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Cummins v Body Corporate 172108 [2023] NZCA 226 (12 June 2023)

Last Updated: 19 June 2023

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA223/2022
[2023] NZCA 226

	BETWEEN	ROBERT JAMES CUMMINS Appellant
	AND	BODY CORPORATE 172108 Respondent

Hearing:	23 March 2023
Court:	Brown, Lang and Palmer JJ
Counsel:	K P Sullivan for Appellant J B Orpin-Dowell for Respondent
Judgment:	12 June 2023 at 10.30 am

JUDGMENT OF THE COURT

The appeal is dismissed.
The appellant must pay the respondent costs for a standard appeal on a 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 the respondent, Body Corporate 172108 (the Body Corporate). The High Court dismissed the application and awarded indemnity costs against Mr Cummins for the application.^[1] Mr Cummins appeals against the costs award.

The proceedings

[2] Mr Cummins and the Body Corporate have had a protracted and involved history of legal proceedings over the remediation of leaks in the Hobson Apartments at 196 Hobson Street, in central Auckland. The background is set out in the judgment under appeal.^[2] Relevantly:

(a) Unit 12A, comprising almost all of the 12th floor of the Hobson Apartments, is owned by Manchester Securities Ltd (Manchester). Manchester was a trustee company for the Manchester Securities Trading Trust (the Trust) and is now in liquidation. Mr Cummins is the sole director and shareholder of Manchester and a trustee of the Trust.
(b) Mr Cummins is also the sole director and shareholder of Flat Bush Finance Ltd (Flat Bush). In March 2017, Flat Bush registered a caveat over the title of Unit 12A to protect its interest in the unit under a mortgage granted by Manchester in return for funding to renovate Level 12.
(c) In November 2017, this Court upheld the High Court’s variation of the terms of a remediation scheme settled under s 48 of the Unit Titles Act 1972, which had gone awry.^[3] This Court criticised Manchester’s conduct as “dilatory and prevaricating” and upheld the High Court’s order requiring Manchester to make an interim payment of $321,264.79 (plus GST).^[4] Manchester did not do so and the Body Corporate subsequently issued a statutory demand. The High Court declined to set aside the demand and this Court dismissed Manchester’s appeal of that decision.^[5] Manchester initiated arbitration but was (eventually) subject to liquidation. Along the way, this Court again criticised Manchester’s actions as “dilatory and prevaricating”, seeking to achieve by a side route what it had failed to achieve directly.^[6]
(d) In December 2019, the Body Corporate registered a caveat against the title of Unit 12A to protect its subrogated interest as a creditor. In November 2020, Gwyn J declined Flat Bush’s application to remove the Body Corporate’s caveat and upheld the Body Corporate’s application that its caveat not lapse, pending further order of the Court.^[7]
(e) In June 2021, the Body Corporate began proceedings to obtain a substantive decision upholding the claimed interest protected by the caveat. It sought: a declaration that the assets of the Trust, including Unit 12A, stand charged in favour of the Body Corporate to the extent of a debt comprised of the unpaid levies, judgment orders, and costs orders; a declaration that the Body Corporate’s equitable proprietary interest in the Trust’s assets ranks ahead of that of Flat Bush; and a final order that its caveat not lapse. Ultimately, the Body Corporate is seeking a final determination on the merits that Manchester’s property is subject to an equitable lien that takes priority over the interest claimed by Flat Bush. The substantive hearing is yet to occur.
(f) In March 2021, the High Court declined Mr Cummins’ application to be joined to two sets of proceedings, in addition to, or in substitution for, Manchester.^[8] The proceedings he sought to join were the Body Corporate’s application to vary the remediation scheme and the Body 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, as an abuse of the courts’ processes.^[9] The Court awarded indemnity costs against Mr Cummins for abuse of process, recalling its previous description of Manchester’s actions as “dilatory and prevaricating”.^[10]
(g) In September 2021, Associate Judge Bell decided that the Body Corporate could bring its substantive caveat proceedings against Manchester while Manchester was in liquidation. The Associate Judge recommended that Flat Bush amend its pleadings in the substantive caveat proceeding to include a claim for removal of the Body Corporate’s caveat if Flat Bush established its interest takes priority.^[11] Flat Bush did not take up these recommendations and instead Mr Cummins brought the application that resulted in this appeal.^[12]

[3] Sage Investments Ltd (Sage) is a registered first mortgagee on the title to Unit 12A. Until recently, Sage has been the primary funder of the remediation to Level 12. After indicating it was no longer willing to provide funding, Sage agreed to provide 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 an unregistered second mortgage over Unit 12A. Mr Cummins says any new funder will want priority over the bulk of the debt owed to Sage so Flat Bush’s mortgage will need to be assigned to the new funder. To assign this mortgage, the mortgage needs to be registered. 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 on the 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 same submission that Flat Bush advanced before Gwyn J, namely that the Court should exercise its discretion to remove the Body Corporate’s caveat, even accepting that the Body Corporate has an arguable caveatable interest.

[5] The Judge was not completely satisfied that the legitimate interests of the caveator would not be prejudiced if the Court exercised its discretion to remove the 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 for Mr Cummins] do not satisfy me that the legitimate interests of the Body Corporate 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 would have seen no case for exercising the Court’s residual discretion to remove the caveat.

[104] I do not accept Mr Sullivan’s submission that the litigation history concerning Unit 12A is largely irrelevant. The history shows that Mr Cummins and entities under his direction and control have pursued a deliberate course of refusing to pay debts owed to the Body Corporate, despite numerous Court orders that those debts must be paid immediately. They have also continued to assert that payment of those debts can be delayed pending the resolution of cross-claims in an arbitral process, despite clear directions from the Court of Appeal that the debts were to be paid irrespective of the cross-claims and arbitration. In the meantime, Mr Cummins and his entities have continued to prioritise their interests over those of the Body Corporate and the other owners of the units in the Hobson Apartments. Those owners have had to endure the stress and disruption caused by unfinished repairs to the top level of their apartment building and the succession of efforts by Mr Cummins and his entities to avoid paying the money owed to the Body 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 of the application does not satisfy me that he has a genuine need to refinance in order to complete the work on Level 12. There is no evidence from Sage to establish why its position as funder has suddenly changed. The information provided concerning the arrangements between Sage, Flat Bush and Mr Cummins is opaque and incomplete. There is no evidence of any attempts to secure alternative finance approach to, let alone agreement with, an independent funder. Mr Cummins’ statements about the work required to complete Level 12 and the timeline for completion are not supported by independent evidence. [The] evidence [of a building surveyor who inspected Level 12] calls into question the reliability of Mr Cummins’ statements.

[107] While it is unnecessary to make findings as to credibility, the evidence falls well short of persuading me that there is an adequate basis for ordering the outcome advocated by Mr Sullivan.

[6] In relation to the Body Corporate’s strike-out application, the Judge considered there was no genuine change of circumstances justifying a further application to that considered by Gwyn J and, accordingly, the doctrine of issue estoppel applied.^[15] The Judge stated:

[117] Mr Sullivan does not dispute that Mr Cummins is a privy of Flat Bush such that the doctrine of issue estoppel can apply. Rather he says there has been a change of circumstances that justifies a further application to remove the caveat.

[118] I agree with Mr Sullivan that just because the current application seeks the same orders as those declined in an earlier application does not preclude an application seeking the exercise of the Court’s discretion based on a change of circumstances. There must, however, be a genuine change of circumstances.

[119] I do not accept that the fact Mr Cummins did not know that the Body Corporate had no intention of enforcing its lien by seeking a sale of Unit 12A amounts to a genuine change of circumstances.

[120] As noted above, Gwyn J recorded in the Caveat Judgment that there had been no sale and there was no assurance there would be a sale. Her Honour also recorded Mr Sullivan’s advice that Flat Bush had no current intention to sell. In other words, the likelihood that one of the parties contending for a priority equitable interest was unlikely to seek to enforce its rights was squarely before Her Honour. I do not accept that the absence of an intention to sell on the part of the other party seeking priority amounts to a change in circumstances justifying a further application.

(Footnotes omitted.)

[7] In relation to abuse of process, after canvassing the authorities, the Judge stated:

[124] As already discussed, I do not accept that an absence of an intention to sell on the part of the Body Corporate is a new circumstance justifying a further application to remove the caveat. In that sense, I do not consider that Mr Cummins is raising an issue that could have been raised before. However, in bringing this application, Mr Cummins is, in reality, seeking to mount a collateral attack on the Caveat Judgment. More generally, I consider that the application is another instance of Mr Cummins and his associated entities engaging in, as Lord Bingham termed it, “unjust harassment” of the Body Corporate and the other owners by seeking again to advance their interests while avoiding paying the sums declared by the Courts to be immediately payable. In that sense, Mr Cummins is again vexing the Body 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 he could not achieve earlier. It is a further example of the Cummins’ interests seeking to circumvent the Courts’ “pay now, argue” later rulings as discussed by the Court of Appeal in the Joinder Appeal and which it held to be an abuse of process.

[125] In all of these respects, I am satisfied that the present application is an abuse of process. Strike out would have been justified if I had not dismissed the application.

(Footnote omitted.)

[8] In relation to costs, he stated:

[127] The Body Corporate seeks indemnity costs. I consider that an award of actual and reasonable costs is appropriate in this case. The application is an abuse of process and another example of dilatory and prevaricating behaviour by the Cummins’ interests.

[128] Counsel should attempt to agree costs. If they are unable, they may submit memoranda of no more than five pages.

[9] Indemnity costs were fixed at $51,750. Mr Cummins appeals the award of indemnity costs and seeks substitution of it with an award of costs to the Body Corporate on a 2B basis. In order to do so, he appeals against the findings of abuse 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 into account relevant matters.^[16]

Relevant law of costs

[10] Rule 14.6(4) of the High Court Rules 2016 provides that the court may order a party to pay the actual costs and disbursements reasonably incurred if, relevantly:

(a) the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or
(b) the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or

...

(f) some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.

[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 the making of irrelevant allegations of fraud;
(b) particular misconduct that causes loss of time to the court and to other parties;
(c) commencing or continuing proceedings for some ulterior motive;
(d) doing so in wilful disregard of known facts or clearly established law; or
(e) making allegations which ought never to have been made or unduly prolonging a case by groundless contentions, summarised in French J’s “hopeless case” test.

Submissions

[12] Mr Sullivan, for Mr Cummins, submits the application was not a collateral attack on Gwyn J’s judgment and not an abuse of process. Rather, Mr Cummins had legitimate commercial reasons to apply because of the adverse effect of the caveat on his ability to refinance the remediation. Removal of the caveat would have given the Body Corporate a better position. A catalogue of matters had changed. There had been no discussion before Gwyn J as to whether the Body Corporate would seek sale orders pursuant to its equitable charge to which it claimed to be subrogated. In its substantive application, it does not seek sale orders. The Body Corporate gains no priority over other creditors from the maintenance of the caveat. The real purpose of lodging the caveat was to preclude further borrowing against Unit 12A. The “pay now, argue later” regime does not apply here. The “dilatory and prevaricating” criticism and 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 secure refinancing 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 to award indemnity costs for the reasons he gave. Mr Cummins has had indemnity costs awarded against him five times before in this litigation, including three times by this Court.^[18]

Was the application a collateral attack or abuse of process?

[14] During the hearing, the Court asked counsel about whether van Bohemen J really meant to agree with Mr Cummins that there were new circumstances, as the second sentence of [124] appears to say. We consider the Judge made it quite clear in paragraphs [117]–[120] (quoted above)^[19] that he did not accept the lack of an intention by the Body Corporate to enforce its lien amounted to a genuine change of circumstances.^[20] The context of those paragraphs suggest that the second sentence of paragraph [124], which summarised paragraphs [117]–[120], accidentally contained an extra negative. But, in any case, we consider the crux of this appeal turns on whether 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 the Body Corporate would have to be paid first from any sale, the Body Corporate’s position would worsen if the caveat was removed. That, together with its experience of Mr Cummins’ past behaviour of not paying to the Body Corporate what the courts have ordered, constitute clear reasons why the Body Corporate could reasonably have been expected to resist such a proposal. It is clear from the correspondence Mr Sullivan pointed to that the Body Corporate did resist the proposal for those reasons.^[21]

[16] Furthermore, Mr Cummins did not explain why funding was no longer available or provide evidence of any attempt to find a new funder. We consider the Judge was entitled to find, on the evidence before him:

[17] So, the Judge was entitled to conclude that there had been no material change of circumstances. Mr Cummins wanted the caveat removed and the Body Corporate was not satisfied its interests would be sufficiently protected. Gwyn J had already rejected the arguments that the Body Corporate’s interest was already effectively secured and that the Body Corporate’s subrogation was only an entitlement.^[22] Mr Cummins’ stated need to find a new funder was not a new circumstance as far as the Body Corporate was concerned. As van Bohemen J said, the Court’s residual discretion to remove a caveat will be exercised cautiously and only when the Court is satisfied that doing so would not prejudice the legitimate interests of the caveator.^[23] Both judges were being asked to exercise the same discretion on materially the same 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 on that judgment. But it was a second attempt to achieve what had not been achieved earlier, without a material change of circumstances. Accordingly, we do not consider van 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 award indemnity costs. The threshold for overturning the award is not met.

Result

[19] The appeal is dismissed.

[20] The appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.

Solicitors:
Langford Law, Wellington for Appellant
Grove Darlow & Partners, Auckland for Respondent

^[1] Cummins v Body Corporate 172108 [2022] NZHC 774 [Decision under appeal].

^[2] 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: Manchester Securities 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 Manchester Securities Ltd v Body Corporate 172108 [2018] NZCA 190, [2018] 3 NZLR 455.

^[6] 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].

^[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].

^[14] At [95]–[96].

^[15] At [117]–[121].

^[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].

^[17] Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [29], citing Hedley v Kiwi Co-operative Dairies Ltd (2002) 16 PRNZ 694 (HC) at [11].

^[18] Body Corporate 172108 v Manchester Securities Ltd [2019] NZHC 253; Manchester Securities Ltd 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 Manchester Securities 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 the Body Corporate’s position.

^[22] Caveat judgment, above n 7, at [65]–[77].

^[23] Decision under appeal, above n 1, at [95].

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