Body Corporate 406198 v Property Opportunities Limited
[2023] NZHC 3795
•19 December 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2019-404-818
[2023] NZHC 3795
UNDER The Declaratory Judgments Act 1908 and Part 18 of the High Court Rules 2016 IN THE MATTER OF
Bianco and the Unit Titles Act 1972
BETWEEN
BODY CORPORATE 406198
Plaintiff
AND
PROPERTY OPPORTUNITIES LIMITED
First Defendant
SHIRAZ HOLIDAY LIMITED
Second DefendantBIANCO LIMITED
Third Defendant
AVONDALE PROPERTIES LIMITED
Fourth Defendant
On the papers Counsel:
D Bigio QC and I J Stephenson for the plaintiff C J Pendleton for the first defendant
T J Rainey for the second defendant
Judgment:
19 December 2023
JUDGMENT OF CAMPBELL J
This judgment was delivered by me on 19 December 2023 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
BODY CORPORATE 406198 v PROPERTY OPPORTUNITIES LIMITED [2023] NZHC 3795 [19 December
2023]
[1] The plaintiff, Body Corporate 406198 (the Body Corporate), is the body corporate of a unit title development, known as Bianco Off Queen, in central Auckland.
[2] In December 2008, when the developer of Bianco Off Queen was the sole owner of all the units in the development, it caused the Body Corporate to enter into an agreement under which the Body Corporate would pay a building manager to provide building management services (the Management Agreement). The developer also arranged for the building manager to enter into a lease of a unit in the development (the Management Unit) and for the Body Corporate to guarantee the building manager’s obligations under that lease. In addition, the Management Agreement obliges the Body Corporate to reimburse the building manager for the rent (but not outgoings) payable under that lease.
[3] The Management Agreement was for a term of ten years with the building manager having two options to require the Body Corporate to enter into new agreements, each of ten years. The second defendant, Shiraz Holiday Ltd (Shiraz), became the building manager in 2014 and exercised its option for a new agreement in 2018. Shiraz leases the Management Unit from the first defendant.
[4] The Body Corporate challenged the validity of the Management Agreement. It said it was entered into ultra vires the Unit Titles Act 1972 (UTA 1972) and was accordingly void and of no effect. Alternatively, the Body Corporate said that cl 5.6.6 of the Management Agreement (which obliges it to reimburse the building manager for the rent payable under the lease of the Management Unit) is ultra vires the UTA 1972. The Body Corporate sought declarations. It also made a claim in unjust enrichment against Shiraz. The Body Corporate asked for an order that Shiraz repay money the Body Corporate had spent in (i) reimbursing Shiraz for rent (under cl 5.6.6) and (ii) reimbursing Shiraz for outgoings (under a void guarantee).
[5] In a judgment dated 10 March 2022,1 I found that some provisions in the Management Agreement, but not cl 5.6.6, were ultra vires the UTA 1972. I was not satisfied that the Management Agreement as a whole was ultra vires. I nonetheless
1 Body Corporate 406198 v Property Opportunities Ltd [2022] NZHC 418, [2022] 23 NZCPR 1.
expressed some findings in respect of the Body Corporate’s unjust enrichment claim in respect of rent (which had been premised on its argument that cl 5.6.6 was ultra vires). I allowed the Body Corporate’s unjust enrichment claim in respect of outgoings.
[6] The Body Corporate appealed my decision. Its appeal succeeded in part, the Court of Appeal finding that cl 5.6.6 is ultra vires.2 The Court of Appeal referred the matter back to this court for reconsideration of the Body Corporate’s unjust enrichment claim in light of that court’s finding.
[7] My earlier judgment already determined the Body Corporate’s unjust enrichment claim against Shiraz in respect of outgoings. My reconsideration of the Body Corporate’s unjust enrichment claim is therefore limited to the claim against Shiraz in respect of rent. That is the sole focus of this judgment.3
My earlier findings on the unjust enrichment in respect of rent
[8] In my earlier judgment, I addressed the Body Corporate’s unjust enrichment claim in respect of rent by asking three questions:
(a)Was Shiraz enriched by the Body Corporate’s payments of rent?
(b)Was Shiraz’s enrichment unjust?
(c)If Shiraz was unjustly enriched, would it be inequitable to require Shiraz to reimburse the Body Corporate?
[9] I found that Shiraz had been enriched by the payments the Body Corporate made either to the first defendant (which had the effect of relieving Shiraz from its obligation to pay rent) or directly to Shiraz.4
2 Body Corporate 406198 v Property Opportunities Ltd [2023] NZCA 302, [2023] 3 NZLR 140, [2023] 24 NZCPR 286. The Supreme Court declined leave to appeal from the Court of Appeal’s decision: Shiraz Holiday Ltd v Body Corporate 406198 [2023] NZSC 157.
3 The first defendant took no steps on this reconsideration. It abided the decision of the Court.
4 Body Corporate 406198 v Property Opportunities Ltd [2022] NZHC 418, [2022] 23 NZCPR 1 at [152].
[10] I found that Shiraz’s enrichment was not unjust. This was because of my finding that cl 5.6.6 was not void.5 I nonetheless briefly recorded my views on what the position would have been had I concluded that cl 5.6.6 was void. I rejected the Body Corporate’s submission that where there is an ultra vires contract (or an ultra vires provision in a contract) a party may obtain restitution without showing a total failure of consideration.6 I then said:
[158] … [I]t is plain that Shiraz, by performing the building management services, conferred benefits on the Body Corporate under the Management Agreement. This raises an issue as to how, if cl 5.6.6 had been void, such benefits are to be taken into account in a claim by the Body Corporate for restitution. For example, is the Body Corporate obliged to provide counter- restitution as a condition of recovery, so that it is limited to a claim for the difference between the payments it made under the Agreement and the value of the services that it received? Or does each party have an independent claim for restitution against the other? This might have had an impact on which party bore the burden of proving the value of the services that Shiraz provided.
[159] That is a live and difficult issue in the law of restitution.7 I did not receive any submissions on the issue. It is not necessary for me to express a view. This is because, at worst for the Body Corporate, it bore the burden of proving the value of the services provided by Shiraz and of thereby showing that the amount it sought to recover from Shiraz was less than the amount by which its payments exceeded the value of those services. If I had found cl
5.6.6 to be void, I would have been satisfied on the basis of Mr Wright’s evidence that the Body Corporate had discharged that burden. He analysed market rates for building management services for comparable unit titled serviced apartments complexes. His evidence was that the cost at comparable complexes ranged from $490 to $1,250 per unit per annum, with an average of $665 per unit per annum. By contrast, at Bianco Off Queen the management fee (including the amount payable under cl 5.6.6) is about $2,025 per unit per annum. The difference between the amount paid to Shiraz and the highest of the other comparable complexes is about $125,000 per annum.
[160] Shiraz did not lead any evidence in response. Mr Rainey did cross- examine Mr Wright, but I was easily persuaded by Mr Wright’s analysis. It is clear from his evidence that the amount of the rent that the Body Corporate sought to recover from Shiraz is much less than the amount by which the payments made by the Body Corporate exceed the value of the services provided by Shiraz.
5 At [154].
6 At [157].
7 See Charles Mitchell and Paul Mitchell Goff and Jones The Law of Unjust Enrichment (9th ed, Sweet & Maxwell, London, 2016) at ch 31; and Graham Virgo The Principles of the Law of Restitution (3rd ed, Oxford University Press, Oxford, 2015) at 367–378. For a recent survey of the English authorities and academic writings on the way in which counter-restitution might apply in the context of restitution in void transactions, see School Facility Management Ltd & Ors v Governing Body of Christ The King College [2021] EWCA Civ 1053, [2021] 1 WLR 6129.
[11] As to whether it would be inequitable to require Shiraz to reimburse the Body Corporate for the rent:
(a)I first addressed the argument of Mr Rainey, counsel for Shiraz, that Shiraz had paid $1.46 million to acquire the management rights and had done so only after completing due diligence and obtaining the Body Corporate’s consent to an assignment, in which process the Body Corporate did not disclose any concerns over the validity of the Management Agreement. I said that, had I found cl 5.6.6 to be void, this argument would not have defeated the Body Corporate’s unjust enrichment claim in respect of the payment of rent. I said that Shiraz took a commercial risk in acquiring the management rights, performed due diligence, exercised its own judgment, and that the Body Corporate did not make any representation to Shiraz about the validity of the Management Agreement.8
(b)I then dealt with Mr Rainey’s argument that it would be inequitable for the Body Corporate to have the benefit of the services provided by Shiraz under the Management Agreement without paying for those services. I said that this simply raised the counter-restitution point that I had addressed earlier in my judgment.9
(c)Finally, Mr Rainey argued that Shiraz had changed its position in reliance on the validity of the Agreement. He did not identify any change of position (other than the acquisition of the management rights and the performance of the Management Agreement, which I had already dealt with).
[12] In summary, if I had found cl 5.6.6 to be void, I would have allowed the Body Corporate’s unjust enrichment claim in respect of rent.
8 Body Corporate 406198 v Property Opportunities Ltd [2022] NZHC 418, [2022] 23 NZCPR 1 at [180].
9 At [181].
Events after Court of Appeal decision
[13] After receiving the Court of Appeal’s judgment, I issued a minute asking counsel to file brief memoranda on one matter. This was whether, if the Body Corporate succeeded in its unjust enrichment claim in respect of rent, the amount of that claim should be updated for new payments since the original hearing, and if so what that amount would be.
[14] In response, counsel for the Body Corporate filed a memorandum submitting that there was no reason why the Body Corporate’s unjust enrichment claim should not be updated for payments made since the original hearing. The memorandum said that the total rent payments made by the Body Corporate for the benefit of Shiraz amounted to $407,757.11. That total included payments by the Body Corporate up to July 2023. I assume that the Body Corporate will not have made any further payments after July 2023, as the Court of Appeal delivered its decision that month.
[15] Mr Rainey filed a memorandum agreeing that the unjust enrichment claim should include all the rent paid by the Body Corporate, including payments made since the original hearing. Counsel did not take any issue with the amount stated in the Body Corporate’s memorandum. Accordingly, I will treat the Body Corporate’s unjust enrichment claim in respect of rent as being for $407,757.11.
Should the parties have the opportunity to file further evidence and make further submissions?
[16] Mr Rainey also submitted that the parties should have the opportunity to file affidavit evidence and make submissions at a further hearing on the Body Corporate’s unjust enrichment claim in respect of rent. Mr Rainey said that my finding based on Mr Wright’s evidence did not determine whether Shiraz had been unjustly enriched by the payments made by the Body Corporate under cl 5.6.6. Mr Rainey then set out much the same arguments as those he made at the original hearing.
[17] I do not consider that it is necessary or appropriate to give the parties the opportunity to file further evidence and submissions. The Body Corporate’s unjust enrichment claim in respect of rent was before the court at the original hearing.
Indeed, it was a focus of the hearing. Both parties had full opportunity then to adduce evidence and make submissions in respect of that claim. I made findings on the claim, including findings that were premised on the assumption (now found to be the case by the Court of Appeal) that cl 5.6.6 was void.
[18] It is correct that, on one issue (how to take account of the benefits that had been conferred on the Body Corporate by Shiraz), I said I had not received any submissions. But further submissions on the point would not assist. This is because, as I explained then,10 at worst for the Body Corporate it bore the burden of proving the value of the services provided by Shiraz and of thereby showing that the amount it sought to recover from Shiraz was less than the amount by which its payments exceeded the value of those services. On the evidence that was before me, it was clear that the Body Corporate had discharged that burden. There is no justification for allowing Shiraz to adduce more evidence and make further submissions on the issue when it had every opportunity to do so at the earlier hearing.11
[19] It remains the case that, over the period of the claim, the amount the Body Corporate seeks to recover from Shiraz in respect of rent (about $44,500 per annum) is much less than the amount by which the total payments made by the Body Corporate exceed the value of the services provided by Shiraz (that excess being about $125,000 per annum). I therefore find that the Body Corporate succeeds on its unjust enrichment claim in respect of rent in the amount of $407,757.11.
Result
[20] On the Body Corporate’s unjust enrichment claim in respect of rent, I order that Shiraz is to reimburse the Body Corporate in the amount of $407,757.11.
[21] I received no submissions on the interest that might be payable by Shiraz. If the parties are unable to agree, they may file and serve brief memoranda (no longer than three pages each): the Body Corporate by 16 February 2024, Shiraz by 1 March 2024.
10 At [159].
11 Although not definitive, the Court of Appeal simply referred the matter back for reconsideration of the unjust enrichment claim. The Court did not require a further hearing.
Campbell J
3
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