Body Corporate Number 164205 v Berachah Investments Limited HC Auckland CIV-2010-404-3324 [2011] NZHC 540 (8 June 2011)

Last Updated: 19 June 2011

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV-2010-404-3324}

UNDER the Judicature Act 1908 section 24C (4)

BETWEEN BODY CORPORATE NUMBER 164205

Plaintiff

AND BERACHAH INVESTMENTS LIMITED Defendant

Hearing: On the papers

Counsel: T Herbert for Plaintiff

K Berman for Defendant

Judgment: 8 June 2011 at 2:00 PM

_{COSTS JUDGMENT OF ALLAN J}

This judgment was delivered by

The Hon. Justice Allan on

8 June 2011 at 2:00pm

pursuant to Rule 11.5 of the High Court Rules

.....................................................

_{Registrar/Deputy Registrar}

Solicitors:

Wadsworth Ray (B T Wood), P O Box 26 301 Epsom, Auckland 1344

Email: [e-mail]

Harrison Stone (Gretchen Stone), P O Box 6211 Auckland 1141.

_Email: [e-mail]

Copy for:

Timothy J Herbert, Level 13 Shortland Chambers, 70 Shortland Street, Auckland 1010

Email: [e-mail]

Keith W Berman, P O Box 105-358 Auckland 1143

_Email: [e-mail]

_{Case Officer:} [e-mail]

BODY CORPORATE NUMBER 164205 V BERACHAH INVESTMENTS LIMITED HC AK CIV-2010-404-

3324 8 June 2011

[1] The plaintiff Body Corporate No.164205 is the owner of the common property in a building at 17 Albert Street, Auckland. The building is several storeys high and is used predominantly for commercial purposes. Eighty per cent of the roof forms part of accessory unit A3 owned by the defendant. Twenty per cent of the roof is part of the common property.

[2] A dispute arose as to legal responsibility for the cost of repairing or replacing the roof. An early amendment to the plaintiff’s rules fixed the Body Corporate with sole responsibility. But the Body Corporate was of the view that the rule amendment was ultra vires and therefore invalid. The defendant, on the other hand, considered the rule amendment to be valid and so supported his argument that the Body Corporate was responsible for repairing or replacing the whole of the roof.

[3] In a judgment given on 22 December 2010, I held in favour of the Body Corporate, declaring that the amendment to the Body Corporate rules was invalid to the extent that it required the plaintiff to repair or maintain the roof other than that part of it which formed part of the common property. I held that the plaintiff was entitled to costs and that counsel may file memoranda if they were unable to agree. The parties have not agreed, but have filed memoranda which I now deal with on the papers.

[4] The plaintiff contends that it is entitled to indemnity costs of $37,141.11. In the alternative, it claims Category 2B costs of $13,007.75. The defendant accepts liability to pay scale costs and raises no objection to that calculation, but it says that the plaintiff is not entitled to indemnity costs.

[5] In support of its claim for such costs, the plaintiff relies upon s 34 of the Unit

Titles Act 1972 (“the Act”) which (as relevant) reads:

34 Recovery of money expended where person at fault

Where the body corporate does any repair, work, or act which it is required or authorised by or under this Act or by or under any other Act to do ... and the repair, work, or act was rendered necessary by reason of any wilful or

negligent act or omission on the part of, or any breach of any rule by, any proprietor ... any expense incurred by it in doing the repair, work, or act shall be recoverable by it as a debt in any Court of competent jurisdiction from that proprietor.

[6] The meaning and application of s 34 of the Act was considered in both Mid- City Apartments v Body Corporate 162791[1] and Hart v Body Corporate 180455.[2] In the former case, Lang J held[3] that the word “act” in s 34 did not extend to the defence of a proceeding brought by the body corporate. In the latter case, Courtney J took a different view. She held that the word “act” in s 34 included the defence of

_{legal proceedings.}[4] _{I do not need to resolve that difference because I consider that}

the word “wilful” in s 34 does not extend to every deliberate act but rather is confined to cases in which the party sought to be charged with indemnity costs has set out to cause loss or unnecessary expenditure to the body corporate. I adopt, with respect, the reasoning of Courtney J in Hart.[5]

[7] I do not consider the defendant’s actions in this case to fall within the confined interpretation of the term “wilful” that I believe to be correct. It is counter- intuitive to regard as wilful the defence of a claim brought by the body corporate for the purpose of obtaining a declaration that its own rules are, in part, invalid. Counsel for the plaintiff asserts that the defendant was motivated simply by financial considerations. That is no doubt correct. But so was the Body Corporate. Its objective was to reduce the amount of the levy on remaining members and to impose the whole of the obligation to repair 80 per cent of the roof upon the defendant. It is difficult to entertain a great deal of sympathy for an argument advanced by a body corporate which, having relied for many years on its rules, then asserts that they are partially invalid and seeks indemnity costs from a proprietor who, in effect, asks the court for a ruling. In these circumstances, I do not accept that s 34 is available to the

_plaintiff.

[8] The parties being agreed that the plaintiff is entitled to category 2B costs, I therefore order by consent that the defendant pay to the plaintiff for its costs in this proceeding the sum of $13,007.75.

[9] The defendant suggests, somewhat faintly, that there might be room for a reduction in that figure by reason of the plaintiff’s failed claim for indemnity costs. While in some circumstances a party may be entitled to costs in respect of a failed costs argument, it is not appropriate to make an allowance here. I note in passing that the defendant now accepts that its own initial calculation of its liability for 2B costs was too low.

_{.............................................}

C J Allan J

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[1] _{Mid City Apartments v Body Corporate 162791 HC Auckland CIV-2003-404-7104, 31 May 2004.}
[2] _{Hart v Body Corporate 180455 HC Auckland CIV-2005-404-1429, 23 June 2005.}
[3] _{Mid City Apartments, above n 1, at [10].}
[4] _{Hart, above n 2, at [18].}

[5] At [19]-[28].