St John's College Trust Board v Body Corporate No 197230 [2013] NZCA 35 (27 February 2013)

Last Updated: 6 March 2013

IN THE COURT OF APPEAL OF NEW ZEALAND

CA304/2012 [2013] NZCA 35

BETWEEN ST JOHN'S COLLEGE TRUST BOARD Appellant

AND BODY CORPORATE NO 197230 First Respondent

AND THE GATEHOUSE LIMITED & ORS Second Respondents

AND G B & J A EVANS & ORS Third Respondents

AND W R & P K ALLEN & ORS Fourth Respondents

AND L B & S A BELL & R M CRAIG Fifth Respondents AND OTHERS Sixth to Forty-Third Respondents

Hearing: 12 November 2012

Court: Harrison, MacKenzie and Courtney JJ

Counsel: B W Morley and G J Luen for Appellant M C Harris for Second Respondents T J G Allan for Third Respondents D R Bigio for Fourth Respondents

Judgment: 27 February 2013 at 2.30 pm

JUDGMENT OF THE COURT

A The appeal is dismissed.

2. The appellant and second respondents must jointly pay costs to each of the third and fourth respondents for a standard appeal on a band A basis and usual disbursements.
   

REASONS OF THE COURT

(Given by Harrison J)

Introduction

[1] A large property complex in central Auckland requires remedial work to repair significant damage caused by leaking. All the unit title owners agree on the work that is necessary but are unable to agree on how its cost should be apportioned. In particular, two groups of unit title holders object to a proposal whereby contributions to the cost of repairing common property are assessed on the normal or statutory basis of funding according to the unit entitlements. The objectors claim that the financial benefit from that proposal will be enjoyed almost exclusively by smaller groups of unit title holders. In the High Court the objectors proposed schemes for the remedial work under s 48 of the Unit Titles Act 1972 (the Act) designed to apportion the repair costs according to the benefit assessed as accruing to each unit.[1] Duffy J rejected the objectors’ proposals, approving instead a scheme for allocating costs on the statutory basis.[2]
[2] The two groups of objectors challenge Duffy J’s decision. One is the appellant, the St John’s College Trust Board (the Board); the other is the second respondents, known by the name of the law firm which represents them, the Gilbert Walker group. The third and fourth respondents, the Grove Darlow group and Hayden Tate group respectively, constitute the smaller groups which support the decision.
[3] The issue on appeal is whether the Judge correctly exercised her statutory discretion when concluding that the best interests of the unit owners as a whole did not justify departing from the statutory regime for allocating repair costs.

Background

[4] We gratefully adopt Duffy J’s summary of the background facts as follows:

[1] The [Board] is a unit title holder in an unusual strata title building complex located at 186 to 202 Queen Street, Auckland City. The complex is made up of what were once four multi-storey buildings on separate properties each having its own freehold title; it now comprises 110 units plus common property. The units have a mix of uses, with those at ground and lower levels having commercial/retail uses and those at the upper levels residential uses. Most of the units are contained within the structure of the old buildings, but some are part of new structural additions that were added to the top levels of the old buildings. Unfortunately, these additions and, to a much lesser extent, some of the renovated residential units in the old buildings have developed what has commonly come to be known as leaky building syndrome. Curing this problem is going to be expensive. The parties are agreed on the nature and scope of the remediation works, as well as their estimated total cost of $4M, for which approximately 75 per cent relates to remediation of common property and 25 per cent to remediation of private property. However, because of the unique characteristics of this complex, the unit owners have been unable to reach agreement on how the costs should be apportioned between them. ...

[2] The dispute between unit title holders is due to the unique configuration of the unit titles in this complex. The four buildings were, and largely still are, stand-alone buildings with a minimal degree of interconnection. The body corporate is responsible for the maintenance and repair of common property. A large part of the exterior cladding of these buildings is designated common property, as are the stairways and lifts and other such areas. The practical effect of these designations is that under the statutory formula in the Act for apportioning costs relating to common property, persons responsible for paying body corporate levies will have to contribute towards the repair costs of the exterior cladding of units and other common areas located in a different building from the one they own and in circumstances where they see themselves enjoying little benefit from such work. Hence, their requests for the Court to approve a scheme under s 48 of the Act.

...

[7] In its present state, the complex has the following configuration:

(a) Twenty-five units in the lower levels of the old buildings have retail, commercial and office uses and comprising 63.41 per cent of the total unit entitlement under s 6. The proprietors of these units consider that they have received Final Code Compliance Certificates for them;

(b) Forty-nine residential units which are located in the old buildings and comprising 19.89 per cent of the total unit entitlement under s 6. These units do not have Final Code Compliance Certificates; and

(c) Thirty-six residential units which are located in the new structural additions built on to the roof tops of the old buildings. These units comprise 16.7 per cent of the total unit entitlement. They do not have Final Code Compliance Certificates.

[8] The unit boundaries of the lower ground floor and level one of the old buildings (which comprises retail/commercial units) are coincident with and thus render the “weatherproofing fabric” of the exterior walls of these units within unit property, as opposed to common property. The unit boundaries of the remaining units (being the majority of the units) in both the old and new building structures are such that, generally, they are within the exterior walls and ceiling voids, which means that, in general, the weatherproofing fabric of those units is within common property and not unit property.

[9] An image of the buildings showing the configuration of the various units within the buildings is annexed to this judgment. The residential units that are leaking appear in the dark shaded top section of the image. A street frontal view of the image from Queen Street shows the four buildings that make up this complex. [The same image is annexed to this judgment.]

[10] Everyone accepts that parts of this building complex leak, with roughly 75 per cent of the leaks affecting common property and the balance private property. The total remediation costs are approximately $4M. Everyone is agreed on the need for and scope of remediation. Everyone is also agreed that the extent of the damage qualifies for a s 48 scheme and that, given their failure to reach agreement on apportionment of remediation costs, a scheme is needed. The dispute is entirely about how the cost of the works under any such scheme should be apportioned between them.

Statutory framework

[5] Four statutory provisions are particularly material to this appeal. First, s 6 provides the criteria and framework for assigning the unit entitlement for each unit in a unit title complex as follows:

6 Unit entitlement

(1) For the purpose of determining the matters specified in subsection (3) of this section, before the unit plan is deposited there shall be assigned to every principal unit and every accessory unit a unit entitlement, to be fixed by ... a registered valuer within the meaning of the Valuers Act 1948 ... on the basis of the relative value of the unit in relation to each of the other units on the unit plan.

(2) Subject to paragraph (d) of section 19(5) and section 44(3) of this Act, no change shall be made in the unit entitlement of any unit after the unit plan is deposited.

(3) The matters referred to in subsection (1) of this section are—

(a) The proprietor’s share in the common property in accordance with section 9 of this Act;

(b) The extent of the proprietor's liability for damages and costs under section 14 of this Act;

(c) The extent of the proprietor’s obligation under section 15 of this Act in respect of contributions levied by the body corporate, and of his rights under that section on a distribution of any surplus money or personal property;

...

(g) Subject to section 48(5) of this Act, the proportion in which money (if any) received or held by the body corporate for distribution among the proprietors is to be distributed among them in accordance with section 45(7) of this Act;

...

[6] Second, s 9 provides the ownership structure for common property as follows:

9 Common property

(1) The common property shall be held by the proprietors of all the units as tenants in common in shares proportional to the unit entitlement in respect of their respective units:

Provided that nothing in this subsection shall affect the interests among themselves of the proprietors of a stratum estate in an individual unit.

(2) While the same person is proprietor of all the units, subsection (1) of this section shall apply as if there were different proprietors for each of the units.

(3) The proprietors of all the units may sell or lease part of the common property or may grant an easement over the whole or any part of it.

[7] Third, s 33 entitles a body corporate to recover repair costs from unit title holders in these circumstances:

33 Recovery of money expended for repairs and other work

Where the body corporate does any repair, work, or act which it is required or authorised by or under this Act or by or under any other Act to do (whether or not the repair, work, or act is done pursuant to any notice or order served on it by a local authority or public body) but the repair, work, or act is substantially for the benefit of 1 unit only, or is substantially for the benefit of some of the units only or benefits 1 or more of the units substantially more than it benefits the others or other of them, any expense incurred by it in doing the repair, work, or act shall be recoverable by it as a debt in any Court of competent jurisdiction in accordance with the following provisions—

(a) so far as the repair, work, or act benefits any unit by a distinct and ascertainable amount, the proprietor at the time when the expense was incurred and (subject to the provisions of section 36) the proprietor at the time when the action is instituted shall be jointly and severally liable for the debt; or

(b) so far as the amount of the debt is not met in accordance with the provisions of paragraph (a), it shall be apportioned among the units that derive a substantial benefit from the repair, work, or act rateably according to the unit entitlements of those units, and in the case of each such unit the proprietor at the time when the expense was incurred and (subject to section 36) the proprietor at the time when the action is instituted shall be jointly and severally liable for the amount apportioned to that unit:

provided that, if the Court considers that it would be inequitable to apportion the amount of the debt in proportion to the unit entitlements of the last-mentioned units, it may apportion that amount in relation to those units in such shares as it thinks fit, having regard to the relative benefits to those units.

[8] Fourth, s 48 authorises the Court to approve a scheme for remedial work following damage or destruction of buildings in this way:

48 Scheme following destruction or damage

(1) Where any building or other improvement comprised in any unit or 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, an administrator, the proprietor or one of the proprietors of a unit, or a registered mortgagee of a unit, by order settle a scheme including provisions—

(a) For the reinstatement in whole or in part of such building or other improvement; or

(b) For the transfer of units to the proprietors of the other units so as to form part of the common property.

(2) Where an order is made under paragraph (b) of subsection (1) of this section, the provisions of section 19 of this Act shall, so far as they are applicable, but subject to any order of the Court to the contrary, thereafter apply to any such transfer.

(3) A notice of any application made under subsection (1) of this section shall be served on the Registrar who shall thereupon enter on the supplementary record sheet a notification that application has been so made.

(4) On any application to the Court under subsection (1) of this section, any person having or claiming to have any estate or interest in any unit or in the land or in any part of the land or any insurer who has effected insurance on the buildings or other improvements comprised in any unit or in the land or any part thereof shall have the right to appear and be heard.

(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—

(a) Directing the application of any insurance money;

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

(c) Directing the deposit of an appropriate new unit plan; or

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

(6) The Court may from time to time cancel, vary, modify, or discharge any order made by it under this section.

(7) On any application under this section the Court may make such order for payment of costs as it thinks fit.

High Court

[9] The principal part of the proposed remedial work will be carried out on the new structures added to the existing buildings. As Duffy J recognised,[3] the small group of owners of units within those additions would gain the greatest benefit. However, if liability was assessed in accordance with the s 6 formula, the greatest financial burden, 63.41 per cent, would be borne by the owners of the 25 units on the lower levels constituted by the Board and the Gilbert Walker group.[4] That undisputed fact was at the forefront of the arguments advanced on appeal by Messrs Morley and Harris.
[10] The Board and the Gilbert Walker, Hayden Tate and Grove Darlow groups submitted four different scheme plans to the High Court for approval. All parties agreed on the scope and nature of the plan for physical repairs and its cost; they disagreed, however, on their respective responsibilities for payment.
[11] Duffy J summarised the scope and purpose of the schemes submitted by the Board and the Gilbert Walker group as follows:

[20] The focus of the scheme promoted by the [Board] and the Gilbert Walker respondents is very much on the practical physical benefits of the repairs of the unit owners. From that perspective, the units of the [Board] and the Gilbert Walker respondents are little affected by the leaks and, therefore, the consequences of remediation. Some of the units being repaired will be located in a separate building: for example, the [Board] has ground floor units in the Security and Lewis Eady buildings, whereas some of the required remediation of weatherproofing fabric is for new residential units that are part of the Met apartments which are in the Whitcombe and Tombes building. The actual units owned by the [Board] and the Gilbert Walker respondents are largely sound, weather-tight and well-functioning. For the most part, they and their tenants can probably operate in the complex without needing to set foot in the areas where the new residential units are located. Nor does it seem that the present leaky building problems pose any risk to the physical integrity of their units.

[21] The scheme promoted by the Hayden Tate respondents focuses primarily on the legal benefits that will flow from the remediation. These respondents will undoubtedly enjoy the most practical benefit from the remediation works as units that are not presently weather-tight and without Final Code Compliance Certificates will have those benefits once the works are carried out. Nonetheless, these respondents argue that since legally the weatherproofing fabric of much of the buildings’ exterior structures are common property, it is in the interests of all unit owners that any faults pertaining to those areas be remediated. In this regard, they argue that until the remediation is completed, the potential legal liability all owners face for remediation costs relating to common property, wherever it may be located in the complex, will reflect poorly on the values of all units.

[12] The parties called valuation evidence to provide a factual foundation for the competing schemes. Duffy J carefully summarised that evidence.[5] But, we do not need to address its detail. We are satisfied that the Board’s appeal falls for determination as a matter of statutory construction and principle not by reference to the valuation evidence. We respectfully adopt the Judge’s concluding observations that:

[35] The totality of the valuation evidence that was before the Court has led me to conclude that assessing the pre-remediation value of any unit in this complex is a difficult exercise, as the value of any one unit will necessarily reflect the legal liability to be attributed to that unit for contributing to the remediation costs of the common property. To take any commercial unit, for example, its pre-remediation value will necessarily be affected by whether this Court orders the owners’ contribution to the remediation costs will be determined by s 6 of the Act, or, at the other end of the spectrum, by the scheme for which the [Board] and the Gilbert Walker respondents seek approval, or something in between those two.

[36] Under Ms Nettleship’s approach, CT reference 160559, which is a Queen Street ground floor retail unit, has an unaffected (no weather-tight issues) value of $7,671,431 and a value as is of $7,280,000. Thus, the adjustment for remedial works is $387,063; whereas on the approach Messrs Cheyne and McGowan have adopted, the same unit has an unaffected value of $7,670,000 and a weather-tightness impact benefit of two percent, which reduces the value to $7,516,000 (being post-remediation value less weather-tightness benefit). On this approach, the adjustment for the remedial works for this unit is $153,400. The difference between $387,063 on the one hand and $153,400 is significant.

[37] It therefore becomes evident that any attempt to inform the Court of the benefits that any unit will enjoy from the remediation of the common property will necessarily entail circular reasoning, as the valuation exercise will necessarily involve a hypothesis of how the liability might be apportioned either under s 6 of the Act, or under any proposed s 48 scheme. Because the concerns of this complex are unique, there are no comparable sales that would allow the valuers to arrive at a pre-remediation value based on the usual approach to valuation involving analysis of comparable market sales.

[13] The argument before Duffy J focussed primarily on the nature and extent of the s 48 discretion to approve a remediation scheme which departs from the default provisions of s 6. In applying this Court’s decision in Tisch v Body Corporate No 318596,[6] Duffy J refused to approve the Board and Gilbert Walker schemes because in summary: (1) they provided a marked departure from the statutory apportionment of liability for repairs to common property;[7] (2) such a marked or significant departure from the Act could not be seen as fair and equitable in terms of s 48;[8] and (3) there were difficulties with approving a scheme which relied on apportioning liability in accordance with a formula according to a cost benefit analysis based on individual gain or loss from the costs of remediation.[9]
[14] Duffy J found as follows:

[58] I am left in a position where I consider that the only outcome that achieves fairness for all unit owners is one that apportions liability for costs of remediating common property in accordance with s 6 of the Act. Whilst on this occasion the application of the statutory formula for apportionment of common property costs appears to result in owners who derive little practical benefit individually from remediation being responsible for a large share of the costs, it will not necessarily follow that this will always be the case if the statutory formula is adhered to. On the other hand, if the statutory formula is departed from on this occasion and replaced with an approach that attempts to apportion liability for common property costs on the basis of a cost-benefit analysis, it is hard to see why a similar analysis would not be undertaken when other significant common property costs were required to be apportioned. But if this were the case, the manner of apportionment of common property costs would become uncertain. There would always be the likelihood that when one group of owners was seen to benefit in more ways than others from work done to common property that the others would perceive the need for a s 48 scheme to readjust this benefit. Such an outcome is contrary to the scheme of the Act, which has as its purpose a degree of certainty when it comes to assessing how liability for repair and maintenance costs relating to common property will be apportioned. I recognise that the Act has now been repealed, but since the current legislation requires me to determine this application under the former legislation, I must have regard to the purposes and policy of that legislation.

[15] The Judge also considered in some detail and dismissed a separate argument propounded in support of the Board and Gilbert Walker schemes based on s 33.[10]

Decision

[16] On appeal Messrs Morley and Harris maintain the primary arguments advanced in the High Court. In opposition Messrs Allan and Bigio support the judgment and Duffy J’s reasoning.
[17] Mr Morley observes that the Board’s scheme identified four factors justifying a departure from the statutory structure for cost allocation of remedial works. Three of those factors – the incidence of physical damage and benefit; the unusual and unique nature of the building complex; and the incidence of code compliance certificates – were not in issue. It was the fourth, the incidence of economic benefit, which attracted the primary debate.
[18] Messrs Morley and Harris rely on what they say is a gross disparity in benefits by reference to the valuation evidence. Counsel submit that the Judge erred by improperly fettering her otherwise wide statutory discretion. They point to her rejection of the objectors’ schemes on the ground that their proposed departure from the statutory scheme was “too great” and would not lead to fairness for all unit owners.[11] In this respect, they submit that in equating the default rules provided by s 6 strictly with fairness the Judge has misread Tisch and effectively replaced the statutory discretion with an inflexible rule.
[19] We do not accept this submission. We are satisfied that Duffy J neither misread Tisch nor erred by fettering her discretion. We largely endorse her reasoning. As this Court said in Tisch:

[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.

[20] The issue on this appeal is discrete. As noted, the overriding question is whether, within the context of the statutory discretion, the best interests of the unit owners as a whole justified the departures from the statutory scheme propounded by both objectors. As this Court pointed out in Tisch, when buying into a unit title development owners acquire contractual rights with a consequential expectation that legal relationships between them will be governed accordingly. We would add that they also assume contractual liabilities giving rise to the same expectation. Certainty is a central theme of the statutory and contractual regime.
[21] It is beyond question that acceptance of the schemes proposed by the Board and the Gilbert Walker group would interfere with the legal relationships created under the unit plan by completely recreating the parties’ established rights and obligations. A cost/benefit approach would, we are satisfied, have led to a result which was completely inconsistent, to adopt the phrase used in Tisch, with the statute and the rules.[12] In our judgment Duffy J was correct, first, to treat the scheme based upon the existing legal structure, settled in accordance with the formula provided by s 6(1), as the starting point for consideration and, second, to require a special or unique feature of a type which might justify a scheme that disregarded parties’ rights.
[22] When considering the interests of the unit holders as a whole an important if not decisive factor is that approval of the proposed schemes would, to the extent of the approvals, have a conversely prejudicial effect on the existing rights of others. The Judge was entitled to find that an argument based on perceived economic benefit was not sufficient to justify that course.[13] The statute gives express and detailed recognition to this concept of cross-subsidisation of costs, where disparities in benefit necessarily arise in maintaining and repairing common property in a unit title development. Section 6 proceeds from the certain premise of ownership of common property based solely on unit entitlement, with all the legal consequences provided by s 6(3) including liability for its repair.
[23] Accordingly, Duffy J correctly gave weight to the fact that it would have been apparent to all purchasers from the outset that the configuration of the common property was such that unit owners in one part of the complex could assume liability for repair and maintenance costs for common property located in other buildings. Each owner must have known also that the common property included a large part of the exterior cladding of the new structure – the leaky apartments; and that apportionment of repair costs would not necessarily be proportionate to the benefits derived.[14] In our judgment Duffy J had a sufficient basis to find that the objectors’ schemes did not give proper weight to the interlocking statutory property rights and obligations stemming from s 6.
[24] Moreover, as a matter of statutory construction, we are satisfied that when read as a whole s 48 was directed towards the Court’s approval of a plan for physical repair or reinstatement of property. Its apparent aim is to achieve a coordinated approach to the remediation work. While s 48 includes a power to direct payment of money to the body corporate by any person and to impose such terms and conditions as the Court thinks fit, the overriding element of the Court’s discretion is to make such orders “as it considers expedient or necessary for giving effect to the scheme ...”.
[25] There is nothing on the face of s 48(5) to suggest that the discretion is to be invoked according to the touchstone of relative benefits or that it is to be used in a manner designed to recreate settled rights and obligations between unit holders. The statutory discretion relating to what is expedient or necessary to give effect to the physical scheme is much more confined. Its focus is on what is required to ensure that the scheme can be implemented. In our judgment s 48 does not contemplate orders of the scope and effect proposed by the objectors.
[26] Mr Morley also relies upon Heath J’s judgment in Body Corporate 172108 v Meader.[15] That decision was made on an application for scheme approval under s 48. The property was a high rise unit title apartment development. The body corporate owned the exterior of levels 1 to 11; level 12 was owned by an individual proprietor. The cladding of the unit on level 12 was substantially different from that of the remainder of the building. Like this building, it suffered extensive damage caused by water leakage.
[27] In Meader all individual owners except the level 12 owner approved the body corporate’s scheme for remediation. The level 12 owner opposed because the work being undertaken on that level was relatively minor compared with the recladding of the rest of the building. The body corporate also argued that it should be allowed full responsibility for repair work to the exterior of level 12, thereby ensuring that all unit title owners would be protected from potential water ingress and a single code compliance certificate could be obtained.
[28] Heath J adopted a pragmatic approach on the basis that s 48 vested a wide discretion. He was satisfied that costs should be apportioned on a basis other than unit entitlement because of the unusual ownership structure. In the event he directed the level 12 owner to meet all costs associated with its repairs and to contribute a fixed amount to the cost of the balance of the repairs undertaken to common property. That amount was less than its unit entitlement.
[29] Heath J referred briefly to s 33, to support a conclusion that he was not constrained in exercising his powers under s 48(5).[16] We agree. But otherwise like all cases in this area Meader is largely fact specific, and was based primarily upon the unique ownership structure existing in that case. This complex is unusual, in that most of the exterior walls which form part of the common property of the whole complex were originally part of four separate buildings. However, the whole complex has been brought within a single unit plan, and there is nothing unique about the ownership structure.
[30] Mr Morley submits that Tisch endorsed the Meader approach. That is not an accurate summary. The Court referred primarily to the decision as an example of a scheme which was supported by a majority of owners but which the Judge found worked unfairly to the minority.[17]
[31] What is significant, however, is that in Tisch this Court construed the s 48 discretion much more narrowly than did Heath J in Meader. As already noted, in Tisch this Court held that the statutory discretion must be analysed according to legal provisions prevailing under the Act, starting with the statute and the rules. By contrast, Heath J took a much more expansive view in Meader, reasoning that it need only be exercised “judicially”, not arbitrarily or capriciously.[18]
[32] Furthermore as this Court noted in Tisch:

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

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.

[33] In Law v Tan Corporate Trustee Ltd, which was delivered after argument in this appeal, this Court reaffirmed:[19]

We accept as a general proposition that a scheme under s 48 should depart from the general principles of the Act and the terms of the [Body Corporate] rules no more than is necessary. We also accept that, as a general proposition, the owners in a unit title development are not expected to meet the costs of repairs to common property except in accordance with the levy system under the 1972 Act and the relevant [Body Corporate] rules. ...

[34] We are not calling into question the result in Meader. The decision was given in short order against a background of urgency and was designed as a fair and equitable result against the background of an unusual ownership structure. However, with respect, the judgment does not assist us here. We must follow Tisch.
[35] Messrs Morley and Harris seek support for their arguments from the terms of s 33 of the Act.[20] Mr Harris describes it as providing broadly that costs incurred by a body corporate in carrying out repairs or other work that substantially benefit some units more than others can be recovered from those enjoying the benefit of the work. He acknowledges that it operates retrospectively after work has been carried out and costs have been incurred, and cannot be used ahead of work commencing. However, he says, there is no logical or policy justification for reallocating costs on the basis of substantial benefit after remedial work has been carried out under s 33 but not before the full work has been carried out under s 48. He submits that Duffy J erred in finding otherwise.[21]
[36] We disagree and endorse the view expressed by Ellis J in Body Corporate 198245 v Wong that ss 33 and 48 are mutually exclusive.[22] An analysis of s 33 shows that:

• (a) It only applies where the body corporate carries out any repair, work or act that is required or authorised by the Act. In this respect, there is force in Duffy J’s view that s 33 was enacted to empower the body corporate to act in situations such as those provided by ss 15(1)(g) and 16, where it is bound to carry out work in compliance with a local authority or public body notice which includes work for both common property and individual units.[23] Section 33 provides the Body Corporate with the power to recover from the unit holder a “distinct and ascertainable amount” by which the unit holder takes a benefit.[24]
• (b) The value of the individual unit holder’s benefit must be capable of precise definition as a sum certain in order for it to be recoverable as a debt. In normal circumstances the measure of that benefit would be the cost of the work carried out on the unit.
• (c) The Court is specifically empowered to apportion liability (being the amount of indebtedness) in such amounts as it thinks fit, rather than in proportion to unit entitlements, where the unit holder with primary liability is unable to meet its debt.[25] Its absence from s 48 counts strongly against its relevance in this case.

[37] In Tisch the Court noted counsel’s agreement that s 33 did not apply to a s 48 remedial scheme relating to water damage caused by leakage.[26] Similarly, we are not persuaded that that provision is of any assistance in this case.
[38] In summary, we are satisfied that Duffy J adopted a balanced approach, correctly applying the statutory discretion by giving appropriate even if decisive weight to the carefully structured regime of rights and obligations introduced by the Act, and refusing to approve schemes for physical reinstatement which were based instead on perceptions of relative economic benefit. As this Court said in Tisch, relative benefits are not of themselves a sufficient reason to depart from the statutory regime.[27] Neither the Board nor the Gilbert Walker group has identified any other compelling reason.
[39] Accordingly, the objectors’ challenge to Duffy J’s decision must fail.

Result

[40] The appeal is dismissed.
[41] The appellant and second respondents must jointly pay costs to each of the third and fourth respondents for a standard appeal on a band A basis and usual disbursements.

Solicitors:
Hesketh Henry, Auckland for Appellant
Gilbert Walker, Auckland for Second Respondents
Grove Darlow & Partners, Auckland for Third Respondents
Martelli McKegg, Auckland for Fourth Respondents

---

[1] The Unit Titles Act 1972 was repealed by the Unit Titles Act 2010 which came into force on 20 June 2011. All statutory references are to the 1972 enactment which was in force at the material times.

[2] St Johns College Trust Board v Body Corporate 197230 [2012] NZHC 827.
[3] At [15].

[4] See at [4] above.

[5] At [30]–[34].

[6] Tisch v Body Corporate No 318596 [2011] NZCA 420, [2011] 3 NZLR 679.

[7] At [49].

[8] At [50].

[9] At [51]–[54] and [57].

[10] At [59]–[72].

[11] At [54].
[12] Tisch at [64].
[13] Tisch at [64].
[14] Tisch at [65].

[15] Body Corporate 172108 v Meader [2010] NZHC 187; (2010) 12 NZCPR 101 (HC).
[16] At [42] and [43].
[17] At [48].
[18] At [14].
[19] Law v Tan Corporate Trustee Ltd [2012] NZCA 620 at [73]. We note that the broad effect of the s 48 scheme approved in Law v Tan Corporate Trustee Ltd was to apportion the costs among the unit owners in accordance with the floor area of their unit rather than by their unit entitlement. This reflected the parties’ positions on appeal as outlined at [83] of the judgment.
[20] Section 33 is set out above at [7].
[21] At [59]–[72].
[22] Body Corporate 198245 v Wong [2012] NZHC 2676 at [54].
[23] At [61]–[64].
[24] Section 33(a).
[25] Section 33(b).
[26] At [25]. See also Law v Tan Corporate Trustee Ltd, above n 19, at [32] and [36].
[27] At [64].