Body Corporate 166208 v York Trustees Ltd

• Jurisdiction: New Zealand
• Judge: Duffy J
• Judgment Date: 02 August 2021
• Neutral Citation: [2021] NZHC 1974
• Docket Number: CIV 2018-404-2623
• Court: High Court

Between

Body Corporate 166208

First Plaintiff

Roger Murray Bell and Webb Ross Johnson Trustees Limited

Second Plaintiffs

Masami Toda

Third Plaintiff

David John Collis and Jillian Kay Gapes

Fourth Plaintiffs

Pamela Taylor

Fifth Plaintiff

and

York Trustees Limited

First Defendant

Lyon Trustee No 10 Limited

Second Defendant

[2021] NZHC 1974

Duffy J

CIV 2018-404-2623

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA

TĀMAKI MAKAURAU ROHE

Civil Procedure — application for standard scale costs, increased costs and indemnity costs — whether a claim that was unreasonable and untenable for the purpose of the test for strike out in combination with refusing a settlement offer could be regarded as unreasonable in the context of the tests for awards of either indemnity or increased costs — High Court Rules 2016

Counsel:

D J Barr for the Plaintiffs

J Heatlie and J P Wood for the Defendants

COSTS JUDGMENT OF Duffy J

This judgment was delivered by me on 2 August 2021 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar / Deputy Registrar

1 The defendants (York Trustees) are owners of a unit in a residential Unit Titles development which leaks (the development). The first plaintiff is the development's Body Corporate. York Trustees disputed the Body Corporate's proposed approach to undertaking remediation work on the development. This led the Body Corporate to commence proceedings against York Trustees. It was subsequently joined by the other plaintiffs in the second amended statement of claim dated 14 February 2020 (the statement of claim). On 21 September 2020 I struck out the Body Corporate's proceedings (the strike out judgment). 1 Following their success in this Court, York Trustees now seek orders for costs and disbursements against the Body Corporate and the other plaintiffs. For convenience I shall refer to this group collectively as the Body Corporate. 2

2 The parties' attempts at reaching an agreed outcome on costs and disbursements have failed. The issues of contention are:

• (a) Whether the Body Corporate should pay indemnity costs from the point in time when York Trustees made an offer to resolve the dispute;

• (b) Whether the Body Corporate should pay increased costs from the start of this proceeding on the ground there was never a tenable basis for the relief sought and the claim was hopeless;

• (c) How York Trustees should be put in a neutral position for payments it has made as a Body Corporate member to contribute to the Body Corporate bringing this proceeding against York Trustees; and

• (d) Whether York Trustees are entitled to an award of disbursements in regard to expert opinion evidence they obtained to assist them in the dispute with the Body Corporate;

3 As is usual where indemnity or increased costs are sought, York Trustees have provided the Court with a schedule of the scale costs they would be entitled to ($35,252.50) and the filing fee disbursement for the statement of defence ($110).

4 The Body Corporate contends:

• (a) The quantum of scale costs as sought by York Trustees is incorrect, it should be $29,784.50;

• (b) There is no justification for an award of increased or indemnity costs;

• (c) Costs should be reduced by such proportion as the Court determines appropriate (to reflect York Trustees' pursuit of an argument that lacked merit) and failure to (without reasonable justification) admit facts; and

• (d) Regarding disbursements, Body Corporate contends York Trustees should not be entitled to expert fees because the sole expert for whom the fees are claimed confirmed the Body Corporate's case. Secondly, the Body Corporate should be entitled to the costs of its expert building surveyor and expert cadastral surveyor.

5 I propose to deal with the costs issues first and the disbursement issues second.

Costs award

Ascertaining scale costs

6 The starting point is the general principle that costs follow the event. Here, York Trustees were successful, and I see no reason to depart from the general approach. Accordingly, I am satisfied that they are entitled to an award of costs.

7 Before the Court will contemplate awards of indemnity or increased costs it needs to ascertain the scale costs. This is because the discretion to award increased or indemnity costs takes into account the extent to which scale costs can be said in the circumstances to fall short of the sum the applicant is entitled to receive. Here, the parties dispute the quantification of the scale costs.

8 The parties appear to agree on the appropriate categorisation of the scale costs. Each has approached the scale costs exercise using category 2B. This is not surprising as proceedings in this Court are typically category 2 and costs awards are usually based on a category 2B allocation. I shall proceed on this basis.

9 I accept the Body Corporate's argument that steps taken prior to 1 August 2019 for category 2B are subject to the daily recovery rate of $2,230 rather than the present rate, which is what York Trustees have used. 3 Accordingly, for those steps the costs sought by York Trustees need to be adjusted to take the correct appropriate daily recovery rate into account. For the purpose of this exercise I have used the schedule prepared by the Body Corporate because it provides more accurate information and more closely resembles the layout of Schedule 3 of the High Court Rules. It follows that steps 2, 10, 11 (first step 11), and 21 (as shown in the Body Corporate's schedule) 4 will be reduced to the total figure of $9,589.

10 There appears to be no dispute with the subsequent steps from March 2020 onwards, save for the last step (discussed below). For those steps (11 (second step 11), 20, 22, 24, 25 and 26 as shown on the Body Corporate's schedule) the allocation comes to $19,000.50.

11 There is a dispute between the parties regarding the last step, 30. York Trustees have claimed 2.5 days for the preparation of briefs. The Body Corporate submits that this is overly generous and that 0.5 days is appropriate because the defendants only served a single short brief (being 16 pages long). No one says anything else about this brief. I do not have a copy and it is not clear to me if the parties are referring inaccurately to the affidavit evidence prepared for the interlocutory hearing before me or to a brief of evidence prepared in anticipation of the trial proceeding. If it is the latter this would be a wasted cost that resulted from York Trustees preparing their evidence for a trial that never eventuated.

12 The application before me, which brought the proceeding to an end, was an application for summary judgment or strike out of the plaintiffs' claim and vacation of the trial. In support of this application, York Trustees filed two affidavits, one from Barry James Gill and one from Trent Carey. Those documents were before me at the hearing. The decision to strike out the statement of claim meant there was no need to deal with the summary judgment application. 5 The application was brought on two bases and could have succeeded on either basis; therefore I consider York Trustees are entitled to claim costs for the two affidavits they prepared.

13 Under the High Court Rules 2016, costs for the preparation of affidavits are assessed based on an allocation formula that allows two days' preparation time for the first day of hearing. 6 I do not need to consider the allocation formula beyond this because here the proceeding was heard in one day. I reject the general thrust of the Body Corporate's argument that the time allocated for the purpose of costs can be influenced by the length of the evidence prepared. The standard approach on scale costs is to give two days for the preparation of evidence for a one day interlocutory hearing. I see no basis here to depart from the standard approach. Accordingly, I consider York Trustees are entitled to costs for the preparation of the affidavit evidence, which is assessed at two days based on a daily recovery rate of $2,390. That brings the costs allocation for the evidence preparation to $4,780. Taken together, the three subtotals I have arrived at come to a grand total of $33,369.50. This figure falls somewhere between that identified by the parties.

14 At the time of the hearing before me the trial date was imminent. York Trustees may, in terms of the Court timetable, have been required to prepare and exchange their evidence for trial. If they did, the effort would have been wasted once the statement of claim was struck out. However, they have not provided any explanation for the costs claim for the briefs of evidence item included in their schedule. In those circumstances, I am not prepared to make assumptions about the briefs of evidence. To my knowledge they did not form part of the hearing before me. Accordingly, no allowance will be made for those items. On the other hand, I have included in the costs award an allowance for the two affidavits that were provided in support of the

application before me. This will make up for the exclusion of an allocation for the briefs of evidence. 7

Indemnity costs

15 York Trustees say that they engaged their present solicitors, Rainey Law, shortly after the plaintiffs filed their second amended statement of claim dated 14 February 2020. On 28 February 2020, their solicitors wrote to the Body Corporate's solicitors setting out concerns about the approach taken in that statement of claim (the letter). The letter is attached to the costs submission. York Trustees submit that the letter identified a clear jurisdictional issue with the Body Corporate pursuing a declaratory judgment on the allocation of repair costs. This contention aligns with my decision in the strike out judgment. Further, York Trustees argue that it was implicit from the letter that they would provide access to the Body Corporate to undertake...