Maiden v Body Corporate 46112

[2018] NZHC 448

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

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

CIV-2017-485-960

[2018] NZHC 448

IN THE MATTER

of an originating application to appoint an administrator

UNDER

Section 141 of the Unit Titles Act 2010

BETWEEN

KELLY ROCHELLE MAIDEN

First Applicant

PHIL JOHN JAMESON AND XIAO HUA XU

Second Applicants

GAEL MARIA BAGSHAW AND WILLIAM LESLIE CAMERON BRIERLEY

Third Applicants

SAMUEL DENNIS MARMENT AND ERIC ELMER NEMRAVA

Fourth Applicants

COLIN STEVEN MARSHALL

Fifth Applicant

AND

BODY CORPORATE 46112

First Respondent

ALAN CLAUDE GREGAN

Second Respondent

Hearing:	13 March 2018
Appearances:	J Mahuta-Coyle for the applicants A C Gregan self-represented
Judgment:	14 March 2018

JUDGMENT OF CULL J

MAIDEN v BODY CORPORATE 46112 [2018] NZHC 448 [14 March 2018]

The applicants are five owners of unit titles in the first respondent, Body Corporate 46112 (known as FIVE-O Apartments). They have filed an originating application, seeking the appointment of an administrator to the Body Corporate. A formal proof hearing is set down for 11 April 2018 to determine that application.

[1]    Two memoranda of counsel have been filed, seeking respectively an urgent hearing date and the appointment of an interim administrator until 11 April 2018. There was no proof of service of the memorandum being served on Mr Gregan, as second respondent, who is self-represented.

[2]    Before hearing the matter I sought confirmation from the applicants’ counsel that the urgent memoranda and submissions had been served on Mr Gregan. I also raised with counsel, that in these circumstances, an urgent interlocutory application should have been filed, rather than a memorandum containing the orders sought. I note the form of the orders was amended by way of submission. An application enables any opposition to be filed formally.

[3]    Mr Mahuta-Coyle confirmed that all the documents filed had been sent to   Mr Gregan by email, as agreed and directed previously.

[4]    The applicants seek urgency because the level of dysfunction within the Body Corporate has increased and has created a more urgent need for the appointment of an administrator.

[5]    No submissions were filed by the respondents, but Mr Gregan appeared (with his wife), to oppose the interim appointment.

Factual background

[6]    FIVE-O Apartments comprises nine principal units and a number of accessory units. The applicants are each the owner of a single principal unit. Mr Gregan is the owner of the remaining four principal units. Although the applicants comprise the majority of the owners, Mr Gregan possesses 53 per cent of the assigned ownership

interest under the unit plan, with the applicants together possessing the other 47 per cent.

[7]    The Body Corporate last held a completed AGM in 2010, after which the then chairperson retired. No AGM was held between 2011 and 2013.

[8]    On 9 September 2014, an AGM was held, but abandoned before any formal decisions could be made.

[9]    Since 2014, attempts  have  been  made  severally  by  the  applicants  and  Mr Gregan, to convene meetings in order to vote on necessary resolutions, but without success.

[10]   As a result, the Body Corporate has no governance structure, and has failed to fulfil its statutory duties to maintain the common property and building elements.1 Necessary maintenance, now considered critical, includes:

(a)exterior cladding, which needs painting;

(b)a leaky roof, which needs replacing; and

(c)degraded external windows and joinery, which need replacing.

The applicants also note that the leaky roof is now causing water damage to the internal structures of their units.

[11]   On 13 November 2017, the applicants filed an originating application for an order under s 141 of the Unit Titles Act 2010 (the Act) appointing Mr Paul Crew as administrator of the Body Corporate for a period of six months, with leave reserved for any party to apply for renewal for a further term.

1      Unit Titles Act 2010, s 138.

[12]   On 16 November 2017, the matter was called before Clark J. Counsel for the applicants drew the Court’s attention to the fact that Mr Gregan has an interest in the proceedings and should be named as a party. Directions for service were then made.

[13]   On 11 December 2017, the matter was called before Ellis J. Mr Gregan had not filed a notice of opposition, and advised that he was in agreement with the temporary appointment of an administrator. However, he expressed concerns about the possibility of adverse comment about him in any judgment, and the possibility of a costs award against him. The parties therefore agreed to a half day formal proof hearing for the substantive application.

Current application

[14]   On 7 March 2018, counsel for the applicants filed memoranda seeking an urgent hearing date for the appointment of an interim administrator. The two grounds advanced for the interim appointment are:

(a)Mr Gregan has recently started harassing tenants of the applicants’ units in relation to their use of common property. Police have been called twice in relation to this; and

(b)Mr Gregan has purportedly appointed himself chairperson of the Body Corporate, and has made attempts to obtain control over the Body Corporate’s bank account.

[15]   Three affidavits are filed in support, two from the applicants, and one from a tenant at FIVE-O Apartments.

[16]   A consent to act has also been filed on behalf of Mr Crew, dated 5 March 2018. He proposes remuneration at $130 per hour plus GST for himself and $60 per hour plus GST for any staff acting on his behalf.

[17]   Mr Gregan made oral submissions in opposition to the appointment of an interim administrator. Mr Gregan addressed the Court on the background of the Body Corporate’s governance history, including the problems experienced with the change

in governance of the Body Corporate and the change in tenants. At a meeting in March 2017, where no other unit title holder was present, Mr Gregan outlined his concerns about the legality of the resignation of Mr Marment as Body Corporate chairperson.

[18]   Although the historical matters were not before the Court for the purposes of this application, I allowed Mr Gregan to explain his concerns and grievances about the way in which the Body Corporate governance has been conducted. For the purposes of today’s hearing, however, Mr Gregan accepted that there was dysfunction among the unit title holders. He also accepted that work needed to be undertaken urgently, as the majority of units within the Body Corporate have become rundown and are now in urgent need of building works and repairs. Mr Gregan told the Court that three of his units in the Body Corporate are deteriorating and he is losing money as a result.

[19]   Mr Gregan stressed that the present states of affairs would not have happened, if the Body Corporate had followed the law and proper process. He pointed to the absence of a chairperson, which has created the problem, but considers that he could do the job of chairperson, if he were accepted, and undertake the work required.

Discussion

[20]Section 141 of the Act provides:

141     Appointment of administrator

(1)The body corporate, a creditor of the body corporate, or any person having a registered interest in a unit, may apply to the High Court for the appointment of an administrator.

(2)In the case of a layered development,—

(a)       a head body corporate or parent body corporate may apply to the High Court for the appointment of an administrator of any 1 of its subsidiaries:

(b)        a subsidiary body corporate may apply to the High Court for the appointment of an administrator of its parent body corporate.

(3)The High Court may, in its discretion on cause shown, appoint an administrator for an indefinite period or for a fixed period on such terms and conditions as to remuneration or otherwise as it thinks fit.

(4)The remuneration and expenses of the administrator are to be met out of the operating account.

(5)The administrator, to the exclusion of the body corporate and the body corporate committee, has and may exercise the powers of the body corporate and the committee, and is subject to the duties of the body corporate and the committee, or such of those powers and duties as the High Court orders.

(6)The administrator may, in writing, delegate any of the powers vested in the administrator and may revoke any delegation at any time.

(7)The High Court may, in its discretion on the application of the administrator or any other person referred to in subsection (1), remove or replace the administrator.

(8)On any application made under this section the High Court may make any order for the payment of costs as it thinks fit.

(9)As soon as an administrator is appointed, the administrator must lodge with the Registrar a sealed copy of the order of the High Court making the appointment.

[21]   In Body Corporate 68792 v Memelink, Brown J appointed an administrator on an interim basis pending a full hearing.2 The applicants had filed a without notice application, which was served on the respondents on a Pickwick basis. In that case, there was an on-going factional dispute between two groups of unit title holders. The chairperson of the Body Corporate at the time was spending an average of 10 hours a week dealing with email and phone communications from the two key personalities involved, many of which were abusive in tone. The Body Corporate’s bank account had been frozen, and threats had been made that the electricity would be cut off, access to telecommunications installations restricted and trespass noticed issued.

[22]   In Melview Viaduct Harbour Ltd (in rec) v Body Corporate 384911, Ellis J summarised some of the circumstances in which it would be appropriate to appoint an administrator (under the predecessor to s 141):3

(a)the existence of any undemocratic or ultra vires decisions;

(b)the existence of any dysfunctionality or deadlock;

(c)the existence of any majority decisions that;

2      Body Corporate 68792 v Memelink [2015] NZHC 519.

3      Melview Viaduct Harbour Ltd (in rec) v Body Corporate 384911 [2012] 1 NZLR 84 (HC) at [71].

(i)have been brought about by the improper influence of a third party;

(ii)deliberately and/or unnecessarily harm the interests of the minority.

[23]   In Low v Body Corporate 384911, Heath J observed (again in relation to the predecessor to s 141) that “Parliament has provided an open-textured approach for the Court to apply, by using general words as a threshold test”.4

[24]   I am satisfied that s 141(3) provides the High Court with discretion to appoint an administrator for an indefinite period or for a fixed period on such terms and conditions as it thinks fit. This extends to making an interim appointment in appropriate cases, as Brown J did in Body Corporate 68792.5

[25]   I am also satisfied, having read the grounds for the current application contained in the applicants’ counsel’s memorandum, supported by the affidavits of Mr Jameson, Ms Maiden and Dr Weller, in addition to hearing from Mr Gregan, that the current state of affairs of the Body Corporate is sufficiently serious to warrant an interim appointment of an administrator. In general, without engaging in the allegations raised by each of the applicants and Mr Gregan, the following facts emerge:

(a)the Body Corporate is dysfunctional, given that there is no committee to represent the Body Corporate; no AGM has been held since 2014 and there is no operative governance structure;

(b)in the absence of an elected chairperson replacing the previous one and without an agreement on an acceptable replacement, an interim measure is necessary to enable an independent report to be completed on the outstanding issues to be resolved and recommendations as to how to achieve that; and

4      Low v Body Corporate 384911 (2011) 12 NZCPR 142 (HC) at [33].

5      Body Corporate 68792, above n 2.

(c)the disagreement among the shareholders not only demonstrates the state of dysfunction that exists within the Body Corporate, but also prevents the Body Corporate from undertaking necessary building works; and

(d)the two blocks of flats contained within the Body Corporate have fallen into disrepair and are now in a state where necessary building works to common property and/or building elements of those buildings has become critical.

[26]   After hearing from Mr Mahuta-Coyle and Mr Gregan, I indicated that I was minded to make the interim orders as sought.

[27]   I am satisfied that the appointment of an independent administrator will give all unit title holders an independent person from whom they can ask for information and express their respective concerns. I also indicated that in the appointment of an interim administrator, it is essential that he remains independent and is not captured by either faction of the unit title holders. He must make urgent and objective enquiry into the outstanding issues and be scrupulously fair in providing his independent report to the Court. Mr Crew, who was present in Court, nodded his agreement in response.

Timetabling orders

[28]   As part of the hearing, Mr Mahuta-Coyle asked for directions for the formal proof hearing, which the parties agreed should be scheduled for eharing at a later date, after 11 April 2018, and I so order. The administrators interim report is to be completed by 9 April and the parties need time to respond to that report, where necessary.

Result

[29]I therefore make the following orders:

(a)Mr Paul Crew, of The Body Corp Ltd, is appointed as administrator of Body Corporate 46112 on an interim basis;

(b)under s 141(5) of the Act, Mr Crew, may exercise all of the powers of Body Corporate 46112 and may access, operate and authorise expenditure from the bank account(s) held in the name of Body Corporate 46112 or FIVE-O Apartments, being Westpac Account number 03-0539-0089512-00 (and any other associated suffixes), to the exclusion of all other previously authorised persons;

(c)under s 141(6) of the Act, Mr Crew, as administrator may, in writing, delegate any of the powers vested in him and revoke any delegation at any time;

(d)Mr Crew is to investigate the state of Body Corporate 46112 and shall file and serve an initial report to the Court by 9 April 2018 with his findings, setting out the key issues to be resolved and his recommendation and/or proposal to resolve each of those issues;

(e)Mr Crew’s remuneration is to be fixed in the terms of the consent filed with this Court; and

(f)the costs of this application are reserved to be resolved at the formal proof hearing.

[30]Accordingly, I make the following directions:

(a)the formal proof hearing scheduled for 11 April 2018 is adjourned to a later date;

(b)by consent, Mr Gregan is to file his evidence in response to the applicants’ evidence filed in November 2017 within four weeks, by  10 April 2018;

(c)the applicants are to file any further evidence and submissions, in response to Mr Crew’s initial report within three weeks of 9 April 2018, by 30 April 2018;

(d)Mr Gregan is to file his response to the report and to the applicants’ submissions and evidence by 14 May 2018; and

(e)the formal proof hearing is to be scheduled at a date after 14 May 2018.

[31]As requested by applicants’ counsel, costs are reserved.

Cull J

Solicitors:
GreenwoodRoche, Wellington