Body Corporate 126001 v Hannam
[2024] NZHC 738
•9 April 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-2003
[2024] NZHC 738
IN THE MATTER of Unit Titles Act 2010 IN THE MATTER
of an application under Part 19 Rule 19.2(za) High Court Rules
BETWEEN
BODY CORPORATE 126001
Applicant
AND
GARY KEITH HANNAM AND PATRICIA JOY DRAPER
First Respondents
KEITH OLIVER DIPROSE, LYNETTE PATRICIA CHAPMAN AND STUART IAN CHAPMAN
Second RespondentsMIKAELE CHARLES WESTERLUND
Third Respondent…/cont
Hearing: On the papers Counsel:
J Orpin-Dowell and T Allan for the Applicant
D Bigio KC, G Lewis and S Zellman for First Respondents D Nilsson and K Calder for the Fifty-First Respondent
Judgment:
9 April 2024
JUDGMENT OF GORDON J
[As to costs]
This judgment was delivered by me on 9 April 2024 at 3pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors (Auckland): Grove Darlow & Partners, Grimshaw & Co, LeeSalmonLong
BODY CORPORATE 126001 v HANNAM [2024] NZHC 738 [9 April 2024]
JEFFREY LAURENCE FISHER AND LISA FIONA FISHER
Fourth Respondent
SUSAN MARY KINGSTON
Fifth Respondent
AVRIL BARBARA STOTT AND DAVID IAN HAIGH
Sixth Respondents
BRIAN JOSEPH HINCHCO AND SELENA JANE HINCHCO
Seventh Respondents
NIGEL KING
Eighth Respondent
SARAH KATE GREENAWAY
Ninth Respondent
SNEZANA DACIC
Tenth Respondent
LEANNE JOY GREENHALGH AND PAUL RICHARD GREENHALGH
Eleventh Respondents
COLIN GRANT KENYON AND JANINE LOIS KENYON
Twelfth Respondents
TONY ALAN HOPKINS AND TRACEY ANN HOPKINS
Thirteenth Respondent
JAMES ANTHONY YOUNG, JENNY JUNE TONG AND NATALIE SAMANTHA TONG
Fourteenth Respondents
ANNA GABRIELLE SOTHERAN AND HAYDEN ROBERT HYAMS
Fifteenth Respondent
FRANCES ANNE SIMEON AND JOHN MICHAEL SIMEON
Sixteenth Respondents
DONELLE MARIE THOMPSON AND PAUL ALISTAIR CRAIGIE
Seventeenth Respondent
ERIK TORE OLOFSSON
Eighteenth Respondent
ANN SANDRA EVERARD AND GRANT IAN HALLY
Nineteenth Respondents
KAREN ANN COTES
Twentieth Respondent
DAVID ALEXANDER LLOYD AND TRINA MAREE LLOYD
Twenty-First Respondents
DAVID JAMES WAY
Twenty-Second Respondent
CHERL ROSEMARY DWYER, WAYNE DAVID KEENE AND KM TRUSTEE
SERVICES LIMITED
Twenty-Third Respondents
PHILIP ANDREW JOHNSTONE AND STEPHANIE ROCHELLE JOHNSTONE
Twenty-Fourth Respondents
PAUL FRANCIS QUINLIVAN,
SHELLEY ROZANNE QUINLIVAN AND NEW ZEALAND TRUSTEE SERVICES LIMITED
Twenty-Fifth Respondents
CAMERON ROSS GRIBBEN
Twenty-Sixth Respondents
JAMES KENNINGTON WATSON AND WENDY MIRIAM WATSON-EKSTEIN
Twenty-Seventh Respondents
MELT INVESTMENTS LIMITED
Twenty-Eighth Respondent
ALISON STUART SMITH, ALLEN DONALD SHANKS AND SCOTT SHAW SMITH
Twenty-Ninth Respondents
JON RIVERS LAMB, LAWREEN
LAMB AND BEECH HILL TRUSTEE LIMITED
Thirtieth Respondents
ANGELA MARY GREENHALGH AND BARRYGREENHALGH
Thirty-First Respondent
DOUGLAS SMERDON CARTER, PATRICIAEMILY CARTER AND SOONG YUAN CHAU
Thirty-Second Respondents
HAULTAIN PROPERTIES LIMITED
Thirty-Third Respondent
AVANTI APARTMENT LIMITED
Thirty-Fourth Respondent
MARGARET ELIZABETH WATTS
Thirty-Fifth Respondent
JOHN ANDREW BEDKOBER
Thirty-Sixth Respondent
CLIVE MARIO FERNANDES AND ELIZABETH SCOTT JOHNS
Thirty-Seventh Respondents
PETER DAVID BONE AND SHALE CHAMBERS
Thirty-Eighth Respondents
JOHN NORMAN SISSONS, SUZANNE ELIZABETH SISSONS AND ATACH
LIMITED
Thirty-Ninth Respondents
GERARD JOHN RENNIE, IAN MARTINGUILFORD AND TRISH JANE
Fortieth Respondents
WESTPAC NEW ZEALAND LIMITED
Forty-First Respondent
ANZ BANK NEW ZEALAND LIMITED
Forty-Second Respondent
ASB BANK LIMITED
Forty-Third Respondent
BANK OF NEW ZEALAND
Forty-Fourth Respondent
NEW ZEALAND HOME LENDING LIMITED
Forty-Fifth Respondent
MORTGAGE HOLDING TRUST COMPANY LIMITED
Forty-Sixth Respondent
SOUTHLAND BUILDING LIMITED
Forty-Seventh Respondent
CHUBB INSURANCE NEW ZEALAND LIMITED
Forty-Eighth Respondent
GRANT JENSEN CASHMORE, PETER GRANT STODDARD CASHMORE AND SELLAR BONE TRUSTEES (2015)
LIMITED
Forty-Ninth Respondent
KAPLANA CHIMANLAL AND SURESH CHINANLAL
Fiftieth Respondent
WESTERN PARK SUBSIDIARY BODY CORPORATE (493826)
Fifty-First Respondent
GREGORY IAN VARLEY AND LAURA ALICE DONALDSON
Fifty-Second Respondent
LISTON TRUSTEE SERVICES
LIMITED, MARY WALLACE FRANCIS AND WILLIAM PETER FRANCIS
Fifty-Third Respondent
TSB BANK LIMITED
Fifty-Fourth Respondent
[1] This is an application for costs by the applicant, Body Corporate 126001 (Body Corporate) and the 51st respondent, Western Park Subsidiary Body Corporate (493826) (Subsidiary Body Corporate) against the first respondents, Gary Hannam and Patricia Draper.
[2] The substantive proceeding involved an application by the Body Corporate for an order approving a scheme under s 74 of the Unit Titles Act 2010 (the Act). The Subsidiary Body Corporate, which was separately represented, supported the application in all respects.
[3] The only opposition was from Mr Hannam and Ms Draper as trustees of the GK Hannam Family Trust (the Trust) which owns one of the units in the development. I will refer to the first respondents as the Trustees as I did in the substantive decision (judgment).1
[4] The hearing proceeded over two weeks. I granted the application and approved the scheme as applied for without amendment.
[5] The parties have been unable to agree costs and separate memoranda have been filed.
Costs applied for and opposition
[6]The Body Corporate seeks costs as follows:
(a)indemnity costs and disbursements of $489,144.53;
(b)in the alternative, increased costs (30 per cent uplift on 2B scale) and disbursements of $242,107.72; or
(c)in the further alternative, 2B scale costs and disbursements of
$214,646.62.
1 Body Corporate 126001 v Hannam [2023] NZHC 3604 (Judgment).
[7]The Subsidiary Body Corporate seeks costs as follows:
(a)increased costs (25 per cent uplift on 2B scale) amounting to
$66,770.63; or
(b)in the alternative, 2B scale costs amounting to $53,416.50.
[8]The Trustees oppose the applications on the following grounds:
(a)the costs applications should be deferred pending the Trustees’ appeal of the judgment to the Court of Appeal;
(b)alternatively, the Court should exercise its discretion to let costs lie where they fall;
(c)alternatively, neither the threshold for indemnity costs for the Body Corporate nor increased costs for either the Body Corporate or the Subsidiary Body Corporate are made out; and
(d)the costs claimed by the Body Corporate and Subsidiary Body Corporate are excessive and should be reduced for various reasons.
Should an award of costs be deferred?
Deferral pending appeal
[9] Mr Bigio KC, counsel for the Trustees, submits costs should be deferred pending the decision of the Court of Appeal on the appeal against the judgment. The hearing in the Court of Appeal is scheduled for 22–23 May 2024. Mr Orpin-Dowell, counsel for the Body Corporate, submits that costs should be determined in the usual way and any appeal against a costs decision can be incorporated into the substantive appeal thus avoiding the inconvenience of two separate appeals.
[10] The starting point is the High Court Rules 2016 (HCR). The relevant general principle is that “so far as possible the determination of costs should be predictable
and expeditious”.2 This rule indicates a presumption against deferring costs pending appeal.
[11]The Law of Costs in New Zealand states:3
There is no presumption that determination of costs should be deferred pending an appeal, nor does an extant appeal justify a failure or refusal to pay costs. Generally it will be appropriate for costs to be determined despite an appeal being brought because the successful party is entitled to the fruits of any costs award, and an appeal does not operate as a stay. The ability of the Court of Appeal to set aside a costs award if a substantive appeal is successful tells against deferring determination of costs, as does the ability of a party to seek a stay of a costs award once it has been made. Deferral of costs is likely only justified where the parties have agreed, or in unusual circumstances such as where the appeal point is very narrow and is to be heard very quickly. Where the parties have already gone to the effort of filing submissions on costs it is unlikely that the determination of costs will be deferred if an appeal is subsequently brought.
(footnotes omitted)
[12] Mr Bigio submits there is a risk that the Court will waste time and resources in dealing with the costs applications (and any potential appeals that arise) if the substantive appeal is successful.
[13] This argument was raised recently in the High Court where Gwyn J noted that there is no presumption that a costs determination should be deferred until an appeal would be heard. The Judge considered that even if an award of costs may require reconsideration depending on the outcome of an appeal, this potential inefficiency is outweighed by the benefit to the successful party in receiving costs following the hearing.4
[14] Justice Mallon came to a similar conclusion in Strathboss Kiwifruit Ltd v Attorney-General, saying:5
… The parties have already incurred the time and cost of putting forward their respective submissions on costs and disbursements so that time and cost is sunk. There is some inefficiency in my determining costs now if any part of
2 High Court Rules 2016, r 14.2(1)(g).
3 David Bullock and Tim Mullins The Law of Costs in New Zealand (LexisNexis, Wellington, 2022) at [8.1].
4 New Zealand Independent Community Pharmacy Group v Te Whatu Ora — Health New Zealand (Formerly Hutt Valley District Health Board) [2023] NZHC 3314 at [33].
5 Strathboss Kiwifruit Ltd v Attorney-General [2019] NZHC 62 at [7].
that determination requires reconsideration following the appeal(s). That inefficiency, if it arises, is outweighed by the benefit to Strathboss (or its funder, LPF) in receiving some payment towards the substantial costs it has incurred in achieving its success on the stage one issues.
[15] In that case the costs decision was given on 4 February 2019 and an appeal and cross-appeal were scheduled for a two week hearing in the Court of Appeal commencing on 11 March 2019.
[16] I respectfully follow and adopt the same position as Mallon and Gwyn JJ. Although in this case the appeal will be heard relatively soon on 22–23 May 2024, for the reasons referred to by the two Judges above, I consider it is appropriate for the Court to determine costs now.
Deferral due to indemnification by third party
[17] Mr Bigio makes a further submission as to why a decision on costs should be deferred. He says the developer of the ground level to level 3,6 Western Park Apartments Ltd (WPA), through its director Ian Guilford, gave evidence that WPA:
(a)indemnified the Body Corporate and Subsidiary Body Corporate in respect of costs relating to levels 8 to 10 by way of an agreement; and
(b)settled those indemnities by way of a Deed which provides for the Body Corporate to make immediate payments to WPA of proceeds of the scheme proceeding up to $286,628.00.
[18] Mr Bigio says WPA, while not an owner of the building, stands to gain the most from any costs award. Mr Bigio submits this consideration defeats the presumption that costs should not be deferred pending an appeal.
[19] A similar submission was made in Strathboss as discussed above at [14]. In that case the defendant submitted that Strathboss was not prejudiced if costs were deferred because it was funded by a litigation funder. The Judge did not accept that submission, reasoning that Strathboss as the successful party was entitled to a costs
6 The part of the complex which forms the Subsidiary Body Corporate.
order. Although WPA is not properly a litigation funder, its position is similar to that of a litigation funder. WPA has advanced payments to the Body Corporate and Subsidiary Body Corporate upfront, and so any payments made to it by the Body Corporate through court-awarded costs is in the nature of a refund, similar to a litigation funder receiving a share of the sum recovered.
[20] In the present case the Body Corporate was the successful party. What the Body Corporate may or may not do with the costs after receiving them is, in my view, irrelevant. I do not consider the Trustees’ argument is sufficient to rebut the presumption that costs should not be deferred pending an appeal.
Is there a principle in relation to scheme decisions that costs should lie where they fall?
[21] Mr Bigio submits that if the Court is minded to determine costs now, costs should lie where they fall or be included in the s 74 scheme costs. He says the Trustees and the Body Corporate have an ongoing relationship and will need to work closely together to implement the terms of the scheme over a period of time. An award of costs can only be detrimental to that relationship.
[22] Mr Bigio says that the Trustees advanced an orthodox argument at the hearing as to how costs in relation to levels 9 and 10 (the unit owned by the Trustees) should be apportioned. Mr Bigio further says that the decommissioning of levels 9 and 10 by the Body Corporate without any plans to reinstate that unit was an unprecedented turn of events which could have led any reasonable unit owner to reconsider their earlier position (agreement to the proposed scheme) moving forward. In any event Mr Bigio submits that the Court’s finding that there was a binding agreement between the parties was not advocated by any party.
[23] Mr Orpin-Dowell submits that there is no such universal principle that costs should lie where they fall following scheme decisions by the Court.
[24] There is no case law I am aware of that supports a presumption that ‘costs should lie where they fall’ for hearings relating to scheme applications. However,
there are some decisions which hold that the usual rules relating to costs may be departed from depending on the circumstances involved in the scheme decision.
[25] The starting point is s 74(9) of the Act, which provides that “the High Court may make any order for payment of costs that it thinks fit.”
[26] In support of their position, the submissions for the Trustees refer to the following paragraphs from LV Trust Holdings Ltd v Body Corporate 114424:7
[15] I see s 74(9) as recognising that there are a number of special cost considerations that will arise when a scheme is settled under the Unit Titles Act and that the Court has a broad discretion in this regard.
…
[18] In the unit titles scheme context, there is the feature of there being a body that represents all of the unit title owners. There may be unanimous support from unit owners, or there may be individual unit title owners that may not support the scheme. The body corporate is notionally acting on behalf of the unit title owners, but in fact some may be opposed to a proposed scheme. Unit title owners have a relationship with each other that is dictated by complex laws and rules, and just outcomes may require time and compromise. In such circumstances, the general principles that apply to the determination of costs, in particular the principles set out in r 14.2(a) that the party who fails will normally pay costs to the party who succeeds, may not be applicable. Just as with Family Court proceedings, where some greater flexibility is needed in making costs awards than is usually the case in civil proceedings, so too in relation to unit title proceedings. …
(footnote omitted)
[27]However, it is necessary to read further in that judgment where Asher J said:
[19] I do not see s 74(9) as excluding the application of the High Court Rules cost regime. The general principles applying to the determination of costs set out in r 14.2 still have application, although the realities of the unit titles situation must be taken into account and may mean that some or all of those principles are inapplicable in a particular case.
[20] … I do not see a basis for applying a different concept of cost allocation to unit title scheme disputes to that which applies generally to civil disputes. But just as in the Family Court arena where the special circumstances that can arise can be recognised, so too in the unit title context.
[28] In other words, LV Trust Holdings Ltd acknowledges that HCR cost principles are applied but with discretion if any special considerations arise. Justice Asher
7 LV Trust Holdings Ltd v Body Corporate 114424 [2013] NZHC 1764.
recognised the circumstances of that case as having “the flavour of ordinary litigation” and awarded 2B costs with a $45,000 uplift because the body corporate failed to take initiative in bringing the proceeding (which is not an issue in the present case).8
[29] This issue was also considered by Moore J in Body Corporate 208203 v ANZ Bank New Zealand Ltd.9 The case concerned a body corporate applying to vary a scheme, purely to correct inadvertent errors. The 53rd respondent initially opposed the application, then withdrew his opposition allegedly due to a mistaken belief induced by the body corporate. In response to the body corporate’s claim for costs for preparing submissions, the 53rd respondent argued his initial opposition was reasonable in the circumstances and costs should lie where they fall.
[30] In assessing costs, Moore J noted that the 53rd respondent was seeking to rely on a technical legal argument that was separate from the mistaken belief. Further, there was good evidence that the mistaken belief, if there was one, was not induced by the body corporate. Accordingly, it was just and equitable to award costs.
[31] A scheme decision cited by Mr Bigio where the Judge was inclined to let costs lie where they fall is Hayes v Body Corporate 162225.10 However, the reasoning is brief, and the circumstances are not particularly similar to the present case. Justice Brewer dealt with costs in one paragraph as follows:
[42] I am inclined to let costs lie where they fall. This is a small body corporate where the owners of seven units face significant expense in order to remedy weathertightness issues. The application for a s 74 scheme was not opposed by Mr McConnell and Ms Glover. Their opposition was to aspects of the scheme. However, if any party wishes to seek costs, then memoranda are to be filed by 30 April 2016 and replies by 15 May 2016.
[32] Mr Bigio relies on Hayes v Body Corporate 162225 in support of the proposition that “where an owner does not oppose the scheme but rather aspects of the scheme, that may weigh in favour of letting costs lie where they fall.”
8 LV Trust Holdings Ltd, above n 7, at [24], [28].
9 Body Corporate 208203 v ANZ Bank New Zealand Ltd [2017] NZHC 1287.
10 Hayes (as trustee of the Burr/Hayes Family Trust) v Body Corporate 162225 [2016] NZHC 487.
[33] That may be so, but it begs the question of what “aspects of the scheme” are involved.
[34] In the present case there were two significant aspects of the scheme proposed by the Body Corporate that the Trustees opposed. They were how the costs of repairs should be allocated and who should administer the scheme. The Trustees argued that an independent administrator should be appointed for that purpose. In the course of the hearing, and without prior service on the parties, the Trustees put forward two alternative schemes addressing these two issues. In the judgment I stated that the provisions regarding cost allocation were central and crucial issues. I further stated that the appointment of an administrator was no less of a central and crucial issue. As well, there was an alternative dispute resolution process proposed by the Trustees which I considered was less central and crucial but nevertheless material.11 There were also other amendments proposed by the Trustees.12
[35] In other words, the opposition by the Trustees and their presentation of alternative schemes did not involve minor aspects of the Body Corporate’s proposed scheme. Additionally, this was a case which very much had the flavour of ordinary litigation. For those reasons costs should not be left to lie where they fall.
Does the conduct of the Trustees justify an award of indemnity costs?
[36] Mr Orpin-Dowell submits that indemnity costs should be awarded on the basis that the Trustees’ opposition to the scheme was hopeless or totally without merit for the following reasons:
(a)The Trustees had previously accepted that the proposed scheme was fair when they had agreed to support the scheme in November 2019 and nothing had happened since that time to undermine the fairness of the scheme. There was no proper basis for avoiding the 2019 settlement as the three reasons advanced by the Trustees for avoiding the settlement
11 Judgment at [150].
12 At [355]–[357].
(frustration, settlement conditional upon specific like-for-like repairs and material change in circumstances) were hopeless.
(b)It was not procedurally open to the Court to consider the Trustees’ alternative schemes, and the Trustees’ conduct in only serving their own scheme after the hearing had commenced meant that significant trial time and resources were wasted.
(c)The Trustees’ key allegations, namely impropriety by the Body Corporate requiring the appointment of an administrator, were never put to the relevant witnesses.
(d)The Trustees only explained what they wanted to happen to their unit during the trial.
[37] Mr Orpin-Dowell also submits that indemnity costs are appropriate because the Trustees opposed the scheme for an ulterior purpose: having failed to acquire common property under a development agreement with the Body Corporate, the Trustees’ proposed alternative scheme was an attempt to compulsorily acquire that property without paying compensation.
[38]Mr Bigio responds to those submissions as follows:
(a)Leaving aside whether the Court was able to grant specific performance of the 2019 agreement, in the highly unusual circumstances of the Trustees having their unit decommissioned and the costs of doing so charged to them (neither was on the table in 2019) it is understandable that the Trustees would now take a different approach. Mr Bigio says the Trustees may not have succeeded in their argument but it was in no way frivolous or vexatious.
(b)Mr Bigio takes issue with the Court’s finding that the alternative wording proposed by the Trustees was in effect a cross application rather than a submission and he says this will be a matter for the Court
of Appeal to consider. But in any event Mr Bigio submits that it is not justified to characterise the Trustees’ proposal as vexatious or frivolous.
(c)As to whether allegations were not put to relevant witnesses, Mr Bigio submits having reviewed the evidence, there was no breach of s 92 of the Evidence Act 2006. Further, on the issue of impropriety Mr Bigio notes that the Court upheld two of the Trustees’ complaints about the conduct of the chairperson of the Body Corporate.
(d)The Trustees did explain what they wanted to happen (namely enclosure of the level 9 deck) prior to the trial. There was support for that proposal by experts and accordingly there is nothing vexatious or hopeless about the proposal.
[39] As to the submission on behalf of the Body Corporate that the Trustees opposed the scheme for an ulterior purpose, Mr Bigio refers to the Court’s finding that the Trustees were effectively opposing the scheme because they did not achieve a development agreement.13 Mr Bigio submits that is different from opposing the scheme for an ulterior motive. He says the Trustees were transparent as to why they were opposing the scheme.
[40] Finally, Mr Bigio refers to my statement that schemes are not designed to be punitive in nature or for resolving old grievances.14 Mr Bigio submits that in considering the application for indemnity costs, that statement is relevant.
[41] The HCR provide that indemnity costs may be ordered if a party has acted “vexatiously, frivolously, improperly, or unnecessarily” during the proceeding.15 The threshold is a high one. Exceptionally bad behaviour is required. The misconduct must be flagrant.16
13 Judgment at [118].
14 Judgment at [333].
15 At r 14.6(4)(a).
16 Body Corporate 208203 v ANZ, above n 9, at [28].
[42] The Court of Appeal has recognised an inexhaustive list of circumstances where indemnity costs may be justified:17
(a)the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;
(b)particular misconduct that causes loss of time to the court and to other parties;
(c)commencing or continuing proceedings for some ulterior motive;
(d)doing so in wilful disregard of known facts or clearly established law;
(e)making allegations which ought never to have been made or unduly prolonging a case by groundless contentions, summarised in French J's “hopeless case” test.
[43] I accept Mr Bigio’s submission that there is a significant difference between an argument which does not succeed and an argument that is frivolous, vexatious or improper. Even taking all of the findings I made in favour of the Body Corporate together, they do not add up to impropriety. The high threshold for indemnity costs is not met.
[44] Mr Bigio makes various submissions regarding the legal fees claimed by the Body Corporate and expert witness costs as part of the Body Corporate’s application for indemnity costs. Given that the threshold for indemnity costs is not met, it is not necessary to consider those submissions, at least in this context (it will be necessary to refer to expert witness fees later in the judgment).
Does the conduct of the Trustees justify increased costs?
[45] I will address the positions for the Body Corporate and the Subsidiary Body Corporate separately as there is a prior issue in relation to the Subsidiary Body Corporate.
17 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [29] citing Hedley v Kiwi Co-operative Dairies Ltd (2002) 16 PRNZ 694 (HC) at [11]; and Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 232–234.
Body Corporate claim for increased costs
[46] The Body Corporate makes an alternative claim for increased costs and relies on the same factors as set out in [36] above. In addition, Mr Orpin-Dowell submits that by abandoning their argument that the Court needed to determine the scope of repair works, the Trustees’ conduct of the case materially added to the Body Corporate’s costs. It is submitted that from the time of Davison J’s decision18 onwards, including at the hearing before Muir J,19 the Trustees prepared their case on the basis that the Court needed to determine the repair work which needed to be carried out at levels 4 to 10. Mr Orpin-Dowell says the Trustees abandoned this argument at trial but nevertheless proceeded to call all briefed evidence relating to the scope of repair. Mr Orpin-Dowell submits that the Trustees running the case in this way significantly added to the Body Corporate’s costs of preparing for trial.
[47] In response Mr Bigio submits that the Trustees’ notices of opposition dated 13 October 2021 and 24 February 2023 make no allegation that the Court needed to determine the scope of repair.
[48] Mr Bigio also submits that the Body Corporate’s claim of increased costs is not made on a step-by-step basis as required by the Court of Appeal decision in Holdfast NZ Ltd v Selleys Pty Ltd.20 Rather, he submits that the Body Corporate simply nominates 2B scale costs for every step and then proposes an arbitrary 30 per cent uplift across the board.
[49] Rule 14.6 of the HCR relevantly provides as follows in relation to increased costs:
14.6 Increased costs and indemnity costs
…
(3) The court may order a party to pay increased costs if—
…
18 Body Corporate 126001 v Hannam [2021] NZHC 2307, (2021) 22 NZCPR 662.
19 Body Corporate 126001 v Hannam [2022] NZHC 2746.
20 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [43]–[45] and [48].
(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
…
(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or
…
(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.
…
[50] That the Trustees’ arguments failed, is insufficient in itself to justify increased costs. Otherwise, every losing party would be liable for increased costs and that is not the case. The key arguments for the Trustees were that events since the 2019 settlement justified their taking a different position now. I did not accept those submissions, so to that extent it could be said they lacked merit, but their failure does not have the flavour that would warrant increased costs.
[51] I turn to the submission on behalf of the Body Corporate that at trial the Trustees abandoned their argument that the Court needed to determine the scope of repair work carried out at levels 4 to 10. In support of that submission Mr Orpin- Dowell refers to the judgment at [55] and [56]. For context I set out the preceding two paragraphs as well as the paragraphs relied on:
[53] … I bear in mind the Body Corporate carries the burden of satisfying the Court that the scheme it proposes should be settled.
[54] It is important to also set out at this point what the Court does not need to decide. The Court received a large amount of evidence in the form of affidavits, cross-examination of some of the deponents, and reports commissioned at various times since 2001 by both the Body Corporate and the Trustees which addressed issues such as the state of the cladding on the building and various aspects of damage to the building. As well, there are emails and minutes of meetings on these issues.
[55] However, the Court does not need to determine the scope of repair works to be carried out, including whether levels 4 to 8 of the building need to be fully reclad now. The Body Corporate accepts that levels 4 to 8 will need to be reclad at some point. But whether that occurs now in connection with repairs to unit 900 or in the future is a matter for decision under the Body Corporate’s proposed scheme. Mr Bigio made it clear in opening submissions on behalf of the Trustees, and again in closing submissions, that the Trustees
are not insisting that levels 4 to 8 need to be reclad now. (I note this appears to be a change of position from the position adopted before Muir J in October 2022. At that time it appeared to be submitted that any works must include a reclad.)
[56] The current position, as acknowledged by the Body Corporate and by the Trustees, is that the decision as to whether levels 4 to 8 also need to be reclad will ultimately be one for the Council when evaluating an application for a building consent for work on levels 9 and 10.
(footnotes omitted)
[52] The reference in [55] quoted above, to the judgment of Muir J was the statement by the Judge that:21
… Mr Bigio says that since the time of the settlement, Hannam/Draper have undertaken further investigations into the condition of the building and say that any works must now include a reclad for which the cost allocation provisions in the deed they signed would not be appropriate.
[53] I did not read that quoted extract as the Trustees saying that the Court itself must determine the scope of repairs including a reclad. It was rather a submission that works must include a reclad now.
[54] While there appeared to be a change in that position at trial it was not a change from saying that the Court would be required to determine the scope of repairs including a reclad. That is perhaps a fine distinction, but a distinction nevertheless.
[55] I consider that both the Body Corporate and the Trustees can be criticised for the amount of expert evidence filed. No thought appeared to have been given to consolidating and refining all the expert evidence that had been filed in the course of this proceeding since 2017.
[56] For the above reasons I do not consider there to be a basis for awarding increased costs to the Body Corporate.
Subsidiary Body Corporate claim for increased costs
[57] There is a prior issue to be addressed and that is whether there should be a separate award of costs to the Subsidiary Body Corporate.
21 Body Corporate 126001 v Hannam, above n 19, at [20].
Should there be a separate award for the Subsidiary Body Corporate?
[58] Mr Bigio submits that the application by the Subsidiary Body Corporate for costs is unorthodox. The Trustees made no applications against the Subsidiary Body Corporate, nor did they oppose any application by the Subsidiary Body Corporate. Mr Bigio says there is no precedent for owners being awarded costs against each other in the context of a scheme application. He says this is a case where all owners are dealing with competing interests and have genuine differences as to how the issues should be resolved. He submits it is not appropriate to treat these owners as if they have engaged in civil litigation against each other and award costs.
[59] In the alternative Mr Bigio submits if the Court is prepared to entertain a costs application by the Subsidiary Body Corporate, there are two important factors to consider. First, the main Body Corporate’s position was aligned with the Subsidiary Body Corporate throughout. It was not necessary for the Subsidiary Body Corporate to be represented in Court for the duration of the two week hearing. Second, he says given the Subsidiary Body Corporate called no evidence, it could simply have given closing submissions or submissions in writing in support of its position.
[60] The overriding principle is that costs are at the discretion of the Court, and accordingly there is no rule preventing the courts from awarding costs to multiple parties.22 The HCR provide that the party who fails with respect to a proceeding should pay costs to the party who succeeds.23 A party is defined as any person who is a plaintiff or a defendant or a person added to a proceeding.24 A defendant is defined as any person served or intended to be served with a proceeding.25
[61]The closest guiding rule for the present situation is r 14.15, which provides:
14.15Defendants defending separately
The court must not allow more than 1 set of costs, unless it appears to the court that there is good reason to do so, if—
(a)several defendants defended a proceeding separately; and
22 High Court Rules, r 14.1.
23 High Court Rules, r 14.2(1)(a).
24 High Court Rules, r 1.3.
25 High Court Rules, r 1.3.
(b)it appears to the court that all or some of them could have joined in their defence.
[62] The Subsidiary Body Corporate had a unique interest in the application and in opposing the Trustees’ position. The Subsidiary Body Corporate has a joint unit entitlement of 52.4 per cent and comprises all units in the building which are not clad in the same cladding as the cladding at levels 4 to 10. Its unique interest arises from the fact that its members have already effectively paid for the significant upgrade of the lower levels (ground to level 3) including the replacement of the cladding on that part of the building. The position of the Trustees was in effect that they were requiring the Subsidiary Body Corporate to pay more than half of the costs associated with the remediation of the Trustees’ unit and with the recladding of the remainder of the building at level 4 and above.
[63] Further, Mr Bigio’s submission that it was unnecessary for counsel for the Subsidiary Body Corporate to be present in Court as the filing of written submissions would have been sufficient overlooks the approach adopted at the hearing on behalf of the Trustees. In the course of the hearing (as already noted above) the Trustees proposed what were significant amendments, to the extent that I referred to the Trustees’ proposal as “effectively a counter application”.26 I consider the conduct of the hearing justified the presence of counsel for the Subsidiary Body Corporate for the whole of the hearing.
[64] The submissions for the Subsidiary Body Corporate were appropriately focused on issues that affected the Subsidiary Body Corporate and the Court derived assistance from those submissions. Cross-examination by counsel for the Subsidiary Body Corporate was limited and appropriately focused.
[65] In the somewhat unusual circumstances of this case, I consider it is appropriate to make an award of costs in favour of the Subsidiary Body Corporate.
Should the Subsidiary Body Corporate receive an award of increased costs?
[66]I turn to consider whether increased costs are justified.
26 Judgment at [130].
[67] Mr Nilsson, counsel for the Subsidiary Body Corporate, submits the scheme that was eventually approved by the Court is identical to the one that the Trustees agreed to consent to as part of the settlement in 2019. The Trustees did not argue that the 2019 settlement agreement was in any way deficient. Instead, their position was that the settlement agreement had been frustrated by the Court order setting aside the original scheme order and that there had been a material change in circumstances which released them from any ongoing obligation. Mr Nilsson submits both arguments lacked merit.
[68] I have already effectively considered those arguments in the context of considering the main Body Corporate’s application for increased costs. There is nothing further that Mr Nilsson adds that persuades me that increased costs are appropriate in the case of the Subsidiary Body Corporate.
Should scale costs be awarded?
[69] Mr Bigio again relies on the submission (made in the context of the argument that a decision on costs should be deferred pending the appeal) that because of the involvement of WPA, the developer of the ground level to level 3, any scale costs in favour of either the main and/or Subsidiary Body Corporate will simply be passed on to WPA pursuant to the Deed of Settlement.
[70] I am not persuaded by that submission. The Body Corporate, as a successful party, is eligible for a costs award. The same applies to the Subsidiary Body Corporate. No payment of costs is made towards WPA. As I have already said, what the Body Corporate may or may not do with the costs funds after receiving them is irrelevant. Evidence that the Body Corporate has agreed to pay a third party using the costs funds does not diminish its entitlement to the costs funds itself.
Body Corporate claim for scale costs
[71] The Body Corporate’s claim for scale costs is set out in various appendices to counsel’s submissions. I reproduce two of those appendices as annexures to this judgment, relabelled as Appendix A27 and Appendix B.
[72] As is apparent from both appendices there are two separate time periods. Up to the end of June 2023 another unit owner also opposed the Body Corporate’s proposed scheme. Accordingly, the Body Corporate has (properly) attributed half of the scale costs and disbursements in that period to that unit owner and half to the Trustees. From July 2023 onwards the Body Corporate seeks 100 per cent of its claimed costs and disbursements from the Trustees.
[73] I note that in calculating scale costs, costs for trial preparation are claimed under Item 33B (which applies to the preparation for ordinary witness hearings) rather than Item 40 (which applies to preparation of written submissions in respect of originating applications). Mr Orpin-Dowell submits this reflects the fact that in substance this was a full defended conventional trial. I accept that submission.
[74] Mr Bigio makes the following submissions in relation to the scale costs claimed:
(a)there is no justification for any award of expert costs as there was no logical basis for the Body Corporate to call this evidence;
(b)the Body Corporate has claimed a number of steps which are not claimable or are in error:
(i)a case management conference (fourth item in Appendix A) was in fact a duty list appearance;
27 I note there are some calculation errors in the totalling on page 3 of Appendix A, as submitted by the Body Corporate. I have corrected for these errors in my calculation of costs below.
(ii)the Body Corporate’s priority fixture application (fifth to seventh items in Appendix A) was unsuccessful and no allowance is made for costs in favour of the Trustees;
(iii)the Body Corporate’s opposition to the Trustees’ application for access orders (last item on first page of Appendix A), was unsuccessful and no allowance is made for costs in favour of the Trustees; and
(iv)the Body Corporate claims full scale costs for preparation of briefs/affidavits filed before July 2023 and therefore they are not claimable on the Body Corporate’s own approach and no allowance is made for the fact that at least some of the evidence would have been required in any event.
[75] In relation to disbursements Mr Bigio submits that there are some significant disbursements which are unexplained or unjustified. The only example he provides is the Body Corporate claim of $1,529.22 for copying Mr Ferens’ photographs. Mr Bigio says they were already provided electronically and were of no assistance to the Court.
[76]I address each of the criticisms made by Mr Bigio in turn.
[77] First, in relation to the amount of expert evidence, I have already expressed my view at [55] above that both parties can be criticised for the amount of expert evidence filed. Having said that, it was necessary for the Body Corporate to file some expert evidence in support of its application for a scheme and additionally having regard to its position regarding costs apportionment.
[78] Then, having been served with expert evidence on behalf of the Trustees, the Body Corporate was faced with the need to file expert evidence in reply to respond to the Trustees’ experts.
[79] I consider that some reduction is, however, required to the claim for expert witness fees. I will reduce the claim by one third.
[80] The total of expert witness fees for the period before 1 July 2023 is $42,187.18. reduced by one third, the amount is $28,124.79 Half that amount is $14,062.39.
[81] For the period from 1 July 2023 the expert witness fees are $81,381.98. reduced by one third the amount is $54,254.65 Accordingly, the total expert witness fees that may be claimed is $68,317.04.
[82] As to the claim for a case management conference , Mr Bigio is correct that it was in fact a duty list appearance. A claim may be made under Item 12 (0.2 days), rather than under Item 13 (0.3 days). Accordingly, the proper amount for this item is
$478.00, rather than the claimed amount of $717.00.
[83] The next items challenged by Mr Bigio relate to the Body Corporate’s priority fixture application. I do not consider it is correct to say, as Mr Bigio does, that the application was unsuccessful. The Court had regard to the particular circumstances of the case which supported priority and accepted in principle “that this case should be heard in priority to other cases of the same or similar length and the Registrar should bear that in mind when allocating fixtures”.28 Accordingly, I allow the three items claimed (filing application, preparation of written submissions and preparation of bundle for hearing).
[84] The next item relates to the Trustees’ application for access orders (access by expert witnesses to units in the complex). The opposition by the Body Corporate was unsuccessful. I will disallow this claim. In addition, because costs on the application were reserved by Venning J29 and do not appear to have been addressed, I will make an allowance in favour of the Trustees of $5,616.50. This allowance is comprised of
$1,434.00 (0.6 days) for filing the application, plus $3,585.00 (1.5 days) for the preparation of written submissions, plus $597.50 (0.25 days) for attendance at the hearing. This amount will be deducted from the total scale costs I propose to award to the Body Corporate.
28 Body Corporate 126001 v Hannam [2022] NZHC 158 at [12].
29 At [35].
[85] As well, I reduce the claim for appearance at the hearing of the defended interlocutory application (first item at the top of page 2 of Appendix A) as the interlocutory application was in respect of both the priority fixture and access orders. Rather than 0.5 of a day, I approve 0.25 of a day. Instead of the claimed amount of
$1,195.00, the approved amount is $597.50.
[86] Finally, in relation to scale costs, I do not accept Mr Bigio’s submission that the Body Corporate has not divided up preparation of supporting affidavits and briefs in terms of its approach of making a distinction prior to and after June 2023. I accordingly allow the claim (first item on page 3 of Appendix A).
[87] As to disbursements, I propose to disallow the claim of $1,529.22 for copying Mr Ferens’ photographs. The hearing commenced on 25 September 2023 and on 21 September 2023 I made an order for an electronic courtroom and ClickShare to be utilised. Accordingly, I accept it was not necessary for Mr Ferens’ photographs to be colour photocopied.
[88]However, I propose to otherwise allow the claim for photocopying.30
Subsidiary Body Corporate claim for scale costs
[89] The Subsidiary Body Corporate’s costs calculations for scale costs are set out in Mr Nilsson’s table annexed as Appendix C to this judgment.
[90] As is apparent from the annexed table, costs are only sought on steps that post- date the original scheme order being set aside and after it became apparent that the Trustees would oppose the scheme.
[91] Like the Body Corporate, the Subsidiary Body Corporate makes its claim for costs relating to trial preparation under Item 33B rather than Item 40. I have already expressed my view that is appropriate when I was considering the Body Corporate’s application. It is similarly appropriate for the Subsidiary Body Corporate.
30 There are three items of photocopying claimed after my minute of 21 September 2023. One is for submissions. I accept that hard copy submissions were useful to the Court. The two other items are for minor amounts for items copied during the course of the hearing.
[92] I further note that the Subsidiary Body Corporate does not seek costs for second counsel (who appeared during opening and closing submissions).
[93] Mr Bigio submits that the steps and appearances claimed by the Subsidiary Body Corporate could have been handled by counsel for the main Body Corporate. He says this is a duplication of costs.
[94] I have already found that in the somewhat unique circumstances of this case it was appropriate for the Subsidiary Body Corporate to be separately represented at the hearing. I consider the same applies in respect of the steps leading up to the hearing.
[95] I approve the claim for scale costs totalling $53,416.50 for the Subsidiary Body Corporate.
Result and orders
[96] I have calculated total scale costs in favour of the Body Corporate in the sum of $83,112.25 which takes into account a deduction of $5,616.50 for the reasons set out in [84]. I award scale costs and disbursements in the sum of $170,534.12 (being costs of $83,112.25 and disbursements of $87,421.87) in favour of the Body Corporate against the Trustees.
[97] I also award scale costs of $53,416.50 in favour of the Subsidiary Body Corporate against the Trustees.
Gordon J
Appendix A
Scale Costs - Before 1 July 2023 - Part A Item
Description
Allocated days
Rate
Amount
Total
Originating Application under Part 19 HCR 37
Filing application and
supporting affidavits
2
2B
$2,390
$4,780.00
10
Preparation for first case
management conference
0.4
2B
$2,390
$956.00
11
Filing memorandum for first case management conference 0.4
2B
$2,390
$956.00
13
Appearance at first case management conference before Gordon J on 18
October 2021
0.3
2B
$2,390
$717.00
22
Filing interlocutory
application for priority fixture
0.6
2B
$2,390
$1,434.00
24
Preparation of written submissions for
interlocutory
application
1.5
2B
$2,390
$3,585.00
25
Preparation by applicant of bundle for hearing of interlocutory
application
0.6
2B
$2,390
$1,434.00
11
Filing memorandum for second case management
conference
0.4
2B
$2,390
$956.00
13
Appearance at second case management conference before Woolford J on 3
November 2021
0.3
2B
$2,390
$717.00
38
Filing note of opposition to access order dated 26 November 2021 2
2B
$2,390
$4,780.00
26 Appearance at hearing of defended interlocutory application for sole counsel before Venning J on 4 February 2022 0.5
2B
$2,390
$1,195.00
29
Sealing order for judgment given in interlocutory application 0.2
2B
$2,390
$478.00
11
Filing memorandum for third case management conference 0.4
2B
$2,390
$956.00
13
Appearance at third case management conference before Lang J on 31 May 2022 0.3
2B
$2,390
$717.00
11
Filing memorandum for fourth case management conference 0.4
2B
$2,390
$956.00
13
Appearance at fourth case management conference before Lang Jon 14 July 2022 0.3
2B
$2,390
$717.00
Total Costs Before 1 July 2023
$25,334.00
Total Costs Before 1 July 2023 uplifted by 30%
$32,934.20
Disbursements (excl. GST)
Filing fees I hearing fees $965.22 Photocopying $3,357.91 Office expenses $510.12 Preparation of Trial Bundle $360.24 Expert Witness Fees $42,187.18 Total disbursements excluding GST $47,380.67 Total costs and disbursements
$80,314.87
Scale Costs -After 1 July 2023 - Part B Item
Description
Allocated days
Rate
Amount
Total
Originating Application under Part 19 HCR 33
Preparation of briefs, list of issues, authorities, and agreeing common bundle (witness hearing) 8.75
2B
$2,390
$20,912.50
33A
Additional allowance for whichever party prepared
common bundle
0.5
2B
$2,390
$1,195.00
33B
Preparation for hearing
8.75
$2,390
$20,912.50
42
Appearance at hearing before Gordon J for principal counsel 10
2B
$2,390
$23,900.00
43
Appearance at hearing before Gordon J for second counsel if
allowed by court
5
2B
$2,390
$11,950.00
Total costs after 1 July 2023 $78,870.00 Total costs after 1 July 2023 uplifted by 30% $102,531.00 Disbursements (excl. GST) Filing fees / hearing fees $10,573.91 Photocopying $2,640.77 • Ferens’ photographs $1,529.22 • Useability element $121.74 • Other photocopying $989.81 Office expenses $1,195.62 Preparation of Trial Bundle $3,627.00 Expert Witness Fees $81,381.98 Total disbursements excluding GST $102,060.05 Total costs and disbursements after 1 July 2023 $202,294.69
Appendix B
Total of Scale Costs sought by Body Corporate
Elements of claim Amount (ex GST) Pre-July 2023 Scale costs $25,334.00 Expert witness fees $42,187.18 Other disbursements $5,193.50 Sub total $72,714.68 Reduce by 50% to reflect BC’s response to 37th respondent’s opposition $36,357.34 Post-July 2023 Scale costs $78,870.00 Expert witness fees $81,381.98 Other disbursements $18,037.30 Sub total $178,289.28 Total claim
(Pre and post July 2023)
$214,646.62
Appendix C
Schedule – costs calculations (Subsidiary Body Corporate)
Date
Item
Step
Band
Time
Allowance ($2,390)
25% uplift
4/10/2021
11
Memorandum of counsel (re parties)
B
0.4
$956.00
$1,195.00
18/10/2021
12
Appearance in Duty Judge's List
B
0.2
$478.00
$597.50
2/11/2021
11
Memorandum of counsel (re case management)
B
0.4
$956.00
$1,195.00
3/11/2021
13
Appearance at case management conference
B
0.3
$717.00
$896.25
26/11/2021
11
Memorandum of counsel (re inspection application)
B
0.4
$956.00
$1,195.00
4/02/2022
26
Appearance reserving rights (priority fixture and inspection hearing)
B
0.5
$1,195.00
$1,493.75
30/05/2022
11
Memorandum of counsel (re case management)
B
0.4
$956.00
$1,195.00
31/05/2022
13
Appearance at case management conference
B
0.3
$717.00
$896.25
13/07/2022
11
Memorandum of counsel (re case management)
B
0.4
$956.00
$1,195.00
14/07/2022
13
Appearance at case management conference
B
0.3
$717.00
$896.25
33B
Preparation for witness hearing
B
8.75
$20,912.50
$26,140.63
42
Appearance at Trial
10
$23,900.00
$29,875.00
Total
22.35
$53,416.50
$66,770.63
12
0