Bell v Body Corporate Number 203780

[2021] NZHC 2485

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-000310

[2021] NZHC 2485

BETWEEN

ROBERT JOHN BELL JUDITH SYLVIA BELL

Plaintiffs

AND

BODY CORPORATE NUMBER 203780

Defendant

Hearing:

On the papers

Counsel:

T J Herbert for Plaintiffs

T J G Allan & K M Wakelin for Defendant

Judgment:

21 September 2021

JUDGMENT OF PAUL DAVISON J

[Re: Costs]

This judgment was delivered by me on 21 September 2021 at 4:00 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Daniel Overton & Goulding, Auckland

Grove Darlow, Auckland

BELL v BODY CORPORATE NO 203780 [2021] NZHC 2485 [21 September 2021]

Introduction

[1]                  In my judgment of 28 February 2020 I made a declaration that the 9 June 2017 resolution of Body Corporate 203780 (the Body Corporate/defendant) was ultra vires and invalid.1 This proceeding arose from a dispute between members of a body corporate over the correct approach to remediating a group of townhouses with weathertightness issues. The resolution authorised individual unit owners to carry out work required to repair water damage. I accordingly made an order quashing the resolution and held that the plaintiffs (the Bells) were entitled to an award of costs and disbursements. By consent order dated 8 June 2020 the plaintiffs were awarded costs in the sum of $24,805.00 and disbursements of $12,736.07.

[2]                  On 9 November 2020, the Body Corporate was successful on appeal.2 The Court of Appeal set aside the declaration made in the High Court. Addressing trial costs, the Court of Appeal also set aside the High Court costs award and stated:3

[69] Costs in the High Court should be determined by that Court in light of the outcome in this Court, if they cannot be agreed by the parties.

Submissions

Defendant (successful on appeal) – the Body Corporate

[3]Mr Allan for the Body Corporate seeks costs on a 2B basis, in the sum of

$21,784.00 and disbursements totalling $17,686.84. He submits that the effect of the quashing of the High Court costs order is that costs are “at large”.4 He says that where a party is successful on appeal, it is usually entitled to recover the costs as if it had won the lower court case.5 He submits that the general principle that the unsuccessful party should pay costs is applicable here. Mr Allan further submits that there must be an exceptional reason to depart from that general principle.6

1      Bell v Body Corporate Number 203780 [2019] NZHC 333.

2      Body Corporate Number 203780 v Bell [2020] NZCA 665.

3      At [69] and [70].

4      Americhip, Inc v Dean [2015] NZHC 1871 at [25].

5      High Court Rules 2016, r 14.2(1)(a).

6      Shirley v Wairarapa District Health board [2006] NZSC 63 at [19].

[4]                  Applying those principles, he submits that the defendant is accordingly to be treated as having been successful in the High Court. He submits that there are no exceptional reasons to depart from the general principles and therefore costs ought to follow the event. Mr Allan rejects the plaintiffs’ submission that because the defendant’s case was argued differently in the Court of Appeal costs should not be awarded to the defendant in respect of the High Court phase of the proceeding.

[5]                  Mr Allan presumes that the plaintiffs rely on rule 14.7 in the High Court Rules 2016, specifically r 14.7(d):

although the party claiming costs has succeeded overall, that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs; …

Or r 14.7(f)(ii):

the party claiming costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

…

taking or pursuing an unnecessary step or an argument that lacks merit; or

[6]                  Mr Allan acknowledges that the defendant advanced three arguments in support of its defence and notes that two were upheld and accepted on appeal. He also notes that the hearing, including submissions and evidence, was one day in duration. He submits that it cannot be said that the defendant failed on an issue that significantly increased the plaintiffs’ costs, nor did the defendant contribute unnecessarily to the time or expense of the proceeding by pursuing an unnecessary step or argument that lacked merit. He says that had the defendants’ third argument not been relied on the overall effect would not have been significant in terms of the time and expense involved in the hearing in the High Court. Mr Allan says that if the one unsuccessful argument had not been advanced, the parties would likely have spent more time making their submissions or presenting evidence on the other issues.

[7]  Mr Allan submits that a reduction or refusal to award costs to a successful party is only warranted where the increased expense caused by one party pursuing an argument that lacks merit or failing in relation to a cause of action or issue is

substantial.7 He says that the defendant has been “entirely successful” as a result of the appeal, with the validity of the Body Corporate’s resolution being upheld.

[8]                  Finally, Mr Allan submits the defendant’s case in the Court of Appeal was not based on different arguments from those made at trial in the High Court.

[9]                  Mr Allan has summarised the costs sought by the defendant relating to the High Court phase of the proceeding in the following table:

Item	Description	Daily Recovery Rate (Category 2)	Time Allocation	Total
2	Commencement of     defence    by defendant	$2,230	2	$4,460.00
10	Preparation     for first             case management conference	$2,230	0.4	$890.00
11	Filing memorandum for first                or subsequent mentions hearing	$2,230	0.4	$890.00
11	Filing memorandum for first                or subsequent mentions hearing (50%              of allowance      for joint memorandum)	$2,230	0.2	$446.00
11	Filing memorandum for first                or subsequent mentions hearing	$2,390	0.4	$890.00
30	Preparation of affidavits, lists of issues              or authorities; and agreeing common bundle	$2,390	2	$4,780.00

7      Mr Allan cites the example in Aotearoa Kiwifruit Export Ltd v Southlink Ltd HC Auckland CIV- 2003-470-478, 23 May 2006.

32	Preparation     for hearing	$2,390	2	$4,780.00
34	Appearance at hearing for sole or            principal counsel	$2,390	1	$2,390.00
36	Filing memorandum as to costs	$2,390	0.4	$890.00
29	Sealing order or judgment	$2,390	0.2	$478.00
36	Filing memorandum as to costs	$2,390	0.4	$890.00
Total costs				$21,784.00

[10]              Excluding the defendant’s claim for costs on costs, the sum of 2B costs sought is: $20,004.00.

[11]Disbursements are also sought:

Filing fees	$160.00
Auckland Council property file	$95.00
LINZ search fees	$5.00
Photocopying	$82.20
Expert witness fee — Patrick Hanlon	$4,945.00
Expert witness fee — Paul Leuschke	$2,792.89
Expert witness fee — Michael Sprague	$5,491.25
Expert witness fee — Andrew Gray	$4,115.50
Total disbursements	$17,686.84

Plaintiffs – the Bells

[12]              For the plaintiffs, Mr Herbert submits that “the Court of Appeal was neutral as to the issue of who should bear the costs in the High Court”, and he submits that the costs in the High Court should be borne by the defendant. He argues that the general principle that the successful party on appeal is entitled to costs in the lower court is displaced in this instance. He submits that where a party has presented a “somewhat

different” argument in the High Court than the argument they presented on appeal, there is “good reason” to depart from the general principle.8

[13]              Mr Herbert says that in the High Court the defendant did not challenge the interpretation of the resolution, and that the dispute was focused instead on whether the resolution infringed on the defendant’s duty under s 138 of the Unit Titles Act 2010. Mr Herbert submits that the Court of Appeal’s approach to the case did not adopt the theory of the case proffered by either the plaintiffs or the defendant. He submits that the Court of Appeal instead “took hold of the case and put its own theory in place”. Mr Herbert also submits that the defendant should not be awarded costs for preparation of its counsel’s costs memoranda.

Defendant’s reply

[14]              Mr Allan responds by submitting that the Court of appeal was not “neutral” as to costs in the High Court. He distinguishes Commissioner of Inland Revenue v United Fisheries Ltd (No 2) relied on by the plaintiffs and says that case concerned costs in the appellate court, not a fresh application for costs in the lower court following appellate success. Relying on a decision of Brewer J in EBR Holdings Ltd (in liq) v McLaren Guise Associates Ltd9 Mr Allan submits “it is well established that costs may be awarded on an application for costs”.10

Approach

[15]              Matters relating to costs are at the discretion of the Court,11 which must be exercised on a principled basis.12 The determination of costs, so far as possible, should be both predictable and expeditious.13

[16]              Rule 14.2(1)(a) provides that, “the party who fails … should pay costs to the party who succeeds”. The other relevant principles set out in r 14.2(1) are that:

8      EBR Holdings Ltd (in liq) v McLaren Guise Associates Ltd [2017] NZHC 1008 at [17], citing:

Commissioner of Inland Revenue v United Fisheries Ltd (No 2) (1983) 6 NZTC 61,572 (HC).

9      EBR Holdings Ltd (in liq) v McLaren Guise Associates Ltd, above n 8, at [11].

10 At [5].

11     High Court Rules 2016, r 14.1(1).

12     Huakiwi Copenhagen Lot 4 Orchard Ltd v Te Moana [2019] NZHC 1582 at [13]; Bi v Westcoast Mining Ltd [2020] NZHC 2940 at [14].

13     High Court Rules 2016, r 14.2(1)(g).

(a)an award of costs should reflect the complexity and significance of the proceeding; and

(b)costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application.

[17]              The successful party is entitled to recover the actual disbursements incurred that were reasonable in amount, reasonably necessary for the conduct of the proceeding, and were specific to the conduct of the proceeding.14

[18]              The Court commonly reconsiders costs on the High Court decision where there has been a successful appeal to the Court of Appeal.15 The general principle that a successful party is entitled to costs also applies where the party is “successful” in the lower court due to an appeal overturning the lower Courts’ decision.16 The general approach is that applications are to be treated as if the party who has successfully appealed had also been successful in the lower court.17

Discussion

[19]              As the defendant was successful in the Court of Appeal, it is entitled to costs as if it had been successful in the High Court. I am not persuaded that any reduction of costs should be made by reason of the extent to which the Court of Appeal accepted the parts of the defendant’s argument. The Body Corporate’s resolution was found to be valid on appeal, and as noted above, the Court of Appeal stated:18 “[c]osts in the High Court should be determined by that Court in light of the outcome in this Court”. The Court of Appeal set aside the original costs order,19 and that together with the general approach that costs in the court below are reversed when an appeal is successful, lead me to conclude that the usual approach of costs to follow the event is the appropriate approach to be taken here.20

14     High Court Rules 2016, r 14.12. See further A C Beck and others McGechan on Procedure (loose- leaf ed, Thomson Reuters) at [HR14.12].

15     Americhip, Inc v Dean [2015] NZHC 1871 at [25].

16     Americhip, Inc v Dean, above n 15, at [25] and [26] citing: Wholesale Distributors v Songle [2015] NZHC 809; and LSG Sky Chefs New Zealand Ltd v Pacific Flight Catering Ltd [2015] NZHC 685.

17     LSG Sky Chefs New Zealand Ltd v Pacific Flight Catering Ltd, above n 16, at [30].

18     Body Corporate Number 203780 v Bell, above n 1, at [69].

19 At [73].

20     LSG Sky Chefs New Zealand Ltd v Pacific Flight Catering Ltd, above n 16, at [30].

[20]              I am not persuaded that an entirely different case was advanced by the defendant in the Court of Appeal than at trial. While the hearing before the Court of Appeal may have focussed on different issues than had been the case in the High Court, the outcome of the appeal was that the defendant was entirely successful, and I find that the plaintiffs have not shown there to be any good and sufficient reason why costs should not follow the event. 21

[21]                I accordingly award costs to the defendant calculated on a scale 2B basis and as detailed in paragraph [9], totalling $20,004.00.

[22]              The defendant is also entitled to disbursements as detailed above in [10] totalling, $17,686.84.

Application for award of costs on the costs application

[23]              The defendant also seeks costs of $1,780 for the steps related to the preparation of its costs memorandum. While the Court has the power to award such costs, the Court is generally reluctant to do so.22 I decline to award costs on the costs memorandum.

Result

[24]              I make an order directing the plaintiffs to pay the defendant costs of $20,004.00 and disbursements totalling $17,686.84, being a total sum of $37,690.84.

Paul Davison J

21 Shirley v Wairarapa District Health Board [2006] NZSC 63 at [19]; EBR Holdings Ltd (in liq) v McLaren Guise Associates Ltd, above n 8, at [11].

22 See for example Jeffreys v Morgenstern [2013] NZHC 1361 at [40]; Epsom Woods Ltd v Waitakere Farms Ltd [2020] NZHC 3137 at [4]; and Combined Property Maintenance Limited v Singh [2021] NZHC 621.