An equally divided Supreme Court: receivers still liable for body corporate levies

Tuesday 12 July 2016

Authors: Murray Tingey and Himmy Lui

​​In a rare split decision, the Supreme Court has upheld the Court of Appeal’s decision holding that receivers are personally liable for body corporate levies under section 32(5) of the Receiverships Act 1993. The decision in Gilbert v Body Corporate 162791 [2016] NZSC 61 means that receivers will have to make provision to pay body corporate levies due under the Unit Titles Act 2010, unless they vacate possession within 14 days of their appointment. 

The lower court proceedings

Body Corporate 162791 is the body corporate of a building known as the Mid City complex. It applied for summary judgment against Mr Gilbert, the receiver of a company which owned five units in the Mid City complex. Body Corporate 162791 contended that Mr Gilbert was liable for all body corporate levies falling due 14 days after his appointment until either his appointment as receiver ends or the company in receivership ceases to have use, possession or occupation of the units, on the basis of section 32(5) of the Receiverships Act 1993.

The High Court held that section 32(5) did not make Mr Gilbert as receiver personally liable for the body corporate levies. The Court of Appeal overturned the High Court’s decision. It held that the receiver was personally liable for body corporate levies, on the basis that they were due under an agreement and were related to the use, possession or occupation of the property in receivership.

For further detail on the lower court decisions, please see our previous publications here and here​.

Supreme Court decision

Mr Gilbert appealed the Court of Appeal’s decision in the Supreme Court. Because Arnold J was unwell on the day of the hearing, only four Supreme Court Judges heard the appeal.  

William Young and Glazebrook JJ upheld the decision of the Court of Appeal, holding that the receiver was personally liable for body corporate levies under section 32(5) for similar reasons to the Court of Appeal. In contrast, Elias CJ and O’Regan J would have allowed the appeal and restored the High Court’s decision on the basis that body corporate levies are due under statute, not under an agreement.

This resulted in the rare situation of an equally divided Supreme Court. In those circumstances, the Court invoked section 31(2) of the Supreme Court Act 2003 and affirmed the judgment of the Court of Appeal.

Comment

We will never know if the outcome in this case would have been different had Arnold J been on the bench that day. However, given that the effect of the Supreme Court’s split decision is to uphold the Court of Appeal’s decision, parties seeking to enforce security over property under the Unit Titles Act will need to consider whether they are prepared to pay body corporate fees before appointing a receiver or taking possession. The split decision may mean that the matter can be reconsidered by the Supreme Court. Prudent receivers may also require an indemnity and available funds to pay body corporate levies from their appointer prior to accepting appointment.


Disclaimer

This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

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  • David McPherson

    Partner Auckland
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