Body Corporate 329952 v Strata Title Administration Limited HC Auckland CIV 2009-404-7484

[2010] NZHC 823

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2009-404-007484

BETWEEN  BODY CORPORATE 329952

Plaintiff

ANDSTRATA TITLE ADMINISTRATION LIMITED

Defendant

Hearing:         29 April 2010

Counsel:         T J G Allan and T J P Bowler for Plaintiff

B Rooney for Defendant

Judgment:      30 April 2010

JUDGMENT OF SIMON FRANCE J

[1]      The  plaintiff  is  the  Body  Corporate  of  a  building  in  Palmerston North consisting now of 19 units, each with their own unit title.

[2]      The defendant is an Auckland based company which carries on business as a body corporate secretary.  It is or was the secretary for this body corporate.

[3]      Of  the  19 units,  15  are  owned  by  Booked  In  Limited,  a  company  in receivership.  Two are owned by another company in receivership, and the other two by  Morse  Limited  and  Vanda  Investments  Limited  respectively.    Vanda  is  a company  owned  by  Mr Chapman-Smith  who  is  also  the  sole  director   and

shareholder in the defendant.

BODY CORPORATE 329952 V STRATA TITLE ADMINISTRATION LIMITED HC AK CIV 2009-404-

007484  30 April 2010

[4]      On  28 November 2009,  at  an  extraordinary  general  meeting  initiated  by Booked In Limited, a resolution was passed removing the defendant as the body corporate secretary, and appointing a different organisation.  The defendant declines to accept the validity of the resolution, and has declined to hand over the books, and any body corporate funds.

[5]      The Body Corporate has initiated proceedings seeking orders requiring the defendant to do so, and now seeks interim orders requiring the same thing.

Decision

[6]      I approach the decision from the viewpoint of analysing why the defendant says the resolution is not valid, and cannot found an arguable case.  Before doing so I record that I commented in blunt terms that the situation lacks merit.  It is plain that, if there are defects in the process, they can be remedied.  I accept there has been time to do that, and it has not happened.  Nevertheless, I remain of the view that there is no proper reason, other than outstanding monies owed it, for the defendant to cling to its position as secretary.  I note also the various judgments, in relation to other bodies corporate, which concern the defendant, and the observations made in those.

(a)      Convened improperly and no quorum

[7]      The meeting was called by Booked In Limited (in receivership).  The Notice detailed when the meeting was to occur, where it was to be held.  No challenge is made to the Notice, its compliance with time periods, or its appropriate service on the necessary parties.

[8]      Of the four units not owned by Booked In Limited, the owner in receivership of two took no part.  The third is that owned by Morse Limited which attended and voted to remove the defendant.

[9]      Mr Chapman-Smith, the body corporate secretary and the owner through

Vanda of the remaining unit, did not attend.  He had purported, as secretary, to call

an AGM for exactly the same time as the extraordinary general meeting, and he attended that meeting.  A member of his staff then purported to chair that AGM.

[10]     Turning to the extraordinary general meeting, it is common ground that the body corporate rules, for a quorum, require one third of the proprietors to be present. At the meeting at which the resolution to remove Strata was passed there was present Morse Limited, as the owner of one unit, and a Mr Wilkinson.   Mr Wilkinson is connected with Booked In Limited, through the receivers.  Obviously Mr Wilkinson has to somehow be the proprietor of six units for there to be a one third quorum.

[11]     At this point some further information is needed.  The 15 Booked In Limited units were in default on body corporate levies.  A unit holder cannot vote whilst in such default.   Accordingly, in advance of the meeting the receivers of Booked In Limited had taken steps to bring three of the 15 units up to date on the payments. (There is a dispute as to whether that was achieved but that is irrelevant for now.)

[12]     Mr Wilkinson attended the meeting.     He was armed with a proxy from Booked In Limited in respect of units S1, S2 and S3.   He was also armed with a Power of Attorney which provided:

1Declares   Stephen   John Wilkinson   of   Marac   Finance   Limited (“Attorney”) to be the true and unlawful attorney of the Appointer to:

(a)exercise in the manner set out in clauses 2 and 3 below the Appointer’s votes in respect of principal units S1, S2 and S3 at any extraordinary general meeting of Body Corporate Number 329952  (“Body  Corporate”)  convened  by  the Appointer for the purpose of reviewing the position of Strata Title Administration Limited (“Strata”) as secretary of the Body Corporate, or at any adjournment thereof, held prior to

31 December 2009 (“EGM”); and to

(b)sign any documents or do any other acts or deeds necessary to give effect to the resolutions passed at the EGM.

2        Directs the Attorney to vote at the EGM to:

(a)Remove Strata as the secretary of the Body Corporate; and to

(b)Appoint  Boutique  Body  Corporates  Limited  as  the  new secretary of the Body Corporate in place of Strata.

3Acknowledges that if other resolutions are put to the EGM, the Attorney shall be entitled to exercise the Attorney’s discretion as to the vote.

[13]     Also  relevant  to  Mr Wilkinson’s  status  at  the  meeting  is  the  affidavit evidence of one of the receivers who states:

17.The Receivers provided a proxy in respect of units S1, S2 and S3 to Stephen John Wilkinson.  A copy is attached marked exhibit “R13”. Over      and      above      that,      the      Receivers      appointed Stephen John Wilkinson attorney in respect of the EGM.  A copy of the power of attorney is attached marked exhibit “R14”.

18.The proxies and power of attorney authorised Mr Wilkinson to vote for the removal of Strata as Body Corporate Secretary, effective immediately, and to appoint another company, Boutique Body Corporates Ltd (“BBC”), as the replacement secretary.

[14]     The issue then is whether the plaintiff has an arguable case that Mr Wilkinson was there as Booked In Limited’s representative in relation to the 15 units.   If he was, then there was a quorum.  If he was there only in relation to 3, then there was no quorum.

[15]     There are arguments both ways.   Plainly he could only vote in relation to three, and it can be argued that the power of attorney means he was only representing three.  On the other hand it is not untenable to say he was present as a representative of Booked In Limited.  Although Booked In Limited had authorised him to only vote concerning three, because there were only three paid up units, he was nevertheless the representative of the proprietor of 15 units.

[16]     There is a decision of Ronald Young J, Body Corporate 199883 v Clarke (2005) 5 NZ ConvC 95–491 which holds that “voting power” as used in the rules is a reference to the voting power of the persons actually present at the meeting, and does not include absent proxies.  The decision is not on point here in that Mr Wilkinson, if representing  Booked  In  Limited  generally,  was  present  and  representing  the proprietor of 15 units.   No one advanced the submission that the reference is to proprietors able to vote (i.e. compliant with Rule 32) and not just to proprietors able to vote if they were paid up.  I proceed on the basis argued by counsel but it is a matter to be considered if the substantive hearing proceeds.

[17]     In this regard I add also that the particular rules modify the statutory default rule.  Rule 27(c) sets out a modification on how a company is to exercise its vote and purports to require the company to have passed an internal resolution naming a representative, and then advising the body corporate of the name.  There are issues here as to whether the power of attorney meets that requirement, and Mr Allan flagged a vires issue about the modification.

[18]     The   other   argument   is   that   the   meeting   was   improperly   convened. Mr Rooney submitted that there are three routes for convening a meeting:

a)        the committee of the body corporate may call one;

b)        the secretary can call one;

c)        in the absence of a committee, 50 percent of the body corporate can requisition one.

[19]     There is no committee here.  The proposition is that Booked In Limited had to requisition the body corporate to call the meeting which would then do so.  Of course here Booked In Limited represents 15/19ths of the body corporate.  Further the  requisition  rule  to  which  Mr Rooney  refers  is  itself  in  the  Rule  which contemplates a committee.

[20]     The argument I heard did not satisfy me as to compliance, but nor did it appear that the plaintiff did not have an arguable case that there was both proper notice, and a quorum.   I do not regard its case as strong, but it is by no means untenable.  The rules appear deficient as regards convening a meeting when there is no committee and there is a conflict with the secretary.  The plaintiff could of course have established a committee, but a Court would be reluctant to heap numerous technical  requirements  one  upon  the  other  in a  case  such  as  the  present  where palpably control is with the one body.  Further, none of the three units independent of Booked  In have complained about the change, and the one who participated supported it.  It is for this reason I have made comments about the lack of merit in the defendant’s position.

[21]     The one other challenge to validity of the resolution was as to whether the three units were properly paid up.  It is an irrelevant issue because Morse Limited was paid up and voted to remove Strata.

Balance of convenience

[22]     The application of the balance of convenience test has some unusual features here.

[23]     I begin by acknowledging that the interim orders may have the effect of determining  the  matter  in  that  the  practicalities  tell  against  further  litigation. However, it is equally appropriate to observe that Strata’s fees for a year are about

$3,000, so the issues properly at stake are minimal.

[24]     The plaintiff’s evidence, as Mr Rooney submits, does not establish any case for urgency.  However, the plaintiff’s evidence does indicate dissatisfaction, whether valid or not, with the past performance of Strata, and it is unable to fully review things because Strata holds the records.

[25]     There are three matters that lead me to make the orders sought:

a)       there is no merit in Strata’s position.  It accepts it can be replaced, the body which controls 15/19 of the body corporate wants a change, and the only independent to state a position, also wants a change.   The objections are technical and merely prolong the inevitable;

b)damages,  and  comparatively  small  ones,  are  plainly  an  adequate remedy for any period of wrongful cancellation of contract;

c)       the body corporate is entitled to access to its books, records and any financial statements.  It should not be prevented from obtaining them.

[26]     I address, therefore, conditions that must be attached to any orders.

[27]     First there are unpaid invoices.   The initial suggestion was payment into Court but there has not been any specific challenge, and  I accept Mr Rooney’s submission the money should be paid to Strata.  In his affidavit Mr Chapman-Smith identified sums of $1,584.65, $3,206.25 and $3,325 plus GST.  If it wants the interim orders, the plaintiff will first have to pay $4,790.90, and also $3,325 plus GST.

[28]     Second, Mr Rooney queried the sufficiency of the now two undertakings provided.  His complaint is the wording which, although from a third party, links the undertaking back to the plaintiff.   Given that the majority of units have not paid levies for some years, the body corporate as plaintiff is of questionable solvency. The latest undertaking is from Real Estate Credit Limited which I am advised has substantial assets.   I take the undertaking to mean that Real Estate Credit Limited will itself meet any damages caused by the granting of interim relief.  The orders I make are made on that basis.   If the plaintiff pays the money and demands the records, it is to be taken as accepting my interpretation of the undertaking.

[29]     On that basis I make the following orders.  I record that order (c) was made at the hearing:

a)       upon payment to the defendant of $4,790.90, and of $3,325 plus GST, the  defendant  shall  by  Monday,  3 May  at  1.00 p.m.  pay  into  the plaintiff’s nominated bank account all monies held on behalf of the plaintiff (inclusive of interest);

b)the defendant shall by Monday, 3 May at 1.00 p.m. deliver to Grove Darlow & Partners all documents of whatever kind, and in whatever format and in whatever status, relating to the plaintiff’s affairs;

c)       the defendant shall not destroy or dispose any records deeds, letters, notices or other documents (and without limitation, electronic documents)  relating  to  the  plaintiff  and  in  the  case  of  electronic records not to delete them from the defendant’s database.

[30]     If the parties cannot agree, memoranda on costs may be filed.

Solicitors:

T J G Allan and T J P Bowler, Grove Darlow & Partners, PO Box 2882, Auckland

Simon France J

B Rooney, Barrister, PO Box 3320, Shortland Street, Auckland, email:  [email protected]