Newhaven Waldorf Management Limited v Allen
[2015] NZHC 383
•6 March 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV2014-404-000678 [2015] NZHC 383
UNDER the Declaratory Judgments Act 1908 AND
IN THE MATTER
of "Newhaven"
BETWEEN
NEWHAVEN WALDORF MANAGEMENT LIMITED Plaintiff
AND
GEOFFREY ROBERT ALLEN Defendant
Hearing: 23 February 2015 Appearances:
C Bryant and M O'Brien for Plaintiff (Respondent) J Wood for Defendant (Applicant)
Judgment:
6 March 2015
(RESERVED) JUDGMENT OF ANDREWS J [Application to join additional defendants]
This judgment is delivered by me on 6 March 2015 at 4 pm pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
NEWHAVEN WALDORF MANAGEMENT LTD v ALLEN [2015] NZHC 383 [6 March 2015]
Introduction
[1] Newhaven Waldorf Management Limited (“Waldorf”) has issued this proceeding seeking declarations under the Declaratory Judgments Act 1908, concerning an encumbrance registered against the title to a property owned by Mr Allen. Mr Allen has applied to join additional defendants. His application is opposed by Waldorf.
Background
[2] The proceeding relates to the “Newhaven” estate at 40 Haven Drive, East Tamaki, Auckland. Newhaven includes six residential complexes, named Jarrah, Parkside, Rimu, Kauri, Waterview and Courtside. The Jarrah, Parkside, Rimu and Kauri complexes each comprise a number of individual units held as unit titles, initially under the Unit Titles Act 1972, and now under the Unit Titles Act 2010 (the UTA 2010). Each complex has a separate body corporate. Courtside comprises 12 units held as individual fee simple titles. Courtside does, not, of course, have a body corporate.
[3] Newhaven also includes a park and “mall” area, which is vested in the Auckland Council, and a recreational area with a tennis court, swimming pool, gym, barbecue facilities and a children’s playground. The recreational area, and the facilities on it, are owned and managed by Waldorf.
[4] Each of the fee simple and unit titles (in all, 176) is subject to a registered encumbrance in favour of Waldorf. The encumbrances are in identical terms. The encumbrance imposes a rent charge over each of the titles. The encumbrance includes various express covenants on the part of unit owners (at cl 3), and sets out
(at cl 7) rules for the Newhaven community,1 to which each unit owner agrees to be
bound.2
1 Clause 7 of the encumbrance provides that membership of the Newhaven community is automatic by virtue of execution of the encumbrance or by becoming a registered proprietor of a Lot (defined as an individual title for a single dwelling or duplex, or any unit title) to which the covenants in the encumbrance apply.
2 There are two clauses numbered 7. The rules in dispute are set out in the first-numbered clause
7.
[5] A dispute has arisen as to the meaning and effect of certain sub-clauses of clause 7 of the encumbrance. In March 2014, Waldorf issued proceedings under the Declaratory Judgments Act 1908, seeking declarations in respect of the disputed provisions. Waldorf named Mr Allen as the sole defendant. Mr Allen is the registered owner of a unit in the Kauri complex. He is the chairperson of the body corporate for Kauri, and chair person of the Newhaven community committee.
[6] At the time of issuing the proceeding, Waldorf applied for directions as to service. Waldorf acknowledged that the declarations it sought might affect each unit owner, but submitted that the proceeding should be served on:
(a) Mr Allen;
(b)the secretary for each of the bodies corporate for the Jarrah, Parkside, Rimu, Kauri and Waterview complexes, the secretary being directed to provide copies of the proceeding to the registered members of each body corporate; and
(c) the holders of each of the fee simple titles in the Courtside complex.
[7] In a Minute dated 27 March 2014, Associate Judge Bell declined to make such an order. Among other things, his Honour observed that suing only Mr Allen, but serving other owners, would not make those owners parties to the proceeding. Only parties would be bound by any declaration made.
[8] Waldorf elected to proceed against Mr Allen, alone. However, it has consented to those unit owners who wished to do so being joined as parties, to be represented by Mr Allen’s solicitors and counsel. I was advised that several owners have expressed a wish to be joined. However, Mr Allen and the Kauri, Waterview, Rimu and Parkside bodies corporate have applied for joinder of the bodies corporate
as parties to the proceeding.3
3 The Jarrah body corporate did not seek to be joined.
[9] Rule 4.56 of the High Court Rules provides, as relevant to this application:
4.56 Striking out and adding parties
(1) A Judge may, at any stage of a proceeding, order that–
…
(b) the name of a person be added as a … defendant because–
(i) the person ought to have been joined; or
(ii) the person’s presence before the court may be
necessary to adjudicate on and settle all questions involved in the proceeding.
…
[10] Barker J discussed the application of this rule in relation to adding defendants to a proceeding in his judgment in Mainzeal Corporation Ltd v Contractors Bonding Ltd.4 His Honour referred to a number of authorities, including the statement of Lord Denning MR in Gurtner v Circuit that he preferred to give a wide interpretation of the equivalent English rule:5
It seems to me that when two parties are in dispute in an action at law, and the determination of that dispute will directly affect a third person in his legal rights or in his pocket, in that he will be bound to foot the bill, then the Court in its discretion may allow him to be added as a party on such terms as it thinks fit. By so doing, the court achieves the object of the rule. It enables all matters in dispute to be “effectually and completely determined and adjudicated upon” between all those directly concerned in the outcome.
Barker J noted that Gurtner v Circuit was referred to with approval in the decision of the Privy Council in Pegang Mining Co Ltd v Choong Sam.6
[11] On the issue of what effect a plaintiff’s opposition may have on an application to join a new defendant, Barker J did not accept a submission that a new defendant should not be joined where the plaintiff opposes joinder, and observed that the plaintiff’s wishes, and its possible liability for additional costs are factors in the
exercise of the court’s discretion.7
4 Mainzeal Corporation Ltd v Contractors Bonding Ltd (1989) 2 PRNZ 49 (HC), at 50.
5 Gurtner v Circuit [1968] 2 QB 587 at 595.
6 Pegang Mining Co Ltd v Choong Sam (1969) 2 MLJ 52, per Lord Diplock.
7 Mainzeal Corporation Ltd v Contractors Bonding Ltd, above n 2 at 49–50.
[12] In Newhaven’s second amended statement of claim, five declarations are sought in relation to cl 7 of the encumbrance. Declarations (a) and (b) relate to Waldorf’s entitlement to call meetings of the Newhaven community. The bodies corporate do not assert a particular interest in that issue. The most contentious of the declarations sought by Newhaven are those concerning cls 7(h) and (i).
[13] The Declaration sought in respect of cl 7(h) relates to the first sentence of the clause, which reads:
(h) Each member of the Newhaven Community shall pay the Encumbrancee an annual estimate of operating expenses (levies) for the Common Facilities and managing Newhaven, which will be added to the rent charge as set out in this Encumbrance. …
[14] Newhaven seeks the following declarations relating to cl 7(h):
c.A declaration that under the first sentence of clause 7(h) of the Encumbrance Waldorf, as Encumbrancee, is entitled to recover operating expenses (levies) in respect of the following:
i. The Common Facilities:
(1) Having regard to the purposes set forth in clause 4(a)
of the Encumbrance, and
(2) Including but not limited to the items listed in clause
7(j) of the Encumbrance;
and
ii. Managing Newhaven, having regard to the covenants set forth in clause 3 and the purposes set forth in clauses 4(b) and 4(c) of the Encumbrance.
d.A declaration, that under clause 7(h) of the Encumbrance, operating expenses of “managing “Newhaven” may include (without limitation) costs associated with (i) the provision of services to areas that are not common property or any body corporate and for which the bodies corporate are not required under the UTA to take responsibility and/or (ii) monitoring on behalf of the Encumbrancors the provision of any complex-wide services voluntarily undertaken by any of the bodies corporate, including relaying any complaints from Encumbrancors in connection therewith and/or (iii) liaising with the Newhaven Committee.
(a) “Common Facilities” are defined as “the land, buildings, amenities
and equipment situated on the Encumbrancee’s Land”.
(b) Clause 4 reads:
The covenants contained herein are designed to:
(a) control the use, maintenance, replacement and operation of the Common facilities;
(b) ensure the operation and enforcement of regulations and
covenants benefiting owners and occupiers within
Newhaven; and
(c) to enable the provision or co-ordination of services for the benefit of Newhaven including securing favourable terms of
supply for Utilities and other services provided by
Newhaven;
by levying owners within Newhaven sufficient funds to ensure the above purposes can be undertaken.
(c) The “items listed in clause 7(j) of the Encumbrance” are:
The operating expenses (levies) will include the cost of the Common
Facilities including, but not limited to:
(i) equipment hire;
(ii) maintenance charges;
(iii) special levies for events or items;
(iv) a sinking fund for replacement of equipment or structural repairs;
(v) on site caretaking.
(d)“Utility” is defined as “the supply of power, gas, telecommunications, television transmission, security, landscaping and any other services that are used by the majority of owners in Newhaven.”
(e) Clause 7(i) of the encumbrance reads:
The Committee will keep a register of all members and any occupants or tenants of the Land together with a contact address for the service of notices. The Covenantor shall provide all such details to the Committee upon becoming a member of the Newhaven Community and upon any change of the occupancy of the Land.
The Committee shall provide an up to date copy of the register of members to the Encumbrancee at intervals of not less than six months. The Encumbrancee shall be entitled to refuse entry to the Encumbrancee’s Land to any person not named on the register of members.
[16] Newhaven seeks the following declaration relating to cl 7(i):
A declaration that, under clause 7(i) of the Encumbrance, the respondent and the Committee are required to provide Waldorf, as Encumbrancee, with an up to date register of all members of the Newhaven Community at periods of not less than six months.
Submissions
[17] Mr Wood submitted for Mr Allen and the bodies corporate that the bodies corporate should be joined, because the interpretation of the encumbrances will affect them as well as individual unit owners. He submitted, in particular, that the encumbrance must operate alongside the statutory regime under the UTA 2010, and will impinge on the statutory role of the bodies corporate. He submitted that this gave the bodies corporate a legitimate interest in the proceeding.
[18] Mr Wood further submitted that the purpose of a body corporate is, among other things, to allow the individual unit owners to act together for purposes that affect all their interests. As such, he submitted, it would be artificial to require the individual owners to defend the proceeding independently, and not allow the bodies corporate to perform this rule.
[19] Ms Bryant submitted for Newhaven that the outcome of the proceeding will have no impact on the rights of the bodies corporate, as the encumbrances function independently of the rights of the bodies corporate. Therefore, she submitted, the bodies corporate have no interest in the proceeding and should not be joined. She submitted that any interest the bodies corporate may have in the proceeding is far removed from the Mainzeal v Contractors Bonding principles.
[20] Ms Bryant next submitted that the encumbrance is a contract between Waldorf and unit owners. It does not affect the bodies corporate’s rights and obligations. Rather, it affects the way in which members can vote at body corporate
meetings. It tells owners that they must procure their body corporate to engage Waldorf to do things. For example, she accepted that “landscaping” is commonly a body corporate function, but submitted that the encumbrance imposes an obligation on owners to instruct the body corporate to engage Waldorf to provide landscaping services. She likened the encumbrance to the right given to a mortgagee under s 96(3) of the UTA 2010 to direct how a mortgagor votes.
[21] Ms Bryant further submitted that the application to join the bodies corporate is, in reality, an attempt by Mr Allen and other interested owners to protect themselves from the costs of the proceeding by ensuring that they can rely on levies raised by the body corporate to fund the defence. She submitted that the bodies corporate would be acting ultra vires their powers under the UTA 2010 if they were to become parties to the proceeding. She also submitted that this would be unfair on other unit owners (which include Waldorf).
Discussion
The declaration concerning clause 7(h)
[22] The bodies corporate are particularly concerned that the matters which are set out in cl 7(h) as being ones in respect of which Waldorf may impose levies are (with the exception of the recreational facilities which are owned and managed by Waldorf) ones in respect of which the bodies corporate are charged with responsibility under the UTA 2010. He referred to “common facilities”, and “utilities” (as defined as” landscaping and any other services that are used by the majority of owners in Newhaven”) as obvious examples.
[23] Mr Wood also referred to the fact that on the Unit Plan for the Waterview, Rimu and Kauri complexes the boundary between common property and unit property is the edge of the external wall. Therefore all external walls are unit property. However, the walls fall within the definition of “building element” in the UTA2010, so by virtue of the s 138(1)(d) of that Act, they are the responsibility of the bodies corporate. Thus, he submitted, declarations (c) and (d) directly impinge on the bodies corporate, and they therefore have an interest and should be heard.
[24] Ms Bryant submitted that cl 7(h) concerns levies to be charged by Waldorf to unit owners. She submitted that the bodies corporate do not charge the levies, they are not charged the levies, they do not pay the levies, and they do not administer the levies. She submitted they cannot possibly have an interest in the levies Waldorf charges owners.
[25] I do not accept Ms Bryant’s submission. I accept Mr Wood’s reply submission that by concentrating on the levies, the submission does not take account of the wider ramifications of cl 7(h). It is evident from the matters in respect of which levies may be charged under cl 7(h) that many fall within the obligations imposed on the bodies corporate under the UTA 2010. I accept that the bodies corporate have an interest in the outcome of the application for the declarations relating to cl 7(h), and are entitled to be heard on the application.
The declaration concerning cl 7(i)
[26] The bodies corporate are not concerned with a declaration that the Committee is to provide Waldorf with an up to date list of members of the Newhaven community every six months. However, while members (unit owners) are obliged to provide information to the Committee, there is no means (either in the Encumbrance or in practice) by which the Committee can enforce the obligation. The Committee members are volunteers, and the Committee has no bank account, or funds, that can be used to enforce members’ obligations.
[27] Mr Wood submitted that, in contrast to their position as members of the Newhaven community, members of the bodies corporate have an obligation to provide information to their body corporate, and the body corporate secretary collates this information and can levy recalcitrant owners. He submitted that this reinforced the bodies corporate’s submission that the scheme of the encumbrance anticipated Waldorf working through the bodies corporate and that that involvement supported their contention that they have a proper interest in the proceeding.
[28] The bodies corporate’s interest in the declaration relating to cl 7(i) could not be put as high as that in the declaration relating to cl 7(h). Nevertheless, there is
force in Mr Wood’s submission that the scheme of the encumbrance concerning provision and collation of membership information can only work effectively with the bodies corporate’s involvement. That involvement gives the bodies corporate an interest in the proceeding.
[29] I conclude that the proceeding affects the bodies corporate’s rights and obligations, and that they have a right to be joined.
The ultra vires issue
[30] Ms Bryant referred me to the judgment of Courtney J in Guardian Retail Holdings Ltd v Buddle Findlay.8 She submitted that this judgment supported her submission that the body corporate would be acting ultra vires if it were to become a party to this proceeding and to levy members for the costs of doing so.
[31] In Guardian Retail Holdings, the plaintiff was a member of a body corporate and brought proceedings’ against the body corporate and three members of the body corporate committee. The plaintiff alleged that the committee acted ultra vires (in bad faith, preferring their own interests over those of other members) in imposing various levies relating to the payment for water and gas services, and taking other actions, and the body corporate did not validly ratify the committee’s actions.
[32] Her Honour’s judgment was (in part) in relation to an application for an order that the body corporate be restrained from funding or contributing to the committee members’ costs of defending the proceeding. In the course of her judgment, her Honour first discussed the relationship between a body corporate and members of the committee. She observed that a body corporate has only the powers conferred and the obligations imposed on it by statute, and may only do acts that are for the
purpose of performing its duties or exercising its powers under the UTA 2010.9
[33] Her Honour further observed that a body corporate that has a committee exercises its powers through its committee, and is variously liable for breaches of its
obligations occasioned through the conduct of the committee. However, members of
8 Guardian Retail Holdings Ltd v Buddle Findlay [2013] NZHC 1582.
9 At [23].
the committee may have personal liability in respect of ultra vires acts that result in liability to the body corporate, or for losses caused to other members of the body corporate.10
[34] In concluding that the body corporate should be restrained from funding the committee members’ legal costs, her Honour accepted that there was a serious question to be tried as to whether the body corporate may indemnify the committees members (which would turn on the question whether the body corporate had validly ratified the committee’s actions), and that the balance of convenience lay in restraining the body corporate against further contributing to or funding the
committee members’ defence costs.11
[35] I observe, first, that there was no challenge in Guardian Retail Holdings to the body corporate funding its defence to the proceeding. The challenge related to the committee’s costs, not the costs of the body corporate. In the present case, it is the body corporate that seeks to be joined.
[36] I accept that, as Ms Bryant submitted, it was held in Guardian Retail
Holdings that a body corporate has the powers and obligations set out in the UTA
2010. However, that does not mean that the Kauri, Waterview, Rimu and Parkside bodies corporate would be acting ultra vires in being joined as defendants in this proceeding.
[37] Section 77(1) of the UTA 2010 gives a body corporate the power to do anything authorised under the Act or any other Act, and s 77(2) gives the body corporate the power to do anything a natural person could do. That is constrained by s 78, which provides that a body corporate may act pursuant to s 77 only for the purpose of performing its duties or exercising its powers. Section 84 sets out the powers and duties of a body corporate. They include (as relevant to the present application) the powers and duties set out in s 85 (relating to keeping and
maintaining a register of unit owners) and s 138 (relating to the repair and
10 At [24].
11 At [60].
maintenance of common property, assets designed for use in connection with the common property, infrastructure, and building elements).
[38] I accept Mr Wood’s submission that that the powers set out above must include the power to participate in proceedings that concern the scope of the bodies corporate’s powers. I do not accept that the bodies corporate would be acting ultra vires in participating in the proceeding, and levying members for the costs in doing so.
Conclusion
[39] For the reasons set out above, I am satisfied that the presence of the Kauri, Waterview, Rimu and Parkside bodies corporate is necessary in order to adjudicate on and settle all the issues in this proceeding. Their application to be joined as parties to this proceeding is granted. I order accordingly.
[40] This is an interlocutory application. Costs are reserved for determination at the conclusion of the substantive proceeding.
Andrews J
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