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Body Corporate 114424 v LV Trust Holdings Limited [2014] NZCA 21 (20 February 2014)

Last Updated: 27 February 2014

     
IN THE COURT OF APPEAL OF NEW ZEALAND
BETWEEN
 Appellant
AND
 First Respondents
Second Respondent
Third Respondent
Fourth Respondents
Fifth Respondent
Sixth Respondent
Seventh Respondents
Eighth Respondents
Ninth Respondent

Tenth Respondents
Eleventh Respondents
Twelfth Respondent
Thirteenth Respondents
Fourteenth Respondents
Fifteenth Respondents
Sixteenth Respondent
Seventeenth Respondent
Eighteenth Respondent
Ninetieth Respondent
Twentieth Respondent

Twenty-First Respondent
Hearing:
12 November 2013
Court:
Ellen France, White and Winkelmann JJ
Counsel:
C T Walker for Appellant N R Campbell QC for First Respondents No appearance for other Respondents
Judgment:


JUDGMENT OF THE COURT

  1. The appeal is dismissed.
  2. The appellant is to pay the first respondents’ costs for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by White J)

Table of Contents

Para No
Introduction [1]
The cost allocation

Factual background [17]

Asher J’s reasons [25]

Discussion [26]
Compensation

Factual background [44]

Asher J’s reasons [48]

Discussion [50]
Result [66]

Introduction

[1] The 17 level Shangri-La residential apartment tower on Jervois Road, Herne Bay, Auckland, was a “leaky building” which cost over $6 million to make weatherproof by work which included recladding the south-western half of the building with a glass curtain wall.
[2] This appeal relates to a dispute between the majority of the owners of the units in the tower, represented by the appellant, Body Corporate 114424 (the Body Corporate), and the first respondents, LV Trust Holdings Ltd and KP Trust Holdings Ltd (the applicants). The applicants own the only unit in the tower which occupies more than one level, namely all of level 15 and part of level 16, which is the top level and which also contains a lift and services block and a deck.
[3] The dispute is about two issues: first, the allocation between the owners of the units of the costs incurred by the Body Corporate in carrying out the remedial work; and, second, a claim for compensation by the applicants for loss of use of their unit while the work was being carried out.
[4] The Shangri-La apartments are a unit title development completed in 1987. The unit plan for the development was deposited under the Unit Titles Act 1972. That Act has been repealed and replaced by the Unit Titles Act 2010 (the Act) which now applies to the development.[1]
[5] Under the 1972 Act, each unit owner had what was described as a “unit entitlement”.[2] This set the unit’s share of the proprietor’s liabilities, rights or entitlements for the purposes of a number of matters, including proportionate ownership of common property,[3] based on the value of a particular unit in relation to the others, as determined by a registered valuer.[4] Under the 2010 Act the proportionate liabilities rights and obligations of proprietors are determined by reference to each unit’s “utility interest”. By s 222 of the Act, the unit entitlements assigned under the 1972 Act are deemed to be an “ownership interest” assigned under s 38 of the 2010 Act. Where, as in the current proceeding, no special circumstances apply, an “ownership interest” is the same as the utility interest.[5] Accordingly, the parties’ utility interests under the Act are the same as their unit entitlements under the 1972 Act. As the owners of the largest unit, the applicants’ “utility interest” is significantly greater than the utility interests of the other owners.
[6] The Body Corporate is the governing body for all the owners under the Act.[6]
[7] The unit on the ground level of the tower, which is occupied by the building manager, is owned by the second respondent, Shangri-La Apartments Services Ltd. Every other unit owner is a shareholder in that company.
[8] The respondents include all the unit owners and a number of their mortgagees. Apart from the applicants, the other respondent owners support the Body Corporate while the mortgagees continue to abide the decision of the Court.
[9] In the High Court the applicants obtained interim orders for the approval of a scheme drafted by them under s 74 of the Act whereby:[7]
[10] The High Court subsequently approved a scheme implementing the interim orders and made orders for costs in favour of the applicants.[8]
[11] As the Body Corporate had argued that all the costs should be allocated on a utility interest basis, the practical effect of the approval of the applicants’ scheme relating to the allocation of the costs involved in the installation of the curtain wall was to reduce the amount that they would need to pay by some $80,000. While, because of their greater utility interest, the applicants would still end up paying more than the other unit owners, the differential between them and the other owners would be reduced.
[12] The Body Corporate appeals against the High Court’s approval of this aspect of the scheme and against the provision in the scheme relating to the payment of compensation.
[13] On the first issue, Mr Walker for the Body Corporate submits that the High Court Judge, Asher J, erred by asking himself the question what was “fair”, having regard to the relative benefits received by the various owners from the curtain wall work. Mr Walker submits that this approach is inconsistent with this Court’s decision in Tisch v Body Corporate No 318596,[9] and there was no good reason to depart from the scheme of the Act and of the Body Corporate rules, by which the costs of work to common property are borne according to unit entitlement. The Judge’s conclusion that all unit owners benefitted equally could not, in any event, be supported.
[14] On the second issue, Mr Walker submits that s 74(7)(b) of the Act does not permit orders to compensate owners for loss of use of their units during repair works and, alternatively, compensation was not justified in the present case. Mr Walker also submits that, in any event, the applicants did not prove that they would have been able to let their unit at market rates during the remedial works, had they had the use of it.
[15] Mr Campbell QC for the applicants supports the decision of Asher J.
[16] It is convenient to address the two issues raised on appeal separately and in each case by referring to the factual background in a little more detail and the reasons for Asher J’s decision before addressing the submissions for the Body Corporate.

The cost allocation

Factual background

[17] The Shangri-La apartments consist of a residential tower, with ancillary garage buildings, and a stair tower with walkways connecting the two towers. It is common ground that the stair tower is entirely common property and that the residential tower, including the walkways, is partly common property and partly unit property.
[18] The cost allocation dispute relates solely to the remedial work done on the residential tower and the walkways. There is no dispute that the cost of work to the stair tower should be allocated to all unit owners according to their utility interest.
[19] It is also common ground that the further factual background relevant to the first issue is correctly summarised by Asher J in the first High Court judgment[10] as follows:

[32] The apartments began to suffer from weathertightness issues shortly after construction was completed in 1987. Up to level 15 there was a standard form of external construction in the building. The leaks were in the windows and external walls primarily in the south-western side of the tower where there were no balconies and therefore overhangs to protect the windows from the weather. There were also other maintenance issues involving leaks in other areas, including leaks through the tiles in the balcony areas of level 16 which were in part the roof of the building below. By 2008 leaks through the windows were a major issue.

[33] The solution adopted to fix the leaking was to re-clad the south-western half of the apartment tower with a glass curtain wall, being the part where there were no balconies and the existing windows were most exposed. Around that half of the apartment tower the external windows were to be removed and the new glass curtain wall erected from level 1 upwards extending to the top of level 15. It did not have to extend to level 16 and did not do so, because level 16 was largely surrounded by balconies and the external walls and windows on that level did not leak.

[34] In effect the curtain wall was a new exterior cladding for the part of the building where it was erected. The existing windows were removed and the new glass curtain or sheath constituted the new windows. Inside those windows a new internal lining for each unit had to be built as well as a new sill board inside each of the new curtain wall windows, to fill the extra 200 to 300 millimetres of extra space created by the removal of the windows. Thus, there was work to be done inside each unit. There were other problems to which the building project was expanded to address, the most significant being the repair of the leaks in the Deccan [sic] parapet at level 16, forming part of the roof of the tower. Unit owners were in a position whereby they could request the contractors to do additional work for their units, and some availed themselves of that opportunity. The individual unit owners were to pay for that work, and that is not contentious.

[20] It is unnecessary for the purpose of determining the issues on appeal to refer in any detail to the meetings of the Body Corporate and the discussions between the parties relating to the proposals for the remedial work and the allocation of the payment of the costs involved that ultimately led to the applicants’ High Court application for approval of a scheme.[11] There is now no dispute about the need for a scheme under the Act. Indeed the Body Corporate put forward its own scheme to the High Court which would have authorised the collection of building levies on a unit entitlement (or utility interest) basis.
[21] Based on an assumption that the installation of the curtain wall and associated work was work to repair unit property rather than common property, the applicants’ original scheme proposed that the costs incurred in respect of this work should be shared equally between the owners of the 15 levels. The work on the walkways and the cleaning and painting of the balconies and residential tower was treated in the same way.
[22] Prior to the High Court hearing, however, there was a meeting of experts for the parties as a result of which the applicants’ expert agreed that the boundary between common property and unit property was at the medians or centre line of the external wall and balcony balustrades rather than at the external face of the external walls and windows.[12]
[23] On this basis the applicants changed their proposal for allocating these costs. Taking the view that the curtain wall was a replacement or substitute for the external walls and windows, the applicants considered that the cost of this work should be treated as a mix of unit property cost and common property cost in the same way as the external walls and windows were. Then, taking the view that it was likely to be difficult and costly to identify which costs were incurred in relation to unit property and which costs were incurred in relation to common property, the applicants put forward what they called their “pragmatic solution”: 50 per cent of the work was to be assumed to be work on unit property (and so 50 per cent of the cost allocated on the original equal share basis), and 50 per cent was to be assumed to be work on common property (and so 50 per cent of the cost allocated on a utility basis).
[24] The Body Corporate proposed in its scheme that the whole cost be borne on a utility interest basis.

Asher J’s reasons

[25] Asher J concluded that the applicants’ proposal should be preferred because:

(c) as the purpose of the Act in s 3 indicates, the emphasis is on the management of buildings “on a socially and economically sustainable basis”;[15]
(d) no party suggests that the Act (s 138(4)) should be strictly applied thereby requiring an exact apportionment of the work done contained in the unit and that done on the common property;[16]
(e) the assumption referred to in Tisch that the greater level of support from owners for the proposed scheme, the more likely it is to do justice,[17] does not invariably apply because the majority of owners may support a scheme that is unfair to the minority;[18]
(f) in accordance with the decision in Tisch, the scheme of the Act and the Body Corporate rules should be departed from no more than is reasonably necessary to achieve fairness between unit holders in the circumstances, but a consequence that is appreciably less than fair cannot be accepted;[19]
(g) the applicants’ proposal was fair in that it “broadly reflects the benefits achieved” and avoids the unfairness of the extra payment of $80,000 from the ownership of an extra floor “on which the relevant work was not done”;[20] and
(h) the Body Corporate’s alternative proposal was unfair in failing to reflect the particular position of the applicants’ unit.[21]

Discussion

[26] We do not agree with Mr Walker that Asher J’s decision is inconsistent with the judgment of this Court in Tisch. On the contrary, we consider that Asher J correctly applied the relevant principles from that decision to the present case.
[27] Tisch was concerned with the approval of a scheme under s 48 of the 1972 Act which has now been replaced by s 74 of the 2010 Act. It was common ground between the parties to the present appeal that, as there are no material differences between the two provisions, the decision in Tisch remains applicable to the interpretation and application of s 74.
[28] For present purposes, s 74(7) relevantly provides:

74 Scheme following destruction or damage

...

(7) In the exercise of its powers under subsections (2) and (3), the High Court may make any orders that 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; or

...

(d) imposing any terms and conditions that it thinks fit.

[29] In Tisch this Court rejected a submission that the discretionary power of the High Court under s 74(7)’s predecessor could be exercised without regard to the other provisions of the Act.[22] The Court accepted that a fundamental theme of the Act was the distinction between individual units (for which each registered proprietor takes responsibility) and common property (the domain of the body corporate).[23] Individual registered proprietors could only deal with individual property, whereas “common property” was owned by all proprietors and had to be managed by the body corporate for the common good.
[30] The Court in Tisch accepted that s 48 (now s 74) was an exception to the general rule that a body corporate might only undertake tasks associated with common property, but pointed out that:

[30] ... 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.

[31] In light of these general observations, the Court in Tisch held that, if the High Court has decided a scheme is appropriate, and is exercising its discretion to make “such orders as it considers expedient or necessary for giving effect to the scheme”:

[44] ... 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.

[32] The five guiding principles identified by the Court in order to achieve the outcome fairest to all unit holders are:
[33] Later in Tisch, the Court said:

[64] ... 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.

[34] It is clear from Asher J’s decision in the present case, which we have summarised,[29] that, in indicating a preference for the applicants’ scheme, he was aiming to balance the interests of each unit holder in a way that imposed terms that achieved the outcome fairest to all unit holders in accordance with the overarching guidance required by Tisch. In particular, Asher J was satisfied that in this case the views of the majority should not be accepted as that would be unfair to the minority (the applicants). He was also satisfied that, in order to achieve fairness between the unit holders, it was necessary to depart from the scheme of the Act in respect of 50 per cent of the costs incurred in the installation of the curtain wall and associated work. In doing so, Asher J correctly applied the relevant guiding principles identified in Tisch.
[35] The submissions for the Body Corporate seem to overlook the fact that the curtain wall and associated work involved both unit property and common property work. To allocate 100 per cent of the costs involved on a utility interest basis, as proposed by the Body Corporate, would therefore clearly be unfair to the applicants whose unit in this respect had the same amount of work done to it as the other units in the tower.
[36] The submissions for the Body Corporate also seem to overlook the fact that neither scheme sought a strict approach to the allocation of the costs incurred as between the work done on unit property and common property. As Asher J said:

[53] The limitations of a strict Body Corporate/unit owner division based on where the repairs have been carried out are demonstrated by this case where neither side chooses to adopt such an approach for the good reason that it would be unnecessarily rigid and the work was done, save for the limited amount of work carried out at the instruction of individual owners, for the general benefit of all owners, even when it was proceeding inside the units.

[37] The issue was therefore one of obtaining fairness as between the owners of the units in the tower. We agree with Asher J that the applicants’ scheme obtained the requisite fairness.
[38] The issue was not one of assessing relative “benefits” in the manner criticised by the Court in Tisch. In our view Asher J did not err in this way when he referred to “benefits”. He was using the expression as a proxy for what was fair in this case where the choice was between two schemes neither of which was strictly consistent with the Act.
[39] In our view the 50/50 approach adopted by the applicants and approved by Asher J achieves fairness in the circumstances of this case. In this respect we adopt what Allan J said in Body Corporate 198072 v Bank of New Zealand:[30]

[95] I consider the blended formula approach appearing in the scheme to represent an appropriate solution in this case. The unit entitlement element of the formula reflects the proper approach to the sharing of common property repair costs between owners, while the introduction of a calculation based on the relative percentages of exterior wall area forming part of each unit reflects the underlying legal liability of each owner for those costs of repair. The two elements of the formula are weighted equally. The result is, in my view, that while there may be an element of cross-subsidisation by one proprietor of another, it will be relatively limited, and it is justified by the unusual configuration of the building. In other words, the formula reflects an equitable solution to a difficult costs allocation problem.

[40] For completeness, we address two further less significant submissions for the Body Corporate on this aspect of the appeal.
[41] First, Mr Walker submits that the works were commenced and progressed by the Body Corporate in the expectation that the costs would be met by all unit owners, including the applicants, according to utility interest. While the representative of the applicants may have said at one stage that he would pay on a unit entitlement basis (because he was told that it was the only legal way to strike the levy), the applicants subsequently voted against the relevant resolutions.[31] There is nothing in this submission.
[42] Second, Mr Walker submits that, contrary to the third principle in Tisch, the applicants are seeking a retrospective scheme different from that which has been implemented. In this case, where the applicants voted against the relevant resolutions and later discovered that their unit would suffer more disruption than any other unit, we do not consider that the third principle prevents approval of the applicants’ scheme.
[43] As we therefore agree with Asher J’s decision on the cost allocation issue, we also agree with his subsequent judgment approving the relevant part of the scheme implementing his decision on this issue.[32]

Compensation

Factual background

[44] In the High Court there was ultimately no difference between the parties as to the factual background to the applicants’ claim for compensation.[33] It was based on the uncontested fact that during the remedial work to the residental tower the applicants were deprived of access to their unit for a period of 18 months while the other unit owners only had to vacate their units for periods of approximately five weeks.[34]
[45] The reasons why the applicants were deprived of access to their unit for so much longer than the other unit owners are explained by Asher J in his first judgment.[35] In summary they are:
[46] Against this background, Asher J had little difficulty in finding that the remedial work done to level 15 and 16 was necessary to make the apartment tower weatherproof and that therefore the use of the applicants’ unit for this purpose during the 18 month period was for the common benefit of all unit owners.[36]
[47] The applicants’ unit, which had been tenanted, was vacated in January 2011. In providing the Body Corporate with access to their unit, the applicants expressly reserved their right to compensation.

Asher J’s reasons

[48] Asher J accepted that the Act was silent on the issue of compensation, but held that, as the Court had power under s 74(7) (and its predecessor) to order payment of a sum of money by the Body Corporate to any person, it was not prohibited from awarding compensation in an appropriate case.[37] While there was no case in which compensation had been ordered, there was also no case in which it had been refused.
[49] Asher J then decided to exercise the Court’s jurisdiction to make an order for compensation in favour of the applicants for the following reasons:

[84] A scheme must do equity between unit owners. A gross inequity should not be tolerated. In my view it would have been a gross inequity to have required the applicants to give up possession of unit P for a period that exceeded the loss of use of other units by approximately 17 months, and to have not provided compensation. The fact that the work has now been done and what are sought are retrospective orders does not change that position. The loss of a valuable home for 17 months is undoubtedly a significant event. It can be assumed that the rental value of the property for such a period would be very considerable indeed, the unit occupying as it did the top two floors of an apartment building on a ridge by Jervois Road in Herne Bay overlooking the harbour and the city.

[85] The respondents pointed out that there was no legal wrong by the Body Corporate or the other unit owners. They argued that a compensation order amounts to imposing a financial penalty where there has been no fault. However, it is significant that no merits argument was put to me as to why such a compensatory order should not be made for the applicants. It was not disputed that the applicants had lost possession for much longer than the other unit owners, and for the common benefit. The arguments rather centred on the fact that there was no jurisdiction to make such an order, or that the Court’s discretion to approve schemes should not go so far as encompassing compensation orders.

[86] While the discretions under ss 48 and 74 are not unfettered and must be exercised in a principled way, there is no barrier to a compensatory award. Where it is patent that compensation is necessary to do equity between unit owners, then such compensation can and should be part of this scheme. Given the scale of the loss to the applicants, it follows that I find for them on this point.

Discussion

[50] On appeal the Body Corporate has attempted to challenge aspects of the factual findings made by Asher J in the High Court relating to the length of time the applicants were deprived of access to their unit and the extent to which that access was required for work for the benefit of all unit owners. We have not been persuaded by the submissions for the Body Corporate in support of these challenges to the factual findings.
[51] There can be little doubt that all work relating to the installation and subsequent strengthening of the beams from which the curtain wall was to be hung was for the benefit of all unit owners.
[52] We also accept Mr Campbell’s submissions for the applicants that the evidence establishes that most of the other work for which access was required to the applicants’ unit was also for the benefit of all unit owners, including work rerouting the tower’s (not the applicants’ unit’s) waste water and server vents through the ceiling of level 15, rectifying the leaks in the level 16 deck and parapet (common property), upgrading the roof above the lift room and storage and tank room on level 16 (common property), capping and flashing the top of the curtain wall at the parapet around level 16, and repairing damage to the applicants’ unit. As Mr Walker accepted, the damage to the applicants’ unit was caused by the other work done by the Body Corporate’s contractors.
[53] On the basis of all the relevant evidence, we have little difficulty in concluding that Asher J was right to find that the applicants were deprived of access to their unit to enable the remedial work to be carried out for the common benefit of all unit owners and that the relevant period during which they were deprived of access was from 17 March 2011 to 5 October 2012, some 18 months.
[54] In particular, we do not accept Mr Walker’s submissions that the work to level 16 “primarily benefitted” the applicants or that there “is no reason to think that other owners did not experience equivalent problems”. The work to rectify the leaks in level 16 was clearly for the benefit of all unit owners. There was no evidence from any of the other unit owners to suggest that they had experienced anything like the inconvenience experienced by the applicants.
[55] Mr Walker’s attempts to suggest that the applicants were not deprived of access to their unit for all of the 18 months overlooked the fact that from a practical point of view there was no time in the period from 17 March 2011 to 5 October 2012 when the applicants could have re-let their unit.
[56] As far as the jurisdiction of the Court to make an order for compensation is concerned, there is no doubt that under s 74(7)(b) of the Act the High Court, when approving a scheme, is empowered to make “any orders” that it considers “expedient or necessary” for giving effect to the scheme, including an order directing “payment of money” by the body corporate to any person. We see no reason why this power should not be construed to enable the Court to order the payment of compensation in an appropriate case.
[57] The text of the statutory provision is in sufficiently general terms to encompass such an order.[38] The purpose of the provision is to enable the Court to make all appropriate ancillary orders when approving a scheme. An order for the payment of compensation under a scheme designed to resolve issues following the destruction or damage of any building to which the Act applies is consistent with that purpose.
[58] While jurisdiction may not be conferred on the Court by agreement, Mr Walker does accept that the power under s 74(7)(b) might conceivably extend to a power to order compensation in an appropriate case. He submits, however, that the power is not unconstrained and must be exercised in light of the scheme of the Act. We agree.
[59] The High Court should not be encouraged to open the floodgates to a multitude of claims for compensation. There will need to be a significant loss for a particular unit owner before a claim for compensation should be contemplated. As Asher J said:

[82] It will of course always be the case that there will be a measure of give and take from Body Corporate owners and particularly that on occasion unit owners will have to allow occupation and accept inconvenience without compensation to enable work to be done for the benefit of all the units. Mr Bigio [High Court counsel for the Body Corporate] has a point when he observes that to accept that there can be compensation in such circumstances could give rise to a whole new area of claims and potential areas of dispute. Indeed, a Court would have little sympathy for claims based on modest differentials in inconvenience. A degree of cost or inconvenience can be seen as part of the inevitable give and take of body corporate life, even when it does not necessarily fall equally on each owner.

[60] In the present case we are satisfied, largely for the reasons given by Asher J, that it was appropriate for the High Court to make the order for compensation in favour of the applicants for the period by which their loss of use of their unit exceeded six weeks, being longer than the period all the other owners were deprived of the use of their units.[39] Here the applicants were clearly put to a much greater level of inconvenience and disadvantage than any of the other unit owners as a result of giving up possession of their unit for that longer period. Bearing in mind that their unit was used during this period for the common benefit of all unit owners, we consider that it would have been inequitable to deny them any compensation.
[61] We do not accept Mr Walker’s submission that the existence of provisions in the Act obliging proprietors to give access to their units to effect repairs “at all reasonable hours” prevents the Court from exercising its discretion under s 74(7)(b) to order compensation in an appropriate case. The statutory obligation to provide reasonable access for this purpose is separate from the right to seek compensation for loss suffered as a result of the need to provide reasonable access.
[62] Nor do we accept Mr Walker’s submission that the absence of evidence for the applicants that they could have rented out their unit at a market rate for the additional period means that no order for compensation should be made. This confuses the right to an order for compensation with the appropriate method for the calculation of the compensation.
[63] The compensation clause in the scheme provides that the compensation is to be the “full market rental” for the applicants’ unit for the relevant period as determined by an independent registered valuer unless the parties otherwise agree.[40] As Mr Campbell acknowledged in argument before us, it will be for the valuer to work out whether the applicants’ unit could have been rented at full value during the relevant period. Mr Campbell conceded that the loss of amenity value should be factored in by the valuer as a matter of principle relevant to the valuation exercise. That exercise will involve determining the full market rental for the unit taking into account factors that reasonable persons in the shoes of the parties would have considered in arriving at an agreed figure.[41]
[64] Finally, we do not accept Mr Walker’s submission that the compensation order should be assessed prospectively rather than retrospectively. As Mr Campbell points out, the compensation clause in the scheme always provided that compensation would depend on the actual (not estimated) period of loss of use and the Body Corporate itself proposed that any compensation should be assessed once the work was completed.
[65] As we therefore agree with Asher J’s decision on the compensation issue, we also agree with his subsequent judgment approving the relevant part of the scheme implementing his decision on this issue.[42]

Result

[66] For the reasons we have given, the appeal is dismissed.
[67] As costs should follow the event, the Body Corporate is to pay the applicants’ costs for a standard appeal on a band A basis and usual disbursements.







Solicitors:
Gilbert Walker, Auckland for Appellant
ASCO Agmen-Smith & Co, Auckland for First Respondents

[1] Unit Titles Act 2010 [Act], s 219.

[2] Unit Titles Act 1972, s 6.

[3] Section 6(3). A significant change introduced by the 2010 Act is that legal ownership of the common property is vested in the body corporate: see s 54(1).

[4] Section 6(1).

[5] Act, s 39(2).

[6] Section 3(b).

[7] LV Trust Holdings Ltd v Body Corporate 114424 [2012] NZHC 3578, (2013) 14 NZCPR 344 [first High Court judgment].

[8] LV Trust Holdings Ltd v Body Corporate 114424 [2013] NZHC 1764 [second High Court judgment].

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

[10] First High Court judgment, above n 7.

[11] See First High Court judgment, above n 7, at [35]–[39].

[12] First High Court judgment, above n 7, at [41] and see Survey Regulations 1972, reg 41(6).

[13] At [45] and [55].

[14] At [50].

[15] At [56]–[57] and [64].

[16] At [52]–[53] and [62].

[17] Tisch v Body Corporate No 318596, above n 9, at [45].

[18] First High Court judgment, above n 7, at [44] and [60]–[61].

[19] At [62] and [64].

[20] At [65]–[66].

[21] At [67].

[22] Tisch v Body Corporate No 318596, above n 9, at [28].

[23] At [29].

[24] At [45]. See also Body Corporate 172108 v Meader [2010] NZHC 187; (2011) 12 NZCPR 101 (HC).

[25] At [46].

[26] At [47].

[27] At [48].

[28] At [49].

[29] Above at [25].

[30] Body Corporate 198072 v Bank of New Zealand [2011] 3 NZLR 249 (HC).

[31] First High Court judgment, above n 7, at [36].

[32] Second High Court judgment, above n 8, at [8] and approved scheme, cl 9.2.

[33] First High Court judgment, above n 7, at [69].

[34] At [78].

[35] At [70]–[77].

[36] At [72], [81] and [85].

[37] At [80]–[83].

[38] Compare the specific compensation provision in the Unit Titles Act 2001 (ACT), s 152(e).

[39] Approved scheme at cls 10.1 and 10.2.

[40] Approved scheme at cl 10.4.

[41] Modick RC Ltd v Mahoney [1992] 1 NZLR 150 (CA) at 154.

[42] Second High Court judgment, above n 8, at [8] and approved scheme at cl 10.2.

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