May v Body Corporate 329331
[2020] NZHC 1554
•3 July 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2009-404-7379
[2020] NZHC 1554
BETWEEN JENNIFER ANN MAY and ANDREW JOHN MAY
Applicants
AND
BODY CORPORATE 329331
First Respondent
…./cont’d
Hearing: On the papers Appearances:
A J Lloyd / P H Bremer for Applicants
T Rainey for 201 Limited, Meakins Trustee Co Ltd and Christy Lynn Maxwell-Steele as administrator of the estate of William John Maxwell-Steele.
T J G Allan / K M Wakelin for Administrator
Judgment:
3 July 2020
JUDGMENT OF LANG J
[on costs]
This judgment was delivered by me on 3 July 2020 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
Counsel: T J Rainey, Auckland
Solicitors: Minter Ellison Rudd Watts, Auckland Rainey Law, Auckland
Grove Darlow and Partners, Auckland
MAY v BODY CORPORATE 329331 [2020] NZHC 1554 [3 July 2020]
PATRICIA ELIZABETH HALLT
Third Respondent
RICHARD GRAHAM MOGRIDGE
Fourth Respondent
CAROL ANNE MOGRIDGE
Fifth Respondent
JACQUELINE MCDERMOTT
Sixth Respondent
ROSS WILLIAM SHENNAN
Seventh Respondent
STEPHANIE MARGARET SHENNAN
Eighth Respondent
MPH08 LIMITED
Ninth Respondent
JAMES RONALD ASHTON
Tenth Respondent
ANNETTE JEAN ASHTON
Eleventh Respondent
JUST LAW NO.65 LIMITED
Twelfth Respondent
RODNEY CHARLES SWIFT
Thirteenth Respondent
FRANCES SWIFT
Fourteenth Respondent
MEAKINS TRUSTEE CO LIMITED
Fifteenth Respondent
207 LIMITED
Sixteenth Respondent
206 LIMITED
Seventeenth Respondent
JOHN CHARLES DEACON
Eighteenth Respondent
MARGARET MARY DEACON
Nineteenth Respondent
RAM TRUSTEE COMPANY LIMITED
Twentieth Respondent
203 LIMITED
Twenty First Respondent
202 LIMITED
Twenty Second Respondent
201 LIMITED
Twenty Third Respondent
GEORGE CHARLES HALLIDAY
Twenty Fourth Respondent
BRENDA MARY HALLIDAY
Twenty Fifth Respondent
307 LIMITED
Twenty Sixth Respondent
306 LIMITED
Twenty Seventh Respondent
JCBEEZ LIMITED
Twenty Eighth Respondent
H&P PROPERTIES LIMITED
Twenty Ninth Respondent
302 LIMITED
Thirtieth Respondent
OLEG ALEXANDROVICH ZAITSEV
Thirty First Respondent
OLGA NIKOLAYEVNA ZAITCEVA
Thirty Second Respondent
DENIS OLEGOVICH ZAITSEV
Thirty Third Respondent
PETER FRANCIS ANDREWS
Thirty Fourth Respondent
LINDA ANNE ANDREWS
Thirty Fifth Respondent
ANGUS STUART OGILVIE
Thirty Sixth Respondent
FIONA JANE MATHIESON
Thirty Seventh Respondent
BIG PICTURE INVESTMENTS LIMITED
Thirty Eighth Respondent
405 LIMITED
Thirty Ninth Respondent
404 LIMITED
Fortieth Respondent
403 LIMITED
Forty First Respondent
NOMACK GROUP LIMITED
Forty Second Respondent
WESTPAC NEW ZEALAND LIMITED
Forty Third Respondent
ASB BANK LIMITED
Forty Fourth Respondent
BANK OF NEW ZEALAND LIMITED
Forty Fifth Respondent
GEOFFREY PETER ROBERTON DE LATOUR
Forty Sixth Respondent
JUDITH MARGARET DE LATOUR
Forty Seventh Respondent
TIMOTHY JOHN BURCHER
Forty Eighth Respondent
ANZ BANK NEW ZEALAND LIMITED
Forty Ninth Respondent
DAVID JOHN MCFARLANE
Fiftieth Respondent
STEPHANIE ELIZABETH DOUGLAS BANKS
Fifty First Respondent
[1] This proceeding concerns an apartment complex known as the Ridge Apartments (the complex). The affairs of the complex are conducted by the first respondent, a body corporate originally constituted under the Unit Titles Act 1972 (the 1972 Act).1
[2] The complex has had weathertightness issues for more than 10 years. The body corporate obtained an order from this Court sanctioning a scheme of arrangement under s 48 of the 1972 Act on 3 February 2010, but remedial work had not begun by September 2018. By that stage the remedial project was complicated by the fact that unit owners had divided into opposing factions, one of which wished to remediate the complex under an existing contract whilst the other wanted to terminate that contract and investigate other alternatives.
[3] Mr and Mrs May, the applicants in this proceeding, own a unit in the complex. They were part of the group of unit owners who wanted the remedial works to be completed under the existing contract. They therefore applied for an order under s 141 of the Unit Titles Act 2010 (the 2010 Act) appointing an administrator to undertake the remedial work sanctioned by the Court. That application was granted on 6 September 2018, with Clark J giving her reasons the following day.2
[4] In December 2019, Mr and Mrs May applied for an order that the administrator’s appointment be made permanent to enable him to ensure the remedial work commenced under the existing contract as then planned on 14 January 2019. The unit owners who did not want the remedial work to commence under that contract (the opposing respondents) opposed that application and cross-applied for an order rescinding the order appointing an administrator. They wanted control of the remedial works to be restored to the body corporate. A schedule listing the opposing respondents is annexed as an appendix to this judgment.
[5] In a judgment delivered on 9 January 2019 I granted Mr and Mrs May’s application and dismissed the opposing respondents’ cross-application.3 The parties
1 The Unit Titles Act 1972 was repealed by s 218 of the Unit Titles Act 2010.
2 May v Body Corporate 329331 [2018] NZHC 2396.
3 May v Body Corporate 329331 [2019] NZHC 3.
have been unable to resolve the issue of costs in relation to those applications and I am now required to determine that issue.4
[6] When the Registry first referred the memoranda that had been filed to me I was unsure whether all affected parties were aware of what was occurring in relation to costs. I therefore accepted an offer of assistance from the administrator to serve copies of relevant judgments, minutes and memoranda on all unit owners and the administrator of the estate of the late William Maxwell-Steele. Mr Maxwell-Steele was a director of 11 companies that owned units in the complex and were opposing respondents.5 I am grateful to the administrator for his assistance in resolving the issue of service on unit owners.
[7]Memoranda or responses on behalf of the following have now been received:
(a)The administrator:
(b)The body corporate committee;
(c)Christy Maxwell Steele – the administrator of the estate of the late William John Maxwell-Steele;
(d)Meakins Trustee Ltd;
(e)201 Ltd.
The respective arguments
Mr and Mrs May
[8] Mr and Mrs May have contributed the sum of $40,000 towards the costs of the present litigation. Two other unit owners have also contributed sums of $5,000 each. The applicants say the body corporate should levy the unit owners to reimburse those unit owners who have contributed to the costs of the proceeding. They contend the
4 Costs in relation to the original application will be determined by Clark J.
5 202 Ltd, 203 Ltd, 204 Ltd, 206 Ltd, 207 Ltd (in liquidation), 302 Ltd (in liquidation), 306 Ltd, 307 Ltd (in liquidation), 403 Ltd (in liquidation), 404 Ltd and 405 Ltd.
body corporate should also be entitled to recover costs from the opposing respondents because they were the unsuccessful parties in this proceeding.
[9] Mr and Mrs May seek costs against the opposing respondents under both the High Court Rules 2016 and s 141(8) of the 2010 Act. They say they should receive increased costs under the High Court Rules against the opposing respondents. They point out that the administrator was appointed for the express purpose of progressing the existing contract for remedial works. Costs associated with the administration are being met under the scheme of arrangement approved by the Court. Mr and Mrs May contend that parties who funded the litigation before me should be reimbursed through levies issued to unit owners by the administrator under the scheme. They say the opposing owners should be required to pay a greater share of the costs than the remaining unit owners.
[10] Mr and Mrs May also contend that costs should be awarded against the estate of the late William Maxwell-Steele. Four of the unit owning companies of which he was a director are now in liquidation. Mr and Mrs May contend Mr Maxwell-Steele was the driving force behind the opposition to the continued appointment of the administrator and his estate should be required to pay costs on that basis.
The administrator
[11] The administrator is neutral on the issue of costs but suggests the Court should proceed in a manner analogous to that taken in contested liquidation proceedings where there are opposing groups of shareholders. In such cases an award of costs is likely to be made against the unsuccessful group of shareholders.6
[12] The administrator says he would not be prepared to levy unit owners to reimburse Mr and Mrs May and the parties who have provided funding without a direction from the Court authorising him to take that step.
6 Jenkins v Supscaf Ltd [2006] 3 NZLR 264 (HC); GBR Investment Ltd v Goose Bay Ranch Holdings Ltd HC Christchurch CIV 2009-409-613, 21 April 2010.
The body corporate committee
[13] In a letter to the Registrar dated 19 June 2010 the chair of the body corporate committee advises that the committee has canvassed the views of unit owners. He summarises these as follows:
…
The view of the Body Corporate is that the costs incurred by the Mays in this instance should be recovered from those owners who opposed the appointment of the Administrator as detailed at Schedule 1 of the Applicants’ Memorandum as to Costs dated 14 February 2020. This is based on the opinion that there would not have been any requirement for these costs to be incurred by Mr. & Mrs. May, or anyone else, if those owners had not opposed the appointment of the Administrator, or opposed the letting of a contract to Brosnan Construction earlier.
Further, the Body Corporate believes that any contribution from other owners should be on a purely voluntary basis.
201 Ltd and Meakins Trustee Co Ltd
[14] At the hearing in January 2019 Mr Rainey represented all 18 opposing respondents. He now only has instructions to act on behalf of 201 Ltd and Meakins Trustee Co Ltd. He has filed and served submissions on behalf of those parties but none of the remaining opposing respondents has made submissions on costs.
[15] Mr Rainey submits costs should lie where they fall because all parties succeeded in their arguments to some degree. Alternatively, he submits the opposing respondents should be required to pay costs on a category 2B basis. He contends there is no justification for an award of increased costs.
[16] Mr Rainey also argues there is no jurisdiction for the Court to make a direction that the administrator levy unit owners to meet the costs incurred by Mr and Mrs May in pursuing the application and opposing the cross-application. He submits that the scheme permits the administrator to levy unit owners to meet the costs of remedial work carried out on the complex. He says this power does not extend to levying unit owners to recover costs incurred by those unit owners who funded the application to appoint an administrator.
Estate of William Maxwell-Steele
[17] Mr Rainey has filed submissions on behalf of Mrs Christy Maxwell-Steele, the administrator of Mr Maxwell-Steele’s estate. He submits there is no justification for any award of costs to be made against the estate. Mr Rainey says there is no evidential basis to support the allegation that Mr Maxwell-Steele acquired units in the complex for the purpose of thwarting the existing contract for remedial works. In addition, Mr Rainey submits there is no evidence Mr Maxwell-Steele funded the costs of the opposing respondents.
[18] Mr Rainey also contends the evidence confirms Mr Maxwell-Steele genuinely believed the complex could be successfully remediated for substantially less than the cost of the existing contract.
Decision
Costs against parties other than Mr Maxwell-Steele
[19] I do not propose to adopt the approach suggested by the administrator, namely that the Court should treat the present case as being analogous to a contested liquidation proceeding. In a contested liquidation proceeding the shareholders are not generally parties to the proceeding. I see no need to take a similar approach in the present case because, with the exception of Mr Maxwell-Steele’s estate, the opposing respondents are all parties to the proceeding. The usual principles accordingly apply.
[20] I accept Mr Rainey’s submission that the scheme does not permit the administrator to levy unit owners to reimburse Mr and Mrs May and those who have provided funding to them. The administrator only has the power to levy unit owners to meet the costs of the remedial work. Costs associated with the present proceeding relate to the administration of the body corporate‘s affairs and not the remedial work. Another means therefore needs to be found if unit owners are to be levied to reimburse Mr and Mrs May and those who have provided funding to them.
The High Court Rules 2016
[21] Under the High Court Rules 2016 all matters as to the costs of a proceeding are at the discretion of the Court.7 In exercising that discretion the Court must take into account the principles set out in r 14.2. To the forefront of these is the principle that the party who fails with respect to a proceeding or application should pay costs to the party who succeeds.8
[22] As between the applicants and the opposing respondents there can be no doubt that the applicants were the successful parties. They succeeded in obtaining the order they sought under their application and they also succeeded in opposing the cross- application filed by the opposing respondents.
[23] I do not consider there is any basis on which I could order increased costs against the opposing respondents as Mr and Mrs May contend should occur. As will be plain from my judgment, the arguments advanced by the opposing respondents had real merit. Furthermore, I have no doubt they genuinely believed the existing contract for remedial works was not in the best interests of unit owners as a whole. They considered unit owners should investigate alternative forms of remedial work. The decisive factor from my perspective was the delay that had occurred since the body corporate obtained the Court’s approval for the scheme of repairs. I was concerned that, if the remedial work was not undertaken under the existing contract, the body corporate would breach its obligation to carry out the repairs diligently and expeditiously.9 I therefore do not consider it appropriate to award more than scale costs against the opposing respondents.
[24] The applicants also contend that, if scale costs are awarded, the proceeding should be categorised as a category 3 proceeding for costs purposes and/or that Band C should apply to steps taken in the proceeding. I do not accept either submission because the present proceeding is properly categorised as a Category 2 proceeding for costs purposes and Band B is appropriate for all steps taken in the proceeding.
7 High Court Rules 2016, r 14.1(1).
8 Rule 14.2(1)(a).
9 May v Body Corporate 329331, above n 3, at [39].
[25] I am therefore satisfied it is appropriate that Mr and Mrs May should receive joint and several award of costs on a category 2B basis against the opposing respondents together with disbursements as fixed by the Registrar.
Section 141(8) Unit Titles Act 2010
[26]Section 141(8) provides as follows:
141 Appointment of administrator
…
(8)On any application made under this section the High Court may make any order for the payment of costs as it thinks fit.
…
[27] Section 141(8) provides the Court with a broad discretion to make orders as to costs when it determines an application for the appointment of an administrator. I have not been able to locate any authority in which the Court has exercised its power to award costs under the section. However, I consider the broad nature of the discretion reflects the fact that, as the present case demonstrates, those who apply for an order appointing an administrator will not generally do so for their own benefit. Rather, they make the application for the benefit of the unit owners as a body.
[28] I consider it unlikely in the present case that the recovery of scale costs from the opposing respondents will be sufficient to fully reimburse those unit owners who have funded the application and opposition to the cross-application. It would be unjust in my view for those parties to be left out of pocket when they have acted in the interests of the unit owners as a body. I consider s 141(8) provides a convenient mechanism by which this issue can be addressed. It is appropriate in my view that any shortfall is met by all unit owners as if it were part of the cost of remedial work.
The claim against the estate of Mr Maxwell-Steele
[29] As Downs J recently observed in Minister of Education v H Construction North Island Ltd, orders for costs against non-parties are exceptional.10 They are awarded
10 Minister of Education v H Construction North Island Ltd (in rec and liq) [2019] NZHC 1459, (2019) 24 PRNZ 549 at [1]
only where it is just to do so, and when “something more” about the non-party’s conduct warrants costs.11
[30] I am satisfied Mr and Mrs May cannot meet this threshold in the present case. First, there is no evidence to confirm Mr Maxwell-Steele funded the opposing respondents or that he was the driving force behind their opposition to Mr and Mrs May’s application. More importantly, the application cannot succeed for the same reasons there is no justification for an award of increased costs against the opposing respondents. I have no doubt that, in common with the other opposing respondents, Mr Maxwell-Steele genuinely believed the interests of unit owners were not best served by the existing contract for remedial works. As I have already observed, the arguments for the opposing respondents had real merit and were only trumped by the fact that unacceptable delay would occur if the existing contract was not performed.
[31]I therefore decline the application for costs against Mr Maxwell-Steele’s estate.
Result
[32] The opposing respondents are ordered jointly and severally to pay the applicants a single award of costs on a category 2B basis on all steps taken in relation to the application and cross-application together with disbursements as fixed by the Registrar.
[33] To the extent that there is a shortfall between the actual and reasonable costs incurred by the applicants and those recovered from the opposing unit owners, I make a direction under s 141(8) of the Unit Titles Act 2010 that the administrator is to levy all unit owners to meet the cost of funding the shortfall in the same way as if it was part of the cost of the remedial work.
[34]I make no award of costs against Mr Maxwell-Steele’s estate.
11 At [1], citing Kidd v Equity Realty (1995) Ltd [2010] NZCA 452 at [16].
[35] Counsel ought to be able to reach agreement regarding the quantification of costs on a category 2B basis. If they cannot, they retain leave to ask the Court to quantify costs.
Lang J
APPENDIX
Unit Opposing respondents 2A Rodney Charles Swift and Frances Swift 2B Meakins Trustee Co Ltd 2C 207 Ltd (in liquidation) 2D 206 Ltd 2F 204 Ltd 2G 203 Ltd 2H 202 Ltd 2I 201 Ltd 3B 307 Ltd (in liquidation) 3C 306 Ltd 3G 302 Ltd (in liquidation) 3H Oleg Alexanderovich Zitsev, Olga Nikolayevna Zaitceva and Dennis Olegovich Zaitsev 4A The estate of Peter Francis Andrews and Linda Anne Andrews 4D 405 Ltd 4E 404 Ltd 4F 403 Ltd (in liquidation) 4G Nomack Group Ltd 4I Meaks Trustee Co Ltd
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