Published tribunal order
Tenancy Tribunal case 9054004 — Tenancy dispute in Newton, Auckland
Decided 14 Aug 2024 · Published 14 Aug 2024 · Application 9054004
Landlord favoured
- Unit Titles
Order
- Otti Limited must pay Body Corporate 384684 $77,233.79 immediately, calculated as follows: DescriptionsApplicant Levies$65,468.76 Costs: Legal $4,758.65 Interest$7,006.38 Total payable by Respondent to Applicant $77,233.79
Reasons
- Both parties attended the hearing. Submissions were provided by the parties after the hearing.
- The application relates to the balance of an unpaid levy, incurred in connection with various remedial works. The respondent does not dispute the quantum of that unpaid levy, which is $65,468.76. The respondent has had difficulty obtaining funding to pay this sum, but is hopeful of obtaining funding through a second tier lender.
- The Body Corporate is also seeking: a) Interest on the outstanding levy at 10% of $7,006.38 as at 8 August 2024. b) Debt recovery fees of $460. c) Legal cost of $4,790.25 (including counsel costs at the hearing) d) Filing fee of $500.
Does the Unit Owner owe the levies claimed?
- A unit owner must pay all body corporate levies and outgoings payable for the unit. See sections 80(1)(f) and 121(1) Unit Titles Act 2010.
- The Body Corporate has determined the levies payable and unit owner's share has been calculated according to their utility interest.
- The Body Corporate has fixed the due date for the levy to be paid, and the unit owner has not paid by that date. The Body Corporate has provided records to prove the amount claimed and ordered above for the levy. The levy amount is accepted by the unit owner.
Is the unit owner liable for interest?
- If a unit owner fails to pay levies by the due date, interest accrues on the unpaid balance. A Body Corporate may charge interest up to 10% per annum. See section 128 Unit Titles Act 2010.
- The Body Corporate has resolved to charge interest at 10% per annum on unpaid levies. The Body Corporate has proven the amount of interest owing from the due date to the hearing date.
- The respondent claims that it is due an offset in relation to the interest. It says that the Body Corporate was in receipt of settlement funds of $95,678.40 in relation to the remedial works and it claims that it ought to have had the benefit of interest on that sum.
- There has been no claim filed by the respondent in relation to this aspect, seeking to challenge the resolution to charge interest or to claim interest on the settlement funds.
- The Tribunal is not prepared to order any offset in connection with the interest earned on the settlement funds. The respondent is able to pursue this by way of a separate claim if it considers it has a lawful entitlement to interest on the settlement proceeds. It would of course need to make out sufficient grounds to prove such a claim.
- The respondent must pay the amount claimed for interest, ordered above.
Is the unit owner liable for costs?
- The Body Corporate claims legal costs of $4,790.25 and $460 for the Body Corporate handover costs.
- The Respondent disputes the costs for reasons which include: a) it alleges that there are elements of double up between its unit and other unit holders, and b) it alleges there are multiple filing fees charged to it for the same item.
- A memorandum was supplied by the Body Corporate which included all time sheets and the relevent terms of engagement. The memorandum advises that: a) there are two LINZ property searches because one of them relates to potential enforcement action following any orders made by the Tribunal. b) The total filing fee payable is $500. The reason there have been two separate charges of $250 for the filing fee was because it was paid across two invoices due to Unit Titles Services only initially invoicing the applicant $250. c) There is no duplication of any charges in the invoices.
- The LINZ search charges for the two searches is recorded on the invoices as follows: Disbursements (GST Inclusive) Auckland Legal Services Ltd – Agency title search fees$21.50 Auckland Legal Services Ltd – Agency title search fees$21.50 Land Information New Zealand – Title search fees$6.00 Land Information New Zealand – Title search fees$6.00 Auckland Legal Services Ltd – Agency fee on LINZ enquiry$8.20
- The total of these LINZ search charges is $63.20 Relevant law
- Body Corporate administration charges are approved by way of resolution recorded in minutes of the Body Corporate. Further, in any event, these costs are recoverable as a debt due pursuant to s 124 of the UTA if they amount to “reasonable costs”.
- In accordance with judgments (of the District Court and Court of Appeal respectively) in Body Corporate 162791 v Cheah 1 and Body Corporate 162791 v Gilbert, 2 the Tribunal must order that the reasonable costs incurred by the Body Corporate in recovering the levies, objectively assessed, be paid by a defaulting unit owner.
- The assessment of reasonableness of costs in connection with a contractual indemnity for reasonable solicitor and client costs was discussed in Exuberant Ltd v Quinovic Management Limited 3 and, in the context of s 124 of the UTA, in Body Corporate 45131 v 88 CHI Ltd, where the approach taken in Exuberant was adopted and applied. 4
- The District Court in Body Corporate 45131 v 88 CHI Ltd summarised the relevant legal framework as: 5 a) the relevant test is as set out in section 124(2) of the Unit Titles Act – the body corporate is entitled to recover “any reasonable costs incurred in collecting the levy”; and b) solicitor and client costs are a category of costs that can be recovered under this provision; and c) the task is to assess the reasonableness of the solicitor and client costs that are claimed.
- Having set out that framework, the Court reviewed the relevant method to be applied in assessing the reasonableness of the costs, concluding: 6 ... 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.
- At para [8], the Court observed: 7 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: 1 DC Auckland, CIV2014-004-0120, 24 June 2014. 2 [2015] NZCA 185. 3 [2021] NZ HC 3533. 4 CIV 2022 – 096 – 000494 [2023] NZDC 9036, at paragraph [5]. 5 Body Corporate 45131 v 88 CHI Ltd CIV 2022 – 096 – 000494 [2023] NZDC 9036, at paragraph [5]. 6 At [6], citing Exuberant Ltd v Quinovic Property Management Limited [2021] NZHC 3533 and other authorities. 7 Footnotes from the quote omitted. (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. Analysis and application of the law The legal costs
- I deal first with the legal costs that are claimed and then with the Body Corporate costs.
- I have viewed the terms of engagement and the time records associated with the legal costs. The Body Corporate advises that there is no conditional fee agreement in place with its solicitor.
- I am satisfied that the material I have been provided with shows that: a) the work undertaken was likely similar to other applications of this nature, but still need to be checked and completed carefully, b) the work has been undertaken and charged out by a staff member with a reasonable hourly rate, c) there appeared to be no double up with other matters evident, and d) there were no unnecessary attendances.
- Even although the work might be regarded as somewhat formulaic and consistent with similar applications of this nature made before the Tribunal, I am satisfied that all of these steps that were undertaken are required to ensure the information is correct and the relevant material completed correctly with respect to this particular case. Just because the application might be regarded as generic does not mean a rigorous approach should not be taken to ensuring that the documentation is completed correctly.
- I find that the billing records disclose no inefficiencies or any inappropriate recording of time.
- Whether or not there is a conditional fee agreement in place is a rule 9.1 consideration I am required to take into account. I consider that this entails assessing whether or not the Body Corporate will be required to pay the full amount of the invoice claimed, in the event the applicant is unsuccessful in claiming those costs today. In relation to the rule 9.1 factors, the Body Corporate submits that there is no conditional fee agreement relating to its payment. The invoice will therefore be paid regardless of the outcome of this application. I accept that submission.
- Taking a “standing back assessment”, I am of the view that the legal costs that have been charged would, in this case, be within the standard commercial range for this sort of work.
- I note further that the incurring of these costs by a unit holder generally only arises following letters of demand and follow-ups, first by the Body Corporate and then, by the Solicitors acting. There are chances to pay at the various stages, to avoid the costs increasing. The unit holder is therefore given every opportunity to pay. Given the Body Corporate is liable to pay these invoices regardless, it is undesireable that those costs might then be essentially be worn by the other unit holders, in the event they are not recoverable.
- For the foregoing reasons, I find that the actual solicitor and client costs are, in the circumstances of this case, reasonable costs incurred in collecting the levies and can therefore be recovered from the unit owner. However, I deduct from the amount ordered for legal costs half the cost of the LINZ searches, being $31.60. I consider that the second search does not relate to this application, rather, it relates to the possibility of enforcement action, which has not as yet arrived. The Body Corporate charges 24In relation to the Body Corporate “handover charge”, I note that the minutes that were produced reflect resolutions regarding the cost of sending out the various letters of demand from the Body Corporate. These charges are mentioned in the minutes and therefore unit holders are aware of them. However, these minuted charges relate to the sending of letters of demand. They make no mention of the handover charge.
- The Body Corporate nevertheless submits the handover charge is a reasonable cost and should be allowed.
- There is little information provided as to what is comprised of this amount. Presumably it simply entails gathering and sending an electronic file to a Solicitor. I am not satisfied it is a charge that is reasonable, in the circumstances, and given the paucity of information as to what it entails. I am not satisfied that this is not simply a general administration cost that would be expected to be absorbed by the Body Corporate as part of its function. I therefore do not allow this amount in this case. It has not been proven.
- I note that the filing fee is recoverable under s 176(1) Unit Titles Act 2010 and s 102(4) Residential Tenancies Act 1986 but I do not need to make any further orders about that because it is already included in the Body Corporates invoices for legal costs.