Published tribunal order
Tenancy Tribunal case 9042644 — Unit Titles in Eden Terrace, Auckland City
Decided 19 Sept 2023 · Published 19 Sept 2023 · Application 9042644
Mixed / unclear
- Unit Titles
Order
- Ziyi Zou must pay Body Corporate 354782 $52,197.40 immediately, calculated as follows: DescriptionsApplicantRespondent Costs $6,000.00 Filing Fee Administration costs $850.00 $402.50 Ordinary levies and remedial levy $39,030.97 Interest, as at 18.9.23 $5,913.93 Total award $52,197.40
Reasons
1
- Only the applicant attended the hearing.
- The body corporate has applied for recovery of unpaid levies (ordinary and remedial), interest, costs and the filing fee from the unit owner.
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 levies to be paid, and the unit owner has not paid the levies by that date. See section 124(1) Unit Titles Act 2010. The body corporate has provided records to prove the amount claimed and ordered above. The levies include ordinary levies but also remedial levies in connection with repairs to the roof.
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 proved the amount of interest owing and ordered above, from the due date to the hearing date, being 18 September 2023.
Is the Unit owner liable for costs?
- The applicant claims legal costs of $13,727.22 in connection with collecting the levies. An additional $172.50 is claimed, being costs incurred by Tim Bates Solicitor relating to a section 74 scheme of arrangement necessary for the repairs.
- The applicant also claims $500 plus GST for the appearance at the hearing on 18 September 2023 and administration costs incurred by Barfoot & Thompson of $402.50. Those administration costs relate largely to sending out demands before lawyers were engaged.
- The applicant provided all invoices and details of all time recorded and the hearing was adjourned for that purpose. The hourly rates of various authors who worked on the matter ranged from $85 per hour to just over $500 per hour. There were some economies of scale, because the applicant was initially pursuing four non-paying 1 This order replaces the order made in this matter yesterday, which is recalled and re-issued due to a typographical error. unit owners. The invoices have been pro-rated accordingly. Still, the respondent’s share is over $14,000.
- The respondent engaged in no part of the process. Instructions were received in September 2022 and various letters of demand were sent. The respondent did not reply. Work was done to obtain instructions and ensure all documentation was correct, as well as calculating interest. Preparation was necessary for this hearing and the earlier hearing. The applicant provided adequate information corroborating the work that was done, including a breakdown of all time recorded. Relevant Law
- Pursuant to section 124 of the UTA, and as resolved at meetings of the Body Corporate, the Body Corporate is entitled to recover any “reasonable costs” incurred by it in collecting unpaid levies as a debt due by the owner to the Body Corporate. In accordance with judgments (of the District Court and Court of Appeal respectively) in Body Corporate 162791 v Cheah 2 and Body Corporate 162791 v Gilbert, 3 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.
- As was accurately stated by the District Court recently in Body Corporate 45131 v 88 CHI Ltd, 4 the basics of the relevant legal framework are: 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 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 client costs that are claimed.
- Having set out that framework, the District Court then went on to review the relevant method to be applied in assessing the reasonableness of the solicitor client costs, following the approach set out in Exuberant v Quinovic Property Management Ltd, 5 concluding: 6 the essential method is as follows: a) first, ask whether the work that was done was reasonably necessary; 2 DC Auckland, CIV2014-004-0120, 24 June 2014 3 [2015] NZCA 185 4 CIV 2022 – 096 – 000494 [2023] NZDC 9036, at paragraph [5] 5 Exuberant Ltd v Quinovic Property Management Limited [2021] NZ HC 3533. 6 At [6], citing Exuberant Ltd v Quinovic Property Management Limited [2021] NZ HC 3533 and other authorities 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 District Court stated: 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: (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 referred to the Rule 9 considerations in its decision, but the relevant rule of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 is 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. 7 footnotes from the quote omitted Analysis
- I consider that there should be a costs award in favour of the applicant and adopt the appropriate approach to the costs award is that set out in Exuberant Ltd v Quinovic Management Limited 8 and recently summarised and applied by the District Court in Body Corporate 45131 v 88 CHI Ltd 9 (as is set out above).
- I find that the work that was done was reasonably necessary.
- The matter itself was not particularly complex but nevertheless I accept that there is a level of skill and specialised knowledge required to perform the services correctly and that the matter is of importance to the client.
- Applying the methodology endorsed by the District Court and set out above, I have viewed the records associated with the legal costs that are claimed. These show the details of the various tasks that were undertaken.
- Even though the work might be regarded as somewhat generic and formulaic, consistent with similar applications of this nature made before the Tribunal, I am satisfied that all of these steps that were undertaken were required to ensure the information was correct and the relevant material completed correctly with respect to this particular case. Just because the application might be regarded as generic or similar to many other applications does not mean a rigourous approach should not be taken to ensuring that the documentation is completed correctly.
- I am satisfied that there was no conditional fee agreement in place and that the costs have all been paid by the Body Corporate in the first instance (other than the costs of the appearance at the hearing which has not yet been charged).
- Turning to the second question, is the amount charged reasonable? I am not satisfied that it is. The amount charged is around one third of the overall total of unpaid levies. Further, even though there were four defaulting unit owners, the overall amount charged is high, for this sort of work.
- The work has however been done well and to a high standard.
- I allow $6,000 by way of legal costs, including the cost of the appearance on 18 September 2023. Standing back, I consider this to be a reasonable amount, when weighing up the foregoing factors.
- I allow the Barfoot & Thompson costs in full, because I am satisfied that this step was necessary and if successful, would have resulted in payment being made without lawyers being engaged.
- I am satisfied that the costs ordered above are reasonable. 8 [2021] NZ HC 3533. 9 CIV 2022 – 096 – 000494 [2023] NZDC 9036, at paragraph [5].
- Because the body corporate has succeeded with the claim I have reimbursed the filing fee. Section 176(1) Unit Titles Act 2010 and section 102(4) Residential Tenancies Act 1986.