Body Corporate 199380 v Cook

[2018] NZHC 2356

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2017-404-1852

[2018] NZHC 2356

UNDER

the Unit Titles Act 2010

AND

the Residential Tenancies Act 1986

IN THE MATTER

of an appeal from the District Court

BETWEEN

BODY CORPORATE 199380

Appellant

AND

ALISON COOK & MICHAEL VAN DEN BLINK

First Respondents

AND

MARY WEBB

Second Respondent

Hearing:	On the papers
Appearances:	S Price and I Stephenson for Appellant J P Wood and J Heatlie for Respondents
Judgment:	7 September 2018

COSTS JUDGMENT OF VAN BOHEMEN J

This judgment was delivered by me on 07 September 2018 at 3pm Pursuant to Rule 11.5 of the High Court Rules

…………………………

Registrar/Deputy Registrar

Solicitors:

MinterEllisonRuddWatts, Auckland Rainey Law, Auckland

BODY CORPORATE 199380 v COOK & ANOR [2018] NZHC 2356 [7 September 2018]

[1]    On 30 May 2018, I dismissed the appeal by the body corporate seeking to recover the costs of repairs made to unit property under s 138(1) of the Unit Titles Act 2010 when recovery was possible under both s 126 and s 138(4) of that Act.1

[2]    As I recorded in my judgment, counsel for the appellant body corporate said the specific question raised on appeal was:

Does s 138(4) apply only where the repairs to an owner’s principal unit do not “substantially benefit” any other units in the circumstances provided for in s 126?

[3]    I upheld the body corporate’s contention that the Tenancy Tribunal and the District Court were wrong in holding that s 138(4) can apply only in circumstances that s 126 does not apply, but I rejected the body corporate’s submission that in circumstances where both sections apply, the choice as to which to use is solely at the discretion of the body corporate. I also held that while the District Court erred in holding that s 138(4) can apply only when s 126 does not apply, its approach and the result were broadly consistent with the approach that should be taken when deciding how the costs of repairs by a body corporate within unit titles should be allocated.

[4]    I allowed the body corporate’s appeal against the District Court’s decision on costs on the basis that the uplifts applied were in error, and instead applied a single uplift to the costs payable to the respondents, the unit owners.

[5]On costs, I said:

[125] While the body corporate can claim to have been partly successful on the substantive appeal and to have succeeded on its costs appeal, in an overall sense the respondents were the successful parties and are entitled to costs on this appeal on a 2B basis. If the parties are not able to agree costs, the respondents are to file a memorandum by 27 June 2018; any reply by the body corporate should be filed by 18 July 2018.

[6]    The parties have been unable to agree on costs and have submitted memoranda, albeit not in accordance with the timetable in my judgment. The unit owners seek costs on a 2B basis. The body corporate submits that its relative success on appeal should result in a reduction in costs of 50 per cent.

1      Body Corporate 199380 v Cook [2018] NZHC 1244.

Submissions from the parties

[7]The unit owners have provided a schedule of costs on a 2B basis totalling

$8,920.00.

[8]    The body corporate takes issue with the half-day allocation for the itemised step “commencement of response of appeal”, which comes to $1,115.00. It says that this step is not an entitlement in a proceeding, but rather a document equivalent to that in r 33 of the Court of Appeal (Civil) Rules 2005, and there can be no recovery for this because no actual step was taken – the unit owners not having filed such a document

– in the proceeding.

[9]    More generally, the body corporate takes issue with the unit owners receiving full costs. It seeks a 50 per cent reduction on the basis that costs ought to follow the event and that it was partially successful. It acknowledges it was unsuccessful in obtaining the relief sought relating to the costs of the deck repairs. But the body corporate submits that it succeeded in its legal question on appeal that “s 138(4) does not apply only where the repairs to an owner’s principal unit do not substantially benefit any other units” and it succeeded in its appeal against the District Court decision on costs.

[10]   In reply, the unit owners submit that it is clear that they won the appeal and are entitled to costs and refute the body corporate claim for a 50 per cent reduction on the cost award.

Decision on costs

The response to appeal itemisation

[11]   The item in dispute is number 53 in Schedule 3 of the High Court Rules, and is described as “Commencement of response to appeal or cross-appeal”.

[12]   The body corporate says a “response to appeal” envisages the filing of a document similar to that permitted by r 33(1) of the Court of Appeal (Civil) Rules 2005, which provides:

33 Respondent who intends to support decision appealed against on other ground

(1)If the respondent intends to support the decision appealed against on  a ground other than the one upon which it was based, the respondent must, within the time specified in subclause (2), file and serve a memorandum setting out the ground upon which the respondent intends to support the decision appealed against.

[13]   Rule 33 deals only with the situation where a respondent intends to support a decision under appeal on a ground other than the one upon which the decision was based. As noted by the Court of Appeal in Attorney-General v Dotcom, the rule is intended to enable a respondent to support the decision under appeal on grounds on which the judge in the lower court could have relied but did not. It is also appropriate to cover the emergence of a new line of argument or authority discovered since the lower court hearing and is within the scope of the pleadings.2

[14]   The body corporate has not pointed to a High Court rule equivalent to r 33. In QBE Insurance (International) Ltd v Steward Motorsports European Ltd Asher J concluded that because the High Court Rules do not provide for a document for “commencement of response”, what must be intended by item 53 of Schedule 3 of the High Court Rules is the cost of perusing and assessing the notice of appeal and any points on appeal, understanding them and initiating the response process.3 Asher J upheld the claim based on that item.

[15]   I agree with Asher J’s analysis. No document is necessary to claim this item. This kind of preparatory step is not unique under the Schedule, the items of which encompass more than simply the filing of documents. I consider that the unit owners are entitled to claim this item in the absence of the actual filing of a document to recognise the time taken in assessing the original decision, assessing the notice of appeal and considering any points of appeal.4

2      Attorney-General v Dotcom [2013] NZCA 488 at [11]-[12].

3      QBE Insurance (International) Ltd v Steward Motorsports European Ltd [2014] NZHC 886 at [6].

4      QBE Insurance (International) Ltd v Steward Motorsports European Ltd [2014] NZHC 886 at [7].

The respective success of the parties

[16]   The body corporate is correct that I answered the specific question it posed on appeal regarding the relationship between ss 126 and 138(4) in the negative – as the body corporate contended was the correct answer. However, as noted at [3], I went on to reject the body corporate’s submission body that in circumstances where both sections apply, the choice as to which to use is solely at the discretion of the body corporate. I identified considerations to which the body corporate should have had regard when deciding which section to apply and found that, in the circumstances of this case, it was appropriate for the costs of repair to be recovered under s 126 rather than under s 138(4) as the body corporate had contended. The result was that I upheld the outcome reached in the Tenancy Tribunal and in the District Court and dismissed the appeal.

[17]   Accordingly, while the body corporate succeeded in part on the interpretation and application of the Unit Titles Act, in a real world sense it lost the substantive appeal. Applying the approach of the Court of Appeal in Packing In Ltd (in liq) v Chilcott – that the concept of success or failure is better assessed by a realistic appraisal of the end result rather than by focusing who initiated what step, and the extent to which that step succeeded or failed5 – there can be little doubt that the unit owners were the successful party on the substantive appeal.

[18]   The body corporate did have a measure of success on the costs appeal. I held that the Judge was wrong to have imposed an uplift for the body corporate’s refusal to accept a settlement offer and that the further uplift made by the District Court was excessive and motivated in part by a desire to bridge the gap between total actual costs incurred by the respondents and scale costs. Instead, I imposed a single uplift of

$3,000 on top of the scale costs amount to compensate the respondents both for their having to incur considerable legal expenses through the body corporate’s pursuit of a point of law that was of considerably more importance to it than it was to individual unit owners and for the unfairness of their having to contribute towards the body corporate’s costs in bringing the unsuccessful appeal to the District Court.

5      Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA) at [6].

[19]   As I observed in my decision when addressing costs, the amount in dispute over the costs of repairs to the building, slightly in excess of $27,000, on its face would not justify the legal resource expended on it even before the appeal to this Court. On one side are two individual unit owners who legitimately and successfully challenged the amount charged by a body corporate which is concerned at the wider implications of the decision for the longer-term operations and sees it as in its interest to secure a definitive ruling on the legal question. The unit owners have been successful at every stage of the proceeding but have been required to participate in further rounds of litigation to the point that the costs involved could negate the fruits of their success. These considerations further tell against a reduction in costs for the body corporate. Nevertheless, to recognise the costs appeal was a partial success of the body corporate in the proceeding, I allow a reduction in costs claimed by the unit owners of ten per cent.

Conclusion and result

[20]   The respondents are entitled to recover costs in accordance with the schedule filed with the Court, subject to a reduction of ten per cent. This results in costs payable by the appellant to the respondents of $8028.00.

G J van Bohemen J