Body Corporate 234525 v Stent
[2017] NZHC 2948
•29 November 2017
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI TERENGA PARĀOA ROHE
CIV-2016-488-94 [2017] NZHC 2948
BETWEEN BODY CORPORATE 234525
Plaintiff
AND
ROBYN CATHLEEN STENT First Defendant
CLARRIE LAWENCE SMALL and KM TRUSTEE SERVICES LIMITED
Second Defendants
ANTHONY JOHN BUTCHER and
RUTH BARBARA ROGERS Third Defendants
IVOR ANTONY MILLIINGTON Fourth Defendant
NEVILLE EADE Fifth Defendant
Hearing: 29 November 2017 at 9:30am Appearances:
TJG Allan and S Powrie for the Plaintiff
B E Brill for the DefendantsJudgment:
29 November 2017
[ORAL] JUDGMENT (No.3) OF ASSOCIATE JUDGE R M BELL
Solicitors:
Grove Darlow, Auckland, for the Plaintiff
Barry E Brill Limited, Paihia, for the Defendants
BODY CORPORATE 234525 v STENT [2017] NZHC 2948 [29 November 2017]
Recall application
[1] On 21 November 2017, I gave judgment on the body corporate’s summary judgment application in its claim for unpaid levies.1 I gave the body corporate judgment for levies SL4, SL6 and SL7. The first defendant was not required to pay levies SL4 and SL6 as she had already paid them. I struck out the body corporate’s claim for SL1. I dismissed the body corporate’s summary judgment application for SL8. I directed a hearing for today to fix the amounts of levies payable by each defendant, the interest payable by each defendant, costs payable by the defendants, to enter judgment, and give any related directions.
[2] The body corporate has applied for recall of that part of my judgment where I dismissed its application for summary judgment for levy SL8. It relies on two matters – the procedural history of the proceeding and a resolution passed at an annual general meeting of the body corporate on 29 January 2017, the Saturday before the hearing of the summary judgment application which started on Thursday 2 February 2017.
[3] In my judgment of 21 November 2017, I recorded that the other levies in issue had either been made at general meetings or had been ratified at general meetings. SL8 was made by the body corporate committee under delegated authority. It was not made in a general meeting and had not been ratified. The defendants challenged the decision of the committee, saying that it was required to have a physical meeting whereas the decision to impose the levy had been made by an exchange of emails between
Mr Leishman of Boutique Body Corporates Ltd and the members of the committee.
[4] I dealt with that in paragraphs [93]-[115] of my decision. I accepted that it was open to a body corporate committee with delegated authority to carry on its business other than by meeting at one place at the same time. But I was not satisfied, for summary judgment purposes, that a levy resolution was properly passed in accordance with ss 104 and 109 of the Unit Titles Act and with the Unit Titles Regulations – see paragraph [108]
of my decision.
1 Body Corporate 324525 v Stent (No 2) [2017] NZHC 2857.
[5] Those reasons extended somewhat beyond the initial objection raised by the defendants. They contested the process by which the decision was made but did not expressly state that a decision had not been made. I considered the record of emails between Mr Leishman and the committee members. That led me to doubt, for summary judgment purposes, whether it was unarguable that no resolution had been made. Because the matter was not clear-cut, I did not give summary judgment. The body corporate relied on parts of the judgment of Muir J in Wheeldon 2. I distinguished that case. Muir J upheld a resolution made by the body corporate committee because it had been later ratified in a general meeting. I found that there was no evidence of ratification in this case.
[6] It now turns out that the levy SL8 was ratified. The body corporate held an annual general meeting on 28 January 2017. It passed this as an ordinary resolution:
Levies raised under delegated authority
…
To the extent necessary and without prejudice to the view the levies have been validly raised the Body Corporate hereby ratifies, to the extent necessary, the raising of the following levies during the year to 30 November 2016 pursuant to the Committee’s delegated authority:
(a) $700,000 plus GST in the building account due for payment on
15 May 2016 …
Other resolutions were also passed but it is not necessary to refer to them. In the summary judgment hearing over four days from 2 to 15 February 2017 neither side advised me of this resolution or sought leave to adduce evidence about it.
[7] Because of that resolution, the body corporate asks me to recall two paragraphs of my decision and to give it judgment on SL8. Alternatively, it says that if I do not recall, it seeks leave to make a second summary judgment application. Leave would be required under r 7.52 of the High Court Rules. As a third option, it seeks leave to discontinue the proceeding with no issue as to costs after judgment has been given for levies SL4, SL6, SL7, interest and costs, and permitting it to begin a fresh proceeding for SL8.
[8] For recall applications, the leading judgment is Wild CJ’s decision in
Horowhenua County Council v Nash (No 2):2
Generally speaking, a judgment once delivered must stand for better or worse subject, of course, to appeal. Were it otherwise there would be great inconvenience and uncertainty. There are, I think, three categories of cases in which a judgment not perfected may be recalled – first, where since the hearing there has been an amendment to a relevant statute or regulation, or a new judicial decision of relevance and high authority; secondly, where counsel have failed to direct the court’s attention to a legislative provision or authoritative decision of plain relevance; and thirdly, when(where?) for some other very special reason, justice requires that the judgment be recalled.
[9] That test has been re-emphasised many times by appellate courts. I refer, in particular, to Erwood v Maxted.3 McGechan on Procedure refers to a wider formulation which comes from England. The English Court of Appeal in Stewart v Engel 4 referred to this dictum of Neuburger J in Re Blenheim Leisure (Restaurants) Ltd (No 3): 5
A plain mistake on the part of the courts; a failure of the parties to draw to the court’s attention a fact or point of law that was plainly relevant; or discovery of new facts subsequent to the judgment being given. Another good reason was if the applicant could argue that he was taken by surprise by a particular application from which the Court ruled adversely to him and that he did not have a fair opportunity to consider.
The Court of Appeal referred to that in Unison Networks Ltd v Commerce Commission.6 It is necessary also to confirm that courts treat applications for recall with caution and generally do not encourage them.
[10] For its recall application, the body corporate relied on two factors – the procedural history of the case combined with the ratification on 28 January 2017. It relies on the procedural history to say that it did not have the opportunity to adduce evidence of it. For my part, if I had been told during the hearing that the body corporate meeting had ratified the decision of the body corporate committee, I would have upheld levy SL8. In my decision, I contemplated that with the dismissal of the
summary judgment application, the body corporate could well convene a general
2 Horowhenua County Council v Nash (No 2) [1968] NZLR 632 (SC).
3 Erwood v Maxted [2010] NZCA 93, (2010) 20 PRNZ 466.
4 Stewart v Engel [2000] 1 WLR 2268 (CA).
5 Re Blenheim Leisure (Restaurants) Ltd (No 3) The Times, 9 November 1999.
6 Unison Networks Ltd v Commerce Commission [2007] NZCA 49 at [32].
meeting if only for the purpose of ratifying the levy. I expect that if my decision were appealed, the Court of Appeal would likely admit evidence of the resolution. But I remind myself that a recall application is not a substitute for an appeal. Wild CJ made that clear in Horowhenua.
[11] The procedural history that the body corporate relies on is its difficulty in knowing what arguments the defendants intended to raise in opposition to its summary judgment application. My decision noted that the defendants had to be prodded to give further particulars of their opposition to the summary judgment application. I refer here to paragraphs [29], [32] and [113] of my decision. At the same time, I take into account that the lawyers for the body corporate may have had some inkling of what they might have to meet. While the pleadings, the particulars given by the defendants, adverted only obscurely to a levy decision made in April 2016, the lawyers knew that at earlier hearings the defendants had argued unsuccessfully that the body corporate committee could not do business except in a meeting. In their reply evidence, they included emails relevant to the decision in April 2016 for imposing the levy. The body corporate’s opening submissions for the summary judgment application said:
35. It is not at all clear what the defendants are saying in response to paragraph 8 of the statement of claim and in paragraph 8 of the amended notice of opposition and subsequent particulars. The following submissions are therefore to a very great extent an exercise in shadow-boxing made necessary by the obtuse nature of the amended notice of opposition.
Later, in the synopsis the body corporate addressed the argument that the body corporate committee could not transact business except in meetings. All the same, I accept that those submissions were prepared not knowing exactly whether that point was to be taken. It only became apparent on the fourth day of the hearing, when
Mr Brill tendered second written supplementary submissions.
[12] Mr Brill makes the point that I had indicated in my minute of December 2016 that I would not hear arguments as to validity. After the Butcher decision was given, I said that I would hear them. All the same, the opportunity was missed for the body corporate’s lawyers to take instructions as to any resolutions intended to validate the levy decision SL8.
[13] Mr Brill says that even if evidence were now permitted, the resolution was ineffective. His argument is that a ratifying resolution may be effective to confer authority retrospectively by the principal in favour of an agent who lacked authority at the time of the relevant transaction. But the invalidity here did not go to lack of authority. He says that under my decision it is arguable that there was no effective resolution at law, and that remains the position even after the ratifying resolution. The resolution purports only to ratify, not to impose a fresh levy.
[14] I accept his argument that for summary judgment purposes it is arguable that in April 2016 the body corporate committee did not make an effective resolution to impose a levy. The decision on that point remains unchanged, but it is surely relevant to the summary judgment application that on 28 January 2017 the body corporate in general meeting passed a resolution ratifying what had been done by the committee.
[15] Mr Brill takes too fine a point as to the construction of the resolution. The general meeting clearly intended to confer authority and effectiveness on decisions made earlier by the body corporate committee with regard to all levies imposed during the year ending 30 November 2016. Muir J’s judgment in Wheeldon 1 makes it clear that there is to be a generous approach to construing resolutions made by body corporates under the Unit Titles Act. It is pedantic to say that the resolution in general meeting confirming that a levy was made was ineffective because it did no more than ratify. Clearly the intention was to uphold the levy. A ratification operates retrospectively to confer authority when someone may not have had authority at the time of the transaction. While it is arguable that there was no ratification because there was arguably no resolution at all, the resolution of 28 January 2017 was nevertheless effective to impose the resolution as at that date.
[16] Again, if I had been advised of these matters during the summary judgment hearing, I would have upheld the resolution of 28 January 2017. I would have recognised that it was arguable that the decision of the body corporate committee made in 2016 was ineffective to impose a levy, but the body corporate could still recover judgment for SL8 because of the 28 January 2017 resolution, even if it could not recover interest under s 128 of the Unit Titles Act for 2016.
[17] The fact that the body corporate, perhaps out of appropriate caution, took care to ensure that the written resolution was validated by the decision of the body corporate in general meeting makes it pedantic to insist on upholding my original judgment and to require the body corporate to go through the hoops again. This is very much a one-off case, turning on its own special circumstances. It entitles the court to take into account evidence which, for understandable reasons, was not available when I heard the summary judgment application. If the defendants had clearly signalled the issue with proper pleadings, the plaintiff would have been alerted so that the body corporate could instruct its lawyers that the levy had been the subject of the resolution of 28 January 2017. I would have admitted the evidence if asked, even though the time for filing evidence had passed. This is a case within the third category in Horowhenua.
[18] Accordingly, I now recall that part of my judgment of 21 November 2017 in which I dismissed the application for summary judgment for SL8. I give the body corporate judgment for SL8 against all defendants. I do not, however, give the body corporate judgment for interest on SL8 except from 28 January 2017.
Costs
[19] The plaintiff seeks costs under s 124 of the Unit Titles Act for this proceeding instead of Part 14 of the High Court Rules:
124 Recovery of levy
…
(2) The amount of any unpaid levy, together with any reasonable costs incurred in collecting the levy, is recoverable as a debt due to the body corporate by the person who was the unit owner at the time the levy became payable or by the person who is the unit owner at the time the proceedings are instituted
[20] The defendants were owners when the levies became payable and when the proceedings were filed. The plaintiff seeks actual costs of $84,333.00 excluding GST and disbursements of $6,619.41 including GST. The materials provided include copies of lawyers’ invoices for charges from July 2016 to 22 November 2017. Charges
for the recall application and the hearing today have not been included. For each invoice there is a schedule setting out attendances on a day-by-day basis. I have also been provided with a schedule which sets out a summary of attendances beginning on
29 July 2016 and ending on 22 November 2017, showing day-by-day work by each author, identifying the author, identifying the time spent, and showing that author’s charge-out rate. The work was carried out by three lawyers within the law firm.
[21] In claims for costs under s 124 there is guidance from the approach taken by the Court of Appeal in Black v ASB Bank Ltd.7 There the court, dealing with a claim for costs under a contractual provision, said this:
[80] Assessing whether the indemnity costs claimed under a contract are reasonable involves the Court making an objective assessment of these matters:
[a] What tasks attract a costs indemnity on a proper construction of the contract?
[b] whether the tasks undertaken were those contemplated in the contract; [c] whether the steps undertaken were reasonably necessary in pursuance
of those tasks;
[d] whether the rate at which the steps were charged was reasonable having regard to the principles normally applicable to solicitor/client costs; and
[e] whether any other principles drawn from the general law of contract would in whole or in part deny the claimant its prima facie right to judgment.
[22] Much of that can be transposed to claims for costs under s 124 with references to the contract and contract law replaced by references to the Unit Titles Act.
[23] Section 124 is directed at the tasks of collecting a levy. In the case of a claim against a natural person that will typically involve filing a proceeding in the Tenancy Tribunal, the District Court or this Court. The claim will be taken through to judgment. The steps from preparing a claim through to obtaining judgment and enforcing it are
covered by s 124(2) of the Unit Titles Act. Where a claim is not contested, the tasks
7 Black v ASB Bank Ltd [2012] NZCA 384 at [80].
will involve obtaining judgment by default. When the claim is contested, the tasks may be more extensive.
[24] In this case, the body corporate sued for unpaid levies. It appropriately applied in this court. I say “appropriately” for the reasons I gave in my judgment on jurisdiction.8 The case is certainly outside the jurisdiction of the Tenancy Tribunal. There were good reasons for having all claims against all the defendants heard together in this court, even if some of the claims were within the jurisdiction of the District Court. The ceiling on the District Court’s jurisdiction when the proceedings were filed was $200,000. The claims against most of the defendants were over $200,000 once interest was taken into account.
[25] Where an owner opposes a claim for unpaid levies, the tasks required include all steps to overcome defences to obtain judgment. In this case, the defendants challenged the validity of the levies. They also alleged claims in tort. The tort claims were raised for a defence of equitable set-off and to suggest a counterclaim so that judgment should be deferred until the counterclaims could be decided. Overcoming the defences and dealing with arguments about counterclaims were all steps taken to obtain judgment. Similarly, the defendants challenged the jurisdiction of the court. Those steps to clarify the court’s jurisdiction were also appropriately within s 124.
[26] There are, however, two steps which I do not regard as reasonably necessary. The first is that the plaintiff claimed for the levy SL1. The plaintiff, as defendant in the Wheeldon proceeding, filed a counterclaim for SL1. When this proceeding was started, judgment had not been given on the counterclaim for SL1. That did not mean that the body corporate was entitled to begin a fresh proceeding seeking judgment for SL1. As a general proposition, it is an abuse of process to sue a defendant twice over the same matter at the same time.9 A defendant should have to face a claim in only one proceeding. It is duplicitous and unnecessary to run the same matter twice in
separate proceedings. I regard the claim for SL1 as unnecessary.
8 Body Corporate 324525 v Stent [2016] NZHC 2442.
9 Yeoman v Public Trust Ltd [2011] NZFLR 753 at [73].
[27] The other aspect is the body corporate’s claim for “other fees”. The body corporate began this proceeding as a levy collection proceeding. The “other fees” were not payable as levies under any provision in the Unit Titles Act. They are about something else altogether. These are fees targeted at the defendants individually and are not chargeable to the general body of owners. Conceivably, the body corporate might have drafted a cause of action for the claim for other fees, but it did not. The claim was made as if it were simply for levies payable under s 124. At the hearing the body corporate accepted that it could not continue its claim for other fees. Directions were given to allow it to continue any such claim in the Tenancy Tribunal. The attempt to tack on the “other fees” claim to a levy collection proceeding was mistaken and involved unnecessary steps.
[28] Aside from those two matters, I am satisfied that the steps taken were reasonably necessary for the body corporate to bring its levy claim and meet the requirements of s 124 of the Unit Titles Act.
[29] Mr Brill noted that on a scale basis, costs would be in the order of $30,000. Even if there were an uplift of 50 per cent, the costs awarded would still be about half what the body corporate was claiming. Notwithstanding that, it is necessary to note that this case is typical of much Bridgewater litigation as involving lengthy hearings, examination of fine points and extensive argument. By “Bridgewater litigation” I am referring to the proceedings leading to the judgments in Wheeldon 1, Wheeldon 2 and Butcher.
[30] As an example of this case requiring far more extensive work than is typically expected in a proceeding of this sort, I instance the defendants’ challenge to the jurisdiction of this court. The defendants brought their own proceedings challenging the authority of the body corporate to impose levies – that was the Wheeldon case. They had no difficulty in suggesting that this court had jurisdiction to set aside a resolution requiring them to pay a levy. On the other hand, when the body corporate sued for unpaid levies, they challenged the jurisdiction of this court to decide the validity of the levies.
[31] The defendants have been assiduous in taking as many points as they can think of to resist the body corporate’s claim for levies. The plaintiff’s solicitors were to an extent prepared for this, given the experience they had had with the defendants in the Wheeldon and Butcher proceedings. If anything, I consider that there has been some efficiency with the body corporate’s lawyers continuing to act for it in this proceeding, because they were able to build on their knowledge of the issues from the Wheeldon and Butcher proceedings. Many of the matters raised in this proceeding had been raised in the earlier proceedings. Even if the exact same matters were not raised, similar arguments of law required decision.
[32] The plaintiff’s lawyers’ schedule shows a total of 290 hours spent on this job from 29 June 2016 to 22 November 2017. The charge-out rates ranged from $180 per hour to $450 per hour. The junior lawyer’s rate has been recently increased. I am satisfied that the charge-out rates are appropriate for this case. I am also satisfied that the time has been spent appropriately, apart from the time spent on SL1 and “other fees”.
[33] In short, save for the other fees and SL1, I am satisfied with the work carried out. Some adjustment is required for effort spent on SL1 and other fees. It is not possible to isolate work done on those aspects from general preparation. It is necessary to make some broad assessment. The work up to the filing of the proceeding took 30 hours. I regard the components that I treat as extraneous as comprising one-fifth of that. I take off 6 hours. I apply a blended rate of $300.00 per hour. It seems that after filing the proceeding no extra work was required as a result of those unnecessary elements in the claim. The body corporate was required to do the same amount of work for the proceeding generally. Those elements did not add any extra work. That means that I make a deduction from the costs claim of $1,800.00. That aside, I see no need to adjust the costs claimed.
[34] Mr Brill submitted that s 124 should be confined to steps that are truly collection, and that steps taken to determine the validity of levies were outside the scope of collection. Because the body corporate is required to overcome any arguments as to validity so as to obtain judgment, I do not accept that s 124 has the confined scope that he contends. Mr Powrie cited Lang J’s decision in Body Corporate
207650 v Speck10 as authority supporting that proposition. I respectfully follow Lang
J on that point.
[35] Mr Brill also submitted that s 124 was confined to cases where there has been wrongdoing on the part of a defendant. That misconceives the purpose of s 124. If ordinary scale costs were payable in proceedings for the collection of levies, the body corporate would end up having to use its general funds to fund the proceedings without being able to recoup itself in full from a non-paying owner. Clearly, parliament intended that the general body of owners ought not to bear the burden of collecting from owners who do not pay their levies. The reasons for non-payment are irrelevant under s 124. That section says that the debt is recoverable as a debt. That means that it is recoverable as of right. The court does not have a discretion as to how it should apply s 124. That is consistent with the approach of the Court of Appeal in Black v ASB Bank Ltd and Lang J’s decision in Body Corporate 207650 v Speck.
[36] In summary, the body corporate will have the costs claimed exclusive of GST and with a deduction of $1,800.00. Under the decision of Associate Judge Osborne in Dunedin Catering v Mr Chips,11 GST on disbursements is not allowed if a successful party is registered for GST. The body corporate in this case is so registered. Allowing GST on disbursements involves an element of double recovery. Accordingly, I adjust the GST claim to $5,756.00. In all other respects, I approve the disbursements.
[37] I have heard counsel on costs incurred since 22 November 2017. Since then, the plaintiff has applied for the recall application and the hearing today has had to deal with fixing judgment, fixing interest and fixing costs. Those were all steps necessary for collection of the levies. In particular, the recall application was successful, whereas steps taken up until 21 November 2017 were not successful in respect of SL8. Clearly further work was required to obtain judgment in respect of SL8. The fact that it was by a recall application is neither here nor there.
[38] I direct the body corporate’s lawyers to send an invoice for the further steps they have taken since 22 November 2017 up until the completion of today’s hearing
10 Body Corporate 207650 v Speck [2017] NZHC 1636.
11 Dunedin Catering Ltd v Mr Chips [2013] NZHC 1815, (2013) 21 PRNZ 798.
in this case, so that I can award costs for that as well. The amounts claimed are to be exclusive of GST on both costs and disbursements. Mr Brill is to receive a copy.
Amount of judgments
[39] At the end of the hearing the body corporate’s lawyers provided updated schedules showing calculations of the amounts which they sought for judgment for levies SL4, SL6, SL7 and SL8. They have taken into account payments by each owner. Interest calculations have allowed for payments made. Payments have been credited first against interest and then against the levies with payments going against the oldest levy first. In the case of four owners they have taken into account funds credited to the owners’ accounts on 21 June 2017 after the settlement of the claim against the Far North District Council, and in the case of four owners they have taken into account payments of $40,000 each made on 11 October 2017. All calculations showed the amounts payable as at 29 November 2017. Mr Brill considered the calculations overnight. He did not submit on them.
[40] I record the totals for each defendant under those calculations:
(a) Ms Stent, owner of unit 204, owes $166,461,22 for unpaid levies and
$2,234.68 for interest, a total of $168,695.90. The daily interest rate is
$45.60.
(b)For Mr Small and his trustee company, the owners of unit 206, the unpaid levies come to $57,807.98 and the interest is $776.05, a total of
$58,584.03. The daily interest rate is $15.84.
(c) For Mr and Mrs Butcher, owners of unit 301, the levies come to
$138,125.52, interest is $1,854.29 – a total of $139.979.81. The daily interest rate is $37.84.
(d) For Mr Millington, owner of unit 307, the unpaid levies are
$132,879.57, interest is $1,783.86, a total of $134,663.43. The daily interest rate is $36.41.
(e) For Mr Eade, owner of unit 310, the levies are $168,369.43, with interest $7,426.71, a total of $175,796.13. The daily interest rate is
$$46.13.
[41] There is another proceeding in which the defendants contend that further amounts should be credited to them under the settlement of the proceeding against the Far North District Council so as to reduce their indebtedness to the body corporate.12
Those claims have still to be determined. At this stage I am applying legal set-off as under the Statutes of Set-off for liquidated amounts which are conceded as due by the body corporate. At this stage, not having heard that proceeding, I am unable to say whether the other claims by the defendants should be brought into account to fix the amount of the judgment. Depending on the outcome of that proceeding, there may be later adjustments.
Result
[42] I make these orders:
(a) On the recall of the judgment of 21 November 2017 the order dismissing the summary judgment application for SL8 is set aside. The plaintiff has judgment against each defendant for levy SL8, but not for interest under s 128 before 28 January 2017;
(b) The plaintiff recovers judgment against the first defendant for
$168,695.90. Interest on that sum runs at $45.60 per day;
(c) The plaintiff recovers judgment against the second defendants for
$58,584.03. Interest on that sum runs at $15.84 per day;
(d) The plaintiff recovers judgment against the third defendants for
$139.979.81. Interest on that sum runs at $37.84 per day;
12 CIV 2017-488-82 Small v Body Corporate 324525.
(e) The plaintiff recovers judgment against the fourth defendant for
$134,663.43. Interest on that sum runs at $36.41 per day;
(f) The plaintiff recovers judgment against the fifth defendant for
$175,796.13. Interest on that sum runs at $46.13 per day;
(g) The plaintiff recovers judgment against all defendant for costs of
$82,533 plus disbursements of $5,756. Interest on the costs and disbursements runs at five per cent per annum;
(h) The judgment takes effect on 29 November 2017;
(i)Leave is reserved to the body corporate to seek directions if it wishes to claim for interest under s 128 on levy SL8 from 5 May 2016 to 28
January 2017;
(j)Leave is reserved to the defendants to have the amounts of the judgments adjusted if they succeed in their claims for monetary relief in the proceeding CIV 2017-488-82 Small v Body Corporate 324525;
(k)Except as otherwise provided here, the judgment of 21 November 2017 still applies.
……………………………….
Associate Judge R M Bell
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