Een v Body Corporate 384911
[2025] NZHC 238
•20 February 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-718
[2025] NZHC 238
UNDER Section 141 of the Unit Titles Act 2010 IN THE MATTER OF
An originating application for the appointment of an administrator
BETWEEN
WONG SUN EEN and others Applicants
AND
BODY CORPORATE 384911
First Respondent
PANDEY VIADUCT QUAYS LIMITED
Second RespondentPANDEY VIADUCT SUITES LIMITED
Third Respondent
Cont/:
Hearing: On the papers Counsel:
S V A East and S L Cahill for Applicants J A McMillan for First Respondent
W J Revell for Second to Sixth Respondents
Judgment:
20 February 2025
JUDGMENT OF O’GORMAN J
[As to costs]
Solicitors:
This judgment was delivered by me on 20 February 2025 at 3:00 pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
…………………………………
Bell Gully, Auckland
Dentons Kensington Swan, Auckland Farry Law Ltd, Auckland
EEN & ORS v BODY CORPORATE 384911 & ORS [2025] NZHC 238 [20 February 2025]
…/continued
AND PANDEY VIADUCT SUITES TWO LIMITED
Fourth Respondent
PANDEY VIADUCT SUITES THREE LIMITED
Fifth RespondentCUSTOM STREET HOTEL LIMITED
Sixth Respondent
[1] On 6 September 2024, I made orders as sought by the applicants, appointing administrators to the first respondent (Body Corporate) under s 141 of the Unit Titles Act 2010 (the Act). The applicants are body corporate owners (a minority). They are in dispute with other body corporate owners (a majority) that are named as the second to sixth respondents (the CP Group). Two unit owners (units 321 and 325) are not in either group.
[2] Following the outcome of my judgment, the applicants seek an award of costs on a 2B basis, plus an uplift (or similar) for two different purposes:
(a)to offset for any costs awarded in this judgment against the Body Corporate being passed on to them as levies; and
(b)to compensate for the fact that the Body Corporate has already levied its own solicitor and client costs for opposing the application.
[3] The applicants’ position is that the CP Group should bear the cost both of defending the application to appoint administrators and of meeting any costs award. The justification for this is that, as a group of owners forming the majority, the CP Group was the driving force behind the Body Corporate opposing the application.
Legal principles
[4] The Court has a general discretion to award costs under r 14.1 of the High Court Rules 2016. This includes:
(a)A broad discretion to make an order for costs against a non-party, either under r 14.1 of the High Court Rules 2016 or under its inherent jurisdiction.1 Non-party costs are exceptional, but do not require misconduct on the part of the non-party.2 Often the ground for such an
1 Xiangli Ltd v A Class Coaches 2008 Ltd [2024] NZHC 3331 at [5] referencing Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39, [2005] 1 NZLR 145 at [25]; and Kidd v Equity Realty (1995) Ltd [2010] NZCA 452 at [14]–[20].
2 Xiangli Ltd v A Class Coaches 2008 Ltd, above n 1, at [6] referencing Carborundum Abrasives Ltd v Bank of New Zealand (No 2) [1992] 3 NZLR 757 (HC) at 764–765.
order is that the non-party substantially controlled and sought to benefit from the proceeding.3
(b)A discretion to award an uplift in the costs award by the amount a successful party has been required to contribute to the unsuccessful body corporate’s legal costs in the litigation,4 requiring disclosure of that amount if necessary.5
[5] Subject to such discretions, r 14.2 states the principles to be applied in most cases:
(a)Under r 14.2(1)(a), the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds.
(b)Under r 14.2(1)(b), an award of costs should reflect the complexity and significance of the proceeding. For those purposes, r 14.3 provides for three categories of proceeding (1, 2 or 3).
(c)Rule 14.2(1)(c) provides that costs should generally be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application. These are classified in r 14.5 by band (A, B or C).
(d)Rule 14.2(1)(f) provides that an award of costs should not exceed the actual costs incurred by the party.
[6] Under r 14.7, the Court may refuse to make an order for costs, or may reduce the award of costs, if (among other reasons):
3 Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HRPt14.09(2)(iii)].
4 Body Corporate 198900 Ltd v Bhana Investments Limited [2015] NZHC 2787; Body Corporate 199380 v Cook [2018] NZHC 1244, (2018) 19 NZCPR 522; and Body Corporate 166208 v York Trustees Ltd [2021] NZHC 1974.
5 Body Corporate 166208 v York Trustees Ltd, above n 4, at [58].
(a)the party that succeeded overall had nevertheless failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs;6 or
(b)the party claiming costs has contributed unnecessarily to the time or expense of the proceeding or step in it by (among other things):7
(i)taking or pursuing an unnecessary step or an argument that lacks merit; or
(ii)failing, without reasonable justification, to admit facts, evidence, or documents, or accept a legal argument.
Applicants’ position
[7] The applicants claim costs on a 2B basis in the sum of $13,623 plus disbursements of $540, totalling $14,163.
[8] The applicants also seek an uplift in the costs award by the amount the successful applicants have been required to contribute to the Body Corporate’s legal costs in the litigation.8 The applicants understand that the Body Corporate incurred
$48,228.70 in its own solicitor and client costs opposing the application, and those costs were passed on to all owners, in accordance with the default provisions of the Act.9 This means that the minority owners were levied 37.106 per cent, or $17,895.74 of those Body Corporate costs. This amount is sought as an uplift in addition to
$14,163 scale costs and disbursements.
[9] In respect of the prospect that any costs awarded by this judgment might also be passed on by levies, the applicants request:
(a)Preferably, that leave be reserved for the applicants to make a further application for costs to take account of any further levy imposed on
6 High Court Rules 2016, r 14.7(d).
7 Rules 14.7(f).
8 In reliance on cases cited in [4](b)] above.
9 Unit Titles Act 2010, s 121.
them by the Body Corporate to fund the costs award and any other flow on costs.10
(b)In the alternative, that this costs award be grossed up to compensate for the prospect that 37.106 per cent of it will be passed onto the applicants in their Body Corporate levies.
CP Group’s position on costs
[10] The CP Group does not dispute the calculation of the 2B scale amounts referred to in para [7] above.
[11] It opposes any orders that have the effect of allocating payment of costs to the CP Group, including on the grounds that this is inconsistent with the agreement in a joint memorandum of counsel dated 15 April 2024. Paragraph 3 of that memorandum states:
The second to sixth respondents intend to abide the decision of the court on the administrator application. Accordingly, the applicants and the second to sixth respondents agree that there will be no issue as to costs between them in relation to the administrator application.
[12] In any event, the CP Group submits that this is not a proper case for uplifting costs to address any unfairness of such costs being passed on via levies:
(a)In each of the decisions relied on by the applicants as justifying an uplift, the relevant body corporate was the plaintiff. The unit owners who received costs awards were successful defendants with no real choice about whether to participate in the litigation.
(b)Properly examined, something extraordinary outside what is already in the contemplation of the Act amounting to “unfairness” should be required to justify an uplift. The Act contemplates litigation between bodies corporate and their unit owners and nevertheless prescribes a pro rata allocation as the method of allocation. In Body Corporate
10 A similar order was made in Body Corporate 198900 Ltd v Bhana Investments Limited [2015] NZHC 2787 at [15] and Body Corporate 166208 v York Trustees Ltd, above n 4, at [59].
199380 v Cook, the Court did not think unfairness arose solely from a successful unit owner having to contribute to body corporate costs in addition to their own.11
(c)Nothing extraordinary arises in this case because it was the applicants’ decision to pursue this application without any remedy of monetary compensation, the Body Corporate was not pursuing a determination at all, there has been only one round of litigation, and the applicant group is quite large so the costs are spread more broadly than in other cases.
[13] Furthermore, the CP Group submits that costs should be decreased from scale to reflect that the applicants lost on numerous issues that were hopeless and have unnecessarily increased the costs of both groups and the Body Corporate. A 50 per cent discount is sought to reflect these issues, and the CP Group also submits that such conduct should also be a disentitling factor for seeking any uplift for the effect of levies.
[14] Accordingly, the CP Group submits that the applicants should receive a cost award of no more than $7,081.50 (50 per cent of costs calculated on a 2B basis and disbursements), with no uplift.
Administrators’ position
[15] The position of the administrators appointed over the Body Corporate can be summarised as follows:
(a)To the extent that costs are awarded to the applicants, they should be reduced to take into account the applicants’ failure on most of the claims taken to hearing and the increase in costs that resulted from those claims being pursued.
(b)The administrators abide on the issue of uplift, noting that there is precedent for such an uplift in this type of body corporate situation, but
11 Body Corporate 199380 v Cook [2018] NZHC 1244, (2018) 19 NZCPR 522 at [116]–[117].
that the applicants and the CP Group dispute how those principles should be applied on the facts of this case.
(c)If the Court were to adopt the preferred approach sought by the applicants in [9](a) above, then the Court should give directions as to how to pass on the levy, given that the jurisdiction under s 127 of the Act to charge expenses to specific owners is narrow.12
Analysis
[16] The starting point under r 14.2(1)(a) is that the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds. There is no dispute that the default 2B scale costs calculated in accordance with rr 14.2–14.5 is $13,623 plus disbursements of $540, making a total of $14,163.
[17] I accept that the applicant succeeded in achieving the remedy sought in the application, namely the appointment of administrators. However, it is also true that the applicants were unsuccessful on most of the grounds referred to in the evidence and legal submissions. If the application had been more narrowly focused, then significantly less hearing time would have been required and each of the represented party groups would have incurred lower solicitor and client costs.
[18] During the hearing, the applicants seemed open to acknowledging that many of the issues were not themselves grounds for seeking orders under s 141 of the Act, but the applicants nevertheless considered that factual context relevant for me to understand the level of acrimony and distrust between the two factions. Issues of distrust were a factor that I considered relevant in deciding whether to exercise the discretion to appoint an administrator, and whom to appoint. However, the applicants’ various unsuccessful arguments received far too much focus when they were advanced as substantive grounds for seeking the appointment of administrators. I accept the CP Group’s submissions that a 50 per cent reduction is warranted under r 14.7 for
12 This requires that the repair, work, or act was rendered necessary by reason of any wilful or negligent act or omission on the part of, or any breach of the Act, the body corporate operational rules, or any regulations by, any unit owner or his or her tenant, lessee, licensee, or invitee.
those reasons (applied to steps but not the disbursement). This results in a figure of
$7,351.50, comprising $6,811.50 of scale costs, plus the $540 disbursement.
[19] I accept that it would be unfair for the applicants to be levied for their share of party and party costs, thereby reducing the net amount received, because that would be circular and undermine the purpose of awarding them. I therefore consider it appropriate to gross up such a party and party costs, resulting in a sum of $11,370.13.13
[20] I prefer the approach of grossing up, as opposed to leaving it to the administrators to decide how to levy the costs (or to revert to the Court on that issue), because:
(a)I agree with the administrators’ concern that the statutory provisions for levying costs do not seem to provide any clear scope for levying only the CP Group (in the absence of their wilfulness and negligence).
(b)The joint memorandum agreement that there would be no issue as to costs as between the applicants and the CP Group does appear inconsistent with those arguments now advanced.
(c)The Body Corporate did not take instructions for this proceeding from the minority owners or any extraordinary general meeting (EGM). Therefore, such instructions must have come from the majority owners or their appointees on the Body Corporate Committee. Regardless, the litigation was not conducted for the benefit of the majority owners in any sense that might attract a costs award against them directly,14 particularly given that the Body Corporate was an unwilling respondent that was successful on most issues (if not the overall outcome).
(d)Reverting to the Court on how to levy would be disproportionate and will only increase the costs for all concerned, which is not in anyone’s interests.
13 This is calculated by dividing $7,351.50 by 0.62894 (one minus the 37.106 per cent likely to be levied against the applicants).
14 By analogy with the principles on costs against non-parties.
[21] I do not consider it appropriate to provide an uplift seeking to reallocate the Body Corporate’s previous solicitor and client costs:
(a)I accept that it remains a discretionary assessment as to whether there is unfairness justifying a departure under r 14.1 from the principles to be applied in most cases. This will depend on the facts of each individual case.
(b)The Act contemplates that disputes may arise between bodies corporate and their unit owners, yet a pro rata allocation still applies subject to only limited statutory exceptions.
(c)The Court does not normally seek to reallocate solicitor and client costs, and in this case I do not consider it appropriate to do so, given the extent to which the applicants’ arguments failed and unduly added to the costs of the other parties. In circumstances where there was mixed success on the disputed issues, and my examination of them was limited to the s 141 context, this case is distinguishable from other cases where the body corporate’s claims lacked merit throughout, and the successful party had no choice but to defend.
[22] Stepping back and considering the issues in the round, my decision is ultimately based on my overall assessment that a grossed up costs award of $11,370.13 (including the disbursement) properly reflects the outcome in this proceeding and the general principles sought to be achieved by scale costs, taking into account the specific factors in this case (including levy issues), the fact that there appears to be fault on both sides for their ongoing clashes, and the mixed results achieved in this proceeding.
[23] I do not award any costs for determining these cost issues (costs on costs are to lie where they fall).
Result
[24]Accordingly, I award the applicants costs and disbursements of $11,370.13.
O’Gorman J
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