Alderman Property Ltd v Body Corporate 379933 HC Auckland CIV-2010-404-003658
[2011] NZHC 188
•9 March 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-003658
BETWEEN ALDERMAN PROPERTY LTD Plaintiff
AND BODY CORPORATE 379933
Defendant
Hearing: 9 March 2011 (On the papers) Appearances: M Kelly for Plaintiff
L J Till for Defendant and Administrator
J Foster for Mr Kearney and Ms Newman-Watt
L Herzog for Citiland Ltd
Judgment: 9 March 2011 at 3:00 PM
INTERIM COSTS JUDGMENT OF ASSOCIATE JUDGE BELL
This judgment was delivered by me on 9 March 2011 at 3:00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date: ………………….
Solicitors/Counsel:
Burton & Co. (T Nicholson/S Jones), PO Box 8889, Symonds Street, Auckland
Kensington Swan, Private Bag 92101, Auckland
Equity Law Ltd, PO Box 8333, Symonds Street, Auckland
Jesse & Associates (J Nguy), PO Box 106773, AucklandMinter Ellison Rudd Watts (J Stewart), PO Box 3798, Auckland
Copy to:
J Foster, PO Box 2340, Shortland Street, Auckland
M Kelly, PO Box 5844, AucklandL Herzog, PO Box 1001, Shortland Street, Auckland
ALDERMAN PROPERTY LTD V BODY CORPORATE 379933 HC AK CIV-2010-404-003658 9 March 2011
[1] McKenzie J heard this case on 1 October 2010. The substantive proceeding was an application under s 40 of the Unit Titles Act for the appointment of an administrator of Body Corporate 379933, the body corporate for the premises at 160
Grafton Road, Auckland City. Alderman Property Ltd owns unit 3B2 and accessory unit 119, 1130 in the premises. It is the plaintiff. Its case is that the affairs of the body corporate are dysfunctional. The contest was essentially between Alderman Property Ltd and other unit owners associated with it, on the one hand, and units in the Citiland Group, under the control of a Mr David McCall. I will call the opposition “Citiland”. Citiland Ltd has the right to appoint a secretary to the body corporate.
[2] Early in the proceeding, Mr Jesse Nguy appeared for the body corporate. When the matter was about to be heard, he sought leave to withdraw. Citiland appeared and appointed other counsel.
[3] During the hearing on 1 October 2010, the parties reached agreement for orders to be made for the appointment of an administrator, Mr Tony Woodworth, as originally sought by the plaintiff. The plaintiff says that the outcome was a vindication of its position.
[4] McKenzie J reserved costs. Costs have not been determined since then, although costs memoranda were filed in October and November 2010. The delay in fixing costs is disappointing for the parties. It is clearly unsatisfactory that that this matter has been left undetermined since October 2010. I determine costs under r
14.9 because McKenzie J is not conveniently available.
[5] Memoranda as to costs have been received from the plaintiff, Mr Nguy, and from Minter Ellison Rudd Watts, now acting for the body corporate. Although the plaintiff sought a modest order against Citiland, it did not file a memorandum. For reasons that will appear, Citiland carries greater responsibility for costs. However, it has not been put on notice that it may be found liable for increased costs. Accordingly, a copy of this minute will go to Citiland and Citiland will have 10 working days following receipt to file any submissions in response. I will then consider what order for costs, if any, ought to be made against Citiland.
[6] The total costs order the plaintiff seeks is $20,106, including disbursements. It has calculated costs on a 2B scale. No parties take issue with the calculation of costs and disbursements. Similarly, no party contends that the plaintiff ought not to have costs. It is entitled to costs: costs follow the event, r 14.2(a).
[7] The contest is over the incidence of costs. The plaintiff contends that Mr Nguy personally, as solicitor, should pay costs of $13,526, and that the body corporate should pay costs of $5,640 and disbursements of $1398.13. It seeks costs of $940 against Citiland and the other parties for whom Mr Herzog appears.
[8] The plaintiff goes after Mr Nguy because it says that he purported to act for the body corporate without any actual authority from the body corporate to do so. They say he had no authority to do so because the body corporate had no meetings, no committee and no duly appointed secretary. It says that its lawyers put Mr Nguy on notice as to this problem of lack of authority. It also points to Mr Nguy’s late withdrawal from the proceeding.
[9] In my judgment, this takes too narrow a view of the case. The case was really a dispute between Alderman and other unit holders, on the one hand, and Citiland. Mr McCall, or companies associated with him, were the original developer. Some body corporate rules contained provisions which apparently allowed Citiland to control the affairs of the body corporate, as by appointing a secretary.
[10] Mr Nguy says that Citiland appointed Non Carburandum Ltd as body corporate secretary. That company in turn appointed Ms Kirsten Goldman as body corporate secretary but she passed away in April 2010. Non Carburandum Ltd continued as secretary, allegedly in the interests of the body corporate. Non Carburandum accepted service of the proceedings issued by the plaintiff. Mr Nguy says that his instructions came from Non Carburandum Ltd, but it also appears clear that the underlying authority to act came from Mr David McCall. The reality is that Mr Nguy had authority from Citiland to act in its interests against the claims made by the plaintiff. It was part of Citiland’s case that, through the body corporate rules, it could exert some control over the body corporate, which included appointing a
body corporate secretary. Those powers were alleged to extend to authorising
Mr Nguy to appear for the body corporate.
[11] Mr Nguy’s conduct is to be measured under the standard laid down by the Privy Council in Harley v McDonald [2002] 1 NZLR 1 for the Court to use its inherent jurisdiction to award costs against the practitioners. At [55] the Privy Council said:
Then there is the question as to the kind of conduct that can be regarded as involving a serious breach of duty to the Court. … A simple mistake or oversight or a mere error of judgment will not, of itself, be sufficiently serious to fall into that category. Something more is required. In Myers v Elman at 291-292 Viscount Maugham indicated that the test was whether the conduct amounted to a serious dereliction of duty, and that negligence could be so described if it was at a sufficiently high level. At 304 Lord Atkin described the kind of negligence that could lead to an exercise of the jurisdiction as gross negligence. At 319 Lord Wright said that, while a mere mistake or error of judgment is not generally sufficient, a gross neglect or inaccuracy in a matter which it was the solicitor’s duty to ascertain with accuracy, such as whether he had a retainer to act, might suffice. A more precise definition of the level of seriousness is not appropriate. But where negligence or incompetence is alleged the conduct must be put into its proper context.
[12] And in [57]:
Their Lordships agree with the Court of Appeal’s conclusion … that a duty rests on officers of the Court to achieve and maintain appropriate levels of competence and care and that, if he is in serious dereliction of such duty, the officer is properly amenable to the costs jurisdiction of the Court. But care must be taken not to assume that just because it appears to the Court that the case was hopeless there was a failure by the barrister or solicitor to achieve the appropriate level of competence and care. …
The essential point is that it is not errors of judgment that attract the exercise of the jurisdiction, but errors of a duty owed to the Court.
[13] In this case, Citiland, through various entities, asserted a measure of control over the body corporate. The plaintiff, alleging that the affairs of the body corporate were dysfunctional, sought orders only against the body corporate. Clearly, Citiland opposed the orders sought and the plaintiff ought to have anticipated that Citiland would oppose. For the case to be run fairly, opportunity had to be available for those opposing the orders sought by the plaintiff to take steps to present their cases why the orders sought by the plaintiff should not be made. The plaintiff ought to have joined all unit owners, so that other unit owners, with an interest in the proceeding,
could take steps to support or oppose. However, the plaintiff simply applied for summary judgment against the body corporate. I raised the question of service on other owners in my minute of 20 August 2010.
[14] While other unit owners had not been served, the opposition to the plaintiff’s application came through the defendant, the body corporate, admittedly as a channel for Citiland interests. Later, after service, Citiland directly entered the proceeding and Mr Nguy retired as solicitor for the body corporate. Ideally, Citiland ought to have entered the proceeding earlier, but I cannot see that Mr Nguy’s interim representation of Citiland interests using the name of the body corporate, until replaced by Mr Herzog acting directly for Citiland interests, is a matter that exposes Mr Nguy to a complaint of serious dereliction of duty. After all, the plaintiff contributed to the situation itself because, while it should have anticipated opposition from Citiland interests, it did not take steps to ensure that Citiland interests were identified as an appropriate defendant.
[15] In hindsight, its decision to seek summary judgment and seek orders against the body corporate alone, without joining other owners of units, was misguided. Just as the plaintiff’s lawyers would not agree that that error of judgment exposes them to an order for costs imposed by the Court, they should likewise recognise that their errors of judgment should not expose Mr Nguy to an order for costs.
[16] As against the body corporate, it is futile to make an order for costs. It has no funds to pay. It will only be able to raise funds if it levies unit owners. The unit owners who will have to contribute levies to pay those costs will include the plaintiff and other unit owners associated with it. That means that the plaintiff and unit owners associated with it will end up paying the costs of this proceeding, except to the extent that Citiland contributes. I see no benefit in such circularity.
[17] Instead, the responsibility for the affairs of the body corporate being in disarray and requiring the present proceeding lies with the Citiland interests controlled by Mr McCall. They appeared in the proceeding and were parties to it. Orders for costs should be made against them.
[18] As earlier indicated, they should have the opportunity to submit why the entire costs should not fall on them. They have 10 working days to respond to this
minute.
R M Bell
Associate Judge
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