Body Corporate 207650 v Speck
[2018] NZHC 1952
•1 August 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-000326
[2018] NZHC 1952
UNDER the Unit Titles Act 2010, s 74 IN THE MATTER
varying a scheme for payment of remedial works
BETWEEN
BODY CORPORATE 207650
ApplicantAND
KATY SPECK and RYAN SPECK & ORS
Respondents
Hearing: 20 July 2018 Appearances:
SF Powrie for Applicant
Sixteenth Respondent in person (C Singh) Thirtieth Respondent in person (E Simpson)
Judgment:
1 August 2018
JUDGMENT OF DOWNS J
This judgment was delivered by me on Wednesday, 1 August 2018 at 4 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Grove Darlow & Partners, Auckland.
Copy to:
Sixteenth Respondent.
Thirtieth Respondent.
BODY CORPORATE 207650 v SPECK & ORS [2018] NZHC 1952 [1 August 2018]
The case
[1] Richmond Terraces is a residential complex in East Tamaki. It leaked. In 2016, the High Court approved a repair scheme under s 74 of the Unit Titles Act 2010.1 The scheme acknowledged the extent of the damage could not be known until work commenced. Sadly, the damage was much worse than anticipated. There have been four “top-up” levies to date. A final levy is to come.
[2] Code compliance certificates have been issued in respect of all units—the work is largely complete. The scheme requires the body corporate to apply to discharge it within 25 working days of obtaining a code compliance certificate for the complex. But, because of a dispute with a consultant, the body corporate says it cannot yet issue the final levy and so cannot discharge the scheme: levies are made under the scheme. The body corporate applies to vary the scheme so it is instead required to apply for its discharge within 25 working days of issuing the final levy. The owners of three units oppose the application: Ms Stark-Heath (unit 12); Ms Singh (unit 16); and Mr and Mrs Simpson (unit 30).2 The owners of the remaining 27 units either do not oppose the application or have taken no steps in relation to it.
Related cases
[3]Three related cases warrant mention.
[4] First, Ms Singh and the Simpsons challenged the validity of the body corporate’s second levy. On 12 May 2017, Lang J upheld the levy. His Honour concluded work to obtain code compliance fell within the scheme.3 The Judge considered the work the body corporate had carried out was necessary.4 Top up levies could, therefore, be issued.
[5] Second, the body corporate sought summary judgment against Ms Singh and the Simpsons in respect of the second and third levies. The third levy was issued after Lang J’s judgment. Ms Singh and the Simpsons refused to pay either. On
1 Body Corporate 207650 v Speck [2016] NZHC 1826.
2 Ms Amy Cole also opposed the application but has withdrawn her opposition.
3 Body Corporate 207650 v Speck [2017] NZHC 966, (2017) 18 NZCPR 742 at [48].
4 At [56].
20 December 2017, Judge GM Harrison granted summary judgment.5 Ms Singh and the Simpsons appealed to this Court. The appeal has been heard but no decision yet given.
[6] Third, on 22 February 2018, Ms Singh commenced a case in this Court against the body corporate manager and current and former body corporate committee members.6 The cause of action is framed as “negligence”, but the claim contains wide-ranging allegations of harassment, self-interested behaviour, health and safety risks, theft, deceptive trading and more. The defendants have applied to strike out the statement of claim. That application will be heard in September 2018.
Principle
[7] The High Court may cancel, vary, modify or discharge a scheme.7 When asked to vary one, the Court will consider whether the logic of the existing scheme would be compromised by the variation.8
The opposition
[8] Ms Stark-Heath, Ms Singh and the Simpsons are self-represented. They oppose the application on many grounds. Ms Singh and Mrs Simpson made oral submissions. They are frustrated with increasing costs and the scheme’s ongoing nature. I acknowledge these concerns. However, these are likely shared by all owners. And once repairs are underway, the process often attracts self-perpetuating momentum.
Issues with the scheme and proposed variation
[9] The respondents contend the scheme is outdated and now irrelevant, as their units have been fixed and some owners have since sold.
5 Body Corporate 207650 v Singh [2017] NZDC 29041.
6 Singh v Boutique Body Corporate Ltd HC Auckland CIV-2018-404-317, statement of claim dated 22 February 2018.
7 Unit Titles Act 2010, s 74(8).
8 Body Corporate 172108 v Manchester Securities Ltd [2017] NZHC 329 at [67]; Body Corporate 211747 v Gu [2017] NZHC 2191 at [77] and Manchester Securities Ltd v Body Corporate 172108 [2017] NZCA 527 at [41].
[10] I disagree. Levies need to be issued in respect of costs incurred under the scheme. The scheme provides for this. The fact repairs are complete or some owners have sold does not change this.
[11] The respondents say the scheme should have been discharged last year. This because a code compliance certificate was obtained in respect of their units in September 2017. And, they say the dispute with the consultant does not concern their units.
[12] However, the scheme does not operate on an individual block or unit basis. There is one scheme in respect of the entire complex, and there is no provision for the scheme to be discharged in respect of some units only. The scheme expressly states: “for the Repairs to be conducted in the most efficient and cost-effective manner they
must be undertaken as a single project”.9 Moreover, subject to this application, the
scheme must be discharged 25 working days after code compliance certificates have been issued in respect of the entire complex.
[13] The respondents also object to the variation because it does not include a date for the scheme to be discharged.
[14] However, the body corporate cannot identify a date because it cannot know when the dispute with the consultant will be over. The proposed variation accounts for this reality. And, the amounts of any further levies will depend on the outcome of the dispute.
[15] The respondents also contend the scheme is not necessary for the issue of levies as costs under the scheme must be approved by the body corporate at a general meeting.
[16] While levies can only be imposed by a resolution of the body corporate pursuant to the scheme, the scheme is the source of that power. It provides a mechanism for recovering levies. Lang J’s judgment confirms the body corporate may
9 Clause 1.7 – emphasis as in original.
levy unit owners in respect of work necessary to bring the complex to a state of code compliance.
[17] The respondents also argue the body corporate should have earlier resolved all disputes. The body corporate received expert advice on this point in 2016, as observed by Lang J:10
The Minutes of that meeting show that Mr Paul Grimshaw, a solicitor whose firm specialises in leaky buildings litigation, told attendees that the owners should make it their priority “to get on and get the complex fixed”. Mr Grimshaw also “reinforced that you cannot suddenly stop” repairs, and that owners needed a code compliance certificate in order “to restore at least minimal value to the complex”.
[18] Based on this advice, the body corporate elected to first complete repairs. That strikes me as reasonable.
Authority to bring the application
[19] The respondents say the body corporate was not authorised by the unit owners to bring the present application. They did not give permission for it to be brought.
[20] The body corporate delegated its powers and authority to the body corporate committee at its 2018 annual general meeting. The scheme expressly allows for this. The committee, therefore, had authority to instruct solicitors to bring the application.
[21] Despite such delegation, the scheme still requires the body corporate to be consulted on “major decisions”.11 Clause 3.4 provides:
Major decisions shall include:
(a)any decisions to engage contractors or consultants pursuant to the terms of the Scheme;
(b)any decision to engage a project manager;
(c)any decision to alter the Plan; and
(d)all decisions to raise and enforce payment of levies or to borrow funds to pay for the costs incurred pursuant to the Scheme.
10 Body Corporate 207650 v Speck, above n 3, at [38].
11 Clause 3.4.
[22] The respondents rely primarily on cl 3.4(c). The phrase “the Plan”, however, is defined as the plans for the proposed remedial works prepared by a building consultant, annexed to the scheme. The present application does not affect the Plan. It also does not constitute a decision to raise levies under cl 3.4(d). If the body corporate wishes to do so, it must obtain a resolution at a general meeting—as it has previously done.
[23] I do not consider the decision to bring the application is a major decision for any other reason. The proposed variation does not change any significant aspect of the scheme. And, the work is substantially complete.
Service and communication
[24] The respondents take issue with service. They say some people, specifically banks, have not been served. Ms Singh attached an email from Westpac dated 8 June 2018 to her second affidavit, in which a banker says he checked with the legal team and Westpac did not appear to have been served.
[25] On 7 March 2018, Hinton J made orders directing personal service on the respondents may be dispensed with and substituted service effected by email to the unit owners. A legal secretary at the firm that represents the body corporate has sworn an affidavit. She testifies she served the application by email on all unit owners—as permitted by Hinton J. Clearly, the respondents have been served.
[26] The respondents also contend the body corporate has been poor in keeping them informed. This contention lies beyond my purview.
Levies
[27] As observed, there have been several top-up levies. The respondents contest their validity.
[28] Validity of levies is not relevant to this application. That said, this issue was addressed by Lang J when Ms Singh and the Simpsons challenged the second levy.
Again, the Judge considered the levy valid.12
[29] The levies also feature in the summary judgment appeal, in which Ms Singh and the Simpsons dispute their liability to pay the second and third levies. Complaints about related debt collection procedures are live in the appeal too.
[30]In summary, arguments in relation to levies are for others, not me.
Misconduct and mismanagement
[31] The respondents accuse the body corporate manager and committee of wide ranging misconduct and negligence. For example, they say:
(a)“The body corporate committee has not been able to manage the project efficiently and cost effectively”.
(b)“There has been various project and financial mismanagement of the project”.
(c)“There is no accountability and multiple conflicts of interest between the body corporate manager and its lending facility”.
(d)“The body corporate manager took advantage of the scheme and the body corporate and has exposed owners to financial strain and bankruptcy due to its negligence, misconduct, harassments and mismanagement of body corporate funds and repair project”.
(e)“The committee has neglected the fiduciary duty of care owed to the owners and has allowed misconduct from body corporate manager, contractors and consultants”.
12 Body Corporate 207650 v Speck, above n 3, at [51].
(f)“There has been serious breach of our ownership rights and trust which was delegated to the committee in good faith”.
[32] However, Ms Singh expressly acknowledges these points are being dealt with in the High Court “negligence” case.
[33] I note too submissions were made to Lang J to the effect the committee had failed to ensure the repair work was undertaken in a cost-effective manner. The Judge considered it was not necessary or desirable to determine the point,13 but noted cl 14.1 of the scheme leaves open the prospect committee members may be liable to unit owners for wilful misconduct or gross negligence.14
[34] This reasoning is applicable. Allegations of misconduct and negligence are not relevant to whether the scheme’s deadline should be extended. This applies to all examples listed above and other like allegations. And as Ms Singh acknowledges, the separate “negligence” case will address these.
Decision
[35]I grant the variation for four reasons.
[36] First, the variation does not change any significant aspect of the scheme. The work is substantially complete. Code compliance certificates have been issued in respect of all units. The varied scheme will represent no further departure from the Act and body corporate rules than the original one.15
[37] Second, the original clause envisaged the body corporate would be able to issue any levies it needed to within that timeframe. But because of a dispute with a consultant, it cannot do so yet. The scheme is still necessary.
13 Body Corporate 207650 v Speck, above n 3, at [29].
14 At [29].
15 Tisch v Body Corporate 318596 [2011] NZCA 420, [2011] 3 NZLR 679, (2011) 12 NZCPR 533,
at [49].
[38] Third, I am satisfied the variation is not unfair to the respondents, and fair as between all unit owners.16 The body corporate should be able to levy owners in respect of work completed to reach the standard of code compliance. The scheme specifically envisages this. Indeed, it is integral to the scheme.
[39] Fourth, these aspects answer the foreshadowed question: would the logic of the existing scheme be compromised by the variation? I am satisfied the answer is no. The variation complements the existing scheme and is necessary to bring it to fruition.
Order
[40]The scheme is varied.
……………………………..
Downs J
16 Tisch v Body Corporate 318596, above n 15, at [45].
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