Body Corporate 366611 v B.E.M.A. Property Investments Limited

[2015] NZHC 31

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-003047 [2015] NZHC 31

UNDER

Part 16 of the Companies Act 1993

IN THE MATTER OF

an application to put a company into liquidation

BETWEEN

BODY CORPORATE 366611
Plaintiff

AND

B.E.M.A. PROPERTY INVESTMENTS LIMITED

Defendant

Hearing:	[On the Papers]
Counsel:	S C Price for the Plaintiff B P Rooney for the Defendant
Judgment:	27 January 2015

JUDGMENT OF VENNING J [re Costs]

This judgment was delivered by Justice Venning on 27 January 2015 at 12.30 pm, pursuant to

r 11.5 of the High Court Rules

Registrar/Deputy Registrar
Date:

Counsel:     B P Rooney, Auckland

Solicitors:    Minter Ellison Rudd Watts, Auckland

BODY CORPORATE 366611 v B.E.M.A. PROPERTY INVESTMENTS LTD [2015] NZHC 31 [27 January

2015]

[1]      Body Corporate 366611 (Body Corporate) brought liquidation proceedings against B.E.M.A. Property Investments Limited (“BEMA”).  The proceedings were defended.  By consent, on 22 January 2015, the proceedings were discontinued, with the question of costs to be dealt with on the papers by way of an exchange of memoranda.

[2]      The plaintiff has filed a memorandum, dated 20 January 2015. The defendant has filed a memorandum in reply, dated 21 January 2015; and the plaintiff has filed a response to that reply, dated 22 January.  I deal with the matter on the papers, as the parties anticipated.

[3]      Body  Corporate  brought  these  proceedings  against  BEMA in  respect  of unpaid levies owed by BEMA pursuant to s 124(2) of the Unit Titles Act 2010 (“the Act”).

[4]      The liquidation proceedings followed the issue of a statutory demand for the levies, which expired unremedied.   However, following the issue of these proceedings,  BEMA has  paid  the levies  and  the interest  portion  claimed  in  the statutory demand.  BEMA, however, disputes the costs claimed.

[5]      Body Corporate seeks costs on an indemnity basis, relying on s 124 and/or s 127 of the Act.  Section 124(2) of the Act provides:

124     Recovery of levy

…

(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.

[6]      Section 127 is to similar effect, but s 124 is more directly relevant to the recovery of levies.

[7]      In its memorandum, Body Corporate seeks costs of $15,441.63 on a solicitor- client basis made up as follows:

Making the demand  $1,940.33

The liquidation proceedings  $9,694.45

Preparation of the costs submissions  $3,806.85

Body Corporate also seeks disbursements of $696.09.

[8]      Although BEMA did not respond to the statutory demand, or file a statement of  defence  within  the  prescribed  time,  it  made  application  for  leave  to  file  a statement of defence and asserts it has a counterclaim against Body Corporate for “about $100,000”.  The counterclaim is based on the Wu litigation.1   BEMA submits it is not open for Body Corporate to seek the costs under s 124 unless it makes an application to the Tenancy Tribunal under s 171 of the Unit Titles Act.  Mr Rooney

also submits on behalf of BEMA that the costs are not reasonable, having regard to the circumstances (namely that BEMA was locked out of its unit) and the amount involved.   Mr Rooney submits scale costs on a category 1A basis would be appropriate, but notes the plaintiff is not seeking scale costs or costs under the rules.

[9]      In reply, Mr Price has submitted that if there is an issue with recovering reasonable indemnity costs under s124, then scale 2B costs could be awarded on the basis Body Corporate’s ability to pursue recovery under ss 124 and 127 of the Act is preserved.2

[10]     There  are  potentially  conflicting  processes  relating  to  costs.    First,  the provisions of the High Court Rules which provide for costs in proceedings before the Court. Second, the relevant sections of the Act.

[11]     The starting point is that as these proceedings are before this Court, the relevant provisions of Part 14 of the High Court Rules apply.  In particular where, as here, Body Corporate’s principal application is for reasonable solicitor-client costs,

i.e. indemnity costs, r14.6(4)(f) applies.

1      Wu v Body Corporate 366611 [2014] NZSC 178.

2      Body Corporate 379933 v Thorne Property Group Ltd [2013] NZHC 2825.

[12]     Section 124 of the Act could come within the considerations in r 14.6(4)(f). However, it appears the Act contemplates disputes will be determined by the “appropriate decision-maker”. Appropriate decision-maker is defined as:

means the Tribunal or the court that, if the matter were a dispute under subpart 1 of Part 4, would have jurisdiction over that dispute in accordance with that subpart.

[13]     Subpart 1 of Part 4 records inter alia:

171      Jurisdiction of Tenancy Tribunals

(1)       Except as provided in this section, a Tenancy Tribunal (a Tribunal) constituted under section 67 of the Residential Tenancies Act 1986 has jurisdiction to hear and determine all disputes arising between any persons of the kind listed in subsection (2) in relation to a unit title development (a unit title dispute).

(1A)     To avoid  doubt,  and  without limiting subsection (1),  a unit title dispute may relate to a claim for unpaid levies.

[14]     The effect of s 171(1A) is that a unit title dispute may include a claim for unpaid  levies.    I  consider  that  a  dispute  as  to  “reasonable  costs”  incurred  in collecting that levy under s 124 is such a dispute.  The current claim for reasonable costs would be within the jurisdiction of the Tenancy Tribunal.

[15]     For those reasons, I am not prepared to make an order for indemnity costs in reliance on the provisions of the High Court Rules in this case.   However, the provisions of the Act do not oust the Court’s jurisdiction in relation to its ability to make an order for costs on proceedings before it.  I see no reason why the standard order for costs on liquidation proceedings should not apply. As noted, the liquidation proceedings   followed   the   expiry   of   a   statutory   demand   unremedied,   and unchallenged by the defendant, BEMA.  The debt claimed was only paid after the issue of the liquidation proceedings.

Result

[16]     Body Corporate is to have costs on a 2B basis, together with disbursements for all steps taken in relation to the statutory demand and liquidation proceedings before the Court.

[17]     For clarity, I record that I make no order for costs in relation to the exchange of memoranda for costs, and I reserve leave to Body Corporate to pursue an application for the balance of the costs incurred in collecting the levy before the

appropriate decision-maker, the Tenancy Tribunal.

Venning J