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Last Updated: 26 January 2018
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IN THE COURT OF APPEAL OF NEW ZEALAND
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CA59/2011
[2012] NZCA 256 |
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BETWEEN BERACHAN INVESTMENTS LIMITED
Appellant |
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AND BODY CORPORATE 164205
Respondent |
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Hearing: 6 March 2012
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Court: Glazebrook, Arnold and Harrison JJ
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Counsel: K W Berman for Appellant
T J Herbert for Respondent |
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Judgment: 19 June 2012 at 11 am
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JUDGMENT OF THE COURT
_______________________________________________________________
REASONS OF THE COURT
(Given by Arnold J)
Table of Contents
Para No
Introduction [1]
Factual background [5]
Statutory background [14]
High Court decision [20]
Basis of appeal [24]
Discussion [29]
(i) The authorities [30]
(ii) Evaluation [47]
Decision [53]
Introduction
[1] The appellant, Berachan Investments Ltd (Berachan) owns unit 12A in a 12 story building in Albert Street, Auckland. The building is an older building that is used primarily for commercial purposes but also contains some apartments. It was developed and brought within the Unit Titles Act 1972 (the Act) in the 1990s.
[2] The roof of the building is in a state of disrepair and needs replacing. 80 per cent of the roof forms part of accessory unit AU3, which is attached to unit 12A, and 20 per cent is common property. Despite this, the roof is physically and functionally a single entity, so that the whole roof must be replaced and that must be done as a single project. A dispute has arisen as to who bears responsibility for the roof’s replacement.
[3] Under the Body Corporate Rules, which have been in their present form since immediately after the building was brought under the Act, it is the Body Corporate’s responsibility to replace the roof. However, the Body Corporate considered that it should be responsible only for the replacement of the 20 per cent of the roof that is common property and that Berachan, as the proprietor of AU3, should be responsible for the remainder. It issued proceedings against Berachan, in which it argued that the Body Corporate Rules were ultra vires to the extent that they purported to provide otherwise. Allan J upheld the Body Corporate’s contentions.[1] Berachan now appeals.
[4] For the sake of completeness, we should mention that under the Unit Titles Act 2010, the Body Corporate would have the obligation to repair or replace the roof in the present case.[2] That Act does not, however, have this effect until 1 October 2012.[3]
Factual background
[5] The building at issue contains around 50 principal units and a number of accessory units. Unit 12A comprises about half of the twelfth floor. There are several accessory units attached to unit 12A, including AU3. As we have said, around 80 per cent of the roof is within AU3.
[6] The building has a central core which contains an elevator shaft, stairwell and other facilities. There is a plant room above this shaft, which sits above the normal roofline of the building. The roof of the plant room is part of the common property and is not relevant to the present dispute. Rather, it is the roof that forms part of what we have described as the building’s normal roofline that is at issue. We shall refer to this as the roof for ease of reference.
[7] Obviously, the roof abuts the base of the plant room on all four sides. An area of the roof out from the base of the plant room is designated as common property, again on all four sides. The result is that the plant room is surrounded by roof which is part of the common property. This comprises approximately 20 per cent of the roof. The remainder of the roof is part of AU3 although physically it covers units 12B and 12C as well as unit 12A.
[8] There is no physical indication in the roof at the point that it changes from common property to being part of AU3. The roof looks and functions like a single entity. As Mr Berman for Berachan said, there is simply a line on a drawing to indicate the extent of the common property component. It is accepted that the roof must, as a practical matter, be replaced as a single entity. Moreover, workers access the roof for various reasons, for example, to set up outlet pipes, air conditioning units, television aerials and such like and to access the building’s parapets and external walls for window cleaning, painting and similar purposes. In this context, it is relevant to note that the unit boundaries go to the internal face of external glass and walls, so that the exterior of the building is common property and accordingly the responsibility of the Body Corporate.
[9] There are two rain water collection gutters running the length of the roof, through both common and unit property. These collect rainwater from the roof and take it to downpipes adjacent to the plant room and to overflow downpipes at the edge of the building. Mr Berman submitted that these gutters are the responsibility of the Body Corporate, a contention that the Body Corporate disputed in correspondence. On the face of it, however, whatever the outcome of the present dispute, it does appear that the gutters fall within the Body Corporate’s responsibilities under r 2(b) of its rules.[4]
[10] The building was redeveloped and brought within the Act when the unit plan was deposited on 14 November 1994. Under the Act, the Body Corporate Rules set out in schs 2 and 3 to the Act applied at the outset (the default rules). However, before any units were sold, the default rules were amended.
[11] Rule 2(a) in sch 2 provides that the body corporate shall:
[R]epair and maintain all chattels, fixtures, and fittings (including stairs, lifts, elevators, and fire escapes) used, or intended, adapted or designed for use, in connection with the common property or the enjoyment thereof.
This rule was amended to read:
Repair and maintain the roof and common property together with all chattels, fixtures and fittings (including without limitation stairs, lifts, elevators, fire escapes, security or fire protection systems) used, or intended, adapted, or designed for use, in connection with the common property or the enjoyment thereof: ...
(Emphasis added to indicate changes.)
[12] There was also an amendment in relation to the duties of proprietors. Rule 1(e) in sch 2 provides that a proprietor shall:
[R]epair and maintain his unit, and keep it 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 his unit forms part: ...
This was replaced by the following clause:
Repair and maintain the interior of the unit and its fittings, fixtures and equipment in good, clean order, repair and condition and in the event of the interior of the unit or the fixtures, fittings or equipment in the unit being damaged or destroyed in any manner, immediately repair and reinstate the same in a proper and workmanlike manner to ensure that no damage, harm or diminution in the value or enjoyment shall ensue to the common property or any other unit:
(Emphasis added.)
[13] There are, then, two features of the amended rules that are relevant for present purposes:
(a) First, the responsibility to repair and maintain the roof is expressed to be that of the Body Corporate.
(b) Second, the proprietors’ relevant obligations are expressed to be limited to the interior of their units.
Statutory background
[14] Several provisions in the Act are relevant to the discussion which follows. We do not propose to set them all out in this section of the judgment but rather will address them as they arise in the discussion. We deal with three provisions at this stage, namely ss 15, 16 and 37.
[15] Section 15 is a lengthy provision setting out the duties of a body corporate. The more relevant elements of it are as follows:
Duties of body corporate
(1) The body corporate shall–
(a) subject to the provisions of this Act, carry out any duties imposed on it by the rules:
(b) insure and keep insured all buildings and other improvements on the land to the replacement value thereof (including demolition costs and architect’s fees) against fire, flood, explosion, wind, storm, hail, snow, aircraft and other aerial devices dropped therefrom, impact, riot, and civil commotion, malicious damage caused by burglars, and earthquake in excess of indemnity value:
...
(f) keep the common property in a state of good repair:
...
(h) subject to this Act, control, manage, and administer the common property and do all things reasonably necessary for the enforcement of the rules:
...
(2) The body corporate shall also–
(a) establish and maintain a fund for administrative expenses sufficient in the opinion of the body corporate for the control, management, and administration of the common property, and for the payment of any insurance premiums, rent, and repairs and the discharge of any other obligations of the body corporate:
(b) determine from time to time the amounts to be raised for the purposes aforesaid:
(c) raise amounts so determined by levying contributions on the proprietors in proportion to the unit entitlement of their respective units.
...
[16] Section 16 relevantly provides that, subject to the Act, “the body corporate shall have all such powers as are reasonably necessary to enable it to carry out the duties imposed on it by this Act and by its rules”.
[17] Section 37(1) provides that, except as otherwise provided by the Act, the “control, management, administration, use, and enjoyment” of the units and common property and the activities of the body corporate shall be regulated by the rules of the body corporate. The section goes on to say that the rules applying to the body corporate shall be those set out in schs 2 and 3.[5] These rules may be amended, but only by unanimous resolution of the proprietors in relation to the sch 2 rules[6] and by resolution of the body corporate at an annual general meeting in relation to sch 3 rules.[7]
[18] Next there is s 37(5). Given its importance to the issue in the case, we set it out in full. Section 37(5) provides:
Any amendment of or addition to any rule shall relate to the control, management, administration, use, or enjoyment of the units or the common property, or to the regulation of the body corporate, or to the powers or duties of the body corporate (other than those conferred or imposed by this Act):
provided that no powers or duties may be conferred or imposed by the rules on the body corporate which are not incidental to the performance of the duties or powers imposed on it by this Act or which would enable the body corporate to acquire or hold any interest in land or any chattel real or to carry on business for profit.
(Emphasis added.)
As will become apparent, the italicised part of the proviso is critical to the parties’ arguments.
[19] Finally, we mention that s 37(6) provides that no rule or addition, amendment or repeal of a rule shall (among other things) “destroy or modify any right implied or created by this Act”. The remaining subsections in s 37 have no relevance to the problem before us.
High Court decision
[20] Allan J began the substantive part of his judgment by discussing three authorities: Velich v Body Corporate 164980,[8] Young v Body Corporate 12006[9] and Body Corporate 188529 v North Shore City Council (Sunset Terraces).[10] We discuss these cases in more detail below. It is sufficient for present purposes to say that the Judge described the effect of the judgment in Velich as follows:
[21] In essence, the Court of Appeal gave full effect to the proviso to s 37(5) by holding that no powers or duties may be conferred or imposed upon the Body Corporate by an amended rule, unless the amendment could fairly be said to be incidental to the performance of the duties or powers imposed on the Body Corporate by the Act. A rule which appreciably expanded the existing powers and duties could not fairly be said to be merely “incidental” to those existing powers and duties.
[21] The Judge then noted that Heath J in Sunset Terraces had applied Velich, whereas in Young, Harrison J had taken what was arguably a more expansive view, without reference to Velich.
[22] Allan J then considered and rejected an argument raised by Mr Berman on the basis of s 11 of the Act (which we describe in more detail below), before concluding that the amended r 2(a) constituted an extension of the Body Corporate’s duties which fell foul of this Court’s reasoning in Velich. Accordingly, he declared that “the amendment to the ... Body Corporate Rules, effected in November 1994, is invalid to the extent that it requires the [Body Corporate] to repair or maintain the roof, other than that part of the roof which forms part of the common property”.[11] It is clear from the statement of claim and from the judgment that this declaration applied only to r 2(a) and not to r 1(e), which limits the responsibility of proprietors to the interior of their units.
[23] The Judge later awarded costs to the Body Corporate, although not on the indemnity basis it sought.[12]
Basis of appeal
[24] Mr Berman argued, first, that r 2(a) (as amended) was not ultra vires given the nature of the roof and the terms of ss 15, 16 and 37(5) of the Act. He focussed on two obligations imposed by s 15, namely the duty to keep the common property in good repair[13] and the duty, subject to the Act, to control, manage and administer the common property.[14] He then drew attention to s 16, which relevantly provides that, subject to the provisions of the Act, “the body corporate shall have all such powers as are reasonably necessary to enable it to carry out the duties imposed on it by [the] Act and by its rules”. Mr Berman submitted that, in terms of s 16, an assessment of what powers were reasonably necessary to enable the Body Corporate to carry out these duties required consideration of the physical characteristics of the relevant building and the structure of the Body Corporate. He noted that a power that is found to be “reasonably necessary” under s 16 is a power conferred by the Act.
[25] Mr Berman then drew a distinction between what he described as Act-based powers and duties and rules-based powers and duties. He submitted that the proviso to s 37(5) was confined to the latter. He argued that, given the physical structure of the building and the characteristics of the roof mentioned above, it was “reasonably necessary” in terms of s 16 for the Body Corporate to repair the roof as a single project so as to meet its obligation of keeping the common property in good repair. He submitted that how the costs of the replacement of the roof should be met was a different question from who should carry out the work. He said that if the Body Corporate considered that Berachan and the other owners of 12th floor units benefitted disproportionately from the work, it had the ability under s 33 to seek a remedy.
[26] Second, in relation to Velich Mr Berman submitted that it was distinguishable on its facts, in essence because the duty or power at issue in that case was rules-based rather than Act-based (as in the present case).
[27] Third, Mr Berman invoked s 11 of the Act. He relied in particular on s 11(1) and (3). They provide:
(1) The common property and each unit on a unit plan shall, by virtue of this section, have as an appurtenant thereto all such rights of support, shelter, and protection, and for the passage or provision of water, sewerage, drainage, gas, electricity, oil, garbage, air, and all other services of whatsoever nature (including telephone, radio, and television services) over the land and every part thereof as may from time to time be necessary for the reasonable use or enjoyment of the common property or unit.
...
(3) The rights created by this section shall carry with them all ancillary rights necessary to make them effective as if they were easements.
...
[28] Mr Berman submitted that the common property and each unit had the right to be sheltered and protected by the roof of the building. Such a right was, he argued, “necessary for the reasonable use or enjoyment of the common property or unit” within the meaning of s 11(1). By virtue of s 11(3), the rights of shelter and protection “shall carry with them all ancillary rights necessary to make them effective as if they were easements”. Mr Berman then argued, by reference to authorities such as Spear v Rowlett, that the grant of an easement did not impose a positive duty on the grantor to undertake repair work on the servient tenement to make it fit for the exercise by the grantee of his or her easement. Rather, it was for the grantee to undertake such work on the servient tenement as might be reasonably necessary for the exercise and enjoyment of the easement.[15] In the present case, Mr Berman said, the common property was the dominant tenement entitled to shelter and protection from the servient tenement, namely accessory unit AU3. The Body Corporate could enter AU3 to undertake the work necessary to preserve the right to shelter and protection of the common property.[16]
Discussion
[29] We will begin with a discussion of the authorities and will then discuss the facts in the light of the applicable principles.
(i) The authorities
[30] As we have said, this Court’s decision in Velich was central to the Judge’s reasoning and was also important to Mr Herbert’s submissions for the Body Corporate before us. Accordingly, we begin with it.[17]
[31] The developer of a former office building into apartments experienced financial difficulties. As a consequence, a number of unit owners in the development sought to complete their apartments themselves. Mr Velich owned an apartment and accessory units on the fourth and fifth floors of the building. His wished to complete a deck that had been planned for the fifth floor, on the roof of the fourth floor part of his apartment. The rules of the Body Corporate had been amended to require proprietors to obtain the consent of the Body Corporate where they wished to undertake certain types of work to their units. The deck fell within the scope of the clause, and the Body Corporate withheld its consent. Mr Velich became frustrated with the Body Corporate’s attitude and went ahead with building the deck. The Body Corporate said that he was in violation of its rules and sought an injunction to prevent him from continuing. This Court held that the relevant rule was ultra vires.
[32] There are, in our view, two features of the case which were critical to the Court’s analysis:
(a) First, the Court considered that Mr Velich had the right to use the fifth floor space as a result of his ownership of that floor and that this right was protected by s 37(6). It will be recalled that s 37(6) relevantly provides that a body corporate’s rules may not “destroy or modify any right implied or created by [the] Act”. The Court said:
[27] The units associated with apartment 4G in relation to the fifth floor of the building are in the nature of a space defined primarily by reference to the surface area of the roof over the fourth floor. Mr Velich’s entitlements as an owner in fee simple of the stratum estate necessarily include rights of use in relation to the entire space on the fifth floor of the building in respect of which he has title. Such rights must necessarily be seen as “implied or created” by [the Act] for the purposes of s 37(6).
The Court considered that it would not be open to a body corporate to make rules that prohibit the use of a unit, as such rules would be inconsistent with s 37(6).[18]
(b) Second, the Court noted that under s 37(5) the amended rule was only valid if the new powers and duties it conferred could fairly be seen as incidental to the performance of the powers and duties imposed on the Body Corporate by the Act. The only duty imposed by the Act that could be invoked to justify the amended rule was s 15(1)(a), which required the Body Corporate to “carry out any duties imposed on it by the rules”. The Court said that the question of the validity of the amended rule had to be assessed against the powers and duties of the Body Corporate existing at the time the amendment was made. Because the amended rule appreciably expanded those powers and duties beyond those set out in the default rule, the additional powers and duties it contained could not be seen as incidental to the Body Corporate’s existing powers and duties. The amended rule was, accordingly, ultra vires.[19]
[33] As will be apparent, Velich is far removed from the present case. There has been no suggestion that the amended r 2(a) removes any of Berachan’s rights protected by s 37(6). Moreover, the validity of r 2(a) does not depend on s 15(1)(a), but on s 15(1)(f) and (h). The argument is that the amendment to r 2(a) requiring the Body Corporate to repair and maintain the roof is incidental to the Body Corporate’s obligations in respect of the common property, in particular to keep it in a state of good repair.[20] Accordingly, the circularity evident in the Body Corporate’s argument in Velich is not present in Berachan’s argument in the present case. For this reason, we do not see the decision in Velich as governing the present case in the way that Allan J did.
[34] We turn now to the decision of Harrison J in Young. In that case, four three-storied apartment buildings comprising one complex suffered weathertightness problems. Each of the buildings was shaped like a tiered wedding cake, so that the decks of apartments higher in the complex formed part of the roofs of apartments lower in the complex. The boundaries of individual units finished at the centre line of the external walls, so that the outside of the external walls were common property, as were the roofs of the top-floor apartments.[21] However, the doors and windows leading on to decks were unit property, as apparently were the decks themselves.[22]
[35] The Body Corporate passed a resolution under which it assumed responsibility to repair and maintain the exterior of the building, including that part that was unit property. (It is not clear whether a corresponding amendment was made to the rules relating to the obligations of proprietors.) Some of the proprietors challenged the amended rule, on the basis that the obligation it imposed was not incidental to the performance of the Body Corporate’s statutory duties and powers. Harrison J rejected that argument, holding that the amended rule was incidental to the Body Corporate’s statutory obligation to maintain the common property in good repair. The Judge considered that any other approach would lead to a practical absurdity.
[36] The Judge said:
[32] ... The body corporate is under a statutory obligation to keep and maintain the common property in good repair (s 15(1)(f)). The scope of this obligation is extended by rule 2(a) to repair and maintenance of all fittings used in connection with the common property or its enjoyment. The statutory intention is plain. A body corporate must have all powers reasonably necessary to protect the common property in a building including a power to repair and maintain parts of the external structure, the condition of which might expose the common property to consequential physical damage. Leakage through a failure to keep the exterior in good condition places at risk the development as a whole incorporating, of course, the common property. As Mr Hurd says, “in a perfectly box like structure, all of the exterior will be common property and there will be no practical issue”. The power conferred by rule 2(d) is, in my judgment, reasonably necessary to allow this body corporate to carry out the statutory duties provided by s 15 and Schedule 2, in that it is expressly directed towards meeting the requirements imposed by the unorthodox configuration of this complex.
[33] Any other approach would lead to a practical absurdity. On Mr Colthart’s approach, the body corporate would be empowered to carry out, under s 15(f) and r 2(a), remedial work to the decks. But it would have no jurisdiction to replace the windows adjacent and above because, while part of the exterior, they are not common property, even though the integrity of the deck repair is dependent upon installing new weatherproof windows. As a result, the deck repair work would in time be rendered ineffective. The extension of the body corporate’s repair and maintenance obligation to the exterior of apartments must be ‘incidental to’ its performance of the same duty relating to use or enjoyment of the common property.
[34] I also accept Mr Allan’s argument to the same effect. He submits that a body corporate is commonly responsible for repairing and maintaining the exterior of a building structure (Jacklin v Proprietors of Strata Plan No 2795 [1975] 1 NSWLR 15 at p 24). Extension of a repair and maintenance obligation to the whole of the exterior of buildings of this type reasonably ensures, as Mr Allan says, that the expectation that the buildings as a whole will be kept in an adequate and functional condition, thereby maintaining the value of each apartment, is met uniformly and to a standard which protects the investment of all proprietors even where one or more benefits disproportionately to the amount of his or her levy contribution (Simons v Body Corporate Strata Plan No 5181 [1980] VicRp 12; [1980] VR 103 at p 108).
[37] An important aspect of Harrison J’s reasoning is that it proceeds on the basis that the assessment of what is “incidental to the performance of the duties or powers imposed on [the body corporate] by [the] Act” under s 37(5) must take account of the nature of the particular building or complex. We agree with that view. We do not consider that Parliament intended that a “one size fits all” approach be taken. Rather, what is “incidental” is to be considered in light of the characteristics or features of the building or complex at issue, so that what might properly be regarded as “incidental” in one context may not be in another.
[38] In the judgment under appeal, Allan J addressed Mr Berman’s submission supporting Harrison J’s approach in Young in the following way:
[34] Mr Berman supported the decision of Harrison J, characterising it as carrying with it “... a great deal of commonsense to the extent that it would be a remarkably contrary interpretation of the Act if it did not allow for a unified regime of repair, maintenance and replacement”. At a practical level that may well be so, but questions of vires will ordinarily turn on questions of statutory construction rather than commonsense or workability.
Mr Herbert referred to this passage in argument and submitted that there was no need for this Court to take the practical effect of its judgment into account in the present case.
[39] We accept, of course, that questions of vires are ultimately questions of statutory interpretation. But the point on which we are in agreement with Harrsion J in Young is that the statutory language permits the Court to have regard to the individual characteristics of particular unit title developments — they are relevant to determining what is “incidental” to a body corporate’s performance of its duties or powers in terms of s 37(5).
[40] Finally, we come to Sunset Terraces. That case raised a number of issues and ultimately went on appeal to the Supreme Court.[23] However, the point that we are presently interested in was addressed only by Heath J in the High Court.
[41] Sunset Terraces is a residential complex, which the Judge described as “a linear unit title development comprising 21 townhouses, each of two stories”.[24] The development was built of untreated timber framing and monolithic cladding and suffered weathertightness issues. Unlike the situation in Young, the unit boundaries extended to the outside of the exterior walls[25] and, it appears, included the roof. The following extract from Heath J’s judgment identifies the issue in which we are interested and his response to it:
[106] In my view, s 37(5) makes it clear that only powers or duties incidental to the performance of duties or powers imposed on it by the 1972 Act may be amended. Section 37(5) has the effect of forbidding any change to the rules that creates a responsibility for the body corporate going beyond common property, or anything incidental to it.
[107] In this case, the body corporate purported to amend rr 2 and 3 of Schedule [2]. The amendment was effected at a time (30 April 1998) when the developers owned all units within the unit title development. Accordingly, the democratic process by which individual owners were intended to determine their rules was not available to any of those who purchased units from the developers.
[108] For the purpose of this proceeding, the amendments to r 2 assume some significance. The amended rule stated:
The body corporate shall (in addition to any other duties imposed on it by the Act):
...
(b) Keep clean and in a state of good repair and from time to time when the condition so requires paint the exterior and roof of the building of which the Units form part excluding the exterior of the windows of each Unit.
...
(Emphasis added)
[109] The 1972 Act makes it clear that a Certificate of Title for an individual unit must be in the name of the “registered proprietor” and “not the body corporate”. A Deposited Plan must define the boundaries of the individual units, so that the District Land Registrar is able to issue a Certificate of Title to the unit in favour of a purchaser. In this case, the plan defines that boundary “to the external face of exterior walls and glass adjoining, common property and accessory units and to the centre line of walls between adjoining units”. So, the outside face of an exterior wall is part of an individual unit.
[110] In my view, the provisions of the Unit Titles Act contemplate corporate responsibility for the maintenance or repair of common property only. Applying the Court of Appeal decision in Velich v Body Corporate No 164980, the amendment to r 2(b) of the default rules was ultra vires because it purported to confer an obligation on the body corporate inconsistent with the powers and duties conferred by the Act. Thus, the amendment was outside of the powers to vary the rules authorised by the Unit Titles Act.
[42] We make three observations about this reasoning. First, at [107] of the extract, Heath J says that the democratic process by which individual owners were intended to determine their rules was not available to any of the proprietors who purchased units from the developer because the developer amended the default rules while it still owned all the units. However:
(a) On the Judge’s approach, it would have made no difference if all the proprietors had themselves agreed to change the rules after purchase — the amended rules would still have been ultra vires.
(b) In any event, all of the proprietors bought into the complex on the basis of the amended rules. Those rules set out the basis on which they might legitimately have expected that the complex would be operated. To have a body corporate come along years after the event (as in the present case) and claim that its own rules are ultra vires, to the significant disadvantage of some proprietors and the significant advantage of others, is somewhat unattractive.
[43] Second, the Judge says at [110] that the Act contemplates body corporate responsibility for maintenance or repair of common property only. However, as the Judge had earlier recognised at [106], the effect of s 37(5) is that the body corporate may also have powers or duties incidental to that obligation. The Judge seems to have thought that a power or duty incidental to that obligation could not encompass any responsibility in relation to unit property. If that was the Judge’s view, we do not agree with it.
[44] The default rules envisage that the body corporate may have to repair unit property in some circumstances. Rule 2(b) in sch 2 is the clearest example. It requires the body corporate to repair and maintain “all pipes, wires, cables, ducts, and other apparatus and equipment of whatsoever kind and wheresoever situate which may be reasonably necessary for the enjoyment of an incidental right which may from time to time exist by virtue of section 11 of [the Act]”. Correspondingly, r 1(a)(ii) in sch 2 requires a proprietor to permit the body corporate to enter his or her unit for the purpose of “maintaining, repairing, or renewing any pipes, conduits, wires, cables, or ducts for the time being in, upon, or passing through his unit and capable of being used in connection with the enjoyment of any other unit or common property”. Given that pipes, conduits, ducts and so on will often be situated within ceiling cavities, wall cavities or other enclosed spaces, it is implicit in these provisions that, as an incident of performing its responsibilities, a body corporate may be obliged to repair unit property.[26] In principle, we see no reason why this should not be so in other situations as well.
[45] Third, and related to the point just made, it does not appear that the Judge was asked to consider the particular characteristics of the Sunset Terraces development in reaching his assessment under s 37(5) (beyond, that is, the unit boundaries). Given the nature of that development (a linear townhouse development), it may well be that the Judge’s assessment that the amended rules went beyond what was permissible as being “incidental” was fully justified. However, as we have said, we consider that the assessment of what is “incidental” for the purposes of s 37(5) should take account of the physical and other characteristics of the particular development.
[46] To summarise, then, while we accept that the duties of a body corporate in this context relate principally to the maintenance and repair of common property, we consider that a body corporate is entitled to assume responsibility in relation to the repair and maintenance of items of unit property provided that the duty can fairly be seen as incidental to the duty to maintain and repair common property. Whether a body corporate’s assumption of responsibility in a particular case can fairly be seen as incidental will depend on all the circumstances, including the characteristics of the building or complex involved.
(ii) Evaluation
[47] There is no doubt that r 2(a) comes within the first part of s 37(5): it relates to “the control, management, administration, use, or enjoyment of the units or the common property”. The question is whether it is caught by the proviso, that is, whether the duty it imposes on the Body Corporate is “incidental to the performance of the duties or powers imposed on it by [the] Act”.
[48] To recapitulate, we are concerned with the roof of a 12 story building, 20 per cent of which is common property and 80 per cent of which is part of accessory unit AU3 owned by Berachan (excluding, it will be recalled, the roof of the plant room). Both visually and functionally, the roof is a single entity and must be replaced as a whole. Rain water collection gutters, which by virtue of r 2(b) are the responsibility of the body corporate, run through the common property and unit property portions of the roof. Workers utilise the roof for the purposes of both the Body Corporate (to fix equipment to enable the cleaning, maintenance and painting of the outside of the building, for example) and individual unit owners (to install television aerials and air-conditioning units, for example). The configuration of the building means that the roof must be kept in a good state of repair both to protect the units and common property from damage and to provide the Body Corporate with safe and convenient access to common property (the exterior walls and windows of the building) for cleaning, maintenance and repairs.
[49] Mr Herbert submitted that the Body Corporate could not be under an indirect duty to keep unit property in good repair to avoid consequential damage to common property, as that duty is directly imposed on unit holders by default r 1(e). This overlooks, however, that default r 1(e) was amended in the present case to make unit owners responsible only for the repair and maintenance of the interior of their units, reflecting no doubt that the exterior walls and windows of the building are common property. Presumably it was for that reason, and because of the practical considerations referred to in [48] above, that the Body Corporate decided that it should also assume responsibility for the whole of the roof.
[50] Given the features discussed in [48] above, we accept that r 2(a) as amended can fairly be regarded as incidental to the body corporate’s statutory obligation under s 15(1)(f) to maintain and repair common property. Accordingly, it does not fall foul of the proviso to s 37(5).
[51] We consider that this outcome is consistent with the practical realities of the situation and, as it happens, fairness:
(a) As to practical realities, it is difficult to see how the work on the roof would be undertaken if the Body Corporate’s arguments were accepted. First, r 1(e), which limits proprietors’ obligations to the interior of their units, would have to be declared to be ultra vires also, otherwise no party would be responsible under the rules for the maintenance of that part of the roof that is unit property. Yet the Body Corporate has never sought that. Second, if that were to occur and the default r 1(e) was reinstated,[27] there would be obvious coordination difficulties in having the work undertaken, especially in light of the fact that the rainwater gutters run across parts of the roof that are unit property. Plainly, there would be scope for much wasteful dispute on a range of matters and, while it may be possible to have recourse to the courts for assistance under the Act, that also is a contentious process.[28] We consider that the declaration made in the High Court would be difficult to implement for these reasons.
(b) As to fairness, all of the unit proprietors purchased their units on the basis of rules that are clear in their allocation of responsibilities as between the Body Corporate and the proprietors in respect of the roof and their units. Provided that it can be achieved in a way that is consistent with the Act, it is obviously desirable that their legitimate expectations be given effect.
[52] In the result, then, we consider that the appeal should be allowed.
Decision
[53] The appeal is allowed. The declaration made by the High Court is quashed, as is the order for costs in that Court. The appellant is entitled to costs for a standard appeal on a band A basis, plus usual disbursements. Costs in the High Court are to be fixed by that Court in light of this judgment.
Solicitors:
Harrison Stone, Auckland for Appellant
Wadsworth Ray, Auckland for
Respondent
[1] Body Corporate 164205 v Berachan Investments Ltd [2010] NZHC 2343; (2011) 12 NZCPR 385 (HC).
[2] Unit Titles Act 2010, s 138.
[3] Unit Titles Act 2010, s
220.
[4] Rule 2(b) requires that the
Body Corporate “repair and maintain all pipes, wires, cables, ducts, and
all other apparatus and
equipment of whatsoever kind and wheresoever situate
which may be reasonably necessary for the enjoyment of an incidental right which
may from time to time exist by virtue of section 11 of the [Act]”. (The
text of s 11 is set out at [27] below.) We discuss
r 2(b) further at [44]
below.
[5] Section
37(2).
[6] Section
37(3).
[7] Section
37(4).
[8] Velich v Body
Corporate 164980 [2005] NZCA 108; (2005) 5 NZConvC 194,138
(CA).
[9] Young v Body
Corporate 12006 [2007] NZHC 1401; (2007) 8 NZCPR 932 (HC).
[10] Body Corporate 188529 v
North Shore City Council [2008] NZHC 2300; [2008] 3 NZLR 479 (HC) [Sunset
Terraces].
[11] At [49].
[12] Body Corporate 164205 v
Berachan Investments Ltd HC Auckland CIV-2010-404-3324, 8 June
2011.
[13] Section
15(1)(f).
[14] Section
15(1)(h).
[15] Spear v
Rowlett [1924] NZGazLawRp 25; [1924] NZLR 801 (SC) at 803–804.
[16] We have recorded Mr Berman’s argument in relation to s 11, but on the view we take of the case, it will not be necessary for us to address it.
[17] The case is helpfully
discussed in Thomas Gibbons “Body Corporate Rules: Tensions” [2008] WkoLawRw 8; (2008)
16 Waikato L Rev 167 at
181–184.
[18] At
[34].
[19] At
[30]–[32].
[20] As we have said, Mr Berman
argued that a power to repair the roof was “reasonably necessary” in
terms of s 16 given
the Body Corporate’s obligations with regard to the
common property. However, s 16 deals with powers, not duties. Rule 2(a)
is
expressed in terms of a duty rather than a power. The duty contained in r 2(a)
cannot be seen as incidental to a power conferred
by s 16. Accordingly, we
prefer to approach the issue by considering whether the duty in r 2(a) can
properly be viewed as incidental
to the duties imposed by s 15(1)(f) and
(h).
[21] At
[31].
[22] At [25] and [31].
[23] North Shore City Council
v Body Corporate 188529 [Sunset Terraces] [2010] NZCA 64, [2010] 3 NZLR 486
and North Shore City Council v Body Corporate 188529 [Sunset Terraces]
[2010] NZSC 158, [2011] 2 NZLR
289.
[24] At
[1].
[25] See
[109].
[26] This is, of course,
consistent with Mr Berman’s argument based on s
11.
[27] Which would not
necessarily be the outcome: see Velich at
[36]–[41].
[28] See, for
example, Tisch v Body Corporate No 318596 [2011] NZCA 420.
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