Manchester Securities Limited v Body Corporate 172108 [2013] NZCA 515 (23 October 2013)

Last Updated: 30 October 2013

IN THE COURT OF APPEAL OF NEW ZEALAND
CA131/2013 [2013] NZCA 515
BETWEEN	MANCHESTER SECURITIES LIMITED Appellant
AND	BODY CORPORATE 172108 Respondent

Hearing:	22 July 2013; 26 September 2013 (telephone conference); (further submissions received 3 October 2013)
Court:	Ellen France, Ronald Young and Cooper JJ
Counsel:	M C Harris for Appellant T J Allan for Respondent
Judgment:	23 October 2013 at 12.30 pm

JUDGMENT OF THE COURT

1. The appeal is dismissed.

2. No order as to costs.

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REASONS OF THE COURT

(Given by Ronald Young J)

[1] Manchester Securities Ltd (Manchester) owns the top floor of a 12 storey apartment building on Hobson Street in Auckland. The other 11 floors are divided into 39 individual apartments. The building was affected by weathertightness problems. It leaked.
[2] In 2009 remedial work was planned. The body corporate sought High Court approval for a remediation scheme under s 48 of the Unit Titles Act 1972. A series of judgments from the High Court followed. Heath J concluded that Manchester could (with limits) determine the scope of the work for the 12th floor and pay for this work.^[1] The work for floors one to 11 would be undertaken by the body corporate. The total remedial cost for the building (all 12 floors) would be ascertained and Manchester would pay 11.88 per cent of that total. At the time of Heath J’s judgment the 11.88 per cent was expected to cover all of the 12th floor remedial costs and provide a contribution by Manchester to the body corporate costs.
[3] The body corporate, as it was entitled to, levied all the building owners in the interim to enable the remedial work to begin. Manchester challenged the levy advising the body corporate that it was calculated on an improper basis. The body corporate did not agree. Manchester refused to pay.
[4] Clause 13.1 of the s 48 remediation scheme provided that where an owner objected to a levy (amongst other matters) the body corporate shall refer the matter to arbitration. And at cl 13.3 no owner was entitled to withhold a levy on the basis that a dispute had been referred to arbitration (a “pay now argue later” clause). When the body corporate received Manchester’s challenge to the levy, it referred the dispute to arbitration. But it did not accept (based on cl 13.3) that Manchester was entitled to withhold payment of a levy in the meantime.
[5] The body corporate issued a statutory demand for the remedial levy and an ordinary levy both unpaid by Manchester. Manchester applied to the High Court to set aside the demand.
[6] Associate Judge Bell found that the “pay now argue later” clause in the s 48 scheme meant exactly that.^[2] He considered that Manchester’s challenge was effectively a challenge to the merits of the levy which the s 48 agreement required to be arbitrated. Thus, it was for the arbitrator to decide if the levy was properly payable. But in the meantime Manchester was obliged to pay the levy. Manchester has now paid the levies but challenges the correctness of Associate Judge Bell’s decision in this appeal.
[7] Manchester says the statutory demand should have been set aside because the remedial levy which gave rise to the debt was an unreasonable and therefore unlawful levy. There are two grounds on which it says the levy was unreasonable. First, because the body corporate failed to take into account Manchester’s estimate of the remediation cost of the 12th floor and secondly, the body corporate’s estimate for the 12th floor repair cost was not assessed on the same basis as the estimate for floors one to 11.
[8] We have now been advised by counsel that the arbitration with respect to the levy challenge by Manchester has been held. The arbitrator has given a ruling on the levy.
[9] We therefore arranged for a telephone conference with counsel inviting submissions on whether the appeal was now moot and whether it was therefore appropriate for us to give judgment on the substance of the appellant’s claim.
[10] Having heard oral submissions supplemented by written submissions we are satisfied that the substantive issues before this Court have been canvassed in the arbitration and ruled on by the arbitrator. As we have noted the essence of the appellant’s claim in this case was that the interim levy was unreasonable. That required an assessment of the basis on which the levy was calculated, including the 12th floor remediation cost and an assessment as to whether the estimates for repair costs were the same for all 12 floors. This was the same issue before the arbitration.
[11] Before the arbitrator released his decision there was the potential for the arbitrator and this Court (in any judgment given on this appeal) to reach different conclusions with respect to the “unlawfulness” levy. Although the arbitrator has now given his decision the potential for a different result in this Court remains should we proceed to a considered judgment. Further, the body corporate has filed an application for leave to appeal the arbitral award. There is therefore the potential for even more uncertainty.
[12] Manchester expressed concern that as a result of further levies by the body corporate it had received another statutory demand. A judgment by this Court might therefore avoid further litigation with respect to that statutory demand. As the body corporate pointed out, however, Manchester has other remedies available to it with respect to this statutory demand including an application for an injunction or an application for orders to vary the s 48 scheme. And there is no certainty in any event that a judgment of this Court on this statutory demand would necessarily apply to another statutory demand.
[13] We are satisfied, therefore, that a merits based judgment is no longer called for or appropriate in the circumstances given the issue before the Court is now moot. The appropriate course is for us to dismiss the appeal. We accept in these circumstances that the appellant will suffer some potential financial loss given the costs order made against it by the Associate Judge. In this appeal we consider that costs should appropriately lie where they fall and accordingly we make no order as to costs.

Solicitors:
Gilbert Walker, Auckland for Appellant
Grove Darlow & Partners, Auckland for Respondent

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^[1] Body Corporate 172108 v Meader [2010] NZHC 187; (2011) 12 NZCPR 101 (HC); and see Body Corporate 172108 v Meader (No 2) HC Auckland CIV-2009-404-6868, 19 August 2010.

^[2] Manchester Securities Ltd v Body Corporate 172108 [2013] NZHC 177.