CBD Investments (NZ) Limited v Body Corporate 095035 [2014] NZHC 72 (5 February 2014)

Last Updated: 27 March 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-004867 [2014] NZHC 72

UNDER the Unit Titles Act 2010 and Part 19 of the

High Court Rules

IN THE MATTER of an application for the settling of a scheme in respect of the Endeans Building

BETWEEN CBD INVESTMENTS (NZ) LIMITED Applicant

AND BODY CORPORATE 095035

First Respondent

RONG YU CHANG, KAN HSIN HUNG CHANG and KENNETH AH KEN KOO Second Respondents

MARK DANIEL WATSON Third Respondent

JAMES TIMOTHY JEPSON, RHONDA CHANTELL HELLENA NGAPOKO MAKAPELU and WRMK TRUSTEES (2013) LIMITED

Fourth Respondents

ROGER HAMILTON STEWART Fifth Respondent

JANE ELIZABETH MANTELL and JONATHAN MARCHANT MANTELL Sixth Respondents

DOMUS PROPERTY INVESTMENT LIMITED

Seventh Respondent

JING GANG WANG Eighth Respondent

MARK FRANCIS SMITH, BRIDGETTE ANN FRANKLIN and DOMINION LAW TRUSTEE COMPANY LIMITED

_{Ninth Respondents}

CBD INVESTMENTS (NZ) LIMITED v BODY CORPORATE 095035 [2014] NZHC 72 [5 February 2014]

BARRY MARSH Tenth Respondent

CLAYTON JOHN HILLS and MICHELLE YVETTE WILSON Eleventh Respondents

LLOYD MARK GILMORE and GRANT JAMES FOX

Twelfth Respondents

RICHARD FRED ACKE Thirteenth Respondent

MARILYN LOIS REYNOLDS Fourteenth Respondent

PROPERT-ABILITY LIMITED Fifteenth Respondent

MUHAMMAD SHAHRIR BIN MUHAMAD ARIFF and GEOK LEE YEO

Sixteenth Respondents

JONOTHAN NORRIS BRISCOE and PATRICIA ANNE BRISCOE Seventeenth Respondents

IAN ASHSLEY PAUL MILLS and ANNETTE JOAN MILLS Eighteenth Respondents

VANESSA JEANNE JEANDIN Nineteenth Respondent

HARRY ROY LAW and SUK CHING LIAUW

Twentieth Respondents

ANNE ELIZABETH MOLLOY and

BRIEN HERBERT CREE Twenty-first Respondents

LINDA MARGARET BRADY and

BARRY MARSH

Twenty-second Respondents

DARCEY ROSE and WARREN NEIL HARGREAVES

Twenty-third Respondents

NOEL ALLAN PLAYLE and MARGARET PLAYLE Twenty-fourth Respondents

PATRICIA ANNE NELSON Twenty-fifth Respondent

FLOTSAM LIMITED Twenty-sixth Respondent

MICHELLE JOY O'HALLORAN and

KELVIN HILL

Twenty-seventh Respondents

MALCOLM CRAIG SMELLIE, ROBERT PHILIP SMELLIE and LYNDSAY ANN SMELLIE Twenty-eighth Respondents

TAN CORPORATE TRUSTEE LIMITED Twenty-ninth Respondent

GABRIELLE THERESE WILSON, MICHAEL ERIC MARRIS and TRUSTS SB LIMITED

Thirtieth Respondents

ROSS NEVIN JOHNSON Thirty-first Respondent

Hearing: 29 January 2014

_{Appearances: S A Grant and B R Saldanha for Applicant}

M Marris for 17^th and 27^th to 30^th Respondents

Judgment: 5 February 2014

INTERIM JUDGMENT OF VENNING J

This judgment was delivered by me on 5 February 2014 at 4.00 pm, pursuant to Rule 11.5 of the High

_{Court Rules.}

Registrar/Deputy Registrar

Date...............

Solicitors: Macky Roberton, Auckland

Copy to: S A Grant, Auckland

B R Saldanha, Auckland

M Marris, Auckland

Introduction

[1] This case is the latest in a number of cases that have been brought to this

Court concerning the Endeans Building at 2 Queen Street, Auckland (the Building).

[2] The applicant, an owner of several ground floor units of the Building, seeks an order settling a scheme under s 74 of the Unit Titles Act 2010 (UTA 2010) governing the reconstruction and future management of a verandah to the Building.

General Background to the Building

[3] I gratefully adopt the background concerning the Building and the verandah largely from the reserved judgment of Ellis J delivered on 14 July 2011 (the first decision).¹

The Building and the land

[4] The Building was first constructed in 1905. It was rebuilt after the original building was razed by fire in 1912. Further alterations were done in 1922, 1934 and

1967. Historical photographs suggest that a verandah was part of the original structure although it has never been shown on any title plan to the building. Prior to its redevelopment in 1994, the building had been divided into ground floor shops and offices on the other six levels.

[5] The land upon which the Building is situated was, at the time of construction, owned by the Auckland Harbour Board (AHB). For most of the twentieth century, the land was leased by AHB to the mining entrepreneur John Endean and (later) to Endeans Building Ltd.

[6] On 15 April 1982, the land was subdivided into leasehold strata titles and the

_{Body Corporate was thereby established.}

¹ Body Corporate 95035 v Chang & Ors [2011] 3 NZLR 132; (2011) 12 NZCPR 947.

[7] In 1983, a Mr John Stubbs was one of the lessees of office space on the first floor. Through his company, J Stubbs Investments Ltd, he applied for and obtained a building consent to refurbish both the ground and first floor areas.

[8] In the early 1990s a property developer, Mr Arthur Morgenstern, sought to freehold the Building through his company Allrich Investments Ltd. Mr Stubbs (or entities associated with him) agreed to sell to Mr Morgenstern (or entities associated with him) his leasehold interest in the first floor and to purchase the ground floor commercial units once freehold unit titles had been issued.

[9] On 27 April 1994:

(a) the land was transferred to Allrich Investment Ltd (58 per cent shares)

and Stubbs Investments Ltd (42 per cent shares);

(b) an application was registered under s 44 of the Unit Titles Act 1972 (UTA 1972) to deposit Unit Plan 95035 (the Unit Plan) and issue strata titles for the units on the plan;

(c) under s 31 of the UTA 1972 the strata leasehold estates merged with the reversionary estate in the land;

(d) the existing certificates of title were cancelled and new certificates of title for strata estates in freehold were issued; and

(e) a change in the rules of the Body Corporate was registered.

[10] Units C to I are the seven commercial units on the ground floor (the GFUs). The applicant owns six of the GFUs, namely D to I. Thirty residential units (the RFUs) are located on floors one to six.

[11] The auxiliary units, which include for example a large atrium area, are jointly owned (in equal shares) by the RFUs only. Thus the auxiliary units have been constituted as a de facto form of common property owned by all unit holders other than the GFUs.

[12] For present purposes, it is relevant to note that the atrium light well which constitutes Auxiliary Unit Seven (AU7) is owned in this way, namely by the RFUs in equal shares of 1/30 each.

The verandah

[13] The verandah fronted onto Queen and Quay Streets and extended out from and was attached to Units D, E, F, G, H and I. No part of Unit C, which is also on the ground floor but on the Tyler Street side of the building, was appurtenant to the verandah. A small portion of the verandah also adjoined that part of the external wall of AU7.

[14] Because the Building is built to the edges of the land comprised in the Unit Plan, the verandah extended beyond the Unit Plan’s boundaries. It overhung the footpaths on both Quay and Queen Streets.

[15] The verandah was removed after the first decision following the issue by the

Auckland Council of a Dangerous Building Notice under s 124 of the Building Act

2004 in relation to the verandah.

Procedural background

[16] In the first decision Ellis J declined to make a declaration then sought by Body Corporate 095035 (the Body Corporate) as to the ownership of the verandah. Importantly in the course of the first decision Ellis J found that the verandah:

(a) was not common property;

(b) was rather owned by the registered proprietors of the units to which it was attached;

(c) was affixed to the stratum estate in freehold created by the operation of the UTA 1972 upon the deposit of the unit plan in 1994 and was part of the freehold in the units to which it was attached; and

(d) was subject to the residual oversight and control by the Body Corporate as provided for in the Body Corporate’s amended rules (or the default rules to the extent that any amended rules were ultra vires).

[17] On the basis that ownership of the verandah should reside collectively in the owners of units D, E, F, G, H, I and AU7 that reflected the relative portions of the verandah adjoining those units, Ellis J concluded the Body Corporate would have

93.1 per cent ownership and AU7 would have 6.9 per cent ownership (in turn shared by the 30 residential owners). Ellis J compared that to the unit entitlements of AU7 (108/10,000), and GFUs D to I which ranged from 483/10,000 to 933/10,000.

[18] In a subsequent decision, delivered on 24 September 2012 (the second decision), Ellis J addressed the issues that had arisen following the removal of the verandah and, as she understood it, the requirement of the Council that a new verandah be constructed.² In the second decision Ellis J concluded that:

[54] In summary, the position seems to be as follows:

(a) It is all but certain that the Auckland Council will require a new verandah to be constructed around the Endeans Building.

(b) As from 15 October 2012:

(i) the relevant unit owners would be required to comply with any directive from the Council in that respect;

(ii) the Body Corporate is, in any event (ie absent a local authority directive) arguably obliged by s 138(2) to “renew” the verandah;

(iii) to the extent the GFUs took it upon themselves to construct a new verandah (which they would prima facie be entitled to do), it seems that they would require the consent of the Body Corporate;

(iv) once a verandah is constructed there would appear to be a shared responsibility to maintain and repair it. The GFUs and the owners of AU7 would have a statutory obligation to maintain and repair it as part of their units and the Body Corporate would have a statutory obligation to maintain and repair it as a building element;

² Body Corporate 95035 v Chang & Ors [2012] NZHC 2467.

(v) the Body Corporate can levy on a unit entitlement basis for the upfront costs involved, subject to any later reapportionment on the basis of substantial benefit.

(c) The GFUs are, and will continue to be, entitled to place signs on the verandah, in accordance with the existing Body Corporate rules (provided the signs comply with any bylaws or other Council requirements).

[19] Ellis J considered that with the changes in the UTA 2010 responsibility for and control over the verandah would repose in the Body Corporate under s 138(2).³

However, the Judge noted that created difficulties for both the owners of the GFUs and the RFUs. The GFUs sought recognition for the contribution of 93 per cent of the costs that they were prepared to make (on terms) towards the reinstatement of the verandah. Also, while the owners of the RFUs might otherwise be happy for the Body Corporate to have overall oversight and control of the verandah:

[58] ... the principal difficulty from the [RFUs’] perspective would be the prospect of having to contribute to the up-front remediation cost on a unit entitlement basis, even though that contribution may later be able to be largely reapportioned to the [GFUs].

[20] Ellis J was also aware that in separate proceedings Courtney J had addressed the issue of the repairs required to the roof and upper areas of the building and had proposed settling a scheme for the completion of that work.⁴

[21] In the circumstances Ellis J suggested:

[60] In all the above circumstances it seems to me that an application to the Court to settle a scheme under s 48 or s 127 may well be warranted. Ideally any scheme pertaining to the verandah would be merged or at least co-ordinated with whatever scheme results from Courtney J’s judgment and would also deal with any other remedial work required. To the extent any scheme dealt with discrete verandah issues, it might be expected that it would contain a mechanism whereby the GFUs would be given a say on those issues that was commensurate with their ownership interests and/or their financial responsibilities. I have, however, not heard submissions on whether it is possible to settle a scheme in such terms and therefore express no final view upon it.

³ _{Section 138(2) was repealed as from 5 December 2013. It is now provided for in s 138(1)(d).}

⁴ Body Corporate 95035 v Chang [2012] NZHC 1512.

[22] This application has followed. On the applicant’s request it was granted urgency. If a scheme is to be settled to provide for reinstatement of the verandah it is intended that the work is completed at the same time as the other repairs are carried out, with an attendant cost saving to all parties.

The nature of the scheme

[23] The proposed scheme provides for both the reinstatement of the verandah and for decisions about its future use and appearance. To do so it provides for verandah rules separate and additional to the Body Corporate rules. It establishes a verandah committee made up of one representative appointed by each of the registered proprietors of the GFUs to which the verandah is attached (D to I), and auxiliary unit AU7. It provides for the establishment of a sinking fund for maintenance and repairs to the verandah, and for contributions by the verandah proprietors to be in shares reflecting the relative proportions of the verandah adjoining each verandah proprietor’s unit which are to be the percentages determined by Ellis J of 93.1 by the GFUs and 6.9 in total by the 30 RFUs with an interest in AU7. Importantly, it also proposes the verandah committee will make future decisions concerning the verandah including its appearance and use.

The opposition

[24] The application is formally opposed by the 17^th respondent and the 27^th to

30^th respondents who are owners of five of the 30 RFUs. Mr Marris filed full submissions relating to the issue which explained the position of the respondents in opposition. He also spoke on their behalf in opposition to the application.

[25] At the outset of his submissions Mr Marris confirmed the respondents that he represented (the opposing RFUs) accepted that, if the verandah was to be reinstated, then a s 74 scheme was an appropriate means of enabling the work to be carried out given the different interests of the residential and commercial owners within the building. The opposing RFUs do not oppose the settling of such a scheme for reinstatement in principle, rather it is the detail of the proposed scheme they object to. While they generally support a scheme for the reinstatement of the verandah they

particularly object to the proposal of a verandah committee to have responsibility for and control over the future appearance and use of the verandah.

[26] The opposing RFUs also oppose the applicant’s proposal that the costs associated with this proceeding be paid by all owners in accordance with the unit title entitlement assessment.

[27] The opposing RFUs propose a clause be added to any scheme endorsed by the Court to ensure that a costs allocation between the existing scheme confirmed by Courtney J and any verandah scheme is put in place (a shared scheme costs allocation). On this point Ms Grant confirmed the applicant agreed to a clause in the following terms could be included in the scheme:

Where the verandah scheme uses materials and processes for works related to the NTF scheme, the project manager will identify the relevant shared costs. Such costs will include but not be limited to the scaffolding in place for the NTF scheme, the hirage cost of the footpath areas to Auckland Council and a share of the building manager cost over the construction period. These costs will be proportionally allocated between the NTF scheme and the verandah scheme.

The issues

[28] The three principal issues that emerge are:

(a) jurisdiction – whether the Court has jurisdiction to make the orders sought;

(b) the verandah rules – whether the Court should sanction the verandah rules proposed, or whether some other form of rules should be adopted; and

(c) costs – on what basis should the costs of these proceedings be borne.

Discussion

Jurisdiction

[29] Although the opposing RFUs effectively agree a scheme for reinstatement of the verandah is required, it is still necessary to confirm the jurisdiction for the verandah scheme. The jurisdiction for a scheme under the UTA 2010 is to be found in s 74 of the Act:

Scheme following destruction or damage

(1) This section applies if any building or other improvement comprised in any unit or on the base land is damaged or destroyed, but the unit plan is not cancelled.

(2) The High Court may, by order, settle a scheme on the application of—

(a) the body corporate; or

(b) if the unit title development is in a layered unit title development, the body corporate of the head unit title development or any subsidiary unit title development in that layered unit title development; or

(c) an administrator; or

(d) the owner or one of the owners of a unit; or

(e) a registered mortgagee of a unit.

(3) A scheme under subsection (2) may include provisions—

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

(b) for the transfer of units to the body corporate so as to form part of the common property.

...

(6) On any application to the High Court under subsection (2), the following persons have the right to appear and be heard:

(a) any person having or claiming to have any estate or interest in any unit or in the whole or part of the base land; or

(b) any insurer who has effected insurance on the buildings or other improvements comprised in any unit or in the whole or part of the base land.

(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—

(a) directing the application of any insurance money; or

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

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

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

(8) The High Court may cancel, vary, modify, or discharge any order made by it under this section.

(9) The High Court may make any order for payment of costs that it thinks fit.

[30] As a preliminary point I note that as an owner of one or more of the units in the building the applicant is entitled to bring the application.⁵

[31] The leading authority is the Court of Appeal decision in Tisch v Body Corporate.⁶ Although the case concerned s 48 of the UTA 1972, for present purposes s 74 of the UTA 2010 is materially the same. The pre-requisites to the Court making an order were noted in Tisch:⁷

Step 1: the court must be satisfied that the building has been damaged or destroyed.

Step 2: if so satisfied, the court must decide whether to settle a scheme. That is, the court must decide whether a scheme is appropriate in the circumstances.

Step 3: if the court decides a scheme is appropriate, it must then decide what the terms of the scheme should be.

[32] In the present case, while “building” is not defined in UTA 2010, “building elements” is.⁸ There can be little doubt that the verandah falls within the definition

_{of “building elements” which includes:}

⁵ _{Unit Titles Act 2010, s 74(2)(d).}

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

[t]he external and internal components of any part of a building or land on a unit plan that are necessary to... the exterior aesthetics of the building, or the health and safety of persons who occupy or use the building ...

[33] I accept Ms Grant’s submission the verandah is an external component of the building necessary to the exterior aesthetics of the building and the health and safety of persons who occupy or use the building. Mr Foote’s evidence confirms that the amenities provided by the verandah include shelter from adverse weather, lighting, protection from road, pavement, vehicular, pedestrian and tenancy noise and smells, as well as signage for the residences and tenancies.⁹

[34] The verandah has clearly been damaged or destroyed. I note that a scheme may include provisions for the reinstatement either in whole or in part of the building.¹⁰ The proposed scheme provides for reinstatement of the verandah as part of the building.

[35] For the above reasons I am satisfied that there is formal jurisdiction to settle a scheme for the reinstatement of the verandah in the present case. For the reasons that follow, I consider the real issue to be whether there is jurisdiction for the scheme to provide for future decisions as to the appearance and ongoing use of the verandah.

Should a scheme be settled in this case – is it appropriate in all the circumstances?

[36] In Tisch the Court noted the general rule that a body corporate may only undertake tasks associated with common property and that any departure from that general rule should only be to the extent necessary to achieve what is fair as between unit owners in the circumstances.¹¹ The Court at [37] also endorsed Heath J’s observation in Fraser v Body Corporate S63621¹² that a scheme “should be a remedy of last resort”.

[37] However, importantly for present purposes in Tisch the Court also noted that uncertainty as to the rules and whether the Body Corporate had jurisdiction to

⁹ _{Mr Foote is a registered valuer. His evidence was not challenged.}

¹⁰ Unit Titles Act 2010, s 74(3)(a).

organise and carry out the work in issue was a factor supporting the settlement of a scheme.¹³

[38] In the present case, while Ellis J suggested in the second decision that the Body Corporate might have jurisdiction under s 138(2) UTA 2010 on the basis that the verandah is a building element she went on to note the difficulty with that was that it would require the Body Corporate to levy all unit holders on a unit entitlement basis for the funds required, even if the contributions might later be able to be reapportioned.

[39] In any event Ellis J was satisfied an application for a scheme should be made. I agree with that assessment particularly now that a scheme has been established for remedial work to the other parts of the building. That supports the settlement of a scheme for the reinstatement of the verandah. If a scheme is settled for the reinstatement of the verandah it should be possible for the reconstruction work of the verandah to be carried out at the same time as the other works with consequent cost

savings to all parties.¹⁴

[40] In the circumstances of this case, I am satisfied that it is appropriate to settle a scheme for the reinstatement of the verandah.

[41] I turn to the last step, the terms of the scheme.

[42] In my judgment, the terms and extent of the proposed scheme are the real issue on this present application, namely whether the Court can, as a matter of jurisdiction, settle a scheme which provides for the ongoing control of the appearance and use of the reinstated verandah. The particular aspects the opposing RFUs object to is the establishment of a verandah committee¹⁵ with the power to make decisions relating to the verandah; in particular clause 4 of Schedule 3:

4. Appearance

4.1 Decisions relating to the verandah, including any decisions relating to (but not limited to):

¹³ _{Tisch v Body Corporate No 318596, above n 6 at [34].}

¹⁴ A similar consideration applied in Body Corporate 173457 v Dunn [2007] NZHC 800; (2007) 8 NZCPR 668.

(a) maintenance;

(b) colour schemes; (c) signage;

(d) property on, or affixed to, the verandah (including, but not limited to, air-conditioning units); and

(e) affixations,

shall be made by a 66.67% majority of the Verandah Committee.

4.2 No-one is to make any addition or alteration of any sort to any part of the verandah including installation of pipes, conduits, wires, cables, service ducts, or plant upon or passing through the verandah without the consent of the Verandah Committee.

[43] In my judgment, the Court does not have jurisdiction to approve a scheme containing the provisions in clause 4 in particular. Relevantly, s 74(3) confirms the scheme may include provisions for the reinstatement in whole or in part of the [verandah]. However neither s 74(3)(a) nor 74(3)(b) provide for the control over future use which is contemplated by clause 4 of the proposed scheme.

[44] Section 74(7) does not assist the applicant. First, as the Court of Appeal confirmed in Tisch, the equivalent provision under the UTA 1972 was relevant to how the Court exercises its discretion, not to whether it exercises it.¹⁶ It does not and cannot provide jurisdiction if the jurisdiction does not exist.

[45] Next, as the Court of Appeal also observed in Tisch:¹⁷

[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.

[46] I also note the Court of Appeal’s comments in St John’s College Trust Board v BC 197230:

¹⁶ _{Tisch v Body Corporate No 318596, above n 6, at [38].}

¹⁷ Tisch v Body Corporate No 318596, above n 6, confirmed in St John’s College Trust Board v BC

197230 [2013] NZCA 35 at [20].

[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.

(emphasis added)

[47] Further, it cannot be said, in any event, that it is necessary for the scheme to contain provisions for the ongoing control of the verandah to give effect to the scheme for its reinstatement.¹⁸

[48] In my judgment, the proposed scheme (with the exception of clause 4) achieves the objectives of s 74 in that the GFUs who will contribute 93.1 per cent towards the cost of the reinstatement will, through the verandah committee, control the reinstatement. That is, however, a different issue to the ongoing control and management of the appearance and use of the verandah once it is reinstated. While I can understand the applicant may wish to control the future appearance and use of the reinstated verandah (as it proposes to pay 93.1 per cent of the costs of reinstatement), I note and adopt the observation of Ellis J in the second decision

that:¹⁹

(iv) once a verandah is constructed there would appear to be a shared responsibility to maintain and repair it. The GFUs and the owners of AU7 would have a statutory obligation to maintain and repair it as part of their units and the Body Corporate would have a statutory obligation to maintain and repair it as a building element;

...

[57] ... As I have said, however, the present rules already seem to me to permit the GFUs considerable autonomy when it comes to signage.

¹⁸ _{Unit Titles Act 2010, s 74(7).}

¹⁹ Body Corporate 95035 v Chang & Ors, above n 2, at [54](b)(iv) and [57].

[49] For the above reasons I conclude that the Court does not have jurisdiction to approve a scheme containing the proposed provision of clause 4.

[50] Ms Grant had an alternative argument relating to jurisdiction. She submitted that the provisions of the scheme could be regarded as an amendment to the Body Corporate rules. Body Corporate rules can be amended by ordinary resolution at a body corporate general meeting.²⁰ A resolution in writing signed by a majority of eligible voters is as valid as if passed at a meeting of voters.²¹ Further, an eligible voter may exercise the right to vote at a Body Corporate meeting by casting a postal vote.²²

[51] Against that statutory background Ms Grant submitted that the resolution circulated by the Body Corporate with its letter of 8 November 2013:

RESOLUTION

It is resolved to support the application by CBD Investments (NZ) Limited (CBD) to reconstruct the verandah on the terms of the application and scheme attached to this resolution and to allow CBD to let the contract for construction of the verandah, and the Committee of the Body Corporate to undertake such actions as are necessary to ensure that the verandah is built, and the rules implemented, in accordance with the scheme

was approved by a majority of the Body Corporate members.

[52] Ms Grant submitted that 22 of the 31 unit owners (or 71 per cent) entitled to vote supported the resolution. Two others who supported the resolution were not eligible to vote. Two owners could not be found. Only the opposing RFUs (the owners of five units) opposed the resolution.

[53] There are in my view two difficulties with that submission. First, the resolution does not expressly identify that it is proposed to alter the Body Corporate rules in relation to the ongoing control of the appearance and use of the verandah. It is focused primarily at support of the proposed application to the Court. The

_{offending clause is buried in Schedule 3 to the Scheme.}

²⁰ _{Unit Titles Act 2010, s 106(3)(a).}

²¹ _{Unit Titles Act 2010, s 104(3).}

²² Unit Titles Act 2010, s 103.

[54] If the Body Corporate rules are to be amended by postal vote (rather than at a meeting where there can be discussion and explanation of the resolution) the terms of the resolution should make it clear that it is proposed to amend the Body Corporate rules. The resolution fails to do that.

[55] Second, s 106(4) of the UTA 2010 provides that an amendment that is inconsistent with any provision of the UTA 2010 is invalid. To the extent the amendment purports to support the approval by this Court of clause 4 as part of the settlement of a scheme under s 74 (which I have concluded the Court does not have jurisdiction to do) it is inconsistent with s 74 of the Act and is therefore invalid.

Summary

[56] The position I have reached is this. The Court would be prepared to approve and settle the proposed scheme for the reinstatement of the verandah on the terms proposed, with the exclusion of clause 4 and any necessary consequential amendments.

[57] If the applicant wishes to change the Body Corporate rules by the addition of clause 4 or an equivalent, then that could be done by the Body Corporate following the procedure in s 106, by proposing a resolution specifically addressed to the future control of the appearance and use of the reinstated verandah but any such resolution should be expressed as one proposing to change the body corporate rules as opposed to being related to the settlement of a scheme for the reinstatement of the verandah.

[58] For the above reasons, I express this as an interim judgment and reserve leave to the parties to apply further on 48 hours notice.

Costs

[59] That leaves the issue of costs. On an application under s 74 as this was, the court has a general discretion as to costs.²³

²³ Unit Titles Act 2010, s 74(9).

[60] In my judgment costs associated with obtaining the Court approval of the scheme should follow the contributions proposed in the scheme for the reinstatement of the verandah, namely 93.1 per cent by the GFUs and 6.9 per cent by the

_{proprietors of AU7 (the RFUs).}

Venning J