Published tribunal order
Tenancy Tribunal case 9041784 — Tenancy dispute in Wellington, Wellington
Decided 21 Aug 2023 · Published 21 Aug 2023 · Application 9041784
Landlord favoured
- Costs
- Interest
- Unit Titles
Order
- Tsui Ping Jean Leow must pay Body Corporate 352532 $17,077.93 immediately, calculated as follows: DescriptionsApplicantRespondent Levy$11,495.26 Costs: Management costs (incl. GST)$287.50 Interest: 20/11/2020 - 21/02/2023$1,404.03 Costs: Legal Costs (incl GST)$2,547.25 Costs: Legal Disbursements (incl
GST
$154.64 Filing Fee$850.00 Costs: Hearing Fee (incl GST)$339.25 Total award$17,077.93 Total payable by Respondent to Applicant $17,077.93
Reasons
- This is an application for outstanding levies, interest, collection costs, and section 124 costs and disbursements.
- The applicant body corporate was represented by counsel. The Tribunal was advised that the unit owner is resident in Singapore: the unit owner was not represented.
- The matter was set down for hearing by way of teleconference on 19 June 2023. Shortly prior to that date, the District Court issued a decision on legal costs, Body Corporate 45131 v 88 Chi Ltd [2023] NZDC 9036, which, although it involved counsel for the present applicant body corporate, had apparently not been distributed to counsel. The Tribunal indicated that it was prepared to adjourn the matter to enable Council to consider that decision and that occurred. Operational Levies
- The substantive claim is for operational levies totalling $12,242.90. The levies are itemised at paragraph 6 of counsel’s submission. The first amount claimed, $747.64, is not justified by the supporting document 3, which appears to be an earlier version of document 5. It is disallowed.
- The sum of $11,495.26 is awarded. Interest
- There is also a claim for interest at the rate of 10%, authorised by annual general meeting resolutions which were provided in evidence. A sum of $1597.05 is claimed. A calculation of the evidence was also provided.
- This claim also includes interest on the sum of $747.64 referred to above. This is disallowed. Over the 941 days claimed, the Tribunal calculates it at $192.75.
- An amended sum of $1404.03 is awarded. Debt Collection Charges.
- The applicant also seeks body corporate secretarial charges totalling $920, comprising – a. debt collection charges, $632.50; b. legal handover charges, $287.50.
- In its interim order dated 19 June 2023, the Tribunal requested counsel to provide submissions on the reasonableness of these costs. The response was that they are not susceptible to break down and are regularly ordered in similar claims by the Tribunal.
- As counsel will be well aware, stare decisis does not apply in the Tribunal. As counsel should also aware, there are number of cases where such charges have either been disallowed or reduced by the Tribunal.
- The submission includes an explanation of the handover charges, but not the debt collection charges.
- According to the various minutes of AGMs submitted in support of the claim, the body corporate has a levy recovery regime which is available through the body corporate portal. It should be a simple matter for counsel to have at least provided that.
- The Tribunal also notes that “outstanding owner invoices” begin to appear as an item in the Levy Notice dated 3 August 2021, $126.50. They remain at that level until the Levy Notice dated 2 June 2022, at which time they increase to the claimed $632.50.
- According to the evidence submitted, on 2 February 2022, the manager issued a Levy Collection Notice, which advised that the unit owner had now incurred a “Late Payment Charge” of $253 (GST inclusive of any)”. There is authorisation in the Act for payment of interest, but no authorisation for a “late payment charge” which appears to be in the nature of a penalty and unenforceable.
- To confuse matters further, a Notice of Impending Legal Action was issued by the manager on 27 April 2022 refers to the unit owner as having “by resolution of the body corporate, incurred a debt recovery fee of $220 plus GST (invoice available on request)”. This bears no relationship to the sum claimed, nor is the resolution provided.
- The supporting invoice (document 16) is dated 8 November 2002. In short, the Levy Notices appear to include amounts which have not been claimed.
- The due date of the invoice is 8 November 2023: it is not yet due for payment.
- Given this evidence and in the absence of the explanation requested, this claim is disallowed.
- The legal handover charge is allowed. Section 124 Costs.
- The next claim is for section 124 legal costs including GST and disbursements, $4620.09.
- As noted above, the Tribunal drew the attention of counsel to the decision of the District Court in Body Corporate 45131 v 88 Chi Ltd [2023] NZDC 9036, as being relevant to this claim. Counsel has provided an abbreviated response which seems to suggest that the Tribunal – or at least this adjudicator – is seeking to relitigate the District Court decision. That is not the case: it accepts that it is bound by it. It simply offered counsel the opportunity to address the relevant considerations in accordance with that decision. Counsel has chosen not to, except in the most general of terms.
- In recent times the Tribunal adopted the approach to costs in Exuberant Limited v Quinovic Management Ltd ,[2021] NZHC 3533. which has also been adopted by 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 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 AK 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.
- The latter case was also drawn to the attention of counsel. His submission is that it merely endorses the approach adopted in 88 Chi Ltd. The view of the Tribunal differs: In its view Criffel Deer gives a greater relevance to scale costs.
- 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. In Body Corporate 324525 v Stent [2017] NZHC 2857, the High Court noted that assessment of costs is not an exact science and assessment left room for “robust judgment”.
- Was the work done reasonably necessary? This has been a persistent area of contention in respect of claims lodged or acted on by this firm over a long period of time. The preponderance of view in the Tribunal is that much of the work is unnecessary or could more reasonably be carried out by the manager. For example, the firm produces a schedule of levies and also a schedule of interest. The manager charges a “handover charge”: it could reasonably be expected that this would cover the production of that information, which is uniquely within the purview of the manager. By contrast, the view of the District Court appears to be that it is reasonable. It is work that needs to be carried out, and whether it is carried out by the manager or the lawyers is irrelevant.
- Was the amount charged for the reasonably necessary work reasonable?
- I note at the outset that the bulk of the work has been charged at a rate of $265 per hour, and some at what appears to be a partner rate of $590 per hour. That does not, in itself, appear unreasonable.
- These are proceedings which are not particularly complex, and representation of body corporates is frequently carried out by either the chairperson, a committee member or the manager. Applications are usually undefended, as it is in this case.
- There is a standard application form, which runs to some 4 pages. In addition, counsel usually files a submission which is a template form running to some 8 pages and varying little in its content from application to application. The only variable of any significance is the summary of costs claimed. It is usually accompanied by supporting documentation: in this case it runs to over 100 pages, the bulk of which such as minutes and invoices is information which would have been provided by the manager. Most of the minutes and appendices are irrelevant to the claim.
- For this, by the Tribunal’s calculation, 6.4 hours are claimed. By reference to similar claims and other cases, and, by reference to scale costs, this is high. No explanation for this has been given.
- Costs are also claimed on a memorandum seeking to represent the body corporate, and also a memorandum seeking to appear by teleconference.. These are also common applications by this applicant: they are considered reasonable.
- A claim is made for a letter of demand to the unit owner. The cost does not appear unreasonable.
- The bulk of the rest of the claim appears to relate to matters that appear to be administrative, correspondence with the manager and with the Tribunal. For example, communications with the manager appear to total over 4 hours. Given that the firm is acting in concert with an experienced body corporate manager which has charged a handover fee and with whom it regularly acts, the justification for this level of interaction is questionable.
- Exclusive of GST and disbursements, the sum claimed is $3883.00. In the view of the Tribunal, a reasonable claim would be – a. application and related submissions: 3 hours, $900 (blended); b. memoranda: one hour, $300 (blended); c. preparation for hearing, one hour, $265 (allowing that the firm is usually represented by a junior solicitor/legal administrator); d. letter of demand: one hour, $250; e. administration: 2 hours, $500. In total, $2215.00.
- GST on that amount and disbursements are allowed. Assessment
- I am conscious of the comment that an assessor should not substitute a personal view as to what legal services should cost or are worth and the thinly veiled criticism by counsel in that regard. If counsel chooses not to file supporting submissions, that is his choice but that does not mean that the Tribunal is limited to whatever counsel chooses to put before it. It is still the responsibility of the Tribunal to assess what would be a reasonable cost. In doing so the rules require it to take into account the factors enumerated.
- I have been dealing with unit Title levy claims in the Tribunal for some 12 years. In that time I have heard numerous claims. It is a substantial body of information.
- Some of these claims have been lodged by the body corporate itself (chairperson or other representative). Some are lodged by managers. The Tribunal has provided guidance on the information it requires and generally it is supplied without the assistance of counsel. These claims are generally successful, costs are claimed and awarded. While this does not mean that counsel should not be entitled to reasonable legal costs where it is entitled to appear, it does indicate that the claims are not particularly complex or require a high degree of skill.
- The ability to use counsel is limited by section 102 of the RTA. It has had the effect of limiting the number of claims where counsel is involved, although I note the recent practice of counsel to argue that it is acting as agent pursuant to section 171 of the UTA and the restriction does not apply. The relevant point is that other counsel than the present appear on such applications. In my experience the application for costs by other counsel is usually supported by submissions referencing the factors cited, resulting in a discount to actual costs, and a comparison to scale costs is provided. Counsel has chosen not to do so in this case. In other cases and in the District Court, decisions indicate that counsel has referred to the extensive work carried out, but this is only one of the factors to be considered.
- The Tribunal also has the benefit of guidance from the higher courts and the District Court. Reference is sometimes made to the comment of the Court of Appeal in Body Corporate 162791 v Gilbert [2015] NZCA 185 suggesting that in levy cases other body corporate unit owners should not have to bear the cost of legal fees not awarded, thereby justifying an award of full solicitor/client costs, but even there the decision is qualified by the requirement that the costs be reasonable. It also ignores that the rules are different in the higher courts and there are any number of cases in those courts concerning body corporates where costs have been awarded based on scale or with an uplift. The ability to recover actual costs is far from absolute.
- There are also a plethora of cases referenced in such resources as Judgments Express with which adjudicators is provided. I note, for example, the very recent (17 August 2023) decision of the High Court in Exclusive Estates Ltd v Hoffman [2023] NZHC 2221, a case concern costs in a residential tenancy appeal from the District Court, in which the High Court declined to award costs at all.
- With respect, the argument of counsel that his costs have been supported in two recent District Court cases hardly represents a watershed. I note, for example, the often cited decision of the now Chief District Court Judge in French v Ryan, noted above, which, while it involved a tenancy appeal and resulted in an uplift of costs awarded by the Tribunal, still only represented an award of 45% of actual cost incurred.
- Although, as I have noted, stare decisis does not apply in the Tribunal I also have the benefit of decisions of other adjudicators over the years. As only one example I note Body Corporate 72434 v Thackery, 14/00159/UT, 29/05/2015, where the position to that date is extensively reviewed, resulting in a reduction of costs claimed from $5486.65 to $1500.00. Recent decisions indicate little change in the conclusion of the Tribunal as a collective.
- Tested again scale costs, by reference to calculations included by MBIE in a recent discussion paper, June 2023, the costs of preparation of a claim and preparation for hearing for a simple case would be $1587.50. Allowing that this is calculated at 70% of estimated solicitor/client costs gives a figure of $2270 (rounded).
- Direction mandates that the costs claimed should be tested against other reference points. The Tribunal notes that it is a lay Tribunal. This reflects policy that such claims should be dealt by the parties themselves where possible (section 85(1) RTA) and at minimal cost to the parties (section 102 RTA). Sections 124 and 128 of the UTA do allow recovery of reasonable costs but costs which are claimed by laypersons appearing for a body corporate are typically low.
- In short, there is an abundance of comparative evidence and guidance available to the Tribunal to inform its decisions. I have had regard to that evidence and guidance as well as what information I have received particular to this case, limited as it is. I consider a fee of $2215.00 reasonable having reqard to that information. It may be “robust judgment” but it is not a personal view as I understand that term to be meant. Hearing Costs
- A separate claim has been made for Tribunal appearance, 2 hours or $1357.00 inclusive of GST. The hearing was approximately half an hour and held by teleconference. The Tribunal allows $295.00 plus GST, $339.25. Filing Fee
- The filing fee of $850.00 is awarded.