By Anna Longdill
Application for variation of arbitration costs award – Arbitration Act 1996, s 12, schedule 2, clause 6 – is an arbitrator required to apply the costs principles in the High Court Rules? – was the amount of costs awarded unreasonable in all the circumstances?
McCracken v Boyer [2025] NZHC 546 per O’Gorman J
The context for this judgment is a long running and seemingly intractable dispute over a cross-leased property in Western Springs.
The applicant, Clare McCracken, and the respondents, Arthur Boyer and Nicole Kramer (the Boyers), are co-proprietors and cross-lessors/lessees of the property.
In March 2022, the Boyers commenced arbitration proceedings against McCracken so that the property’s flats plan and the parties’ cross-leases could be updated and registered on the title of the property.
This followed a High Court proceeding in 2017 in which Hinton J had made orders adjusting the legal boundary after surveying found that the boundary was not at the fence which separated the two flats. McCracken counterclaimed in relation to issues concerning a new block wall and the repair of the driveway.
A three-day arbitration hearing took place before Dr Anna Kirk in November 2023. In March 2024, Kirk issued an award which was largely in the Boyers’ favour. The Boyers then sought costs totalling $314,960.66.
Kirk awarded the Boyers $191,154.66 in total costs. She held that: the High Court scale was not applicable to costs awards; indemnity costs were not the starting point for an award of costs following arbitration; the Boyers were the successful party overall and were entitled to a reasonable contribution to their costs; the high threshold for indemnity costs was not met; it was not appropriate for costs to lie where they fell and overall, while high, the costs appeared to be reasonable.
She directed that McCracken must reimburse the Boyers for 66% of their claimed actual legal fees and the costs of the arbitration, 50% of their expert costs and their share of the arbitrator’s fees for the costs award. No costs on costs were awarded.
The Boyers sought to enforce the costs award by entering it as a judgment.
McCracken applied to the High Court to vary the amount and allocation of costs ordered under clause 6(3) of schedule 2 of the Arbitration Act 1996. That provides that the High Court may “..if satisfied that the amount or allocation of [the] costs and expenses is unreasonable in all the circumstances, make an order varying their amount or allocation, or both”.
McCracken argued that the arbitrator was required to apply the principles in the High Court Rules when considering an award of costs and she failed to do so. She also argued that the arbitrator could not, and did not, make a proper assessment of the reasonableness of the Boyers’ actual costs because the attendance narrations on the invoices were redacted.
Applicable principles: Arbitration Act 1996, s 12, schedule 2, clause 6 – is an arbitrator required to apply the costs principles in the High Court Rules? (no, there is nothing in s 12(1)(a) of the Act that specifies or implies that the power to award costs must be exercised in the same way as a judge would in the High Court. Such restrictions were not contemplated in the legislative history. The principles for awarding costs in arbitration have been well-established, both before and after the 1996 Act. The authorities universally support the position that the arbitrator has a wide discretion and need not assess or consider what High Court scale costs would be, these would be a non-mandatory consideration) – correct approach to appeals against arbitration costs awards under clause 6(3) of schedule 2? (appeal is against the exercise of a discretion, so appellate court should not interfere unless arbitrator acted on wrong principle, failed to take into account a relevant factor, took into account an irrelevant factor, or was plainly wrong) – was the arbitrator required to examine the detail of the attendance narrations on counsel’s invoices? (no, an arbitrator can make an assessment based on their own experience of costs, assessing that in the round) – has McCracken shown that the costs award was unreasonable in all the circumstances? (no, the costs award accords with principle and is one that could reasonably be made by an arbitrator in all the circumstances)
Held: The application for variation of the costs award is dismissed. The Boyers’ application to enforce the costs award by entering it as a judgment under article 35 of schedule 1 of the Arbitration Act 1996 is granted.
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