Barry Park Investments Limited v Body Corporate Number 95388 [2016] NZHC 1527 (6 July 2016)

High Court of New Zealand

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Barry Park Investments Limited v Body Corporate Number 95388 [2016] NZHC 1527 (6 July 2016)

Last Updated: 19 August 2016

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-2192 [2016] NZHC 1527

BETWEEN	BARRY PARK INVESTMENTS LIMITED Applicant
AND	BODY CORPORATE NUMBER 95388 Respondent

Hearing:	On the papers
Counsel:	T J Herbert for Applicant I J Stephenson for Respondent
Judgment:	6 July 2016

_{COSTS JUDGMENT OF PAUL DAVISON J}

This judgment was delivered by me on 6 July 2016 at 4pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Castle Brown, Newmarket, Auckland

Minter Ellison Rudd Watts, Auckland

BARRY PARK INVESTMENTS LTD v BODY CORPORATE 95388 COSTS JUDGMENT [2016] NZHC 1527 [6 July 2016]

Introduction

[1] These proceedings were discontinued by consent. The only issue outstanding is that of costs.

[2] In a Minute dated 18 February 2016, I issued timetabling orders for the filing of memoranda by both parties regarding costs which provided for each party to contemporaneously file their memoranda and, by a later date, respond to each other’s memorandum. However the parties proceeded to file and exchange a series of further and additional memoranda and thereby introduced contentions against each other regarding the merits of the substantive proceeding.

[3] In response to a memorandum by the respondent seeking costs, the applicant filed a further memorandum and challenged the respondent’s entitlement to seek costs, saying that the respondent had assumed an unwarranted right of reply to the applicant’s reply memorandum. The respondent in reply, disputed the applicant’s contention and requested that a hearing be set down if the applicant were to maintain its complaints. In the end, the applicant withdrew the complaints.

[4] Putting these issues aside, I briefly summarise the parties’ position on the

issue of costs. First, I set out the factual context.

Background

[5] The respondent is the Body Corporate of a building comprising 15 units. The applicant owns one of those units.

[6] The respondent sought to carry out remedial works which would affect the

applicant’s unit and part of the common property.

[7] Two ordinary resolutions by the body corporate were passed.¹ The first

resolution approved the design work and authorised the respondent “to raise such

_{special levies” for that work. The respondent voted against this by proxy. The}

1. The first resolution was passed at an annual general meeting on 20 May 2014. The second resolution was passed at an annual general meeting on 29 April 2015.

second (unanimous) resolution gave the respondent approval to take steps to secure a remedial works contract, and authorised the raising of levies on a basis other than in accordance with each owner’s utility interest apportionment. The applicant did not attend the annual general meeting at which this resolution was passed; nor did it provide a proxy to indicate its voting preference.

[8] On 24 June 2015, the respondent’s committee raised a special levy of

$102,925.12 against the applicant’s unit and sought payment of that levy from the

applicant. The applicant refused to pay the levy.

[9] In August 2015, contractors engaged by the respondent began remedial works on the building. The applicant refused access to its unit.

[10] In September 2015, the applicant commenced proceedings against the respondent, seeking declaratory and ancillary relief on the basis that the first and second resolutions were ultra vires because they were contrary to ss 120 and 121 of the Unit Titles Act 2010.

[11] In October 2015, the respondent defended the allegations and made a counterclaim, seeking (inter alia) a declaration that the applicant was in breach of its statutory obligations when refusing the respondent and its agent access to its unit to undertake the planned work.

[12] On 14 December 2015, the respondent passed two further resolutions. The third resolution effectively rectified the respondent’s position, which achieved compliance with the provisions of the Unit Titles Act.² The fourth resolution gave the respondent the discretion to exclude the applicant’s unit from the remedial works. It has since exercised that discretion, with the result that the declarations sought by

_{the applicant would no longer be of any affect and rendered nugatory.}

² It resolved to levy the remedial works on a utility interest basis as between all owners. On 21

December 2015, the respondent issued a demand for payment of the levy raised pursuant to the resolution of 14 December 2015. The levy remains unpaid and the respondent has filed proceedings in the District Court for payment of levies in the amount of $111,86.84.

[13] The parties’ respective claim and counterclaim were discontinued by consent

on 18 February 2016. It is in this context that the issue of costs is addressed.

Submissions

[14] In chronological order, the parties made the following submissions in their costs memoranda:

(a) 26 February 2016: the applicant said the presumption contained in r

15.23 of the High Court Rules (the Rules), that the party who discontinues a proceeding must pay costs, is displaced here because the respondent’s passing of the third and fourth resolutions amounts to a change of circumstances rendering the proceedings unnecessary; hence its discontinuance. Further, the third and fourth resolutions represent an implied admission on the part of the respondents that the first and second resolutions were ultra vires, as was alleged by the applicant.

(b) 1 March 2016: the respondent said the presumption does apply in this case, requiring the applicant to pay costs to the respondent for the following reasons:

(i) The applicant did not engage in or contribute to the respondent’s decision making process. It did not attend the AGMs to voice its concerns, and only voted (via proxy) on the first resolution.

(ii) The proceedings were brought prematurely in a context where the respondent had proposed a further two weeks to continue negotiations.

(iii) It was unnecessary to put the respondent to the cost of a proceeding. The respondent did not dispute the applicant’s position that the levy was invalidly raised and “was happy to put a new motion to owners to resolve that concern.”

The respondent also seeks costs on costs.

(c) 8 March 2016: the applicant in reply, disputed the respondent’s

contentions and said:

(i) It did in fact participate in the decision making process but this was to no avail. That it did not attend the AGMs does not assist the respondent’s position as it cannot show that the resolutions would not have been passed (so as to render the proceeding unnecessary) had the applicant attended the AGM.

(ii) Although there was an undertaking on the part of the respondent that it and/or its agent would not carry out works to the applicant’s unit while negotiations were ongoing, it was a condition of the undertaking that the applicant “bring[s] the proceedings on an expedited basis and the proceedings are indeed dealt with on an expedited basis”. Therefore, said the applicant, the proceeding was effectively brought at the behest of the respondent.

(iii) At all relevant times (prior to and after the proceeding had been commenced) the respondent’s position was that the levy was validly raised. The applicant only learned that the respondent had rectified its position on or around 14

December 2015, which was after the proceeding had been commenced.

The applicant agreed that there should be costs on costs, but said it is the applicant who is entitled to them.

(d) 9 March 2016: the applicant identified an error in its earlier memorandum.

(e) 10 March 2016: the respondent submitted that the applicant’s claim that the proceedings had been brought at the behest of the respondent was incorrect. Furthermore, the respondent repeated the submission that the applicant had not voted against the second resolution, and complained that the applicant had “sat on its rights”. If it had voted, and had the vote been rejected, the respondent could have sought minority relief under s 210. The respondent made a further submission on the issue of costs on costs, saying that daily allocations for costs memoranda should be made as though they were submissions on an interlocutory application.

(f) 11 March 2016: applicant’s memorandum filed, subsequently withdrawn by consent.

(g) 11 March 2016: respondent’s memorandum filed, advising that it does not consent to any of its own memoranda being withdrawn.

Analysis

[15] The principal issue of dispute is whether the presumption that a plaintiff who discontinues a proceeding against a defendant should pay costs to the defendant, applies in this case.

[16] The focus is not on whether the applicant has acted unreasonably in commencing and then discontinuing the proceeding, but whether there are circumstances which make it just and equitable that the presumption should not apply.³ The reasonableness of the parties’ conduct up to the point of discontinuance may be taken into account.⁴

[17] The Court will not usually consider the merits of the respective claims unless, as in this case, they are so obvious that they should influence the costs outcome.⁵

³ The rationale is to obviate any requirement for the defendant to demonstrate that the plaintiff acted unreasonably in commencing and then discontinuing the proceeding. The defendant has the advantage of the presumption even where there has not been such unreasonableness.

⁴ _{Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150 at [29].}

⁵ See generally, FM Custodians Ltd v Pati [2012] NZHC 1902 at [11].

[18] The respondent’s submission that the applicant should have taken alternative steps before commencing its proceeding – for example, by continuing its negotiations with the respondent or participating more in the decision making process before seeking relief – is an insufficient answer to the applicant’s submission as to why the circumstances after the proceedings were commenced make it just and equitable that the presumption should not apply.

[19] For present purposes, the relevant circumstances are simply that the applicant brought a proceeding against the respondent setting out its complaints, following which, the respondent took remedial steps to resolve them. It was only after the respondent took such actions that the applicant discontinued the proceeding. For that reason, I agree with the applicant’s submission that the circumstances leading to discontinuance were brought about by the actions of the respondent, making it just and equitable that the applicant should not pay costs on the discontinuance.

[20] The respondent says it was always willing to accept that the levy was invalidly raised. Therefore, says the respondent, the applicant should not have brought the proceeding or it was unreasonable for it to have done so. I do not agree. The reality is that up until 14 December 2015, the respondent had not taken any steps to demonstrate a concession on its part that the levy had been invalidly raised. To the contrary, by its statement of defence dated 7 October 2015, the respondent defended the claims made against it, and maintained the position that the levy had been validly raised. The respondent’s change of position between October and December 2015, well after the applicant’s proceeding was commenced on 18

September 2015, supports the applicant’s contention that the respondent’s remedial steps had overtaken the proceeding and it was because of that development that the applicant then discontinued its proceeding.

[21] I agree with the applicant’s submission that the resolutions of 14 December

2015 had the effect of rendering the applicant’s proceeding nugatory. I add further, that it would have been unreasonable for the applicant to continue its proceeding in circumstances where the granting of the relief sought would have been futile.

[22] Accordingly, I find that the presumption contained in r 15.23 is displaced, and the applicant is not liable to pay the respondent costs.

[23] The next issue is whether the respondent is liable to pay the applicant costs. If not, costs should lie where they fall.

[24] In my view, and in light of the circumstances of this case, I consider the general principle that the “losing” party should pay costs to the party who “succeeds” applies by analogy here. The applicant could have done no better even if it had succeeded. For this reason, I order that the respondent is to pay costs to the applicant.

[25] I decline to award costs on costs. In the chain of exchanged memoranda, both parties fell into the tempting error of raising and repeating issues of dispute which led to an extended sequence of memoranda and an expansion of the dispute as to responsibility and, consequently, as to costs. Despite the Court’s general reluctance to award costs on costs applications, it would be rare for this Court to award costs on costs where doing so would conflict with the general principle and objective that the determination of costs should be expeditious.

Conclusion

[26] The respondent is to pay costs to the applicant in the sum of $11,596, plus disbursements in the sum of $1,350.

_{[27] Costs on costs shall lie where they fall.}

Paul Davison J