Body Corporate 166671 v Camben Farms Limited

[2024] NZHC 178

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-2927

[2024] NZHC 178

UNDER

the Unit Titles Act 2010 and the Property Law Act 2007

IN THE MATTER OF

an application for orders cancelling a unit plan and an application for order for sale of Base Land

BETWEEN

BODY CORPORATE 166671

Applicant

AND

CAMBEN FARMS LIMITED and

THE OWNERS IN SCHEDULE 1 TO THE APPLICATION
First Respondent

KIWIBANK LIMITED
Second Respondent

NATIONAL AUSTRALIA GROUP (NZ) LIMITED

Third Respondent

WESTPAC NEW ZEALAND LIMITED
Fourth Respondent

ANZ BANK NEW ZEALAND LIMITED
Fifth Respondent

ASB BANK LIMITED
Sixth Respondent

BANK OF NEW ZEALAND LIMITED

Seventh Respondent

Hearing:	On the papers.
Appearances:	Timothy J Rainey for the Applicant
Judgment:	15 February 2024

BODY CORPORATE 166671 v CAMBEN FARMS LIMITED [2024] NZHC 178 [15 February 2024]

JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

Application for leave and for directions

This judgment was delivered by me on 15 February 2024 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:

Pideon Judd Law (Joanna M Pidgeon), Auckland, for the Applicant

Counsel:

Timothy J Rainey, FortyEight Shortland Chambers, Auckland, for the Applicant

Introduction

[1]    By an amended ex parte application dated 1 December 2023 the applicant, Body Corporate 166671 (Body Corporate), applied for the following orders:

(a)Permitting the applicant to commence the proceeding seeking (in part) orders for the sale of the base land in the Body Corporate unit title development (Base Land) and the division of proceeds of sale among the co-owners of the Base Land under s 339 of the Property Law Act 2007 (PLA) by originating application under Part 19 of the High Court Rules;

(b)directing that the persons named in Schedule 1 to the application, being all persons with a registered interest in the principal units in the Body Corporate, either as registered proprietors or as mortgagees, are respondents to the substantive application.

[2]    In support of the application, counsel for the applicant has filed the originating application itself and a memorandum of counsel both dated 1 December 2023, and an affidavit of David Ross Gandar in support of the application, dated 29 November 2023.

Background

[3]    This  proceeding  concerns  a  41-unit  residential  apartment  complex   at   17 Federal Street, Auckland, which is known as Federal Terraces. The building, originally built in 1937, was redeveloped as a residential apartment complex in 1994. The original roof of the factory was removed and 12 residential apartments were built on top of a concrete structure.

[4]    Each of the residential apartments had a carpark located in the concrete structure below and as there were more carparks than necessary for the residential apartments, the developer created a separate unit title for each extra carpark. There are 12 principal units for the 12 residential apartments, and there are 29 principal units for individual carparks.

[5]    The division between the apartment owners (who are in the minority of the principal units in the complex but who have a majority of ownership interest/utility interest) and the carpark owners (who have a majority of the principal units but have a minority of the ownership interest/utility interest) has created some difficulties in the operation of the Body Corporate.

Building defects

[6]    The building has suffered weathertightness issues. After commissioning various reports, the Body Corporate and the owners have reached the view that the building is now at the end of its economic life and either has to be completely rebuilt or sold. There is an agreement between the owners of the principal units that it is uneconomic to proceed with the repairs necessary to rectify the building and the owners agreed that the property should be sold and the proceeds of sale divided between the owners of the principal units.

[7]    At the annual general meeting of the Body Corporate held on 5 October 2023, the Body Corporate resolved to make an application to the High Court to cancel the unit plan under s 188 of the Unit Titles Act 2010 (the UTA), and to seek order for the sale of the Base Land.

Reassessment of ownership interests

[8]    The only area of dispute is the basis for the division of the proceeds of the sale of the Base Land between the owners of the principal units. The Body Corporate engaged a firm of valuers to reassess the ownership interests of the units in the development and following a report from the valuers, at an annual general meeting held on 5 October 2020, the Body Corporate considered a special resolution to reassess the ownership interest under s 177(3)(b)(ii) of the UTA. The resolution was withdrawn when it was agreed to amend the proposed application to include both the current ownership interest and the proposed amended ownership interests as alternatives for the division of the proceeds of sale.

[9]    There is a difference of opinion between the unit owners as to whether the net proceeds of sale should be divided between the unit owners based on the current ownership interest, or whether it should be decided based on the proposed revised ownership interest from the valuer’s report. This dispute is to be put before the Court for the Court to determine how the net proceeds of sale should be divided.

The originating application

[10]   The Body Corporate has resolved by special resolution to make an application to the High Court to cancel the unit plan under s 188 of the UTA. The effect of cancellation of the unit plan is that the principal units in the development cease to exist, leaving the Base Land which underlies the development owned by the registered proprietors of the principal units as tenants in common in shares proportionate to the ownership interest in the former Body Corporate.

[11]   The Body Corporate and owners then seek an order for sale of the Base Land under s 339 of the PLA, together with ancillary orders providing for distribution of the funds. Because several of the units are mortgaged, and the effect of cancellation of the unit plan is to cancel the mortgages, the proposed orders provide for the protection of the mortgagees’ interests in the funds which will be distributed following the sale of the Base Land.

Grounds on which the orders are sought

Order permitting the commencement of the proceeding by originating application

[12]The applicant seeks orders to:

(a)cancel the unit plan for the Body Corporate and then;

(b)orders for the sale of the Base Land and to divide the proceeds of sale between the co-owners.

[13]   The application to cancel the unit plan, pursuant to s 187 of the UTA, is an application which must be made by originating application. Counsel for the applicant submits that the application for the sale of the Base Land under s 339 of the PLA,

arises out of the same facts and circumstances and it is in the interests of justice that the application is determined in the same proceeding.

[14]   Counsel for the applicant submits it is in the interests of justice if the applicant is permitted to commence the proceeding by originating application and that there is no prejudice to the respondents from the applicant being given leave to commence the proceedings by originating application.

Direction as to the respondent parties

[15]   The applicant accepts that all persons with any legal or equitable interest in the principal units in the Body Corporate should be parties to the application and have a right to be heard in relation to each of the orders sought.

[16]   The persons named in Schedule 1 to the proposed application are the only persons the applicant has identified as having any legal or equitable interest in the principal units from title searches of all principal units in the Body Corporate. Counsel for the applicant submits that it is in the interests of justice that the persons named in Schedule 1 are respondents to the proposed originating application.

Legal principles

[17]Rule 19.5 of the High Court Rules 2016 provides as follows:

19.5 Court may permit proceeding to be commenced by originating application

(1)The court may, in the interests of justice, permit any proceeding not mentioned in rules 19.2 to 19.4 to be commenced by originating application.

(2)The court’s permission may be sought without notice.

(3)The proposed application must be filed with an application for permission under this rule.

[18]   The originating application procedure, in contrast to standard proceedings, provides a short and streamlined civil litigation procedure.1 It is a “genuine exception”

1      Hong Kong and Shanghai Banking Corp v Erceg (2010) 20 PRNZ 652 (HC) at [20].

to the standard procedure and is an expedient in cases where there is, in reality, no opposing party. The procedure is not intended routinely to be used where there is another party with contrary interests.2 As well, where the proposed proceeding does not fall into one of the categories prescribed in r 19.2, the originating application procedure is strictly exceptional.3

[19]   Rule 19.5 provides that a court may, in the interests of justice, permit any proceeding not mentioned in rr 19.2 to 19.4, to be commenced by originating application. The “interests of justice” entails securing the just, speedy and inexpensive determination of the proceeding.4

[20]   A primary indicator for whether a proceeding is amenable to the originating application procedure is whether the issue or issues the subject of that proceeding are “predetermined or obvious under the relevant statute or other rule of law, or whether the issues need to be defined by an exchange of pleadings”. As well, cases where there are likely to be underlying factual disputes are often ill-suited to the originating application procedure.5

[21]   The leading authorities in relation to r 19.5 are Hong Kong and Shanghai Banking Corp Ltd v Erceg6 and Solar Bright Ltd v Martin.7 A useful statement of the Court’s approach to leave applications is the statement of Asher J:8

… the type of proceeding suited to the originating application procedure is a straightforward application, not requiring detailed pleadings or interlocutory orders for its fair resolution. Such a type of proceeding tends to be an application under a specific statutory provision, where the issue that arises can be clearly defined, and the issues confined. The procedure is not well suited to the determination of substantive rights involving the application of common law doctrines as distinct from statutory tests. It is not well suited to cases involving multiple parties, and cases where there is the possibility of cross- claims or counterclaims.

2      Jones v H W Broe Ltd (1989) 5 PRNZ 206 (HC) at 207; and Re Hollinshead [2020] NZHC 2119 at [11].

3      Lung v Liu [2021] NZHC 1810 at [9].

4      See Young v Young [2020] NZHC 2569 at [12]; and Solar Bright Ltd v Martin [2019] NZHC 300, at [18] to [26]. This is also the overriding objective of the High Court Rules 2016: see r 1.2.

5      100 Investments Ltd v Walker [2020[ NZHC 1947 at [11].

6      Hong Kong and Shanghai Banking Corp v Erceg (2010) 20 PRNZ 652 (HC), at [25].

7      Solar Bright Ltd v Martin [2019] NZHC 300, at [18].

8 Above, n 6 at [25].

[22]Section 339 of the Act provides:

339     Court may order division of property

(1)A court may make, in respect of property owned by co-owners, an order –

(a)for the sale of the property and the division of the proceeds among the co-owners; or

…

(2)An order under subsection (1) (and any related order under subsection (4)) may be made –

(c)only on an application made and served in the manner required by or under section 341; and

(d)only after having regard  to  the  matters  specified  in section 342.

…

(4)A court making an order under subsection (1) may, in addition, make a further order specified in section 343.

[23]Section 342 of the Act provides:

342     Relevant considerations

(1)A court considering whether to make an order under section 339(1) (and any related order under section 339(4)) must have regard to the following:

(a)the extent of the share in the property of any co-owner by whom, or in respect of whose estate or interest, the application for the order is made;

(b)the nature and location of the property;

(c)the number of other co-owners and the extent of their shares;

(d)the hardship that would be caused to the applicant by the refusal of the order, in comparison with the hardship that would be caused to any other person by the making of the order;

(e)the value of any contribution made by any co-owner to the cost of improvements to, or the maintenance of, the property;

(f)any other matters the court considers relevant.

Result

[24]   Having considered the application, the memorandum of counsel, the originating application itself and the affidavit of Mr Gandar, I am satisfied that it is appropriate to make the orders sought. In relation to granting leave to commence the proceedings by originating application pursuant to r 19.5, the reasons, in my view, that leave should be granted are:

(a)the proceedings to cancel the unit plan pursuant to s 188 of the UTA must be commenced by originating application and, as submitted by counsel, it is in the interests of justice and expediency of dealing with the proceedings if the application to sell the Base Land pursuant to     s 339 of the PLA is dealt with in the same proceedings;

(b)the proceeding under s 339 of the PLA deals with the application of the statutory test, and is therefore a narrowly-defined proceeding;

(c)the dispute between the co-owners is narrowly defined, being restricted to whether the proceeds of sale of the Base Land should be divided among the co-owners on the basis of existing ownership interest or the ownership interest proposed in the valuer’s report;

(d)as Schedule 1 of listed respondents includes all parties who have a legal or equitable interest in the property, there should be no need to join any other parties to the proceedings. It is also unlikely that discovery orders will be necessary as the issues are restricted to sale of the Base Land and division of the net proceeds of sale;

(e)overall in my view, it is in the interests of justice that leave should be granted.

Orders and directions

[25]I make the following orders:

(a)The applicant is permitted, pursuant to r 19.5 of the High Court Rules 2016, to commence this proceeding seeking (in part) orders for sale of the Base Land of the Body Corporate and the division of the proceeds of sale amongst the co-owners of the Base Land under s 339 of the Property Law Act 2007 by originating application under Part 19 of the High Court Rules.

(b)The persons named in Schedule 1 to the application, being all the persons with a registered interest in the principal units in the Body Corporate, as registered proprietors or mortgagees, are the respondents in the proceeding and are to be served with the application.

(c)Costs of the application are reserved.

…………………………….. Associate Judge Taylor