B.E.M.A. Property Investments Ltd v Body Corporate 366611
| Jurisdiction | New Zealand |
| Judge | Wylie J |
| Judgment Date | 29 June 2016 |
| Neutral Citation | [2016] NZHC 1434 |
| Docket Number | CIV-2015-004-000437 |
| Court | High Court |
| Date | 29 June 2016 |
[2016] NZHC 1434
CIV-2015-004-000437
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
Claim for damages for loss of rent of $89,026, by the plaintiff unit holder, on the basis of breach by the defendants of a natural right of access, trespass and nuisance — counter-claim by the defendants to recover costs they say were incurred in collecting body corportate levies owed by the plaintiff - the plaintiff owned a unit in an apartment complex – the first defendant was the body corporate — the second defendant was building manager — the complex operated as a student hostel — the plaintiff had purchased its unit through Blue Chip New Zealand Group which then leased it to a related company which sublet it out to students — when Blue Chip collapsed in 2007, the plaintiff stopped receiving rental payments — the plaintiff did not let out its unit again, or receive any income from it and claimed it was locked out of the apartment complex, and its unit, by the defendants because it refused to agree to certain terms – application of SC decision involving other unit owners Wu v Body Corporate 366611 — whether the plaintiff had a natural right of access to its unit — whether the plaintiff had causes of action in trespass and nuisance.
B P Rooney for Plaintiff
S C Price and R W Harris for Defendants
JUDGMENT OF Wylie J
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.
The complex comprises over 300 units. It was purpose built, and it has been run, as a student hostel.
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.
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.
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.
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.
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.
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.
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.
Three causes of action are alleged:
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(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;
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(b) trespass; and
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(c) nuisance.
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.
Quantum is not in issue. Liability is in dispute.
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.
The counterclaim is denied.
As noted above, the Blue Chip Group collapsed and Auckland Residential Tenancies Limited went into liquidation in February 2008.
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.
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.
BEMA did not terminate its lease with Auckland Residential Tenancies. Nor is there any evidence that the liquidator took steps to disclaim the lease.
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.
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.
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.
There was further correspondence between Mr Kapa and Mr Chen in mid April 2008. Mr Kapa was requesting various changes to the Theta lease.
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.
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.
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...
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