Body Corporate 207498 v Zhang

[2020] NZHC 2435

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-000878

[2020] NZHC 2435

BETWEEN

BODY CORPORATE 207498

Plaintiff/Respondent

AND

XIURU ZHANG

Defendant/Applicant

Hearing:	17 September 2020
Appearances:	P J Napier and N W Coyle for Plaintiff/Respondent J C Morrison for Defendant/Applicant
Judgment:	17 September 2020

ORAL JUDGMENT OF VENNING J

APPLICATION FOR STAY OF ENFORCEMENT

Solicitors:           Keegan Alexander, Auckland

Hesketh Henry, Auckland

BODY CORPORATE 207498 v ZHANG [2020] NZHC 2435 [17 September 2020]

[1]    The application before the Court is an application by Ms Zhang to stay enforcement of a judgment obtained by the Body Corporate 207498 in the District Court on 25 February 2020.1 The judgment has been transferred to this Court for execution. The Body Corporate intend to sell Ms Zhang’s unit. Ms Zhang seeks orders staying enforcement of the judgment pending determination of her application to set aside the judgment, which was obtained by summary judgment.

[2]    The judgment entered in favour of the Body Corporate arises against the background of a levy imposed on apartment owners. The property in question is at 437 Parnell Road, known as Parnell Oaks. There are 10 apartments. The property unfortunately suffered from leaky building syndrome. The Body Corporate has struck a number of levies to address the issues that that has caused the apartment owners, including Ms Zhang.

[3]    The Chair of the Body Corporate is a Mr Phillip Melchior. As Mr Melchior has deposed in his affidavit in opposition to the current application the situation was made worse by the discovery during the course of the remedial works that there were non-compliant structural issues in the interior of the buildings. That resulted in significant financial burdens for all the unit holders in the Body Corporate. In his estimate, roughly speaking, it has cost about 80 per cent as much to repair the property as it would have to build the property from scratch.

[4]Ms Zhang purchased her unit in the property on 19 June 2015.

[5]    Special levies were initially raised in August 2017 to pay for remedial work. Ms Zhang’s ownership or utility interest share is 11.36 per cent. Ms Zhang paid her share of the initial levies.

[6]    By resolution adopted at a general meeting of the owners on 31 October 2018, the owners resolved to raise an operational levy of $33,750.61. Ms Zhang paid her share of the first instalment. Payment of the second instalment was due 29 March 2019. Ms Zhang did not pay that balance. Then by ordinary resolution adopted at an Extraordinary General Meeting of the Body Corporate on 2 April 2019 the owners

1      Body Corporate 207498 v Zhang [2020] NZDC 3339.

resolved to complete further works to remediate and reclad the buildings at Parnell Oaks, and to do so to raise a special levy of $2,436,000.   Ms Zhang’s share was

$276,729.60. She was invoiced that amount on 9 April 2019. In addition the Body Corporate re-charged Ms Zhang $18,481 for incidental works carried out specifically at her unit during the remediation process.  The Body Corporate sought judgment for

$297,128.22 for the outstanding balance due under the invoices raised in relation to the above levies or re-charged amounts.

[7]    The summary judgment application was heard before Judge Sharp at 10.00 am on 25 February 2020. Although Ms Zhang had filed a defence, notice of opposition and affidavit, neither she nor any counsel on her behalf appeared. The Judge considered the matters raised in the defence by Ms Zhang before noting:2

[it] is fair to say that I am unable to divine from either her opposition or her affidavit what arguable defence, if any, exists for her.

The Judge entered summary judgment accordingly.

[8]    On 6 March Ms Zhang filed an application in the District Court seeking to set aside the summary judgment on the basis that she had not been heard. Ms Zhang says she understood the case was to have been heard at 2.15 pm on 25 February and attended the Court at that time. Unfortunately, again representing herself, Ms Zhang failed to serve that application to set aside the judgment until 20 May. In the meantime Judge Sharp had confirmed in a written direction issued on 27 March 2020 that the Body Corporate could seal the judgment. The judgment was sealed. On 24 June the Body Corporate requested this Court to issue an enforcement process.

[9]    When Ms Zhang’s application to set aside the summary judgment was called before the District Court on 28 July it was adjourned for a fixture on 10 November 2020.

[10]   In the meantime, the Body Corporate has registered a charging order over Ms Zhang’s unit and obtained a sale order. The Body Corporate seeks to pursue the sale of the unit to pay the judgment, interest and costs.

2 At [8].

[11]   Ms Zhang argues that the enforcement of the judgment and the proposed marketing and sale of her unit should be stayed pending the outcome of her application to set aside the summary judgment in the District Court. There are certain procedural issues for Ms Zhang in that application, not the least of which is that the judgment has been sealed. Notwithstanding that, I propose to deal with the application for stay on its merits as they appear before this Court.

[12]   The general principles to apply on such an application are settled. They were summarised in the Bay Cities Real Estate Ltd v Re/Max New Zealand Ltd case.3 The onus is on an applicant for stay of enforcement such as Ms Zhang to persuade the Court to exercise its discretion. The Court must be satisfied that a substantial miscarriage of justice is involved. Further, that such a miscarriage of justice is likely to result if the stay is declined.

[13]   In this case the Court may also consider the conflicting interests of the Body Corporate and the other apartment owners in addition to Ms Zhang’s interests. In addition the Court may consider the apparent strength of the proposed claim, the reasons the stay is sought, and any explanation for why the matter has reached the stage it has. The Court may also consider the ability of an applicant to meet the judgment, and the timeliness of the application.

[14]   At first sight, as Mr Morrison emphasised, there is merit in Ms Zhang’s concern that the application for summary judgment in the District Court proceeded in her absence. Ms Zhang received an initial notice from the District Court that the application for summary judgment would be heard at 2.15 pm on 25 February 2020. Apparently Ms Zhang sought to clarify that. She and her daughter attended Court on the afternoon of 25 February 2020, only to be told the summary judgment application had been heard at 10.00 am that morning.

[15]   However, it does appear that the Court and the Body Corporate sought to confirm or provide advice to Ms Zhang that the hearing time had been changed to

10.00 am on 25 February. I note that the Court gave Ms Zhang advice of the hearing

3      Bay Cities Real Estate Ltd v Re/Max New Zealand Ltd HC Napier CIV-2010-441-134, 8 June 2011.

at 10.00 am in a notice dated 18 February. That notice was sent to Ms Zhang’s address. While Ms Zhang had not provided an address for service in the District Court, the address the notice was sent to was Ms Zhang’s address recorded on her documents. The Court’s notice was sent on 18 February 2020, a week before the scheduled hearing at 10.00 am on 25 February 2020.

[16]   Further, on 19 February 2020 the solicitors for the Body Corporate sent an email to the email address used by Ms Zhang by way of service of an interlocutory application to amend an error in relation to the application. The email concluded with the advice:

You will see that it is being called on Tuesday 25 February 2020 at 10.00 am.

[17]   Mr Morrison argued that as Ms Zhang had not been heard she should be entitled to pursue her application to set aside the summary judgment entered against her before the sale order is pursued.

[18]   A summary judgment entered without the defendant appearing may be set aside if there has been or may have been a miscarriage of justice.4 In relation to that, the Court will consider whether there is a substantial ground of defence, any delay and whether the failure to appear in response to the summary judgment application is reasonably explained.

[19]   While as noted, Ms Zhang should have been on notice the application was to be heard at 10.00 am, the Court is prepared to accept for present purposes that there is a reasonable explanation on her behalf for her not attending at 10.00 am on 25 February when the application was heard.

[20]   However, the principal issue is whether she has a substantial ground of defence. That is a consideration for the District Court on the application to set aside and it is also a particularly relevant consideration for this Court as to whether or not there will be a substantial miscarriage of justice if the Body Corporate is permitted to

4      District Court Rules, r 12.14.

proceed with its enforcement procedures in advance of Ms Zhang’s application to set aside the judgment in the District Court.

[21]   In relation to that Mr Morrison properly accepted he could not argue on Ms Zhang’s behalf that the levy that had been levied in April 2019 was not payable. The record is clear from the evidence before the Court of the relevant meeting at which the levy was fixed and approved. The minutes of the meeting record it was unanimously approved. Even if it were not, however, and Ms Zhang now denies approving the levy, it would have been passed by nine out of 10 of the unit owners which is far in excess of the 75 per cent required for even a special resolution. The levy was properly payable. Ms Zhang’s share is readily calculable. I note Ms Zhang accepts in her evidence that the special levy for $2,436,000 for recladding and other remediation costs was passed at the meeting of 3 April 2019.5

[22]   Ms Zhang’s opposition to the payment of the levy, is as Mr Morrison put it, because she is “not convinced” that the levies were paid by other property owners and she is concerned at how the cost of remediation in relation to this building have increased so substantially. As noted, Ms Zhang’s concern at the increased costs is met by the evidence of Mr Melchior. Unfortunately, and roughly speaking, it has cost about 80 per cent as much to repair the property given its underlying issues, as it would to build the property from scratch.

[23]   Ms Zhang has also filed further affidavit evidence in reply to the Body Corporate’s opposition to her application for stay. Ms Zhang says that Judge Sharp appears to have failed to take into account that she had already paid levies of

$703,268.63 for the repairs. The reason Judge Sharp did not refer to those earlier levies is that they were not relevant to the application for summary judgment before her. They were not referred to in the statement of claim before the Judge. Those levies had been paid and were not in issue. The Body Corporate’s claim was in relation to the unpaid levies.

[24]   Next, consistent with Mr Morrison’s submission that Ms Zhang is not convinced the levies have been properly paid by other unit owners, she challenges the

5      [Ms] Zhang’s affidavit of 31 August 2020.

validity of the bank statements provided by the Body Corporate to show the payments by other unit owners of the levies. Ms Zhang says that she took the transaction history reports initially provided by the Body Corporate to various branches of the ASB Bank and received various advice about them.

[25]   Ms Zhang says that bank staff members told her that either they had never seen that format, or that the documents did not have the proper stamps. She says one teller suggested she should call the Police. Another said she had never seen that kind of document, and suggested the Bank should be asked to print out the statements for them, and the Bank would date it and sign it. Ms Zhang appears to be very distrustful over the actions of the Body Corporate generally.

[26]   In response Ms Doney, the in-house company accountant for Strictly Body Corporate Ltd, the entity that administers the Body Corporate, attached copies of ASB bank statements for the 2017/2018 period which cover the earlier levies period and confirm the payments. Ms Doney has also confirmed that all unit holders other than Ms Zhang have paid all current levies that were due and owing.

[27]   In addition, each of the other individual unit owners has filed affidavits confirming that they have paid the April 2019 levy. In their affidavits they have attached documentary evidence to confirm the payments. If Ms Zhang is not convinced that the levies have been properly paid by the other unit owners in light of that evidence, then it is difficult to see what more could be produced to satisfy her. In any event that evidence satisfies the Court that other unit owners have paid the April 2019 levies and all the relevant earlier levies.

[28]   Given that the levy was properly struck and others have paid it, Ms Zhang is left without any arguable basis to set aside the summary judgment which has been entered against her. I note, as Mr Napier observed, that in her affidavit in support of the application for stay, she said that:

If the Body Corporate provides officially recognised ASB documents and it is determined that I do owe the Body Corporate money, I will make arrangements to pay what I owe. I do not have a mortgage over my unit.

[29]   Returning to the other considerations, Ms Zhang’s home is at risk. If she does not pay the sale of her unit will proceed. It is a home for her, her daughter and her daughter’s children.

[30]   However, against that, as the Court has noted, there is no apparent basis for a defence to the claim by the Body Corporate for payment of the judgment of the District Court. It would be a futile exercise to stay this proceeding solely to enable Ms Zhang to apply to set aside the judgment when, as I have noted, quite apart from any procedural issues that may be in her way, on the merits there is no basis to Ms Zhang’s proposed defence.

[31]   Ms Zhang can avoid the impact on her by paying the moneys that are owed. If she pays what is owing, that will avoid the sale of her property. If she has a claim against the Body Corporate (and it is not apparent to the Court on what basis there could possibly be such a claim) she could pursue that claim in separate proceedings.

[32]   In considering the interests of justice overall I also take into account the interests of other unit owners who are impacted and affected by Ms Zhang’s refusal to pay the levy due.

[33]   Mr Melchior has said that in order to pay for the remediation work he took it upon himself to borrow the money to pay for Ms Zhang’s share initially. He has borrowed that money from the ANZ. He and his wife, who are in their early seventies or late sixties were mortgage free before that. He has done so because a real person must borrow the money rather than the Body Corporate and a number of other unit owners are suffering financially.

[34]   Also, in their affidavits in support a number of the unit owners have set out the effect on them of Ms Zhang’s failure to pay.6

6      The owners of unit 1, the Nanascas, will have to sell their unit. Ms Zhang’s refusal to pay is affecting their ability to do that, as matters are unfinished. Ms Whitehead, the owner of unit 7 says Ms Zhang’s refusal to pay has impacted her. She has the added stress that the sale of her property is impacted and has had to seek extra legal advice.

[35]   In summary, while I understand Ms Zhang’s concern about the progress leading to the entry of judgment against her in the District Court, she fails to satisfy this Court that a substantial miscarriage of justice would be likely to result if the Body Corporate is able to pursue with the enforcement of the judgment. There is simply no basis for a defence to the Body Corporate’s claim that Ms Zhang pay her share of the levies. To stay the enforcement of the judgment would only prolong the stress for all parties and increase the costs Ms Zhang will ultimately have to pay. Further, as noted, a number of other parties are prejudiced by Ms Zhang’s failure to meet her obligations under the April 2019 levy and the other outstanding sums.

Result

[36]For those reasons the application for stay is dismissed.

[37]   The Body Corporate is entitled to the costs of this application. Section 124 of the Unit Titles Act 2010 applies. The Body Corporate may recover its reasonable costs associated with the application.

Venning J