Memelink v Body Corporate 68792

[2021] NZHC 835

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

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

CIV-2016-485-141

[2021] NZHC 835

IN THE MATTER OF

A claim for breaches of the Unit Titles Act 2010, Unit Titles Regulations 2011.

BETWEEN

HARRY MEMELINK and CISCA FORSTER

Plaintiffs

AND

BODY CORPORATE 68792

Defendant

Hearing:	12 April 2021
Appearances:	D L Livingston for Plaintiffs A O’Connor for Defendant
Judgment:	20 April 2021

JUDGMENT OF COOKE J

[1]    By application dated 30 October 2020, the defendant, Body Corporate 68792 (the Body Corporate), seeks to strike out the plaintiffs’ claim under rr 15.1 and 15.2 of the High Court Rules 2016, or alternatively the inherent jurisdiction of the Court. The primary basis for the application is a failure to prosecute the proceedings. The application is supported by an affidavit of Anthony Gambitsis who is the administrator of the defendant. The application is opposed and an affidavit from one of the plaintiffs, Mr Harry Memelink has also been filed and served.

[2]    The plaintiffs are the trustees of a trust which owns approximately half of the unit titles in the Body Corporate. The relevant property is a residential building in Lower Hutt of approximately 12 unit titles. The plaintiffs’ claim, as now identified in a fourth amended statement of defence dated 8 April 2021, includes challenges to

MEMELINK v BODY CORPORATE 68792 [2021] NZHC 835 [20 April 2021]

certain levying decisions made by the Body Corporate, as well as certain decisions concerning the spending of levies raised. The underlying events involve disputes originating from approximately 2003.

Striking out for want of prosecution

[3]Rule 15.2 of the High Court Rules provides:

15.2 Dismissal for want of prosecution

Any opposite party may apply to have all or part of a proceeding or counterclaim dismissed or stayed, and the court may make such order as it thinks just, if—

(a)the plaintiff fails to prosecute all or part of the plaintiff’s proceeding to trial and judgment; or

(b)the defendant fails to prosecute all or part of the defendant’s counterclaim to trial and judgment.

[4]    The approach taken under this rule is well settled. In Commerce Commission v Giltrap City Limited the Court of Appeal said:1

The authorities are well known and do not need rehearsal. To succeed with such an application it must be shown (a) that there has been inordinate delay,
(b) that such delay is inexcusable, (c) that the party affected has suffered serious prejudice, and (d) it is not in the overall interests of justice to allow the case to proceed.

[5]The Court of Appeal also observed;2

In cases of delay and alleged want of prosecution, the right of all citizens and organisations to have access to the Courts for the determination of the issues they have raised should be denied only if that important right is outweighed by a stronger right vested in the defendant to have the case dismissed because justice can no longer be done in light of the delay.

Application in the present case

[6]    For the reasons set out below I accept Mr O’Connor’s submission that there has been an inordinate and inexcusable delay, that it has caused serious prejudice, and that it is not in the overall interests of justice to allow this case to proceed. I will

1      Commerce Commission v Giltrap City Limited (1997) 11 PRNZ 573 at 577; see also Lovie v Medical Assurance Society Limited [1992] 2 NZLR 244 at 248 (HC).

2      At 579.

address the required considerations when assessing the chronology of events in relation to the proceeding.

[7]    The claims were first advanced by statement of claim dated 1 March 2016. It included complaints concerning the amounts that had been levied against the unit titles associated with the plaintiffs and other unit holders, the management of the Body Corporate, and decisions to spend funds raised by way of levy on certain disputes that the Body Corporate had with the NZ Transport Agency (then  known  as Transit New Zealand) associated with the decision to demolish units of the body corporate for the realignment of State Highway 2 at Petone. The NZ Transport Agency had purchased units in the Body Corporate in 2005.

[8]    An important initial factor arises from the nature of that kind of proceeding. It is a challenge to the legality of levying and spending decisions. By their very nature such challenges need to be brought promptly. Levying decisions, particularly annual levying decisions, need to be addressed promptly because those subject to the levy will be required to pay it unless action is taken to set aside the levy, or obtain some form of interim relief pending a prompt determination of the challenge. That need is even more acute in relation to a challenge to spending decisions made by the body that has raised the levy. Once funds raised by levies have been spent by the Body Corporate it is very difficult to grant effective relief. In a situation where there are other members of the Body Corporate it is also necessary for there to be prompt action, as the challenge to the legitimacy of the levy or spending decisions has significant effects on them.

[9]    When the proceedings were first filed they prompted strikeout applications. By judgment dated 14 June 2016, Mr Memelink’s claims against the individuals associated with the Body Corporate were struck out, and an application to join the Body Corporate itself was granted.3 At that stage Brown J recorded:

[12] While it is apparent that Mr Memelink has a significant number of complaints about the way in which [the body corporate] has been and currently is operated, as he said in the course of his oral submissions the main issue concerns the chairmanship of the body corporate. Indeed that issue is the focus of the second and third causes of action in particular.

3      Memelink v Martens [2016] NZHC 1285.

[10]   That referred to the emphasis the claim then had. But the Judge also commented on the lack of clarity with the allegations as then advanced. He referred to the “regrettable history of dissension and disfunction” of the Body Corporate.4 He also cross-referenced his earlier decision in which he had appointed Administrators of the Body Corporate.5 What was clear at this stage, however, was that the proceedings needed to be against the Body Corporate itself.

[11]   The proceedings then came before the Court in February and March, and then again in May 2017. In her Minute of 18 May 2017, Clark J said:

[3] … the claim has now been afoot for over a year. The court file is voluminous yet no progress has been made. The state of the pleadings is such that it is still not feasible to convene a first case management conference. That is unacceptable. The carriage of the proceedings developing an air of abuse of the Court’s processes.

[12]   That observation was directed at the general state of the proceeding. It was not directed to the additional point that the very nature of the disputes required prompt proceeding, and a prompt determination in order to do justice for this kind of case.

[13]   Clark J gave directions for the progress of the proceeding. Those directions were not complied with. In his affidavit Mr Memelink says that delays through 2017 and 2018 are attributable to the defendant seeking to make him bankrupt. It appears that attempt failed in 2017, although Mr Memelink was made bankrupt in August 2018.

[14]   As I understand it, the debts that were relevant to the bankruptcy are the debts arising from the levies challenged in the proceedings. I accept that bankruptcy proceedings might provide some explanation for Mr Memelink being distracted. On the other hand, however, those proceedings rather reinforced the need to have the underlying disputes concerning the levies resolved promptly. As Clark J had observed in May 2017, the delay to that point had already given rise to the concern that the proceedings were becoming an abuse of process. This was a very clear warning to the

4 At [1].

5      Body Corporate 68792 and Others v Memelink and Others [2015] NZHC 1731.

plaintiffs that they needed to take action in the proceedings, otherwise they would be regarded as an abuse of process.

[15]   The only things that appear to have taken place following Clark J’s Minute in May 2017 were the filing of a statement of defence by the defendant and in July, and the filing of a memorandum from counsel for the defendant in January 2018. The next step was not taken until September 2020. That is some three years and four months following Clark J’s Minute.

[16]   During this period an agreement was reached between Mr Memelink and the Body Corporate that these proceedings would not be continued. Mr O’Connor provided me with a copy of Mr Memelink’s affidavit dated 28 September 2017 sworn in related proceedings concerning the appointment of an Administrator of the Body Corporate. In that affidavit Mr Memelink said:

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.

[17]   Mr Gambitsis was then duly appointed. Mr Memelink says in his affidavit sworn in opposition to this application that “I agreed to put these proceedings on hold in January 2018 for the production of a report”. But the agreement as recorded in his earlier affidavit was not simply to put the claim on hold, but rather to “withdraw the claim”.

[18]   Mr Memelink also explains that he served a statutory demand on the defendant and that “rather than pursue insolvency proceedings against the [body corporate] in

these proceedings, I agreed to wait for the production of the Deloitte report”. That must be taken to be an election on his behalf to pursue alternative remedies rather than this proceeding. Again, the Court will be cautious to ensure that a party is not deprived access to the Court. But Mr Memelink had been put on notice, he then reached an agreement not to pursue them, and elected to pursue alternative remedies.

[19]   Against that background I have little hesitation in concluding that that period of time involves inordinate delay, particularly in the context of the very nature of the proceeding and the warning that Clark J had given.

[20]   In terms of whether the delay is excusable, Mr Livingston relied on two matters. First, he indicated that the delay had been with agreement of the defendant. But as I understand Mr Memelink’s affidavit of 28 September 2017 the Administrator was appointed as a resolution of the proceeding, not simply a deferral of them. That then leads on to Mr Livingston’s second main point, which was that the audit report had failed to address the issues that Mr Memelink had raised, and the agreement could not prevent him from proceeding with his claims in those circumstances. But it is very difficult to read paragraphs 5–8 of Mr Memelink’s own affidavit as having the implied limit to “withdraw the claim” only if certain conditions were met.

[21]   Even if I am is wrong about that however, Mr Memelink would have had to have acted very promptly indeed if he was to say that he could advance this claim notwithstanding his earlier agreement. But he did not do so. The audit report in question was provided in October 2018, some two years before steps were taken to revive this proceeding.

[22]   Steps were taken in other proceedings during this time, however. In early 2019 the Body Corporate served a statutory demand was served on an entity associated with Mr Memelink, Lynx Trustees Limited. An application was then made to set aside that statutory demand. That application was dismissed by the Court in a judgment dated  2 July 2019.6 The Court referred to the earlier agreement that Mr Memelink had reached. It referred to the arguments then advanced to set aside the demand. Simon France J held:

6      Lynx Trustees Ltd v Body Corporate 68792 [2019] NZHC 1521.

[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.7 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  …  Mr Memelink indicates the appointment of the administrator and the undertaking of an audit will bring those 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.

[23]   Mr Memelink relies on a number of practical factors that explain why this proceeding was not progressed, however. They include the bankruptcy proceedings against him, and the fact that his solicitor proved to be unreliable. By itself the fact that delays can be attributable to a solicitor does not provide an excuse.8 The pursuit of alternative remedies also does not provide such an excuse.9 The Court will be wary to ensure that justice is still done, but Mr Memelink must be taken to have taken certain strategic decisions in the proceeding.

[24]   Mr Memelink then says that as a result of his bankruptcy, and the liquidation of the associated entity (Lynx Trustees Limited) since August 2018, the issue of outstanding levies has been conducted in the sphere of the bankruptcy and liquidation. But this again involves a degree of election by Mr Memelink as to where the disputes would be addressed. Given this proceeding was conducted by Mr Memelink in his capacity as a trustee, the right to pursue it did not vest in the Official Assignee. As Mr Memelink says, however, he elected to have the issues addressed in the bankruptcy, and he did not pursue this proceeding. Certain decisions were also then made by the Official Assignee in relation to his bankruptcy. Decisions were made as to whether to accept or dispute debts said to be owed to Mr Memelink’s creditors, including those arising from the levies. Those matters were addressed in a decision of the Associate Judge on 15 October 2020. In Memelink v Official Assignee Associate Judge Johnston held:10

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

8      Lovie v Medical Insurance Society Limited, above n 1, at 253.

9      Stewart v Grey River Gold Mining Ltd HC Christchurch A51/78, 19 December 1991 at 8.

10     Memelink v Official Assignee [2020] NZHC 2709 footnotes omitted.

[55]      In my view, neither the Official Assignee pursuant to s 234 nor the Court in the context of an application pursuant to s 238 are required to examine in minute detail every levy to ensure that it was imposed in compliance with all aspects of the legislation and BC 68792’s internal management rules. It is sufficient for the Official Assignee or the Court to be satisfied that the Body Corporate had a statutory entitlement and responsibility to levy, has done so and that those levies are prima facie payable.

[56]      Of course any unit title holder is entitled to challenge the lawfulness of levies, but in my view that is something which must be done in a timely way in a separate ordinary proceeding.

[57]      The trustee owners here have had years to do that and have elected not to do so.

…

[61] It turns out that in fact the trustees – or at least Mr Memelink – did initiate such a proceeding in 2016, a proceeding that, for whatever reason, although still extant, is apparently moribund.

[25]   This reiterates the point I have already made that such challenges would need to have been brought and determined promptly. Moreover, the debt in question has been confirmed in the bankruptcy proceeding. To suggest that Mr Memelink can now reargue the same matters in this proceeding against all this background may well involve an abuse of process.

[26]   Mr Livingston argued that the Associate Judge expressly said that the Court could not determine the broader issues and that this proceeding had been reinvigorated as a consequence. I  do  not  accept  that  that  provides  a  proper  explanation  for Mr Memelink’s stance. The short point is that he has elected to pursue other remedies rather than pursue this proceeding.

[27]   I also cannot see how this proceeding could now justly deal with the matters that are raised. It seeks to call into question levying and spending decisions made many years ago. The proposed causes of action are for breach of statutory duty. For example, the relief sought on the first cause of action is that the monthly levies be set at $5,883 for the plaintiff and “mutatis mutandis for the other body corporate members” and:

That the historical outstanding levy position for the body corporate members be calculated retrospectively with any necessary revisions for reduced

insurance premiums or approved administrative budgets (to be particularised in advance of the hearing); and

Any payments by the plaintiff in excess of its ordinary levy position be returned to the plaintiff.

[28]   Similar relief is sought in relation to a claim for breach of statutory duty in relation to body corporate management (the second cause of action), special levies (the third cause of action) and a claim for an injunction (the fourth cause of action). The fourth cause of action can also be noted for its novelty. In it the plaintiffs seek an injunction requiring the Body Corporate to consider suing the individuals in negligence. The individuals are presumably the same individuals who were originally struck out of the proceeding in 2016.

[29]   To the extent these claims involve going back in time to rearrange levying decisions I cannot see how this can now fairly be done. As indicated, a challenge of this character would have needed to be dealt with promptly.

[30]   Mr  Livingston  also  argued  that   the   delays   were   excusable   because Mr Memelink suffers from a disabilities arising from his dyslexia, that in fact he has only one functioning eye and that he has had one leg amputated as a result of a traumatic accident in the middle of these proceedings. This is in addition to the difficulties he has had with his previous solicitor. I accept that the Court should exercise some care in striking out any proceeding when there are issues of this kind. But I do not fully accept Mr Livingston’s submission. That is because Mr Memelink has been regularly engaging in Court proceedings before this Court. Even his own description of the events in this affidavit in opposition shows that he has been pursuing the disputes in one way or another. The Associate Judge observed that “the dispute between the parties has been going on for years”.11 I do not accept that Mr Memelink’s disabilities have prevented him having access to the Court to pursue the avenues he has wished to pursue.

[31]   Finally, I note Mr Livingston’s submission that any attempt to enforce amounts said to be owed by way of a levy would require proceedings in any event.

11     Memelink v Official Assignee, above n 10, at [41].

Furthermore, he argued that Mr Memelink would always be able to challenge the current levies charged by the Body Corporate in proceedings. Those propositions may or may not be true. But this proceeding is primarily directed to historic issues. That  is so notwithstanding the most recent formulated fourth amended statement of claim brings in allegations about the present circumstances. This is not a reason why the existing claim should not be struck out for want of prosecution. The current proceeding must be struck out because it has not been prosecuted appropriately. Whether Mr Memelink can commence new proceedings, or defend proceedings brought by others, is a separate question that will need to be addressed in light of this and other judgments.

Result

[32]   For these reasons I accept that there has been inordinate delay, that it has been inexcusable and that it has seriously prejudiced the ability to do justice in the case. It is not in the overall justice of the case to allow the case to proceed. I accept it should be struck out under r 15.2. I do not need to address the alternative ground that it is an abuse of process under r 15.1, although I note that that may be an alternative way of describing the reasons why the strike out application is successful.

[33]   The defendant’s application to strike out the proceedings is granted. The defendant is also granted costs of this application on a 2B basis to be fixed by the Registrar if the costs cannot be agreed.

Cooke J

Solicitors:

Livingston & Livingston, Wellington for the Plaintiffs Surridge & Co, Porirua for the Defendant