Body Corporate 188529 v North Shore City Council HC Auckland CIV 2004-404-3230

[2010] NZHC 2097

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2004-404-3230

BETWEEN  BODY CORPORATE 188529

First Plaintiff

ANDSTEPHEN ROBERT DEVLIN & ORS Second Plaintiff

ANDNORTH SHORE CITY COUNCIL First Defendant

ANDROBERT HENRY GRAHAM BARTON AND KAY BARTON

Second Defendants

ANDR F COUGHLAN & ASSOCIATES Third Defendant

Hearing:         23 November 2010

Counsel:         M Josephson and J McTavish Butler for Plaintiffs (except for

Michelle and Lisa Turner)
S C Price for Michelle and Lisa Turner
No appearance by or on behalf of First and Second Defendants
A Maclean for Third Defendant

Judgment:      23 November 2010

(ORAL) JUDGMENT (NO. 7) OF HEATH J

Solicitors:

Grimshaw & Co, PO Box 6646, Auckland
Minter Ellison Rudd Watts, PO Box 3798, Auckland
Heaney & Co, PO Box 105391, Auckland
Kidd Tattersfield Maclean, PO Box 40294, Glenfield, Auckland
Counsel:

A Maclean, PO Box 147422, Ponsonby, Auckland

BODY CORPORATE 188529 AND ANOR V NORTH SHORE CITY COUNCIL AND ORS HC AK CIV

2004-404-3230  23 November 2010

An application for costs

[1]      Following a lengthy hearing in the latter part of 2007, R F Coughlan & Associates (the designer) successfully repelled  all claims that had been brought against it by Body Corporate No 188529 (the Body Corporate) and many of the individual proprietors of units within the Sunset Terraces development.[1]

[1] Body Corporate 188529 v North Shore City Council [2008] 3 NZLR 479 (HC) at [487]-[554].

[2]      Subsequently I fixed costs.[2]   Notwithstanding the designer’s success, I made a 60% reduction on a 2B scale to reflect the fact that I saw him as having brought the proceedings on his own head, at least to some degree.[3]    The Body Corporate and individual  proprietors  appealed  against  the  substantive  judgment  against  the designer.[4]   On the other hand, the designer appealed against the costs judgment. [5] At least in part, each appeal was successful.

[2] Body Corporate 188529 v North Shore City Council HC Auckland CIV 2004-404-32430, 2 October 2008

[3] Ibid, at para [48].

[4] North Shore City Council v Body Corporate 188529 [Sunset Terraces] [2010] 3 NZLR 486 (CA).

[5] North Shore City Council v Body Corporate 188529 [2010] NZCA 234.

[3]      One of the individual proprietors, Mr Devlin, was successful in his claim against the designer, but my decision was upheld in respect of others and the Body Corporate.[6]   On the costs appeal, the Court of Appeal determined that I had erred in failing to follow the principle that the fixing of costs should be expeditious and predictable and in reducing costs when that was not appropriate.   The Court of Appeal   remitted   aspects   of   costs   raised   on   the   appeal   generally   for   my consideration.[7]   In other respects, formal orders were made by the Court of Appeal to which I shall return.

[6] North Shore City Council v Body Corproate 188529 [Sunset Terraces] [2010] 3 NZLR 486 (CA) at paras [111]-[129] (Baragwanath J), paras [187]-[203] (William Young P). Arnold J (at para [205]) agreed with the reasons given by William Young P.

[7] North Shore City Council v Body Corporate 188529 [2010] NZCA 234.

[4]      Aside from the designer’s claim, there were two other questions of costs remitted for further consideration in this Court.   All extant questions of costs involving the North Shore City Council claims have been resolved.  No Court order

is necessary.   The appearance of counsel for the Council at today’s hearing was excused.

[5]      The other question relates to claims made by Blue Sky Holdings Ltd (in liq), as trustees of the Auckland Residential Property Trust.[8]     However, the Supreme Court granted leave for the Council to appeal against entry of judgment against it in favour of the Blue Sky claimants.[9]   Questions of costs in this Court, while remitted to it by the Court of Appeal, have been deferred pending the Supreme Court’s decision on that appeal.

The designer’s costs claims

[8] Ibid at para [4].

[9] North Shore City Council v Body Corporate188529[2010] NZSC 79.

[6]      For reasons set out in my judgment of 2 October 2008,[10]  I held that the designer was entitled to reduced costs.[11]   As foreshadowed earlier, the reduction was made because I considered it was appropriate for the designer to be joined and it was clear  from  the  evidence  that  his  work  fell  below  an  acceptable  standard  for  a

development of this type.

[10] Body Corporate 188529 v North Shore City Council HC Auckland CIV 2004-404-3230, 2 October 2008. 

[11] Ibid [48].

[7]      However, that is an approach with which the Court of Appeal disagreed.  So, I leave it to one side for the purpose of assessing the questions of costs that now arise as between the designer and the unsuccessful Body Corporate and proprietors, other than Mr Devlin.

[8]      I record that an application by the remaining individual proprietors for leave to appeal to the Supreme Court against the dismissal of claims against the designer, was refused.[12]

[12] Halford and Blue Sky Holdings Ltd (in liq) v R F Coughlan & Associates [2010] NZSC 80.

[9]      In a supplementary judgment given on 4 June 2010,[13] the Court of Appeal set aside the reduced order for costs.  Instead, the Court declared that the designer was

[13] North Shore City Council v Body Corporate 188529 [2010] NZCA 234

entitled  to  16/17ths  of  his  costs,  assessed  on  a  2B  basis  in  this  Court.[14]      The reduction of 1/17th was made to recognise that Mr Devlin had succeeded against the designer, on appeal.[15]   The Court was also mindful that it would be necessary for me to fix costs in favour of Mr Devlin in this Court.[16]

Analysis

[14] Ibid, at para [14]; see also Formal Order C.

[15] Ibid, at paras [14] and [15].

[16] Ibid, at para [15].

[10]     I had the benefit of written submissions from counsel on questions of costs relating to the designer prior to today’s hearing.  I thank them for those submissions. I have also heard orally from counsel this morning.

[11]     The starting point must be the Court of Appeal’s decision of 4 June 2010.  In discussing the costs to which the designer was entitled on the unsuccessful claims against him, the Court of Appeal said:

[14] The designer is entitled in the High Court to 16/17ths of costs assessed on the 2B basis adopted by the Judge.

[15] That costs order is made against the Body Corporate and all of the owners except Mr Devlin. Mr Devlin is entitled to his costs against the designer in the High Court. We remit the issue of their quantum to Heath J for determination in the light of this judgment.

[12]     As I read the Court of Appeal’s judgment, it has already made an order that the Body Corporate and all owners (except Mr Devlin), pay costs to the designer on a 2B basis calculated, as 16/17ths of those costs.

[13]     The question of Mr Devlin’s costs is something that was remitted to me for my consideration in light of the terms of the Court of Appeal’s judgment.

[14]     Reading the two paragraphs to which I have referred in that way, is consistent with  Formal  Order  C  of  the  Court  of  Appeal’s  judgment  in  which  a  general remission of costs in the High Court was remitted to this Court for consideration.

[15]     There is no basis on which I can go behind the Court of Appeal judgment. The order for costs made in favour of the designer must stand.  Because costs are awarded on a joint and several basis unless the Court otherwise orders,[17] the Court of Appeal must also be taken to have ordered the 16/17ths of costs on that basis.

[17] High Court Rules, r 14.14.

[16]     In taking that view, I am mindful of the difficulties that have been raised by Mr Josephson about changes of owners and membership of the Body Corporate.  I am also mindful of the points raised by Mr Price, on behalf of Michelle and Lisa Turner, who are now separately represented.

[17]     In terms of any agreements for sale and purchase of individual units, I do not know whether any particular arrangements have been made to cover contingencies with regard to costs as between vendors and purchasers.  Nor have I received any evidence about the existence or otherwise of a cost sharing agreement, in relation to the proceedings that were originally taken.  Even if I had the right to go behind the Court of Appeal order, I would not have done so as a matter of discretion.

[18]     The situation with regard to Mr Devlin’s costs have also been the subject of argument.  Mr Josephson submits that costs on a 2B basis should be ordered on a calculation representing 1/17th  of those costs.   Mr Maclean submits that a lesser order should be made, having regard to the relatively modest amount recovered by Mr Devlin and the relatively little time that was taken in presenting this part of the case in the context of a lengthy hearing dealing with many other issues.

[19]     As the judgment of the Court of Appeal currently stands, judgment has been entered against the designer in the sum of $65,000 and the Court has made it clear that it would expect the designer and the Council each to bear 50% of those damages.[18]

[18] North Shore City Council v Body Corporate 188529 [Sunset Terraces] [2010] 3 NZLR 486 (CA) at para [129].

[20]     The  calculation  of  costs  payable  to  Mr  Devlin  on  the  basis  of  a  1/17th assessment of costs on a 2B basis would be approximately $19,000 inclusive of disbursements.     I  propose  to  make  a  global  order  inclusive  of  costs  and

disbursements which will reflect the much lesser time spent on his case, in the High Court.    A  global  order  is  made  in  favour  of  Mr  Devlin  personally against  the designer in the sum of $12,500, inclusive of disbursements.

Result

[21]     In summary,

a)       Costs are awarded in favour of the designer, on a joint and several basis, against the Body Corporate and all of the individual owners who  brought  the  claim,  other  than  Mr  Devlin.    Those  costs  are assessed on a 16/17th  share of an assessment based on a 2B scale. Disbursements are also ordered.  All costs and disbursements shall be fixed by the Registrar.

b)Costs are awarded in favour of Mr Devlin, in the sum of $12,500 inclusive of disbursements, against the designer.

[22]     Mr Price for Michelle and Lisa Turner has pointed to the potential injustice that might arise if there were no ability for individual proprietors to seek contribution as between themselves, particularly in the event that the Body Corporate does not meet the claims for costs made by the designer directly.  To meet that issue, I reserve leave for any individual owner against whom an order for costs has been made to apply for a contribution as between themselves, in the event that the Body Corporate fails to meet claims made on it by the designer under the orders  made in the Court of Appeal.

[23]     Mr Maclean has also raised issues in relation to a charging order and stay with which I dealt in my judgment of 11 February 2009.[19]   I agree with Mr Maclean that  those  orders  should  remain  in  place  pending  the  outcome  of  the  Supreme Court’s judgment on the extant appeal, which was argued earlier this month.  Leave

continues  to  be  reserved  to  apply  at  short  notice,  in  case  any  unforeseen developments occur.

[19] Body Corporate 188529 v  North Shore City  Council HC  Auckland CIV 2004-404-3230, 11

February 2009.

[24]     Mr Josephson informs me that, of moneys currently held by the Council which are subject to the charging order, $10,000 has been contributed by Mr Devlin, who now has no liability for costs.

[25]     Rather than make any order in that regard today, I leave it to Mr Maclean and Mr Josephson to explore that issue further.   If agreement were reached, a consent memorandum  may  be  put  before  me  and  I  will  make  an  appropriate  order. Otherwise, counsel could ask the Registrar to see me in chambers at short notice to

discuss the outstanding issue.

P R Heath J