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High Court of New Zealand Decisions |
Last Updated: 2 August 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-004-000437 [2016] NZHC 1434
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BETWEEN
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B.E.M.A. PROPERTY INVESTMENTS
LIMITED Plaintiff
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AND
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BODY CORPORATE 366611
First Defendant
THETA MANAGEMENT LIMITED Second Defendant
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Hearing:
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13 and 14 June 2016
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Appearances:
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B P Rooney for Plaintiff
S C Price and R W Harris for Defendants
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Judgment:
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29 June 2016
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JUDGMENT OF WYLIE J
This judgment was delivered by Justice Wylie
On 29 June 2016 at 11.00am Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar
Date:..............................
Solicitors/counsel:
James Keat/B Rooney, Auckland
Minter Ellison Rudd Watts, Auckland
B.E.M.A. PROPERTY INVESTMENTS LTD v BODY CORPORATE 366611 [2016] NZHC 1434 [29 June
2016]
Introduction
[1] The plaintiff company (“BEMA”) owns a unit in
the Empire apartment complex in Whitaker Place, Auckland.
The first
defendant is the body corporate comprising the proprietors of all units in the
apartment complex. The body corporate
has appointed the second defendant, Theta
Management Ltd (“Theta”) as its building manager.
[2] The complex comprises over 300 units. It was purpose built, and it
has been run, as a student hostel.
[3] BEMA purchased its unit in 2006, through an investment scheme
operated by the Blue Chip New Zealand Group, which had purchased
119 units in
the complex. As part of the Blue Chip scheme, the unit purchased by BEMA had
been leased to a company which was part
of the Blue Chip Group – Auckland
Residential Tenancies Ltd. It paid a base rental for the unit and sublet it out
to students.
The lease was managed by another company within the Blue Chip
Group – Bribanc Property Group Ltd.
[4] The directors of and shareholders in BEMA – Berkie Kapa and
his partner, Aneta Heke – did not intend to live
in the unit. Rather it
was purchased as an investment. BEMA borrowed money to buy the unit. Mr Kapa
and Ms Heke intended to
use the rental income BEMA would receive from Auckland
Residential Tenancies to meet the mortgage repayments and other
outgoings.
[5] Initially all went well. Auckland Residential Tenancies
paid the rental received by it from tenants to Bribanc.
Bribanc deducted body
corporate fees and other outgoings, and paid the balance to BEMA on a monthly
basis. BEMA paid the mortgage
repayments direct to its mortgagee.
[6] Ultimately the Blue Chip Group collapsed. Rental payments to BEMA under the lease ceased from late 2007 and Auckland Residential Tenancies was placed into liquidation in February 2008.
[7] BEMA did not let out its unit again, or receive any income from it,
until January 2015. It claims that from May 2009 to
January 2015 it was locked
out of the apartment complex, and its unit, by the body corporate and Theta. It
seeks to recover the
rental it says it has lost.
The pleadings
[8] BEMA alleges that the body corporate and Theta controlled access to
its unit, and that by letter dated 11 May 2009, Theta,
on behalf of the body
corporate, advised that BEMA would be denied access, unless it agreed to terms
which, BEMA says, Theta and
the body corporate had no right to
impose.
[9] BEMA says that it did not agree to these terms and that, as a
result, from May
2009 until January 2015, it was denied access to its unit by the body
corporate and Theta. It says they refused to provide it with
electronic cards
to operate the lifts, physical keys to the stairwells, electronic cards to
operate the door to its unit, or physical
keys to the doors within its
unit.
[10] Three causes of action are alleged:
(a) breach of a natural right of access. BEMA says that, as the
registered proprietor, it had a natural right of access to
its unit, and that
the body corporate and Theta impeded it from exercising that right;
(b) trespass; and
(c) nuisance.
[11] Damages for loss of rent are sought in the sum of $89,026.96, being
rental BEMA says it would have received for the unit
from May 2009 to January
2015 – a total of 68 months. In addition, it seeks reimbursement of
$625.00, being an amount it says
it was overcharged to ultimately obtain access
cards. An additional claim for the costs involved in changing door locks was
abandoned
at trial.
[12] Quantum is not in issue. Liability is in dispute.
[13] There is a counterclaim. The body corporate and Theta seek to
recover from BEMA costs they say were incurred in collecting
levies owed by BEMA
in respect of its unit.
[14] The counterclaim is denied.
Relevant facts
[15] As noted above, the Blue Chip Group collapsed and Auckland
Residential
Tenancies Limited went into liquidation in February 2008.
[16] On 23 February 2008, John Chen, a director of Theta, sent unit
owners an email discussing the collapse of the Blue Chip Group.
The email noted
that, under the Auckland Residential Tenancies leases, units were zero rated for
GST purposes. It suggested that,
following the collapse of the Blue Chip Group
and termination of the Auckland Residential Tenancies leases, unit owners would
become
liable to pay GST to the Inland Revenue Department. The email advised
that Theta could provide a new deed of lease to unit owners.
It was claimed
that execution of this lease would avoid any GST liability falling on unit
owners. A copy of Theta’s proposed
lease was attached to the email. The
lease was for a term due to expire on 20 April 2016, with one right of renewal
for a further
term of 10 years. It required each unit owner to irrevocably
appoint Theta to be the unit owner’s proxy pursuant to the rules
of the
body corporate.
[17] Mr Kapa received another email from Mr Chen later on the same day. This second email was addressed to those unit owners who had not signed the Theta lease. It advised that Mr Chen had spoken to the liquidator of Auckland Residential Tenancies, and that the liquidator, in turn, had advised that he was not aware of the identity of those unit owners who had terminated their leases, because owners’ faxes had not been passed on to him. The email recorded that Theta had been asked to send all rental collected prior to termination direct to the liquidator and that funds sent to the liquidator would then be distributed to secured creditors in priority to unit owners. Mr Chen recorded that he had advised the liquidator that he had received notices of termination from those unit holders who had signed the Theta lease, and that the liquidator had confirmed that he would accept those terminations if copies
were forwarded to him. Mr Chen went on to strongly recommend that all unit
owners should immediately terminate their Auckland Residential
Tenancies’
leases, and send a copy of the termination letter to the liquidator. He went on
to renew his suggestion that all
unit owners should sign the Theta lease, so
that Theta could send rental received direct to owners without having to account
to the
liquidator.
[18] BEMA did not terminate its lease with Auckland Residential
Tenancies. Nor is there any evidence that the liquidator took
steps to disclaim
the lease.
[19] On 1 March 2008, Mr Chen sent an email to Ms Heke and Mr Kapa. He advised that Theta had received executed leases from 99 of the 119 “Blue Chip owners”. He advised that Theta would be paying the February 2008 rental direct to those owners on or about 10 March 2008. He recorded that, pursuant to advice Theta had received from its lawyer and accountant, rental otherwise payable to those
20 unit owners who had not signed Theta’s lease would be
paid direct to the liquidator of Auckland Residential
Tenancies. He asked Ms
Heke and Mr Kapa to sign the Theta lease as soon as possible.
[20] On 12 March 2008, Mr Chen wrote again to Ms Heke and Mr Kapa. He
advised that Theta needed to urgently establish a direct
contractual
relationship with BEMA, in order to avoid having to pay rental received in
respect of BEMA’s unit to the liquidator.
[21] Mr Kapa replied to Mr Chen on 25 March 2008. He apologised for his
delay, and raised various queries about the Theta lease.
He queried the term
and he asked about anticipated future rentals. He also noted that there was no
“get out clause”
which BEMA could use in the event that it wished to
terminate the lease with Theta.
[22] There was further correspondence between Mr Kapa and Mr Chen in
mid
April 2008. Mr Kapa was requesting various changes to the Theta
lease.
[23] On 16 April 2008, a Mr Chan responded direct to Mr Kapa. It seems
that Mr
Chan worked for Theta. He suggested that he and Mr Kapa should meet.
[24] Mr Kapa did not respond until 12 May 2008. He then advised that
travel to Auckland was an expensive option for him, and
that he was only
prepared to do so if the matters that he had raised in earlier emails were
addressed.
[25] Thereafter little seems to have happened. Mr Kapa gave evidence that he endeavoured to rent out or sell BEMA’s unit through various agents. Mr Kapa asserted that BEMA was unable to either rent or sell the unit because, he says, it could not get access to it. This is supported by contemporaneous correspondence. On 29 October 2008, Mr Kapa sent an email to “Empire Body Corporate”, asking if he could obtain a key for BEMA’s unit and a security key for the apartment complex. He recorded his understanding that there was a fee payable, and asked for advice on the costs involved. A person called “Kwan”, who it seems was the body corporate secretary, replied to Mr Kapa, advising that he had sent the request to Theta. Theta however did not contact Mr Kapa. Mr Kapa wrote to the body corporate again on 6
January 2009. Again he received a response from Kwan, saying that he had
forwarded the email to Theta. Once again, Theta did not
contact Mr Kapa or
respond to him.
[26] In April 2009, BEMA appointed City Sales Ltd as manager of its unit
so that it could be let out. Mr Kapa advised Theta of
this by letter dated 30
April 2009. He told Theta that City Sales wished to show prospective tenants
through the unit, and asked
when it could pick up swipe keys to access the unit.
Mr Kapa again recorded his understanding that a security deposit was payable
and
asked where that deposit was to be paid.
[27] Theta replied by letter dated 11 May 2009. The letter advised that since BEMA was appointing independent managers to manage its unit, the body corporate required it to abide by the body corporate rules and, in particular, rule 3.10(a).1 It stated that in order to obtain an access card, BEMA and its authorised representative
had to sign a security and access protocol agreement and an
undertaking and
1 The rule had been introduced into the body corporate rules as from April 2009. Inter alia it provided that the body corporate or its manager could require any unit owner to enter into a security and access protocol agreement and to pay a refundable security deposit to the manager, and, where the unit owner had appointed another person or entity to rent, manage or sell its unit, it could require the owner’s representative to give a warranty and undertaking to abide by all body corporate rules. This rule had been adopted by a majority only.
warranty, make payment of outstanding body corporate levies, and pay a
refundable security deposit of $5,000, a $500 utility
deposit and a
key deposit of $150. Attached to the email were the security and access
protocol agreement and the undertaking
and warranty required.
[28] Mr Kapa was not prepared to allow BEMA to enter into the security
and access protocol agreement or the undertaking and warranty.
Nor was he
prepared to pay Theta any money to get access to BEMA’s unit. He did not
however advise Theta of this. Indeed
he did not have any further correspondence
with Theta or the body corporate for some two and a half years until October
2011.
[29] While Mr Kapa was involved in these various discussions with Theta, other owners of units in the apartment complex, seeking to get access to their individual units, were taking legal action. A Mr Wu, who was the registered proprietor of one of the units in the apartment complex, had also refused to sign the security and access protocol agreement required by an earlier but similar version of rule 3.10. He brought proceedings in the District Court, on his own behalf and on behalf of various
other owners in the same position.2 BEMA was not however a
party to these
proceedings. Mr Wu and the other owners succeeded in the District Court.
They obtained an injunction directing the body corporate
to take all practicable
steps to provide them with access cards. The decision was appealed to this
Court by the body corporate.3 The appeal was allowed, but only to
give the body corporate a further opportunity to comply with the orders made in
the District Court.
Lang J stated that he expected that the body corporate
would require Theta to hand over access cards to Mr Wu and the other applicant
owners by 12 March 2008.
[30] There is nothing in the evidence to suggest that Mr Kapa was aware
of these proceedings or the resulting judgments at the
time.
[31] Mr Wu and the other owners also challenged rule 3.10, relied on by
the body corporate.
2 Mai v Body Corporate 366611 DC Auckland CIV-2008-004-14, 16 January 2008.
3 Body Corporate 366611 v Mai HC Auckland CIV-2008-404-809, 6 March 2008.
[32] On 30 November 2009, Lang J issued a decision4 holding
that the body corporate had acted in excess of its powers under the
Unit Titles Act 1972 in amending rule 3.10,
because the rule could be amended
only by a unanimous resolution of body corporate members, and not by a majority
resolution. Inter
alia, he commented as follows:5
The final matter to which I refer relates to the issue of access to units. As
I indicated at the beginning of this judgment, Mr Wu
and others have now been
prevented from obtaining access to their units for more than two years. The
effect of this judgment is that
the rules that the body corporate and Theta have
been relying on to justify their actions to date are invalid as a result of this
judgment.
There can be no justification for the body corporate and Theta denying
proprietors access to their units in the future. Counsel for
the body corporate
responsibly accepted during the hearing that this was the case. I would
therefore expect the body corporate and
Theta to cooperate immediately in
providing Mr Wu and others in his position with keys to their units.
[33] The body corporate decided to hold an extraordinary general
meeting (“EGM”) to discuss this decision
and its impact. Notice of
the meeting was sent out on 2 December 2009 to Mr Kapa. The agenda made it
clear why the meeting was
being called. Mr Kapa acknowledged that he received
the notice of meeting. As from that date Mr Kapa was, or should have been,
aware of the decision made by Lang J declaring that the rule relied on by the
body corporate in its May 2009 letter was invalid.
[34] The EGM was held on 10 December 2009. Mr Kapa did not
attend.
[35] On 10 February 2010, the body corporate sent a copy of the EGM minutes to Mr Kapa. Inter alia, the minutes referred to Lang J’s decision and briefly summarised the same. The minutes went on to record that Mr Chen explained to the meeting why, in his view, rule 3.10 or a similar rule was required. The minutes recorded that the body corporate was to consider whether to appeal Lang J’s decision. A resolution was passed authorising the body corporate to obtain legal advice in this regard. The minutes also recorded that a resolution was passed
authorising the body corporate committee to engage legal advisors to
draft new rules
4 Wu v Body Corporate 366611 [2009] NZHC 2153; (2009) 10 NZCPR 917 (HC).
5 At [52]-[53].
dealing with access to the apartment complex and related security issues.
It was proposed that this new rule would be put to a further
EGM.
[36] Mr Kapa accepted that he received these minutes but said that he
simply did not understand them. He gave evidence that they
“could be
written in alien” for all he knew.
[37] A further EGM was held on 18 January 2010. Mr Kapa was again given
notice of this meeting. He did not attend. Mr Chen
did attend. He held 262
proxies from various unit owners. Various resolutions were carried by a
majority including a resolution
approving a replacement rule for rule 3.10,
which would permit the body corporate to require unit owners to enter into a
security
and access protocol agreement, and provide for a refundable security
deposit of $5,650, in order to obtain access to the apartment
complex. Those
in attendance also carried a resolution empowering the body corporate to make
application to this Court pursuant
to s 42 of the Unit Titles Act 1972 for an
order that the resolutions be deemed to be passed unanimously, because they had
been supported
by 80 per cent of those entitled to vote, and obtaining a
unanimous resolution was impossible.
[38] There is no evidence that the minutes of this meeting were sent to
Mr Kapa. Nor is there any evidence as to whether application
was made under s 42
of the Unit Titles Act or as to the fate of any application made.
[39] It is, however, clear that BEMA did not take any advice in regard to
the May
2009 letter from Theta, or in regard to the matters disclosed in the notices
of EGM, and in such minutes of the EGMs as Mr Kapa received.
[40] Indeed Mr Kapa took no steps at all until October 2011. At this
point, he sent an email to Mr Chen. He recorded that he
and Mr Chen had
previously spoken about BEMA obtaining entry to its unit, but that “due to
unforeseen circumstances on my part,
there has been some delays”. Mr Kapa
advised that he would like to meet with Mr Chen to discuss matters.
[41] On 25 November 2011, Mr Kapa sent a further email to Mr Chen, asking
Mr
Chen to provide him with a copy of Theta’s standard lease. Mr Chen responded on
26 November 2011, enclosing a copy of the lease. He invited Mr Kapa to
contact him if he had any questions.
[42] Nothing happened thereafter until September 2013, when Mr Kapa was
in Auckland for work purposes. He arranged to meet Mr
Chen and to view
BEMA’s unit.
[43] Mr Chen and Mr Kapa met at the apartment complex on Wednesday
18
September 2013. This was the first and only time that Mr Kapa had ever been
to the unit. Mr Chen had an assistant with him, who
opened the unit. Mr Chen
had a copy of the Theta lease with him, which had “sign here”
stickers on it. Mr Kapa thought
that Mr Chen expected him to sign the lease
that day. Instead, Mr Kapa told Mr Chen that he wanted to get his own tenants
into
the unit. He said that, when he raised this, Mr Chen became evasive and
that he changed the subject. He said that Mr Chen started
to give him reasons
why he should not endeavour to manage the unit himself, or get somebody else to
manage it on behalf of BEMA.
Mr Kapa said that he could see that he was getting
nowhere. He said that he told Mr Chen that he would get back to him, and
left.
[44] Mr Kapa did not get back to Mr Chen. Rather, on 27 May 2014, Kwan
from the body corporate sent an email to Mr Kapa asking
whether he wanted to
rent out BEMA’s unit, and advising him that if so, he would pass on Mr
Kapa’s contact details to
Theta. He also advised that Theta rented out
over 85 per cent of the units in the complex, and that he thought that it would
be
able to rent out BEMA’s unit relatively quickly.
[45] Mr Kapa did not respond to this email.
[46] On 7 July 2014, Kwan sent a further email to Mr Kapa. He stated that Mr Chen and another person from Theta had been endeavouring to call Mr Kapa, that they had left several messages, but that Mr Kapa had not returned their calls. The email advised that Mr Chen and Theta were trying to help BEMA by renting out its unit. It went on to advise that BEMA was liable for outstanding body corporate levies in excess of $7,800, and that rental received could be used to pay off those levies. Kwan advised that unless Mr Kapa replied by Friday 11 July 2014, the body
corporate would start debt collection proceedings against BEMA, and that all
costs incurred would be charged back to BEMA.
[47] Mr Kapa sent an email to Mr Chen on 11 July 2014, asking Mr Chen to
forward the necessary paperwork “regarding the
rental of [BEMA’s]
unit ...”. Mr Kapa apologised and said that things had been very busy and
that he had been moving
house.
[48] Mr Chen replied on 18 July 2014 enclosing the requisite documents,
and asking that BEMA sign the Theta lease.
[49] BEMA did not sign the lease and, on 28 July 2014, Kwan sent an email
to Mr Kapa recording advice he had received from Theta
that the lease agreement
had not been signed, and requesting Mr Kapa’s urgent advice.
[50] BEMA was not paying body corporate levies, and on 11 September 2014 the body corporate’s solicitors wrote to it recording that the total amount then outstanding was $8,113.17, and making demand for that sum, together with recovery costs of $1,175. BEMA did not respond, and on 24 September 2014 the body corporate served a statutory demand on it. Again, BEMA took no steps, and on 17
November 2014, the body corporate filed a statement of claim seeking to put
BEMA
into liquidation.
[51] BEMA then consulted its accountant. The accountant referred Mr Kapa to an agent who had been able to let out units in the complex for other owners who had not signed the Theta lease. It was Mr Kapa’s evidence that it was at this point that he found out that, subsequent to Lang J’s decision declaring rule 3.10 invalid, other
disgruntled owners had successfully sued the body corporate and Theta.6
Mr Kapa
gave evidence that he decided to pay the outstanding levies to resolve the liquidation application, and to then pursue the body corporate and Theta for rental he says
BEMA would have earned had it not been locked out of its unit. To this
end, BEMA
NZLR 215.
paid $6,000 on account of the outstanding levies on 24 November 2014 and the
balance on 17 December 2014.
[52] Once the full amount stated in the statutory demand had been paid, the body corporate withdrew the liquidation application, but sought to require BEMA to pay the costs incurred. Agreement was reached in part, and a joint memorandum was filed with the Court recording that the parties agreed that the costs on the liquidation application should be determined by the Court. Both parties filed memoranda, and on 27 January 2015, Venning J ordered BEMA to pay to the body corporate its costs on the liquidation application on a 2B basis, together with disbursements, for all steps taken in relation to the issue of the statutory demand and the liquidation proceedings. Venning J made no order for costs incurred by the body corporate over and above the scale costs. He reserved leave to the body corporate to pursue an application for the balance of the costs incurred in collecting the levies before the
appropriate decision maker – the Tenancy
Tribunal.7
[53] BEMA commenced the present proceedings in the District Court in
March
2015. The body corporate and Theta sought to transfer the proceedings to
this Court. They also filed a counterclaim for the balance
of the costs
they said they had incurred in recovering the unpaid levies.
[54] There is no evidence as to when BEMA ultimately obtained access
cards to the apartment complex and/or to its unit. Eventually
BEMA did however
manage to rent its unit. It received rental from tenants as from 12 January
2015.
[55] BEMA says that it was locked out of its unit for 68 months, from May 2009 to January 2015. It has taken the date of Mr Chen’s May 2009 letter as the beginning of the lock out period for the purposes of its claim. As already noted, the parties have agreed that the net monthly rental BEMA would have received for the unit, had it been leased, is $1,309.22. BEMA is therefore claiming $89,026.96, being the total rental it says it would have earned over the 68 month period it says it
was locked out.
7 Body Corporate 366611 v BEMA Property Investments Ltd [2015] NZHC 31.
Analysis
[56] Mr Rooney, appearing for BEMA, submitted that this case is
indistinguishable from the position which applied in the
damages proceedings
involving Mr Wu.8
[57] In that case, Mr Wu, for himself, and on behalf of a number of other
owners in the apartment complex, brought proceedings
against the body corporate
and Theta arguing they had been locked out of their units, and deprived of the
rental income which should
have been generated from them. An earlier management
company had resigned, because it had been unable to obtain continuous insurance
cover for the apartment complex. It went into liquidation owing substantial
arrears of rent to unit owners, and it cancelled all
access cards giving unit
owners entry to common areas in the complex. As a result Mr Wu and the other
owners could not access their
units. The body corporate had appointed a new
management company (Theta) and unit owners had been asked to lease their units
to Theta.
The terms were somewhat less favourable than the previous terms
offered by the earlier management company, and Mr Wu and a number
of other unit
owners refused to enter into the new leases. They wanted to let their
apartments themselves. The body corporate,
in reliance on the then applicable
rule 3.10, informed Mr Wu and the other owners that they would not give them new
access cards
unless they paid a security deposit and signed a protocol
purporting to give the manager power to make further rules governing the
use of
common areas.
[58] As I have noted above at [29], Mr Wu took action in the District Court. It ordered the body corporate to provide access cards to Mr Wu and the other owners.9
The body corporate and management company did not do so. Rather the body corporate purported to amend the relevant rule, rule 3.10, in an attempt to validate its demands. It also appealed to the High Court. The High Court ordered the body corporate to obtain access cards from Theta.10 Subsequently Lang J held that rule
3.10 was invalid.11 Mr Wu and the other owners
were then given access cards to the
8 Wu v Body Corporate 366611 (HC, CA and SC), above n 6.
9 Mai v Body Corporate 366611, above n 2.
10 Body Corporate 366611 v Mai, above n 3.
11 Wu v Body Corporate 366611, above n 4.
common areas in the apartment complex. This meant that they could access
their individual units.
[59] Mr Wu and the other owners then claimed damages for the period during
which they had been unable to access their units.
(a) The High Court held that Theta’s actions, in refusing to issue access cards unless the body corporate’s demands under r 3.10 were met, were an unreasonable interference with Mr Wu and the other owners’ use and enjoyment of their units, and that there was a nuisance.12 The Court did not find it necessary to consider whether there had been a trespass. Damages were awarded for Mr Wu and the other owners’
loss of net income up until December 2009, when access cards were
made available following Lang J’s decision of 30 November
2009.
(b) The body corporate appealed. The Court of Appeal upheld Asher J’s conclusions that the body corporate and Theta committed a private nuisance actionable by Mr Wu and the other owners, but on a narrower basis. The Court was more sympathetic to rule 3.10, but nevertheless held that it was not reasonably necessary to restrict Mr Wu or the other owners’ access to their units, as there was no suggestion that they raised security or insurance concerns. It remitted
the issue of damages back to the High Court for
reconsideration.13
(c) Mr Wu and the other owners obtained leave to appeal, and the Supreme Court unanimously held that the body corporate and Theta had no power to require unit owners to enter into the protocol, or pay the security deposit, as a condition of being provided with access keys to the building and their own units.14 It considered that neither rule
3.10, nor any provision in the Unit Titles Act 1972, authorised the
imposition of the security deposit which the body corporate had
insisted on. It considered the right to use common property
as a
12 Wu v Body Corporate 366611 (HC), above n 6.
13 Body Corporate 366611 v Wu (CA), above n 6.
14 Wu v Body Corporate 366611 (SC), above n 6.
thoroughfare for access to individual units as so fundamental to the Unit
Titles Act that it went without saying, and that no distinction
could be drawn
between owners and occupiers. The majority – Elias CJ, McGrath,
Glazebrook and Tipping JJ - held that
the body corporate and Theta had
unlawfully excluded Mr Wu and the other owners from access to the common
property. The majority
considered that Mr Wu and the other owners were in joint
possession of the common property once the liquidator had disclaimed the
leases
of their units. They therefore had an action in trespass.
[60] I do not accept Mr Rooney’s submission that the present case is
indistinguishable from Mr Wu’s situation. There
are significant factual
differences:
(a) Mr Wu and the other owners he represented do not seem to have been
part of the Blue Chip Group investment scheme. Rather
their claims arose out of
events which, at least in part, pre-date Theta’s involvement.
(b) The leases between Mr Wu and the earlier management company had
been disclaimed by the earlier management company’s
liquidators as being
too onerous. Mr Kapa confirmed under cross examination that BEMA never had a
contract with the earlier management
company and there is no evidence that
BEMA terminated its lease with Auckland Residential Tenancies, or that the
liquidator
disclaimed it.
(c) The access cards held by Mr Wu and the other owners had been
cancelled when the earlier management company went
into
liquidation. There is no evidence that any access cards BEMA may have had were
cancelled. Indeed there is no evidence that
at relevant times BEMA had any
access cards either to the common property or to its unit.
As a result, a number of findings of fact made by the Courts in the Wu proceedings, on which the judgments turned, are not supported by similar evidence in the present proceedings.
[61] Mr Spooner invited me to treat the facts found in Wu as facts
in the present case. I decline to do so. Evidence of a finding of fact in a
civil proceeding is not admissible in another
civil proceeding to prove the
existence of a fact that was in issue in the proceedings in which the judgment
was given.15 I can only decide the present case on the evidence
adduced before me. The only evidence adduced came from Mr Kapa. Mr Price for
the defendants did not call any witnesses.
[62] I accept that the Supreme Court in Wu held that the body
corporate and Theta unlawfully excluded Mr Wu and the other owners from
access to the common property, and
that they did so by seeking to require Mr
Wu and the other owners to enter into the security and access protocol agreement
and to
pay the security deposit. Because Mr Wu and the other owners were in
joint possession of the common property, the liquidators of
the prior management
company having disclaimed their leases, they could successfully maintain an
action in trespass.
[63] The question is whether the evidence which has been put before me
supports
BEMA’s claim in trespass, or one of its other causes of
action.
[64] BEMA relies on three causes of action.
[65] First, it asserts breach of a natural right to access its units. This phrase has been taken by BEMA from the Supreme Court’s judgment in Wu. The Court did say that the right to use common property in a unit title development, as a thoroughfare for access to individual units, is a right so basic and fundamental to the Unit Titles Act that it goes without saying,16 but I do not apprehend that the Court intended to create a new cause of action, not otherwise known at law. Rather it held that trespass was the most appropriate cause of action on the facts before it. There is no
independent tort of breach of a natural right of access. I do not therefore
consider
the first cause of action pleaded by BEMA any
further.
16 Wu v Body Corporate 366611 (SC), above n 6, at [98], [128] and [130].
[66] Trespass is also pleaded. Trespass is an unjustified direct
interference with the land in possession of another.17
[67] For BEMA to succeed on this cause of action, it was required to show that it had possession of its unit. When BEMA purchased the unit, it was subject to the lease to Auckland Residential Tenancies. A copy of that lease was not produced in evidence. It seems that it has been lost. Mr Kapa did produce a letter from Blue Chip’s solicitors, recording that the unit was subject to the lease. During the term of the lease, Auckland Residential Tenancies had possession and the right to sue for trespass committed in respect of the land. BEMA, being out of possession, could not sue, unless the damage was permanent physical damage to its reversionary interest in
the land.18
[68] The letter from the solicitors is dated 11 May 2007. It records that the lease had a four year term, but it does not state when that term commenced. It was Mr Kapa’s evidence that BEMA purchased the unit subject to the lease in 2006. At the latest, it would follow that the lease would have terminated in 2010, assuming it was signed in 2006. It may have terminated earlier, if the lease was put in place prior to
2006.
[69] The letter from the solicitors also states that Auckland Residential
Tenancies had the option to acquire the unit on giving
notice. There is no
evidence suggesting that it took advantage of that option. Further, according
to the letter, BEMA had the right
to renew the lease for one further period of
two years, with a further renewal thereafter for a further two years, making a
total
term of eight years if both renewals were exercised. There is no evidence
suggesting that the lease was renewed.
[70] There is no evidence suggesting that the lease provided that it came
to an end automatically if the lessee became
insolvent.
17 At [115] citing Bill Atkin “Trespassing on Land” in Stephen Todd (ed) The Law of Torts in New Zealand (6th ed, Brookers, Wellington, 2013) 467 at 468; and see Bill Atkin “Trespassing on Land” in Stephen Todd (ed) The Law of Torts in New Zealand (7th ed, Thomson Reuters, Wellington, 2016) 418 at [9.2.01].
18 Bill Atkin (7th ed), above n 17, at [9.2.04(1)].
[71] Mr Kapa did not accept Theta’s advice to terminate the lease with Auckland Residential Tenancies after that company went into liquidation. He confirmed in his evidence that he took no legal action against Auckland Residential Tenancies, and that he did not issue it with any letters, demands, notices or the like. It was Mr Kapa’s evidence that he “didn’t know where to go”, and that as a result he took no action. Notice would have been a pre-requisite to any termination for breach after 1
January 2008, pursuant to s 243 of the Property Law Act 2007. Further, when
I questioned him about it, Mr Kapa was unable to advise
whether or not the
liquidator had abandoned the lease or taken any steps to disclaim it. Nor is
there any evidence that BEMA terminated
the lease by re-entering the unit. The
first and only time Mr Kapa went into the unit was when he met Mr Chen there on
18 September
2013. Mr Kapa did not suggest in evidence that he took or tried to
take possession on that day.
[72] The evidence is unsatisfactory. The onus of proof was on BEMA. It
had to show that it had possession of its unit at the
relevant time – May
2009. It has failed to do so. It follows that the cause of action based in
trespass must fail.
[73] BEMA raised nuisance in its statement of claim. Although nuisance
was the cause of action favoured by both the High Court
and the Court of Appeal
in Wu, it did not find favour with the Supreme Court. The Supreme Court
did however make obiter comment on it. It observed that the tort
of nuisance
protects two types of right from unreasonable
interference:19
(a) the use or enjoyment of a plaintiff’s land; and
(b) rights over or in connection with a plaintiff’s land.
[74] The Supreme Court noted that, for an action in private nuisance to be sustained on the basis of interference with the use or enjoyment of land, “some emanation of the effect of the nuisance from the defendant’s land to the plaintiff’s land is usually required”.20 The Court observed that it was hard to see how the re-
programming of electronic locks, and the refusal to issue keys, emanated
from the
19 Wu v Body Corporate 366611 (SC), above n 6, at [120].
20 At [122].
common (or other) property, and it doubted that Mr Wu could sustain an action
for private nuisance, because of lack of emanation.21
[75] The reasoning must apply in the present case. The body corporate
and Theta refused BEMA access unless their demands were
met. Nothing has
emanated from their property.
[76] The Supreme Court also noted that an action for private nuisance can be brought when there is interference with an easement, a profit à prendre, or natural rights attached to land. It considered that there is an implied and fundamental right to access one’s unit under the Unit Titles Act, and that it is arguable that that right can be seen as a natural right that is an incident of ownership of a unit under the Act. It considered that, if there is a right to bring an action in private nuisance, then Mr Wu would have succeeded, because there had been a substantial interference with Mr
Wu’s natural right of access to his individual unit.22
This required no emanation.
The Court did not however come to a definitive conclusion on the
issue of nuisance.23
[77] There are difficulties with nuisance from BEMA’s perspective. First, a private nuisance is a wrong against land and the action can be brought only by a person with sufficient interest in the land affected.24 For the reasons I have set out above at [67] to [72], BEMA has failed to prove that it was in possession of the unit. It cannot show that it had sufficient interest to bring a cause of action based in nuisance. Secondly, on the evidence BEMA’s access rights were not affected. There
was no evidence that BEMA ever had any access cards permitting it to go into the common areas, or cards or keys permitting it to access its unit. Nor was there any evidence suggesting that any access cards that BEMA may have had were re- programmed. On the evidence, it seems that BEMA never had any access cards at all. There was no abrogation of BEMA’s right of access to common areas and thus
to its unit. Rather the body corporate and Theta refused to issue BEMA
with access
21 At [125].
22 At [131].
23 At [132].
24 Bill Atkin “Nuisance” in Stephen Todd (ed) The Law of Torts in New Zealand (7th ed, Thomson Reuters, Wellington, 2016) 525 at [10.1] and [10.2.05]; And see Hunter v Canary Wharf Ltd [1997] AC 655 (HL).
cards unless their requirements were met. Thirdly, the refusal to issue access cards or keys except in accordance with the body corporate’s request was communicated on 11 May 2009. BEMA did not challenge this refusal or query it. By notice of meeting sent out on 2 December 2009, Mr Kapa was told that the rule on which the body corporate had purported to rely on in imposing its requirements was invalid. In order to constitute an actionable nuisance any interference with a plaintiff’s rights
must be both substantial and unreasonable.25 The body
corporate’s actions were
unreasonable and unlawful, but I do not consider that, on the facts, there
was any substantial interference with BEMA’s right
of access. The
interference lasted for a little over six months and BEMA did not challenge or
dispute it.
[78] Accordingly I conclude that the cause of action based in nuisance
advanced by BEMA was not made out.
[79] For the sake of completeness I record that, in my view, there were difficulties with causation from BEMA’s perspective. It was Mr Kapa’s evidence that rental flows to BEMA ceased in late 2007. There was nothing in the evidence to suggest that BEMA had access to its units from that date through until 11 May 2009. Rather it seems that it did not have access to it. It is difficult to see that Theta’s letter of 11
May 2009 caused BEMA to be locked out of its unit. Further, the causal
effect of Theta’s actions on 11 May 2009 came to an
end on 30 November
2009, when Lang J issued his decision declaring rule 3.10 invalid. It was that
rule which was relied on by the
body corporate and Theta in seeking to impose
the requirements contained in the 11 May 2009 letter. Mr Kapa was advised of
Lang
J’s decision when he received copies of the agenda for the 10
December 2009 EGM notifying him that rule 3.10 had been declared
invalid. Any
interference caused by the letter of 11 May 2009 was then at an end. It is not
the body corporate’s, or Theta’s,
fault that Mr Kapa and BEMA did
not understand the minutes, or that they did not take advice in relation to
them. It would follow
that the maximum loss that BEMA could recover would be
for the period 9 May 2009 to 2 December 2009.
[80] For the reasons I have set out, I have concluded that BEMA cannot
succeed in its claim against the body corporate and Theta.
25 At [10.2.03].
The counterclaim
[81] The body corporate asserts that BEMA failed to pay various levies raised by the body corporate in 2013 and 2014. It pleads that it incurred costs of $15,441.63 in attempting to recover the unpaid levies. This sum is broken down as follows -
$1,940.33 in issuing letters of demand and the statutory demand, and $13,301.30 in respect of the liquidation proceedings commenced in this Court. It accepts that BEMA has paid $4,422.51 on account of costs pursuant to the order made by Venning J in January 2015.26 It seeks to recover the balance pursuant to ss 124 and
127 of the Unit Titles Act 2010.
[82] Relevantly those sections provide as follows:
124 Recovery of levy
...
(2) The amount of any unpaid levy, together with any reasonable costs
incurred in collecting the levy, is recoverable as a
debt due to the body
corporate by the person who was the unit owner at the time the levy became
payable or by the person who is the
unit owner at the time the proceedings are
instituted.
127 Recovery of money expended where person at fault
...
(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.
[83] I am not persuaded that it is appropriate to make an order
in the body corporate’s favour for payment of
the balance of the costs
the body corporate says it incurred.
[84] The body corporate has previously failed to recover the balance of the costs it now claims – see above at [52]. In declining to award indemnity costs, Venning J
observed that the Unit Titles Act provides that disputes over, inter
alia, unpaid levies
26 Body Corporate 366611 v BEMA Property Investments Ltd, above n 7.
fall within the jurisdiction of the Tenancy Tribunal.27 He
reserved leave to the body corporate to pursue an application for the balance of
the costs it alleges is owing to it before the
Tenancy Tribunal, as the
appropriate decision maker.
[85] The effect of s 171(1A) of the Unit Titles Act is that a unit title
dispute includes a claim for unpaid levies. I
agree with Venning J
that a claim for “reasonable costs” incurred in collecting unpaid
levies under s 124 falls
within the jurisdiction of the Tenancy
Tribunal.
[86] As between the body corporate and BEMA the matter is res judicata.
It is an abuse of process to try and reopen it. There
is an option available
to the body corporate – namely to apply to the Tenancy Tribunal. It has
not done so. Rather it has
sought to short circuit Venning J’s direction
by bringing its counterclaim. In my view this course is inappropriate. The
body corporate should comply with the relevant provisions contained in the
Unit Titles Act, and make application pursuant to the
leave reserved by Venning
J.
[87] I do not express any view as to the reasonableness of the costs
which the body corporate seeks to recover. That is a matter
for the Tenancy
Tribunal.
[88] It follows that the body corporate’s counterclaim must
fail.
Result
[89] Both the plaintiff’s claim and the body corporate’s
counterclaim fail, for the reasons I have set out.
[90] Neither party has succeeded in its action and it is my preliminary
view that costs should lie where they fall. If the parties
disagree, then I
make the following directions:
(a) BEMA is to file any application it wishes to make for costs within 10
working days of the date of the release of this
judgment;
27 Unit Titles Act 2010, s 171.
(b) the body corporate and Theta are to file any memorandum
in response, or themselves seeking costs, within a further
10 working day
period;
(c) BEMA is to file a memorandum in reply in relation to any
application for costs that the body corporate and/or Theta may
make, within a
further 10 working day period.
[91] I will then deal with the issue of costs on the papers, unless I require
the assistance of
counsel.
Wylie J
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