Link: Case Summary Document
Citation:  NZSC 109 (Supreme Court of New Zealand, McGrath, William Young, Chambers, Glazebrook JJ)
Acknowledgement:The Pemsel Case Foundation thanks The Australian Centre for Philanthropy and Nonprofit Studies for its contribution in the drafting of this Case Note.
This was an appeal to New Zealand’s highest court against a decision of the New Zealand Court of Appeal not to grant costs to Manukau Golf Club Inc (the Club) when it had been successful in a Court of Appeal hearing.
In 2010 the Club brought a claim in the High Court against Shoye Venture Ltd (SV) for breach of a written contract. SV counterclaimed and was successful in obtaining summary judgment, plus costs, against the Club. The High Court granted the summary judgment on the basis of an implied term that was not pleaded. The Club appealed to the Court of Appeal. The Court of Appeal granted the appeal, setting aside the summary judgment in SV’s favour and quashing the order for costs. It made no order for costs with respect to that appeal, but did not give reasons for not doing so.
The issue which went to the Supreme Court for decision was whether the Court of Appeal erred in denying costs to the Club, since it was the successful party in the appeal. Further to rule 41(1)(c) of the Court of Appeal (Civil) Rules 2005, the Club set out in detail its claim for costs in its written submissions. It calculated costs on the basis that the appeal would be classified as a ‘standard appeal’ and that each step should have a band A time calculation. The claim came to $12,220. Disbursements were also set out, and totalled $5,051.73.
The Supreme Court unanimously held that the Court of Appeal erred in refusing the Club costs. In denying the Club costs, the Court of Appeal departed from the fundamental principle that a successful party in an appeal is generally entitled to costs against the unsuccessful party. As the Court of Appeal did not give any reasons for refusing costs, the Supreme Court accepted the Club’s submission in this appeal that the Court of Appeal probably took into account irrelevant considerations in its decision to refuse costs. The Supreme Court held that there was no disentitling conduct on the part of the Club to justify a refusal of costs. The Supreme Court said on this point (at –):
In virtually every case where an appeal succeeds, the appellate court has formed the view that the Judge below went wrong in some way or other. For the purposes of costs in the appellate court, it does not matter why the Judge went wrong. The losing party on the appeal almost always has to pay costs to the winning party – and in that sense ‘pays for’ the error (as found) of the judge below. That is the consequence of a respondent fighting to maintain its win and supporting the findings of the judge below. If the respondent accepts the judge below was wrong, then it should settle with the appellant or not seek to defend the appeal. In those circumstances, it would avoid liability for costs. Shoye did not adopt that stance in the Court of Appeal. We have seen its submissions. It sought to uphold what the Judge had found in its favour. All that mattered so far as costs in the Court of Appeal were concerned was how the appeal was conducted. Since Shoye chose to seek to uphold the judgment in its favour but was unsuccessful, it became liable to costs in accordance with the fundamental principle of costs that ‘the party who fails with respect to an appeal should pay costs to the party who succeeds’. There was in this case no suggestion of any disentitling conduct on the part of the Club, justifying a refusal to award costs on the basis of r 53F.
The Supreme Court also confirmed that although a court is generally not required to give reasons for a standard costs order, it should do so where it is departing from the fundamental principle that costs should follow the event. On this issue, the Court said (at ):
We wish to make clear a court does not have to give reasons for costs orders where it is simply applying the fundamental principle that costs follow the event and the costs awarded are within the normal range applicable to that court. So here, had the Court of Appeal awarded costs in the Club’s favour on a standard appeal basis, no further explanation would have been required. It is only when something out of the ordinary is being done that some explanation, which may be brief, should be given.
The appeal was allowed, and costs of $12,220, plus disbursements of $5,051.73 ordered to be paid by SV.
The case may be viewed from a list at: http://www.courtsofnz.govt.nz/from/decisions/judgments
Implications of this case
This was a case which went to New Zealand’s highest court when its outcome should have been obvious. However, the incorporated club was successful, so lost nothing in the attempt. The case is perhaps more interesting for its criticism of the Court of Appeal decision.