Cummins v Body Corporate 172108
[2022] NZCA 68
•22 March 2022 at 11.00 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA234/2021 [2022] NZCA 68 |
| BETWEEN | ROBERT JAMES CUMMINS |
| AND | BODY CORPORATE 172108 |
| Hearing: | 28 September 2021 |
Court: | Goddard, Woolford and Mander JJ |
Counsel: | K P Sullivan for Appellant |
Judgment: | 22 March 2022 at 11.00 am |
JUDGMENT OF THE COURT
AThe appeal is dismissed.
BThe appellant must pay the first respondent’s actual and reasonable costs. Counsel must attempt to agree costs. In the event that they cannot, leave is reserved for the parties to apply to the Court to determine the amount payable.
____________________________________________________________________
REASONS OF THE COURT
(Given by Goddard J)
Introduction
Manchester Securities Ltd (Manchester) is the registered proprietor of Unit 12A of the Hobson Apartments. There is a long running dispute between Manchester and the respondent Body Corporate, which has been before this Court on four previous occasions.[1] Manchester was placed into liquidation by the High Court on 19 February 2020 on the application of the Body Corporate.[2]
[1]Manchester Securities Ltd v Body Corporate 172108 [2017] NZCA 527, (2017) 19 NZCPR 65 [Variation appeal]; Manchester Securities Ltd v Body Corporate 172108 [2018] NZCA 190, [2018] 3 NZLR 455 [Statutory demand appeal]; Manchester Securities Ltd v Body Corporate 172108 [2019] NZCA 408 [Stay appeal]; Cummins v Body Corporate 172108 [2021] NZCA 145, [2021] 3 NZLR 17 [Liquidation appeal].
[2]Body Corporate 172108 v Manchester Securities Ltd [2020] NZHC 198 [High Court liquidation decision], upheld in the Liquidation appeal.
Mr Cummins applied under rr 4.50 and 4.52 of the High Court Rules 2016 to be joined as a party in two sets of proceedings before the High Court, either in substitution for or in addition to Manchester. Mr Cummins says Manchester held Unit 12A on trust, and he is the successor trustee, though he has not taken legal title to Unit 12A. He says that Manchester is not expected to play an active role in the continuing proceedings, so the interests of the beneficial owners of Unit 12A will be unrepresented unless he is able to participate in the proceedings in place of Manchester. He says that he is the party with a direct interest in the proceedings who can present arguments in opposition to various applications made by the Body Corporate.
In the High Court Powell J concluded that Mr Cummins should be permitted to become a party to the proceedings in place of Manchester, provided that within 14 days of the High Court judgment he:
(a)registered a transfer or transmission of the title to Unit 12A from Manchester to himself; and
(b)paid the Body Corporate all of the amounts owed by Manchester to the Body Corporate at the time of its liquidation, without deduction or set-off.
In the event that Mr Cummins did not complete the steps set out above, the application for joinder would be dismissed.[3]
[3]Body Corporate 172108 v Manchester Securities Ltd [2021] NZHC 365 [High Court joinder decision].
Mr Cummins did not make any payment to the Body Corporate, and did not register a transfer of the legal title in Unit 12A to himself. His application was therefore dismissed.
Mr Cummins appeals to this Court from the High Court joinder decision, having been granted leave to do so by that court.[4]
[4]Body Corporate 172108 v Manchester Securities Ltd [2021] NZHC 686.
It is in our view clear that joinder of Mr Cummins as a party would be appropriate if, and only if, the conditions imposed in the High Court were complied with. The attempt by Mr Cummins to be joined to the proceeding, and be heard in opposition to the applications made by the Body Corporate, represents a continuing attempt on his part to exercise the rights of a proprietor of a unit while avoiding the obligations of a proprietor. He cannot have it both ways. His attempt to do so represents an abuse of the processes of the court.
The appeal must therefore be dismissed. Because the appeal is an abuse of process, the Body Corporate is entitled to costs on an indemnity basis. We set out our reasons for making those orders in more detail below.
Background
The following summary of the background to this appeal is taken largely from this Court’s decision on the liquidation appeal.[5]
The scheme for repair of Hobson Apartments
[5]Liquidation appeal, above n 1.
The Body Corporate is the body corporate of the unit title property known as Hobson Apartments at 196 Hobson Street, Auckland. In the first of its three earlier judgments, this Court described Hobson Apartments as follows:[6]
[5] Hobson Apartments is a 12 storey unit title development in Central Auckland with an unusual feature. The exterior of levels 1–11 is common property owned by the Body Corporate but not the exterior of the 12th floor. Almost all of the 12th floor is private property owned by Manchester. This came about because the 12th floor which is aesthetically and physically different from the rest of the building was constructed separately after the rest of the building had been completed. The 12th floor has a penthouse, Unit 12A, which covers the entire floor. The only common property on the 12th floor comprises the lift and stairwell shafts, ducts and a small recessed area at the rear on the eastern side.
[6] Unit 12A is the largest and most valuable unit in the complex. The ownership interest or unit entitlement of unit 12A is 11.88 per cent.[7]
[6]Variation appeal, above n 1.
[7]This includes both the principal unit 12A and the associated accessory unit, a carpark.
Hobson Apartments is a leaky building. In 2010 the Body Corporate sought court sanction to empower it to carry out repairs to individual units, including 12A, as well as common property. The Body Corporate proposed a scheme in line with standard unit title principles: that is the Body Corporate would contract for the repairs, with each unit holder paying for the repairs required to its separate property and contributing its unit entitlement of the cost of repairing the common property.
Manchester was the only unit holder to oppose the scheme. Manchester considered Unit 12A was in a far better condition than the rest of Hobson Apartments. Manchester was also mindful of the limited extent of the common property on level 12. Accordingly, Manchester was unwilling to contribute to the repair of common property, on the floors below level 12. It wanted to repair Unit 12A, and the common property on level 12, independently of the Body Corporate.
The scheme eventually sanctioned by the High Court provided for Manchester to repair level 12 (separate and common property) pursuant to a separate contract. The Body Corporate would repair levels 1 to 11 (separate and common property).[8] Manchester’s total liability would be limited to its unit entitlement (11.88 per cent) of the overall cost of repairing Hobson Apartments (common and separate property) as incurred (i) by the Body Corporate under its level 1 to 11 contract and (ii) by Manchester itself under its level 12 contract. That approach was based on the then current estimate that the total cost of all repairs would be $6,250,000, comprising $5,750,000 for levels 1 to 11 and $500,000 for level 12. Manchester’s unit entitlement liability (11.8 per cent of $6,250,000) would be $742,500. Manchester would therefore, in addition to paying the $500,000 to repair level 12, be liable to contribute $242,500 to the costs of repairing levels 1 to 11.[9]
[8]See Body Corporate 172108 v Meader (Nos 2 & 3) (2010) 12 NZCPR 181 at 195.
[9]See Body Corporate 172108 v Manchester Securities Ltd [2017] NZHC 329 [High Court variation decision] at [23] and [26]–[27].
Things did not go according to plan. By 2017:
(a)Manchester had made little, if any, progress on the repair of level 12. Level 12 was not in the condition initially assumed and the estimated costs of its repairs were continuing to increase: by June 2012 to around $1.1 m,[10] and by early 2016 to around $2.3 m.[11]
(b)The Body Corporate had completed the repair of common property on levels 1 to 11 at a final cost of $8,131,002.55.[12]
(c)Manchester had not paid any amount levied by the Body Corporate for the level 1 to 11 common property repairs. Its view was that as the projected cost of repairing level 12 was now greater than its capped 11.88 per cent contribution to total costs, the Body Corporate owed it money.[13]
The amendments to the scheme
[10]At [86].
[11]At [82].
[12]At [80].
[13]At [31] and [39].
Against that background, the Body Corporate applied to the High Court to amend the scheme by the removal of the special Manchester payment arrangements, so as to revert to the standard approach of separate liability for separate property, and unit entitlement liability for common property. Fogarty J was in no doubt that justice, and the scheme of the Act properly understood, required such an amendment.[14]
[14]At [69].
The scheme was amended to provide for Manchester to pay the full cost of repairing its separate property on level 12. The cost to repair the common property on level 12 would be met by all unitholders (Manchester included) in proportion to their unit entitlements. And Manchester would be liable for its proportionate share of the repair costs for the levels 1 to 11 common property.
Fogarty J went on to address the financial implications of these amendments to the scheme at the time of his decision. The repair of the common property on levels 1 to 11 had cost $4,320,266. The cost estimate for the repair of the common property on level 12 was, at that time, $217,865.20.[15]
[15]At [149]–[151].
On that basis the Judge reasoned:[16]
(a)Manchester owed the Body Corporate $513,247.60 for common property repairs (11.88 per cent of $4,320,266).
(b)Manchester’s unit entitlement liability for estimated level 12 common property costs was $25,882.90 (11.88 per cent of $217,865.20), meaning other unit owners’ liability to reimburse Manchester in respect of those costs was $191,982.81.
[16]At [149]–[153].
In those circumstances the Judge was prepared to allow Manchester a credit for that amount “if only to encourage immediate compliance by Manchester with this Court’s order to the benefit of all the other unit holders”.[17] On that basis Manchester could be said to owe the Body Corporate — as things then stood[18] — $321,264.79.[19]
[17]At [154].
[18]Notionally, as Manchester was then yet to incur level 12 common property repair costs.
[19]At [155].
The Judge summarised the effect of his decision amending the scheme in the following way:
[157] The effect of that order is [to] set aside the limit of 11.88 per cent and to reinstate the policy of the Act. Second, as indicated in paragraph [146], I order Manchester to pay to the Body Corporate for the benefit of the unit holders of levels 1 to 11 the sum of $321,264.79 (plus GST) as a provisional sum. That sum [is] to be adjusted upon completion of remediation of the property on level 12 to the extent that the [estimated] figure of $217,865.20 varies.
Manchester unsuccessfully appealed Fogarty J’s judgment varying the scheme to this Court.[20]
Manchester fails to pay the amount awarded by the High Court and is placed in liquidation
[20]Variation appeal, above n 1.
Manchester has never paid the amount that Fogarty J ordered to be paid immediately in 2017. Nor has Manchester paid any levies to the Body Corporate since then. Nor are its repairs to level 12 complete.
Following the decision of this Court in the appeal against Fogarty J’s judgment varying the scheme, the Body Corporate sought to enforce the payment of that judgment debt by way of statutory demand,[21] then by filing an application for the liquidation of Manchester.[22]
[21]Manchester Securities Ltd v Body Corporate 172108 [2018] NZHC 169 [High Court statutory demand decision]; and Statutory demand appeal, above n 1.
[22]Manchester unsuccessfully sought to stay, before unsuccessfully defending, that application for liquidation: Body Corporate 172108 v Manchester Securities Ltd [2018] NZHC 3307 [High Court stay decision]; Stay appeal, above n 1; High Court liquidation decision, above n 2; and Liquidation appeal, above n 1.
The High Court allowed Manchester a final opportunity to pay. It was given 20 days to pay the amounts owing to the Body Corporate. If it did not do so, it would go into liquidation.[23] Payment was not made, and Manchester went into liquidation on 11 March 2020. The appeal by Mr Cummins to this Court was unsuccessful.[24]
[23]High Court liquidation decision, above n 2, at [43].
[24]Liquidation appeal, above n 1.
Manchester unsuccessfully resisted each of the enforcement steps described above. It based that unsuccessful opposition on its claimed rights of set-off against the Body Corporate’s claim for the payment of the judgment debt ordered to be paid by Fogarty J in 2017, and on its right to pursue arbitration of its dispute with the Body Corporate.
On each of those occasions Manchester has in effect said that, by the time it finishes the repairs to level 12, the costs it is entitled to pass on to other unit holders via the Body Corporate under the scheme will be greater than the amount it was required to pay by Fogarty J back in 2017. Manchester says that if — as appears likely in the circumstances — there is disagreement between it and the Body Corporate about the amount of those costs, it has rights to arbitrate that dispute. Until those rights have been exhausted, the amount owing will not have been settled.
At every stage of that process this Court has emphasised that Manchester was required to pay the amounts referred to in the judgment of Fogarty J, and other levies owed to the Body Corporate, immediately. Manchester was not, in this context, entitled to defer payment pending quantification of its claims against the Body Corporate. So, for example, in dismissing Manchester’s appeal against the High Court’s refusal to grant a stay of the liquidation proceedings, this Court concluded that Manchester’s stay application had been a collateral challenge to the earlier findings of the High Court — as affirmed by this Court — that arbitration about a set off claim did not affect Manchester’s obligation to pay immediately.[25] The stay application was an abuse of process. This Court awarded indemnity costs to the Body Corporate.[26]
Mr Cummins appoints himself as a trustee in place of Manchester
[25]Stay appeal, above n 1, at [24]–[30].
[26]At [39]–[40].
Manchester held Unit 12A as trustee of the Manchester Securities Trading Trust (the Trust). The Trust is a discretionary trust. Mr Cummins is a discretionary beneficiary, but not a final beneficiary.
Mr Cummins is the settlor of the Trust. In that capacity he has the power to appoint and remove trustees. Mr Cummins appointed himself an additional trustee on 21 December 2018. Manchester subsequently retired as a trustee on 15 March 2019, leaving Mr Cummins as the sole trustee. Then, for the avoidance of doubt, Mr Cummins removed Manchester as a trustee on 2 June 2020, after Manchester had gone into liquidation.
Although Mr Cummins was then the sole trustee of the Trust, he decided not to take legal title to Unit 12A. The deeds providing for Manchester’s retirement and removal as trustee recorded that Manchester would continue to hold the Trust property as a bare trustee, to the order of Mr Cummins.
Mr Cummins said in evidence that he did not intend to call for transfer of title from Manchester until that became “expedient”. He did not consider it would be expedient to call for a transfer “before the status of the Trust’s set-offs has been determined”. He noted in his evidence that “as registered proprietor, I would be susceptible personally to a claim by the Body Corporate under s 124 of the Unit Titles Act 2010”.
Section 124 of the Unit Titles Act, to which Mr Cummins referred, provides that levies may be recovered from the owner at the time the levy became payable, or from the owner at the time proceedings are brought by the body corporate for the recovery of those levies. So the current owner is liable for all unpaid levies, regardless of when they were imposed.
On 27 February 2020, after the High Court made orders for Manchester to be placed into liquidation on 11 March 2020 unless the amounts payable to the Body Corporate were paid by that date, Mr Cummins as sole director of Manchester executed documents which purported to assign Manchester’s interest in the proceedings between Manchester and the Body Corporate to himself personally. Mr Cummins has given evidence that he did this because he did not want the liquidators to control the liquidation. He was concerned that they might take steps he did not agree with.
Mr Cummins’ application for joinder
Mr Cummins applied to be joined as a party in two proceedings which have been consolidated and are being case managed together:
(a)In CIV-2009-404-6868 the Body Corporate has applied for orders under s 48(6) of the Unit Titles Act 1972 varying and modifying the remediation scheme approved by Fogarty J in 2017.[27] Manchester has filed a cross-application in that proceeding for its own preferred variation of the scheme, which seeks to reverse the variation of the scheme approved by Fogarty J in 2017.
(b)In CIV-2019-404-1445 the Body Corporate appeals against an arbitral award determining a preliminary question as to jurisdiction in relation to an arbitration that Manchester sought to commence under the remediation scheme.
[27]The application is made under the 1972 Act, rather than the Unit Titles Act 2010, because the original scheme was made under the 1972 Act. That Act applies to any application to vary it until it is completed, cancelled or discharged. In respect of all other matters, the rules that govern the Body Corporate and the apartments are those set out in the 2010 Act.
A five day hearing of both proceedings was scheduled to begin on 19 April 2021. However that fixture was adjourned as a result of Mr Cummins’ joinder application, and the appeal to this Court, as explained in more detail below.
Mr Cummins says he should be joined as a party in those proceedings because following the liquidation of Manchester, there is no party with standing to represent the Trust in the proceedings. He says he should be appointed to represent the interests of the Trust, as he is now the sole trustee of the Trust, Manchester holds Unit 12A on a bare trust for him, and Manchester’s interest in the choses in action represented by the proceedings is vested in him by virtue of s 47 of the Trustee Act 1956.
If Mr Cummins is not joined as a party, it is likely that the Body Corporate’s applications will proceed by way of formal proof, without any opposition by Manchester. The liquidators do not intend to participate in the proceedings. Mr Cummins says that a formal proof hearing at which the interests of the Trust’s beneficiaries are unrepresented would be inconsistent with the requirements of natural justice.
High Court joinder decision
Powell J considered that Mr Cummins’ application was “essentially premature”.[28] It did not come within r 4.50 of the High Court Rules, which applies only in the case of death, bankruptcy, or devolution of an estate of a party by operation of law.[29] None of those circumstances had arisen in this case. Rule 4.52(1) only allowed for the making of an order that the proceeding be carried on by continuing parties and a new party:[30]
… if, after a proceeding has commenced, there is an event causing a change or transmission of interest or liability (including death or bankruptcy) or an interested person comes into existence, making it necessary or desirable—
(a) that a person be made a party; or
(b) an existing party be made a party in another capacity.
[28]High Court joinder decision, above n 3, at [8].
[29]At [9]–[10].
[30]At [11].
In this case, there had been no relevant change or transmission of interest or liability. Legal ownership of all relevant trust property remained with Manchester. There had been no change to the beneficial ownership of the Trust property. Because Manchester remained in existence and continued to hold ownership of the property, it remained properly joined in the proceeding. The Judge then observed:[31]
… On the other hand, given the history of the litigation between the parties, the attempt by Mr Cummins to be joined as a party only in his capacity as a trustee amounts to an attempt to continue to participate in the proceedings while continuing to attempt to delay payment of those sums that go with the ownership of the property and which the Courts have consistently directed be paid. As such I have no hesitation in concluding the same is an abuse of process and given those circumstances, I do not consider it is necessary or desirable that Mr Cummins be made a party at this time.
[31]At [13].
The Judge considered that simply dismissing Mr Cummins’ application would not assist the ultimate disposal of the proceedings. Rather, the best course was to give Mr Cummins the opportunity to effect the transfer of the Trust assets to himself as trustee. If Unit 12A was transferred to him, and he paid the amounts currently outstanding from Manchester to the Body Corporate, he would then appropriately be joined to the proceeding as the trustee of the Trust.[32]
[32]At [14]–16].
The Judge therefore made the following orders:[33]
(a) within 14 days of the date of this judgment:
(i) Robert Cummins is to register a transfer or transmission of the title to the unit on Level 12 from Manchester to himself (proof of which registration at LINZ is to be provided to the Court and the Body Corporate). The Body Corporate is to consent to that transfer as part of these conditions; and
(ii) he is to pay the Body Corporate all of the amounts owed by Manchester to the Body Corporate at the time of its liquidation, without deduction or set-off.
(b) In the event that Mr Cummins completes the matters set out [above] within the time specified, he is to be joined as a respondent to both proceedings (CIV-2009-404-6868 and CIV-019-404-1445) in place of Manchester Securities Limited (in liquidation).
(c) In the event that Mr Cummins does not complete the steps set out [above] within the time specified, the application for joinder is dismissed.
…
[33]At [17].
As matters transpired, Mr Cummins did not comply with those conditions and the application for joinder was accordingly dismissed on 17 March 2021.
Leave to appeal
On 30 March 2021 the Judge granted leave to Mr Cummins to appeal to this Court.[34] The Judge considered that his assessment of whether the application for joinder was an abuse of process depended on his assessment of the effect of the earlier judgments involving the Body Corporate and Manchester. It was at least arguable that different considerations applied to Mr Cummins following the liquidation of Manchester.[35]
[34]Body Corporate 172108 v Manchester Securities Ltd, above n 4.
[35]At [6].
The Judge also vacated the fixture scheduled to begin on 19 April 2021, pending the hearing of the appeal.
Mr Cummins’ argument on appeal
Mr Sullivan, counsel for Mr Cummins, submits that the threshold for an order under r 4.52 is low. He argues that the Court adopts a liberal approach to ensure appropriate representation.[36] One of the principal objects of the joinder rules is to enable the Court to prevent injustice being done to a person whose rights will be affected by its judgment by adjudicating upon the matter in dispute without giving that person an opportunity of being heard.[37]
[36]Newhaven Waldorf Management Ltd v Allen [2015] NZCA 204, [2015] NZAR 1173 at [46].
[37]At [43]–[44].
In this case, the Trust (and its beneficiaries) will not be represented if Mr Cummins is not joined as a party. Mr Sullivan says that Mr Cummins as trustee has a beneficial interest in Unit 12A, arising out of the bare trust on which Manchester holds the unit and Mr Cummins’ right of indemnity out of the Trust property.
Conversely, Mr Sullivan says, there will be no unfair prejudice to the Body Corporate as a result of the joinder of Mr Cummins. All that will happen is that the Body Corporate’s applications will be the subject of a defended hearing, rather than a formal proof hearing. That is not oppressive, or seriously and unfairly burdensome, prejudicial or damaging.[38]
[38]Merisant Company Inc v Flujo Sanguineo Holdings [2018] NZCA 390, [2018] NZAR 1550 at [21]–[27].
The joinder application is not, Mr Sullivan submits, a collateral attack on the earlier decisions. The earlier decisions concerned the obligations of Manchester and Manchester’s insolvency; issues which have now been resolved. Manchester is not re-litigating any of those issues. And joinder is irrelevant to the question of any obligation to pay levies, as Manchester is in liquidation, and Mr Cummins is not presently liable.
Mr Sullivan submitted that although if Mr Cummins took title to Unit 12A he would be exposed to the risk of a claim being brought by the Body Corporate under s 124 of the Unit Titles Act, as Mr Cummins said in his evidence referred to at [31] above, he would not in fact have any liability under s 124 as Manchester’s claims against the Body Corporate exceed the Body Corporate’s claims against Manchester. By virtue of s 310 of the Companies Act 1993, Mr Sullivan submitted, the claims by the Body Corporate against Manchester have been set-off and effectively extinguished.
Mr Sullivan also submitted that Mr Cummins is a “person having or claiming to have any estate or interest” in the Hobson Street property, so has the right to appear and be heard in the proceedings under s 48(4) of the Unit Titles Act 1972. We explored this submission with Mr Sullivan at the hearing of the appeal. He confirmed that Mr Cummins does not have any legal estate or interest in the property. Nor does he have any vested beneficial interest. The beneficial interest that Mr Sullivan identified as the qualifying interest for the purposes of s 48(4) of the Unit Titles Act 1972 was Mr Cummins’ right of indemnity out of the Trust’s assets in respect of any expenditure he incurs for the benefit of the Trust, and in particular expenditure incurred on remediation work.
Mr Sullivan emphasised that Mr Cummins was willing to take title, but was not able to do so because the Body Corporate would not allow this unless he made the outstanding payments.
Mr Sullivan took issue with the Body Corporate’s submission that Mr Cummins had chosen not to pay. There was no finding to this effect in the High Court. Mr Cummins’ position is that he is not able to meet the claims by the Body Corporate: he is reliant on the mortgagees of Unit 12A to fund remediation work on that unit.
Mr Sullivan also submitted that Mr Cummins should be joined as he has rights and obligations under the scheme as an “owner”. Under the scheme the definition of “owner” includes registered owners and their successors. Mr Cummins is a successor. He has a right to recover from other owners under the scheme, which is a chose in action vested in him.
Mr Sullivan said that Mr Cummins would be happy to participate in the proceedings alongside the liquidators of Manchester, rather than replacing them. That would not add materially to the cost or complexity of the proceedings.
Body Corporate’s submissions on appeal
The submissions made by Mr Orpin-Dowell for the Body Corporate are largely reflected in our reasons, and need not be set out in any detail. In short, Mr Orpin-Dowell submitted that:
(a)Mr Cummins’ application to be substituted as a party without taking title to Unit 12A was an abuse of process;
(b)it was open to the High Court Judge to impose the two conditions on joinder, and it was necessary to do so to prevent the courts’ processes being abused; and
(c)even putting aside abuse of process principles, the conditions imposed on joinder were necessary to prevent prejudice to the Body Corporate.
Discussion
Requirements for joinder order not met
We agree with the Judge that Mr Cummins’ application for joinder was premature, in the sense that at the time it was made there had been no relevant change or transmission of interest or liability that made it necessary or desirable that Mr Cummins be made a party to the High Court proceedings.
It is common ground that legal title to Unit 12A remains with Manchester. It is also common ground that there has been no change to the ultimate beneficial ownership of the unit.
We doubt that any interest that Mr Cummins may have in Unit 12A as a result of the arrangements he has entered into with Manchester is a relevant change or transmission of interest for the purpose of r 4.52 of the High Court Rules. Manchester was a party to the proceedings by virtue of its legal title to Unit 12A. In the event of a change or transmission in respect of that interest, the threshold for an order under r 4.52 replacing Manchester as the relevant party would be met.
We do not rule out the possibility that some other estate or interest in the unit created by Manchester might amount to a transmission or change that would justify the joinder of the person claiming under Manchester. But even assuming that Mr Sullivan is right that Mr Cummins has acquired some equitable interest in respect of Unit 12A as a result of the arrangements he has entered into with Manchester, the acquisition of that limited interest — neither legal title, nor any form of beneficial ownership — falls well short of being a change or transmission that would make it necessary or desirable for Mr Cummins to be made a party in place of Manchester under r 4.52. Consistent with the scheme of the Unit Titles Act, it is necessary for the legal owner of each unit to be a party to proceedings concerning a scheme. For so long as it continues to hold legal title, Manchester must remain as a party in the relevant proceedings. Nor do we consider that the arrangements Mr Cummins has brought about between himself and Manchester make it necessary or desirable that he be added as a party, in addition to Manchester.
It is disingenuous in the extreme for Mr Cummins to argue that he needs to be joined as a party in order to protect the interests of the beneficiaries under the Trust. Manchester was their trustee. Manchester had an immediate payment obligation, which it was entitled to meet out of the assets of the Trust. That is, this was a Trust obligation. Similarly, the cross-claims were being pursued by Manchester as a trustee, for the benefit of the beneficiaries under the Trust. These cross-claims were trust assets. In holding that Manchester was required to pay the amounts due to the Body Corporate immediately, and was not entitled to defer payment until the cross‑claims were resolved, the courts have determined that issue as regards Manchester and any persons (such as the Trust beneficiaries) claiming under Manchester. It would be unjust for the persons claiming under Manchester to now be permitted to defer the payment obligation, while pursuing their cross-claims.
If we had considered that the threshold for making an order under r 4.52 was met, we would have upheld the conditions that the Judge imposed on the making of that order. If Mr Cummins were to be joined without first meeting those conditions, he would have the opportunity to present argument in opposition to the Body Corporate’s claims, and in support of the cross-claims that Manchester as trustee was pursuing. Those arguments would be advanced by Mr Cummins for his own benefit and for the benefit of his family interests. But he and his family interests would have avoided the payment obligation that this Court has repeatedly held must be complied with immediately. Just as Manchester was not entitled to postpone payment while the cross-claims were being pursued, so too those claiming under Manchester — the Trust beneficiaries — are not entitled to postpone payment while the cross-claims are pursued for their benefit.
In the course of argument we explored with Mr Orpin-Dowell, counsel for the Body Corporate, whether the second condition relating to payment was needed. We asked him why the Body Corporate was not willing to allow Mr Cummins to take title to Unit 12A, and then pursue the rights that the Body Corporate would have against him under s 124 of the Unit Titles Act. Mr Orpin-Dowell said, and we accept, that that would simply give rise to another round of litigation. In that litigation, Mr Cummins would advance a range of arguments (some of them foreshadowed above) about why he is not personally liable for the whole of the amount that Manchester owed the Body Corporate. We accept that it would not be reasonable to expose the Body Corporate to that risk. The conditions imposed by the Judge, which required Mr Cummins to both take title and pay, were necessary to avoid an injustice in this case.
The application is an abuse of process
We accept the submission that Mr Cummins’ application for joinder without conditions, and this appeal, are an abuse of the courts’ processes. As explained above, the courts have repeatedly ruled that Manchester (and as a consequence, those claiming under Manchester) must pay the sums owing to the Body Corporate immediately. That obligation cannot be deferred while cross-claims are pursued. The steps that Mr Cummins has taken to ensure that he can pursue the cross-claims on behalf of the Trust’s beneficiaries — persons claiming under Manchester — without meeting the payment obligations to the Body Corporate are inconsistent with, and seek to defeat, the courts’ previous decisions that Manchester must “pay now, argue later”.[39]
[39]Stay appeal, above n 1, at [39].
We do not accept Mr Sullivan’s argument that these issues are no longer live as a result of the liquidation of Manchester, and the operation of s 310 of the Companies Act. Even if s 310 of the Companies Act had the consequence contended for by Mr Sullivan in relation to liability of subsequent unit owners for unpaid levies — a proposition we doubt, but need not decide — it would be an abuse of the processes of the court for Mr Cummins and the Trust beneficiaries to circumvent the courts’ “pay now, argue later” rulings by seeking to argue now, while deferring payment. If they want to be heard in the proceedings, they should pay the levies first.
Put another way, no-one claiming under Manchester can be in a better position than Manchester in respect of these matters. That includes the beneficiaries of the Trust, and Mr Cummins as successor trustee. The elaborate arguments that Mr Sullivan presented to us in an attempt to do an end run around that proposition represent a clear abuse of process. Even if those arguments were consistent with the literal application of procedural rules (and for the reasons explained above, we do not consider they are) the result contended for would be manifestly unfair to the Body Corporate, and would bring the administration of justice into disrepute among right-thinking people.[40] Where there is an abuse of process, the court has a duty (as opposed to a discretion) to prevent that abuse.[41]
[40]Hunter v Chief Constable of the West Midlands [1982] AC 529 (HL); Reid v New Zealand Trotting Conference [1984] 1 NZLR 8 (CA) at 9; and New Zealand Social Credit Political League Inc v O’Brien [1984] 1 NZLR 84 (CA) at 95.
[41]Reid v New Zealand Trotting Conference, above n 40, at 9–10; New Zealand Social Credit Political League Inc v O’Brien, above n 40, at 89.
In these circumstances, the approach adopted by the Judge was, if anything, generous to Mr Cummins. The conditions imposed were the minimum necessary to prevent an abuse of process.
It follows that the appeal must be dismissed.
Costs
The Body Corporate seeks indemnity costs. Manchester opposes an award of indemnity costs, and submits that costs for a standard appeal on a band A basis would be appropriate.
We consider that this is an appropriate case for an award of indemnity costs. As long ago as the appeal against Fogarty J’s 2017 decision, this Court described Manchester’s actions as “dilatory and prevaricating”.[42] That description of Manchester’s actions was reiterated in the stay appeal.[43] Mr Cummins was throughout that period the controlling mind and will of Manchester. He was responsible for that dilatory and prevaricating course of conduct. The joinder application, and the appeal to this Court, represent a continuation of that course of conduct. The grant of leave to appeal by the High Court does not mean that the application to that court and the appeal to this Court are not an abuse of process, and does not mean that an award of indemnity costs is inappropriate.[44] Mr Cummins continues to attempt to deploy a range of procedural strategies to defer the payment of levies while he pursues his set-off arguments. That is a clear abuse of process, as discussed above.
[42]Variation appeal, above n 1, at [44].
[43]Stay appeal, above n 1, at [39].
[44]This Court reached the same conclusion in the Stay appeal at [38].
As in the stay appeal, an award of the Body Corporate’s actual and reasonable costs and disbursements is appropriate. Counsel must attempt to agree costs. In the event that they cannot, leave is reserved for the parties to apply to the Court to determine the amount payable.
Result
The appeal is dismissed.
The appellant must pay the first respondent’s actual and reasonable costs. Counsel must attempt to agree costs. In the event that they cannot, leave is reserved for the parties to apply to the Court to determine the amount payable.
Solicitors:
Core Legal Ltd, Masterton for Appellant
Grove Darlow & Partners, Auckland for Respondents
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