John Gilbert v Body Corporate 162791

JurisdictionNew Zealand
CourtSupreme Court
JudgeWilliam Young J,Elias CJ,O'Regan J,William Young
Judgment Date02 June 2016
Neutral Citation[2016] NZSC 61
Docket NumberSC 59/2015
Date02 June 2016

[2016] NZSC 61

IN THE SUPREME COURT OF NEW ZEALAND

Court:

Elias CJ, William Young, Glazebrook and O'Regan JJ

SC 59/2015

Between
John Gilbert
First Appellant
QSM Trustees Limited (In Receivership and in Liquidation)
Second Appellant
and
Body Corporate 162791
Respondent
Counsel:

D J Chisholm QC and S M Jass for First Appellant

J F Anderson and T J G Allan for Respondent

Appeal against a Court of Appeal decision which held the appellant receiver was liable for body corporate levies from 14 days after his appointment as receiver, pursuant to s32(5) (liabilities of receiver) and s32(6) Receiverships Act 1993 (liability did not commence until 14 days after a receiver was appointed) — the appellant was the receiver of the second appellant which owned units in the Mid — City complex on Queen Street, Auckland — the second appellant was liable for body corporate fees under s80(1)(f) Unit Titles Act 2010 (responsibilities of owners of principal units — must pay all rates, taxes, charges, body corporate levies…) — whether the levies were due under an agreement — if yes, whether the agreement related to the use, possession or occupation by the second appellant of the property in receivership.

The issues were: whether the levies were due under an agreement; and if yes, whether the agreement related to the use, possession or occupation by QSMTL of the property in receivership.

Held: Section 32(5) RA imposed personal liability on receivers for rent and other payments accruing due under a pre-receivership agreement in respect of property in receivership that the company continued to use. Section 32(5) RA applied only to certain types of obligations. The first of these was rent, and the second was a payment that was “becoming due under an agreement”. A payment that became due under an agreement was an obligation arising by virtue of the agreement. Its source was contractual. There was no particular significance in the fact that some of the provisions of s32 RA referred to a “contract”, whereas s32(5) referred to an “agreement”.

The agreement relied on by the body corporate, which was said to arise on acquisition of a unit, did not add anything to the legal framework created by the UTA. The obligations imposed on unit owners by the UTA applied and were binding on unit owners whether they agreed to them or not. The Rules did not constitute an agreement. There was no indication in the UTA that the statutory obligation under s124 UTA to pay a levy should be read as supplementing and not excluding a concurrent contractual liability to do so. As the statutory obligation was self-standing, there was no need to resort to the rules of the body corporate.

The obligation of QSMTL to pay levies imposed by the body corporate was not a liability for a “payment becoming due under an agreement” and therefore fell outside the scope of s32(5) RA.

The reference to “reasonable costs incurred in collecting a levy” in s124(2) UTA meant that actual costs of collection, providing they were reasonable, were recoverable and that encompassed solicitor and own client costs.

William Young and Glazebrook J held there were two bases upon which it might be concluded that the levies are due under an agreement. The first was that both before and after receivership, QSMTL was the beneficiary of services provided by the body corporate, including: insurance, fire alarm monitoring, obtaining annual building warrants of fitness, repairs and maintenance, building cleaning, air conditioning maintenance, rubbish removal, security, water rates and electricity. It might be thought that the receipt and utilisation of those services implies an agreement to meet the costs of their provision. The second was that the relationship between unit owners and a body corporate and thus their rights and duties were affected not only by the UTA but also by the operational rules which the body corporate adopted. The statutory obligation to pay levies may be read as supplementing, and not excluding, a concurrent contractual liability to do so.

As the Court was equally divided, the judgment of the CA was affirmed.

JUDGMENT OF THE COURT
  • A The judgment of the Court of Appeal is affirmed.

  • B There is no order for costs.

REASONS

William Young and Glazebrook JJ [1]

Elias CJ and O'Regan J [60]

WILLIAM YOUNG AND Glazebrook JJ

(Given by William Young J)

Table of Contents
Para No
Introduction [1]
The commercial background to the dispute [3]
The general position as to the priority of body corporate fees [12]
The basis of the claim against Mr Gilbert [23]
Are the levies due under an agreement? [27]
The bases upon which it might be said that the levies are due under an agreement [27]
The approach of the High Court and Court of Appeal to the agreement issue [34]
Our approach [39]
Does the agreement relate to the use, possession, or occupation by QSMTL of property in receivership? [45]
Relief under s 32(7) [48]
Solicitor and own client costs [55]
An equally divided Court [59]
Introduction
1

QSM Trustees Ltd (in liquidation and receivership) (QSMTL) owns five units (units 3A–3E) in a building at 239 Queen Street, Auckland, known as the Mid City complex. Mr John Gilbert is its receiver. Mr Gilbert and QSMTL are the appellants. Under s 80(1)(f) of the Unit Titles Act 2010 (the 2010 Act) unit owners are required to pay body corporate levies as fixed by the body corporate. By reason of s 32(5) of the Receiverships Act 1993, receivers are personally liable: 1

for rent and any other payments becoming due under an agreement subsisting at the date of the appointment of the receiver relating to the use, possession, or occupation by the grantor of property in receivership.

Under s 32(6) such liability does not commence until 14 days after a receiver is appointed.

2

The respondent is the body corporate of the Mid City complex. It claims that Mr Gilbert is personally liable for body corporate levies from 9 August 2013, being 14 days after his appointment as receiver. A summary judgment application was rejected by Associate Judge Abbott in the High Court. 2 His judgment was reversed by the Court of Appeal which: 3

  • (a) held that Mr Gilbert was liable for the levies and interest;

  • (b) rejected an application by him for relief against that liability;

  • (c) entered summary judgment accordingly; and

  • (d) ordered him to pay the body corporate “its reasonable solicitor/client” costs.

Mr Gilbert and QSMTL appeal against the Court of Appeal decision.

The commercial background to the dispute
3

The Mid City complex was built in the 1980s. In 1994 it was redeveloped by its then owner, Mission Developments (Auckland) Ltd (Mission), into its current unit title structure and now consists of:

  • (a) a basement;

  • (b) a mid level of two floors divided into individually owned units which are used as retail premises; and

  • (c) an upper level spread over three floors, in which the five units owned by QSMTL are located.

4

A cinema complex was located on the upper level. This venture was unsuccessful and stopped operating in 1998. More to the present point, there is a land covenant providing for redevelopment of the upper level and the airspace above. This is registered on the supplementary record sheet comprising part of the unit plan. Mission was both grantor and, in its capacity as the then owner of the five upper level units, also the grantee. In litigation in 2006, Venning J held that the then owner of units 3A–3E could enforce the land covenant against the other unit holders and the body corporate. 4 In the event, however, the redevelopment proposed did not proceed.

5

On 9 September 2010 Messrs Alan Copeman and Kerry Finnigan settled a trust known as the 239 Queen Street Trust. The original trustee was 239 Queen Street Trustees Ltd (239QSTL). The trust was interested in acquiring the five units on the upper level of the complex with a view to redevelopment. There were associated negotiations between the trust and the body corporate. These negotiations resulted in a letter of 24 November 2010 from the solicitors for the trust to the body corporate which the latter executed. This letter recorded a bargain as to the proposed redevelopment under which, inter alia, the trust was to replace the roof of the building and make a small payment towards the levy arrears and the body corporate was to write-off the balance of the levy arrears once the roof was completed. Its liabilities in relation to historic body corporate levies thus having been conditionally addressed, 239QSTL took a transfer of the five units. The trust has subsequently redeveloped, to some extent, the upper level of the building and, by early 2012, a market (known as Queen Street Market) consisting of 25–30 retailers was operating there.

6

There is no direct evidence from Mr Gilbert in the present proceedings as to the legal basis upon which the market operates. It appears, however, from what we were told by counsel (based on affidavits filed in relation to stay proceedings and not strictly before us) that under a lease of the five units of 1 March 2012 between 239QSTL 5 and a company associated with Mr Finnigan, the lessee (that is Mr Finnigan's company which operates the market) is not required to pay rent to 239QSTL (now, we deduce QSMTL) 6 unless the rental it derives exceeds $1,100,000 per annum. We will come back to this evidence later. It was not before the Court of Appeal when it heard the appeal from the Associate Judge's decision.

7

There has been substantial disagreement between the body corporate and the trust as to the implementation of the 24 November 2010 agreement and more generally as to the trust's rights under the redevelopment covenant. In the result, relations between the trust and the body corporate broke down. The roof of the

building has not been replaced and 239QSTL did not...

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