Body Corporate 193764 v Prakash

[2012] NZHC 27

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-004-000342 [2012] NZHC 27

BETWEEN  BODY CORPORATE 193764

Plaintiff

ANDJAI PRAKASH Defendant

Hearing:         2 February 2012

Appearances: J Tiang for the Plaintiff

Defendant appears in Person

Judgment:      16 February 2012

RESERVED JUDGMENT OF WOOLFORD J

This judgment was delivered by me on Thursday, 16 February 2012 at 4:00 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:           Grove Darlow & Partners, DX CP24049, Queen Street Central, Auckland

Copy to:            J Prakash, 118 St Georges Road, Avondale, Auckland.

BODY CORPORATE 193764 V PRAKASH HC AK CIV-2010-004-000342 [16 February 2012]

[1]      The plaintiff is a Body Corporate established pursuant to the Unit Titles Act

1972 to administer the former Auckland Railway Station, now known as Grand Central  Station.    The  defendant  is  the  registered  proprietor  of  Unit  403  of  the building.

[2]      The plaintiff seeks leave to apply for summary judgment and for summary judgment against the defendant for the sum of $56,951.77, together with interest and costs in respect of repair and maintenance costs.   The defendant has admitted his obligation to pay some of the amount claimed but denies owing interest, debt collection costs and legal costs.  He also applies to transfer the proceedings to the Tenancy Tribunal.

[3]      The substantive issue for determination in these proceedings is whether the defendant is legally obliged to pay the amount sought.   The plaintiff points to a resolution passed on 21 July 2008 to raise a levy of $6.1 million for repairs and to resolutions  passed  on  15 April  2009  to  recover  any unpaid  levies  owed  to  the plaintiff through Court proceedings, to add interest to any unpaid levies and to recover all costs and expenses in recovering any unpaid levies, which it says form the basis of its claim against the defendant.

History of the claim

[4]      The claim started life not in the High Court but in the District Court where the Body Corporate filed a notice of claim on 19 February 2010.  The amount sought at that time was $28,415.25, together with interest and costs.

[5]      In a response filed by the defendant on 7 May 2010, he admitted owing

$11,977.38, which he had calculated by subtracting interest, debt collection costs and legal costs as well as what he said was his share of a sinking fund and surplus operating levies from the amount claimed by the Body Corporate.

[6]      Following an application by the Body Corporate for judgment in the sum of

$11,977.38 dated 16 June 2010 which was based on the defendant’s admission that he owed that sum, the defendant paid the sum of $11,977.38 to the Body Corporate on 8 July 2010.   He has paid nothing further.   The Body Corporate says that the defendant’s indebtedness has now increased substantially because subsequent levies for routine maintenance costs have been added to the amount outstanding from the

2008 levy for repairs.   In addition, interest, debt collection costs and legal costs continue to be incurred.

[7]      On 16 July 2010, the defendant served the Body Corporate with documents alleging that the Body Corporate had misappropriated money from a sinking fund and surplus operating levies by spending it on non-approved and excessive remedial costs. The Body Corporate denies this claim.

[8]      Subsequently, by application dated 26 January 2011, the Body Corporate applied to transfer its claim to the High Court on the basis that the claim arose in the context of two judgments given in the High Court in which the Body Corporate was placed in administration and made subject to a scheme to undertake repairs.  At least one issue arising in the claim was said to be the effect of the orders already made by the High Court.   In addition, it was submitted that the defendant was, in essence, seeking an order compelling the Body Corporate to comply with its requirements or duties imposed by the Unit Titles Act 1972 and that such an order could only be made by the High Court under s 51 of the Act.

[9]      The defendant opposed the transfer application.  After hearing argument on

19 May 2011 from both parties, Judge Harvey transferred the claim to the High Court  on  the  basis  that  the  matters  raised  by  the  defendant  involved  questions relating to the duties of the Body Corporate and accordingly the District Court lacked jurisdiction to hear the claim.  No appeal was filed against the District Court decision to transfer the claim to the High Court.

[10]     By memorandum dated 23 January 2012, the defendant seeks a change of venue to “best enable the matter to be cost efficiently and effectively dealt with”.  He wants his claim to be heard in the Tenancy Tribunal.   He points to a number of prejudicial consequences to him of the claim being heard in the High Court as follows:

(a)       the requirement to engage legal counsel in the High Court at huge personal expense, which is not so in the Tenancy Tribunal;

(b)      the disadvantage to him in the High Court where counsel for the Body

Corporate knows the procedures and processes; and

(c)       the risk of huge costs being awarded against him when senior counsel engaged by the plaintiff charges in excess of $400 per hour.

[11]     The defendant is not, however, obliged to engage legal counsel in the High Court.  He appeared in person on the hearing of the application in this Court and at all stages in the District Court.   Secondly,  I assume that counsel for the Body Corporate also knows the procedures and processes in both the District Court and the Tenancy Tribunal.   This Court is also alive to the challenges that procedural requirements   pose   to   self-represented   litigants   and   will   make   allowances accordingly.  Finally, I also note the counsel who appeared for the Body Corporate in this hearing is not senior counsel.  She also appeared in the District Court to argue the transfer application heard by Judge Harvey on 19 May 2011.  The defendant’s arguments on cost efficiency and effectiveness do not therefore appear to me to carry much, if any, weight.

[12]     The   defendant   concedes   that   the   amount   now   claimed   exceeds   the jurisdiction of the Tenancy Tribunal, which is set at $50,000, but submits that the claim  has  been  inflated by legal  costs  incurred  by the Body Corporate without obtaining judgment for those costs or providing an itemised account of them. However, the jurisdictional limit applies only to the claimed sum and not the proved

sum.  The Body Corporate claims $56,951.77, together with interest and costs.  The Body Corporate has not forgone part of its claim to bring it within the jurisdiction of the Tribunal.  As it stands, the Tenancy Tribunal has no jurisdiction to hear the Body Corporate’s claim.

[13]     Finally, the defendant says he cannot afford legal counsel but has colleagues who would be able to assist him to have his case heard in the Tenancy Tribunal.  He says to prevent him having that opportunity would deny his right to justice.   I certainly do not want to deny the defendant his right to justice but fail to see why his colleagues are not able to assist him in the High Court.   They might have been present to aid the defendant in Court as MacKenzie friends.   In fact, three of his colleagues have filed affidavits in these proceedings.  The defendant has also filed an affidavit in opposition to the application for summary judgment.   I will certainly have regard to the sworn evidence of the defendant and his colleagues in determining the Body Corporate’s application for leave to apply for summary judgment and for summary judgment.

[14]     In all the circumstances, I decline the defendant’s application to transfer the claim to the Tenancy Tribunal, assuming that I had jurisdiction to do so.  I did not hear  argument  on  the  issue  of  the  High  Court’s  jurisdiction  to  transfer  the proceedings  to  the Tenancy Tribunal  so  my decision  to  decline  the  defendant’s application  on  its  merits  should  not  be  taken  as  deciding  that  there  is  such jurisdiction.

Application for leave to apply for summary judgment

[15]     The Body Corporate did not commence the proceeding against the defendant by way of a summary judgment application in the District Court as it understood that this course of action was no longer available under the new District Court Rules. As the  claim  is  now  in  the  High  Court  jurisdiction  where  summary  judgment applications are available, the Body Corporate seeks the Court’s leave to proceed with a summary judgment application on the basis that the defendant has no defence to its claim.

[16]     Rule 12.4 of the High Court Rules provides that an application by a plaintiff for summary judgment may be made either at the time the statement of claim is served on the defendant or later with the leave of the Court.  No guidelines are laid down  for  the  granting  of  leave.    The  question  is  clearly  a  discretionary  one. However, the history of the claim is such that I am of the view that leave should be granted to the Body Corporate to make application for a summary judgment.  After the claim was transferred to the High Court, the Body Corporate filed an amended statement  of  claim  at  the same  time  as  filing  an  application  for  leave to  issue summary judgment proceedings.  Although a notice of claim was first filed in the District Court on 19 February 2010, the Body Corporate made application for summary  judgment   at   the  first   opportunity  in   the  High   Court.      In   those circumstances, I grant leave to the Body Corporate to make application for summary judgment.

Legal principles relating to application for summary judgment

[17]     The principles applicable to summary judgment applications were described by the Court of Appeal in Krukziener v Hanover Finance Ltd1 as follows:

[26]      The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ

84 (CA).

[18]     Thus, although the onus is on the Body Corporate to show that the defendant does not have a defence to its claim, the defendant must put forward an issue or

issues  worthy  of  trial  if  the  plaintiff ’s  summary  judgment  application  is  to  be

1      Krukziener v Hanover Finance Ltd (2008) 19 PRNZ.

declined.   I am not, however, bound to accept uncritically every statement in a defence affidavit.   Where those affidavits are equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent or inherently improbable in themselves then the Court may assess them critically.

[19]     As noted by Wylie J in S H Lock (NZ) Limited v Oremland:2

While the onus of showing there is no defence is on the plaintiff ... the discharge of that onus is not in my view, to be frustrated by a defendant raising hypothetical possibilities in vague terms unsupported by any positive assertions or corroborative documentation.

Discussion

[20]     Grand Central Station was a leaky building.  The history of its administration is  set  out  in  three  judgments  of  the  High  Court  -  the  first,  appointing  an administrator;3 the second, sanctioning a scheme for repair of the building;4 and the third, authorising the allocation of levies on an equitable basis.5

[21]     At the annual general meeting of the Body Corporate held on 21 July 2008, at which the defendant was present as owner of Unit 403, the following resolutions were passed:

Resolved  that  a  special  levy  $6,100,000  plus  gst  be  raised  by  unit entitlement,   25%   raised   immediately   in   the   first   instalment,   second instalment 25% raised 1 November, third instalment 25% raised 1 February

2009, fourth instalment 25% raised 1 May 2009 and due in 30 days.

[J Griffin/C Elson Carried.]

N McGowan abstained on behalf of the Hamblett Trust

Resolved  to transfer the Sinking Fund to the Remediation Account for the remedial repairs.

[P Walters/M McGovern  Carried.]

2      S H Lock (NZ) Limited v Oremland CP641/86, 19 August 1986.

3      Norman v Body Corporate 193764, CIV-2009-404-6570, 23 October 2009, Hugh Williams J.

4      Body Corporate 193764 v Antioch Investments Ltd  HC Auckland CIV 2009-404-7149, 16

December 2009.

5      Norman & Ors v Body Corporate 193764, CIV 2009-404-006570, 27 June 2011.

[22]     The defendant was also present at the next annual general meeting of the

Body Corporate on 15 April 2009. The minutes record:

Debt collection

The secretary advised the purpose of the resolution suggested on the meeting’s agenda was to provide the Secretary with the authority of the body corporate to deal with debtors.  The secretary advised that 14 days after the payment due date debtors would be sent a letter and statement outlining the process to be followed if their levy remained unpaid.

Resolved  that the Secretary is authorised to recover any unpaid levies owed to the Body Corporate, whether through Court proceedings or otherwise, that may be outstanding for 14 days after the due date and to levy interest at the rate of 10% per annum as provided in s 34A of the Unit Titles Act on any monies due from the due date until the date of payment.   The Secretary’s costs and all costs and expenses involved in the issue of demands or legal proceedings on a full cost recovery basis shall be charged against the defaulting proprietor in full.  The Secretary is directed to pursue any current debtors who are beyond 14 days of due date using the Crockers’ collection procedure and this includes the issue of proceedings if need be.

[A Tonkin/G Curtis  Carried.]

It was confirmed that all unit owners where no levies were paid had been sent final demand notices.  The next step, upon instruction of the committee, is to commence summary judgment proceedings, or issue a statutory demand where the units are owned by a corporate entity.

[23]     In accordance with the resolution passed at the annual general meeting on 21

July 2008, the Body Corporate invoiced the defendant for his share of the levy of

$6.1 million calculated in accordance with his unit entitlement (being 0.48799%). This amounted to $34,079.17 and was payable in four equal amounts of $8,519.79.

[24]     In addition, the defendant has been levied the sum of $31,223.69 between

11 July 2007 and 6 July 2011 in respect of routine maintenance costs.   In other words, the levies imposed on the defendant since 2007 in respect of both remedial work and normal operating expenses total $65,302.86, of which the defendant has only ever paid $31,977.38, which leaves a shortfall of $33,325.48.

[25]     As noted above in paragraphs [5] and [7], the defendant believes that the sinking fund and the surplus operating levies were supposed to be offset against any remedial levies and that the Body Corporate has misappropriated them by using them for repairs.  It seems to me however that the defendant’s position is inconsistent

with undisputed contemporary documents, in particular, the resolutions passed by the Body Corporate  at  its Annual  General  Meeting  on  21  July 2008  where  it  was resolved to raise a special levy of $6.1 million as well as transfer the sinking fund to the remediation account for the remedial repairs.  The resolutions clearly authorised the Body Corporate to use the sinking fund for repairs in addition to the $6.1 million levy.   As to the use of surplus operating levies for repairs, the Annual General Meeting on 14 April 2009 approved an operating budget of $901,449 plus GST which included the sum of $150,000 for repairs as an extraordinary item.  I am of the opinion that the defendant is therefore not entitled to a deduction of his share of the sinking fund and surplus operating levies based on unit entitlement.  Their use on repairs was authorised by the owners in the general meeting.

[26]     In addition to the shortfall in payments in respect of both the remedial levy and  the  normal  operating  levies,  the  defendant  has  not  reimbursed  the  Body Corporate for repairs to bathroom lights, the replacement of internal door handles, and pest eradication, all of which was work specifically undertaken on his unit for his benefit alone. Auckland City Council rates of $1,155.40 also remain outstanding.

[27]     In his affidavit dated 30 September 2011, the defendant raises a number of other issues relating to the levies.  In particular, he alleges that the Body Corporate raised levies against owners in an unlawful manner up to June 2011 and that they raised levies to fix private property, which they had no right to do.  These matters were however considered in proceedings taken by the administrator of the Body Corporate to authorise the apportionment of levies and are dealt with in my judgment of 27 June 2011.  Attempting to reopen these issues cannot form a defence to the summary judgment application.

[28]   The defendant also complains about the process of appointment of an administrator and queries why administration continues at some cost when repairs have been completed.   The defendant is able to make application to this Court to terminate the appointment of the administrator but I fail to see how this provides some sort of defence to the Body Corporate’s claim for unpaid levies, interest, debt collection costs and legal costs.

[29]     In the hearing before me, the defendant acknowledged to some extent his liability for the levies but objected to the interest charged on unpaid levies of 10%, debt collection costs and legal costs.   In particular, the defendant referred me to a letter dated 3 August 2011 he sent to the Law Society complaining about the amount of one of the bills from the solicitors representing the Body Corporate, which was on-charged to him over a year earlier.   However, the New Zealand Law Society decided on 17 October 2011 that no further action would be taken in respect of the defendant’s complaint.  It noted that the solicitors acted for the Body Corporate in the recovery of levies that the defendant had failed to pay.  The legal costs arising out of those proceedings were then levied to the defendant by the Body Corporate. That was a decision by the Body Corporate.  The solicitors were simply acting on instructions when it sought to recover that sum from the defendant.  There was no evidence of any professional shortcoming on the part of the solicitors.   The Law Society held that the complaint could not be sustained and resolved to take no further action in respect of the defendant’s complaint.

Conclusion

[30]     In conclusion, I have reached the view that the defendant has no defence to the Body Corporate’s claim.  The defendant acknowledges liability to some extent for the levies.   He was also present at the Annual General Meeting of the Body Corporate on 15 April 2009 as the registered proprietor of Unit 403 at which he was entitled to vote.   At that meeting it was resolved that the Body Corporate was authorised  to  recover  any  unpaid  levies  owed  to  it,  whether  through  Court proceedings or otherwise, and to levy interest at rate of 10% per annum as provided in s 34A of the Unit Titles Act on any monies due from the due date until the date of payment.  The Body Corporate was also directed to recover all its costs and expenses involved in the debt collection or legal proceedings on a full cost recovery basis.  I am of the view that the Body Corporate is merely carrying out the directions of the owners when it continues with its claim against the defendant.

[31]     The Body Corporate’s claim at the time it filed its amended statement of claim in the High Court amounted to $56,951.77.  This amount was verified by the affidavit  of  Marion  Jean  Holt  sworn  on  2  September  2011.    There  have  been

subsequent legal costs which are proved in the affidavit of Georgina Patricia Hill sworn on 1 February 2012.  Invoices from the Body Corporate’s solicitors totalling

$9,811.13 have been rendered since the statement of account annexed to the affidavit of Ms Holt as Exhibit 12.

[32]     Accordingly, summary judgment is granted against the defendant in favour of the plaintiff for the following sum:

(a)    Principal sum outstanding as at 8 July 2011  $56,951.77

(b)    Grove   Darlow    invoices    from   29   July   2011   to

31 January 2012

$9,811.13

(c)   Interest at the rate of 10% as permitted by s 34A of the Unit Titles Act on the sum of $33,325.48 (being the total of unpaid levies as at 8 July 2011) from 8 July

2011 to 1 February 2012 (209 days @ $9.13 per day)

$1,908.17

Total  $68,671.07

Costs

[33]     I make no separate order as to costs because the claim includes legal costs as authorised  by the  resolution  passed  at  the  annual  general  meeting  of  the  Body Corporate on 15 April 2009.

……………………………….

Woolford J