Body Corporate 198072 v Bank of New Zealand
[2020] NZHC 1341
•15 June 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2010-404-2932
[2020] NZHC 1341
BETWEEN BODY CORPORATE 198072
First Applicant
AND
TY MAWR INVESTMENTS LIMITED
Second Applicant
BANK OF NEW ZEALAND
First RespondentAUSTRALIA AND NEW ZEALAND GROUP LIMITED
Second Respondent
Hearing: On the papers Judgment:
15 June 2020
JUDGMENT OF DUFFY J
This judgment was delivered by me on 15 June 2020 at 4.00 pm pursuant to
Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Solicitors:
Grove Darlow & Partners, Auckland Conveyancing Centre, Auckland Katerina L Wendt, Barrister, Auckland
BODY CORPORATE 198072 v TY MAWR INVESTMENTS LIMITED [2020] NZHC 1341 [15 June 2020]
[1] The applicant for further directions, Ms Smith, and the respondent, the Body Corporate, each seek costs orders against each other.
Background
[2] This proceeding commenced as an application for approval of a s 48 scheme pursuant to the Unit Titles Act 1972 to remediate a residential building complex known as the Columbia Apartments, which is situated at 50 Nelson Street Central Auckland. The application was heard and granted by Allan J on 30 May 2011.1 The judgment included provision for the parties to apply to this Court for leave for further directions, should the need to do so arise.
[3] A dispute subsequently arose between the tenth respondent Vanessa Smith on the one part and the Body Corporate and the ninth respondent Craig Leishman on the other part regarding who was liable for costs of reinstating a patio garden courtyard (the courtyard) that Ms Smith had created for her unit (Unit 1Q). Accordingly, Ms Smith returned to this Court in reliance on the leave reserved to her and applied to this Court for directions. Her application was heard on 10 February 2016.
[4] On 28 July 2016 I delivered a judgment in which I made an order essentially directing that reinstatement of the courtyard was part of the scheme governing the remedial works to the buildings in the Columbia Apartments.2 At [62] of the judgment I gave leave to Ms Smith to seek further directions on the scope of the reinstatement works that would need to be done before a clear idea could be had as to how the courtyard would be remediated. This was because no specific orders relevant to reinstatement could be made before expert advice on this topic was obtained.3 Ms Smith was awarded costs to recognise the success she had enjoyed to that time.4
1 Body Corporate 198072 v Bank of New Zealand HC Auckland CIV-2010-404-2932, 30 May 2011 at [132].
2 Body Corporate 198072 v Bank of New Zealand [2016] NZHC 1731 at [60]; through a typographical error the relevant paragraph refers to [57](a) of the judgment when the relevant paragraph is [59](a). This is clear from the judgment because [57] has no subparagraph (a) whereas [59] does. The error has caused no-one any difficulty in interpreting the judgment and I see no basis for correcting it now pursuant to the slip rule.
3 See [38] and [41] of the above judgment.
4 Body Corporate 198072 v Bank of New Zealand [2016] NZHC 2979.
[5] Regrettably a dispute then developed between Ms Smith and the Body Corporate relating to the expert advice and how it should be implemented. This culminated in a further hearing before me on 24 and 25 May 2017. The experts called by the parties gave evidence and it became clear to all that further work needed to be done. Accordingly the hearing was adjourned part heard. On 25 May 2017 I issued a minute recording the outcome so far. At first instance an expert engaged by Ms Smith was to carry out work on what I described in the minute of 25 May 2017 at [1] as “Option A”. Ms Smith was initially to bear the cost of this work. However, whoever ultimately paid for this work was to be determined by me if the parties could not reach agreement. Leave was reserved to the parties to have the adjourned hearing brought back before the Court. The proceeding was also listed for mention in the Duty Judge list on 28 August 2017.
[6] Ms Smith engaged Reveal, as experts to work on Option A. When they commenced this work, they became perturbed about the weatherproof quality of aspects of the general remediation work carried out by the Body Corporate. Reveal refused to guarantee the work it would have performed to implement Option A, or some modification of it if agreed by all or approved by me. Reveal’s concerns resulted in the Body Corporate undertaking further investigations, which went beyond remediation of the courtyard. The re-commencement of the hearing was postponed while various investigations and actions were carried out.
[7] The matter did not return to this Court until June 2018 when there was a telephone conference. The minute I issued records the parties were closer to agreement. Ms Smith had provided a proposed reinstatement plan and the Body Corporate’s counsel anticipated the Body Corporate would be responding to that proposal shortly. I scheduled a further telephone conference for 12 September 2018. The minute issued on that date records the parties were essentially agreed on all matters except costs. However, their measure of agreement had not reached the point where I could make orders by consent. Accordingly, I directed the registry to allocate a two day fixture. I directed there was to be a telephone pre-trial conference 15 working days before the fixture date. A fixture was scheduled for 17 June 2019. In early 2019, there was an exchange of memoranda between counsel which revealed
they were essentially agreed, but not to the point where I could make orders by consent. Costs appeared to be a sticking point.
[8] On 28 May 2019 I issued a minute which confirmed the fixture on 17 June 2019 would proceed. That prompted a further exchange of memoranda between the parties in which both parties expressed the view the matters in dispute between them relevant to remediation issues were moot. However, the Body Corporate remained concerned about costs. I considered I had insufficient information to inform me reliably, such that it was appropriate the fixture be vacated. I requested further information. This prompted the parties to file a joint memorandum, which led to me vacating the trial fixture. The parties had by then made it clear that costs were the only outstanding issue between them.
The costs sought
[9]Ms Smith seeks 2B costs of $23,415, expert and other disbursements of
$33,752.43 (including GST). The expert invoices of Reveal, who were engaged to prepare reinstatement plans and specifications, total $18,715.56 including GST. Alternatively, she submits that costs should lie where they fall but on the basis the Body Corporate is ordered to pay expert costs for preparing plans/specifications for the remediation as the Body Corporate has accepted and used those plans.
[10] The Body Corporate seeks costs at scale 2B for events after 22 September 2016 uplifted by 30 per cent, or costs at scale 2B for events after that date, or for costs to lie where they fall.
The approach to an award of costs
[11] The starting point here is that each party seeks costs against the other in the context where the substantive proceeding between them was discontinued before any judicial decision was made on its merits.
[12] The first hearing before me on 10 February 2016 resolved the matters then in issue and I made costs orders against the Body Corporate on 9 December 2016. The matters for which costs are now sought follow the steps taken since I delivered
judgment on 28 July 2016 up to the time the scheduled fixture on 17 June 2019 was vacated on 14 June 2019, owing to the substantive dispute between the parties being resolved.
[13] The essential effect of the judgment I delivered on 28 July 2016 was that the Body Corporate was directed that it must reinstate the courtyard. How the reinstatement was to be carried out depended upon what was then possible given the other remediation work that had taken place. The parties were unable to resolve as between themselves how the remediation of this courtyard would be done. This is what led to Ms Smith’s return to this Court in 2017. By then the focus of the parties dispute was how the reinstatement would be carried out. This was a separate issue from those determined in the 28 July 2016 judgment. The issue remained live until the proceeding was effectively discontinued in June 2019 by the vacation of the fixture date.
[14] Accordingly, I am satisfied that the proper approach to take here is that adopted when a proceeding is discontinued before it goes to trial. The general rule set out in r 15.23 of the High Court Rules 2016 is that unless the defendant otherwise agrees or the Court otherwise orders a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.
[15] The present proceeding is an originating application. However, I do not see that as being a reason to depart from the general rule set out in r 15.23. It was Ms Smith who brought the application for further directions following delivery of my judgment of 28 July 2016 and accordingly I view her as being analogous to a plaintiff for the purposes of r 15.23. I view the Body Corporate as analogous to a defendant for the purpose of that rule.
[16] It follows therefore that on a general application of r 15.23 Ms Smith, being the party who discontinued her application and given the absence of agreement with the defendant, is the party who would be liable to pay costs to the Body Corporate.
[17] However, there is room for departure from the general rule. The following principles are relevant. First, the presumption in r 15.23 obviates any requirement for the Body Corporate to demonstrate that Ms Smith acted unreasonably in commencing and then discontinuing the present application. In this regard the Body Corporate has the advantage of the presumption even when there has not been unreasonableness.
[18] Secondly, the general presumption can be displaced if the Court finds there are circumstances which make it just and equitable that it should not apply. Factors that are relevant to the Court’s consideration in this regard are:5
(a)the Court will not consider the merits of the respective cases unless they are so obvious that they should influence the costs outcome;
(b)the Court will consider the reasonableness of the stance of both parties up to the point of discontinuance; whether it was reasonable for Ms Smith to bring and continue her application and for the Body Corporate to oppose the application. She will not be able to avoid the presumption by showing that at one point she had reasonable grounds for believing she would be successful in the proceeding; and
(c)the reason for discontinuing may be relevant, for example a change of circumstances rendering the proceeding unnecessary. However, it must be clear that Ms Smith would have succeeded had the circumstances not changed.
[19] The Court’s general discretion in r 14.1 as to costs can override the general principles relating to discontinuance.
Analysis
[20] The Body Corporate seeks costs in line with the general approach following the discontinuance of a proceeding.
5 See Robert Osborne (ed) McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR15.23.01].
[21] Ms Smith’s costs application is implicitly a request that I depart from the general approach following a discontinuance. I shall consider her application first.
[22] This is not a circumstance where I consider the merits of one party’s case are so obvious they should influence the costs outcome. At the time the hearing was adjourned in 2017 the parties were still polarised, although it appeared that one option with modification, offered a potential solution. The hearing was adjourned to enable experts to consider that. Ms Smith engaged Reveal. At some point Option A or a modification thereof was abandoned; I do not have a clear evidential picture of what transpired. From the memoranda filed in support of this application I have the impression that for some reason Option A could not proceed in any form. The parties are now agreed on a way to remediate the courtyard. The Body Corporate considers this way is much the same as the Option B it advocated at the hearing in 2017. Ms Smith does not.
[23] Whether the work now being done to everyone’s agreement is Option B, a modification of Option B or something else altogether is not something I can determine on the papers the parties have presented in support of their respective costs applications. Such factually disputed matters can only be properly resolved after hearing evidence and argument from the opposing parties. Such an approach is not appropriate in the present context. This is a case where the merits are not obvious and therefore it would be wrong to attempt to ascertain them given the strictures of a costs application that is being dealt with on the papers. Accordingly, the costs applications will be approached by considering the principles set out at [18] (b) and (c) above.
Reasonableness of conduct of litigation
[24] Something to be borne in mind is the comments made by Palmer J in his minute dated 25 November 2015, when Ms Smith first sought leave, then reserved by Allan J in his judgment of 30 May 2011, to bring an application relating to the remediation of the courtyard. Because the remediation costs for the courtyard were anticipated to be around $33,180 (GST inclusive) Mr Leishman, who as ninth respondent was opposing the application, suggested it be dealt with in the Tenancy Tribunal. Ms Smith however chose to pursue her rights to seek leave of this Court.
[25] The judgment Ms Smith obtained on 28 July 2016 recognised her entitlement to have the courtyard remediated as part of the general remediation work to be undertaken by the Body Corporate. It essentially entitled her to have the courtyard remediated at the Body Corporate’s costs to a version that was as close as was reasonably possible to the original version, given the need to ensure any such works did not harm the general remediation works that had been undertaken following the destruction of the original courtyard. She then faced difficulties implementing that entitlement. No-one has addressed whether the Tenancy Tribunal would have provided an alternative forum to obtain relief to enforce that entitlement. For that reason, I will proceed on the basis her return to this Court in 2017 was a reasonable step for her to take.
[26] The impression I gained of the parties’ conduct up to and at the hearing in 2017, was that each party was maintaining their respective preferred positions. These seemed to me to be Ms Smith wanted the courtyard reinstated to much the same as it had been before the Body Corporate commenced the major remediation work for the building complex. On the other hand, the Body Corporate wanted to do as little as possible in terms of costs to remediate her courtyard, such that from Ms Smith’s perspective the outcome would have been nothing like the former courtyard.
[27] It was not until the parties were before the Court and their experts had participated in an experts’ conference that some clarity as to a way forward became apparent. This involved engaging an expert to explore whether what was known at the hearing as Option A could be modified to accommodate the parties’ respective concerns, which in turn required adjourning the hearing part heard. Both sides were agreeable to this. However, it was not until Ms Smith returned to Court that some movement on possible remediation options happened. Thus, Ms Smith achieved partial success insofar as further movement in progressing the remediation work was achieved, although not to the point where she obtained final Court orders. The Body Corporate also achieved partial success insofar as it did not find itself ordered by the Court to remediate the courtyard in accordance with a works plan that it did not want to implement.
[28] I consider therefore, that during the period following delivery of the 28 July 2016 judgment and up to the time the 2017 hearing was adjourned, Ms Smith acted reasonably in the conduct of this proceeding. The Body Corporate may have required the initial impetus of a resumed hearing to fix its mind on how it should conduct itself during this time frame, but once the matter was before the Court I consider it behaved reasonably, in that it was prepared to engage in a process that required further exploration of how to progress matters. The alternative would have been for the 2017 hearing to proceed to a conclusion with the Court ordering implementation of whichever of the then available remediation options best fitted the realities of the present situation. That may have resulted in an outcome that was in neither party’s best interests.
[29] It follows that I am satisfied that proceeding to Court in 2017 was reasonable and the degree of success Ms Smith achieved brings into balance a situation that would otherwise fall within the general presumption in r 15.23, favouring a costs award to the Body Corporate. Accordingly, I consider that for the period between delivery of the 28 July 2016 judgment and the adjournment of the 2017 hearing costs should lie where they fall.
Change of circumstances since 2017 hearing warranting discontinuance
[30] The remediation work that the parties have now agreed on for the courtyard cannot be seen to reflect on the reasonableness of their conduct earlier on. As already stated, I cannot in the context of an assessment of costs on the papers determine disputed issues as to what may have prompted either of them now to reach the measure of agreement that has been achieved.
[31] The steps taken in the proceeding since the adjourned hearing have involved no more than the exchange of memoranda to inform the Court of progress and to seek further time to resolve matters without the need for a Court hearing. I have had no substantial involvement in the proceeding during this time other than to make or approve specific case management steps, where essentially the parties sought to postpone a return to Court on the ground they were making progress towards a solution themselves.
[32] I consider each side has conducted itself reasonably here, and given the small sums involved relevant to legal costs, I am satisfied that other than the costs incurred for Reveal’s services, costs should lie where they fall for this portion of the proceeding as well.
[33] I consider it appropriate that the Body Corporate pay the costs of Reveal. The costs were essential to progressing a remediation which the Body Corporate was required to undertake. They have also benefitted from the work done by Reveal. In this regard I see Reveal’s costs as being different from the costs of experts engaged to provide expert evidence at the hearing in 2017.
[34] It follows that the views I have expressed herein also lead me to reject the applications each side makes for an award of costs in their favour, either at scale or with an increase.
Result
[35]The Body Corporate is to pay Ms Smith the costs of Reveal being a total of
$18,715.56 including GST. The costs and disbursements incurred by Ms Smith and the Body Corporate in relation to all other expenses (legal and otherwise) arising from and incidental to this litigation are to lie where they fall.
Duffy J
0
1
0