BODY CORPORATE 159626 V MIN HOLDINGS LTD HC AK CIV 2009-404-002852

BODY CORPORATE 159626 V MIN HOLDINGS LTD HC AK CIV 2009-404-002852 2 July 2010IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2009-404-002852BETWEEN BODY CORPORATE 159626 Plaintiff AND MIN HOLDINGS LIMITED Defendant Hearing: 1 July 2010 Counsel: DR Bigio for plaintiff BP Rooney for defendant Judgment: 2 July 2010 at 5:00pmJUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for summary judgment]This judgment was delivered by me on 2 July 2010 at 5:00pm pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy Registrar DateSolicitors: Burton & Co, PO Box 8889, Auckland for plaintiffQueen City Law, PO Box 6908, Auckland for defendantThe applications[1] There are two plaintiff applications for summary judgment. The first is the named plaintiff's application seeking summary judgment in the sum of $82,653.10 for unpaid levies. The second is the defendant's counterclaim application for summary judgment. It does not directly affect the outcome of the plaintiff's claim. It seeks a declaration that a change of rules of the body corporate is ultra vires and invalid.The court's approach to a plaintiff's summary judgment application[2] Because both are plaintiff's application for summary judgment I briefly set out the court's approach to such applications. [3] Rule 12.2 of the High Court Rules requires that a plaintiff satisfy the court that a defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action. The rule permits the entry of judgment in respect of part of a claim, as was made clear by the amendment introduced by r 5 of the High Court Amendment Rules 2009 (SR 2009/75). The obligations imposed by the rule have been examined by a number of authorities. [4] The correct approach to an application for summary judgment by a plaintiff was recently summarised by the Court of Appeal in Krukzeiner v Hanover Finance Ltd1 where the court said:The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried:Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example1 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at 26.where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court's assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).[5] Because a declaration is sought in the defendant's application for summary judgment it is appropriate that I simply record that applications for declarations by way of summary judgment are permissible: Johnston v Johnston.2Background[6] This proceeding relates to the building known as Lowndes Associates House at the corner of Shortland Street and Jean Batten Place in Auckland. Title in that building is held under the Unit Titles Act 1972. [7] The original unit plan was deposited in February 1994. As a result of a redevelopment a redevelopment plan was lodged in July 1994 at a time when Mr and Mrs Pendergrast were the proprietors of all the units in the building. [8] The plaintiff is the body corporate. [9] There are eleven principal units in the building. They are units B, C, 1B, 1C, 1D, 1E, 2A, 3A, 4A, 5A and 6A. [10] The defendant is the registered proprietor of premises on the ground floor street level, which is Unit B. [11] Unit C is owned by a party who is not involved in this litigation. Under the original unit plan Units B and C were a single unit and were described in that plan as Unit A. Unit A comprised the entire ground floor surrounded by Shortland Street, Jean Batten Place and Fort Street. In addition, it included a smaller mezzanine level.2 Johnston v Johnston (1990) 2 PRNZ 323 per Master Williams QC.[12] The redevelopment plan which was lodged in July 1994 divided Unit A into two smaller units, which became Units B and C. That is now shown on the redevelopment plan. [13] The creation of Units B and C did not, in any way, affect the common area lobby at the mezzanine level of the building. [14] Counsel confirmed to me that the lifts, which are one of the subject matters of this dispute, service the ground floor as well as the other floors in the building. The ground floor does not need, however, access via the lifts, nor, for that matter, to the lobby area. [15] The rule change which is at the centre of the defendant's summary judgment was amended on 22 March 2004. That change introduced a new rule 1(o) to which I will make further reference when I deal with the defendant's summary judgment application. [16] The defendant purchased Unit B in 2004. Registration of the defendant's title was effected on 22 July 2004.The plaintiff's application for summary judgment[17] The plaintiff seeks summary judgment in respect of outstanding levies. There are three parts to the plaintiff's claim. The first is for $52,688.48 inclusive of GST. That is for what is described as the defendant's share of the cost of the lift works. The second is for $18,585.00 inclusive of GST. That is for what is described as the defendant's share of the cost of lobby works. The third is for $11,379.62. That is for what is described as the defendant's share of unpaid invoices issued in respect of miscellaneous levies and charges. [18] Counsel confirmed to me that they were likely to agree on a resolution of the third aspect of the plaintiff's claim that is the claim for the miscellaneous levies and charges. On that basis, they invited me to reserve the issue. I shall proceed accordingly.The defendant's opposition[19] The defendant pleads that the rules of the body corporate expressly exclude the registered proprietor of the defendant's unit from any obligation to contribute to the costs of any lift or any building lobby maintenance works.The plaintiff's claim analysed[20] The sole issue for consideration is whether, in terms of the rules of the body corporate, the defendant is obliged to contribute to the costs of lift and building lobby maintenance work. [21] This issue requires a consideration of r 39 of the Body Corporate Rules which provides:39. Recovery of expensesWhere in the opinion of the body corporate or its secretary, it is necessary to pay any expense or undertake any work pursuant to rule 2(a) or to rule 2(b) or to rule 2(d) which is substantially for the benefit of one unit only, or is substantial for the benefit of one or more of the units than for the benefit of the others of them, the body corporate may apportion the amount payable to the proprietor of any unit or units having regard to the relative values of such work notwithstanding that the amount so apportioned may be greater or less than the unit entitlement assigned to the unit or those units, without the necessity of making any application pursuant to section 33 of the Unit Titles Act 1972, providing however that this rule shall be without prejudice to the rights of any proprietor pursuant to that section AND PROVIDED FURTHERhowever that the registered proprietor for the time being of Unit A on Unit Plan 159626 shall not be obliged to contribute to the cost of running, maintenance, cleaning and security of the common entrance, vestibules, stairs and lifts giving access to units 1A to 7A inclusive on the said plan and to the basement carparks.[22] The defendant's position is that the proviso to r 39 applies. Mr Rooney submitted that the reference to Unit A in the proviso is a reference to the area of the building occupied by the former Unit A. In particular, that is a reference to the Unit A on the original unit plan which was deposited in February 1994. [23] Mr Rooney submitted that unless the proviso is interpreted in that way it would be completely meaningless. He acknowledged that one view of the mattermight be that an oversight occurred in July 1994 when the redevelopment plan was lodged in not ensuring that the proviso to r 39 was left in a position which was consistent with the redevelopment plan which was lodged. [24] I leave aside the fact that the defendant purchased his unit some 10 years after the redevelopment plan was lodged. He purchased his unit knowing that he was purchasing Unit B and not part of Unit A. Correspondence between the parties before the precise issues that are identified in this summary judgment application were confirmed, do not suggest the interpretation which the defendant now advances is appropriate. That material I do not find helpful in determining the issue raised in this application. [25] Mr Bigio's response, which I find compelling, can be summarised as follows: a) The proviso to r 39 makes no reference to Unit B. There is nothing in the wording of the proviso to r 39 which suggests that Unit B is entitled to the exemption from contribution to lift and lobby maintenance; b) The proviso refers to "the registered proprietor for the time being of Unit A on unit plan 159626". The current land transfer unit plan 159626 shows no Unit A. The proviso therefore has no application; c) The Unit Titles Act 1972, s44(5) provides:44 Redevelopment(5) On the deposit of a plan of redevelopment and the registration of any necessary transfers, the Registrar shall— (a) Cancel the existing certificates of title to the units affected by the redevelopment, and for that purpose the outstanding copies of the certificates of title shall be surrendered to the Registrar; and (b) Issue separate certificates of title in accordance with the plan of redevelopment for the units affected by the redevelopment.The old plan, which was produced in evidence, is now numbered UP159621/1. The present plan is now numbered UP159626. That position puts into effect the provisions of the Unit Titles Act 1972, s 20(3) which provides:20 Supplementary record sheets and new unit plans(3) In any case where, under any of the provisions of sections 18, 19, and 44 of this Act, a new unit plan is deposited under the same number as a previous unit plan— (a) The previous unit plan shall be filed under a different number: (b) The plan so deposited shall be noted so as to show clearly that it is in substitution for the earlier plan, which plan shall be identified by the number under which it is filed: (c) Where any unit is described in any certificate of title or in any other instrument whatsoever by reference to a numbered unit plan in respect of any land, the reference shall be read as a reference to the plan for the time being deposited under that number in respect of that land.Accordingly, the operative plan for the purpose of the proviso is the revised plan which bears the number in the proviso to r 39. The result is that, by definition, there is no Unit A; and d) The interpretation advanced by the plaintiff does not amount to a declaration which introduces a new rule. If it did that, there would be no jurisdiction for me to do so, as was held in Disher v Farnworth.3The reason why there is no declaration declaring a new rule here is because the court is interpreting the meaning of the current rule. There is no question of change or amendment involved.Decision on plaintiff's application[26] I conclude, therefore, that the plaintiff is entitled to judgment for the levies dealing with the lift and lobby maintenance works which, collectively, total$71,273.48. In the orders at the conclusion of this judgment, there will be judgment entered for that sum. In accordance with the position provided to me by counsel in respect of the miscellaneous levies and charges in the sum of $11,379.62 there will be an order that leave be reserved to apply in the event that the parties cannot agree on a result in respect of this part of the claim.The defendant's application for summary judgment[27] At an Annual General Meeting of the body corporate on 16 October 2003 the body corporate passed a resolution to include in its rules an amendment to the default rules set out in the Unit Titles Act 1972, Third Schedule, which comprised an amendment as follows:Rule 1(o)Clause 1 is amended by inserting a new rule (o) as follows: (o) Use, allow or permit his unit to be used, without the consent of a majority of the committee (or in the event that there is no committee, a majority of the proprietors of the body corporate) ("committee"), for any purpose which, in the opinion of the committee is or could reasonably be expected to be diminishing or injurious to the appearance, reputation or professional image of the building complex, or any part of it. Without limiting the foregoing, and by way of example only, uses which may be injurious to the reputation or professional image of the building including the following:• A business connected to the sex trade or industry;• A shop or retailer;• A crèche, kindergarten, school or other training establishment;• A computer establishment providing internet use and/or computer use and/or access or training;• An establishment involving betting, gaming or the use of electronic entertainment machines;• A residence;• A use which results in the lifts, entrances or common areas becoming more crowded than they would be where the3 Disher v Farnworth [1993] 3 NZLR 390 (CA).whole building was used for usual office premises;• A use primarily engaged in the sale of liquor; No unit may be used for any purpose (other than an existing purposed conducted by an existing proprietor or existing occupier on the date this rule is adopted) unless the committee has first confirmed that the use does not infringe this rule, or consented to the use under this rule.[28] The defendant seeks a declaration that r 1(o) is ultra vires and invalid. [29] The grounds advanced in summary are: a) The resolution adopting this rule amendment was not a unanimous resolution of the proprietors; b) Rule 1(o) is a rule which is properly part of the rules set out in the Unit Titles Act 1972, Second Schedule. By the operation of the Unit Titles Act 1972, s 37(3) any addition, amendment or repeal can only be effected by a unanimous resolution of the proprietors; and c) The issue of whether r 1(o) is properly an addition or amendment to either the Unit Titles Act 1972, Schedules 2 or 3 is a legal issue which is suitable for determination by summary judgment.The plaintiff's opposition[30] The plaintiff opposes the declaration sought by the defendant on the following grounds: a) Rule 1(o) is an amendment to the default rule set out in the Unit Titles Act 1972, Third Schedule and not the Second Schedule of that Act; b) Accordingly the resolution which passed r 1(o) was valid and effective; andc) If, however, the court finds that r 1(o) is ultra vires, parts of the rule can be severed with the result that the remaining parts are a valid rule amendment.The issue for determination[31] The principal issue for determination is whether r 1(o) is a rule which is properly part of the rules set out in the Unit Titles Act 1972, Second Schedule. If it is, then the resolution which adopted it is invalid. If that applies, a subsidiary question arises as to whether the rule can be saved in part by severing part of it.The defendant's claim analysed[32] Counsel's research had not discovered any authority which analysed a detailed amendment or addition to a body corporate's rules which dealt with the use of a proprietor's unit. [33] The amendment extends the power of the committee, or in the absence of the committee, in one instance, the majority of the proprietors in two areas. They are: a) It is empowered to determine what use a proprietor may use his unit for to those areas which, in its opinion, "could reasonably be expected to be diminishing or injurious to the appearance, reputation or professional image of the building complex, or any part of it". There are, then, recorded a number of examples which are said to be non- inclusive; and b) It is empowered to permit a change of the use to which a proprietor used his unit at the time the rule was adopted. Without that approval the rule prohibits any change of use by a proprietor from the use to which the unit was put at the time the rule was adopted. [34] Counsel advanced very careful submissions, for which I most grateful. From their submissions and the authorities cited I extract the following propositions whichI consider give assistance in determining the questions raised by this summary judgment application. They are as follows: a) A right or power will be classified by a court as a Schedule 2 rule or a Schedule 3 rule having regard to its effect: Thomas Fifer "Unit Titles and No 8 Wire"; 4b) There is a need to distinguish between rules which provide for decisions to be made by a body corporate that are likely to affect all proprietors and those which are of less significance: World Vision of New Zealand Trust Board v Seal; 5c) Amendments to rules which introduce a power or duty are limited to those which are incidental to the performance of the duties or powers imposed by the Act (and in another area which does not relate to this case): proviso to the Unit Titles Act 1972, s 37(5); d) A rule which appreciably expands the existing powers and duties of the body corporate cannot fairly be regarded as merely incidental to those existing powers and duties: Velich v Body Corporate 164980; 6e) An addition to or amendment of a rule may not prohibit or restrict the devolution, or transfer of a unit and other matters referred to the Unit Titles Act 1972, s 37(6); f) A body corporate cannot by-pass the requirements that a rule be adopted unanimously which is imposed by the Unit Titles Act 1972, s 37(3) by purporting to include the addition or amendment within Schedule 3: Wu v Body Corporate 366611,7 Ballard v Body Corporate4 Thomas Fifer "Unit Titles and No 8 Wire" [2006] NZLJ 152 citing Craig-Gordon v Proprietors Strata Plan No 16 (1964) 82 WN (PT 1) (NSW) 306 SC.5 World Vision of New Zealand Trust Board v Seal [2004] 1 NZLR 673 at 681-682.6 Velich v Body Corporate 164980 (2005) 5 NZ ConvC 194,138.7 Wu v Body Corporate 366611 HC Auckland CIV 2009-404-5756, 30 November 2009 at [41] per Lang J.Strata Plan No 1792,8 and Craig-Gordon v Proprietors Strata Plan No 16;9 and g) Care must be taken where a power is reserved. In Wu v Body Corporate 366611 10 a distinction was drawn between rules which give a power to a body corporate and those which do not. Rules which give a power were classified as rules which can only be part of Schedule 2. That, perhaps, overstates the position because a power to consent to the keeping of an animal is reserved to the committee of a body corporate pursuant to Schedule 3. Nevertheless a rule change which gives extension powers to the committee of body corporate would not seem to be incidental to the performance of the duties or powers imposed on the body corporate by the Act. [35] Where I apply the above propositions to this case I conclude that the wide powers reserved to the body corporate by r 1(o) are not of and incidental to the range of matters covered by Schedule 3. The amendment has the effect of imposing a considerable restriction on the use to which a proprietor may put his or her unit. That condition means that the method of adoption of the rule change required a unanimous resolution. No such resolution was passed. The resolution that was passed is therefore invalid. It is contrary to the Unit Titles Act 1972. [36] The rule is invalid, however, for a second reason. In its last paragraph it purports to restrict the ability to transfer. In that respect it infringes the Unit Titles Act 1972, s 37(6). [37] Mr Bigio invited me to consider severance should I come to the conclusion that the rule was invalid. The severance he suggested was to delete all reference to powers being given to the body corporate or its committee. To do that, in my view, changes the rule substantially and, in fact, could have the effect of imposing an even greater restriction on the ability of registered proprietors to use their units. Plainly,8 Ballard v Body Corporate Strata Plan No 1492 [1974] VR 818.9 Craig-Gordon v Proprietors Strata Plan No 16 (1964) 82 WN (PT 1) (NSW) 306 SC.10 Wu v Body Corporate 366611, above n7.severance is not appropriate.Conclusions[38] I conclude that the defendant is entitled to the declaration sought.Costs[39] I discussed with counsel what should happen if the plaintiff was successful in its summary judgment application and the defendant was successful in its. Both agreed in that event that no order for costs should be made. That is the reason, then, why no order for costs is made.Adjournment of the plaintiff's application[40] Out of an abundance of caution in the orders that I make I am adjourning the plaintiff's application so that there is the opportunity available to the parties to deal with the miscellaneous levies/charges claimed in the sum of $11,379.62 in the event that agreement cannot be reached.Orders[41] I enter judgment as follows: a) For the plaintiff in the sum of $71,273.48; b) A declaration that r 1(o) of Body Corporate 159626 as recorded on supplementary record sheet NA96A/165 is ultra vires and invalid; and c) The plaintiff's application for summary judgment is adjourned to 2:15pm on 12 August 2010 for the purpose of determining whatdirections or orders are appropriate in respect of the plaintiff's claim in respect of the miscellaneous levies/charges. _____________________ JA Faire Associate Judge