Body Corporate 172108 v Manchester Securities Ltd [2013] NZHC 2441 (18 September 2013)

Last Updated: 10 October 2013

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2009-404-6868 [2013] NZHC 2441

BETWEEN	BODY CORPORATE 172108 Applicant
AND	MANCHESTER SECURITIES LTD Respondent

Hearing:	21 May 2013
Counsel:	TJG Allan and L Hawes-Gandar for Applicant MC Harris for Respondent
Judgment:	18 September 2013

_{JUDGMENT OF KATZ J}

This judgment was delivered by me on 18 September 2013 at 3:00 pm

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors:

Grove Darlow & Partners, Auckland

Gilbert/Walker, Auckland

BODY CORPORATE 172108 v MANCHESTER SECURITIES LTD [2013] NZHC 2441 [18 September 2013]

Introduction

[1] These proceedings concern a 12-storey unit development in Auckland known as Hobson Street Towers. Hobson Street Towers has weathertightness issues. A remediation scheme under the Unit Titles Act 1972 (“1972 Act”) was settled by this Court in 2010. That remediation scheme specifies how the costs of remedying the weathertightness defects in the building are to be allocated between the various unit holders.

[2] The Body Corporate now applies to vary the remediation scheme. Manchester Securities Limited (“Manchester”) has applied to dismiss the Body Corporate’s application. Manchester owns the top floor unit in Hobson Street Towers and would likely bear a greater share of the remediation costs if the scheme was varied as proposed. Manchester submits that this Court does not have jurisdiction to vary the remediation scheme, due to the repeal of the 1972 Act on 20

June 2011 by s 218 of the Unit Titles Act 2010 (“2010 Act”). Manchester submits that the Body Corporate must apply for an entirely new remediation scheme, under the 2010 Act.

[3] Determination of Manchester’s dismissal application turns on two key issues:

(i) Have the 2009 proceedings which settled the terms of the remediation scheme now been “completed?” (If not, the 1972 Act will continue to apply, pursuant to a transitional provision in the 2010 Act.)

(ii) Alternatively, does the Body Corporate have an “existing right” in terms of ss 17 and 18 of the Interpretation Act 1999? (The effect of those sections is that the repeal of an enactment does not affect the completion of a matter or thing or the bringing or completion of proceedings that relate to an “existing right”.)

Further background

[4] Under the 1972 Act, Body Corporates were ordinarily responsible for repairing and maintaining common property1 and unit owners were responsible for unit property.2 Owners generally contributed to the Body Corporate’s expenses based on unit entitlement shares.3

[5] The unit title scheme for Hobson Street Towers has an unusual feature that lies at the heart of the parties’ dispute. The exterior of levels 1 to 11 is common property, owned by the Body Corporate. However, Manchester’s level 12 unit covers the whole of the 12th floor and was constructed separately from the floors below. It is clad in different materials. The unit title scheme provided that the exterior of Manchester’s unit is not common property, but forms part of

Manchester’s level 12 unit.

[6] By 2009 major remedial work to Hobson Street Towers, including full replacement of the exterior cladding to levels 1 to 11, was being planned. Remedial work was also required to Manchester’s level 12 unit, although the understanding at the time appears to have been that the remedial work required to the cladding of that unit was less extensive than in relation to the rest of the building.

[7] The Body Corporate commenced this proceeding in late 2009, seeking to settle a remediation scheme under s 48 of the 1972 Act. Section 48 relevantly provides as follows:

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

1 _{Unit Titles Act 1972, s 15(f) (now see s 138(1) of the 2010 Act).}

2 _{Ibid, cl(1)(e) of Sch 2 (now see s 80(1)(g) of the 2010 Act).}

3 Ibid, s 15(2)(c) (now see s 121 of the 2010 Act).

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

...

(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.

(Emphasis added.)

[8] Heath J settled the terms of the remediation scheme, which were appended to orders of the Court.4 The remediation scheme capped Manchester’s total costs exposure at 11.88% of the costs of remediating the whole building. This reflected Manchester’s 11.88% ownership interest in the building. It appears to have been envisaged that Manchester would, in essence, meet the costs of remediating its own unit and then make a “top up” contribution (up to the 11.88% cap) towards the costs

of remediating the common property.

[9] The remedial work to Hobson Street Towers has commenced. It now appears, however, that Manchester’s costs of carrying out work to its level 12 unit is likely to exceed 11.88% of the total building remediation costs. In that event, Manchester will not have to make any contribution to the costs of remediating the rest of the building, including the areas that are common property.

[10] The Body Corporate says that such an outcome would be contrary to the

parties (and the Court’s) understanding and expectation when the remediation

_{scheme was settled in 2010. It says that the remediation scheme was settled on the}

4 Body Corporate 172108 v Meader [2010] NZHC 187; (2011) 12 NZCPR 101 (HC).

basis that, in addition to repairing its own unit, Manchester would be making a reasonable contribution towards remediation of the common areas. The Body Corporate says that Manchester represented to the Court and the Body Corporate that it would do one thing (repair level 12), while it now intends to do something entirely different (redevelop level 12). Against this background, the Body Corporate seeks orders under s 48(6) of the 1972 Act modifying or varying the cost allocation aspects of the remediation scheme.

Does the transitional provision of the 2010 Act apply?

[11] The first issue is whether the Body Corporate’s variation application falls

within the scope of the transitional provision in the 2010 Act.

[12] The 1972 Act was repealed by the 2010 Act, which includes a transitional provision which relevantly provides as follows:

227 Transitional provision for proceedings under former Act

(1) Except as provided in subsection (2), any proceedings that were commenced, but not completed, before the date of commencement of this section [20 June 2011] must be continued and completed in all respects under the Unit Titles Act 1972 as if this Act had not been passed.

[13] If s 227 applies, then the Body Corporate can seek to vary the scheme by way of application in the original 2009 proceedings, under the 1972 Act (as it has). If s 227 does not apply, the Body Corporate must file fresh proceedings, seeking the Court’s approval to settle an entirely new scheme, under the 2010 Act.

Submissions

[14] The transitional provision will not apply if, by 20 June 2011 (when the 1972

Act was repealed) the 2009 proceedings had been completed. Prior to 20 June 2011

Heath J had settled the remediation scheme by way of Court orders which were sealed by the Body Corporate. Following that, his Honour delivered a costs judgment. Manchester submitted that the proceedings were by that stage completed and that the proceeding does not remain incomplete until such time as the

remediation scheme itself is completed. The proceeding and the remediation scheme are not synonymous.

[15] The Body Corporate submitted to the contrary. The proceeding is not completed “in all respects” until the remediation scheme is completed. Until that time the 1972 Act allows for an application to be made to cancel, vary, modify or discharge the remediation scheme. Such an application can, and should, be made in the original proceedings in which the scheme was settled.

Discussion

[16] It is clear from both the 1972 Act and prior decisions and orders in these proceedings that the parties had an ongoing ability to apply to the Court for orders or directions in relation to the remediation scheme, following the sealing of the orders settling the scheme and the subsequent costs judgment. This is inconsistent with the

2009 proceedings having been completed in all respects.

[17] For example, in the first judgment of this Court, reference was made to s

48(6) of the 1972 Act. It was noted that “once approved, a scheme is not set in concrete. Changing circumstances can lead to the Court, from time to time, to cancel, vary, modify or discharge any order”.5 In addition, the sealed Court orders sanctioning the remediation scheme provided that the provisions of the scheme were binding “until the scheme is completed and fully paid for”. Prior to that time the orders reserve leave to the parties to apply for any ancillary orders or directions

necessary to give effect to the terms of the scheme.

[18] In addition, despite the sealing of orders settling the terms of the scheme, there remained an express statutory power to “from time to time” apply to cancel, vary, modify or discharge those orders, pursuant to s 48 of the 1972 Act. This further supports the conclusion that the proceedings settling the remediation scheme were

_{not finally “completed” when the orders were sealed.}

5 At [22].

[19] It follows that this Court was not functus officio as at the date the scheme was settled and the orders sealed. The Court retained a residual jurisdiction to cancel, vary, modify or discharge the scheme (under s 48) or make ancillary orders or directions necessary to give effect to it (under the terms of the Court orders).

[20] There is no provision under the 2010 Act enabling a Court to vary a scheme settled under the 1972 Act. Manchester accepted that, if its interpretation of s 227 of the 2010 Act was correct, the only way to now vary a scheme settled under the 1972

Act would be for a party to apply under s 74 of the 2010 Act for an entirely new scheme to be settled. On Manchester’s interpretation of s 227, no matter how minor the proposed variation, an entirely new scheme would be necessary. A Court would have no ongoing residual discretion to vary a remediation scheme settled under the

1972 Act. This would be the case even if the proposed variation was consented to.

[21] Applying for a new scheme would require a new proceeding, with potentially onerous and expensive notice and service requirements. For example, over 40 respondents were originally named as parties and served with these proceedings. They included all unit holders and all identifiable charge holders and insurers. However, to date, the Body Corporate’s application to vary the scheme has only been

served on Manchester (the 37th respondent) on the basis that it is the only party

prejudiced by the variation application. The Body Corporate has indicated that it intends to seek the Court’s leave not to serve the other respondents. (Obviously, it is not possible to express any view at this stage as to whether such an application will be successful.)

[22] If a new scheme under the 2010 Act is required, unit holders will not necessarily be limited to only opposing those aspects of the proposed scheme that are “new”. For example, where units have changed hands subsequent to the original scheme being settled, new unit holders may well have new issues or grounds of opposition they wish to raise in respect of the proposed scheme. The Court would need to consider and determine such issues on their merits (albeit in the context of a prior scheme having been approved). Considerable delay, expense and uncertainty could result. This would clearly be undesirable, particularly where the works under the original remediation scheme are partially completed.

[23] I find it difficult to accept that Parliament can have intended such an outcome. As noted above, Parliament did not include any provision under the 2010

Act enabling parties to existing remediation schemes (of which there are presumably a significant number) to seek to cancel, vary, modify or discharge those schemes under the 2010 Act. That is presumably because Parliament envisaged that, in relation to existing remediation schemes, such applications would continue to be made in the original proceedings, under the 1972 Act, until those schemes had been completed, cancelled or discharged.

[24] Although there is a paucity of authority directly on point, I note that the following authorities appear to indirectly support the conclusion I have reached:

(a) In Fraser v Body Corporate S636621(No 4)6 the Court made an order cancelling a scheme under s 48(6) in the same proceeding in which it had originally settled the scheme. Obviously if the Court had been functus officio once the relevant scheme had been settled this would not have been possible.

(b) In Tisch Body Corporate No. 3185967 (which was determined after the 2010 Act had come into force) the Court of Appeal commented that s 48(6) of the 1972 “empowers the Court to cancel or vary any order it makes”.

(c) In Body Corporate 95035 v Chang (No 2)8 the Court made an order sanctioning a scheme under s 48 of the 1972 Act and reserving “leave to any party to apply to the Court to vary the terms of the scheme”. This order was made after the 1972 Act had been repealed and therefore demonstrates the Court’s view in that case that it has jurisdiction to revisit a s 48 scheme after it has been settled even after

_{the 1972 Act has been repealed.}

6 _{Fraser v Body Corporate S636621(No 4) HC Auckland CIV-2008-470-772, 11 February 2011.}

7 _{Tisch v Body Corporate No. 318596 [2011] 3 NZLR 679 (CA) at [3].}

8 Body Corporate 95035 v Chang (No 2) [2012] NZHC 2808.

[25] In conclusion, the 2009 proceedings had not been completed in all respects prior to the 2010 Act coming into force. Accordingly, pursuant to s 227 of the 2010

Act, the Body Corporate retains an ability to apply to this Court to vary the remediation scheme pursuant to s 48 of the 1972 Act. It is not required to apply for an entirely new remediation scheme to be settled under the 2010 Act.

Do sections 17 and 18 of the Interpretation Act 1999 apply?

[26] In the alternative, the Body Corporate submitted that the effect of ss 17 and

18 of the Interpretation Act 1999 is to enable it to bring its variation application under s 48 of the 1972 Act. Given my conclusion as to the correct interpretation of s

227 of the 2010 Act, it is not strictly necessary to consider this alternative argument. I will, however, address it briefly.

[27] Sections 17 and 18 essentially preserve existing rights or interests when a statute is repealed. The Body Corporate submitted that it has an existing right or interest under s 48 of the 1972 Act to apply to vary or amend the scheme. It submitted that the true effect of ss 17 and 18 of the Interpretation Act is to protect all parties to the remediation scheme by allowing them to bring proceedings to enforce their rights under it, despite the repeal of the 1972 Act.

[28] Manchester submitted, on the other hand, that the “right” to seek to vary or amend the scheme is not a relevant right or interest in terms of ss 17 and 18 of the Interpretation Act 1999, in light of the authorities as to how those sections should be interpreted.

Discussion

[29] Section 17(1)(b) of the Interpretation Act 1999 provides that the repeal of an enactment does not affect an existing right, interest, title, immunity, or duty. This equates to the common law rule that statutes are not to be construed retrospectively

_{so as to affect substantive rights.}9 _{Further, if a right is preserved by s 17, then s 18}

9. JF Burrows and RI Carter Statute Law in New Zealand (4th ed, LexisNexis, Wellington, 2009), chapter 19.

allows for proceedings to be taken subsequent to repeal of the statute to enforce that right.

[30] A number of cases have considered what does, and what does not, constitute a “right” in terms of s17(1)(b). The distinction is often a fine one. In Dental Council of New Zealand v Bell10 Tipping J discussed s 20(e) of the Acts Interpretation Act

1924 (which employed the concept of “accrued rights”) as follows:

The essence of an accrued right in this context is that something must have happened to give the person claiming the right the ability to prosecute the same to judgment. Although the right need not have matured into formal legal relief the facts entitling the person concerned to relief must have happened before the repeal in such a form that the right, although not having matured into judgment or relief, can nevertheless be described as inchoate or contingent. As Lord Evershed said in the Privy Council, the distinction between what is and what is not a right for present purposes must often be one of the great fineness, but it must be something more than a hope or expectation or a spes as it is sometimes called.

[31] The mere possibility that at some future time a person may be able to take advantage of the provisions of a statute is not enough.11 Similarly, it is well established that the “existing rights” that survive the repeal of an enactment do not extend to the mere possibility of a benefit to come from the exercise of a discretion. The learned authors of Statute Law in New Zealand summarise the position as follows:12

In the same way, if someone has applied for a discretionary benefit under a statute before its repeal, [s 17(1)(b)] gives him or her no right to continue with the application after the repeal, for no right was acquired before the repeal. At most the person had a hope, or even an expectation, that the discretion would be exercised in his or her favour, but no right that it would be. “[A]n application for a purely discretionary benefit should not be treated, for the purposes of s 20(e)(iii) [of the Acts Interpretation Act 1924] as giving even an inchoate or contingent right to such a benefit”.13

10 Dental Council of New Zealand v Bell [1992] 1 NZLR 438 at 443. See also Wellington

Diocesan Board of Trustees v Wairarapa Market Buildings Limited [1974] 2 NZLR 562 (CA) at

570-571 per Cooke J; Belcher v Belcher (No 2)[1978] 2 NZLR 253 (CA) at 256 per Cooke J (for Richmond P and Woodhouse J); Scott v Scott HC Tauranga, CIV-2004-470-0094; CIV-2004-

_{470-0957, 5 August 2009, Stevens J at [31].}

11 JF Burrows and RI Carter, above n 9, chapter 19, citing Abbott v Minister of Lands [1895] AC

_{425 at 431 (PC) per Lord Herschell.}

12 _{At 618-619.}

13. Wellington Diocesan Board of Trustees v Wairarapa Market Buildings Ltd [1974] 2 NZLR 562 (HC) at 571 per Cooke J.

[32] In Belcher v Belcher the Court found that Mr Belcher, who had applied for a discretionary order under the Matrimonial Property Act 1963, had acquired no “right” when that Act was repealed.14 The present case is one step further removed from the Belcher scenario, because no application to vary the remediation scheme had been filed at the date the 1972 Act was repealed.

[33] It follows that, in my view, the Body Corporate did not have a relevant

“right” in terms of s 17(1)(b) of the Interpretation Act, at the time of the repeal of the

1972 Act. At most the Body Corporate had an entitlement to apply to the Court to vary the remediation scheme. Whether or not such an application was granted would be within the discretion of the Court. The Body Corporate had no “right” to have the remediation scheme varied and accordingly the Body Corporate has no substantive right that has survived the repeal of the 1972 Act. Sections 17 and 18 of the Interpretation Act accordingly do not assist the Body Corporate.

Conclusion

[34] In conclusion, it is my view that the correct interpretation of s 227 of the

2010 Act is that an application to cancel, vary, modify or discharge the remediation scheme relating to Hobson Street Towers may be made pursuant to s 48 of the 1972

Act until final completion, cancellation or discharge of the scheme under the 1972

Act ([16] to [25] above).

[35] For completeness I have also considered the Body Corporate’s alternative argument, namely that the “right” to seek a variation of the remediation scheme was an existing right in terms of ss 17 and 18 of the Interpretation Act 1999. If it had been necessary, I would have found against the Body Corporate on this issue. The Body Corporate had no “right” to have the scheme varied, but simply the ability to request the Court to exercise its discretion in favour of variation. This does not amount to a “right” in terms of s 17 of the Interpretation Act ([29] to [33] above.)

Result

_{[36] Manchester’s application to strike out or stay the proceedings is dismissed.}

14 Belcher v Belcher (No 2) [1978] 2 NZLR 253 (CA).

[37] The Body Corporate is entitled to costs in respect of the application. My preliminary view is that scale costs should be awarded on a 2B basis. If costs cannot

_{be agreed based on this indication, leave is reserved to file memoranda.}

Katz J