Body Corporate 172108 v Manchester Securities Limited
[2022] NZHC 2076
•19 August 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2009-404-6868
[2022] NZHC 2076
BETWEEN BODY CORPORATE 172108
Applicant
AND
MANCHESTER SECURITIES LIMITED
37th Respondent
CIV-2019-404-1445 BETWEEN
BODY CORPORATE 172108
ApplicantAND
MANCHESTER SECURITIES LIMITED
Respondent
Hearing: On the papers at Auckland Date of judgment:
19 August 2022
JUDGMENT OF POWELL J
[Costs – Application for joinder and application for leave to appeal]
This judgment was delivered by me on 19 August 2022 at 3.30 pm pursuant to R 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors/Counsel:
Grove Darlow & Partners, Auckland (T J G Allan) Core Legal Ltd, Masterton
J B Orpin-Dowell, Stout Street Chambers, Auckland K Sullivan, Port Nicholson Chambers, Wellington
BODY CORPORATE 172108 v MEADER & ORS [2022] NZHC 2076 [19 August 2022]
[1] On 3 March 2021 I dismissed an application by Robert Cummins to join longstanding proceedings in addition to or in substitution for Manchester Securities Limited (“the joinder judgment”).1 As I noted in the judgment:2
The proceedings in issue form part of a protracted and complex dispute over remediation carried out in respect of Hobson Apartments, a 12-storey apartment block located in Hobson Street, Auckland. Manchester is the legal owner of Level 12, which is constructed separately to the rest of the building and is “aesthetically and physically different”, with the only common property on the 12th floor being “the lift and stairwell shafts, ducts and a small recessed area at the rear on the eastern side”.
(footnotes omitted)
[2] In a subsequent judgment dated 30 March 2021 I granted Mr Cummins leave to appeal the joinder judgment and granted an application for interim relief which vacated a substantive fixture previously set down (“the leave judgment”).3
[3] Costs on the joinder judgment were reserved pending the final outcome of various directions made in the joinder judgment, whereas costs on the leave judgment were fixed on a 2B basis to be paid to the successful party on the substantive appeal.
[4] In the event Mr Cummins’ appeal against the joinder judgment was dismissed.4 The Court of Appeal concluded that Mr Cummins’ application for joinder without conditions and the subsequent appeal was an abuse of the Courts’ processes5 and indemnity costs were awarded against Mr Cummins on the appeal.6 A subsequent application by Mr Cummins to recall the decision of the Court of Appeal was declined,7 and indemnity costs were awarded on the recall application.8 Mr Cummins has since been declined special leave to appeal to the Supreme Court.9
[5] Against that background, costs in respect of both the joinder and leave judgments stand to be considered.
1 Body Corporate 172108 v Manchester Securities Ltd [2021] NZHC 365.
2 At [2].
3 Body Corporate 172108 v Manchester Securities Ltd [2021] NZHC 686.
4 Cummins v Body Corporate 172108 [2022] NZCA 68.
5 At [63].
6 At [68]–[70].
7 Cummins v Body Corporate 172108 [2022] NZCA 153.
8 At [25].
9 Cummins v Body Corporate 172108 [2022] NZSC 95.
Costs on the joinder judgment
[6] The Body Corporate seeks indemnity costs in the sum of $49,281.71, together with disbursements of $1,386.21, both sums being exclusive of GST. In the event indemnity costs are declined the Body Corporate seeks increased costs in the sum of
$30,739.01 (2B scale costs uplifted by 75 percent) plus disbursements.
[7] Mr Sullivan, on behalf of Mr Cummins, does not dispute costs are payable but disputes that indemnity costs are appropriate as well as the quantum sought. Although Mr Sullivan acknowledged that both this Court and the Court of Appeal concluded that Mr Cummins’ application to seek joinder while not taking legal title was an abuse of process, he nonetheless submitted that neither increased nor indemnity costs in terms of r 14.6 of the High Court Rules 2016 were appropriate in respect of the joinder application because:
(a)the Body Corporate’s opposition to Mr Cummins’ application for joinder was made for an ulterior motive: to achieve an undefended formal proof hearing in the substantive proceeding;
(b)Mr Cummins otherwise acted reasonably in making the application in the context of the proceedings, relying in particular on previous observations of the Court of Appeal to the effect that Manchester had a “clear and persuasive” claim to an equitable set-off and a “genuine dispute for arbitration purposes”; and
(c)the costs claimed by the Body Corporate are otherwise excessive.
Legal principles
[8] Rule 14.6(1)(b) of the High Court Rules 2016 defines indemnity costs as the “actual costs, disbursements, and witness expenses reasonably incurred by a party”. Rule 14.6(4) gives a Court a discretion to order a party to pay indemnity costs if:
(a)the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or
(b)the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or
(c)costs are payable from a fund, the party claiming costs is a necessary party to the proceeding affecting the fund, and the party claiming costs has acted reasonably in the proceeding; or
(d)the person in whose favour the order of costs is made was not a party to the proceeding and has acted reasonably in relation to it; or
(e)the party claiming costs is entitled to indemnity costs under a contract or deed; or
(f)some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.
[9] The leading authority on indemnity costs is the decision of the Court of Appeal in Bradbury v Westpac Banking Corporation.10 In particular, the Court noted in relation to the three broad approaches to costs:11
(a)standard scale applies by default where cause is not shown to depart from it;
(b)increased costs may be ordered where there is failure by the paying party to act reasonably; and
(c)indemnity costs may be ordered where that party has behaved either badly or very unreasonably.
[10] With regard to indemnity costs the Court recognised that the categories in respect of which the discretion to order indemnity costs are not closed, but identified a number of circumstances in which indemnity costs have been ordered:12
(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;
10 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400.
11 At [27].
12 At [29].
(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.
[11] In the High Court, the Judge had applied the test of hopelessness and of misconduct and observed that “if sustained on the evidence each was a proper basis for indemnity costs”.13
Are indemnity costs appropriate?
[12] The position of Mr Cummins regarding costs on the joinder judgment perpetuates a range of arguments made in the course of the joinder application and, prior to its liquidation, on behalf of Manchester in the course of the substantive proceedings.
[13] As I concluded, and as the Court of Appeal likewise found, notwithstanding Mr Cummins submission that opposition to the joinder application was misconceived, there was in fact no jurisdiction under either rules 4.50 or 4.52 of the High Court Rules 2016 for Mr Cummins to be joined to the present proceedings unless and until he took legal ownership of Level 12 from Manchester as he accepted he was entitled to do at any time. Had he done so the Body Corporate made clear it would not oppose the joinder, as it would have meant that the monies currently owing from Manchester to the Body Corporate would have had to have been paid on the transfer taking place. Given this position I simply do not accept that the Body Corporate had an ulterior motive in opposing the joinder application.
[14] On the contrary, there can be absolutely no doubt the decision by Mr Cummins to avoid taking legal ownership of Level 12 was a deliberate choice on his part, made in order to avoid paying the monies that the Courts have consistently held Manchester should pay regardless of the ultimate strength of any set off or counterclaim to which Manchester (or any successor in title) was entitled. As I noted in the joinder judgment:14
… I am satisfied that as Manchester remains in existence and continues to hold ownership of the property it remains properly joined into the proceeding. On
13 At [33].
14 Body Corporate 172108 v Manchester Securities Ltd, above n 1, at [13].
the other hand, given the history of the litigation between the parties, the attempt by Mr Cummins to be joined as a party only in his capacity as a trustee amounts to an attempt to continue to participate in the proceedings while continuing to attempt to delay payment of those sums that go with the ownership of the property and which the Courts have consistently directed be paid. As such I have no hesitation in concluding the same is an abuse of process and given those circumstances, I do not consider it is necessary or desirable that Mr Cummins be made a party at this time.
[15] It follows that Mr Cummins’ application could not succeed unless and until he took title to Level 12 and in the absence of legal title, persisting with the application amounted to a substantive abuse of process as the Court of Appeal also concluded.
[16] Therefore, in accordance with the Court of Appeal’s conclusion, indemnity costs on the application are appropriate.
Are the costs claimed reasonable?
[17] Bradbury v Westpac also provides the most assistance in determining what reasonable indemnity costs may be. The analysis of Harrison J, endorsed by the Court of Appeal, commenced by confirming that indemnity costs does not simply mean all costs incurred, but rather “the phrase ‘reasonably incurred’ envisages a degree of judicial oversight of awards of indemnity costs”.15
[18] In proceeding to fix indemnity costs, Harrison J analysed a number of documents provided by the successful party in that case including a “schedule of scale costs, a breakdown and analysis of actual costs and witnesses’ expenses and a thorough chronology of steps taken”.16 From these documents Harrison J ultimately reduced Westpac’s costs from the $1,683,571.15 claimed to $996,712.00. His Honour also significantly reduced the disbursements claimed by Westpac from $136,865.15 to
$60,979.25, including ruling out claims for payment for individual legal advice provided to witnesses.
15 Bradbury v Westpac Banking Corporation (2008) 18 PRNZ 859 (HC) at [205]. Harrison J was dealing with r 48C of the previous High Court Rules but this was cast in substantially the same terms as the present r 14.6 of the High Court Rules 2016.
16 At [210].
[19] On behalf of Mr Cummins, Mr Sullivan submits the amounts incurred by the Body Corporate are “eye watering and objectively unreasonable and disproportionate”.
[20] Other than a broad swipe at the amount of the costs claimed by the Body Corporate Mr Sullivan did not however provide any reasoning as to why the amounts claimed were objectively unreasonable. On the other hand, no issue was taken with the charge out rates claimed by either Mr Orpin-Dowell ($350/ hour) or Mr Allan ($500/ hour).
[21] Given this position it is difficult for me to assess the reasonableness or otherwise of the amounts claimed by the Body Corporate, although I agree on the face of it the claimed costs are significant for a single interlocutory application.
[22] Taking therefore a broad-brush approach and having regard to the calculations of scale costs undertaken by the parties I accept:
(a)the context to the application and in particular the ongoing attempts by Mr Cummins to avoid paying the amounts owing by Manchester necessarily informed the responses taken by the Body Corporate in relation to the joinder application, and necessarily required a thorough analysis of the litigation to date;
(b)as a result, a comprehensive response was required, more so given that Mr Cummins was self-represented until shortly before the hearing of the joinder application; and
(c)it was reasonable for both of the Body Corporate’s counsel to be involved in the response to the joinder application and attend the hearing on 11 September 2020.
[23] Other than that, the hearing lasted for one day and there were a limited number of relevant documents.
[24] In those circumstances I consider that costs in the total sum of $35,000 (exclusive of GST), together with the disbursements in the sum of $1,386.21 (also exclusive of GST), are reasonable as sought.
Costs on the leave judgment
[25] Costs on the leave judgment can be addressed more shortly. As noted, these were fixed on a 2B basis payable to the successful party on appeal.
[26] The only difference between the parties is therefore in calculation of the 2B costs:
(a)The Body Corporate calculates these at $6,472.78, including disbursements, on the basis that the hearing, which took place by telephone, lasted for approximately half a day and allowing for one day for the drafting of the submissions presented at the hearing.
(b)Mr Cummins generally agrees with the approach, save that it is submitted the hearing should be reduced to 0.25 days and the submissions were limited to 0.4 days, resulting in a costs calculation of
$4,182.50. No issue is taken with the disbursements claimed.
[27] Having reviewed the submissions and the Court records relating to the hearing I am satisfied that one day is appropriate with regard to the comprehensive submissions filed on behalf of the Body Corporate. Likewise, the Court taker’s notes record that the hearing totalled 2 hours and 32 minutes and therefore a half-day allowance for the hearing also reflects what occurred.
[28] I therefore fix costs on the leave application in favour of the Body Corporate at $6,472.78 (exclusive of GST).
Decision
[29] Mr Cummins is to pay costs and disbursements to the Body Corporate in the total sum of $42,858.99 made up as follows:
(a)Costs of $35,000 and disbursements of $1,386.21 (both exclusive of GST) on the joinder judgment; and
(b)Costs of $6,214 and disbursements of $258.78 (both exclusive of GST) on the leave judgment.
Powell J
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