BODY CORPORATE 172108 v MEADER & ORS [2022] NZHC 2076

BODY CORPORATE 172108 v MEADER & ORS [2022] NZHC 2076 [19 August 2022]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2009-404-6868[2022] NZHC 2076BETWEEN BODY CORPORATE 172108ApplicantAND MANCHESTER SECURITIES LIMITED37th RespondentCIV-2019-404-1445BETWEEN BODY CORPORATE 172108ApplicantAND MANCHESTER SECURITIES LIMITEDRespondentHearing: On the papers at AucklandDate of judgment: 19 August 2022JUDGMENT OF POWELL J[Costs – Application for joinder and application for leave to appeal]This judgment was delivered by me on 19 August 2022 at 3.30 pm pursuant toR 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors/Counsel:Grove Darlow & Partners, Auckland (T J G Allan)Core Legal Ltd, MastertonJ B Orpin-Dowell, Stout Street Chambers, AucklandK Sullivan, Port Nicholson Chambers, Wellington[1] On 3 March 2021 I dismissed an application by Robert Cummins to joinlongstanding proceedings in addition to or in substitution for Manchester SecuritiesLimited ("the joinder judgment").1 As I noted in the judgment:2The proceedings in issue form part of a protracted and complex dispute overremediation carried out in respect of Hobson Apartments, a 12-storeyapartment block located in Hobson Street, Auckland. Manchester is the legalowner of Level 12, which is constructed separately to the rest of the buildingand is "aesthetically and physically different", with the only common propertyon the 12th floor being "the lift and stairwell shafts, ducts and a small recessedarea at the rear on the eastern side".(footnotes omitted)[2] In a subsequent judgment dated 30 March 2021 I granted Mr Cummins leaveto appeal the joinder judgment and granted an application for interim relief whichvacated a substantive fixture previously set down ("the leave judgment").3[3] Costs on the joinder judgment were reserved pending the final outcome ofvarious directions made in the joinder judgment, whereas costs on the leave judgmentwere fixed on a 2B basis to be paid to the successful party on the substantive appeal.[4] In the event Mr Cummins' appeal against the joinder judgment was dismissed.4The Court of Appeal concluded that Mr Cummins' application for joinder withoutconditions and the subsequent appeal was an abuse of the Courts' processes5 andindemnity costs were awarded against Mr Cummins on the appeal.6 A subsequentapplication by Mr Cummins to recall the decision of the Court of Appeal wasdeclined,7 and indemnity costs were awarded on the recall application.8 Mr Cumminshas since been declined special leave to appeal to the Supreme Court.9[5] Against that background, costs in respect of both the joinder and leavejudgments stand to be considered.1 Body Corporate 172108 v Manchester Securities Ltd [2021] NZHC 365.2 At [2].3 Body Corporate 172108 v Manchester Securities Ltd [2021] NZHC 686.4 Cummins v Body Corporate 172108 [2022] NZCA 68.5 At [63].6 At [68]–[70].7 Cummins v Body Corporate 172108 [2022] NZCA 153.8 At [25].9 Cummins v Body Corporate 172108 [2022] NZSC 95.Costs on the joinder judgment[6] The Body Corporate seeks indemnity costs in the sum of $49,281.71, togetherwith disbursements of $1,386.21, both sums being exclusive of GST. In the eventindemnity costs are declined the Body Corporate seeks increased costs in the sum of$30,739.01 (2B scale costs uplifted by 75 percent) plus disbursements.[7] Mr Sullivan, on behalf of Mr Cummins, does not dispute costs are payable butdisputes that indemnity costs are appropriate as well as the quantum sought. AlthoughMr Sullivan acknowledged that both this Court and the Court of Appeal concludedthat Mr Cummins' application to seek joinder while not taking legal title was an abuseof process, he nonetheless submitted that neither increased nor indemnity costs interms of r 14.6 of the High Court Rules 2016 were appropriate in respect of the joinderapplication because:(a) the Body Corporate's opposition to Mr Cummins' application forjoinder was made for an ulterior motive: to achieve an undefendedformal proof hearing in the substantive proceeding;(b) Mr Cummins otherwise acted reasonably in making the application inthe context of the proceedings, relying in particular on previousobservations of the Court of Appeal to the effect that Manchester had a"clear and persuasive" claim to an equitable set-off and a "genuinedispute for arbitration purposes"; and(c) the costs claimed by the Body Corporate are otherwise excessive.Legal principles[8] Rule 14.6(1)(b) of the High Court Rules 2016 defines indemnity costs as the"actual costs, disbursements, and witness expenses reasonably incurred by a party".Rule 14.6(4) gives a Court a discretion to order a party to pay indemnity costs if:(a) the party has acted vexatiously, frivolously, improperly, orunnecessarily in commencing, continuing, or defending aproceeding or a step in a proceeding; or(b) the party has ignored or disobeyed an order or direction of thecourt or breached an undertaking given to the court or anotherparty; or(c) costs are payable from a fund, the party claiming costs is anecessary party to the proceeding affecting the fund, and theparty claiming costs has acted reasonably in the proceeding; or(d) the person in whose favour the order of costs is made was not aparty to the proceeding and has acted reasonably in relation toit; or(e) the party claiming costs is entitled to indemnity costs under acontract or deed; or(f) some other reason exists which justifies the court making anorder for indemnity costs despite the principle that thedetermination of costs should be predictable and expeditious.[9] The leading authority on indemnity costs is the decision of the Court of Appealin Bradbury v Westpac Banking Corporation.10 In particular, the Court noted inrelation to the three broad approaches to costs:11(a) standard scale applies by default where cause is not shown to departfrom it;(b) increased costs may be ordered where there is failure by the payingparty to act reasonably; and(c) indemnity costs may be ordered where that party has behaved eitherbadly or very unreasonably.[10] With regard to indemnity costs the Court recognised that the categories inrespect of which the discretion to order indemnity costs are not closed, but identifieda number of circumstances in which indemnity costs have been ordered:12(a) the making of allegations of fraud knowing them to be false and themaking of irrelevant allegations of fraud;(b) particular misconduct that causes loss of time to the court and to otherparties;(c) commencing or continuing proceedings for some ulterior motive;(d) doing so in wilful disregard of known facts or clearly established law;10 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400.11 At [27].12 At [29].(e) making allegations which ought never to have been made or undulyprolonging a case by groundless contentions, summarised inFrench J's "hopeless case" test.[11] In the High Court, the Judge had applied the test of hopelessness and ofmisconduct and observed that "if sustained on the evidence each was a proper basisfor indemnity costs".13Are indemnity costs appropriate?[12] The position of Mr Cummins regarding costs on the joinder judgmentperpetuates a range of arguments made in the course of the joinder application and,prior to its liquidation, on behalf of Manchester in the course of the substantiveproceedings.[13] As I concluded, and as the Court of Appeal likewise found, notwithstandingMr Cummins submission that opposition to the joinder application was misconceived,there was in fact no jurisdiction under either rules 4.50 or 4.52 of the High Court Rules2016 for Mr Cummins to be joined to the present proceedings unless and until he tooklegal ownership of Level 12 from Manchester as he accepted he was entitled to do atany time. Had he done so the Body Corporate made clear it would not oppose thejoinder, as it would have meant that the monies currently owing from Manchester tothe Body Corporate would have had to have been paid on the transfer taking place.Given this position I simply do not accept that the Body Corporate had an ulteriormotive in opposing the joinder application.[14] On the contrary, there can be absolutely no doubt the decision by Mr Cumminsto avoid taking legal ownership of Level 12 was a deliberate choice on his part, madein order to avoid paying the monies that the Courts have consistently held Manchestershould pay regardless of the ultimate strength of any set off or counterclaim to whichManchester (or any successor in title) was entitled. As I noted in the joinderjudgment:14 I am satisfied that as Manchester remains in existence and continues to holdownership of the property it remains properly joined into the proceeding. On13 At [33].14 Body Corporate 172108 v Manchester Securities Ltd, above n 1, at [13].the other hand, given the history of the litigation between the parties, theattempt by Mr Cummins to be joined as a party only in his capacity as a trusteeamounts to an attempt to continue to participate in the proceedings whilecontinuing to attempt to delay payment of those sums that go with theownership of the property and which the Courts have consistently directed bepaid. As such I have no hesitation in concluding the same is an abuse ofprocess and given those circumstances, I do not consider it is necessary ordesirable that Mr Cummins be made a party at this time.[15] It follows that Mr Cummins' application could not succeed unless and until hetook title to Level 12 and in the absence of legal title, persisting with the applicationamounted to a substantive abuse of process as the Court of Appeal also concluded.[16] Therefore, in accordance with the Court of Appeal's conclusion, indemnitycosts on the application are appropriate.Are the costs claimed reasonable?[17] Bradbury v Westpac also provides the most assistance in determining whatreasonable indemnity costs may be. The analysis of Harrison J, endorsed by the Courtof Appeal, commenced by confirming that indemnity costs does not simply mean allcosts incurred, but rather "the phrase 'reasonably incurred' envisages a degree ofjudicial oversight of awards of indemnity costs".15[18] In proceeding to fix indemnity costs, Harrison J analysed a number ofdocuments provided by the successful party in that case including a "schedule of scalecosts, a breakdown and analysis of actual costs and witnesses' expenses and a thoroughchronology of steps taken".16 From these documents Harrison J ultimately reducedWestpac's costs from the $1,683,571.15 claimed to $996,712.00. His Honour alsosignificantly reduced the disbursements claimed by Westpac from $136,865.15 to$60,979.25, including ruling out claims for payment for individual legal adviceprovided to witnesses.15 Bradbury v Westpac Banking Corporation (2008) 18 PRNZ 859 (HC) at [205]. Harrison J wasdealing with r 48C of the previous High Court Rules but this was cast in substantially the sameterms as the present r 14.6 of the High Court Rules 2016.16 At [210].[19] On behalf of Mr Cummins, Mr Sullivan submits the amounts incurred by theBody Corporate are "eye watering and objectively unreasonable anddisproportionate".[20] Other than a broad swipe at the amount of the costs claimed by the BodyCorporate Mr Sullivan did not however provide any reasoning as to why the amountsclaimed were objectively unreasonable. On the other hand, no issue was taken withthe charge out rates claimed by either Mr Orpin-Dowell ($350/ hour) or Mr Allan($500/ hour).[21] Given this position it is difficult for me to assess the reasonableness orotherwise of the amounts claimed by the Body Corporate, although I agree on the faceof it the claimed costs are significant for a single interlocutory application.[22] Taking therefore a broad-brush approach and having regard to the calculationsof scale costs undertaken by the parties I accept:(a) the context to the application and in particular the ongoing attempts byMr Cummins to avoid paying the amounts owing by Manchesternecessarily informed the responses taken by the Body Corporate inrelation to the joinder application, and necessarily required a thoroughanalysis of the litigation to date;(b) as a result, a comprehensive response was required, more so given thatMr Cummins was self-represented until shortly before the hearing ofthe joinder application; and(c) it was reasonable for both of the Body Corporate's counsel to beinvolved in the response to the joinder application and attend thehearing on 11 September 2020.[23] Other than that, the hearing lasted for one day and there were a limited numberof relevant documents.[24] In those circumstances I consider that costs in the total sum of $35,000(exclusive of GST), together with the disbursements in the sum of $1,386.21 (alsoexclusive of GST), are reasonable as sought.Costs on the leave judgment[25] Costs on the leave judgment can be addressed more shortly. As noted, thesewere fixed on a 2B basis payable to the successful party on appeal.[26] The only difference between the parties is therefore in calculation of the 2Bcosts:(a) The Body Corporate calculates these at $6,472.78, includingdisbursements, on the basis that the hearing, which took place bytelephone, lasted for approximately half a day and allowing for one dayfor the drafting of the submissions presented at the hearing.(b) Mr Cummins generally agrees with the approach, save that it issubmitted the hearing should be reduced to 0.25 days and thesubmissions were limited to 0.4 days, resulting in a costs calculation of$4,182.50. No issue is taken with the disbursements claimed.[27] Having reviewed the submissions and the Court records relating to the hearingI am satisfied that one day is appropriate with regard to the comprehensivesubmissions filed on behalf of the Body Corporate. Likewise, the Court taker's notesrecord that the hearing totalled 2 hours and 32 minutes and therefore a half-dayallowance for the hearing also reflects what occurred.[28] I therefore fix costs on the leave application in favour of the Body Corporateat $6,472.78 (exclusive of GST).Decision[29] Mr Cummins is to pay costs and disbursements to the Body Corporate in thetotal sum of $42,858.99 made up as follows:(a) Costs of $35,000 and disbursements of $1,386.21 (both exclusive ofGST) on the joinder judgment; and(b) Costs of $6,214 and disbursements of $258.78 (both exclusive of GST)on the leave judgment._______________________________Powell J