BODY CORPORATE 198693 v HUA XI [2022] NZHC 804

BODY CORPORATE 198693 v HUA XI [2022] NZHC 804 [14 April 2022]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2021-404-001528[2022] NZHC 804UNDER Rules 15.10, 17.29 and 17.30 of the HighCourt Rules 2016IN THE MATTER of Sale Order / Enforcement ProcessBETWEEN BODY CORPORATE 198693ApplicantAND NAI ZUO TAO and HUA XIRespondentsHearing:Further evidence:28 February 202214 and 21 March 2022Appearances: C Baker for RespondentNai Zuo Tao in person assisted by his daughter, An Li TaoJudgment: 14 April 2022JUDGMENT OF WOOLFORD JThis judgment was delivered by me on Thursday, 14 April 2022 at 11:00 ampursuant to r 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors: Price Baker Berridge (C Baker), AucklandCopy to: Applicants[1] The respondent, Body Corporate 198693, has obtained a final judgment andsale order against the applicants who are the joint owners, together with their daughter,Ms An Li Tao, of Unit R in a unit title development at 8 Margan Avenue, New Lynn.On 16 November 2021, the applicants filed an application to set aside the sale orderand/or for a stay of enforcement.Grounds of application[2] The applicants say:(a) the respondent has never served the application for a sale order on them;(b) the respondent claimed that the amount of $14,405.14 remained unpaid,which sum did not take into account payments by the applicants of$916.80 on 15 April 2019 and $2,098.62 on 27 June 2019. In addition,no accounting was made of the sum of $890 paid by the applicants on28 May 2018 as security for costs in respect of a failed appeal to theDistrict Court against the determination of the Tenancy Tribunal;(c) there is a lack of justification for the "subsequent costs anddisbursements of $2,695.00" listed in the sale order;(d) the applicants have filed a claim in the Human Rights Review Tribunalagainst the respondent on the grounds of discrimination on the basis ofrace or ethnic or national origins in that the respondent has not takenenforcement action against two Indian owners for unpaid levies;(e) the respondent's secretary/manager, Strata Title AdministrationLimited (Strata), has engaged in fraudulent activities by transferringlarge amounts of money to a few unknown recipients;(f) the respondent has misled the High Court by advising the Court inseparate unsuccessful proceedings taken by their daughter, Ms Tao,against the respondent that it had opened a separate bank account toreceive the levies from the owners;(g) although the respondent only claimed unpaid levies of $3,015.42, it alsoclaimed more than $8,000 "legal costs" and $394.61 as wronglycalculated "interests"; and(h) on appeal in the District Court, Judge Harrison was wrong to find thatthe Tenancy Tribunal had implicitly approved legal representation forthe respondents. The threshold in s 93 of the Residential Tenancies Act1986 was not met. Judge Harrison also did not consider whether thecosts claimed by the respondent were reasonable in terms of s 124 ofthe Unit Titles Act 2010.The law[3] A sale order is a method of enforcing a judgment.1 An enforcement processsuch as a sale order may be issued as of right unless leave of the Court is requiredunder r 17.9 of the High Court Rules 2016.2 An enforcement process is issued by theentitled party or that party's solicitor filing (a) a written request that a particularenforcement process should be issued, and (b) an affidavit stating that none ofparagraphs (c) to (e) of r 17.9(2) apply.3[4] An entitled party issuing an enforcement process must file an original order forthe particular enforcement process sought and a copy for the Court.4 The Registrarmust seal the original order and give it to an enforcing officer.5[5] A liable party may apply to the Court for a stay of enforcement or other reliefagainst the judgment upon the ground that a substantial miscarriage of justice wouldbe likely to result if the judgment were enforced, and the Court may give relief on justterms.6 The Court may also set aside an enforcement process if it is issued contrary to(a) any order of the Court; or (b) the agreement of the entitled party or; (c) good faith.71 High Court Rules 2016, r 17.3.2 Rule 17.8(1).3 Rule 17.8(2).4 Rule 17.22(1).5 Rule 17.22(2).6 Rule 17.29.7 Rule 17.30.[6] An entitled party may issue a sale order at any time after judgment for a sumof money is sealed.8 An entitled party must endorse the sale order with the amountclaimed.9 The amount claimed must reflect money paid on account of the judgment,the entitled party's wish to waive any part of the money and/or the entitled party'scosts or that the judgment has been given for a larger amount than is due.10 If theamount due under a judgment is less than the amount of the judgment and the entitledparty has not endorsed that on the sale as required by r 17.64(2), the Court may setaside or vary the order and make whatever restitutionary or incidental orders arethought just.11[7] An enforcing officer must give notice of the sale in a newspaper at least15 working days before the date of the intended sale.12 Then, at least seven workingdays before the sale, an enforcing officer must serve a copy of the notice referred to inr 17.71 on the liable party at the liable party's address for service.DiscussionService of application for sale order[8] There is no requirement in the High Court Rules that the entitled party servethe liable party with an application for sale order. There is no actual applicationrequired. An entitled party is entitled to have a sale order issued by the High Court asof right. The entitled party merely has to make a written request. Such a request doesnot come before a judge. It is dealt with administratively. The only requirement forservice is of a notice, which must state that the sale is made on behalf of the entitledparty and must specify the land intended to be sold, the name of the enforcing officerand the name of the solicitor (if any) for the entitled party. Such a notice must beserved by the enforcing officer (not the entitled party) on the liable party at least sevenworking days before the sale.138 Rule 17.63.9 Rule 17.64(1).10 Rule 17.64(2).11 Rule 17.64(3).12 Rule 17.71.13 Rule 17.72.Failure to take two payments and security for costs into account[9] The applicants raised the issue of a payment of $916.80 on 15 April 2017 onappeal before Judge Harrison. The applicants sought to adduce further evidence onappeal, which they claimed was proof of payment. The further evidence was in theform of a bank statement, allegedly showing a deposit of $916.80 into the bankaccount of the respondent on 15 April 2017. However, the respondent's accountmanager produced its bank statements for the same period, which did not record anypayment received by or on behalf of the applicants.[10] Judge Harrison found that the applicant could have produced their evidencebefore the Tenancy Tribunal but did not do so. In light of the fact that the evidencethen adduced by the respondent demonstrated that the claimed payment was not made,Judge Harrison declined leave to the applicants for them to adduce further evidenceon appeal. There were no special reasons for hearing the evidence on appeal.[11] In this Court, one of the applicants, Mr Nai Zuo Tao, has attached a Kiwibankdocument date-stamped 26 June 2019 to his affidavit, affirmed on 14 March 2022, asevidence of the payment of $916.80 on 15 April 2017. This is the same payment inrespect of which Judge Harrison refused leave to adduce fresh evidence in the appealhe heard from the decision of the Tenancy Tribunal. This is, however, only a smallpart of the debt owing to the respondent such that a substantial miscarriage of justicewould not be likely to result if the judgment were enforced, which is the appropriatetest to apply to the current application to set aside the sale order or for a stay ofenforcement.[12] As to the second sum of $2,098.62, the respondent acknowledges that theapplicants paid this sum after the Tenancy Tribunal's decision, but prior to the appealhearing in the District Court. It has therefore issued an amended sale order specifyingthe sum of $12,306.52, being the original sum of $14,405.14 less the sum of $2,098.62.[13] The respondent also acknowledges that the applicants paid the sum of $890into the District Court as security for costs. The District Court subsequently orderedthe applicants to pay cash of $1,085 to the respondent in respect of the unsuccessfulappeal. The District Court should therefore pay the sum of $890 which they hold tothe respondent in partial payment of the costs awarded to it. The respondent has notyet received the sum of $890, but it has undertaken that when it does, the amount withrespect to which the sale order proceeds will be reduced by the same sum.Subsequent costs and disbursements of $2,695[14] The subsequent costs and disbursements comprise a filing fee of $1,500 paidto the Court, and scale costs of $1,195.14[15] The claim for $2,695 is unobjectionable.Claim in the Human Rights Review Tribunal[16] The applicants' claim in the Human Rights Review Tribunal has yet to bedetermined. The applicants say that this is in the form of a counterclaim and theircombined demand for $60,000 against the respondent in the Human Rights ReviewTribunal well exceeds the amount claimed by the respondent in the presentproceedings. It is not, however, a counterclaim as such because it is not filed in thesame court or tribunal. The prospective success or otherwise of the claim in theHuman Rights Review Tribunal does not disentitle the respondent from exercising itsrights to recover payment of the debt owed to it by the applicants.Fraudulent activities[17] In support of their claim of fraudulent activities, one of the applicants, Mr Tao,annexes a copy of a transaction history report for a bank account in Strata's name forseven days from 15 April 2017 to 22 April 2017. It consists of 15 pages and 424transactions. In his affidavit, Mr Tao states, "In this Bank Statements, most of thewithdrawals which have been transferred to the unknown payee".[18] Mr Tao also annexes a copy of the respondent's statement of financialperformance for the period from 1 February 2017 to 31 October 2018, and commentsthat through comparing the transaction history report and the statement of financial14 Schedule 3. 0.5 days are allowed for item 61, "Sale order, including sale of seized property", at arate of $2.390 per day.performance, no matching data can be found. He states: "The fraud is undisputable,unless the respondent is able to justify these withdrawals, provide evidence of whowere the recipients and the authorizations from the Body Corporate."[19] With respect, the transaction history report and the statement of financialperformance do not, by themselves, provide any evidential foundation for anallegation of fraud. It is obvious that the bank account in Strata's name was used as aclearing account for a number of unit title developments and not just the property at8 Margan Avenue, New Lynn. The withdrawals from the bank account are alsoincomprehensible without analysis and reconciliation with other records. For instance,the sum of $75,516.33 was withdrawn from the account on 18 April 2019. The payeeis described as 19035 EFT13042017 and the reference is 072639. But the fact that thewithdrawals are incomprehensible without analysis and reconciliation with otherrecords does not make them fraudulent. It is not for the respondent to prove they arenot fraudulent as Mr Tao invites the respondent to do. There is instead an evidentialonus on the applicants to provide some evidential foundation for an allegation of fraud.This they have not done.Separate bank account[20] The applicants refer to a judgment of Thomas J in separate unsuccessfulproceedings to allege that the respondent has misled the Court about opening and usinga separate bank account to receive levies from the owners.15 The applicants refer tothe statement made by Thomas J:16Even if there were any issue as to whether the bank account operated by Stratawas in breach of s 120 of the Act, which, given s 120(b) and the evidence ofcompliance, it was not, a separate bank account has now been opened.[21] The Judge had, however, earlier found that the respondent was not in breachof s 120. Thomas J stated:17Finally in relation to Strata, Ms Tao alleges that it has breached s 120 of theAct by failing to provide bank statements to the owners. Section 120 requireseach body corporate to maintain either a separate bank account for its funds,15 Tao v Strata Title Administration Ltd & Anor [2016] NZHC 814.16 At [85].17 At [61].or a single bank account in which the respective funds are kept entirelyseparate and are able to be identified. Section 120 does not provide for thedisclosure of any bank statement information, and Strata's evidence showsthat it keeps a compliant account with financial details reviewed by an auditor.The auditor's report is sent out to owners along with the AGM agenda andmaterials, and has been approved by the body corporate at each AGM. Section120 places no disclosure obligations on Strata, and there is no other evidencethat it is in breach of s 120 as alleged.[22] Subsequent to the hearing, the applicants provided the Court with affidavitsdated 22 March 2016 from the former chairperson of the respondent, Mr Jigar Pandya,and the former managing director of Strata, Mr Michael Williams, which had beenfiled in the earlier proceedings before Thomas J. These referred to instructions givenby the respondent to Strata on 30 October 2015 to establish a separate bank account/sto hold and administer the respondent's funds.[23] In an affidavit in response dated 21 March 2022, the current general managerof Strata, Ms Nicola Bullock, advises that Mr Pandya subsequently sold his unit andis not longer a member of the respondent. Mr Williams also ceased to be the managingdirector of Strata in May 2016. Ms Bullock therefore advises that neither she noranyone else in Strata nor anyone now on the committee of the respondent has anybackground information as to why accounts were opened by the respondent in 2016,but not used after that year.[24] Ms Bullock confirms that the body corporate fees collected from unit holdersat 8 Margan Avenue, New Lynn, are deposited into a trust account held by Strata alongwith many other body corporates managed by Strata. The Court in the earlierproceedings specifically endorsed this practice as compliant with the Unit Titles Act.Ms Bullock assumes that, following the 2016 High Court decision, the committee ofthe respondent reverted to the use of the Strata general trust account as a compliantaccount rather than utilising the separate account/s identified in the affidavits ofMr Pandya and Mr Williams. Ms Bullock further assumes that the committee's viewchanged as to the necessity or desirability of the alternative account/s once the decisionof Thomas J was released.[25] Having reviewed all the information now provided by the applicants, therespondent's continued use of a compliant general trust account in the name of Stratawill not likely result in a substantial miscarriage of justice if the judgment for therespondent and against the applicants is enforced by way of a sale order.Legal costs and interest[26] The original sale order recorded a judgment debt of $14,405.14 as recorded ina sealed final judgment. It comprised:Tenancy Tribunal - 3 August 2017Levies $3,015.92Costs $6,430.11Filing fee $850.00Interest $394.61$10,690.14District Court – charging order - 3 October 2017Schedule costs and filing fee $962.00Tenancy Tribunal - 22 December 2017Counsel's attendances $1,518.00 (1/3 of $4,554.00)District Court on appeal - 9 November 2020Schedule costs $1,085.00MiscellaneousCost of two certificates of judgment $100.00Cost of sealing judgment $50.00$14,405.14[27] As to the reasonableness of the costs awarded against the applicants, theAdjudicator stated in his decision dated 3 August 2017:[44] The Body Corporate is entitled to claim costs incurred in collectinglevies, including costs on a solicitor/client basis, pursuant to rule 5 of the BodyCorporate's Operational Rules and in accordance with section 124 UTA. I amsatisfied that, viewed objectively and applying Cheah and Gilbert to thepresent facts, the costs claimed in respect of each application are reasonable.In so finding, I have taken into account the merits of the various argumentsraised by the respondents in opposing the applications and the need to respondto those arguments.[28] However, the Adjudicator did not, at the time, award costs in respect ofcounsel's appearance at the hearing. He stated:[45] The Body Corporate also sought costs in respect of counsel'sappearance at the hearing in the sum of $3,200.00. Understandably, no invoiceto the Body Corporate for these costs was produced at the hearing. Becausethe Body Corporate is only entitled to claim costs incurred in collecting levies,I have reserved leave for the Body Corporate to seek a further order in respectof the costs incurred for the hearing provided an invoice rendered for thosecosts is provided to the Tribunal.[29] The Adjudicator did subsequently award such costs in a later decision. Hestated:[7] After considering the submissions made in the memoranda filed, I amsatisfied that the total solicitor/client costs claimed for counsel's attendance atthe hearing, $4,554.00, are reasonable. In so finding I have taken into accountthe range of issues that were raised by the respondents in defence to the levyclaims as well as the standard principle that costs should follow the result. Iam satisfied that, notwithstanding the relatively modest amounts of unpaidlevies, the respondent's strident opposition to the levy claims and the historyof litigation between the owners of unit R and the Body Corporate in otherjurisdictions meant that it was entirely appropriate for the Body Corporate tobe represented at the hearing by experienced counsel. Finally I note here, andin relation to one of the concerns raised by Ms Tao in her memorandum, thatthe hearing costs claimed only relate to Mr Baker's attendance at the hearing.[8] I consider that it is appropriate, given the very similar argumentsraised by all three respondents in opposing the claims, for each respondent tobear an equal share of the hearing costs.[30] The costs awarded in the District Court relating to an application for a chargingorder by the respondent and an appeal against the Tenancy Tribunal decision by theapplicants (both of which were resolved in the respondent's favour) are in accordancewith Schedule 4 and 5 of the District Court Rules. They are quite unexceptional.[31] Interest is also payable on the unpaid levies in accordance with s 128 UnitTitles Act and resolutions passed at annual general meetings of the respondent at therate of 10 per cent per annum. Again, there is nothing exceptional about the award ofinterest. The applicants have not demonstrated how such interest was wronglycalculated.District Court Errors[32] Counsel are in general not permitted to appear in the Tenancy Tribunal exceptin special circumstances. Section 93(2) and (3) of the Residential Tenancies Act 1986provides:93 Right of audience(2) Except as provided in the succeeding provisions of this section, noparty shall be entitled to be represented at the hearing by counsel orby a representative, except where—(a) the other party consents; or(b) the amount in dispute exceeds $6,000; or(c) the other party is, or the other party's case is being conductedby, the chief executive acting under section 124 or 124A.(3) The Tribunal may allow any party to be represented by counsel if itconsiders that it would be appropriate to do so, having regard to—(a) the nature and complexity of the issue involved; or(b) any significant disparity between the parties affecting theirability to represent their respective cases.[33] The applicants say that Judge Harrison was wrong to find that the TenancyTribunal had implicitly approved legal representation for the respondent. The TenancyTribunal had in fact specifically approved representation of the respondent bycounsel.18 The Adjudicator has not been shown to be wrong in his assessment, giventhe multiplicity of actions taken by the applicants in a number of differentjurisdictions.[34] Although Judge Harrison did not specifically focus on the reasonableness ofthe costs claimed by the respondent, it appears that the reasonableness of the costs wasnot a specific focus of the appeal. Rather, the focus was on the decision of the Tribunalto allow the respondent to be represented by counsel. The Judge concluded:[24] The Tribunal was therefore entitled to allow the Body Corporate to berepresented by counsel pursuant to s 93(3) by reason of the nature andcomplexity of the issue involved, and the appellants' share of the BodyCorporate's costs was properly allowed.[35] The Judge's conclusion was not wrong.18 See [29] above.Result[36] The application to set aside the sale order and/or for a stay of enforcement isdismissed. Costs are to follow the event.____________________________Woolford J