QSM Trustees Limited v Body Corporate 162791

[2013] NZHC 1762

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-001286 [2013] NZHC 1762

BETWEEN  QSM TRUSTEES LIMITED Plaintiff

AND  BODY CORPORATE 162791

First Defendant

BOUTIQUE BODY CORPORATES LIMITED

Second Defendant

DOUGLAS PATTINSON Third Defendant

GRACE CHENG Fourth Defendant

SHAHIN KERMANI Fifth Defendant

TERRY KIM Sixth Defendant

STUART GORDON Seventh Defendant

PETER COOPER Eighth Defendant

Hearing:                   11 July 2013

Counsel:                  DM Hughes for Plaintiff

TJG Allan and A Credin for Defendants

Judgment:                11 July 2013

ORAL JUDGMENT OF ASHER J (Security for costs and directions)

Solicitors:

Kensington Swan, Auckland.

Grove Darlow & Partners, Auckland.

QSM TRUSTEES LIMITED v BODY CORPORATE 162791 [2013] NZHC 1762 [11 July 2013]

[1]      In this commercial dispute the defendants at the outset seek security for costs. There are also timetabling issues that must be resolved.

[2]      The plaintiff is a corporate trustee and the registered proprietor of units 3A to

3E, being levels three to five 239 Queen Street.

[3]      The first defendant Body Corporate is the body corporate for the unit title development at 239 Queen Street.  The second defendant Boutique Body Corporates Ltd is the secretary.  The defendants named thereafter are members of the committee of the Body Corporate.

[4]      The  dispute  relates  to  complex  arrangements  entered  into  between  the proprietors of levels three to five and the Body Corporate.  The plaintiff claims that there was an agreement reached on various matters with the Body Corporate that has been breached.  It says that there have been wrongful attempts by the defendants to vary the arrangements made.   There is also an argument about whether the Body Corporate levies are payable, whether the Body Corporate made misrepresentations, and a pleading of estoppel against the Body Corporate.

[5]      Further details of the dispute are too complex to endeavour to summarise in this short judgment, and it has to be observed that the statement of claim is difficult to follow.  I accept that there was a lack of formality in the dealings of the various parties over the years which makes the task of pleading a difficult one.  However, obviously the plaintiff must have clear and discernible causes of action if it is to be able to proceed.

[6]      It is not in dispute that the threshold requirement for the payment of security for costs by the plaintiff has been crossed.   The plaintiff has not contested the proposition that it should pay security for costs (despite some equivocation in its most recent submission).

[7]      The real issue that arose in the conference last week was quantum and how security for costs should be paid.   Mr Allan for the defendants has submitted a schedule of costs calculated on a 2B basis.  On the basis that there will be a 10 day

hearing, the total costs come to $67,206.   I accept Mr Allan’s submission that the costs calculation is conservative.

[8]      Mr Hughes  for the  plaintiff  has  sensibly not  sought  to  quibble over the amount claimed.

[9]      It was his position at the case management conference last week, and remains his position, that there should be staged security.  He proposes $20,000 now with the balance to be paid prior to the filing of briefs.

[10]     Mr Allan has not been able to obtain instructions to accept a staged payment and submits that the entire amount should be paid.

[11]     It is common for staged security to be ordered.  It can be draconian to require all the costs effectively to be paid up-front.  A defendant who is the beneficiary of a staged security order will have the same security whether costs are paid on a staged basis or a single payment basis, provided the monies are securely held. After all, the money held can only be accessed after the completion of the hearing and an order for costs has been made in favour of the defendants, and only if that is what transpires.

[12]     I consider therefore that an order for a staged security should be made.  As I have already indicated, the issues are not straight forward, and I have no difficulty with costs being calculated on the basis of there being two counsel appearing for the defendants.   I consider the amount sought rounded to $67,000 as reasonable.   It seems to me likely to involve a significant discount on an order for scale costs, should there be a hearing.   It is appropriate, of course, that there should be some discount in a security for costs situation, but Mr Allan’s figure recognises this.

[13]     Given the lack of detailed  submissions on the issues and the reasonable approach taken by both counsel at the hearing before me today, I do not propose setting out more detailed reasons for my decision.  I am satisfied that:

(a)       There should be security for costs orders. (b)   $67,000 is the appropriate sum.

(c)       There should be staged security.

(d)The terms of that staged discovery should be $20,000 to be paid initially, and $47,000 to be paid on the completion of inspection (prior to the preparation of briefs).

[14]     It is now necessary to make timetable directions taking into account this order for security for costs.   I have discussed these with counsel, who are in agreement  on  the  type  of  orders  that  should  be  made.    I  make  the  following directions:

(a)      Security for costs of $20,000 is to be paid to the Registrar of the High Court to be held in a suitable interest-bearing account on or before Thursday,  8 August  2013.   The orders that  I make hereunder are contingent on that payment being made.  If the payment is not made the orders hereunder are to have no effect and the proceeding is to be treated as stayed until further order of the Court.

(b)Mr Hughes accepts that there should be an amended statement of claim. This is to be filed and served by Thursday, 8 August 2013.

(c)       A  statement  of  defence  is  to  be  filed  and  served  by  Thursday,

22 August 2013.

(d)      Lists  of  documents  are  to  be  filed  and  exchanged  by  Thursday,

3 October 2013.

(e)       Inspection is to be completed by Monday, 14 October 2013.

(f)      On 14 October 2013 the defendant is to pay to the Registrar of the High Court on the same terms as before the balance of the security for costs of $47,000.  If this payment is not made the proceeding will be treated as stayed until further order of the Court.

(g)      There will be a conference at 9.00 am on Wednesday, 23 October

2013.  If security has not been paid counsel should file memoranda or a memorandum and the conference is likely to be vacated.

Costs on this appearance

[15]     It is necessary to now rule on costs on this hearing.  Both sides seek costs.

[16]     In fact the orders that I have made do not reflect what either party has been formally seeking.  Mr Allan has sought a fixed amount of $67,000.  While initially seeking it in one lump sum he was prepared to accept the possibility of a staged payment, albeit on a different basis from the orders I have made.

[17]     Mr Hughes  at  the first  conference  fairly faced  the issue of security and acknowledged that an order could be made and offered a staged amount of $20,000. However, in his written submissions he did appear to retract from an acceptance of the fact that a security for costs order was appropriate and did not make any explicit concession as to the amount, and did not make a concession as to the total amount sought by Mr Allan of $67,000.

[18]     I can see merit in the positions of both sides.  Mr Hughes took an entirely reasonable stance at the case management conference last week, and Mr Allan (who could not get immediate instructions) was not able to respond constructively to what Mr Hughes was proposing.   However, I am mindful of the long and frustrating history the defendants have faced in relation to this proceeding.  There have been considerable delays on the plaintiff ’s part and failures to do things, all of which occurred prior to Mr Hughes’ involvement.   I have already ordered a payment of

$500 for costs in relation to that.  Nevertheless, the background of impasse remains relevant.

[19]     At the hearing today, in my view both counsel have been entirely reasonable and the issue of security for costs has been able to be dealt with probably in about half an hour (given that more time was spent on timetabling issues).  I accept that both parties will have been put to the cost of preparing submissions, but these in themselves have probably helped move each party towards a common position.

[20]     By a modest margin my sympathies in relation to costs are directed more towards the position of Mr Hughes than that of Mr Allan, but the orders do not exactly reflect what Mr Hughes offered, and when I look at things in the round I have decided that costs are best left where they fall.  I am therefore not prepared to make any costs order in relation to these issues and rule accordingly.

……………………………..

Asher J