Published tribunal order
Tenancy Tribunal case 9035062 — Unit Titles in Takapuna, Auckland
Decided 12 Sept 2023 · Published 12 Sept 2023 · Application 9035062
- Unit Titles
Order
- The applicants must pay costs to the respondents as follows: (a) to the first respondent, $5,500, (b) to the second respondent, $3,000 and (c) to the proposed third respondents, $4,000.
- These costs must be paid before the matter is set down for a hearing.
Reasons
- The first, second and the proposed third respondents apply for costs against the applicants, following the applicant’s unsuccessful applications for discovery and for an order joining the proposed third respondents into this application. Each of these parties were represented by Counsel at the hearing of the applications. The first respondent’s submissions
- The first respondent has incurred costs of $8,636.50 including GST with respect to these applications. Copies of the three invoices relating to those costs were provided. The invoices provide a narration of attendances but do not break down the time or provide an hourly rate.
- The first respondent says that the approach to be taken to costs orders before the Tribunal should be that taken in Exuberant Ltd v Quinovic Management Limited 1 and recently summarised and applied by the District Court in Body Corporate 45131 v 88 CHI Ltd. 2 As was stated in Body Corporate 45131 v 88 CHI Ltd, 3 ... the essential method is 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 prime reference points when assessing reasonableness; d) third, test the analysis against other available reference points.
- The first respondent says that it should be entitled to full indemnity costs because there an aggravating factor at play in this case in that reasons why the applications ultimately failed had already been notified to them in advance of the hearing. Further that the applicants were notified that the Body Corporate would seek full costs incurred on a solicitor and client basis should they still decide to proceed. Submissions of the second respondents
- The second respondents submit that the reasonableness of costs is assessed having regard to the criteria understood in the context of cost provisions under the Lawyers and Conveyancers Act 2008, rather than being a discretionary exercise.
- She refers to some of the factors that should be taken into account as being the cost of running a practice, the hourly rates of lawyers of comparable skill and experience, the area of legal work and the locality of the practice. Other relevant 1 [2021] NZ HC 3533. 2 CIV 2022 – 096 – 000494 [2023] NZDC 9036, at paragraph [5]. 3 At [6], citing Exuberant Ltd v Quinovic Property Management Limited [2021] NZHC 3533 and other authorities. factors include the importance of the matter to the client, the urgency of the work and the results achieved.
- The second respondents claim $3339, inclusive of GST. A full copy of the relevant timesheet relating to those costs is produced. This shows that the hourly rate for Counsel’s work was $375 per hour
- She submits that costs calculated on a 2B basis for a defended interlocutory hearing in the District Court would amount to $3151 and points out that scale costs in the District Court are intended to recover two thirds of the reasonable costs for the action. On that basis, she submits that her client’s costs are reasonable and the Tribunal should award the same. Submissions for the proposed third respondents
- The proposed third respondents were the individual committee members and are treated as parties for the purposes of making costs awards. They seek their reasonable costs on the basis that it was necessary for them to be represented by counsel.
- They say that it is apparent that the committee members should never have been joined without any evidential basis to suggest that any duty or rule had been breached by the committee members. They submit that they have had to incur cost in engaging counsel and submit that it was appropriate in a matter in which all parties were represented for the committee members to instruct counsel.
- They seek costs that are assessed as reasonable under the Lawyers and Conveyancers Act 2008. They say that they have incurred actual costs of $9927.50 but seek only $4000, GST inclusive. They point to the costs award that would be made under the District Court scale costs and submit that the costs they are seeking of $4000 are modest.
- A copy of the relevant invoice from their lawyer is attached. It does not provide any breakdown of time, and orders that provide an hourly rate. The applicant’s submissions
- The applicants submit that the applications for discovery and for joinder were not frivolous or vexatious. They say that the Tribunal’s decision does not imply that the applicants requests were either frivolous or vexatious.
- They submit that they acted in good faith in applying to join the committee members and submit that it was actually their original intent however the Tribunal website did not provide an option for individuals to be joined as respondents.
- They disagree with the Tribunal’s statement that there was no evidence pointed to that any of the committee members had acted in breach of any duty or rule, whether statutory, common law or otherwise. They submit that had the claim been particularised in the District Court then it would be improbable that a strike out application could be sustained.
- In relation to the respondents decision to appoint counsel, they say that this was their own wilful decision. They submit that representation was initially granted to the Body Corporate, contrary to their own wishes. They challenge the appointment of Ms Pidgeon as counsel for the Body Corporate, stating that the relevant form was not completed. They submit the presence of counsel has not assisted in resolving matters.
- They submit that costs should lie where they fall and/or be reserved until a final outcome. If the Tribunal is minded to award costs they make submissions as to the level of those costs. They emphasise that the Tenancy Tribunal is a “People’s Court” and that costs awards should be low in the Tribunal. Analysis of the legal principles
- The general principle is costs follow the event. The respondents and the proposed third respondents were wholly successful in their opposition to the applications.
- There is no set scale of costs in the Tenancy Tribunal, as there is in the District Court in the High Court.
- The applicant described the Tenancy Tribunal as “a People’s Court”. I consider that whilst this case is a far cry from the extent of legal costs claimed and fact pattern that prevailed in Exuberant, 4 it is nevertheless a reasonably complex case in the Unit Titles jurisdiction of the Tenancy Tribunal, with all parties appropriately represented by counsel/legal advisors.
- The starting point to costs is ss 102(2) and 102(3)(b) of the Residential Tenancies Act 1986 (RTA), which provide that the Tribunal can order the unsuccessful party to pay “reasonable costs” to the other party in connection with the proceedings where parties are represented by counsel. All respondents and the proposed respondents in this case were represented by counsel.
- Section 127 of the Unit Titles Act 2010 (UTA) is also of relevance. It provides: 127Recovery of money expended where person at fault (1) This section applies if the body corporate does any repair, work, or act that it is required or authorised to do, by or under this Act, or by or under any other Act, and the repair, work, or act was rendered necessary by reason of any wilful or negligent act or omission on the part of, or any breach of the Act, the body corporate operational rules, or any regulations by, any unit owner or his or her tenant, lessee, licensee, or invitee. (2) Any expense incurred by the body corporate in doing the repair, work, or act, together with any reasonable costs incurred in collecting the expense, is recoverable as a debt due to the body corporate (less any amount already paid) by the person who was the unit owner at the time the expense became payable or by the person who is the unit owner at the time proceedings are instituted. 4 Exuberant Ltd v Quinovic Property Management Limited [2021] NZHC 3533. Costs were sought of approximately $1,000,000. Franchisor sought recovery of actual costs pursuant to a contractual indemnity.
- Section 127 is in similar terms to its predecessor, s 34 of the Unit Titles Act 1972. That provision was considered in Hart v Body Corporate No 180455, 5 where Courtney J found that the defence of legal proceedings was “an act” for the purposes of s 34. Courtney J found that the Body Corporate was, however, only entitled to recover indemnity costs from a unit holder under where it could show that the unit holder acted either negligently or deliberately in the sense of intending to cause the Body Corporate to incur expenditure.
- In that case, the applicant had applied unsuccessfully for an interim injunction against the Body Corporate. The Body Corporate’s submission was that its responsibility was to all unit holders and that to discharge that responsibility the Body Corporate was required to resist the applicant’s application. It submitted that while there was no resolution that the Body Corporate defend the proceedings, there had been a resolution that it engaged a contractor to undertake the proposed repairs and levy all of the unit holders, including the applicant. Those resolutions could not be implemented if it did not defend the applicant’s application for an injunction preventing it from engaging the contractor.
- Her Honour accepted that the Body Corporate’s actions were necessary but decided that the applicant did not act wilfully. 6
- The case was later considered and discussed in Body Corporate No 164205 v Berachah Investments Ltd, 7 where there was a dispute between the Body Corporate and a unit holder as to the legal responsibility for the cost of repairing or replacing the roof. There had been an early amendment to the plaintiff’s rules which fixed the Body Corporate with sole responsibility but the Body Corporate successfully argued that the rule amendment was ultra vires and therefore invalid.
- The Body Corporate sought indemnity costs under s 34. Alan J expressed no view as to whether or not the word “act” as contained in s 34 extended to the defence of the proceeding brought by the Body Corporate but took the view that the word “wilful” did not extend to every deliberate act but rather was confined to cases in which the party sought to be charged with indemnity costs had set out to cause loss or unnecessary expenditure to the Body Corporate. In that respect he adopted the reasoning of Courtney J in Hart. 8
- Dealing with an assessment of “reasonable costs” in the context of s 124(2) of the Unit Titles Act, 9 the District Court in Body Corporate 45131 v 88 CHI Ltd noted that 5 HC Auckland CIV 2005 – 404 – 1429, 23 June 2005 6 At [29]. 7 HC AK CIV 2010 -404–3324 [8 June 2011]. 8 HC Auckland CIV 2005 – 404 – 1429, 23 June 2005 9 Section 124 entitles a body corporate to recover “reasonable costs” incurred in collecting a levy. the NZLS rules and Rule 9 in particular are prime reference points when assessing reasonableness. 10 The Court stated: 11 I make the following observations from the discussions on the cases and having regard to the way in which the methodology has been applied in the cases: (a) the exercise the adjudicator or the judge is engaged in is an objective one. The adjudicator or the judge must make a principled assessment of reasonableness against stated criteria; (b) the adjudicator or the judge must do the work required by the methodology, and in particular grapple with the available information on the specific tasks that were undertaken by the lawyers, and the amounts that were charged for them; (c) when doing that, the adjudicator or the judge must test the work and the invoicing against the realities of the legal market that we have, not an idealised or hypothetical standard; (d) the Rule 9 considerations are helpful in providing some structure to this assessment. Time expended is one of these factors but it is not the only factor; (e) if an adjustment to actual solicitor client costs is made, this should be explained with some specificity by identifying tasks that were seen to be unnecessary, or the necessary steps that were seen to have been overcharged in some way.
- The District Court refers to the Rule 9 considerations but the relevant rule of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 would appear to be Rule 9.1. It provides that the factors to be taken into account in determining the reasonableness of a fee in respect of any service provided by a lawyer to a client include the following: (a) the time and labour expended: (b) the skill, specialised knowledge, and responsibility required to perform the services properly: (c) the importance of the matter to the client and the results achieved: (d) the urgency and circumstances in which the matter is undertaken and any time limitations imposed, including those imposed by the client: (e) the degree of risk assumed by the lawyer in undertaking the services, including the amount or value of any property involved: (f) the complexity of the matter and the difficulty or novelty of the questions involved: (g) the experience, reputation, and ability of the lawyer: (h) the possibility that the acceptance of the particular retainer will preclude engagement of the lawyer by other clients: (i) whether the fee is fixed or conditional (whether in litigation or otherwise): (j) any quote or estimate of fees given by the lawyer: (k) any fee agreement (including a conditional fee agreement) entered into between the lawyer and client: (l) the reasonable costs of running a practice: (m) the fee customarily charged in the market and locality for similar legal services. Findings
- I consider that there should be a costs award in favour of the respondents and the proposed respondents pursuant to s 102 of the RTA. I do not consider that appropriate to make the award for costs under s 127 of the UTA in this case 10 At [6], citing Exuberant Ltd v Quinovic Property Management Limited [2021] NZHC 3533 and other authorities. 11 At [8]. Footnotes from the quote omitted. because, applying the reasoning of Courtney J, there is no evidence before me that points to the applications are being regarded as “wilful”. There is no evidence that the applicants commenced these applications to cause unnecessary expenditure to the respondents and the proposed respondents. I find that the applicants have proceeded genuinely and in good faith, albeit misconstrued.
- I consider that the appropriate approach to the costs award is that set out in Exuberant Ltd v Quinovic Management Limited 12 and recently summarised and applied by the District Court in Body Corporate 45131 v 88 CHI Ltd 13 (as is set out above).
- I find that the work that was done and invoiced was reasonably necessary. This being a reasonably complex Unit Titles matter, I find that it was reasonable for the respondents and the committee members to engage counsel. This most likely had the added benefit of saving overall time with Counsel that were instructed being experienced in the area and therefore focused on the key issues that the Tribunal had to determine.
- Having engaged counsel, it was necessary for Counsel to file memoranda and appear at the preliminary conferences. It was also necessary for Counsel to file written submissions in advance of the hearing and appear at the hearing itself. There is a significant amount of material that has already been filed with these applications.
- Following the approach taken in the authorities referred to above, I turn my mind to the Rule 9.1 factors in assessing whether the charges were reasonable.
- In terms of the importance to the respondents and proposed respondents, I find that the matter was undoubtedly of importance to them. In relation to the committee members, I note that individual committee members have appeared at some of the prior conferences. The threat of being joined into litigation personally would be of concern and worry to them.
- All respondents/proposed respondents were represented by counsel experienced in this area of the law. With the matters raised in these proceedings being a specialist Unit Titles area, I understand the desire of the respondents to all brief counsel familiar with this area of the law.
- In terms of the invoices themselves, there is a paucity of information submitted by the first and proposed third respondents as to the breakdown of their invoices. I have no hourly rates or idea of time and attendances spent. This is to be contrasted with the invoices submitted by second respondent, which includes a time sheet for the work done. I note that that time sheet reveals a very modest hourly rate. No party has submitted their terms of engagement. 12 [2021] NZ HC 3533. 13 CIV 2022 – 096 – 000494 [2023] NZDC 9036, at paragraph [5].
- Although little supporting information is provided in relation to the proposed third parties invoice, I note that the costs sought by them are modest, being a significant discount off the amount charged.
- I consider that when compared with other Tenancy Tribunal matters, the matters raised by the applications were reasonably novel, involving the question of the powers of the Tribunal to make such orders.
- Overall, I did not consider the amounts invoiced to be excessive, given the work involved and the level of expertise required for this sort of work. Most likely the invoices are in line with the sorts of charges rendered by practitioners specialist in this area.
- In fixing any costs awards, however, I need to be mindful of the fact that this is, after all, the Tenancy Tribunal where costs awards were generally low and where parties only infrequently instruct counsel.
- I find that the applicants should pay the following costs to the respondents: (d) to the first respondent, $5,500. (e) to the second respondent, $3,000. (f) To the proposed third respondents $4,000. 14
- These costs are to be paid before the matter is set down for a hearing.