LORA TRADING LIMITED AND STIRLING INVESTMENT PROPERTIES LIMITED
[2024] NZHC 3661
•4 December 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-2027 [2024] NZHC 3661
IN THE MATTER of Unit Titles Act 2010 BETWEEN
LORA TRADING LIMITED
Plaintiff
AND
STIRLING INVESTMENT PROPERTIES LIMITED
Defendant
Hearing: On the papers Appearances:
A K Hough and B M Easton for Plaintiff
D R Kigio KC and J N Batchelor-Smith for Defendant
Judgment:
4 December 2024
COSTS JUDGMENT OF BOLDT J
[1] The plaintiff, Lora Trading Limited (Lora) unsuccessfully sought a mandatory injunction against the defendant, Stirling Investment Properties Limited (Stirling). Lora and Stirling own neighbouring stand-alone units — Units 1 and 2 respectively
— in a unit title development called Ponsonby Gardens. Lora asked for an order compelling Stirling to conduct specified weathertightness repairs to Unit 2.
[2] There was no dispute that Unit 2 suffers from numerous unremedied weathertightness defects. The question at trial was whether Unit 2’s ongoing weathertightness issues had affected, or had the potential to affect, the value of Unit 1. Like all unit title owners, Stirling is under a duty, under s 80(1)(g) of the Unit Titles Act 2010, to repair and maintain its property to ensure no economic harm “is, or has the potential to be, caused to … any other unit” in the development.
LORA TRADING LIMITED v STIRLING INVESTMENT PROPERTIES LIMITED [2024] NZHC 3661 [4
December 2024]
[3] On 5 September 2024 I dismissed Lora’s claim. I found Lora had not proved the weathertightness issues which afflict Unit 2 have materially affected the value of Unit 1, or that they have the potential to do so.1 It followed Lora had not established that Stirling was in breach of s 80(1)(g).
[4] The parties asked me to reserve the question of costs, though I indicated a preliminary view that Stirling should receive an award.2 I invited the parties to settle the question among themselves, but they have been unable to do so. In a rare moment of accord, they agree the proceeding is properly placed in category 2B for costs purposes, but there is significant disagreement beyond that.
Positions of the parties
Costs
[5] Stirling seeks costs for two counsel, and asks me to increase its award by 33 per cent. It argues an uplift is appropriate because, in its submission, Lora’s case was entirely lacking in merit. Stirling relies on my finding that Lora had fallen “well short” of persuading me the condition of Unit 2 had caused, or had the potential to cause, economic harm to Lora as the owner of Unit 1.3
[6] Lora says costs should lie where they fall. It characteries the proceeding as a test case, brought to clarify the application of s 80(1)(g), which had not previously been considered by the Court.
[7] In the event I still consider an award should be made, Lora argues a number of reductions from the schedule proposed by Stirling would be appropriate. Lora takes particular issue with a claim of 0.8 days for Stirling’s response to a notice to admit facts. It argues Stirling’s response was evasive, and led to both parties calling unnecessary evidence. Lora also argues the time spent at hearing, and in preparation for hearing, should be reduced to exclude the unnecessary day (or so) of evidence that might have been avoided if Stirling had answered the notice to admit facts more fully.
1 Lora Trading Ltd v Stirling Investment Properties Ltd [2024] NZHC 2532.
2 At [74].
3 At [73].
[8] Lora characterises the case as one of insufficient complexity or duration to warrant an allowance for second counsel, though as Stirling pointed out, Lora itself was represented at trial by two senior counsel.
Disbursements
[9] Lora contends it should not be liable for all Stirling’s expert witness costs. Both parties tendered expert evidence about the internal state of Unit 2 and the seriousness of its weathertightness defects. Stirling seeks to recover the fees it incurred instructing Mr Philip O’Sullivan, a building surveyor and engineer, and Ms Adrienne Burnie, a microbiologist. Mr O’Sullivan and Ms Burnie’s evidence answered expert evidence given by Mr Andrew Gray, another building surveyor. Mr Gray alleged, among other things, that Unit 2’s weathertightness defects rendered it insanitary for the purposes of the Building Act 2004.
[10] As it happened, I did not find the evidence of Mr Gray for Lora, or Mr O’Sullivan and Ms Burnie for Stirling, particularly relevant. The case turned on whether the undisputed weathertightness defects in Unit 2 had the potential to cause economic harm to Lora as the owner of Unit 1. I determined I did not need to resolve the (relatively narrow) differences between Mr Gray and Mr O’Sullivan, because on neither analysis had Lora proved Unit 2’s internal defects had affected, or had the potential to affect, the value of Unit 1.
[11] It follows, Lora argues, that Stirling should not be entitled to recover the fees it incurred in securing Mr O’Sullivan’s and Ms Burnie’s evidence. Lora accepts Stirling should be entitled to recover the expenses it incurred in instructing Mr Gary Cheyne, Stirling’s expert valuer, whose evidence proved highly material.
Discussion
[12] The starting point in any civil proceeding is that the unsuccessful party should pay costs to the successful party, the award should reflect the complexity and significance of the proceeding, costs should be assessed with reference to the appropriate daily recovery rate rather than the costs the parties actually incurred, and
that “so far as possible the determination of costs should be predictable and expeditious”.4
[13] It follows that any party seeking a departure from the standard allocations in sch 3 to the High Court Rules 2016 bears the onus persuading the Court there is something sufficiently unusual which warrants a departure from the principle that costs should be predictable and expeditious. I am not persuaded either party has discharged that onus, except in one respect I discuss in more detail below.
[14] I do not accept this was a test case. While s 80(1)(g) had not been considered by this Court before, the case was not brought to settle a difficult question of law which required clarification. I agree Mr and Mrs Hough, as Lora’s directors, brought the proceeding in their own interests; it had no particular significance beyond the parties. Moreover, the law governing the case was relatively straightforward; the central question was one of fact. I do not consider the admittedly novel nature of the proceeding comes close to justifying the exceptional step of dispensing with or reducing an otherwise appropriate award.
[15] Next, I agree it is appropriate to certify for second counsel. The case involved a considerable volume of technical and complex evidence. The bundles, both of documents and authorities, were large. The parties’ written submissions were extensive. Lora was itself represented by two senior counsel.
[16] I reject Lora’s submission that I should disallow Stirling’s claim for Mr O’Sullivan’s and Ms Burnie’s expert fees. While their evidence did not prove decisive, Stirling was obliged to respond to the evidence and allegations advanced by Lora. Lora devoted considerable energy to seeking to characterise Unit 2 as badly afflicted by ongoing weathertightness issues. It sought to characterise the defects as more serious than Stirling accepted, and made the serious but unnecessary allegation that the building was insanitary. Once those allegations were made, Stirling was entitled to answer them, and it was plainly appropriate for it to engage expert witnesses in doing so.
4 High Court Rules 2016, r 14.2(1).
[17] The only area in which I direct a reduction from a strict 2B costs allocation concerns Stirling’s response to Lora’s notice to admit facts. Lora issued a notice requiring Stirling to admit the existence of 16 specific defects in Unit 2, all of which were referred to in the 2014 report Stirling obtained from the consultancy firm Maynard Marks. Almost all the defects were admitted for the purposes of trial.
[18] In its response Stirling declined to admit those matters, recording it denied the relevant allegations, though it admitted they were “descriptions contained in the Maynard Marks Report”. That response was evasive and unhelpful. Stirling should not be entitled to recover the costs associated with responding to the notice, and I disallow its claim under item 19.
[19] That said, I do not accept Stirling’s failure to answer the notice appropriately had wider implications. Lora says it was Stirling’s refusal to admit the facts in the notice which led to the need for expert evidence about the condition of Unit 2. But by trial Stirling had admitted the contents of the Maynard Marks report. Nonetheless, Lora called Mr Gray (who said the building had deteriorated since the Maynard Marks report was written) and maintained its allegation that Unit 2 was insanitary. Once Lora embarked on that course, Stirling was entitled to respond.
[20] The only remaining point of contention is Stirling’s contention that I should direct a 33 per cent uplift to reflect the “fundamentally defective” nature of Lora’s case.
[21] Lack of success — even conspicuous lack of success — in civil proceedings is not ordinarily regarded as a sufficient basis for an increased award. To paraphrase, r 14.6(3)(b)(ii) permits an uplift where a party has contributed unnecessarily to the time or expense of the proceeding by taking or pursuing an unnecessary step or an argument that lacks merit. Stirling argues Lora’s entire case lacked merit, and that a general uplift is accordingly warranted.
[22] As Kós J observed in N-Tech Ltd v Abooth Ltd, r 14.6(3)(b)(ii) presents a double hurdle. The first assesses the claim, the second examines the plaintiff’s conduct. The lack of merit in the unsuccessful party’s case must have been both
obvious and incontrovertible, to the point where there was no possibility the Court might form a different view with the benefit of evidence and submissions.5
[23] While I concluded Lora had fallen well short of proving its case, I do not consider the lack of merit in its case was so obvious, at least without the benefit of hindsight, that the rare step of an increased award is appropriate.
Orders
[24] I make the following orders. Lora is to pay Stirling’s costs on a 2B basis. I certify for second counsel. I disallow Stirling’s claim under item 19 of sch 3 of the High Court Rules; disallowance of that item reduces Stirling’s award by 0.8 of a day, or $1,912.
[25] Stirling is entitled to its disbursements in full, including the costs it incurred in obtaining the evidence of its three expert witnesses.
[26]I make an order for costs of $56,095.75 together with disbursements of
$42,760.6 Leave is granted to the parties to file further memoranda if they consider any element of the award requires recalculation.
Boldt J
Solicitors:
Grimshaw & Co, Auckland for Plaintiff Batchelor*Smith, Auckland for Defenda
5 N-Tech Ltd v Abooth Ltd [2012] NZHC 1167 at [108]. While N-Tech was a case where the trial was abandoned before completion, the need for the proceeding to be plainly hopeless applies with equal force to a completed proceeding.
6 I note the difference in the parties’ tables with respect to items 33 and 33B, which relate to aspects of a party’s preparation for hearing. Stirling claims 5 days for each. Lora suggests 2.75, reflecting its submission that the time taken by the evidence of Messrs Gray and O’Sullivan should be excluded from costs calculations. I have rejected Lora’s submission that any part of the trial should be excluded.
Items 33 and 33B are calculated with reference to sitting days. They are not divisible into quarter- days in the way appearance time is. The trial occupied at least some of each of the five sitting days on which it was scheduled, therefore five days is the appropriate allocation for items 33 and 33B.
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