Tisch v Body Corporate No 318596 [2011] NZCA 420; [2011] 3 NZLR 679 (29 August 2011)

Last Updated: 25 January 2018

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA359/2010 [2011] NZCA 420

BETWEEN NEIL OWEN TISCH AND JEANNETTE MARIE TISCH & ORS Appellants

AND BODY CORPORATE NO 318596 First Respondent

AND R E & R M BARTLETT Second Respondents

AND TYPHOON INVESTMENTS LIMITED & ORS Third Respondents

Hearing: 31 May 2011

Court: Chambers, Arnold and Wild JJ

Counsel: T J G Allan for Appellants G J Kohler for Second Respondents No appearance for First and Third Respondents

Judgment: 29 August 2011 at 4 pm

JUDGMENT OF THE COURT

A The appeal is dismissed.

2. The appellants are to pay the second respondents’ costs as for a standard appeal on a Band A basis, with usual disbursements.

____________________________________________________________________

REASONS OF THE COURT
(Given by Wild J)

Introduction

[1] The appellants challenge a judgment of Andrews J declining to approve the terms of a scheme under s 48 of the Unit Titles Act 1972.^[1]
[2] The broad issue we must decide is whether the Judge’s approach to s 48 was correct. That necessitates our determining the scope and proper use of s 48. Relevant to this case, s 48 provides:

48 Scheme following destruction or damage

(1) Where any building ... on any land to which a unit plan relates is damaged or destroyed, but the unit plan is not cancelled, the Court may, on the application of the body corporate, ... by order settle a scheme including provisions–

(a) For the reinstatement in whole or in part of such building ...

...

(5) In the exercise of its powers under subsection (1) of this section, the Court may make such orders as it considers expedient or necessary for giving effect to the scheme, including orders–

...

(b) Directing payment of money by or to the body corporate or by or to any person;

...

(d) Imposing such terms and conditions as it thinks fit.

...

[3] Section 48(4) gives any affected party the right to appear and be heard on the

application. Subsection (6) empowers the Court to cancel or vary any order it makes.

Background

[4] The scheme was submitted by the Body Corporate and eight of the 10 unit owners for repair of a ‘leaky building’ property. The property comprises two three-level apartment buildings.
[5] The building fronting onto the street (which is a marine parade, running along the beachfront) has two units at the front of the ground floor. These are owned by the second and third respondents to this appeal who opposed the scheme.^[2] At the rear of the ground floor are garages. An entrance leads to a lift and stairs to the first and second floors, each of which has two apartments. Each of these four ‘upper level’ apartments has a balcony.
[6] The rear building is similarly configured, save that the ground floor only has carparks and accessory (storage) units, with two apartments on each of floors one and two.
[7] Each building has a “wedding cake” configuration: each of the first and second floors is set back and is smaller in area than the floor below.
[8] The roofs form part of the second floor units, and the balconies part of the first and second floor units each balcony serves.
[9] The exterior walls of the first and second floors of both buildings need re-cladding. The roofs must be replaced. The balconies need to be re-sealed and re-tiled. The lowest tendered cost of this remedial work, including consultants’ fees, is approximately $2 million. The breakdown of the major items is:

Item	$	%[3]
Balconies	498,600	27.9
Re-cladding walls	474,868	26.6
Replace roofs[4]	132,803	7.43

At 28 per cent of the total cost, we accept that the balconies do not represent “by far the majority of work required” (at least if measured in terms of cost), as stated by Andrews J.^[5] However, the critical point for this appeal is that the balconies are the private property of the respective unit owners and not common property.

[10] The Body Corporate rules include these:

1. A proprietor shall:-

...

(e) Repair and maintain the proprietor’s unit including all intertenancy walls, balconies, (including tiles) and balustrades, all electrical amenities and keep the same in sufficiently good order, repair and condition to ensure that no damage or harm shall ensue to the common property or any other unit in the building of which the proprietor’s unit or accessory unit form part.

...

2. The body corporate shall:-

(a) Repair and maintain the exterior of the building including the windows of the units but excluding garage doors.

...

Both rules 1 and 2 are Second Schedule rules, meaning they may only be amended by unanimous resolution.^[6]

[11] The contentious clause in the draft scheme submitted by the Body Corporate is cl 4.

Responsibility for the cost of Repairs

4. The Body Corporate and the Owners shall be responsible for the cost of the Repairs as follows:

(a) The Body Corporate shall be responsible for the cost of the Repairs to:

(i) The roofs, exterior walls (to the mid-point of the wall and including windows and associated joinery but excluding garage doors) and balconies of the Buildings; and

(ii) Any common property not included in (i) above.

(“The Body Corporate repair costs”)

(b) The Owners shall each be responsible for the cost of the Repairs to their unit property not included in (a) above.

(“The Owner repair costs”)

[12] Relevant also is the related cl 6:

6. In accordance with the responsibilities set out in clause 4 above the Body Corporate shall levy:

(a) the Owners for the Body Corporate repair costs in accordance with unit entitlement;

(b) each Owner for the Owner repair costs which relate to their unit.

The parties’ approach in the High Court and the judgment

[13] Mr Kohler told us the position of the second respondents (the Bartletts) was more one of ambivalence about the need for a scheme. But he confirmed the Bartletts had strongly opposed the terms of the proposed scheme. Their particular objection was to the requirement that they contribute, on a unit entitlement basis, to the cost of repairing the unit property of other owners, in particular their balconies.
[14] Mr Kohler contended the appellants’ approach had changed. In the High Court their argument was that a scheme was needed because of the ambiguity in the Body Corporate Rules, specifically between rr 1(e) and 2(a). On appeal the appellants were no longer concerned to resolve that ambiguity. Now they contended the Judge ought to have ignored the Body Corporate Rules in considering the s 48 application, because s 48 gave the Court an unfettered and open-ended discretion to do what is ‘fair’.
[15] Andrews J started her judgment by noting that the Bartletts and the third respondent (Typhoon) opposed the s 48 scheme proposed by the Body Corporate, supported by eight unit holders. She then defined the two issues for determination:

(a) whether the Court should sanction a scheme; and

(b) if yes, the terms of the scheme.

[16] Dealing with the first issue, the Judge held the draft scheme was not consistent with the Act, because the scheme made the Body Corporate responsible for repairs to property which was not common property.
[17] Next, the Judge held that cls 4 and 6 of the draft scheme were not consistent with the Body Corporate Rules, because they made the Body Corporate responsible for repairing the balconies which were unit property.
[18] Andrews J rejected the Body Corporate’s submission that there was no conflict between rr 1(e) and 2(a) of the Body Corporate Rules because r 1(e) was only concerned with minor maintenance. The Judge held that the express and specific must override the general, with the result that r 1(e) prevailed over r 2(a), and 2(a) could not be read as including balconies.
[19] The Judge then asked herself: is a scheme necessary? She concluded that it would be pragmatic and most convenient for a scheme to be established. She noted that the unit owners opposing the scheme had made it clear they did not dispute the Body Corporate’s power to undertake the repair work, and she accepted the Body Corporate’s submission that there was an advantage in the remedial work being undertaken pursuant to a scheme which will be binding on subsequent purchasers. Accordingly, Andrews J exercised the Court’s discretion in favour of settling a scheme.
[20] That took the Judge to the second issue: is the draft scheme fair and equitable? The answer turned on whether it was fair and equitable that the unit owners opposing the draft scheme contribute to the cost of repairing the balconies. The Judge observed that she had not been referred to any case involving approval of a s 48 scheme which made unit owners responsible for the cost of repairs to other owners’ private property. Body Corporate 172108 v Meader^[7] was put to the Judge as one such case, but Andrews J pointed out that it concerned unit owners’ contributions to common property only, not to other proprietors’ private property.
[21] The Judge concluded that the draft scheme did not apportion costs in a fair and equitable manner, in particular because it made the Body Corporate responsible for the cost of repairing the balconies which were not common property. The Judge therefore declined to sanction the draft scheme. She set out various amendments that were required and directed that an amended draft scheme giving effect to these be prepared and filed for her consideration.

Jurisdiction to entertain the appeal

[22] No amended draft scheme has been submitted to Andrews J, who obviously has not given a final judgment settling the terms of the scheme. A sealed judgment of the High Court was not part of the case on appeal, although it should have been.^[8] In those circumstances, we queried with counsel whether any appeal was not premature.
[23] We consider that the decision of Andrews J to decline to approve the scheme in the terms sought is appealable. That decision resulted from the approach the Judge took to s 48. And, as we said in [2], the issue for us is the correctness of that approach.

Section 48 of the Unit Titles Act 1972

Genesis

[24] Section 48 has its roots in Australian legislation, owing more to the Victorian Strata Titles Act 1967 than anything else.^[9] We have been unable to find in Hansard any guidance as to Parliament’s intention in enacting s 48. Nor can we locate any clue from any Australian source as to the genesis of their equivalent provisions, particularly the Victorian one.
[25] Within the Act, s 48 seems to sit alone. It appears in Part 3, containing miscellaneous provisions. Section 48 is not expressly linked to any other section in the Act. In particular, it contains no reference to ss 15 and 16 which prescribe the duties and powers of the body corporate. The duties subject to the provisions of the Act include those imposed on the body corporate by its rules. The repairs, control, management and administration duties of the body corporate relate to “the common property”. There is no cross-reference to s 33, which enables the body corporate to recover money it expends on repairs and other work.^[10] There is no indication in s 33 or in s 48 as to when the one section, rather than the other, is appropriately employed.
[26] In the Unit Titles Act 2010, which replaced the 1972 Act with effect from 20 June 2011,^[11] s 74 is essentially the equivalent of s 48. So the way in which s 48 had been employed up to the passing of the 2010 Act did not prompt Parliament to make any change.

Interpretation of s 48

[27] Given that background, s 48 is to be interpreted applying the principles set out in s 5 of the Interpretation Act 1999.
[28] We thus do not accept the appellants’ submission that s 48 has a “plain and unconstrained intention”, and affords a discretion that is to be – or can be – exercised without regard to the other provisions of the Act, in particular ss 15 and 16.
[29] Andrews J was right to accept Mr Kohler’s submission that the Act gives ownership of, and thus responsibility for, the common property to the body corporate while unit proprietors own and have responsibility for their own units. This basic structure is apparent right from the Long Title to the Act.^[12] The Judge cited this passage from the judgment of Heath J in Fraser v Body Corporate S63621, with which we also agree:^[13]

A fundamental theme of the [Act] is the distinction between individual units (for which each registered proprietor takes responsibility) and common property (the domain of the body corporate). Individual registered proprietors can deal only with individual property, whereas “common property” is owned by all proprietors and must be managed by the body corporate for the common good.

That passage summarises Heath J’s more extensive review of the scheme and purpose of the Act in World Vision of New Zealand Trust Board v Seal^[14] and Body Corporate 188529 v North Shore City Council.^[15]

[30] The appellants fasten upon another statement of Heath J, this time in Meader:^[16]

Section 48 is an exception to the general rule that a body corporate may only undertake tasks associated with common property.

That is obviously correct. But it does not follow that the s 48 exception is to be used without regard to the general rule. The situation must be one justifying departure from the general rule, and the departure should only be to the extent necessary to achieve what is fair as between unit owners in the circumstances.

[31] The rationale of the general rule is that unit owners purchase knowing the property is subject to the Act. They purchase also knowing they are subject to the body corporate rules. Those rules are a contract between the unit holders. The starting point must be that unit holders should adhere to the statutory scheme they bought into, and to the body corporate rules they agreed to abide by. We see the scope of s 48 as limited to a situation where the best interests of unit owners as a whole dictate a departure from the scheme of the Act and from the body corporate rules.
[32] It is therefore understandable that one response to the ‘leaky building’ problem has been to amend the body corporate rules or to pass a resolution making the body corporate responsible for the whole of the building exterior. The problem with this approach is that such a rule risks being ultra vires. The ultra vires argument is this:^[17]

• (a) the body corporate statutory maintenance obligations are limited to the maintenance of common property;
• (b) powers in amended or additional rules/resolutions must be “incidental to the performance of the duties or powers imposed on” a body corporate by the Act (by virtue of s 37(5)); and
• (c) a duty to maintain individual property cannot logically be incidental to the existing duty to maintain common property.

[33] The High Court’s decisions in Young v Body Corporate 120066^[18] and Body Corporate 188529 v North Shore City Council^[19] reached different conclusions on challenges to rule changes as being ultra vires. While we do not need to express a view on the correct approach, we recognise the difficulty in this uncertain position.
[34] That uncertainty is one of the factors that makes it attractive to apply to the Court to settle a scheme under s 48. Other factors are that such a scheme does not require unanimity.^[20] It can enable the body corporate to force owners to vacate their units while the remedial work is carried out. Perhaps most importantly, because a s 48 scheme is settled by the Court under the Act, it avoids potential ultra vires issues by enabling the body corporate to repair both common and unit property, and to do so to the same standard and at the same time.^[21]

Approach to a s 48 application – three steps

[35] We consider the Act imposes a three step process on a Court considering an application to settle a scheme under s 48:

• Step 1: the Court must be satisfied that the building has been damaged or destroyed.
• Step 2: if so satisfied, the Court must decide whether to settle a scheme. That is, the Court must decide whether a scheme is appropriate in the circumstances.
• Step 3: if the Court decides a scheme is appropriate, it must then decide what the terms of the scheme should be.

[36] Step 1 is a triggering requirement: the building must be damaged or destroyed. There is no guidance in s 48 as to the amount of damage necessary to trigger the section. Nor, as far as we can ascertain, is there anything in the Australian or New Zealand background to the section providing such guidance. About all that can be said is that no-one is likely to apply under s 48 unless the damage is substantial. But if they do, the Court will probably not be minded to settle a scheme.
[37] Step 2 arises because s 48(1) provides that the Court “may ... by order settle a scheme ...”. Hopefully, a scheme will not be needed for most ‘leaky buildings’ or other cases where substantial repair work is required. The risks and costs of applying to the Court and the desirability of maintaining harmony between people living in the same building or complex surely call for a determined effort to achieve agreement between owners on the carrying out of the required repairs. We endorse Heath J’s observation in Fraser that “s 48 should be a remedy of last resort”.^[22]
[38] In Meader Heath J referred to the concepts of ‘expedience’ and ‘necessity’ in s 48(5) as determining whether the Court should exercise its discretion to settle a scheme.^[23] We do not agree: s 48(5) is relevant to how the Court exercises its discretion having decided to do so, not to whether it exercises it. That follows from the words in s 48(5) “[i]n the exercise of its powers under subsection (1) of this section the Court may make such orders as it considers expedient or necessary for giving effect to the scheme ...”. Logically, the orders are made after the Court has determined, under s 48(1), to settle a scheme.
[39] Nevertheless, expedience and necessity are probably useful touchstones when the Court is considering how to frame the scheme. We do agree with Heath J’s observation in Meader that in shaping the scheme “the focus ... is on pragmatic considerations”.^[24]
[40] Just one example of a scheme motivated by pragmatic considerations is Body Corporate 173457 v Dunn,^[25] where it was the need for the work, which was to both common and private areas, to be “undertaken at the same time and to the same standard”^[26] that persuaded Courtney J to settle a scheme.
[41] Body Corporate 205963 v Becker^[27] instances a scheme that was necessary. Unit owners proposing the scheme submitted that it “represented the collective will of the proprietors who actively participated in discussions and consultations about how to solve the serious water ingress problems with the apartments”.^[28] One proprietor, who had not engaged in the discussions and consultations, opposed the scheme. Because that one proprietor was still going to benefit from the repairs, Stevens J found there was “no good reason why the proposed Scheme should not be approved for the benefit of all proprietors”.^[29]
[42] We agree that the s 48 discretion does not permit of any threshold requirement that remedial work be “essential”.^[30] There may, for example, be cases where early work will prevent or minimise imminent damage.
[43] Whatever the particular situation, settling a scheme should always be the best option for the unit holders as a whole.
[44] Step 3 involves the Court settling the terms of the scheme. As at step 2, the Court has a discretion: s 48(5) provides “... the Court may make such orders as it considers expedient or necessary for giving effect to the scheme ...”. The aim should be to balance the interests of each unit holder in a way that imposes terms that achieve the outcome fairest to all unit holders. Although we do not preclude other considerations relevant in the particular case, at least five guiding principles emerge from the case law.
[45] First, a scheme with broad support is to be preferred. The greater the level of support from owners for the proposed scheme, the more likely it is that the scheme does justice between owners. This will not invariably be so, because a majority of owners may support a scheme that is unfair to the minority. Meader^[31] is an example of just such a scheme. The case involved a block of units with a penthouse on level 12, distinct in appearance and construction, which had been added at a later date. The body corporate owned the exterior of the building at levels 1–11 (that is, it was common property) and the owner of the level 12 penthouse unit owned the exterior of level 12. The scheme proposed by the body corporate and supported by the owners on levels 1–11 proposed one contractor and required the penthouse owner to contribute to the cost of repairing ‘leaky building’ problems on levels 1–11, although the owner of the penthouse submitted that the repairs required to his property were relatively minor. The penthouse owner opposed the scheme. Heath J held that it was fairer to have two contractors as joint project managers, to give the penthouse owner a degree of autonomy over repairs to the penthouse. Heath J also capped the penthouse owner’s financial contribution to the cost of the ‘leaky building’ repairs. Heath J ordered that the penthouse owner contribute its unit entitlement (11.88 per cent or $742,500) to the total cost of repairs to the building. As the estimated cost of repair work to level 12 was $500,000, the penthouse owner’s contribution to repairs to the common property (the exterior of levels 1-11) was effectively capped at some $242,500.
[46] Secondly, the scheme should be appropriately detailed. The more detailed a scheme, the less scope for later misunderstanding and argument about it.
[47] Thirdly, providing that what has been done by the body corporate before the s 48 scheme is actually approved is in accordance with the scheme, the order has retrospective effect. We endorse the following comments by Ronald Young J in Re Body Corporate 304209:^[32]

As a question of interpretation of s 48 I can see no reason why orders cannot relate back to the time when the damage entitling an order under s 48 first occurred. It would in my view be wholly unreal to suggest a s 48 order could not be retrospective. Without retrospective effect the Body Corporate will be hamstrung until an order is made.

[48] Fourthly, work should normally be done to the same standard and at the same time. We referred in [40] above to Courtney J’s statement in Dunn about this. To achieve that outcome, Courtney J held that “the work should be the subject of a single managed building cont[33]ct”.³³ There is a similar statement by Heath[34] in Meader³⁴ although, as we have pointed out, fairness between proprietors demanded a departure from this principle in Meader. The reasons for this principle are really self evident: maximising efficiency; minimising cost and disruption. The fairness and desirability of completing work to a uniform standard is equally self evident.
[49] Fifthly, as we explain in [30] and [31] above, the terms of the s 48 scheme should depart from the scheme of the Act and from the body corporate rules no more than is reasonably necessary to achieve what is fair as between unit owners in the circumstances. Thus, the Act and the body corporate rules remain relevant considerations. An exception to this fifth guiding principle is a scheme unanimously agreed to by all unit owners.

This appeal

[50] Steps 1 and 2 are not in issue on this appeal. It is not in dispute that water damage to the buildings necessitates substantial repair work. And there is no cross-appeal against Andrews J’s decision to settle a scheme.
[51] Step 3 is the issue on this appeal, and we assess the Judge’s approach against the five principles we have set out. First, the level of support. The Body Corporate proposed the scheme to the High Court with the support of eight of the 10 unit holders. That was a broad level of support, although the division appears to have been on “balcony lines”, that is the support came from the eight owners with balconies, the opposition from the two without.
[52] Mr Kohler is entitled to point out that only three unit holders have appealed. He submits we should assume that the Body Corporate and the other seven unit owners accept the judgment of Andrews J (that is certainly true of the second respondents). Although Mr Allan does not accept that, he could not tell us whether the Body Corporate had resolved not to appeal. And there is nothing to substantiate his claim that the five unit owners who are neither appellants nor respondents support the appeal. We accept Mr Kohler’s submission: the unit owners other than the three appellants must be taken to accept the High Court’s judgment. So the scheme proposed to the High Court does not now have broad support.
[53] There is no suggestion that the scheme lacks sufficient detail, so that requirement is met.
[54] Nor is there any difficulty over the scheme’s retrospectivity – the fact that whatever terms are eventually settled by the High Court will apportion cost for work already done. Indeed, our understanding from counsel is that the repair work was scheduled for completion last month. All unit holders accepted that the repair work should be done at the same time and to the same standard. We understand that a single contract was let. The disagreement is limited to the apportionment of the repair costs.
[55] That takes us to the last principle, that it will ordinarily be fair that the scheme follow the Act and the body corporate rules. This is the contentious area. We have already (in [28]–[31] above) rejected the appellants’ submission that the discretion to settle a scheme under s 48 may be exercised without regard to the scheme of the Act, in particular that the Act limits the body corporate’s repair and maintenance responsibilities to the common property.
[56] The appellants submitted Andrews J had incorrectly interpreted Body Corporate Rules 1(e) and 2(a). The appellants argued that r 2(a) is not restricted to exterior common property. It is not expressly so restricted. In Young^[35] Harrison J had not restrictively interpreted a similar rule. So restricted, r 2(a) would be redundant. Further, the Body Corporate must have all the powers necessary to protect common property: s 15(1)(f).^[36]
[57] These grounds differ slightly from those advanced to Andrews J. But they fail for much the same reasons Andrews J gave in interpreting the word “exterior” in r 2(a) as excluding balconies (including their tiled surfaces) and balustrades. First, the contention that these items are included in the general wording “the exterior of the building” in r 2(a) cannot succeed in the face of the express wording in r 1(e) – that is, the specific reference to “balconies, (including tiles) and balustrades” as included in the proprietor’s unit. The rules Harrison J considered in Young lacked this specificity.
[58] Secondly, the Third Schedule Body Corporate rules reinforces r 1(e) by placing this obligation on unit owners:

Interior maintenance: Each proprietor or occupier of a unit shall be responsible for the interior maintenance of his or her unit (including terrace and balcony and balustrades).

[59] Thirdly, Yeoman’s Survey Solutions Ltd reported to the Body Corporate that the “exterior weatherproofing elements” comprising the “exterior walls, doors and windows fronting on to the decks of the units, together with the decks themselves” were “unit property, not common property”. Only “the exterior ‘weatherproofing fabric’ of the balustrades” was “within common property”. The latter point is a consequence of the fact that the unit boundary is the median of the balustrade.
[60] Should we uphold the Judge’s view that the scheme proposed to her was inconsistent with the Act and the Body Corporate rules, the appellants nevertheless challenged the view of Andrews J:^[37]

While I am satisfied that a scheme should be settled, I am not satisfied that the draft scheme apportions costs in a fair and equitable manner. That is the result of my finding that the draft scheme makes the body corporate responsible for repair costs to balconies at the property, which are the unit owners’ individual property, not common property.

[61] The appellants contend the Judge gave “no consideration at all” to the fact that the balcony of the first floor units is the roof of the ground floor units – those owned by the second and third respondents. That submission was obviously put to the Judge, because she recorded it:^[38]

The balconies of the level two units to some extent form the roofs of the ground floor units owned by the respondents and Typhoon, such that the respondents and Typhoon are affected by repairs to the balconies.

We accept that the point is not again mentioned in the judgment. It is thus unclear whether the Judge overlooked it, or discarded it as unworthy of consideration.

[62] The position was covered in evidence before the Judge by two experts, one (Mr Williams) called by the Body Corporate, the other (Mr Longman) by the second respondents. The roof of the ground floor units/floor of the level one units is a steel reinforced concrete slab. The experts agree that no damage was evident to them on inspection.^[39] The experts also agreed that if water was able to penetrate the slab through any cracks in it that were left unrepaired, it could erode the reinforcing steel in the slab.^[40] The experts differed in their opinion on the risk of damage to the slab through possible water ingress. While Mr Williams considered the risk was sufficient to recommend “that a repair solution (was) a reasonable and robust recommendation”,^[41] Mr Longman’s belief was that any damage that might occur would not manifest itself “in the lifetime of this building”.^[42]
[63] Given their own expert’s opinion that water damage to the ‘roof’ of their apartment would not occur during the life of the building, the balcony repairs were of no direct benefit to the ground floor unit owners. They got only the indirect benefit of having the whole ‘leaky building’ problem fixed. Nevertheless, for the purposes of dealing with this submission, we assume two points. The first is that leaving the balconies unrepaired risked damaging the concrete slab. The second, consequent, point is that repairing (that is, weatherproofing) the tiled balconies benefits the owners of the ground floor units by removing or minimising the risk of damage to the “roof” of their units.
[64] Assuming these points does not, in our view, undermine the tenability of the Judge’s view set out in [60] above. There are two considerations. First, assessing a scheme in terms of who will benefit from it may lead to outcomes that are completely inconsistent with the Act and the body corporate rules. Relative benefits, of themselves, are not a sufficient reason to depart from the Act and rules. Balconies are a good example. Repair of a leaky balcony that is the roof of the unit below may be of no benefit to the balcony’s owner, but of considerable benefit to the owner of the unit below. But if the Act and the body corporate rules assign responsibility for balconies to owners, the relative benefits just spelt out must be assumed to have been taken into account. That is, there has been a conscious decision to assign responsibility for remedial work to owners even though in some situations at least they may derive little or no benefit from that remedial work.
[65] Secondly, and a related point, the owners of the eight units with balconies must be taken to have purchased knowing the balconies were their property and therefore their responsibility under the Act and the Body Corporate rules. While they may well not have anticipated the ‘leaky building’ problem that necessitates the balcony repairs, the unexpected nature of that problem is neither a logical nor a sound reason for shifting some of the repair costs to the owners of the units below, who equally may not have anticipated ‘leaky building’ problems above. In fact, as Mr Kohler pointed out, the evidence^[43] disclosed that there was some awareness of the ‘leaky building’ problem by the time this Body Corporate’s rules were promulgated.
[66] Resort to the many cases on s 48 schemes is of limited help, given the discretionary nature of the s 48 power and the different situation in every case. But Andrews J was entitled to find it noteworthy^[44] that no case had been cited to her where a s 48 scheme had been granted involving a requirement that unit owners contribute to the cost of repairs to other unit owners’ private property. Mr Allan submitted there are at least four such cases. The first case he referred to is Body Corporate 205963 v Becker,^[45] mentioned in [41] above. Stevens J approved a scheme covering repairs estimated to cost approximately $5.4 million to a three storey ‘leaky building’ containing 67 apartment units. The damage and necessary remedial work involved both the common and private property areas of the entire apartment block. Stevens J noted that at an extraordinary general meeting of the bod[46]corporate:⁴⁶

... there was unanimous agreement among the attending proprietors that the Body Corporate should engage a single contractor to undertake all repairs to the common property and also to the private exterior cladding of the apartments. It was also agreed that proprietors should be levied on a unit entitlement basis as set out in the Scheme.

[67] That meeting was attended by representatives of 54 of the 67 units. Of the 13 units not represented, 12 were in the control of the liquidator of two insolvent companies. The other owner who did not attend was the sole objector to the scheme. She had not engaged in any of the discussions about necessary repairs to the apartments. Stevens J noted that this sole objector’s “primary contention appears to be that there is no cost involved to repair her unit and she will not herself benefit from repairs”.^[47] The Judge rejected that. He found that the estimated cost of repairs to the exterior walls of the sole objector’s unit was in fact $19,200, and that she would benefit from the repairs, both to the common areas and the private areas. Accordingly, Becker is a case where the High Court approved a s 48 scheme requiring contribution on a unit entitlement basis to repairs to private property. But there are significant factual distinctions between Becker and the present case. The first is that the exterior cladding of the apartments was private property not common property (in drawing that distinction we except the balconies). Secondly, the scheme had overwhelming support: ultimately just one of 67 unit owners opposed it, and on a basis Stevens J found to be inaccurate and misconceived.
[68] The second case is Young v Body Corporate No 120066,^[48] which we have referred to several times.^[49] That was not a s 48 scheme case. Harrison J ruled on an application for an interim injunction restraining the body corporate implementing resolutions to carry out extensive repairs and enter into contracts to do so. The apartment blocks had the same “wedding cake” layout as in the present case. The issue was whether one of the body corporate rules^[50] was ultra vires under the Act to the extent that it authorised repairs to those parts of the exterior of the building which were not common property, in particular the windows and doors leading on to the decks and the decks themselves. Harrison J rejected the challenge on the basis that the rule was reasonably necessary to enable the body corporate to carry out the statutory duties contained in s 15 and in its Schedule 2 rules. So, while Young was not a case in which the Court sanctioned a s 48 scheme involving contribution on a unit entitlement basis to private property, it was a case where the Court declined to restrain a body corporate from proceeding with repairs to private property. We note that Harrison J rejected a further challenge to the resolutions on the ground that they were “inequitable” in terms of s 43 of the Act. He dismissed an argument that it was unfair to levy all owners for the cost of deck repairs given that not all the apartments had decks. The Judge noted^[51] that all the apartments did in fact have decks, although those on the ground level were built closer to the ground and were not above units below. He held:^[52]

... In a development of this configuration, a breakdown of any part of the exterior structure could affect any other part adversely. For example, a ground floor apartment such as the one owned by Mr Muckleston and Ms Farrant is particularly susceptible to damage from defects in both apartments on levels above. There is nothing inequitable in requiring them to contribute equally with the owner of the top level apartment.

We find it difficult to follow the Judge’s reasoning on this point. Where a leaky deck is above another unit, the potential damage to the unit below is self evident. For those units with ground level decks there is no potential for such damage. It follows there would be inequity in requiring ground level apartment owners to contribute equally with the owners of the top level apartments.

[69] The third case is Body Corporate 193764 v Antioch Investments Ltd.^[53] That is a short judgment, also of Harrison J, granting an urgent application sanctioning a s 48 scheme, eventually not opposed by any of the unit owners. The judgment is silent as to whether the scheme covered repairs to the private property parts of the building, as well as to the common property.
[70] The last case is Body Corporate 172108 v Meader, which we have also referred to, in particular at [20] and [45]. As Andrews J correctly pointed out, and for the reasons we have detailed, Meader was not a case where the Court settled at s 48 scheme which required a unit owner(s) to contribute to the cost of repairing the private property of other unit owners.

Conclusion

[71] We have rejected the appellants’ submission that Andrews J erred in principle in her approach to the scheme proposed to her. In particular we cannot see any error in the Judge’s view that the proposed scheme was an unwarranted departure from the scheme of the Act and the Body Corporate’s rules. Nor have the appellants persuaded us that the Judge was wrong to hold that the proposed scheme was not fair and equitable as between the 10 unit owners.
[72] Lastly, we have considered the cases referred to us by Mr Allan, which he contends are cases in which the High Court has approved a s 48 scheme that requires unit owners to contribute to the cost of repairing the private property of other unit owners. Having looked at those cases, we do not consider they impugn the view Andrews J took in this case.

Result

[73] The appeal is dismissed.
[74] The appellants are to pay the second respondents’ costs as for a standard appeal on a band A basis, with usual disbursements.
[75] The Body Corporate should now take prompt steps to place before Andrews J a draft scheme, amended in accordance with the directions the Judge gave, so that she can consider it and make orders.

Solicitors:
Grove Darlow & Partners, Auckland for Appellants
Sandi Anderson, Auckland for Second Respondents

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^[1] Body Corporate No. 318596 v Bartlett HC Tauranga CIV-2009-470-952, 13 May 2010.

^[2] Although the third respondents initially supported the scheme, at the start of the High Court hearing they changed their position, aligning themselves with the second respondents in opposition to the scheme.
^[3] As a percentage of total tender price of $1,788,300.

^[4] Clause 4(a)(i) of the draft scheme provides that the roofs are part of the Body Corporate repair costs. [16] of the High Court’s judgment makes it clear that the roofs of Units 5, 6, 7 and 8 are unit property. However, there was no disagreement, either in the High Court or before us, as to cl 4(a)(i).
^[5] At [4].
^[6] Unit Titles Act 1972 s 37(3).

^[7] Body Corporate 172108 v Meader HC Auckland CIV-2009-404-6868, 3 March 2010; Body Corporate 172108 v Meader (No 2) HC Auckland CIV-2009-404-6868, 19 August 2010.
^[8] High Court Rules 2008, rr 11.11–11.13.
^[9] (14 July 1972) 379 NZPD 1092.

^[10] Section 33, Recovery of money expended for repairs and other work, is not an issue in this case. Counsel agreed it does not fit a “leaky building” situation. Rather, it provides a mechanism to reallocate repair costs after they have been incurred, and are thus known. It contemplates: i) a levy; ii) repairs; iii) reallocation of the cost of those repairs (counsel termed this a “back end adjustment”) if the repairs substantially benefit some unit(s) more than another(s). The way in which the New South Wales equivalent of s 33 had been used was the issue in Jacklin v Proprietors of Strata Plan No. 2795 [1975] 1 NSWLR 15.
^[11] Unit Titles Act 2010 s 2; r 2 Unit Titles Regulations 2011 (SR 2011/122).

^[12] The Long Title states: An Act to facilitate the subdivision of land into units that are to be owned by individual proprietors, and common property that is to be owned by all the unit proprietors as tenants in common, and to provide for the use and management of the units and common property.

^[13] Fraser v Body Corporate S63621 (2009) 10 NZPR 674 (HC) at [34](b).
^[14] World Vision of New Zealand Trust Board v Seal [2004] 1 NZLR 673 (HC) at [21]–[52].
^[15] Body Corporate 188529 v North Shore City Council [2008] NZHC 2300; [2008] 3 NZLR 479 (HC) at [83]–[102].

^[16] Body Corporate 172108 v Meader HC Auckland CIV-2009-404-6868, 3 March 2010 at [18].

^[17] Martin Taylor “The uncertain state of body corporate maintenance” NZ Lawyer (11 July 2008) at 22.
^[18] Young v Body Corporate 120066 [2007] NZHC 1401; (2007) 8 NZCPR 932 (HC).
^[19] Body Corporate 188529 v North Shore City Council [2008] NZHC 2300; [2008] 3 NZLR 479 (HC).

^[20] An example of this is Body Corporate 205963 v Becker HC Auckland CIV-2009-404-6017, 21 April 2010.

^[21] Advantages pointed out in Re Body Corporate 304209 HC Wellington CIV-2009-485-1104, 23 March 2010 at [19].
^[22] Fraser v Body Corporate S63621 [2009] NZHC 1222; (2009) 10 NZCPR 674 (HC) at [97].

^[23] Body Corporate 172108 v Meader HC Auckland CIV-2009-404-6868, 3 March 2010 at [20]–[21].

^[24] Also at [20]–[21].
^[25] Body Corporate 173457 v Dunn [2007] NZHC 800; (2007) 8 NZCPR 668 (HC).
^[26] At [12].
^[27] Body Corporate 205963 v Becker HC Auckland CIV 2009-404-6017, 21 April 2010.
^[28] At [19].
^[29] At [36].
^[30] Fraser v Body Corporate S63621 [2009] NZHC 1222; (2009) 10 NZCPR 674 (HC) at [92].

^[31] Body Corporate 172108 v Meader HC Auckland CIV-2009-404-6868, 3 March 2010; Body Corporate 172108 v Meader (No 2) HC Auckland CIV-2009-404-6868, 19 August 2010.
^[32] Re Body Corporate 304209 HC Wellington CIV-2009-485-1104, 23 March 2010 at [22].
^[33] At [12].
^[34] At [26] in the first, 3 March 2010, judgment.

^[35] Young v Body Corporate 120066 [2007] NZHC 1401; (2007) 8 NZCPR 932 (HC) at [19]–[20] and [27]–[41].

^[36] Section 15(1)(f) provides that the body corporate shall “keep the common property in a state of good repair”.
^[37] At [68].
^[38] At [60](c).
^[39] Case on Appeal Vol 2/69F/3–6, 12–17; Vol 2/57 at [28].
^[40] Vol 2/69H.1/10–18; Vol 2/69F/12–26.
^[41] Vol 2/69F/29.
^[42] Vol 2/69A.1/3–9.
^[43] Vol 2/69G/29–69H/8.
^[44] At [67].
^[45] Body Corporate 205963 v Becker HC Auckland CIV 2009-404-6017, 21 April 2010.
^[46] At [8].
^[47] At [21].
^[48] Young v Body Corporate No 120066 HC Auckland, CIV-2007-404-2375, 6 December 2007.
^[49] At [33], [56] and [57].

^[50] Rule 2(d) which authorised the body corporate to “repair and maintain the exterior of the building of which the units form part in all respects”.
^[51] At [52].
^[52] At [52].

^[53] Body Corporate 193764 v Antioch Investments Ltd HC Auckland, CIV-2009-404-7147, 16 December 2009.