Lynx Trustees Limited v Body Corporate 68792

[2019] NZHC 1521

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV 2019-485-66

[2019] NZHC 1521

BETWEEN

LYNX TRUSTEES LIMITED

Applicant

AND

BODY CORPORATE 68792

Respondent

Hearing:

1 July 2019

Counsel:

K R Smith for Applicant

A O’Connor for Respondent

Judgment:

2 July 2019

JUDGMENT OF SIMON FRANCE J

[1]                 By notice dated 1 February 2019, the respondent served a statutory demand on the applicant in the sum of $289,004.59. The money relates to unpaid body corporate levies. The applicant has applied to set the statutory demand aside.

[2]                 The applicant is a trustee of Link Trust No 1 which owns six of 16 units in a commercial building. The present proceeding has been difficult because the applicant has struggled to obtain or maintain legal representation. This led to an initial dispute over the validity of the application to set the demand aside, a dispute resolved in favour of the applicant.1 A timetable was set for the filing of further evidence. This allowed Mr Bassett-Burr, the director of the applicant, to file a further affidavit. It was hoped it might clarify better than his original affidavit of 18 February the matters in issue. The date by which to file was not met, and a belated application to nevertheless file was declined.2 It was made clear that the applicant could only appear by counsel.

1      Lynx Trustees Limited v Body Corporate 68792 [2019] NZHC 945.

2      Lynx Trustees Limited v Body Corporate 68792 HC Wellington CIV-2019-485-66, 10 June 2019.

LYNX TRUSTEES LTD v BODY CORPORATE 68792 [2019] NZHC 1521 [2 July 2019]

[3]                 Until shortly before the hearing it was unclear if there would be an appearance, but on 28 June Mr Smith filed a notice of representation. Submissions were filed at the same time, and Mr Smith appeared this morning. Mr O’Connor made oral submissions and sought leave to file written submissions, but I have not found that necessary in order to determine the matter.

[4]                 The body corporate in question has been subject to court directed administration since 18 March 2015. There have been three administrators. Previous judgments record the onerous nature of the task due to what is seen as the obstructive and unreasonable conduct of persons associated with the applicant.

[5]                 The appointment of the current administrator was supported by Link Trust  No 1. At the time one of those persons, Mr Memelink, swore an affidavit in support, observing:

5.My biggest concern with the operation of the Body Corporate has always been the failure of the Body Corporate and successive Court appointed Administrators to reconcile the levies that I have paid to the body corporate as both operational and special levies.

6.I support Mr Gambitsis appointment because he has committed to carrying out such an audit of the historical levies and Body Corporate accounts.

7.I agree to be bound by the outcome of the audit of Mr Gambitsis if he is appointed as Administrator. If it is found that there are outstanding levies then I will pay those promptly at the conclusion of the audit process.

8.I also agree that if Mr Gambitsis is appointed as Administrator to withdraw   the   claim   against   the   Body   Corporate    under    CIV 2013-485-141. As any such audit will satisfy my concerns as articulated in that claim.

[6]                 It can be seen that it was contemplated that an independent audit of the Body Corporate’s levy situation would be done. Mr Memelink agreed to be bound by it and to withdraw related proceedings he had against the Body Corporate.

[7]                 The audit has been done by Deloitte.  It  was requested to reconcile back to   1 April 2005 but advised it was unable to do so due to the lack of information. Its audit runs from 1 January 2008 to 31 January 2018 and identified a position for each of the 16 units. As regards the six units owned by the applicant, two were in credit and four in deficit.

[8]                 The statutory demand is  based on the Deloitte figures, but adjusted for the  13 months between the report and the demand. During that time the applicant has not been paying levies.

[9]                 Under s 290(4) of the Companies Act 1993 the Court has a discretion to set aside a statutory demand:

(4)The court may grant an application to set aside a statutory demand if it is satisfied that –

(a)there is a substantial dispute whether or not the debt is owing or is due; or

(b)the company appears to have a counterclaim, set-off, or cross- demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or

(c)the demand ought to be set aside on other grounds.

[10]                 The principles that apply to this discretion have been summarised in these terms:3

(a)The applicant must show that there is arguably a genuine and substantial dispute as to the existence of the debt.

(b)The mere assertion that a dispute exists is not sufficient. Material, short of proof, is required to support the claim that the debt is disputed.

(c)If such material is available, the dispute should normally be resolved other than by means of proceedings in the Companies Court.

(d)An applicant must establish that any counterclaim or cross demand is reasonably arguable in all the circumstances.

(e)It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise.

3      BWIP Limited v Singleton and Kirkland [2012] NZHC 3174 at [30]; and Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 at [16].

[11]             The basis for the application to set the demand aside is found in the affidavit of Mr Bassett-Burr dated 18 February 2019. The primary grounds of opposition appear to be:

(a)the  Deloitte  report  does  not  take  account  of  balances  prior  to     1 January 2008;

(b)the Deloitte report does not take account of monies owed by other unit holders;

(c)there has been mismanagement;

(d)there has been a failure to obtain a building warrant of fitness; and

(e)there is an issue over voting rights (not pursued at the hearing).

[12]             The affidavit does not progress beyond generalisations and mere assertion. In particular no proper basis is advanced on which a Court could conclude there is any substance to the challenges made against the conclusions of the Deloitte report. Further, while it is the case that the report does not go back as far as was intended, there is nothing in the evidence filed to suggest material exists that could give substance to the applicant’s claim that the pre-2008 position favoured it.

[13]             The other matters such as the alleged poor management of the Body Corporate similarly do not afford a basis to either dispute the money owing or suggest there is a reasonably arguable counterclaim. At the hearing emphasis was placed by the applicant on the unresolved High Court claim by the trustees of Link Trust No 1 against the Body Corporate.4 A fourth amended statement of claim in that proceeding was filed on 30 May 2017.  This  was  however  prior  to  the  affidavit  sworn  by Mr Memelink in support of the appointment of the current Body Corporate administrator. In the passage cited earlier (at [5]) Mr Memelink indicates the appointment of the administrator and the undertaking of an audit will bring those

4      Memelink and Hamilton v Body Corporate 68792 HC Wellington CIV-2016-485-141.

proceedings to an end. It can be noted nothing has happened on those proceedings for two years, which is consistent with Mr Memelink’s affidavit.

[14]             Section 124(2) of the Unit Titles Act 2010 makes unpaid levies recoverable as a debt. The Deloitte report provides an independent audit to which the applicant agreed to be bound, and which identifies levies due. The applicant has not advanced any credible basis on which the Court can conclude there is a substantial dispute as to the money being owed. In particular, the affidavit of Mr Bassett-Burr makes claim but provides no supporting material. By contrast the Deloitte report sets out its processes and the material relied upon to calculate on a consistent basis the sums due from each unit holder.

Conclusion

[15]             The application to set aside the statutory demand is dismissed on the basis that there is insufficient material to suggest there is a reasonably arguable substantial dispute with the statutory demand.

[16]             Memoranda may be filed on costs if agreement cannot be reached. On the information available to me, costs would follow the event.

Simon France J