Knight v Body Corporate 81340
[2020] NZHC 1111
•25 May 2020
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2020-485-18
[2020] NZHC 1111
BETWEEN ZENA RENEE KNIGHT
First Appellant
TENUS LIMITED
Second AppellantAND
BODY CORPORATE 81340
Respondent
Hearing: 11 May 2020 Appearances:
N Dunning for the Appellants
A J Knowsley and B R J Ruback for the Respondent
Judgment:
25 May 2020
JUDGMENT OF CULL J
[1] This is an appeal from a summary judgment in the District Court where judgment was entered against the appellants for two Body Corporate special levies imposed in 2015 and 2016. 1 The appellants are the owners of a unit in an apartment complex known as “the Links”.
[2] The Links is a 14-storey unit title complex, which suffers from weathertightness issues. From around 2010, the Body Corporate has attempted to deal with these issues. The complex is owned by the Body Corporate and the owners of its constituent units under the Unit Titles Act 2010 (the Act). For the relevant dates, the first appellant, Ms Knight, was either jointly (with Ms Pethybridge) or solely the
1 Body Corporate 81340 v Knight [2019] NZDC 24452 (Decision Under Appeal).
KNIGHT v BODY CORPORATE 81340 [2020] NZHC 1111 [25 May 2020].
owner of unit 5D and its associated accessory units.2 In December 2018, Ms Knight transferred ownership of unit 5D to Tenus Ltd, the second appellant. Ms Knight is the sole director and shareholder of that company.
[3] The District Court summary judgment concerned two Body Corporate levies which were imposed on the owners of unit titles at two extraordinary general meetings of the Body Corporate in 2015 and 2016. The levies are special levies, raised to fund building repairs, remediation and construction in the Links. These special levies have been held in an earlier decision by the District Court to be arguably invalid.3 In the decision under appeal, the Judge held that the Body Corporate’s Scheme, as approved by this Court under s 74 of the Act,4 was intended to retrospectively validate these remediation-related levies.5 Accordingly, he granted the summary judgment.
[4] The appellants contend that the approved Scheme was not intended to retrospectively validate the special levies and, they say, the levies are not enforceable under the Scheme. They say the grant of summary judgment on that basis therefore is in error.
Background and procedural history
[5] The history and structure of the Links is succinctly described in the judgment of Thomas J, who approved the Body Corporate’s Scheme under s 74 of the Act. It is unnecessary to repeat the detail for this appeal but by way of context, the Links has weathertight issues and leaks. 6 The leaks are through the glazed curtain wall forming the tower faces of the Links, the quality of which is unsuitable, through the decks of the penthouse apartments at least one cause of which was the installation of abseil anchors on the decks which allowed water ingress, and through the level one decks which are apparently due to defects in the construction of the decks. There is corresponding damage to the building as a result of the leaks.
2 In August 2013, unit 5D transferred to Ms Knight and Ms Pethybridge in equal shares. In July 2015, Ms Knight acquired the sole interest in unit 5D. In November 2018, unit 5D was transferred to Tenus Ltd, of which Ms Knight is the sole director and shareholder.
3 Body Corporate 81340 v Newland [2016] NZDC 1963.
4 Body Corporate 81340 v Knight [2018] NZHC 2953 (Scheme Decision).
5 Decision Under Appeal, above n 1, at [41].
6 Scheme Decision, above n 4, at [12]-[13].
[6] Since 2010, the Body Corporate has attempted to deal with these issues. It acknowledges that the real solution lies in recladding the building but, having decided this is too expensive to carry out immediately, has resolved to undertake interim remediation measures. The Body Corporate set up a deferred maintenance project, later named the Links Apartments Remediation Programme (LARP), to address the remediation issues. From 2011, the Body Corporate raised levies for its long-term maintenance fund, established under s 117 of the Act.
[7] The appellants are engaged in a longstanding dispute with the Body Corporate and with the majority of the unit holders both as to the nature of the remedial work required and about how payment for both past and present works should be apportioned. In July 2011, the Body Corporate resolved to raise a levy of $1.5 million to fund the necessary remedial works for the Links, in particular, to carry out repairs to the curtain wall and the decks and balconies. It resolved that the costs of the repairs would be paid by the unit holders by way of a special levy calculated in accordance with their unit entitlements.7 It should also be noted that in December 2011, the Body Corporate held its extraordinary general meeting and passed a resolution that interest would accrue at a rate of 10 per cent per annum on all unpaid Body Corporate levies.
[8] The complex blend of ownership in The Links meant that there was a problem with the 2011 special levy resolution. The Tenancy Tribunal found the Body Corporate could only impose levies on a utility interest basis to meet the costs of repairs to common property.8 Any responsibility for repairing and levying to repair individual units (which included a large part of the decks and balconies) was limited to cases in which the need for the repairs could fairly be seen as incidental to the Body Corporate’s obligations to maintain and repair common property. The Tribunal held that the special levies were ultra vires and that the unit holder had no obligation to pay them, to the extent they related to repairs to the decks.
7 The minutes record the resolutions were passed unanimously.
8 Body Corporate 81340 v Yee Good Fortune Investments Ltd TT Wellington 12/00048/UT, 6 March 2013 cited in the Scheme Decision above n 4, at [51]. In that case, the Tribunal held that the Unit Titles Act 1972 still applied.
[9] There was then a change in the governing legislation. Thomas J in her decision detailed the changes to the Unit Titles Act in detail.9 The changes to the Act assisted the Body Corporate’s position both in terms of levying for the cost of the LARP and its ability to undertake work on privately owned parts of the building. It meant the Body Corporate’s responsibility extended beyond common property rights only. The 2010 Act requires the Body Corporate to repair damage to building elements such as decks and balconies regardless of whether they form part of a principal unit in private, as opposed to common, ownership.10 However, in order to levy in advance to pay for such repairs, the Body Corporate needed to apply for a scheme under s 74 of the Act.
[10] On 6 June 2015, at the 2015 extraordinary general meeting the Body Corporate raised a special levy of $231,000 and the Body Corporate owners were invoiced in accordance with their ownership interests. Ms Knight was invoiced for the special levies raised for $9,747.05, payable by 20 August 2015.11 On 14 May 2016, a further special levy of $1,610,631 was raised. The Body Corporate decided that the 2016 special levies were to be invoiced in parts. Accordingly, Ms Knight received an invoice for $23,817.22 payable by 31 July 2016 and an invoice for $19,502.53 payable by 10 September 2016. Ms Knight has refused to pay the special levies. It is these levies that are the subject of this appeal.
[11] In 2015, the Body Corporate sought summary judgment against another unit- holder of the Links in the District Court for the debt it said it was owed.12 Of relevance to this case, the Court held that the long-term maintenance fund could not be used (and a long-term maintenance levy could not be struck) to pay for the remediation works. The Court held that the long-term maintenance funds were intended to meet the costs of anticipated future maintenance, so that the burden would not suddenly fall on the owners at some future time.13 They were not to gather funds to pay for already identified defects of the nature and scale confronting the Links. The Judge therefore
9 Scheme Decision, above n 4, at [54]-[64]. The Unit Titles Act 1972 was replaced by the Unit Titles Act 2010.
10 At [60]; Wheeldon v Body Corporate 342525 [2015] NZHC 884; and Wheeldon v Body Corporate 34525 [2018] NZCA 20.
11 Ms Knight acquired the sole interest in unit 5D a week later. At the time, the Pethybridge Estate was actually invoiced, although it is accepted the liability lies with Ms Knight.
12 Body Corporate 81340 v Newland, above n 3.
13 At [18].
doubted the validity of the levies and observed that the appropriate way of funding the remediation works was by way of an application to the High Court for the settlement of a scheme under s 74 of the Act.
[12] In April 2016, the Body Corporate applied for a s 74 scheme under the Act, to cover both the work already undertaken and that still outstanding.14 The terms of the application for the Scheme provided for the allocation of the costs of the LARP on the basis of utility entitlement. This was instead of a combined approach on the basis that unit entitlement determines only the costs allocation for common property, with actual ownership of the building elements determining the remainder. Thomas J calculated that under a utility entitlement approach, the amount payable by Ms Knight and Tenus Ltd is some $13,000 more than it would be under a combined approach.15
[13] The s 74 application was heard in the High Court in October 2018. Ms Knight opposed the Scheme but the Court held that the Scheme was appropriate as a practical solution to the remediation problem,16 and approved it on the utility interest basis as the outcome fairest to all.17
[14] A month later, unit 5D was transferred to Tenus Ltd. On 2 May 2019, demand for payment was made from the Body Corporate’s lawyer to Ms Knight and Tenus Ltd. On 14 May, Ms Knight’s lawyer rejected the Body Corporate’s claim. On 26 June 2019, the Body Corporate sought summary judgment for unpaid levies totalling $53,066.80, together with interest and costs in the District Court. On 8 December, the District Court entered judgment in favour of the Body Corporate.18 As noted, the Judge held that the Body Corporate’s Scheme, as approved by this Court under s 74 of the Act, was intended to retrospectively validate these remediation- related levies.19
14 Scheme Decision, above n 4.
15 At [70].
16 At [5] and [46].
17 At [80] and [85].
18 Decision Under Appeal, above n 1.
19 At [41].
The decision under review
[15] The Judge ultimately found that the outstanding levies were validated by the Scheme. He proceeded on the basis that, even if the 2015 and 2016 levies were unlawful at the time (which he assumed they were for the purposes of the summary judgment), the question then was whether they were no longer unlawful because of the High Court’s approval of the Scheme and the incorporation in it of the work to which they relate.20 The key issue was whether there was an arguable defence to the proposition that “the June 2015 and May 2016 levies, which were arguably unlawful at the time they were imposed, are now able to be recovered because of the scheme having been approved by the High Court.” 21
[16] The Judge concluded, based on the terms of the Scheme itself and Thomas J’s judgment, there was no such arguable defence.22 He held that the levies may have been unlawful at the time they were imposed but that both those levies and the costs to which they related are now “clearly recoverable” as part of the Scheme from each of the owners, including Ms Knight, in accordance with their utility interests.23 He based this conclusion on both the preamble to the Scheme and clause 1.2.24 The Judge went on to note that, if he were to decline the claim for summary judgment, he considered that the Body Corporate could impose a levy now in the same amount as the present claim, under the Scheme.25
[17] These findings left the Judge satisfied that there was no arguable defence to the Body Corporate’s claim.26 He then went on to consider whether, if the original levies were unlawful, the Body Corporate should be able to recover interest from the original dates. Ultimately, the Judge held that any other approach would be at odds with the clear intention to make the Scheme retrospective in effect. He also found that to not require interest to be recoverable from the original dates would be unfair to
20 At [39].
21 At [40].
22 At [41]-[44].
23 At [48].
24 See [28] of this judgment.
25 At [49].
26 Rule 12.2 of the District Court Rules 2014 provides that the Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to any cause of action in the statement of claim or to a particular cause of action.
owners who paid their levies on time in 2015 and 2016, when Ms Knight has not yet done so and has had the use of the money in the meantime. He therefore upheld the interest claim from the respective dates when the invoices became payable to the date of the judgment.27
[18] Finally, the Judge awarded the legal/recovery costs claimed of $4,746.45, which were costs as at 13 June 2019, but reserved the question of costs from 14 June 2019 to the date of judgment.28 He then entered summary judgment for $53,066.80 against each defendant (Ms Knight and Tenus Ltd) in the full amount, under s 124 of the Act.29
Parties’ positions
[19] Ms Knight and Tenus Ltd contend that the Scheme was not intended to retrospectively validate the special levies, or that they be enforceable under the Scheme because they were unlawful. They say that costs incurred under the Scheme are not levies and in order to demand the sums, the Body Corporate needed to use the provisions of the Scheme to strike new levies. They also submit that the District Court Judge was wrong to order the appellants to pay interest and the Body Corporate’s solicitor costs on a solicitor/client basis.
[20] The Body Corporate submits that the s 74 Scheme authorised the repair of the Links and any other work as the Body Corporate determined necessary or appropriate. It says that the Scheme sought to achieve this purpose by ordering “all costs incurred in identifying the initial damage to the Links and the repairs required and carried out in respect of which Owners have already been levied shall be deemed to be part of this scheme and shall be deemed to be Costs.”30 Therefore, it was not limited to raising levies prospectively and the Body Corporate says, there has been no error by the District Court, either in fact or in law, in awarding summary judgment.
27 At [53].
28 At [54].
29 At [55].
30 As provided in clause 1.2 of the Scheme.
Grounds of appeal
[21] From the grounds of appeal, the points of appeal and the parties’ submissions, there are five issues to determine on this appeal. They are:
(a)Did the Judge err in finding that the Scheme retrospectively validated the special levies and their enforcement?
(b)Did the Judge err in misapplying clause 1.2 of the Scheme, which refers to costs and repairs already carried out prior to the date the Scheme was validated, when the levies cover repairs which have not yet been carried out?
(c)Was summary judgment available when the special levies were unlawful at the time the Scheme was approved and the Body Corporate had no cause of action arising from them?
(d)Was there an obligation on the appellants to pay interest from the dates the levies were originally issued or is it limited to the commencement of the Scheme, namely 14 November 2018?
(e)Should the costs of collection by the Body Corporate have been approved by the Judge?
Approach on appeal
[22] General appeals from the District Court are by way of rehearing.31 On appeal, the High Court may “make any decision it thinks should have been made”.32 It can also direct the District Court to rehear the proceedings, to consider or determine any matter that the High Court directs or to enter judgment for any party that the High Court directs.33
31 District Court Act 2016, ss 124 and 127.
32 Section 128(1)(a).
33 Section 128(1)(b).
Analysis
[23] I approach this analysis on the basis that the District Court could enter judgment only if the Body Corporate satisfied the Court that the defendant had no arguable defence to the Body Corporate’s claim.34 I deal with each of the grounds of appeal as distilled above. I turn to the first and main ground of appeal, and that is whether the Scheme retrospectively validated the special levies and their enforcement.
Retrospective validation
[24] The levies at the heart of this appeal were approved at the extraordinary general meetings of 6 June 2015 and 14 May 2016 respectively, for remediation work on the Links. It is clear, and accepted by both parties, that whether the Scheme had retrospective application to the 2015 and 2016 levies stands or falls on the application of the Scheme.
[25] The appellants argue that the Scheme was misinterpreted by the Judge, who erred by interpreting the Scheme through the lens of Thomas J’s intentions for the levies. They contend that the Judge ought to have focussed on the possibility there was a defence and that the Scheme was a Court-ordered scheme for the remediation of the Links, with its own method of funding. It did not validate the special levies, they say. The focus of the appellants’ case is the preamble and clause 1.2 of the Scheme.
[26] The preamble is quoted in full in the decision under appeal and the appellants agree that the preamble deals comprehensively with the remediation of the Links in its clauses A, C, E and J. Of particular relevance is clause C which provides:35
C. The scheme authorises the repair of the Links generally in accordance with the Links Apartments Remediation Programme (“LARP”) as updated from time to time and subject to the terms of the scheme, the LARP comprising the following building work in particular:
a.The work completed and described in the report of Wojoski Architects Limited, dated 22 April 2014.
34 District Court Rules 2014, r 12.2.
35 Judgment approving scheme, above n 30, preamble, clause C.
b.The work listed in Option 2 of Hampton Jones Property Consultancy Limited’s November 2015 report (excluding the work listed in that report to be completed 2030/2032), and set out in further detail in Hampton Jones Property Consultancy Limited’s 5 September 2018 letter.
c.Further necessary building work (being part of the work listed under Option 2 in Hampton Jones Property Consultancy Limited’s November 2015 report):
i.Remediation of the glazed curtain wall on the Kapiti Road Face of the Links building tower; and
ii.Remediation work to Apartments on levels 11 and 12 of the Links building.
[27] Clauses D to G are also relevant, showing that the LARP is part of the long- term maintenance plan for the Links and the Scheme governs repairs to the common property, some of which were commenced in accordance with the LARP. This is explained in the clauses below:
D.The Body Corporate has agreed that this LARP is part of the Long Term Maintenance Plan (“the Plan”) for the Links, but it has not yet been included in the physical version of the Plan.
E.The scheme governs repairs to the Common Property held by the Body Corporate and to the Owners’ Unit and Accessory Units for the purpose of ensuring that damage caused to the Links by water ingress is repaired in an integrated manner (“Repairs”).
F.Although the Repairs have commenced in accordance with the LARP, the full extent of the work required to carry out the Repairs is incomplete. Any further damage to the Links beyond the LARP that is identified during the course of the Repairs will be governed by the terms of this scheme.
G.The scheme fixes and apportions responsibility for the costs incurred in carrying out the Repairs and any other costs approved under the scheme, and accounts for such costs.
[28] The Scheme sets out the duties and obligations of the owners and binds the Body Corporate. For the appellants, Mr Dunning points to the absence of any reference to past levies in the preamble which, he says, shows there was never any intention to retrospectively validate the special levies. In support of this contention, Mr Dunning points to clause 1.2 of the Scheme. He says the Scheme is retrospective only to the extent provided in that clause, which does not include the 2015 and 2016 special levies. Clause 1.2 provides:
All costs incurred in identifying the initial damage to the Links and the repairs required and carried out in respect of which Owners have already been levied shall be deemed to be part of this scheme and shall be deemed to be Costs, Repairs, and Levies within the meaning of this scheme in respect of which the Body Corporate will have all the powers and duties under this scheme.
[29] Mr Dunning contends that the reference to “all costs incurred” does not include special levies or special levy resolutions passed before the Scheme was approved. He says that “costs incurred” must be costs incurred in carrying out the remediation required for the LARP, and those costs must have been lawfully levied. Relying on the preamble, the appellants say the Scheme governs and authorises the repair of the Links, not the status of any special levies or their recovery.
[30] It is plain from a reading of the preamble that the Wojoski and Hampton Jones reports, both of which are referred to, cover the repairs for which the special levies were raised. On the face of the preamble, these are the repairs for which the levies were struck and are therefore covered by the Scheme. Clause 1.2 specifically refers to costs incurred in identifying the initial damage to the Links, and the repairs required and carried out in respect of which Owners “have already been levied.” Although I deal with the submission on prospective repairs in the next section, it is relevant to note clause F of the preamble, which records that the repairs have commenced in accordance with the LARP but the full extent of the work is incomplete.
[31] This suggests to me that the Scheme specifically covers costs incurred, both in identifying the initial damage to the Links and the repairs required in the future and carried out in the past, in respect of which the owners have already been levied. I consider that the Scheme does cover the special levies, which include both past and future costs in identifying and undertaking repairs.
[32] I turn then to consider Mr Dunning’s subsidiary submission that “costs” does not include levies. The term “costs” is defined under clause 3 of the Scheme to have “the widest possible meaning and shall include but not be limited to all costs involved in assessing and carrying out the Repairs”. Clause 3.3 provides that “the decision of the Body Corporate as to what constitutes Costs shall be final and binding on all owners.”
[33] Further, under clause 4.2(h) the Body Corporate is granted the power to implement and carry out the Scheme, by levying and charging owners for the costs. In allocating costs, clause 10.2 provides specifically that:
Costs incurred or projected as at the date this scheme is settled, or yet to be calculated but still part of the LARP, will be allocated based on the scheme defined by the section 74 decision, being based on utility interest, as approved by the overwhelming majority at the EGM dated 19 March 2016.
[34] On reading these clauses within the Scheme, I consider that there is little doubt that the 2015 and 2016 special levies were raised in respect of the Wojoski and Hampton Jones reports, both of which are authorised in the preamble of the Scheme. The apportionment of the levies reflects the costs the Body Corporate expected to incur for the required works following the commission of the reports. I uphold the Body Corporate’s submission that clause 1.2 applies retrospectively to validate the work that has already been done. Clause 10.2, it seems to me, validates projected costs, as were approved by the “overwhelming majority at the EGM dated 19 March 2016.”
[35] As part of the appellants’ argument on the meaning of “costs”, they submit clause 1.2 of the Scheme deems only the costs actually incurred before the Scheme was approved on 14 November 2018 were covered by the Scheme. In other words, the appellants seek an interpretation that carrying out “work in respect of which Owners have already been levied” means the costs incurred of work carried out by 14 November 2018 only, not levies. The District Court Judge, in dismissing the appellants’ submission, acknowledged that it was possible to read clause 1.2 of the Scheme in the limited sense advocated by the appellants but found it was not intended to be limited in this way.36 The Judge interpreted the intention of clause 1.2 in the context of Thomas J’s judgment and the preamble to find that the Scheme retrospectively validated the work that had been done or was reported as needing to be done and the levies imposed in respect of it.37 I agree with the Judge’s finding.
[36] Clause 1.2 must be read in the context of the Scheme as a whole, including the clauses outlined above and clause 2.2. Clause 2.2 provides that repairs should be
36 Decision under Appeal, above n 1, at [44].
37 At [44].
given the widest possible meaning, including alteration, demolition, reconstruction, restoration, reinstatement or modification of any part of the common property or such related work as the Body Corporate considers necessary or advisable. For the reasons already addressed, the Scheme contemplates that the Body Corporate can levy for costs incurred or projected as at the date the Scheme was settled or yet to be calculated. I reject the appellants’ submission that the Scheme only covers costs that have been identified and incurred prior to the High Court’s approval of the Scheme. I consider it is clear that the special levies fall within the definition of “costs incurred” and the term “costs” are therefore validated by the scheme.
[37] I turn then to the appellants’ further submission that Thomas J made no specific reference to the levies in the decision approving the Scheme and that the District Court Judge erred by finding that it was Thomas J’s intention the special levies be retrospectively validated. I note at the outset that Thomas J’s intention, and what this Court or the District Court perceives it to be, is not decisive. The question is whether the Scheme, in fact, retrospectively validates the levies, which I have found it does. Nevertheless, I address the submission.
[38] Thomas J relied on Tisch v Body Corporate 318596, where the Court of Appeal identified a three-step process for the purpose of settling a scheme:38 the Court must be satisfied that the building has been damaged or destroyed; the Court must decide whether to settle a scheme, including whether a scheme is appropriate in the circumstances; and the Court must then determine what the terms of the scheme should be. The Court went on to identify five factors which are likely to be relevant to an assessment of appropriate terms. One of these factors is that the scheme should have retrospective effect, provided the Body Corporate has acted in accordance with it prior to the Court’s approval.39
[39] Thomas J observed that the Body Corporate had done its best in light of its financial constraints and the information known at the time.40 She accepted that the work to the Links went well beyond routine repairs and maintenance, because it is
38 Tisch v Body Corporate No 318596 [2011] NZCA 420, [2011] 3 NZLR 679 at [35].
39 At [41], cited in Scheme Decision, above n 4, at [10(c)].
40 Scheme Decision, above n 4, at [42].
required to address significant defects in the buildings construction and a comprehensive approach is clearly required.41 The LARP, Thomas J found, will “remediate” parts of the building but it is not a permanent solution. Section 74 of the Act provides that an appropriate scheme should be approved where the best interests of all owners warranted departure from the Act. Thomas J was satisfied that the Scheme was appropriate but this was not to be taken as an endorsement of the work undertaken to date, which has at times been less than perfect.42
[40] As noted in Tisch, schemes are appropriate where the best interests of all owners warranted departure from the Act, and s 74, in Thomas J’s view, reflected the reality of the situation and a practical solution to it. She addressed the five factors identified by the Court of Appeal in Tisch and was satisfied that the LARP had broad support, was detailed to the extent reasonably practicable and that “there will necessarily be works required in the future which have not as yet been identified.”43 Thomas J found that the Scheme, therefore, “needs to have retrospective effect in the circumstances, noting in particular the Body Corporate support for the works already undertaken, warts and all.”44 It is plain in my view that Thomas J’s intention was for the Scheme to apply retrospectively.
[41] Given the Scheme is to apply to the repairs retrospectively, it must apply to the levies raised for those repairs. From my assessment of the preamble, clauses 1.2, 3.3 and 10.2 and Thomas J’s decision, they all support this interpretation. The Body Corporate’s “support” for the works already undertaken, as Thomas J describes, has to include all costs already incurred as a matter of logic. All costs incurred in identifying the initial damage to the Links, and the repairs required and carried out in respect of which the owners have already been levied, as the preamble makes clear, are deemed to be part of the Scheme and deemed to be costs, repairs, and levies within the meaning of the Scheme.
[42] I uphold the Body Corporate’s submission that the s 74 Scheme retrospectively validated the special levies of 2015 and 2016 and there was no error in the
41 At [43].
42 At [46].
43 Scheme decision, above n 4, at [81] (b).
44 At [81(c)].
District Court’s Judge’s findings that there was no arguable defence, based on both the wording of the Scheme and Thomas J’s approval and understanding of the Scheme, to the grant of summary judgment.
[43] For completeness, I record that the appellants submit that the principles of interpretation in the Interpretation Act 1999 are of general application and can be applied to the text of this Scheme. In particular, reliance is placed on s 7 of the Interpretation Act which provides that there is no retrospective effect of enactments.
[44] There are three reasons why I do not uphold the appellants’ submission on statutory interpretation principles. First, the Interpretation Act applies to “an enactment that is part of the law of New Zealand”, and the Scheme is not a part of the law. Second, s 4(1)(a) of the Interpretation Act permits a retrospective effect where the enactment specifically provides. Third, s 4(1)(b) permits a retrospective effect where context of the enactment requires such an interpretation. These provisions make s 7 irrelevant here because retrospectivity was specifically addressed in Thomas J’s decision approving the Scheme as necessary in the circumstances.
Prospective remediation
[45] The appellants’ raise a further and related challenge to the District Court Judge’s interpretation of clause 1.2 and say that there is no evidence that the work referred to in the levies was required by the Scheme or has been carried out, and therefore, there could be no costs incurred until those repairs required have actually been carried out. They say the levies could not be validated for repairs not yet done, because the special levies in 2015 and 2016 were not an exercise of powers under either clause 4.2(h) or 6.1 of the Scheme, and no provision of the Scheme authorises the Body Corporate to claim payment from the appellants of levies pre-dating the Scheme.
[46] The answer to this ground of appeal is provided in clause 10.2 of the Scheme, which incorporates costs already incurred or “projected as at the date this scheme is settled, or yet to be calculated but still part of the LARP”. The LARP has been approved for remediation costs as part of the Scheme. This includes both past and projected costs of repairs from the date of the settlement of the Scheme.
[47] I consider clause 10.2 deems the special levies to be lawful. This is specifically incorporated into clause 10.2. They were part of the LARP and are now part of the s 74 Scheme. In my view, it is irrelevant whether the actual repairs have been undertaken, because they were clearly projected costs as at the date the Scheme was settled.
[48] I do not uphold the appellants’ submission. The wording of the Scheme, both the preamble and the various clauses in the Scheme incorporate by reference to the repairs work both required and carried out in respect of which owners have already been levied. This includes prospective remediation.
Was summary judgment available?
[49] For completeness, I address this issue as framed by the appellant, although I consider this point has already been covered above. The appellants’ points on appeal allege that the special levies were unlawful when they were passed at the respective extraordinary general meetings and the Body Corporate had no basis or cause of action based on them such that summary judgment should have been entered. This is a challenge to the Body Corporate’s claim for amounts invoiced, which the appellants say are based on no evidence or calculation for the proportion of the levies to be allocated. Further, they say, there was no date for payment fixed and say the Body Corporate has invoiced the wrong person. Amounts claimed on invoices are not by themselves evidence of a debt or the basis for a legal claim.
[50] At the heart of this submission, the appellants contend the work carried out by the Body Corporate before the s 74 Scheme was approved in November 2018 was unlawful, as the work was not authorised by the Unit Titles Act 1972 and the special levies raised for the purpose of funding that work were in themselves unlawful.
[51] Mr Dunning acknowledged at the hearing that no issue was taken with the decision to approve the Scheme and nor did the appellants which to appeal it. This challenge is to the grounds upon which the Body Corporate can apply for judgment on outstanding levies, which the appellants say were unlawful at the time they were passed.
[52] The appellants are correct that in Body Corporate 81340 v Newland, Judge Walker questioned whether it was lawful for the Body Corporate to levy for contributions to a long-term maintenance plan when they were raised to for the repair of existing defects in a building in the absence of a s 74 Scheme.45 On that basis, Judge Walker declined to enter summary judgment in respect of levies sought against an apartment owner of the Links. Ironically, Mr Dunning, acting for the apartment owner in that case, argued that the levies were not validly raised and that the Body Corporate should apply to the High Court for approval of a scheme under s 74 of the Act, because what is being repaired is damage or destruction of the building.46 The Body Corporate has done so.
[53] Now that the Scheme for the Body Corporate has been approved under s 74, the levies have been assessed and validated by the Scheme as described above. For the reasons I have addressed in relation to both the retrospective validation of the levies and prospective remediation under the Scheme, I do not find the Judge erred by upholding the retrospective effect of the levies and entering judgment for the Body Corporate.
[54] For all of the reasons advanced above and the s 74 authorisation, the Body Corporate was entitled to seek judgment on the unpaid levies by the appellants. The invoices showed the amounts owing, by each of the unit owners and gave a date for the payment. This ground of appeal fails.
Was interest payable on the levies?
[55] The appellants submit that, in the event that the Scheme is held to validate the levies, there is no obligation on them to pay interest before the date of the Scheme approval, namely 14 November 2018. Again, the appellants’ argument relies on the fact that the levies were unlawful before 14 November. They say the Act does not provide for the recovery of interest on levies.
45 Body Corporate 81340 v Newland, above n 3.
46 At [5]-[6].
[56] In the District Court, the Judge saw some force in the contention that interest could only properly flow from the date of the approval of the Scheme, when the levies were retrospectively validated. However, given that the levies are deemed to be within the meaning of the Scheme and have been retrospectively validated, he upheld the interest claim made by the Body Corporate.
[57] I consider that the Judge has not erred in making this finding. Under s 128 of the Unit Titles Act 2010, interest accrues in respect of a debt to the Body Corporate that remains unpaid. The Body Corporate relies on the pay-by date stipulated in the invoices sent to the appellants. The levies were raised by the Body Corporate after the respective extraordinary general meetings in 2015 and 2016 and all unit owners were liable to pay them. The appellants have not paid them because they believed the levies were unlawful. I am in agreement with the Judge that the levies have retrospectively been validated by the Scheme; they are deemed to be levies within the meaning of the Scheme; and interest accrues on the unpaid invoices, as provided under s 128 of the Act. This ground of appeal fails.
Were the costs of collection validly imposed?
[58] The appellants submit that the total collections costs of $4,746.45 ordered to be paid in the summary judgment include costs incurred in respect of the proceedings filed in the District Court. They submit that s 124 of the Act allows for the costs of collection which relate to the costs of enforcing a judgment, not engaging in a dispute before the courts determining liability for the amount intended to be collected.
[59] I reject the appellants’ submission. The Body Corporate filed proceedings for summary judgment, in order to collect the outstanding levies, which have remained unpaid since 2015 and 2016 respectively. Although the Judge did not address the issue of whether the “legal/recovery costs” were “costs of collection” under the Act, I consider that summary judgment proceedings are a collection cost. I reject the appellants’ submission that these were costs from a dispute determining liability. This was a summary judgment on issued invoices for outstanding levies and properly form the costs of collection.
[60] I find the Judge was not in error in awarding such costs. As for the costs of the hearing, that is a matter for the jurisdiction of the District Court and the Judge has requested memoranda. I take that matter no further.
Result
[61]The appeal is dismissed.
[62] Costs are awarded to the respondent on a 2B basis, with reasonable disbursements to be approved by the Registrar.
Cull J
Solicitors:
Nat Dunning Law, Wellington for the Appellants Rainey Collins, Wellington for the Respondent
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