Singh v Boutique Body Corporates Ltd

JurisdictionNew Zealand
JudgeR M Bell
Judgment Date19 July 2019
Neutral Citation[2019] NZHC 1707
CourtHigh Court
Docket NumberCIV-2019-404-317
Date19 July 2019
Between
Sheryl Sitara Singh
Plaintiff
and
Boutique Body Corporates Limited
First Defendant
Katherine Speck
Second Defendant
Ryan Antony Speck
Third Defendant
Jennifer Grace Radonich
Fourth Defendant
Faqiang Liang
Fifth Defendant
Samir Chawla
Sixth Defendant
Gurabachan Singh and Mark Ijesseldjik
Seventh Defendants

[2019] NZHC 1707

Judge R M Bell

CIV-2019-404-317

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA

TĀMAKI MAKAURAU ROHE

Civil Procedure, Property — strike out application — claim of negligence against the defendants — leaky building — remedial scheme under Unit Titles Act 2010 — settlement left shortfall — extra fees levied to unit owners — whether body corporate secretaries and committee members owed duties of care to individual owners

Appearances:

S P Bryers for the Plaintiff

V Wethey and S McDonald for the First Defendant

TJG Allan and K Windmeyer for the Second to Seventh Defendants

JUDGMENT OF ASSOCIATE JUDGE R M Bell

This judgment was delivered by me on 19 July 2019 at 3.30 pm pursuant to Rule 11.5 of the High Court Rules.

Deputy Registrar

1

This case concerns a dispute within a body corporate under the Unit Titles Act 2010. Ms Singh, the plaintiff, is one of the owners. Boutique Body Corporates Ltd, the first defendant, provided secretarial, administrative and management services to the body corporate. The second to seventh defendants were members of the body corporate committee. The origins of the dispute are weathertightness defects in a residential unit complex in Flat Bush, South Auckland. The body corporate sued those it alleged were responsible for the defects and settled, but the amount received on settlement was not enough to cover all the repair costs. Under a scheme under s 74 of the Unit Titles Act, the body corporate levied the owners to meet the shortfall. Ms Singh unsuccessfully contested the levies. 1 In this proceeding she holds the defendants responsible for the extra levies she has been required to pay.

2

In response the defendants have applied to strike out. Boutique Body Corporates Ltd applies to strike out all the allegations against it in Ms Singh's amended statement of claim of 1 February 2019. The committee members apply for partial strike-out of the allegations against them: paragraphs [33](b), [33](c) and [34], which allege some breaches of duty by the committee members and damage suffered Ms Singh.

3

I find for the defendants mainly because Ms Singh's pleading does not show a tenable case that the defendants assumed responsibility to her personally for their work for the body corporate under the s 74 scheme. The second defendants also alleged abuse of process, but that argument did not take them all the way they needed.

Background
4

The unit title development is “Richmond Terraces” in Flat Bush, South Auckland. The body corporate is BC 207650. In her judgment on an earlier hearing of the strike out application, Courtney J gave the background: 2

[9] The weathertightness problems in Richmond Terraces were discovered in 2009. At that stage, the cost of remediation was estimated at approximately $5 million. Work began in 2015 and the Body Corporate applied for approval of a scheme under s 74 of the Unit Titles Act 2010 under CIV 2015-404-003079

(the 3079 proceedings). Gilbert J approved the scheme in August 2016. 3

[10] The Body Corporate used settlement monies obtained in other litigation to fund the repairs and then, as costs rose, began to levy owners for the balance. It became obvious that the repairs would cost much more than had been obtained in the settlement of the proceedings. The total cost of repairs is now expected to exceed $13 million.

[11] In June 2015, the Body Corporate Committee appointed to oversee the repair work purported to impose a first levy. It did not have the power to do so and that levy was ultra vires. But the Body Corporate approved the levy at an Extraordinary General Meeting on 25 October 2016. In November 2016, Ms Singh and the owners of another unit (the Simpsons) brought proceedings under CIV-2016-404-2950 (the 2950 proceeding) seeking declarations that the levy was invalid because it was ultra vires and because they had been excluded from voting for failure to pay previous levies.

[12] The substantive proceeding was resolved without a hearing but the parties could not agree on costs. Lang J fixed costs in favour of Ms Singh and the Simpsons but reduced them by 50 per cent. This was on the basis that, although their claims stood a good chance of success, the Court still may not have granted substantive relief because the resolution confirming the levy had passed by a wide margin. The outcome would have been the same even if Ms Singh and the Simpsons had been entitled to vote against it. 4

[13] On 5 December 2016, the Body Corporate held another Extraordinary General Meeting at which Ms Singh and the Simpsons voted. The imposition of levies was again approved. In the 3079 proceeding Ms Singh and the Simpsons applied for orders that the levies were ultra vires, seeking declarations of invalidity in relation to levies imposed at the Extraordinary General Meetings on 25 October and 5 December 2016. They argued that the remedial works being undertaken went beyond the scope of the s 74 Scheme. They also made assertions that the Committee had failed in its responsibilities to undertake the repair work in a cost-effective and economic manner.

[14] Lang J held that the levies had been properly imposed and dismissed the application. 5 He found it unnecessary to reach a conclusion on the allegations that the Committee had failed to control the cost of the repairs, but did comment that he could not see “what motive the Committee would have had to spend the unit owners' money in a profligate manner” given that they were all unit owners themselves. He also noted that: 6

Clause 14.1 of the scheme leaves open the prospect that members of the Committee may be liable to unit owners for wilful misconduct or gross negligence. The manner in which the Committee has carried out its task may therefore yet need to be tested in another forum.

[15] Lang J imposed indemnity costs on the applicants. 7 Ms Singh and the Simpsons appealed the costs award but the appeal was withdrawn following a settlement with the Body Corporate.

[16] The Body Corporate imposed a further levy on 24 May 2017. In June 2017, it began proceedings against Ms Singh in the District Court (CIV-2017-404-1132) (the District Court proceeding), seeking summary judgment in respect of Ms Singh's unpaid levies, which, by then, totalled $166,573.27. Ms Singh filed a statement of defence and counterclaim. She asserted that the costs of remediation on which the levies were based were caused by inexperience and errors on the part of the construction company engaged to do the work, and that the costs had been approved by voting at meetings rather than by individual owners. She claimed that in those circumstances she was not liable for the levies. On the basis of the same assertions, she counterclaimed for unspecified “damages (including exemplary) for abuse of powers and not exercising powers in accordance with the law and causing unnecessary embarrassment and strain on the defendant”.

[17] In addition to the counterclaim, Ms Singh filed an application seeking to join as third parties, BBCL and those members of the Body Corporate Committee who are named as second to seventh defendants in the present proceeding. That application was still extant by the time the summary judgment came to be dealt with.

[19] Judge G M Harrison granted the summary judgment application. 8 Commenting on Ms Singh's allegations, he said: 9

The essence of the case for the defendants was that the remediation costs determined by the second and third levies were excessive and should not be paid by them until they were satisfied that all costs had been properly incurred. That approach has been rejected the High Court in the past, see in particular Wheeldon v Body Corporate 342525 [2015] NZHC 884.

What effectively the defendants are attempting to do is have a second attempt at challenging the validity of the levies, when the High Court has already held that the second levy was imposed validly, and there is no challenge to the third levy.

That can only mean that there is now no defence to the claims by the body corporate.

[19] In relation to the application to join the third parties, he said that: 10

Those proceedings are not sufficient to decline to grant summary judgment in favour of the body corporate. If indeed those proceedings are intended seriously, they can proceed independently of the necessity for the defendants to pay their respective shares of the levies.

[20] In relation to the counterclaim, the Judge noted that a counterclaim is not a defence to a summary judgment application and, in any event: 11

The allegations in the counterclaims essentially repeat issues raised before Lang J and relate to the scope and amounts of costs increases … All of these matters were dealt with by Lang J and the attempt of the defendants to raise the same issues again by way of their counterclaim may amount to an abuse of the process of the court. I make no specific finding in that regard. It is clear, however, that the counterclaim does not challenge directly the validity of the two levies in question and consequently does not provide a basis for declining summary judgment.

[21] Ms Singh has neither pursued the counterclaim and application to join third parties to the District Court proceedings, nor abandoned them. She indicated in submissions that she had not pursued the counterclaim because she perceived that Judge Harrison would rule against her. I infer that she does not intend to take steps to advance either the counterclaim or the third-party application in the District Court.

[22] Ms Singh filed an appeal against the summary...

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