Denham v Tauranga City Council

[2013] NZHC 3199

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-470-000599 [2013] NZHC 3199

BETWEEN  ROBYN KATHLEEN DENHAM, MAREE LILLIAN FISHER and ALISON MARGARET KELLAWAY

Applicants

ANDTAURANGA CITY COUNCIL First Defendant

WARWICK VINCENT BROUGHTON Second Defendant

ESOON LIMITED First Third Party

AQUATIGHT ROOFING SERVICES Second Third Party

ABBAS LIMITED Third Third Party

RYAN LIMITED Fourth Third Party

Hearing:                   On the papers

Judgment:                3 December 2013

JUDGMENT OF COURTNEY

This judgment was delivered by Justice Courtney on 3 December 2013 at 11.00 am

pursuant to R 11.5 of the High Court Rules

Registrar / Deputy Registrar

Date…………………………

DENHAM & ORS v TAURANGA CITY COUNCIL [2013] NZHC 3199 [3 December 2013]

Introduction

[1]      The applicants, Ms Denham, Ms Fisher and Ms Calloway, own an apartment located at 198 Marine Parade, Mount Maunganui (the Denham apartment).  It is one of two  with the other,  at  198B Marine Parade,  being owned  by the  defendant, Warwick Vincent Broughton (the Broughton apartment).   Mr Broughton and his company were, jointly, the developer of the apartments and vendors of the Denham apartment.    Since 2008  the apartment  block has  suffered  from  weathertightness issues.   The applicants sought to remedy those problems.   Mr Broughton was uncooperative.  In 2011 an administrator was appointed for the Body Corporate and approval obtained from this Court for a scheme of arrangement under s 74 of the Unit Titles Act 2010.  Mr Broughton has not cooperated in advancing the remedial work under that scheme.

[2]      There are already proceedings on foot in the District Court in which the applicants seek damages from the Tauranga City Council and Mr Broughton for the cost of remedying the defects in the apartment.  As a result of amendments to the specifications the estimated building costs are now $439,442.99, beyond the jurisdiction of the District Court.   In November 2013 the applicants requested the District Court transfer the proceedings to the High Court but, as yet, it appears that

this request has not been actioned.1   The applicants now have reason to believe that

Mr Broughton is about the sell his apartment and they have applied to this Court without notice for a freezing order to secure sufficient of the proceeds of any sale so that there will be funds to cover the remedial work.

[3]      This Court may make a freezing order without notice to restrain a respondent from, among other things, disposing of or dealing with assets.  The applicants must satisfy the Court that there is a good arguable case,2  if possible identify specific assets to be the subject of the order and show that there is a risk that the assets will be dissipated.3  Applicants seeking a freezing order must also provide an undertaking

as to damages.4

1 Section 44 District Courts Act 1947.

2 BNZ v Hawkins (1989) 1 PRNZ 451.
3 Euro National Corporation v Petricevic Financial Services Ltd (1989) 2 PRNZ 351.

4 Which the applicants have done.

[4]      In her memorandum filed in support of the application for freezing order, Ms Whitfield, for the applicants, submitted that the existence of the District Court proceedings does not preclude a freezing order being made in this Court.  I accept that r 32.5 permits me to make a freezing order notwithstanding the District Court proceedings.  However, for convenience and because the District Court has not yet dealt with the request for transfer, I make an order that the District Court proceedings

be removed to this Court.5

A good arguable case

[5]      The circumstances relied on by the applicants appear from affidavits filed by Ms Denham, Mr Braun (one of the applicants’ solicitors) and Mr Talbot (administrator of the Body Corporate).

[6]      Ms Denham has annexed to her affidavit the notice of claim filed in the District Court and a draft statement of claim proposed to be filed in this Court.  She deposes to the nature of those claims and the factual basis for them.   These are essentially that Mr Broughton and his company owned a 50 per cent share each of the land on which the apartments were constructed and jointly applied for building consent to undertake the work.  When the applicants purchased their unit the vendors were named in the sale and purchase agreement as both Broughton Homes Limited and Warwick Vincent Broughton.

[7] The applicants settled their purchase in October 2007. By mid-2010 there were signs of water ingress. The causes, identified in the draft statement of claim, are said to be construction defects, including lack of adequate waterproofing on the tops of walls, failure of the waterproof membrane on the deck, insufficient falls on the deck, failure of the butonyl rubber roof and incorrect installation of windows. It is alleged that Mr Broughton was negligent in his capacity as developer and in breach of implied warranties under s 397 of the Building Act 2004 in his capacity as

vendor.

5 Section 43(6) District Courts Act 1947.

[8]     In July 2013 a Hamilton solicitor, Michael Talbot, was appointed as administrator of the Body Corporate.  In his affidavit he describes his unsuccessful efforts to have Mr Broughton cooperate in terms of arranging to have the remedial work done and to secure payment of levies for the remedial work, costs connected with the Unit Titles Act scheme, insurance payments and project management fees.

[9]      I am satisfied from the evidence filed that there is a good arguable case against Mr Broughton arising from the reported defects in the apartment block.

Risk of assets being dissipated

[10]     Recently, it has come to the attention of Ms Denham and Mr Talbot that the Broughton apartment is likely to be sold very soon.   In August 2013 Mr Talbot received a phone call from a John Lloyd of First Mortgage Service, acting as agent for the BNZ in respect of the arrears owing by Mr Broughton on mortgage loans. Mr Lloyd  said  that  Mr  Broughton  had  told  him  that  he  (Mr  Broughton)  was intending to move to Australia permanently.

[11]     Ms Denham has deposed to inadvertently opening two envelopes addressed to “the tenant 198 Marine Parade” this being her address. These envelopes contained notices under the Property Law Act 2007, the first being served as a result of an order for substituted service and referring to the amount secured by the mortgage as being in the vicinity of $1.3m.  According to Ms Denham the Broughton apartment has a CV of 2.475m.

[12]     Finally,  Mr  Braun  has  deposed  to  a  discussion  with  the  tenant  of  the Broughton apartment, Peter Cooney, in late November 2013 about Mr Cooney purchasing the Broughton apartment.  Mr Cooney has told Mr Braun that he has a conditional sale and purchase agreement on the apartment, with the main unfulfilled conditions being the completion of due diligence by Mr Cooney.   Mr Cooney conveyed to Mr Braun that he was currently working on figures for the purposes of making the contract unconditional.  In the event that an unconditional agreement was reached Mr Cooney has said that settlement would be straightaway.

[13]     I am satisfied that is a real risk that the apartment will be sold soon and the proceeds left after clearing the mortgage debt will be dissipated.

Conclusion

[14]     As I have concluded, I am satisfied from the evidence put before me that the plaintiffs do have a good arguable case, that there are assets available to satisfy that claim  but  that  there  is  a  real  risk  of  those  assets  being  dissipated  before  the applicants’ claim is determined.

[15]     I accordingly make the orders sought at paragraph 4 of the draft freezing and ancillary orders.

P Courtney J