Mu v Body Corporate 312421 HC Auckland CIV-2011-404-4768
[2011] NZHC 1864
•8 December 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-404-4768
BETWEEN DANNI MU Plaintiff
AND BODY CORPORATE 312421
First Defendant
ANDSHARRON WYNNE O'SULLIVAN Second Defendant
ANDGRAHAM BELL Third Defendant
Hearing: 8 December 2011 at 2:15pm
Appearances: G Illingworth QC for plaintiff
T J Herbert for first defendant
Judgment: 8 December 2011
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL [Re: Security for costs]
Solicitors:
Steindle Williams Legal Ltd (James Stewart) P O Box 47 858 Auckland 1144, for plaintiff
Email: [email protected]
Adina Thorn Ltd (A J Thorn) P O Box 1753 Auckland 1140, for first defendant
Email: [email protected]
Lee Salmon Long (Tim Mullins), P O Box 2026 Auckland 1140, for second and third defendants
Email: [email protected]
Meredith Connell, P O Box 2213 Auckland 1140, for fourth defendant
Email: [email protected]
Copy for:
Grant Illingworth, P O Box 7205 Auckland 1141, for plaintiff
Email: [email protected]
Timothy J Herbert, Level 13, Shortland Chambers, 70 Shortland Street, Auckland 1010, for first defendant
Email: [email protected]
David J Chisholm P O Box 2629 Auckland 1140, for second and third defendants
Email: [email protected]
Paul W David, P O Box 4472 Auckland 1140, for fourth defendant
Email: [email protected] / [email protected]
Case Officer: [email protected]
DANNI MU V BODY CORPORATE 312421 HC AK CIV-2011-404-4768 8 December 2011
[1] This is an application for security for costs. In the proceeding, the plaintiff is an owner of a unit title apartment in a block of apartments in Normanby Road, Mt. Eden, Auckland. The first defendant is the body corporate. The second defendant is the body that provides secretarial and managerial services to the body corporate, and the third defendant is the director of the second defendant. The fourth defendant, Mr Bell, is the former chairperson of the management committee of the body corporate.
[2] The block of apartments has weathertightness problems. The body corporate and apartment owners are trying to run leaky building litigation but in the meantime have run into problems within the apartments with how to go forward with a system of repair.
[3] Various meetings of the body corporate and the unit owners have been held to deal with the weathertightness issues. There was a meeting on 26 October 2010. At the meeting a resolution was put in these terms:
It was resolved to continue with the Rockcote system as detailed by Brown
Day and approved by Auckland City Council.
It was passed by a bare majority of those who were held eligible to vote. Some of those present were held to be not financial and not eligible to vote. Certain proxies held by the plaintiff were also disallowed.
[4] The plaintiff says that this resolution was invalid because a 75 per cent majority of all eligible voters was required. For that, she relies on Rule 4 of the Body Corporate rules:
Rule 4
Where there are more than three (3) proprietors, the powers and duties of the Body Corporate shall be exercised and performed by a committee, subject to any restriction imposed or direction given at a general meeting of the Body Corporate provided that any expenditure of over $5,000.00, not being expenditure which the Body Corporate is legally obliged or previously authorised to incur, shall be referred to a general meeting; and if the share of the proprietor or proprietors of any principal unit in any expenditure that is
referred to a general meeting exceeds $1,000.00 that expenditure shall not be incurred unless it is approved by at least a three-fourths majority of votes;
[5] The plaintiff also says that the resolution was invalid because the procedure adopted at the meeting was unfair, misleading and contrary to the rules. She contests the disallowance of some votes. The plaintiff seeks a declaration that the decision is invalid and that the defendants are not authorised to enter into any contracts on behalf of the body corporate for re-cladding the complex unless the expenditure is approved by special resolution approved by a 75 per cent majority.
[6] Since then, in October this year, the body corporate has held a further meeting in which the body corporate, with a 75 per cent majority, resolved that s 138 of the Unit Titles Act would apply. Mr Herbert has referred me to s 221 of the Unit Titles Act 2010 to show that an appropriate express resolution of the body corporate can make s 138 binding on an existing unit title development. Section 138 imposes repair obligations on body corporate. For this decision, I do not want to go into the merits of the arguments of counsel. That is a matter to be canvassed at the hearing. I simply record at this stage that it appears that s 138 and some of the associated provisions of the Unit Titles Act 2010 are new and there can well be benefits, generally, to have the scope of those provisions clarified by judicial decision. To that extent, I accept that there are arguments available and the plaintiff’s claim cannot be thrown out at this stage as being completely untenable.
[7] Rule 5.45 governs applications for security for costs and provides:
5.45 Order for security of costs
(1) Subclause (2) applies if a Judge is satisfied, on the application of a defendant,—
(a) that a plaintiff—
(i) is resident out of New Zealand; or
(ii) is a corporation incorporated outside New Zealand;
or
(iii) is a subsidiary (within the meaning of section 5 of the Companies Act 1993) of a corporation incorporated outside New Zealand; or
(b) that there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff's proceeding.
(2) A Judge may, if the Judge thinks it is just in all the circumstances, order the giving of security for costs.
(3) An order under subclause (2) —
(a) requires the plaintiff or plaintiffs against whom the order is made to give security for costs as directed for a sum that the Judge considers sufficient—
(i) by paying that sum into court; or
(ii) by giving, to the satisfaction of the Judge or the
Registrar, security for that sum; and
(b) may stay the proceeding until the sum is paid or the security given.
(4) A Judge may treat a plaintiff as being resident out of New Zealand even though the plaintiff is temporarily resident in New Zealand.
(5) A Judge may make an order under subclause (2) even if the defendant has taken a step in the proceeding before applying for security.
(6) References in this rule to a plaintiff and defendant are references to the person (however described on the record) who, because of a document filed in the proceeding (for example, a counterclaim), is in the position of plaintiff or defendant.
[8] An application under r 5.45 follows these steps:
[a] Has the applicant satisfied the Court of the threshold under r 5.45(1)? [b] How should the Court exercise its discretion under r 5.45(2)?
[c] What amount should security for costs be fixed at? [d] Should a stay be ordered?
[9] Although the plaintiff comes from China, she lives in New Zealand. The first defendant does not rely on her being resident out of New Zealand or being a corporation incorporated outside New Zealand. Instead, it says that “there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if the
plaintiff is unsuccessful in her proceeding”. For evidence of inability to pay, the first defendant relies on an email that the plaintiff sent on 18 October 2011. The email was sent to Sharon O’Sullivan, the third defendant. It is headed:
“Congratulations on your three.”
It is quite clear that there is a sense of irony in that the tone of the email is one of defiance, making a vigorous attack against the defendants in this case. The wording is close to libellous. The clear impression I have got is that she is going to be an unco-operative member of the body corporate and will make life difficult for the defendants. She attacks the motives of the three to whom she has addressed her letter. The words that the first defendant relies on are these:
“Simply Danni has no money for him”.
The first defendant invites me to take that as a statement of fact. However, I have to make allowance for the fact that the plaintiff is using English as a second language. It is clear that while she is conversant with English it is her second language, and she does not express herself as fluently as native speakers of the language. I regard her statement “Simply Danni has no money for him” as being a statement that she is unwilling to pay any money by way of costs towards the defendants. It is a statement of defiance, consistent with the other statements in her email. It is a statement of unwillingness to pay anything for costs. It is not a statement of inability to pay anything for costs.
[10] There is evidence within the email that she does have some means. She has recorded the fact that she bought the unit and put $250,000 of her own money in, and also took out a loan of $150,000. That suggests that she paid about $400,000 for the property, independently of other costs.
[11] I appreciate that as this block of apartments is afflicted with leakiness issues, she is unlikely to have the equity that she had before. Equally I assume that she may have made some reductions in the loan that she took out as well. Overall, while the email is clear evidence that she is an unco-operative person who will not make life
easy for those managing the body corporate, she is not a person within r 5.45(1)(b). That is, I do not think there is reason to believe that she will be unable to pay the costs. I suspect that if the defendants are successful they may have to go to some effort to get money out of her. They will probably have to proceed by way of a charging order against her unit, possibly bankruptcy proceedings or something like that. Rule 5.45 is directed at people unable to pay, not people unwilling to pay and although she may put the defendants to some trouble with enforcing costs, I am not satisfied that she will not be good for the money. Accordingly, at that threshold stage, I am not satisfied that there is an inability to pay. Not being satisfied at the threshold step in the process, I do not need to go on and consider the other matters under the application. Accordingly, I dismiss the application.
[12] On costs, the plaintiff has succeeded in the application and the normal approach is that the person who succeeds should have costs which should be fixed and payable immediately. However, this is a matter which has been set down for hearing early next year. I doubt that there will be any serious hardship to either party if costs are held over until the final determination of the case. It may well be that the final determination of the case will cast the present application in a better right and costs may be better assessed by the trial Judge than by me. I reserve costs but note
that the plaintiff has succeeded in the application.
Associate Judge Bell
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