Mu v Body Corporate 312431

[2012] NZHC 3474

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-494-004768 [2012] NZHC 3474

BETWEEN  DANNI MU Plaintiff

AND  BODY CORPORATE 312431

First Defendant

ANDABOUT BODY CORPORATES LIMITED Second Defendant

ANDSHARRON WYNN O'SULLIVAN Third Defendant

ANDGRAHAM BELL Fourth Defendant

Hearing:         (On the papers)

Counsel:         G M Illingworth QC for Plaintiff

T J Herbert for First Defendant

Judgment:      18 December 2012

COSTS JUDGMENT OF VENNING J

This judgment was delivered by me on 18 December 2012 at 11.30 am, pursuant to Rule 11.5 of the

High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Carter & Partners, Auckland (B O’Callahan)

Adina Thorn Lawyers, Auckland

Copy to:            G M Illingworth QC, Auckland

T J Herbert, Auckland

MU V BODY CORPORATE 312431 HC AK CIV-2011-494-004768 [18 December 2012]

Introduction

[1]      On 16 November 2012 the Court made the following orders on the basis of a consent memorandum filed by the plaintiff and first defendant:

(a)      That at the extraordinary general meeting of the members of the first defendant held on 26 October 2010, the resolution that the first defendant should continue with the Rockcote system as detailed by Brown Day and approved by Auckland City Council did not authorise either the first defendant or its committee to use the Rockcote system to replace the existing cladding.

(b)That instead the resolution confirmed only that the first defendant’s committee was entitled to continue its planning and strategy as to the replacement of the existing cladding on the basis that the Rockcote system would be used, rather than any alternative system.

(c)      That no binding decision as to the type of cladding eventually to be used was made by the first defendant or its members on 26 October

2010.

[2]      The consent memorandum noted that the plaintiff had agreed to discontinue its claims on the basis of the declarations and that the first defendant was prepared to agree to the discontinuance.   The memorandum went on to record that the only outstanding matter was costs.  Both parties considered they were entitled to costs and agreed the Court should consider all issues as to costs.

[3]      The parties have now exchanged memoranda as to costs.  The plaintiff seeks costs on a 2B basis.  The defendant seeks costs on an indemnity or increased costs basis.

[4]      The second and third defendants were joined to the proceedings because the second defendant (ABC) was secretary of the first defendant.  The third defendant was a director of ABC and the fourth defendant was a member of the management

committee of the first defendant.   The second to fourth defendants have filed a defence but have taken no other steps.   They have not filed any memoranda in relation  to  costs.    The  proceedings  have  been  actively  conducted  between  the plaintiff and first defendant throughout.

Brief background

[5]      The plaintiff is the owner of one of 48 units in a residential development at Normanby Road, Mount Eden, Auckland.  The first defendant is the body corporate for the complex.   The exterior cladding of the upper levels of the complex is of monolithic plasterboard construction.  It is not weathertight and needs to be replaced. The cladding could be replaced with another plasterboard system or with a weatherboard system.   The plaintiff has throughout opposed the suggestion of replacement with another plaster board system.  She supports a weatherboard system replacement.

[6]      In October 2009 the first defendant Body Corporate had resolved:

[t]hat the Body Corporate supported both systems [Nuplex and Rockcote] presented and that the authority for the final decision on which system would lie with Brown Day Group after determining price advantage, warranties and support.

[7]      Both the Nuplex and Rockcote systems are plaster systems. An extraordinary general meeting was called on 26 October 2010 to discuss, inter alia, the plaintiff’s concerns  with  Brown  Day’s  choice  of  the  Rockcote  system  and  to  discuss  a resolution proposed by the plaintiff that there be a change from the Rockcote system to a weatherboard system. Although the plaintiff had a number of proxies supporting her position, the resolution she proposed was not supported.  Instead the following resolution was passed:

It was resolved to continue with Rockcote system as detailed by Brown Day and approved by Auckland City Council.

[8]      The plaintiff then issued these proceedings seeking, inter alia:

a declaration that the purported decision was invalid;

a declaration  that  the  defendants  were  not  authorised  to  implement  the purported decision;

an order by way of injunction restraining the defendants from implementing

the purported decision.

[9]      In her amended claim she sought:

a declaration that the purported decision was invalid;

a declaration that the defendants are not authorised to enter into a contract or contracts, by or on behalf of the body corporate, for the recladding of the complex unless the expenditure is approved by a special resolution approved

by 75 per cent of the eligible voters.

[10]     The proceedings have taken longer to resolve than they should have for a variety of reasons.   The first defendant has made unsuccessful applications to the Court for security for costs, and for stay (which incorporated an oral application to extend the time to apply for a review of the Associate Judge’s decision in relation to security for costs). The first date allocated for the substantive fixture then became an argument about the pleadings because the first defendant sought judgment on the basis  the  plaintiff  had  not  filed  a  reply  to  positive  allegations  and  affirmative defences in the statement of defence. Allan J confirmed the plaintiff was not obliged to file a reply to para 22 of the statement of defence.  The plaintiff was also largely successful in its application to strike-out the first defendant’s discretionary defence alleging wrongful conduct.

Decision

[11]     The first issue is to determine whether the plaintiff or the first defendant should have costs.

[12]     The first defendant argues that it should have costs because the plaintiff discontinued and r 15.24 applies.  However, while there is a presumption that on a

discontinuance the defendant will have costs, that is always subject to the overriding discretion of the Court.   In this case the plaintiff discontinued on the basis of the declarations being made which were made by consent.  Both parties recognised in the consent memorandum that costs were in issue.  In the circumstances it is open for the Court to make whatever order is appropriate.

[13]     In addressing the issue of costs it is necessary to first consider Part 14 of the rules and determine, in accordance with r 14.2(a), which party failed with respect to the proceeding or interlocutory applications.

[14]     In this case the plaintiff had more success than the first defendant in the interlocutory skirmishes.  The costs on those interlocutory disputes should have been fixed  at  the  time:    r  14.8.    The  plaintiff  is  entitled  to  costs  on  her  successful opposition to the defendant’s application for security for costs, on her successful opposition to the application for stay (including the first defendant’s oral application to extend the time for review), on her successful opposition to the application for judgment on the pleadings by the first defendant and on her, in large part, successful application to strike-out the first defendant’s allegations of disentitling misconduct. In relation to each of the above four applications the plaintiff is to have costs on either item 22 or 23 (as appropriate), such costs that were incurred in accordance with items 24 and 25, and costs for appearances in accordance with item 26 to the Third Schedule, all on a 2B basis, together with disbursements as approved by the

Registrar.[1]

[1] In the absence of a schedule from the plaintiff I have not attempted the calculation myself.

[15]     That leaves for determination the general costs in the proceedings.

[16]     The first defendant takes the view that there was no basis or reason for the plaintiff to bring the action she did.  In a letter of 8 August 2011 to the plaintiff’s counsel the first defendant’s counsel noted:

What  it  [the  resolution]  does  not  do,  though,  and  this  is  admitted,  is authorize my client to carry out any works in relation to the plans.  For the avoidance of doubt, my client has no intention to carry out these works (and thus incur any expenditure):

a.        without first obtaining the requisite resolution;  and

b.in  all  probability,  there  being  some  form  of  settlement  in  the proceeding [a related substantive proceeding].

[17]     That was followed by a letter of 9 August in which counsel clarified that the first defendant accepted that it would be necessary to apply to the Court under s 74 of the Unit Titles Act 2010 (the Act) for a plan to be approved to rectify the defects. Alternatively, if it became apparent the repairs fitted within the general duty of repair and maintenance under s 138 of the Act, then the first defendant was prepared to give a specific undertaking it would not commence the repairs without obtaining the necessary special resolution as required under its rules.   Despite that the plaintiff pursued the proceedings.

[18]     Mr  Illingworth  QC  submits  the  plaintiff  is  entitled  to  costs  because  the plaintiff has achieved a significant legal outcome.  It is now established, as a matter of law, that the resolution never authorised either the first defendant or its committee to use the Rockcote system to replace the existing cladding.   He submits the declaration achieves the plaintiff’s objective of ensuring that the resolution cannot later be relied upon as a valid or binding authorisation for the first defendant to use Rockcote cladding.  The plaintiff relied on r 4 of the Body Corporate Rules and the requirement for a three-fourths majority of votes on a certain level of expenditure. The first defendant disputes that point.  It is the first defendant’s position that r 4 was not infringed as the resolution in issue did no more than enable the first defendant to continue its planning on the basis of using the Rockcote system.  It always accepted a further resolution was required before any repair work was commissioned.

[19]     To the extent it is the plaintiff’s position that the declaration achieves her objective of ensuring the resolution could not be relied on as a valid or binding authorisation  for  the  first  defendant  to  use  Rockcote  cladding  I  consider  that outcome was effectively open to her on the basis of the correspondence in August

2011.  Counsel’s letter expressly admitted and accepted that the resolution did not authorise the first defendant to carry out any works in relation to the plans.  To all intents and purposes that acknowledged, as the declaration does, that the resolution “did not authorise either the first defendant or its committee to use the Rockcote system and to replace the existing cladding”.  The first defendant accepted a further

resolution was required.  In context, given what had occurred earlier and the earlier decision to continue with the Rockcote system the resolution in issue was no more than an authorisation to the first defendant to continue its planning and strategy as to the replacement of the existing cladding on the basis the Rockcote system would be used rather than any alternative system.  Again that is effectively what the agreed declaration at (b) says.

[20]     Finally the content of declaration (c), that there was no binding decision as to the type of cladding eventually to be used, was effectively contained in the correspondence of 8 and 9 August to the extent that the correspondence implicitly recognised it would be necessary to either apply to the Court under s 74 of the Unit Titles Act 2010 for a plan to be approved (following an ordinary resolution authorising that Act) or, if the repairs were to be conducted under s 138 of the Act following a special resolution.  The question of payment for the repairs and levies as unit owners would only be dealt with, either by the Court, or by the members of the unit of the Body Corporate at a further meeting.

[21]     In the absence of a substantive hearing, the Court is left to deal with the issue on the basis of its assessment of the merits of the parties’ cases for costs on the material before it.

[22]     On the basis of the material I consider it fair to say that the first defendant’s position, as clarified after the issue of the plaintiff’s proceedings, has largely been vindicated and that while the plaintiff may have achieved certainty in her mind by the declarations, it was not necessary to continue the proceedings given that the first defendant could have been held to its solicitor’s concessions.   So, while the strict legal point taken by the plaintiff may have justified the issue of the proceedings, the plaintiff could, and should, have resolved them earlier.  I consider that, looked at in the round, the first defendant should generally be entitled to costs in the proceedings (but subject to the costs payable to the plaintiff for the interlocutory steps that the plaintiff succeeded in).

[23]     I reject the first defendant’s submission that it is entitled to indemnity costs

under s 127 of the Unit Titles Act 2010 in reliance on Hart v Body Corporate (No

180455).[2]     I  do  not  accept  that  the  plaintiff  can  be  said  to  have  acted  either negligently or deliberately in the sense of intending to cause the first defendant to incur the expenditure.  The material before me does not take me to that point.  The plaintiff had a substantive claim about the passage of the resolution.  Nor do I accept that s 126 of the 2010 Act supports a finding for indemnity costs.  The proceedings were not brought substantially for the benefit of the plaintiff or her unit only.

[2] Hart v Body Corporate No 180455 HC Auckland CIV-2005-404-1429, 23 June 2005. 

[24]     Nor do I accept that this is a case for indemnity or increased costs under r 14.6.   There is some force in Mr Illingworth’s point that in part that submission relies on allegations Associate Judge Bell had struck out.  The first defendant also seeks to raise a number of other issues to support the indemnity costs, most of which are not before the Court by way of formal evidence.   I decline to take them into account.

[25]     However, for the above reasons, the first defendant should have costs on the substantive proceedings.  While the plaintiff was justified in issuing the proceedings, she should have reviewed her position during the course of the proceedings, after counsel’s letters of 8 and 9 August.

[26]     In the circumstances the first defendant is to have costs of $20,364[3] together with disbursements of $217.60, in total $20,581.60 for the proceedings generally apart from the interlocutory matters, for which the plaintiff is to have costs.

[3] I have disallowed the first defendant’s application for costs related to the preparation for hearing

of the interlocutory applications.

Result/orders

[27]     The first defendant is entitled to costs on the proceedings of $20,581.60 (including disbursements).  The plaintiff is to have scale costs on the interlocutory applications calculated in accordance with [14] above.   There will be a set-off between them.  With the assistance of counsel the parties should be able to resolve

the arithmetic required.

Venning J