Lihua Limited v Body Corporate 366611 [2012] NZHC 1975 (13 September 2012)

Last Updated: 21 September 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2012-404-000937 [2012] NZHC 1975

UNDER the Unit Titles Act 2010 and the Unit Titles

Regulations 2011

IN THE MATTER OF Body Corporate 366611

BETWEEN LIHUA LIMITED Applicant

AND BODY CORPORATE 366611

First Respondent

AND THETA MANAGEMENT LIMITED Second Respondent

AND BCS LIMITED Third Respondent

Hearing: 16 April 2012

Counsel: B Rooney for Applicant

P Sills for First Respondent

S Price/J Wilson for Second Respondent

P Spring for Third Respondent

Judgment: 13 September 2012

_{JUDGMENT OF WOOLFORD J}

This judgment was delivered by me on Thursday, 13 September 2012 at 2:30 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:

Mr B Rooney, Barrister, Auckland. Mr P Sills, Barrister, Auckland.

Mr S Price, Partner, MinterEllisonRuddWatts, Auckland. Mr P Spring, Partner, Keegan Alexander, Auckland.

LIHUA LIMITED V BODY CORPORATE 366611 HC AK CIV 2012-404-000937 [13 September 2012]

Introduction

[1] The applicant, Lihua Limited (Lihua), is the owner of a residential unit in the Empire apartment building in Auckland, a unit title development. Lihua also manages several other units in the building on behalf of their owners. The first respondent is the Body Corporate of which all unit owners are members. The second respondent, Theta Management Limited (Theta), is the building manager pursuant to a contract with the Body Corporate. The third respondent, BCS Limited (BCS), is the Body Corporate secretary. Lihua seeks various orders against the respondents relating to the management of the building. In particular, it challenges the validity of an annual general meeting of the Body Corporate held on 13 December 2011.

Factual background

[2] There are a total of 313 units in the Empire apartment building made up of

300 residential units and 13 commercial units. In addition to being the building manager pursuant to a contract with the Body Corporate, Theta manages 277 of the

300 residential units, 276 of those pursuant to leases between Theta and the unit owners.

[3] The original leases included enduring proxies permitting Theta to cast votes at Body Corporate meetings for the owner. Clause 9.2 of the leases originally provided:

9.2 The Lessor hereby irrevocably appoints the Lessee to be the Lessor’s proxy pursuant to the rules of the Body Corporate with full power to exercise the Lessor’s voting and other rights and functions relating to the operation and control of the Body Corporate to the exclusion of the Lessor provided that the Lessee shall give the Lessor prior notice wherever practical of any matter of substance which is to be decided by the Body Corporate.

[4] Restrictions on the use of proxies were, however, introduced by the Unit

Titles Act 2010 (the 2010 Act) and the Unit Titles Regulations 2011 (the 2011

Regulations), both of which came into force on 20 June 2011. Eligibility for voting is now governed by s 96 of the 2010 Act. Representatives of owners are eligible to

vote at general meetings of a body corporate if they are authorised to act on the

owner’s behalf. Sections 96(1) and (2) provides:

96 Voting: eligibility

(1) A person eligible to vote at a general meeting of the body corporate (eligible voter) is a person who is of or over the age of 16 years and—

(a) whose name is entered on the register of owners of principal units as—

(i) the owner of a principal unit; or

(ii) the representative of that owner; or

(b) who is the nominee of a company the name of which is entered on the register of owners of principal units as the representative of the owner; or

(c) who is a subsidiary body corporate representative.

(2) For subsection (1)(a)(ii), a person is a representative of the owner of a principal unit if—

(a) the person is a guardian, trustee, receiver, or other representative of the owner, and is authorised to act on the owner’s behalf; or

(b) the person is authorised by law to administer, manage, or control the property of the owner.

[5] As to the use of proxies, although permitted by s 102 of the Act, their use has been restricted by reg 14 of the 2011 Regulations to particular general meetings. Section 102 provides:

102 Voting: proxies

(1) An eligible voter may exercise the right to vote either by being present in person or by proxy.

(2) A proxy for an eligible voter is entitled to attend and be heard at a body corporate meeting as if the proxy were the eligible voter.

(3) A proxy must be appointed by notice in writing signed by the eligible voter.

(4) If there are 2 or more eligible voters who own 1 principal unit and they are jointly entitled to exercise 1 vote and wish to do so by proxy, that proxy must be jointly appointed by them and may be 1 of them.

[6] Regulation 14 relevantly provides:

14 Voting: proxies

(1) A proxy is appointed for a particular general meeting. (2) A proxy appointment expires—

(a) at the end of the general meeting for which the appointment is made; or

(b) if that meeting is adjourned, at the end of the reconvened meeting.

(3) A proxy appointment may be revoked at any time before it expires.

...

[7] As a consequence of the law change, Theta contacted many of the owners of the units under Theta’s management to put in place arrangements pursuant to which Theta could continue to represent the owners at Body Corporate meetings. To that end, between 18 July and 25 November 2011, Theta entered into deeds of variation with the owners of 189 units pursuant to which cl 9.2 was replaced with the following:

POWER OF ATTORNEY

9.2 The Lessor hereby irrevocably and unconditionally appoints the Lessee as the Lessor’s representative pursuant to s 96(2) of the Unit Titles Act 2010 and the Lessor’s true and lawful attorney to appoint the Lessor’s proxy for a general meeting, and/or exercise the Lessor’s voting and other rights and functions relating to the operation and control of the Body Corporate to the exclusion of the Lessor provided that the Lessee shall give the Lessor prior notice wherever practical of any matter of substance which is to be decided by the Body Corporate.

[8] The amended cl 9.2 appoints Theta as the owner’s representative, pursuant to s 96(2) of the 2010 Act. It also gives Theta a power of attorney to appoint a proxy for the owner at general meetings of the Body Corporate.

[9] Similarly, between 18 July 2011 and 5 December 2011, Theta entered into new leases in respect of 42 units, which also contain the amended cl 9.2. Further, the owners of 8 units, which are not subject to a Theta lease, have also granted Theta a power of attorney.

[10] Following notice of the annual general meeting to be held on 13 December

2011, Theta then completed proxy appointment forms in the form prescribed in Schedule 2 of the 2011 Regulations on behalf of 228 owners pursuant to the power of attorney that each of those owners had granted to Theta in terms of the amended cl 9.2. In doing so, Theta appointed John Chun Ching Chen as each of those owner ’s proxy for the meeting.

[11] Mr Chen then attended the annual general meeting held on 13 December

2011 on behalf of the owners of those 228 units claiming to be the nominee of Theta, and the owners’ authorised representative pursuant to s 96(2) in terms of the amended cl 9.2, as well as their appointed proxy pursuant to s 102 of the Act. Other owners attended in relation to 21 other units, making a total attendance of 249.

[12] Mr Chen brought copies of the deeds of variation, the new deeds of lease, the proxies and the nomination letters and presented them at the commencement of the meeting. He also brought along a solicitor in order to be able to address any queries that might arise in relation to his attendance as representative/nominee or proxy, although no queries were raised either at the meeting or subsequently.

[13] Prior to the meeting held on 13 December 2011, nominations were sought for the positions of Body Corporate Chairperson and members of the committee. Following receipt of nominations, formal notice was given to the owners of the meeting to be held on 13 December 2011. It was sent pursuant to reg 6 of the 2011

Regulations. The notice was accompanied by the documents required by reg 6(5), including a copy of the Body Corporate’s financial statements for the most recent financial year. These statements had been audited. A copy of the audit certificate was also sent out with the notice of the meeting.

[14] After the notice of the annual general meeting had been sent to the owners, the solicitors acting for Lihua wrote to the auditors making various assertions in relation to the financial statements. On 9 December 2011, four days prior to the meeting, the auditors wrote to the Body Corporate committee advising them that, subsequent to issuing their audit opinion, they had been advised of additional facts which could have an impact on the financial results for the year ended 30 April 2011.

Under those circumstances, the auditors advised that they were formally withdrawing their audit certificate and further advised that the financial statements should neither be approved at the meeting on 13 December 2011 nor relied upon by any party for any purpose.

[15] Subsequently, at the annual general meeting on 13 December 2011, the motion to approve the financial statements for the year ended 30 April 2011, which was included in the agenda set out in the notice of the meeting, was withdrawn. The minutes of the meeting record that the auditors would reissue their audit certificate once the audit was finished and the financial statements would be subject to approval at the next annual general meeting.

Orders sought

[16] Lihua seeks orders or declarations that:

(a) Theta is prohibited from exercising at meetings of Body Corporate

366611:

(i) Proxies conferred by the original cl 9.2 of leases of units between Theta and any registered proprietor of a unit comprising Body Corporate 366611; and

(ii) Votes pursuant to or under or in reliance on the amended cl 9.2 set out in deeds of variation in respect of the leases of 189 units; and

(iii) Votes pursuant to or under or in reliance on the amended cl 9.2 in respect of new leases with the owners of 42 units; and

(iv) Votes pursuant to or under or in reliance on powers of attorney granted by the owners of 8 units, which are not subject to a Theta lease.

(b) The annual general meeting of the Body Corporate held on

13 December 2011 was not a valid meeting of the Body Corporate and all business transacted at the meeting was invalid.

(c) The Body Corporate and the Body Corporate secretary are directed to convene another annual general meeting of Body Corporate 366611 forthwith with an independent chairperson nominated by the Arbitrators and Mediators Institute of New Zealand if the parties cannot agree on a chairperson.

(d) The respondents are directed to deliver up to the applicant forthwith a copy of the register of the unit owners containing the information set out in reg 4(1) of the 2011 Regulations.

(e) Levies invoiced by the Body Corporate as an “additional legal levy”

on or about 28 February 2011 were ultra vires and invalid.

Voting at General Meetings

[17] Firstly, Lihua seeks an order prohibiting Theta from exercising proxies conferred by the original cl 9.2. Lihua notes that Theta has amended cl 9.2 only in respect of 231 units, which apparently leaves 46 original unamended leases in respect of which a ruling is sought.

[18] However, I decline to make any order in respect of the 46 original unamended leases. Mr Chen did not seek to rely on the enduring proxies conferred by the 46 original unamended leases when he attended at the meeting on

13 December 2011 with 228 proxies. I agree with Theta’s counsel that it is a fundamental requirement of the Declaratory Judgments Act 1908 that declaratory relief is directed to actual legal controversies and not to answering abstract or hypothetical questions. Declaratory relief is not available where there is a lack of a genuine dispute between the parties affecting their respective rights[1] or where the

Court is being asked to answer purely abstract questions in anticipation of actual controversy.[2] There is, in my view, no controversy in relation to the original cl 9.2.

[19] Secondly, Lihua also seeks an order prohibiting Theta from exercising votes pursuant to, under or in reliance on the amended cl 9.2 contained in the deeds of variation, the new leases or the powers or attorney granted to Theta by the owners of units which are not subject to a Theta lease.

[20] Lihua submits that the amended cl 9.2 was a device to avoid the prohibition on enduring proxies brought about by the 2011 Regulations and, as such, is somehow illegal and/or invalid. Lihua also submits that the amended cl 9.2 offends the general regime of the 2010 Act and the 2011 Regulations in some other way. Lihua further submits that the power of attorney granted to Theta by the amended cl 9.2 potentially conflicts with powers of attorney granted to mortgagees pursuant to the contractual terms of their mortgages. Finally, Lihua submits that the proper interpretation of s 96(2) of the 2010 Act does not permit the appointment of Theta as an owner ’s representative.

[21] In support of its submission regarding, what it says, is a prohibition on enduring proxies, Lihua refers to a minute of a decision of the Cabinet Economic Growth and Infrastructure Committee dated 25 August 2010. In the minute, the Committee agreed that the regulations should prohibit the use of enduring proxy votes. However, the same Cabinet minute also noted that there are other existing legal frameworks under which an enduring proxy is more suitably arranged. The minute relevantly states:

On 25 August 2010, the Cabinet Economic Growth and Infrastructure

Committee (EGI):

...

29. noted that a practice has developed whereby some professional body corporate managers obtain enduring proxy votes from unit owners, analogous to a power of attorney;

30. noted that the use of enduring proxies was not envisaged or desired when the 1972 Act was originally designed, and that there are other

existing legal frameworks under which an enduring proxy is more suitably arranged.

31. agreed that regulations prohibit the use of enduring proxy votes.

[22] It seems to me that on the proper interpretation of the minute, the Cabinet Committee did not envisage that the legislation would prohibit an owner from granting an on-going authority (that is non-meeting specific) to attend general meetings of a body corporate and/or vote on behalf of the owner by any means or framework. The Committee noted that there were other existing legal frameworks under which an enduring proxy is more suitably arranged. In my opinion, one of those legal frameworks is a power of attorney. The framework for powers of attorney in respect of dealings with land is set out in ss 19 – 22 of the Property Law Act 2007. It refers to both revocable and irrevocable powers of attorney.

[23] It is also significant, in my opinion, that Parliament has expressly considered that a contractual appointment of a power of attorney on similar terms to be appropriate in the context of a mortgagor/mortgagee relationship. Section 95(1) of the Property Law Act 2007 provides that every mortgage over land contains the implied covenants, conditions, and powers set out in Part 1 of Schedule 2 to the extent that they are relevant in the circumstances. Clause 15 in Part 1 of Schedule 2 of the Act relates to unit titles. Clause 15(3) and (4) provide:

(3) The mortgagor’s voting rights under the Unit Titles Act 2010 and the rules of the body corporate (whether at a meeting or by entry in the minute book) may be exercised by the mortgagee, at the expense of the mortgagor.

(4) For the purposes of subclause (3), the mortgagor irrevocably appoints the mortgagee as the attorney of the mortgagor.

[24] Lihua, however, submits that this supports its contention that the amended cl

9.2 is invalid. It submits that if a mortgagor/owner already has an attorney for voting purposes, Theta cannot be appointed as another attorney of the owner. Lihua, however, does not refer to any legal authority in support of this proposition. It runs contrary to academic commentary that one can have several attorneys.[3]

[25] No mortgagee attended the annual general meeting on 13 December 2011 and sought to exercise an owner’s voting rights under the 2010 Act, so the issue of a possible conflict between two separate powers of attorney does not arise.

[26] Lihua refers to Quest Rose Hill Pty Ltd v White[4] as appearing to be the only judgment in Australia or New Zealand where entrenched voting rights in a body corporate have been examined in detail. In that case, the Court held that the clause at issue in the leases did not confer unconditional voting rights, in that it was limited to the grant of a power to ensure compliance with the owner’s obligation to vote as reasonably requested, such that it was not contrary to statute. Lihua seeks to distinguish the case and submits that the position is quite different in the present case. Firstly, because the statutory or regulatory position is different in New Zealand, and secondly, because both the original and the amended cl 9.2 are a complete unconditional and irrevocable abandonment of the owner’s voting rights and is inconsistent with the Act. It is my opinion, however, that the case of Quest Rose Hill Pty Ltd v White does not assist Lihua because in that case the Court upheld the grant of powers of attorney.

[27] Finally, Lihua submits that Theta is unable to be appointed as the owner’s representative pursuant to s 96(2) of the 2010 Act. Lihua submits that s 96(2) does not confer a power to appoint any person as an owner’s representative. It submits that it expressly applies only where particular relationships (guardianship, trustee, receiver) already exist within a legal framework creating rights and obligations. Lihua submits that the list in s 96(2) must be considered sui generis. Lihua says “it cannot extend to just anyone and would make no sense if it did”. It is my view, however, that s 96(2) is drafted rather more widely and can include a person who is appointed by contract as well as by operation of law. Attorneys do also exist within a legal framework.

[28] In all the circumstances, Lihua has not persuaded me that there was any illegality involved in Mr Chen being appointed as proxy by Theta for the purposes of the annual general meeting on 13 December 2011 pursuant to powers of attorney

granted to Theta by owners or acting as the owner’s representative pursuant to s

96(1) of the 2010 Act.

Validity of Annual General Meeting on 13 December 2011

[29] The second order sought is a declaration that the annual general meeting of the Body Corporate held on 13 December 2011 was not a valid meeting of the Body Corporate and all business transacted at the meeting was therefore invalid. Lihua submits that the meeting was invalid for two reasons. First, it was not attended by a quorum of owners. Secondly, it was not valid because the notice of meeting sent to owners did not comply with reg 6(5), which requires that a copy of the financial statements for the Body Corporate for the most recent financial year be distributed to owners with the notice of meeting.

[30] On the issue of the quorum, there is some doubt about which rule applies. The Body Corporate came into existence upon deposit of a unit plan with the District Land Registrar in 2006. At that time, the legislation in force was the Unit Titles Act

1972 (the 1972 Act). Rule 18 of Schedule 2 to the 1972 Act provided that at a general meeting of a body corporate, the persons entitled to exercise the voting power in respect of not less than one-third of the units shall constitute a quorum.

[31] Section 37 of the 1972 Act allowed amendments to the rules in Schedule 2 and the Body Corporate, on 30 March 2006, adopted new rules to replace the statutory ones. Rule 2.18 of the rules adopted by the Body Corporate provides that a general meeting of the Body Corporate, the persons entitled to exercise the voting power in respect of not less than 20 of the units shall constitute a quorum. This is approximately 6% of the units, which can be contrasted with one-third of the units, the “default” rule in Schedule 2 to the 1972 Act.

[32] As noted in [4], the 1972 Act was replaced by the 2010 Act in 2011. The rule relating to quorums is now set out in the 2010 Act itself. Unlike the position under the 1972 Act, it is unable to be amended by vote of the Body Corporate. Section 95 of the 2010 Act provides that at a general meeting of a body corporate the persons entitled to exercise the voting power in respect of not less than 25% of the units shall

constitute a quorum. There is, however, a transitional provision contained in s 220 of the 2010 Act which provides that, despite the repeal of the 1972 Act, s 37 and Schedule 2 and 3 of the Act continue to be in force until 15 months from the first day of the month following the date of commencement of the 2010 Act (1 October 2012).

[33] While it would appear from s 220 of the 2010 Act that the existing rules continue to govern the operation of the Body Corporate until 1 October 2012, commentators have questioned whether existing rules relating to meetings and voting continue to be applicable. Gibbons[5] accepts that on its plain wording, s 220 seems to require that a meeting of a body corporate should be run under the rules in Schedule 2 of the 1972 Act or as amended under s 37 of the Act. However, he goes

on to state that this approach would seem to counter other express provisions of the

2010 Act, in particular, the general provisions as to meetings and voting (which include the quorum provision in s 95) which are not expressed to be subject to s 220. Gibbons states that it would seem that while existing rules can remain in place, in practical terms, only the Schedule 3 rules (relating to noise, pets, and other “operational” matters) will remain in place. He is of the view that the Schedule 2 rules remaining in place would frustrate other express provisions of the 2010 Act.

[34] Gibbons concludes:

Therefore, reading the scheme of the UTA 2010 as a whole, it is submitted that s 220 should be read subject to the remainder of the legislation, and that existing body corporate rules only remain in place under s 220 where these do not contradict express provisions of the UTA 2010 and the Regulations. All meetings (and other governance matters) from commencement should therefore be run according to the UTA 2010.

[35] The Body Corporate adopted a similar approach when it included an agenda item relating to the 2010 Act and 2011 Regulations in the notice of the annual general meeting on 13 December 2011. In an explanatory note enclosed with the notice of meeting, the Body Corporate stated:

There is a transitional provision in the new Act preserving some existing rules until 1 October 2012. However it is unclear whether the transitional provision applies only to existing operational rules or to both governance and operational rules in the form of Schedules 2 and 3 of the old Act (as amended or otherwise).

Until this is clarified the prudent view is that the governance rules based on Schedules 2 and 3 of the old Act or amended such as in any body corporate rules are not preserved for the transitional period and the governance provisions of the new Act and new Regulations apply from 20 June 2011. In any event after 1 October 2012 all existing rules for all bodies corporate will no longer apply and the default rules in the new Regulations will apply unless a body corporate registers new rules so new rules are required.

Some of the requirements of the new Act which are contrary to, or not addressed in, most body corporate rules are:

...

(d) The quorum for a meeting is 25% of all eligible voters.

[36] Although the minutes of the annual general meeting held on 13 December

2011 do not record which quorum rule was applied to the meeting, I infer from the explanatory note enclosed with the notice of meeting that the Body Corporate took the view that the relevant requirement for a quorum was 25% in accordance with s

95 of the 2010 Act. I have already found that Mr Chen was the valid representative or proxy of 228 owners – in excess of two-thirds of the owners. Accordingly, Lihua has not persuaded me that the meeting was not attended by a quorum of owners. In the circumstances of the case, I am not required to determine whether or not r 2.18 of the rules adopted by the Body Corporate was validly adopted under s 37 of the 1972

Act. It has been treated by the Body Corporate as having been superseded by s 95 of the 2010 Act. In any event, it will not be applicable after 1 October 2012.

[37] On the issue of the provision of financial statements with the notice of meeting, I note that there is no requirement to do so either under r 16 in Schedule 2 to the 1972 Act or under r 2.16 of the rules adopted by Body Corporate in place of the statutory rules (which is, in fact, in the same terms as r 16). Both rules only require seven days notice of a general meeting specifying the place, the date, and the hour of the meeting and the proposed agenda.

[38] That has been changed by reg 6 of the 2011 Regulations. Regulation 6 provides:

6 Notice of annual general meeting

(1) Notice of an annual general meeting must be issued to every unit owner in the unit title development by each owner's preferred method of contact.

(2) Notice of an annual general meeting must be issued by—

(a) the body corporate, in the case of the first annual general meeting; and

(b) the chairperson, in the case of every other annual general meeting.

(3) Notice of an annual general meeting must be issued—

(a) at least 3 weeks before the date of the annual general meeting where the unit title development is a parent unit title development; or

(b) at least 2 weeks before the date of the annual general meeting in every other case.

(4) Notice of an annual general meeting must—

(a) set out the agenda for the meeting; and

(b) contain the text of motions to be decided by resolution (if any); and

(c) contain the names of the candidates for election; and

(d) set out the voting procedures for unit owners who wish to vote by proxy or by post; and

(e) set out the procedure to be followed if a quorum is not present; and

(f) contain any other information that the body corporate or chairperson (as the case may be) considers relevant.

(5) Notice of an annual general meeting must be accompanied by the following documents:

(a) a proxy appointment form; and

(b) a postal voting form; and

(c) a copy of the financial statements for the most recent financial year; and

(d) any other document that the body corporate or chairperson

(as the case may be) considers relevant.

[39] Again, the Body Corporate took a cautionary approach, in line with the recommendations of Gibbons, that all meetings (and other governance matters) from commencement of the new Act should be run according to the 2010 Act and 2011

Regulations, notwithstanding the transitional provision in s 220. Accordingly, it did

include a copy of the financial statements for the most recent financial year with the notice of meeting. Those statements had been audited but four days before the meeting the auditors withdrew their audit certificate.

[40] There is, however, no requirement in reg 6(5) that the statements to be sent with the notice of meeting should be audited. In fact there is no requirement for them to be audited at all. Section 132(2) of the 2010 Act provides for two alternatives to auditing. Within two months after the end of each financial year, a body corporate may, instead of submitting its financial statements to an independent auditor for auditing, submit its financial statements to an accountant for review or engage an accountant to undertake specific verification procedures. Furthermore, s 132(8) allows a body corporate to decide not to utilise any of the three approaches (auditing, reviewing or verifying) in any particular year.

[41] Again, Lihua has not persuaded me that the withdrawal of the audit certificate four days before the annual general meeting in some way invalidated the notice of meeting. I am of the view, therefore, that the annual general meeting on

13 December 2011 was a valid meeting and that the resolutions passed at the meeting were also accordingly valid.

Further Annual General Meeting

[42] Having determined that the annual general meeting held on 13 December

2011 was valid, Lihua is therefore not entitled to the third order sought, that a further annual general meeting with an independent chairperson be called as soon as practicable. In any event, I do not believe that there is jurisdiction for an independent chairperson to be appointed in respect of the Body Corporate’s general meetings. The process by which a chairperson may be elected is set out in reg 10 of the 2011 Regulations. The chairperson must be the owner of a principal unit in the unit title development or the director of the owner if the owner is not a natural person. It is also clear that the chairperson is to be elected by ordinary resolution of the Body Corporate members, that is, each unit owner’s vote carries equal weight.

Access to register of unit owners

[43] The fourth order sought by Lihua is to direct the respondents to deliver up to Lihua forthwith a copy of the register of unit owners containing the information set out in reg 4(1) of the 2011 Regulations. Lihua seeks access to the register of unit owners so as to forward information or documentation to the other owners which relates to the management, use and enjoyment of the units and common property. It is said that the respondents have been requested to provide a copy of the register of unit owners but have failed to do so.

[44] Regulation 4 provides:

4 Register of unit owners

(1) A body corporate must include the following information in a register of unit owners, to the extent that the information is relevant, for every unit owner in a unit title development:

(a) the unit number; and

(b) the unit owner's full name; and

(c) the unit owner's contact details and preferred method of contact; and

(d) the unit owner's ownership interest; and

(e) the unit owner's utility interest; and

(f) the name, contact details, and preferred method of contact of any representative of the unit owner; and

(g) the name, contact details, and preferred method of contact of any agent appointed by the unit owner under section 81 of the Act; and

(h) if the unit owner is a corporation, the name, contact details, and preferred method of contact of a director or representative of the corporation; and

(i) if the unit is held on trust, the name, contact details, and preferred method of contact of each trustee of the trust; and

(j) if the unit owner is the Crown, the name, contact details, and preferred method of contact of the appropriate Minister or officer or employee of the Crown.

(2) A unit owner's preferred method of contact—

(a) must be either by post or by email; and

(b) may be through—

(i) an agent appointed under section 81 of the Act or a representative; or

(ii) the subsidiary body corporate representative, the chairperson, or the body corporate committee, if the unit owner is a subsidiary body corporate.

(3) The following may search a register of unit owners for the purposes specified in subclause (4):

(a) the chairperson:

(b) the body corporate committee:

(c) a person approved by the body corporate or the body corporate committee.

(4) The purposes referred to in subclause (3) are—

(a) to give notice of body corporate meetings: (b) to give notice of resolutions voted on:

(c) to advise unit owners of matters relating to the body corporate or the unit title development:

(d) to serve documents:

(e) to forward information or documentation from a unit owner to another unit owner, provided that the information or documentation—

(i) relates to the management of the unit title development; or

(ii) relates to the use or enjoyment of the unit title development.

(5) In this regulation,—

contact details means address for service, telephone number, and email address (if any)

representative means a representative of the owner of a principal unit within the meaning of section 96(2) of the Act.

[45] As is evident from the terms of reg 4, Lihua needs the approval of the Body Corporate or Body Corporate committee to access the register. It says that the respondents have been requested to provide a copy of the register but have failed to

do so. James Keat, a firm of solicitors, sought a copy of the register from the Body Corporate by letter dated 8 February 2012 on behalf of “a number of owners of units in the Empire Building”. It appears a copy of the register was not provided to James Keat.

[46] The Body Corporate takes the view that Lihua has not in fact made a formal request for access to the register of unit owners. It says that if Lihua did make such a request it would be considered in terms of reg 4. It submits that reg 4(3) permits the register to be searched in certain circumstances but does not permit it to be copied. It also submits that the Body Corporate must be satisfied that the information will be used for one of the purposes permitted by reg 4(4). It says that it would be cautious about granting access to the register, given an anonymous letter sent to unit owners recently. The Body Corporate says that a number of unit owners have expressed concerns to the Body Corporate about how somebody had obtained their private contact details and why the Body Corporate committee (as they understood it from anonymous letter) was writing to them in this way. The Body Corporate submits that the threshold for Body Corporate approval should be high in order to reflect an individual’s right to privacy, and notes that contact may be made with unit owners other than by searching the register.

[47] The letter that was sent anonymously to a number of the unit owners commenced:

We are a group of owners of apartments in the Empire Building in Auckland who believe that we have lost control of our investment and that we are losing money.

Recently, the Body Corporate circulated audited accounts. The auditors, however, have withdrawn their audit certificate because the accounts were inaccurate. It appears that the Body Corporate is insolvent. Where has the money gone? We are gravely concerned about this and what it means for our investments. The present financial position of the Body Corporate suggests that the governance and management of the Body Corporate is inadequate.

We have looked at the finances of other Body Corporates of a similar size and we are convinced that the Body Corporate can achieve potential savings of $200,000.00 a year. We believe that there should be an independent and professional Body Corporate secretary and building manager to provide value for money services.

For some years now, long before we knew about the Body Corporate’s financial problems, we have been concerned that the present structure of the Body Corporate, and the way the building operates, is too heavily weighted in favour of the building manager, Theta Management Limited.

[48] The letter continued:

Even if you currently have a management agreement with Theta, we can still help you to save a significant amount of money and improve the capital value of your property. We have successfully helped some owners to prevent Theta from managing their apartments, so there is nothing for owners to fear if they wished to do so. Remember it is lawful for owners to control their own apartments, even if they are being managed by Theta at present. We can do something about this! We need to exercise control over OUR Body Corporate! The Empire Body Corporate is the owners Body Corporate, not Theta’s.

[49] Having carefully considered submissions of counsel, I am of the view that there is no legal basis for the order sought by Lihua as it has not yet made a formal request to access the register. The Body Corporate has said it will consider any formal request. If permission to inspect the register is refused following a formal request by Lihua, then that refusal may be challenged by way of further Court proceedings. The Body Corporate will be aware that its actions can be reviewed to

check their reasonableness.[6]

[50] However, it seems to me that the Body Corporate should not unnecessarily withhold its approval of any request by Lihua to search the register. In my view, the right to search also includes the right to take copies of the register.

[51] I start with the principle that unit owners should be able to communicate with each other on matters relating to the management of the unit title development. This is, after all, what reg 4(4)(e)(i) provides.

[52] I would not have thought that it would be reasonable for the Body Corporate to refuse to allow Lihua to search the register merely on the ground of one anonymous letter in which Lihua may have had been involved. On the other hand, it may be reasonable for the Body Corporate to make its approval to search the register

_{conditional on any proposed communication being made available to the Body}

Corporate 10 days before it is sent to unit owners to enable the Body Corporate to explain to unit owners that it had provided their contact details to Lihua following a formal request and in accordance with reg 4(4) and to present its own view on the issues raised in the proposed communication.

[53] In that way, unit owners would not be taken by surprise and the Body Corporate would have the opportunity to issue proceedings seeking to restrain Lihua from communicating with the unit owners if it had received advice from counsel that the proposed communication was an unlawful interference with contractual rights, a concern that Theta has articulated about the anonymous letter.

Recalculation of levies

[54] The last order sought by Lihua is a declaration that the levies invoiced by the Body Corporate as an “additional legal levy” on 28 February 2011, were ultra vires and invalid. There are alleged to be ultra vires and invalid because it is said they were not imposed by resolution of the Body Corporate.

[55] The levies arose in the context of proceedings between Mr Chuan Wu and a number of other unit owners against the Body Corporate and Theta.[7] In those proceedings, the plaintiffs sought damages from the Body Corporate and Theta arising from a refusal to give the plaintiffs electronic keys to access their units and the common areas. The plaintiffs also sought declarations in relation to certain actions taken by the Body Corporate and Theta. Those proceedings were heard in the High Court at Auckland between 14 and 21 March 2011.

[56] Two weeks before the hearing commenced, the Body Corporate wrote to unit owners as follows:

I refer to the current claim between Mr Wu (and 8 others), the Body

Corporate and Theta Management Limited.

At various times since 8 February 2008 the Body Corporate has passed resolutions for special levies to meet the costs associated with the current litigation and its predecessor.

Those levies were calculated on a flat rate and not on a unit entitlement basis. The plaintiff has complained of this fact in the proceeding and alleges that the levies should be by way of unit entitlement. The Body Corporate’s barrister has commented on this claim and his letter of advice is attached:

Based on this advice, the levies in question have been recalculated based upon unit entitlement.

Any proprietor that has a unit entitlement over 0.32% has been under charged. If that is the case for your unit, an invoice has been prepared (and is attached) for the value of the amount undercharged.

For those with a unit entitlement of 0.32% or less they have been slightly overcharged on the levies issued to date. It is quite likely that there will be a further levy before this litigation is complete. That will be known in the next few weeks. So rather than refund the overpayment at this stage we will revisit the matter in a few weeks and I will write to you again then.

[57] The fact that the levies had been wrongly calculated on a flat rate rather than a unit entitlement basis was conceded in the High Court proceedings. In his judgment dated 30 May 2011, Asher J stated:

[107] The Body Corporate at general meetings on 8 February 2008 and 15

August 2008 passed resolutions recorded in the minutes of those meetings as items 6(3) and 6(5), and items 7(2) and 7(iv) respectively, imposing levies requiring the payment of fixed amounts on the proprietors. The charges were flat charges and not in proportion to the unit entitlement of the respective units. The levies were raised in order to defend these proceedings and the earlier proceedings.

[108] The Body Corporate acknowledges that the proprietors have levied fixed amounts and acknowledges the obligation to levy in proportion to the unit entitlement. It undertakes through Mr Sills to make an adjusted payout to reflect actual unit entitlements within the next 28 days. On the basis of that undertaking Mr Rooney does not seek any order directing the first defendant to repay to the claimants any levies collected from them. Nevertheless, he seeks a declaration.

[109] Under s 15(2) there is no power to raise amounts other than by levying contributions on unit owners on a proportionate basis, in accordance with their unit entitlement. The promise to make an adjusted payout at a later time cannot create the power, or alleviate the invalidity. It cannot be said that there is a reasonably incidental power to the power to raise amounts by levying proprietors proportionately under s 15(2)(c), to do a different thing entirely and levy them on a flat rate. By implication such a flat levy is not contemplated by the Act.

[110] Mr Sills submitted that there was no need to determine the issue given the acknowledgement that there will be an adjusted payout. That was a sensible concession and may be relevant to costs, but does not mean the point is moot. At the present time the levy stands and it was a wrongful levy.

[111] I declare that the resolutions recorded as items 6(3) and 6(5) in the minutes of the meeting of Body Corporate 366611 held on 8 February 2008, and items 7(ii) and 7(iv) in the minutes of the meeting of Body Corporate

366611 held on 15 August 2008, and any other similar resolutions, were

ultra vires and invalid.

[58] The resolutions of the Body Corporate passed at general meetings on

8 February 2008 and 15 August 2008 and recorded in the minutes of those meetings as items 6(3) and 6(5), and Items 7(2) and 7(iv) respectively were not produced in evidence in these proceedings. However, I agree with Asher J that they, and any other similar resolutions, are ultra vires and invalid. There is no power to raise amounts other than by levying contributions on unit owners on a proportionate basis in accordance with their unit entitlement. I agree with Asher J that the promise to make an adjusted payout at a later time cannot create the power, or alleviate the invalidity.

[59] Once again, Lihua, the applicant in these proceedings, like Mr Wu in the earlier proceedings, does not seek an order directing the Body Corporate to repay the adjusted levies, which were notified to unit holders on 28 February 2011.

[60] The Body Corporate committee understood that the issue had been resolved by way of an agreed position between counsel as recorded in [108] of Asher J’s judgment dated 30 May 2011 and, accordingly, no formal resolution re-levying the recalculated levies was required. That, however, does not appear to be the position and Lihua is therefore entitled to a declaration that the levies invoiced by the Body Corporate as an “additional legal levy” on 28 February 2011 were ultra vires and invalid. A formal resolution of the Body Corporate will therefore now be required to validate the levies.

Conclusion

[61] The applicant, Lihua Limited, is largely unsuccessful in these proceedings. The only declaration made is that the levies invoiced by the Body Corporate as an “additional legal levy” on or about 28 February 2011, were ultra vires and invalid. A formal resolution of the Body Corporate will therefore now be required to validate the levies.

[62] The respondents are entitled to costs. For the reasons advanced in the submissions of counsel for the third respondents, BCS is entitled to indemnity costs as it should not have been joined in these proceedings. If counsel are unable to agree on quantum, I will receive memoranda.

.....................................

Woolford J

---

[1] Gazley v Attorney-General (1995) 8 PRNZ 313 (CA).
[2] NZ Insurance Co Ltd v Prudential Insurance Co Ltd [1976] 1 NZLR 84 (CA).

[3] Trevor M Aldridge, Powers of Attorney (9th ed, Sweet and Maxwell, London, 2000) at [4-03].

[4] Quest Rose Hill Pty Ltd v White [2010] NSWSC 939.

[5] Thomas Gibbons Unit Titles Law and Practice (LexisNexis, Wellington, 2011) at [8.3].

[6] Velich v Body Corporate 164980 [2005] NZCA 108; (2005) 6 NZCPR 143 (CA).

[7] Wu v Body Corporate 366611 [2011] 2 NZLR 837 (HC).