York Trustees Limited v Body Corporate 166208
[2017] NZHC 2942
•29 November 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-001805 [2017] NZHC 2942
UNDER the Unit Titles Act 2010 BETWEEN
YORK TRUSTEES LIMITED Applicant
AND
BODY CORPORATE 166208
Respondent
Hearing: 9 November 2017 Appearances:
K Wendt for the Applicant/Appellant
D Barr and J S Learner for the RespondentJudgment:
29 November 2017
JUDGMENT OF VAN BOHEMEN J
This judgment was delivered by me on 29 November 2017 at 4.00 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date: ………………………….
Solicitors: McCaw Lewis, Hamilton
Simpson Grierson, Auckland
Counsel: K Wendt, Auckland
YORK TRUSTEES LIMITED v BODY CORPORATE 166208 [2017] NZHC 2942 [29 November 2017]
Introduction
[1] This is an application by York Trustees Ltd (York) for leave to appeal out of time against a decision of the District Court upholding a decision of the Tenancy Tribunal that York is obliged to pay water and gas charges invoiced by the respondent, Body Corporate 166208 (the Body Corporate).
[2] District Court Judge M-E Sharpe dismissed York’s appeal against the decision of the Tenancy Tribunal in an oral judgment delivered at the end of the appeal hearing on 11 April 2017.1
[3] York was not represented at the District Court appeal hearing and became aware of Judge Sharpe’s judgment only when the District Court sent an email attaching the judgment on 5 July 2017, well after the expiry of the appeal period provided for in pt 20 of the High Court Rules.
[4] The substantive issue between the parties is whether the water and gas charges were ultra vires s 125 of the Unit Titles Act 2010, the statutory basis on which they were invoiced.
Background Facts
[5] York owns Unit G or Penthouse 7 in the apartment complex at 30 York Street, Parnell, known as the York Street Apartments. The Body Corporate is the body corporate constituted under the Unit Titles Act for the York Street Apartments. York rents Unit G to tenants.
[6] The relationship between York and the Body Corporate has been fractious with disputes and proceedings over levies and charges dating back to 2005. The application to the Tenancy Tribunal that led to the current application covered aspects of those wider disputes but the application before this Court relates only to
the water and gas charges and associated costs.
1 York Trustees Ltd v Body Corp 166208 [2017] NZDC 7961.
[7] Water is provided to the York Street Apartments by Watercare Services Ltd, which invoices the Body Corporate for the total supply and associated charges. The water is on-delivered to each unit with usage measured by mechanical flow meters installed in every unit. Those meters can be read only by physically inspecting each meter inside the unit. Separate electronic pulse meters, however, provide individual usage readings directly to the Body Corporate which invoices each unit for its share of the Watercare invoice based on the electronic pulse meter readings.
[8] Gas is provided to the York Street Apartments by Contact Energy Ltd, which invoices the Body Corporate for the total supply. The gas is used exclusively to heat water in a central boiler from which hot water is piped to each unit. The usage of hot water is metered at each unit. The Body Corporate invoices each unit for its share of the Contact Energy gas invoice based on those metered readings of hot water usage.
[9] In 2014, the Body Corporate became aware that the electronic pulse meters in some units, including Unit G, had been malfunctioning and had sent low readings of water usage for the period 24 December 2012 to 5 April 2013. As a result, the owners of those units had substantially underpaid for the water their units had received.
[10] The Body Corporate sent invoices to the owners of the units concerned to recover the underpayments. There was some dispute before me as to the basis on which those catch-up invoices were calculated. In his affidavit of 14 August 2017 filed in support of this application, Hamish McPhail, who is a member of the Body Corporate Committee, said the catch-up invoices were based on readings of the mechanical flow meters inside every apartment (which continued to function properly at all times). York’s understanding, however, was that the catch-up invoice for Unit G was based on two estimates of water usage.
[11] York objected to the catch-up invoice for the water charges to Unit G because in its view an estimate of costs in respect of a metered service is ultra vires s 125 of the Unit Titles Act. It also objected because it could not recover the costs charged in the catch-up invoice from its tenants because of tenancy changes within Unit G.
[12] York’s objection to the water charges relates only to the period when the electronic pulse meters were malfunctioning. York accepts that other charges for water have been properly invoiced in accordance with s 125 of the Unit Titles Act.
[13] York’s objection to the gas charges, however, is on-going because it says that charges for gas cannot be assessed on the basis of metering hot water usage. It says gas is an unmetered service for which charges can be passed on to unit owners only by a levy imposed pursuant to s 121 of the Unit Titles Act, according to each owner’s utility interest as assigned in accordance with s 39 of the Act.
[14] York complained to the Tenancy Tribunal about the water and gas charges and other Body Corporate charges to which it objected.
Decisions of Tenancy Tribunal and District Court
[15] The Tenancy Tribunal held that York was liable for both the water and the gas charges — although it referred to the latter as hot water charges. The Tribunal noted that the amount at issue over the water charges was $5,272.69 and the Body Corporate had accepted that water had been previously charged incorrectly. It also noted the Body Corporate’s view that any over-charging to York had been de minimis and of no consequence.
[16] The Tribunal reached its decision after considering the purpose of the Unit Titles Act as set out in s 3 and the intention behind s 125. The Tribunal also had regard to s 85 of the Residential Tenancies Act 1986 which, pursuant to s 176 of the Unit Titles Act, applies with necessary modifications to the Tribunal’s hearing and determination of unit title disputes. Among other things, s 85 of the Residential Tenancies Act directs the Tribunal to exercise its jurisdiction in a manner “most likely to ensure the fair and expeditious resolution of disputes”.
[17] The Tribunal also referred to the evidence presented by the Body Corporate that the difference in the total water charges invoiced to York and that which would have been invoiced to York if the charges had been levied under s 121 of the Unit Titles Act was $13.50.
[18] The Tribunal stated that:
I consider that the fairest resolution is that York should have to pay for the water invoices issued by the [Body Corporate] for the amount claimed regardless it does not fit with the strict interpretation of section 125 [of the Unit Titles Act].
[19] The Tribunal issued its decision on 25 September 2014, and a second decision on 29 March 2016 which related to quantum. York appealed the decisions to the District Court.
[20] The District Court appeal was not heard for a full year after the second decision — on 11 April 2017. There were various reasons for the delay, including a lack of action by York in prosecuting its appeal, adjournments sought by York for various reasons including the availability of York’s counsel, technical issues with York’s computers and changes of counsel by York. York also says that one adjournment was at the request of the Body Corporate.
[21] On 7 April 2017, a few days before the scheduled hearing on 11 April, York changed counsel again and sought a further adjournment of the hearing. This was declined by Judge Sharpe on 10 April 2017 on the grounds that it would not do justice between the parties. In her minute of 10 July 2017 recording this decision, Judge Sharp noted:
The appellant has had a very long time to prepare for the Appeal but has chosen to seek new representation virtually on the eve of the Appeal hearing. There have been too many delays in the progress of this appeal (all occasioned by the Appellant). The hearing will take place tomorrow whether the Appellant is represented or not.
[22] Following that decision, the recently-appointed counsel for York was granted leave to withdraw.
[23] On 11 April 2017, prior to the appeal hearing, Ms Wendt, who had just been instructed to act for York, sought a further adjournment which was also declined by Judge Sharpe in a separate oral judgment. At that point, Ms Wendt, on instructions, sought and was granted leave to withdraw.
[24] The appeal proceeded on 11 April, with York unrepresented. In her decision, however, Judge Sharpe took into account a memorandum filed by York’s director, Mr Price, which set out three strands of York’s appeal. The first strand focused on the validity of the gas charges. The charges for cold water did not feature in the memorandum.
[25] The District Court decision recorded York’s argument that the hot water charges were ultra vires s 125 of the Unit Titles Act. The decision also recorded a concession made by the Body Corporate at the Tribunal hearing and which the Tribunal accepted, that the water charges had been incorrectly charged. The Court then observed that the Tribunal had considered the small difference of $13.50 in the calculations the Body Corporate had made of the water charges that had been made and could have been made to York. The decision noted the Tribunal’s consideration of the purpose of the Unit Titles Act, the intention behind s 125 and the implications of s 85 of the Residential Tenancies Act, and the Tribunal’s conclusion that the fairest resolution was that York should pay the Body Corporate’s invoices.
[26] The Court then stated:
[5] … it is obvious that the Tribunal was within its legal rights and obligations to find as it did and this particular so-called strand of appeal cannot be substantiated and must fail.
[27] The Court recorded that pursuant to s 117(4) of the Residential Tenancies Act, s 85 of that Act also applies with necessary modifications to the hearing and determination of appeals to the District Court against decisions of the Tenancy Tribunal. The Judge stated:
[9] So s 117(4) simply tells the Court that like the Tribunal in its original jurisdiction, it is to approach the exercise of its appellate jurisdiction in a practical, not rule-bound, and fair way and like the Tribunal, though bound to adhere to general principles need not do what otherwise the law might strictly require or impose. Housing New Zealand Corporation v Salt, Judge Roderick Joyce QC.
(Footnote omitted)
[28] As I shall discuss more fully, the Court also recorded that appeals from decisions of the Tenancy Tribunal are by way of re-hearing which can involve
rehearing the original evidence and receiving further evidence, but noted that in the current case the Court was dealing solely with the record below.
[29] The Court also dismissed the other strands of York’s appeal which dealt with the costs awarded by the Tribunal and the basis on which the Body Corporate had calculated the total costs owed by York. The issues in those strands are not raised in the current application.
Considerations governing application
[30] In accordance with the Court of Appeal’s decision in My Noodle Ltd v Queenstown-Lakes District Council,2 Ms Wendt for York and Mr Barr for the Body Corporate agreed that the key considerations governing the application for leave are:
(a) The reasons for the delay; (b) The conduct of the parties;
(c) Any prejudice caused by the delay; (d) The merits of the appeal; and
(e) Whether the appeal raises any issues of public importance.
[31] Most of the discussion at the hearing involved the last two considerations.
Discussion
[32] The proximate reason for the delay was a misunderstanding on the part of newly-appointed counsel who had not been aware of the oral decision given by Judge Sharpe on 11 April 2017. The impact of that misunderstanding was compounded by the delay in issuing the written judgment to the parties. That factor
militates in favour of granting leave.
2 My Noodle Ltd v Queenstown-Lakes District Council [2009] NZCA 224, (2009) 19 PRNZ 518 (CA).
[33] Granting leave would not cause significant prejudice to the Body Corporate given that York has paid the bulk of the monies in dispute. That too supports the grant of leave.
[34] York’s conduct in prosecuting its appeal and in its earlier dealings with the Body Corporate counts the other way, bearing in mind the critical observations of the District Court, in its oral judgment of 11 April 2017 dismissing York’s last application for an adjournment:3
[9] I have never seen a clearer case of a recalcitrant appellant who appears to be attempting to delay the evil hour when a judgment, if I may call the Tenancy Tribunal decision that, might be executed against it. This case has all the hallmarks of an appellant who wishes and will try almost anything to delay.
[35] Notwithstanding that criticism, I consider the application for leave should stand or fall on the merits of the appeal and on whether it raises issues of public importance.
[36] Ms Wendt said the District Court made three errors in its dismissal of York’s
appeal:
(a) It failed to consider the matter afresh and simply adopted the decision of the Tenancy Tribunal;
(b)It failed to interpret and apply s 125 of the Unit Titles Act correctly with regard to both the water and gas charges; and
(c) It endorsed the Tribunal’s incorrect interpretation and application of s 85 of the Residential Tenancies Act in relation to disputes concerning the Unit Titles Act.
[37] On the first of these claimed errors, the District Court addressed the nature of an appeal from a decision of the Tenancy Tribunal and explained the approach it
followed in this case:4
3 York Trustees Ltd v Body Corp 166208 [2017] NZDC 7895.
4 York Trustees Ltd v Body Corp 166208 [2017] NZDC 7961.
[10] It has long been determined that appeals from decisions of the Tenancy Tribunal will be by way of rehearing. It is the nature of such an appeal that it is to be heard on the record of the oral evidence given below subject to there being a discretionary power to rehear the whole hearing, part of the evidence or even to receive further evidence and that the Court in question is not limited to correction of errors in the judgment or decision below that may take into account developments since. Of course, that is not the case here. I am dealing solely with the record below.
[38] In my view, this is an adequate description of how an appeal by way of rehearing should be conducted and is consistent with the decision of the Supreme Court in Austin Nichols & Co Inc v Stichting Lodestar.5 In this case, apart from the memorandum filed by York’s director, York played no part in the hearing of the appeal. That memorandum did not provide any new evidence to the Court. Nor did it argue that the evidence before the Tenancy Tribunal should be reheard. It simply asserted the charges for gas/hot water were legally invalid. The Judge was correct to
base her decision on the record of the Tribunal hearing. Accordingly, I do not consider this ground has merit.
[39] York’s key submission is the both the cold water and the gas/hot water charges were ultra vires s 125 of the Unit Titles Act.
[40] Section 125 provides:
125 Recovery of metered charges
(1) If any amenity or service is supplied to the unit title development and the body corporate installs and maintains a meter recording the use of that amenity or service by any principal unit, the body corporate may charge the owner of that unit the cost of the usage as indicated on the meter.
…
[41] York’s position is:
(a) The Unit Titles Act provides only two bases on which amenity or service charges may recovered:
5 Austin Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
(i) The regime in s 125, where charges are measured by meter;
and
(ii) Contributions levied under s 121, based on each unit owner’s
utility interest;
(b)The water charges disputed by York were based on assessments and not on metered readings; and
(c) The gas charges were based on metering the delivery of hot water to each unit and not on the delivery of gas which was the amenity or service provided to the unit development.
[42] York asserts that these questions and related questions about the scope of the Tenancy Tribunal’s powers under s 85 of the Residential Tenancies Act 1986 are important questions of law that have broad public importance.
[43] I referred at [10] to the conflict in the evidence about the basis on which the catch-up invoices for water were calculated. In his affidavit of 14 August 2017, Mr McPhail said the catch-up invoices were based on readings of the mechanical flow meters based inside every apartment. If that were the case for Unit G (to which, uniquely in the apartment complex, the Body Corporate does not have access), York’s complaint about the water charges must fail because, on York’s own view of the law, the charges covered by the invoice would have been levied in accordance with s 125 of the Unit Titles Act. However, York’s case is that the catch- up invoice for Unit G was based on assessments of usage rather than a metered reading.
[44] The decision of the Tenancy Tribunal described the process by which the catch-up invoices were calculated and the positions of the parties as follows:
38. The [Body Corporate] in rendering the catch up invoice, knowing that it was an assessment or estimate established its invoice figures by using two different calculations
i. They took a current invoice to the [Body Corporate]. They calculated the total amount of water and then from this, the
percentage that was used solely by the [Body Corporate]. The [Body Corporate]then divided the total water invoice taking into account its use and then what each apartment would have used based on their unit interest. York’s interest is 3.017%.
ii They also took a current reading for all the water used and then using the now fully working meters, calculated the percentage of water used by York, being 3.067%.
39. The difference between the amount of water used and what York must pay in both of these separate calculations is a difference of only $13.50 (as calculated by the [Body Corporate]).
40. The [Body Corporate]believes that because York’s unit has consumed the water, it should pay for its share, like all the other owners have.
41. York disagrees and argues that a strict interpretation of Section 125 of the [Unit Titles Act] precludes the [Body Corporate]from charging for any of this water, because it was not calculated by an accurate meter reading and is an estimated figure, which isn’t sufficient for section 125 [of the Unit Titles Act] to apply.
[45] This passage supports York’s argument that the catch-up invoice for Unit G was based on estimated use. However, it also highlights an important difference in the argument York made to the Tenancy Tribunal and that advanced by Ms Wendt on the current application. Before the Tribunal, York sought to rely on the technical argument that because an invoice based on an estimate was not in accordance with s 125, York was relieved of any obligation to pay for the water Unit G consumed. Before me, Ms Wendt, quite properly, conceded that York had to pay for its water usage; the question at issue was the basis on which its usage should be calculated.
[46] While the legal basis on which bodies corporate levy charges for the use of water in unit developments is a valid issue, the merit and importance of that issue depend on the context. In this case, there is no dispute that the Body Corporate can validly levy charges for water usage pursuant to s 125 provided the water meters function properly. The dispute over the water charges relates only to the period when the electronic pulse meter in Unit G was malfunctioning — a period of just over three months and for which a catch-up invoice was issued. According to the decision of the Tenancy Tribunal, the disputed charges for water and hot water came to $5,272.69.
[47] If that is the total sum at issue, there is a real question as to why the matter warrants the attention of the High Court. But when account is taken of the evidence, noted by the Tribunal and the District Court, that the difference between the amounts actually invoiced to York for water and hot water usage and the amounts that would have been invoiced if the charges had been calculated on the basis of utility interest (as York says they should have been) was $13.50, it is hard to credit why this issue was pursued in the first place let alone taken to the District Court and then to this Court.
[48] Moreover, even if the amount at issue was not trivial, I am not persuaded that where a meter malfunctions a body corporate is precluded by s 125 of the Unit Titles Act from invoicing units on the basis of an estimate that seeks to approximate what the metered usage would have been, bearing in mind that one of the purposes of the Act, as set out in s 3, is “to establish a flexible and responsive regime for the governance of unit title developments”. As Ms Wendt accepted, a key purpose of s 125 is to ensure that bodies corporate do not pass on any additional charges beyond actual use. There is no suggestion that the Body Corporate in this case did anything more than try to recover the actual cost of the water provided.
[49] It follows that I see no merit, let alone any question of broad public
importance, in relation to York’s challenge to the water charges.
[50] The challenge to the gas/hot water charges raises a less trivial and on-going but technical issue: does s 125 enable a body corporate to charge unit owners for the cost of an amenity or service (in this case, gas) if the metered use is not of the amenity or service itself but of the consequences of the use of that amenity or service (in this case, hot water)? On this application, it is not for me to rule on the substance of York’s challenge. The issues for me are whether the question has merit and raises a question of broad public importance.
[51] I acknowledge that s 125 of the Unit Titles Act contemplates metering the amenity or service that is supplied to the unit development. However, it is at least arguable, as submitted by Mr Barr, that where the only use of the amenity or service (gas) is to heat hot water which is piped to each unit, metering the hot water is an
effective way of recording the use of the gas by any unit and for passing on the cost of that usage to unit owners, and so complies with s 125. Such an interpretation is certainly in keeping with the intent of the section — which is that unit owners are charged only for the costs incurred in providing the service. So I do not accept York’s assertion that the charges based on the metering of hot water are necessarily ultra vires.
[52] York does not argue that it or other owners suffered any loss from the course taken by the Body Corporate. So, the point York raises is essentially academic. If York wants to pursue that point, it can do so in declaratory proceedings but not as grounds for filing a late appeal to a decision requiring it to pay for services already received.
[53] York’s final argument is that the District Court confirmed an incorrect interpretation by the Tenancy Tribunal of its jurisdiction in relation to a dispute under the Unit Titles Act, particularly its jurisdiction under s 85 of the Residential Tenancies Act 1986. It says that to leave the decision unchallenged risks setting a precedent which itself raises a question of public importance.
[54] Section 176 of the Unit Titles Act provides that pt 3 of the Residential Tenancies Act applies with all necessary modifications in respect of the hearing and determination of a unit title dispute by a Tenancy Tribunal, except for three specified exceptions. Part 3 of the Residential Tenancies Act includes s 85. Section 85 is not excluded from application to unit title disputes by s 176 of the Unit Titles Act. Accordingly, and as found by the District Court, the Tenancy Tribunal can have
regard to s 85 when deciding unit title disputes.6 As the District Court also noted,
the Court itself is required to have regard to s 85 when deciding appeals from the
Tenancy Tribunal.
6 Section 85 of the Residential Tenancies Act 1986 provides:
(1) Subject to the provisions of this Act and of any regulations made under this Act, the Tribunal shall exercise its jurisdiction in a manner that is most likely to ensure the fair and expeditious resolution of disputes between landlords and tenants of residential premises to which this Act applies.
(2) The Tribunal shall determine each dispute according to the general principles of the law relating to the matter and the substantial merits and justice of the case, but shall not be bound to give effect to strict legal rights or obligations or to legal forms or technicalities.
[55] The essence of York’s argument is that the Tribunal used its jurisdiction under s 85 to “to circumvent strict legal requirements or ‘cure’ ultra vires body corporate actions” as submitted by Ms Wendt.
[56] As I recorded at [17], the Tribunal did cite considerations of fairness in deciding that York should pay the Body Corporate’s water invoices even if the invoices did not “fit with a strict interpretation” of s 125 of the Unit Titles Act. That does not mean, however, that the Tribunal used its jurisdiction under s 85 of the Residential Tenancies Act in the manner contended by Ms Wendt.
[57] In particular, the Tribunal did not use s 85 to “cure” ultra vires actions by the Body Corporate. The Tribunal did not find or accept that the water and gas charges were ultra vires. Indeed, what the Tribunal said about the “fit” of the invoices with “the strict requirements” of s 125 of the Unit Titles Act is consistent with the analysis above, which is that neither the water nor the gas invoices were necessarily ultra vires s 125, even if they did not fall squarely within the language of the section.
[58] Accordingly, I do not accept the premise on which the ground concerning s 85 of the Residential Tenancies Act is based. It follows that I do not accept that this question has merit or is of broad public importance.
[59] My conclusion, therefore, is that there is no real merit in the issues that York wishes to take on appeal and that these issues do not raise questions of broad public importance. As a consequence, leave should not be granted.
Result
[60] The application for leave to appeal out of time is declined.
[61] The Body Corporate is entitled to reasonable costs, pursuant to s 124 of the Unit Titles Act. If agreement cannot be reached, leave is reserved for the Body Corporate to file a memorandum as to costs within 10 working days of receipt of this
judgment. A memorandum in response may be filed within 10 days thereafter.
Memoranda should not exceed five pages.
van Bohemen J
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