Memelink v Body Corporate 81012

[2016] NZHC 3151

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2016-485-567 [2016] NZHC 3151

UNDER

Unit Titles Act 1972 and Unit Titles Act

2010 and Unit Title Regulations 2011

IN THE MATTER

of sections 210 to 216 of Unit Titles Act
2010

BETWEEN

HARRY MEMELINK Applicant

AND

BODY CORPORATE 81012

Respondent

Hearing:	1, 11 and 29 November 2016
Counsel:	Applicant in person supported by Ms K Terpstra C Matsis for Respondent
Judgment:	20 February 2017

RESERVED JUDGMENT OF ELLIS J

[1]      The Link Trust (the Trust) owns a unit in a building in Queens Drive, Lower Hutt,  that  is  managed  by  the  respondent,  Body  Corporate  81012  (the  Body Corporate).   Mr Memelink is the trustee of the Trust.   He has applied by way of originating  application  for  minority  relief  under  ss  210-216  of  the  Unit  Titles Act 2010 (the Act) relating to matters said to arise from an AGM held by the Body Corporate  on  28  June  2016.    In  truth,  however,  the  principal  issues  between Mr Memelink and the Body Corporate significantly predate the AGM; there is a long history of strife between them.

[2]      The Body Corporate seeks to have Mr Memelink’s application struck out.

MEMELINK v BODY CORPORATE 81012 [2016] NZHC 3151 [20 February 2017]

Background

[3]      Among the issues discussed at the 28 June AGM was the need to upgrade the lift and the foyer area of the building.   A resolution was passed that a long term maintenance levy of $130,000 be raised to fund the upgrade and refurbishment.  It was also resolved that this levy was to be apportioned in accordance with existing utility interests.  Mr Memelink has for some time had an issue with apportionment

on that basis and has been pressing for a reassessment under s 41 of the Act.1

[4]      But more specifically,  and as far as the upgrade to the lift and foyer  is concerned, he says that levying for repairs on the basis of the existing apportionment disadvantages those unit holders on the ground floor (who do not use the lifts). Mr Memelink’s own apartment, however, is on the first floor.

[5]      Mr Memelink has a number of other complaints about the Body Corporate more generally, the involvement of the law firm Collins & May and the conduct of the June AGM.  But I do not need to detail those matters here; in the absence of a specific resolution, they cannot be the subject of minority relief under the Act.

Unit Titles Act: the minority relief provisions

[6]      Mr Memelink’s application is founded in subpt 3 of pt 5 of the Act which is headed “Minority and majority relief”.   Section 210 relates to minority relief.2    It provides:

210     General relief for minority where resolution required

(1)       In any case where this Act requires a resolution and the resolution is passed, any person who voted against the resolution may apply to the appropriate decision-maker for relief on the grounds that the effect of the resolution would be unjust or inequitable for the minority.

(1A)    Subsection (1) does not apply if the resolution is a designated resolution.

1      Section 41 provides (inter alia) that the ownership interest or utility interest may be reassessed for each unit if the body corporate decides by special resolution at a general meeting to reassess the ownership interest or the utility interest, or both.

2      Section 211 relates to majority relief and is not relevant here.

(2)      An application for relief under subsection (1) must be made within

28 days of the passing of the resolution.

[7]      A designated resolution is defined in s 212 to include a resolution approving the method of apportionment of a utility interest under s 41(6).   Sections 213-216 provide for a formal and discrete notice and objection procedure in relation to such resolutions.

Mr Memelink’s application

[8]      The specific relief sought in Mr Memelink’s application is as follows:

(a)      the BC81012 Unit Title entitlements to be reassessed and corrected, with them correctly allocated and compensated;

(b)the incorrectly and illegally set original individual agreements made with BC81012 owners to be reassessed and corrected;

(c)       that these BC81012 reassessments and corrections then be backdated;

(d)      that the voted works and associated extra levies from the BC81012

AGM of 18 June 2016 be stopped and fully investigated; or

(e)      that at the least these voted works and associated extra levies be held from progressing until the orders sought by the applicant are determined; and

(f)      that  the  past  issues  from  the  initial  set-up  of  the  BC81012  be investigated and corrected or at least compensated by those liable for creating these issues.

The Body Corporate’s position

[9]      In  seeking  to  strike  out  Mr Memelink’s  application,  the  Body  Corporate essentially argues that the procedural pre-requisites for minority relief are not met, because Mr Memelink:3

(a)      was not eligible to vote at the AGM because he had an outstanding debt to the Body Corporate (said to be a small costs order relating to a Tenancy Tribunal claim);

(b)did  vote  against  the  $130,000  levy,  but  did  not  vote  against apportioning it as per current utility interests; and

(c)      has  not  filed  sufficient  evidence  to  show  that  the  effect  of  the resolution would be unjust or inequitable for the minority owners who voted against  the  resolution.   The lifts  are aging  and  pose safety issues; the upgrade work is necessary.

Discussion

[10]     At the outset it can be observed that the first, second, third and sixth heads of relief in Mr Memelink’s application clearly relate to the setting of the original utility interests which, as I have said, appears to be at the heart of Mr Memelink’s concerns. Any reassessment of those must occur in accordance with s 41 of the Act and, indeed, I understand that matters are in train on that front.  Section 41 makes it clear that for any change to be effected under it, a special resolution is required and, to the extent the change means that utility interests are to be assigned other than on the basis of the relative value of the unit, then any resulting dispute is to be dealt with by way of a specific statutory objection procedure.

[11]     There has, as yet, been no special resolution in relation to the utility interests and  no  relief under s  210  (or the  subsequent  provisions)  is  therefore  available. Accordingly, to the extent that the originating application is directed to the first,

second, third and sixth heads of relief it must be struck out.

3      Other procedural objections had fallen away by the time of the hearing before me.

[12]     It is therefore only the fourth and fifth of the orders sought by Mr Memelink that arguably relate to the resolution made at the June AGM to levy for the lift and foyer upgrade.  While I do have reservations about it, it is therefore those orders (and the grounds upon which they are sought) which will be the focus of the remainder of this judgment.   In that context I deal with the three matters raised by the Body Corporate in turn.

[13]     First,  for  reasons  that  I  do  not  propose  to  set  out  here,  Mr Memelink’s ineligibility to vote at the AGM (and the existence of any disqualifying debt) does not appear to be clear-cut and I do not consider it appropriate to resolve the issues in the context of a strike out application.  Moreover, in light of the view I have taken of other matters, it is not necessary for me to decide the point.  I merely record that the (draft) minutes of the AGM record him as voting, at least in relation to some of the resolutions, and do not record any objection or reservation around his ability to do so.

[14]     Secondly, and as I have said, the draft minutes do indicate that Mr Memelink voted against the $130,000 long term maintenance levy.   Assuming that he was eligible to vote (as I am inclined to do) I proceed on the basis that he therefore does qualify to challenge that resolution under s 210.  As I understand it, he accepts that an upgrade of the lobby and lifts is necessary but says that the cost is too high.4   But he says that the reason  that the costs are high is because  (he says) the current apportionment causes those who are presently required to pay less than their fair share to have a perverse incentive to require a “Rolls Royce” job at the expense of

other unit holders.5

4      Following the hearing Mr Memelink also raised an issue about wider long term maintenance costs, but that is beyond the scope of his application and this judgment.

5      It is noteworthy that my understanding of Mr Memelink’s position comes from his submissions to  me  rather  than  from  any  evidence  he  has  filed  demonstrating just  how  the  impugned resolutions would be unjust or inequitable for him or for some wider the minority.  Mr Sik, who is more obviously likely to be adversely affected by the resolutions (because he is a ground floor unit holder) does not address the point at all in his affidavit which was concerned, rather, with matters historical.

[15]     The difficulty with that position in the present context is that it is inextricably intertwined with the utility interest apportionment issue which, as I have said, must be pursued elsewhere.  In my view, an application under s 210 cannot deal with a s 41 issue by a side wind.

[16]     Rather oddly, as Mr Matsis pointed out, the draft minutes also indicate that Mr Memelink  did  not  in  fact  vote  against  the  resolution  that  the  long  term maintenance levy be apportioned on the basis of existing utility interests (although they also record that there was discussion about this issue).  The draft minutes were circulated to Mr Memelink.  While he indicated that he objected to aspects of them he has declined to be more specific or to propose any amendment.  Moreover, neither he nor Mr Sik (a ground floor unit holder who was present at the AGM and filed an affidavit in support of Mr Memelink) has given evidence that they did cast opposing votes.   There is therefore nothing before the Court to indicate that Mr Memelink meets the statutory (s 210(1)) prerequisite for challenging the resolution relating to

the apportionment of the lift and foyer levy.6

[17]     In any event, and as I have said, the signal point is that Mr Memelink’s fundamental  concern  lies  elsewhere,  namely in  the  original  allocation  of  utility interests.  To the extent he intends to pursue that matter at all it must be through the s 41 process.   There is, on the material before me, nothing to found a claim for minority relief under s 210.

[18]     The application must be struck out accordingly.  Mr Memelink is to pay the

Body Corporate’s costs on a 2B basis.

Rebecca Ellis J

6      Although Mr Memelink is recorded as voting against the resolution to levy for the lift and foyer repairs he did not seek to argue before me that they do need to be upgraded, and the evidence clearly suggests that the work is necessary.  His opposition is based on the proposed cost of the work which, in turn, is inextricably linked to the apportionment issue.