Singh v Boutique Body Corporates Ltd
[2019] NZHC 1707
•19 July 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-317
[2019] NZHC 1707
BETWEEN SHERYL SITARA SINGH
Plaintiff
AND
BOUTIQUE BODY CORPORATES LIMITED
First Defendant
Continued over page
Hearing: 23 May 2019 Appearances:
S P Bryers for the Plaintiff
V Wethey and S McDonald for the First Defendant
TJG Allan and K Windmeyer for the Second to Seventh DefendantsJudgment:
19 July 2019
JUDGMENT OF ASSOCIATE JUDGE R M BELL
This judgment was delivered by me on 19 July 2019 at 3.30 pm pursuant to Rule 11.5 of the High Court Rules.
………………………………………….
Deputy Registrar
Solicitors:
Richard S Wood, Auckland, for the Plaintiff
Fee Langstone (Virginia Wethey), Auckland, for the First Defendant
Grove Darlow (Tim Allan), Auckland, for the Second to Seventh Defendants
Copy for:
Stephen P Bryers, Barrister, Auckland Official Assignee
SINGH v BOUTIQUE BODY CORPORATES LIMITED [2019] NZHC 1707 [19 July 2019]
KATHERINE SPECK
Second Defendant
RYAN ANTONY SPECK
Third Defendant
JENNIFER GRACE RADONICH
Fourth Defendant
FAQIANG LIANG
Fifth Defendant
SAMIR CHAWLA
Sixth Defendant
GURABACHAN SINGH and MARK IJESSELDJIK
Seventh Defendants
[1] This case concerns a dispute within a body corporate under the Unit Titles Act 2010. Ms Singh, the plaintiff, is one of the owners. Boutique Body Corporates Ltd, the first defendant, provided secretarial, administrative and management services to the body corporate. The second to seventh defendants were members of the body corporate committee. The origins of the dispute are weathertightness defects in a residential unit complex in Flat Bush, South Auckland. The body corporate sued those it alleged were responsible for the defects and settled, but the amount received on settlement was not enough to cover all the repair costs. Under a scheme under s 74 of the Unit Titles Act, the body corporate levied the owners to meet the shortfall. Ms Singh unsuccessfully contested the levies.1 In this proceeding she holds the defendants responsible for the extra levies she has been required to pay.
[2] In response the defendants have applied to strike out. Boutique Body Corporates Ltd applies to strike out all the allegations against it in Ms Singh’s amended statement of claim of 1 February 2019. The committee members apply for partial strike-out of the allegations against them: paragraphs [33](b), [33](c) and [34], which allege some breaches of duty by the committee members and damage suffered Ms Singh.
[3] I find for the defendants mainly because Ms Singh’s pleading does not show a tenable case that the defendants assumed responsibility to her personally for their work for the body corporate under the s 74 scheme. The second defendants also alleged abuse of process, but that argument did not take them all the way they needed.
Background
[4] The unit title development is “Richmond Terraces” in Flat Bush, South Auckland. The body corporate is BC 207650. In her judgment on an earlier hearing of the strike out application, Courtney J gave the background:2
[9] The weathertightness problems in Richmond Terraces were discovered in 2009. At that stage, the cost of remediation was estimated at approximately
$5 million. Work began in 2015 and the Body Corporate applied for approval of a scheme under s 74 of the Unit Titles Act 2010 under CIV 2015-404-
1 Singh v Body Corporate 207650 [2018] NZHC 1932.
2 Singh v Boutique Body Corporates Ltd [2018] NZHC 3233.
003079 (the 3079 proceedings). Gilbert J approved the scheme in August 2016.3
[10] The Body Corporate used settlement monies obtained in other litigation to fund the repairs and then, as costs rose, began to levy owners for the balance. It became obvious that the repairs would cost much more than had been obtained in the settlement of the proceedings. The total cost of repairs is now expected to exceed $13 million.
[11] In June 2015, the Body Corporate Committee appointed to oversee the repair work purported to impose a first levy. It did not have the power to do so and that levy was ultra vires. But the Body Corporate approved the levy at an Extraordinary General Meeting on 25 October 2016. In November 2016, Ms Singh and the owners of another unit (the Simpsons) brought proceedings under CIV-2016-404-2950 (the 2950 proceeding) seeking declarations that the levy was invalid because it was ultra vires and because they had been excluded from voting for failure to pay previous levies.
[12] The substantive proceeding was resolved without a hearing but the parties could not agree on costs. Lang J fixed costs in favour of Ms Singh and the Simpsons but reduced them by 50 per cent. This was on the basis that, although their claims stood a good chance of success, the Court still may not have granted substantive relief because the resolution confirming the levy had passed by a wide margin. The outcome would have been the same even if Ms Singh and the Simpsons had been entitled to vote against it.4
[13] On 5 December 2016, the Body Corporate held another Extraordinary General Meeting at which Ms Singh and the Simpsons voted. The imposition of levies was again approved. In the 3079 proceeding Ms Singh and the Simpsons applied for orders that the levies were ultra vires, seeking declarations of invalidity in relation to levies imposed at the Extraordinary General Meetings on 25 October and 5 December 2016. They argued that the remedial works being undertaken went beyond the scope of the s 74 Scheme. They also made assertions that the Committee had failed in its responsibilities to undertake the repair work in a cost-effective and economic manner.
[14] Lang J held that the levies had been properly imposed and dismissed the application.5 He found it unnecessary to reach a conclusion on the allegations that the Committee had failed to control the cost of the repairs, but did comment that he could not see “what motive the Committee would have had to spend the unit owners’ money in a profligate manner” given that they were all unit owners themselves. He also noted that: 6
Clause 14.1 of the scheme leaves open the prospect that members of the Committee may be liable to unit owners for wilful misconduct or gross negligence. The manner in which the Committee has carried out its task may therefore yet need to be tested in another forum.
3 Body Corporate 207650 v Speck [2016] NZHC 1826.
4 Singh v Body Corporate 207650 [2017] NZHC 2031.
5 Body Corporate 207650 v Speck [2017] NZHC 966, (2017) 18 NZCPR 742.
6 At [29].
[15] Lang J imposed indemnity costs on the applicants.7 Ms Singh and the Simpsons appealed the costs award but the appeal was withdrawn following a settlement with the Body Corporate.
[16] The Body Corporate imposed a further levy on 24 May 2017. In June 2017, it began proceedings against Ms Singh in the District Court (CIV-2017- 404-1132) (the District Court proceeding), seeking summary judgment in respect of Ms Singh’s unpaid levies, which, by then, totalled $166,573.27. Ms Singh filed a statement of defence and counterclaim. She asserted that the costs of remediation on which the levies were based were caused by inexperience and errors on the part of the construction company engaged to do the work, and that the costs had been approved by voting at meetings rather than by individual owners. She claimed that in those circumstances she was not liable for the levies. On the basis of the same assertions, she counterclaimed for unspecified “damages (including exemplary) for abuse of powers and not exercising powers in accordance with the law and causing unnecessary embarrassment and strain on the defendant”.
[17] In addition to the counterclaim, Ms Singh filed an application seeking to join as third parties, BBCL and those members of the Body Corporate Committee who are named as second to seventh defendants in the present proceeding. That application was still extant by the time the summary judgment came to be dealt with.
[19] Judge G M Harrison granted the summary judgment application.8 Commenting on Ms Singh’s allegations, he said:9
The essence of the case for the defendants was that the remediation costs determined by the second and third levies were excessive and should not be paid by them until they were satisfied that all costs had been properly incurred. That approach has been rejected the High Court in the past, see in particular Wheeldon v Body Corporate 342525 [2015] NZHC 884.
What effectively the defendants are attempting to do is have a second attempt at challenging the validity of the levies, when the High Court has already held that the second levy was imposed validly, and there is no challenge to the third levy.
That can only mean that there is now no defence to the claims by the body corporate.
[19] In relation to the application to join the third parties, he said that:10
Those proceedings are not sufficient to decline to grant summary judgment in favour of the body corporate. If indeed those proceedings are intended seriously, they can proceed independently of the necessity for the defendants to pay their respective shares of the levies.
7 Body Corporate 207650 v Speck [2017] NZHC 1636.
8 Body Corporate v Singh [2017] NZDC 29041.
9 At [21]–[23].
.10 At [25].
[20] In relation to the counterclaim, the Judge noted that a counterclaim is not a defence to a summary judgment application and, in any event:11
The allegations in the counterclaims essentially repeat issues raised before Lang J and relate to the scope and amounts of costs increases
… All of these matters were dealt with by Lang J and the attempt of the defendants to raise the same issues again by way of their counterclaim may amount to an abuse of the process of the court. I make no specific finding in that regard. It is clear, however, that the counterclaim does not challenge directly the validity of the two levies in question and consequently does not provide a basis for declining summary judgment.
[21] Ms Singh has neither pursued the counterclaim and application to join third parties to the District Court proceedings, nor abandoned them. She indicated in submissions that she had not pursued the counterclaim because she perceived that Judge Harrison would rule against her. I infer that she does not intend to take steps to advance either the counterclaim or the third-party application in the District Court.
[22] Ms Singh filed an appeal against the summary judgment decision. Before that could be heard the Body Corporate issued bankruptcy notices in relation to the amounts owed by Ms Singh from the summary judgment. Ms Singh applied to stay the execution of the summary judgment pending determination of the appeal (CIV-2017-404-001132) and applied to set aside the bankruptcy notice (CIV-2018-404-116). Both proceedings were withdrawn later in the year following Ms Singh’s payment of the outstanding costs.
[23] By the time the appeal against Judge Harrison’s decision was heard, Ms Singh had commenced the present proceedings (CIV-2018-404-317). Hinton J considered that Judge Harrison was correct to conclude that there was no defence in respect of the levies which had been lawfully imposed and that the counterclaims did not provide any defence. Dismissing the appeal, the Judge noted that a number of Ms Singh’s submissions related to the allegations made in the present proceedings, including alleged failure by the Body Corporate Committee to manage the project in accordance with s 74, harassment by the Body Corporate Committee and BBCL, negligence by BBCL in relation to cost controls, BBCL having a conflict of interest in relation to the lending facility and the Body Corporate not providing sufficient accounting and other information. The Judge commented that relief for the issues that Ms Singh was raising needed to be dealt with in the separate proceedings.12
[24] The Body Corporate applied to vary the s 74 Scheme (CIV-2018-404- 000326) to permit the Body Corporate to impose a final levy. The owners of three units, one of which was Ms Singh, opposed the application, including on the grounds that BBCL and the Body Corporate Committee were guilty of misconduct and negligence in the general and financial management of the project, and that BBCL had a conflict of interest with the lender. However, these issues were acknowledged to be the subject of the present proceedings.
11 At [32].
12 Singh v Body Corporate 207650 [2018] NZHC 1932 at [29].
Downs J accordingly granted the application to vary the Scheme, without determining those allegations.13
[5] Ms Singh’s attempts to contest her liability for the levies imposed by the body corporate have been unsuccessful and she has exhausted all rights of appeal. In this proceeding she looks to the body corporate secretary and the committee members. She began this proceeding without the assistance of a lawyer. Courtney J held that the original statement of claim was defective. It is unnecessary to go through all her reasons, but I note the following:
[52] Some of the allegations may be capable of being pleaded in a form that will satisfy the High Court Rules, but to do so will require a proper understanding of the available causes of action and their requisite elements. Allegations must be properly particularised so that the defendants can appreciate the specific complaints that are being made against them. Allegations of misconduct, especially in the form of dishonesty, carry a heavy responsibility to ensure that there is a justifiable basis for such allegations.
[53] … any allegations that are essentially an attempt to re-litigate the scope of the Scheme or the validity of the levies amount to an abuse of the court process.
And in response to a submission by Boutique Body Corporates Limited that it did not owe Ms Singh a duty of care:
[56] I am not convinced that either of these arguments preclude a duty of care. BBCL is an agent of the Body Corporate. The Body Corporate’s interests are aligned with those of the unit holders (subject, of course, to unit holders failing to comply with their own obligations to the Body Corporate, such as to pay properly imposed levies). If Ms Singh could sue the Body Corporate in negligence then, in the usual course, one would expect the Body Corporate’s agent to be in no better position. However, the current state of the pleadings makes it impossible to know exactly what the scope of the alleged duty or the alleged breach is. At this stage I am not prepared to strike out the negligence allegations, though that is not to be taken as indicating a view that such a cause of action is tenable. It is no more than an acknowledgement that the pleadings are in such a parlous state that I am unable to do justice to the question.
The s 74 scheme
[6] The scheme under s 74 of the Unit Titles Act is part of the background. Under that section, the court may settle a scheme where a building in a unit title development is damaged or destroyed. The court may make any orders it considers expedient or
13 Body Corporate 207650 v Speck [2018] NZHC 1952.
necessary to give effect to the scheme. Schemes are invariably bespoke and may allow considerable departures from the Unit Titles Act. Schemes under s 74 have been frequently used to allow bodies corporate to carry out repairs to damage from weathertightness defects.
[7] I paraphrase some of the scheme. The preamble records background, notes that repairs to both common property and unit property are required and should be carried out as a single project, that the scope of works cannot be ascertained until works start, and that the cost of repairs will be funded by the settlement sum received from the litigation with additional amounts to be paid by owners. Owners will contribute their shares of the settlement sum plus top-up amounts, which represent the costs of repairs of an owner’s unit as a proportion of the total repairs. Under the scheme the body corporate is to carry out the repairs and is appointed agent of all the owners for that purpose. The scheme ratified and confirmed all work that had been carried out up until then. It gave the body corporate power to raise levies for the repairs, which are to be calculated according to a proportion of the costs represented by the quantity survey or assessed actual unit cost of repairs to an owner’s unit as a proportion of the total. There is power to impose further levies if there is not enough money to cover the repairs. There is an acceleration provision if an owner does not pay a levy on time. Surplus funds will be refunded – that contemplates a taking of accounts when the work is completed. Owners are required to co-operate in carrying out the scheme and the repairs.
[8]The scheme includes these provisions:
3.4 The Body Corporate may delegate all or any of its powers or duties to the Body Corporate Committee (“the Committee”). Nonetheless, the Committee must refer all major decisions in connection with the scheme for decision to a general meeting of the Body Corporate and may, in its discretion, elect to refer to any matter in relation to the scheme for a decision to a general meeting of the Body Corporate. Major decisions are defined to include: all decisions to raise and enforce payment of levies, or to borrow funds to pay for the costs incurred pursuant to this scheme.
6.2: Scheme levies shall be calculated according to a proportion of the costs represented by the quantity surveyor, or assessed at actual cost of such repairs to that owner’s unit as a proportion of the total repairs.
9.1 The Body Corporate will keep each owner fully informed of details of the repairs and progress of same over the period of the scheme, by reporting every 3 months.
9.2 Reports to the owners shall include:
a) A report on the progress of the repairs;
b) A report on the financial progress of the repairs, including details of costs and apportionments;
c) A statement of the position of each owner detailing any arrears of levies raised to meet the obligations under the Scheme.
d) A final report on the repairs and the final cost, which will eventually be undertaken at the completion of the repairs.
14.1 The Body Corporate members jointly indemnify and hold harmless the Body Corporate chair and the members of the Committee for all acts and omissions done in furtherance of this scheme, except in case of wilful misconduct or gross negligence.
[9] The scheme is silent on the role of Boutique Body Corporates Ltd, the body corporate secretary.
[10] The way scheme levies are imposed is distinctive. Under the Unit Titles Act, levies are fixed according to ownership or utility interests,14 but here owners are levied according to their share of the work carried out on their unit, with the assessment made by a quantity surveyor. While the body corporate may delegate many of its powers and duties under the scheme to the body corporate committee, the body corporate makes major decisions, including the power to raise levies. The body corporate’s decisions are made by owners in general meetings. Even though the body corporate may make major decisions in general meetings, including on levies, the committee is likely to have an ancillary role, which may include reporting to the general meeting on what it has done and giving information and advice as to options.
14 Unit Titles Act 2010, ss 38, 39 and 121.
The new pleading
[11] Courtney J allowed Ms Singh to amend her statement of claim. Ms Singh retained lawyers, who have filed an amended statement of claim with three causes of action:
[a]failure by all the defendants to supply adequate reports as required by the scheme under s 74 of the Unit Titles Act;
[b]gross negligence or wilful misconduct by the committee members in administering the scheme;
[c]negligence by Boutique Body Corporates Ltd in advising and assisting the committee and the body corporate to administer the scheme.
In summary, the statement of claim pleads that the body corporate identified construction and design defects in Richmond Terraces and brought proceedings which were settled in 2015. The body corporate decided to use the settlement funds to carry out remedial work. It applied to the Court under s 74 of the Unit Titles Act 2010 to approve a scheme to carry out the remedial work. The scheme provided how costs of the remedial works would be apportioned among the owners. Clauses 3.4, 6.2, 9.1 and
9.2 are pleaded. The body corporate delegated its powers and duties to the committee, which contracted with Boutique Body Corporates Limited to carry out those duties. The duties of Boutique Body Corporates Limited under its contract with the body corporate included a duty to advise and assist the committee to administer its powers under the scheme. A building contractor carried out the remedial work from August 2015 to about August 2018. During the repair work Ms Singh had to vacate her unit and paid rent for alternative accommodation. The remedial work took much longer than initially estimated. The body corporate settled claims for payment with the building contractor following advice given by Boutique Body Corporates Limited or the committee. Following the settlement with the building contractor the body corporate has levied Ms Singh for $232,097.27, which is $198,371.92 more than the budgeted levy. Ms Singh has not paid the $198,371.92, and the body corporate has obtained summary judgment against her for the unpaid levies.
[12] For her first cause of action Ms Singh alleges that both Boutique Body Corporates Limited and the committee failed to supply reports as required under the s 74 scheme. She seeks the following information:
[a]The legal and factual basis of the claims for payment made by the building contractor under its contract with the body corporate, including:
[i]The amount claimed by the contractor for construction costs, including the amount claimed for provisional cost sums; and
[ii]The amount claimed by the contractor for any costs additional to construction costs and provisional costs sums.
[b]The legal and factual basis on which the body corporate has settled the claims for payment by the building contractor.
[c]The amounts paid to professional advisors engaged for the scheme for professional costs, and the justification for those costs.
[d]The amounts incurred under the scheme for any other costs.
[e]The basis on which the portion of the total costs incurred for the remedial works have been apportioned to the plaintiff.
Without that information she is unable to assess the basis on which the costs of the remedial works have been apportioned to her. For relief she seeks an order requiring the defendants to supply a report to her regarding the remedial works, including details of all the matters sought above.
[13] The second cause of action pleads that the committee members are liable to all owners, including herself, for gross negligence or wilful misconduct in the administration of the scheme. Paragraph [33] says that they breached that duty in:
[a]failing to provide sufficiently detailed reports regarding the remedial works;
[b]settling the claims made by the building contractor for an amount that was not legally or factually justified; and
[c]apportioning to her an amount for the cost of the remedial works ($453,066.25) which is not legally or factually justified. Particulars are given.
Further, any apportionment to her of the cost of the remedial work should be reduced by $9,600 for the excess rent she has paid. In paragraph [34] she claims the excess levies and rent she has paid as her losses.
[14] The third cause of action alleges that Boutique Body Corporates Limited as secretary/manager/agent of the body corporate owed a duty to all members of the body corporate, including herself, to exercise reasonable skill and care when advising the committee and the body corporate to administer the scheme. This duty arises from the following:
[a]Boutique Body Corporates Limited gave advice and assistance given to the committee and the body corporate in a professional capacity;
[b]Boutique Body Corporates Limited provided the advice and assistance knowing that the committee, the body corporate and all members of the body corporate relied on its skill and expertise as a secretary and manager of body corporate affairs; and
[c]As agent of the body corporate and/or the committee, it owed the same duty of care to members of the body corporate as it did the body corporate and the committee.
Its duty of care included exercising care and skill in relation to:
[a]obtaining and distributing reports to all unit owners of the financial progress of the repairs, including details of costs and apportionments;
[b]representing the body corporate in negotiations with the building contractors and with professionals engaged for the remedial works; and
[c]ensuring that the body corporate complied with the scheme, including that apportionments of the costs of the remedial works were properly carried out in accordance with the scheme.
Boutique Body Corporates Limited breached its duty in:
[a]failing to ensure that the unit owners, including Ms Singh, were provided with reports on the financial progress of the repairs, including details of costs and apportionments;
[b]failing to adequately advise the committee and to ensure the committee was properly advised as to the legal and factual validity of the claims by the building contractor, with the result that the body corporate settled the contractor’s claim for an amount that was not legally or factually justified; and
[c]failing to ensure that Ms Singh was apportioned only for the actual unit costs of the repairs for relief.
Ms Singh claims the same losses as for her negligence claim against the committee members.
Procedural matters
[15] The defendants’ strike out applications were directed at Ms Singh’s original statement of claim. After her lawyers filed her amended statement of claim, the defendants filed memoranda setting out their objections to the new pleading.
Courtney J directed this hearing. The defendants did not however file amended strike out applications. That could be unfair to Ms Singh, as the matters relied on to strike out the first statement of claim would not necessarily apply to the new pleading. The defendants’ memoranda would have given Ms Singh’s lawyers some inkling of the specific basis for continuing the strike out application. Her lawyers did not find out about it in full until the defendants served their synopses of submissions. All the same Ms Singh has not been prejudiced. Mr Bryers ably addressed the defendants’ arguments.
[16] The defendants did not provide any sworn evidence in support of their applications. In a strike out application it is not always necessary. The committee members provided a book of judgments and minutes in proceedings between Ms Singh and the body corporate. A copy of minutes of a general meeting of the body corporate was attached to Mr Allan’s synopsis. Mr Bryers did not object to it being read, but I use it only as showing what matters may be decided at a general meeting.
[17] At my request Mr Bryers gave me a copy of the s 74 scheme. I asked for it because it is part of the background, Ms Singh has pleaded some of its terms and I was wary of reading them out of context.
[18] The defendants apply for strike out on two grounds: absence of a reasonably arguable cause of action and abuse of process.15 For strike out for absence of a reasonably arguable cause of action, the tests recognised under Attorney-General v Prince are so well known that they do not need to be repeated.16 The abuse of process ground is that stated by Lord Diplock in Hunter v Chief Constable of the West Midlands Police:17
The abuse of process which the instant case exemplifies is the initiation of proceedings in a court of justice for the purpose of mounting a collateral attack upon a final decision against the intending plaintiff which has been made by another court of competent jurisdiction in previous proceedings in which the intending plaintiff had a full opportunity of contesting the decision in the court by which it was made.
15 High Court Rules 2016, r 15.1(1)(a) and (d).
16 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267, upheld in Couch v Attorney-General
[2008] NZSC 45, [2008] 3 NZLR 725 at [33].
17 Hunter v Chief Constable of the West Midlands Police [1982] AC 529 (HL) at 541.
The claim against Boutique Body Corporates Ltd for inadequate reporting
[19] The first cause of action against all defendants pleads that they failed to supply adequate reports as required by the scheme under s 74. It relies on cl 9.1 and 9.2 of the scheme in paragraph [8] above. These clauses give unit owners substantive rights to information about the repairs and costs. Ms Singh can enforce those rights independently of any other claims. But the body corporate has the duty of disclosure, not Boutique Body Corporates Ltd or the committee members. As a matter of fact, they may need to take steps to ensure that the body corporate complies with the s 74 scheme, as they are the body corporate’s agents tasked with carrying out the scheme. But the scheme imposes the disclosure obligation on the body corporate alone and Ms Singh can enforce the duty only against the body corporate, not its agents.
[20] In her cause of action in negligence against Boutique Body Corporates Ltd, Ms Singh says that one aspect of its negligence was its failure to give adequate reports. For reasons I shall give more fully when dealing with that cause of action, Ms Singh has not pleaded a tenable cause of action that Boutique Body Corporates Ltd owed her a duty of care when it acted as secretary and administrator for the body corporate. Those reasons apply to the negligence allegation about reporting under the s 74 scheme. Boutique Body Corporates Ltd assumed responsibility to the body corporate, which had a disclosure obligation to her, but the body corporate secretary did not owe a duty to her directly.
[21] The committee members did not apply to strike out this cause of action against them, so it remains on foot against them, but it is struck out against Boutique Body Corporates Ltd.
The negligence claim against Boutique Body Corporates Ltd
[22] The question here is whether Boutique Body Corporates Ltd owes Ms Singh a duty of care in addition to any duties it owes the body corporate. Other matters that make up a claim in negligence are not in issue, for example, standard of care, breach of duty, foreseeability of loss, causation, damage and measure of losses. The statement of claim pleads circumstances consistent with the role of body corporate secretaries. While bodies corporate under the Unit Titles Act are self-governing entities, most find it convenient to engage a professional administrator to provide secretarial, accounting and managerial assistance and advice. Ms Singh says that that was Boutique Body Corporates Ltd’s role and it does not suggest otherwise. While it worked under contract for the body corporate, it also owed the body corporate a concurrent duty of care in tort.18 The imposition of a duty of care arises from an assumption of responsibility in the performance of services for the body corporate. Once an assumption of responsibility has been found, it is not necessary to go further and ask whether it is fair, just and reasonable to impose liability for economic loss.19 A plaintiff needs to prove that they relied on the assumption of responsibility.
[23] It does not follow that because Boutique Body Corporates Ltd owes a duty of care to the body corporate, it also owes a duty of care to its members, the unit owners. Cases involving companies give guidance. In Takaro Properties Ltd v Rowling a Minister of Finance breached a duty of care to a company when exercising a statutory power to authorise an overseas investment, but did not owe any duty to the shareholder, the man behind the company.20 That distinction has been drawn in negligence claims against professionals. In Brownie Wills v Shrimpton a law firm acted for a company in obtaining guarantees by directors to a bank, including a director who was not a client of the firm. The law firm was held not to owe a duty to that director to explain the nature and effect of the guarantee.21 Tipping J said:22
18 Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 (HL); Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830 (HL) at 834-835.
19 Henderson v Merrett Syndicates Ltd at 180.
20 Takaro Properties Ltd v Rowling [1986] 1 NZLR 22 (CA) at 67, 70, 71, 72 and 75. Reversed on appeal, but not on this ground: Takaro Properties Ltd v Rowling [1987] 2 NZLR 700 (PC).
21 Brownie Wills v Shrimpton [1998] 2 NZLR 320 (CA).
22 At 329-330.
If there is a solicitor involved in a transaction, it is not uncommon for the participants to blame the solicitor if something goes wrong. In such circumstances, if the party seeking redress from the solicitor is not that solicitor’s client, and the complaint lies in a failure to act or advise, it is necessary to find some clear and principled bases for saying that there was sufficient proximity between solicitor and non-client to raise a duty of care.
Assumption of responsibility is the conventional touchstone upon which the proximity issue is determined in circumstances such as the present. Without an assumption of responsibility to act on the part of the solicitor, it is hard to see any rationale for finding proximity and thus liability in tort for not acting. Similarly, as a matter of policy, absence of any assumption of responsibility to act will ordinarily lead to a finding of no duty to act.
That can be compared with Christensen v Scott where shareholders of a company sued its accountants and solicitors. Thomas J said:23
It is accepted, of course, that no separate or independent duty of care arises where there is an identity of interest between the company and the shareholders. Professional advisers acting for the company do not simply because of that relationship owe a duty of care to its shareholders. Takaro Properties Ltd v Rowling… is sufficient authority for that proposition. But Mr and Mrs Christensen assert an independent duty arising, not out of their status as shareholders, but as personal clients of Peat Marwick and McCaw Lewis. Both firms had acted for Mr and Mrs Christensen personally for a number of years. Both firms dealt with them individually, particularly Mr Christensen.
That recognises that the facts may show that the professional has specifically assumed responsibility to the shareholder as well as the company, but the duty does not arise only because they are shareholders of the client company.
[24] One reason for not holding that the professional does not generally assume responsibility for shareholders of a client company is to uphold the rules restricting derivative proceedings.24 A wrong to a company was actionable only by the company, unless the case came within one of the exceptions under the rule in Foss v Harbottle.25 Or nowadays, unless a derivative proceeding is allowed under s 165 of the Companies Act 1993. A claim by a shareholder that a professional’s failure to do his job properly
23 Christensen v Scott [1996] 1 NZLR 273 (CA) at 279.
24 That was the first instance decision in Christensen v Scott – Christensen v Peat Marwick [1994] 3 NZLR 745 (HC).
25 Foss v Harbottle (1843) 2 Hare 461.
for the company has caused loss to the shareholder would cut across those rules. Thomas J recognised the point in Christensen v Scott:26
Such claims can only be brought by the company itself or by a member in a derivative action under an exception to the rule in Foss v Harbottle… But this is not necessarily to exclude a claim brought by a party, who may also be a member, to whom a separate duty is owed and who suffers a personal loss as a result of that breach of duty.
[25] Similar caution against a general imposition of a duty of care can be seen in cases where directors or employees are sued by third parties for alleged defective performance while working for their companies. In Body Corporate 202254 v Taylor, William Young and Arnold JJ said:27
In a situation where assumption of responsibility is an element of tortious liability, an employee who is acting on behalf of a principal can only be liable if there is a personal assumption of responsibility by that employee. Further, picking up points already made, to preserve the existing framework of the law of contracts and the idea that a corporation has a legal identity which is separate from those of the individuals involved in it, considerable caution is required before concluding that an employee has assumed personal responsibility.
[26] These approaches apply where a professional provides services to a body corporate under the Unit Titles Act. In general, the professional assumes a duty of care only to the body corporate, not to individual owners. That means that the body corporate can hold the professional to account. Any decision to do so will be made by the body corporate in a general meeting or by those acting with delegated authority of the body corporate. The rule against derivative claims applies to bodies corporate under the Unit Titles Act as well other incorporated entities.28
[27] A policy reason supports this approach. By confining the body corporate secretary’s duty of care in tort to the body corporate, the risks of conflicting duties are reduced. Differences among members of a body corporate are common. There may be legitimate differences of opinion on many matters in the administration of a body
26 At 280.
27 Body Corporate 202254 v Taylor [2008] NZCA 317, [2009] 2 NZLR 17 at [33].
28 Small v Body Corporate 324525 [2018] NZHC 19 at [28]-[29]. The separate provision for derivative proceedings under s 165 of the Companies Act does not displace the common law rule in other contexts, such as limited partnerships, trade unions and incorporated societies.
corporate. A body corporate secretary can hardly be expected to cater for every point of view. The provisions in the Unit Titles Act for decision-making by the body corporate – by resolution in general meeting29 or by chairpersons or committees with delegated authority30 - mean that instructions and authority to the body corporate are fixed by what the body corporate as a whole decides, not by the wishes of individual members. Correspondingly the secretary assumes responsibility to the body corporate as a whole, not to individual members, and the scope of the duty is determined by the instructions and authority given to it by the body corporate as a whole.
[28] I record something that is assumed in the argument above – the body corporate should have an effective remedy for any breach of duty by the professional causing damage to it. If the body corporate had no remedy, the argument for denying a duty of care owed to a unit owner would be weakened. Now suppose a body corporate suffers financial loss because of negligence by a professional who assumed responsibility to it. While the body corporate may bring a claim against the professional for compensatory damages, it must get by in the meantime and to do so it levies unit owners under s 121 of the Unit Titles Act. It can be no defence for the professional to say that the body corporate has mitigated its losses by levying its members and that damages should be reduced by the extra levies raised. In levying its members, the body corporate is drawing on its own resources. In measuring damages, the interests of the body corporate and the owners are aligned. The body corporate is still regarded as out of pocket for losses caused by the professional. The position is little different from that of a company whose shareholders inject capital for the company to keep trading after it has suffered damage. In short, a body corporate’s power to levy its members does not count against its ability to recover the full measure of losses caused by the negligent professional.
[29] Ms Singh can sue Boutique Body Corporates Ltd in negligence only if she can show that, aside from any duty to the body corporate, Boutique Body Corporates Ltd assumed personal responsibility to her of the sort recognised in Christensen v Scott. There must be something more to show that Boutique Body Corporates Ltd assumed responsibility to her personally. Her pleadings do not however state such a case. They
29 Unit Titles Act 2010, s 101.
30 Section 113. For a chairperson, see Unit Titles Regulations 2011, reg 11.
do no more than allege a duty to all members of the body corporate. That will not do, because that alleges no more than that whatever duties Boutique Body Corporates Ltd owed the body corporate it also owed to the members. To allow that pleading would undermine the rule against derivative proceedings – breaches of any duty to the body corporate would be actionable by individual owners, regardless of the wishes of other owners. The power of the body corporate (acting in general meeting or by agents with delegated authority) to approve or disapprove of the actions of Boutique Body Corporates Ltd would be undermined. There is nothing in Ms Singh’s pleading that alleges that Boutique Body Corporates Ltd assumed a personal responsibility to her in such a way that the rule against derivative proceedings would not be affected.
[30] Ms Singh’s negligence cause of action against Boutique Body Corporates Ltd is not tenable because it does not show that it assumed responsibility to her personally. To survive her pleading needs to show more than that there was arguable negligence in acting for the general body of unit owners. If it were allowed to stand, it would improperly undermine the rule against derivative proceedings. The negligence cause of action against Boutique Body Corporates Ltd is accordingly struck out.
The negligence cause of action against the committee members
[31] The committee members’ strike out application is limited. As seen already, they do not say that the first cause of action against them can be struck out. For the negligence cause of action, they object to paragraphs [33](b) and (c) and [34] of the new statement of claim.31 Their ground for strike out is that these are an abuse of process for trying to relitigate matters that have already been decided in earlier cases. Paragraph [33] sets out allegations of negligence; (b) alleges negligence in settling claims made by the building contractor for unjustifiable amounts; (c) alleges negligence in apportioning the costs of remedial works. Paragraph [34] pleads the losses suffered. Paragraph [33](a) – negligence in not providing adequate reports under the s 74 scheme – is left alone.
[32] Paragraph [33] says that the committee members are liable for “gross negligence and/or wilful misconduct in the administration of the scheme”. Ms Singh
31 See [13] above.
has aimed her cause of action to fix the committee with personal liability without recourse to other owners. That comes from cl 14.1 of the s 74 scheme:
The Body Corporate members jointly indemnify and hold harmless the Body Corporate Chair and the members of the Committee for all acts and omissions done in furtherance of this Scheme except in case of wilful misconduct or gross negligence.
If Ms Singh established liability against the committee members that came within the indemnity, she and all the other owners would have to pay to meet the committee’s liability. As Ms Singh claims levies she has had to pay as her loss, that would be a roundabout way of getting out of the levies she has been ordered to pay and would impose most of the burden on the other owners. By alleging only liability for wilful misconduct and gross negligence, she is avoiding that abuse. She wants the committee to pay her for the levies she has objected to but must pay.
[33]Other features of cl 14.1 can be noted:
[a]The indemnity is imposed on the body corporate members, not on the body corporate itself. As the body corporate members’ liability is joint but not several, the body corporate may become involved in steps to indemnify the committee, for example by raising funds collectively.
[b]The clause does not create liabilities. It only provides an indemnity if liability is established. Other rules of law will say whether the committee can be liable.
[c]The clause applies whether the committee’s liability is to a unit
owner or to a third party.
[d]As to the standard of conduct, it has been said that there is no difference between negligence and gross negligence, except the addition of a vituperative epithet,32 but that was in the context of
32 Wilson v Brett (1843) 11 M & W 113, 115.
liability of a gratuitous bailee. Here the clause is intended to offer protection to the committee in case they incur liability, as when they are found to have been careless. It would run counter to that purpose for the exclusion from the indemnity to apply to ordinary acts of negligence. “Gross negligence” is intended to apply to something much more serious. I am not required to assess whether Ms Singh’s pleading does show the requisite gross negligence. While she alleges wilful misconduct generally, her pleading does not say in what ways the committee’s conduct was wilful, as opposed to careless.
[34] The committee’s submissions showed that in earlier proceedings between Ms Singh and the body corporate she had contested the matters in [33](b) and (c) unsuccessfully and her liability for levies had been upheld notwithstanding the complaints which she has repeated in this proceeding. Courtney J had expressly warned her against relitigating these matters. Her claim was said to be an attempt to relitigate her liability for levies for which she has already been found liable. As such it was an abuse of process.
[35] That argument takes the committee only so far. As a counter-argument Ms Singh says that while she has been found liable for the levies, notwithstanding her strong objections, she is still entitled to look to those who through their negligence have caused her losses which should have been avoided. Her position might be compared to a taxpayer who has unsuccessfully contested their tax liability but then take their tax adviser to task for lack of care in attending to their affairs. An example is Stirling v Poulgrain, which involved a lawyer’s negligence in estate planning to avoid gift and death duties.33
[36] The committee rejected that comparison, saying that they could not be responsible in the same way as a tax adviser. But in raising that objection they were arguing that they could not be under any duty of care to individual owners. While a tax adviser might assume responsibility to a client to advise and manage their taxes,
33 Stirling v Poulgrain [1980] 2 NZLR 402 (CA).
they did not owe any comparable duty to owners when they administered the s 74 scheme. With that, they raised a duty of care issue similar to that of Boutique Body Corporates Ltd. That needs to be addressed as part of the strike out application. Mr Bryers argued that the committee owed Ms Singh a personal duty of care.
[37] The suggestion that committee members owe a duty of care to individual owners needs to be treated cautiously. In his article “A Disincentive to Service – Committee Members’ Personal Liability under the Unit Titles Act” Mr Rod Thomas pointed out:34
Committee members are invariably volunteers with little “hands on” experience in terms of performing a role which is a cross between property management and corporate governance. Being volunteers, they often give their time under a sense of social obligation. Experience indicates they usually have minimal comprehension of the workings and requirements of the 2010 Act, which can be difficult to understand and apply.
…in terms of quantum, committee members may likely be liable for potentially substantial claims amounts, possibly extending to millions of dollars for even fairly modest developments located in the suburbs. In this regards, to date, an extensive amount of leaky building litigation involves bodies corporate, from high-rise developments to relatively modest, multi-unit developments. Conceivably, remediation costs may amount to rebuild costs, comparable to or exceeding the purchase price of any unit at issue. Personal liability, once incurred, could expose individual committee members to the risk of being sued even after they have exited the development and purchased elsewhere.
[38] I am not required to consider the entire topic of committee members’ personal liability, only the present case, where one owner claims in negligence (although with a heightened standard of carelessness) in circumstances where the committee was acting within its delegated authority, and there is no suggestion that it breached the scheme, the operational rules of the body corporate or the Unit Titles Act, or that it acted illegally. Ms Singh says that the committee’s decisions in dealing with the building contractor to settle its payment claims and any role it had in apportioning costs among unit owners were flawed and it does not matter if those decisions were or could be approved by owners in general meeting.
34 Rod Thomas “A Disincentive to Service – Committee Members’ Personal Liability under the Unit Titles Act” [2014] NZLR 423 at 423-424.
[39] Before dealing with the role of the committee, consider decisions made by owners in a general meeting. That is the default position – decisions are made by owners in a general meeting, unless the decision-making power has been delegated. Not all bodies corporate have committees35 and general meetings of owners decide matters which have not been delegated. There are few limitations on how owners may exercise their voting powers. They must be eligible and up to date with their levies.36 They must not vote for a matter that is beyond the powers of the body corporate or that is illegal. Under s 210m, a minority who vote against a resolution may obtain relief if the effect of the resolution is unjust or inequitable to them. These matters aside, owners can generally vote as they wish. The court does not decide between competing views as to the merits.
[40] In company law, the courts have leaned against interfering with voting powers in a general meeting. In Pender v Lushington Sir George Jessel MR said:37
In all cases of this kind, where men exercise their rights of property, they exercise their rights from some motive adequate or inadequate, and I have always considered the law to be that those who have rights of property are entitled to exercise them, whatever their motives may be for such exercise – that is as regards a Court of Law as distinguished from a court of morality or conscience, if such a court exists…There is, if I may say so, no obligation on a shareholder of a company to give his vote merely with a view to what other persons may consider the interests of the company at large. He has a right, if he thinks fit, to give his vote from motives or promptings of what he considers his own individual interests.
This being so, the arguments which have been addressed to me as to whether or not the object for which the votes were given would bring about the ruin of the company, or whether or not the motive was an improper one which induced these gentlemen to give their votes, or whether or not their conduct shews a want of appreciation of the principles on which this company was founded, appear to me to be wholly irrelevant.
[41] A similar approach can be seen in unit titles cases. In Wheeldon v Body Corporate 324525, Muir J said about decisions made in a general meeting about the merits of repair plans:38
35 Under the Unit Titles Act 2010 s 112, a development with nine or fewer units does not need a committee but may appoint one. Larger developments must have them unless they decide by special resolution to do without.
36 Unit Titles Act s 96.
37 Pender v Lushington (1877) 6 Ch D 70 at 75-76.38 Wheeldon v Body Corporate 324525 [2015] NZHC 884, (2015) 16 NZCPR 829 at [76], upheld on appeal, [2016] NZCA 247 and [2016] NZSC 125.
The Body Corporate was, in my view, entitled to accept that advice and develop its scope of works accordingly. It was entitled to do so despite the existence of contrary views. It is not for the Court to substitute its own view on the merits of one repair plan over another or to examine, in the words of Jaine J, “whether the minority view on the merits of the proposal should be upheld with the result that the wishes of the majority could not be given effect to”.
(citations omitted)
In Body Corporate 324525 v Stent I held that, so long as jurisdictional requirements were met, alleged negligence as to the merits of decisions of a body corporate was not justiciable.39 In that case the body corporate sued for unpaid levies and the defaulting owners resisted alleging equitable set-off for negligent decision-making (as well as other matters).
[42] Given the strong policy of not interfering with the exercise of voting powers so long as jurisdiction and eligibility requirements are met and the case is not within s 210, there is no basis for holding that one owner owes a duty of care to other owners when voting in a general meeting. The consequence is that the owners generally must take the consequences of decisions in general meeting for better or worse. If the body corporate makes a botch of matters, the owners may be worse off and may face increased levies to put matters right, but they will not have recourse against the body corporate or each other. So, in this case Ms Singh can have no claim against the body corporate or her fellow owners for their decisions in general meeting, including any major decisions under cl 3.4 of the scheme. That includes decisions to raise scheme levies.
[43] Now for delegated decision-making. Subject to those matters reserved under s 108(2), a body corporate may delegate any of its powers and duties to a committee. Clause 3.4 of the scheme is another delegation provision. Under s 114 a committee must report to the body corporate on the exercise of its powers and duties. A committee is not a separate legal person, does not own property in its own right and cannot sue and be sued. Instead it exercises the powers and duties of its parent body.40 Decision-making by committee members may not be as unrestrained as owners voting in a general meeting. Because they make decisions on behalf of the body corporate,
39 Body Corporate 324525 v Stent [2017] NZHC 2857 at [183]- [192].
40 Dental Council of New Zealand v Gibson (2010) 19 NZCPR 900 at 905-906.
they owe it some duties. It is not necessary to set out definitively what those duties are, but they are likely to include acting in the best interests of the body corporate as a whole, acting only within the powers given to them, using their powers for a proper purpose, exercising independent judgment, not allowing the body corporate to incur obligations that cannot be fulfilled, exercising some degree of care and not allowing conflicts between their personal interests and their duty to the body corporate. Because they owe duties to the body corporate, it may approve their actions and release them from any liability for breaches of their duty. The body corporate’s approval may take different forms: authorising some decision in advance, ratifying the decision afterwards, affirming a decision which might otherwise be voidable and adopting a decision which the committee had no power to make. The body corporate’s approval decisions are made in general meeting and the same restraint against interfering with decisions in general meeting applies.
[44] Ms Singh cannot sue committee members for breaches of their duties to the body corporate. Only the body corporate has standing to do so. And it would only decide to do so if a majority of owners in general meeting assented to a resolution to do so. Generally speaking, Ms Singh cannot sue derivatively for any alleged wrongs done to the body corporate. That is no more than a restatement of the rule in Foss v Harbottle. The rule is subject to exceptions – decisions may be challenged if they are ultra vires or illegal, require a special majority or are a fraud on the minority. None of them apply here and there was no suggestion that they did. I infer that the body corporate has approved the decisions of the committee because it has raised levies under the scheme to cover additional costs of repair. Ms Singh’s liability under judgments for unpaid levies is evidence of the approval. It would not have imposed levies for costs which it did not approve.
[45] Ms Singh’s claim that the committee owed her a personal duty of care is to be assessed against that general governance background. Two cases have recognised that an owner may have a personal claim against a committee member. Manning v BC 126411 was decided under the Unit Titles Act 1972.41 Section 37 of that Act provided that owners and the body corporate are bound by rules of the body corporate
41 Manning v BC 126411 HC Auckland CP 89SD01, 29 November 2001.
and that an action could be brought for breach of the rules. An owner sued the chairman for breach of the rules (a sixth cause of action). In a strike-out decision, Master Faire upheld that cause of action. An owner could enforce a breach of the rules against another owner and should not be compelled to pursue any claim through the body corporate. The case comes within the illegality exception in Foss v Harbottle. It did not involve claims of negligence. This case is different – there is no claim that the committee breached the Act or body corporate rules.
[46] In Guardian Retail Holdings v Buddle Findlay an owner sued the body corporate and committee members for breaches of the body corporate rules and misfeasance.42 There were four causes of action: i) breaches of the Unit Titles Acts 1972 and 2010, body corporate rules and general meeting resolutions with allegations that the committee were motivated to advance their own interests as residential owners over those of the plaintiff as a commercial owner; ii) a claim for relief under s 210; iii) a claim that a special levy was ultra vires; iv) a claim that the body corporate could not restrict communications among owners. Again, this case comes within the exceptions in Foss v Harbottle, given the invalidity allegations.
[47] Neither case discussed the issue in this case – whether a committee owes an owner a personal duty of care when no questions of validity arise and the committee’s decisions have been ratified in general meeting. Earlier cases of Ms Singh have referred to her claim against the committee but only obiter and in passing.43
[48] Ordinarily committee members do not owe a duty of care to individual owners. They are appointed by the body corporate as a whole and are its agents. They answer to it. It may approve their decisions by authorisation, ratification, affirmation and adoption. The approval is a decision of the majority in a general meeting. An individual owner can hardly take the committee to task for a decision approved by the body corporate. That would subvert the vote of the majority in general meeting. Accordingly, an individual owner’s claim can be available only in circumstances where the body corporate’s approval is irrelevant. In a case alleging breach of a duty
42 Guardian Retail Holdings v Buddle Findlay [2013] NZHC 1582, [2013] NZAR 988.
43 See for example Lang J’s comments in Body Corporate 207650 v Speck [2017] NZHC 966, (2017) 18 NZCPR 742 at [25].
of care, that can only be if, putting aside its obligations to the body corporate as a whole, the committee assumes responsibility to particular owners. This point is largely the same as for the claim against Boutique Body Corporates Ltd.
[49] There is nothing in Ms Singh’s case that suggests that the committee assumed responsibility to her for a matter that lay outside of its general obligations to the body corporate as a whole. She pleads that the committee are liable to all owners for gross negligence, but a duty owed to all owners is tantamount to a duty to the body corporate as a whole. The other owners can approve the actions and decisions of the committee and that would leave Ms Singh without a claim.
[50] Ms Singh’s pleading does not show a claim that the committee assumed responsibility to her so as to impose a duty of care to her. They are not like the negligent tax adviser. While they are answerable to the body corporate, it would be wrong to superimpose an additional obligation of care to individual owners whose views run counter to the majority. Her claims against committee members in paragraphs [33](b) and (c) and [34] are not tenable and should be struck out.
Outcome
[51] I have decided to strike out mainly because of an absence of a duty of care. In the context of unit titles disputes the claims that body corporate secretaries and committee members owe duties of care to individual owners are new. No authorities on point were cited. In Couch v Attorney-General Elias CJ and Anderson J emphasised that the courts should be slow to strike out a claim where a duty of care is alleged in a new situation.44 Notwithstanding that caution, I am satisfied that a ruling should be made now that no duty of care arose. The issue of principle stood out clearly.45 Ms Singh was allowed to file a new pleading after her first had been found defective. Her lawyers would have appreciated that they had one chance to get it right. They must have drafted the pleading to state her case as advantageously as possible. They would not have omitted any matters showing any assumption of duty directly to her. Finality is required, especially for the committee members. They are entitled to an
44 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
45 Gartside v Sheffield Young & Ellis [1983] NZLR 37 (CA) at 39-40.
early decision whether Ms Singh has pleaded an effective cause of action against them. They should not be left to worry about ongoing allegations of personal liability while the case progresses to a full hearing. The dispute between Ms Singh and the body corporate has already led to many proceedings and hearings. Prompt resolution is desirable.
[52] The result is that all the claims against Boutique Body Corporates Ltd are struck out. Paragraphs [33](b) and (c) and [34] of the amended statement of claim against the committee members are struck out. Ms Singh’s claims against the committee members in her first cause of action and in paragraph [33](a) remain on foot. The surviving parts allege a failure to give adequate reports against the scheme. I noted that under the scheme the body corporate was responsible for giving reports, not anyone else. Earlier decisions do not seem to bar Ms Singh from pursuing that matter against the body corporate. The remaining parties might consider whether the body corporate should be substituted for the committee members.
[53] After completing this decision, I learnt that Ms Singh was adjudicated bankrupt on 3 July 2019.46 Her claim in this proceeding will have vested in the Official Assignee, who should receive a copy of the judgment. I direct this proceeding to be called in the chambers list at 2.15 pm on Friday, 23 August 2019 to give further directions. The parties and the Official Assignee should consider the effects of the bankruptcy on the proceeding. Annulment of the bankruptcy under s 309(1)(b) of the Insolvency Act 2006 may be possible if Ms Singh’s unit can be sold and all her debts paid. The remaining parts of her claim would re-vest in her.47 If so, should this proceeding be put on hold to see what happens?
[54] Ms Singh’s estate is liable to the other parties for costs. Boutique Body Corporates Ltd has costs on the proceeding, the committee members costs on the strike out application. If the parties cannot agree costs, memoranda may be filed.
…………………………………
Associate Judge R M Bell
46 Body Corporate 207650 v Singh [2019] NZHC 1547.
47 Insolvency Act 2006, s 311.
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