Body Corporate 68792 v Memelink [2015] NZHC 1731 (28 July 2015)

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IN THE MATTER	of section 141 of the Unit Titles Act 2010
IN THE MATTER	of an originating application to appoint an administrator
BETWEEN	BODY CORPORATE 68792 First Applicant
AND	SYNERGY ENTERPRISES LIMITED, JAMES AND CAROLINE MCKERNAN, STEVEN AND VALDA SCHECKTER AND GEOFFREY ARDEN Second Applicants
AND	HARRY MEMELINK AND IAN TREVOR NEILL HAMILTON First Respondents
AND	ANTHONY HARRY DE VRIES AND GERALDINE DE VRIES Second Respondents
AND	CUDBY & MEADE LIMITED Third Respondent

Hearing:	17 July 2015
Counsel:	J K Mahuta-Coyle for Applicants H Memelink in Person A H de Vries in Person J L Greenwood (Interim Administrator)
_Judgment:	_{28 July 2015}

[1] As noted in my first judgment¹dated 18 March 2015 appointing Mr J L Greenwood as interim administrator, there has been a long and troubled history of conflict between the members of the first applicant (BC68792).

In my fourth judgment I made a direction for the timetable which was to apply for the filing of further written material in advance of the hearing on Friday,

17 July 2015 to determine the substantive application for the appointment of an administrator.

(a) amended originating application for an order appointing an administrator dated 19 June 2015;

(e) a memorandum of the second applicants in support of the originating application filed on 8 July 2015;

(f) an annotated copy of the amended application with commentary filed by Mr de Vries on 9 July 2015;

²Body Corporate 68792 & Ors v Memelink and Hamilton & Ors [2015] NZHC 854, 1159 and

(h) an eighth memorandum of Mr de Vries dated 13 July 2015; (i) submissions on behalf of the applicants dated 14 July 2015;

(n) an annotated copy of the interim administrator’s supplementary report with commentary filed by Mr de Vries on 16 July 2015;

In addition during the hearing Mr de Vries handed up a further written submission.

The application for an order under s 141 of the Unit Titles Act 2010 (the Act)

[4] The original application dated 12 March 2015 sought an interim order appointing Mr Greenwood on an interim basis. That application was made on a without notice basis although the application and supporting affidavits had been provided to the respondents on a Pickwick basis. In a Minute dated 13 March 2015 I directed that the application should be heard on 18 March 2015 as I was not satisfied that it should properly be dealt with in terms of r 7.46(3) without notice.

[5] At the hearing on 12 June 2015 I drew to the applicants’ attention the fact that the application did not seek final orders. Consequently the amended application dated 19 June 2015 was filed which seeks the following orders:

1.1 Appointing JOHN PAUL GREENWOOD of Wellington, solicitor, as the administrator of the First Applicant, BODY CORPORATE

1.2 Confirming that John Paul Greenwood, as administrator, may exercise all of the powers of Body Corporate 68792 and may operate the Body Corporate’s bank account number: 01-0542-0081634-00 (ANZ, Lower Hutt Branch).

1.3 An order declaring that John Paul Greenwood, as administrator, may, in writing, delegate any of the powers vested in him and revoke any delegation at any time.

1.4 An order that the above-named Respondents pay the costs and expenses of the administration.

1.5 For further orders and/or directions for the determination of this application on such notice and on such terms as this Court deems just.

[6] At the hearing on 17 July 2015 Mr Mahuta-Coyle sought an amendment to order 1.2 by the addition of the following words after the word “administrator”:

[7] Those words, which are contained in s 141(5), were incorporated in the Order made on 18 March 2015. I grant leave to amend proposed order 1.2 accordingly.

[8] As noted above the original application was made on an urgent basis. The circumstances then pertaining were explained in the first affidavits of Mr S Scheckter and Mr P Martens, the current chairman of BC68792. At that time the bank account of BC68792 had been frozen and it was alleged that Mr de Vries had threatened to have power to the units cut off. After explaining the history of BC68792 including the Public Works Act acquisition by Transit New Zealand relating to the Dowse Interchange, the re-assessment of ownership interests in 2011

and the various disputes among the members, including in particular the issue of unpaid levies, Mr Martens’ affidavit concluded in this way:

43. We now have our bank account frozen and we have received threats to cut off power, restrict access to telecommunications installations and trespass notices. We ask the Court to urgently appoint Mr Greenwood for these reasons.

Mr de Vries’ signing authority on the account and substitute another management committee member, Mr Scheckter. It remains to be seen whether the bank will recognise that, but in the meantime we have additional threats in respect of power, telecommunications, etc. We have resolved to make an application to this Court as the minute shows, and we respectfully ask the Court, both for my part and as chairman of the Body Corporate, to confirm the appointment of Mr Greenwood as an administrator on an urgent basis

[9] On his appointment Mr Greenwood lifted the freeze on the ANZ Bank account and assumed sole authority to sign cheques. His reports to the Court (discussed below) disclose the several steps which he has taken to regularise the management of BC68792.

[10] However, and perhaps unsurprisingly, the fundamental points of difference between the members, which go back several years, remain on foot. The depth of feeling concerning those grievances has been readily apparent to me in the course of the five hearings which have taken place between 18 March and 17 July 2015.

[11] In his recent second affidavit in support of the application Mr McKernan stated that the matters in dispute among the group of members remain unresolved. It is his belief that those matters will never be resolved and that the body corporate must remain in administration. Each of the other second applicants signed a memorandum in which they confirmed that they had read and agreed with the content of Mr McKernan’s affidavit and that they also sought the orders in the amended application.

[12] Mr Memelink and Mr de Vries continue to resist an order for the appointment of an administrator. They remain resolute in their conviction that at earlier meetings they constituted a majority of voting members which accounts for their description of the management committee (prior to the appointment of the interim administrator) as the “minority”. That conviction is reflected in the following extract from the Further Notice of Opposition dated 15 July 2015 signed by both Mr Memelink and Mr de Vries:

5.5 What then is an actually fair solution or outcome under the bias and unfair situation, considering the actions and constant mismanagement by the minority in the past; as even the sincere attempt of the First Respondents to bring a communal BC68792 solution from its EGM of October 2014, was and still is deliberately misinterpreted and commandeered?

5.6 Harry Memelink as head trustee of Link Trust No.1, First Respondent, has again provided a supporting affidavit to this Further Notice of Opposition and can overwhelmingly prove that he had the voting rights and poll vote since the day of the EGM held

Chairmanship of BC68792 granting him the ability to work at a communal solution for BC68792 but this was denied and blocked by the incorrect and illegal actions of the BC68792 Chairmanship and Management as well as Gerard and Fiona.

5.7 If the outcomes of the EGM of 21^stOctober 2014 had been upheld as per law, or the following AGM’s and EGM’s been held correctly as in accordance with the Act and Regulations, then as Chairman Mr Memelink would have had all issues resolved or well under way to communal resolution and the flooding disasters which have since occurred, with damage to the respondents units estimated at over

[13] They contend that, had the Body Corporate Rules been followed, there would not now be a state of dysfunctionality. Again quoting from the Further Notice of Opposition:

4.1 If the BC68792 Chairman, Management and Legal Counsel had correctly and legally followed the Unit Titles Act, Regulations and Body Corporate Rules, there would have been no suggestion of dysfunctionality leading to this application now before the Court to appoint an administrator.

4.2 The Respondents have consistently informed, notified and warned the BC68792 Chairman, Management and Legal Counsel of their non-adherence to and breaking of the Unit Titles Act, Regulations and Body Corporate Rules, but this has been to no avail.

4.3 The Respondents have taken significant steps to be the majority so as to ensure just rights would be upheld against the constant persecution and ostracizing by the Second Applicants, being the minority who treat the Respondents as impecunious members.

4.4 The minority Applicants have and still are prejudicing the majority Respondents and holding them to ransom, now using this court process.

4.5 With the ultimate ransom being the Second Applicants guise of using the BC68792 as First Applicant in this case; and the so called BC68792 lawyers to represent both Applicants.

[14] It was apparent from the Further Notice of Opposition that even Mr Memelink and Mr de Vries recognise that a state of dysfunctionality now prevails:

6. As can be seen the BC68792 has become more dysfunctional since the appointment of an interim administrator by this court, with an unfair continued bias maintained with silence from the Applicants; this not being the fault of Mr Greenwood, rather the result of continued commandeering by the minority, with the Applicants giving a biased focus on specific issues benefiting them but not responding when asked for relative information and the sorting out of the unresolved issues and mistakes made by them in the past.

[15] However they oppose the appointment of an administrator and instead request that Mr Greenwood be appointed to provide “advice and legal counsel to BC68792, as and when required”.

[16] They also place reliance on the following highlighted observation in Gibson v Body Corporate 384911 where an application for the appointment of an administrator was dismissed:³

[96] Perhaps more significantly, I find it difficult to see that the appointment of an administrator would put an end to that pursuit or even render it ultimately less successful. An administrator would be required to act within the four corners of the UTA and the Body Corporate rules. I do not for one minute think that he would be entitled to ignore the will of the majority. (emphasis added)

[17] Section 141(5) envisages that in exercising the powers of a body corporate and a committee the administrator would act to the exclusion of the body corporate and the body corporate committee. It is plain in my view that the Judge was not there suggesting that an administrator should act under the direction of the majority of members of a body corporate. However, even if the highlighted sentence bore the meaning which Mr Memelink and Mr de Vries advocate, that would not advance matters in the present case where each side claims to be the “majority”.

[18] As a consequence of the several detailed written reports which Mr Greenwood as interim administrator has provided, the Court also has the benefit of an assessment by a professional independent third party of some of the several points of difference between the members of BC68792.

50 As I see matters, the genesis of the Body Corporate’s problems started circa 2007 when Transit (now NZTA) separately negotiated with individual owners their compensation packages following acquisition of some of the Units within the Body Corporate development. Secondly, the significant outstanding levies due from Anthony (Unit 15) and Harry (principally Harry’s company Cudby

& Meade Limited which owns Unit 14) has polarised the owners and created an atmosphere of distrust. The owners who have continued

Body Corporate feel intimidated and bullied. Whilst it is appreciated the Body Corporate has not followed, in some cases, normal

on litigation or having to reassess the ownership interests is expenditure that was not appropriate. What is clear, is that it is intolerable that the paid up owners have been forced to pursue recovery of levies through the Tribunal and Court system. This in turn has resulted in the Body Corporate’s funds being depleted in order to defend and/or pursue the various Tribunal and Court actions which are identified in Appendix 2 of my Report of 21 April 2015. I accept that that there may well exist genuine historical concerns relating to decisions made or not made by the Body Corporate Committee.

[20] In that report Mr Greenwood expressed the opinion that there was no merit in the several invoices rendered to BC68792 by Mr Memelink and Mr de Vries, which invoices had been relied on by them as a set off against the levies which they have declined to pay.

[21] In his third report dated 11 June 2015 Mr Greenwood advised that no progress had been made in reaching settlements between the members and that Mr de Vries was in the process of launching new proceedings which would only serve to exacerbate the morass which had evolved. He stated that had no doubt that the owners were not able to function without administration.

12.1 I support a permanent appointment of an Administrator since the dysfunction continues and there remains little hope of amicable settlement. Further, it is very doubtful that either Anthony or Harry will pay any disputed levies up front to give them a lawful right to vote in terms of section 96(b) of the Unit Titles Act 2010 and thereby open up the possibility, however remote, of the Body Corporate going out of administration. I am mindful however of the considerable cost this imposes on those owners who continue to pay levies. I am in the Court’s hands as to whether I shall continue in the role. It is not a role I envy where getting any compromise or agreement to settle matters on a sensible basis with Anthony and Harry is proving elusive. Hard decisions need to be made to stop the Body Corporate from bleeding.

[23] A supplementary report to Mr Greenwood’s fourth report annexed a list of the then current proceedings filed as between BC68792 and the interests of Mr Memelink and Mr de Vries:⁴

CIV No.	Plaintiff	Defendant	Court
2014-086-161	BC68792	Cudby & Meade Ltd	Hutt Valley District Court
2013-485-906	BC68792	Cudby & Meade Ltd	High Court – Insolvency List
2013-485-5775/ 5389	BC810012	Harry Memelink	High Court – Insolvency List
2015-485-202	BC68792 & Ors	Memelink & de Vries	High Court Wellington
2014-096-683	BC68792	de Vries	District Court
2015-485-295	de Vries	BC68792	High Court Wellington

[24] Furthermore the second affidavit of Mr McKernan annexed a number of documents which appeared to be court proceedings instituted by Mr de Vries, in some instances with Mr Memelink, and which had been served on the persons named as defendants who included Mr McKernan. As Mr McKernan explained:

6. While it is difficult to keep track, as far as I can see Mr de Vries and Mr Memelink have either jointly or alone presented the following claims:

6.2 A Statement of Claim from Mr de Vries on or about 11 June, claiming $106,000.00 in damages (annexed and marked “B”, “C” and “D”). I have three copies naming different defendants, but I think there are more.

12 June, signed by Mr Memelink and Mr de Vries, seeking over $2 million. (The Statement of Claim and Notice of

6.4 A Statement of Claim and Notice of Proceeding (which have does have a stamp from the High Court indicating this one might at least have been presented to the Court) received last week, naming myself and others, including the Body Corporate’s solicitor, Mr Dewar, as defendants, claiming

[25] In view of the uncertainty as to the status of the various documents referred to by Mr McKernan, at the commencement of the hearing I questioned Mr de Vries and Mr Memelink about them. Mr de Vries advised that the documents comprising Exhibits B to H (inclusive) have been “put on hold” and are “in abeyance”.

[26] Consequently the position appears to be that, although the documents have not been issued in compliance with the High Court Rules and hence High Court proceedings are not yet on foot, these several documents in the form of court proceedings have not been abandoned and presently sit in what might be described as a dormant state. This environment of both actual and threatened court proceedings only serves to exacerbate the state of tension among the members of BC68792.

[27] My consideration of the voluminous documentation filed in this proceeding together with the insights which I have gained from hearing submissions from Mr Memelink and Mr de Vries on a number of occasions has led me to the clear view that the degree of dysfunctionality within BC68792 and the polarisation of the positions of the two sides is such that an order under s 141 is not only warranted but essential. My conclusion has been fortified by the information provided in Mr Greenwood’s reports. Consequently an order will be made appointing Mr Greenwood as administrator.

[28] Section 141(3) provides that such an appointment may be for an indefinite period or for a fixed period on such terms and conditions as to remuneration or otherwise as the Court thinks fit. Having discussed the duration of an appointment with Mr Greenwood, I consider that it is inappropriate to make the appointment for an indefinite period. However the six month period which he suggested is in my view too brief. I consider that the appointment should be to a fixed date with leave reserved to the applicants to apply to extend the period and with leave reserved to the administrator to apply generally. The administrator will continue to render accounts to BC68792 for his time spent in the conduct of the administration.

[29] The applicants sought as Order 1.4 a direction requiring the respondents to pay the costs and expenses of the administration. I do not consider that such a course is open to the Court given the provision in s 141(4) that the remuneration and expenses of the administrator are to be met out of the operating account. However Mr Mahuta-Coyle placed reliance on s 127 of the Act which states:

(1) This section applies if the body corporate does any repair, work, or act that it is required or authorised to do, by or under this Act, or by or under any other Act, and the repair, work, or act was rendered necessary by reason of any wilful or negligent act or omission on the part of, or any breach of the Act, the body corporate rules, or any regulations by, any unit owner or his or her tenant, lessee, licensee, or invitee.

(2) Any expense incurred by the body corporate in doing the repair, work, or act, together with any reasonable costs incurred in collecting the expense, is recoverable as a debt due to the body corporate (less any amount already paid) by the person who was the unit owner at the time the expense became payable or by the person who is the unit owner at the time proceedings are instituted.

[30] He notes that the body corporate passed a resolution to appoint Mr Greenwood and he submits that the need to make application to the Court was rendered necessary by wilful acts on the part of the respondents. Section 127 may well apply, for example, to the guttering repairs to Mr de Vries’ unit which were

[31] However I do not consider that the fact that a body corporate is one of the persons entitled to apply for an order under s 141 means that such an application is “an act that it is required or authorised to do” by or under the Act. Consequently I do not accept that in the circumstances where an application happens to be made by the body corporate that s 127 has the consequence that certain members can be required to meet the costs of an administrator appointed under s 141.

[32] The applicants also seek costs on the application. I apprehend that Mr Memelink and Mr de Vries will view an order for costs as a further instance of persecution of them. However the primary rule is that the costs of litigation follow the event. The respondents opposed the application and the applicants have prevailed. The applicants are therefore entitled to costs.

[33] Mr Mahuta-Coyle submitted that this is a case where an award of increased costs is justified, primarily because of the manner in which Mr Memelink and Mr de Vries have conducted their opposition to the application. In particular he referred to their failures to comply with timetable directions, to the volume of material filed and to the fact of Mr de Vries having issued “subpoenas” to various of the applicants with reference to the hearing on 17 July 2015.

While an unrepresented party should not be penalised on that account alone, if the result has been to throw an extra burden of legal cost upon the represented party, there is no reason why some recognition should not be given to that.

[35] Having carefully reflected on the conduct of the several hearings in this matter and Mr de Vries’ explanation for the subpoena incident, I conclude that Mr Memelink and Mr de Vries have come close to but not quite crossed the line which would justify an award of increased costs against them. However I take this opportunity to warn them that constant resort to repetitive litigation is a short-term strategy and that the almost invariable outcome of litigation which is unsuccessfully pursued is a costs award. They would be well-advised to note the observation of Fisher J above.

[36] Because I apprehend that agreement on costs is unlikely, Mr Mahuta-Coyle is

(a) Appointing John Paul Greenwood of Wellington, solicitor, as the administrator of Body Corporate 68792 until 30 June 2016.

(b) Confirming that John Paul Greenwood, as administrator, to the exclusion of the body corporate and the body corporate committee may exercise all of the powers of Body Corporate 68792 and may operate the Body Corporate’s bank account number:

(c) Declaring that John Paul Greenwood, as administrator, may, in writing, delegate any of the powers vested in him and revoke any delegation at any time.

(e) Leave is reserved to the applicants to apply by 31 May 2016 to extend the term of the appointment of the administrator beyond

(f) Leave is reserved to the administrator to apply to the Court for any directions which the administrator thinks are necessary or appropriate.

High Court of New Zealand Decisions

Body Corporate 68792 v Memelink [2015] NZHC 1731 (28 July 2015)