Tao v Strata Title Administration Ltd

[2018] NZHC 848

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-002177

[2018] NZHC 848

IN THE MATTER

of the Insolvency Act 2006

AND

IN THE MATTER

of the bankruptcy of AN LI TAO

BETWEEN

AN LI TAO

Applicant

AND

STRATA TITLE ADMINISTRATION LTD

First Respondent

JIGAR PANDYA
Second Respondent

BODY CORPORATE 198693

Third Respondent

Hearing:

18 April 2018

Appearances:

Applicant in person

C Baker for Respondents

Judgment:

30 April 2018

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

This judgment was delivered by me at 10.30 am on 30 April 2018 pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Price Baker Berridge, Auckland for Respondents

TAO v STRATA TITLE ADMINISTRATION LTD & ORS [2018] NZHC 848 [30 April 2018]

[1]                  On 27 April 2016 the High Court entered summary judgment against the applicant, Ms Tao, on two proceedings she had brought against the respondents. On  8 August 2016 the Court issued a further judgment awarding costs to the respondents against Ms Tao in the sum of $60,210. Ms Tao has not paid any part of this sum. The respondents have issued a bankruptcy notice against her. Ms Tao applies to set that notice aside.

[2]                  Section 17 of the Insolvency Act 2006 provides that a debtor commits an act of bankruptcy in certain circumstances. A creditor must have obtained a final judgment or order against the debtor for a sum of money, execution must not have been halted by a court and the debtor must have been served with a bankruptcy notice. Further, and of relevance to the present case, it must be shown that the debtor has not, within 10 working days of service of the notice, complied with it or satisfied the Court that he or she has a cross claim against the creditor.1 A cross claim means a counterclaim set-off or cross demand that is equal to or greater than the judgment debt or the amount that the debtor has been ordered to pay, and which the debtor could not use as a defence in the action or proceedings in which the judgment or the order was obtained.2

[3]                  The judgment arose from proceedings filed by Ms Tao in relation to issues arising in the operation of the Body Corporate of an apartment complex in New Lynn, Auckland. The respondents are, respectively, the Body Corporate secretary, the Body Corporate chairperson, and the Body Corporate itself, constituted under the Unit Titles Act 2010.

[4]                  In her application Ms Tao raises a number of grounds on which she says the Court should set the bankruptcy notice aside. First, Ms Tao says that as her action in bringing the original proceeding was directed at assisting with overall Body Corporate management issues, she is entitled to an indemnity from the Body Corporate in relation to her costs.

1      Section 17(1)(d)(ii).

2      Section 17(7).

[5]                  Secondly, Ms Tao says that she has filed claims in the District Court and a complaint against the Body Corporate with the Human Rights Commissioner, which is to be decided by the Human Rights Review Tribunal. These are claims in terms of s 17.

[6]                  Thirdly, Ms Tao says that the respondents are covered by insurance pursuant to an Office Bearer Liability Insurance policy, and they have claimed under that policy so should not claim against her.

[7]                  Fourthly, she says that the costs awarded to the first and second respondents have already been paid by the Body Corporate to them so they are no longer creditors.

[8]                  Finally Ms Tao says that she is the attorney of both of her parents who are unwell and adjudicating her bankrupt may disqualify her from acting in that capacity.

[9]                  It will be noted that apart from the second of these grounds in the application, all other matters are outside the ambit of s 17(1)(d)(ii). Ms Tao also presented argument on issues outside the terms of this paragraph. It is appropriate, therefore, to deal, first, with the claims which Ms Tao maintains she has against the respondents, and then to refer to the remaining issues raised.

[10]              The claim Ms Tao has against the respondents has been filed by her with the Human Rights Commissioner, and is now referred to the Human Rights Review Tribunal. The claim is brought by her, her mother and father and relates to specified actions contrary to their interests which are said to amount to a breach of the Human Rights Act. It is not necessary to describe this action in any more detail than this, because the sum claimed from the Tribunal is $30,000 in respect of each plaintiff. As the definition of a cross claim shows, it must be one in which the sum claimed exceeds the amount of the judgment debt. Here, the sum claimed by Ms Tao is under one half of that amount. Accordingly the claim in the Human Rights Review Tribunal does not qualify as a cross claim in terms of s 17.

[11]              Ms Tao had also brought a proceeding in defamation against the respondents in the District Court. That proceeding has been struck out.

[12]              Accordingly there is no cross claim against the respondents in terms of s 17, and accordingly all the criteria in s 17 which are required to be met in order to establish the commission of an act of bankruptcy have been met.

[13]              Ms Tao raised six other issues, and I refer to them briefly. First, Ms Tao says that both of her parents require considerable levels of care, and she has enduring powers of attorney for them. She says that if she were adjudicated bankrupt, these powers of attorney would be in jeopardy and there is no-one else to manage her parents’ affairs. In respect of her mother, Ms Tao is employed by the District Health Board to look after her.

[14]              This point is valid. Section 106 of the Protection of Personal and Property Rights Act 1988 provides that an enduring power of attorney ceases to have effect when the attorney is adjudged bankrupt. However, the application presently before the Court relates to the bankruptcy notice, and is not an application to adjudicate   Ms Tao bankrupt. This provision may be a relevant issue for the Court to consider if an application for adjudication is filed and comes before the Court, but it is not relevant at the present time.

[15]              Secondly, Ms Tao applied to the Court of Appeal on 15 April 2018 for leave to appeal against the judgments of Thomas J on which the bankruptcy notice is based. In the circumstances of this case this is not, in my view, a reason to stay the present process. After the judgment was issued Ms Tao filed an appeal and the Court of Appeal required payment of a sum by way of security for costs. Ms Tao asked that this requirement be dispensed with but the Registrar of the Court declined. Ms Tao sought a review which came before Miller J. He also declined. Ms Tao applied for leave to appeal against the judgment of Miller J to the Supreme Court. The Supreme Court declined leave, and in due course, security not having been made, the appeal lapsed.

[16]              In the course of issuing its reasons for declining leave the Supreme Court observed “The judgment of Thomas J contains an extensive review of the applicant’s complaints. There is no obvious error in the Judge’s analysis”.

[17]              Based on this it seems unlikely that the Court of Appeal will grant leave, now, for an appeal to be brought to that Court. I acknowledge that Ms Tao informs me that the grounds of the appeal are different and that she also seeks leave to adduce further evidence. Be that as it may, the judgments of this Court have not been expressly stayed, and an appeal does not operate as an automatic stay. The possibility of an appeal is not a sound basis on which to stay the present process. In the event leave is granted, this can be raised with the presiding Judge on an application for adjudication, if one is filed.

[18]              Thirdly, Ms Tao maintains that she has an indemnity for these costs from the Body Corporate. This submission is based on a resolution passed at the AGM of the Body Corporate on 12 March 2015. The Body Corporate resolved, by special resolution, that it would not form a committee which is a body formally provided for by s 112-114 of the Unit Titles Act, but instead would elect a “Working Group of seven members” who are then named. The Body Corporate further resolved that “this Working Group has wide powers to administer onsite maintenance matters …” and “by majority written decision the Working Group may request the secretary to convene an extraordinary general meeting of the Body Corporate”.

[19]Ms Tao was not one of the named seven members of the working group.

[20]The Body Corporate further resolved at the AGM:

That Body Corporate 198693 holds harmless its Working Group and the chairperson and the members of same (jointly and severally) against all costs, expenses, claims and proceedings and any other liability of any sort incurred by them in the exercise or attempted exercise of their powers as a Working Group/chairperson and as members of the group taken in accordance with the provisions of the Rules of the Body Corporate and of the Unit Titles Act 2010 and Regulations 2011, but not against any act or omission done fraudulently or with wilful misconduct.

[21]              An extraordinary general meeting was called for 16 April 2015. At this meeting the Body Corporate resolved to appoint a committee of nine members. Eight members were elected and the minutes of the meeting then note:

An Tao was elected to the Committee and as she was not present Tom Wilson rang her the next day to ask her [if] she wants to be a Committee member. She

informed that she will not be on the Committee unless she is also Body Corporate Chairperson.

[22]              There is no resolution in the minutes of the AGM giving any indemnity to any members of the committee, as was the case in relation to members of the Working Group who had limited power “to administer onsite maintenance matters”. There is no evidence that at any later point the Body Corporate has given any form of indemnity to the committee members.

[23]              Notwithstanding the indication in the minutes that Ms Tao did not accept appointments to the committee, as she was not appointed as the Chairperson, it seems that she did in fact take up office as a committee member at a later date. Nonetheless, there is no evidence that any indemnity was given to her or any other members of the committee by the Body Corporate.

[24]              Ms Tao’s submission is that the resolution in relation to an indemnity of the Working Group applies to the committee nonetheless, and therefore to her. That submission is incorrect. A working group was appointed in lieu of a committee, and that working group was given limited power, in respect of which it was then given an indemnity. Conversely, when the committee was appointed, the Body Corporate delegated all its powers to the committee until the following AGM, but did not give the committee any indemnity in respect of their actions.

[25]              Accordingly, Ms Tao cannot rely on the resolution at the AGM on 12 March 2015 as giving her some form of indemnity by the Body Corporate in relation to the costs she in fact owes to the Body Corporate and the other respondents.

[26]              For completeness, I record that the Body Corporate had evidently taken out Office Bearers’ Liability Insurance for members of the committee, but a claim in relation to the costs awarded against Ms Tao has been declined by the insurer and that decision upheld by the Insurance & Financial Services Ombudsman. This is as one might have predicted, given that the policy is in respect of defence costs and Ms Tao was a plaintiff. Ms Tao says that as the respondents Strata Title Administration Ltd and Jigar Pandya have had their legal fees paid by the Body Corporate or its

indemnifiers, they cannot now enforce the judgment against her. That is not so; if they recover monies from Ms Tao they will have to account for any monies received.

[27]              Fourthly, Ms Tao argues that as the committee is required to report to the Body Corporate on the exercise of duties or powers delegated to it, and did not do so at the AGM in 2018, its actions are invalid. In particular, the committee’s decision to request the issue of a bankruptcy notice and then serve it on her was not reported to the Body Corporate at the AGM this year. There is no basis for coming to a view that this affects the validity of the actions of the committee. Plainly the committee must observe the requirement in s 114 of the Unit Titles Act 2010 to report to the Body Corporate. If it has not done so as required, that does not invalidate its acts. It would merely put it in breach of that obligation.

[28]              In conjunction with this submission Ms Tao argues that there has been no resolution of the Body Corporate authorising the committee to commence a bankruptcy process. That may be so, but no specific resolution is required as the Body Corporate delegated all its powers to the committee when it was appointed.

[29]              Fifthly, Ms Tao submits that the use of the bankruptcy procedure is an abuse of process because the judgment was sealed in August 2016, but not served on her until it was served along with the bankruptcy notice. She says the bankruptcy notice was only issued after she issued proceedings against the respondents in the District Court.

[30]              There is no substance in this submission. The respondents have proceeded in relation to the issuing and service of a bankruptcy notice, and of the sealed judgment, in a way which they are entitled to as a matter of law.

[31]              Sixthly, Ms Tao argues that the Body Corporate committee cannot proceed with this proceeding against her because it has a limitation on the expenditure it can incur of $5,000. Again there is no substance in this submission. It is not known what the procedure will cost the Body Corporate. In any event, the proceeding is brought by three respondents and neither of the other two respondents is subject to a cost limitation. There is no logical basis on which the limitation on expenditure by the

committee, without further Body Corporate authority, affects the validity of the actions it has taken.

Outcome

[32]The application to set aside the bankruptcy notice is dismissed.

[33]Time for compliance with the notice is extended to 5.00 pm on 11 May 2018.

[34]              Ms Tao will pay the respondents costs on a 2B basis and disbursements fixed by the Registrar.

J G Matthews Associate Judge