Body Corporate 162791 v Gilbert
[2016] NZHC 1026
•18 May 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-3833 [2016] NZHC 1026
BETWEEN BODY CORPORATE 162791
Plaintiff
AND
JOHN GILBERT First Defendant
QSM TRUSTEE LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION
Second Defendant
AND
ASTON INVESTMENTS LIMITED Third Party
Hearing: 18 May 2016 Counsel:
TJG Allan and CL Wei for plaintiff
J Macdonald for third partyJudgment:
18 May 2016
JUDGMENT OF FAIRE J
This judgment was delivered by me on 18 May 2016 at 4:45 pm], pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Grove Darlow & Partners, Auckland
Tompkins Wake, Hamilton
MBC Law Ltd, Auckland
Body Corporate 162791 v Gilbert [2016] NZHC 1026 [18 May 2016]
The application
[1] Aston Investments Ltd applies for an order that it be joined as a third defendant to this proceeding and that the trial which is due to commence on 13 June
2016, to the extent that it relates to declarations concerning the redevelopment covenant, be adjourned.
[2] It was apparent when the hearing of this application commenced and I had considered the written submissions advanced by the applicant, that the applicant had modified its position considerably. Mr Macdonald confirmed that Aston Investments Ltd now seeks an order that it be permitted to address the court in final submissions only at the trial of this current proceeding as to the true construction of the redevelopment covenant and, in particular, as to what that covenant permits the covenantee to do.
[3] He confirmed that Aston Investments Ltd did not seek leave to lead any evidence at trial or to cross-examine any witness at trial. His client was prepared to be bound by a condition attaching to any order made, that its rights of address be those which are provided in r 10.10 of the High Court Rules as if Aston Investments Ltd was treated as a defendant who appears at trial.
Background facts
[4] I set out a short summary of the background.
[5] The plaintiff is the Body Corporate for the Mid City complex and owns all the common property in the complex. The complex comprises three distinct areas:
(a) A basement area;
(b)A mid-level area comprising two floors which are divided into a number of individually owned units, used as retail premises, together with arcades on each floor; and
(c) A third level area spread over three floors, originally developed as a movie theatre complex, but now comprising some five units.
There are some 25 to 30 tenants or licensees operating small retail business on the three floors.
[6] The common property includes an arcade on the ground floor, arcades giving access to units on the higher floors, open void areas looking down to the ground floor area and stairs and escalators between the various floors. There are approximately 44 units in the complex. The owners of individual units are beneficially entitled to the common property as tenants-in-common in equal shares proportional to the ownership interest of their respective units.
[7] The movie theatre complex was unsuccessful. Proposals were floated to redevelop the complex. There is a land covenant providing for redevelopment registered on the supplementary record sheet comprising part of the unit plan.
[8] Issues arose as to rights to redevelop units. On 24 July 2006, Venning J held that the then owner of units 3A to 3E could enforce the redevelopment covenant against each of the other unit holders and the Body Corporate.
[9] Two mortgages have been registered against the titles to units 3A to 3E. A first mortgage has been registered in favour of the applicant, Aston Investments Ltd. On 25 July 2013, the first defendant was appointed a receiver of QSMTL, which is the registered proprietor of units 3A to 3E. The security therefore, in the form of the mortgage held by Aston Investments Ltd, appears to cover the rights in the redevelopment covenant, which was the subject of the judgment of Venning J on
24 July 2006.
The causes of action in the current proceeding
[10] Mr Allan, in his written submissions, which were prepared to answer the application as made in its original form, has set out a helpful summary of the six causes of action which are currently before the court as follows:
(a) First cause of action (levies) – not under consideration in this trial.
This cause of action is awaiting the Supreme Court’s decision.
(b)Second cause of action (trespass) – whether the first defendant is trespassing on the common property by occupying common property without the plaintiff’s consent. The issues will be whether there was a licence for a fixed term or a bare licence revocable at will; if the later, whether the bare licence was terminated on 5 August 2013; even if revoked, whether the Covenant (which permits annexation for the purposes of common property “in to further units (“Redevelopment”)” permits the erection of structures other than “units”.
(c) Third cause of action (declaration) – whether it is permissible for a body corporate to ‘cut off’ services to the second defendant as a result of its failure to pay its share of body corporate levies. The issue will be whether if the Covenant permits ad hoc annexation of common property, whether the Body Corporate is nevertheless permitted to cut off services because the owner is not paying levies.
(d)Fourth cause of action (declaration) – whether the Covenant may be used in such a manner so as to, inter alia, annex common property on an ad hoc basis from time to time without creating “units”.
(i)Whether the Covenant is a one off right to redevelop by undertaking a redevelopment process with all the adjunct consent processes or whether it is permissible to undertake a series of ad hoc annexation of common property (or in a position of fencing to redirect foot traffic), when and if it is considered desirable by the developer of the Units.
(ii)Whether the grantee is required to comply with legal requirements including but not limited to various statutes
governing the development of land prior to the process of annexation.
(iii)Whether the acquisition of common property has to be shown to be below level 3 has to be shown to be necessary or ancillary to a redevelopment in and above levels 3 – 5.
(iv)Whether without observing particularly relevant statutes, the owner or the Units may erect any structure including but not limited to fencing, barriers, or diversion systems across any part of the common property short of creating units.
(e) Fifth cause of action (implied term / s313 Property Law Act 2007) – whether, if the first and second defendants actions in annexing common property in the manner contended is lawful, the plaintiff is entitled to be compensation for the land.
(f) Sixth cause of action - whether by erecting a fence across the arcade on 15 August 2013, the first defendant committed a nuisance and injunction should issue. The issues in paragraphs (b) and (d) above engage.
Directions for trial
[11] The proceeding was set down for trial on 26 June 2015 and is due to commence on 13 June 2016. Directions for trial were made by Wylie J in a minute issued on 5 May 2016, issued some two days after this application was filed. His Honour also gave directions for the disposal of this application and directed specifically that the application needs to be dealt with as soon as is reasonably practicable given the pending hearing, and the Registrar is directed to give it an urgent fixture.
Jurisdiction for the order sought
[12] The application is made in reliance on r 4.56 which provides:
4.56 Striking out and adding parties
(1) A Judge may, at any stage of a proceeding, order that—
(a) the name of a party be struck out as a plaintiff or defendant because the party was improperly or mistakenly joined; or
(b) the name of a person be added as a plaintiff or defendant because—
(i) the person ought to have been joined; or
(ii) the person's presence before the court may be necessary to adjudicate on and settle all questions involved in the proceeding.
(2) An order does not require an application and may be made on terms the court considers just.
(3) Despite subclause (1)(b), no person may be added as a plaintiff without that person's consent.
[13] In Hallam v Ryan, Henry J provides a helpful summary of the position when non-parties or interveners seek joinder and said: 1
The wording of the rule is wide enough to permit a non-party to apply for the exercise of the Court's power (Dollfus Mieg v Bank of England [1951] 1 Ch
33), and although as a general rule a plaintiff is entitled to pursue his remedy against the defendant of his choice and cannot be compelled to proceed
against others, that rule is subject to exceptions as was discussed in Taylor v
McDougall [1963] NZLR 694. Recognised exceptions include:
(i) Representative actions, where the person seeking to intervene is one of a class whom the plaintiff seeks to represent, and the intervenor is unwilling to be so represented;
(ii) Where proprietary rights of the intervenor will be directly affected by the proceedings;
(iii) Actions for specific performance where the intervenors have an interest in the manner in which the contract should be performed
[14] In Capital and Merchant Finance Ltd (in receivership and in liquidation) v
Perpetual Trust Ltd, Thomas J distilled the following propositions from a number of authorities which she considered applying to the joinder of interveners and interested
1 Hallam v Ryan (1989) 3 PRNZ 132 at 133.
parties and said: 2
(a) An applicant must show that its legal rights against or liabilities in relation to the subject matter will be directly affected. Commercial, financial, or reputational interests in the outcome will only be sufficient in exceptional circumstances.
(b) If the intending intervener's presence before the Court will not improve the quality of information before the Court, that will count heavily against its addition to the proceedings.
(c) A relevant consideration is the extent to which the proposed intervener can rely on one of the parties to protect its rights and obligations.
(d) If either party would be prejudiced by the intervention, or if the intervention would create an impression of partiality, the application will not be granted.
(e) In cases where development of the law is likely, the application is more likely to be granted if the proposed intervener has special expertise to assist the Court on wider public policy issues.
(f) The underlying issue is whether it would be unjust to adjudicate on the matter in dispute without the intervener being heard. Several of the factors mentioned above tie into this issue.
(g) Where intervention is justified, the degree of participation granted to the intervener should be the minimum necessary to protect the intervener's interests.
[15] The plaintiff acknowledges that the causes of action against the defendants are directed at and in response to the defendants’ claimed rights alleged to be exercised under the covenant. The covenant, of course, is part of the security enjoyed by Aston Investments Ltd. Whilst it may not have asserted specific rights under the covenant, it seems to me that what rights that do exist, necessarily require a construction of the covenant, directly affecting Aston Investment Ltd’s security. It has proprietary rights that will be directly affected by the proceeding.
[16] Having regard to the limited nature of the intervention sought by Aston
Investments Ltd, I referred counsel to the comments set out in McGechan on
Procedure:3
2 Capital and Merchant Finance Ltd (in receivership and in liquidation) v Perpetual Trust Ltd
[2014] NZHC 3205 [at 41].
3 McGechan on Procedure, hr 4.101.
HR4.1.01 Types of parties and non-parties
…
Sometimes the court permits “outsiders to the litigation”(that is, persons other than the plaintiffs and the defendants) to intervene, participate or be heard in the proceeding. Various names are commonly used to describe persons in this position: “interested parties”, “interveners” or “interested persons”. Strictly, these persons are not parties to the proceeding; it is simply that the court has granted them the right, to a greater or lesser extent, to participate and be heard in the proceeding.
[17] It is understandable that the plaintiff should be concerned about this late interlocutory application, particularly with a trial pending shortly. That concern, however, is recognised by the applicant in the amended form in which they now seek an order.
[18] I am satisfied that the order I make granting Aston Investments Ltd a right of audience in the proceeding on terms is both justified in terms of rr 4.56 and 1.6. In short, its position satisfies the first proposition referred to by Thomas J. There is nothing which suggests that an order should not be made having regard to the remaining propositions referred to by Thomas J.
[19] There should, in fact, be little change to the current trial arrangements. Rule 4.52 permits the making of orders on terms which, by analogy, applies to the type of order that I shall make.
Orders
[20] I order that Aston Investments Ltd be permitted to address the court in final submissions only at the trial of this proceeding as to the true construction of the land covenant providing for redevelopment in respect of the Mid City complex and, in particular, as to what that covenant permits the covenantee to do.
[21] It is a condition of this order that the right to address applies as if Aston Investments Ltd is a defendant pursuant to r 10.10. The order made does not permit Aston Investment Ltd to lead evidence, or to cross-examine any witness called by the parties to this proceeding.
Costs
[22] The application that has been made by Aston Investments Ltd is in a considerably reduced form to that which was originally filed. To what extent its intervention in this case is, in fact, required will not be able to be determined until the evidence has been adduced and counsel provide final submissions to the court at the close of the case. For that reason, I do not consider it appropriate to fix costs at this stage. They must be reserved and I so order, so that the trial judge can determine if, in fact, this application proved to be necessary and the court has been assisted by submissions from Aston Investments Ltd.
[23] I record that the hearing before me today occupied one hour.
JA Faire J
0
0
0