Body Corporate 366567 v Auckland Council

[2024] NZHC 1867

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2014-404-000716

[2024] NZHC 1867

IN THE MATTER OF

The GORE STREET APARTMENTS also

known as “HARBOUR OAKS”

BETWEEN

BODY CORPORATE 366567

First Plaintiff

AMER LIMITED & ORS
Second Plaintiffs

AND

AUCKLAND COUNCIL

First Defendant

CLARK BROWN ARCHITECTS LIMITED

(In Liquidation)

Second Defendant

(see over for further Defendants)

Hearing:

14 June 2024

Appearances:

G Illingworth KC and G Lewis for the Plaintiffs

C Meechan KC and S Price for the First Defendant

Judgment:

9 July 2024

JUDGMENT OF WALKER J

[Recall application]

This judgment was delivered by me on 9 July 2024 at 4 pm Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

BODY CORPORATE 366567 v AUCKLAND COUNCIL & Ors [2024] NZHC 1867 [9 July 2024]

PM DEVELOPMENTS LIMITED (STRUCK OFF)

Third Defendant

EQUUS INDUSTRIES LIMITED
Fourth Defendant

MAPEI   NEW   ZEALAND   LIMITED   (In

liquidation) Fifth Defendant

AQUASTOP LIMITED
Sixth Defendant

CHARLES NORAGER & SON LIMITED

(In Liquidation) Seventh Defendant

HOLMES FIRE & SAFETY LIMITED
Eighth Defendant

FIREPEL KIDD LIMITED
Ninth Defendant

MACDONALD BARNETT PARTNERS LIMITED

Tenth Defendant

HOLMES STRUCTURES LIMITED (DISCONTINUED)
Eleventh Defendant

CHENERY CONTRACTING LIMITED
Twelfth Defendant

ZURICH AUSTRALIAN INSURANCE LIMITED

(Claim discontinued)

BROOKFIELD MULTIPLEX CONSTRUCTIONS (NZ) LIMITED

(In Liquidation) First Third Party

DE BOER WATERPROOFING SOLUTIONS NV (DISCONTINUED)

Second Third Party

[1]                 This judgment determines the plaintiffs’ interlocutory application for recall of the interim judgment on liability for 13 building defects and multiple sub-defects.1

[2]                 The background to the lengthy and complex proceeding is set out in detail in the interim judgment. It need not be repeated here.

[3]                 The application for recall concerns the following matters advanced by the plaintiffs:

(a)That there ought to be deductions from the lost rental claims for property management (paragraph [1557] of the interim judgment).

(b)Whether the second plaintiff owners who carried on a taxable activity (short stay accommodation) and were not GST registered are entitled to GST on the damages for repair costs relating to defect 13 (paragraph [1639] of the interim judgment).

[4]                 The plaintiffs rely on rules 11.9 and 11.10 of the High Court Rules 2016 (HCR) to argue that the findings on these issues inadvertently omit to consider relevant evidence. They say, if not corrected, the findings will deprive the plaintiffs of compensation they are entitled to recover.

[5]                 For further background context, both the plaintiffs and Auckland Council have appealed the interim judgment. The notice of appeal and cross-appeal are comprehensive. If either succeeds, there will be considerable reshaping of the contours of this case. The appeal is scheduled to be heard by a permanent Court over two weeks in September 2025.

[6]                 Finally, by way of prefatory comments, I record that the parties agreed that this application be determined on the papers. A timetable for filing memoranda/submissions was accordingly set.

1      Body Corporate 366567 v Auckland Council [2024] NZHC 32.

Approach to applications for recall

[7]                 Rule 11.9 provides that a Judge may recall a judgment any time before it is sealed. It does not prescribe the basis on which a judgment may be recalled, or indeed what the recall of a judgment empowers a Judge to do. However, the approach is well settled. The discretion to recall must be exercised with circumspection and must not in any way be seen as a substitute for an appeal.2

[8]                 The plaintiffs rely on the recall ground that there is a ‘very special reason’ that justice requires the judgment be recalled.3 They maintain that certain evidence and related matters were not brought to the Court’s attention during closing submissions. This is not surprising in a case involving voluminous and complex evidence comprising tens of thousands of pages and well over one thousand pages of written submissions. The plaintiffs draw an analogy with cases in which recall was held to be justified because relevant authorities were not brought to the attention of the Court.

[9]                 The scope of this category of recall is intended to be narrow and cases in which the interests of justice will require recall on that basis are likely to be rare.4 Critically, recall is not an appropriate means of correcting error.

Determination of recall application

[10]I deal with each aspect of the recall application in turn.

[11]              The first aspect is the finding in paragraph [1557] which the plaintiffs say means that there should be deductions from all the lost rental claims for property management fees. This paragraph sits within the section of the interim judgment dealing with consequential losses suffered by the plaintiffs. Under this head of loss, the second plaintiffs sought loss of rental and alternative accommodation costs, along with moving and storage costs.

2      Falloon v Commissioner of Inland Revenue (2006) 22 NZTC 19,832 (HC) at [13], approved in

Erwood v Maxted [2010] NZCA 93, (2010) 20 PRNZ 466 at [5].

3      Horowhenua County v Nash (No. 2) [1968] NZLR 632 (SC) at 633, approved in Saxmere Co. Ltd v Wool Board Disestablishment Co. Ltd (No. 2) [2009] NZSC 122, [2010] 1 NZLR 76 at [2].

4      Unison Networks Ltd v Commerce Commission [2007] NZCA 49 at [23] and [34].

[12]This part of the judgment reads:

Loss of rental and alternative accommodation costs, moving and storage

[1556] Alternative accommodation costs, while conceptually available, are dependent on any revised work programme as a consequence of this judgment. I will hear further from the parties on this aspect of the consequential loss claim.

[1557] In terms of rental loss, the parties are generally agreed on the assessment of an “unaffected” rental value as at May 2022, that is the market rental rates if the units were defect free. This is despite the difficulty of providing a reliable estimate of market rental rates so far into the future.5 Rental received by an owner would be the net value after deduction of the management fee. I accept that this is a fee of eight per cent. Accordingly, the “unaffected” rental value should be reduced by eight per cent. This provides a base for calculating rental loss.

[13]              The plaintiffs argue that this finding means that all rental received is the net value regardless of whether there is a manager and is based on an erroneous assumption that all owners who rent out their units use the services of property managers. They say, in fact, there is evidence to the contrary. They refer to rental agreements exhibited to owner briefs and contend that these record that some owners use property managers and others do not.

[14]              I pause to note that there were over 600 owner briefs of evidence. Thirty-nine unit owners were called for cross-examination in a parallel hearing which took place before a Deputy Registrar by agreement of the parties.6

[15]              The plaintiffs propose a “correction” by insertion of the following italicised additions should be inserted into the critical paragraph:

Rental received by an owner would be the net value after the deduction of any management fee. I accept that is a fee of eight per cent. Accordingly, the “unaffected” rental value should be reduced by eight per cent where there is evidence the owner uses a property manager to let the unit. This provides a base for calculating rental loss.

[16]              Auckland Council opposes recall. It argues that the relevant second plaintiffs did not advance their claims for lost rental based on individual tenancy arrangements.

5      The task was undertaken in mid-2020.

6      A 95-page schedule to Part V of the closing submissions dealt with individual owners but did not refer to the position in respect of use of the units.

Rather, global claims were advanced based on an estimated market rental for an “unaffected” unit based on evidence by an expert valuer.   Ms Meechan KC and     Mr Price remind the Court that the Council’s expert evidence was that it is likely that most let units would be managed by a property manager. His evidence was that the adjustment would be around eight per cent and the plaintiffs’ expert accepted that money received by the owner/landlord would be the net value after deduction of the management fee of around eight per cent. Thus, they characterise the plaintiffs’ protest as an attempt to recast the claim advanced at trial.

[17]              In reply, Mr Illingworth KC and Mr Lewis point out that the plaintiffs in closing submitted that the Council had the option of producing evidence setting out the units it says are subject to property management fees. It produced no such evidence.

[18]              With respect, that submission reverses the burden of proof. However, in the end, it is unnecessary to resolve the substantive arguments and counterarguments because I have determined that this is not an issue fit for a recall application. The issue is more aptly an appeal point.

[19]              Accordingly, I am satisfied that the proper and principled course is to decline to recall the judgment on this basis.

[20]              The second aspect of the judgment for which the plaintiffs seek recall is the inclusion of GST in the damages award in respect of defect 13 once quantum is finally determined.

[21]              At paragraph [1636] the judgment addresses a submission by the plaintiffs that, other than second plaintiffs who are GST registered and use their apartment for a taxable activity, the compensation to all second plaintiff owners should be on a GST inclusive basis.

[22]In oral closing submissions, plaintiffs’ counsel submitted:

Whether or not the owners are entitled to claim back the GST component of their levies will depend on their GST registration status, if they are registered, and of course whether they use their units in a taxable activity.

And Mr Carruthers also explained that any compensation made to plaintiffs who use their apartments for short-stay accommodation and are GST registered should therefore be net of GST, and compensation to other second plaintiffs should be on a GST inclusive basis.

[23]                I accepted Auckland Council’s contrary argument that it was for the second plaintiffs to prove that they are neither GST registered nor liable to be GST registered under s 51 of the Goods and Services Tax Act 1985 in the light of the s 2 definitions.

[24]The judgment provides:

[1639] It follows that compensation to all second plaintiffs who use their apartment for short stay accommodation should be net of GST. Compensation to other second plaintiffs should be on a GST inclusive basis.

[25]              The plaintiffs’ complaint is that this assumes that none of those owners gave evidence they were not liable to be GST registered because they earned less than

$60,000 per annum. The plaintiffs say that assumption is incorrect. Further they say that    the    Court     overlooked     a     pre-trial     ruling     by     Lang     J     on     11 December 2019, in which Lang J addressed the issue of the evidence the second plaintiff owners would need to call if they wished to claim GST.

[26]Lang J stated:

[10] The plaintiffs ultimately bear the onus of proof at trial. If the second plaintiffs, and/or the Body Corporate acting as their agent, seek damages containing a GST component they will need to provide evidence that they are not registered for GST and/or do not carry out a taxable activity using their unit. In the absence of such evidence, I do not see how the trial Judge will be able to conclude this aspect of a claim for damages to have been proved.

[27]              Auckland Council responds that while some second plaintiffs gave supplementary evidence that they are not registered for GST, there was no cogent or and clear evidence that they were not liable to be registered for GST. In other words, that the total value of their supplies from their taxable activities was less than $60,000 in any 12-month period.

[28]              In rebuttal the plaintiffs say that, in fact, owners of 11 units gave this evidence under cross-examination in the parallel evidential hearing undertaken before the Deputy Registrar.

[29]              For the same reasons set out above, whether there was complete or cogent evidence to discharge the burden, or whether Lang J’s pre-trial ruling constituted a direction of the evidence required to claim GST (which I doubt) this issue does not fall within the auspices of a recall application.

[30]I therefore decline to recall the judgment on that basis also.

............................................................

Walker J