Body Corporate 199883 v Auckland Council [2017] NZHC 2455

Body Corporate 199883 v Auckland Council [2017] NZHC 2455 [6 October 2017]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2016-404-2038[2017] NZHC 2455BETWEEN BODY CORPORATE 199883First Plaintiff/continuedAND AUCKLAND COUNCILFirst DefendantBC2004 LIMITED AND BC2009LIMITEDSecond DefendantsGAVIN SMITH [Discontinued]Third DefendantHearing: On the papersCounsel: CE Lane for plaintiffsSC Price and JK Wilson for first defendantJudgment: 6 October 2017JUDGMENT OF FITZGERALD J[As to costs]This judgment was delivered by me on 6 October 2017 at 4 pmpursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateSolicitors: Grimshaw & Co, AucklandMinterEllisonRuddWatts, AucklandSecond PlaintiffsCLAIRE JENNIFER LAMBDEN, SARAH JAYNE MCCLINTOCK, BARRY AMOR, JANET MARY BRADLEY, ROBERT HENRY BOLSOVER (Half Share) AND ROBERT HENRY BOLSOVER as Executor AND WILLIAMENA BARBARA KNOWLES AS EXECUTOR (Half Share), GILLIAN MARJORIE RODGER, NOEL RONALD THOMAS ATKINS AND ANITA JOYCE ATKINS, MARY REEDER LAMBERT VISSER, AUDREY FRANCES WUNG-WEE TSEUNG, BARRY CLIVE OATES, DAVID KENT BEASLEY, HELYN MARY MCKAY, GAEL ELIZABETH WRIGHT, CHARLETT WENDY DOWSING, MARIGOLD ANNE ALLEN EDWARDS, RHEA JOSEPHINE PICKETT, CHUNG- ROUNG LEE AND SHIH-CHING YING, PETER LAWRENCE CLARKE AND KEITH MICHAEL CLARKE Second PlaintiffsIntroduction[1] The plaintiffs are the Body Corporate and the owners of apartments at theRidgeview Apartments in Birkenhead (the "building"). Auckland Council (the "Council") is the first defendant. The plaintiffs say that repairs carried out to the building between 2005 and 2006 (to remediate watertightness issues) were defective, such that the building still leaks and does not comply with the New Zealand Building Code. The plaintiffs plead that the Council breached a number of duties of care owed to the plaintiffs, in connection with the consent, inspection and certification processes in relation to the repairs.[2] The Council applied to strike out the plaintiffs' original and amendedstatement of claim, on the basis that each was so devoid of details of the case against the Council, it amounted to an abuse of the process of the court.1 In the alternative, the Council sought orders that a more explicit pleading be filed.[3] At the outset of the Council's application, I also heard and determined anancillary dispute between the parties in respect of the admissibility of certaindocuments annexed to affidavits filed in support of the plaintiffs' opposition to the Council's application (the "disputed documents"). The Council said the disputeddocuments were privileged and privilege had not been waived. I found for the Council on both these points.[4] By judgment dated 24 August 2017, I declined to strike out the plaintiffs'proceedings, but did order the plaintiffs to file a more explicit statement of claim. 2 I also gave reasons for my ruling in relation to the disputed documents.[5] At the conclusion of my judgment, I encouraged the parties to seek to agree costs, and gave a non-binding and provisional view that, as the Council had been broadly though not wholly successful on its application, an appropriate outcome may be a discounted award of costs to the Council.1 If the Council has succeeded in its strike out application, the plaintiffs' claim against the Councilwould have come to an end, as the limitation period would prevent the filing of a fresh claim.2 Body Corporate 199883 v Auckland Council [2017] NZHC 2042.[6] The parties have not been able to agree costs and costs submissions have been filed.Pleadings applicationSubmissions[7] The Council says it was successful on its application, though acknowledges it was not wholly successful. It therefore says it was the "successful" party for costspurposes. The Council appears to accept that, all thing being equal, a discount to the costs otherwise payable to it would ordinarily be appropriate, to reflect that it was not fully successful on its application. However, the Council says that no discount is warranted given that, well prior to the hearing of the application, it had offered to withdraw its application if the plaintiffs provided an appropriately particularised claim.[8] The Council has put before the Court number of items of pre-hearing correspondence, which it says demonstrates its reasonable and pragmatic approach in the lead up to the hearing.[9] In contrast, the plaintiffs submit that on a realistic appraisal, each side had an equal measure of success at the hearing, and if anything, the plaintiffs were moresuccessful overall. This is said to be because the focus of the Council's applicationwas to strike out the plaintiffs' statements of claim, on which the Council failed. Theplaintiffs say that most of the evidence, submissions and hearing time were directed to that issue. However, standing back and looking at the matter broadly, the plaintiffs submit that an appropriate outcome would be for costs to lie where they fall.Approach[10] It is trite that the ordinary approach is that costs follow the "event".However, where a party has only been partially successful on its application, there can sometimes be difficulty in assessing who the "successful" party was, and therefore what the "event" is.[11] The Court of Appeal has considered this issue in two recent decisions,Weaver v Auckland Council and Water Guard NZ Ltd v Midgen Enterprises Ltd.3 In doing so, it has confirmed that an earlier decision of that Court on the question of costs in cases of partial success, Packing In Ltd (in liq) v Chilcott,4 ought to be confined to the particular facts of that case. 5[12] Reinforcing that the "loser" ordinarily pays, the Court of Appeal in Weaverobserved that although the appellants in that case had not succeeded to the full extentof their damages claim (but only roughly to half that extent), "success on more limited terms is still success".6 The Court went on to observe that, given the limited success in that case, the cost award to the appellants should be reduced by 50 per cent.[13] Those observations reflected and reinforced Court's earlier comments inWater Guard NZ Ltd v Midgen Enterprises Ltd. In that case, the plaintiff had succeeded in only two of its five claims. The High Court considered that 75 per centof trial time had been devoted to the plaintiff's unsuccessful claims, and so had found the defendant to be the "successful" party overall. Costs were awarded on that basis, also taking into account the plaintiff's unreasonable conduct in declining intervening settlement offers.[14] The Court of Appeal overturned the High Court's costs orders. It disagreed with the High Court that the plaintiff had lost the status of being the "successful"party because it failed on most of its claims which in turn had occupied most of thetrial. As such, it considered it was unprincipled to award costs to the "losing" side.The Court stated that failure on issues which occupy significant trial time can be properly recognised in other ways, such as reducing the costs otherwise payable or ordering costs to lie where they fall. In Water Guard itself, the Court concluded that, while the plaintiff was strictly the successful party, costs should nevertheless lie3 Weaver v Auckland Council [2017] NZCA 330; Water Guard NZ Ltd v Midgen Enterprises Ltd[2017] NZCA 36.4 Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA).5 Weaver v Auckland Council [2017] NZCA 330 at [24].6 At [26].where they fall, in light of the declined settlement offers and the trial-time allocations.Analysis[15] In light of the approach mandated by the Court of Appeal in Weaver andWater Guard, I do not accept Mr Lane's proposition (for the plaintiffs) that bothparties had a measure of success and therefore costs should lie where they fall. That approach relies largely on Packing In. As noted, the Court of Appeal has confirmed that that approach is confined to the particular facts and claims in that case.[16] As observed by the Court of Appeal in Weaver, success on more limited terms is still success. For this reason, the Council was plainly the "successful" party.While it did not succeed on its application for an order to strike out the proceedings, it was successful on its application for an order that the plaintiffs file a more explicit statement of claim.[17] The issue is therefore properly one of whether there is any reason to exercise my discretion pursuant to r 14.7, either to refuse to make an order for costs (with the result that costs lie where they fall) or to reduce the costs otherwise payable to the Council.[18] I consider it is appropriate to discount the costs otherwise payable to the Council, to reflect that a not insignificant aspect of its application failed. For the purposes of r 14.7(d), the issue on which the Council failed undoubtedly increasedthe plaintiffs' costs significantly from those they would have otherwise incurred. Forexample, the legal principles on this issue were quite different to those in respect of the order that a more explicit statement of claim be filed. In addition, matters relating solely to the strike out issue occupied at least one-third of the hearing time.[19] The affidavit evidence was, in my view, broadly directed to both the strike out issue and the need for further particulars in any event, given the thrust of theCouncil's evidence (and that filed in response for the plaintiffs) was the Council'sposition that it could not properly understand the nature of the claim against it. I therefore do not accept Mr Lane's submission that if the Council's application hadbeen limited to seeking an order for a more explicit pleading, it would have been unnecessary to prepare most, if not all, of the affidavit evidence. The evidence may, however, have been somewhat more narrowly focused.[20] Accordingly, while I do not agree with Mr Lane's submission that themajority of the evidence, submissions and hearing time addressed the strike out application, nor was it a minor or secondary point only.[21] I consider that a 2B scale costs award to the Council, reduced by 30 per cent, is appropriate in all the circumstances.[22] As flagged earlier, the Council submits that, even if a discount might have otherwise been appropriate, it should nevertheless receive full scale costs, given theparties' respective communications and conduct in the lead up to the hearing.[23] I have read the correspondence. The Council had raised its concerns as to the adequacy of the pleadings from the outset. Further, after it had filed it application, there was more specific correspondence between the parties of potential ways to resolve the application. The Council relies in particular on its offer of 24 February2017 to withdraw its application if "proper details" of the claim were provided.[24] Ultimately, I am not persuaded that the parties' communications and actionsin the lead up to this hearing warrant an alteration to the approach I have set out at [21] above. The 24 February 2017 letter did not, in and of itself, amount to a compromise of its application, given "proper details" of the claim were preciselywhat (the successful aspects of) its application sought. And ultimately, the position remains that the Council did not succeed on an important aspect of its application which significantly increased the plaintiffs' costs. Moreover, I note that it appearsthat it was fairly late in the piece when the Council identified the particular details it sought by way of a more explicit pleading. The application itself did not identify the particulars sought (rather these were set out in counsel's submissions for thehearing).[25] There is accordingly an order that Auckland Council is entitled to costs on its application on a 2B basis, discounted by 30 per cent, namely $5,385.45.Without prejudice issueSubmissions[26] As the Council was wholly successful on this "application", it seeks costs ona 2B basis, with no discount.[27] The plaintiffs submit that no costs should be awarded to the Council on this issue, given:(a) it was of little significance to the overall dispute between the parties;(b) it would never have come before the Court if the Council had taken certain steps other than amending its application (in respect of the pleading) and seeking ancillary orders (in respect of a site visit by the experts); and(c) the documents were only presented to the Court to respond to an allegation that the plaintiffs and their expert had been obstructive.Analysis[28] In relation to [27](b) and (c) above, the fact remains that the matter did come before the Court and privileged communications were produced when they ought not to have been. The rationale for their production does not alter their privileged status.[29] In relation to [27](a) above, I accept this issue was of much less significance in the context of the overall contest between the parties, and certainly occupied much less of the hearing time. It was nevertheless an issue that needed to be dealt with and in respect of which the parties no doubt incurred costs (evidenced by, for example, the number of bundles and papers produced). The short amount of time this issueoccupied at the hearing is appropriately reflected in the time allowances considered appropriate for costs purposes, rather than no costs being awarded at all.[30] The Council has sought costs on the basis that the without prejudice issue was dealt with by way of a formal interlocutory application and the steps that follow. However, the matter was raised by way of memorandum only, without a formal application being filed. Ordinarily, substantive orders should not be raised and sought via memoranda. Duffy J also noted this in her minute of 21 June 2017 (issued at the conclusion of an attempted hearing on the issue), namely that there was no formal application in respect of the disputed evidence; no notice of opposition and no written submissions with relevant authorities.[31] Nevertheless, given the Council was ultimately successful on this issue, I consider it is entitled to an award of costs, on a category 2B basis. However, some adjustments are required to the time allocations set out in Appendix C to theCouncil's submissions, to reflect those matters discussed at [29] and [30] above.[32] I consider the appropriate steps (by analogy where necessary) are:(a) step 11 (memorandum for case management conference), at 0.4 days;(b) step 13 (appearance at first case management conference) at 0.3 days;(c) step 24 (preparation of written submissions) at 1.5 days; and(d) step 26 (appearance at hearing of defended application for sole counsel) at 0.25 days.[33] This results in a costs award of $5,463.50.Costs on the costs application[34] As the Council has largely been successful on its costs application, it is entitled to costs on its memorandum on costs and sealing the costs order (inaccordance with Appendix C to its submissions). Disbursements are also ordered in accordance with Appendix C to its submissions.Concluding observations[35] Both parties filed lengthy written submissions on costs. The Council's submissions were 10 pages in length and the plaintiffs' submissions were 20 pages.The issues arising on costs were not particularly complex, and ought to have been able to be dealt with in much briefer submissions. In particular, 20 pages of submissions on costs is wholly inappropriate, particularly given r 7.39(4) sets a 10 page limit for submissions on a substantive interlocutory application. The Chief High Court Judge has also recently reminded the profession of this requirement.7____________________S Fitzgerald J7 Statement of the Chief High Court Judge dated 1 August 2017.