Body Corporate Number 205990 v The Sheriff [2013] NZHC 786 (17 April 2013)

Last Updated: 24 April 2013

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-005625 [2013] NZHC 786

BETWEEN BODY CORPORATE NUMBER 205990

Plaintiff

AND THE SHERIFF First Defendant

AND COLLEGE CHAMBERS LIMITED Second Defendant

Hearing: Dealt with on the papers

Judgment: 17 April 2013

_{JUDGMENT AS TO COSTS OF CHISHOLM J}

[1] When judgment was delivered on 12 December 2012 the issue of costs was reserved. Counsel were directed to confer and to attempt to resolve the issue. However, they have been unable to do so, and the Court is now required to decide the issue.

[2] A number of memoranda, together with an affidavit, indicate the competing stances of the parties.

Background

[3] At the conclusion of the hearing on 12 December Mr Anderson sought costs in favour of the second defendant on an indemnity basis. I rejected that possibility, indicating:

[36] ...On the other hand, my preliminary view is that an uplift on 2B

costs would be appropriate, possibly in the vicinity of 50%.

_{Because the first defendant was abiding the decision of the Court and was not}

BODY CORPORATE NUMBER 205990 V THE SHERIFF HC AK CIV-2012-404-005625 [17 April 2013]

represented when judgment was delivered, the issue of costs could not be finalised.

[4] Nevertheless, I expressed a preliminary view that if a heavier share of costs was to be borne by anyone, it should be borne by the first defendant rather than the plaintiff because the first defendant conducted the sale and rescinded the agreement. But I also commented that the situation might be different if the first defendant was simply following the plaintiff’s instructions.

[5] In terms of the substantive judgment, in which the second defendant’s counter-claim for specific performance succeeded, the sale of the unit in question was to be settled in accordance with the settlement statement dated 4 April 2011 (updated to take account of further rates and body corporate levies). The plaintiff’s contention that costs, interest charges and penalties totalling $49,992.11 were payable by the second defendant was rejected in a minute dated 25 February 2013. I understand the sale was finally settled on 28 March 2013.

Second defendant’s application for costs

[6] The second defendant seeks costs of $17,760.75, plus disbursements of

$108.80, making a total of $17,869.50. Those costs are sought against the plaintiff on the basis that the plaintiff was effectively providing the instructions that resulted in the refusal of the first defendant to settle the sale of the unit and the ultimate cancellation of the contract.

[7] These costs are based on actual time where the time taken for a particular step is less than the time allowed in the schedule. An uplift of 50% is sought on the basis that the claim by the plaintiff was without merit from inception. This uplift also reflects that following judgment the plaintiff ’s intransigent attitude towards settlement gave rise to unnecessary attendances.

Plaintiff ’s response

[8] The costs claimed are unreasonable and no order should be made until the level of actual costs incurred by the second defendant has been ascertained. There is

no basis on which there should be an uplift because the plaintiff was seeking the Court’s ruling on an issue that could not be resolved by the parties. While the ruling indicated that the Court favoured the second defendant’s interpretation, this was not a situation where the claim was so obviously without merit that there should be an uplift.

[9] Any award of costs should be against the first defendant. It declined to settle the agreement for sale and purchase and ultimately cancelled the contract. Any wrongful conduct was the responsibility of the first defendant, not the plaintiff. Had the first defendant thought that the plaintiff’s actions were wrong, it could have settled. Effectively the plaintiff was left in a position of having to sort out a mess created by others.

First defendant’s response

[10] The first defendant was acting on the plaintiff’s instructions. This is reflected by the correspondence exhibited to the affidavit of Michelle Brown, including a letter indicating that the plaintiff had requested the first defendant to exercise its power under the contract and rescind the contract.

[11] In all the circumstances the first defendant should not be liable for any costs: it was the plaintiff who initiated the proceeding; the first defendant abided the decision; and the plaintiff was responsible for the decisions resulting in the proceeding and for the delays in settling the sale of the unit in accordance with the judgment.

Decision

[12] For the purposes of rule 14.2 the second defendant was clearly the successful party and there is no basis on which the Court should depart from the primary principle that costs should follow the event. The second defendant is therefore entitled to an award of costs.

[13] I do not accept that the Court should defer a decision until the actual costs incurred by the second defendant are known. Obviously those costs will exceed the amount that I intend to award. In this respect I note that the documentation before the Court giving rise to the minute of 25 February 2013 indicates that the plaintiff’s legal costs were in the vicinity of $34,000.

[14] There are two remaining issues: the quantum of the award; and whether the award should be against the plaintiff or first defendant, or both.

Quantum of award

[15] Counsel for the plaintiff has challenged the actual time taken for various steps referred to in the memorandum on behalf of the second defendant dated 27 February

2013. Having reflected on those steps, including the underlying research and preparation that would have been involved, I am satisfied that in each case the time claimed is reasonable, especially taking into account that the time claimed is less than the scheduled allowance. The second defendant is therefore entitled to a 2B award based on 5.95 days.

[16] The next issue is whether there should be an uplift, and if so, the extent. An uplift of 50% is sought. In the case of the steps prior to judgment the uplift is sought on the basis that the claim was so totally lacking in merit that it should have never gone to court. As to the steps post-judgment, the rationale is that these steps should not have been necessary.

[17] Rule 14.6(3) specifies when the Court may order a party to pay increased costs. In Bradbury v Westpac Banking Corporation1 the Court of Appeal summarised this provision by saying that increased costs may be ordered where there is a failure by the paying party to act reasonably, noting that clear cause must be shown to justify an increase.

[18] Cases in which increased costs have been awarded because a claim lacked merit are discussed in N-Tech Ltd v Abooth Ltd.2 Although those cases involved situations where the proceeding had not resulted in a judgment, I accept that the underlying approach adopted by Kós J of assessing whether the plaintiff has acted unreasonably in bringing or continuing a claim is appropriate in this case. Obviously, the threshold should not be set too low, otherwise increased costs would

be awarded on virtually every occasion where a claim fails. That would be contrary to the underlying objective of the scale.

[19] Despite the initial view expressed after judgment was delivered, I have now concluded that there is insufficient justification for increased costs in respect of the steps taken prior to judgment. While the Court ultimately disagreed with the plaintiff’s interpretation, I cannot responsibly proceed on the basis that this interpretation adopted by the Court was so patently obvious, and the contrary interpretation so patently untenable, that the matter should have never gone to Court.

[20] The scale recognises that in the normal course of events an award of costs in favour of the successful party will compensate that party for having to go to Court. Under those circumstances I am not prepared to order increased costs in relation to the steps pre-judgment.

[21] On the other hand, I am satisfied that the plaintiff’s actions in declining to settle the sale of the unit after judgment had been delivered unnecessarily contributed to the expense of the second defendant. As recorded in the minute of

25 February 2013 the plaintiff’s stance in relation to costs, interest charges and penalties was misconceived. And it appears that even after that minute was issued, there were still difficulties in achieving settlement. The second defendant is entitled to an uplift of 50% on the last two steps (memorandum seeking clarification and memorandum in response) referred to in its memorandum of 27 February 2013.

[22] The second defendant is also entitled to disbursements as claimed.

Whether the award should be against the plaintiff or first defendant

[23] On the evidence before the Court I am satisfied that the plaintiff was the driving force behind events leading to the cancellation of the agreement for the sale of the unit which resulted in the proceeding being issued. No doubt it was for this reason that the plaintiff initiated the proceeding and the first defendant elected to abide the decision of the Court.

[24] Under those circumstances the order for costs will be against the plaintiff, not the first defendant.

Outcome

[25] The plaintiff is to pay the second defendant costs on a 2B basis as set out in paragraph 2 of the second defendant’s memorandum of 27 February 2013 (5.95 days), together with an uplift of 50% in relation to the last two items. The second defendant’s disbursements of $108.80 are also to be paid by the plaintiff.

Solicitors:

T J Herbert, P O Box 3320 Shortland Street, Auckland, [e-mail]

Crown Law, DX SP20208, Wellington, [e-mail]

John Anderson, P O Box 155-012, Auckland, [e-mail]