Dress Circle Apartments Limited v Body Corporate 49674
[2023] NZHC 674
•30 March 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-001372
[2023] NZHC 674
IN THE MATTER OF An application for interim injunction BETWEEN
DRESS CIRCLE APARTMENTS LIMITED
Plaintiff / Applicant
AND
BODY CORPORATE 498674
Defendant / Respondent
Hearing: 9 March 2023 Appearances:
S R J Hamilton for Plaintiff / Applicant
K J Crossland and I R B Bycroft for Defendant / Respondent
Judgment:
30 March 2023
JUDGMENT OF ANDREW J
This judgment was delivered by Justice Andrew on 30 March 2023 at …..
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar
Date …………………………..
DRESS CIRCLE APARTMENTS LTD v BODY CORPORATE 498674 [2023] NZHC 674 [30 March 2023]
Introduction
[1] The plaintiff, Dress Circle Apartments Ltd,1 and the defendant, Body Corporate 498674,2 are parties to a building management agreement signed in March 2017.3 DCAL agreed to provide the building management services defined in the Agreement. The Body Corporate agreed to pay the annual fee of $60,000 plus GST.
[2] The parties are in dispute about the renewal of the Agreement. DCAL says it has done all it can to renew the Agreement and that the Body Corporate is in breach of its implicit obligation to do all things reasonably necessary to bring about a renewal. DCAL seeks an interim injunction restraining the Body Corporate from taking steps adverse to its interest under the Agreement pending resolution of the dispute under the dispute resolution process in part 7 of the Agreement.
[3] The Body Corporate says that there is no serious issue to be tried; DCAL has no right to renewal, having failed to give notice of an intention to renewal in accordance with the terms of the Agreement. It further says that damages would be an adequate remedy and the undertaking as to damages is inadequate.
[4]The critical issues I must determine are:
(a)Is there a serious issue to be tried; is it seriously arguable that DCAL gave valid written notice under cl 3.2 of the Agreement of its intention to renew?
(b)Would damages be an adequate remedy?
(c)Is the undertaking as to damages inadequate – and if so, should I allow further affidavit evidence from DCAL addressing that issue?
1 DCAL.
2 The Body Corporate.
3 The Agreement.
Factual background
[5] The members of the Body Corporate are the owners of the property situated at 46 Rosedale Road, North Shore.
[6]Under the Agreement DCAL is the building manager.
[7] The Agreement is dated 3 March 2017. The term was for five years. Under cl 3.1 the Agreement commences on the “commencement date”. The “commencement date” under the Agreement is defined as:
March 2017 or two weeks before the first settlement date.
[8]Clause 3.2 of the Agreement, which governs renewal, states:
If the building manager:
(a)has given to the Body Corporate written notice of its intention to renew this Agreement at least 60 Business Days before the end of the Term;
(b)is not at the date of giving such notice in breach of the terms of this Agreement;
(c)has, in the opinion of the Body Corporate (acting reasonably) performed the Services (and where applicable the Additional Services or Modified Services) properly and in a timely manner in accordance with the terms of this Agreement,
then, provided that the parties are able to agree on the new Fee for the Term Renewal, the Body Corporate will renew this Agreement for the Term Renewal, and upon exercise of the Term Renewal, the Term will be deemed to be the Term Renewal.
(emphasis added)
[9] Under the Agreement, the parties acknowledged that as at the commencement date, Strata Title Administration Ltd4 was appointed as the Body Corporate manager. The “Body Corporate manager” is referred to in the definition section of the Agreement as the person or entity appointed by the Body Corporate from time to time to carry out secretarial and other administrative functions on the part of the Body Corporate.
4 Strata.
[10] On 27 May 2017, Mr Arvind Saluja of DCAL sent an email to Mr Cyrus Mehta of Strata stating that:
We have commenced the Building Management [sic] from 22 May 2017. We were to start two weeks before the first settlement but because of short notice we were only able to start on 22 May.
[11]On 28 May 2017, Mr Mehta advised Mr Saluja by email that:
I had a conversation with Sunil and agreed that the management officially starts on 29 May 2017.
[12] DCAL says that in reliance on Mr Mehta’s email of 28 May 2017, it has always proceeded on the basis that the commencement date for the Agreement was 29 May 2017.
[13] On 4 September 2019 and 10 November 2021, DCAL sent notices of increases in the management fee to the Body Corporate via Strata. Those notices of increase were based on a commencement date of the Agreement of 22 May 2017.
[14] On 15 February 2022, Ms Yanyan Li, on behalf of Strata, sent DCAL a notice of termination in respect of the Agreement. The termination was to take effect from 3 March 2022.
[15] On 15 February 2022, Mr Saluja of DCAL wrote to back to Ms Li, suggesting that the notice of termination had been sent in “oversight”. Mr Saluja asked Ms Li for the notice of termination to be withdrawn. He claimed that the commencement date of the Agreement was 29 May 2017. Mr Saluja also gave Ms Li formal notice for renewal of the Agreement and proposed a renewed management fee of $81,000 plus GST per annum from 29 May 2022 under cl 4.6.
[16]By email dated 22 February 2022, Ms Li again stated to Mr Saluja that:
(a)The commencement date was “two weeks before the first settlement date”;
(b)The commencement date was 12 May 2017 since settlement of the first unit occurred on 26 May 2017;
(c)DCAL was outside the renewal date, namely 60 business days before the end of the term;
(d)DCAL’s services would be terminated as from 3 March 2022.
[17] On 15 August 2022, Lang J granted an “interim interim” injunction,5 restraining the Body Corporate (until the next call of the proceeding) from taking:6
… further steps to enforce the purported termination of the Agreement or to appoint a new building manager to manage the apartment complex in place of the plaintiff.
Relevant legal principles
[18] Interim injunctions are a “principled discretionary remedy”.7 The Court generally focuses on three separate matters:8
(a)Whether the plaintiff can show that there is a serious question to be tried;
(b)The balance of convenience between the parties; and
(c)An assessment of the overall justice of the case.
5 On 22 August 2022, Powell J ordered the “interim interim” injunction remain in force until the next call of the proceedings. On 18 October 2022, Paul Davison J extended the injunction until further order of the Court.
6 I reject the submission of DCAL that the failure by the Body Corporate to continue to pay the management fees since the “interim interim” order of Lang J was in breach of his Honour’s orders. Lang J’s orders were confined and did not include all of the matters sought in the plaintiff’s interlocutory application. The orders of Lang J were granted during a busy Duty Judge List, and it would be remarkable to read the order to include an order of specific performance for payment without hearing from the party required to make the payment.
7 Christopher Corry (ed) Sim’s Court Practice (online ed, LexisNexis) at [HCR7.53.9].
8 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (HC) at 142; see also Sir Peter Blanchard ed Civil Remedies in New Zealand (2nd ed, Thomson Reuters, Wellington 2012) at 284.
Analysis and decision
Issue (a): Is there a serious issue to be tried; is it seriously arguable that DCAL gave valid written notice under cl 3.2 of the Agreement of its intention to renew?
[19] As noted above, the commencement date of the Agreement is defined as “March 2017 or two weeks before the first settlement date”. The first settlement was 26 May 2017. Two weeks before the settlement date is 12 May 2017.
[20] The Body Corporate says that the Agreement commenced on 12 May 2017; it expired five years later, namely on 11 May 2022.
[21] Under cl 3.2, DCAL had to give written notice of its intention to renew at least 60 business days before the end of the term. The Agreement defines business day as “working day” under the Property Law Act 2007. DCAL’s claim for breach of contract depends on the Agreement being renewed in time. DCAL served its renewal notice on 15 February 2022. The Body Corporate says that 60 working days before 11 May 2022 is 11 February 2022. DCAL’s notice, some four days later, was thus too late.
[22] In response, DCAL says that its notice was issued within time. It says the parties agreed to a variation of the commencement date and that the agreed date was 29 May 2017. Using the same calculation of 60 working days, with the Agreement’s expiration date being 28 May 2022, the notice of renewal had to be issued by 2 March 2022. Accordingly, the notice was in time. DCAL says that Mr Mehta, of Strata, had the authority to bind the Body Corporate and did so, and that, as required, the variation to the Agreement was in writing.
[23] DCAL relies on the doctrine of ostensible authority. That doctrine is referred to by the Court of Appeal in New Zealand Tenancy Bonds Ltd v Mooney as follows:9
The doctrine of apparent or ostensible authority applies where a person by words or conduct represents or permits it to be represented that another person has authority to act on his behalf: in such a case he is bound by the acts of that other person with respect to anyone dealing with him as an agent on the faith of any such representation, to the same extent as if that other person had the
9 New Zealand Tenancy Bonds Ltd v Mooney [1986] 1 NZLR 280 (CA) at 283–284; see also Savill v Chase Holdings (Wellington) Ltd [1989] 1 NZLR 257 at 272.
authority that he was represented to have, even though he had no actual authority (Bowstead on Agency (15th ed, 1985) p 284).
[24] DCAL submits that a body corporate secretary (i.e. Strata) is the agent of the Body Corporate. It says therefore that Mr Mehta of Strata was acting as the Body Corporate’s agent in correspondence with Mr Saluja about the commencement date and did so with ostensible authority.
[25] DCAL relies upon the Privy Council decision Kelly v Fraser.10 That case involved an employee pension plan and whether the employer was bound by the actions of its vice-president confirming the receipt and investment of an employee’s pension funds from his previous pension fund. The Privy Council held:11
… An agent could not be said to have authority solely on the basis that he has held himself out as having it. It is, however, perfectly possible for the proper authorities of a company (or, for that matter, any other principal) to organise its affairs in such a way that subordinates who would not have authority to approve a transaction were nevertheless held out by those authorities as the persons who were to communicate to outsiders the fact that it has been approved by those who are authorised to approve it or that some particular agent has been duly authorised to approve it. These are representations which, if made by someone held out by the company to make representations of that kind, may give rise to an estoppel. Every case called for careful examination of its particular facts.
…
The trustees of a pension fund are the ultimate source of authority for the conduct of its affairs. There will be some functions which they must perform personally, and others which they may delegate. But pension fund trustees hardly ever communicate personally with contributories and beneficiaries. … Mr Masters was the senior officer of the relevant department of the company. He never professed to have authorised the acceptance of the transfer funds himself, but the plan could hardly have been operated if he did not have authority to write letters informing contributories that they had been duly accepted and in respect of what contributions. Moreover, with or without the trustees’ approval, the transfer funds were in fact accepted, and accruals to the transfer funds notified in successive benefit statements. Subject to the question of reliance, the trustees cannot now disclaim all of this and treat the transfer funds for some purposes as if they had been received and for other purposes as if they had not.
[26] One of the fundamental problems for DCAL here is that self-authorisation by the agent alone is generally regarded as insufficient to establish a claim based on
10 Kelly v Fraser [2012] UKPC 25.
11 Kelly v Fraser, above n 10, at [15]–[16].
implied authority.12 As the Court of Appeal noted in New Zealand Tenancy Bonds Ltd v Mooney,13 it is the essence of the doctrine of ostensible authority that the principal has made a representation as to the extent of the agent’s authority:
An agent cannot by simply asserting that its authority exceeds the limits laid down by the principal and notified to the contracting party create an apparent or ostensible authority wider than that.
[27] In this case there was no representation or holding out by the Body Corporate that Strata, as agent, had the authority to commit to a variation of the Agreement. As stated, the role of Strata, defined as the Body Corporate manager, is referred to in the definition section of the Agreement as the entity appointed by the Body Corporate “from time to time to carry out secretarial and other administrative functions on the part of the Body Corporate”. The Body Corporate itself is the agent for all of the owners of the units in the building comprising the Body Corporate.14 These provisions clearly suggest that Strata did not have the authority to bind the Body Corporate in the way that DCAL contends.
[28] I accept that the Privy Council in Kelly v Fraser,15 made it clear that each case turns on its own facts. However, the claim of ostensible authority here appears to be a weak one.
[29] In any event, DCAL faces a further and insurmountable hurdle, namely that the amendment to the Agreement albeit in writing, was not signed by the parties.
[30]Clause 9.9, the Entire Agreement clause, reads:
This Agreement records the entire agreement and understanding between the parties in relation to the matters contemplated by the Agreement and supersedes any prior agreement, correspondence or undertaking made between the parties. Any subsequent written variation and signed by both parties may be added to and shall then form part of this Agreement.
[31] The parties entered into a comprehensive written agreement drafted by solicitors. Clause 9.9 expressly addresses the issue of a variation to the Agreement
12 Tahi Enterprises Ltd v Taua [2018] NZHC 516 at [55].
13 New Zealand Tenancy Bonds Ltd v Mooney, above n 9, at 283–284.
14 See part C of the background section to the Agreement.
15 Kelly v Fraser, above n 10.
and the requirements are clear: the variation must be in writing and signed by both parties.
[32] Although the commencement date is defined in the interpretation section of the Agreement, it is clear that it forms part of the operative and critical machinery clauses of the Agreement itself. That is apparent from cl 3.1. The only way in which that clause could be amended is in accordance with the procedure set out at cl 9.9. That was not followed in this case.
[33] I find that DCAL has not established a serious issue to be tried; the renewal notice was not validly issued because it was issued after the mandatory time period in cl 3.2(c) of the Agreement. The commencement date had not been amended in the way that DCAL claims and the mandatory requirements of cl 9 were not complied with.16
Issue (b): Balance of convenience – would damages be an adequate remedy?
[34] In determining where the balance of convenience lies it is necessary to address whether damages would be an adequate remedy for the defendant’s alleged continuing wrongful conduct (as opposed to granting the interim injunction).17
[35] I find that in this case damages would be an adequate remedy. I reject DCAL’s submission that it would suffer irreparable harm if an interim injunction were not granted. DCAL’s losses, if it establishes its claim, are readily quantifiable and the assertion of irreparable loss is not supported by probative evidence. There is no evidence to suggest the Body Corporate (ultimately backed up members’ equity in apartments and levies) could not afford to pay damages for any losses that DCAL might conceivably establish. I note also that the Body Corporate has and continues to pay fees claimed by DCAL since May 2022 into its solicitor’s trust account.
16 In these circumstances, it is not necessary for me to address the question of whether there is a serious issue to be tried that the Body Corporate had not acted reasonably under cl 3.2(c) of the Agreement.
17 Lightbourne v New Zealand Racing Board HC Auckland CIV-2008-404-7273, 10 December 2008 at [28]; referring to American Cyanamid v Ethicon Ltd [1975] AC 396 (HL) at 408.
[36] Here the Agreement was for one term of five years with one right of renewal for a further five. DCAL purported to renew the Agreement for a fee of $81,000 per annum. Assuming a 20 per cent profit that would give rise to a total loss of profit of
$80,000–$90,000 over five years. There would of course also be potential losses arising from any arbitral award that DCAL might win. There is no evidence to suggest that the Body Corporate could not afford to meet payment of losses of that kind (assuming they were made out). If DCAL contends, as it does, that the Body Corporate cannot afford to meet its potential losses, then evidence on that issue needs to be put before the Court. If there are a large number of apartments all paying levies to the Body Corporate, that would obviously be relevant to whether the Body Corporate can meet any damages award.18
[37] I accept that if the interim injunction is not granted the Body Corporate will likely award the management rights to another building manager. However, there is no evidence establishing that DCAL will be unable to obtain an alternative contract or that it would incur significant loss of goodwill. There is of course a requirement for DCAL to mitigate its losses by seeking to find a fresh contract.
[38] There is a further and important factor counting in favour of the defendant, the Body Corporate, and against the grant of an interim injunction. The contract here is akin to a contract for personal services. An interim injunction would force the apartment owners to continue to have regular face-to-face dealings with the sole representative of DCAL, Mr Saluja. DCAL is required to enforce the Body Corporate rules and to attend Body Corporate committee meetings. Mr Saluja would be onsite and in and around the homes of the members.
[39] In Finewood Upholstery Ltd v Vaughan,19 Fitzgerald J held that if a contract is properly characterised as a contract for personal services, or akin or suitably analogous to one, specific performance is unlikely to be ordered. Her Honour held that the status of the parties’ relationship will be important, and the Court’s overall assessment of whether the relationship is “workable” on an ongoing basis.
18 No evidence was provided by DCAL as to the size of the property at 46 Rosedale Road and the number of apartments.
19 Finewood Upholstery Ltd v Vaughan [2017] NZHC 1195 at [38].
[40] This is the very situation where a Court should be reluctant to compel the parties to continue a relationship that has obviously broken down and has a clear and substantial personal dimension. I acknowledge that the “interim interim” injunction has been in force now for some time, but this is the first time that the Body Corporate’s concerns have been addressed.
Issue (c): Adequacy of DCAL’s undertaking as to damages
[41]In Jireh Holdings Ltd v Porchester Ltd, this Court held:20
A factor relevant to the damages assessment is that Porchester has not supplied details of its financial position. A claimant seeking an injunction has an obligation to provide the court with sufficient information to enable the Court to assess the worth of its undertaking as to damages. This has not been done
…
[42] In Allan v Cressida Capital Investments Ltd,21 this Court refused an interim injunction because despite the applicants offering an undertaking as to damages, they provided little or nothing suggesting that the undertaking could be honoured. The applicant’s affidavit asserted that he could pay but this was unsupported by any financial statements or statement of financial position.
[43] In this case, the undertaking as to damages by Mr Saluja, the director of DCAL, is similarly expressed in bald and unsubstantiated terms. In September 2022, the Body Corporate’s lawyers sought financial information from DCAL but there was no reply. A further request was made in November 2022. Fourteen days before the hearing Mr Saluja filed a further affidavit in an attempt to bolster the August 2022 undertaking. That affidavit notes that DCAL has two building management contracts, that its current trading account has $15,000 in it and that DCAL is part of the wider “VR group” of hotels and apartment buildings in which 15 hotels are managed throughout New Zealand.
[44] However, the problem is that DCAL’s financial and asset position is still unknown.
20 Jireh Holdings Ltd v Porchester Ltd HC Auckland M1466/02, 18 December 2002, at [32].
21 Allan v Cressida Capital Investments Ltd HC Auckland CIV-2008-404-3856, 30 June 2008, at [32]–[34].
[45] Subsequent to the hearing (and as discussed at the hearing), DCAL sought to file a further affidavit containing further financial information relevant to its undertaking. However, I decline to grant leave to allow for the filing of that affidavit; it will not be read. DCAL has been on notice for some considerable time on the issue of the adequacy of its undertaking. It has not addressed the issue until late in the piece and, in my view, in a somewhat cavalier fashion.22
[46] This is quite a different case from Nuwave Software Ltd v Objective Corporation Solutions NZ Ltd.23 In that case, and as part of his order granting an interim injunction, Palmer J ordered the plaintiff to file a further affidavit within 10 working days regarding the sufficiency of its undertaking. The overall interests of justice favoured the grant of the interim injunction and the threshold of a serious question to be tried had been established. This case is different and as noted the plaintiff, DCAL, has failed to take steps within time to address what was an obvious issue raised some time ago by the defendant, the Body Corporate.
[47] I find that the undertaking as to damages is inadequate and does not meet the requirements for the grant of an interim injunction.
Conclusion
[48] In assessing the overall justice of the case, I find that DCAL has not established a basis for an interim injunction. There is no serious issue to be tried, damages would be an adequate remedy and DCAL has failed to provide an adequate undertaking as to damages.
[49] I further note that the parties have invoked the dispute resolution procedure under part 7 of the Agreement and are likely to attend a mediation shortly. That is the appropriate forum to resolve their differences. The overall interests of justice do not require an interim injunction to preserve the status quo.
22 I do not intend any criticism of counsel.
23 Nuwave Software Ltd v Objective Corporation Solutions NZ Ltd [2022] NZHC 2511.
Result
[50]The application by DCAL for an interim injunction is declined.
[51] As to costs, I am of the preliminary view that having succeeded, the Body Corporate, the defendant, is entitled to costs and disbursements and on a 2B basis. If the parties cannot agree on costs, then memoranda (no more than three pages) are to be filed and served within 14 days.
Andrew J
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