Millar v Body Corporate 392619

[2018] NZHC 2114

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA

TĀMAKI MAKAURAU ROHE

CIV-2017-404-3097 [2018] NZHC 2114

UNDER

the Unit Titles Act 2010 and the Unit Titles

Regulations 2011

IN THE MATTER

of an application for administration of a body corporate

BETWEEN

GARY LYNN MILLAR and CAROL ANNE MERRELL

First Applicants

BERNHARD PIETER VAN NOOIJEN Second Applicant

AND

BODY CORPORATE 392619

Respondent

Hearing:	On the papers
Appearances:	D A Cowan for the Applicants TJG Allan and S F Powrie for the Respondent
Judgment:	17 August 2018

JUDGMENT OF WOODHOUSE J (Costs)

This judgment was delivered by me on 17 August 2018 at 11:00 a.m. pursuant to r 11.5 of the High Court Rules 1985.

Registrar/Deputy Registrar

……………………………………

Solicitors:

Mr D A Cowan, Solicitor, Auckland

Mr TJG Allan and S F Powrie, Grove Darlow & Partners, Solicitors, Auckland

MILLAR and MERRELL v BODY CORPORATE 392619 [2018] NZHC 2114 [17 August 2018]

[1]      The applicants, as owners of two units in a unit title development known as Bella Vista, brought an originating application for an order appointing an administrator of the respondent body corporate.  The application was subsequently discontinued. The respondent now seeks indemnity costs, or costs on a mixed 2B/2C scale increased by 50 per cent.  Disbursements of $1,075.24 are also sought.

[2]      The applicants oppose the respondent’s alternative applications for costs and contend that costs should be fixed on a 2B basis for all items.

[3]      Bella Vista has 40 principal units: 37 are apartments and three are commercial units. The applicants are the owners of two units.

[4]      The application arose out of the applicants’ dissatisfaction with the way in which the respondent, the body corporate committee, and the body corporate manager, had handled processes and other matters relating to the investigation of and then commissioning of work to be undertaken for remedial works to repair the apartment complex.

[5]      The applicants sought an order for appointment of an administrator for the following purposes, as recorded in the originating application:

(i)        to review the Body Corporate’s management of claims relating to defective construction works and the proposed remedial solutions to repair those defects;

(ii)       to review the actions of the Body Corporate’s manager in respect of the Body Corporate’s actions in respect of the defective construction works and the proposed remedial solutions to repair those defects;

(iii)      to  advise  the  Body  Corporate  and  its  unit  owners  in  respect  of proposed remedial solutions and an appropriate scheme to administer the completion and funding of the same.

[6]      The  applicants,  in  their  application,  alleged  that  there  was  significant

dysfunction arising out of matters relating to the remedial work and that the body corporate manager had improperly influenced the body corporate and its committee and had failed properly to manage the body corporate.

[7]      The respondent contended that all matters relating to the court proceeding and the assessment of appropriate remedial work had been dealt with properly by it and its committee in accordance with the Unit Titles Act 2010 and there were no circumstances justifying the appointment of an administrator.  The following grounds of opposition are central to the respondent’s position in opposition, and on its present

costs application:

(c)	The application is an attempt to judicially review decisions of the Body Corporate (including resolutions at general meetings and decisions by the Committee following delegation by the Body Corporate) in respect of the development of a remedial solution to repair original construction and or design defects in the complex and raising levies to fund such repairs, including preparation of scope based on advice it has received from its professional advisors and consultants.
(d)	The application does not fall within any of the recognised categories
of cases for which appointment of an administration is appropriate;
(e)	The Body Corporate has delegated full powers to the Body Corporate Committee, which is duly elected and formally resolving decisions pursuant to that delegated authority;
(f)	The applicants are part of a minority group of owners who would
prefer to see the complex repaired in a different (targeted) and cheaper way from the way in which the majority of owners have decided to have the complex repairs (namely, holistic repair);
(g)	The affairs of the body corporate are not being conducted in a dysfunctional manner. Whatever complaints the applicants may have about the decisions being made by the committee, it cannot be said that those decisions are being reached irrationally;
[8]	The	defective   construction,   resulting   in   weathertightness   issues,	was

discovered  in  2011  and  proceedings  were  issued  against  the  builder, Auckland Council,  and  others,  in  March  2012.    The  applicants’ application  was  filed  in December 2017.   In an affidavit of Donna Greig, for the respondent, sworn on 27

March 2018, Ms Greig stated that the respondent expected to lodge a building consent for the remedial work “within the next few weeks and for works to commence in August 2018”.   On 19 February 2018 the application was set down for a two day hearing commencing on 16 July 2018.  By 28 March 2018 the respondent had filed five affidavits in opposition.

[9]      On 5 April 2018, just eight days later, the applicants’ solicitors wrote to the respondent’s solicitors with a settlement proposal. This included requirements that the body corporate manager step down until the remedial works and litigation had been completed, that the chairperson of the body corporate step down, and that remedial proposals advanced by the applicants be reconsidered on stipulated terms.  The offer was rejected by letter from the respondent’s solicitors of 13 April 2018. From a further letter from the applicants’ solicitors it appears that on 7 May 2018 the applicants advised the respondent that they had elected to withdraw their application. The notice of discontinuance was filed on 15 May 2018.

[10]     There are detailed submissions for the respondent and for the applicants in response, with a further brief reply for the respondent.   A substantial part of the argument on both sides focuses on the merit of the application.   The respondent contends that there was no merit. It is argued, as recorded in the notice of opposition, that the grounds for seeking appointment of an administrator were totally misconceived and did not come within any of the recognised criteria discussed, in particular, in Melview Viaduct Harbour Ltd (In Rec) v Body Corporate 384911.1   A substantial part of the submissions for the applicants is to the opposite effect.

[11]     The thrust of the submissions for the respondent is that the applicants’ case was a hopeless  case.   To  bring  and  persist  in  a  hopeless  case is  a  well  recognised circumstance for award of indemnity costs.2     I am unable to be satisfied that the applicants’ case was so self-evidently hopeless that the high threshold for an award of indemnity costs has been met.   The Court is effectively being asked to make a determination on the merits when there has been no hearing on the merits.   If a proceeding is commenced and then discontinued, and it is demonstrable that the claim as pleaded was legally untenable, or there is no evidential foundation for complaints, indemnity costs might be awarded in spite of the fact that there has been no determination on the merits. This is not such a case. This is sufficiently demonstrated by the fact that the affidavit evidence runs to hundreds of pages, with a very large

number of documents produced with affidavits.  In addition, as Mr Allan indicated to

1      Melview Viaduct Harbour Ltd (In Rec) v Body Corporate 384911 [2012] 1 NZLR 84 (HC) at [71].

2      Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [23] and [29].

Muir J, in the course of the only case management conference that occurred, cross- examination was required.

[12]     Although the respondent does not in my judgment reach the high threshold required for an award of indemnity costs, I am satisfied that the respondent is entitled to increased costs.

[13]     In relation to increased costs, I consider that the Court can make what amounts to a provisional assessment of merit and that provisional assessment firmly favours the respondent. This assessment is drawn from the present submissions, and the cases on appointment of administrators, rather than an attempt to reach conclusions on the untested evidence.

[14]     I am reinforced in that conclusion by the following considerations.   The respondent’s evidence in opposition, which was extensive, was filed and presumably served at the end of March.  Within eight days there was a settlement offer from the applicants.  Then, at the beginning of May the applicants voluntarily withdrew their proceeding.    In  practical  terms,  that  was  not a significant  time after  they were confronted with the respondent’s evidence.   This indicates recognition by the applicants themselves that their contentions were unlikely to prevail. But the decision to withdraw was nevertheless made after the respondents had been put to significant cost in preparing and filing affidavit evidence under urgency.

[15]     There is a statement in the submissions for the applicants that in April 2018, before the proceeding  was  discontinued,  the second  applicant,  Mr van  Nooijen, decided to return to his homeland, The Netherlands, and this fact, together with ill- health of the first named applicant, Mr Millar, made it quite difficult “for them” to continue the proceeding.  It is unclear as to whether the reference to difficulty “for them” was a reference to all of the applicants, to Mr Millar alone, or to Mr Millar and the second named first applicant, Ms Merrell. In any event, and leaving aside the fact that there is no evidence on these matters, this does not provide grounds for refusing increased costs. Whilst the Court has sympathy for any ill-health Mr Millar may have, these matters tend to provide some support for a conclusion that there should be

increased costs – and in particular, Mr van Nooijen’s departure from New Zealand after he had joined in launching this proceeding.

[16]     The respondent, in its application for increased costs, bases its claim on scale costs totalling $15,833.  The applicants contend that the base scale total should be

$6,913. The difference between the parties arises from the allowance for filing a notice of opposition and supporting affidavits.  The respondent seeks costs on a 2C basis, with a total of $13,380. That is an allowance for six days. The applicant contends that the allowance should be based on the 2B, not 2C, scale – two days at a total of $4,460.

[17]     I am satisfied that the respondent’s 2C claim is justified.  In consequence the base scale sum is $15,833.  I am also satisfied that an uplift of 50 per cent, taking the total to $23,749.50, is justified. That allowance has been calculated in a conventional way.  It may also be compared with the indemnity costs claim of $33,543, which sum was supported by production of invoices and narratives for the work undertaken.

Result

[18]     There is an order that the applicants pay the respondent a sum of $24,824.74 for costs and disbursements.

Woodhouse J