A short and sharp costs decision from the High Court last month is an example of how a scattergun approach to litigation can sometimes backfire.
Facts
Body Corporate 388915 v Napier City Council [2020] NZHC 2720 was a dispute about a leaky apartment building. As it is usually the case with defective construction claims, there were a lot of joinders and cross-claims. The case involved 38 parties: 2 claimants, 11 defendants, 20 third parties and 5 fourth parties. The claim settled by negotiation. However, two parties (Wynands Masonry Ltd and its director) did not contribute to the settlement. After the proceedings were discontinued, Wynands sought costs from Napier City Council which joined them, and from Equus Industries which had a cross-claim against them.
The law
The Court summarised the law. The starting point is that a party which discontinues is obliged to pay the costs of the other party. This presumption can be displaced if the party, by refusing to participate in settlement discussions is seeking to take unfair advantage of the other participants, ie enjoying the fruits of the settlement but refusing to engage with the process. Such parties are not generally entitled to costs.
The arguments and the Court’s decision
Napier City Council argued that Wynands benefitted from the settlement and should not be entitled to costs. However, the Court was not convinced it was as simple as that. Justice Cooke said that it was possible that Wynands was joined as part of a “general litigation strategy to join many parties and then seek to secure a resolution which calls upon as many resources as possible”. The Court thought that Wynands had only small involvement with the work in dispute and it was not obvious that it was a significant player in the claim. The presumption of costs following discontinuance was a strong one and the Court was not satisfied that the facts were sufficient to displace this presumption. As such, it held that Napier City Council was liable to pay Wynands’ costs upon discontinuance.
The Court arrived at a different view as between Equus and Wynands. It found that the two companies and their directors were in very similar positions. Both were family companies, both had limited involvement with the dispute and Equus’ cross-claim against Wynands was a consequence of the joinder by others. The Court decided that it would be unfair for Equus to pay Wynands’ costs in the circumstances where they were both in the same position, and Equus’ participation in the settlement created a benefit for Wynands.
Comments
The case is a cautionary tale on the risk of costs. Does this mean a scattergun approach is wrong? No. If the Council managed to get a contribution from the remaining 33 parties, then the strategy paid off.
The Court process should never be abused and only claims that have merit should be made.
