Receivers Not Personally Liable for Body Corporate Levies

Monday 28 April 2014

Authors: Murray Tingey and Himmy Lui

​In Body Corporate 16279​​1 v Gilbert [2014] NZHC 567, the High Court found that receivers are not personally liable under s 32(5) of the Receiverships Act 1993 (the Act) for body corporate levies under the Unit Titles Act 2010.

The facts

Body Corporate 162791 (the Body Corporate) was established under the Unit Titles Act for a unit title development for Mid City in Auckland. A trust known as 239 Queen Street Trust was formed to acquire the units in that development. 239 Queen Street Trustees Ltd (239QSTL) was incorporated and became the first trustee of the trust. After non payment of body corporate levies, the Body Corporate applied to put 239QSTL into liquidation. A further company known as QSM Trustee Ltd (QSMLT) was incorporated and became trustee in the place of 239QSTL. The Body Corporate applied to have QSMTL put into liquidation for its failure to pay levies. A receiver was appointed to QSMTL, after which QSMTL was placed in liquidation.

The proceedings

The Body Corporate applied for summary judgment against the receiver of QSMTL, contending that the receiver is liable for all levies falling due 14 days after the receiver’s appointment until either the receiver’s appointment ends or QSMTL ceases to have use, possession or occupation of the units. Counsel relied on s 32(5) of the Act, which provides:

Receivers are not personally liable for body corporate levies

Associate Judge Abbott found that s 32(5) does not make the receiver personally liable for levies imposed under the Unit Titles Act, for two reasons.

First, his Honour found that levies are not payments “due under an agreement”. His Honour said that “agreement” imports an element of consent or mutual understanding. The obligation to pay levies is derived from statute, rather than from an agreement.

Secondly, his Honour considered that levies do not relate to the use, possession or occupation of the property. Rather, they are payments that arise from the fact of ownership of that property. This conclusion was consistent with:

  • the fact that an owner is liable to pay levies regardless of whether it uses, possesses or occupies the unit;

  • the principle that receivers are not liable for rates, which are an aspect of ownership;

  • the fact that Parliament legislated expressly for parties other than owners, including a mortgagee in possession, to be bound by the body corporate operational rules, so Parliament would have expressly made receivers liable for levies if that was the intention;

  • the policy that it would be unfair for a receiver not to pay for obligations arising under agreements with a third party while still taking the benefit of that agreement;

  • the fact that the receiver can disclaim the third party’s property but is not able to disclaim ownership of the company’s property.

Comment

This case provides welcome clarification of the extent of receivers’ personal liability when dealing with companies involved in unit title developments. It shows the Court’s willingness to take a purposive approach to the interpretation of s 32(5) so that the receiver’s personal liability does not extend beyond the intended ambit of the section. ​


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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