Body Corporate 319433 v Westpac New Zealand Limited [2018] NZHC 2691 (17 October 2018)

Last Updated: 6 May 2019

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-001860 [2018] NZHC 2691

	UNDER	Section 74 of the Unit Titles Act 2010 and Part 19 of the High Court Rules
	BETWEEN	BODY CORPORATE 319433 Applicant
	AND	WESTPAC NEW ZEALAND LIMITED First Respondent
		Respondents continued over

Hearing: 17 October 2018

Appearances: J P Wood for the Applicant
No Appearance of, or for the Respondents

Judgment: 17 October 2018

ORAL JUDGMENT OF EDWARDS J

Solicitors: Rainey Law, Auckland

BODY CORPORATE 319433 v WESTPAC NEW ZEALAND LTD [2018] NZHC 2691 [17 October 2018]

ANNA TRAININA
Second Respondent

THE HONGKONG and SHANGHAI BANKING CORPORATION LIMITED
Third Respondent

ASB BANK LIMITED
Fourth Respondent

ANZ NATIONAL BANK LIMITED
Fifth Respondent

KIWIBANK LIMITED
Sixth Respondent

BANK OF NEW ZEALAND
Seventh Respondent

MORTGAGE HOLDING TRUST COMPANY LIMITED
Eighth Respondent

WARWICK SYDNEY EADY and ELIZABETH ANN EADY
Ninth Respondents

CAPITAL MARKETING (NZ) LIMITED
Tenth Respondent

KEITH CHARLES KNAPP
Eleventh Respondent

ST JAMES & CO LIMITED
Twelfth Respondent

VERONICA REREMOANA McCAULEY
Thirteenth Respondent

ANTHONY WILLIAM WAKEFIELD
Fourteenth Respondent

2THDR HOLDINGS LIMITED
Fifteenth Respondent

FRANCESCA JEAN BURMISTER
Sixteenth Respondent
RAYMOND ASHLEY GARRETT and GAEL PATRICIA GARRETT
Seventeenth Respondents

DENNIS NEIL MOSSOP and JOAN MOSSOP
Eighteenth Respondents

ELSON PROPERTIES LIMITED
Nineteenth Respondent

ALISTAIR CRAIG BLACK
Twentieth Respondent

LOUIE’S RENTALS LIMITED
Twenty First Respondent

KEITH McKELLAR STEWART and RUTH McKELLAR STEWART
Twenty Second Respondents

ERIN BRADLEY
Twenty Third Respondent

STEVEN PAUL McMECHAN
Twenty Fourth Respondent

KENNETH JOHN GREENHILL
Twenty Fifth Respondent

LINDA EILEEN LAVIN
Twenty Sixth Respondent

BARRY LOUISE RICKARDS and MICHAEL CHANEL FINNIGAN
Twenty Seventh Respondents

DOROTHEA CHRISTIANE LARSEN and CHRISTINE ROSALIE LARSEN
Twenty Eighth Respondents

PPM DEVELOPMENTS 2014 LIMITED
Twenty Ninth Respondent

SARAH MARGARET ROSE SMITH
Thirtieth Respondent

WENDY KERRYN MACK
Thirty First Respondent
PERCY CHARLES BARRETT
Thirty Second Respondent

ANTHONY JAMES RIELLY and JOANNE ELIZABETH RIELLY
Thirty Third Respondents

JOHN ANDREW GRAY
Thirty Fourth Respondent

MAURICE WAYNE MEAD
Thirty Fifth Respondent

ANDREA JEAN BURMISTER and PROFESSIONAL TRUSTEE
SERVICES LIMITED
Thirty Sixth Respondent

VANESSA MAIRI KARL and SARA JANE KARL
Thirty Seventh Respondents

JAN JOYCE, LENAIRE ANNE JOYCE and GRAEME KENNETH BEAVER
Thirty Eighth Respondents

DAVID MICHAEL ROSS PANTHER
Thirty Ninth Respondent

PEACE OF BETHLEHEM LIMITED
Fortieth Respondent

IAG NEW ZEALAND LIMITED
Forty First Respondent
[1] The applicant is the body corporate of a residential unit development known as the Braemar Villas in Tauranga. The Braemar Villas complex is in need of repair due to weathertightness issues. The Body Corporate applies for an order sanctioning a scheme of repair under s 74 of the Unit Titles Act 2010 (Act).

[2] The application is not opposed. When this application was first called in the duty Judge list, the director of the twelfth respondent indicated that it would be opposing the application. The application was adjourned to allow the director to consider her position. Since then, the director has spoken to counsel for the applicants and indicated that the twelfth respondent will not be opposing the application. The twelfth respondent was called in the list this morning but made no appearance.

[3] In the circumstances, I am satisfied that the application may be dealt with in the duty Judge list today without the need for a further hearing.

The scheme

[4] The scheme provides for the apportionment of the cost of repairs at the Braemar Villas by way of an adjusted utility interest. That means of apportionment accounts for the fact that the Body Corporate comprises 34 principal units, but unit 34 is a swimming pool which is jointly owned by the other 33 residential unit owners.

[5] The terms of the scheme are set out in a schedule to the memorandum of counsel for the applicant dated 15 October 2018. This differs in only one minor respect to the scheme annexed to the application. The difference is in the name of the architect recorded in preamble D. It is not an amendment which affects the operative part of the scheme in any way.

Approach to the application

[6] In Tisch v Body Corporate No 318596, the Court of Appeal set out a three-step process for Courts to follow when considering an application to settle a scheme under s 48 of the Unit Titles Act 1972, the predecessor to s 74 of the Act.¹ Those three steps are:

¹ Tisch & Ors v Body Corporate No 318596 [2011] NZCA 420 at [35]

(a) Step 1: the Court must be satisfied that the building has been damaged or destroyed.

(b) 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.

(c) Step 3: if the Court decides the scheme is appropriate, it must then decide what the terms of the scheme should be.

[7] The Court considered that at least five guiding principles emerged from the case law which were relevant considerations in deciding whether to approve a scheme:²

(a) a scheme with broad support was preferred;

(b) the scheme was to be appropriately detailed;

(c) the order can have retrospective effect, as long as the body corporate has acted in accordance with the scheme prior to the Court’s approval;

(d) normally work is to be done to the same standard and at the same time; and

(e) the terms of the scheme are not to depart from the Act and the body corporate rules any more than reasonably necessary to achieve fairness between unit holders in the circumstances.

[8] Each of the three steps outlined by the Court of Appeal, and the above considerations, are considered below.

² At [45]–[49]

Damage to the building

[9] The damage to the building is detailed in the affidavit filed in support of the application. The buildings were investigated by the Weathertight Homes Resolution Service which found a number of systemic weathertightness deficiencies. The report also noted that damage is occurring and further widespread deterioration will occur until and unless significant repairs are undertaken. I am accordingly satisfied that there is damage to the building, and s 74 is “triggered” accordingly.

The appropriateness of the scheme and terms of the scheme

[10] The affidavit evidence filed in support of the application establishes that a scheme is necessary to be able to raise funds through a levy of the owners in order to undertake the necessary repairs.

[11] A copy of the draft scheme was circulated to all owners together with a notice of resolution to be passed without a general meeting, and the resolution voting form. Owners were required to return their form by 9 July 2018 if they were voting for the resolution.

[12] On 25 July 2018, the resolution accepting the draft scheme without the need for a general meeting was passed. Owners of 24 units voted in favour of the resolution. The owners of nine units did not return their forms, and in accordance with the Act were counted as voting against the resolution. On the basis of this evidence, I am satisfied that the scheme has broad support.

[13] I am also satisfied that the scheme is appropriately detailed. Its terms are substantially the same as several schemes approved by this Court over previous years.³ Although the cost of repair is allocated in a way which is different to most other schemes, that is because the swimming pool is a principal unit rather than common property. The method of apportionment has been an accepted method of calculating

3. Body Corporate 205373 v Baltazaar [2015] NZHC 2827; Body Corporate 202692 v James Holdings Ltd [2016] NZHC 1226; Body Corporate 201161 v Keung HC Auckland CIV 2016-404- 1478, Gilbert J.

levies for body corporate members in the past and I am satisfied that it is fair and equitable in the circumstances.

[14] The repair work was commenced a few weeks ago in accordance with the scheme. As the Court of Appeal confirmed, a scheme may have retrospective effect as long as it is in accordance with the scheme. This factor does not provide grounds for refusing to approve the scheme.

[15] As the complex comprises of a single building, it needs to be repaired at the same time. Remediation at the same time is in the best interests of all unit owners and will ensure that remediation is kept to the same standard across the building.

[16] The terms of the scheme are generally consistent with the Act, and the departures are no more than necessary. Those departures simply confirm the scope of the Body Corporate’s powers to do the work required to the extent that the powers under s 138 of the Act are uncertain in these circumstances. Further, the scheme allows the owners to be levied up front, rather than the cost of repair being recouped from the owners. That is necessary because the repair costs far exceed the body corporate resources, and the repairs need to be undertaken without delay.

[17] Finally, the scheme ensures that the repair costs are apportioned in an equitable way which is consistent with s 126 of the Act with no unit owner benefiting substantially more than any other.

[18] In summary, I am satisfied that it is appropriate to grant a scheme in all the circumstances, and the terms of the scheme balance the interests of all the owners.

Result

[19] The application is granted and the scheme annexed to the memorandum of counsel dated 15 October 2018 is approved.





Edwards J