Body Corporate 348047 v Strata Title Administration Limited [2012] NZHC 41 (27 February 2012)

Last Updated: 19 December 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-3581 [2012] NZHC 41

BETWEEN BODY CORPORATE 348047

First Plaintiff

AND RACHEL MURRAY, MICHAEL TERRANCE BUTLER, JAMES STEWART, NADEDZA PASTUSHENKO, LI-YU (PHILLIP) WEI AND CARLA JOYCE BRADLEY

Second Plaintiffs

AND STRATA TITLE ADMINISTRATION LIMITED

Defendant

Hearing: On the papers

Counsel: TJP Bowler for plaintiffs

B Rooney for defendant

Judgment: 27 February 2012

JUDGMENT OF LANG J [on costs]

This judgment was delivered by me on 27 February 2012 at 4 pm, pursuant to Rule

11.5 of the High Court Rules.

Registrar/Deputy Registrar

_{Date...............}

BODY CORPORATE 348047 V STRATA TITLE ADMINISTRATION LIMITED HC AK CIV-2011-404-3581 [27 February 2012]

[1] On 12 October 2011 the plaintiffs filed a notice discontinuing this proceeding. Earlier, on 6 October 2011, Courtney J had directed a timetable for the filing of submissions in relation to the issue of costs. This required any memorandum seeking costs to be filed and served by 21 October 2011.

[2] Neither party complied with this direction. On 29 November 2011, however, counsel for the plaintiffs filed a memorandum seeking an award of costs in his clients’ favour. Counsel for the defendant then filed a memorandum in opposition on

15 December 2011.

[3] Notwithstanding the late filing of memoranda, I propose to deal with the issue of costs on the merits.

Background

[4] This proceeding concerns a large apartment complex known as Imperial Gardens. The first plaintiff is the body corporate under which the individual unit owners administer the complex. The second plaintiffs are the owners of units in the complex. The defendant, Strata Title Administration Limited (“Strata”), was the secretary of the body corporate at the time this proceeding was issued.

[5] The genesis of this proceeding was the desire of a number of unit owners, represented in this proceeding by the second plaintiffs, to remove Strata as the secretary of the body corporate. That aim has now been realised, albeit not directly because of any orders made by the Court. Rather, the unit owners passed a resolution at an Annual General Meeting (“AGM”) held on 16 July 2011 that Strata should be removed from its position. The unit owners then appointed a new secretary, and it has now taken up the duties that Strata had been performing up prior to its removal.

[6] The body corporate filed this proceeding on 16 June 2011. At that stage, there was considerable friction between Strata and the unit owners who sought its removal. Those owners had arranged for an Extraordinary General Meeting of unit

owners to be held on 24 May 2011 to consider a resolution that Strata be dismissed as the secretary of the body corporate.

[7] Strata then gave notice that it proposed to hold an AGM of unit owners on

21 May 2011, three days prior to the scheduled EGM. The purpose of that meeting was to consider several items of business, but not the proposal that Strata be dismissed as Secretary. Those who attended the AGM on 21 May 2011 passed resolutions adjourning the AGM to 25 June 2011, and purporting to cancel the EGM that was scheduled to be held on 24 May 2011. Strata used proxies that it held from absentee owners to vote in favour of these resolutions.

[8] The unit owners who sought Strata’s removal did not accept that the EGM had been validly cancelled. They proceeded with the EGM on 24 May 2011, and those present purported to pass a resolution dismissing Strata as secretary of the body corporate. They then demanded that Strata should cease to act in that capacity.

[9] Strata did not accept the validity of the resolution, and refused to cease acting as secretary of the body corporate. This prompted the body corporate to institute the present proceeding, in which it effectively sought to enforce the resolution that had been passed at the EGM on 24 May 2011.

[10] On 29 June 2011, I heard an application by the plaintiffs for interim relief.[1]

At the conclusion of the hearing I held that the resolutions passed at the AGM on 21

May 2011 were arguably valid, but that the resolutions passed at the EGM on 24

May 2011 were arguably invalid.[2] In order to enable the issue of Strata’s future status to be resolved, however, the parties agreed that it was to be the subject of a vote when the AGM resumed. By that stage the AGM scheduled for 25 June 2011 had been postponed to 16 July 2011. I also directed that new proxies would need to be given for the items of business to be discussed at the AGM on 16 July 2011, and that any unit holder was entitled to request Strata to provide the names of other unit

_{owners, their unit numbers and their up to date postal and/or email addresses.}[3]

[11] Those present at the AGM on 16 July 2011 voted overwhelmingly to dismiss Strata as secretary of the body corporate, and Strata has accepted the validity of that vote. Although some transitional issues are yet to be resolved, the present proceeding effectively became redundant. For that reason the plaintiffs elected to file the notice of discontinuance.

The arguments

[12] The plaintiffs contend that the present proceeding was necessary for the following reasons:

a) After the plaintiffs called the EGM on 24 May 2001, Strata sought to

“trump” that meeting by calling its own AGM three days earlier.

b) Strata sought to personally attack members of the steering Committee.

It therefore failed to adopt a neutral stance as it ought to have done.

c) The plaintiffs were largely successful with their application for interim relief.

d) Strata insisted that it was entitled to use the proxies for the original AGM when that meeting resumed. It maintained this position until the Court directed that all parties were required to obtain new proxies for the AGM to be held on 16 July 2011.

[13] In addition, the plaintiffs submit that there is now a “clear history” of Strata attempting to obstruct unit owners from removing it as secretary of other bodies corporate. This is evidenced by other litigation in which Strata has been the defendant.

[14] The plaintiffs also rely upon actions that Strata took following the AGM on

16 July 2011. In particular, they contend that Strata has wrongly withheld funds that it ought to have repaid to the body corporate.

[15] Furthermore, the plaintiffs say that Strata misled the Court regarding the number of valid proxies that it held at the AGM on 21 May 2011.

[16] Taken together, the plaintiffs contend that these factors mean that they are entitled to an award of indemnity or increased costs. At the very least, they seek an award of costs on a 2B basis.

[17] Strata rejects any suggestion that the plaintiffs are entitled to an award of costs. Instead, Strata contends that that the plaintiffs should contribute to the costs that it has incurred in defending this proceeding. It argues that it was the successful party in the application for interim relief. It also contends that the present proceeding was unnecessary, and that the plaintiffs have ended up in exactly the same position they would have been in had the proceedings not been issued.

Decision

[18] I do not propose to decide the issue of costs having regard to events that have occurred outside the context of this proceeding. Ongoing arguments between the plaintiffs and Strata regarding transitional issues are irrelevant to the issue of costs, as is any other litigation in which Strata may be involved. Moreover, the issue relating to the number of valid proxies that Strata held at the AGM on 21 May 2011 has not yet been determined by the Court, and may never be.

[19] It is important, however, to bear in mind the circumstances that gave rise to this proceeding, and the events that occurred before the plaintiffs ultimately discontinued it. These demonstrate that it is not possible to say that either party was wholly in the right or in the wrong, or that either party has clearly been successful in relation to the proceeding. They also confirm that it would be unjust to determine the issue of costs solely on the basis that the plaintiffs ultimately elected to discontinue the proceeding.

[20] As I have already noted, the plaintiffs filed the proceeding at a time when there was considerable discord between them and Strata. I am satisfied that the blame for that state of affairs must to some extent lie with Strata. It was undoubtedly

aware that some of the unit owners were deeply unhappy with its performance. It also knew that this dissatisfaction had led those owners to attempt to bring matters to a head at the EGM scheduled for 24 May 2011. The proposed resolution removing Strata as the secretary of the body corporate was the principal item of business to be discussed at that meeting.

[21] For that reason Strata was ill advised to call an AGM three days prior to the EGM. This is particularly so given the fact that Strata did not include any item relating to its own performance, or its continued status as secretary of the body corporate, on the agenda for the AGM. It is therefore hardly surprising that the plaintiffs’ faction viewed Strata’s action in falling the AGM as a blatant attempt to thwart, or pre-empt, the outcome of the EGM that they had called. Their suspicions about this were undoubtedly confirmed at the AGM when Strata used the proxies that it held to vote in favour of the resolution purporting to cancel the forthcoming EGM. Those actions are likely to have destroyed the last vestiges of cordiality between the two factions.

[22] Not surprisingly, relations between the parties worsened further when Strata refused to accept the validity of the resolution that the unit owners passed at the EGM removing Strata as the secretary of the body corporate. Although I subsequently held that the resolution was arguably ineffectual for lack of a valid majority, the plaintiffs did not know this at the time. they no doubt believed that Strata’s refusal to abide by the resolution was governed by a stubborn desire to retain its position at all costs.

[23] Given that background, the plaintiffs cannot be criticised for filing the proceeding. They undoubtedly considered that they needed the assistance of the Court to force Strata to accept the will of the unit owners.

[24] Having said that, I determined most of the issues I was required to consider at the hearing on 29 June 2011 in Strata’s favour, at least to an arguable standard. As a result, the AGM scheduled for 16 July 2011 cannot be described as a “Court ordered AGM” as counsel for the plaintiffs contends. Rather, it was a resumption of the arguably valid AGM that Strata had originally scheduled for 21 May 2011. I also

held that the resolutions passed at the EGM on 24 May 2011, which formed the entire basis of the present proceeding, were arguably invalid. To the extnt that the Court has been required to express a view on the merits, Strata has therefore been the successful party.

[25] The end result, however, is that the plaintiffs ultimately achieved their desired object, albeit not directly as a result of the present proceeding. In order to do so, however, they used the vehicle of the adjourned AGM. The AGM that Strata originally called, and those present voted to adjourn, was therefore ultimately of considerable benefit to the plaintiffs.

[26] Viewing all of these matters objectively and in totality, I have concluded that the interests of justice will best be served if costs lie where they fall. Indeed, I perceive that to have the plaintiffs’ initial reaction given the fact that they filed their application for costs so late.

Result

_{[27] There will be no order as to costs.}

Lang J

Solicitors:

Grove Darlow & Partners, Auckland

James Keat, Newmarket

Counsel:

B Rooney, Vulcan Buildings, Auckland

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[1] Body Corporate 348047 v Strata Title Administration Ltd HC Auckland CIV-2011-404-3581, 29

_{June 2011.}

[2] _{At [18] and [25].}

[3] At [33] and [35].