Body Corporate 68792 v Memelink
[2016] NZHC 2146
•9 September 2016
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2015-485-202 [2016] NZHC 2146
UNDER of section 141 of the Unit Titles Act 2010 IN THE MATTER
of an originating application to appoint an administrator
BETWEEN
BODY CORPORATE 68792
First ApplicantAND
SYNERGY ENTERPRISES LIMITED, JAMES AND CAROLINE MCKERNAN, STEVEN AND VALDA SCHECKTER AND GEOFFREY ARDEN
Second Applicants
AND
HARRY MEMELINK AND IAN TREVOR NEILL HAMILTON Respondents
Hearing: 6 September 2016 Counsel:
D G Dewar for Applicants
Mr Memelink in PersonJudgment:
9 September 2016
JUDGMENT OF CLARK J
I direct that the delivery time of this judgment is
4:00pm on 9 September 2016
BODY CORPORATE 68792 v SYNERGY ENTERPRISES LIMITED, MCKERNAN, SCHECKTER AND ARDEN [2016] NZHC 2146 [9 September 2016]
Introduction
[1] The first applicant, Body Corporate 68792 (BC68792), is the Body Corporate in respect of the unit title development located at 408 Hutt Road, Lower Hutt. Since early 2015, BC68792 has been managed by an administrator. That is in consequence of the “long and troubled history of conflict” between the members of BC68792. An interim administrator was appointed on 18 March 2015.1
[2] When the substantive application under s 141 of the Unit Titles Act 2010 for the appointment of an administrator was heard four months later there had been no improvement. Nor was there any foreseeable prospect of improvement. Consequently, in a judgment delivered on 25 July 2015, Brown J appointed John
Paul Greenwood as the administrator of BC68792.2
[3] The period of administration was for one year. Mr Greenwood’s appointment
was until 30 June 2016. Leave was reserved to the applicants to apply by 31 May
2016 to extend the term of the appointment. They did so.
[4] This judgment determines BC68792’s application for orders:
(a) extending the period of administration to 30 June 2017;
(b) appointing Robert Gary Naylor as administrator in substitution for
Mr Greenwood (as Mr Greenwood wishes to stand down); and
(c) dispensing with service on the second and third respondents.
The applicants’ case for extended administration
[5] Mr Greenwood prepared a report in support of the application to extend administration of BC68792. It is Mr Greenwood’s “unequivocal opinion” that BC68792 continues to require independent administration. Mr Greenwood’s own
resources have been exhausted by the demands of the assignment. Mr Greenwood
1 Body Corporate 68792 & Ors v Memelink and Hamilton & Ors [2015] NZHC 519.
2 Body Corporate 68792 & Ors v Memelink and Hamilton & Ors (Judgment No 5) [2015] NZHC
1731.
described the ongoing issues and litigation in which Mr Memelink is engaged including against members of BC68792 and Mr Dewar, counsel for BC68792.
[6] Mr Naylor also prepared a report for the anticipated hearing. His belief is that BC68792 will not function without external administration.
[7] Elizabeth Middleton and her husband have an interest in Unit 10 in BC68792. Ms Middleton filed an affidavit in support of the application to continue the administration as she considered it was “vital to do so”. The couple is retired and Ms Middleton deposed to having bought the unit as an investment but also to enable her to use the property initially as an art studio. They no longer rent any part of their unit and Ms Middleton said she uses it infrequently.
For the past six to seven years the hostility and antagonism within the Body Corporate, which initially began in a conflict between Mr Memelink and Mr De Vries, has made our communal ownership impossible. This has caused both Hugh and I distress and, I believe, very substantial loss both in income and in the value of our investment.
[8] Ms Middleton deposed to past threats to sue by Mr Memelink and having to seek “endless legal advice”. Ms Middleton believes that the only hope of any fairness and proper management of their Body Corporate is to have an external administrator which she and her husband seek for their protection.
[9] Memoranda in support of ongoing administration were also filed by each of the named second applicants.
Mr Memelink’s opposition to ongoing administration
[10] I note at this point that the second and third respondents no longer have an interest in BC68792 and did not therefore appear.
[11] Mr Memelink addressed the Court. He is vehemently opposed to ongoing administration. He spoke to a number of matters that he described as extremely stressful which were taking their toll. Mr Memelink recounted in some detail the background to his ongoing disputes and the litigation brought by him and against him. The following is a fair summary of the main points of relevance:
(a) Mr Memelink disputes both the rise and manner of setting levies. He said the issue of levies has distorted voting rights. Therefore the decision to bring this application to extend the appointment of an administrator is not brought by a majority interest in BC68792.
(b)The Body Corporate and unit owners do have issues but what the Body Corporate needs is independent counsel. With fresh, independent counsel the issues which bring the applicants into Court on this application would be removed. The initial application was based on grounds that are all historical. With fresh counsel it would be easy to sit down and sought things out. An administrator is not needed to achieve that.
(c) Related to Mr Memelink’s assertions of conflict of interest and a bias against him is Mr Memelink’s High Court proceeding filed against two of the applicants and BC68792 itself.3
(d)Mr Memelink rehearsed a contention advanced in earlier litigation that at significant meetings of the Body Corporate in 2014 he and another (with a relevant interest) constituted a majority of voting members and that by virtue of his voting rights and poll vote he became the Chair of BC68792. Being granted the Chairmanship of BC68792 he was given the ability to attempt a communal solution but this lawful entitlement has been blocked by the illegal actions of others.
(e) The common property is small. It includes the seal on the driveway and car park. Therefore management is very simple.
Assessment
[12] It is simply not the case that the grounds on which the initial application was based are resolved. The original application was made on an urgent basis as the
3 CIV-2016-485-141.
bank account of BC68792 had been frozen and apparently there had been threats to cut off power to the units.4 Although some progress has been made in some aspects the underlying animosity and polarisation remain a constant. In his report Mr Greenwood said this is evidenced by the proceedings filed by Mr Memelink naming Mr McKernan, Mr Martens and Mr Dewar as defendants in CIV-2016-485-
141.
[13] Mr Memelink’s firm belief that the solution lies in the replacement of the Body Corporate’s lawyer is not borne out by the facts. Mr Greenwood himself was independent, expert and in fact promoted to the Court by Mr Memelink admittedly not as an administrator, but to provide “advice and legal counsel to BC68792 as and when required”.5 Notwithstanding Mr Memelink’s initial manifestation of confidence Mr Greenwood reports that his actions are the subject of significant criticism by Mr Memelink who has threatened to hold him liable in respect of certain matters.
[14] In respect of Link Trust’s (Mr Memelink and Mr Hamilton) four units there are currently levies due of $127,860.36. Body Corporate 68792 along with another Body Corporate has appeared as a supporting creditor in insolvency proceedings brought against Mr Memelink. Spider Properties Ltd (Cally Ross) has not paid levies since February 2015. As at 21 June 2016, the date of Mr Greenwood’s report, that outstanding balance was $18,116.74.
[15] Aside from the levy arrears issues there are the numerous claims made by Mr Memelink and a fellow trustee in CIV-2016-485-141. At the forefront of the proceeding is a complaint concerning the conduct of a meeting in 2014. Mr Memelink spent a considerable proportion of his time during the hearing on this point but these issues are not new. Nor are they relevant to this application for extended administration. Brown J made a similar observation in a judgment delivered on 14 June 2016 striking out Mr Memelink’s claims based on the validity
of meetings in 2014 and 2015.6
4 Body Corporate 68792 & Ors v Memelink and Hamilton & Ors above n 2 at [8].
5 At [15].
6 Memelink v Martens [2016] 1285 at [3].
[16] I also observe that the validity of the extraordinary general meeting (EGM) of BC68792 held on 21 October 2014, which was called by Mr Memelink, was the subject of legal advice. The 12-page opinion to BC68792 dated 7 November 2014 concluded the EGM was not validly called and a number of resolutions passed at the meeting were not validly passed.
[17] The Body Corporate’s insurance is seriously compromised by past events and the conduct of Mr Memelink. Mr Greenwood reports that renegotiating insurance will be difficult. Current terms were only obtained based on a $100,000 excess in respect of past claims. Apparently the excess figure was primarily based on the insurers concerns of claims and demands made by Mr Memelink and Mr De Vries.
[18] Even without these indicia of dysfunction Mr Memelink’s determination to advance his claim against BC68792 for a significant sum strongly suggests ongoing administration is necessary.
[19] It is apparent to me that fundamental points of difference between the members of BC68792 continue and the depth of feeling concerning those grievances which was readily apparent to Brown J in the course of the five hearings before him between March 2015 and July 2015 has not dissipated in the 14 months since.
[20] The holistic approach to the management of unit title developments, which is one of the features of the Unit Titles Act, requires a degree of goodwill and cooperation. This is manifestly unachievable for BC68792 without the assistance of an external administrator.
Appointment of Mr Naylor
[21] After twelve months Mr Greenwood’s resources are exhausted by the demands of the assignment. Administration must continue. Mr Naylor has been nominated as a replacement administrator. He is well qualified for the role. He is independent of all concerned and he and his business partner, Douglas Buchanan, have established reputations in all aspects of the administration of commercial property in the Wellington area. Together they have substantial experience.
[22] Mr Greenwood refers also to an added advantage of this appointment. Mr Naylor has agreed to provide the administration services of collecting and monitoring levies, management of accounts, payment of insurance and the like at the rate at which Mr Greenwood presently outsources those services ($10,000 per annum). Consequently it will not be necessary to continue to outsource administrative functions. Additionally Mr Naylor will provide time at a rate of
$220 per hour which is less than has been charged.
[23] Mr Naylor has confirmed his willingness to accept appointment and has also filed a report in support of continued administration. Being aware of Mr Memelink’s objections to the so-called partiality of Mr Dewar and Mr Greenwood, Mr Naylor has referred Mr Memelink’s proceeding (CIV-2016-485-141) to fresh counsel for independent advice as to the merits or otherwise of Mr Memelink’s claims against BC68792. Mr Naylor will be guided by this independent advice.
[24] That said Mr Naylor observes that he is not aware of any evidence that Mr Dewar has failed in any duty towards BC68792 and he doubts that any other lawyer will have the knowledge and background necessary to enable the Body Corporate to deal with the multiple issues that Mr Memelink raises.
[25] Mr Naylor has already investigated Mr Memelink’s claims that other unit owners have carried out “illegal” works throughout the premises and is alive to the other issues raised by Mr Memelink within and beyond his legal proceedings. In all respects it seems that Mr Naylor is an entirely suitable appointment as administrator.
Costs
[26] There is one final matter. Mr Dewar put a proposal to Mr Memelink in the week before this hearing. He suggested that as administration was inevitable Mr Memelink might consent to the application on the basis that Mr Memelink could apply, on notice, to end the administration. Mr Memelink declined. His response is relevant to costs. In the face of the “unequivocal” opinions of both Mr Greenwood and Mr Naylor that ongoing administration is essential to the proper functioning of BC68792 Mr Dewar’s proposal was realistic and constructive. Mr Memelink has been unable to identify any basis for opposing the application beyond his personal
and resolute opposition. The hearing could have been avoided. As costs follow the event, and the applicants have succeeded, the applicants are entitled to costs. A memorandum including a 2B costs calculation may be submitted for the Court’s approval. If he wishes Mr Memelink may submit a memorandum in response within five working days of service of the applicants’ memorandum.
Orders
[27] Orders are made in the following terms:
(a) Extending the term of administration of Body Corporate 68792 from
1 July 2016 to 30 June 2017.
(b)Appointing Robert Gary Naylor of Wellington, Company Director, as the administrator of Body Corporate 68792 until 30 June 2017.
(c) Reserving leave to Mr Memelink to apply to end the administration on four weeks notice.
(d)Confirming that Robert Gary Naylor, as administrator, to the exclusion of the body corporate and the body corporate committee may exercise all of the powers of Body Corporate 68792 and may operate its bank account number: 01-0542-0081634-00 (ANZ, Lower Hutt Branch).
(e) Declaring that Robert Gary Naylor as administrator may, in writing, delegate any of the powers vested in him and revoke any delegation at any time.
(f) The applicants are entitled to costs against the respondent on a
2B basis with reasonable disbursements approved by the Registrar.
(g)Leave is reserved to the applicants to apply by 31 May 2017 to extend the term of the appointment of the administrator beyond 30 June
2017.
(h)Leave is reserved to the administrator to apply to the Court for any directions which the administrator thinks are necessary or appropriate.
(i) Service on the second and third respondents is no longer required.
[28] Finally, I record the Court’s appreciation of Mr Greenwood’s services as administrator and his final report. The Court is also grateful to Mr Naylor for accepting appointment and for his report. Quarterly reports to the Court through the
period of administration would be of assistance.
Karen Clark J
Solicitors:
Thomas Dewar Sziranyi Letts, Lower Hutt
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