Tao v Strata Title Administration Ltd
[2016] NZHC 1821
•8 August 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-817 [2016] NZHC 1821
BETWEEN AN LI TAO
Plaintiff
AND
STRATA TITLE ADMINISTRATION LTD
First Defendant
AND
JIGAR PANDYA Second Defendant
UNDER Section 141 Unit Titles Act 2010
BETWEEN AN LI TAO Applicant
AND BODY CORPORATE 198693
Respondent
On the papers Judgment:
8 August 2016
JUDGMENT OF THOMAS J [COSTS]
This judgment was delivered by me on 8 August 2016 at 11.30 am pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date:………………………….
TAO v STRATA TITLE ADMINISTRATION LTD & ORS [2016] NZHC 1821 [8 August 2016]
Introduction
[1] Ms An Li Tao is the registered proprietor of one of 36 units in a unit title development at 8 Margan Avenue, New Lynn, Auckland. She filed proceedings making various claims against the defendants, Strata Title Administration Ltd (Strata), the body corporate secretary, and Jigar Pandya, the body corporate chairperson. The defendants’ application for summary judgment against her, on the basis that none of the claims could succeed, was granted by me on 27 April 2006. By the same decision, I dismissed Ms Tao’s application for the appointment of an administrator under s 141 of the Unit Titles Act 2010, (the Act) which had been
opposed by the Body Corporate.1
[2] The defendants/respondent, who I will jointly refer to as “the applicants”,
now seek costs against her, either indemnity costs or an increase on scale costs.
[3] Ms Tao disagrees with the calculations of scale costs, and opposes an award of indemnity or increased costs. She seeks reduced costs or that costs lie where they fall, on the basis that she put effort into trying to resolve the disputes, was representing legitimate complaints, and is impecunious in any event.
Submissions
[4] The applicants say that all the costs to date have been met by Strata Title, but these will be passed on to the Body Corporate, meaning any award less than indemnity costs will be visited on the Body Corporate. They claim indemnity costs of $65,164.75. By their calculations, scale costs are $50,621.00, so a 25 per cent uplift on an increased costs basis would amount to recovery of $63,276.25.
[5] The applicants say this is justified on the basis of the indemnity and increased costs rules. Ms Tao’s complaints could have been dealt with within the body corporate structure process, and her failure to pay her fees was a deliberate choice
which halted those processes. The applicants say that the proceedings were brought
1 Tao v Strata Title Administration Ltd [2016] NZHC 814.
for the ulterior motive of obtaining what she could not achieve through the
Extraordinary General Meeting processes because of her refusal to pay levies.
[6] The applicants allege that Ms Tao’s submissions were incomprehensible, lacked focus and were highly repetitive, and “defied any logical or commercial position when the easy way through her complaints was to pay the levies and then vote toward what she sought.” They maintain she failed to adopt the rules of procedure and evidence, which prejudiced them. Furthermore, that Ms Tao made repeated allegations of fraud and dishonesty, against Strata and Mr Pandya as chairperson, and that judges had consistently warned her against doing so and that there could be costs consequences if she persisted.
[7] The applicants submit that Ms Tao is not entitled to any concessions as a lay litigant.2
[8] Ms Tao says that scale costs have been calculated incorrectly. She also opposes indemnity or increased costs, and says that the request for increased costs is too broad and insufficiently particularised, and includes orders which were declined by the Court. She says it was never indicated to her that indemnity or increased costs would be sought.
[9] Ms Tao says that she has no capacity to pay costs as she is a full-time in- home caregiver for her disabled mother, has a number of debts and a mortgage and a very limited income. She says that she will not be able to meet the costs award, and that this is a factor the Court should take into account because there is merit in a plaintiff not being deterred from exercising its rights by the spectre of a large costs award.3
[10] Ms Tao says that the way she ran her claim was not close to being exceptionally bad, and that, although she is not a lawyer and does not know all the correct procedures, her claim was genuine and sincere and she did the best she could to argue all the points well. She also says that, although the Court ruled against her,
there is widespread dissatisfaction with the way the Body Corporate is being run and that she was supported by 22 other members in her attempt to terminate Strata’s contract. Ms Tao again complains about the fact that Mr Pandya delayed in calling the EGM until the day after the levies were due to stop members voting, and says that members refused to pay those levies as there was insufficient information about what they were being used for. She highlights the perceived unfairness of the fact that Strata knew the members wanted to end its contract and challenge the levies, and then used non-payment of the levies to stop them voting.
[11] Ms Tao asks the Court to understand the extreme sense of frustration she and other Body Corporate members felt, especially in circumstances where the EGM could have been held earlier.
[12] Ms Tao says that Strata has a history of issues with members of bodies corporate it manages, including being voted out and refusing to leave.4 She says that the same thing has happened here, and that it can be reasonably asked why Strata clung to its position against its members, and fought her claim on technical grounds despite knowing the views of the majority of Body Corporate members. She says that it was sheer frustration and not any ulterior motive which led to her claim, and also offers additional evidence purporting to show further breaches of the Unit Titles Regulations around the voting procedure overseen by Strata.
[13] Ms Tao says that although she was unsuccessful, a 25 per cent uplift in costs is not warranted as she was simply trying to address legitimate grievances. She asks for costs to lie where they fall and says that she put real effort into trying to settle with Strata and Mr Pandya prior to the litigation.
[14] She also seeks a reduction from scale costs under rr 14.7(e) and (g), on the basis of the defendants’ failed applications for consolidation and urgency, which added to the time of the proceedings (if removed from the calculation of scale costs, she does not seek an additional reduction). She also relies on the fact that there
should not be full scale costs for two proceedings when in effect the proceedings
4 See Body Corporate 329952 v Strata and Chambers v Strata Title Administration Ltd (2004) 5
NZ ConvC 193,864 (HC). Ms Tao is correct that significant criticisms were made of Strata in those cases
were on the same issue, and for the contextual background of the applications, being
Strata’s behaviour.
Analysis
[15] I first address whether the case warrants indemnity or increased costs before
turning to Ms Tao’s challenges to the content of the applicants’ costs claim.
[16] Before turning to the substantive costs claim, Ms Tao has objected to the un- particularised nature of the application for costs, and specifically the fact that the claim was made generally by saying that all of her actions justify increased or indemnity costs. She relies on Glaister v Amalgamated Dairies Ltd for the proposition that increases above scale should only be done on a proper and particularised basis and in a principled way.5
[17] The comments in that case do not require costs claims to be specifically pleaded at the level of a statement of claim. The case refers to the principle that the costs regime is to be applied fairly and consistently and any departures from it should be principled and clearly delineated. Although it is obviously preferable if costs applications are made in as specific a manner as possible, the fact that the applicants did not specify under which specific subsections their claims were brought, and relied on all of them, could be taken as an indication of Ms Tao’s behaviour.
[18] There was no prejudice caused to Ms Tao, as the applicants clearly indicated the elements of her conduct with which they took objection. In any event, costs are an exercise of discretion and it is ultimately for the court to determine the level of costs which are appropriate and on what basis.
Indemnity or increased costs
[19] The party claiming indemnity costs bears the onus of persuading the court that the award is justified.6 Rule 14.6(4) governs the awarding of indemnity costs:
14.6 Increased costs and indemnity costs
(1) Despite rules 14.2 to 14.5, the court may make an order—
(a) increasing costs otherwise payable under those rules (increased costs); or
(b) that the costs payable are the actual costs, disbursements, and witness expenses reasonably incurred by a party (indemnity costs).
…
(4) The court may order a party to pay indemnity costs if—
(a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or
…
[20] Bradbury v Westpac Banking Corporation is the leading case on indemnity costs, and the principles from that judgment have recently been confirmed by the Court of Appeal.7 In Westpac, the Court of Appeal described increased costs as warranted where “there is a failure by the paying party to act reasonably” and indemnity costs “where the party has behaved very badly or unreasonably”.8
Specifically, the Court identified the following circumstances as ones where indemnity costs have been ordered:9
(a) the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud;
(b) particular misconduct that causes loss of time to the court and to other parties;
(c) commencing or continuing proceedings for some ulterior motive;
(d) doing so in wilful disregard of known facts or clearly established law;
(e) making allegations which ought never to have been made or unduly prolonging a case by groundless contentions, summarised in French J's “hopeless case” test.
25 April 2006.
7 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400; Ben Nevis Forestry v Commissioner of Inland Revenue and Redcliffe Forestry Venture Limited [2014] NZCA 348, (2014) 22 PRNZ 322.
8 At [27].
[21] In relation to the final “hopeless case” category, the Court of Appeal in Ben Nevis commented that if the action is truly hopeless, the action must be presumed to have been commenced for some ulterior motive, with no requirement of flagrant misconduct to justify an award of indemnity costs on that basis.10 In that case, it was hopeless due to the fact that it was impossible to overturn, in the High Court, a High Court decision upheld by the Supreme Court.
[22] In this case, aside from the other objections taken to Ms Tao’s prosecution of
this case, she did in fact make allegations of fraud. As noted in the judgment of 27
April:11
Overall, Ms Tao raises serious accusations against Strata and Mr Pandya. She was cautioned against this when her earlier application for an injunction was heard. Notwithstanding clear evidence, she has persisted with a number of her allegations. This extended to claiming that the lawyers preparing the bundle for the summary judgment application had falsified the copy of an affidavit by inserting an additional page into the copy of an exhibit to one of Mr Pandya's affidavits. It was explained to her in painstaking detail at the hearing that the reason for her confusion was that two copies of the same page were inserted in the bundle, one being a full copy of the front of the page and the other being a copy of the folded over page showing the exhibit note on the back. I invited Ms Tao to inspect the Court file to satisfy herself of this but she assured me that she accepted the position. Notwithstanding that, however, she filed a memorandum with the Court after the close of the hearing repeating her allegation.
[23] The reference to being cautioned against making such allegations is to Woodhouse J’s judgment of 14 September 2015, in which he dismissed Ms Tao’s application for an interim injunction.12 Woodhouse J very carefully warned Ms Tao
about the effect of making allegations of this type:13
… The Courts have said for a very long time — and by that I mean over the past 150 years or more — that allegations of fraud should not be made unless there is a strong evidential foundation for those allegations. I am not saying that allegations of fraud cannot be made in court cases. They are made often enough. The point I am making is that they should not be made unless there is a clear evidential foundation for the allegation… It is something that applies to all people who make allegations, including lawyers. Lawyers are not permitted to make those sorts of allegations in
10 Ben Nevis Forestry v Commissioner of Inland Revenue and Redcliffe Forestry Venture Limited,
above n 7, at [27].
11 At [11].
12 Tao v Strata Title Administration [2015] NZHC 2215.
Court, directly or through a statement of claim on behalf of a client, unless they are fully satisfied that there is some good evidence to support them.
[24] In Ma v Tay, Ellis J considered a claim for indemnity costs on the basis of improper allegations of fraud and sham, which were not properly particularised or pleaded and made in disregard of the facts and the established law.14 In that case, a cause of action had been described as “common law fraud” and the Judge described the third and fifth causes of action as “fundamentally misconceived”.15 Ms Ma had also refused a reasonable settlement offer.
[25] However, Ellis J took notice of the wider context of the litigation, including Ms Ma’s feelings of betrayal by the defendant, and the fact that the defendant could have adopted a less combative approach to proceedings. She also took notice of the cultural context at play and narrowly determined to award increased, not indemnity costs.
[26] Other cases involving self-represented litigants filing proceedings and with seriously questionable conduct have still, albeit narrowly, not been found to meet the standard necessary for indemnity costs.16
[27] In my view, Ms Tao’s behaviour in the current case, although time- consuming and difficult for all parties involved (and often in breach of clear warnings from a number of judicial officers), was not quite at the high standard which has been adopted for awarding indemnity costs. She did not seek to plead directly and pursue claims of fraud, although making very serious allegations in this regard. Neither was her behaviour “flagrant misconduct” in the sense that phrase has
been used, by disregarding court orders or relying on fraudulent evidence.17
Although she was unsuccessful, there were some points of interpretation of the Unit
Titles Regulations which were not necessarily straightforward.
[28] The strongest basis for awarding indemnity costs is that this was, in many respects, a hopeless case. There were a number of causes of action, such as under the
14 Ma v Tay [2014] NZHC 232 at [24] – [26].
15 At [26].
16 See, for example, Tavendale v Hargreaves [2013] NZHC 2990 and Re Auckland Transport, ex parte Prescott [2014] NZHC 1674.
17 See, for example, Medtronic New Zealand Ltd v Finch [2014] NZHC 266.
Fair Trading Act, which were doomed to fail. However, other complaints were based on questions as to interpretation of the Unit Titles Act and Regulations. Although the evidence did not support any of Ms Tao’s claims in the end, they were not hopeless as described by the Court of Appeal, as being a case which jurisdictionally could never have succeeded. Ms Tao appeared to be zealously interested in enforcing the body corporate rules generally and accounting for its spending, rather than necessarily escaping only her own obligations.
[29] The decision on indemnity costs was finely balanced, and I now turn to consider whether the applicants are entitled to increased costs. There is little real distinction between the effect of an award of indemnity costs and an award of increased costs, based on the 25 per cent uplift from scale which the applicants seek.
[30] Increased costs can be awarded if, under r 14.6(3)(b):
(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by
(i) failing to comply with these rules or with a direction of the court;
or
(ii) taking or pursuing an unnecessary step or an argument that lacks merit;
(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
…
[31] It is very clear that Ms Tao ran many arguments which lacked merit. She also pursued a number of unnecessary steps, including applying for an interim injunction, in which she sought relief which the Court was unable, legally, to grant. She continued to seek relief which was unavailable in the main hearing. Further, she proceeded without addressing any of the issues raised concerning her standing, as signalled to her as necessary by other judges dealing with interlocutory matters in
this claim.18
18 See the Minute of Whata J: Tao v Strata Title Administration Ltd HC Auckland CIV-2015-404-
000817, 5 June 2015.
[32] As noted in the substantive judgment, and as referred to above, Ms Tao also refused to accept evidence presented to the Court. She continued to file further evidence after the hearing, and filed new evidence alongside these costs claim.
[33] In my view, this is a clear case for awarding increased costs. Ms Tao’s behaviour in prolonging the time and adding to the expense of the trial is deserving of recognition. A 25 per cent uplift is appropriate, given that further uplift would result in over-recovery.
[34] Costs can be awarded against lay litigants.19 Further, impecuniosity is no answer to a claim for a costs award: a costs award “should be made at a meaningful level, even against an impecunious party, when that party has advanced a case which is poorly pleaded or lacking in merit”.20 However, a lack of means to pay can be a relevant consideration in exercising the discretion to award costs.21
[35] In his judgment, Woodhouse J noted:22
The general rule is that costs follow the event; that is to say, costs should go to the successful party and be paid by the unsuccessful party. Ms Tao has not succeeded. However, the substantive claim remains on foot and will have to be disposed of. It may be, if the substantive claim goes to a hearing, or there is substantially more evidence before the Court, that Ms Tao will be able to establish some of her complaints, even though the nature of the relief she sought today is not relief the Court can give on this sort of application. For that reason, but solely within that context, I consider that the appropriate course here is to reserve costs. I might add that this decision involves exercise of a discretion significantly in favour of Ms Tao. Ms Tao should nevertheless bear in mind that at the end of the day the costs on this application may very well have to be paid by her.
[36] Ms Tao was warned by a High Court Judge that she might have to pay costs on that proceeding. She was also warned, specifically, about the way in which she was advancing the proceeding and her arguments. Although some consideration can be given for her views that she and fellow Body Corporate members were being
taken advantage of by Strata, she chose not to engage in the straightforward means
19 Belling v Belling (1996) 9 PRNZ 296 (HC); cited with approval under the new costs regime
Slavich v Collins [2012] NZHC 2104 at [15].
20 Te Whare O Te Kaitiaki Ngahere Inc v West Coast Regional Council [2014] NZHC 2969 at [16];
Gibson v Fisher HC Auckland CIV-2006-404-103, 17 July 2007 at [9].
21 Tuck v Keedwell [2016] NZHC 794 at [11] and Howard v ACC [2015] NZHC 351.
22 At [29].
of challenging Strata under the terms of the Body Corporate, such as paying her levies and then voting for the removal of Strata. Had she and her supporters done so, it would have resolved the situation at a far earlier stage. Her impecuniosity does not, in this circumstance, warrant any reduction in costs. This is so particularly given the context. Any deficit in the applicants’ actual costs will have to be met by the Body Corporate members. Ms Tao has apparently failed to grasp this point. She and the other owners are the Body Corporate. A good example of this was Ms Tao’s vehement criticism of Strata for not having paid the insurance premium for the development in circumstances where she refused to pay her levy, and encouraged others to do likewise.
[37] Furthermore, although she relies on her view that her actions were on behalf of the other Body Corporate members, had they all paid their levies, they would have been able to achieve the result they sought without the expense of the court case. It appears to have been Ms Tao who advised the other Body Corporate members not to pay their levies. As noted in Re Auckland Transport, the principle that plaintiffs should not be deterred from exercising their rights by the spectre of a large cost award is applicable primarily in cases “sensibly brought on proper bases where there is an issue of substance that involves the constitutional rights of individuals”. That
case, like the present proceeding “is a long way from being so described”.23
[38] Ms Tao’s continued criticism of Strata and her reference to adverse decisions relating to them do not assist her case on costs. The focus is primarily on assessing whether any party’s behaviour was unreasonable in the context of the current proceeding.24
[39] Finally, Ms Tao refers to her attempts to settle. The email she attaches in support of that claim does not represent an attempt to settle. It shows her demanding an outcome at the threat of legal proceedings. This cannot be taken into account as a justification to reduce costs, or not award increased costs.
[40] An uplift on scale costs of 25 per cent, as sought, is warranted.
23 Re Auckland Transport [2014] NZHC 1674 at [12].
24 Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA) at [160].
Scale
[41] Ms Tao makes the following complaints about the costs claimed by the applicants:
(a) The application for consolidation, and associated costs relating to the application, should not be granted as the overall application for consolidation was rejected by Muir J.
(b)No costs should be awarded for filing a statement of defence in the CIV-2015-404-2754 proceeding, as no statement of defence was filed but only a Notice of Opposition. The Notice would not have taken anywhere near the time allocation given for a statement of defence, as it was only 1 and ½ pages long.
(c) Costs on two amended statements of defence in the matter CIV-2015-
404-000817 have been claimed. Ms Tao says that only one was occasioned by an amended statement of claim by her, and asks that the costs of the other be deducted from scale.
(d) No costs should be awarded for second counsel.
Consolidation
[42] By minute on 24 February 2016, Muir J did not grant an order sought by the applicants that the two proceedings be consolidated. His Honour saw the most appropriate order as being that the two proceedings be heard together, to avoid difficulties in aligning due dates for submissions. He also noted that Ms Tao had not opposed the application.
[43] In essence, therefore, what the applicants sought was achieved. Although the order sought was not granted, this was only because it was more appropriate to make a different order, in circumstances where the different order had similar effect to the one sought. I allow costs for the consolidation application.
Notice of opposition
[44] Two days allocation is claimed for item 2 on the Schedule, “Commencement of defence by defendant”. Ms Tao says this only applies to statements of defence, and that the Notice of Opposition should be considered item 23 “Filing opposition to interlocutory application”.
[45] However, the Notice of Opposition filed on 22 March 2016 was not filed in response to an interlocutory application, but to Ms Tao’s originating application for appointment of an administrator. The correct claim would be item 38, “Filing note of opposition and supporting affidavits”. The time allocation under band two is 2 days.
[46] There is therefore no difference in the time claimed and no reduction is warranted.
Amended statements of claim
[47] The applicants have claimed twice for Item 9, “pleading in response to amended pleading (payable regardless of outcome except when formal or consented to)”
[48] An initial statement of defence was filed on 22 May 2015, and an amended statement of defence on 19 June 2015. Following Ms Tao filing an amended statement of claim on 30 September 2015, a further statement of defence was filed on 14 October 2015.
[49] Ms Tao is correct that only one of the amended statements of defence was filed in response to an amended pleading. Under the terms of the rule, only that statement of defence can be claimed as costs.
[50] I therefore agree that the first claimed amended statement of defence, dated
19 June 2015, cannot be claimed as costs and 0.6 days should be subtracted from the overall claim.
Second counsel
[51] The applicants seek costs for second counsel, in respect of the hearing of the summary judgment application only. This, at 50 per cent of the allowance for appearance for principal counsel, is a claim of 0.5 days. The Court must specifically allow such a claim. In Nomoi Holdings Ltd, Chambers J held that the key question in determining whether to certify costs for second counsel was:25
… whether the nature of this proceeding, given the way the trial was conducted, was such as to justify requiring the losing party to contribute to the winning party’s cost in having a junior counsel present.
[52] The approach to determining whether costs of second counsel should be granted is always objective, and “is focused on the nature of the proceeding, not the actual counsel involved and how he or she or they choose to conduct the litigation”.26 It was emphasised both in Nomoi Holdings Ltd and in subsequent cases, that there will usually need to be some unusual feature to the litigation to warrant allowances for second counsel.27 However, in Wholesale Distributors Ltd v Songle Ltd, it was noted that the applicant did not need to show that the case was beyond the capabilities of the principal counsel, so long as it was sufficiently complex to justify certification for second counsel.28
[53] In this case, the claim itself was not complex. The issues involved working through the Unit Titles Act and relevant regulations to determine the correct position. However, because Ms Tao was self-represented and given the nature of her pleadings and way in which she conducted the case, it was certainly more challenging for counsel than it should have been.
[54] I will not certify second counsel because, in my assessment, the pressures and resulting cost on the applicants are reflected in the award of increased costs.
[55] Scale costs are therefore reduced by 1.1 days, making 10.1 days the total time allocation for CIV-2015-404-000817. At $2,230 per day, this is $22,523.
25 Nomoi Holdings Ltd v Elders Pastoral Holdings Ltd (2001) 15 PRNZ 155 (HC) at [21].
26 At [21].
27 See Nomoi Holdings Ltd, above n 25,at [19], and ZYXCBA Developments Ltd v Auckland
Council [2015] NZHC 2224 at [16].
28 Wholesale Distributors Ltd v Songle Supermarket Ltd [2015] NZHC 809 at [8].
[56] The time allocation for CIV-2015-404-2754 remains $25,645.
[57] In total, this results in $48,168.00 scale costs. An uplift of 25 per cent results in a total of $60,210.
Conclusion
[58] The applicants are entitled to costs. For the reasons given, I award increased costs, with an uplift of 25 per cent.
Thomas J
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