Published tribunal order
Tenancy Tribunal case 9045064 — Property damage in Onehunga, Auckland
Decided 24 Jun 2024 · Published 24 Jun 2024 · Application 9045064
Landlord favoured
- Property damage
Order
Brendan Thomas Mulligan must pay Body Corporate 386900 $19,991.38 immediately, calculated as follows: Descriptions Amount payable s126 levy struck on 21 September 2022 for deck repairs s121 levy (unpaid balance) struck on 21 September 2022 for 1 Aug 2022 to 31 July 2023 period $1,493.43 $379.50
Costs: BC manager debt collection charges $540.50 Costs: Solicitor-client costs $16,145.54 Costs: Legal - hearing appearance (2 hours) $575.00 Interest to 24 June 2024$357.41 Filing Fee$500.00
Total payable by Respondent to Applicant $19,991.38
Reasons
- Both parties attended the rehearing as directed by the District Court. Counsel Mr Conal MacFadyen represented the body corporate. Mr Mulligan attended in person.
- Adjudicator Brennan has earlier made an order on 18 October 2023 in respect of the body corporate’s claim for recovery of unpaid levies, interest, costs and the filing fee from the unit owner.
- Mr Mulligan appealed the decision of the Tribunal to the District Court who subsequently directed a rehearing of the body corporate’s claim before me this morning.
Does the Unit Owner owe the levies claimed?
- A unit owner must pay all body corporate levies and outgoings payable for the unit. See sections 80(1)(f) and 121(1) Unit Titles Act 2010.
- The body corporate has determined the levies payable and unit owner's share has been calculated according to their utility interest.
- The body corporate has fixed the due date for the levies to be paid, and the unit owner has not paid the levies by that date. See section 124(1) Unit Titles Act 2010. The body corporate has proved the amount claimed for the unpaid levies struck at the annual general meeting on 21 September 2022 for the 1 August 2022 to 31 July 2023 period.
- At the annual general meeting on 21 September 2022, the body corporate also resolved payment of contractor’s quotes for the amount of $12,767.82 for deck repairs which costs are to be funded by utilising $5,000 of surplus contingency funds for units A-E and the raising of special levy of $7,767.82 with a due date of 15 October 2022. Specifically, the body corporate also instructed its manager Strata Title Administration Limited to raise a special levy for units A-E for deck repairs with a levy due date of 15 October 2022.
- Mr Mulligan, as unit owner 5A, says that the owner of unit 5E should be solely responsible for paying for the deck repairs because anchoring bolts had improperly penetrated unit 5E’s decking membrane which cause the leak that was subsequently repaired by the body corporate in the adoption of the contractor’s quotes. Mr Mulligan argued that the body corporate’s decision to levy the owners of units A-E collectively (under section 126 UTA) is “unconstitutional” and improper.
- Mr Mulligan states that under section 80(1)(g) UTA, the owner of unit 5E is obliged to repair and maintain the unit and keep it in good order to ensure that no damage or harm, whether physical, economic, or otherwise, is, or has the potential to be, caused to the common property, any building element, any infrastructure, or any other unit in the building. Mr Mulligan also submitted that the use of the sinking/contingency fund for deck repairs is improper.
- However, the body corporate has resolved at the 21 September 2022 AGM that all owners of units A-E are liable to share the deck repair costs.
- In Wheeldon v Body Corporate 324525 [2015] NZHC 884, Muir J said about decisions made in a general meeting about repair plans thus: The Body Corporate was, in my view, entitled to accept that advice and develop its scope of works accordingly. It was entitled to do so despite the existence of contrary views. It is not for the Court to substitute its own view on the merits of one repair plan over another or to examine, in the words of Jaine J, “whether the minority view on the merits of the proposal should be upheld with the result that the wishes of the majority could not be given effect to”.
- In Body Corporate 34525 v Stent [2017] NZHC 2857, Associate Judge Bell held that, so long as jurisdictional requirements were met, alleged negligence as to the merits of decisions of a body corporate was not justiciable. In Stent the body corporate sued for unpaid levies and the defaulting owners resisted alleging equitable set-off for negligent decision-making (as well as other matters).
- In Singh v Boutique Body Corporates [2019] NZHC 1707, AJ Bell at the High Court reiterated at [42] as follows: Given the strong policy of not interfering with the exercise of voting powers so long as jurisdiction and eligibility requirements are met and the case is not within s 210 (on minority relief), there is no basis for holding that one owner owes a duty of care to other owners when voting in a general meeting. The consequence is that the owners generally must take the consequences of decisions in general meeting for better or worse. If the body corporate makes a botch of matters, the owners may be worse off and may face increased levies to put matters right, but they will not have recourse against the body corporate or each other. So, in this case Ms Singh can have no claim against the body corporate or her fellow owners for their decisions in general meeting, including any major decisions under cl 3.4 of the scheme. That includes decisions to raise scheme levies.
- The Court of Appeal confirmed in Tremont Holdings Limited v Body Corporate 401803 [2015] NZCA 314, that the threshold for establishing that any resolution is unjust or inequitable for the minority is a high threshold. The courts have consistently emphasised the weight that should be given to decisions made by body corporates and confirmed that it is only in limited circumstances the majority decision will be interfered with.
- One of few remedies available to Mr Mulligan is under section 210 UTA whereby on the resolution approving the deck repair levy on units A-E, Mr Mulligan, being a person who voted against the resolution may apply to the appropriate decision- maker for relief on the grounds that the effect of the resolution would be unjust or inequitable for the minority.
- An application for relief under subsection (1) of section 210 however must be made within 28 days of the passing of the resolution on 21 September 2022. There is no such application for minority relief before me and under the “pay now, argue later” regime of the UTA, I am without jurisdiction to consider Mr Mulligan’s dispute on his liability to pay for his apportioned costs on deck repairs duly passed by the body corporate at its annual general meeting on 21 September 2022.
- I adopt the observations of adjudicator Brennan that in this instance, the special levy was proposed and resolved at the AGM of 21 September 2022 where Mr Mulligan attended that meeting, as did the other eight owners, or their legal representatives. Adjudicator Brennan noted that the impacted building has five owners, including the respondent here. The respondent was unable to advise if any of the other four owners in that building had similar concerns and/or have also refused to pay the special levy applied against the five of them. There was no evidence to suggest this to be the case.
- The passing of such levies does not require a unanimous vote. Given his view that the levy is unfair, it is unfortunate Mr Mulligan has not exercised his right to seek minority relief and within time under section 210 UTA.
- For the above reasons, I find Mr Mulligan is liable to pay the levy imposed on him for deck repairs as claimed by the body corporate.
Is the Unit owner liable for interest?
- If a unit owner fails to pay levies by the due date, interest accrues on the unpaid balance. A body corporate may charge interest up to 10% per annum. See section 128 Unit Titles Act 2010.
- The body corporate has resolved to charge interest at 10% per annum on unpaid levies. The Body Corporate has proved the amount of interest owing from the due date to the hearing date.
Is the Unit owner liable for costs?
- Pursuant to sections 124 and 126 UTA, and as resolved at meetings of the Body Corporate, the Body Corporate is entitled to recover any reasonable costs incurred by it in collecting unpaid levies as a debt due by the owner to the Body Corporate.
- In accordance with the judgments (of the District Court and Court of Appeal respectively) in Body Corporate 162791 v Cheah DC Auckland, CIV2014-004- 0120, 24 June 2014 and Body Corporate 162791 v Gilbert [2015] NZCA 185, the Tribunal must order that the reasonable costs incurred by the Body Corporate in recovering the levies, objectively assessed, be paid by a defaulting unit owner.
- More recently, the District Court in Body Corporate 85928 v Sherry [2022] NZDC 11535, Body Corporate 45131 v 88 Chi Limited [2023] NZDC 9036 and Body Corporate 346799 v Gueirard & Vu [2023] NZDC 19645 endorsed the body corporate’s recovery of full solicitor/client costs under section 124 UTA.
- As the unit owner failed to pay the outstanding levies at the time they fell due, the outstanding levies together with interest and collection costs are recoverable as a debt due to the body corporate.
- Following the judgments of the District Court and Court of Appeal set out above, the Tribunal must order that the reasonable costs incurred by the body corporate in recovering the levies be paid by a defaulting unit owner.
- It is reasonable to expect full and timely compliance by all unit owners on the levies payable when they fall due otherwise a burden is carried disproportionately by those who have paid the levies on time.
- In Gilbert v Body Corporate 162791 [2016] NZSC 61, the Supreme Court affirmed the judgment of the Court of Appeal and held at [57] that section 124 is of considerable relevance in that “it indicates that those who default in the payment of levies are responsible for the costs of collection. The alternative would be to impose some or all of those costs on the other unit owners.”
- The Court of Appeal judgment in Gilbert emphasised at [78] that “section 124(2) of the Unit Titles Act provides that the amount of any unpaid levy, together with any reasonable costs incurred in collecting that levy, is recoverable as a debt due to the body corporate. The use of the words “reasonable costs” does not compel the conclusion that solicitor/client costs cannot be recovered. Rather it compels the conclusion that it is only reasonable solicitor/client costs, objectively assessed, that can be recovered.”
- In York Trustees Limited v Body Corporate Number 166208 [2017] NZDC 7961 the District Court, dealing with a cross-appeal on costs from the Tenancy Tribunal, quashed the Tribunal decision awarding only a contribution of 60 percent of the total legal costs claimed by the body corporate. DCJ Sharp held that the Tribunal misdirected itself as to the legal position in respect of reasonable solicitor/client costs and the Tribunal should have determined that the body corporate was entitled to its actual reasonable costs (on a solicitor/client basis) of $32,563.05. Notably at [22], Judge Sharp stressed that the Court of Appeal judgment in Gilbert is binding on the Tribunal (and on the District Court) in that “there is no discretion” available to the Tribunal to award anything less than the full reasonable legal costs charged by the solicitor to its client, the body corporate, when it comes to the concept of “reasonable costs incurred in collecting that levy” under section 124 UTA.
- Having been satisfied that the costs charged by counsel for the body corporate and the body corporate manager are reasonable and actually incurred in collecting the unpaid levy, I do not have any discretion to waive any of those costs in favour of defaulting unit owner no matter how high they appear in relation to the unpaid levies in question.
- In the upshot, section 124 UTA prescribes a statutory debt in favour of the body corporate once levies are properly raised and payable; equally, legal and collection costs and interest become a statutory debt which accords no discretion on the Tribunal to waive or discount, despite the Tribunal exercising a substantial merits and justice jurisdiction pursuant to section 85 of the Residential Tenancies Act 1986 (‘RTA’).
- On the contrary, under section 85 RTA, the Tribunal is mandated to determine each dispute according to the general principles of the law relating to the matter, including those principles of law set out above.
- Having perused the body corporate counsel’s timesheets and body corporate manager’s invoices, I am satisfied that the collection and solicitor-client costs ordered above are reasonable. They were incurred in respect of the entire proceedings including the costs incurred to respond to the appeal to the District Court and this rehearing; all of the legal costs claimed constituted expenses incurred in pursuing the claim for recovery of unpaid levies under sections 121, 124 and 126 UTA.
- It is unfortunate that the costs that followed the non-payment of the levy have greatly inflated the total owed. Mr Mulligan’s description of the legal costs, when viewed in the context of the principal levies owing, as “farcical” cannot influence the Tribunal on its duty to follow legal authorities set by the higher courts on an award of solicitor-client costs in favour of the body corporate.
- Because the body corporate has succeeded with the claim I have reimbursed the filing fee. Section 176(1) Unit Titles Act 2010 and section 102(4) Residential Tenancies Act 1986.