Hill v Body Corporate 372185

[2024] NZHC 2326

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-470-111

[2024] NZHC 2326

BETWEEN

JENNIFER MARLENE HILL

Plaintiff

AND

BODY CORPORATE 372185

Defendant

Hearing:

On the papers

Counsel:

J W McDougall for the Plaintiff

S C Price / J J K Spring for the Defendant 19 August 2024

Judgment:

19 August 2024

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

[costs]

This judgment was delivered by me on 19 August 2024 at 4 pm Pursuant to r 11.5 of the High Court Rules.

…………………..

Registrar/Deputy Registrar

Solicitors:

Holland Beckett Law, Tauranga MinterEllisonRuddWatts, Auckland

HILL v BODY CORPORATE 372185 [2024] NZHC 2326 [19 August 2024]

Introduction

[1]                 On 19 March 2024, I gave judgment declining the defendant’s application for an order under r 5.49 of the High Court Rules 2016 (HCR) dismissing this proceeding on the ground that the Court has no jurisdiction to hear it.1

[2]                 The plaintiff’s statement of claim pleaded three causes of action. The third cause of action claimed minority relief under s 210 of the Unit Titles Act 2010 (UTA). I struck out the third cause of action on the ground that the plaintiff did not have standing to bring it.

[3]                 I expressed my preliminary view in the judgment that I considered the plaintiff to be the successful party, and that 2B costs would be appropriate subject to a reduction to reflect mixed success. The plaintiff now applies for costs on that basis.

[4]                 The plaintiff seeks ancillary orders to deal with what it submits is inherent unfairness arising from the defendant’s contractual right to pass on a share of the defendant’s costs to the plaintiff.

[5]                 The Trinity Wharf unit title development is atypical. The principal units are stratum estates in leasehold land. The registered owner of the stratum in leasehold interests is Trinity Wharf Limited (TWL). Therefore, TWL is the sole member of the Body Corporate, who is the defendant. TWL has granted registered leases of the principal units. The plaintiff, Ms Hill, is one of the lessees. She brings the proceeding on her own behalf and on behalf of other lessees of units, challenging certain resolutions of the Body Corporate.

[6]                 Ms Hill and the other lessees that she represents are concerned that TWL is responsible for meeting the Body Corporate’s costs in defending the proceeding, including any costs award that the Body Corporate is ordered to pay to Ms Hill, and that TWL is seeking to pass those costs on to the lessees pursuant to the terms of the registered leases.

1      Hill v Body Corporate 37215 [2024] NZHC 600.

[7]                 The defendant argues that it is the successful party and entitled to costs on a 2B basis with a 50 per cent reduction to reflect partial success.

[8]The applications for costs raise the following issues:

(a)Who is the successful party?

(b)Should costs be reduced to reflect mixed success?

(c)Is Ms Hill entitled to any further orders to remedy any unfairness that might arise if TWL seeks to pass on its own legal costs, or the burden of any costs order, to Ms Hill and the other lessees that she represents?

Who is the successful party?

[9]The Body Corporate submits that it was the successful party because:

(a)it successfully challenged the Court’s jurisdiction to hear Ms Hill’s third cause of action under s 210 of the UTA; and

(b)it was successful in its argument that the Court does not have jurisdiction to hear the remaining claims under the Declaratory Judgments Act 1908 (DJA).

[10]             When the Body Corporate was served with the statement of claim, it did not file a statement of defence. It filed a protest to jurisdiction, followed by an application for an order dismissing the proceeding under r 5.49(3) of the HCR, which provides:

A defendant who has filed an appearance may apply to the court to dismiss the proceeding on the ground that the court has no jurisdiction to hear and determine it.

[11]             The application was unsuccessful. I held that the Court did have jurisdiction to hear the plaintiff’s claim, relying on the UTA. I clarified that the jurisdiction did not arise independently under the DJA.

[12]             The Body Corporate had not applied to strike out one or more of the causes of action in the statement of claim under r 15.2 of the HCR. There was no application to strike out the cause of action under s 210 of the UTA on the grounds that it could not succeed.

[13]             The issue was jurisdiction. Jurisdiction and standing are different concepts. This was not a situation where the High Court did not have jurisdiction to hear a claim under s 210 of the UTA; it was a situation where the particular plaintiff did not have standing. I struck out the cause of action under s 210 of the UTA on that basis, on the Court’s own motion.

[14]             Accordingly, the Body Corporate’s application to dismiss the proceeding for want of jurisdiction was unsuccessful. Ms Hill was the successful party.

Should costs be reduced to reflect mixed success?

[15]             Although the Body Corporate was unsuccessful with its application for dismissal of the proceeding, the discretionary relief awarded did result in Ms Hill’s third cause of action being struck out. As Ms Hill’s submissions on costs acknowledge, it is appropriate for costs to be discounted accordingly.

[16]             I accept the calculation of full 2B costs on Ms Hill’s behalf to be $6,692. Ms Hill seeks an award of $5,497, which reflects a 25 per cent reduction for preparation of written submissions and appearance at the defended hearing. This is an appropriate reduction. Ms Hill is entitled to costs of $5,497 and disbursements of $160.

Is Ms Hill entitled to any further orders to remedy any unfairness that might arise if TWL seeks to pass on its own legal costs, or the burden of any costs order, to Ms Hill and the other lessees that she represents?

[17]             This issue is complicated because TWL is not a party. Costs orders may be made against non-parties in exceptional circumstances, including where a non-party substantially controls the proceeding and plays an active part in the conduct of the litigation, or has an interest in the litigation.2 TWL is effectively in control of the Body

2      For further discussion, see Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters, accessed 19 August 2024) at [HRPt14.09(2) and (3)].

Corporate and it is at least arguable that TWL is the party that is controlling the conduct of this proceeding for the defendant. However, Ms Hill does not seek an award of costs against TWL.

[18]             Counsel for Ms Hill refers to the Court’s discretion to award an uplift of costs to rectify unfairness that will result if a successful party is liable to contribute towards the unsuccessful party’s costs.

[19]             The application of this principle in a body corporate setting was confirmed in Tremont Holdings Ltd v Body Corporate 401803,3 Body Corporate 198900 v Bhana Holdings Limited4 and Body Corporate 1662018 v York Trustees Limited.5 If necessary, the Court can award increased costs to reimburse a successful owner for a contribution that the owner is compelled to make to an unsuccessful body corporate’s costs.

[20]             Although Ms Hill and the other lessees that she represents are not members of the Body Corporate the principle applies in this case by analogy.

[21]             Counsel for Ms Hill has produced correspondence and an invoice from TWL to one of the lessees which confirm that TWL is meeting the Body Corporate’s legal costs and seeking to pass on those costs to the lessees, relying on the terms of the registered leases. It remains to be seen whether TWL will also seek to pass on any costs awarded against the Body Corporate in this judgment. If it does, then it is appropriate that Ms Hill is given the opportunity to apply for an increase in the costs award, to ensure that the incidence of the costs award in her favour is not borne by Ms Hill.

[22]             The practical difficulty is that TWL is not a party to this proceeding. The Court can increase the costs awarded against the Body Corporate, however no basis has been put forward for the Court to prohibit:

(a)the Body Corporate from passing that cost on to TWL; or

3      Tremont Holdings Ltd v Body Corporate 401803 [2015] NZCA 314 at [25].

4      Body Corporate 198900 v Bhana Holdings Limited [2015] NZHC 2787 at [13] and [14].

5      Body Corporate 1662018 v York Trustees Limited [2021] NZHC 1974 at [55]–[59].

(b)TWL from passing that cost on to Ms Hill and the other lessees under the terms of the registered leases.

[23]             This issue arises in respect of the costs award and the Body Corporate’s costs in general. At this stage, I need do no more than indicate that the Court will be prepared to intervene if the Body Corporate passes the burden of the costs order on to TWL, and in turn TWL seeks to pass the burden to Ms Hill and the other lessees that she represents.

Orders

[24]             The defendant shall pay the plaintiff’s costs on the dismissal of the defendant’s protest to jurisdiction of $5,497 together with disbursements of $160.

[25]             Leave is reserved to the plaintiff to seek further orders if the plaintiff, and the lessees of units in Trinity Wharf that she represents, are required to contribute to meeting the costs award.

Associate Judge Brittain