May v Body Corporate 329331 - [2018] NZHC 2396

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2009-404-7379

[2018] NZHC 2396

IN THE MATTER of an interlocutory application for orders pursuant to a scheme settled under s 48 of the Unit Titles Act 1972

BETWEEN

JENNIFER ANN MAY AND ANDREW JOHN MAY

Applicants

AND

BODY CORPORATE 329331

First Respondent

REX BADDELEY
Second Respondent

Continued …

Hearing: 5 September 2018

Appearances:

A J Lloyd and I J Stephenson for Applicants T J Rainey for First Respondent

Judgment:

6 September 2018

Reasons:

12 September 2018

JUDGMENT OF CLARK J

(Reasons)

Pursuant to r 11.5 of the High Court Rules, I direct that this judgment be delivered on 12 September 2018 at 11.00 am

MAY AND MAY v BODY CORPORATE 329331 [2018] NZHC 2396 [6 September 2018]

PATRICIA ELIZABETH HALLT
Third Respondent

RICHARD GRAHAM MOGRIDGE
Fourth Respondent

CAROL ANNE MOGRIDGE
Fifth Respondent

JACQUELINE MCDERMOTT
Sixth Respondent

ROSS WILLIAM SHENNAN
Seventh Respondent

STEPHANIE MARGARET SHENNAN
Eighth Respondent

MPH08 LIMITED
Ninth Respondent

JAMES RONALD ASHTON
Tenth Respondent

ANNETTE JEAN ASHTON
Eleventh Respondent

JUST LAW NO.65 LIMITED
Twelfth Respondent

RODNEY CHARLES SWIFT
Thirteenth Respondent

FRANCES SWIFT
Fourteenth Respondent

MEAKINS TRUSTEE CO LIMITED
Fifteenth Respondent

207 LIMITED
Sixteenth Respondent

206 LIMITED
Seventeenth Respondent Continued …

JOHN CHARLES DEACON
Eighteenth Respondent

MARGARET MARY DEACON
Nineteenth Respondent

RAM TRUSTEE COMPANY LIMITED
Twentieth Respondent

203 LIMITED
Twenty First Respondent

202 LIMITED
Twenty Second Respondent

201 LIMITED
Twenty Third Respondent

GEORGE CHARLES HALLIDAY
Twenty Fourth Respondent

BRENDA MARY HALLIDAY
Twenty Fifth Respondent

307 LIMITED
Twenty Sixth Respondent

306 LIMITED
Twenty Seventh Respondent

JCBEEZ LIMITED
Twenty Eighth Respondent

H&P PROPERTIES LIMITED
Twenty Ninth Respondent

302 LIMITED
Thirtieth Respondent

OLEG ALEXANDROVICH ZAITSEV
Thirty First Respondent

OLGA NIKOLAYEVNA ZAITCEVA
Thirty Second Respondent Continued …

DENIS OLEGOVICH ZAITSEV
Thirty Third Respondent

PETER FRANCIS ANDREWS
Thirty Fourth Respondent

LINDA ANNE ANDREWS
Thirty Fifth Respondent

ANGUS STUART OGILVIE
Thirty Sixth Respondent

FIONA JANE MATHIESON
Thirty Seventh Respondent

BIG PICTURE INVESTMENTS LIMITED
Thirty Eighth Respondent

405 LIMITED
Thirty Ninth Respondent

404 LIMITED
Fortieth Respondent

403 LIMITED
Forty First Respondent

NOMACK GROUP LIMITED
Forty Second Respondent

WESTPAC NEW ZEALAND LIMITED
Forty Third Respondent

ASB BANK LIMITED
Forty Fourth Respondent

BANK OF NEW ZEALAND LIMITED
Forty Fifth Respondent

GEOFFREY PETER ROBERTON DE LATOUR
Forty Sixth Respondent

JUDITH MARGARET DE LATOUR
Forty Seventh Respondent Continued …

TIMOTHY JOHN BURCHER
Forty Eighth Respondent

ANZ BANK NEW ZEALAND LIMITED
Forty Ninth Respondent

DAVID JOHN MCFARLANE
Fiftieth Respondent

STEPHANIE ELIZABETH DOUGLAS BANKS
Fifty First Respondent

[1] On 6 September 2018 I granted, with reasons to follow, the applicants’ application for the appointment of an administrator of Body Corporate 329331 (Body Corporate or BC 329331).1 The orders made are set out in the schedule to this judgment.

[2]In this judgment I provide my reasons for granting the application.

“Without Notice” hearing

[3] On 30 August 2018, the applicants filed a without notice interlocutory application for interim orders. The accompanying memorandum of counsel explained the application was without notice for two reasons. First, time was…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2018] NZHC 2396
Decision Date: 6 September 2018

CaseChat Overview and Summary

The applicants, Jennifer and Andrew May, sought the appointment of an administrator for Body Corporate 329331. The application was made without notice to the respondents. The applicants sought orders varying or modifying the scheme to include express directions that the Body Corporate take all reasonable steps to meet its obligations under the contract with Brosnan Construction including, and in particular: procuring and providing the principal’s bond; raising levies necessary to meet the payment obligations under the contract; providing vacant possession pursuant to the contract; and consulting with the engineer for the appointment of an engineer pursuant to the contract. The Body Corporate was in default of its obligations under the contract. The Body Corporate had suspended the construction contract and had called an emergency extraordinary general meeting at which a motion to accept a settlement offer by Brosnan Construction for agreed termination of the contract would be put to owners. The applicants submitted the Body Corporate is in a state of dysfunction and cannot meet its obligations under the contract, the scheme and s 138 of the Unit Titles Act. Consequently, the Body Corporate is incurring or will incur damages under the contract. The Body Corporate submitted the application should be made on notice and with an opportunity for all the relevant evidence to be put before the Court. The court considered the extensive affidavit material filed in support of the application, the memoranda of counsel and counsels’ helpful submissions. The court concluded that it was necessary to appoint an administrator. The scheme was central to the considerations of the court. The Body Corporate’s resolution to halt the remediation process was a proposed breach of contractual arrangements. The Body Corporate, in proposing to so breach the contract, offered no alternative towards repair of the buildings. The court was concerned at the apparent miscommunication in the notice of “emergency extraordinary general meeting” to be held on Thursday, 6 September 2018 at 1:00 pm, sent from Mr Hudson to owners on Monday, 3 September 2018 at 2:13 am. The notice stated the meeting was to be held to address the offer received from Brosnan Construction to terminate the current contract. The notice stated: Phil Brosnan himself believes cancellation of the contract is in the best interests of the Body Corporate until a more adequate solution can be found. He also agreed that the contract price was likely to increase. We have spoken to Tim Rainey who says these types of contracts are ‘never fixed price’, and is merely a base line. It is highly likely the current contract could increase to (or even exceed) $30,000,000, which would simply be even more unaffordable. Counsel for the applicants sought to verify with Brosnan Construction’s solicitors the statements attributed to Mr Brosnan. Mr Lloyd provided to the Court, by way of an attachment to his memorandum, an email from the KensingtonSwan partner acting for Brosnan Construction advising that Mr Brosnan confirmed the statements attributed to him did not reflect accurately what was discussed in his meeting with the Body Corporate committee. Specifically: Mr Brosnan agreed cancellation of the contract was in the best interests of the Body Corporate “on the basis of its advice it did not have the funds to complete the project”. Mr Brosnan did not agree with the comment attributed to him in the notice, namely, that it was “highly likely the current contract could increase to (or even exceed) $30,000,000”. Mr Brosnan did not agree with the comment attributed to him in the notice that the contract would be likely to go substantially higher once invasive investigations were underway and that the increase in costs would be subject to variation fees. As to the statement in the notice that it was agreed by all, including Mr Brosnan, at the meeting that it was probably in the best interests of the Body Corporate to terminate the contract and rethink the proposal, Mr Brosnan confirmed he had agreed, again, on the basis of the advice they did not have the funds to complete the project. Mr Lloyd submitted that any statement made to Mr Brosnan that the Body Corporate could not afford to undertake the contract works was misleading because levies had not been raised to pay for the contract works. The court was satisfied that the grounds for an urgent hearing were established by the imminent, proposed termination of a construction contract. The principal’s bond was to be paid within a matter of days, and Brosnan Construction had already advised the sum for which the Body Corporate would be liable in compensation and damages in the event of termination. An emergency extraordinary general meeting to be held on 6 September 2018 appeared to be at risk of proceeding on the basis of representations sourced to Mr Brosnan which he had confirmed were either inaccurate or required to be understood in light of the understandings he had been given by Body Corporate representatives. The construction contract was at risk of being irrevocably lost. In that situation the prospects for repair which were imminent, become distant. In all of the circumstances which I have outlined the appointment of an administrator who would consider the relative merits of adhering to or abandoning contractual obligations in light of a Court sanctioned scheme of arrangement for expeditious remediation of the Body Corporate’s buildings seemed to be mandated. The court appointed Anthony McCullagh, consultant, PKR Corporate Recovery and Insolvency, Auckland, as the administrator of Body Corporate 329331 for 30 working days from the date of this order. The administrator is to have and may exercise the powers of the Body Corporate and Body Corporate Committee pursuant to the Scheme (as varied or modified from time to time by order of the Court), to the exclusion of the Body Corporate and Body Corporate Committee. Without limiting the ambit of his powers and duties under (1)(b), the administrator will take all reasonable steps necessary to meet the obligations of the Body Corporate under the contract between the Body Corporate and Brosnan Construction Limited (Contractor) dated 29 June 2018 (Contract), which for the avoidance of doubt includes the following steps: procuring the principal’s bond and providing the principal’s bond to the contractor, pursuant to the special conditions and clause 3 of the general conditions of the Contract; raising levies necessary to meet Payment obligations under clause 12 of the Contract; providing vacant possession pursuant to clause 5.4 of the Contract; and consulting with the engineer for the appointment of an engineer to the Contract, pursuant to clause 6.1.3 of the Contract. Within five working days of the date of this order, and at intervals of 10 working days thereafter, the administrator will report to the Court, addressing: steps taken pursuant to these orders; and charges rendered pursuant to these orders. A copy of the report shall be served on all members of the Body Corporate by sending the report to an address for service in the register of owners. A copy of these orders is to be served on all those having a registered interest in any unit in Deposited Plan 329331. A copy of these orders is to be lodged with the Registrar General of Land.

Orders