Body Corporate 392418 v Chan

[2022] NZHC 2486

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-605

[2022] NZHC 2486

BETWEEN

BODY CORPORATE 392418

Applicant

AND

HOK FAI CHAN AND DEXIN MA & ORS

First Respondents

ANZ BANK NEW ZEALAND LIMITED
Second Respondent

Continued over page

Counsel:

A Hough and M Samountry for the applicant J Haig and D MacKenzie for the respondent

Judgment

(on the papers):

29 September 2022

COSTS JUDGMENT OF ROBINSON J

This judgment was delivered by me on 29 September 2022 at 3:00pm pursuant to Rule 11.5 of the High Court Rules

…………………………………………………………………… Registrar/Deputy Registrar

Solicitors:

Grimshaw & Co

Counsel:
J Haig, Barrister, Auckland

D MacKenzie, Barrister, Auckland

BODY CORPORATE 392418 v HOK FAI CHAN AND DEXIN MA & ORS [2022] NZHC 2486 [29 September 2022]

ASB BANK LIMITED

Third Respondent

BANK OF NEW ZEALAND
Fourth Respondent

LLOYDS BANK PLC
Fifth Respondent

MORTGAGE HOLDING TRUST COMPAY LIMITED

Sixth Respondent

WESTPAC NEW ZEALAND LIMITED
Seventh Respondent

CHUBB INSURANCE NEW ZEALAND LIMITED

Eighth Respondent

[1]                 On 18 March 2022 I granted the plaintiff’s application to settle a scheme under s 74 of the Unit Titles Act 2010.1 I offered my preliminary views on costs but directed the parties file memoranda in the event they could not agree.

[2]                 The parties could not entirely agree and have filed memoranda. They agree the Body Corporate is entitled to costs on a 2B basis, but dispute certain amounts as follows.

[3]The Body Corporate seeks costs of $43,727.13 against HWD comprising:

(a)2B scale costs of $17,208 with a 50 per cent uplift;

(b)disbursements of $2,301; and

(c)expert fees of $15,614.13.

[4]HWD says the Body Corporate should only be entitled to 2B scale costs of

$13,862 with no uplift, plus disbursements of $2,301. It also says it is appropriate to reduce the award because as owner of 20 per cent of the units it must pay 20 per cent of the Body Corporate’s costs in levies.

Discussion

Quantum of scale costs

[5]                 The parties dispute the amount claimable for the filing of six case management memoranda under item 39 in sch 3 to the High Court Rules 2016. They otherwise agree on other scale costs.

[6]                 Item 39 provides that the days allocated to case management for originating applications is the same as for ordinary proceedings. The relevant item for ordinary proceedings is item 11, which under category B allocates 0.4 days for the filing of case management memoranda.

1      Body Corporate 392418 v Chan [2022] NZHC 503.

[7]                 In accordance with that allocation, the Body Corporate claims 2.4 days for its six case management memoranda. HWD, however, contends these were not ordinary case management memoranda: some did not involve HWD at all, being as to service, and others were one-page memoranda seeking timetabling orders. It says that at most 1 day is appropriate, not the 2.4 sought.

[8]                 While it is the case some case management memoranda did not involve HWD at all, and others were short memoranda seeking timetabling orders, nevertheless the Body Corporate is entitled as the successful party to be reimbursed for costs it has reasonably incurred. I do not see anything making these memoranda unreasonable. The Body Corporate is therefore entitled to costs on those memoranda as prescribed by the Rules.

Uplift on scale costs

[9]                 The Body Corporate says it is entitled to a 50 per cent uplift pursuant  to       r 14.6(3)(b) of the High Court Rules 2016. That rule empowers the Court to order increased costs if the party opposing costs contributed unnecessarily to the time of the proceeding by, amongst other things, pursuing an argument lacking merit or failing to accept a legal argument without reasonable justification.

[10]              The Body Corporate submits HWD meets that criteria in opposing the application despite the benefit the scheme would clearly provide HWD, and by pursuing the arguments it did at the hearing.

[11]              HWD says the Body Corporate should not receive any uplift. HWD submits it was entitled to oppose the application and had meritorious arguments to pursue. It also says the application was novel compared to other applications to settle a scheme in that:

(a)the works to be carried out on alleged building defects were the subject of outstanding proceedings, and the defendant (HWD) was also a unit owner; and

(b)most of the alleged damage was to areas of common property for which the Body Corporate could have undertaken remedial work without recourse to a s 74 scheme. Further, HWD did not consider the alleged damage not affecting common property—the passive fire defects— constituted ‘damage’ for s 74 purposes.

[12]              I agree that the Body Corporate should receive an uplift on scale costs. However, I consider an uplift of 25 per cent more appropriate than the 50 per cent requested.

[13]              I consider the previous case law on s 74 applications contained enough to suggest HWD’s arguments concerning “damage” were unlikely to succeed. There has never been a suggestion of a “substantial” threshold; the cases make clear passive fire defects can amount to damage; and in any event, the evidence as to the weathertightness damage was clear.

[14]              I also consider it was relatively clear that settling the scheme would not prejudice HWD in the negligence proceeding, for the reasons discussed in my substantive judgment.

[15]              However, in neither case would I go so far to say that HWD knew with certainty its arguments were meritless and unlikely to succeed. For that reason, I consider the Body Corporate is entitled to a 25 per cent uplift on the scale costs of

$17,208 (i.e., $21,510).

Expert fees

[16]              The Body Corporate submits it is entitled to actual costs of $15,614.13 for the expert witnesses who provided evidence at the hearing.  It says it is so entitled under r 14.12(2) because HWD’s opposition rendered the evidence reasonably necessary for the proceeding and the expert fees are reasonable in amount.

[17]              HWD submits expert fees should not be awarded due to potential overlap with other proceedings between the parties (and others). It says the plaintiffs have settled that claim and have been compensated for their costs. It says the expert evidence in

this s 74 proceeding in large part replicates the expert evidence in the Defects Litigation. Further, to the extent the Body Corporate tries to differentiate the expert fees between the two proceedings, HWD submits the invoices provided do not clearly delineate those fees.

[18]              In principle the Body Corporate is entitled to expert costs pursuant to r 14.12(2). On the material before me I am unable to determine whether the Body Corporate has already recovered those costs by the terms of settlement of the defect litigation. I therefore award the Applicant its actual expert costs of $15,614.13, while observing that this is not intended to entitle the Applicant to double recovery.

Reduction for Body Corporate levies

[19]              Finally, HWD submits as an owner of nine of the 47 units at the relevant development, it will have been levied by the Body Corporate for its share of the s 74 litigation costs (approximately 19 per cent, which it rounds up to 20 per cent). It says a reduction 20 per cent is appropriate to reflect those levies.

[20]              The Applicant submits that reduction is inappropriate. It says it will indirectly compensate HWD as a unit owner out of any costs award it receives. Further, it says HWD has provided no evidence of what levies it has paid for the proceedings, nor whether 20 per cent is an accurate representation of its contribution.

[21]              I agree with the Applicant. HWD as a unit holder and member of the Body Corporate will indirectly benefit from its payment of costs to the Applicant. No further discount or reduction is required to recognise its membership of the Applicant.

Result

[22]              I order HWD pay to the Body Corporate costs in the sum of $39,425.13, comprising:

(a)2B scale costs of $17,208 with a 25 per cent uplift (i.e., $21,510);

(b)disbursements of $2,301; and

(c)expert fees of $15,614.13.

Robinson J