Body Corporate 360485 v Deetin Investments Limited

[2012] NZHC 3616

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-3571 [2012] NZHC 3616

BETWEEN  BODY CORPORATE 360485

Plaintiff

ANDDEETIN INVESTMENTS LIMITED Defendant

Hearing:         (on the papers) Judgment:        21 December 2012

RESERVED JUDGMENT OF ASSOCIATE JUDGES SARGISSON (Costs)

This judgment was delivered by me on 21 December at 12 pm pursuant to

Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date ..........................

Solicitors:

Wilson Harle, PO Box 4539, Shortland Street, Auckland

Parshotam & Co, PO Box 27-079, Auckland

BODY CORPORATE 360485 V DEETIN INVESTMENTS LIMITED HC AK CIV-2012-404-3571 [21

December 2012]

Introduction

[1]      The plaintiff, Body Corporate 360485, seeks costs in the sum of $9,038.50[1] excluding GST (and not including disbursements) for an unopposed liquidation proceeding and the subsequent recall of a liquidation order against the defendant, Deetin Investments Ltd.[2]

[1] The figure is exclusive of GST, except for the “office charges” for which a figure without GST has

not been provided.

[2] The plaintiff seeks to recover its costs in accordance with s 124 Unit Titles Act 2010, submitting that legal costs incurred in recovering unpaid levies and bringing liquidation proceedings are reasonable under s 124. Section 124 provides:

124 Recovery of a levy

(1)   A body corporate must fix the date on or before which payments of levies are due.

(2)   The amount of any unpaid levy, together with any reasonable costs incurred in collecting the levy, is recoverable as a debt due to the body corporate by the person who was the unit owner at the time the levy became payable or by the person who is the unit owner at the time the proceedings are instituted.

[2]      The liquidation order was made on 8 August 2012 after counsel did not appear on behalf of the defendant due to an oversight.   The plaintiff was granted costs on a 2B basis in the sum of $1,990, which is the sum that the plaintiff sought in its memorandum as to costs dated 8 August 2012.

[3]      Later that day, 8 August, then counsel for the defendant filed and served a memorandum advising that the defendant was not insolvent.  The plaintiff advised that it would consent to the liquidation order being recalled subject to payment of all sums due to it.   The plaintiff then claimed for legal  costs above $1,990.   The defendants paid $1,990 and offered to pay an additional $1,000, but the plaintiff rejected that offer and the parties could not agree on the appropriate amount for costs.   In order to  secure the plaintiff’s  consent to recall, the defendant placed

$3,761.61 into its solicitors’ trust account and undertook that the funds would be held until further court order.  The liquidation order was then recalled by consent on

10 August 2012. The liquidation application was then set aside save as to costs.

[4]      The plaintiff now claims costs in the sum of $9,038.50.  That figure is made up as follows:

a)  $5,615 (excluding GST) being costs up to the hearing;[3] and

[3] Made up of $3,540 (being “costs directly incurred in the liquidation process and costs incurred researching the complex ownership issues” together with “negotiations with the defendant as to settlement”) and $2,916.40 (being “additional fees invoiced related to the liquidation proceeding”).

b)  $3,044 (excluding GST) being “costs since the [liquidation] hearing up, until

15 August, 2012”; and

c)  $379.50 being (including GST) being “office charges”. The plaintiff does not specify when these charges accrued, or what they specifically consist of.

[5]      The plaintiff takes into account the fact that the defendant has made a contribution of $1,990 toward costs, and seeks the remaining $7,048.50.

Principles

[6]      The fundamental principle governing costs is set out in r 14.1. Costs are in the discretion of the Court. There is however a presumption that a party who discontinues a proceeding will pay costs to the other party up to the discontinuance: r

15.23. That presumption may be displaced should the circumstances indicate that a different outcome would be just and equitable.[4]   There is no dispute that it is just and equitable that the plaintiff should have costs on its application and recall.   The dispute is confined to whether:

a)        scale costs on the liquidation application should be increased; and b) costs claimed on the recall are reasonable.

[4] Coromandel Heritage Protection Society Inc. v Thames Coromandel District Council Hamilton HC CIV-2007-419-1649, 11 February 2008 (per Stevens J).

[7]      The court has the power to order increased or indemnity costs under r 14.6(3)

and (4)(a) and (b). They relevantly provide as follows:

(3) The court may order a party to pay increased costs if—

...

(b)   the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

...

(ii)  taking or pursuing an unnecessary step or an argument that lacks merit; or

...

...

(v)  failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule

14.10  or  some  other  offer  to  settle  or  dispose  of  the proceeding; or

(d)   some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

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

(a)     the party has acted vexatiously, frivolously, improperly,  or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or

(b)   the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or

Decision

Costs prior to the liquidation hearing

[8]      The plaintiff sought 2B costs in its original claim and the defendant has met those costs.  As a matter of discretion, I do not think it reasonable that the plaintiff seeks costs for steps on the application in excess of the costs it sought and received.

[9]      The issue between the parties immediately prior to agreeing to the recall was whether the plaintiff was entitled to either the amount that it claimed for costs up to the hearing, presumably that was the $5,615 that it now claims, or the amount that the defendant offered, $1,990 plus $1,000.   I am unclear as to how the plaintiffs made the leap from scale costs of $1,990 to the sum of $5,615.  The onus is on the plaintiff to demonstrate that the uplift is reasonable and it has failed to do so.  The plaintiff has not demonstrated that costs above the sum of $1,990 are reasonable and I therefore disallow the plaintiff’s claims for $3,079 and $2,536.

[10]     I also disallow the plaintiff’s claim for $379.50 toward “office charges” as the plaintiff has not sufficiently identified what those charges entail.

Costs after the liquidation hearing

[11]     I am satisfied that the plaintiff is entitled to actual and reasonable solicitor- client costs consequential to the hearing that it incurred to satisfy itself that the defendant was insolvent and to resolve and negotiate the recall.  Such costs would not have been incurred but for the defendant’s non-appearance at the liquidation hearing. The plaintiff was therefore put to an unnecessary step under r 14(3)(b)(ii).

[12]     I am not satisfied that the plaintiff should be entitled to costs that it incurred in its attempt to renegotiate from scale costs of $1,990 to the sum of $5,615. It was not reasonable for the plaintiff to attempt to renegotiate for the sum $5,615.

[13]     The plaintiff has filed a memorandum providing particulars of the steps it took to negotiate the terms of the recall.   Though the memorandum provides no accurate indication as to the amount it incurred in its attempt to renegotiate from scale costs to the sum of $5,615, it appears that relatively significant costs were incurred in that endeavour.

[14]     I will allow the plaintiff’s claim for $3,044, being costs since the liquidation hearing,  minus  one  third  of that  sum.   This  is  necessarily imprecise,  but  I am satisfied that such a reduction is needed to reflects costs that are reasonable.

[15]     The result is that in addition to the sum of $1,990 that the plaintiff has already received, it is entitled $2,029.35 which is two thirds of $3,044.

[16]     I make no award for GST as “costs between parties are GST neutral”[5]

Order

[5] Burrows v Rental Space Ltd (2001) 15 PRNZ 298 at [14] (per Chambers J).

[17]     I order the defendant to pay to the plaintiff the sum $2,029.35.

Associate Judge Sargisson