CY Kennedy & Anor v Body Corporate 82981 - [2024] NZCA 250
Date of Judgment
20 June 2024
Decision
CY Kennedy & Anor v Body Corporate 82981 (PDF 268 KB)
Summary
This appeal involved two joint owners of units in a body corporate building alleging that two resolutions and a deed of the Body Corporate indemnifying past, present and future committee chairpersons and members, including the second and third respondents, were ultra vires the Body Corporate’s powers as they were not “anchored” to a duty in the Unit Titles Act. One of the key drivers behind the indemnification was that there had been high levels of tension, including litigation, between members of the Body Corporate. The appellants sought minority relief under s 210 of the Act. They also alleged the High Court Judge, Grice J, erred in finding that their claim for minority relief was time barred and in excluding two affidavits as inadmissible.
Did the Judge err in finding the affidavits were inadmissible? Held: No
Grice J excluded an affidavit filed by a Mr Phillips (another owner) on the basis it was filed by him and not the appellants, and an affidavit filed by Mr Kennedy as it was filed after the hearing without leave. The Court held that the Judge was correct in these decisions, for the reasons she gave.
Were the resolutions and deed outside the powers of the Body Corporate? Held: No
The Court canvassed the legislative scheme of the Act, including its purpose—to provide a legal framework for the ownership and management of unit title developments “on a socially and economically sustainable basis” via “a flexible and responsive” governance regime—and the power conferred upon bodies corporate to “do anything a natural person of full age and capacity may do” excepted as provided for by the Act or another Act.
The Court held that a resolution/deed to grant indemnity for the benefit of the governance of a body corporate, as done in this case, is not prohibited by the Act. In this case it was directly related to the Body Corporate’s duty to meet expenses relating to the management and governance of the unit title development and a natural and understandable reaction to the threat of disruptive litigation against members of the Body Corporate personally.
The Court noted that the requirement of s 78 that a body corporate “may do an act under section 77 only for the purpose of performing its duties or exercising its powers” reflects the ordinary public law requirements of a body established under statute, and is to be read in light of the purpose of the Act. Case law under the old Act stating that the exercise of power must be “anchored to” a duty in the Act could be distinguished as the scheme of the old Act and new Act are different.
That the indemnity serves individual persons interests, cannot be revoked retrospectively and payments are to be made forthwith are not contrary to the Act or its purposes and did not put the resolutions/deeds outside the Body Corporate’s powers. The features are functional, and the deed gave the Body Corporate the ability to prospectively terminate the deed, and provided reasonable exceptions and limits to the indemnity.
Were the appellants in time to challenge the second resolution? Held: Yes.
An application for minority relief under s 210 requires that the application be brought “within 28 days of the passing of the resolution”. The High Court Judge held that “the passing of the resolution” means when voting closed not when the result was notified to members. The appellants’ application was therefore out of time.
The Court considered the purpose of the time bar in s 210 is to ensure that applications are made in a relatively timely fashion, given that an applicant can be expected to need some time to understand the resolution and potentially take advice on whether to apply. A potential applicant would not have 28 days to do so if the period runs from the time at which votes are received because they will not know what the result is. There was also the possibility that a careless or cynical committee could exploit the time limit by delaying when the votes are counted/result is notified. The Court considered that the purpose of the time limit was better achieved by the 28-day period beginning from notification. As a result, the appellants’ application concerning the second resolution was in time.
Was the second resolution unjust or inequitable to the minority? Held: No.
The Court considered that the resolution was not unjust or inequitable to the minority/appellants. The motivation for the indemnity was understandable. The indemnity does not make litigation pointless if the point is to pursue a genuine substantive point about governance rather than punish particular decision-makers. The appellants are not treated any differently to any other member in their ability to pursue such litigation.
The Court dismissed the appeal and ordered that the appellants pay the respondents' costs.
Did the Judge err in finding the affidavits were inadmissible? Held: No
Grice J excluded an affidavit filed by a Mr Phillips (another owner) on the basis it was filed by him and not the appellants, and an affidavit filed by Mr Kennedy as it was filed after the hearing without leave. The Court held that the Judge was correct in these decisions, for the reasons she gave.
Were the resolutions and deed outside the powers of the Body Corporate? Held: No
The Court canvassed the legislative scheme of the Act, including its purpose—to provide a legal framework for the ownership and management of unit title developments “on a socially and economically sustainable basis” via “a flexible and responsive” governance regime—and the power conferred upon bodies corporate to “do anything a natural person of full age and capacity may do” excepted as provided for by the Act or another Act.
The Court held that a resolution/deed to grant indemnity for the benefit of the governance of a body corporate, as done in this case, is not prohibited by the Act. In this case it was directly related to the Body Corporate’s duty to meet expenses relating to the management and governance of the unit title development and a natural and understandable reaction to the threat of disruptive litigation against members of the Body Corporate personally.
The Court noted that the requirement of s 78 that a body corporate “may do an act under section 77 only for the purpose of performing its duties or exercising its powers” reflects the ordinary public law requirements of a body established under statute, and is to be read in light of the purpose of the Act. Case law under the old Act stating that the exercise of power must be “anchored to” a duty in the Act could be distinguished as the scheme of the old Act and new Act are different.
That the indemnity serves individual persons interests, cannot be revoked retrospectively and payments are to be made forthwith are not contrary to the Act or its purposes and did not put the resolutions/deeds outside the Body Corporate’s powers. The features are functional, and the deed gave the Body Corporate the ability to prospectively terminate the deed, and provided reasonable exceptions and limits to the indemnity.
Were the appellants in time to challenge the second resolution? Held: Yes.
An application for minority relief under s 210 requires that the application be brought “within 28 days of the passing of the resolution”. The High Court Judge held that “the passing of the resolution” means when voting closed not when the result was notified to members. The appellants’ application was therefore out of time.
The Court considered the purpose of the time bar in s 210 is to ensure that applications are made in a relatively timely fashion, given that an applicant can be expected to need some time to understand the resolution and potentially take advice on whether to apply. A potential applicant would not have 28 days to do so if the period runs from the time at which votes are received because they will not know what the result is. There was also the possibility that a careless or cynical committee could exploit the time limit by delaying when the votes are counted/result is notified. The Court considered that the purpose of the time limit was better achieved by the 28-day period beginning from notification. As a result, the appellants’ application concerning the second resolution was in time.
Was the second resolution unjust or inequitable to the minority? Held: No.
The Court considered that the resolution was not unjust or inequitable to the minority/appellants. The motivation for the indemnity was understandable. The indemnity does not make litigation pointless if the point is to pursue a genuine substantive point about governance rather than punish particular decision-makers. The appellants are not treated any differently to any other member in their ability to pursue such litigation.
The Court dismissed the appeal and ordered that the appellants pay the respondents' costs.