Boyce v Body Corporate 70841

[2014] NZHC 2709

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV-2013-470-605 [2014] NZHC 2709

IN THE MATTER OF

an application under s 141 of the Unit

Titles Act 2010

BETWEEN

M J BOYCE AND C W D MORGAN AS TRUSTEES OF THE HILTON JONES FAMILY TRUST

Applicants

AND

BODY CORPORATE 70841
First Respondent

AND

JOHN SPOONER PROPERTY CONSULTANTS LIMITED Second Respondent

Hearing:	On the papers
Counsel:	D J O'Connor for Applicants T S Richardson for First Respondent M B Beech for Second Respondent
Judgment:	31 October 2014

JUDGMENT OF KEANE J

This judgment was delivered by me on 31 October 2014 at 4.45pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Lunn & Associates, Napier for Applicants
Evan Turbott Law Office, Napier for First Respondent

Holland Beckett, Tauranga for Second Respondent

BOYCE AND MORGAN AS TRUSTEES OF THE HILTON JONES FAMILY TRUST v BODY CORPORATE

70841 [2014] NZHC 2709 [31 October 2014]

[1]      On  17  December  2013  Heath  J  appointed  an  administrator  for  Body

Corporate 70841, initially until 4 February 2014.  At the annual general meeting on

30 November 2013, the members had been unable to elect a committee to administer its affairs and then in issue was the structural integrity of a veranda and the safety of the public.

[2]      At the date of the order the body corporate had already resolved to hold an extraordinary general meeting on 24 January 2014 in order to elect a committee. Heath J directed the administrator to chair that meeting and afterwards to report to the Court.  In the meantime the administrator was to have all the powers of the body corporate.

[3]      On 24 January 2014 five committee members were elected, but not delegated any power.  On 31 March 2014 at a further extraordinary meeting three more were elected and the committee thus constituted was delegated the powers essential.  On

17 April 2014 orders were made by consent terminating the administrator’s appointment, requiring the body corporate to meet his costs, and reserving costs in the cause.

Costs applications

[4]      The applicants seek a heightened costs award on their application, not against the body corporate, but against its former chairman, Wayne Kusabs, who had been re-elected on 30 November 2013, Evan Turbott, the solicitor whom he instructed on behalf of the body corporate to oppose the application, and Spooner Property Consultants, which until its contract was terminated on 30 November 2013 had managed the property.

[5]      The applicants contend that all three opposed their application obstructively and unsuccessfully.   The applicants’ costs and disbursements exceed $48,000. A scale  2B  award,  and  their  allowable  disbursements,  would  give  them  less  than

$13,000.  They seek an increased award.  Mr Kusabs, they contend, was the architect of the impasse at the annual general meeting on 30 November 2013 and had no authority to oppose the application on behalf of the body corporate.  Mr Turbott had no right to act on Mr Kusabs’ instructions, when it was evident that he lacked that

authority.   Spooner Property Consultants opposed the application to safeguard its position as manager after its contract had been terminated.

[6]      Mr Kusabs has not made any reply.  Mr Turbott has, principally on his own behalf.  He contends that Mr Kusabs, though not a party, had to respond when on 11

December 2013 Heath J directed that he as well as the body corporate be served with the application.   Mr Kusabs had been re-elected chairman on 30 November 2013. He was the body corporate’s only officer.  For that reason Mr Turbott acted on his instructions.

[7]      Spooner Property Consultants also opposes any award and seeks one itself.  It too had to respond to the application when on 11 December 2013 Heath J directed that it be served and file any notice of opposition and submission by 16 December

2013.   It then contested whether its contract  with the body corporate had been terminated  as  the  contract  stipulated.    But  it  was  not  a  necessary party  to  the application.  It has incurred $17,431 costs and disbursements and seeks an indemnity award against the applicants.

[8]      The body corporate has responded by letter only.  The present chairman says that the committee is unable to take any position as to costs.  It represents all owners, some of whom supported the application and some of whom did not.  It seeks a fair and reasonable determination.

Costs principles

[9]      Costs ultimately lie in  the discretion  of the Court. All the specific rules governing costs are subject to that paramount principle.1 But the particular rules will ordinarily apply. The discretion is reserved for 'the unexpected and the unforeseen' case for which the particular rules do not cater.2

[10]     The ordinary principle, which the applicants invoke and the three against whom they seek an award contend cannot apply, is that the party who fails should

1      HCR 14.1.

2      Glaister v Amalgamated Dairies [2004] 2 NZLR 606 at [24].

pay the costs of the party who succeeds  and  that any award should reflect the complexity and significance of the proceeding.3

[11]     The applicants also invoke the Court's power to award increased costs on the ground that the three against whom it seeks an award ‘contributed unnecessarily to the time or expense of the proceeding’, presumably by opposing the appointment of an administrator needlessly and meritlessly.4   Spooner Property Consultants seeks an indemnity award on the ground that in applying at all, and in joining it as second respondent, the applicants acted ‘vexatiously, frivolously, improperly or unnecessarily’,5 a discretion reserved for the extreme case.6

[12]     In seeking an award against Mr Turbott, the applicant invokes rather this Court’s inherent jurisdiction to supervise its officers both to compensate any disadvantaged litigant and to punish the officer.  Such an award may be made where a solicitor has breached his or her duty to the Court, and that breach has caused an increase in the expense of a proceeding, and is sufficiently clear to be summarily determined.7

[13]     It remains to mention that this Court has a further ability and that is to award reduced costs or refuse them.  That can be for a number of reasons but finally it is a matter of discretion.  Costs may be refused or reduced if that is justified in the face of the principle that costs should be determined predictably and expeditiously.8   It is that discretion, which seems to me most apt in this case.

Conclusions

[14]     Heath J appointed the administrator for two reasons, the first of which was that the public might be at risk if a veranda at the base of the building over retail shops was structurally unsound; an issue of particular concern to the applicants,

whose trust owns six retail shops beneath the veranda.

3      HCR 14.2(a), (b).

4      HCR 14.6(3)(b)(ii)(d).

5      HCR 16.4(4)(a).

6      Bradbury v Westpac Banking Corp [2009] 3 NZLR 400.

7      Harley v McDonald [1999] 3 NZLR 545.

8      HCR 14.7.

[15]     Over the month before the meeting on 24 January 2014, Heath J held, Mt Maunganui’s population would increase markedly, as would the numbers passing under the veranda.  If there was any imminent danger to the public from the veranda, that needed to be identified and countered.  The Judge was also concerned about the needs of elderly residents of the body corporate.

[16]     Heath  J’s  second  reason  was  that  the  body  corporate  was  incapable  of resolving this safety issue with any immediacy. At the annual general meeting on 30

November 2013 those in the applicants’ ‘faction’ had voted out the existing committee, the other ‘faction’, but were not willing to form a new committee themselves. They, themselves, had directly contributed to the then existing impasse.

[17]     Conversely,  while  on  the  safety  issue  the  Judge  was  concerned  that  the former committee, chaired by Mr Kusabs, had withheld an important report relating to weathertightness and structural issues, and terminated the contract of the author, he did not enter into who was responsible for the impasse.  He expressed no opinion about whether the management contract had been lawfully terminated.  He accepted that neither Mr Kusabs nor Spooner Property Consultants, both of whom, as he said in his 11 December 2013 minute, had received ‘minimal’ notice and sought  an adjournment, had not had adequate time to reply.

[18]     Mr Kusabs,  as  the sole  officer of  the body corporate, though  an  officer without any ability to act, had to respond to the application, if only as a contradictor. In this, how reasonable he was cannot now be assessed.  Heath J expressly withheld making that assessment in his primary decision.  It follows that Mr Turbott cannot be considered to be in breach of his duty to the Court in acting on Mr Kusabs’ instructions.

[19]     As second respondent, Spooner Property Consultants could have abstained from opposing the appointment of the administrator.  It could have said, as it does now, that it had only continued to manage the property to ensure that essential services continued.  It could have reserved the issue whether its contract had been lawfully terminated for a separate proceeding.  Instead it engaged in the merit of the application, when it had no need to.  It clearly had a continuing interest to pursue.  It

is no more entitled than the applicant to an award of costs, let alone on an indemnity scale.

[20]     The administrator’s appointment proved highly beneficial.  The veranda was rapidly found to be structurally sound, though  there were other issues with the building.  A new committee was appointed and a new management contract entered into, benefiting all members of the body corporate.  The administrator’s appointment was terminated by consent.  This is a case, I consider, where those who brought and contested the application should bear their own costs.  I decline to make any order as

to costs.

P.J. Keane J