Inert Holdings Limited v Gulf Harbour Marine Village Residents Association Incorporated

[2022] NZHC 2867

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-957

[2022] NZHC 2867

UNDER

Part 18 of High Court Rules 2016

IN THE MATTER

of an application under s 21(3A) of the Incorporated Societies Act 1908

BETWEEN

INERT HOLDINGS LIMITED

First Plaintiff

WESTERN ARM MARINA LIMITED
Second Plaintiff

AND

GULF HARBOUR MARINE VILLAGE RESIDENTS ASSOCIATION INCORPORATED

Defendant

Hearing:

On the papers

Counsel:

D W Grove for Plaintiffs

S A Barker and P J Niven for Defendant

Judgment:

3 November 2022

COSTS JUDGMENT OF PETERS J

This judgment was delivered by Justice Peters on 3 November 2022 at 2 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date: ...................................

Solicitors:           Foy & Halse, Auckland

Buddle Findlay, Auckland

Counsel:            D W Grove, Auckland

INERT HOLDINGS LTD v GULF HARBOUR MARINE VILLAGE RESIDENTS ASSOCIATION INCORPORATED [2022] NZHC 2867 [3 November 2022]

[1]                 This judgment determines the defendant’s (“Association”) claim for costs and disbursements in this proceeding.

[2]                 The plaintiffs, to whom I shall refer as Inert, accepts that the Association should have costs on a 2B basis and some but not all of the disbursements it claims.

[3]                 The Association seeks a greater award. In the first instance, it seeks an award of indemnity costs. Failing that, it seeks an award of increased costs, the increase sought being 50 per cent. The Association has calculated its costs on a 2B basis, subject to two steps for which it seeks costs on a 2C basis.

Background

[4]                 Inert owns land in the Gulf Harbour Marine Village (“Village”). Its case was that it was entitled to be recognised as the “Developer” and “Controlling Member” under the rules of the Association, or rather that it would have been but for amendments made to the rules in 2012. Under the rules the Developer and Controlling Member is able to exercise extensive powers.

[5]                 Inert’s proceedings were, first, to reverse the amendments (which required an order under the Incorporated Societies Act 1908) and then, secondly, to obtain a declaration that it was the Developer and Controlling Member under the corrected rules.

[6]                 It was never in dispute that a mistake was made when the 2012 amendments to the rules were registered with the Registrar of Incorporated Societies.1 What was in dispute was whether the amendments ought to be reversed and, if so, whether to make the declaration Inert sought as to its status.

[7]                 For reasons set out in the judgment, I declined to rectify the rules. If I were wrong, I said that I would not have made the declaration Inert sought because I did not consider that it was the Developer and Controlling Member even under the corrected rules.

1      Inert Holdings Ltd v Gulf Harbour Marine Village Residents Association Incorporated [2021] NZHC 1262.

Indemnity/increased costs

[8]                 The Association seeks indemnity alternatively increased costs on the grounds that Inert made an unwarranted allegation of fraud against the members of the committee of the Association who were involved in making the amendments to the rules and attending to their registration. The essence of the Association’s submission on this ground is that there was no basis for the allegation and, worse, that Inert persisted in its allegation despite the Association setting the record straight in correspondence. This meant the Association was put to the cost of mounting a comprehensive response to Inert’s allegation when it should not have been required to do so.

[9]                 If I am not willing to award indemnity costs, it is necessary to consider the claim for an award of increased costs. As I said above the Association claims most items on a 2B basis but two on a 2C basis. These are for the Association’s pleading in response to an amended pleading (step 9 on Schedule 3 to the High Court Rules 2016) and for preparation of affidavits, lists of issues and so forth (step 30).

[10]             On this basis the Association’s scale costs are $92,651.2 An increase of 50 per cent is sought on this sum, bringing the total costs to $138,976.50.

[11]             Inert accepts that there must be an award of costs on a 2B basis, although it does not accept that second counsel was required, for which the Association has sought an award. 2B costs on this basis total $54,411.

[12]             Inert submits there is no basis for indemnity or increased costs. It contends that it had good grounds for considering the amendments to the rules were made deliberately and for an improper purpose. In any event, Inert submits that this part of the case should not be taken out of proportion, as it was just one factual issue in the litigation.

2      I record that I have not checked counsel’s calculations. I assume they are correct.

Discussion

[13]             I accept the Association’s submission that the gist of Inert’s allegation was that the amendments to the rules were made for an improper purpose, with a deliberate intention to defeat the Developer and Controlling Member provisions in the rules.

[14]             As to the latter point, it is correct that, in about 2012, the Association wished to rid itself of the Developer and Controlling Member provisions in the rules, given the substantial powers able to be exercised by whoever occupied that position from time to time. As it turned out, the Association was thwarted in that attempt by the then Developer and Controlling Member and it abandoned the proposal.

[15]             That was not the end of the matter, however, as some amendments to the rules were properly made and those amendments had to be registered. In doing so there was a mistaken amendment to the provisions of which Inert complained and in respect of which it sought rectification. This was an entirely innocent mistake. Various versions of the rules were in circulation at the relevant time and the wrong one was registered. There was no more to it than that.

[16]             It must or should have been obvious to Inert that this was a mistake made by well-intentioned people who were volunteering their time to administer the Association’s affairs, and who should not have been lambasted as they were in the affidavit evidence that Inert filed. If it were not plain to Inert at the outset, it ought to have been on receipt of the Association’s affidavit evidence. For these reasons, I do not accept the submissions made for Inert as set out in [12] above.

[17]             That said, bad behaviour though this was, it was not bad enough to warrant indemnity costs. It does, however, warrant increased costs. This is because I am satisfied it contributed unnecessarily to the time or expense of this proceeding as the argument lacked merit, alternatively that an order for increased costs is warranted given Inert’s persistence in the allegation to which I have referred.

[18]             I am satisfied that the Association should have costs on a 2B basis, subject to the sum claimed for step 30 (but not step 9) for which I award costs on a 2C basis. I accept the increased sum for that step would have been required given what was involved.

[19]             I also allow the costs claimed for second counsel. There was a considerable amount of information before the Court that was relevant to the Association’s defence. I accept that second counsel was required to keep on top of the documentation and the trial bundle.

[20]             I allow the 50 per cent increase that is sought. I accept this is a substantial increase but on my view it is required to come close to a fair sum in the circumstances.

Disbursements

[21]By  my   calculations,   the  disbursements   that  the  Association   seek  total

$10,067.62.

[22]             Of this, $6,915.22 is for Land Information New Zealand search fees, and fees charged by “Mid-Town Agency”, described as Buddle Findlay’s agent. Inert opposes this disbursement on the ground that the costs were wasted. I am not persuaded the costs were wasted but I am satisfied they are excessive. Taking a broad brush approach, I allow $3,500 which is essentially 50 per cent of the sum claimed for this outgoing.

[23]             Inert does not oppose the remaining disbursements comprising Court fees ($756.52) and travel and accommodation costs ($2,395.88).

Result

[24]             I make an award of costs to the defendant on a 2B basis, subject to costs on a 2C basis for step 30 in Schedule 3 to the High Court Rules 2016.

[25]I award an increase of 50 per cent on those costs.

[26]Disbursements are as ordered in [21] to [23] above.

Peters J