MEMELINK v BODY CORPORATE 68792 [2021] NZHC 835

MEMELINK v BODY CORPORATE 68792 [2021] NZHC 835 [20 April 2021]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECIV-2016-485-141[2021] NZHC 835IN THE MATTER OF A claim for breaches of the Unit Titles Act2010, Unit Titles Regulations 2011.BETWEEN HARRY MEMELINK and CISCAFORSTERPlaintiffsAND BODY CORPORATE 68792DefendantHearing: 12 April 2021Appearances: D L Livingston for PlaintiffsA O'Connor for DefendantJudgment: 20 April 2021JUDGMENT OF COOKE J[1] By application dated 30 October 2020, the defendant, Body Corporate 68792(the Body Corporate), seeks to strike out the plaintiffs' claim under rr 15.1 and 15.2 ofthe High Court Rules 2016, or alternatively the inherent jurisdiction of the Court. Theprimary basis for the application is a failure to prosecute the proceedings. Theapplication is supported by an affidavit of Anthony Gambitsis who is the administratorof the defendant. The application is opposed and an affidavit from one of the plaintiffs,Mr Harry Memelink has also been filed and served.[2] The plaintiffs are the trustees of a trust which owns approximately half of theunit titles in the Body Corporate. The relevant property is a residential building inLower Hutt of approximately 12 unit titles. The plaintiffs' claim, as now identified ina fourth amended statement of defence dated 8 April 2021, includes challenges tocertain levying decisions made by the Body Corporate, as well as certain decisionsconcerning the spending of levies raised. The underlying events involve disputesoriginating from approximately 2003.Striking out for want of prosecution[3] Rule 15.2 of the High Court Rules provides:15.2 Dismissal for want of prosecutionAny opposite party may apply to have all or part of a proceeding orcounterclaim dismissed or stayed, and the court may make such order as itthinks just, if—(a) the plaintiff fails to prosecute all or part of the plaintiff's proceedingto trial and judgment; or(b) the defendant fails to prosecute all or part of the defendant'scounterclaim to trial and judgment.[4] The approach taken under this rule is well settled. In Commerce Commissionv Giltrap City Limited the Court of Appeal said:1The authorities are well known and do not need rehearsal. To succeed withsuch an application it must be shown (a) that there has been inordinate delay,(b) that such delay is inexcusable, (c) that the party affected has sufferedserious prejudice, and (d) it is not in the overall interests of justice to allowthe case to proceed.[5] The Court of Appeal also observed;2In cases of delay and alleged want of prosecution, the right of all citizens andorganisations to have access to the Courts for the determination of the issuesthey have raised should be denied only if that important right is outweighedby a stronger right vested in the defendant to have the case dismissed becausejustice can no longer be done in light of the delay.Application in the present case[6] For the reasons set out below I accept Mr O'Connor's submission that therehas been an inordinate and inexcusable delay, that it has caused serious prejudice, andthat it is not in the overall interests of justice to allow this case to proceed. I will1 Commerce Commission v Giltrap City Limited (1997) 11 PRNZ 573 at 577; see also Lovie vMedical Assurance Society Limited [1992] 2 NZLR 244 at 248 (HC).2 At 579.address the required considerations when assessing the chronology of events inrelation to the proceeding.[7] The claims were first advanced by statement of claim dated 1 March 2016. Itincluded complaints concerning the amounts that had been levied against the unit titlesassociated with the plaintiffs and other unit holders, the management of the BodyCorporate, and decisions to spend funds raised by way of levy on certain disputes thatthe Body Corporate had with the NZ Transport Agency (then known as TransitNew Zealand) associated with the decision to demolish units of the body corporate forthe realignment of State Highway 2 at Petone. The NZ Transport Agency hadpurchased units in the Body Corporate in 2005.[8] An important initial factor arises from the nature of that kind of proceeding. Itis a challenge to the legality of levying and spending decisions. By their very naturesuch challenges need to be brought promptly. Levying decisions, particularly annuallevying decisions, need to be addressed promptly because those subject to the levywill be required to pay it unless action is taken to set aside the levy, or obtain someform of interim relief pending a prompt determination of the challenge. That need iseven more acute in relation to a challenge to spending decisions made by the body thathas raised the levy. Once funds raised by levies have been spent by the BodyCorporate it is very difficult to grant effective relief. In a situation where there areother members of the Body Corporate it is also necessary for there to be prompt action,as the challenge to the legitimacy of the levy or spending decisions has significanteffects on them.[9] When the proceedings were first filed they prompted strikeout applications.By judgment dated 14 June 2016, Mr Memelink's claims against the individualsassociated with the Body Corporate were struck out, and an application to join theBody Corporate itself was granted.3 At that stage Brown J recorded:[12] While it is apparent that Mr Memelink has a significant number ofcomplaints about the way in which [the body corporate] has been and currentlyis operated, as he said in the course of his oral submissions the main issueconcerns the chairmanship of the body corporate. Indeed that issue is thefocus of the second and third causes of action in particular.3 Memelink v Martens [2016] NZHC 1285.[10] That referred to the emphasis the claim then had. But the Judge alsocommented on the lack of clarity with the allegations as then advanced. He referredto the "regrettable history of dissension and disfunction" of the Body Corporate.4 Healso cross-referenced his earlier decision in which he had appointed Administrators ofthe Body Corporate.5 What was clear at this stage, however, was that the proceedingsneeded to be against the Body Corporate itself.[11] The proceedings then came before the Court in February and March, and thenagain in May 2017. In her Minute of 18 May 2017, Clark J said:[3] the claim has now been afoot for over a year. The court file isvoluminous yet no progress has been made. The state of the pleadings is suchthat it is still not feasible to convene a first case management conference. Thatis unacceptable. The carriage of the proceedings developing an air of abuseof the Court's processes.[12] That observation was directed at the general state of the proceeding. It was notdirected to the additional point that the very nature of the disputes required promptproceeding, and a prompt determination in order to do justice for this kind of case.[13] Clark J gave directions for the progress of the proceeding. Those directionswere not complied with. In his affidavit Mr Memelink says that delays through 2017and 2018 are attributable to the defendant seeking to make him bankrupt. It appearsthat attempt failed in 2017, although Mr Memelink was made bankrupt in August2018.[14] As I understand it, the debts that were relevant to the bankruptcy are the debtsarising from the levies challenged in the proceedings. I accept that bankruptcyproceedings might provide some explanation for Mr Memelink being distracted. Onthe other hand, however, those proceedings rather reinforced the need to have theunderlying disputes concerning the levies resolved promptly. As Clark J had observedin May 2017, the delay to that point had already given rise to the concern that theproceedings were becoming an abuse of process. This was a very clear warning to the4 At [1].5 Body Corporate 68792 and Others v Memelink and Others [2015] NZHC 1731.plaintiffs that they needed to take action in the proceedings, otherwise they would beregarded as an abuse of process.[15] The only things that appear to have taken place following Clark J's Minute inMay 2017 were the filing of a statement of defence by the defendant and in July, andthe filing of a memorandum from counsel for the defendant in January 2018. The nextstep was not taken until September 2020. That is some three years and four monthsfollowing Clark J's Minute.[16] During this period an agreement was reached between Mr Memelink and theBody Corporate that these proceedings would not be continued. Mr O'Connorprovided me with a copy of Mr Memelink's affidavit dated 28 September 2017 swornin related proceedings concerning the appointment of an Administrator of the BodyCorporate. In that affidavit Mr Memelink said:5. My biggest concern with the operation of the Body Corporate hasalways been the failure of the Body Corporate and successive Courtappointed Administrators to reconcile the levies that I have paid to thebody corporate as both operational and special levies.6. I support Mr Gambitsis appointment because he has committed tocarrying out such an audit of the historical levies and Body Corporateaccounts.7. I agree to be bound by the outcome of the audit of Mr Gambitsis if heis appointed as Administrator. If it is found that there are outstandinglevies then I will pay those promptly at the conclusion of the auditprocess.8. I also agree that if Mr Gambitsis is appointed as Administrator towithdraw the claim against the Body Corporate under CIV 2013-485-141. As any such audit will satisfy my concerns as articulated in thatclaim.[17] Mr Gambitsis was then duly appointed. Mr Memelink says in his affidavitsworn in opposition to this application that "I agreed to put these proceedings on holdin January 2018 for the production of a report". But the agreement as recorded in hisearlier affidavit was not simply to put the claim on hold, but rather to "withdraw theclaim".[18] Mr Memelink also explains that he served a statutory demand on the defendantand that "rather than pursue insolvency proceedings against the [body corporate] inthese proceedings, I agreed to wait for the production of the Deloitte report". Thatmust be taken to be an election on his behalf to pursue alternative remedies rather thanthis proceeding. Again, the Court will be cautious to ensure that a party is not deprivedaccess to the Court. But Mr Memelink had been put on notice, he then reached anagreement not to pursue them, and elected to pursue alternative remedies.[19] Against that background I have little hesitation in concluding that that periodof time involves inordinate delay, particularly in the context of the very nature of theproceeding and the warning that Clark J had given.[20] In terms of whether the delay is excusable, Mr Livingston relied on twomatters. First, he indicated that the delay had been with agreement of the defendant.But as I understand Mr Memelink's affidavit of 28 September 2017 the Administratorwas appointed as a resolution of the proceeding, not simply a deferral of them. Thatthen leads on to Mr Livingston's second main point, which was that the audit reporthad failed to address the issues that Mr Memelink had raised, and the agreement couldnot prevent him from proceeding with his claims in those circumstances. But it is verydifficult to read paragraphs 5–8 of Mr Memelink's own affidavit as having the impliedlimit to "withdraw the claim" only if certain conditions were met.[21] Even if I am is wrong about that however, Mr Memelink would have had tohave acted very promptly indeed if he was to say that he could advance this claimnotwithstanding his earlier agreement. But he did not do so. The audit report inquestion was provided in October 2018, some two years before steps were taken torevive this proceeding.[22] Steps were taken in other proceedings during this time, however. In early 2019the Body Corporate served a statutory demand was served on an entity associated withMr Memelink, Lynx Trustees Limited. An application was then made to set aside thatstatutory demand. That application was dismissed by the Court in a judgment dated2 July 2019.6 The Court referred to the earlier agreement that Mr Memelink hadreached. It referred to the arguments then advanced to set aside the demand. SimonFrance J held:6 Lynx Trustees Ltd v Body Corporate 68792 [2019] NZHC 1521.[13] The other matters such as the alleged poor management of the BodyCorporate similarly do not afford a basis to either dispute the money owing orsuggest there is a reasonably arguable counterclaim. At the hearing emphasiswas placed by the applicant on the unresolved High Court claim by the trusteesof Link Trust No 1 against the Body Corporate.7 A fourth amended statementof claim in that proceeding was filed on 30 May 2017. This was however priorto the affidavit sworn by Mr Memelink in support of the appointment of thecurrent Body Corporate administrator. In the passage cited earlier Mr Memelink indicates the appointment of the administrator and theundertaking of an audit will bring those proceedings to an end. It can be notednothing has happened on those proceedings for two years, which is consistentwith Mr Memelink's affidavit.[23] Mr Memelink relies on a number of practical factors that explain why thisproceeding was not progressed, however. They include the bankruptcy proceedingsagainst him, and the fact that his solicitor proved to be unreliable. By itself the factthat delays can be attributable to a solicitor does not provide an excuse.8 The pursuitof alternative remedies also does not provide such an excuse.9 The Court will be waryto ensure that justice is still done, but Mr Memelink must be taken to have taken certainstrategic decisions in the proceeding.[24] Mr Memelink then says that as a result of his bankruptcy, and the liquidationof the associated entity (Lynx Trustees Limited) since August 2018, the issue ofoutstanding levies has been conducted in the sphere of the bankruptcy and liquidation.But this again involves a degree of election by Mr Memelink as to where the disputeswould be addressed. Given this proceeding was conducted by Mr Memelink in hiscapacity as a trustee, the right to pursue it did not vest in the Official Assignee. AsMr Memelink says, however, he elected to have the issues addressed in the bankruptcy,and he did not pursue this proceeding. Certain decisions were also then made by theOfficial Assignee in relation to his bankruptcy. Decisions were made as to whether toaccept or dispute debts said to be owed to Mr Memelink's creditors, including thosearising from the levies. Those matters were addressed in a decision of the AssociateJudge on 15 October 2020. In Memelink v Official Assignee Associate Judge Johnstonheld:107 Memelink and Hamilton v Body Corporate 68792 HC Wellington CIV-2016-485-141.8 Lovie v Medical Insurance Society Limited, above n 1, at 253.9 Stewart v Grey River Gold Mining Ltd HC Christchurch A51/78, 19 December 1991 at 8.10 Memelink v Official Assignee [2020] NZHC 2709 footnotes omitted.[55] In my view, neither the Official Assignee pursuant to s 234 nor theCourt in the context of an application pursuant to s 238 are required toexamine in minute detail every levy to ensure that it was imposed incompliance with all aspects of the legislation and BC 68792's internalmanagement rules. It is sufficient for the Official Assignee or the Court to besatisfied that the Body Corporate had a statutory entitlement and responsibilityto levy, has done so and that those levies are prima facie payable.[56] Of course any unit title holder is entitled to challenge the lawfulnessof levies, but in my view that is something which must be done in a timelyway in a separate ordinary proceeding.[57] The trustee owners here have had years to do that and have electednot to do so.[61] It turns out that in fact the trustees – or at least Mr Memelink – didinitiate such a proceeding in 2016, a proceeding that, for whatever reason,although still extant, is apparently moribund.[25] This reiterates the point I have already made that such challenges would needto have been brought and determined promptly. Moreover, the debt in question hasbeen confirmed in the bankruptcy proceeding. To suggest that Mr Memelink can nowreargue the same matters in this proceeding against all this background may wellinvolve an abuse of process.[26] Mr Livingston argued that the Associate Judge expressly said that the Courtcould not determine the broader issues and that this proceeding had been reinvigoratedas a consequence. I do not accept that that provides a proper explanation forMr Memelink's stance. The short point is that he has elected to pursue other remediesrather than pursue this proceeding.[27] I also cannot see how this proceeding could now justly deal with the mattersthat are raised. It seeks to call into question levying and spending decisions mademany years ago. The proposed causes of action are for breach of statutory duty. Forexample, the relief sought on the first cause of action is that the monthly levies be setat $5,883 for the plaintiff and "mutatis mutandis for the other body corporatemembers" and:That the historical outstanding levy position for the body corporate membersbe calculated retrospectively with any necessary revisions for reducedinsurance premiums or approved administrative budgets (to be particularisedin advance of the hearing); andAny payments by the plaintiff in excess of its ordinary levy position bereturned to the plaintiff.[28] Similar relief is sought in relation to a claim for breach of statutory duty inrelation to body corporate management (the second cause of action), special levies(the third cause of action) and a claim for an injunction (the fourth cause of action).The fourth cause of action can also be noted for its novelty. In it the plaintiffs seek aninjunction requiring the Body Corporate to consider suing the individuals innegligence. The individuals are presumably the same individuals who were originallystruck out of the proceeding in 2016.[29] To the extent these claims involve going back in time to rearrange levyingdecisions I cannot see how this can now fairly be done. As indicated, a challenge ofthis character would have needed to be dealt with promptly.[30] Mr Livingston also argued that the delays were excusable becauseMr Memelink suffers from a disabilities arising from his dyslexia, that in fact he hasonly one functioning eye and that he has had one leg amputated as a result of atraumatic accident in the middle of these proceedings. This is in addition to thedifficulties he has had with his previous solicitor. I accept that the Court shouldexercise some care in striking out any proceeding when there are issues of this kind.But I do not fully accept Mr Livingston's submission. That is because Mr Memelinkhas been regularly engaging in Court proceedings before this Court. Even his owndescription of the events in this affidavit in opposition shows that he has been pursuingthe disputes in one way or another. The Associate Judge observed that "the disputebetween the parties has been going on for years".11 I do not accept that Mr Memelink'sdisabilities have prevented him having access to the Court to pursue the avenues hehas wished to pursue.[31] Finally, I note Mr Livingston's submission that any attempt to enforce amountssaid to be owed by way of a levy would require proceedings in any event.11 Memelink v Official Assignee, above n 10, at [41].Furthermore, he argued that Mr Memelink would always be able to challenge thecurrent levies charged by the Body Corporate in proceedings. Those propositions mayor may not be true. But this proceeding is primarily directed to historic issues. Thatis so notwithstanding the most recent formulated fourth amended statement of claimbrings in allegations about the present circumstances. This is not a reason why theexisting claim should not be struck out for want of prosecution. The currentproceeding must be struck out because it has not been prosecuted appropriately.Whether Mr Memelink can commence new proceedings, or defend proceedingsbrought by others, is a separate question that will need to be addressed in light of thisand other judgments.Result[32] For these reasons I accept that there has been inordinate delay, that it has beeninexcusable and that it has seriously prejudiced the ability to do justice in the case. Itis not in the overall justice of the case to allow the case to proceed. I accept it shouldbe struck out under r 15.2. I do not need to address the alternative ground that it is anabuse of process under r 15.1, although I note that that may be an alternative way ofdescribing the reasons why the strike out application is successful.[33] The defendant's application to strike out the proceedings is granted. Thedefendant is also granted costs of this application on a 2B basis to be fixed by theRegistrar if the costs cannot be agreed.Cooke JSolicitors:Livingston & Livingston, Wellington for the PlaintiffsSurridge & Co, Porirua for the Defendant