Body Corporate 180379 v Auckland Council
[2012] NZHC 588
•30 March 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-404-005330 [2012] NZHC 588
UNDER the Weathertight Homes Resolution
Services Act 2006
BETWEEN BODY CORPORATE 180379 AND DONK PROPERTIES LIMITED Appellants
ANDAUCKLAND COUNCIL Respondent
Hearing: 15 February 2012
Appearances: G M Illingworth QC and S E Wroe for Appellants
G J Christie and C M Fairnie for Respondent
J McBride for Gapes and Redwood Group No.2 Ltd
Judgment: 30 March 2012
JUDGMENT OF FOGARTY J
This judgment was delivered by Justice Fogarty on
30 March 2012 at 11.30 a.m., pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Solicitors:
Martelli McKegg, PO Box 5745, Auckland 1141
Simpson Grierson, Private Bag 92518, Auckland
Knight Coldicutt, PO Box 106214, Auckland 1143
Legal Vision, PO Box 147423, Auckland 1144Counsel:
G M Illingworth QC, PO Box 7205, Auckland 1141
J McBride, PO Box 1008, Auckland 1140
BODY CORPORATE 180379 AND DONK PROPERTIES LIMITED V AUCKLAND COUNCIL HC AK CIV-
2011-404-005330 [30 March 2012]
Introduction
[1] A building, known as the “Fox Terrace Apartments”, received a code compliance certificate from the Auckland Council on 12 August 1997. Unit B was purchased by Mr and Mrs Watson. On 20 October 2005, fearing that they were in a leaky home, Mr and Mrs Watson applied to the Department of Building and Housing (“DBH”) for an assessor’s report. Thereby, they were making a claim under the
Weathertight Homes Resolution Services Act 2002 (“the 2002 Act”).1 This claim
was within the ten year limit on such claims imposed by s 393(2) of the Building Act
2004and replicated in s 7(2) of the 2002 Act and s 14 of the Weathertight Homes Resolution Services Act 2006 (“the 2006 Act”). About nine months later, still within the ten years, on 20 July 2006 the Watsons sold Unit B to Donk. Donk is their loss attributing qualifying company (“LAQC”) for tax purposes. Mr Watson holds 99 of the shares, his wife one, and they are both directors.
[2] The agreement for sale and purchase included an assignment of the Watson’s cause of action in respect of any defects resultant damage to Fox Terraces and the property.
[3] Notice of the assignment was not given to the Auckland Council. It needs, however, to be kept in mind that the identification of parties under the 2002 Act is not undertaken by the claimant, rather it begins with the assessor’s report in which the assessor identifies the persons who should be parties to the claim.2
[4] On 12 August 2007, ten years had elapsed from the grant of the code compliance certificate statute-barring any further common law claims for damages in respect of Unit B pursuant to s 393(2) of the Building Act 2004, and s 7(2) of the
2002 Act. During the previous year of its ownership of Unit B, Donk did not make
an application for an assessor’s report in respect of Unit B.
[5] The appellants are appealing against a determination of the Weathertight
Homes Tribunal (“the Tribunal”) in July 2011 finding that their claim against the
1 Weathertight Homes Resolution Services Act 2002, s 9(1).
2 Weathertight Homes Resolution Services Act 2002, s 10.
Auckland Council in respect of Unit B is statute-barred pursuant to s 393(2) of the Building Act 2004 because Donk Properties Ltd (“Donk”) did not make a claim before 20 August 2007, being ten years after that date that the code compliance certificate was issued.3
[6] The principal argument before the Tribunal was that advanced by the Auckland Council that following the assignment by the Watsons to Donk, Donk cannot bring a claim in the Watson’s name, but must bring a new claim in its own name. They did not do this and the ten years from the date of issue of the code compliance certificate has expired. Therefore, the Donk claim is out of time.
[7] The 2002 Act was repealed by the 2006 Act which came into force, as to part, on 18 December 2006 and as to the balance on 1 May 2007.4
[8] One of the reforms enacted in the 2006 Act was to enable representative claims in respect of multi-unit complexes such as this. Section 16 of the 2006 Act provides:
16 Multi-unit complex claim
The criteria are that the claimant is the representative of the owners of the dwellinghouses in the multi-unit complex to which the claim relates; and—
(a) the complex was built (or alterations giving rise to the claim were made to it) before 1 January 2012 and within the period of 10 years immediately before the day on which the claim is brought; and
(b) water has penetrated the complex because of some aspect of its design, construction, or alteration, or of materials used in its construction or alteration; and
(c) the penetration of water has caused damage to the complex.
[9] Section 19 of the 2006 Act provides:
19 Representative claims in respect of dwellinghouses in multi-unit complexes
3 Body Corporate 180379 & Anor v Auckland Council & Ors TRI 2011-100-000015, Procedural
Order 7, 27 July 2011.
4 Weathertight Homes Resolution Services Act 2006, s 2.
The representative of some or all of the owners of dwellinghouses in a multi- unit complex may bring a claim under this Act in respect of those dwellinghouses, and any common areas, as if those dwellinghouses and areas were a single dwellinghouse, and as if the representative were its owner, if—
(a) each owner has given the representative a written notice—
(i) authorising the representative to bring and resolve a claim; and
(ii) authorising invasive testing by an assessor relating to the owner's dwellinghouse; and
(b) the owners together own at least 75% of the dwellinghouses in the complex; and
(c) subsection (1), (2), or (3) (as the case requires) of section 22 has been complied with; and
(d) the representative (or, if the representative is a body corporate, an officer or member of the representative) attaches to the application for an assessor's report—
(i) a written notice authorising invasive testing by an assessor relating to any common areas in the complex; and
(ii) a statutory declaration that paragraphs (a) and (b), and subsection (1), (2), or (3) (as the case requires) of section 22, have been complied with.
[10] Section 20 of the 2006 Act provides:
20 Representative claims in respect of common areas only in multi- unit complexes
The representative of some or all of the owners of dwellinghouses in a multi- unit complex may bring a claim under this Act in respect of any common areas as if those areas were a single dwellinghouse, and as if the representative were its owner, if—
(a) subsection (1), (2), or (3) (as the case requires) of section 22 has been complied with; and
(b) the representative (or, in the case of a body corporate, an officer or member of the representative) attaches to the application for an assessor's report—
(i) a written notice authorising invasive testing by an assessor relating to those areas; and
(ii) a statutory declaration that subsection (1), (2), or (3) (as the case requires) of section 22 has been complied with.
[11] Sections 22(1) and (3) of the 2006 Act are also relevant and provide:
22 How authority to bring representative claims in respect of dwellinghouses in multi-unit complexes to be obtained
(1) In the case of a company-share complex, a claim cannot be brought under section 19 or 20 unless, at a general meeting of the company concerned, a resolution authorising the company to take the actions stated in subsection (4) has been passed by the affirmative vote of at least the lower of the following:
(a) 80% of the persons entitled to vote:
(b) the percentage of the persons entitled to vote—
(i) that is provided for in the company's constitution; or
(ii) that the company's constitution has, in some other way, the effect of requiring.
…
(3) In the case of a unit title complex, a claim cannot be brought under section 19 or 20 unless a resolution has been passed in accordance with the Unit Titles Act 2010 authorising the body corporate to take the actions stated in subsection (4).
[12] On 15 August 2007, the Body Corporate lodged a claim as contemplated by s 20. It was ticked as “Body Corporate claim for common areas only”. Applying the rule of indoor management, the Court, at least for the meantime, assumes that s 22(1) and (3) were complied with.
[13] The DBH appears to have interpreted the common area claim under s 20 as a representative claim under s 19. That assumption has been carried through to the Tribunal. The fact that the August 2007 claim refers only to common area was only noticed by me as Judge after the completion of the hearing. Counsel for the appellants argued that it would appear that the document contains an error in that the wrong box appears to have been ticked. The appellants also submit that the Tribunal has always treated the claim as a multi-unit claim because the assessor’s report covered all units as well as the common area and that the Tribunal has closed files on the individual claims on the basis that a multi-unit claim had been filed.
[14] The respondent Council disagrees. Counsel say 15 August 2007 was the date of execution of the application and 23 August was the date the application was made,
or filing date, in terms of ss 32 and 37 of the 2006 Act. The respondent Council submits that the fact that the application is a common area only was not identified by the parties before the Tribunal nor during the appeal hearing in the High Court. Therefore, there may be questions as to whether the individual property claims by the unit owners lodged under the 2002 Act had been withdrawn or remain on foot in some way. Counsel for the respondent Council submit the matter is best now referred back to the Tribunal rather than attempt to tackle it in the confines of the appeal.
[15] Counsel for Gapes and Redwood Group No.2 Ltd dispute that it is a case of the wrong box having been ticked by mistake. Mr McBride submits that:
… it is of critical importance that this Court determines the status of the appellants’ claims according to the legislation and the compliance (or otherwise) with the processes mandated by Parliament. The claims cannot be determined in some sort of ad hoc manner, in which the Court disregards the form (and indeed substance) of the application and substitutes its own views as to what the applicants must have intended.
[16] I agree with the submission of Mr McBride. It is apparent to me that the Tribunal has already sought to apply the 2006 Act against an error of law as to the status of the claim in respect of Unit B prior to the 2006 Act coming into force, and thereafter prior to 23 August 2007. It is important that when the Tribunal applies the
2006 Act that it starts without an error of law vis-a-vis the application of the 2002
Act. It is possible, however, to resolve part of this appeal; the status of the claim in respect of Unit B prior to application by the Body Corporate received on 23 August
2007. In this judgment I do that and then remit the question of examination of the claim by the Body Corporate, and its consequences, back to the Tribunal.
The Tribunal’s determination
[17] The Tribunal’s determination is short and it is convenient to set it out in its entirety:5
1. The Council has applied for a determination that the claim in respect of Unit B is statute barred pursuant to section 393 of the Building Act 2004.
5 Body Corporate 180579 & Anor v Auckland Council & Ors TRI 2011-100-000015, Procedural
Order 7, 27 July 2011.
Unit B is owned by Donk Properties Limited (Donk). Donk purchased Unit B in July 2006 from its former owners, Katherine and Justin Watson (the Watsons) who are shareholders and directors of Donk. The agreement for sale and purchase contained an assignment clause pursuant to which the Watsons assigned to Donk all causes of action in respect of defects and resultant damage to the property.
2. There are 13 units in the complex. On various dates between 7
September 2005 and 7 September 2006, the owners of 12 of the units filed
claims under the Weathertight Resolution Services Act 2002 (“the 2002
Act”). One of these was a claim in respect of Unit B filed on 25 October
2005 by its then owners, the Watsons.
3. Section 55 of the 2002 Act deemed the filing of these claims to be the filing of proceedings in court for the purposes of the Limitation Act 1950 and other provisions that impose a limitation period.
4. The Code of Compliance Certificate for the construction of the complex was issued by the Council on 12 August 1997. Accordingly, pursuant to section 393(2) of the Building Act 2004, the cut off date for limitation considerations in respect of claims against the Council was 12
August 2007.
5. The 2002 Act did not provide for representative claims in respect of multi-unit complexes.
6. Following the passing of the Weathertight Resolution Services Act
2006 (“the 2006 Act”) the existing unit claims were withdrawn pursuant to
section 141(4) of the transitional provisions of the 2006 Act and were re- filed as a multi-unit claim pursuant to section 19 of the Act on 23 August
2007. This claim included Unit B but was now brought in the name of Donk
rather than the Watsons.
7. The Council has argued that the claim against them in respect of Unit B is limitation barred. This is because Donk did not file a claim against it prior to the expiry of ten years from the date of issue of the Code of Compliance Certificate. It says that following the assignment, Donk cannot bring a claim in the Watsons’ name but must bring a new claim in its own name.
8. The claimants have argued that the claim by Donk against the Council in respect of Unit B is not statute barred. They say that the multi unit claim which incorporated the 12 existing claims is effectively one claim filed on one date, and not a series of different claims being dealt with together. Unit B forms part of this one claim and therefore cannot be separately statute barred.
9. It is the view of the Tribunal that the provision in the 2006 Act allowing representative claims in respect of multi-unit complexes to be brought is essentially administrative in nature. It allows claims by separate owners of dwelling houses in multi-unit complexes to have their claims treated as a single claim in order to avoid the duplication of resources which would be involved in determining each unit claim separately. During adjudication, individual consideration is given to each dwelling house in a
multi-unit claim and the owner of each must still establish their loss and defend any affirmative defences made in respect of their specific unit.
10. To succeed, Donk would have to have made the assignment effective by giving notice of it pursuant to section 130(1) of the Property Law Act
1952 and by making a claim in its own name within the limitation period. It did not. Donk did not file a claim until 27 August 2007. That claim was limitation barred.
11. The Council relies on Mountain Road (No 9) Ltd v Michael Edgley Corporation Pty Ltd [1999] 1 NZLR 335 where an assignment was held to be ineffectual in law because express notice of it had not been given prior to the commencement of proceedings in reliance on it. Further proceedings could not be commenced because the limitation period had expired.
12. The claimants argue that Mountain Road is not applicable. This is because section 9 of the 2006 Act provides that a “claim” is brought in respect of a dwellinghouse under the Act by applying for an assessor’s report in respect of it. The information typically included in a report includes the potentially liable parties. It follows that notice of assignment cannot be given before the liable parties are identified. In other words, notice cannot be given before a “claim” is brought.
13. This may be correct. There are practical considerations preventing notice being given to affected parties when an application for an assessor’s report is made. However, it remains the case that the Donk claim was made out of time and in the absence of any steps to make the assignment effective against the Council.
14. Under the 2006 Act, claims cannot be assigned as claimants are required to be owners. Section 55 provides that claims terminate on transfer of ownership. The situation is less clear under the 2002 Act which similarly requires claimants to be owners but lacks an equivalent of section 55. However the opportunity to enforce the purported assignment has been lost due to the expiry of the limitation period.
15. The Tribunal finds that the Council’s defence is made out and determines that the claim by Donk in respect of Unit B against the Council is statute barred. [Footnotes omitted]
[18] The Tribunal’s decision was determined on two distinct and separate grounds: (a) That Donk did not make a claim within the limitation period;6 and
(b) Donk did not make the assignment to it of Mr and Mrs Watson’s
rights against the Council effective by giving notice to the Council
6 Ibid at [9] – [14].
before the expiry of the limitation period as was required pursuant to s 130 of the Property Law Act 1952.7
First issue: Any need for Donk to make a claim?
[19] Mr Christie, for the Auckland Council, supported by Mr McBride for Gapes and Redwood No.2 Ltd, two other respondents who had been given leave to be heard in this case, both argued that the 2002 Act provided a remedy only for an owner of a dwelling house who had applied to the Chief Executor to have an assessor’s report made within the ten years from the date of the code compliance certificate. That expiry date was 12 August 2007. Donk was not such an owner.
[20] They rely principally on s 9(1) of the 2002 Act which provides:
9 Application for assessor's report
(1) An owner of a dwellinghouse who wishes to make a claim may apply to the chief executive to have an assessor's report prepared in relation to the claim. [Emphasis added]
[21] But also on s 3 pf the 2002 Act:
3 Purpose
The purpose of this Act is to provide owners of dwellinghouses that are leaky buildings with access to speedy, flexible, and cost-effective procedures for assessment and resolution of claims relating to those buildings. [Emphasis added]
[22] And on s 29(1) of the 2002 Act:
29 Jurisdiction of adjudicators
(1) In relation to any claim that has been referred to adjudication, the adjudicator is to determine—
(a) the liability (if any) of any of the parties to the claimant; and
(b) remedies in relation to any liability determined under paragraph (a).
[23] Mr McBride also relies on s 7(1) of the 2002 Act:
7 Ibid at [7] and [15].
7 Criteria for eligibility of claims for mediation and adjudication services
(1) A claim may be dealt with under this Act only if—
(a) it is a claim by the owner of the dwellinghouse concerned;
and
(b) it is an eligible claim in terms of subsection (2). [Emphasis added]
[24] And s 22(1) of the 2002 Act:
22 Right to refer claims to adjudication
(1) The owner of a dwellinghouse that is the subject of an eligible claim has the right to refer the claim to adjudication, except as provided in subsection (3). [Emphasis added]
[25] And s 26 of the 2002 Act:
26 How to initiate adjudication
(1) Adjudication is initiated by a claimant in relation to an eligible claim serving written notice, in the approved form and manner, of the claimant's intention to refer the claim for adjudication (the notice of adjudication) on—
(a) the other party or parties to the adjudication; and
(b) the Department.
(2) The notice of adjudication must state—
(a) the date of the notice; and
(b) the nature and a brief description of the claim and of the parties involved; and
(c) the relief or remedy that is sought; and
(d) the names and addresses of the parties to the adjudication;
and
(e) if available, the addresses that the parties have specified for the service of notices.
(3) Every copy of the notice that is served on another party to the adjudication must be accompanied by a copy of the assessor's report that relates to the claim, and may be accompanied by any other documents.
(4) The copy of the notice that is served on the Department must be accompanied by a fee of $400 (or such other amount as is prescribed), less the amount of any fee for mediation services paid by the claimant under section 14. [Emphasis added]
[26] Mr McBride argued that the word “claimant” is used consistently in both Acts to mean an owner of a leaky building who has made an application for an assessors report:
[27] Section 5 of the 2002 Act provides:
claimant means an owner of a leaky building—
(a) who makes an application under section 9(1); or
(b) whose claim is transferred to mediation or adjudication under section
59 or section 60
[28] Section 8 of the 2006 Act provides:
claimant—
(a) means a person—
(i) who applies to the chief executive to have an assessor's report prepared in respect of a building;
[29] Mr Illingworth QC, counsel for the appellants, points out that the definitions in both Acts are prefaced in this way:
In this Act, unless the context otherwise requires, —
[30] When common law claims are being pursued through the ordinary Courts, the Courts recognise and give effect to assignments of the ownership of such causes of action. It is not contrary to public policy for persons to sell the right to bring an action against another, where the action pertains to recovery of compensation for damage to the property being sold at the same time.
[31] None of the statutory provisions of the 2002 Act exclude assignment by a claimant of their claim. It follows that the assignment to Donk in July 2006, before the 2006 Act came into force in December of that year, is prevented only if either the
2002 Act is a complete code, or because it can be implied from the express terms that
there is a statutory policy against such assignment. No counsel argued that the 2002
Act was a complete code. That would be an impossible proposition. It is abundantly plain that the 2002 Act has a limited purpose. It leaves intact the common law basis of the causes of action, the laws of evidence, the ability to settle, and, not the least, the law of limitations.
[32] Both the 2002 and 2006 Acts are remedial. They are remedial as to procedure and the forum, a special tribunal. The purpose is to give such owners access “to speedy, flexible, and cost effective procedures for assessment and resolution of claims relating to those buildings”.8 In all other respects the claims are governed by the common law together with such other statutes as may have been enacted and pertain, such as the Building Acts9 and the Limitation Acts.10
[33] Mr McBride developed an argument orally that the 2006 Act, in s 55, insists on the claim being by an owner to be understood as the current owner because it is against statutory policy for a claimant to sell a leaky home. Mr Illingworth argued against that interpretation as ss 26 and 27 of the 2006 Act expressly provide for new owners to be added. He argued that s 55 of the 2006 Act has to be read against those sections as reflecting policy that when the owner of a leaky home sells, that owner’s claim can be replaced by the new owner.
[34] Section 55 of the 2006 Act, provides:
55 Termination of claim where ownership changes
(1) A change in the ownership of a dwellinghouse on or after the transition date terminates any claim made in respect of that dwellinghouse alone by its former owner.
(2) For the purposes of this section, a change in the ownership of a dwellinghouse arising out of an agreement for its sale and purchase occurs on the day on which the sale and purchase is settled.
(3) Change in the ownership of a dwellinghouse, in this section,—
(a) does not include a change of that kind occurring by operation of law; and
8 Weathertight Homes Resolution Services Act 2002, s 3; Weathertight Homes Resolution Services
Act 2006, s 3(a).
9 Building Act 1991 and Building Act 2004.
10 Limitation Act 1950 and Limitation Act 2010.
(b) if the dwellinghouse is property subject to a trust, does not include a change in the trustee or trustees; and
(c) if the dwellinghouse is owned by a company (whether the company owns other dwellinghouses within the building concerned or not), does not include a change in shareholding that results in control of the company passing to 1 or more different persons. [Emphasis added]
[35] Transition date is defined as meaning:11
transition date means 1 May 2007 unless an earlier date is appointed under section 2(2), in which case it means that earlier date so appointed
Such earlier date could not be earlier than the date of enactment, 18 December 2006.
[36] Donk acquired Unit B by agreement on 20 July 2006, full settlement on 21
July 2006. Section 55 does not apply to Donk because this date precedes the transition date.
[37] All counsel accepted that the assignment of the Watson’s chose in action is binding as between Mr and Mrs Watson and Donk. The appellants contend that that assignment entitles Donk to pursue the claim commenced by Mr and Mrs Watson. Secondly, inasmuch as the 2002 Act only allows claims by owners, Donk is an owner. There is nothing in the 2002 Act that prevents an assignment of a claim lodged by an owner to another purchaser of the very same unit, who becomes the owner of the unit.
[38] The sale of the land from the Watsons to Donk was before the enactment of the 2006 Act. The common law leans against retrospective application of statutes, particularly where they take away existing rights. There is nothing in the 2006 Act which expressly takes away rights acquired under the 2002 Act. On the contrary, the
2006 Act is remedial and intending, when creating representative claims, to assist existing claims. A common law court will resist any interpretation of the 2006 Act that is retrospectively extinguishing the claim in respect of Unit B for the reason that
Mr and Mrs Watson assigned it to Donk.
11 Weathertight Homes Resolution Services Act 2006, s 8.
[39] The common law leans against qualification of property rights. One of the most important, if not the most important, property right, as understood by the common law, is the ability to sell, give, or in any other way transfer the property to another person. This Court would be loathe to interpret a statute as requiring, by implication, a claimant to retain property merely because it is the subject of a claim. That is not the common law.
[40] It is true that the common law is wary of causes of action being sold or causes of action being funded by third parties for a profit. This is a law of maintenance and champerty. Its place in modern law is uncertain. But the issue simply does not arise on the facts of this case. As Mr Illingworth has pointed out, Donk is the owner. And in the context of examining potential policy ramifications in maintenance and champerty, the Court can take notice of the fact that Donk is an LAQC, a creature of statute, directly enabled by Parliament to be almost an alter ego of the taxpayer. Donk is the tax efficient vehicle for Mr and Mrs Watson. It is their company.
[41] It is true that Donk did not apply for an assessment report in its own name within the limitation period. I would add that Mr Illingworth also stressed that under the scheme of the 2002 Act such a step was not provided for. Under this Act (and the
2006 Act) claims are commenced when a home owner applies to the DHB for an assessor’s report.12 As I have discussed earlier in the introduction to this case, the claimant does not nominate who the respondents will be. That exercise is first addressed in the assessor’s report. Parliament never intended notice to be given to potential respondents or defendants at the time the claim is commenced. Parliament simply required that the application to the DHB be made within ten years from the
date the dwellinghouse was built or altered, where the alterations give rise to the claim.13 Thereafter the assessor, in his or her report, sets out the persons who should
be parties to the claim.14
12 Weathertight Homes Resolution Services Act 2006, s 9; Weathertight Homes Resolution Services
Act 2002, s 9.
13 Weathertight Homes Resolution Services Act 2002, s 7(2); Weathertight Homes Resolution
Services Act 2006, s 14.
14 Weathertight Homes Resolution Services Act 2002, s 10(1)(b)(v).
[42] Mr Illingworth pointed out that the argument being pursued by the respondents in this case would require a redundant application for an assessor’s report. There is no provision in the 2002 Act which contemplates that the assessor would duplicate the assessment of the unit. The damage to the unit remains the same and it would be inefficient for the law to require an assessor to do that.
[43] This reasoning enables the conclusion that recognising Donk as an assignee of a claimant, and thereby a claimant in its own right, does no violence to the statutory scheme of the 2002 Act.
[44] I conclude that prior to the 2006 Act coming into force the status of the Unit B claim was that it had been lodged by its owners, Mr and Mrs Watson, who had assigned the claim to the new owner, Donk. There is nothing in the 2002 Act which prevents that assignment. Section 55 of the 2006 Act does not apply.
[45] Setting aside for future inquiry, the implications from the conduct of the Body Corporate when lodging its claim under the 2006 Act, the only remaining issue is whether the assignment is ineffectual by operation of common law.
Second issue: Is the assignment ineffectual against the tortfeasors?
[46] This is a case where the assignor commenced a claim within the limitation period and then assigned the claim to the assignee. The respondents seek to rely upon the decision of the Court of Appeal in Mountain Road (No 9) Ltd v Michael Edgley Corporation Pty Ltd.15 That, however, was a case where proceedings had been commenced by the assignee. The argument was that the assignee had commenced prematurely before it had acquired any title to do so as assignee by reason of the fact that it had not given notice to perfect the assignment to the contracting counterparty of the assignor.
[47] The Court of Appeal found the obligation on the part of the assignee to first notify the liable party by reason of the terms of s 130(1) of the Property Law Act
1952, which provided:
15 Mountain Road (No 9) Ltd v Michael Edgley Corporation Pty Ltd [1999] 1 NZLR 335 (CA).
130 Assignment of debts and things in action
(1) Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal or equitable thing in action, of which express notice in writing has been given to the debtor, trustee, or other person from whom the assignor would have been entitled to receive or claim that debt or thing in action, shall be and be deemed to have been effectual in law (subject to all equities that would have been entitled to priority over the right of the assignee if this Act had not been passed) to pass and transfer the legal or equitable right to that debt or thing in action from the date of the notice, and all legal or equitable and other remedies for the same, and the power to give a good discharge for the same, without the concurrence of the assignor.
[48] Tipping J for the Court said:16
The crucial point is that an assignment is not effectual in law unless and until express notice of it has been given to the persons liable, here Mountain Road and Bay Textiles, they being the parties against whom the assigned causes of action lay. As indicated above, no such notice was given prior to the commencement of the proceedings. Nor was it given prior to the expiry of the limitation period. Thus, even if the assignment had been contractually valid between assignor and assignee, it would not have been effectual as a legal assignment and Edgeley [the assignee] would have had no title to sue on the causes of action as legal assignee thereof at the time it purported to do so. Nor did Edgley acquire such title to sue at any time prior to the expiry of the limitation period.
[49] The Court then went on to consider the effect of this assignment as an equitable assignment. The Court there identified the issue to be decided “whether an equitable assignment also requires notice to the parties liable before it becomes effective against those parties”.17 Having considered some case law dealing with competing equities between different equitable assignments of the same debt, the Court concluded:18
It is clear enough from the cases cited, and many other authorities, that in the case of an equitable assignment of a chose in action, notice to the person liable is not necessary to complete the equitable title of the assignee as between assignor and assignee. Whereas in such circumstances the legal title to the chose remains in the assignor until the requirements for a legal assignment have been satisfied, equitable title is vested in the assignee immediately. But notice to the person liable has consistently been regarded as necessary to give the assignee title to claim the benefit of the chose in action against that person.
16 Ibid at 339.
17 Ibid at 340.
18 Ibid at 343.
[50] The Court went on:19
The trend of authority supports the view that notice in the case of an
equitable assignment is necessary to perfect the title of the assignee. …
We accept Mr Worth’s submission that both authority and principle support the view that the notice requirements of legal and equitable assignments should be the same. It follows that when the present assignment is viewed as equitable, it was not effective against Mountain Road and Bay Textiles prior to their being given notice of it. Thus Edgley had no title to sue pursuant to the assignment when it purported to do so.
[51] This view of the law has been severely criticised. It has not been followed by the Court of Appeal in Queensland,20 the Supreme Court of New South Wales,21 nor by the Supreme Court of Victoria.22
[52] In 2007, Blackburne J in Chancery in the United Kingdom held that an equitable assignment was sufficient to pass a right to sue prior to the expiration of the limitation period even when the notice was given after the period had expired:23
[53] The matter is discussed further in Roger Fenton Garrow and Fenton’s Law of
Personal Property in New Zealand (7th ed, LexisNexis, Wellington, 2010) at 947.
[54] Section 130 of the Property Law Act was repealed by the Property Law Act
2007. Inasmuch as s 130 applies to the facts of this case, I am, however, bound by the decision of the Court of Appeal in Mountain Road, if it applies to the facts of this case.
[55] There are two independent lines of reasoning which make Mountain Road not applicable to the issues to be decided in this judgment.
[56] Firstly, one can see immediately that the material facts in this case and those of Mountain Road are quite different. For here the proceedings were commenced by
the assignor, within time on 20 October 2005. The assessor recommended that the
19 Ibid.
20 Thomas v National Australia Bank Limited [1999] 2 Qd.R. 448 (CA).
21 Jennings v Credit Corp Australia [2000] 48 NSWLR 709 (SC) Santow J.
22 Alma Hill Constructions Pty Ltd v Onal [2007] 16 VR 190 (CA).23 See Finlan v Eyton Morris Winfield (a firm) [2007] 4 All ER 143.
Auckland City Council (as it then was) be a party on 31 May 2006. This was before the Watsons assigned the property and the claim to Donk in July 2006.
[57] The statutory mechanism under the 2002 and 2006 Acts for commencing proceedings is peculiar. Proceedings are not commenced by an applicant making a claim against another party. The claimant does not have the power to identify who the claim is made out against. The legislation is remedial. It is intended to enable lay persons to make claims without having to undertake the expense or run the risk of error in identifying who the tortfeasors are. Whereas by contrast the common law presumes and requires the plaintiff to identify the defendants in the statement of claim when it is lodged in the Court.
[58] If the common law of assignments, as amended by s 130 of the Property Law
Act 1952, were to be applied to claims under the 2002 Act (and for that matter the
2006 Act), there is a real risk that the application of that law would defeat the remedial function of the legislation. The Courts very rarely, and most reluctantly, allow the common law to defeat a statutory reform.
[59] The second point of distinction is this. If notice to the tortfeasor by the equitable assignee is required, but not given, then it does not follow that Mr and Mrs Watson have abandoned their claim. On the contrary, their assignment is simply ineffectual. This is explained again by Tipping J in another Court of Appeal case,
Brazier & Anor v Bramwell Scaffolding (Dunedin) Ltd & Ors.24
[60] It is sufficient to set out paragraph [14] of Tipping J’s reasoning:
[14] Section 130 of the Property Law Act 1952 requires notice of an assignment to be given to the debtor, or other party against whom the thing in action is to be enforced, before the assignment becomes effectual at law. Mr Gibson argued that as no notice had been given to the Brazier interests of the assignment from Bramwell Dunedin to Bramwell Scaffolding, the latter could not enforce the restraint clause, and the former, having gone out of business, had suffered no loss. Counsel based his submission upon the decision of this Court in Mountain Road (No 9) Ltd v Michael Edgley Corporation Pty Ltd [1999] 1 NZLR 335. Mr Barton contended that notice had been given, in writing as required, when the briefs of evidence were exchanged some weeks before trial. We do not need to resolve this issue. Mountain Road, properly understood, does not support Mr Gibson’s
24 Brazier & Anor v Bramwell Scaffolding (Dunedin) Ltd & Ors CA222/99, 3 May 2000.
submission. If, as was contended, the assignment was ineffectual at law as regards the Brazier interests for want of notice, it was undoubtedly valid between the immediate parties. In such circumstances the assignor may sue on behalf of the assignee. Bramwell Dunedin which was a plaintiff from the start could therefore enforce the covenant on behalf of Bramwell Scaffolding. If the assignment was effectual at law, the assignor could sue for damages accruing up to the time of notice, and the assignee could sue for damages accruing thereafter. The beneficial interest in the damages as between assignor and assignee would be a matter between those parties. The Brazier interests cannot defeat the claim against them on any basis to do with the assignment between Bramwell Dunedin and Bramwell Scaffolding. Their attempt to do so has no validity. A careful reading of Mountain Road, especially at 342, demonstrates that if the assignment is not complete at law, but valid in equity, the assignor may sue on account of the assignee.
[61] Tipping J in Brazier is pointing out that if an assignment is ineffective as between an assignee and a third person, an equitable assignment is still effective as between the assignee and the assignor. As against the third party, the assignor remains the owner of the cause of action. But the assignor is obliged to exercise this ownership for the benefit of the assignee. Where, as here, the assignor has commenced the claim, and an equitable assignment is ineffective against a defendant, that simply leaves the defendant responding to the assignor as legal owner of the claim.
[62] Counsel for the respondents argued that Mr and Mrs Watson had in fact withdrawn the claim. There is no evidence before me that either Mr and Mrs Watson or Donk have ever withdrawn the original claim. However, the Tribunal appears to have interpreted the lodging of the claim by the Body Corporate complex on 23
August 2007 as including implicitly a withdrawal of the original claim by Mr and Mrs Watson. The Tribunal adopted the position of the DBH, who wrote to Mr and Mrs Watson on 29 August 2007 as follows:
Closure of unit claim – included in multi-unit complex claim
DBH Case Number: 04036
Property: Fox Terraces, Unit 2, 5 Fox Street, Parnell, Auckland
You initially brought the above claim under the Weathertight Homes
Resolution Services Act 2002.
The body corporate has since brought a multi-unit complex claim under the
Weathertight Homes Resolution Services Act 2006:
DBH case number: 05522
Claims advisor: Kate Ross
In relation to the new multi-unit complex claim, you have given authority to a representative to bring the claim and for an assessor to carry out invasive testing on your unit.
Since there cannot be two active claims for the same unit at one time, your original unit claim will now be closed and be dealt with as part of the new multi-unit complex claim.
Your point of contact regarding the multi-unit complex claim will now be your representative. The representative and the claims advisor will be corresponding with each other regarding all claim matters.
Please call me on 0800 324 477 if you have any queries about the closure. Yours sincerely,
Kate Ross Claims Advisor Weathertight Services
[63] This letter is, however, reassuring Mr and Mrs Watson that their claim will be dealt with as part of the new multi-unit complex claim.
[64] Accordingly, I conclude:
(a) At least prior to the Body Corporate claim in August 2007, there was a valid claim in respect of Unit B lodged by Mr and Mrs Watson, the assignors, and beneficially owned by Donk as the assignee.
(b) It was not lost by Donk failing to make an independent claim.
Conclusion
[65] The appeal is allowed. The determination of the Tribunal is set aside.
[66] This appeal has identified an issue of the status of the claim by the Body Corporate, signed on 15 August and received on 23 August 2007. There are issues as to the scope of that claim, and consequential issues as to whether there needs to be another Body Corporate claim. There might be an issue as to who voted on behalf of Unit B, and whether it matters, for internal management of the Body Corporate, if Mr and Mrs Watson voted as assignors or as directors of the assignee, or both. These
issues are best examined first by the Tribunal. Those issues are referred back to the Tribunal for consideration if, after inquiry, the respondents still challenge the existence of a claim in respect of Unit B.
[67] Costs in this Court are awarded on a 2B basis. The amount paid in security is released to the appellant.
[68] If the parties cannot agree as to costs, I will receive memoranda and fix a sum.
[69] The appellant sought costs generally. I reserve the question as to whether there should be any award of costs in respect of the Tribunal hearing.
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