MYERS PARK APARTMENTS LIMITED V BODY CORPORATE 162791 HC AK CIV-2005-404-4746

MYERS PARK APARTMENTS LIMITED V BODY CORPORATE 162791 HC AK CIV-2005-404-4746 27 January 2006IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV-2005-404-4746BETWEEN MYERS PARK APARTMENTS LIMITED Plaintiff AND BODY CORPORATE 162791 Defendant Hearing: 26 January 2006 Appearances: Mr T.J.G. Allan for Plaintiff Mr G. Satherley for Defendant Judgment: 27 January 2006 at 12.30pmJUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN Upon Application by Plaintiff for Summary Judgment Background[1] The plaintiff is the owner and registered proprietor of various sub stratum estates in fee simple in a building known as the Mid City building at 239 Queen Street, Auckland ("Mid City"). [2] The defendant is the body corporate for the Mid City development. It is duly constituted pursuant to the Unit Titles Act 1972 ("the Act"). [3] The defendant has for some time claimed that it is owed outstanding levies of $127,467.36 by the plaintiff. Its claim is in respect of advice given to it by its solicitors Glaister Ennor. According to the defendant this advice comprises:(i) Legal advice to the defendant about the defendant's general affairs. (ii) Legal advice to the defendant about negotiations between "retail owners committee" set up to negotiate with the plaintiff's predecessor in title. (iii)Legal advice, and/or representation in connection with the plaintiff's proceedings against the proprietors of Mid City concerning the plaintiff's claim of redevelopment rights. (iv) Legal advice/representation in connection with the plaintiff's proceeding against the defendant, the defendant's proprietors and others connected to the plaintiff's redevelopment claims. (v) Interest on the aforementioned categories of cost/debt. [4] The plaintiff claims that despite demand the defendant refuses to provide it with a reconciliation showing what sums within the alleged debt are: (a) Levies proper (per s.15(2)(c) of the Act). (b) Interest on levies under the Act. (s.32A of the Act) following the plaintiff's default. (c) Costs incurred associated with legal action against the plaintiff for the aforementioned faults which the plaintiff acknowledges apply. (d) Other debts which the plaintiff says it has no liability for [5] The plaintiff's position is it owes no part of the claim of $127,467.36. Alternatively, if it is liable to contribute any part of those costs then its contribution should be fixed in accordance with its unit entitlement under the Act.[6] The plaintiff seeks a declaration it is liable only to pay those categories of cost/debt for which it is liable under ss.15(2)(c) and 32A of the Act, together with costs associated with legal action against the plaintiff for its liability pursuant to those provisions of the Act. Alternatively, if it is to pay additional costs it seeks a declaration that its liability is restricted to the proportion for which the plaintiff is liable under the Unit Plan. [7] Additionally, the plaintiff makes a claim to appoint an administrator under s.40 of the Act, or alternatively a chartered accountant, to produce to the Court an audited reconciliation of the defendant's debts alleged to be payable by the plaintiff. [8] The plaintiff's statement of claim alleges the defendant has failed to discharge its obligations to carry out building repairs and replacement as required under the Act and Body Corporate Rules. The plaintiff does not seek summary judgment upon that second cause of action. [9] Mr H.D. Morrison of Auckland, solicitor, has sworn an affidavit in support of the summary judgment application. He represented the plaintiff when it acquired its interest in Mid City. For several years prior to that he also represented the previous owner of those same units, Mid City Apartments Limited ("MCAL") as corporate trustee of Mid City Trust. [10] Mr Morrison deposes that MCAL had refused to pay the defendant any sums debited against MCAL's unit current account with the defendant. MCAL unsuccessfully applied to set aside the defendant's statutory demand issued upon the alleged debt due. By July 2004 MCAL's statement of account for the defendant showed a debit balance of $196,318.63. At about that time correspondence ensued between Mr Morrison and Mr Vile of Eden Property Management Limited, the defendant's secretary and the building manager, concerning a request for a break down of the debit balance into: a) Ordinary levies (i.e. s.15(2)(c)). b) Interest on those levies (i.e. s.32A).c) Special levies (which could be either s.15(2)(c) or some other generic levy across all units). d) Costs. [11] In relation to costs he asked Mr Vile to identify the costs which related to enforcement of the debt (referring to ordinary levies and interest thereon as opposed to other categories of debt). [12] Unsatisfied with the response he received Mr Morrison sent an e-mail stating "the accounts need to be apportioned between what may be recovered by way of levy and what is recoverable as an ordinary debt". Mr Morrison states he received no reply to his request. [13] On 16 August 2004 the defendants served a statutory demand on MCAL demanding payment of $294,891.89 for "outstanding levies". As at 31 July 2004 action upon that statutory demand was averted by the provision of a guarantee on account of any liability that the plaintiff may have pursuant to that demand. The sum of $210,000 was paid to the defendant, each party reserving their rights in respect of the amount owing once that amount was determined. The parties then expressed a desire to achieve a compromise over the claim of the balance due. The plaintiff continued to insist that the defendant undertake a comprehensive analysis in order to identify the category of claim/costs it says were properly due. Pursuant to an agreement for sale and purchase MCAL sold its interest in Mid City to the plaintiff. The agreement for sale and purchase was signed by a Mr Kells for both the vendor and the purchaser. [14] On 5 November 2004 the defendant demanded payment of all outstanding "levies" claiming there was $74,255.46 outstanding. Mr Morrison responded by requesting the defendant to distinguish between contributions which were attached to the plaintiff and debts which lay with MCAL. He says the defendant is either unable, or unwilling, to distinguish between the two because the plaintiff has never received any form of break down.[15] Since, and including November 2004, the plaintiff has duly paid, it says, the monthly invoices sent by the defendant. Mr Morrison asserts that (paragraph 32): "All monthly payments properly levied and invoiced continued to be paid in a timely manner. All other costs, by whatever name, unless they had been proved to be in one or other of the two accepted categories (interest on levies and costs of having pursue recovery of those levies), are not owed." [16] By letter dated 25 January 2005 the defendant particularised its legal costs for which it seeks repayment by the plaintiff. Those particulars have already been detailed in paragrpah 3 of this judgment. [17] Mr Morrison asserted it appears to be the defendant's position that: (a) There is firstly no distinction between levies to which s.15(2)(c) of the Act refers, and other debits against a proprietor under some other provision of the Act. (b) Section 33 of the Act enables the defendant to on charge the general legal costs (on an indemnity basis) for advice and/or representation across all categories (referred to in paragraph 3 herein) rendered to the body corporate. (c) Even if incurred before the plaintiff became the owner, such debts of the previous owner (if properly charged to that owner in the first instance) run with the land. (Paragraph 34). [18] In correspondence the defendant, Mr Morrison, has expressed the view that sections 33 and 34 of the Act are not capable of being used to on charge legal costs incurred by the defendant, whether directly or indirectly attributed to a single proprietor's legal proceeding, or other exercise of a legal right. [19] Mr Morrison reports the defendant's position is that the issues raised by the plaintiff's request for an explanation of its claim for solicitor's costs was a matter that could be addressed as part of another proceeding brought by the plaintiff in this Court under Ref. CIV-2004-404-7180. In that proceeding the plaintiff has issuedproceedings against thirty-four other owners and registered proprietors of .stratum estates in Mid City. It has also issued proceedings against the defendant, and in addition against mortgagees of units, and also against the insurer of the Body Corporate's building. By its proceeding the plaintiff seeks to require individual owners to consent to redevelopment lands for Mid City. Alternatively, it seeks to have the unit's title plan cancelled. [20] The plaintiff asserts the other proceeding raises issues irrelevant to the determination of the present one. It is the plaintiff's position that unless the Court determines the issue raised by this proceeding and makes the declaration sought by the plaintiff the defendant will simply continue to debit the plaintiff's unit with all its legal costs and other costs which are not payable by it. It denies it is liable for indemnity costs of the defendant obtaining legal advice. [21] In response to Mr Morrison's affidavit the defendant has filed an affidavit through Mr Vile, its secretary. It has annexed a copy of the defendant's statement of defence and counterclaim to the plaintiff's other High Court action. By that pleading the defendant seeks modification or extinguishment of the covenant pursuant to which the plaintiff brought. By way of particulars in support the defendant has pleaded, inter alia: (i) The plaintiff's redevelopment was first proposed by MCAL which then had Mr K.W. Kells as a director. (ii) MCAL had disputed its liability to pay amounts charged to it by the defendant and was subsequently placed into liquidation on 6 April 2004 for the unpaid Body Corporate liabilities of $344,200.35. (iii)Prior to its liquidation MCAL sold its units to the plaintiff and the shares are owned by a Mr K.W. Kells.(iv) Despite demand as at 28 February 2005 the plaintiff had outstanding liabilities under ss. 6 and 33 of the Act of $90,092.63 for which it has disputed liability. [22] By way of relief the defendant seeks various orders, including particularisation and the provision of information concerning its redevelopment plans. It also seeks relief, amongst other matters, that the plaintiff pay any outstanding legal or other expenses incurred by the Body Corporate or the other owners as a result of the redevelopment plans or defaults of the plaintiff and requests the plaintiff to pay "any further amounts owed by it pursuant to the Unit Titles Act". [23] By way of a further alternative defence the defendant seeks a declaratory judgment that the Body Corporate has incurred legal and other expenses in order to respond to the plaintiff's attempts to redevelop its units, and that the Body Corporate is entitled to require the plaintiff to meet those costs pursuant to s.33 of the Act. [24] Mr Vile has attached to his affidavit a summary of the liabilities which the defendant has apportioned to the plaintiff. He said the make up of those liabilities is apparent from the invoices and statements already provided to the plaintiff. He said the body corporate's reasons for counterclaiming for a declaratory order in relation to the levies was because it was aware the plaintiff has challenged whether it is liable for those amounts. That counter claim was lodged in the other proceeding on 24 March 2005. The plaintiff's present proceeding was filed on 25 August 2005. The earlier proceeding has already been allocated a 9 day hearing in May 2006. [25] It is apparent from the earlier proceeding, the plaintiff wishes to redevelop its units by building further stories on top of the existing Mid City building which will house residential units, which the plaintiff proposes selling for commercial gain. Mr Vile states the redevelopment would require a new unit plan which in turn requires the unanimous consent of all owners of units within the Mid City Centre which are included on the stratum title unit plan. He says the owners that make up the body corporate have not consented to the redevelopment.[26] Mr Vile states the history to the dispute is a long and involved one. He opines it would be more sensible to have all of these issues heard at once, rather than issuing a series of separate proceedings which duplicate matters that are already before the Court.Considerations[27] Accepting for present purposes that summary judgment may, in appropriate circumstances, be appropriate for the hearing of an application for declaratory judgment, I am firmly of the view in this instance it is not. [28] At the core of this proceeding, as is evidenced by the form of declaratory judgment orders sought, is the plaintiff's concern it has been debited costs and other charges which is says the defendant has no lawful authority to levy. The plaintiff contends it is only liable for levies which, pursuant to s.15(2)(c) and s.32 of the Act can be said to "run with the land". By contrast it cannot be held personally liable for a debt attributable to "repairs, work or acts" in sections 33 and 34 (which by contrast do not "run with the land" – unless they are notified in a s.36 certificate). The plaintiff has on a number of occasions requested the defendant to differentiate between those two distinct elements of liability. It claims that it is arguable the legal costs for levies or interest thereon do not "run with the land", and are not chargeable pursuant to sections 33 and 34 unless the body corporate has made a determination from time to time that such interest is payable. There is no proof, argues the plaintiff, that an appropriate determination has been made. Further, any such determination must, according to the provision of sections 33 and 34, take into account whether those expenses for which liability is set, are substantially for the benefit of one, or only some of the units, or benefit substantially one more than the others. [29] I heard argument from counsel about whether or not sections 33 and 34 could provide a basis for imposing indemnity costs which the evidence discloses have been claimed by the defendant in this case. I have been referred to the decision of Associate Judge Lang in Mid City Apartments Limited v Body Corporate 162791(CIV2003-404-7104, Auckland Registry) and the decision of Courtney J in Hart vBody Corporate 180455 (unreported HC Auckland CIV 2005-404-1429 23 June 2005), on the one hand and that of Fisher J in Godoy v Godoy (unreported HC Auckland M1906/98 14 June 1999) on the other. Whilst Mr Allan urges upon me that I should adopt the reasoning of the former two as opposed to the latter, I am of the view there is not the distinction contended for. I am not satisfied that a claim for indemnity costs can be ruled out in a proceeding where the claim does not relate essentially to the recovery of unpaid levies. [30] Further, Mr Allan contends that the defendant's charges include costs of legal advice related to matters of dealings concerning MCAL, the plaintiff's predecessor in title. Whilst there is evidence to support that contention, I am not satisfied that evidence alone should persuade me to the course of action intended by the plaintiff's proceeding. [31] In Mr Allan's submission it was the payment of $210,000 (an advance from MCAL's mortgagee) which provides the impetus for the present proceedings. The defendant contends that sum satisfied in full MCAL's liability to it. Mr Allan points out that the money was paid under protest, reserving to the plaintiff its right to object to the payment of anything that was not strictly a s.15(2)(c) levy. It was for this purpose that Mr Morrison requested on many occasions a comprehensive analysis to prove how the amounts claimed against the plaintiff were apportioned. The plaintiff has been unsatisfied by the defendant's responses to those requests. Hence this proceeding was initiated. The plaintiff's need for the declarations it seeks by these proceedings is highlighted by the fact that from December 2004 the monthly levy charge was reduced from about $21,000 to about $14,000. Mr Allan contends that implicitly the correctness of previous invoices must be in doubt. [32] I am not persuaded to the plaintiff's view point because I am of the view the present proceedings serves little more than a means of establishing the extent of the plaintiff's liability to the defendant's claim for levies and other charges. I am satisfied that these costs issues are already before the Court in the existing proceeding between the parties set for 9 days beginning 29 May 2006. That proceeding was filed in 2004 by the plaintiff and concerns the plaintiff's desire to undertake a significant redevelopment of Mid City. As earlier noted, the defendant(in those proceedings the thirty fifth defendant) has filed a statement of defence and counter claim. By its counter claim the defendant claims the plaintiff has outstanding liabilities under s.6 and 33 of the Act in respect of which it is liable to pay any outstanding legal and other expenses incurred by the body corporate, or the other owners as a result of the redevelopment plans or defaults. [33] The fact is that the question of the plaintiff's liability for costs raised by its present proceedings is clearly already before the Court, it having been raised by way of counter claim to the plaintiff's earlier proceeding, which proceeding is shortly to be heard. [34] That should be sufficient to dispose of the plaintiff's summary judgment application. However, I also have sufficient concern regarding the nature of the declarations sought which supports my view about how this summary judgment application should be disposed of. [35] Declarations (a) and (b), if granted, could have the effect of excluding costs being ordered on a separate and pre-existing proceeding that is yet to be heard. I accept Mr Satherley's submission that the Court in the other proceeding should be given an opportunity in a more refined way, and after hearing evidence to assess whether the levies are chargeable. It is my perception of the present proceeding that I do not have a complete picture of the extent and nature of the legal advice charged for in order to categorise whether it relates to legal advice for which liability can attach. In itself that inability should preclude the grant of summary judgment. [36] Nor do I think the plaintiff's application for declarations for an appointment of an administrator or a chartered accountant are particularly helpful. The costs already charged to the plaintiff are to be evidenced and assessed as part of the other proceeding. The requirements for auditing, if any, will depend on the extent and the nature of the liability ordered against the plaintiff in that other proceeding. Further, I accept, as Mr Satherley submits, that the appointment of an administrator under s.40 of the Unit Titles Act involves the exercise of a judicial discretion and is unsuited to summary judgment.Judgment[37] The application for summary judgment is dismissed. Costs are to be fixed on a Category 2B basis and are ordered to be paid by the plaintiff to the defendant. If counsel cannot agree upon quantum then I will receive memoranda from them for the purpose of determining the costs payable. ______________________________ Solicitors Grove Darlow, Auckland for Plaintiff Glaister Ennor, Auckland for Defendant