Boyce v Body Corporate 70841
[2013] NZHC 3427
•17 December 2013
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
CIV 2013-470-605 [2013] NZHC 3427
BETWEEN MICHAEL JOHN BOYCE and CHRISTOPHER WIGHT DEBROTHERTON MORGAN as trustees of the HILTON JONES FAMILY TRUST Applicants
AND BODY CORPORATE 70841
First Respondent
JOHN SPOONER PROPERTY CONSULTANTS LTD
Second Respondent
Hearing: 16 December 2013
Counsel: D J O'Connor for Applicants
T S Richardson for First Respondent
E M Eggleston for Second Respondent
Judgment: 17 December 2013
JUDGMENT OF HEATH J
This judgment was delivered by me on 17 December 2013 at 2.30pm pursuant to
Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Lunn & Associates, Napier
Evan Turbott Law Office, Tauranga
Holland Beckett, Tauranga
Counsel:
D O’Connor, NapierT S Richardson, Tauranga
BOYCE and MORGAN as trustees of the HILTON JONES FAMILY TRUST v BODY CORPORATE 70841 [2013] NZHC 3427 [17 December 2013]
The application
[1] Messrs Boyce and Morgan, as trustees of the Hilton Jones Family Trust, own six commercial shops in Tower One, Oceanside Twin Towers (Tower One), in Marine Parade, Mt Maunganui. Tower One is a mixed-use unit title development, consisting of six retail shops and 40 apartments. Some of the individual units are occupied by owners, some are rented, and others are used as holiday homes.
[2] Body Corporate 70841 (the Body Corporate) has responsibility for management and maintenance of all common property and infrastructure relating to or serving more than one unit.1 A number of the Body Corporate’s functions were
delegated to a Body Corporate Committee.2 While the evidence does not reveal the
number of members on a committee to constitute a quorum, I was told that approximately nine people are required.
[3] At present, for reasons I shall develop later,3 there is no functioning Committee. That has led Messrs Boyce and Morgan, supported by a number of other owners, to apply for an order appointing Mr David Shea as administrator of the Body Corporate.4 The application is opposed by the chair of the Committee (Mr Kusabs) and by John Spooner Property Consultants Ltd, a company that purports to have a building management agreement with the Body Corporate.
Appointment of an administrator
[4] Section 141 of the Unit Titles Act 2010 (the Act) provides:
141 Appointment of administrator
(1) The body corporate, a creditor of the body corporate, or any person having a registered interest in a unit, may apply to the High Court for the appointment of an administrator.
...
1 Unit Titles Act 2010, s 138(1) and (2).
2 Ibid, s 108.
3 See paras [6]–[8] below.
4 Unit Titles Act 2010, s 141(1).
(3) The High Court may, in its discretion on cause shown, appoint an administrator for an indefinite period or for a fixed period on such terms and conditions as to remuneration or otherwise as it thinks fit.
...
(5) The administrator, to the exclusion of the body corporate and the body corporate committee, has and may exercise the powers of the body corporate and the committee, and is subject to the duties of the body corporate and the committee, or such of those powers and duties as the High Court orders.
(6) The administrator may, in writing, delegate any of the powers vested in the administrator and may revoke any delegation at any time.
....
[5] Messrs Boyce and Morgan seek appointment of an administrator on two bases:
(a) First, they have a concern about imminent danger to members of the public who may be using cafés, or other shops, at the ground floor level of Tower One, in circumstances where there is concern about the structural safety of the verandah area.
(b)Second, they assert that there is a dysfunctional relationship among members of the Body Corporate.
[6] The dysfunctional relationship appears to have arisen from a perception on the part of some owners that the previous members of the Committee had failed to keep owners satisfactorily apprised of developments, in relation to structural and weathertightness issues on which experts had been engaged to report. An illustration is the termination of the engagement of one of the experts.
[7] At the Annual General Meeting held on 30 November 2013, owners who supported Messrs Boyce and Morgan voted en bloc to remove existing Committee members. However, save for Mr Boyce, none of those responsible for casting votes to remove them showed any willingness to take responsibility for managing the Body Corporate, by making themselves available for election to the Committee. While Mr Boyce offered himself for election as chair, he withdrew when it became clear that no other Committee members would be elected. For present purposes, it is
clear that there is no Committee in place to which the Body Corporate is entitled to delegate powers and functions.5 Further, there is no immediate prospect that the two factions that have developed are capable of working together co-operatively.
[8] In addition to removing members of the Committee at the November 2013
Annual General Meeting, the members of the Body Corporate purported to terminate the management contract of John Spooner Property Consultants Ltd. There is a separate issue whether that contract has been terminated lawfully. I offer no view on that issue. Mr Spooner’s company is perceived as being too closely linked to the interests of previous Committee members.
[9] Those opposing the application do so on the grounds that there is no imminent threat to public safety, and management of the building should not be placed in the hands of an independent administrator pending an Extraordinary General Meeting of the Body Corporate, which has been convened for 24 January
2014. At that meeting, the appointment of committee members will be considered.
Analysis
[10] Extensive evidence was put before me, on behalf of Messrs Boyce and Morgan. Because of the urgency with which the application was brought on for hearing, there was little time for Messrs Kusabs and John Spooner Property Consultants Ltd to respond. In those circumstances, I deliberately refrain from commenting on allegations made against Mr Kusabs and Mr Spooner, in respect of which they have not yet had an adequate opportunity to reply. My reasons for determining the application will be based on facts that are objectively capable of determination at this time.
[11] The statutory jurisdiction to appoint an administrator has been expressed in broad terms. In Low v Body Corporate 384911,6 I discussed applicable principles in the context of s 40 of the Unit Titles Act 1972, the predecessor of s 141. I said:
[33] Because s 40 envisages a less critical situation than does s 46, it would be unwise to attempt to define exhaustively the circumstances in
5 Ibid, s 108.
6 Low v Body Corporate 384911 (2011) 12 NZCPR 142 (HC) at paras [33]–[37].
which the discretion to appoint an administrator should be exercised. Parliament has provided an open-textured approach for the Court to apply, by using general words as a threshold test. All that is required is for the Court, “on cause shown”, to exercise its discretion to appoint an administrator. The nature of the discretion is emphasised by the ability to appoint a person for a fixed or indefinite period and on such terms as the Court thinks fit. ...
...
[35] I was referred to some cases in which the power to appoint an administrator has been discussed. The two New Zealand cases do not attempt to identify principles on which the s 40 discretion should be exercised. In Norman, an order was made as a matter of necessity in what the Judge described as a “near-desperate situation”. In the context of a “leaky building” case, there was a need to refurbish in circumstances where there were insufficient funds to do so. Greenhalgh was a costs judgment that arose out of an uncontested order to appoint an administrator.
(footnotes omitted
A similar approach to the exercise of the jurisdiction was taken by Ellis J, in Gibson v Body Corporate 3849811.7
[12] As I indicated to counsel at the conclusion of the hearing, it seems to me that there are two possible solutions to the identified problems. Both solutions are capable of managing the dual problems of public safety and owner dysfunctionility. The question is which is better. They are:
(a) To appoint an administrator for a period until early February 2014, with a view to having the appointment reconsidered at that time. That would enable the administrator to engage promptly in taking steps to ascertain whether any public safety issues exist and also to chair the proposed Extraordinary General Meeting of the Body Corporate scheduled for 24 January 2014. If, by the time of the next meeting, relationships among the owners have improved and a Committee could be elected to manage the property for the common good, it is unlikely that the appointment of an administrator (with its the attendant (and perhaps prohibitive) cost) would be necessary; or
(b)To adjourn the application to a date in early February 2014, with a direction that all relevant reports dealing with weathertightness and structural issues be referred immediately to Tauranga City Council (the Council). That could be done on the basis that, if any public safety concerns were identified that required urgent attention, leave to bring the application back on for hearing before a Duty Judge in Auckland could be reserved. Such an approach would enable the Council to determine whether there were any public safety issues
requiring its intervention.8
[13] On balance, I consider that the former is the more appropriate route by which to address the problems that have emerged. I have reached that view for these reasons:
(a) There is evidence that the previous Committee withheld an important report dealing with weathertightness and structural issues from other owners. That causes me concern about whether consideration of the issues raised in that report were being dealt with in the interests of all owners. That concern is exacerbated by the fact that the author of the report, Mr Hodgson, subsequently had his contract terminated.
(b) It is clear from what occurred at the Annual General Meeting on 30
November 2013 that the owners who comprise the Body Corporate are incapable of acting in a co-operative fashion in planning and managing the remediation work required. Even though a group associated with Mr Boyce and Mr Morgan acted to remove existing Committee members, none of them were prepared to take their place. Not only does that demonstrate dysfunction, it also suggests a lack of any desire on the part of those associated with Mr Boyce and Mr Morgan to take responsibility for the remediation issues. However, I acknowledge that any perceived apathy may be explained by the fact that many residents are elderly.
(c) An Extraordinary General Meeting has been convened for 24 January
2014. That is over one month away. In the intervening period, there will be many people in the Mt Maunganui area for holiday purposes who will use the cafés in issue.
(d)There is a need for competent leadership of the Body Corporate. I expect the administrator to disclose all available reports to the Council so that it can consider what steps (if any) should be taken to ensure that there are no imminent public safety concerns; or if there were, to take steps to protect the public. An administrator should also be able to expedite instruction of appropriate experts to plan and to carry out necessary remediation work and to ensure all owners are kept informed of developments in a timely manner.
(e) If there were an interregnum during which no administrator was appointed, there is the risk that something could happen within the building which could affect the interests (financial or health) of many elderly residents. For example, who would take responsibility if lifts in the building broke down over that period? The existing building manager may not be in a position to do so as the Body Corporate purported to terminate its contract at the Annual General Meeting.
[14] For those reasons, I am satisfied that appointment of an administrator is necessary. Section 141(5) of the Act identifies the powers that are conferred on an administrator.9 There appears to be no jurisdiction to divide the powers of the Body Corporate between the administrator and the collective body of owners. In those circumstances, I propose to limit the duration of the appointment, so that it can be reviewed early next year. That should be regarded as an interim order that does not
finally determine the application.
[15] Mr O’Connor, for Messrs Boyce and Morgan, has provided to me a consent to act on behalf of the proposed administrator and an amended draft order. I am satisfied that Mr Shea is qualified to undertake the role.
[16] I am doubtful whether the indemnity insurance sought can be ordered by the Court. Rather than adding that as a term of the appointment, I shall authorise Mr Shea to seek insurance cover for an amount of no more than $3 million, to protect him in relation to the office he holds, for the duration of his initial appointment. The cost of obtaining the insurance and any premiums shall be met out of the Body Corporate’s operating account.
Orders
[17] I make the following orders:
(a) I appoint David Anthony Shea as administrator of Body Corporate
70841. That appointment shall enure from today until 4 February
2014, when it will be reconsidered by the Court.
(b) Mr Shea’s remuneration shall be calculated in accordance with para
3(b) of the Consent to Act filed on 16 December 2013. Mr Shea shall render an invoice for his remuneration on 31 January 2014 and that invoice shall be paid out of the Body Corporate’s operating account. On application of any owner, the Court may review that remuneration.
(c) Mr Shea shall chair the Extraordinary General Meeting of the Body
Corporate on 24 January 2014 and report to the Court as directed.
(d)The administrator shall file and provide to all owners of units in Tower One a report, addressed to this Court, confirming the steps that he has taken as administrator to that date, reporting on the outcome of the Extraordinary General Meeting on 24 January 2014, and identifying any further issues that need to be addressed, either by the Body Corporate or the administrator, if his appointment were continued. That report shall be filed and served by midday on Tuesday 28 January 2014.
(e) Mr Shea is authorised to seek insurance cover in the manner previously indicated.10
(f) Leave to apply, on notice to those parties who have given an address for service in this proceeding, is reserved. Any urgent application shall be referred promptly to a Duty Judge in Auckland.
(g) The application is otherwise adjourned until 2.15pm on 4 February
2014 before a Judge of this Court. At that time, the administrator’s report, and any evidence from other parties filed and served before midday on 3 February 2014, will be considered. The presiding Judge will determine whether or not to extend the administrator’s appointment, and make any further directions that he or she may consider necessary.
[18] Mr Shea assumes all powers of the Body Corporate.11 It is not necessary to restrain the persons named in the amended application from further involvement in the management of the Body Corporate. The administrator has all powers necessary to fulfil his functions; no residual powers are available for any other owner to exercise.
[19] Costs are reserved.
Delivered at 2.30pm on 17 December 2014
P R Heath J
10 See para [16] above.
11 Ibid, s 141(5).
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