CUMMINS v BODY CORPORATE 172108 [2023] NZCA 226

CUMMINS v BODY CORPORATE 172108 [2023] NZCA 226 [12 June 2023]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA223/2022[2023] NZCA 226BETWEEN ROBERT JAMES CUMMINSAppellantAND BODY CORPORATE 172108RespondentHearing: 23 March 2023Court: Brown, Lang and Palmer JJCounsel: K P Sullivan for AppellantJ B Orpin-Dowell for RespondentJudgment: 12 June 2023 at 10.30 amJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant must pay the respondent costs for a standard appeal ona band A basis and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Palmer J)[1] In the context of a protracted series of legal proceedings, Mr Robert Cummins,the appellant, applied to the High Court to remove a caveat registered by therespondent, Body Corporate 172108 (the Body Corporate). The High Court dismissedthe application and awarded indemnity costs against Mr Cummins for the application.1Mr Cummins appeals against the costs award.1 Cummins v Body Corporate 172108 [2022] NZHC 774 [Decision under appeal].The proceedings[2] Mr Cummins and the Body Corporate have had a protracted and involvedhistory of legal proceedings over the remediation of leaks in the Hobson Apartmentsat 196 Hobson Street, in central Auckland. The background is set out in the judgmentunder appeal.2 Relevantly:(a) Unit 12A, comprising almost all of the 12th floor of theHobson Apartments, is owned by Manchester Securities Ltd(Manchester). Manchester was a trustee company for the ManchesterSecurities Trading Trust (the Trust) and is now in liquidation.Mr Cummins is the sole director and shareholder of Manchester and atrustee of the Trust.(b) Mr Cummins is also the sole director and shareholder of Flat BushFinance Ltd (Flat Bush). In March 2017, Flat Bush registered a caveatover the title of Unit 12A to protect its interest in the unit under amortgage granted by Manchester in return for funding to renovateLevel 12.(c) In November 2017, this Court upheld the High Court's variation of theterms of a remediation scheme settled under s 48 of the Unit Titles Act1972, which had gone awry.3 This Court criticised Manchester'sconduct as "dilatory and prevaricating" and upheld the High Court'sorder requiring Manchester to make an interim payment of $321,264.79(plus GST).4 Manchester did not do so and the Body Corporatesubsequently issued a statutory demand. The High Court declined toset aside the demand and this Court dismissed Manchester's appeal ofthat decision.5 Manchester initiated arbitration but was (eventually)subject to liquidation. Along the way, this Court again criticised2 At [12]–[68].3 Manchester Securities Ltd v Body Corporate 172108 [2017] NZCA 527, (2017) 19 NZCPR 65[Variation appeal]. The Supreme Court declined leave to appeal this decision: ManchesterSecurities Ltd v Body Corporate 172108 [2018] NZSC 19.4 Variation appeal, above n 3, at [44], [69] and [84].5 Manchester Securities Ltd v Body Corporate 172108 [2018] NZHC 169; and ManchesterSecurities Ltd v Body Corporate 172108 [2018] NZCA 190, [2018] 3 NZLR 455.Manchester's actions as "dilatory and prevaricating", seeking toachieve by a side route what it had failed to achieve directly.6(d) In December 2019, the Body Corporate registered a caveat against thetitle of Unit 12A to protect its subrogated interest as a creditor.In November 2020, Gwyn J declined Flat Bush's application to removethe Body Corporate's caveat and upheld the Body Corporate'sapplication that its caveat not lapse, pending further order of the Court.7(e) In June 2021, the Body Corporate began proceedings to obtain asubstantive decision upholding the claimed interest protected bythe caveat. It sought: a declaration that the assets of the Trust, includingUnit 12A, stand charged in favour of the Body Corporate to the extentof a debt comprised of the unpaid levies, judgment orders, and costsorders; a declaration that the Body Corporate's equitable proprietaryinterest in the Trust's assets ranks ahead of that of Flat Bush; and a finalorder that its caveat not lapse. Ultimately, the Body Corporate isseeking a final determination on the merits that Manchester's propertyis subject to an equitable lien that takes priority over the interestclaimed by Flat Bush. The substantive hearing is yet to occur.(f) In March 2021, the High Court declined Mr Cummins' application tobe joined to two sets of proceedings, in addition to, or in substitutionfor, Manchester.8 The proceedings he sought to join were theBody Corporate's application to vary the remediation scheme and theBody Corporate's appeal of the arbitrator's award. In March 2022,this Court upheld that decision, criticising Mr Cummins' application,and attempt to circumvent the courts' "pay now, argue later" rulings, asan abuse of the courts' processes.9 The Court awarded indemnity costs6 Manchester Securities Ltd v Body Corporate 172108 [2019] NZCA 408 at [38]–[39].7 Body Corporate 172108 v Flat Bush Finance Ltd [2020] NZHC 3135, (2020) 21 NZCPR 622[Caveat judgment] at [62]–[67] and [78].8 Body Corporate 172108 v Manchester Securities Ltd [2021] NZHC 365.9 Cummins v Body Corporate 172108 [2022] NZCA 68 at [7]–[8] and [64].against Mr Cummins for abuse of process, recalling its previousdescription of Manchester's actions as "dilatory and prevaricating".10(g) In September 2021, Associate Judge Bell decided that theBody Corporate could bring its substantive caveat proceedings againstManchester while Manchester was in liquidation. The Associate Judgerecommended that Flat Bush amend its pleadings in the substantivecaveat proceeding to include a claim for removal of theBody Corporate's caveat if Flat Bush established its interest takespriority.11 Flat Bush did not take up these recommendations and insteadMr Cummins brought the application that resulted in this appeal.12[3] Sage Investments Ltd (Sage) is a registered first mortgagee on the title toUnit 12A. Until recently, Sage has been the primary funder of the remediation toLevel 12. After indicating it was no longer willing to provide funding, Sage agreed toprovide a limited amount of interim funding until a new long-term funder is found.The loan for the interim funding is guaranteed by Flat Bush and is secured by anunregistered second mortgage over Unit 12A. Mr Cummins says any new funder willwant priority over the bulk of the debt owed to Sage so Flat Bush's mortgage will needto be assigned to the new funder. To assign this mortgage, the mortgage needs to beregistered. For that purpose, the Body Corporate's caveat needs to be removed.Accordingly, Mr Cummins applied to remove the Body Corporate's caveat.The Body Corporate opposed and applied to strike out Mr Cummins' application onthe basis it sought to revisit issues decided by Gwyn J.[4] On 13 April 2022, in his judgment, van Bohemen J stated:13 Mr Cummins is seeking to re-run, albeit on a fuller basis, the samesubmission that Flat Bush advanced before Gwyn J, namely that the Courtshould exercise its discretion to remove the Body Corporate's caveat, evenaccepting that the Body Corporate has an arguable caveatable interest.10 At [69].11 Body Corporate 172108 v Manchester Securities Ltd (in liq) [2021] NZHC 2580 at [5] and [7].12 Decision under appeal, above n 1, at [64].13 At [92].[5] The Judge was not completely satisfied that the legitimate interests of thecaveator would not be prejudiced if the Court exercised its discretion to removethe caveat.14 Even if he had been satisfied, he would not have exercised the discretion:[103] In summary, the arguments advanced by Mr Sullivan [counsel forMr Cummins] do not satisfy me that the legitimate interests of the BodyCorporate would not be prejudiced if its caveat were removed. In addition,even if I had been so satisfied, in the circumstances of the present case, I wouldhave seen no case for exercising the Court's residual discretion to remove thecaveat.[104] I do not accept Mr Sullivan's submission that the litigation historyconcerning Unit 12A is largely irrelevant. The history shows thatMr Cummins and entities under his direction and control have pursued adeliberate course of refusing to pay debts owed to the Body Corporate, despitenumerous Court orders that those debts must be paid immediately. They havealso continued to assert that payment of those debts can be delayed pendingthe resolution of cross-claims in an arbitral process, despite clear directionsfrom the Court of Appeal that the debts were to be paid irrespective of thecross-claims and arbitration. In the meantime, Mr Cummins and his entitieshave continued to prioritise their interests over those of the Body Corporateand the other owners of the units in the Hobson Apartments. Those ownershave had to endure the stress and disruption caused by unfinished repairs tothe top level of their apartment building and the succession of efforts byMr Cummins and his entities to avoid paying the money owed to theBody Corporate.[105] The current application is another example of that course of conduct.[106] In that regard, the evidence Mr Cummins has adduced in support ofthe application does not satisfy me that he has a genuine need to refinance inorder to complete the work on Level 12. There is no evidence from Sage toestablish why its position as funder has suddenly changed. The informationprovided concerning the arrangements between Sage, Flat Bush andMr Cummins is opaque and incomplete. There is no evidence of any attemptsto secure alternative finance approach to, let alone agreement with, anindependent funder. Mr Cummins' statements about the work required tocomplete Level 12 and the timeline for completion are not supported byindependent evidence. [The] evidence [of a building surveyor who inspectedLevel 12] calls into question the reliability of Mr Cummins' statements.[107] While it is unnecessary to make findings as to credibility, the evidencefalls well short of persuading me that there is an adequate basis for orderingthe outcome advocated by Mr Sullivan.[6] In relation to the Body Corporate's strike-out application, the Judge consideredthere was no genuine change of circumstances justifying a further application to that14 At [95]–[96].considered by Gwyn J and, accordingly, the doctrine of issue estoppel applied.15The Judge stated:[117] Mr Sullivan does not dispute that Mr Cummins is a privy of Flat Bushsuch that the doctrine of issue estoppel can apply. Rather he says there hasbeen a change of circumstances that justifies a further application to removethe caveat.[118] I agree with Mr Sullivan that just because the current application seeksthe same orders as those declined in an earlier application does not precludean application seeking the exercise of the Court's discretion based on a changeof circumstances. There must, however, be a genuine change ofcircumstances.[119] I do not accept that the fact Mr Cummins did not know that theBody Corporate had no intention of enforcing its lien by seeking a sale of Unit12A amounts to a genuine change of circumstances.[120] As noted above, Gwyn J recorded in the Caveat Judgment that therehad been no sale and there was no assurance there would be a sale. Her Honouralso recorded Mr Sullivan's advice that Flat Bush had no current intentionto sell. In other words, the likelihood that one of the parties contending for apriority equitable interest was unlikely to seek to enforce its rights wassquarely before Her Honour. I do not accept that the absence of an intentionto sell on the part of the other party seeking priority amounts to a change incircumstances justifying a further application.(Footnotes omitted.)[7] In relation to abuse of process, after canvassing the authorities, the Judgestated:[124] As already discussed, I do not accept that an absence of an intentionto sell on the part of the Body Corporate is a new circumstance justifying afurther application to remove the caveat. In that sense, I do not consider thatMr Cummins is raising an issue that could have been raised before. However,in bringing this application, Mr Cummins is, in reality, seeking to mount acollateral attack on the Caveat Judgment. More generally, I consider that theapplication is another instance of Mr Cummins and his associated entitiesengaging in, as Lord Bingham termed it, "unjust harassment" of theBody Corporate and the other owners by seeking again to advance theirinterests while avoiding paying the sums declared by the Courts to beimmediately payable. In that sense, Mr Cummins is again vexing theBody Corporate and the other owners, as well as taking up valuable court time,pursuing issues that have already been determined to try to achieve what hecould not achieve earlier. It is a further example of the Cummins' interestsseeking to circumvent the Courts' "pay now, argue" later rulings as discussedby the Court of Appeal in the Joinder Appeal and which it held to be an abuseof process.15 At [117]–[121].[125] In all of these respects, I am satisfied that the present application is anabuse of process. Strike out would have been justified if I had not dismissedthe application.(Footnote omitted.)[8] In relation to costs, he stated:[127] The Body Corporate seeks indemnity costs. I consider that an awardof actual and reasonable costs is appropriate in this case. The application isan abuse of process and another example of dilatory and prevaricatingbehaviour by the Cummins' interests.[128] Counsel should attempt to agree costs. If they are unable, they maysubmit memoranda of no more than five pages.[9] Indemnity costs were fixed at $51,750. Mr Cummins appeals the award ofindemnity costs and seeks substitution of it with an award of costs to theBody Corporate on a 2B basis. In order to do so, he appeals against the findings ofabuse of process. He does not appeal the other substantive findings of the judgment.He has to show that the Judge's decision to award indemnity costs was plainly wrong,based on a wrong principle, took into account irrelevant matters or failed to take intoaccount relevant matters.16Relevant law of costs[10] Rule 14.6(4) of the High Court Rules 2016 provides that the court may order aparty to pay the actual costs and disbursements reasonably incurred if, relevantly:(a) the party has acted vexatiously, frivolously, improperly, orunnecessarily in commencing, continuing, or defending a proceedingor a step in a proceeding; or(b) the party has ignored or disobeyed an order or direction of the courtor breached an undertaking given to the court or another party; or(f) some other reason exists which justifies the court making an order forindemnity costs despite the principle that the determination of costsshould be predictable and expeditious.16 Kinney v Pardington [2021] NZCA 174 at [1], citing Shirley v Wairarapa District Health Board[2006] NZSC 63, [2006] 3 NZLR 523 at [15].[11] In Bradbury v Westpac Banking Corporation, this Court endorsed the following,non-exhaustive, circumstances in which indemnity costs have been ordered:17(a) the making of allegations of fraud knowing them to be false and themaking of irrelevant allegations of fraud;(b) particular misconduct that causes loss of time to the court and to otherparties;(c) commencing or continuing proceedings for some ulterior motive;(d) doing so in wilful disregard of known facts or clearly establishedlaw; or(e) making allegations which ought never to have been made or undulyprolonging a case by groundless contentions, summarised inFrench J's "hopeless case" test.Submissions[12] Mr Sullivan, for Mr Cummins, submits the application was not a collateralattack on Gwyn J's judgment and not an abuse of process. Rather, Mr Cummins hadlegitimate commercial reasons to apply because of the adverse effect of the caveat onhis ability to refinance the remediation. Removal of the caveat would have given theBody Corporate a better position. A catalogue of matters had changed. There hadbeen no discussion before Gwyn J as to whether the Body Corporate would seek saleorders pursuant to its equitable charge to which it claimed to be subrogated. In itssubstantive application, it does not seek sale orders. The Body Corporate gains nopriority over other creditors from the maintenance of the caveat. The real purpose oflodging the caveat was to preclude further borrowing against Unit 12A. The "pay now,argue later" regime does not apply here. The "dilatory and prevaricating" criticismand previous litigation has no relevance. There is insufficient connection between the(disputed) payment of any money due to the Body Corporate and the need to securerefinancing to find that Mr Cummins had engaged in flagrant misconduct.[13] Mr Orpin-Dowell, for the Body Corporate, submits it was open to the Judge toaward indemnity costs for the reasons he gave. Mr Cummins has had indemnity costs17 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [29], citingHedley v Kiwi Co-operative Dairies Ltd (2002) 16 PRNZ 694 (HC) at [11].awarded against him five times before in this litigation, including three times bythis Court.18Was the application a collateral attack or abuse of process?[14] During the hearing, the Court asked counsel about whether van Bohemen Jreally meant to agree with Mr Cummins that there were new circumstances, as thesecond sentence of [124] appears to say. We consider the Judge made it quite clear inparagraphs [117]–[120] (quoted above)19 that he did not accept the lack of an intentionby the Body Corporate to enforce its lien amounted to a genuine change ofcircumstances.20 The context of those paragraphs suggest that the second sentence ofparagraph [124], which summarised paragraphs [117]–[120], accidentally containedan extra negative. But, in any case, we consider the crux of this appeal turns onwhether the application was made in new circumstances and was an abuse of process.[15] The problem for Mr Cummins is that, unless a new funder agrees that theBody Corporate would have to be paid first from any sale, the Body Corporate'sposition would worsen if the caveat was removed. That, together with its experienceof Mr Cummins' past behaviour of not paying to the Body Corporate what the courtshave ordered, constitute clear reasons why the Body Corporate could reasonably havebeen expected to resist such a proposal. It is clear from the correspondenceMr Sullivan pointed to that the Body Corporate did resist the proposal for thosereasons.21[16] Furthermore, Mr Cummins did not explain why funding was no longeravailable or provide evidence of any attempt to find a new funder. We considerthe Judge was entitled to find, on the evidence before him:[106] In that regard, the evidence Mr Cummins has adduced in support ofthe application does not satisfy me that he has a genuine need to refinance inorder to complete the work on Level 12. There is no evidence from Sage to18 Body Corporate 172108 v Manchester Securities Ltd [2019] NZHC 253; Manchester SecuritiesLtd v Body Corporate 172108, above n 6; Cummins v Body Corporate 172108, above n 9;Cummins v Body Corporate 172108 [2022] NZCA 153; and Body Corporate 172108 v ManchesterSecurities Ltd [2022] NZHC 2076.19 At [6] above.20 Decision under appeal, above n 1.21 At [78], quoting the letter sent by the Body Corporate to Mr Cummins outlining theBody Corporate's position.establish why its position as funder has suddenly changed. The informationprovided concerning the arrangements between Sage, Flat Bush andMr Cummins is opaque and incomplete. There is no evidence of any attemptsto secure alternative finance approach to, let alone agreement with, anindependent funder. Mr Cummins' statements about the work required tocomplete Level 12 and the timeline for completion are not supported byindependent evidence. [The] evidence [of a building surveyor who inspectedLevel 12] calls into question the reliability of Mr Cummins' statements.[17] So, the Judge was entitled to conclude that there had been no material changeof circumstances. Mr Cummins wanted the caveat removed and the Body Corporatewas not satisfied its interests would be sufficiently protected. Gwyn J had alreadyrejected the arguments that the Body Corporate's interest was already effectivelysecured and that the Body Corporate's subrogation was only an entitlement.22Mr Cummins' stated need to find a new funder was not a new circumstance as far asthe Body Corporate was concerned. As van Bohemen J said, the Court's residualdiscretion to remove a caveat will be exercised cautiously and only when the Court issatisfied that doing so would not prejudice the legitimate interests of the caveator.23Both judges were being asked to exercise the same discretion on materially thesame basis.[18] Mr Cummins was not challenging any of the findings in Gwyn J's judgment.So, strictly speaking, his application may not have been a direct collateral attack onthat judgment. But it was a second attempt to achieve what had not been achievedearlier, without a material change of circumstances. Accordingly, we do not considervan Bohemen J erred in considering that the application was an abuse of process.That provided an adequate basis for van Bohemen J to exercise his discretion to awardindemnity costs. The threshold for overturning the award is not met.Result[19] The appeal is dismissed.22 Caveat judgment, above n 7, at [65]–[77].23 Decision under appeal, above n 1, at [95].[20] The appellant must pay the respondent costs for a standard appeal on a band Abasis and usual disbursements.Solicitors:Langford Law, Wellington for AppellantGrove Darlow & Partners, Auckland for Respondent