Foreshore Equities Limited v Body Corporate 396688
[2021] NZHC 537
•16 March 2021
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2020-409-000168
[2021] NZHC 537
UNDER the Unit Titles Act 2010 IN THE MATTER OF
an application for relief under s 215 of the Unit Titles Act 2010
BETWEEN
FORESHORE EQUITIES LIMITED
First Applicant
AND
CRANMER LIMITED
Second Applicant
AND
RUSSELL ERNEST MACKIE AND SUZANNE CLAIRE MACKIE
Third Applicants
AND
L & M HOLDINGS (2008) LIMITED
Fourth Applicant
AND
PEEGEECEE LIMITED
Fifth Applicant
AND
RJSN PROPERTIES LIMITED
Sixth Applicant
AND
BODY CORPORATE 396688
Respondent
Hearing: 27 November 2020 Appearances:
K W Clay and S L Austin for Applicants C Baker for Respondent
Judgment:
16 March 2021
JUDGMENT OF OSBORNE J
[Relief under s 215 Unit Titles Act 2010]
FORESHORE EQUITIES LIMITED v BODY CORPORATE 396688 [2021] NZHC 537 [16 March 2021]
This judgment was delivered by me on 16 March 2021 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
[1] The applicants, owners of units in a unit title development, ask the Court to set aside a resolution passed by the body corporate.
Parkview on Hagley
[2] A building known as Parkview on Hagley at 1 Riccarton Road, Christchurch is a unit title development.
[3]A hotel company operates at Parkview.
[4] The various types of premises at Parkview have been described in a recent judgment of this Court:1
[11]There are three types of premises within the Parkview on Hagley building.
(a)First, there are on the ground floor two commercial units owned and operated independently of the hotel business.
(b)Secondly, there is a manager’s unit (usually described as unit
312) which was fitted out in two parts, separated by a locked door, with one half (a two-bedroom unit) having been effectively put back into the hotel letting pool (in this judgment called “unit 314”). This manager’s (double) unit is the subject of its own lease, expressly for manager’s purposes and not for hotel letting.
(c)Thirdly, there are the remaining units which comprise the hotel letting pool. They number (including unit 314) 40.
[5] The six sets of applicants in this case own between them eight units in the first category, the letting pool.2 A company associated with the hotel operation, Travellers
1 Peegeecee Ltd v Parkview on Hagley Ltd [2019] NZHC 258 at [11].
2 First applicant – Unit 203; Second applicant – Unit 2, 3, 4; Third applicants – Unit 209; Fourth applicant – unit 303; Fifth applicant Unit 311; Sixth applicant – Unit 310.
Inn Ltd (Travellers), owns 28 units in the hotel pool. Travellers is in the VR Group of hotels and resorts. It appears that companies associated with the VR Group and Travellers own some, if not all, of the remaining units in the hotel pool, as well as the commercial units, referred to in the first category, the letting pool.
[6] Management of the hotel business has recently been taken over by Parkview Management Limited (PML), also apparently part of the VR Group.
Body Corporate 396688
[7] The respondent (Body Corporate 396688 (Body Corporate)) is the body corporate in relation to the Parkview development.
[8] The chairperson of the Body Corporate is Arvind Saluja who describes his occupation as “revenue manager”. He explains that he manages the revenue for the hotel operation at Parkview.
[9] Mr Saluja explains that the reception area of the hotel operation (unit 1) is on the ground floor. Travellers also owns unit 5 which comprises some car parking on the first floor. The second applicant, Cranmer Ltd, owns unit 4 which also comprises some car parking. There is also car parking shown on the common property area at ground floor level.
[10] At some point, apparently through Mr Saluja or others associated with the VR Group, there was a perception the hotel would benefit from having the use of the car parks in the ground floor common property area. Mr Saluja explained this in his affidavit:
The motivation for the hotel to secure the use of the carparks in the subject common area on the ground floor is to make it easier for guests to access the reception area. Otherwise, guests needs to drive two floors up to park and then walk down with luggage to the ground floor reception. In addition, by leasing that area the Body Corporate (and hence Body Corporate members, including the applicants) would achieve some income.
The car park resolution
[11] On 27 February 2020, Stephanie Byrne, the representative for the Body Corporate, issued to unit owners (including the applicants) a notice of resolution to be decided without a general meeting.3
[12] The notice had attached to it a document setting out background and the proposed resolution, in these terms:
Background
There is an area of common property located on the corner of Bartlett Street and Deans Avenue that has been used for car parking (copy of title attached). VR Group have requested that the body corporate issue a lease to them for this area. The details are as follows:
1.Lease to be for a period of 6 months commencing from when the designated resolution period has expired. Three further terms of six months will be offered to the lessee.
2.Rental is to be $50 per week per car park ie $400 per week to be paid by the 7th day of the month following.
3.Body Corporate Committee members and contractors engaged by the body corporate will be permitted short-term parking in this area.
4.The lessee will pay for any costs incurred in the production of the lease and the associated designated resolution.
5.This resolution is a designated resolution in accordance with S212 (d) of the Unit Titles Act and therefore all interested parties must be given a 28-day period to lodge an objection.
The Members of Body Corporate 396688 Resolve:
That the body corporate issues a lease to VR Group for use of eight carparks located on common property located on the corner of Bartlett Street and Deans Avenue for an initial period of six months followed by three further terms of the same duration.
SIGNATURE OF ELIGIBLE VOTER UNIT NUMBER
DATE
[13] The accompanying notice explained the resolution was to be decided by the Body Corporate without a general meeting and that unit owners were entitled to vote
3 Notice given under s 104(2) Unit Titles Act 2010.
in favour or against the resolution, with votes in favour to be signed and returned to Ms Byrne by 5 March 2020.
[14] On 28 February 2020, the first applicant by email requested further information from Ms Byrne “[i]n order for [it] to make an informed decision”. In particular, it requested:
(a)the valuation of the proposed space as car parks;
(b)a copy of the proposed lease terms; and
(c)a report as to how the proposed changes would affect the members of the Body Corporate and the running of the hotel, either positively or negatively.
[15] On 4 March, the second applicant sent an email to Ms Byrne, stating the proposal raised a number of issues, including the possibility that the change might require resource consent. It was suggested that the issues should probably be discussed at the annual general meeting rather than by special resolution.
[16] The Body Corporate did not respond to the first applicant’s request for information. It also did not provide a response to the issues raised by the second applicant.
[17] On 5 March 2020, the Body Corporate passed the resolution without a meeting. As the resolution related to a lease of common property under s 56 of the Act, it was in terms of s 212(d) of the Act a “designated resolution”.
[18] On 6 March 2020, Ms Byrne, for the Body Corporate, gave notice to all unit owners of the passing of the resolution.4 The notice set out the owners’ rights to object.
[19] On 2 April 2020, the applicants jointly served upon the Body Corporate a notice of objection to the designated resolution.5
4 Under s 213 Unit Titles Act 2010.
5 Under s 213(3).
[20]The notice of objection stated six grounds:
2.1.No valuation of the common area as proposed car parks was provided to the Body Corporate members in order for them to make an informed decision on the resolution;
2.2 The resolution made no reference to the inclusion of any formal lease terms of the type that would be expected for a lease of this nature;
2.3.The Body Corporate failed to obtain any advice as to how the proposed lease of the common property would affect the operation of the hotel and the Body Corporate members’ interests (either positively or negatively);
2.4.Travellers Inn Limited failed to abstain from voting on the resolution, despite the conflict of interest between its roles as member of the Body Corporate and related company to the prospective tenant;
2.5 Travellers Inn Limited used its position as a majority unit owner to unfairly influence the voting on the resolution, to the detriment of the other members of the Body Corporate; and
2.6. The Body Corporate failed to obtain any advice as to whether the proposed use of the common area as parking complied with the Christchurch City Council regulations for parking spaces and what, if any, consents were required;
[21]On 3 April 2020, the applicants filed this application for relief.6
The application and opposition
[22] The application identifies the same six grounds as set out in the applicants’ notice of objection (at [20] above), together with the proposition that it would not be just and equitable for the Court to make an order confirming the resolution.
[23]By its notice of opposition, the Body Corporate asserts:
(a)none of the grounds pleaded by the applicants justify an order under s 215(1) Unit Titles Act 2010 (implicitly an order other than one confirming the resolution);
(b)Body Corporate members were informed to the extent required to pass the resolution; and
6 Invoking the High Court’s jurisdiction under s 173(1)(b) Unit Titles Act 2010.
(c)it would not be just and equitable for the Court to make an order overturning the resolution.
The evidence
[24] The evidence filed has been brief. Clive Cousins, a director of the first applicant, gave background as to the ownership of units at Parkview and then provided the history of the resolution, as summarised above.
[25] Deborah Smith, the director of the second applicant, provided an affidavit to which she attached a written opinion obtained from Jonathan Clease of Planz Consultants Ltd. This opinion discussed whether the car parking arrangements the subject of the resolution require a formal variation to be undertaken to the existing suite of resource consents under which Parkview operates. The planner, Mr Clease, concludes that proposals to vary the use of the parking areas need to be carefully considered against the scope of the activity provided for through the existing consents.
[26] Mr Saluja provided the single affidavit on behalf of the Body Corporate. I have referred to his explanation of the motivation behind the resolution (above at [10]). Mr Saluja added that the second applicant, Cranmer Ltd, had also expressed an interest in leasing or licensing car parks which it owns within unit 4 to earn an income for Cranmer Ltd (as opposed to the Body Corporate and its members generally). Mr Saluja exhibited invoices from Cranmer Ltd for short periods of use of Cranmer’s car park spaces, recording a rate of $25 per week per car park on upper floors. Additionally, Parkview paid $100 when it hired two car parks on the ground floor.
[27] Mr Saluja deposed that these rates “informed” the rate for the currently leased ground floor car parks (in the amount of $50 per week identified in the “Background” in the notice (above at [12])) as they were more suitable for the hotel.
[28] It is common ground that the six sets of applicants (owning eight units between them) opposed the resolution but that the resolution was carried on the vote of Travellers with its ownership of 28 units. As Mr Clay for the applicants has put it, “in effect [Travellers Inn] voted to grant a lease to itself”.
The competing contentions
For the applicants
[29] For the applicants, Mr Clay in submitting that it would be just and equitable for the Court to make an order overturning the resolution distilled his submissions to two grounds. First, that the procedure followed by the Body Corporate in passing the resolution was fundamentally flawed. Secondly, that the resolution itself is so uncertain in its terms that it should not be confirmed.
[30] In relation to procedural failures, Mr Clay referred to the first applicant’s attempt to obtain further information and the failure of the Body Corporate to provide any information on three particular matters:
(a)Absence of valuation information:
No formal valuation or market appraisal of the car parks was carried out before the resolution passed nor was there an opportunity for a valuation to be obtained. There is no means to measure whether the proposed price is fair;
(b)Absence of proposed lease terms:
Failing the provision of a draft formal lease agreement, it is unclear who the lessee is. The resolution refers only to “the VR Group”, a term used interchangeably for a number of entities;
(c)Absence of advice on compliance with planning requirements:
The Body Corporate has not obtained advice as to whether the proposed car parking is compliant with Christchurch City Council planning and resource management requirements.
[31]Mr Clay elaborated upon each of those concerns:
(a)in relation to rental, Mr Clay noted that it would have been a relatively quick and inexpensive exercise for the Body Corporate to obtain market
valuation advice. The resolution does not so much as identify a proposed rental;
(b)in the absence of a formal lease agreement, the Body Corporate by the resolution has not resolved what key requirements are made of the lessee. These include in relation to enforcement, duration, rent, renewal rights, default provisions, assignment;
(c)the apparent failure of the Body Corporate to obtain planning advice on the lawfulness of the proposed car parking arrangements may lead the Body Corporate to contravene the Resource Management Act 1991. As the Body Corporate, under s 77(1) of the Unit Titles Act “may do anything authorised by this Act or any other Act”, it follows that the Body Corporate would be acting ultra vires if its car parking arrangements were in breach of the Resource Management Act.
[32] Bringing these concerns together, Mr Clay submitted that the Body Corporate has not acted in an even-handed manner, and has instead favoured the interests of one owner over the interests of other owners.
[33] Mr Clay’s second head of complaint — the uncertainty of the terms of the resolution — flows from criticisms about the absence of a draft lease and the identification of the proposed lessee simply as “VR Group”. Mr Clay submits where the legal consequences of a resolution are uncertain it follows that equitable principles would lead the Court to overturn the resolution.
[34] Mr Clay in support of his submissions referred in particular to three decisions of this Court:
(a)Dominion Finance Group Ltd (in rec and in liq) v Body Corporate 382902 [Gallery Apartments]:7
Fogarty J considered the meaning of the “just and equitable” test under s 188
7 Dominion Finance Group Ltd (in rec and in liq) v Body Corporate 382902 [Gallery Apartments] [2012] NZHC 3325, (2012) 14 NZCPR 252.
of the Act (in relation to the cancellation of the unit plan) and observed that equity’s analysis looks to substance and not to form.8
(b)World Vision of New Zealand Trust Board v Seal:9
Heath J considered the “just and equitable” jurisdiction in relation to the cancellation of a unit plan under s 46(1) of the Unit Titles Act 1972 (the predecessor to s 188 of the current Act), observing that the jurisdiction under s 46(1) should not “be unduly circumscribed”.10
(c)Tang v Body Corporate 155936:11
Jagose J, on an application for the overturning of both ordinary and special resolutions passed by a Body Corporate, recognised that the “just and equitable” test is objective and requires all relevant circumstances to be taken into account, including the position of both the minority and the majority.12 There then remains a residual discretion whether to order relief, even if the statutory threshold is met.13
[35] Finally, Mr Clay referred to the judgment of the Court of Appeal in Jewett Investments Ltd v Body Corporate 204096.14 In that case, the appellant, one member of a body corporate, had unsuccessfully sought a declaration that a resolution authorising a levy was unlawful. A majority of the Court of Appeal (Fogarty J dissenting) dismissed the appeal. The majority observed that the body corporate had to be even-handed, not preferring some owners to others, unless the Act or the rules called for that approach.15 The Court observed “in that sense the body corporate was under a fiduciary duty”.16 Fogarty J agreed with the conclusion that the individual members of and the committee of proprietors as a whole have fiduciary obligations to
8 Gallery Apartments, above n 7, at [65]–[66], [76], [79].
9 World Vision of New Zealand Trust Board v Seal [2004] 1 NZLR 673 (HC).
10 At [84]–[87].
11 Tang v Body Corporate 155936 [2020] NZHC 2813.
12 At [17].
13 At [15]–[17].
14 Jewett Investments Ltd v Body Corporate 204096 [2011] NZCA 232.
15 At [15].
16 At [15].
all the registered proprietors.17 His Honour would nevertheless have allowed the appeal on the facts.
For the Body Corporate
[36] For the Body Corporate, Mr Baker constructed his submissions as a reply to the six grounds initially identified in support of the application.
[37]In particular, Mr Baker submitted:
(a)Absence of valuation information
The vote of the majority in favour of the special resolution indicates that owners had sufficient information to make an informed decision. Furthermore, there is no evidence of the ($50 per week) rental being at an undervalue.
(b)Absence of proposed lease terms
The fact draft lease terms were not part of the proposed resolution does not render the resolution unfair or inequitable — for two reasons. First, there is in practice now a lease arrangement in place with the lessee with the car parks identified, a term of occupation and the rental, all of which the Body Corporate is capable of converting into a formal lease. Secondly, the “background” provided with the notice to owners immediately above the proposed resolution (containing those terms) is to be read as a part of the resolution itself. To the extent the proposed lessee was not identified other than as “VR Group”, Mr Baker submitted the matter of identity could be “perfected” or “cured” by production of a formal lease document, the identity of the lessee being the “only remaining strand”.
(c)Absence of advice on effect upon operation of the hotel and the owners’ interest
As with matters of valuation, the majority vote in favour of the
17 At [59].
resolution indicates sufficient information was available. In any event, the applicants provided no evidence of a detrimental effect.
(d)Voting by Travellers and influence of others on the voting on the resolution
All owners (including owners of a principal unit under s 79(c) of the Act) — had the right to vote in their personal interest, provided the grant of any interest through such a vote did not of itself result in an inequity or unfairness to minority owners for other reasons.
(e)Absence of advice on planning requirements
The fact the majority had sufficient advice on which to vote in favour of the lease is an answer. Additionally, the evidence of Ms Smith in relation to planning matters takes the applicants’ case no further — it is not admissible evidence in terms of s 17 Evidence Act 2006 and nor does the attached report establish a resulting non-compliance with planning requirements.
[38] Mr Baker referred to case law, citing passages from the judgments in World Vision of New Zealand Trust Board v Seal and Tang v Body Corporate 155936.18 He referred also to the judgment of Ellis J in Re an Application by Body Corporate 46051, which (having adopted passages from World Vision),19 concluded:20
Importantly, the relevant evaluation must be conducted with proper regard to the scheme and purpose of the Act.
[39] Mr Baker observed that, in considering the “just and equitable” threshold, the courts have invariably looked at outcomes to determine whether there should be an interference with the resolution in question. He referred to the outcome in Gallery Apartments, where a resulting financial detriment weighed significantly in the Court’s decision to order cancellation of the subject plan.21 Secondly, Mr Baker referred to
18 World Vision of New Zealand Trust Board v Seal, above n 9; and Tang v Body Corporate 155936, above n 11.
19 World Vision of New Zealand Trust Board v Seal, above n 9.
20 Re an Application by Body Corporate 46051 [2019] NZHC 922 at [12].
21 Gallery Apartments, above n 7, at [83]–[88], [139].
Tang as a case where the Court was concerned with whether a body corporate’s resolutions were available powers under the Act, and with their material effect.22
The Court’s jurisdiction
The power to confirm or overturn a resolution
[40] The Court, upon hearing an objection, has a number of powers under s 215(1) of the Act, including to confirm or to overturn a resolution.23 Section 215 provides:
215 Hearing if objection made
(1)The appropriate decision-maker must hear the objection as soon as practicable and may make any order it thinks fit, including without limitation any of the following orders:
(a)confirming the resolution:
(b)overturning the resolution:
(c)requiring the body corporate to pay compensation to the person making the objection:
(d)requiring the person making the objection to pay compensation to the body corporate:
(e)a work order:
(f)granting an injunction.
(2)The appropriate decision-maker must not make an order under subsection (1) unless it is satisfied that it is just and equitable to do so.
(3)An order may be subject to any terms or conditions that the appropriate decision-maker thinks fit.
(4)If the appropriate decision-maker—
(a)makes an order overturning the resolution, then the resolution is to be treated as not having been passed; or
(b)makes an order confirming the resolution, then the body corporate may proceed to carry out the resolution subject to any terms and conditions imposed by the appropriate decision-maker under subsection (3).
(5)In this section, a work order means an order to carry out any repairs to the unit title development or to rectify any deficiency in the
22 Tang v Body Corporate 155936, above n 11.
23 Unit Titles Act, s 215(1)(a)–(b).
performance of any services by doing the work or attending to the matters specified in the order.
[41] The Court must not make an order under s 215(1) of the Act unless it is satisfied it is just and equitable to do so.24 An order may be subject to any terms or conditions that the Court thinks fit.25
[42] If the Court makes an order overturning a resolution, then the resolution is to be treated as not having been passed.26
The scheme and purpose of the Act
[43]The relevant purpose of the Act is:27
… to provide a legal framework for the ownership and management of land and associated buildings and facilities on a socially and economically sustainable basis by communities of individual owners and, in particular,—
…
(c)to establish a flexible and responsive regime for the governance of unit title developments; …
[44] As recognised by Asher J in LV Trust Holdings Ltd v Body Corporate 114424, “the emphasis is on the management of buildings on a socially and economically sustainable basis, and for a flexible and responsive regime”.28 I note also the observation of a commentator with reference to the name of the Act, as subsequently implicitly adopted by Panckhurst J in Lake Hayes Properties Holdings Ltd v Petherbridge [Petherbridge]:29
“Unit titles” is not a phrase that does justice to the topic. Unit titles are about communities, about infrastructure, about democracy, about governance, about management, about property rights, and above all, about people. These issues go far beyond “title” matters. Fundamentally, these issues are about neighbours – how people live and work together, how people’s lives are controlled by others, and what rights they have. Much of land law is really about contracting parties (buyer/seller, landlord/tenant et cetera), but unit titles are about neighbours.
24 Section 215(2).
25 Section 215(3).
26 Section 215(4)(a).
27 Section 3.
28 LV Trust Holdings Ltd v Body Corporate 114424 [2012] NZHC 3578, (2012) 14 NZCPR 344 at [57].
29 Thomas Gibbons “In Your Neighbourhood” (2011) 172 NZLawyer 23; Lake Hayes Properties Holdings Ltd v Petherbridge [Petherbridge] [2014] NZHC 1673, (2014) 15 NZCPR 590 at [30].
[45] The management and governance of each unit development was succinctly explained by Panckhurst J in Petherbridge in the following passages:30
[27] Management of the unit development lies with the body corporate, which is created upon deposit of the unit plan.31 The unit owners become members of the body corporate,32 and have the rights described in s 79 of the Act, including all the rights derived from being registered as the owner of the stratum estate in a unit under the Act, quiet enjoyment of the unit, and rights to participate in body corporate decision-making and management. Unit owners are subject to responsibilities defined in s 80, being in effect duties to comply with the body corporate operational rules pertaining to maintenance, repairs and the use, occupation and enjoyment of their units. The body corporate enjoys defined powers and is also subject to duties.33 It too must comply with the body corporate operational rules and generally administer and manage the development as a whole to ensure its wellbeing.
[28] One vote is available to each unit at a meeting of the body corporate.34 An ordinary resolution may be passed by a bare majority of the eligible voters who vote.35 However, a special resolution requires a 75% vote in favour.36 Cancellation of a unit plan requires a special resolution.37 Should the body corporate resolve to cancel the unit plan, the minority may invoke the objection process.38
[29] The objection process is governed by ss 210 to 216, contained in Part 5, subpart 3 and entitled “Minority and majority relief”. Section 210 provides that where a resolution is duly 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.” Similarly, if a special resolution is not passed, but there was a 65% vote in favour, relief may be sought if “the effect of the failure of the resolution to be passed would be unjust or inequitable on the majority.”39
The “just and equitable” criterion
[46] By reason of s 215(2) of the Act, any order this Court makes upon hearing an objection must be one which, to the satisfaction of the Court, is just and equitable.
[47] As I am satisfied that (however the relevant case law is construed to inform the statutory jurisdiction) on the particular facts of this case it is just and equitable (and
30 Petherbridge, above n 29, at [27]–[29].
31 Unit Titles Act, s 75.
32 Section 76.
33 Section 84.
34 Section 97(2).
35 Section 97(4).
36 Section 98(4).
37 Section 177(3).
38 Sections 177(4), 212–216.
39 Section 211(1).
clearly so) that the resolution be overturned, I will record only the central legal considerations which apply.
[48] Counsel addressed me on a number of authorities dealing with the expression “just and equitable” within the Act. The submissions in this regard took me to various passages in the cited judgments.
[49] I respectfully adopt the test identified by Panckhurst J in Petherbridge (stated on an application for cancellation of a unit plan under s 188 of the Act but also applicable to the same phrase as used in relation to a hearing concerning a resolution under s 215 of the Act):40
[48] I think that the test is best understood by reference to the words of s 188(2). This Court may authorise the cancellation of a unit plan if it is satisfied it is just and equitable that the body corporate be dissolved and the plan cancelled, having regard to the rights and interests of the creditors of the body corporate and the rights and interests of every person having an interest in a unit or the base land. The phrase “just and equitable” means equitable justice, the justice of the individual case. All matters relevant to the rights and interests of creditors or interest holders must be considered. And, importantly, the evaluation must be conducted with proper regard to the scheme and purpose of the Act.
[50] In other words, it is appropriate that the Court asks, in the manner Heath J approached the issue in World Vision: “Is [the application] “just and equitable” having regard to all the relevant rights and interests?”41
[51] In the event the Court is satisfied under s 215 that it is just and equitable to make one or other order, a residual discretion remains whether or not to order relief.42
[52] I recognise that there is authority that an applicant for cancellation of a plan under s 188 must satisfy the Court on the balance of probabilities that cancellation (and/or dissolution of a body corporate) is “just and equitable”.43 But that approach to the onus cannot apply to the hearing of an objection under s 215 where restraint on the Court’s power to order confirmation or the overturning of a resolution is expressed
40 Petherbridge, above n 29, at [48]; applied in OM Hardware Ltd v Body Corporate 303662 [2015] NZHC 190, (2015) NZCPR 921 at [35]–[40].
41 World Vision of New Zealand Trust Board v Seal, above n 9, at [77].
42 Tang v Body Corporate 155936, above n 11, at [16]–[17].
43 See World Vision of New Zealand Trust Board v Seal, above n 9, at [77].
in the negative — the order is not to be made unless the Court is satisfied that it is just and equitable to do so.44 In this regard, I respectfully adopt the analysis of Jagose J in Tang v Body Corporate 155936.45
Application of the statutory regime in this case
[53] The promotion of the resolution in this case went off the “just and equitable” rails when the proponents failed to identify with particularity all the relevant details of the proposed lease and of the lessee itself. The proposed lessee was an entity within the VR Group. The VR Group also encompasses the company PHL which operates the hotel at the address as well as Travellers as the owner of 28 units in the hotel pool. The scope for the minority to be adversely affected in a way the majority owner was happy with was obvious. Immediately upon receipt of the notice of resolution, the first applicant reasonably requested a copy of the proposed lease terms. As Mr Clay correctly notes, in the absence of a draft formal lease agreement it was and remains unclear who the proposed lessee was. Reference to the “VR Group” does not identify the lessee. Mr Clay identified a number of lease terms which it was important for a minority owner in this context to have “locked in” if a related-party entity were to be the lessee (as provided for in the resolution). As identified by Mr Clay, duration, rent and renewal rights are in such a context important considerations. But I accept Mr Baker’s submission that the Body Corporate, by providing the “details” for those in the “background” above the proposed resolution effectively locked those details into the proposed lease. That said, what was not locked in, anywhere in the proposed resolution, were other details which would have been covered if the proposed resolution had a standard form or special form of lease attached. Matters of importance to a minority owner, such as in relation to events which would be deemed defaults under the lease were not in the proposed resolution and were therefore not voted upon. Implicitly they are left to those who manage the Body Corporate.
[54] The resolution which resulted was not fair and equitable to the minority owners. It created a situation where, a vote not having been taken in relation to such details, the minority owners would have been locked into the outcome of the
44 Unit Titles Act, s 215(2).
45 Tang v Body Corporate 155936, above n 11, at [16]–[17].
designated resolution, while the majority owner could finalise important details on whatever terms it saw fit.
[55] This is not an issue which has been sprung on the Body Corporate after the event. It is one of the issues immediately raised by the first applicant before the vote was taken. It could have been attended to. But for unexplained reasons the Body Corporate apparently chose not to engage. The fact that it did not engage in such circumstances could have justifiably increased the minority owners’ concerns in relation to the future treatment of their interests as minority owners, when it came to the relationship between the Body Corporate and its lessee.
[56] On the basis of this issue alone, I am satisfied it is just and equitable to make an order overturning the resolution. That is sufficient to dispose of the issue before the Court.
[57] That said, it may be that a fresh resolution will be put to the owners. Given the Court has heard detailed submissions in relation to other aspects of the resolution, it is appropriate that I briefly refer to those. In particular, I refer to the absence of valuation information and the absence of specific advice that planning requirements will be complied with. On the evidence before the Court I would not have been satisfied that it was just and equitable to set aside the resolution upon the basis of either of those matters. While there would have been little time after the notification and before the resolution was passed for the applicants to obtain detailed advice on each of those matters, there was time while the hearing of this proceeding was pending. There is nothing in the evidence provided to the Court which establishes the existence of an unfairness to the minority owners in relation to either valuation information or planning requirements. There was nothing in the particular circumstances of this case (notwithstanding that the majority owner effectively controlled the outcome of the voting) to require the majority owner itself to come forward with further supporting or negating evidence. If these were matters of material consequence, it was open to the applicants to bring forward information both into the resolution process and into this litigation.
Orders
[58]I order:
(a)the resolution passed by Body Corporate 396688 on 6 March 2020 is overturned; and
(b)the respondent is to pay the costs (on a 2B basis46) and reasonable disbursements of the proceeding, with the Registrar to fix the quantum if requested by the parties to do so.
Osborne J
Solicitors:
Canterbury Legal, Christchurch
Counsel: K W Clay, Clarendon Chambers, Christchurch Price Baker Berridge, West Auckland
46 High Court Rules 2016, Category 2 under r 14.3(1) and band B under r 14.5(2).
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