Parkinson v Body Corporate 62124
[2024] NZHC 3511
•22 November 2024
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2023-485-163
[2024] NZHC 3511
UNDER Part 19 of the High Court Rules 2016 IN THE MATTER
of an application under section 141 of the Unit Titles Act 2010
BETWEEN
PHILIP GRANGER PARKINSON
First Applicant
PERRY ALEXANDER WALKER
Second ApplicantAND
BODY CORPORATE 62124
First Respondent
BRENDON JOHN GILHOOLY
Second RespondentPIETER JAAP BOS
Third Respondent
Hearing: 31 October 2024 Counsel:
A F D Cameron for First and Second Applicants P S J Withnall for First Respondent
Mr Gilhooly in person Mr Bos in person
Judgment:
22 November 2024
JUDGMENT OF RADICH J
[1] Dr Parkinson, Mr Walker, Mr Gilhooly and Mr Bos each own one of the four units in the Hankey Street complex that is governed by Body Corporate 62124. The relationship between Dr Parkinson and Mr Walker, on the one hand, and Mr Gilhooly
PARKINSON v BODY CORPORATE 62124 [2024] NZHC 3511 [22 November 2024]
and Mr Bos, on the other, is dysfunctional. Most pressingly, a decision needs to be made about the remediation of a retaining wall that is at risk of collapse.
[2] In Grice J’s 1 August 2023 judgment,1 she concluded, on the application of Dr Parkinson and Mr Walker, that an administrator should be appointed to the body corporate under s 141 of the Unit Titles Act 2010. In her 31 October 2023 judgment,2 she appointed John Greenwood – the nominee of the second and third respondents – as the administrator.
[3] As administrator, Mr Greenwood has made decisions that will resolve outstanding issues for the body corporate. However, despite the powers he has to make those decisions, the second and third respondents are resisting the exercise by him of those powers.
[4] Mr Greenwood has, given that resistance, asked the Court to make a direction confirming that the second and third respondents will be bound by the decisions he makes. In this decision, I make a direction to that effect. It is not a direction that adds to any of the orders that are currently in place. From the time of Mr Greenwood’s appointment, he had the power to make decisions that would bind the body corporate and, therefore, its members. He is doing no more now than exercising those powers.
Background
[5] Tensions between members of the body corporate have been building since 2017.3 Matters came to a head as the members were unable to agree on how to deal with the repair of a retaining wall situated between their complex and that of the neighbouring body corporate. The wall was, and still is, in danger of imminent collapse should there be a high rainfall or a modest earthquake.
1 Parkinson v Body Corporate 62124 [2023] NZHC 2022 [interim administration decision].
2 Parkinson v Body Corporate 62124 [2023] NZHC 3050 [decision appointing administrator].
3 For a more complete description of the background circumstances, see the interim administration decision, above n 1, at [1]–[2], [10]–[16] and [33]–[64] and the decision appointing administrator, above n 2, at [3]–[7].
[6] Despite a finding of a Tenancy Tribunal that the body corporate “is legally responsible for the retaining wall, alongside [the neighbouring body corporate]”,4 Mr Gilhooly and Mr Bos hold the view that it should not be the body corporate’s responsibility at all. They say that there should at least be an evidence-based arbitration or adjudication process in the first instance to allocate liability as between the body corporate and the neighbouring body corporate.
[7] The impasse between the body corporate’s members led Grice J to find that it was “unlikely to function as required under the legislation”.5 Following Grice J’s decision confirming that an administrator was needed, Mr Gilhooly and Mr Bos opposed the candidate proposed by Dr Parkinson and Mr Walker. They proposed the appointment of Mr Greenwood instead. Justice Grice, following a further hearing, appointed Mr Greenwood. She did so on the following terms and conditions:6
(a)A term of 12 months or such earlier time as the issues facing the body corporate have been resolved, with the right to seek Court approval to extend the period.
(b)The hourly rates set out in the memorandum of the respondents dated 9 September 2023, with the ability to retain other experts and such other assistance as may be needed from time to time at market rates for such providers.
(c)The fees, disbursements and other costs incurred by or on behalf of the administrator will be paid on or before 20 days following the rendering of an invoice.
(d)The administrator shall exercise all the powers/duties imposed on the body corporate and/or committee arising under the Unit Titles Act 2010, including, but not limited to, in relation to the governance and operation of the body corporate and in respect of steps taken in relation to the key issues facing the body corporate, including the taking of such dispute resolution steps, including litigation, in relation to the repairs or reinstatement of the retaining wall.
(e)The administrator is indemnified by the body corporate in carrying out his role as administrator, subject to any fraud or gross negligence. The administrator may obtain such liability insurance as party of the body corporate insurance or otherwise as is reasonable on market terms.
(f)The administrator will report to the body corporate.
4 Interim administration decision, above n 1, at [55].
5 At [74].
6 Decision appointing administrator, above n 2, at [23].
(g)The administrator will report to the Court at the expiration of 12 months from the date of his appointment or such earlier date.
(h)The administrator may seek further directions or orders from the Court on one month’s notice.
[8] Justice Grice described the key issues facing the body corporate, and requiring an administrator to resolve, as follows:7
(a)the liability for repairs of the retaining wall on the boundary of the development, which is failing, and the cost apportionment for such repairs as between the body corporate, the unit owners and the neighbouring property;
(b)the preparation and registration of amended body corporate operational rules;
(c)the establishment of a long-term maintenance plan;
(d)the striking and raising of levies to fund the body corporate’s operational expenses and costs of remediation of the retaining wall;
(e)to review the calculation of ownership and utility interests and, if necessary, reassess such interests and assign to each unit the new interest, or interests, in accordance with s 41 of the Act; and
(f)putting in place an effective governance framework to avoid the deadlock and dysfunctionality that has occurred to date.
[9] Although Mr Greenwood, as administrator, has the power to enter into an agreement over the retaining wall (and on other body corporate issues) without the need for approval from body corporate members, he saw it as being desirable to have consensus on an agreement over the retaining wall from the four unit owners. After conferring with them, he was able to achieve a consensus to negotiate with the neighbouring body corporate on the basis that the retaining wall would be removed and replaced and the costs shared between the two bodies corporate equally. It took him a number of weeks of ongoing discussions to achieve that consensus.
[10] Extensive negotiations then followed on Mr Greenwood’s part with the members of the neighbouring body corporate. However, the neighbouring body corporate was willing to bear only 40 per cent of the cost of replacing the wall. None
7 At [24].
of Mr Greenwood’s many endeavours would result in them agreeing to bear 50 per cent of the cost.
[11] The members of the neighbouring body corporate have a number of reasons for maintaining that their contribution will not exceed 40 per cent. They include the cost increases to which the project has been subject while the parties in this proceeding have been in dispute with each other, and their views about the primary causes of the retaining wall’s displacement. Mr Gilhooly and Mr Bos have quite different views about who should bear what cost and why. The respective views of the parties are not relevant to the issues that are before the Court.
[12] Mr Greenwood’s, understandable, view is that responsibility for the retaining wall is an issue fraught with a myriad of legal, factual and expert issues. A negotiated agreement on replacement of the wall is in his view preferable to entering into an uncertain form of adjudication after a lengthy process. There are, as Mr Greenwood has explained, a number of reasons for this. Again, it is not for the Court to make any form of decision on these points but they are relevant by way of context. They include the following considerations:
(a)The wall is at or near the shared boundary between the properties of the two bodies corporate. Professional survey and engineering advice, received previously, has confirmed this to be the case. In any event, the wall benefits the land on both sides of the boundary because it retains and supports the, higher, land and buildings of the body corporate and protects the, lower, neighbouring body corporate land from earth movement.
(b)The estimated cost of replacing the wall is $138,000 inclusive of GST and a contingency of 15 per cent: a cost to the body corporate of
$82,800 and a cost to the neighbouring body corporate of $55,200. The members of the neighbouring body corporate, together with Dr Parkinson and Mr Walker, agree with this arrangement. The difference, for Mr Gilhooly, between a 50/50 arrangement and a 60/40 arrangement is only a little over $3,200. For Mr Bos, the difference is just a little over $3,400.
(c)The costs of an adjudication to determine apportionments would be at least $50,000 for each body corporate, excluding the fees of an arbitrator, and before the cost of rebuilding the wall itself. Moreover, adjudication would take significant time.
[13] Accordingly, Mr Greenwood has drafted and negotiated a detailed written agreement for the carrying out of the works to remove and replace the wall on a 60/40 basis and is satisfied that, both legally and practically, entering into the agreement with the neighbouring body corporate is the most appropriate course of action.
The orders sought
[14]The body corporate now applies for the following orders:
1.1. approving or otherwise confirming the second and third respondents are bound by and subject to the decision of Mr J P Greenwood as Administrator to enter into agreement on behalf of the first respondent with Body Corporate 58067 on the terms of the Deed attached (to be updated);
1.2. extending on an interim basis the appointment of Mr J P Greenwood as Administrator of Body Corporate 62124 until determination of the order sought in 2.1 below.
[15] The order sought in 2.1 of the application is to extend Mr Greenwood’s appointment as administrator of the body corporate to 30 June 2025.
[16] The application sought, in addition, orders approving Mr Withnall’s engagement to assist body corporate, orders relating to the administrator’s calculation of ownership and utility interests and orders relating to the payment of costs on the part of the second and third respondents. However, only the orders set out in 1.1 and
1.2 above were pursued at this hearing.
[17] I made the order sought in 1.2 in an oral decision at the conclusion of the hearing, as confirmed in my minute of 31 October.
The powers of an administrator
[18] Under s 3, the purpose of the Unit Titles Act 2010 is “to provide a legal framework for the ownership and management of land and associated buildings and
facilities on a socially and economically sustainable basis by communities of individual owners and, in particular”, among other things, “to create bodies corporate, which comprise all unit owners in a development, to operate and manage unit title developments”.
[19] Bodies corporate are created under s 75 of the Act when a unit plan is deposited. Under s 76, the members of a body corporate for a unit plan are the unit owners of all units in the unit plan. But the body corporate has a separate legal personality and, under s 77 “a body corporate may do anything a natural person of full age and capacity may do except as provided for in this Act or any other Act”. However, under s 78 “a body corporate may do an act under s 77 only for the purpose of performing its duties or exercising its powers”. Under s 84, a body corporate has the powers and duties set out in a number of provisions of the Act, which include (as relevant here) the following provisions:
(a)s 138, which requires a body corporate to maintain and repair common property, assets used in connection with a common property, assets owned by the body corporate, and any elements or infrastructure that serve more than one unit;
(b)s 121, which relates to the raising of amounts for each fund a body corporate is to maintain and to the imposition of levies on unit owners to establish and maintain each of those funds; and
(c)s 130, which provides that a body corporate may spend or borrow money.
[20] While not directly on point, an example of the application of the provisions is provided by Kennedy v Body Corporate 82891 in which it was held that a body corporate committee could, despite opposition from some members, make a decision about repairs and maintenance and that, in doing so, the members of the committee were entitled to an indemnity from the body corporate for the decisions they made.8
8 Kennedy v Body Corporate 82981 [2023] NZHC 1377, (2023) 24 NZCPR 204; upheld on appeal in Kennedy v Body Corporate 82981 [2024] NZCA 250, [2024] 2 NZLR 857.
[21] Administrators are appointed under s 141 of the Act. Mr Greenwood was appointed by Grice J under this provision.9
[22]Section 141(5) is in the following terms:
The administrator, to the exclusion of the body corporate and the body corporate committee, has and may exercise the powers of the body corporate and the committee, and is subject to the duties of the body corporate and the committee, or such of those powers and duties as the High Court orders.
[23]Accordingly, the administrator stands in the shoes of the body corporate.
The administrator’s powers to enter into a binding contract with the neighbouring body corporate
[24] When Mr Greenwood was appointed as administrator, he took on the powers of the body corporate. He did so to the exclusion of the body corporate itself and of its members. Accordingly, the powers of the body corporate, set out above, are exercisable by Mr Greenwood. They include, quite clearly, the power to enter into a contract with the neighbouring body corporate to replace the retaining wall.
[25] Because the body corporate is a separate legal entity and because Mr Greenwood exercises its powers, he may enter into that contract on terms of his choosing. The consent of, or approval from, the body corporate members is not necessary. Further directions from the Court are not, as a consequence, needed. However, as Mr Greenwood has said, in circumstances in which Mr Gilhooly and Mr Bos do not accept that he is able to commit the body corporate to a 60 per cent contribution to the work without their approval, further directions from the Court are needed in a practical sense.
[26] During the hearing, Mr Gilhooly advanced the position that the body corporate is not legally responsible for the retaining wall and that an alternative dispute resolution process should be entered into to apportion liability between the bodies corporate. He emphasised his view that the 60/40 outcome could not simply be forced upon them by Mr Greenwood. Mr Bos supported his position.
9 Decision appointing administrator, above n 2.
[27]However, the position is as follows:
(a)As administrator, Mr Greenwood has the body corporate’s powers to do anything authorised by the Act.
(b)Resolving potential litigation with other parties and entering into the agreement over the retaining wall with the neighbouring body corporate is within his powers under the Act.
(c)As administrator, he exercises those powers to the exclusion of the body corporate and the body corporate committee.
(d)Decisions that Mr Greenwood makes, about any matters on which the body corporate is empowered to make a decision – including on the retaining wall – are for him alone. While there could be little doubt that his decision to enter into the agreement with the neighbouring body corporate is sound and sensible, there is no place in the statutory scheme for the Court to endorse the decision. Equally, there is no place for the body corporate members, on the facts here, to deny it.
(e)Having made the decision, Mr Greenwood as administrator may levy contributions from the unit owners under s 121 of the Act to cover the cost of the work from unit owners. The levy is recoverable as a debt due to the body corporate under s 124 of the Act.
[28] While, as I have explained, there is no basis for a formal declaration of rights by the Court under the statutory scheme, the administrator does have the ability to seek further directions from the Court.10
[29] Accordingly, I can confirm that Mr Greenwood, as administrator of Body Corporate 62124 has the power to enter into the agreement with Body Corporate 58067 on the terms of the deed attached to Body Corporate 62124’s 15 October application, and that the deed, when executed, will be binding, on the basis of the statutory scheme as I have described it in [24]–[27] above.
10 At [23(h)]; and Parkinson v Body Corporate 62124 HC Wellington CIV-2023-485-163, 4 October 2024 (minute of Grice J) at [9(a)].
[30] This decision has dealt with just two of the eight directions or orders sought in the body corporate’s application of 15 October. Accordingly, while the body corporate and the applicants have, essentially, been successful, I anticipate that it will be premature, and potentially unhelpful at this point in time, for an award of costs to be made. Costs are reserved accordingly.
Radich J
Solicitors:
Brookfields, Auckland for First and Second Applicants Greenwood Roche, Wellington for First Respondent
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