Body Corporate 125491 v Waterloo Impasse Limited
[2025] NZHC 725
•1 May 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-1044
[2025] NZHC 725
BETWEEN BODY CORPORATE 125491
Plaintiff
AND
WATERLOO IMPASSE LIMITED
Defendant
Hearing: 17 October 2025 Appearances:
JP Wood and J Heatlie for the plaintiff TJG Allan for the defendant
Judgment:
1 May 2025
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 1 May 2025 at 10 am pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Court One, Auckland Grove Darlow, Auckland
BODY CORPORATE 125491 v WATERLOO IMPASSE LIMITED [2025] NZHC 725 [1 May 2025]
Introduction
[1] This is an application for liquidation of Waterloo Impasse Limited (Company) which owns Unit 14 in Body Corporate 125491, commonly known as Waterloo Towers.
[2] Unit 14 is a two-level apartment situated at levels 16 and 17. Unit 14 was owned by David Jones KC and Siobhan Buckley from 17 August 2009. Mr Jones and Ms Buckley sold the Unit to the Company, of which Mr Jones is the sole director and shareholder, on 18 September 2023.
[3] On 24 July 2023, prior to the sale to the Company, an Administrator had been appointed to the Body Corporate by the Court after considerable dysfunction in its administration.
[4] Mr Jones wrote to the Administrator, Anthony Woodworth, on 12 February 2024, as director of the defendant Company, seeking repayment of ordinary levies paid for Unit 14 since January 2021 as Mr Jones said Unit 14 had been uninhabitable since 2019 following a flood allegedly caused by a failure by the Body Corporate to comply with its obligation to repair and maintain the property. Remediation of the building had been planned around that time but had stalled following significant cost increases that unit owners were not prepared to agree to. In his letter Mr Jones sought a refund of approximately $62,000 as scheduled and said no further body corporate fees would be paid by Unit 14 unless and until the Body Corporate complied with its legal duties and commenced remediation work to the exterior of the building.
[5] Mr Woodworth replied on 23 February 2024 recording that he was aware Unit 14 had not been occupied for some time but “the exact circumstances of how that persisted for a number of years (and in particular whether that was at the previous owners’ election or was imposed on them by the Body Corporate or insurer) is not fully understood.” Mr Woodworth queried whether the Company was able to take a position on events originally affecting the previous owners and recorded that he understood the previous owners were covered by insurance and received a settlement from their insurance company. As far as the levies were concerned, Mr Woodworth said they were to be collected from all owners in accordance with utility interests
except where the Court sanctions a different allocation or where the Body Corporate (now Mr Woodworth as Administrator) considered it appropriate to recoup costs once incurred from a subset of owners. Mr Woodworth said that he did not understand the basis on which the Company was suggesting recoupment of costs was appropriate and concluded by saying that given the number of historical issues he was not inclined to deal with matters on a piecemeal basis.
[6] On 4 March 2024 the Body Corporate sent a statutory demand to the Company by post for non-payment of ordinary levies of $7,779.46.
[7] The Company did not pay the outstanding levies and so the Body Corporate commenced these liquidation proceedings based on failure to comply with the statutory demand.
[8] The Company submits it should not be liquidated, including on the basis that funds of $1,791,345 were raised and are held by the Body Corporate for the particular purpose of completing the remediation project as resolved in an extraordinary general meeting in March 2021. The Company says that as that remediation project is no longer proceeding and the building consent has lapsed, that purpose has failed. The Company alleges its interest in those funds is therefore protected by a Quistclose1 trust, with the Company’s interest available to set off against any amount owing. The Company says its share in the fund amounts to approximately $179,134, calculated by using Unit 14’s ownership interest of 10.89 per cent multiplied by the total fund of
$1,791,345.2
[9] The Body Corporate responds that no Quistclose trust could arise as no money was lent to the Body Corporate either by the Company or its predecessors in title. Furthermore, the Unit Titles Act 2010 has its own regime for the return of money that militates against the imposition of equity and a fiduciary duty. And, in any event, the
1 So named from the House of Lords decision in Barclays Bank Ltd v Quistclose Investments Ltd
[1970] AC 567.
2 The ownership interest is the relative value of the unit relative to each other unit as set out in s 38 of the Unit Titles Act 2010.
Company has no beneficial interest in the funds as the purpose for which they were raised has not failed.
[10] The Body Corporate therefore submits that the Company should be placed into liquidation without delay.
Liquidating a company — relevant legal principles
[11] Pursuant to s 241(4)(a) of the Companies Act 1993, a creditor may apply to the Court for liquidators to be appointed if a company is unable to pay its debts.
[12] Section 287(a) provides that a company is presumed unable to pay its debts if it has failed to comply with a statutory demand. In those circumstances the company must rebut the presumption of insolvency by proving its ability to pay its debts. Alternatively, it must show a genuine and substantial dispute as to whether the debt that is the subject of the statutory demand is due.3
[13] The Court of Appeal in Yan v Mainzeal Property and Construction Ltd (in rec and liq) held:4
[61] It has long been established that, as a general rule, an order to put a company into liquidation will not be made where the application is founded upon a debt that is genuinely disputed. To apply to wind up a company in such circumstances is regarded as an abuse of the court’s process: Bateman Television Ltd (in liq) v Coleridge Finance Co Ltd. In such cases, the court has an inherent jurisdiction to prevent such an abuse of process. But the court also has power to consider disputed debts in the context of an opposed application for liquidation or upon applications for orders restraining advertising and staying proceedings. The relevant principles were recently summarised by Associate Judge Faire (now Faire J) in South Waikato Precision Engineering Ltd v Ahu Developments Ltd in these terms:
(a)A winding up order will not be made where there is a genuine and substantial dispute as to the existence of a debt such that it would be an abuse of the process of the Court to order a winding up;
(b)In such circumstances, the debt, if genuine and substantially disputed, should be resolved through action commenced in the ordinary way and not in the Companies Court;
3 Yan v Mainzeal Property and Construction Ltd (in rec and liq) [2014] NZCA 190 at [63] and [82].
4 At [61].
(c)The assessment of whether there is a genuine and substantial dispute is made on the material before the Court at the time and not on the hypothesis that some other material, which has not been produced might, nonetheless be available.
(d)The governing consideration is whether proceeding with an application savours of unfairness or undue pressure.
(footnotes omitted)
[14] A genuine and substantial dispute is one that is “real and not fanciful or insubstantial” and the grounds of the dispute must be “clear and persuasive”.5 Material, short of proof, is required to support the claim that the debt is disputed.6
[15] The Company submits that the threshold for showing a genuine and substantial dispute is low, referring to Manchester Securities Ltd v Body Corporate 172108 where the Court of Appeal held that there were a number of issues with Mr Cummins’ claim to a dispute on behalf of Manchester: 7
(a)“There was no specific attempt by Mr Cummins to detail precisely how the work of the consultants benefited the whole building.”8
(b)“We have found the narrative of both sides in relation to the details of the set-off claim to be superficial and unsatisfactory.”9
(c)“The claim under art 21.2 is not necessarily strong, and because of the lack of detail we are not able to give it a full evaluation.”10
[16] Nevertheless the Court allowed the appeal on this point “by a fine margin”, holding the threshold of a “clear and persuasive ground showing a set-off” had been crossed.11
5 Waikato Motors Ltd v West End Property Developments Ltd [2019] NZHC 865 at [5].
6 Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 at [16].
7 Manchester Securities Ltd v Body Corporate 172108 [2018] NZCA 190, [2018] 3 NZLR 455.
8 At [39].
9 At [41].
10 At [42].
11 At [42]. Manchester concerned an appeal against a refusal to set aside a statutory demand. Although the Court held the defendant company had shown a sufficient set-off to enable the Court to set aside the demand, the Court of Appeal exercised its discretion not to do so in the special circumstances of that case.
[17] Each case is to be considered on its own particular facts but where a company fails to apply to set aside a statutory demand on the ground that the debt is disputed, the defendant needs to show some exceptional factor to justify its failure to apply to set aside the statutory demand, with such failure likely to reflect the existence of a genuine dispute.12
Issues
[18]The following issues arise:
(a)Is the Body Corporate a creditor of the Company?
(b)If so, is the Company unable to pay its debts where the shareholder has promised to support the Company by continuing to pay the ordinary levies into the Company's solicitor's trust account?
(c)Should the Court exercise its residual discretion to decline to make an order to liquidate the company or to stay the proceeding including on the basis of a Quistclose Trust?
Is the Body Corporate a creditor of the Company?
[19] “Creditor” is defined for the purposes of Part 16 of the Companies Act (which provides for liquidations) as a party who would be entitled to claim in a liquidation in accordance with s 303.13 Subject to certain exceptions not relevant here, a debt or liability, present or future, certain or contingent, whether it is an ascertained debt, liability or damages, may be admitted as a claim in a liquidation.
[20] The debt claimed by the Body Corporate is in respect of ordinary levies. The Company challenges whether those levies ought to be payable as the Company’s evidence is that Unit 14 is uninhabitable as a result of what the Company says was the failure by the Body Corporate to perform its duty to repair and maintain its water pump
12 Waikato Motors Ltd v West End Property Developments Ltd, above n 5, at [6].
13 Companies Act 1993, s 240(1).
and reticulation system leading to a flood in the plant room in early October 2019 and flooding of Unit 14 directly below.
[21] While Mr Jones deposes he and Ms Buckley continued to live in Unit 14 briefly, he says they had to move out so the water damage could be addressed. Mr Jones’ evidence is that as a result of the flood, the Unit was stripped to its studs and all interior walls, floors and ceilings were removed. Since late 2019, Mr Jones says the Unit has been, and remains, uninhabitable with the interior unable to be reinstated until remediation of the building has been completed (roof, cladding and so forth).
[22] Even though there may be a dispute as to whether the levies are payable, the definition of creditor for the purposes of Part 16 is broad with the claim by the Body Corporate clearly falling within it. I therefore proceed on the basis that the Body Corporate is a creditor.
Is the Company able to pay its debts?
[23] Section 287(a) of the Companies Act creates a presumption that a company that has not complied with a statutory demand is presumed unable to pay its debts.
[24] On 22 March 2024, within the time for compliance with the statutory demand, (service by post deemed to have occurred on 11 March 2024), Mr Jones wrote to the solicitors for the Body Corporate saying that funds raised for the specific purpose of carrying out the remediation they voted for should be returned to the owners pari passu as that purpose had now failed. Mr Jones emphasised that, as had already been advised, Unit 14 was the only unit adversely affected by the failure of the Body Corporate to remediate and that “despite receiving no amenity value and the Body Corporate being delinquent in its obligations to remediate (and thereby preventing the Unit 14 interior being remediated) payments were made”. Mr Jones said that situation had now changed for the reasons previously set out but that remarkably the Administrator had seen fit to instruct solicitors to issue a statutory demand, describing its issue as misguided and unjustified.
[25] A without prejudice offer was then made that was included in the evidence filed for the Company. The Body Corporate does not agree to the without prejudice
privilege being waived. I do not therefore rely on that offer or the responses following to determine these proceedings.
[26] Solicitors for the Body Corporate sent an email on 26 March 2024 confirming that it was now more than ten days since the demand was deemed to have been served and the Company had not made payment. The email advised that the Body Corporate would take steps to liquidate the Company if the debt was not paid in full by 4 April 2024.
[27] No payment was made or agreement reached. The Company did not therefore comply with the statutory demand so the s 287(a) presumption applies and the Company is presumed unable to pay its debts.
[28] The Company is still able to file evidence rebutting the presumption. It attempts to do so by relying on an offer by Mr Jones, as shareholder, to pay the amount of the levies into the Company’s solicitor’s trust account. Evidence was provided that he has been doing so, including of further levies invoiced by the Body Corporate since the issue of the statutory demand.
[29] The availability of shareholder support may be relevant to any ability to pay debts but to prevent liquidation it must be support to pay the Company’s debts, not to make payment into the Company’s solicitor’s trust account. Such payment may be relevant to the exercise of discretion below, especially in relation to whether a stay is appropriate, but is not sufficient to rebut the s 287(a) presumption.
[30] No further details have been provided of the Company’s financial position. I therefore proceed to consider the exercise of the discretion on the basis the Company is unable to pay its debts.
Should the Court exercise its residual discretion to decline a liquidation order or to stay the proceedings including on the basis of a Quistclose trust?
[31] Although the Court has a discretion to refuse to make a liquidation order or to stay liquidation proceedings, even where the grounds are made out, the discretion is to be used sparingly.14
[32] The factual background is complicated and has obviously been fraught for all parties. I refer only to those facts necessary for determining whether I ought to exercise the discretion to decline or to stay the liquidation proceedings.
[33] On 11 March 2021 the Body Corporate approved comprehensive building remediation works and resolved to raise a special levy of $8,064,189 payable by the owners in five equal instalments of $1,612,838. No scheme under s 74 of the UTA was obtained.
[34] An invoice for Unit 14’s share of the first instalment of the special levy was issued on 12 April 2021 in the amount of $175,799 and duly paid.
[35] A building consent was subsequently obtained for those works in December 2021.
[36] There was then a series of delays, including changes in consultants and the main contractors. Estimated costs increased. By October 2022, a building consent for the specific work had been obtained and tenders had been received. The Body Corporate was informed the cost of remediating the building had risen to approximately $15.5 million.
[37] The Body Corporate called a meeting on 8 October 2022 where concerns were expressed that the extent of the proposed works was too much. The minutes record that the Body Corporate acknowledged that it had a positive obligation to maintain and repair the common property and that this obligation could not be voluntarily waived by the owners. The minutes further record that it was confirmed that in order for the owners to sell the building to developers, there would need to be unanimous
14 Chesterfields Preschools Ltd (in liq) v Commissioner of Inland Revenue [2020] NZCA 686.
support for such a proposal by all owners. The two motions for appointment of a contractor were not put to a formal vote as several owners required further information before deciding whether to support progressing the consented works. A further meeting was therefore scheduled for 18 October 2022.
[38] By the 18 October 2022 meeting, a majority of owners considered the repairs were too expensive with a number of the owners claiming they could not afford their share of levies or would not pay their levies because it was considered an over capitalisation. As a result, the Body Corporate resolved not to proceed with the planned remediation.
[39] Matters then deteriorated leading to the appointment of the Administrator, Mr Woodworth, on 24 July 2023 as referred to above. The orders made by the Court included that Mr Woodworth “to the exclusion of the Body Corporate and any of the Body Corporate committee (that may be constituted) has and may exercise the powers of the Body Corporate and the committee, and is subject to the duties of the Body Corporate and the committee”.
[40] On 18 September 2023, after the Administrator was appointed but before the issue of the statutory demand or the Administrator’s first report, Mr Jones and Ms Buckley, the original owners of Unit 14, sold Unit 14 to the Company and assigned all of their rights and interests, including any money in the special levy fund. The consideration for the sale was the value determined by a registered valuer plus an amount equivalent to any moneys paid by the vendor and held by the Boby Corporate in any account of the Body Corporate other than ordinary levies at the settlement date.
[41] The building consent for the work, for which the defendant Company says the levy was specifically raised, lapsed on 14 December 2023.
[42] The Administrator issued his first report to the Court on 2 May 2024. In the report he confirmed that as at 31 December 2023, the Body Corporate held $59,093 in its operating account and $1,791,345 in a “remedial fund”. Mr Woodworth recorded that the accounts had not been used strictly in accordance with whether something was an operating expense or a cost relating to remediation, and continued:
31.Given the paucity of meeting minutes and decisions, it is not entirely clear whether all remedial contracts and costs were appropriately authorised. There has been insufficient financial information (including copies of actual invoices paid) to verify exactly what work has been carried out for the funds spent. There are also differing opinions from owners in relation to exactly what was discussed and agreed at either general or committee meetings. This has not been helped with limited documented resolutions.
32.I do not at this stage intend to spend the available resource (both of time and money) needed for the remediation to undertake a full forensic analysis of the contracts and payments. If that becomes necessary, it will involve significant additional costs to owners with little if any guarantee of a benefit. Owners are of course at liberty to take such action as they may independently be advised to take to avoid any potential limitation issues.
33.Be that as it may, for the purpose of my report the combined position of both funds reflect that the body corporate had a fairly significant amount of cash on hand at the end of December 2023.
[43]Mr Woodworth considers several options in his report:
(a)Option 1 — to sell the units individually or the building as a whole in their current state; or
(b)Option 2 — to remediate the building based on a reduced scope put forward by Gunac Waterproofing Specialists (Gunac) with further investigation and consultation necessary.
[44] Mr Woodworth states the preferred option is to proceed to remediate the building based on the Gunac scope and estimated cost, although he makes clear that further investigation is necessary to obtain a more definitive estimate. Based on his current estimate from Gunac and the funds available in the “remedial account” Mr Woodworth estimates that an initial levy would need to be raised of at least $8 million in total, with $1,001,880 to be paid by the owner of Unit 14. Mr Woodworth then says:
62.Anticipating that some owners will struggle to pay their levies:
(a)Property professionals indicate there would be a willing market to purchase individual Units in their current state providing there is formal documentation in relation to a full remediation and that the costs to do so have been confirmed;
(b)Potential purchasers would also need to know that steps were being taken for the Body Corporate to comply with all requirements under the UTA including a Long-Term Maintenance Plan and associated LTMP Fund.
(c)JLL advise that the best sale price to be achieved individually would be a controlled sale to eliminate any form of price war/reduction.
63.I strongly recommend that any owner who has concerns in relation to funding any special levy to be raised make contact with me to discuss the options available to them. Given the need to proceed with the work as soon as possible so as to avoid price hikes and delays, it will be necessary to take recovery action against any defaulting owners.
Quistclose Trust
[45] The Company relies on the operation of a Quistclose Trust to submit that it is beneficially entitled to Unit 14’s share of funds held in the “remedial fund” because the purpose for which those funds were raised has failed.
[46] In Li v 110 Formosa (NZ) Ltd, the appellant paid the respondent $4.8 million for the purpose of purchasing a property through a corporate entity. Fitzgerald J at first instance held there was no Quistclose trust because the funds had indeed been used for the purpose intended by the appellant. Relevantly her Honour held:15
A Quistclose trust arises where a loan or advance of funds is made for a specific purpose and upon the failure of that purpose a resulting trust applies over the funds in favour of the lender.
(underlining added)
[47] On appeal, Cooper J, as he then was, giving judgment for the Court of Appeal held:16
Such a trust arises where property is transferred for a specific purpose and is not at the free disposal of the recipient. The transferor retains a beneficial interest in the property throughout. The recipient holds the property on trust but with the power to use it for the specified purpose. In the event the purpose fails the recipient is obliged to return the property.
(underlining added)
15 Li v 110 Formosa (NZ) Ltd [2018] NZHC 3418 at [224].
16 Li v 110 Formosa (NZ) Ltd [2020] NZCA 492 at [85].
[48] As set out in the introduction, the Body Corporate submits a Quistclose trust only arises in relation to loans and not payments into a fund as has occurred here and in any event, a Quistclose trust does not apply on the facts because the purpose has not failed.
[49] Many of the cases discussing Quistclose trusts are in relation to loans but Li v 110 Formosa suggests that its operation may not be so confined. In addition, on the evidence filed in these proceedings it appears arguable that the purpose has failed.
[50] The Body Corporate further submits that a Quistclose trust cannot be relied on in the context of the UTA because the UTA has its own regime for the return of surplus funds in s 131.
[51]In response, the Company relies on the comment by the Supreme Court in
Gilbert v Body Corporate 162791:17
There is the further consideration that the provisions of the 2010 Act are not expressed in the manner which might be expected if the purpose was to create a statutory code to the exclusion of all other rights and obligations. Most relevantly, the Act makes no provision for the remedies available for breach of the rules, for instance as to injunctive relief, perhaps of a mandatory nature, or damages. This could be explained on the basis that the legislature just expected the courts to fashion remedies around the statutory regime. Usually, however, when a purely statutory regime is created under which rights and obligations come into existence, the legislature does specify, often with considerable specificity, the remedies which are available where duties are breached or rights are infringed. For this reason, a more likely explanation for the absence of reference to remedies is the assumption of an underlying regime in terms of which the usual contractual remedies of damages and injunctions would be available.
[52]For these reasons I consider that it is arguable that a Quistclose trust may arise.
Further reasons
[53] Even if I have erred in accepting that a Quistclose trust may arguably arise, there are further reasons supporting a stay of these proceedings. The first is that the Company may succeed in an application for refund of the surplus under s 131 as it is not clear that the legislative scheme intends that, once special levies are raised, those
17 Gilbert v Body Corporate 162791 [2016] NZSC 61, [2018] 1 NZLR 1 at [42].
levies can then be used for any purpose by the Body Corporate (or the Administrator) including sale of the building ‘as is’ rather than remediation. Although the Administrator says he favours remediation, sale of the building ‘as is’ is included as an option in his report and cannot be discounted at this stage.
[54] The Company submits that the Administrator must still act within the four corners of the UTA and that the Body Corporate, in this case the Administrator, may not act so as to ignore the will of the majority, relying on Gibson v Body Corporate 384911.18
[55] I accept technically the Administrator has the power to make resolutions to proceed on a certain basis but if the majority of owners are unable or unwilling to pay the required levies, the Administrator will not be able to progress the option chosen because he will have no funds to do so. The Administrator has indicated he may apply for a scheme but no steps appear to have been taken yet to do so.
[56] Questions also arise in terms of the exact state of the account between the Company and the Body Corporate, including as a result of the issues raised in respect of the ordinary levies. These questions arguably require consideration of whether Unit 14 is uninhabitable, at whose direction Unit 14 was gutted, whether there was any breach of obligation in terms of repair and maintenance by the Body Corporate and if so, how that ought to affect the ordinary levies.
[57] None of these matters can be determined in the context of these liquidation proceedings but their determination may result in the Body Corporate owing money to the Company rather than the other way around. This is particularly the case where Unit 14’s share in the “remedial fund” well exceeds the amount of the debt on which these liquidation proceedings are based.
[58] In Manchester, the Court of Appeal noted without deciding that there are indicators in the UTA that ordinary levies are charged on a pay now, argue later basis.19 But there, the Court was considering an application to set aside a statutory demand
18 Gibson v Body Corporate 384911 [2012] 1 NZLR 84 (HC) at [96].
19 Manchester, above n 7, at [66].
rather than the liquidation application that follows as is being considered here. If the Company were liquidated as a result of a failure to pay ordinary levies, then there would be no “later” in which to argue.
[59] Furthermore, although the sale price achieved for a unit would ordinarily factor in the owner’s share in any remedial fund, a sale by a liquidator (if that was the option chosen) may not factor in any share in a contingency fund in the same way.
[60] The defendant Company has proposed that it could apply under part 19 of the High Court Rules 2016 for a direction pursuant to s 141(3) of the UTA requiring the Administrator to refund its 10.89 per cent of the remedial fund.
[61] Directions may also be sought in respect of the refund of ordinary levies paid and the Company’s current obligation to pay in respect of Unit 14. It is significant in the context of these liquidation proceedings that the issue in respect of payment of the ordinary levies had been raised prior to the issue of the statutory demand.
[62] Taking all these factors into account, I consider that the circumstances are exceptional and that it is therefore appropriate to stay the liquidation proceedings. The stay is on condition that the shareholder of the defendant Company continue to deposit money into the Company’s solicitor’s trust account to cover the ordinary levies and that the Company file proceedings within two months (allowing time for issues to be resolved by agreement) seeking directions in respect of the obligation to pay ordinary levies and/or repayment of the Company’s share of the money held in the “remedial fund”.
[63] Whether the appropriate course is to apply under pt 19 of the High Court Rules or application ought to be made under part 4 of the UTA, I leave to counsel for the Company.
Result
[64] The application for liquidation of the Company is stayed until further order of the Court on the following conditions:
(a)the shareholder of the defendant Company continues to deposit money into the Company’s solicitor’s trust account to cover the ordinary levies invoiced;
(b)the company files and serves proceedings by 30 May 2025 to determine the position in respect of ordinary levies and/or the remedial fund; and
(c)leave is reserved to seek further directions preferably by joint memorandum.
Costs
[65] Costs are reserved to be determined following final determination of the proceedings.
Associate Judge Sussock
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