Body Corporate 68792 v Memelink

[2015] NZHC 1731

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2015-485-202 [2015] NZHC 1731

IN THE MATTER

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 Applicant

AND

SYNERGY ENTERPRISES LIMITED, JAMES AND CAROLINE MCKERNAN, STEVEN AND VALDA SCHECKTER AND GEOFFREY ARDEN

Second Applicants

AND

HARRY MEMELINK AND IAN TREVOR NEILL HAMILTON First Respondents

AND

ANTHONY HARRY DE VRIES AND GERALDINE DE VRIES

Second Respondents

AND

CUDBY & MEADE LIMITED Third Respondent

Hearing:	17 July 2015
Counsel:	J K Mahuta-Coyle for Applicants H Memelink in Person A H de Vries in Person J L Greenwood (Interim Administrator)
Judgment:	28 July 2015

JUDGMENT (NO 5) OF BROWN J

BODY CORPORATE 68792 & ORS v MEMELINK & ORS [2015] NZHC 1731 [28 July 2015]

Introduction

[1]      As   noted   in   my   first   judgment1     dated   18 March 2015   appointing Mr J L Greenwood  as  interim  administrator,  there  has  been  a  long  and  troubled history of conflict between the members of the first applicant (BC68792).

[2]      The history of the matter since is apparent from my subsequent judgments.2

In my fourth judgment I made a direction for the timetable which was to apply for the  filing  of  further  written  material  in  advance  of  the  hearing  on  Friday,

17 July 2015 to determine the substantive application for the appointment of an administrator.

[3]      Subsequent to my fourth judgment the following documents have been filed:

(a)       amended   originating    application    for    an    order    appointing    an administrator dated 19 June 2015;

(b)      a second affidavit of Mr McKernan in support of the application dated

29 June 2015.

(c)       a seventh memorandum of Mr de Vries dated 1 July 2015;

(d)      memorandum of the first and third respondents dated 2 July 2015;

(e)       a memorandum of the second applicants in support of the originating application filed on 8 July 2015;

(f)       an annotated copy of the amended application with commentary filed by Mr de Vries on 9 July 2015;

(g)      a fourth report of the interim administrator dated 10 July 2015;

1      Body Corporate 68792 & Ors v Memelink and Hamilton & Ors [2015] NZHC 519.

2      Body Corporate 68792 & Ors v Memelink and Hamilton & Ors [2015] NZHC 854, 1159 and

1335.

(h)      an eighth memorandum of Mr de Vries dated 13 July 2015; (i)           submissions on behalf of the applicants dated 14 July 2015;

(j)       a supplementary report to the interim administrator’s fourth report

dated 14 July 2015;

(k)      a response of Mr de Vries to the applicants’ submissions;

(l)       a further notice of opposition of Mr Memelink and Mr de Vries dated

15 July 2015;

(m)     a further affidavit of Mr de Vries dated 15 July 2015;

(n)an annotated copy of the interim administrator’s supplementary report with commentary filed by Mr de Vries on 16 July 2015;

(o)      an  affidavit  of  Mr Memelink  in  reply  to  the  second  affidavit  of

Mr McKernan dated 16 July 2015;

(p)      an annotated copy of the interim administrator’s fourth report with

commentary filed by Mr de Vries on 16 July 2015.

In addition during the hearing Mr de Vries handed up a further written submission.

The application for an order under s 141 of the Unit Titles Act 2010 (the Act)

[4]      The  original  application  dated  12 March 2015  sought  an  interim  order appointing Mr Greenwood on an interim basis.   That application was made on a without notice basis although the application and supporting affidavits had been provided to the respondents on a Pickwick basis.  In a Minute dated 13 March 2015 I directed that the application should be heard on 18 March 2015 as I was not satisfied that it should properly be dealt with in terms of r 7.46(3) without notice.

[5]      At the hearing on 12 June 2015 I drew to the applicants’ attention the fact that the application did not seek final orders.   Consequently the amended application dated 19 June 2015 was filed which seeks the following orders:

1.1Appointing JOHN PAUL GREENWOOD of Wellington, solicitor, as the  administrator  of  the  First  Applicant,  BODY  CORPORATE

68792.

1.2Confirming  that  John  Paul  Greenwood,  as  administrator,  may exercise all of the powers of Body Corporate 68792 and may operate the Body Corporate’s bank account number: 01-0542-0081634-00 (ANZ, Lower Hutt Branch).

1.3An order declaring that John Paul Greenwood, as administrator, may, in writing, delegate any of the powers vested in him and revoke any delegation at any time.

1.4An  order  that  the  above-named  Respondents  pay  the  costs  and expenses of the administration.

1.5For further orders and/or directions for the determination of this application on such notice and on such terms as this Court deems just.

1.6      An order for the payment of the Applicants’ costs of and incidental

to this application.

[6]      At the hearing on 17 July 2015 Mr Mahuta-Coyle sought an amendment to order 1.2 by the addition of the following words after the word “administrator”:

“to the exclusion of the body corporate and the body corporate committee”.

[7]      Those words, which are contained in s 141(5), were incorporated in the Order made on 18 March 2015.  I grant leave to amend proposed order 1.2 accordingly.

The competing contentions

[8]      As noted above the original application was made on an urgent basis.  The circumstances   then   pertaining   were   explained   in   the   first   affidavits   of Mr S Scheckter and Mr P Martens, the current chairman of BC68792.  At that time the bank account of BC68792 had been frozen and it was alleged that Mr de Vries had threatened to have power to the units cut off.  After explaining the history of BC68792  including  the  Public  Works  Act  acquisition  by  Transit  New Zealand relating to the Dowse Interchange, the re-assessment of ownership interests in 2011

and the various disputes among the members, including in particular the issue of unpaid levies, Mr Martens’ affidavit concluded in this way:

42.In the current years, as I have outlined above, things have only got worse.

43.We now have our bank account frozen and we have received threats to cut off power, restrict access to telecommunications installations and  trespass  notices.   We ask the  Court  to  urgently appoint  Mr Greenwood for these reasons.

44.      In  the  face  of  these  developments  I,  as  chairman,  convened  an

Emergency  Extraordinary  General  Meeting  that  took  place  on

5 March   2015.      The   Body   Corporate   resolved   to   remove

Mr de Vries’ signing authority on the account and substitute another management committee member, Mr Scheckter.   It remains to be seen whether the bank will recognise that, but in the meantime we have additional threats in respect of power, telecommunications, etc. We have resolved to make an application to this Court as the minute shows, and we respectfully ask the Court, both for my part and as chairman  of  the  Body Corporate,  to confirm the appointment  of Mr Greenwood as an administrator on an urgent basis

[9]      On  his  appointment  Mr Greenwood  lifted  the  freeze  on  the ANZ  Bank account  and  assumed  sole  authority to  sign  cheques.    His  reports  to  the  Court (discussed below) disclose the several steps which he has taken to regularise the management of BC68792.

[10]     However, and perhaps unsurprisingly, the fundamental points of difference between the members, which go back several years, remain on foot.  The depth of feeling concerning those grievances has been readily apparent to me in the course of the five hearings which have taken place between 18 March and 17 July 2015.

[11]     In his recent second affidavit in support of the application Mr McKernan stated that the matters in dispute among the group of members remain unresolved.  It is his belief that those matters will never be resolved and that the body corporate must remain in administration.   Each of the other second applicants signed a memorandum  in  which  they confirmed  that  they had  read  and  agreed  with  the content of Mr McKernan’s  affidavit and that they also sought the orders in the amended application.

[12]     Mr Memelink and Mr de Vries continue to resist an order for the appointment of an administrator.  They remain resolute in their conviction that at earlier meetings they constituted a majority of voting members which accounts for their description of the management committee (prior to the appointment of the interim administrator) as the “minority”.   That conviction is reflected in the following extract from the Further Notice of Opposition dated 15 July 2015 signed by both Mr Memelink and Mr de Vries:

5.5What then is an actually fair solution or outcome under the bias and unfair  situation,  considering  the  actions  and  constant mismanagement by the minority in the past; as even the sincere attempt of the First Respondents to bring a communal BC68792 solution from its EGM of October 2014, was and still is deliberately misinterpreted and commandeered?

5.6Harry   Memelink   as   head   trustee   of   Link  Trust   No.1,   First Respondent, has again provided a supporting affidavit to this Further Notice of Opposition and can overwhelmingly prove that he had the voting  rights  and  poll  vote  since  the  day  of  the  EGM  held

21st October 2014.     This  should  have  given  him  by  law,  the

Chairmanship of BC68792 granting him the ability to work at a communal solution for BC68792 but this was denied and blocked by the incorrect and illegal actions of the BC68792 Chairmanship and Management as well as Gerard and Fiona.

5.7If the outcomes of the EGM of 21st October 2014 had been upheld as per law, or the following AGM’s and EGM’s been held correctly as in  accordance  with  the  Act  and  Regulations,  then  as  Chairman Mr Memelink would have had all issues resolved or well under way to communal resolution and the flooding disasters which have since occurred, with damage to the respondents units estimated at over

$50,000, would of been averted.

[13]     They contend that, had the Body Corporate Rules been followed, there would not now be a state of dysfunctionality.  Again quoting from the Further Notice of Opposition:

4.1If  the  BC68792  Chairman,  Management  and  Legal  Counsel  had correctly and legally followed the Unit Titles Act, Regulations and Body Corporate Rules, there would have been no suggestion of dysfunctionality leading to this application now before the Court to appoint an administrator.

4.2The Respondents have consistently informed, notified and warned the BC68792 Chairman, Management and Legal Counsel of their non-adherence to and breaking of the Unit Titles Act, Regulations and Body Corporate Rules, but this has been to no avail.

4.3The Respondents have taken significant steps to be the majority so as to ensure just rights would be upheld against the constant persecution  and  ostracizing  by  the  Second Applicants,  being  the minority who treat the Respondents as impecunious members.

4.4The minority Applicants have and still are prejudicing the majority Respondents and holding them to ransom, now using this court process.

4.5With the ultimate ransom being the Second Applicants guise of using the  BC68792  as  First Applicant  in  this  case;  and  the  so  called BC68792 lawyers to represent both Applicants.

[14]     It   was   apparent   from   the   Further   Notice   of   Opposition   that   even Mr Memelink  and  Mr de Vries  recognise  that  a  state  of  dysfunctionality  now prevails:

6.As can be seen the BC68792 has become more dysfunctional since the appointment of an interim administrator by this court, with an unfair continued bias maintained with silence from the Applicants; this  not  being  the  fault  of  Mr Greenwood,  rather  the  result  of continued  commandeering  by  the  minority,  with  the  Applicants giving a biased focus on specific issues benefiting them but not responding when asked for relative information and the sorting out of the unresolved issues and mistakes made by them in the past.

[15]     However  they  oppose  the  appointment  of  an  administrator  and  instead request that Mr Greenwood be appointed to provide “advice and legal counsel to BC68792, as and when required”.

[16]     They also place reliance on the following highlighted observation in Gibson v Body   Corporate 384911   where   an   application   for   the   appointment   of   an administrator was dismissed:3

[96]     Perhaps  more  significantly,  I  find  it  difficult  to  see  that  the appointment of an administrator would put an end to that pursuit or even render it ultimately less successful.  An administrator would be required to act within the four corners of the UTA and the Body Corporate rules.   I do not for one minute think that he would be entitled to ignore the will of the majority.  (emphasis added)

[17]     Section 141(5) envisages that in exercising the powers of a body corporate and a committee the administrator would act to the exclusion of the body corporate and the body corporate committee.   It is plain in my view that the Judge was not there suggesting that an administrator should act under the direction of the majority of members of a body corporate.  However, even if the highlighted sentence bore the meaning which Mr Memelink and Mr de Vries advocate, that would not advance matters in the present case where each side claims to be the “majority”.

The interim administrator’s reports

[18]     As   a   consequence   of   the   several   detailed   written   reports   which Mr Greenwood as interim administrator has provided, the Court also has the benefit of an assessment by a professional independent third party of some of the several points of difference between the members of BC68792.

[19]     In his second report dated 26 May 2015 Mr Greenwood commented on the

origins of the members’ differences in this way:

Where to from here

50As  I see  matters, the  genesis of the  Body Corporate’s  problems started circa 2007 when Transit (now NZTA) separately negotiated with individual owners their compensation packages following acquisition of some of the Units within the Body Corporate development.  Secondly, the significant outstanding levies due from Anthony (Unit 15) and Harry (principally Harry’s company Cudby

& Meade Limited which owns Unit 14) has polarised the owners and created an atmosphere of distrust.  The owners who have continued

to  pay  their  levies  and  have  remained  paid  up  members  of  the

Body Corporate feel intimidated and bullied. Whilst it is appreciated the  Body  Corporate  has  not  followed,  in  some  cases,  normal

protocols in preapproving expenditure, I do not believe items spent

on litigation or having to reassess the ownership interests is expenditure that was not appropriate.   What is clear, is that it is intolerable that the paid up owners have been forced to pursue recovery of levies through the Tribunal and Court system.  This in turn has resulted in the Body Corporate’s funds being depleted in order to defend and/or pursue the various Tribunal and Court actions which are identified in Appendix 2 of my Report of 21 April 2015.  I accept that that there may well exist genuine historical concerns relating to decisions made or not made by the Body Corporate Committee.

[20]     In that report Mr Greenwood expressed the opinion that there was no merit in the several invoices rendered to BC68792 by Mr Memelink and Mr de Vries, which invoices had been relied on by them as a set off against the levies which they have declined to pay.

[21]     In  his  third  report  dated  11 June 2015  Mr Greenwood  advised  that  no progress had been made in reaching settlements between the members and that Mr de Vries was in the process of launching new proceedings which would only serve to exacerbate the morass which had evolved.  He stated that had no doubt that the owners were not able to function without administration.

[22]     Mr Greenwood’s    fourth    report    also    commented   on    the   need    for

administration:

12.1I support a permanent appointment of an Administrator since the dysfunction continues and there remains little hope of amicable settlement.  Further, it is very doubtful that either Anthony or Harry will pay any disputed levies up front to give them a lawful right to vote in terms of section 96(b) of the Unit Titles Act 2010 and thereby open  up the  possibility,  however  remote, of the Body Corporate going out of administration.   I am mindful however of the considerable cost this imposes on those owners who continue to pay levies.  I am in the Court’s hands as to whether I shall continue in the role.    It  is  not  a  role  I envy  where  getting  any  compromise  or agreement to settle matters on a sensible basis with Anthony and Harry is proving elusive.  Hard decisions need to be made to stop the Body Corporate from bleeding.

Other court proceedings

[23]     A supplementary report to Mr Greenwood’s fourth report annexed a list of the then   current   proceedings   filed   as   between   BC68792   and   the   interests   of Mr Memelink and Mr de Vries:4

CIV No.	Plaintiff	Defendant	Court
2014-086-161	BC68792	Cudby & Meade Ltd	Hutt Valley District Court
2013-485-906	BC68792	Cudby & Meade Ltd	High Court – Insolvency List
2013-485-5775/ 5389	BC810012	Harry Memelink	High Court – Insolvency List
2015-485-202	BC68792 & Ors	Memelink & de Vries	High Court Wellington
2014-096-683	BC68792	de Vries	District Court
2015-485-295	de Vries	BC68792	High Court Wellington

[24]     Furthermore  the  second  affidavit  of  Mr McKernan  annexed  a  number  of documents which appeared to be court proceedings instituted by Mr de Vries, in some  instances  with  Mr Memelink,  and  which  had  been  served  on  the  persons named as defendants who included Mr McKernan. As Mr McKernan explained:

6.While it is difficult to keep track, as far as I can see Mr de Vries and Mr Memelink have either jointly or alone presented the following claims:

6.1      A Tenancy Tribunal application provided to Mr Dewar on

13 March 2015 (annexed and marked “A”).

6.2A Statement of Claim from Mr de Vries on or about 11 June, claiming $106,000.00 in damages (annexed and marked “B”, “C” and “D”).   I have three copies naming different defendants, but I think there are more.

6.3      A  Statement  of  Claim  and  Notice  of  Proceeding  dated

12 June, signed by Mr Memelink and Mr de Vries, seeking over $2 million.  (The Statement of Claim and Notice of

Proceeding are annexed and marked “E” and “F”).

6.4A Statement of Claim and Notice of Proceeding (which have does have a stamp from the High Court indicating this one might at least have been presented to the Court) received last week, naming myself and others, including the Body Corporate’s  solicitor,  Mr Dewar,  as  defendants,  claiming

$406,035.29.   (These documents are annexed and marked

“G” and “H”.)

[25]     In view of the uncertainty as to the status of the various documents referred to by Mr McKernan, at the commencement of the hearing I questioned Mr de Vries and Mr Memelink about them.  Mr de Vries advised that the documents comprising Exhibits B to H (inclusive) have been “put on hold” and are “in abeyance”.

[26]     Consequently the position appears to be that, although the documents have not been issued in compliance with the High Court Rules and hence High Court proceedings are not yet on foot, these several documents in the form of court proceedings have not been abandoned and presently sit in what might be described as  a  dormant  state.     This  environment  of  both  actual  and  threatened  court proceedings only serves to exacerbate the state of tension among the members of BC68792.

Decision

[27]     My consideration of the voluminous documentation filed in this proceeding together  with  the  insights  which  I  have  gained  from  hearing  submissions  from Mr Memelink and Mr de Vries on a number of occasions has led me to the clear view that the degree of dysfunctionality within BC68792 and the polarisation of the positions of the two sides is such that an order under s 141 is not only warranted but essential.     My  conclusion  has  been  fortified  by  the  information  provided  in Mr Greenwood’s   reports.      Consequently  an   order   will   be   made   appointing Mr Greenwood as administrator.

[28]     Section 141(3) provides that such an appointment may be for an indefinite period or for a fixed period on such terms and conditions as to remuneration or otherwise as the Court thinks fit.  Having discussed the duration of an appointment with Mr Greenwood, I consider that it is inappropriate to make the appointment for an indefinite period.   However the six month period which he suggested is in my view too brief.  I consider that the appointment should be to a fixed date with leave reserved to the applicants to apply to extend the period and with leave reserved to the administrator to apply generally.  The administrator will continue to render accounts to BC68792 for his time spent in the conduct of the administration.

[29]     The applicants sought as Order 1.4 a direction requiring the respondents to pay the costs and expenses of the administration.   I do not consider that such a course is open to the Court given the provision in s 141(4) that the remuneration and expenses of the administrator are to be met out of the operating account.  However Mr Mahuta-Coyle placed reliance on s 127 of the Act which states:

127     Recovery of money expended where person at fault

(1)       This section applies if the body corporate does any repair, work, or act that it is required or authorised to do, by or under this Act, or by or under any other Act, and the repair, work, or act was rendered necessary by reason of any wilful or negligent act or omission on the part of, or any breach of the Act, the body corporate rules, or any regulations by, any unit owner or his or her tenant, lessee, licensee, or invitee.

(2)       Any expense incurred by the body corporate in doing the repair, work,  or  act,  together  with  any  reasonable  costs  incurred  in collecting the expense, is recoverable as a debt due to the body corporate (less any amount already paid) by the person who was the unit owner at the time the expense became payable or by the person who is the unit owner at the time proceedings are instituted.

[30]     He   notes   that   the   body   corporate   passed   a   resolution   to   appoint Mr Greenwood and he submits that the need to make application to the Court was rendered necessary by wilful acts on the part of the respondents.  Section 127 may well apply, for example, to the guttering repairs to Mr de Vries’ unit which were

referred to in my fourth judgment5 and in Mr Greenwood’s fourth report.

[31]     However I do not consider that the fact that a body corporate is one of the persons entitled to apply for an order under s 141 means that such an application is “an act that it is required or authorised to do” by or under the Act.  Consequently I do not accept that in the circumstances where an application happens to be made by the body corporate that s 127 has the consequence that certain members can be required to meet the costs of an administrator appointed under s 141.

[32]     The  applicants  also  seek  costs  on  the  application.     I  apprehend  that Mr Memelink and Mr de Vries will view an order for costs as a further instance of persecution of them.  However the primary rule is that the costs of litigation follow the  event.    The  respondents  opposed  the  application  and  the  applicants  have prevailed. The applicants are therefore entitled to costs.

[33]     Mr Mahuta-Coyle submitted that this is a case where an award of increased costs  is  justified,  primarily  because  of  the  manner  in  which  Mr Memelink  and Mr de Vries have conducted their opposition to the application.   In particular he referred  to  their  failures  to  comply with  timetable  directions,  to  the  volume  of material filed and to the fact of Mr de Vries having issued “subpoenas” to various of the applicants with reference to the hearing on 17 July 2015.

[34]     I am mindful of the observation of Fisher J in Aplin v Lagan that:6

While an unrepresented party should not be penalised on that account alone, if the result has been to throw an extra burden of legal cost upon the represented party, there is no reason why some recognition should not be given to that.

[35]     Having carefully reflected on the conduct of the several hearings in this matter  and  Mr  de Vries’ explanation  for  the  subpoena  incident,  I  conclude  that Mr Memelink and Mr de Vries have come close to but not quite crossed the line which would justify an award of increased costs against them.  However I take this opportunity to warn them that constant resort to repetitive litigation is a short-term strategy and that the almost invariable outcome of litigation which is unsuccessfully pursued is a costs award.   They would be well-advised to note the observation of Fisher J above.

[36]     Because I apprehend that agreement on costs is unlikely, Mr Mahuta-Coyle is

to submit a 2B costs calculation for the Court’s approval.

Orders

[37]     There will be orders in the following terms:

(a)      Appointing John Paul Greenwood of Wellington, solicitor, as the administrator of Body Corporate 68792 until 30 June 2016.

(b)Confirming  that  John  Paul  Greenwood,  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     the     Body     Corporate’s     bank     account     number:

01-0542-0081634-00 (ANZ, Lower Hutt Branch).

(c)      Declaring  that  John  Paul  Greenwood,  as  administrator,  may,  in writing, delegate any of the powers vested in him and revoke any delegation at any time.

(d)      The applicants are entitled to costs against the respondents on a 2B

basis with reasonable disbursements approved by the Registrar.

(e)      Leave is reserved to the applicants to apply by 31 May 2016 to extend the   term   of   the   appointment   of   the   administrator   beyond

30 June 2016.

(f)      Leave is reserved to the administrator to apply to the Court for any directions which the administrator thinks are necessary or appropriate.

Brown J