Published tribunal order
Tenancy Tribunal case 9018041 — Unit Titles in Te Aro, Wellington
Decided 17 Aug 2023 · Published 17 Aug 2023 · Application 9018041
- Unit Titles
- Costs
Order
- The Tribunal confirms the payment of the sum of $9239.23 by Body Corporate 85659 to [The party] in settlement of her claim for contribution of rent and outgoings for the foyer of Richard Pearse House for the period 1 August 2009 to 31 May 2016.
- The Tribunal confirms the payment of the Filing Fee, $3300.00, by Body Corporate 85659 to [The party].
- The claim for interest on the judgment debt is dismissed.
- Body Corporate 85659 must pay [The party] the sum of $12423.67 by way of contribution to legal costs.
Reasons
- On 28 February 2020, the Tribunal issued an interim decision in this matter, reserving questions of quantum of the applicant’s claim for resolution between the parties if possible, interest and costs.
- Subsequently, on 10 August 2020, the Tribunal made further interim orders setting aside part of the earlier decision and reserving that part for further hearing if required. Counsel for the applicant has advised that that part of the application, which related to window levies, is now discontinued.
- Nothing was heard from the parties for some time and it was assumed that they had been able to resolve outstanding matters between them. However, this proved not to be the case and, on 23 November 2022, counsel for the applicant filed a request for final judgement seeking – a. payment by the Body Corporate to the applicant of the sum of $9239.23, being the calculated substantive sum to which it was claimed the applicant was entitled pursuant to the interim orders; b. interest of $3213.79; c. a contribution to the applicant’s costs of $12,423.67; d. payment of the filing fee, $3300.00.
- By submission dated 13 December 2022, counsel for the body corporate advised that the sum of $9239.23, plus the filing fee, had been paid in satisfaction of those claims. This was subsequently confirmed by counsel for the applicant, leaving only the question of interest and legal costs.
- Orders will be made for the record confirming these payments. Interest
- I deal first with the question of interest.
- In that respect, the submission of counsel for the body corporate is that the Tribunal, being a creature of statute, has no powers except those set out in the Unit Titles Act 2010 (UTA). Therefore, there is no power to award the interest claimed by the applicant.
- The submission for the applicant is somewhat more fulsome. a. It acknowledges that the only specific provision in the UTA concerning interest is section 128, which deals with interest on money owing to the body corporate, and not vice versa; b. section 78(1)(d) of the Residential Tenancies Act 1986 (RTA) permits the Tribunal to order that a party pay money to any other party. This jurisdiction is general. Coupled with this, section 85(1) of the RTA provides that the Tribunal shall exercise its jurisdiction in a matter that is most likely to ensure the fair and expeditious resolution of disputes, and an order for payment of interest is fair; c. section 78(1)(h) of the RTA provides that the Tribunal may make any other order that the High Court or the District Court may make under any enactment or rule of law relating to contracts; d. the Interest on Money Claims Act 2016 is an enactment relating to contracts that section 78(1)(h) applies to; e. jurisdiction is also given to the Tribunal under section 171(3A)(c) of the UTA to make any supplementary orders of a consequential or ancillary nature necessary to exercise or perfect the exercise of any of its jurisdiction, and an award of interest is a supplementary order justified under section 85(1) RTA.
- I interpolate at this stage to note that section 78 of the RTA applies to unit titles disputes by virtue of section 176(1) of the UTA.
- Counsel for the applicant very properly points out that he is not aware of any District Court or High Court decision that has considered the question whether the Tribunal has jurisdiction to award interest on debts owing to unit owners, nor is the question addressed in relevant textbooks.
- He does, however, note that the general jurisdiction of the Tribunal to award interest was considered in Body Corporate 190834 v Body Corporate Administration Ltd, 15/000052/UT, which is cited for the propositions that: a. Section 128 does not stipulate or limit the only circumstances in which interest is recoverable; b. if the Tribunal lacked jurisdiction to award interest outside section 128, the result would be anomalous as between the Tribunal and the District Court and there is no apparent public policy reason why like cases should be treated differently merely on the grounds of limits of jurisdiction.
- Although not mentioned by counsel, I note that there was a third reason advanced in that case, at paragraph [29], which was that the sums for which interest was claimed were levies collected by the manager in default and not on-paid, and the Tribunal, on an expansive reading of section 128, was able to conclude that the ability to charge interest under s.128 applied.
- Stare decisis does not apply in the Tribunal. I have the highest regard for the adjudicator in that case but I do not find the decision particularly helpful in this case.
- Nor do I find the submissions regarding section 78 particularly helpful. Section 78 defines the types of order that the Tribunal may make but it remains necessary that there be a basis for doing so.
- As counsel for the body corporate submits, usually that is to be found in the governing statute. However, I reject the proposition that that is the only source. Counsel for the applicant has made reference to section 85(1) of the RTA which, again, I do not find particular helpful in this case. But that overlooks section 85(2) of the RTA which directs the Tribunal to determine each dispute according to the general principles of the law relating to the matter and the substantial merits and justice of the case. While generally the “general principles of the law relating to the matter” are to be distilled from the UTA (and the RTA) that is not always the case. If it were the case, then it would be unnecessary to include in the RTA section 142, which excludes the application of Part 4 of the Property Law Act 2007. In addition, the provisions of the UTA and the RTA are often only explicable by reference to the underlying common law on which they are frequently based and it is useful guidance to their interpretation. Case law is also part of the common law.
- I am also not prepared to assume that the absence of reference to interest in any circumstances other than section 128 is intended to exclude its application in any other circumstances. The drafting vagaries of the UTA are many and in the absence of compelling evidence, I am not prepared to draw the conclusion that the absence is intentional or policy based and is not accidental or mere oversight.
- The ability to claim interest at common law is usefully summarised in Burrows, Finn, and Todd on the Law of Contract in New Zealand, 7.ed, at section 21.2.3(g). It does not appear that there is any difference in that regard under the law of contract or tort or equitable remedies: Blanchard, Civil Remedies (2011) 1.10.1.
- It appears that originally at common law, if there was a failure to pay money any loss was considered to consist only of that sum and debts did not as a rule carry interest. It may well be that this is the basis on which the UTA makes no reference to interest and it is notable, for example, that for the courts there are statutory provisions authorising the award of interest. It is notable also that in the Interest on Money Claims Act 2016 the definition of “Court” in section 6 expressly does not include a tribunal.
- However, the courts have, over time, ameliorated the arguable harshness of that rule, holding that interest could be claimed as damages under either limb of Hadley v Baxendale: in the House of Lords, Sempra Metals Ltd v Inland Revenue Commissioners [2008] AC 561; in the High Court of Australia Hungerfords v Walker (1989) 171 CLR 125; in the Supreme Court of Canada Bank of America Canada v Mutual Trust Co [2002] 2 SCR 601; and, in the New Zealand Court of Appeal, Clarkson v Whangamata Metal Supplies Ltd [2008] 3 NZLR 31.
- It establishes a principle that the Tribunal can apply. The jurisdiction of the Tribunal under section 171 to determine disputes includes the ability to award damages, at least up to the monetary limits specified by that section and, in principle, the Tribunal has the ability to award interest by way of damages.
- However, it is not a simple as choosing and applying an interest rate. The claim is for damages under either limb of Hadley v Baxendale. As noted in Clarkson, at [42], damages can be claimed under either limb.
- The 2 limbs are- a. the damages which may arise naturally, i.e., according to the usual course of things; or b. such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it.
- Reading the cases, it appears that examples of the first type are cases where it is reasonably foreseeable by the parties that interest will be incurred if a debt is not paid on due date. Cases of the second kind are cases such as loss of profits. But underlying both is the concept of reasonable contemplation or foresight.
- What is also apparent from the cases is that a claim for interest as damages must be pleaded. As the commentary above indicates, it is quite different to simply claiming interest.
- The parties have not approached the question of interest on this basis although the attention of the parties was drawn to Clarkson in the Interim Order, at [133]. They had the opportunity to address it. By virtue of section 85(2) the Tribunal is directed to have regard to not only the principles of law applicable but also to the substantial merits and justice of the case and it is not required to give effect to strict legal rights or obligations or to legal forms or technicalities. However at this point the question is one of pleading rather than substantive argument and in the absence of pleading there is not an applicable principle of law to which any discretion can be applied.
- Damages must also be proved. Even if I were to allow the pleading, this aspect has not been addressed.
- As the Court of Appeal mentioned, at [47], where it is not a case of a failure to pay a sum due on its due date – one of the issues in this case being whether there was an agreement to pay any sum – the question whether interest ought to be awarded as damages is subject to numerous variables, some of which it outlined, such as whether the claimant would have to draw down debt funding as a result, whether it would be obliged to pay interest on debt funding or overdraft, and whether it impacted on profitability. In any particular case there are likely to be others.
- To conclude, the law allows a claim for interest as damages. But it has not been pleaded in this case and I do not consider I have discretion to allow it. That leaves only a simple claim for interest on the award, which is not recognised at common law. None of the statutory provisions cited assist in the face of the common law rule.. The claim therefore has to be dismissed. Legal Costs
- The remaining question is legal costs.
- The submission of counsel for the body corporate was again relatively brief, citing relativity of the amount sought to the judgment amount and noting that the Tribunal did not uphold the entirety of the applicant’s claim.
- Submissions of counsel for the applicant were, again, more fulsome. a. A reasonable contribution to the successful party’s legal costs should be in the range 40 to 70% of actual costs, with 60% considered the average; b. if the unsuccessful party’s case was hopeless, indemnity costs could be awarded; c. the proceeding was complex, needing consideration of a number of years of correspondence and raising a number of legal issues; d. it required involvement of legal counsel; e. it required extensive time producing appendices and calculations; f. nevertheless, concessions were made in regard to the period of liability determined by the Tribunal and that a limited degree of legal knowledge was required for production of the appendices; g. it drew comparison with District Court scale costs, calculated on a 2C basis: h. it argued that Ms Singh should be entitled to indemnity costs or at least an uplift of costs, based on the denial by the body corporate that a contract existed, notwithstanding that payments had been made, and the lack of co-operation from the body corporate throughout; i. it argued that, from an applicant’s perspective, costs had been appropriately mitigated; j. it concluded that an order for costs of approximately 62% of actual costs would be reasonable: this is the amount claimed.
- In recent times the Tribunal has tended to adopt the approach in Exuberant Limited v Quinovic Management Ltd ,[2021] NZHC 3533 which has also been adopted by the District Court although the actual application by the Tribunal has not met universal acceptance from the District Court. While Exuberant strictly concerned indemnity costs, there is authority that this equates to reasonable solicitor/client costs as mandated by the Court of Appeal in Body Corporate 162971 v Gilbert {2015] NZCA 185.
- The approach to be adopted following Exuberant is usefully summarised by the District Court in Body Corporate 45131 v 88 Chi Ltd [2023] NZDC 9036 at [6]-[8] as follows - a. First, ask whether the work that was done was reasonably necessary; b. Second, ask whether the amount charged for the reasonably necessary work was reasonable; c. In both instances the NZLS Rules, and Rule 9 in particular, are a prime reference point when assessing reasonableness; d. Third, test the analysis against other reference points.
- The District Court went on to note that this methodology is different from – a. Accepting actual solicitor/client costs without checking for reasonableness; b. Substituting a personal view as to what legal services should cost or are worth; c. Scaling costs: having regard to scale costs as a point of reference is available but it was not expected that information on scale costs would be especially influential.
- However the Tribunal also notes that the District Court in French v Ryan DC Akld CIV-2012-004-711 has taken the view that scale costs, while not strictly applicable, do provide some guidance as to what a reasonable contribution may be, and recently the High Court in Criffel Deer Ltd v ANZ Bank New Zealand Ltd [2022] NZHC 2418, at [23]-[26], citing Bradbury v Westpac Banking Corporation (2008) 18 PRNZ 859 at [9], upheld [2009] NZCA 234, has taken the view that the difference between the actual costs claimed and what would be awarded under the scale costs regime is a relevant factor in determining whether costs claimed are reasonable. This decision was apparently not drawn to the attention of the District Court in 88 Chi Ltd as it is not referred to.
- The High Court in Exuberant also noted that assessment of costs is not an exact science and the approach which to be adopted should emphasise an assessment of the overall reasonableness of the costs charged bearing in mind the Rules, as opposed to a weighting to time expended.
- Counsel for the applicant has extensively set out the work done In some cases concessions are made or work not claimed for. The work appears to have been reasonably necessary.
- Costs are calculated at a rate of $350 plus GST per hour, which in this adjudicator’s experience is extremely reasonable, having recently experienced rates up to $595 for matters far simpler than this case.
- Counsel has also dealt extensively with the relevant factors, including the NZLS rules. The submissions note a substantial discount to costs actually incurred and also, as a comparator, a discount to scale fees in the District Court on a 2C basis.
- Counsel argues for an uplift but this only relevant if the basis adopted is scale costs. Alternatively he argues that indemnity costs are justified: as noted above the approach of the Tribunal is that this is the appropriate approach to adopt in any event.
- Counsel for the body corporate has noted that the applicant was not wholly successful and therefore costs should be discounted, to which the response has been that costs have already been discounted in that respect.
- The Tribunal agrees that there is no rule that costs cannot exceed the judgment debt awarded. However it may be a relevant factor in assessing reasonableness.
- Taking into account the factors noted, it is the assessment of the Tribunal that the costs claimed are reasonable. They are awarded. Closing
- This concludes what has been a particularly interesting matter for many reasons.
- I apologise for the length of time taken to produce Final Orders but, as explained to counsel, unexpected major surgery and a lengthy recuperation have intervened.