Tremont Holdings Ltd v Body Corporate 401803

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeHarrison J
Judgment Date21 Jul 2015
Neutral Citation[2015] NZCA 314
Docket NumberCA289/2014

[2015] NZCA 314

IN THE COURT OF APPEAL OF NEW ZEALAND

Court:

Harrison, Keane and Wylie JJ

CA289/2014

BETWEEN
Tremont Holdings Ltd
Appellant
and
Body Corporate 401803
Respondent
Counsel:

T J Rainey and J P Wood for Appellant

S C Price and I Rosic for Respondent

Appeal against the High Court's (HC) dismissal of an application for a declaration that the respondent could not impose a levy on the appellant to fund legal proceedings the respondent was taking against the appellant — the appellant was the owner of units in a unit title development and the holder of guarantees given by the respondent Body Corporate (BC) — the BC passed a resolution to take legal steps to terminate the guarantee agreements — at a subsequent meeting it determined to raise a levy to pay for the legal costs and to establish a contingency fund to fund the proceeding — the appellant said it was unfair for it to have to pay to fund the action against itself when it had to pay for its defence anyway — the HC said there was no unfairness under s210 Unit Titles Act 2010 (General relief for minority where resolution required) where there was a duality of roles (owner of unit and defendant holder of guarantees) — appellant said that delegations given to the BC Committee permitting engagement of counsel and commencing proceedings were invalid as they did not specifically refer to each duty or power delegated — whether there was a duality of roles — whether it would be unfair to levy the appellant in respect of the legal fees — whether reg 22 Unit Titles Regulations 2011 (Delegation to body corporate committee) could be construed as requiring a specific description of each duty or power delegated — if so, whether a failure to do so invalidated the delegation.

Held: While any person who voted against a resolution was entitled to apply for relief, s210 UTA required that the effect of the resolution was unjust or inequitable for the minority. The minority here were the nine owners of the 40 units who voted against the resolutions. Tremont owned 20 of those units and constituted 50 per cent of the minority. Only three of its units were the subject of the litigation. Tremont had not satisfied the statutory threshold of showing that the effect of the resolutions would be materially unjust or inequitable for all nine opponents constituting “the minority”.

Secondly, Tremont sought relief from the effect of the AGM resolution, not the EGM resolutions. That resolution was to take whatever steps were necessary to set aside the agreements. Tremont did not argue that it was unjust or inequitable for the BC to resolve to challenge the agreements. Once the decision to take legal action was accepted as lawful, any consequential decision to levy owners for the legal costs could not constitute material unfairness or injustice to any of them.

Tremont had not questioned the BC's decisions to establish a contingency fund to provide for unbudgeted expenditure, to finance the litigation or to exercise its lawful power to impose levies on owners of principal units to establish and maintain the fund. Once those steps were taken, the BC was bound to impose levies “in proportion to each unit owner's utility interest”. In the light of this statutory obligation, Tremont could not claim that the effect of resolutions to impose levies in accordance with its statutory duty was unfair to the minority.

Thirdly, the statutory test under the UTA was plain, requiring a high threshold of material unfairness or injustice to be met by the minority. The HC was correct to find that it was not unjust or inequitable to require Tremont to contribute to the BC's legal costs. The HC rightly emphasised the distinction in or duality of Tremont's roles, or more particularly, its interests. One of Tremont's interests was as owner and lessor of three units, entitled to the contractual benefit of rent payments made by the BC in accordance with a guarantee. The other interest was its membership of the BC, subject to a duty to meet a levy lawfully imposed upon it to contribute its proportionate share of the legal costs to be incurred in pursuing a legal challenge. The fact that the resolutions had the effect of creating a conflict for Tremont's own financial interests, solely because the ownership and contractual structure which it had chosen to adopt, could not render the resolutions themselves unfair.

The starting point for any consideration of an application for relief under s210 UTA was that, given all members of the BC stood to benefit from a successful action to set aside the guarantees and thus relieve them of an obligation to make future rental payments, each should meet its rateable share of the costs incurred for that purpose ( BC No 85403 v Magill). Excusing one or more from compliance with a levy would unfairly disadvantage the majority of owners who otherwise funded the proceeding.

The fact that Tremont might have to incur its own legal expenses in defending a different interest from other members of the BC did not make the effect of the resolution materially unfair for either Tremont or the minority. If Tremont had successfully defended the BC's substantive application, it could have applied to the Court to exercise its discretion and make an award of costs to rectify any unfairness.

The HC was correct that s108 UTA was designed to enable delegation of all powers and duties to the BC Committee, save a few exceptions. The powers to litigate, pursue ultra vires issues, try to renegotiate or set aside obligations seen as unreasonable, were delegable. Further, reg 22 could not be construed as requiring a specific description of each duty or power delegated: that would mean that a delegation could never be general, notwithstanding the express language of s108(1).

In any event, even if there was a deficiency, it did not render the written notice of delegation or the delegation itself invalid. There was nothing in the relevant provisions to support the proposition that Parliament intended that any technical non-compliance invalidated a notice.

Finally, Tremont's failure to plead the invalidity of the EGM resolutions, where issues of the consequences of non-compliance with the BC's statutory and regulatory duties would be properly identified, was fatal to its argument. This ground of challenge failed.

Tremont's application was limited to relief against AGM resolutions on the ground that their effect was unjust or inequitable for the minority. It was now too late for Tremont to raise, for the first time on appeal, an argument that the later resolutions were invalid because they were not passed by a special resolution.

Appeal dismissed.

JUDGMENT OF THE COURT
  • A The application to pursue the additional ground of appeal is declined.

  • B The appeal is dismissed.

  • B The appellant must pay the respondent costs for a standard appeal on a band A basis together with usual disbursements.

REASONS OF THE COURT

(Given by Harrison J)

Introduction
1

Body Corporate 401803 is the body corporate of the Tremont complex, a multi-unit title residential development in St Lukes, Auckland. Tremont Holdings Ltd (Tremont) owns 20 of the 106 units within the complex.

2

In 2008 the Body Corporate entered into three agreements with the complex developer, Vermillion Wagener Ltd, whereby it guaranteed the payment obligations of third parties associated with Vermillion under leases of three units within the complex. Shortly afterwards, Vermillion transferred ownership of the three units to Tremont. Vermillion and Tremont are related parties; Geoffrey Hodgkinson is the sole director of and principal shareholder in both companies. So, in the result, Tremont as owner and lessor is the beneficiary of the Body Corporate's guarantees.

3

At an extraordinary general meeting held on 7 August 2013 the Body Corporate resolved to take whatever steps were necessary to terminate the three agreements and to instruct a law firm to represent it. The Body Corporate's legal advice was that the guarantees were ultra vires or outside its legal powers.

4

At a subsequent extraordinary general meeting on 26 November 2013 the Body Corporate passed ordinary resolutions: (a) removing Mr Hodgkinson and another from its committee; (b) reducing the number of members of the committee to seven and the quorum to four; (c) voting seven members on to a new committee; (d) ratifying the committee's earlier decision to terminate the agreements; and (e) raising a special levy of $165,000 plus GST to fund the necessary legal action.

5

Tremont voted against all resolutions at both general meetings. So did eight other unit owners. The owners who voted against the resolutions owned 40 units between them.

6

As the other party to the impugned agreements, Tremont would be the primary defendant in any proceedings brought by the Body Corporate. The company objected to being levied for around 18 per cent of the Body Corporate's prospective legal costs in pursuing a claim against it. 1

7

Tremont applied to the High Court under's 210 of the Unit Titles Act 2010 (the UTA 2010) for declarations that (a) only those unit owners who voted in favour of the August 2013 resolutions could be levied by the Body Corporate for the costs of the legal and other work outlined to challenge the agreements and that unit owners who voted against such resolutions were to be exempt from the levies or costs; and (b) any contingency fund to which all owners contributed was not to be used to fund the legal and other costs arising from the August 2013 resolutions. As Fogarty J observed, Tremont's application was commenced between the August 2013 and November 2013 resolutions, anticipating the latter step and the levying of members for the costs of the ensuing legal proceedings. 2

8

The pleaded grounds for relief were prolix. However, the essence of the application was that it would be unjust and inequitable for the Body Corporate to levy Tremont for...

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2 cases
  • Body Corporate 199380 v Cook and Another
    • New Zealand
    • High Court
    • 30 May 2018
    ...Bradbury v Westpac Banking Corporation [2009] NZCA 234 , [2009] 3 NZLR 400 at [24] and [73]. 39 Tremont Holdings v Body Corporate 401803 [2015] NZCA 314 . 40 Body Corporate v Bhana Investments Ltd [2015] NZHC 2787 41 Bradbury v Westpac Banking Corporation [2009] NZCA 234 , [2009] 3 NZLR 400......
  • Vermillion Wagener Ltd, Tremont Holdings Ltd, Sage Property Management Ltd and Tmt Amenities Ltd v Body Corporate 401803
    • New Zealand
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    • 21 July 2015
    ...401803 [2014] NZHC 988, (2014) 15 NZCPR 525. In a judgment delivered concurrently today ( Tremont Holdings Ltd v Body Corporate 401803 [2015] NZCA 314), this Court has dismissed an appeal by Tremont. 3 At [115] and [122]. 4 At [104] and [105]. 5 At [32]. 6 At [29]. 7 At [58]; Krukziener v H......

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