LOW & ORS V BODY CORPORATE 384911 HC AK CIV 2010-404-5280

LOW & ORS V BODY CORPORATE 384911 HC AK CIV 2010-404-5280 2 September 2010IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2010-404-5280IN THE MATTER OF section 40 of the Unit Titles Act 1972 BETWEEN COLIN JEE FAI LOW & ORS Applicants AND BODY CORPORATE 384911 Respondent Hearing: 1 September 2010 Counsel: P G Skelton and R Edwards for Applicants D Salmon and C Wilson for Respondent M A Gilbert SC, S Price and A Simkiss for Receivers of Lighter Quay Hotel Management Ltd (in rec) and Melview Viaduct Ltd (in rec) Judgment: 2 September 2010JUDGMENT OF HEATH JThis judgment was delivered by me on 2 September 2010 at 9.30am pursuant to Rule 11.5 of the High Court Rules Registrar/Deputy RegistrarSolicitors: Anderson Creagh Lai, PO Box 106-740, Auckland Gilbert Walker, PO Box 1595, Shortland Street, Auckland 1140 Minter Ellison, PO Box 3798, Auckland Counsel: P G Skelton, PO Box 4314, Shortland Street, AucklandThe application[1] Mr Low owns a stratum estate in leasehold in a unit title development in central Auckland, from which the Westin Hotel operates. He, together with 113 co- applicants who have similar interests in the development, seek an order appointing Mr Gareth Hoole of Auckland, chartered accountant, as an administrator of Body Corporate 384911 (the Body Corporate). 1 The application is opposed by both the Body Corporate and receivers of two associated companies that own other units in the building or have other interests associated with the hotel's operations.Background[2] Deposit of a plan under the Unit Titles Act 1972 (the Act), results in the issue of strata titles for individual units and common areas. The Act adapts the Torrens system of land registration to provide for the ownership of residential and commercial space within a development undertaken on a single block of freehold land. The three main purposes of the Act are to facilitate the subdivision of land into units owned by individual proprietors, to facilitate its subdivision into common property that is owned by all unit proprietors as tenants in common and to provide for the use and management of the units and common property. 2[3] In general terms, the Act divides responsibility for areas within the complex between individual owners of particular units and common property. While individual units are the responsibility of the respective owners, common property is administered by the body corporate, on behalf of all proprietors.3[4] While a body corporate has such powers as are reasonably necessary to enable it to carry out duties imposed on it by the Act and its rules, it has no power1 Unit Titles Act 1972, s 40.2 See World Vision of New Zealand Trust Board v Seal [2004] 1 NZLR 673 (HC) at para [2].3 Ibid, at paras [21]-[52]. See also Body Corporate 188529 v North Shore City Council [2008] 3 NZLR 479 (HC) at paras [83]-[102]."to carry on any trading activities". 4 Therefore, in determining whether the Court should interfere in the affairs of the body corporate it should, ordinarily, acknowledge the fact that it comprises "a group of people who have no reason to be bound together other than the fact that they happen to occupy, or have some other interest in, a unit plan development created under the Act". That lack of common interest will generally mean that each proprietor will have differing interests to protect. 5[5] However, in the present case, the starting point for analysis is somewhat different. On the one hand, there is a group of absentee owners located overseas (in countries such as Singapore and Malaysia) who acquired their units to participate in a hotel operation that was to provide an income stream, by way of rent paid for use of the apartments. On the other, there were associated companies, under the direction of a Mr McKenna, whose interests were in development of the hotel complex and in making money from services rendered in relation to its operation. For reasons that will become clear, the original common interest in the continued long-term economic success of the hotel has become strained as a result of financial pressures on both groups. [6] The application to appoint an administrator falls to be determined in the context of those original commercial aims, even though the body corporate itself does not carry on business as part of the hotel management. It raises questions about the circumstances in which it is appropriate to appoint an administrator and the threshold requirements for such an order to be made.The hotel management structure[7] To understand the context in which the present application is brought, it is necessary to explain the complex structures that were put in place to enable the hotel business to operate.4 Unit Titles Act 1972, s 16.5 World Vision of New Zealand Trust Board v Seal [2004] 1 NZLR 673 (HC) at para [73], in the context of an application to cancel the unit plan and to dissolve the body corporate, under s 46(1) of the Unit Titles Act 1972.[8] The Westin Hotel is situated on the Viaduct Basin, in central Auckland, at the intersection of Viaduct Harbour Avenue and Halsey Street. The freehold title to the land on which the hotel is situated is owned by Viaduct Harbour Holdings Ltd (Viaduct). On 22 November 2006, that company entered into a ground lease of the land to Melview Viaduct Harbour Ltd (Melview). Once it had obtained that ground lease, Melview was able to construct the hotel complex. [9] Melview deposited a unit plan in October 2006. That was approved for survey purposes on 30 March 2007. 6 On deposit of the unit plan, Melview obtained strata leasehold estates in each of the units and was the sole proprietor that constituted the Body Corporate. 7 On creation of that estate, it was open to Melview to deal with each unit for its own benefit.8[10] Melview entered into a sub-lease of each residential unit in favour of Lighter Quay Hotel Management Ltd (Lighter Quay), entitling Lighter Quay to make the units available for use by a hotel operator. In turn, Lighter Quay granted rights in favour of Westin Hotel Management LP, to use the premises as a hotel under the "Westin" brand. [11] Melview set about selling most of the leasehold interests in the units to individual investors. Those sales were expressly subject to the lease in favour of Lighter Quay. I infer that, before the investors decided to buy the units, each obtained appropriate legal advice and had the opportunity to view all relevant documents that would affect the interest being acquired. [12] There are 173 residential units in the Westin Hotel. Of those, Mr Low and his co-applicants own 114, or 66%. Melview has retained ownership of 16 of the residential units, as well as owning "management units", comprising facilities such as the hotel restaurant, gymnasium and spa and reception areas. No steps have been taken in this proceeding by 43 other owners of residential units. In terms of unit6 Unit Titles Act 1972, s 4 (1) and (2).7 Ibid, s 12.8 Ibid, s 4(3).entitlement,9 Mr Low and his co-applicants control 55%, while Melview's combined ownership of residential and management units represents 24.2%. [13] The secretary of the Body Corporate is Galway Auckland Property Services Ltd (Galway Auckland). The building manager is Galway Property Services Ltd (Galway). Those two companies are operated through Mr McKenna, who was the guiding mind behind both Lighter Quay and Melview. [14] The Body Corporate committee is presently made up of five members; two of whom represent proprietors of the serviced apartments; two represent the proprietors of the management units (ie Melview); the other represents Lighter Quay. 10 The individual proprietors are represented by Ms Pike and Mr Chinnery. Mr Evans represents Melview. The receivers, Messrs Stiassny and Gibson, are the remaining members of the committee, representing Lighter Quay. Ms Pike, Mr Chinnery and Mr Evans all have direct links to McKenna companies.Recent developments[15] Under cl 4.1 of the lease agreement between Melview and Lighter Quay, Lighter Quay promised to pay to the Lessor the "Initial Rent and any other money required to be paid by the Lessee pursuant" to that lease. The benefit of that provision passed to individual proprietors who acquired leasehold estates from Melview. The "Initial Rent Period" was defined as a period beginning on 28 May 2007 and ending on 12 June 2010.11 A formula for the payment of rent, from the expiry of the "Initial Rent Period" was set out in cl 4.5 of that lease. [16] Therefore, each of the unit leases contained a guaranteed rental period of three years from the date of commencement of the lease. That rent was to be paid by Lighter Quay to each lessor, regardless of income earned from the letting of that unit9 Ibid, s 6.10 See also para [5] above.11 Definitions of "Initial Rent Period" and "Commencement Date" in cl 1.1 of the Lease.to hotel guests. That rent was not paid, resulting in a successful application 12 by 92 proprietors to cancel the leases and to obtain possession of their units. To allow time for arrangements to be put into place to facilitate continuation of the hotel business, the orders for possession were suspended until 11 August 2010. 13[17] At the time that application was made, over $3.5 million was owing to those proprietors. As income must have been earned by Lighter Quay from the operation of the hotel over that period of three years, the only inference is that Lighter Quay diverted money that ought to have been used to pay rent to the unit owners. [18] As well as failing to pay rent moneys to individual proprietors, both Lighter Quay and Melview fell into default of obligations owed to its secured lender, BOS International (Australia) Ltd. Those defaults resulted in the appointment of Messrs Stiassny and Gibson as receivers of those companies on 30 June 2010. On 14 July 2010, Lighter Quay was also put into liquidation by this Court. The liquidators of that company are Messrs Thursfield and Adams. [19] After Lighter Quay was put into liquidation, the receivers of that company and Melview entered into a "Standstill Agreement" with Mr Low and his co- applicants, which had the effect of extending the period before which the possession order took effect 14 and allowed continued operation of the hotel until 11.59pm on 1 September 2010. Mr Skelton, for Mr Low and his co-applicants, confirmed that the Standstill Agreement would expire at that time. Accordingly, after midnight on 1/2 September 2010, neither Lighter Quay nor Westin may use any of the rooms owned by Mr Low and his co-applicants that were the subject of the 14 July 2010 lease cancellation orders. [20] At present, the Body Corporate owes ground rent to Viaduct, as owner of the freehold estate. The amount owing is in the vicinity of $150,000. A Property Law Act Notice 15 was served on the Body Corporate by the landlord requiring payment12 Tan v Lighter Quay Hotel Management Ltd HC Auckland CIV 2010-404-4042, 14 July 2010 (Heath J) and Low v Lighter Quay Hotel Management Ltd HC Auckland CIV 2010-404-4342, 14 July 2010 (Heath J). These applications were made under s 244 of the Property Law Act 2007.13 Ibid, at para [15](b).14 Ibid.15 Property Law Act 2007, s 245.within 10 working days of date of service. Viaduct has indicated it will apply to the Court to cancel the unit plan and to terminate the ground lease, if that sum were not paid. [21] In addition, there are arrears of insurance premiums due. While the insurance policy apparently expired on 1 August 2010, it appears a short extension has been negotiated, on behalf of the Body Corporate. The premium owing is $150,000. [22] The reason why the ground lease and the insurance premium cannot be paid is that Mr Low and his co-applicants have declined to pay the amounts levied against them. Instead, they have paid the amounts of their levies into their solicitors' trust account to meet their portions of the obligations personally, rather than through the Body Corporate. That is because they distrust those responsible for making those payments to the lessor and insurer. [23] That distrust stems from the failure of Lighter Quay to pay to individual proprietors rental owing to them, despite receiving income through hotel guests. It is exacerbated by the link between Lighter Quay and Galway Auckland (as secretary of the Body Corporate) and the perception that the current constitution of the Body Corporate committee may give greater weight to the interests of Lighter Quay and Melview.Competing submissions[24] Mr Skelton submits that an order is required on the following grounds: a) There is a serious breakdown in the "key relationships" involving a "large majority" of residential unit owners, the Body Corporate secretary, the Body Corporate building manager and Melview, as owner of the management units. b) As a result of conflict of interest, the majority of unit owners no longer have confidence that the Body Corporate will be run in their best interests.c) The Body Corporate is currently "dysfunctional". d) It is seriously arguable that a number of relevant rules of the Body Corporate that favour economically the position of McKenna companies are ultra vires and unenforceable. On 31 August 2010, Mr Low and his co-applicants filed separate proceedings challenging thevires of particular rules. 16[25] For the Body Corporate, Mr Salmon submitted that: a) The jurisdiction to appoint an administrator exists principally to address questions of incapacity or dysfunction. Therefore, an administrator should only be appointed where "truly necessary". b) There is no evidence of either incapacity or dysfunction at Body Corporate level. To the contrary, the evidence establishes that the Body Corporate is functioning in an appropriate way; particularly since Messrs Stiassny and Gibson became members of the committee. c) The real complaints made by Mr Low are directed at actions of the receivers of Lighter Quay and Melview, rather than the Body Corporate. [26] Mr Gilbert SC, for the receivers, opposed the application because: a) The jurisdiction to appoint an administrator can only be made in cases involving dysfunction or when such an appointment is a "necessity". The Court should not exercise such jurisdiction unless it is "necessary" to do so because the Act intends that the Body Corporate is responsible for undertaking duties in respect of common property. b) Questions of vires of the rules are not raised directly by the application and should not inform the decision of the Court.16 Low v Body Corporate 384911 HC Auckland CIV 2010-404-5760.c) Conflict of interest ought not to be elevated to a level justifying appointment of an administrator because the Act contemplates that those proprietors who make up the Body Corporate will have different interests to serve. 17[27] Because an urgent decision is required I will not discuss in detail counsel's submissions. Rather, I set out my own analysis of relevant factors to explain why I have reached my conclusions. Having said that, I express my appreciation to all counsel for their thorough and helpful submissions.Applicable law[28] The jurisdiction to appoint an administrator is contained in s 40(2) of the Act:40 Appointment of administrator... (2) The Court may, in its discretion on cause shown, appoint an administrator for an indefinite period or for a fixed period on such terms and conditions as to remuneration or otherwise as it thinks fit. The remuneration and expenses of the administrator shall be an administrative expense within the meaning of this Act. .... (my emphasis)[29] The Court's power to appoint an administrator must be read in the context of the scheme of the Act. I discussed that scheme in detail in both World Vision of New Zealand Trust Board v Seal18 and Body Corporate 188529 v North Shore City Council.19 The Act makes it clear that individual proprietors retain responsibility for their own property, whereas the Body Corporate is required to deal with all common property. So, for example, proprietors of all units are empowered to sell or lease part of the common property or to grant an easement over all or any part of it, provided17 World Vision of New Zealand Trust Board v Seal [2004] 1 NZLR 673 (HC) at para [73].18 Ibid, at paras [21]-[52].19 Body Corporate 188529 v North Shore City Council [2008] 3 NZLR 479 (HC) at paras [83]-[102]. That decision was upheld by the Court of Appeal in Sunset Terraces [2010] NZCA 64, without adverse comment on the analysis of the scheme of the Act. Subsequently, leave to appeal to the Supreme Court has been granted on points that do not seem to involve reconsideration of the scheme of the Act: North Shore City Council v Body Corporate 188529 [2010] NZSC 79.they act together as a common group, as opposed to an unruly situation that could develop were an individual proprietor to deal with "common property" on its own. 20[30] In Body Corporate 188529 v North Shore City Council, I said:[97] The fundamental theme of the statute is the distinction between the individual units (for which each registered proprietor takes responsibility) and common property (the domain of the body corporate). The distinction is logical. Individual registered proprietors can deal only with individual property whereas "common property" is owned by all proprietors and must be managed by the body corporate for the common good of all. (my emphasis)[31] In World Vision,21 I considered an application for an order cancelling a unit plan and dissolving the Body Corporate. Section 46(1) of the Act states that such orders may be made if a plaintiff proves it is "just and equitable" to do so. Put colloquially, s 40 of the Act is the equivalent of an intensive care ward, while s 46 is the equivalent of euthanasia. [32] In World Vision, I said that the s 46 jurisdiction ought not to "be unduly circumscribed", while indicating that the "just and equitable" threshold to cancel the unit plan and to dissolve the Body Corporate differed significantly from the circumstances in which a similar power "might be exercised in relation to a common business enterprise". 22 I added:[85] A person is likely to invest funds in a business enterprise funds either to enable a particular venture to be undertaken or to obtain a commercial return from the existing business. A person is likely to invest in a development under the Act either to achieve a commercial return or to acquire a private residence in which to live. In a mixed use development of the type undertaken in this case the differing approaches are more stark than other cases. While a residential development may involve some owners whose interest is purely of a commercial nature and others who intend to reside in a unit, commercial developments, almost inevitably, involve solely commercial objectives. For the Court to seek to evaluate proposals with the intention of exercising a "just and equitable" jurisdiction when those who have interests in the property have such disparate aspirations or expectations would invite undesirable legal suits. [86] Nevertheless, circumstances might arise where it becomes necessary for the Court to intervene under s46. If a building has deteriorated through20 Body Corporate 188529 v North Shore City Council [2008] 3 NZLR 479 (HC) at para [96].21 World Vision of New Zealand Trust Board v Seal [2004] 1 NZLR 673 (HC).22 Ibid, at para [84].inadequate maintenance or cannot through the unavailability of funds be maintained properly, an order might be sought because the building is no longer fit for its original purpose. Similarly, if a disparate group of proprietors, together comprising a body corporate, interact so dysfunctionally as to require intervention from the Court, the jurisdiction may well be exercised on similar principles to those applied in company or partnership law where deadlock ensues.[33] Because s 40 envisages a less critical situation than does s 46, it would be unwise to attempt to define exhaustively the circumstances in which the discretion to appoint an administrator should be exercised. Parliament has provided an open- textured approach for the Court to apply, by using general words as a threshold test. All that is required is for the Court, "on cause shown", to exercise its discretion to appoint an administrator. 23 The nature of the discretion is emphasised by the ability to appoint a person for a fixed or indefinite period and on such terms as the Court thinks fit.24 The Court's ability to limit those powers of a body corporate and the committee that the administrator may exercise supports that view. 25[34] In World Vision, 26 I held that rules of a body corporate were designed to create a "democratic framework" within which the affairs of a body corporate are managed. I articulated the underlying principles that could be discerned from the Act as follows: 27a) The need to synthesise the conflicting views, needs and desires of proprietors who have differing interests, through the adoption of a democratic model. That model is designed to enable proprietors to make collective decisions (through the body corporate) about the use of common property and proposals to make structural changes or additions to the property likely to affect the use, enjoyment or value of units owned by other proprietors. Unanimous approval is required (unless s 42 (Court power to dispense with unanimity in certain circumstances) can be invoked) for decisions likely to affect the23 Unit Titles Act 1972, s 40(2).24 Ibid.25 Ibid, s 40(3).26 World Vision of New Zealand Trust Board v Seal [2004] 1 NZLR 673 (HC) at para [28].27 Ibid, at para [51].economic value or use and enjoyment of the units comprised in the plan. b) The need to distinguish between decisions to be made by a body corporate that are likely to affect all proprietors and those which are of less significance. The latter category of decisions can, generally, be left to the good sense of a majority of the proprietors to determine. Hence, the distinction between the need for unanimous consent to amend rules set out in Schedule 2 and an ordinary resolution to amend rules set out in Schedule 3. c) The need for all owners in a body corporate to be bound by rules adopted from the statute or agreed by them unanimously. d) That owners will, occasionally, disagree. For that reason: i) This Court is given power to dispense with the need for a unanimous resolution if a particular act is supported by 80 per cent or more of those entitled to vote: s 42. ii) Disaffected members of the body corporate in a minority can seek relief against any resolution passed on the grounds that it "would be inequitable for the minority": s 43. [35] I was referred to some cases in which the power to appoint an administrator has been discussed. 28 The two New Zealand cases 29 do not attempt to identify principles on which the s 40 discretion should be exercised. In Norman, an order was made as a matter of necessity in what the Judge described as a "near-desperate situation". In the context of a "leaky building" case, there was a need to refurbish in28 Norman v Body Corporate 193764 HC Auckland CIV 2009-404-6570, 23 October 2009 (Hugh Williams J), Greenhalgh v Body Corporate 330324 HC Auckland CIV 2008-404-1854, 2 July 2008 (Stevens J), Filaria Pty Ltd v Proprietors of Units Plan 932 [2002] ACTSC 8 and McKinnon v Adams[2003] VSC 116.29 Norman v Body Corporate 193764 HC Auckland CIV 2009-404-6570, 23 October 2009 (Hugh Williams J), Greenhalgh v Body Corporate 330324 HC Auckland CIV 2008-404-1854, 2 July 2008 (Stevens J).circumstances where there were insufficient funds to do so. 30 Greenhalgh was a costs judgment that arose out of an uncontested order to appoint an administrator. 31[36] The two Australian decisions are more helpful: a) In Filaria Pty Ltd,32 Miles CJ, in the Supreme Court of the Australian Capital Territory, considered s 92 of the Units Titles Act 1970 (ACT), couched in similar terms to s 40(2) of our Act, by permitting the Court to appoint an administrator "on cause shown". The Chief Justice held that "the body corporate [had not] taken any decisions or done or authorised any act in which the suggested conflict [had] resulted in anything adverse to the plaintiff in its position as a unit holder". 33 He added that "the existence of a conflict of interests is not of itself necessarily sufficient to disqualify a person from office of a fiduciary nature" and held that the majority unit holders should be entitled to continue to conduct the affairs of the body corporate. 34b) In McKinnon v Adams35 Bongiorno J, in the Supreme Court of Victoria, said, that to justify appointment of an administrator, a body corporate "must be affected by some incapacity, or must be acting so dysfunctionally as to render the provision of appropriate services to unit holders and/or care of the common property either non-existent, or so beset by difficulties as to render the body corporate unable to function at what the Court considers to be a satisfactory level". Those observations were made in the context of a section that simply conferred on the Court a general discretion to appoint an administrator. 3630 Norman v Body Corporate 193764 HC Auckland CIV 2009-404-6570, 23 October 2009 (Hugh Williams J) at para [3].31 Greenhalgh v Body Corporate 330324 HC Auckland CIV 2008-404-1854, 2 July 2008 (Stevens J) at paras [2], [3] and [8].32 Filaria Pty Ltd v Proprietors of Units Plan 932 [2002] ACTSC 8.33 Ibid, at [36].34 Ibid, at paras [37] and [38].35 McKinnon v Adams [2003] VSC 116 at para [20].36 Subdivision Act 1988 (Vic), s 38(4).[37] Despite the language employed, I do not think the two Australian Judges intended to limit the circumstances in which the discretion to appoint an administrator should be exercised. Rather, their observations should be read in the context of the particular disputes they were deciding. They were illustrations of an approach on different factual premises, rather than any attempt to exhaustively define the circumstances in which the Court could act. In my view, the general discretion (while it must be exercised in a principled way) should not be fettered. Everything turns on the facts of the particular case, with the Court's discretion being informed primarily by the functions of a body corporate and the ability of those with responsibility for its affairs to carry out their duties fairly, against the background of the underlying principles on which the Act is based. 37Should an order be made?[38] I am not satisfied that the affairs of the Body Corporate are being conducted in a dysfunctional manner. Whatever complaints the applicants may have about decisions being made by the committee, it cannot be said that those decisions are being reached irrationally. Although criticism has been made of the way in which the committee has dealt with outstanding debts to Viaduct and the insurer, I agree with counsel for the Body Corporate and the receivers that those problems have arisen because of the failure of the applicants to pay due levies to the Body Corporate. While understanding the reasons for withholding those payments, it is inappropriate for the applicants to criticise the committee for failing to pay those debts when they have lacked money to do so. [39] Similarly, while there appear to be some arguable issues in relation to thevires of particular rules that provide benefits to companies associated with Mr McKenna, the reality is that the applicants had the opportunity (whether or not taken) to ascertain the nature of those benefits by calling for documentation relating to the operation of the hotel on which they were relying for their income stream. I suspect that those who were advised appropriately took the view that the benefits to them from guaranteed income for the first three years was sufficient to outweigh the37 See para [34] above.any detriment caused by favourable treatment for the McKenna companies. Again, while it is understandable that the applicants now wish to challenge the vires of the relevant rules, it is not something on which I can put much weight in exercising the s 40 discretion. [40] My primary concern is with the conflicting interests that have resulted from the receivership and liquidation of Melview and Lighter Quay. A receiver must exercise his or her powers "in a manner he or she believes on reasonable grounds to be in the best interests of the person in whose interests he or she was appointed".38In doing so the receiver must have "reasonable regard to the interests of" (among others) unsecured creditors of the company in receivership.39 Generally speaking, it will be in the best interests of the appointor to obtain an early resolution of the receivership, consistent with the receiver's obligation to obtain "the best price reasonably obtainable as at the time of sale" of an asset. 40[41] On the other hand, the interests of the investors are likely to be long-term in nature, particularly if problems continue and they are unable to sell their units to third parties because of difficulties in the administration of the hotel caused by their inability to use facilities that form part of the management units. [42] My impression is that a high level of brinkmanship is being undertaken by both the receivers and the investors. If that were not the case, there would be more serious efforts being taken to negotiate solutions which would meet needs of both groups, namely to maintain the business operated at the hotel in a manner likely to result in beneficial returns to both the receivers' appointor and the individual unit owners. Instead, the unit owners seek to put pressure on the receivers by withdrawing their apartment units from the hotel and the receivers respond by making it difficult for the individual owners to use their units until the receiverships are resolved. Understandably, each group seeks to exert pressure on the other to maximise prospects of a more favourable outcome. While each party is entitled to take that type of stance, in doing so, they must accept the consequences of their actions.38 Receiverships Act 1993, s 18(2).39 Ibid, s 18(3)(c).[43] Mr Salmon and Mr Gilbert are right to submit that the role of the Body Corporate in a development of this type is limited. But the duties cast on the Body Corporate remain. The Body Corporate is responsible for overseeing the actions of its agents, in particular Galway and Galway Auckland as building manager and secretary respectively. To the extent that those companies do not perform duties cast on the Body Corporate, the committee is required to perform the duties identified in s 15 of the Act. [44] In those circumstances, is there any reason why an administrator should be appointed to take over the functions of the Body Corporate? The only reason can be the level of distrust brought about by Lighter Quay's actions in failing to pay rent in the initial period of three years, while (I infer) diverting those funds for the benefit of itself or those associated with Mr McKenna. That understandable distrust has resulted in a lack of confidence in those associated with McKenna companies who remain on the committee of the Body Corporate. As mentioned earlier, three of the five members of the committee have that association. 41[45] There is no rational reason for distrust of either Mr Stiassny or Mr Gibson. They must, when acting in their capacity as receivers of Lighter Quay, have regard to their duties to unsecured creditors of that company, of which the applicants comprise a number. 42 Yet, because overseas investors are involved, it is understandable (particularly having regard to what has gone before) that they may perceive a degree of partiality on the part of the receivers. [46] The real dispute, in the battle for negotiating supremacy, is between the applicants and the receivers. It may be that the interests of the applicants can be met by the appointment of two of their number to the committee, at the Annual General Meeting of the Body Corporate scheduled for 8 September 2010. Both Mr Salmon and Mr Gilbert emphasised, in the context of the democratic principles identified inWorld Vision,43 the ability of the applicants to safeguard their positions in that way. I consider that it is appropriate, particularly given the closeness in time of the Annual40 Ibid, s 19.41 See para [14] above.42 Receiverships Act 1993, s 18(3)(c) and 19(c).43 World Vision of New Zealand Trust Board v Seal [2004] 1 NZLR 673 (HC) at para [51](a).General Meeting, to provide an opportunity for the applicants to vote to appoint representatives at the meeting. Thereafter, it can be seen whether any dysfunctionality arises out of the way in which all protagonists conduct themselves in attempting to make decisions in the best interests of all proprietors. [47] I am satisfied that it was appropriate for this proceeding to be launched, given the unhelpful responses being made by the Body Corporate secretary and the Body Corporate's (then) solicitors to proper requests for information. I am also satisfied that the appointment of new solicitors by the Body Corporate has resulted in attempts to restore confidence. Likewise, if one puts to one side the commercial posturing of the two parties, there is an ability for the unit owners to negotiate with the receivers to reach a solution beneficial to both. There are a limited range of solutions open to the parties. [48] Because of developments after it was filed, I consider that final determination of the application is premature. [49] Having said that, some degree of reality must be restored. I do not know whether any point will be taken at the Annual General Meeting about the ability of the applicants to vote, assuming that they nominate proposed appointees promptly and pay, directly or indirectly, their share of ground rent and insurance premiums forthwith. In relation to the latter, as the funds are held in the trust account of the solicitors acting for the applicants, there is no reason why the contributions cannot be paid immediately. If any technical points were taken about rights to nominate committee members or to vote, I would have no hesitation in reconsidering whether to appoint an administrator. Leave will be reserved to apply on short notice should that situation eventuate. Otherwise, time will be required to determine whether a new committee can function adequately. If there are insurmountable problems, the present application can be restored for argument.Result[50] For the reasons given, the application to appoint an administrator is adjourned to a date to be fixed by the Registrar, before me, at 9am on the firstavailable date after 11 October 2010. If the applicants wish to pursue the application at that time they shall file and serve any further affidavits updating the position on or before 5 October 2010, with any affidavits in reply being filed and served on or before 8 October 2010. [51] Leave is reserved for the applicants to seek, on 24 hours notice to have the application restored for argument should steps adverse to the applicants be taken which they consider justify that course. Should such an application be made, a telephone conference should be convened by the Registrar as soon as is reasonably practicable. [52] I did not hear from counsel on questions of costs. My provisional view is that it was appropriate for the application to be filed and pursued and that the applicants should receive costs. I emphasise that view is provisional and subject to further argument, but counsel may wish to consider those thoughts when deciding how to approach that question. _______________________ P R Heath J Delivered at 9.30am on 2 September 2010