Body Corporate 90315 v Redican Allwood Limited

[2014] NZHC 1824

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2011-485-011 [2014] NZHC 1824

BETWEEN

BODY CORPORATE 90315 AND

OTHERS Plaintiffs

AND

REDICAN ALLWOOD LIMITED First Defendant

CALUM ANGUS FINLAYSON Second Defendant

WGW PROJECTS LIMITED Third Defendant

APARTMENTS LIMITED Fourth Defendant

WELLINGTON CITY COUNCIL Fifth Defendant

ARCHAUS ARCHITECTS LIMITED Sixth Defendant

AND

REALSURE LIMITED First Third Party

MARTIN HIGGINS Second Third Party

In Chambers:
Counsel:	P A Robertson for Fifth Defendant S A Shortall with A E Gordon for Third Parties
Judgment (2):	4 August 2014

JUDGMENT (No 2) OF THE HON JUSTICE KÓS (Costs)

BODY CORPORATE 90315 AND OTHERS v REDICAN ALLWOOD LIMITED [2014] NZHC 1824 [4 August 2014]

[1]      In my judgment of 30 May 2014 I struck out third party claims brought by the respondent Council against the applicant building inspectors.

[2]      The   applicants   had   produced   a   pre-purchase   report   for   one   of   the shareholders of the eventual owner of one of the apartments.  I held the applicants did not owe the eventual owner a duty of care in tort because of explicit confidentiality and disclaimer conditions in the inspection agreement and pre- purchase report that followed.  I also held that a claim under s 9 of the Fair Trading Act 1986, based on alleged failure to identify weathertightness defects, failed for essentially the same reasons.

[3]      I concluded my judgment by saying that the applicants were entitled to costs on a category 2 band B basis.

[4]      The applicants now apply under r 14.8(2) for variation of my earlier costs decision.  That rule gives me jurisdiction to vary an earlier costs order made where, as  here,  costs  on  an  opposed  interlocutory  application  were  fixed  when  the application was determined.  It provides that the Court may “reverse, discharge, or vary an order for costs on an interlocutory application if satisfied subsequently that the original order should not have been made”.

[5]      The basis of the application for variation is that submissions on costs during the  hearing  of  the  interlocutory application  had  not  been  made  (which  was,  of course, one of the reasons why costs were fixed in the usual way under r 14.8(1)), and that:

Prior to making the application for strike out and/or summary judgment of

the Wellington City Council’s third party claims, by letter dated 16 July

2013, the applicants requested that the respondent withdraw its third party claims  and  outlined  the  reasons  for  that  request.  The  applicants  later

reserved the right to seek increased and/or indemnity costs in the event the respondent did not withdraw its claims.

[6]      By way of variation, the applicants seek increased costs from the respondent now on a category 3 band C basis.

[7]      The respondent Council opposes on the basis that the application is in effect seeking   increased   costs   under   r   14.6(3)(b)   –   i.e.   that   it   had   “contributed unnecessarily to the time and expense of the proceeding or a step in it”, presumably by taking or pursuing an unnecessary step or argument that lacked merit.1     The respondent says it did not act unreasonably or contribute unnecessarily to time and expense.   It also says that if the Court takes a different view, the costs awarded

should not be category 3 band C but simply an uplift – by no more than 15 per cent –

from the usual scale costs awarded in my earlier judgment.

[8]      Costs calculated on a category 2 band B basis in this matter are $7,761. Category 3 band C, on the other hand, would be $21,168.

The letter

[9]      In July 2013 the applicants’ solicitors wrote to the respondent’s solicitors. The letter set out “four main reasons” why the Council’s third party claim had no prospect of success and should be discontinued:

(a)      that the report was not prepared for the current plaintiff apartment owner.   It had not been incorporated at the time the report was produced (for one of its shareholders);

(b)the  terms  of  the  pre-purchase  inspection  report  were  limited  to  a visual inspection – and a reasonable attempt only to identify other faults at the time of visual inspection;

(c)       the claim was likely time-barred; and

(d)there  was  no  basis  for  the  Council  to  have  brought  proceedings against the individual inspector, as opposed to his employer.2

[10]     All  four  points  are  expanded  on  in  some  detail  in  the  letter.    The  very important confidentiality condition is expressly referred to in the letter.  The other

1      Rule 14.6(3)(b)(ii).

2      The applicants are both the employer and the individual inspector.

most important provision, relating to the availability of an additional specialist weathertightness report on request (and on further payment), is referred to only more obliquely.

[11]     The letter concluded by saying that if the respondents did not discontinue their third party claim and offer an unspecified contribution towards the applicant’s costs, they would rely on letter and seek an increased and/or indemnity costs.

Analysis

[12]     In this case I am satisfied that the letter  should have set the respondent Council on a train of inquiry.  The inevitable destination of that train would have an appreciation that the combination of the confidentiality clause and the disclaimer provisions (particularly that relating to the scope of inspection, and the need for a separate specialist weathertightness report if reliance was to be had on that risk) meant the third party claim was very unlikely to succeed, and lacked merit.

[13]     An uplift from scale costs in these circumstances is appropriate. The Court of Appeal in Holdfast NZ Ltd v Selleys Pty Ltd has made clear that an uplift from scale is the appropriate way to increase costs for the purposes of r 14.6.  In most cases the uplift  would  be  no  more  than  50  per  cent  of  applicable  scale  costs.3    It  is inappropriate to move to another category and band, as the applicants suggest.

[14]     In this case I do not think that the uplift should be as much as 50 per cent. The applicant’s solicitor’s letter is somewhat discursive.   It does not present an altogether convincing case as to lack of merit.  But that conclusion should have been reached by the Council by following the letter through to its natural conclusion.

[15]     In this case I think an uplift of 30 per cent only is appropriate.

3      Holdfast v Selleys Pty Ltd CA200/04, 6 December 2005 at [47].

Result

[16]     My judgment of 30 May 2014 is varied, under r 14.8(2).    The successful applicants are awarded scale costs on a category 2 band B basis, with an uplift of

30 per cent.

Stephen Kós J

Solicitors:

Minter Ellison Rudd Watts, Wellington for Third Parties

Heaney & Partners, Auckland for Fifth Defendant