Clearwater Cove Apartments Body Corporate no 170989 v Auckland Council

[2014] NZHC 467

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-005640 [2014] NZHC 467

UNDER          the Weathertight Homes Resolutions Services Act 2006

BETWEEN     CLEARWATER COVE APARTMENTS BODY CORPORATE NO 170989

First Appellant

ANDNICHOLAS VAN DIJK AND NORMAN PALMER AS TRUSTEES OF THE LIVI TRUST

Second Appellant

ANDAUCKLAND COUNCIL First Respondent

ANDTHE FLETCHER CONSTRUCTION COMPANY LIMITED

Second Respondent

Hearing:                   On the papers

Counsel:                  E J L Werry for Applicants

H Waldron for First Respondent
G J Christie and M S C Harrison for Second Respondent

Judgment:                13 March 2014

JUDGMENT OF KATZ J (Costs)

This judgment was delivered by me on 13 March 2014 at 5:00 pm

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors:               Stephen McDonald, Auckland Heaney & Co, Auckland Simpson Grierson, Auckland

Counsel:                 E J L Werry, Auckland

CLEARWATER COVE APARTMENTS BODY CORPORATE NO 170989  & ORS v AUCKLAND COUNCIL

& FLETCHER CONSTRUCTION COMPANY [2014] NZHC 467 [13 March 2014]

Introduction

[1]      On 25 October 2013 I delivered judgment (“Judgment”) in relation to an appeal brought by the appellant (“Body Corporate”) against an award of indemnity costs made against it in the Weathertight Homes Tribunal (“Tribunal”).1   The Body Corporate’s appeal was largely, but not entirely, unsuccessful.  I must now determine what, if any, costs the Body Corporate should pay to the respondents in respect of that appeal.

Background

[2]      The  Body  Corporate  brought  claims  in  the  Tribunal  against  Fletcher Construction  Company  Ltd  (“Fletcher”)  and  Auckland  Council  (“Council”)  in relation to a block of apartments at Clearwater Cove that had developed weathertightness  issues.   The  Body Corporate’s  claims  against  Fletcher and  the Council were unsuccessful in the Tribunal.  An appeal was filed, but not ultimately pursued.

[3]      In a subsequent costs determination, the Tribunal awarded indemnity costs to Fletcher and the Council, totalling in excess of $1 million.   Indemnity costs were awarded on the basis that the Body Corporate’s claims lacked substantial merit and were advanced in bad faith.  The Body Corporate appealed that costs determination to this Court and it came on for hearing before me.

[4]      As set out in the Judgment, I upheld the Tribunal’s finding that the Body Corporate’s claims lacked substantial merit in relation to ten out of the 12 units subject  to  the  claim  (whereas  the  Tribunal  had  found  that  the  claims  lacked substantial merit in their entirety).

[5]      I also concluded that there was ample evidence before the Tribunal to support its finding of bad faith against the Body Corporate.   The Tribunal was entitled to award indemnity costs against the Body Corporate based on that finding.  However,

as I had found that some claims were not completely without merit, I reduced the

1      Clearwater  Cove  Apartments  Body  Corporate  No  170989  v  Van  Dijk  &  Palmer  [2013] NZHC 2824.

indemnity costs  award  from  100  per  cent  to  85  per  cent  of  Fletcher’s  and  the

Council’s actual and reasonable costs.

[6]      Finally, I remitted the issue of quantum back to the Tribunal for a more thorough assessment of what would be reasonable, in accordance with the approach set out in Bradbury v Westpac Corporation.2   In the interim, however, I ordered the Body Corporate to immediately pay $200,000 to the Council and $250,000 to Fletcher, in part payment of their costs.

Submissions

[7]      In accordance with the principles set out in Packing In Ltd (in liquidation) v Chilcott,3 the Council submitted that 2B scale costs, reduced by 15 per cent to reflect the partial success of the Body Corporate in obtaining a reduction in the costs and disbursements  payable,  would  be  appropriate.    The  total  costs  claimed  by  the Council are $8,457.50.

[8]      Fletcher sought full 2B scale costs in the sum of $11,144.00.   It relied on Chilcott  and  Waterhouse  v  Contractors  Bonding  Ltd4    as  authorities  for  the proposition that the Court should consider which party has succeeded by making a realistic appraisal of the end result.  Further, the costs sought by Fletcher included costs  in  relation  to  the  appearance  at  the  hearing  of  junior  counsel.    Fletcher submitted that the attendance of junior counsel was required, given the large number

of documents involved.

[9]      The  Body  Corporate  submitted  that,  as  it  was  partially  successful,  the bringing of the appeal was justified.  Costs ought therefore to lie where they fall.  In the alternative, if the Court is minded to award costs in favour of the respondents, the Body Corporate  submitted  that  the  approach  of  the  Council  (scale  costs  less  a percentage) should be preferred over Fletcher’s submission (full scale costs).    The Body Corporate submitted that Fletcher’s approach ignores their partial success.

Scale costs should be reduced by half, to reflect the parties’ respective successes and

2      Bradbury v Westpac Corporation (2008) 18 PRNZ 859 (HC) at [207] – [214].

3      Packing In Ltd (in Liquidation) v Chilcott (2003) 16 PRNZ 869, (CA).

4      Waterhouse v Contractors Bonding Ltd HC Auckland CIV-2010-404-3074, 7 June 2011.

failures.  Further, the Body Corporate submitted that the costs sought by Fletcher for the appearance of junior counsel are not reasonable, particularly given that all other parties were represented by only one counsel.

Discussion

[10]     The general principle is that costs should follow the event, unless particular circumstances warrant otherwise.   Applying this principle is not straightforward, however, where a party has had partial success.

[11]     In  Chilcott  the  Court  of Appeal  outlined  the  approach  where  the  costs claiming party has only been partially successful:5

Costs in a case such as this should rather be based on the premise that approximately equal success and failure attended the efforts of both sides. To that starting point should be added issues such as how much time was spent on each transaction or group of transactions in issue, and any other matters which can reasonably be said to bear on the Court’s ultimate discretion on the subject of costs. In the end, as in all costs matters, the Court must endeavour to do justice to both sides, bearing in mind all material features of the case...

... Success or failure in this context is better assessed by a realistic appraisal of the end result rather than by focusing on who initiated what step, and the extent to which that step succeeded or failed.

[12]     In my view, a “realistic appraisal of the end result” in this case does not support the Body Corporate’s submission that costs should lie where they fall.  Most of the arguments advanced by the Body Corporate on appeal were unsuccessful, as is reflected in the Judgment.     The costs incurred by Fletcher and the Council in addressing such issues would have been significant.

[13]     On the other hand, given that the Body Corporate’s appeal succeeded to a limited extent, it would not be appropriate for the Body Corporate to be required to meet full 2B scale costs.

[14]     Looking at the situation in the round, and making a realistic appraisal of the end result, I accept the Council’s submission that the appropriate course would be for

the Body Corporate to meet 85 percent of the respondents’ 2B scale costs.  Such an

5      At [5]-[6].

approach reflects that, while the Body Corporate was largely unsuccessful, there were limited aspects of the appeal that were not without merit.

[15]     In relation to Fletcher’s claim for the costs of the attendance of junior counsel I note that in Nomoi Holdings Ltd v Elders Pastoral Holdings Ltd6 Chambers J stated that it will now be less likely that costs will be certified for a second counsel as much of the work is done before trial.  This has reduced the workload at trial and made it less necessary for a second counsel to appear.7

[16]     Awarding costs for the attendance of junior counsel in 2B cases tends to be the exception rather than the norm.  The presence of junior counsel may well have been helpful from Fletcher’s perspective.   However, I am not satisfied that it was sufficiently necessary to justify an additional award of costs against the Body Corporate.

[17]     In terms of quantum, I note that there are a number of issues with both the Council’s and Fletcher’s costs calculations.  The Council has claimed costs on the basis that the hearing was over two days.  While it was set down for two days, in reality it took only one.  I will adjust the quantum of its award accordingly.

[18]     Fletcher seeks costs in relation to the case management conference before Ellis J  on  9  October 2012.    In  that  case management  conference  Ellis  J  made timetable directions for her to hear interlocutory matters, namely:8

(a)       the Body Corporate’s application for stay of the costs decision; and

(b)      the respondents’ applications for increased security for costs in the

appeal.

[19]     After the hearing on 23 October 2012, Ellis J released a decision a week later that granted the applications of all parties.  Her Honour considered that costs should

6      Nomoi Holdings Ltd v Elders Pastoral Holdings Ltd (2001) 15 PRNZ 155 (HC).

7      At [16]-[22].

8      At [2] of Ellis J’s minute dated 9 October 2012. Ellis J timetabled for a third issue relating to whether counsel for the Body Corporate was able to represent the Body Corporate, however, this is not addressed in Ellis J’s decision, but appears to have been resolved by the parties separately.

lie where they fall as all parties had success.  I consider that it follows that the costs for preparing and attending the case management conference of 9 October 2012 should accordingly lie where they fall.

[20]     I consider it likely that Fletcher’s real intent was to seek costs in relation to the 26 February 2013 case management conference before Wylie J, where the subject matter was related to the substantive decision.   In my view both Fletcher and the Council are entitled to the costs of attending that case management conference. Accordingly, Fletcher and the Council are both entitled to costs in respect of appearance at the 26 February 2013 case management conference (0.3 days), preparation   of   written   submissions   for   the   substantive   hearing   (3   days) and appearance  at  the substantive hearing  (1 day).   The  total  sum  is  $7,273.45 ($8,557 less 15 percent).

Result

[21]     I order that the Body Corporate is to pay each of Fletcher and the Council costs in the sum of $7,273.45.

Katz J