Parkinson v Body Corporate 62124 [2024] NZHC 3511

This case centres on a contentious retaining wall situated between two properties—Body Corporate #1 and Body Corporate #2. However, the primary issue in this judgment concerns the appointment and powers of an administrator to Body Corporate #1. This note explores the judgment’s implications, particularly its affirmation of the extensive powers granted to administrators under section 141 of the Unit Titles Act 2010 (the Act). 

Background

A retaining wall between 53 and 47-51 Hankey Street is on the verge of collapse. Body Corporate #1 comprises four units located at 53 Hankey Street, while Body Corporate #2, situated downhill, consists of units at 47-51 Hankey Street. If the retaining wall were to collapse, access to Body Corporate #2 via the right of way from Hankey Street would likely be obstructed by debris.

The Tenancy Tribunal has determined that both body corporates share legal responsibility for the retaining wall, classifying it as a “building element” common to both properties. This designation arises because the wall sits on the boundary between the two. The first issue stems from the inability of the two body corporates to agree on how to share the costs of repairing the retaining wall.

The second, more significant issue concerns Body Corporate #1. The four unit owners cannot reach consensus on addressing the retaining wall problem or resolving other historical issues, such as the registration of new body corporate rules.

Appointing an Administrator

After multiple Tenancy Tribunal adjudications, the impasse among members of Body Corporate #1 led Grice J to conclude that it was “unlikely to function as required under the legislation.” When determining whether to appoint an administrator to a dysfunctional body corporate, Grice J considered the following factors:

1. The extent of dysfunctionality among unit owners;
2. The duration of the dysfunction;
3. The willingness (or lack thereof) of parties to cooperate in resolving the dysfunction and the likelihood of resolution;
4. The existence of prior court or tribunal determinations, comments made in those decisions, and compliance with such orders;
5. The nature and seriousness of the issues in dispute;
6. Relevant professional evidence related to the disputes;
7. Whether the dysfunction breaches the Act and the extent and duration of such breaches;
8. The presence of third parties affected by the dysfunction and any associated risks;
9. The operational and financial structures of the body corporate and the extent of dysfunction in these areas;
10. The size of the body corporate and its capacity to bear the costs of an appointed administrator; and
11. Any other relevant considerations.

After over five years of discord among Body Corporate #1 members, resulting in a lack of cooperation and a failure to establish a functional governance structure, Grice J determined that appointing an administrator was necessary.

Administrator’s Powers

Under section 141 of the Act, a body corporate may apply to the High Court for the appointment of an administrator. The High Court has discretion to set the appointment’s duration and terms of remuneration. Once appointed, an administrator assumes all powers and duties of the body corporate and its committee. Additionally, the administrator may exercise powers granted by the court and delegate any vested powers as needed.

Entering into Agreements

In this case, Radich J confirmed that an administrator may enter into binding contracts on behalf of the body corporate. As a separate legal entity, the body corporate can enter into contracts, and this power extends to administrators.

The respondents objected to a 60/40 cost-sharing arrangement for repairing the retaining wall that Mr. Greenwood, the appointed administrator, had negotiated with Body Corporate #2. Greenwood sought the court’s confirmation that his authority as administrator allowed him to make binding agreements on behalf of Body Corporate #1. The court upheld Greenwood’s authority, referencing sections 3, 77, 78, 84, 138, 121, 130, and 141 of the Act:

• s 3: Purpose of the Act
• s 77: Legal personality of the body corporate
• s 78: Applicability of s 77 for body corporate duties or powers
• s 84: Powers and duties of a body corporate
• s 138: Obligation to maintain and repair common property
• s 121: Ability to levy contributions from unit ownerss 130: Authority to spend, borrow, and invest funds
• s 141: High Court’s authority to appoint administrators

Member Approval

In Kennedy v Body Corporate 82891 (cited by Radich J), the court established that a body corporate committee may make decisions about repairs and maintenance without member approval, even in opposition to some members. Committee members’ decisions are indemnified by the body corporate against claims, liabilities, and costs arising from their actions.

If this principle is applied to administrators, Radich J noted that administrators, in theory, could similarly make decisions without member consent and could be indemnified by the body corporate for their actions.

Restrictions

As long as an administrator acts within the Act’s purpose and adheres to the empowering provisions of the body corporate (sections 77, 78, and 84), their actions are lawful. Unless additional duties or restrictions are imposed by the High Court, administrators are empowered to perform any act the body corporate itself could undertake. In this case, the respondents must comply with Greenwood’s negotiated 60/40 agreement, despite their objections.

Conclusion

This case underscores the extensive powers granted to administrators of body corporates, including the authority to enter into binding contracts and raise funds from members, even against their objections. Administrators’ actions are subject only to the Act’s empowering provisions and any specific restrictions imposed by the High Court. Consequently, applications for appointing administrators require careful consideration to ensure their necessity and appropriateness.

1. Gilhooly v Parkinson [2017] NZTT Wellington 9,002,741 [2017 Tribunal decision].
2. Walker v Parkinson [2018] NZTT Wellington 9,010,001 [2018 Tribunal decision].
3. Walker v Parkinson [2019] NZTT Wellington 9,010,001 [2019 Tribunal decision].
4. Parkinson v Gilhooly [2021] NZTT Wellington 9,028,422 [2021 Tribunal decision].
5. Parkinson v Body Corporate 62124 BC202361997 (High Court #1, interim judgment, waiting for administrator options, August 2023).
6. Parkinson v Body Corporate 62124 BC202363066 (High Court #2, full judgment appointing administrator and the terms, October 2023).
7. Parkinson v Body Corporate 62124 [2024] NZHC 3511(High Court #3, Body Corporate applying for orders to approve administrator's decision, October 2024).