Westwind Properties Limited v Body Corporate 104724
[2023] NZHC 2873
•13 October 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-2453
[2023] NZHC 2873
BETWEEN WESTWIND PROPERTIES LIMITED
Plaintiff
AND
BODY CORPORATE 104724
Defendant
Hearing: 8 June 2023 Appearances:
K L Wendt for Applicant C Baker for Respondent
Judgment:
13 October 2023
COSTS JUDGMENT OF ANDERSON J
This judgment was delivered by me on 13 October 2023 at 11.00 am pursuant to Rule 11.5 of the High Court Rules 2016.
………………………………
Registrar/Deputy Registrar
Solicitors:Lovegroves Lawyers, Auckland Price Baker Berridge, Auckland
WESTWIND PROPERTIES LIMITED v BODY CORPORATE 104724 [2023] NZHC 2873 [13 October 2023]
Introduction
[1] On 10 July 2023 I granted Westwind Properties Ltd (Westwind)’s application for appointment of an administrator over Body Corporate 104724 (the Body Corporate).1 The parties have been unable to agree as to costs.
[2] Westwind seeks indemnity costs. The Body Corporate submits that 2B costs are appropriate but otherwise abides the decision of the Court.
The Law
[3] Costs are discretionary.2 In exercising the discretion to award costs, the Court must have regard to the principles set out in r 14.2 of the High Court Rules 2016. Of particular importance is the principle that the party who fails in respect of a proceeding should pay costs to the party who succeeds.3 As directed in my judgment, Westwind as the successful party is entitled to costs.4 The issue here is whether Westwind is entitled to indemnity costs, or scale costs on a 2B basis.
[4]Westwind submits that indemnity costs are justified on two bases:
(a)s 141(8) of the Unit Titles Act 2010; and
(b)its Calderbank offer (and therefore r 14.11 of the High Court Rules).
[5] Before addressing Westwind’s substantive submissions, I outline the applicable law.
[6]Section 141(8) of the Unit Titles Act provides:
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. …
1 Westwind Properties Ltd v Body Corporate 104724 [2023] NZHC 1767.
2 High Court Rules 2016, r 14.1(1).
3 Rule 14.2(1)(a).
4 Westwind Properties Ltd v Body Corporate 104724, above n 1, at [81].
[7] To date, there is only one authority in which the Court has exercised its power to award costs under s 141(8): May v Body Corporate 329331.5 In that case, the applicants had successfully applied for an administrator to be appointed over the Body Corporate to conduct remedial work necessary to resolve weathertightness issues. The applicants sought indemnity costs in reliance on s 141(8) of the Unit Titles Act. Lang J stated:
[27]… I consider the broad nature of the discretion [within s 141(8)] 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.
[8] Lang J ordered that the respondents were liable to the applicants for costs on a 2B basis.6 As to the shortfall between the actual and reasonable costs incurred by the applicants, Lang J made a direction under s 141(8) of the Unit Titles Act that:7
… 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.
[9] In effect the applicants were indemnified for their costs, but contributed in part to the costs award through the levy on all unit owners.
[10] Westwind also submits that indemnity costs are justified on the basis of its Calderbank offer dated 21 September 2022. A Calderbank offer involves one party offering to settle on a without prejudice basis whilst reserving the right to produce the letter when the question of costs is addressed.8 Calderbank offers are governed by rr 14.10 and 14.11 of the High Court Rules:
5 May v Body Corporate 329331 [2020] NZHC 1554.
6 At [32].
7 At [33].
8 Aldrie Holdings Ltd v Clover Bay Park Ltd [2016] NZHC 1482 at [14].
14.10Written offers without prejudice except as to costs
(1)A party to a proceeding may make a written offer to another party at any time that—
(a)is expressly stated to be without prejudice except as to costs; and
(b)relates to an issue in the proceeding.
(2)The fact that the offer has been made must not be communicated to the court until the question of costs is to be decided.
14.11Effect on costs
(1)The effect (if any) that the making of an offer under rule 14.10 has on the question of costs is at the discretion of the court.
…
(3)Party A is entitled to costs on the steps taken in the proceeding after the offer is made, if party A—
…
(b)makes an offer that would have been more beneficial to party B than the judgment obtained by party B against party A.
[11] Rule 14.11(3) creates a “presumptive entitlement” to costs on the steps taken in the proceeding after an offer in compliance with r 14.10 is made.9
Submissions
[12] Ms Wendt, for Westwind, submits that the costs approach adopted in May applies to Westwind’s application. Similarly to May, she submits that Westwind’s application was beneficial for the Body Corporate as a whole as the existing unit plan for the development did not reflect the as-built structures.
[13] Ms Wendt submits that applying the split cost approach adopted by Lang J in May is fair because Westwind would still contribute to the ultimate cost of legal fees through its utility interest share of the Body Corporate’s operational expenses. These expenses, which Westwind contributes to, will include both the Body Corporate’s legal fees on the application and the costs awarded against the Body Corporate.
9 At [23].
[14] Ms Wendt further submits that Westwind’s Calderbank offer is relevant to costs under both r 14.11 of the High Court Rules and s 141(8) of the Unit Titles Act. In that offer Westwind offered to arrange and pay for paving a strip of common property adjacent to Westwind’s building that the Body Corporate wanted paved. In the process of making that offer, Westwind incurred the expense of an engineer’s report on the capacity of Westwind’s building to sustain additional loading (paving). Westwind offered to undertake this work subject to the Body Corporate taking the required steps to deposit a new unit plan and redevelopment resolutions as sought by Westwind. The Body Corporate did not respond.
[15] This offer, according to Ms Wendt, would have “been materially more beneficial to the Body Corporate than if the Body Corporate had succeeded in its defence of the application”. She notes that Westwind’s offer was for work that the Body Corporate had no legal entitlement to request from Westwind, but that it wanted to achieve. The area Westwind offered to pave was wholly in common property and was thus the responsibility of the Body Corporate not Westwind. Ms Wendt submits that these benefits exceed the benefit that the Body Corporate would have obtained had it succeeded in the proceeding. That benefit would have amounted only to the Body Corporate saving the expense of the costs of the administrator.
Discussion
[16] I am not satisfied that Westwind should be entitled to any costs beyond scale costs on a 2B basis.
[17] First, Westwind’s application can be distinguished from that in May. In May, the Court had ordered certain remedial work be completed by the body corporate within a particular time frame. The owners, however, were divided into two “opposing factions” preventing the work being commenced.10 Some wished for the issues to be remediated under an existing contract, others wished to terminate that contract and investigate alternatives. An administrator was temporarily appointed by Clark J to undertake the remedial work sanctioned by the Court.11 Mr and Mrs May applied for
10 May v Body Corporate 329331, above n 5, at [2].
11 May v Body Corporate 329331 [2018] NZHC 2396.
an order that the appointment be made permanent to enable the administrator to complete the remedial work. Lang J granted this application.12 He considered that to do so was necessary to prevent the body corporate from breaching its obligations under the Court ordered scheme.13
[18] It was in the context of determining costs for that latter application that Lang J considered s 141(8) of the Unit Titles Act. In those circumstances, Mr and Mrs May’s application for appointment of an administrator was a benefit for the body corporate as a whole as it prevented the body corporate from defaulting on court ordered obligations.
[19] Here, although the result of Westwind’s application was that the plans deposited would accurately reflect the as-built structures and Westwind would be responsible for a greater share of operational expenses, the application was in substance for Westwind’s benefit. In fact, Westwind’s application arose in the context of Westwind seeking to sell its interest in the Body Corporate and the purchaser requiring the defect in the unit title to be rectified. This cannot be said to be a case like May where the applicant was acting for the benefit of the unit title owners as a whole.
[20] Additionally, it has relevance that the circumstances leading to the need for the appointment of an administrator were of Westwind’s making. It was only because Westwind did not complete its development in accordance with the plans that the plans deposited on the title were incorrect. This is another factor which distinguishes this case from May.
[21] I also do not consider that the offer made by Westwind justifies indemnity costs. The offer to pave the common area was subject to the following terms:
4.1The Body Corporate will promptly following completion of the proposed work call a general meeting for the purpose of owners voting on all resolutions necessary to enable a new unit plan to be deposited, including any redevelopment resolutions. The wording of the resolutions is also to be agreed between us before any the [of] work is undertaken.
12 May v Body Corporate 329331 [2019] NZHC 3.
13 At [39].
4.2The Body Corporate will irrevocably instruct Price Baker Berridge to attend the EGM to explain the terms of this agreement between the parties, and to recommend both prior to and at the meeting that participants vote in favour of the agreed resolutions.
4.3If the resolutions are passed, the Body Corporate undertakes to provide any assistance to our client as may be reasonably necessary to enable the new unit plan to be lodged, including providing any certificates.
5.If the resolutions do not pass, our client reserves the right to apply to the Court for relief as appropriate.
[22] A Calderbank offer is usually made in a more straightforward context of an offer that can be assessed against a money sum sought in the proceeding. While the provisions have wider application than that, here there is uncertainty in the steps that would then be taken, for example, resolutions need to be drafted, agreed and passed. Moreover, Westwind has provided no quantum in relation to either: a) the costs of the administrator or b) the costs of the works Westwind offered to complete. In these circumstances, the proposal made to the Body Corporate here is not readily measured against the counterfactual of the outcome of the litigation by appointment of an administrator and it also includes matters still remaining to be agreed.
[23] As the successful party Westwind is entitled to costs. I do not however see this as a case where indemnity costs are justified.
Conclusion
[24] The Body Corporate is to pay the applicant’s costs on a 2B basis for the amount of $11,950 together with disbursements of $1,724.22.
Anderson J
0
5
0