Body Corporate 319327 v Gabrielle's Trustee Company Limited

[2012] NZHC 1543

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-1741 [2012] NZHC 1543

BETWEEN  BODY CORPORATE 319327

Plaintiff

ANDGABRIELLE'S TRUSTEE COMPANY LIMITED

First Defendant

ANDK1 RESTAURANT LIMITED Second Defendant

(On the papers)

Counsel:         FC Monteiro for plaintiff

SR Carey for first defendant
MB Lawes for second defendant

Judgment:      2 July 2012

JUDGMENT OF ASSOCIATE JUDGE FAIRE [on costs]

Solicitors:           Wilson Harle, PO Box 4539, Auckland

West Auckland Law Office, PO Box 79 170, Waitakere

Lawes Law, PO Box 220, Orewa 0945

BODY CORPORATE 319327 V GABRIELLE'S TRUSTEE COMPANY LIMITED HC AK CIV-2010-404-1741 [2 July 2012]

Introduction

[1]      On 15 December 2011 I was advised by counsel that this proceeding had been resolved save for the question of costs.  I struck the proceedings out.  I reserved costs.  I ordered that memoranda in support, opposition and reply shall be filed and served at seven-day intervals.  I ordered that that applied to any claim for costs made by one defendant against another.

[2]      Counsel for the plaintiff has filed a memorandum seeking costs on 16 April

2012.  Counsel for the first defendant filed a memorandum on 3 May 2012 opposing the  plaintiff’s  claim  for  costs  and  seeking  costs  against  the  plaintiff  based  on Category 2 Band B. The plaintiff’s counsel filed a memorandum on 17 May 2012.

[3]      As a result of a minute issued by me, counsel for the second defendant filed a memorandum on 18 June 2012 advising that he had no instructions from the second defendant on the question of costs.

Background

[4]      The plaintiff is the body corporate of a number of units situated at Gulf Harbour Town Centre.  The first defendant is the proprietor of a number of the units in the complex.  The second defendant was the tenant of one of the units owned by the first defendant.

[5]     The plaintiff filed this proceeding seeking injunctive relief against both defendants.  There has been no hearing on the merits.  Orders were made in the Duty Judge List, first by Asher J on 31 March 2010, where His Honour recorded the following:

[1]       This  is  an  application  for  interim  injunction.     In  essence  the applicant Body Corporate seeks to restrain K1 Restaurant Limited, which is the lessee of a unit in the Body Corporate, from excessive noise and all use of the common property adjacent to the unit, where to date restaurant cliental have been served.

[2]       The   parties   have   sensibly   reached   some   very   short   term accommodation to hold matters pending the hearing of the interim injunction application.  The following interim orders can be made by consent:

(a)       The second respondent is restrained from supplying liquor for sale or allowing liquor to be consumed by its patrons on the common property adjacent to its unit.  This interim order will inure only for so long as the second respondent has no temporary or interim licence for the supply of liquor in that common property area.   It will cease to have effect if an interim or permanent licence is obtained.

(b)       The second respondent be restrained from creating noise, or permitting noise to be created, in excess of 55dB at any frequency as measured from 1 metre immediately outside of the bar and in the Lodge, and that the bar doors and windows be kept closed at all times when the bar is operating.

(c)       Affidavits of the respondents in opposition to the interim injunction are to be filed and served by 5:00 pm, Friday

9 April 2010.

(d)       Affidavits in reply by the applicant are to be filed and served by 5:00 pm, Friday 16 April 2010.

(f)       A half-day fixture is to be allocated for the hearing of the interim injunction application.

[3]       I make it clear that these orders are a compromise and are not to be taken as acceptance of the status quo by either party.  In particular, it is the position of the applicant that there should be no use of the common property as part of the restaurant, and it is the position of the second respondent that it is entitled to use that common property as part of the restaurant.

[4]       Leave is granted for any party to apply on short notice to vary these orders.

[6]      The matter was further considered by Williams J on 6 March 2010.   His Honour’s minute of the orders made and reasons for them are contained in two minutes dated respectively, 20 May 2010  and  27 May 2010.   Read together the operative parts are as follows:

[3]       As  part  of the  parties’ preparation  for  the  substantive  injunction hearing, counsel for the plaintiffs filed and served their submissions dated 3 May 2010.   In those submissions they indicated the Body Corporate would now seek an order restraining K1 from:

(a)       Creating or permitting unreasonable noise over 30 dBa (the level its own experts say would be reasonable in The Lodge

rooms) when measured from any room of the Gulf Harbour

Lodge; and

(b)      Placing and using tables and chairs on the common property. [4]    That proposed reduction in the noise level to which the parties had

consented on 31 March 2010 led K1 to seek an adjournment of the substantive hearing to enable its acoustic consultant to carry out tests with a view to commenting on the achievability of the proposed reduced noise level.

[5]       When the fixture commenced, Mr Denton, leading counsel for the Body Corporate, advised that the plaintiff was no longer seeking a reduction  in  K1’s  noise  level  to  35  dBa  but  would  seek  a continuation of Asher J’s orders.

[6]      That notwithstanding, K1 continued to seek an adjournment.

[7]       As a result, the matter [w]as briefly stood down and counsel took further instructions.   The result was a large measure of agreement but the question of the time to which noise should be permitted was the subject of a direction from the Court.

[8]      The orders as recalled were:

(a)       The proceeding would be adjourned for mention in the Duty

Judge’s List on 9 June 2010.

(b)       The Body Corporate would permit K1 to continue to allow its patrons to use tables and chairs outside the cartilage of the restaurant until 11:00pm (a time extended from 10:00pm by order of the Court).

(c)       The Body Corporate would not oppose K1’s application to the Liquor Licensing Authority to extend the definition of its “licensed premises” to include the area shown in the photographs immediately outside the cartilage which is currently used by K1’s patrons, so long as the application was for the purpose of obtaining a temporary liquor licence to serve alcohol to its patrons until 10:00pm.[1]

[1] This is the corrected portion confirmed by the minute of Williams J of 27 May 2010.

(d)       Other than as varied, Asher J’s orders were to remain in force until 9 June 2010.  K1 accepted that its patrons could not use the area outside the cartilage after 11:00pm for any purpose.   It recognised the problems that agreement would pose as far as smokers were concerned after 11:00pm.

(e)      The Body Corporate would permit Mr Horne of Design Acoustics Auckland Limited, K1’s acoustics consultant, to carry  out  such  tests  as  he  may  reasonabl[y]  require,

including  obtaining  access  to  some  of  the  unit[s]  in  the building operated by the Body Corporate.

(f)       K1 would immediately desist from permitting its patrons to use any part of the common property of the Body Corporate other than that shown in the photographs of the complex, contained within the rope barrier immediately adjacent to K1’s restaurant.

[7]      The next significant development occurred in terms of action on the Court file with the filing of a joint memorandum by counsel for the plaintiff and the first defendant on 9 August 2010.   It proposed certain consent orders.  A memorandum was filed by counsel for the second on 10 August 2010 seeking a variation to those orders. The variation led to my making orders by consent as follows:

(a)       that the second defendant may serve liquor inside its premises only between the hours of 9am and 12:30am the following day;

(b)       that the second defendant may use, and serve liquor on, the Common Property adjacent to its unit (as defined by the Liquor Licensing Authority and delineated by paving stones, ropes and planter boxes) between the hours of 9am and 10:30pm but is restraining from using that area at other times.   From 10:30pm each evening, the second defendant shall clear the area of all of the second defendants patrons and property by 11pm at the latest;

(c)       that  the  second  defendant  will  carry  out  noise  attenuation  and limitation  measures  to  the  satisfaction  of  Mr  P Horne  and  is  to provide the Rodney District Licensing Authority and the parties with any report issued by Mr Horne;

(d)       that the second defendant may engage a rock band on one evening per  week  (either  a  Friday  or  Saturday)  for  four  hours  between

7:30pm and 11:30pm subject to a permanent noise limiter being

installed and set to indicate when a level of 85dBA Leq (or such other  level  set  by Mr  Horne) inside the bar is exceeded, but is restrained from otherwise engaging a rock band;

(e)       that the 85dBA Leq limit (or such other limit set by Mr Horne) for band noise be accompanied by a spectrum to control low frequency noise as set out in the table at the top of page 7 of the Design Acoustics report of 2 June 2010 (or such other spectrum set by Mr Horne);

(f)       that, while the rock band is playing, all of the doors and windows to the second defendant’s bar and restaurant are to be closed at all times except when persons are entering or leaving the premises or as otherwise agreed by the Body Corporate;

(f)       that, when the rock band is not playing, the music in the bar is not to exceed an overall noise limit of 75dBA Leq (or such other limit set

by Mr Horne) inside the bar and that this limit be accompanied by low frequency noise controls as set out in the second table on page 7 of  the  Design  Acoustics  report  of  2 June  2010  (or  such  other spectrum set by Mr Horne);

(h)      that leave be reserved to alter the interim orders after March 2011 or, if necessary, to bring this matter on early.

[8]      Following that,  case management  conferences  were set  for 5 April  2011, which led to a further adjournment to 18 August 2011 while the parties awaited the renewal of the second defendant’s liquor licence, a further adjournment on 18 August

2011  when  the  Court  was  advised  that  the  case  had  largely  been  resolved,  to

4 November 2011 and advice given to the Court on 3 November 2011 which led to yet a further adjournment to 15 December 2011.  On 15 December 2011, as already recorded, following advice from counsel the proceeding was struck out save as to costs.

The plaintiff ’s case

[9]      The  plaintiff’s  application  relies  on  the  following  rules  and  statutory provisions.  First, counsel submits that the plaintiff is entitled to indemnity costs in reliance on hcr 14.6(4)(e) where the party claiming costs is entitled to indemnity costs under a contract or deed or where some other reason exists which justifies an order for indemnity costs pursuant to hcr14.6(4)(f).

[10]     Secondly, counsel submits the Body Corporate has a statutory right to full indemnity costs by the operation of s 34 of the Unit Titles Act 1972 and the Body Corporate Rules and in particular r 2.3(k).

[11]     Thirdly, counsel submits that the act which justifies the making of an order for indemnity costs pursuant to s 15(h) of the Unit Titles Act 1972 is the requirement that the Body Corporate manage the common property and do all things necessary to enforce the Rules.

[12]     The relevant parts of hcr14.6(4) provide:

14.6     Increased costs and indemnity costs

(4)       The court may order a party to pay indemnity costs if—

…

(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.

[13]     Rule 2.3(k) of the Body Corporate Rules provides:

The Body Corporate may:

…

(k)       levy, and require payment from a defaulting Proprietor, without the necessity of making an application pursuant to section 33 of the Act or apportioning the liability to the Proprietors as a whole, and any fees, costs or expenditure incurred in the recovery of a contribution or other lawful payment shall be recoverable from such defaulting Proprietor (including legal fees which shall be recoverable from a defaulting Proprietor on a solicitor/client basis);

[14]     Section 34 of the Unit Titles Act 1972 provides:

34       Recovery of money expended where person at fault

Where the body corporate does any repair, work, or act which it is required or authorised by or under this Act or by or under any other Act to do (whether or not the repair, work, or act is done pursuant to any notice or order served on it by any local authority or public body) and the repair, work, or act was rendered necessary by reason of any wilful or negligent act or omission on the part of, or any breach of any rule by, any proprietor or his tenant, lessee, licensee, or invitee, any expense incurred by it in doing the repair, work, or act shall be recoverable by it as a debt in any Court of competent jurisdiction from that proprietor.

[15]     Section 15 of the Unit Titles Act 1972 provides:

15       Duties of body corporate

(1)       The body corporate shall—

…

(h)       Subject  to  this Act,  control,  manage,  and  administer  the common property and do all things reasonably necessary for the enforcement of the rules:

[16]     There is no doubt that the plaintiff has undertaken significant work in relation to this proceeding, which has included the preparation of a notice of proceeding, statement of claim, interlocutory application for injunctive relief, several memoranda of counsel, an undertaking as to damages, nine affidavits, the sealing of the interim orders  that  were  made  and  preparation  of  submissions  for  the  two  hearings mentioned.

The first defendant’s position

[17]     The first defendant’s counsel submits:

(a)      As the plaintiff has withdrawn its claim, costs should be awarded to the first defendant against the plaintiff in the usual manner in accordance with hcr15.23;

(b)There are no special circumstances that require costs to be awarded against the first defendant.  The plaintiff did not succeed in its claim against the first defendant.  The plaintiff was not forced by the first defendant to bring this proceeding;

(c)      Indemnity costs are not available and the level of indemnity costs sought by the plaintiff are not reasonable;

(d)If  liability  for  costs  lies  against  the  defendants,  which  the  first defendant denies, it lies only against the second defendant.

Analysis

[18]     As I have recorded in [5] there has been no hearing on the merits.  Passages from the minutes of Asher J and Williams J provide no basis for concluding that one party has been successful.

[19]     The decisions communicated to the Court that the proceeding could be struck out was not based on any formal agreement which could be said to finally resolve

issues.    The  plaintiff’s  counsel  submitted  that  the  interim  orders,  which  have

remained in place for 18 months:[2]

[2] Plaintiff ’s memorandum – court document 48 – paragraph 2.

Have  now largely resolved  the  issues  between  the parties.   The  second defendant has sold its business.  In light of the much improved situation the Body Corporate did not consider it necessary to continue the application and it was accordingly struck out by consent.

[20]     The first defendant’s position is that the plaintiff has withdrawn its claim. Counsel records that there has been no orders or finding made by the Court against either  of  the  defendants.    Counsel  has  noted  that  the  plaintiff ’s  application  for injunctive relief sought relief under five heads, namely:

(a)      An order that the second defendant be restrained from creating excess noise;

(b)An order that the second defendant be restrained from placing chairs and tables in the common area;

(c)      An order that the second defendant be restrained from serving alcohol in the common area;

(d)An order that the second defendant be restrained from preventing the plaintiff accessing the property in order to obtain a building warrant of fitness; and

(e)      An order that the first defendant not permit the second defendant to carry out the activities just mentioned.

Counsel noted that in the one claim against the second defendant in respect of noise, it could be argued to have been successful and even that, counsel submitted, was a

compromise.

[21]     In response, counsel for the plaintiff points to the fact that the orders made on

31  March  restrained  the  second  defendant  from  using  common  property  for supplying alcohol without a licence and from making noise exceeding a certain level. Counsel noted that that indicated a breach for which the landlord, unit owner, as well as the tenant, was liable under the Body Corporate Rules.  Counsel noted that the orders, from its perspective, resolved the noise issue.  So far as the illegal service of alcohol was concerned, the obtaining of a liquor licence without objection by the Body Corporate resolved that issue so far as the use of the common property was concerned.

[22]     The above summary does not disclose a clear outcome which could be seen having been achieved by forcing the defendants to accept a position as a result of the issue of proceedings.

[23]     Where a plaintiff abandons a claim, whether by notice of discontinuance or indication to the Court that the claim may be struck out, the Court will not speculate on the merits of the case it has never heard.  It is only in exceptional cases where the merits are clear that the Court might be influenced to order costs in favour of the party who is not proceeding.  This approach follows the authorities which emerge from cases which analysis r 15.23 and its predecessor r 476C of the High Court

Rules.[3]

[3] North Shore City Council v Local Government Commission (1995) 9 PRNZ 182, Kroma

Colour Prints Ltd v Tridonicatco NZ Ltd NZCA 150, (2008) 18 PRNZ 973.

[24]     Were it not for the fact that counsel for the plaintiff has also referred to statutory grounds as a basis for possibly awarding costs, I would not have ordered costs based on an application of Part 14 of the High Court Rules.

[25]     I next consider whether the position is altered by the operation of ss 15 and

34 of the Unit Titles Act 1972 and r 2.3K of the Body Corporate Rules.

[26]     Rule 2.3K refers to the Body Corporate’s power to levy.   In my view that

does not provide a justification for the Court imposing an order for costs on the first

or second defendants in this proceeding.   How the Body Corporate exercises its powers pursuant to its Rules is a matter for it and not something that the Court should impose one way or the other on any of the parties before it in this proceeding.

[27]     I next consider the application of ss 15 and 34 to this proceeding.  There is no doubt that the Body Corporate is entitled to take action, including the issue of proceedings, if that is necessary to control or manage and administer the common property of the Body Corporate.  The question, however, for resolution in this case is whether there is a basis for my making orders pursuant to s 34 of the Unit Titles Act

1972 in the exercise of that power.

[28]     A pre-requisite to the making of an order under s 34 of the Unit Titles Act

1972 is a finding that there has been wilful or negligent act or omission on the part of, or a breach of, a rule by a proprietor or his tenant.  The immediate problem here is that there has been no finding or, for that matter, any specific determination of this issue by the Court in this proceeding.   The very act of proceeding no further and before adjudication stopped that happening.   For that reason, I conclude that s 34 does not justify my making an order for costs in this proceeding, having regard to the stage at which the proceeding had reached.  The defendants have each resisted the plaintiff’s application.  The plaintiff has not sought the Court’s final determination of the issues that are raised by the plaintiff ’s proceeding.

[29]     It would be quite wrong in these circumstances to make a finding against the defendants of wilful or negligent act or omission or, for that matter, a breach of the Rules.  Accordingly, I conclude that ss 15 and 34 of the Unit Titles Act 1972 do not justify my making an order for costs against the defendants in this proceeding.

[30]     My conclusions, of course, have the effect of excluding any question of indemnity costs orders.

[31]     The next question is whether the first defendant is entitled to an order for costs.   When I analyse this position I note that there was at least an initial basis justifying the issue of the proceeding against the defendants in this case.  At least some relief in favour of the plaintiff has been granted by the two orders that I have

mentioned.  I have carefully the defendants’ counsel’s memorandum.   If I were to apply the normal rule that applies on a discontinuance, there might be some justification for an order for costs in favour of the first defendant.  That, however, would be an over-simplification in this case and ignores the fact that there was an agreement that resolved the two interlocutory injunction hearings.  When I balance that factor against the fact the there has been no pursuit by the plaintiff of a hearing of the entire proceeding, I reach the conclusion that the appropriate result is that costs should lie where they fall.

[32]     That may well have a consequence so far as the first defendant’s position as a owner of a unit at the complex is concerned, vis-à-vis the Body Corporate.  I simply state for the avoidance of doubt that this ruling does not enter into that issue, which may  well  arise  if  the  Body  Corporate  decided  to  exercise  its  power  to  levy proprietors.

Orders

[33]     Accordingly, I order that there will be no order for costs against any party in this proceeding.

JA Faire

Associate Judge