Body Corporate 198693 v Tao
[2022] NZHC 804
•14 April 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-001528 [2022] NZHC 804
UNDER Rules 15.10, 17.29 and 17.30 of the High
Court Rules 2016
IN THE MATTER
of Sale Order / Enforcement Process
BETWEEN
BODY CORPORATE 198693
Applicant
AND
NAI ZUO TAO and HUA XI
Respondents
Hearing:
Further evidence:
28 February 2022
14 and 21 March 2022
Appearances:
C Baker for Respondent
Nai Zuo Tao in person assisted by his daughter, An Li Tao
Judgment:
14 April 2022
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Thursday, 14 April 2022 at 11:00 am pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors: Price Baker Berridge (C Baker), Auckland Copy to: Applicants
BODY CORPORATE 198693 v HUA XI [2022] NZHC 804 [14 April 2022]
[1] The respondent, Body Corporate 198693, has obtained a final judgment and sale order against the applicants who are the joint owners, together with their daughter, Ms An Li Tao, of Unit R in a unit title development at 8 Margan Avenue, New Lynn. On 16 November 2021, the applicants filed an application to set aside the sale order and/or for a stay of enforcement.
Grounds of application
[2]The applicants say:
(a)the respondent has never served the application for a sale order on them;
(b)the respondent claimed that the amount of $14,405.14 remained unpaid, which sum did not take into account payments by the applicants of
$916.80 on 15 April 2019 and $2,098.62 on 27 June 2019. In addition, no accounting was made of the sum of $890 paid by the applicants on 28 May 2018 as security for costs in respect of a failed appeal to the District Court against the determination of the Tenancy Tribunal;
(c)there is a lack of justification for the “subsequent costs and disbursements of $2,695.00” listed in the sale order;
(d)the applicants have filed a claim in the Human Rights Review Tribunal against the respondent on the grounds of discrimination on the basis of race or ethnic or national origins in that the respondent has not taken enforcement action against two Indian owners for unpaid levies;
(e)the respondent’s secretary/manager, Strata Title Administration Limited (Strata), has engaged in fraudulent activities by transferring large amounts of money to a few unknown recipients;
(f)the respondent has misled the High Court by advising the Court in separate unsuccessful proceedings taken by their daughter, Ms Tao, against the respondent that it had opened a separate bank account to receive the levies from the owners;
(g)although the respondent only claimed unpaid levies of $3,015.42, it also claimed more than $8,000 “legal costs” and $394.61 as wrongly calculated “interests”; and
(h)on appeal in the District Court, Judge Harrison was wrong to find that the Tenancy Tribunal had implicitly approved legal representation for the respondents. The threshold in s 93 of the Residential Tenancies Act 1986 was not met. Judge Harrison also did not consider whether the costs claimed by the respondent were reasonable in terms of s 124 of the Unit Titles Act 2010.
The law
[3] A sale order is a method of enforcing a judgment.1 An enforcement process such as a sale order may be issued as of right unless leave of the Court is required under r 17.9 of the High Court Rules 2016.2 An enforcement process is issued by the entitled party or that party’s solicitor filing (a) a written request that a particular enforcement process should be issued, and (b) an affidavit stating that none of paragraphs (c) to (e) of r 17.9(2) apply.3
[4] An entitled party issuing an enforcement process must file an original order for the particular enforcement process sought and a copy for the Court.4 The Registrar must seal the original order and give it to an enforcing officer.5
[5] A liable party may apply to the Court for a stay of enforcement or other relief against the judgment upon the ground that a substantial miscarriage of justice would be likely to result if the judgment were enforced, and the Court may give relief on just terms.6 The Court may also set aside an enforcement process if it is issued contrary to
(a) any order of the Court; or (b) the agreement of the entitled party or; (c) good faith.7
1 High Court Rules 2016, r 17.3.
2 Rule 17.8(1).
3 Rule 17.8(2).
4 Rule 17.22(1).
5 Rule 17.22(2).
6 Rule 17.29.
7 Rule 17.30.
[6] An entitled party may issue a sale order at any time after judgment for a sum of money is sealed.8 An entitled party must endorse the sale order with the amount claimed.9 The amount claimed must reflect money paid on account of the judgment, the entitled party’s wish to waive any part of the money and/or the entitled party’s costs or that the judgment has been given for a larger amount than is due.10 If the amount due under a judgment is less than the amount of the judgment and the entitled party has not endorsed that on the sale as required by r 17.64(2), the Court may set aside or vary the order and make whatever restitutionary or incidental orders are thought just.11
[7] An enforcing officer must give notice of the sale in a newspaper at least 15 working days before the date of the intended sale.12 Then, at least seven working days before the sale, an enforcing officer must serve a copy of the notice referred to in r 17.71 on the liable party at the liable party’s address for service.
Discussion
Service of application for sale order
[8] There is no requirement in the High Court Rules that the entitled party serve the liable party with an application for sale order. There is no actual application required. An entitled party is entitled to have a sale order issued by the High Court as of right. The entitled party merely has to make a written request. Such a request does not come before a judge. It is dealt with administratively. The only requirement for service is of a notice, which must state that the sale is made on behalf of the entitled party and must specify the land intended to be sold, the name of the enforcing officer and the name of the solicitor (if any) for the entitled party. Such a notice must be served by the enforcing officer (not the entitled party) on the liable party at least seven working days before the sale.13
8 Rule 17.63.
9 Rule 17.64(1).
10 Rule 17.64(2).
11 Rule 17.64(3).
12 Rule 17.71.
13 Rule 17.72.
Failure to take two payments and security for costs into account
[9] The applicants raised the issue of a payment of $916.80 on 15 April 2017 on appeal before Judge Harrison. The applicants sought to adduce further evidence on appeal, which they claimed was proof of payment. The further evidence was in the form of a bank statement, allegedly showing a deposit of $916.80 into the bank account of the respondent on 15 April 2017. However, the respondent’s account manager produced its bank statements for the same period, which did not record any payment received by or on behalf of the applicants.
[10] Judge Harrison found that the applicant could have produced their evidence before the Tenancy Tribunal but did not do so. In light of the fact that the evidence then adduced by the respondent demonstrated that the claimed payment was not made, Judge Harrison declined leave to the applicants for them to adduce further evidence on appeal. There were no special reasons for hearing the evidence on appeal.
[11] In this Court, one of the applicants, Mr Nai Zuo Tao, has attached a Kiwibank document date-stamped 26 June 2019 to his affidavit, affirmed on 14 March 2022, as evidence of the payment of $916.80 on 15 April 2017. This is the same payment in respect of which Judge Harrison refused leave to adduce fresh evidence in the appeal he heard from the decision of the Tenancy Tribunal. This is, however, only a small part of the debt owing to the respondent such that a substantial miscarriage of justice would not be likely to result if the judgment were enforced, which is the appropriate test to apply to the current application to set aside the sale order or for a stay of enforcement.
[12] As to the second sum of $2,098.62, the respondent acknowledges that the applicants paid this sum after the Tenancy Tribunal’s decision, but prior to the appeal hearing in the District Court. It has therefore issued an amended sale order specifying the sum of $12,306.52, being the original sum of $14,405.14 less the sum of $2,098.62.
[13] The respondent also acknowledges that the applicants paid the sum of $890 into the District Court as security for costs. The District Court subsequently ordered the applicants to pay cash of $1,085 to the respondent in respect of the unsuccessful appeal. The District Court should therefore pay the sum of $890 which they hold to
the respondent in partial payment of the costs awarded to it. The respondent has not yet received the sum of $890, but it has undertaken that when it does, the amount with respect to which the sale order proceeds will be reduced by the same sum.
Subsequent costs and disbursements of $2,695
[14] The subsequent costs and disbursements comprise a filing fee of $1,500 paid to the Court, and scale costs of $1,195.14
[15]The claim for $2,695 is unobjectionable.
Claim in the Human Rights Review Tribunal
[16] The applicants’ claim in the Human Rights Review Tribunal has yet to be determined. The applicants say that this is in the form of a counterclaim and their combined demand for $60,000 against the respondent in the Human Rights Review Tribunal well exceeds the amount claimed by the respondent in the present proceedings. It is not, however, a counterclaim as such because it is not filed in the same court or tribunal. The prospective success or otherwise of the claim in the Human Rights Review Tribunal does not disentitle the respondent from exercising its rights to recover payment of the debt owed to it by the applicants.
Fraudulent activities
[17] In support of their claim of fraudulent activities, one of the applicants, Mr Tao, annexes a copy of a transaction history report for a bank account in Strata’s name for seven days from 15 April 2017 to 22 April 2017. It consists of 15 pages and 424 transactions. In his affidavit, Mr Tao states, “In this Bank Statements, most of the withdrawals which have been transferred to the unknown payee”.
[18] Mr Tao also annexes a copy of the respondent’s statement of financial performance for the period from 1 February 2017 to 31 October 2018, and comments that through comparing the transaction history report and the statement of financial
14 Schedule 3. 0.5 days are allowed for item 61, “Sale order, including sale of seized property”, at a rate of $2.390 per day.
performance, no matching data can be found. He states: “The fraud is undisputable, unless the respondent is able to justify these withdrawals, provide evidence of who were the recipients and the authorizations from the Body Corporate.”
[19] With respect, the transaction history report and the statement of financial performance do not, by themselves, provide any evidential foundation for an allegation of fraud. It is obvious that the bank account in Strata’s name was used as a clearing account for a number of unit title developments and not just the property at 8 Margan Avenue, New Lynn. The withdrawals from the bank account are also incomprehensible without analysis and reconciliation with other records. For instance, the sum of $75,516.33 was withdrawn from the account on 18 April 2019. The payee is described as 19035 EFT13042017 and the reference is 072639. But the fact that the withdrawals are incomprehensible without analysis and reconciliation with other records does not make them fraudulent. It is not for the respondent to prove they are not fraudulent as Mr Tao invites the respondent to do. There is instead an evidential onus on the applicants to provide some evidential foundation for an allegation of fraud. This they have not done.
Separate bank account
[20] The applicants refer to a judgment of Thomas J in separate unsuccessful proceedings to allege that the respondent has misled the Court about opening and using a separate bank account to receive levies from the owners.15 The applicants refer to the statement made by Thomas J:16
Even if there were any issue as to whether the bank account operated by Strata was in breach of s 120 of the Act, which, given s 120(b) and the evidence of compliance, it was not, a separate bank account has now been opened.
[21] The Judge had, however, earlier found that the respondent was not in breach of s 120. Thomas J stated:17
Finally in relation to Strata, Ms Tao alleges that it has breached s 120 of the Act by failing to provide bank statements to the owners. Section 120 requires each body corporate to maintain either a separate bank account for its funds,
15 Tao v Strata Title Administration Ltd & Anor [2016] NZHC 814.
16 At [85].
17 At [61].
or a single bank account in which the respective funds are kept entirely separate and are able to be identified. Section 120 does not provide for the disclosure of any bank statement information, and Strata’s evidence shows that it keeps a compliant account with financial details reviewed by an auditor. The auditor’s report is sent out to owners along with the AGM agenda and materials, and has been approved by the body corporate at each AGM. Section 120 places no disclosure obligations on Strata, and there is no other evidence that it is in breach of s 120 as alleged.
[22] Subsequent to the hearing, the applicants provided the Court with affidavits dated 22 March 2016 from the former chairperson of the respondent, Mr Jigar Pandya, and the former managing director of Strata, Mr Michael Williams, which had been filed in the earlier proceedings before Thomas J. These referred to instructions given by the respondent to Strata on 30 October 2015 to establish a separate bank account/s to hold and administer the respondent’s funds.
[23] In an affidavit in response dated 21 March 2022, the current general manager of Strata, Ms Nicola Bullock, advises that Mr Pandya subsequently sold his unit and is not longer a member of the respondent. Mr Williams also ceased to be the managing director of Strata in May 2016. Ms Bullock therefore advises that neither she nor anyone else in Strata nor anyone now on the committee of the respondent has any background information as to why accounts were opened by the respondent in 2016, but not used after that year.
[24] Ms Bullock confirms that the body corporate fees collected from unit holders at 8 Margan Avenue, New Lynn, are deposited into a trust account held by Strata along with many other body corporates managed by Strata. The Court in the earlier proceedings specifically endorsed this practice as compliant with the Unit Titles Act. Ms Bullock assumes that, following the 2016 High Court decision, the committee of the respondent reverted to the use of the Strata general trust account as a compliant account rather than utilising the separate account/s identified in the affidavits of Mr Pandya and Mr Williams. Ms Bullock further assumes that the committee’s view changed as to the necessity or desirability of the alternative account/s once the decision of Thomas J was released.
[25] Having reviewed all the information now provided by the applicants, the respondent’s continued use of a compliant general trust account in the name of Strata
will not likely result in a substantial miscarriage of justice if the judgment for the respondent and against the applicants is enforced by way of a sale order.
Legal costs and interest
[26] The original sale order recorded a judgment debt of $14,405.14 as recorded in a sealed final judgment. It comprised:
Tenancy Tribunal - 3 August 2017
Levies $3,015.92 Costs $6,430.11 Filing fee $850.00 Interest $394.61 $10,690.14
District Court – charging order - 3 October 2017
Schedule costs and filing fee $962.00
Tenancy Tribunal - 22 December 2017
Counsel’s attendances $1,518.00 (1/3 of $4,554.00)
District Court on appeal - 9 November 2020
Schedule costs $1,085.00
Miscellaneous
Cost of two certificates of judgment $100.00 Cost of sealing judgment $50.00 $14,405.14
[27] As to the reasonableness of the costs awarded against the applicants, the Adjudicator stated in his decision dated 3 August 2017:
[44] The Body Corporate is entitled to claim costs incurred in collecting levies, including costs on a solicitor/client basis, pursuant to rule 5 of the Body Corporate’s Operational Rules and in accordance with section 124 UTA. I am satisfied that, viewed objectively and applying Cheah and Gilbert to the present facts, the costs claimed in respect of each application are reasonable. In so finding, I have taken into account the merits of the various arguments raised by the respondents in opposing the applications and the need to respond to those arguments.
[28] However, the Adjudicator did not, at the time, award costs in respect of counsel’s appearance at the hearing. He stated:
[45] The Body Corporate also sought costs in respect of counsel’s appearance at the hearing in the sum of $3,200.00. Understandably, no invoice to the Body Corporate for these costs was produced at the hearing. Because the Body Corporate is only entitled to claim costs incurred in collecting levies, I have reserved leave for the Body Corporate to seek a further order in respect of the costs incurred for the hearing provided an invoice rendered for those costs is provided to the Tribunal.
[29] The Adjudicator did subsequently award such costs in a later decision. He stated:
[7] After considering the submissions made in the memoranda filed, I am satisfied that the total solicitor/client costs claimed for counsel’s attendance at the hearing, $4,554.00, are reasonable. In so finding I have taken into account the range of issues that were raised by the respondents in defence to the levy claims as well as the standard principle that costs should follow the result. I am satisfied that, notwithstanding the relatively modest amounts of unpaid levies, the respondent’s strident opposition to the levy claims and the history of litigation between the owners of unit R and the Body Corporate in other jurisdictions meant that it was entirely appropriate for the Body Corporate to be represented at the hearing by experienced counsel. Finally I note here, and in relation to one of the concerns raised by Ms Tao in her memorandum, that the hearing costs claimed only relate to Mr Baker’s attendance at the hearing.
[8] I consider that it is appropriate, given the very similar arguments raised by all three respondents in opposing the claims, for each respondent to bear an equal share of the hearing costs.
[30] The costs awarded in the District Court relating to an application for a charging order by the respondent and an appeal against the Tenancy Tribunal decision by the applicants (both of which were resolved in the respondent’s favour) are in accordance with Schedule 4 and 5 of the District Court Rules. They are quite unexceptional.
[31] Interest is also payable on the unpaid levies in accordance with s 128 Unit Titles Act and resolutions passed at annual general meetings of the respondent at the rate of 10 per cent per annum. Again, there is nothing exceptional about the award of interest. The applicants have not demonstrated how such interest was wrongly calculated.
District Court Errors
[32] Counsel are in general not permitted to appear in the Tenancy Tribunal except in special circumstances. Section 93(2) and (3) of the Residential Tenancies Act 1986 provides:
93 Right of audience
…
(2)Except as provided in the succeeding provisions of this section, no party shall be entitled to be represented at the hearing by counsel or by a representative, except where—
(a)the other party consents; or
(b)the amount in dispute exceeds $6,000; or
(c)the other party is, or the other party’s case is being conducted by, the chief executive acting under section 124 or 124A.
(3)The Tribunal may allow any party to be represented by counsel if it considers that it would be appropriate to do so, having regard to—
(a)the nature and complexity of the issue involved; or
(b)any significant disparity between the parties affecting their ability to represent their respective cases.
[33] The applicants say that Judge Harrison was wrong to find that the Tenancy Tribunal had implicitly approved legal representation for the respondent. The Tenancy Tribunal had in fact specifically approved representation of the respondent by counsel.18 The Adjudicator has not been shown to be wrong in his assessment, given the multiplicity of actions taken by the applicants in a number of different jurisdictions.
[34] Although Judge Harrison did not specifically focus on the reasonableness of the costs claimed by the respondent, it appears that the reasonableness of the costs was not a specific focus of the appeal. Rather, the focus was on the decision of the Tribunal to allow the respondent to be represented by counsel. The Judge concluded:
[24] The Tribunal was therefore entitled to allow the Body Corporate to be represented by counsel pursuant to s 93(3) by reason of the nature and complexity of the issue involved, and the appellants’ share of the Body Corporate’s costs was properly allowed.
[35]The Judge’s conclusion was not wrong.
18 See [29] above.
Result
[36] The application to set aside the sale order and/or for a stay of enforcement is dismissed. Costs are to follow the event.
Woolford J
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