Body Corporate 162791 v Gilbert [2015] NZHC 1789 (31 July 2015)

Last Updated: 8 March 2016

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-003833 [2015] NZHC 1789

BETWEEN	BODY CORPORATE 162791 Plaintiff
AND	JOHN GILBERT Defendant
	QSM TRUSTEE LIMITED (IN RECEIVERSHIP AND LIQUIDATION) Second Defendant

Hearing:	On the papers
Counsel:	TJG Allan for the Plaintiff D Chisholm QC for the First Defendant
Judgment:	31 July 2015

_{JUDGMENT AS TO COSTS OF ASSOCIATE JUDGE CHRISTIANSEN}

This judgment was delivered by me on

31.07.15 at 4:30pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

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

BODY CORPORATE 162791 v J GILBERT AND QSM TRUSTEE LIMITED (IN RECEIVERSHIP AND LIQUIDATION) [2015] NZHC 1789 [31 July 2015]

Background

[1] Counsel have filed memoranda requesting costs be fixed in the resolution of the Court of Appeal hearing.

[2] By its judgment dated 21 May 2015 the Court of Appeal allowed the plaintiff

body corporate’s appeal of the decision of Associate Judge Abbott dated 25 March

2014 refusing the plaintiff’s application for summary judgment.

[3] Judge Abbott had not made an order as to costs. Counsel filed memoranda as to costs. That filed on behalf of the first defendant (Mr Gilbert) requested costs be fixed on a 2B basis for award to Mr Gilbert who was successful in resisting the summary judgment application heard by Judge Abbott.

[4] In Mr Allan’s response submissions, on behalf of the body corporate, he agreed that the costs be fixed on a 2B basis but submitted those should not be ordered to be paid without the Court taking “into account the wider conduct of the first and second defendants”, nor without costs being fixed in favour of the body corporate on its successful interim injunction application - another related matter of dispute between the parties.

[5] It seems the matter of costs was not able to be determined by Judge Abbott prior to his retirement.

Court of Appeal directions

[6] By its judgment the Court of Appeal granted the appeal and entered judgment against Mr Gilbert as receiver of the second respondent and ordered Mr Gilbert to personally pay the body corporate levies owed in respect of units 3A to 3E (inclusive) in the Mid City Complex, from 9 August 2013 to the date of the judgment.

[7] The Court of Appeal also ordered Mr Gilbert personally to pay interest on outstanding levies at the rate of 10 per cent per annum from the last day of each month to the date of the judgment.

[8] The Court reserved leave to counsel to file memoranda in the High Court in the event that they were unable to reach agreement as to the amount owing by Mr Gilbert. Also Mr Gilbert was ordered to pay the body corporate its reasonable solicitor/client costs, together with disbursements and reserved leave for counsel to file memoranda in the High Court if there was any disagreement as to those.

[9] Counsel cannot agree about the amount of levies owed or about what costs are to be paid.

The disagreement

[10] Mr Allan’s memorandum on behalf of the body corporate states that copies of every relevant levy invoice have been provided. They show levies totaling

$852,409.27 were owing to the date of judgment together with interest totaling

$71,493.39.

[11] Mr Allan calculates that solicitor/client costs totaled $26,495.99 in the High

Court and $29,727.40 in the Court of Appeal.

[12] In his memorandum on behalf Mr Gilbert, Mr Chisholm does not accept the claim of unpaid levies. He says Mr Gilbert is entitled to understand how those levies have been calculated as a matter of fact given that levies are prima facie calculated pursuant to s 121(2) of the Unit Titles Act 2010 in proportion to each owner’s utility interest. Mr Chisholm submits the body corporate cannot simply unilaterally allocate costs to a particular owner and assert that they are owing.

[13] He submits Mr Gilbert’s position is that:

(a) The amounts levied are unreasonable and do not reflect actual expenditure. He calculates that Mr Gilbert’s liability for levies in the year 2014 should have been $240,461.45 (on a proportionate basis) rather than the $409,103.69 levied.

(b) That it appears the levied amounts include legal costs and disbursements and if that is so then the body corporate cannot seek to recover costs and disbursements separately.

[14] Mr Chisholm requests the High Court direct the body corporate to provide Mr Gilbert with a detailed breakdown of the levy expenditure for the relevant periods to enable Mr Gilbert to identify and clarify with the High Court what amounts he considers are owing under the Court of Appeal judgment.

[15] Mr Chisholm says that even if the levies as invoiced, together with interest due is owing, then issue is taken with the reasonableness of the body corporate’s solicitor/client costs and disbursements claim. He submits “reasonable” solicitor/client costs and disbursements must take into the account the amount of legal costs and disbursements that are already accounted for in the levies.

[16] Mr Chisholm submits the body corporate is not entitled to solicitor/client costs in relation to the summary judgment application in the High Court. He notes that a claim for indemnity costs on the basis of entitlement under contract (r 14.16(4)(e) of the High Court Rules) was not pleaded in the High Court by the body corporate.

[17] The body corporate’s position in response is that if levies include legal fees then that is a point of appeal and not a point of “quantification” because the judgment was for all levies (without deduction) to the date of judgment.

[18] Regarding the claim on behalf of Mr Gilbert that it is inappropriate for indemnity costs to be entered in respect of the summary judgment application Mr Allan contends that the Court of Appeal entered judgment for solicitor and client costs without quantification for both High Court and the Court of Appeal. He says the only question at large is the quantum of those solicitor/client costs – to be determined by the High Court if counsel cannot agree.

[19] Regarding the position of the defendant that there should be no GST element in relation to both the Court of Appeal indemnity costs and disbursements Mr Allan

notes both parties are registered for GST and it is appropriate therefore that the claim and award for costs include GST.

Ruling

[20] Respectfully I disagree with the position advanced on behalf of the body corporate.

[21] The Court of Appeal ordered reasonable solicitor/client costs to be paid to the appellant. It was to be left to the High Court in the event there was any disagreement regarding those.

[22] The Court of Appeal does not appear to have ordered solicitor/client costs in respect of the summary judgment application. As I earlier noted the parties had earlier agreed that those costs be fixed on a 2B basis. Respectfully this Court agrees that was the proper basis for fixing those costs in the High Court.

[23] It is implicit by the Court of Appeal’s order that if counsel did not agree on the amount of levies that a challenge to the body corporate’s calculation of those would be available. This Court believes there are issues that should be addressed and that the body corporate ought to explain the basis upon which those are calculated. Those levies in particular deal with questions regarding the proportionality of the levy claims in question and whether they include solicitor’s costs and disbursements which are also the subject of the body corporate’s present claim for judgment costs.

[24] Finally with respect the Court agrees with Mr Chisholm’s GST analysis in support of his submission that when a successful party in litigation is GST registered the GST component should be excluded from a costs calculation. Also that the same reasoning ought to apply in relation to disbursements.

[25] In the circumstances the Court is not at this time going to consider the solicitor/client costs claim in respect of the Court of Appeal hearing, because it

believes it has insufficient information available to do so, and because that matter should only be addressed after issues around the levy charges have been resolved.

Decision

[26] The body corporate is to provide the information sought on behalf of Mr Gilbert to explain how the levy charges have been calculated and in particular to deal with concerns raised about proportionality and whether solicitor/client costs of this

_{proceeding and the appeal, have also been included in those calculations.}

Associate Judge Christiansen