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High Court of New Zealand Decisions |
Last Updated: 20 December 2018
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
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CIV 2009-404-6868
[2018] NZHC 3356 |
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BETWEEN
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BODY CORPORATE 172108
Applicant
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AND
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JOANNE MONICA MEADER and others 1st to 36th and 38th to 48th
Respondents
MANCHESTER SECURITIES LIMITED
37th Respondent
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Hearing:
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4 December 2018
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Appearances:
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J B Orpin-Dowell and TJG Allan for the Applicant
M C Harris and H E McQueen for the 37th Respondent
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Judgment:
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17 December 2018
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JUDGMENT OF JAGOSE J
This judgment is delivered by me on 17 December 2018 at 3.00 pm pursuant to r 11.5 of the High Court Rules.
.....................................................
Registrar / Deputy Registrar
Counsel/Solicitors:
J B Orpin-Dowell, Barrister, Auckland Grove Darlow & Partners, Auckland Gilbert Walker, Auckland
BODY CORPORATE 172108 v MEADER and Others [2018] NZHC 3356 [17 December 2018]
[1] On the present application, the applicant (the “Body Corporate”) seeks interim orders preventing arbitration(s) initiated by the 37th respondent (“Manchester”), pending this Court’s determination of the Body Corporate’s claim for a variation to the Body Corporate’s repair scheme. The variation is to prohibit reference to arbitration prior to issue of code compliance for repairs to Manchester’s unit.
Background
[2] The parties are subject to a ‘scheme’, settled by this Court in terms of s 48 of the Unit Titles Act 1972, to reinstate their building following damage from water ingress. The history of the original and varied schemes is set out in a raft of judgments of this Court and of the Court of Appeal.1
[3] Among other things, the varied scheme required Manchester immediately to pay its share of the costs of repair to common property, notwithstanding such may ultimately be refundable in whole or in part to Manchester after setting off expenses it incurs for the benefit of all units within its exclusive penthouse, level 12 (including the exterior). The scheme includes provision for dispute resolution by the Body Corporate’s mandatory reference to arbitration on receipt of any unit owner’s qualifying objection to the Body Corporate’s decision.
[4] Manchester still has not paid; neither has it paid ongoing body corporate levies. That gave rise to the Body Corporate’s statutory demand, which Manchester sought to set aside on grounds of its set-off.2 While the Court of Appeal accepted Manchester arguably had such a set-off, such was “effectively an attempt to relitigate matters already decided” – principally, its obligation to “[p]ay now, argue later”.3 The statutory demand was not set aside. Neither has it been met, or compromised. There has since been litigation over advertising of Manchester’s subsequent deemed insolvency.
2 Manchester Securities Ltd v Body Corporate 172108 [2018] NZHC 169.
[5] The Court of Appeal also observed:4
Ultimately if Manchester overpays the Body Corporate, it will be able to recover what is owed at a later date if an arbitration results in an award in its favour.
The Court added “it would be premature for there to be an arbitration”, because work was ongoing and costs were not finalised.5
[6] Those observations notwithstanding, the following day, Manchester proposed reference of a dispute to Brian Keene QC, under the default appointment process stipulated at clause 1(4) of the Second Schedule to the Arbitration Act 1996, which is what transpired.
[7] The dispute was in relation to clause 10.3 of the scheme, which provides:
Subject to any specific provision to the contrary in this scheme, where repairs involve both Units and Common Property, the Cost of such Repairs shall to the extent possible be apportioned to each Owner on the basis of that owner’s legal title to part of the Building.
Manchester asked the arbitrator:
Does clause 10.3 apply to apportion the cost of repair of the unit property at level 12 among all owners by unit entitlement, or has the High Court and/or the Court of Appeal determined that Manchester alone must pay the cost of repair of unit property at level 12?
[8] In response, the Body Corporate seeks this Court’s further variation to the scheme, to include in the scheme’s dispute resolution clause a new subclause 13.4 in the following terms:
Notwithstanding any other provision of the scheme, any dispute in relation to, or in any way arising out of, repairs to level 12 of the Building shall not be referred to arbitration until completion of all repairs to level 12, completion of which is to be verified by production of a code compliance certificate.
At the same time it sought orders restraining Mr Keene from acting as arbitrator on the arbitration referred to him, and restraining Manchester from referring any dispute relating to level 12 repairs before code compliance is issued. The latter orders are sought by the Body Corporate on an interim basis from me now.
4 Manchester Securities Ltd v Body Corporate 172108, above n 3, at [58].
5 At [59].
[9] Nonetheless, under protest to Mr Keene’s jurisdiction, the Body Corporate participated in a one-day hearing before him on that topic, as a result of which Mr Keene’s partial award on his jurisdiction is available, on the parties’ payment of his
$85,000 fee. The Body Corporate has declined to pay its share, meaning the content of Mr Keene’s award presently is unknown.
Applicable legal principle
[10] Interim injunction applications are determined on the basis of whether the plaintiff has a serious question for trial, and whether the balance of convenience and overall interests of justice favour granting the injunction.6 On the latter consideration(s), the question is whether refusing the injunction would be harder on a plaintiff who was successful at trial, than would granting it be on the successful defendant.7 This assessment is undertaken by reference to the adequacy of damages, preservation of the status quo, the uncompensable disadvantages to either party, and the relative strengths of their cases.8
Discussion
[11] I accept there is a serious question to be tried, in the sense this Court has exclusive jurisdiction to vary a s 48 scheme, and the Body Corporate has foundation in the Court of Appeal’s observation for seeking such variation.
[12] I also accept the balance of convenience favours granting interim relief, at least in the sense any race to the end should be avoided – either in assuming the Body Corporate will ultimately be successful in obtaining such further variation, or in enabling Manchester to render the utility of such variation nugatory.
[13] But Manchester says it is entitled not to be held out of seeking the Body Corporate’s reference of disputes to arbitration, on which award the Body Corporate may be prevailed upon to raise an interim levy to contribute to level 12 works for
6 American Cyanamid Co v Ethicon Ltd [1975] UKHL 1; [1975] AC 396 (HL); and Klissers Farmhouse Bakeries Ltd
[1985] NZCA 70; [1985] 2 NZLR 129 (CA).
8 Wellington International Airport Ltd v Air New Zealand, above n 7, at [6]-[14].
which the other owners are liable. Manchester complains it is ‘vulnerable’ to the Body Corporate’s inertia in those respects, until Manchester has completed its level 12 works. Given the arbitrator has ruled on matters relevant to the Body Corporate’s application for interim relief, it says article 9(3) of the First Schedule to the Arbitration Act 1996 compels me to “treat the ruling or any finding of fact made in the course of the ruling as conclusive for the purposes of the application”. Of course, I do not know the content of the ruling. Beyond that (and any determination of the substantive question), at my invitation, I have Manchester’s undertaking “not to refer, other than with leave of the Court, any other disputes to arbitration under the scheme until the level 12 repairs under the scheme are complete”.
[14] The Body Corporate’s rejoinder is article 9(3) only has application to “interim measures” sought in aid of the arbitration; that is what article 9 addresses. It complains it will be prejudiced by duplicated costs incurred – unnecessarily now, and necessarily after works are complete – in continuing participation in arbitrations with the deemed insolvent Manchester. And it says the present arbitration is simply another attempt on Manchester’s part to avoid paying as it has been directed to do. The Body Corporate’s concern is the present reference invites the arbitrator to delve into the scheme’s principles, which properly are for this Court’s specification, rather than to determine their application, which the Court of Appeal has observed presently is premature.
[15] Whether article 9(3) requires me to treat the arbitrator’s ruling or findings of fact as conclusive for the purposes of the present application is immaterial, as nothing in my consideration of that application turns on whether the arbitrator has jurisdiction. Given the undertaking, I do not see the balance of convenience extends effectively to requiring the arbitrator to withhold his partial award on jurisdiction, or – if holding he has such jurisdiction (and its exercise is not stayed pending any appeal) – continuing to determine the substantive reference.
[16] While I acknowledge the Body Corporate stands to incur some duplication of cost in the substantive arbitration, that is a consequence of permitted resort to the scheme’s established dispute resolution mechanism. As a dispute requiring determination at some point, some economy over full duplication of costs may be achievable by its prior determination. Neither do I see any meaningful risk of the
arbitrator entering this Court’s exclusive jurisdiction to vary the scheme; to the extent his interpretation of the scheme has that effect, it would be in excess of his jurisdiction. These apprehensions for the future are insufficient to favour the Body Corporate’s interests at trial over those of Manchester.
[17] That leaves me to stand back and consider the overall interests of justice. Such is to be considered in terms of this Court’s principled constraint on intervention in arbitral proceedings, to be “exercised sparingly and only where injustice would arise”.9 An applicant for stay of arbitral proceedings in favour of parallel or related court proceedings is:10
... required to satisfy the court that continuance of the arbitration would be oppressive or vexatious to him or would otherwise constitute an abuse of the process of the court.
[18] The Body Corporate relies for its interim relief on Manchester’s persistent failure to pay, increasing the present financial burden on other unit owners, and exacerbated by Manchester’s referral to arbitration, contrary to the Court of Appeal’s observation of its prematurity.
[19] Manchester’s conduct justifies considerable criticism. It is directly disobedient to Fogarty J’s 3 March 2017 order for provisional payment of some $320,000, upheld by the Court of Appeal, and – together with outstanding body corporate levies – subsequently endorsed by that Court as “due and payable”.11 Manchester prefers its deemed insolvency by reason of its failure to meet the Body Corporate’s consequential statutory demand, while concurrently taking forward its arbitral claim, ultimately to avoid performance of that which the Court of Appeal has said is its present obligation.
[20] While doubtless oppressive of, and even vexatious to, the Body Corporate, Manchester’s non-compliance cannot be said an abuse of the Court’s process. This Court’s orders stand for enforcement; Manchester is not seeking anything of the Court. The issue instead is whether Manchester’s ‘continuation of the arbitration’ is unjust. And, given Manchester’s undertaking, that has a relatively confined span: the
9 Carter Holt Harvey Ltd v Genesis Power Ltd (No 2) [2006] NZHC 114; [2006] 3 NZLR 794 at [32] and [33(c)].
10 At [33(c)]. See also at [32], [51] and [61].
11 Manchester Securities Ltd v Body Corporate 172108, above n 3, at [67].
arbitrator’s partial award (already made), and possible determination of the substantive question referred.
[21] Nonetheless, by a slender margin, I am satisfied continuation of the arbitration, even of that reduced compass, is unjust. The tipping point is Manchester’s wish to use any substantive award to obtain the Body Corporate’s interim levy of other unit owners for contribution to Manchester’s expenses, in circumstances in which Manchester is not prepared to meet its financial obligations to the Body Corporate, for the benefit of those unit owners. The overall interests of justice favour grant of an interim injunction.
[22] I am not prepared to make interim orders prohibiting Mr Keene from acting. He is not party to this proceeding, and I have not heard anything in his interest, which may not exclusively be drawn from the parties’ contract with him. Neither am I prepared to stay the arbitration, which is not in any event the relief sought by the Body Corporate. Rather, the appropriate relief may be an order prohibiting the parties’ continued participation in the arbitration, pending further order of this Court.
[23] But I am concerned there may be unintended consequences from such an order. I lack detailed knowledge as to the substantive position before the arbitrator, and the communication to him of any claim or defence and evidence. Depending on that progress, there are default rules for conduct of the arbitration, which entitle an arbitrator to determine the arbitration even without any party’s continued participation.12 That entitlement is “[u]nless otherwise agreed by the parties”. Obviously, I cannot compel such agreement, although – given my view on the appropriate relief – I commend the parties agree to accommodate it.
Result
[24] The Body Corporate’s claim for interim relief succeeds. The Body Corporate is to formulate and file (desirably, agreed) terms for my approval as the formal order.
12 Arbitration Act 1996, sch 1, art 25.
[25] As the arbitrator has advised he is presently unavailable to the parties until his return from overseas in later January 2019, I do not consider I need to make any order for the meantime. The Body Corporate has leave urgently to apply to me if required.
Costs
[26] In my preliminary view, as the successful party, the Body Corporate is entitled to 2B costs and disbursements. That is because, from what I presently know of it, nothing in the steps taken by the Body Corporate in this averagely complex proceeding required other than a normal amount of time.
[27] If that is not accepted by either party, costs are reserved for determination on short memoranda of no more than five pages – annexing a single-page table setting out any contended allowable steps, time allocation, and daily recovery rate – to be filed and served by:
(a) the Body Corporate within ten working days of the date of this judgment;
(b) Manchester within five working days of service of the Body Corporate’s memorandum; and
(c) the Body Corporate strictly in reply within five working days of service of Manchester’s memorandum.
—Jagose J
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