Phythian v Body Corporate No. 120066 HC Auckland CIV 2008-404-4284
[2008] NZHC 2538
•28 August 2008
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2008-404-4284
BETWEEN BRUCE PHYTHIAN, TIENA ANN PRATT, MAGDELENE CHEOK FONG TEO PHYTHIAN
First Appellants
AND JOHN ALDRED BATCHELOR Second Appellant
AND PETER ANDREW JOSEPHSON, ELIZABETH MURIEL JOSEPHSON, MATTHEW CARL JOSEPHSON, ROSEMARY LOUISA ROBERTSON, SALLY ELIZABETH MCLAUGHLIN, DANIEL LLOYD JOSEPHSON AND BRIAN RICHARD ANDERSON
Third Appellants
AND PAUL RICHARD MUCKLESTON AND MARITZA THELMA FARRANT
Fourth Appellants
AND GRAHAM COWLEY Fifth Appellant
AND BODY CORPORATE NO. 120066
Respondent
Hearing: 28 August 2008
Appearances: Mark Colthart for Appellants
Tim Allan for Respondent
Judgment: 28 August 2008
JUDGMENT OF HARRISON J
SOLICITORS
Gregory Simon (Auckland) for Appellants
Grove Darlow & Partners (Auckland) for Respondent
COUNSEL Mark Colthart
PHYTHIAN AND ORS V BODY CORPORATE NO. 120066 HC AK CIV 2008-404-4284 28 August 2008
Introduction
[1] This appeal against a decision in the District Court at Auckland is another step in the continuum of litigation between two groups of owners of apartments in a residential complex in Herne Bay, Auckland.
[2] The appeal challenges the decision of Judge Roderick Joyce QC entering summary judgment for Body Corporate 120066 against six of the 12 owners of apartments on levies for payment of contributions towards substantial costs incurred in rectifying problems resulting from leaking caused by defective construction. The amounts for which judgment was entered range between $39,608 and $56,757 together with interest and indemnity costs.
[3] The appellants opposed the Body Corporate’s application for summary judgment on four discrete grounds. All four were dismissed by Judge Joyce in the District Court. The appellants have now abandoned the first three. The sole ground of appeal is that the Judge erred in refusing to exercise his discretionary power against entering summary judgment: R152(1) District Court Rules.
[4] Having had the benefit of careful written synopses of submissions from both Mr Mark Colthart for the appellants and Mr Tim Allan for the Body Corporate, supplemented orally, I have formed a sufficiently clear view to give judgment orally at the conclusion of argument.
Resolution
[5] The appeal arises as a consequence of a resolution passed by the Body
Corporate on 12 October 2007 to enter into a contract as follows:
(i)To effect remedial works in accordance with a specification that had been provided by Cunningham & Partners, Architects, to repair and maintain windows, decks and to have the buildings re-painted [relating to the complex] (the ‘Windows, Decks and Painting Resolution’); and
(ii) To levy proprietors $962,316 to pay for the Windows, Decks and
Painting Resolution in four instalments payable on 1 December
2007, 1 February 2008, 1 March 2008 and 1 April 2008.
[6] The Body Corporate resolved to amend the original payment structure by calling for staged instalments. The first required payment of 35% of the repair costs, the second and third instalments were fixed at 25%, and the fourth and final instalment at 15%.
High Court
[7] Immediately after the passage of this resolution the appellants filed an application for an interim injunction in this Court restraining the Body Corporate from giving effect to the resolution. The relevant circumstances are summarised in these passages from a judgment which I earlier delivered dismissing the appellants’ application for interim relief: Young v BC120066 HC AK CIV 2007-404-002375 (unreported), 6 December 2007:
[1] Two groups of owners of apartments in an upmarket complex in Herne Bay live in a state of dysfunction. The numbers on each side are roughly equal, but recent defections and counter-defections have continually altered the balance of power. The relationship has deteriorated to the point where earlier this year one group led by Mr Steven Young (the Young Group) applied to this Court for an order appointing an administrator to manage and control the affairs of the Body Corporate. The other group led by Mr Graham Cowley (the Cowley Group) opposes.
[2] There now appears, however, to be an informal degree of consensus that an administrator should be appointed. Agreement on an appropriate candidate, who is also willing and able to assume the role, is the current centre of attention. But an administrator cannot be appointed unless and until a relatively urgent issue is determined.
[3] The Body Corporate, chaired by Mr Young, has resolved to carry out extensive repair works and has entered into contracts accordingly. The Cowley Group has applied for an interim injunction restraining the Body Corporate from implementing its resolutions. It says that the resolutions are procedurally defective, ultra vires or inequitable.
[4] Following argument on 21 November, the parties agreed to convene an extraordinary general meeting on 29 November at the offices of the Body Corporate’s independent counsel, Mr Tim Allan of Grove Darlow, to reconsider the repair resolutions. This step was taken without prejudice and cured the alleged notice irregularities giving rise to the procedural ground of challenge. Mr Allan has since provided a full report. The result of approval
was unchanged and I now need to consider only the ultra vires and inequity grounds of challenge.
[5] The Westpoint complex is on the corner of Sarsfield Street and Hamilton Road in Herne Bay near the waterfront. It comprises two blocks of six apartments. The battle lines are drawn largely according to the physical groupings. The Cowley Group together with Mr Paul Muckleston and Ms Maritza Farrant but excluding Ms Robyn Glozier owns the apartments in Block A which is closest to Sarsfield Street. The Young Group, together with Ms Glozier but excluding Mr Muckleston and Ms Farrant, owns the apartments in Block B, fronting Hamilton Road.
[6] Westpoint was constructed by Chase Group in the late 1980s. Complaints about water leakage were made by owners soon after. The Body Corporate’s minutes record references to these problems as early as 1992. Some individual owners made attempts to rectify defects in their own apartments.
[7] The nature and extent of leakage and consequential damage steadily worsened. The Body Corporate commissioned a series of experts’ reports from early 2004. The theme common to all was that water was penetrating the apartment interiors through external windows, principally those leading on to and through the decks below. The situation was aggravated during periods of heavy rain. The principal defect was the developer’s use of what were essentially shop display windows with lightweight framing and lightweight glass. They were not designed to provide protection against the weather.
[8] The principal argument advanced by Mr Colthart in the Young case was that the resolutions were ultra vires in two respects. One was that rule 2(d), which materially obliged the Body Corporate to ‘repair and maintain the exterior of the building in which the units form part in all respects’, was ultra vires the powers conferred by the Unit Titles Act 1972. An additional argument of ultra vires related to a power to authorise an upgrade of the apartments and require a unanimous decision of the owners. I rejected both arguments, and dismissed the appellants’ application for an interim injunction; there was no serious or arguable question for trial: see [22]-[36].
District Court
[9] As noted, the judgment was delivered on 6 December 2007. In the interim, on 1 December 2007, the first instalment of the windows and decks levy fell due for payment to the Body Corporate. A second levy fell due on 1 February 2008. The appellants refused to satisfy either demand. As a consequence the Body Corporate
filed an application in the District Court on 6 March 2008 for summary judgment. Affidavits were filed in support and opposition. Judge Joyce heard the application on a defended basis on 27 May. He delivered a reserved judgment in favour of the Body Corporate on 13 June.
[10] Two relevant events had occurred in the interim. One was that on
20 December 2007 the appellants had filed and served a notice of appeal against my decision in Young. The other was that Heath J had delivered a decision in Body Corporate 188529 v North Shore City Council HC AK CIV 2004-404-3230 30 April
2008. The Judge held, among other things, that a rule adopted by the Body Corporate in that case, materially similar to rule 2(d), was ultra vires the Unit Titles Act 1972.
[11] Mr Colthart will rely on Heath J’s decision in Body Corporate 188529 as the principal ground for arguing in the Court of Appeal that my decision in Young was wrong. Mr Allan, however, submits that Heath J’s finding was obiter because it was irrelevant to the ultimate decision; that it is distinguishable or is arguably reconcilable with Young given that the physical structures which are subject to the rules are very different; and that academic commentary supports Young and its consistency with Australian authority.
[12] It is unnecessary for today’s purposes for me to embark upon the unappealing exercise of a comparative assessment of the merits of the decisions in Young and Body Corporate 188529. In my judgment the reasoning adopted in either case is irrelevant to the narrow ground on which Mr Colthart advances this appeal.
[13] It is important to note that the appellants had taken no steps to prosecute their appeal at any stage in the period between 20 December 2007 and argument before Judge Joyce on 27 May 2008. They could, of course, have obtained a priority fixture in the Court of Appeal, especially after the Body Corporate filed its application for summary judgment on 6 March. They could also then have applied for a stay in that forum pending determination of their appeal. But, as Mr Allan emphasises, they did nothing. They sat on their hands. While Mr Colthart says that he advised Judge Joyce on 27 May that preparation of the case on appeal was under way, the case was
not itself prepared and filed until 20 June. This step could and should have been taken before 31 January. The appellants have now obtained a fixture in the Court of Appeal on 19 February 2009.
[14] Nevertheless, in these circumstances Mr Colthart submitted that Judge Joyce should have exercised his residual discretion against entering summary judgment. After dismissing all three primary grounds of opposition, the Judge carefully considered the relevant authorities on refusal: at [87]-[91]. He concluded by adopting this analysis from McGechan’s commentary on the High Court Rules as follows: at [92]:
(a)The discretion implied by the use of the word ‘may’ in R136 [High Court Rules] is to be restrictively applied. In the great majority of cases, once the Court is satisfied the defendant has no defence, there is no room for the exercise of its discretion.
(b)The residual discretion may be invoked to avoid oppression or injustice to the defendant where:
(i) The proceeding involves the actions or possible liability of a third party which is not before the Court;
(ii) The proceedings are such that the opportunity should be given to allow discovery or other interlocutory matters to be concluded;
(iii) The circumstances of the case disclose very unusual features, the presence of which leads the Court to conclude that the entry of summary judgment would be oppressive or unjust; or
(iv) The combination of complex issues of fact and law justify the dismissal of the application for summary judgment, either as a matter of discretion or because the Court cannot be satisfied that the defendant has no defence.
[15] Judge Joyce rejected Mr Colthart’s submission that the appropriate course would be to dismiss the Body Corporate’s application and adjourn the substantive claim for determination after the Court of Appeal delivered judgment. He was not satisfied that the appellants’ appeal had any real prospects. And he was satisfied the best interests of all parties required prompt completion of the remedial work: at [93]- [97].
Appeal
[16] Mr Colthart accepts Judge Joyce’s summary of the relevant principles. Mr Colthart acknowledges what he described as the ‘significant challenge’ he faces in establishing that the Judge erred in declining to exercise his discretion. He submits that the Judge should have refused summary judgment because there is every possibility that the Court of Appeal will disagree with Young as to the vires of rule 2(d). That possibility, he says, ought to have resulted in the Court exercising its discretion in favour of the appellants.
[17] Mr Colthart relies in support on this passage from Jowada Holdings Ltd v
Cullen Investments Ltd CA248/02 5 June 2003:
[30] Once the Court has been satisfied that there is no defence Rule 136 confers on it a discretion to refuse summary judgment which is of a residual kind. While the types of cases in which the discretion will be exercised to refuse judgment cannot be exhaustively defined, the most common instance is where there would be an unfairness in proceeding immediately to judgment, for example if the defendant were unable to get in touch in the time available with a material witness who it was reasonably thought might be able to provide it with material for a defence: Bank Für Gemeinwirtschaft v City of London Garages Ltd [1971] 1 All ER 541, 548 (CA). In that case Cairns LJ also said that harsh or unconscionable behaviour of the plaintiff might require a matter to proceed to trial so that any judgment obtained was in the full light of publicity. Generally, however, where the ground relied on in seeking summary judgment goes to the substance of the litigation, the interests of justice would not permit refusal of judgment unless they provided a basis for it to be refused at the substantive hearing: Inner City Properties Ltd v Mercury Energy Ltd (1990) 13 PRNZ 73 (CA). It should not be thought that a plaintiff who has shown that there is no arguable defence will be denied judgment except in rare circumstances.
[My emphasis]
[18] In this respect Mr Colthart, relying on the emphasised passage from Jowada, says the prospect of the Court of Appeal’s reversal of Young is a proper basis for departing from the conventional principle that the interests of justice do not normally permit refusal of summary judgment. In the event of a successful appeal the Body Corporate would be refused judgment at a substantive hearing. He submits that that prospect is a rare circumstance rendering it unfair or harsh to enter judgment.
[19] I note that Judge Joyce considered and dismissed this argument. He expressed his view also that Young was rightly decided. Faced with the problem that the Judge when exercising his discretion did consider a relevant factor, Mr Colthart submits that he was plainly wrong.
Decision
[20] I disagree with Mr Colthart. His argument may have gained some traction if the appellants had taken the available steps which would have likely resulted in the Court of Appeal delivering a final decision in the Young appeal before the Body Corporate’s application for summary judgment was heard on 27 May. Instead they effectively relied on their own inactivity as a ground for setting up what was no more than a possibility that the rule under which the Body Corporate acted and sued was ultra vires.
[21] I do not think the residual discretion was vested for this purpose. I agree with Judge Joyce that its application must apply in a restricted range of circumstances. Principally they relate to unfairness which is likely to arise if a defendant is shut out from raising a defence that was or might otherwise be available due to circumstances beyond his control, or which for some extraordinary reason would be available at a substantive trial but not at an interlocutory hearing, or which, again for some extraordinary reason, cannot fairly be resolved at an interlocutory stage.
[22] Here the Body Corporate was proceeding on the ground that its levies were lawfully issued. It was entitled to assume, consequential upon Young, that the rule was valid. The District Court, as Judge Joyce recognised, was bound by the decision in Young. The appellants would not, if the case had gone to substantive trial on the date of hearing of the interlocutory application for summary judgment, have had a defence. An argument that the Court of Appeal may possibly disagree at a later stage, advanced where the appellants have remained inactive in pursuing their appeal rights for six months, cannot fall within the narrow range of circumstances where the interests of justice should come to a defendant’s aid.
[23] I agree with Mr Allan. The appellants are the authors of their own misfortune. Their argument in opposition to entry of summary judgment and on appeal is no more than an application for stay under a different guise. I repeat that the appellants can and should have exercised that right when appropriate.
[24] Mr Colthart also submits that an injustice will result to the appellants if the judgment is enforced and they meet their levies plus interest and costs. He properly accepts that the appellants are in a position to pay the judgments. However, he says that if successful on appeal they will be unable to recover from the Body Corporate. He may be correct in this respect but that argument, if it is tenable, should have been the basis for an application for stay brought at a much earlier stage and not raised under a different head after the Body Corporate has justifiably undertaken the process of recovering the amounts due through litigation in the District Court.
[25] Furthermore, as Mr Allan submits, even if the appellants succeed in the Court of Appeal, they will face arguments of betterment or improvement in defence of any attempts to recover payments. And, as Judge Joyce noted, from a practical point of view the sooner the complex is properly fixed and is thus sound then the better in the long run for all 12 owners: at [96]. In this respect I note Mr Allan’s confirmation that the appellants have failed to pay the third and fourth levies.
Result
[26] Accordingly, the appellants’ appeal against entry of summary judgment in the District Court on 13 June 2008 is dismissed and the order for stay of execution made by Heath J on 22 August 2008 is discharged.
[27] The appellants are jointly and severally ordered to pay the Body Corporate’s costs on an indemnity basis – that is, all reasonable solicitor and client fees – on or
before 8 September 2008.
Rhys Harrison J
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