Body Corporate 172108 v Manchester Securities Ltd

[2019] NZHC 253

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-225

[2019] NZHC 253

BETWEEN

BODY CORPORATE 172108

Plaintiff

AND

MANCHESTER SECURITIES LTD

Defendant

Counsel:	J B Orpin-Dowell and T J G Allan for plaintiff M C Harris and H E McQueen for defendant
Judgment:	25 February 2019

COSTS JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[On the papers]

[1]                 In a judgment delivered on 14 December 2018 I dismissed an application by the defendant, Manchester Securities Ltd, for a stay (pending the conclusion of arbitral proceedings) of this proceeding, in which the plaintiff, Body Corporate 172108, seeks an order winding up Manchester Securities.1 I reserved costs.

[2]                 The Body Corporate now seeks costs. It contends that an order for indemnity costs is justified. Manchester Securities does not resist a costs order, but submits that scale costs on a 2B basis is the appropriate order.

[3]                 The Body Corporate is responsible for a 12-storey unit title complex known as Hobson Apartments in central Auckland. Manchester Securities is the owner of one of the  unit  titles.  There  is  a  dispute  concerning  the  responsibilities  of  the  Body Corporate  and  the  various  unit  title  holders,  most  particularly   Manchester Securities, for the costs of work carried out to remedy weathertightness

1      Body Corporate 172108 v Manchester Securities Ltd [2018] NZHC 3307.

BODY CORPORATE 172108 v MANCHESTER SECURITIES LTD [2019] NZHC 253 [25 February 2019]

issues in the building. The history of the litigation generated by this dispute has been described in detail elsewhere.

[4]For present purposes, it is sufficient to summarise it in the following terms:

(a)Initially, the dispute was as to the appropriate terms of a scheme pursuant to which remedial work was to be carried out. In February 2011, Heath J issued a judgment approving a scheme.2

(b)Circumstances changed and the Body Corporate sought a revision of the scheme. In March 2017, Fogarty J issued a judgment revising aspects of the scheme. In that judgment, Fogarty J ordered  Manchester Securities pay to the Body Corporate an interim sum of

$321,264.79 together with interest and costs.3

(c)Manchester Securities appealed. In November 2017, the Court of Appeal issued a judgment dismissing the appeal. In doing so, the Court reinforced Manchester Securities’ obligation to pay the interim sum immediately.4

(d)Manchester Securities sought leave to appeal to the Supreme Court. In March 2018, the Supreme Court refused leave.5

(e)When Manchester Securities did not pay, the Body Corporate served a statutory demand pursuant to s 290 of the Companies Act 1993.

(f)Manchester Securities applied to set aside the statutory demand. On 16 February 2018 Associate Judge Doogue issued a judgment declining to do so.6

2      Body Corporate 172108 v Meader HC Auckland CIV-2009-404-6868, 31 August 2010.

3      Body Corporate 172108 v Manchester Securities Ltd [2017] NZHC 329.

4      Manchester Securities Ltd v Body Corporate 172108 [2017] NZCA 527.

5      Manchester Securities Ltd v Body Corporate 172108 [2018] NZSC 19.

6      Manchester Securities Ltd v Body Corporate 172108 [2018] NZHC 169.

(g)Manchester Securities appealed. On 13 June 2018, the Court of Appeal dismissed the appeal.7

(h)Also, around this time, Manchester Securities initiated arbitral proceedings pursuant to a submission to arbitration contained in the Body Corporate’s Rules. As I understand it, these were directed at establishing the net amount that Manchester Securities was obliged to contribute to the costs of the remedial work after the deduction of set offs it was claiming. These arbitral proceedings have not progressed very far. A preliminary jurisdictional issue arose. That has been argued and the arbitrator has indicated that this award is available to be handed down on payment by the parties of his costs. Manchester Securities has paid its half share. The Body Corporate has not. So the outcome is unknown.

(i)The Body Corporate then commenced this proceeding seeking an order winding up Manchester Securities on the basis of its non-compliance with the statutory demands.

(j)Manchester Securities applied for an order staying the proceeding — the application I dealt with in my judgment of 14 December 2018.

[5]                 The Body Corporate seeks indemnity costs on two bases. First, it relies on s 124 of the Unit Titles Act 2010, which says in effect that levies properly fixed by a body corporate are recoverable as a debt along with any “reasonable costs” incurred by it in the collection process. Second, it says that, in any event, r 14.6(4) of the  High Court Rules 2016 entitles it to indemnity costs because Manchester Securities, in applying for a stay, acted “vexatiously, frivolously, improperly, or unnecessarily…”8 or “…ignored or disobeyed an order or direction of the court …”.9

[6]                 As Mr Harris submits on behalf of Manchester  Securities,  s  124  of  the Unit Titles Act applies exclusively to the recovery of levies and only a proportion of

7      Manchester Securities Ltd v Body Corporate 172108 [2018] NZCA 190.

8      High Court Rules 2016, r 14.6(4)(a).

9      Rule 14.6(4)(b).

the amount sought in this case is levies. The plaintiff’s rejoinder is that this is irrelevant because the costs incurred by the Body Corporate in opposing Manchester Securities’ application for a stay would have been incurred irrespective of whether the non-levy component of its claim were present. I am not convinced that is a complete answer. Section 124 can only apply to that proportion of the claim relating to levies. In my view, it would be inappropriate simply to apply it to the total costs of the claim on the basis that a proportion of the claim is for levies.

[7]                 Turning to the High Court Rules, the starting point is that, generally, costs orders are made in favour of successful litigants in accordance with r 14.2(1)(b) and by reference to the scales provided for — that is to say scale costs. It is only in exceptional cases that the court departs from scale costs, and even more exceptionally to the extent of awarding indemnity costs as sought here.

[8]Unquestionably, though, this case has some exceptional characteristics.

[9]                 Manchester Securities has been ordered by both this Court and the Court of Appeal to pay a sum certain to the Body Corporate immediately. It has ignored — or at least consciously failed to comply with — those orders. When served with a statutory demand, it sought to have this set aside. It was unsuccessful in this Court and the Court of Appeal. Against that background, when the Body Corporate commenced this proceeding for an order winding up Manchester Securities on the basis of its failure to comply with the statutory demand, it applied for an order to stay the proceeding on grounds which were, materially at least, the same as those advanced and rejected in its application for an order setting aside that statutory demand.

[10]              There is certainly a sense in which the application for a stay was unnecessary, given the near— if not complete — coincidence of issues raised by Manchester Securities’ application for an order setting aside the Body Corporate’s statutory demand and that application. However, the authorities indicate that the term “unnecessarily” is to be read together with the adjectives that precede it in the rule — “vexatiously”, “frivolously” and “improperly” — suggesting that it is necessary to

identify an element of impropriety.10 Examples are commencing or continuing a proceeding for some ulterior purpose, or in wilful disregard of known facts or clearly established law.11 The Court of Appeal has deprecated the approach that Manchester Securities is adopting to the resolution — or, rather, non-resolution — of the underlying dispute in this case, apparently electing to litigate every possible point through several courts so as to defer having to meet its obligations to the Body Corporate and its fellow unit title holders. The Court described this as “dilatory and prevaricating”.

[11]              In my judgment, against that background, it is not unfair to conclude that there is an element of impropriety in Manchester Securities continuing to refuse to comply with the orders made by this Court and the Court of Appeal, and applying for a stay of the proceeding that was always going to involve running arguments that were very similar to those it ran — unsuccessfully — in applying to set aside the statutory demand. On balance, my judgment is that the Body Corporate is entitled to be indemnified for the costs it incurred in opposing this latest application.

[12]              The authorities are clear that a party entitled to recover indemnity costs may recover only its actual and reasonable costs.

[13]              The Body Corporate says that its actual and reasonable costs and disbursements total $35,919.92. Manchester Securities does not question that the costs claimed were incurred by the Body Corporate, but contends that aspects of those costs are not reasonable and therefore not recoverable.

[14]              Insofar as the costs charged by its solicitors and counsel are concerned these consist of invoices from its solicitors totalling $8,012.50 plus GST and invoices from its counsel in respect of the hearing totalling $24,926.83 (including GST). Manchester Securities contends that there should be no allowance for second counsel at the hearing and that the Body Corporate’s costs relating to Mr Allan’s attendance as junior counsel ought to be deducted from the above figure. I disagree. In my view, the issues were

10     Saunders v Winton Stock Feed Ltd (2009) 19 PRNZ 342 (CA) at  [30];  and  Bradbury  v  Westpac Banking Corp [2009] 3 NZLR 400 (CA) at [26].

11     Bradbury v Westpac Banking Corp, above n 10, at [29].

sufficiently complex to justify the involvement of two counsel. Moreover, this is not a situation in which the Body Corporate’s solicitors engaged two counsel. It is a situation in which they engaged outside counsel and member of the firm that has had the carriage of the matter from day one acted as junior counsel. In my view the involvement of a member of the firm at the hearing was justified.

[15]              Manchester Securities says that, as the Body Corporate is registered for GST purposes, recovery of GST on the costs would be double recovery. The Body Corporate accepts that. The GST component on the costs will have to be deducted.

[16]              There is a difference  between  the parties  in relation to the  calculation of  Mr Orpin-Dowell’s invoices. As far as I can tell from the documentation, his fee notes total $20,328.00 exclusive of GST.

[17]              Manchester Securities challenges the claim made by the Body Corporate in respect of photocopying of $515.20. The Body Corporate has offered no explanation for the size of that figure. As Mr Harris submits, that seems high given that Manchester Securities, as the applicant, was responsible for the preparation of the documentation for the hearing. In the absence of any explanation, I accept that that figure ought to be reduced to $100.

[18]              Accordingly, on my calculations, the Body Corporate’s actual and reasonable costs (inclusive of both costs and disbursements) total $29,704.01 and I make an order that Manchester Securities pay that amount to the Body Corporate.

Associate Judge Johnston

Solicitors:

Grove Darlow & Partners, Auckland for plaintiff Gilbert Walker, Auckland for defendant