Een v Body Corporate 384911

[2020] NZHC 3340

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-1873

[2020] NZHC 3340

BETWEEN

WONG SUN EEN & ORS

Applicants

AND

BODY CORPORATE 384911

First Respondent

AND

PANDEY VIADUCT QUAYS LTD

Second Respondent

Continued

Hearing:

Memorandum:

27 October 2020

28 October 2020 for the Second to Fifth Respondents

Appearances:

P Rice for the Applicants

No Appearance for the First Respondent
R Hollyman QC and W Revell for the Second to Fifth Respondents

Judgment:

15 December 2020

JUDGMENT OF HINTON J

This judgment was delivered by me on 15 December 2020 at 4:30 pm pursuant to Rule 11.5 of the High Court Rules

…………………………………………………………………… Registrar/Deputy Registrar

Solicitors / Counsel:

R Hollyman QC, Barrister, Auckland P Rice, Barrister, Auckland

Farry and Co, Auckland Haigh Lyon, Auckland

EEN v BODY CORPORATE 384911 & ORS [2020] NZHC 3340 [15 December 2020]

AND

AND

PANDEY VIADUCT SUITES LTD

Third Respondent

PANDEY VIADUCT SUITES TWO LTD
Fourth Respondent

AND

PANDEY VIADUCT SUITES THREE LTD

Fifth Respondent

[1]    This originating application concerns a dispute over use as part of a hotel operation of a number of units in a unit title development at 21 Viaduct Harbour Avenue, Auckland Central. The applicants own a minority of the units in the development. They claim that the second to fifth respondents, who own a slight majority of the units, have acted in breach of the Unit Titles Act 2010 (the Act) and in breach of the body corporate rules in having leased their units, as well as certain common areas within the building, for use in the hotel operation. They also seek minority relief under s 210 of the Act regarding a resolution prohibiting Airbnb rentals.

[2]This judgment addresses two interlocutory applications:

(a)the second to fifth respondents, appearing under protest to jurisdiction, apply pursuant to r 5.49 of the High Court Rules 2016 for the originating application to be dismissed on the basis it was brought outside the timeframe specified in s 210 of the Act; and

(b)the applicants seek interim injunctive relief essentially prohibiting the second to fifth respondents from operating the hotel unless all residential unit owners can participate in it.

Background

[3]    The building at 21 Viaduct Harbour Avenue was completed in 2007. The unit title development within the building is comprised of 191 units – 175 residential units and 16 commercial units. The commercial units are those parts of the building, other than guest rooms and hallways, that are needed to operate a hotel. They include the reception, back of house office, kitchens, restaurant, bar, and laundry.

[4]    Between 2007 and 2010, all units in the development were leased to a company called LQHML, which engaged an international hotel company to operate a Westin Hotel from the premises. LQHML was part of the “CP group”, a group of companies primarily owned by the Pandey family, which companies own a number of hotels in New Zealand, Australia, and Fiji. The second to fifth respondents are also part of the CP group.

[5]    The Westin Hotel business operated out of 21 Viaduct Harbour Avenue until LQHML went into receivership in 2010.

[6]    In 2011, the second respondent (PVQL) bought the commercial units in the building and persuaded most of the residential unit owners to lease their units to another CP group company (VQHL). VQHL appointed a company associated with the Accor Hotels brand as hotel manager, and from March 2012 until 6 July 2020 Accor managed a luxury hotel business in the building, trading as Sofitel Auckland Viaduct Harbour. Pursuant to the arrangements put in place, VQHL paid unit owners for use of their units.

[7]    On 6 July 2020, Prakash Pandey, the sole shareholder of VQHL, placed it into voluntary liquidation. The liquidators of VQHL disclaimed the leases and the management agreement with the Accor Hotels company, terminating the hotel business that had operated since 2012.

[8]    As of the present time, the second respondent remains the owner of the 16 commercial units in the development, and the third to fifth respondents (that is, the other CP group companies) own 84 of the 175 residential units in the development. Altogether, the second to fifth respondents control just over 52 per cent of the development. I refer to them as “the majority”.

[9]    The applicants, Mr Een and 84 others, own 85 of the 175 residential units in the development, such that they own about 45 per cent of the total units in the development. I refer to them as “the minority”. It appears that all, or at least virtually all, of the minority unit owners are not domiciled in New Zealand and use their units as investment properties.

[10]   The six other residential units in the development are owned by other persons who are not party to the proceeding.

[11]   The first defendant, Body Corporate 384911, is the body corporate for the development at 21 Viaduct Harbour Avenue. It is represented in the proceeding but

abides the decision of the Court in relation to the two interlocutory applications. On that basis I excused appearance for the body corporate.

[12]   The majority are currently participating in a new hotel business in the building, also under the name of the Sofitel Auckland Viaduct Harbour.

[13]   That business had its “soft opening” on 8 October 2020 and is currently accepting bookings. Mr Pandey deposes that, if required to close as a result of the minority’s claim for an interim injunction, the business would lose revenue of between

$1,200,000 and $2,000,000 per month.

[14]   The new hotel business operates by the second to fifth respondents leasing their residential and commercial units to a company, Custom Street Hotel Ltd, of which Prakash Pandey is director. It seems that, in turn, Custom Street has a hotel management agreement with AAPC Property Pty Ltd (AAPC), which is part of the Accor group, and which manages the hotel under the Sofitel brand name. Mr Pandey, as director of Custom Street, deposes that Custom Street employs 70 staff who work at the Sofitel, and it has spent $4,200,000 renovating the building to comply with Accor’s requirements.

[15]   The majority has not as yet disclosed all relevant documents regarding the hotel operation.

[16]   In August 2020 the minority became aware of the majority’s proposal to reopen the Sofitel. Mr Lip, one of the minority unit owners, who holds authority to conduct this proceeding on behalf of the minority, deposes that he was informed on 7 August that the CP Group proposed to reopen a hotel operation very similar to that which had operated between 2012 and July 2020, and that there was no proposal to include the minority owners or their units in the operation.

New Body Corporate Rules

[17]   On 7 September 2020, at an extraordinary general meeting of the body corporate, ordinary resolutions were passed amending the body corporate rules at the instigation and with the support of the majority owners. It is not in dispute that the

minority owners’ solicitor, Mr Molloy, attended the meeting, and exercised the proxies of the minority owners to vote against the proposed amendments.

[18]   The relevant amendment to the body corporate operational rules is the proposed new r 1(h), which provides:

Owners [of residential units] shall not host members of Airbnb, or any other similar accommodation operator or accommodation provider manager, in their units.

[19]   Mr Lip deposes this amendment is calculated to “squeeze out” the minority unit owners. They are both excluded from the income they formerly enjoyed under their leases with VQHL as part of the 2012-2020 hotel operation (which he deposes was about $42,000 a year between 2017 and 2020), and also prohibited from instead deriving income from other sources such as Airbnb rentals. In addition they remain subject to levies and rates of about $24,000 a year. Mr Lip asserts the CP Group is motivated by the prospect of being able to obtain ownership of the remaining units at a discounted price.

[20]   I note that Mr Pandey, as director of Custom Street, deposes that Custom Street is willing to enter into negotiations with the minority owners, and the other six non- party owners, to lease their units and incorporate them into the hotel operation, at prevailing market rates.

The Applications and Relevant Statutory Provisions

[21]   On 7 October 2020, the minority filed an originating application styled as an “application for relief against body corporate resolutions”, being those passed 30 days earlier on 7 September 2020. In fact, the application concerns two discrete issues:

(a)an application for minority relief under s 210 of the Act, couched as an application for an order declaring the resolutions passed at the general meeting on 7 September 2020 as being inequitable to the minority and of no effect; and

(b)a declaration that a special resolution is required to license the use of the common property for the purpose of a hotel.

[22]As to the first limb of the application, s 210 of the Act provides:

210     General relief for minority where resolution required

(1)In any case where this Act requires a resolution and the resolution is passed, any person who voted against the resolution may apply to the appropriate decision-maker for relief on the grounds that the effect of the resolution would be unjust or inequitable for the minority.

(1A)Subsection (1) does not apply if the resolution is a designated resolution.

(2)An application for relief under subsection (1) must be made within 28 days of the passing of the resolution.

[23]   The second limb of the application is made in reliance on s 56(1) of the Act, which provides:

The body corporate may, after a special resolution to do so, grant a lease or licence over the whole or any part of the common property.

(Emphasis added.)

[24]   The minority contends that a lease of some form must have been given to Custom Street and/or AAPC over the common areas within the building to allow them to operate the hotel (as they say applied before), or that the body corporate and majority are implicitly licensing the use of the common property (in particular hallways) for this purpose. Therefore, they contend a special resolution, which would have to be supported by 75 per cent of eligible voters who vote,1 is required before the hotel can operate.

[25]   The minority’s application for interim relief, to which I return below, was filed as part of its originating application. They seek an injunction prohibiting the body corporate and majority owners, pending determination of the originating application, from:

1      Unit Titles Act 2010, s 98(4).

(i)Licensing the common property to be used for the purposes of a hotel without first obtaining a special resolution of the Body Corporate permitting such use; and/or

(ii)Allowing a hotel business to be conducted in the building unless the hotel business is conducted for the benefit of all [residential unit owners] on terms no less advantageous than those formerly enjoyed under the leases to [VQHL].

[26]   The majority has previously raised concerns about the procedural propriety of an interim injunction application being contained within the originating application itself, rather than in a separate application for interim relief. However, Fitzgerald J in her Minute of 15 October 2020 did not consider it necessary to require that the applicants file a formal application.

[27]   For completeness, I note that on 12 October 2020, the minority filed a separate proceeding on the ordinary track, CIV-2020-404-1899 (the -1899 proceeding), pleading in a somewhat more fulsome manner, breach of the Act, breach of the body corporate rules, and an equitable claim styled “ultra vires/fraud on a power”.2

[28]   Also on 12 October 2020, the minority filed a formal application for interim relief in the -1899 proceeding. This, as counsel for the minority Mr Molloy has previously confirmed to Fitzgerald J, is substantively the same as that sought in this proceeding if different in form. The majority owners take no issue in respect of the duplicate applications for interim relief.

[29]   Returning to this proceeding, on 9 October 2020, the majority filed, under protest to jurisdiction, an application to dismiss the originating application on the basis that an application for relief under s 210(1) must be made within 28 days of the resolution complained of, which did not take place here, and there is no provision within the Act allowing the Court to enlarge the timeframe for filing.

[30]   I observe that the majority’s protest and application to dismiss mischaracterises the minority’s originating application as being solely being for minority relief under s

2      As will be obvious, the -1899 proceeding does not hinge on the s 210 claim for relief. Fitzgerald J proposed to consolidate the s 210 claim brought by way of originating application, into the -1899 proceeding. The Judge accepted, however, that if the majority’s application to dismiss the s 210 claim is successful, there would be no claim capable of “transfer”, such that consolidation was at that time inappropriate.

210 when, as noted above, the second limb of the application is not brought under s 210 of the Act, but rather appears to be an inchoate application for declaratory relief. Given however the styling of the originating application, that misapprehension is understandable.

Application by Majority to Dismiss for Want of Jurisdiction

[31]   So far as the application to dismiss the claim for relief under s 210(1) is concerned, the majority’s point is that s 210(2) says an application for relief under that provision must be made within 28 days, and that the minority’s failure to do so is fatal.

[32]   Mr Rice, for the minority owners, makes a number of points in response to the majority’s protest to jurisdiction. These can be grouped, as I understood him to do at the hearing, under three headings.

[33]   First, he argues that the word “must” in s 210(2) simply denotes an obligation, without specifying a consequence such as ousting the Court’s jurisdiction. He submits that the overall construction of the Act suggests Parliament did not intend that result. He notes in particular that the Tenancy Tribunal can grant an extension of time in cases brought in that jurisdiction under s 210,3 and submits there is no good reason for the Tribunal to have that power if the High Court does not.

[34]   I do not agree with this point. There is no need for s 210(2) to provide for the consequence of failing to comply with the 28-day time limit. The consequence naturally follows. An application brought out of time is not authorised. That conforms with a readily apprehensible statutory policy of avoiding those who supported a resolution being left in a potentially indefinite state of uncertainty as to when the resolution becomes immune from challenge.

[35]   Moreover, it would deprive the word “must” of its ordinary meaning, and in fact of any meaning, to not regard s 210(2) as imposing a time limit. Parliament is not lightly to be regarded as having intended its words to have no meaning, or a meaning well outside the ordinary, which weighs against Mr Rice’s interpretation.

3      Unit Titles Act 2010, s 176; and Residential Tenancies Act 1986, s 96.

[36]   Nor, finally on this point, do I consider the sui generis position of the Tenancy Tribunal points to a more liberal approach as being necessary in construing the position in respect of the powers of this Court. If Parliament had intended that this Court be able to exercise similar powers to the Tribunal, it could and would have said as much. Moreover, it is a distinctive feature of the Tenancy Tribunal that it is meant to “determine expeditiously disputes arising between [such] landlords and tenants”4 in a fair manner, dispensing where required with “strict rights and obligations and legal forms and technicalities”.5 Parliament having awarded the Tribunal greater powers to extend time, than it has to this Court, says more about the statutory policy with regard to cases before the Tribunal than it does about the policy of the Act in terms of s 210.

[37]   Secondly, Mr Rice sought to rely on rr 1.6 and 1.19 of the High Court Rules 2016, saying that the Court’s jurisdiction to extend time “for doing any act or taking any proceeding or any step in a proceeding”6, extends to the filing of an application for relief under s 210(1).

[38]   However, r 1.19 refers only to extending and shortening the time appointed by the Rules themselves, or any order of the Court. It does not empower the Court to modify statutory periods of limitation such as that found in 210(2). Accordingly, r

1.19 does not found a basis on which to potentially grant an extension of time to remedy non-compliance with s 210(2).

[39]   Third, Mr Rice submits I have jurisdiction to extend time for complying with s 210(1) under s 27 and sch 2 cl 1(1) of the Epidemic Preparedness Act 2006 (EPA). Schedule 2 cl 1(1) was inserted into the EPA on 16 May 2020 by the COVID-19 Response (Further Management Measures) Legislation Act 2020 as part of the legislative response to the COVID-19 pandemic and provides:

In relation to a proceeding before it, a court may, in its discretion, extend or shorten the time appointed by rules of court or an enactment, or fixed by a court order, for doing an act or taking a step on the terms that the court thinks just if satisfied that it is necessary or desirable to do so because of circumstances relating to COVID-19.

4      Residential Tenancies Act 1986, Long Title.

5      Section 85.

6      High Court Rules 2016, r 1.19.

[40]   To satisfy me that an extension is necessary or desirable because of circumstances relating to COVID-19, Mr Rice refers to Mr Lip’s affidavit evidence. Mr Lip deposes that the minority’s application was late by two days because he had difficulty in communicating with the other unit owners, many of whom are based overseas; he had difficulty in finding new counsel, which he was required to do when former counsel was appointed as a High Court Judge in July 2020; and difficulty in understanding and managing “a range of Covid related issues”.

[41]   While accepting the power to extend exists under the EPA, counsel for the majority, Mr Hollyman QC, submits it is inapplicable here. He says Mr Lip’s affidavit does not prove the minority’s failure to comply with the time limit is a result of the effects of the COVID-19 pandemic or governmental restrictions imposed in response to the pandemic. At most, he submits, Mr Lip’s affidavit evidence suggests the failure is referable to events that transpired against the background of added confusion and difficulties produced by the pandemic.

[42]   Clause 1(1) of sch 2 of the EPA is broadly drafted. The requirement that the Court be satisfied the extension is necessary or desirable “because of circumstances relating to COVID-19” requires, in my view, only a relatively diffuse connection between the basis on which the extension is sought, and the pandemic itself or governmental restrictions. I consider it sufficient that the extension be sought because of some circumstance or occurrence relatable to the existence of the COVID-19 epidemic. It is not necessary that the request for an extension have been occasioned by the epidemic or a particular governmental restriction itself.

[43]   I note that Bell AJ in Re Strawbridge, the only case I have located in which sch 2 cl 1(1) has been relied on, took a similar approach.7 The Judge extended the convening period in a Companies Act matter where, in his view, requiring a creditors’ meeting be convened by the otherwise applicable date would not have been in “the general interests of the creditors given the current general uncertainty in the commercial community as New Zealand comes out of the COVID-19 lockdown.”8

7      Re Strawbridge [2020] NZHC 1146.

8 At [18].

[44]   A sufficient connection is disclosed by Mr Lip’s affidavit. As Mr Lip says, “it is an understatement to say that this has been a very difficult year”, and it appears this has made more difficult the taking of the steps he refers to in his affidavit. While accepting he does not specify how the minority has been impaired in prosecuting this case by the epidemic and associated disruption, I consider it clear enough that has been the case.

[45]   In particular, I note the 28-day period in which the minority was required to file their application for relief under s 210 coincided with Auckland being under heightened COVID-19 Alert Level restrictions between 12 August and 7 October 2020.9

[46]   Against that background, the general upheaval in personal, business and legal affairs the pandemic has occasioned, and the specific points Mr Lip raises, I accept it would have been more difficult for the minority to proceed in a timely manner than usual. I note also the very slight delay in the timing of the application for relief, and as Mr Hollyman accepts, the fact the majority were on notice of the likelihood of the application being made well before 7 October 2020.

[47]   Overall, I consider it is desirable to extend the timeframe under s 210(1) of the Act because of circumstances relating to COVID-19. Mr Rice made an oral application to that effect at the hearing, as the minority had not formally done so, and Mr Hollyman did not object to my dealing with the application on that basis. I note that in any event, sch 2 cl(1) does not on its face require a formal, or any, application to be made.

[48]   Accordingly, pursuant to sch 2 cl 1(1) of the EPA, I extend the minority’s time for filing of its application for relief under s 210 by three days and reject the majority’s application to dismiss for want of jurisdiction. The majority’s appearance under protest to jurisdiction is set aside.

9      In particular, COVID-19 Alert Level 3 restrictions between 12 August and 30 August 2020, Alert Level 2.5 restrictions between 30 August and 23 September, and under Alert Level 2 restrictions until 7 October 2020: New Zealand Government “History of the COVID-19 Alert System” (28 October 2020) Unite Against COVID-19 <covid19.govt.nz>.

Minority Application for Interlocutory Relief

[49]   As noted, the minority seeks an injunction prohibiting the body corporate and majority owners, pending determination of the originating application, from licensing the common property for use in a hotel business without obtaining a special resolution to that effect; or allowing a hotel business to be conducted in the building except for the benefit of all residential unit owners on terms no less favourable than prevailed under their arrangement with VQHL. That is, the application for interim relief relates entirely to the second limb of the interlocutory application, which relies on to s 56 of the Act; not the claim for minority relief against the new body corporate rules, including that related to Airbnb rentals, under s 210 of the Act.

Applicable principles

[50]   It is well established that an application for an interim injunction is to be determined by examining, in sequence, whether the applicant has established there is a serious question to be tried; whether the balance of convenience favours the grant of relief; and whether the overall justice of the case is consistent with relief issuing.10 The third limb is in the nature of a check on the position reached following the first two evaluations; the assessment not being a rigidly formulaic one, but rather a discretionary exercise.11

Serious question to be tried

[51]   Mr Rice submits that there is a serious question to be tried as to whether the body corporate and majority have, in breach of s 56 of the Act, granted the hotel operator a licence for the use of common property in the development without the requisite special resolution having been passed. It is not in dispute, he notes, that the majority have leased their units to Custom Street so it can conduct business as a hotelier on the premises. As notes, Mr Rice submits that necessarily involves the grant of a licence to Custom Street to use the common property, being primarily the hallways

10 NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90, (2013) 13 TCLR 531 at [12], applying American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL); Eng Mee Yong v Letchumanan [1980] AC 331 (PC); Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 140 (CA) at 142; and Intellihub Ltd v Genesis Energy Ltd [2020] NZCA 344 at [20]-[24].

11 Klissers at 142.

within the building, for the purposes of that business. It appears to be common ground that the hotel’s other facilities (the reception area and so on) are all located within commercial units owned by the majority owners.

[52]   Mr Hollyman argues that no common property has been licensed either to Custom Street or to AAPC. He says all that is required is that the hotel staff and guests be able to pass over the common property without excluding access by the unit owners and their occupiers. Mr Hollyman relies on s 54 of the Act which provides that the “owners” of all units are beneficially entitled to the common property as tenants in common in shares proportionate to their ownership interest in the units and then points to the Supreme Court decision in Wu v Body Corporate 366611 which he says extends “owner” to the owner’s tenants and invitees. Mr Hollyman says in the present case this would include Custom Street, its staff and the Sofitel guests, all of whom are therefore entitled to pass over the common property hallway.

[53]In Wu, all members of the Court agreed that while there is: 12

no explicit statutory right of access to an owner or occupier’s individual unit under the Act, the right to use common property (owned by Mr Wu and the other owners in terms of [s 54]) as a thoroughfare for access to individual units is a right so basic and fundamental to the Unit Titles Act that it goes without saying.

[54]   Mr Hollyman’s submission appears to rely on the Supreme Court’s reference to “ owner or occupiers”.

[55]   This argument, as Mr Rice notes, relies on a significantly more expansive meaning of the word “occupier” than was applied in Wu. Mr Wu was the owner of a unit in a building in Auckland which was run as a student hostel. The building was managed by a building management company. Most of the owners leased their units to that company, which in turn licensed them to the student occupiers. The dispute in Wu had arisen from Mr Wu and a small number of other owners wishing to directly manage their units and lease them to students.13 The building manager would however issue them card keys to allow their tenants access to the common areas (hallways) of

12     Wu v Body Corporate 366611 [2014] NZSC 137, [2015] 1 NZLR 215 at [97].

13     At [1]-[2].

the building and their individual rooms, only if the unit owners signed an agreement as to terms of access, and paid a deposit. The Court could find no provision of the Act or valid applicable body corporate operational rules capable of supporting this requirement, and so the requirement was held to improperly abrogate the unit owners’ and occupants’ “basic and fundamental” right to thoroughfare through the common areas for the purposes of accessing their units.14

[56]   The exact arrangement between the majority, Custom Street, and AAPC does not emerge clearly from Mr Pandey’s affidavit. He refers alternatively to AAPC as running the Sofitel and the Sofitel staff as being employees of Custom Street. The dominant sense to be taken from his evidence however, and also from Mr Hollyman’s submissions, is that the hotel guests stay in the building pursuant to a contractual arrangement with AAPC, with which Custom Street as the majority owners’ lessee has contracted. If that is the case, even the position of the guests themselves as “occupiers” is rather less clear than the position in Wu, where the students resided in the apartment at the invitation of either the tenant company or the unit owners themselves. It may be however, depending on the exact arrangements, that the hotel guests can be said to be invitees of Custom Street, placing them in a position similar to the students in Wu. In that case, their right of access as occupiers, as set out in Wu, would be such that no licence would be required.

[57]   However, the position in respect of the hotel staff and the panoply of guests of guests, external tradespeople, contractors, and others who would be required to pass and re-pass over the hallways to enter hotel rooms, or otherwise as part of the hotel operation, is different. They could not in any sensible way be said to be occupiers of the majority owners’ units, such that they would have the benefit of the occupiers’ implied statutory right of access to those units through the common areas, as did the students in Wu. For persons in such a position to be treated as occupiers of the units would, I agree with Mr Rice, seem to cut across the scheme of the Act. It would also cut across the broader statutory policy of ensuring democratic control over use of common property.15 Accordingly, it is at least arguable that Customs Street/AAPC and its guests, or at least its staff, contractors and others have no entitlement under the

14     At [99]-[101].

15     See Wu v Body Corporate 366611 [2014] NZSC 137, [2015] 1 NZLR 215 at [105]-[106].

Act to pass and re-pass through the common areas of the development and that they can only be doing so by means of an implied licence granted by the Body Corporate and the majority. As noted, no special resolution has been passed authorising the grant of such licence.

[58]   It follows that I am satisfied there is a serious question for trial as to whether the majority and body corporate are entitled to operate a hotel in the building without first obtaining a special resolution under s 56 of the Act.16

The balance of convenience

[59]   As to the balance of convenience, Mr Rice submits that damages are not an adequate remedy for the minority as their damages are not easily quantifiable, involving interference with statutory rights attaching to their collective ownership of the common property. As Mr Rice himself submits however, the potential damage to the minority owners is referable to diminution in the amenity and use value of their units. Also, as emerges clearly from Mr Lip’s affidavit, the minority owners’ primary concern, and potential source of loss, is lost rent. Their application for interlocutory relief is drawn in such terms that the hotel can only be operated, provided it is operated on terms as favourable to the minority owners as prevailed until the former hotel operation ended with the liquidation of VQHL in July of this year. It follows, I agree with Mr Hollyman, that any loss to the minority owners arising before the resolution of the substantive application, could be readily quantified and remedied by damages.

[60]   I also agree with Mr Hollyman that it is clear based on Mr Pandey’s affidavit evidence that there is a real risk of significant loss to the majority owners but more particularly to AAPC (as a third party) if the hotel is unable to operate, both in terms of lost revenue but also, perhaps more significantly, damage to reputation and loss of market position. These losses will be magnified, I am prepared to accept, by the particular difficulties faced by hoteliers and others in tourism-related businesses resulting from the COVID-19 pandemic. The extent of loss of this type is harder to quantify or remedy in terms of damages. Also, I note, the closure of the hotel will

16     I would note although it was not argued, that the majority and body corporate may also be at risk of being in breach of the unit holders’ right to quiet enjoyment under ss 73(1) and 79(d).

likely impact negatively on the hotel’s staff, placing them at risk of unemployment (again in a particularly unfavourable economic climate).

[61]   To these factors I add that at the hearing I suggested to counsel the need for interim relief might be ameliorated if the majority agreed, pending the substantive determination of this matter, to the body corporate at least suspending or not enforcing the operation of the new rule preventing unit owners from renting their apartments on Airbnb and the like. That should materially mitigate any losses sustained by the minority pending determination of the originating application. Although the point was not relevant to the hearing and therefore not argued, the legality of that rule seems debatable in any event given the provisions of ss 50, 52 and 79(a) of the Act which provide for an owner’s right to lease their unit. That right is recognised and discussed in Wu, the case relied on by Mr Hollyman for the majority. I refer also to a recent decision of the Tenancy Tribunal concerning an attempt to prevent unit owners in another development from listing their units on Airbnb, which was held to be ultra vires the Act.17

[62]   By  memorandum  dated  28  October  2020,  the  day  after  this  hearing,  Mr Hollyman advised that the amended rule concerning Airbnb type accommodation provision has not yet been registered, and that the majority owners would “be content” to give an undertaking to not, “pending judgment of the Court on the substance of these proceedings”, seek to enforce the amended rule.

[63]   I fully accept that such an undertaking does not wholly address the minority’s claim for interlocutory relief. As emerges from the above, the minority’s desired state of affairs pending trial is that they be allowed to partake in the hotel operation and obtain the income they formerly received, which would likely be a more reliable and potential source of income than that able to be obtained from renting out the units on Airbnb or similar. Nonetheless, the undertaking does materially alter the balance of convenience in the majority’s favour.

[64]   For the above reasons, I consider the balance of convenience favours the majority.

17     Re Body Corporate 199318 [2020] NZTT Auckland 90189322, 5 November 2020.

Overall justice

[65]   For the same reasons set out above, I consider the overall justice of the case favours the majority owners on the injunction application. In this respect, I also note that the minority had known about the reopening of the hotel since August 2020, but waited seven weeks to apply for injunctive relief, doing so the day before the soft opening of the hotel.

Result and Orders

[66]   For the above reasons, the application by the second to fifth respondents to dismiss the proceeding and their protest as to jurisdiction is dismissed, and the applicants’ application for injunctive relief is also dismissed.

[67]   The second to fifth respondents are to be held to their undertaking set out in Mr Hollyman’s 28 October 2020 memorandum. If there is any question over whether that undertaking is now in effect or the form of it, memoranda are to be filed.

[68]   Both sets of parties have been unsuccessful on the applications made by them, although it might be said that the applicants had some success on the application for injunctive relief. If the parties are unable to agree as to costs, counsel for the applicants is to file and serve a memorandum within fifteen working days from the date of this judgment, with counsel for the respondents having ten working days to reply. Memoranda are not to exceed five pages, excluding intituling pages and supporting materials.

Hinton J