Bell v Body Corporate Number 203780
[2020] NZHC 333
•28 February 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-000310
[2019] NZHC 333
BETWEEN ROBERT JOHN BELL JUDITH SYLVIA BELL
Plaintiffs
AND
BODY CORPORATE NUMBER 203780
Defendant
Hearing: 4 November 2019 Appearances:
T J Herbert for Plaintiffs
T J G Allan & K M Wakelin for Defendant
Judgment:
28 February 2020
JUDGMENT OF PAUL DAVISON J
This judgment was delivered by me on 28 February 2020 at 4:00pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Daniel Overton & Goulding, Auckland Grove Darlow, Auckland
BELL v BODY CORPORATE NUMBER 203780 [2019] NZHC 333 [28 February 2020]
Introduction
[1] This case concerns the ambit of a body corporate’s duty to repair and maintain building elements, being some small decks and their associated balconies constructed on the frontage of each of the five units of a townhouse development in Kingsland, Auckland (the development).
[2] Robert and Judith Bell (the plaintiffs) own and reside in one of the development’s five units. The plaintiffs purchased their unit in 2000. The units are held under unit titles issued pursuant to the Unit Titles Act 2010 (the Act). The defendant is the body corporate responsible for the management and administration of the development in accordance with the Act and the Body Corporate’s Operational Rules (the Operational Rules).
[3] At the defendant’s Annual General Meeting (AGM) in June 2017, a resolution was passed by four votes to one, granting the defendant’s consent to all owners of the units to remove the exterior balconies on their units if they wished to do so, subject to building consents being obtained.
[4] The plaintiffs voted against the resolution. In this proceeding the plaintiffs challenge the legality of the resolution which they say was ultra vires. The plaintiffs argue that the exterior balconies on each of the units are building design elements which relate aesthetically to the design and appearance of the development as a whole, and say that the defendant does not possess the power to authorise the removal of the balconies.
The Development
[5] Although the plaintiffs were unable to obtain the original plans for the development from Auckland Council and produce them as an exhibit, the evidence suggests that the development was constructed in the mid 1990s. An elevation plan of the development prepared in April 1994 shows the balconies located in the positions in which they presently appear on the front of each unit.
[6] The development is a single building comprising five contiguous units identified as Units A – E. The plaintiffs are the owners of Unit E together with an accessory unit. Unit E is located at one end of the development.
[7] The façade on the north-west side of the development faces the vehicle access driveway, and is the side of the development where the balconies and front entrances of the units are located. The units have three levels with the decks and balconies located at the upper level.
[8] The development is constructed on a gently sloping site with the result that the front entrances of the units at the upper end of the site are accessed via a stairway comprising several stairs, while the units at the lower end of the site are accessed via more substantial stairways comprising in excess of a dozen stairs.
[9] The sloping contour of the site has also enabled several of the units to be constructed with vehicle garages located beneath their three levels.
[10] Apart from the variations due to the sloping site that have resulted in some stairways of differing heights and the presence of vehicle garages beneath several of the units, the exterior appearance of the development is that of five otherwise identical units with their windows, doors and balconies in the same positions on each unit.
Leaks are discovered and structural issues arise relating to the balconies
[11] At the defendant’s AGM in April 2012 reference was made to a water leak which had been discovered in the area of the balcony deck of Unit D. Thereafter the problems with water leaks at the development became progressively worse.
[12] In July 2014 the defendant commissioned DD Construction Ltd, a Licensed Building Practitioner to carry out an inspection of the development and to provide a report regarding the cladding and the decks. In the report Mr Montgomery of DD Construction Ltd said:
Exterior Cladding
The cladding is in the process of failing substantially at all junctions and joins. Water is entering wherever this is occurring and it is very clear to see when you look at the surface of the cladding exterior. There is cracking and buckling that looks to be accelerating as the amount of water that can penetrate the structure increases. A cycle is firmly in place of water getting in, causing more movement in the cladding and opening the cladding even further which in turn allows more moisture to penetrate.
Interior
The interior is a mimic of what is occurring on the exterior however the damage is resultant not causative. The water coming into the framing lines of the building is showing on the inside as damage to gib linings, joinery liners, and skirting boards. The damage showing is fairly consistent throughout all units.
Decks
It must be bought [sic] to your attention that these decks are in a state of disrepair that is highly likely to cause their collapse under normal loading conditions. I would recommend they not be used until further assessment of these structures is undertaken.
Summary
There is little point in continuing with the patchwork maintenance to try and stop the water ingress. As an industry we have tried remedial works on buildings of this nature only to discover that we were throwing good money away. The issue with these buildings is the design and until this is addressed the problems will continue. The longer the structure is left in this state the bigger the repair project and the associated costs will be.
….
[13] Consideration was then given to recladding the façade of the units, and it was initially proposed that the recladding be undertaken by each unit individually to enable the work to be done when those units which were leased became available at the end of their respective tenancies. In September 2015 Building Design Ltd was requested by the defendant to quote for the preparation of plans and documentation required to undertake a recladding of all of the units on the basis of replacing like with like. As a result of the unit owners having differing views as to how the recladding of their units should be done and whether the balconies and decks should be removed or replaced, Mr Bell became concerned at the prospect of recladding being undertaken by unit owners that did not involve replacing like with like, without the prior consent of all unit owners.
[14] The unit owners proceeded with their discussions regarding recladding and how to deal with the decks and balconies on the basis that any proposed remedial work or alterations required the consent of all unit owners. However, when Building Design Ltd was ready to lodge an application with the Auckland Council for consent to proceed with the proposed work, it discovered that the unit owners were far from unanimous as to the work required. On 30 September 2015 Mr Connon of Building Design Ltd, in two separate emails sent to Mr Andrew Porter, of Boutique Body Corporate Ltd (the Secretary and Manager of the defendant), said:
…
I noticed at the on-site meeting that each owner had different ideas for there [sic] apartment. I don’t think this is a good idea. I think they all should stay with the original design other wise [sic] the building will change completely.
Also they don’t seem to understand my price is to draw and prepare documentation for there [sic] reclad only. No design or multipull [sic] meetings changing claddings etc.
…
…my brief was like for like and there was a lot of work detailing the balconies.
[15] In early February 2016 Mr Connon inspected all but one of the units and determined that some of the units required work to upgrade their fire ratings to be undertaken as part of any building work being done on the units.
[16] At the defendant’s AGM in April 2016 the issue of whether the balconies and decks should be retained and repaired was discussed. The minutes of the meeting record the discussion:
There was a discussion around whether the body corporate should keep the balconies as part of the re-clad or remove them. Of those present only Unit E indicated they strongly wished to retain the balconies, as they are part of the original design and add value to the units. It was also suggested by R Bell that a legal opinion he has obtained confirms 100% approval is required to make a change and that any change would require a change to the Unit plan with associated legal and filing costs. The view of the rest of those present was that the balconies are troublesome, add to leak issues and require constant maintenance and management and should be removed. R Bell suggested that those wishing to have the decks removed obtain their own legal opinion in this regard. The Manager advised he would canvass a response from C Leishman from [Boutique Body Corporate Ltd] who has a wealth of knowledge in dealing with leaky building repair and associated issues.
[17] Having consulted Mr Leishman, in an email dated 22 April 2016, Mr Porter advised Mr Connon:
Steve – after meeting checked with Craig Leishman from this office who has vast experience in dealing with leaky buildings – majority rules – so looks like balconies will be going – will be advising owners when I send out the minutes.
[18] During December 2016 Mr and Mrs Bell corresponded with Mr Leishman and copied their email to the other unit owners. They said:
…
As we have mentioned in the past meetings and at the AGM other Unit owners have neglected their responsibly [sic] for maintenance of their balconies and other responsibilities and now want to remove the balconies to save costs is not acceptable to us.
We have maintained our balcony and have had it professionally tiled, it is in excellent condition (as Andrew Porter commented on at a site visit). We are aware that the balconies will need altering to meet Councils [sic] requirements when the cladding is changed. The balcony gives views to the Sky tower [sic] and Waitakere Ranges and views to two ACC parks below, and privacy for drying racks etc.. and it would have a structural and intrinsic value in excess of $100,000, this complex has been well architecturally designed.
…
The 2017 AGM
[19] The defendant held an AGM on 9 June 2017. The minutes record the discussion and resolution of the meeting regarding the balconies as follows:
Continued discussion on Matters arising from previous AGM – Balconies.
There was a discussion at the 2016 AMG [sic] whether the body corporate should keep the balconies as part of the re-clad or remove them. Units A, B, D [sic] and D agreed to remove the balconies while unit E strongly opposed to remove their balcony.
There was suggestion of unit E retaining the balcony while the other four units removing their balconies in re cladding [sic]. Owners communicated via emails prior to the 2017 AGM and Unit E again disagreed with this suggestion and stated that this change requires redevelopment of plan with unanimous approval from owners.
The owners of unit E tabled a letter they obtained from Tim Herbert, Barrister Vulcan Building Chambers to support their views.
The Secretary noted that a copy of the unit title plan is enclosed with the agenda and again tabled at the meeting. The Secretary noted that the plan clearly indicated balconies are private property, within principle [sic] units.
The Secretary noted that BBCL believes removing balconies does not change the unit title plan as it does not change boundaries of principle [sic] units. Therefore, a redevelopment plan is not required should the Body Corporate reaches [sic] a majority agreement to remove balconies.
Resolved – Ordinary Motion:
“That the Body Corporate consents be granted to the units who would like to remove their balconies in the building re-clad subject to a building consent being obtained.”
Moved: M Wah Seconded: D Hogg
CARRIED (4 UNITS VOTED IN FAVOUR, UNIT E STRONGLY OPPOSED)
The 2018 AGM
[20] The defendant held an AGM on 3 September 2018. During discussion of the motion to confirm the 2017 AGM minutes, Mr Bell raised the issue of whether the resolution passed at the 2017 AGM granting the defendant’s consent to unit owners removing the balconies of their units was valid. The minutes of the meeting state:
…
Robert [Bell] noted that his opinion was that it was illegal that the body corporate passed the ordinary motion at the 2017 AGM “That the Body Corporate consents be granted to the units who would like to remove their balconies in the building re-clad subject to a building consent being obtained.’
The Secretary explained that this matter was discussed at length at the 2017 AGM and that
·balconies are private property within principle [sic] units
·removing balconies did not change boundaries of principle [sic] units
·a redevelopment plan is not required if the body corporate reaches a majority agreement to remove balconies
This ordinary motion was voted at the 2017 AGM, four units voted in favour of the motion, one unit voted against, motion passed.
Robert [Bell] noted that the meeting minutes did not record that the body corporate was going to obtain a cost from a law firm for legal opinion on this
matter. The Secretary advised that this was suggested at the 2017 AGM before owners vote[ed] on the motion. It was later decided not necessary as the owners of units A,B, C and D voted in favour of the motion and agreed that if any unit is in doubt of this decision, it is up to individual owners to seek their own legal opinion.
Current situation as regards re-cladding and removal of balconies
[21] Notwithstanding the defendant’s 2017 resolution authorising the unit owners to remove the balconies of their units and the need for recladding of the development, to date that work has not been undertaken. The plaintiffs filed this proceeding on 20 February 2019 and, as a consequence of the uncertainty that has arisen regarding the validity of the resolution, no further progress has been made regarding recladding the development and no balconies have yet been removed.
The expert evidence as to the effect of removal of the balconies on the design and aesthetics of the complex
[22] Both parties presented expert evidence by affidavits and the expert witnesses gave viva voce evidence and were cross-examined.
[23] The plaintiffs called evidence from Mr James Bundy and Mr Allan Shanahan. Mr Bundy is a Chartered Building Surveyor and Fellow of the Royal Institution of Chartered Surveyors with 20 years’ experience of surveying buildings, diagnosing defects, and recommending suitable repairs. Having inspected the property, the pleadings and the original marketing materials for the property, which included a plan for the development, Mr Bundy expressed his opinion that the balconies are an integral part of the continuous cladding to the exterior and a structural component of each unit. In his opinion the balconies do not structurally contribute to their adjacent units, or serve adjacent units from a weathertightness perspective. Therefore the failure of one balcony could not affect units other than the one on which that particular balcony was constructed. In his view however, the balconies can be said to relate to more than one unit in that they form an architectural feature “that is consistent to the look of the Development.”
[24] Mr Bundy says that it appears that the designer of the development placed one balcony on each unit in order to achieve a consistency in appearance and so that the units related to the others and would be viewed as a single design. He said:
Another aspect of the Balcony is that it is situated on the main façade of the terrace, one being provided for each unit. I would suggest the original architect will also have placed one Balcony on each unit to achieve a consistency in appearance for the terrace. A sense of consistency would have likely formed a basic principle of his/her design, so they relate and read as a single design.
In the circumstances, it is my opinion that the Balconies can be said to relate or serve more than one unit, from an architectural design perspective.
[25] Mr Bundy accepted that the design of the balconies represents a high weathertightness risk. He said that balconies were well recognised as having a high watertightness risk, but the risk can be mitigated by careful design, careful construction, and regular ongoing maintenance.
[26] The defendant called evidence from Mr Paul Leuschke who is a registered architect and Member of the New Zealand Institute of Architects with over 35 years’ experience practising as an architect. Mr Leuschke has designed most types of buildings including single houses, terrace houses, multi-unit apartments, commercial offices and industrial buildings. Having viewed the property and the building plans which were approved by Auckland City Environments in 2001, his opinion is that removal of some but not all of the balcony decks will not detrimentally impact on the external aesthetics of the complex. Mr Leuschke says that in his opinion the building silhouette and the “stepping” back of each of the units relative to their adjacent unit are the prime design aesthetics of the complex, and the aesthetic value of the balconies is only a minor, and not a major aesthetic element of the complex. Mr Leuschke said that the effect of removing four of the five balconies would not destroy the symmetry of the design of the complex, as in his view there is no symmetry. He points out that not all five units have the same appearance, as only two of them have garages and garage doors at ground level. He says that following removal of the balconies and their replacement with windows, the bulk of the building will not change.
[27] Mr Shanahan, who was called as an expert witness by the plaintiffs, is a registered architect and Member of the New Zealand Institute of Architects with over 30 years’ experience working as an architect specialising in residential architecture
including designing multi-unit townhouse and terrace house developments, subdivision housing and apartments. He was asked by the plaintiffs to comment on the opinions expressed by the defendant’s expert witness, Mr Paul Leuschke. Mr Shanahan says that in his view the five units are externally identical. He notes that they are each four storeys high and stepped back from each other. He says that the façade of each unit on the northern elevation is flat and the flatness is only “articulated” by the entry stairway to the front door on the first floor, and by the balcony on the top floor. In his opinion the removal of any of the balconies from the top floor level will have an adverse effect on the architectural composition of the building by reducing the “articulation” of the facades, and exposing the mismatch between the top floor joinery and the joinery on the levels below.
Effect of removal of balconies on the value of the units
[28] The plaintiffs presented valuation evidence from Mr Robert Lawton who is a registered valuer with over 40 years’ experience and a Senior Member of the New Zealand Property Institute. Mr Lawton says that in his opinion the monetary value of any unit where a balcony was removed would be reduced by between $5,000 and
$10,000.
[29] Mr Joby Barnham, who together with his wife owns Unit B and who supports the defendant in the proceeding, says that his main concern regarding retaining the balcony on their unit is that of safety. He says that the existing structure is not safe and needs to be removed or repaired. He says he cannot understand how he and his wife can be forced to pay the increased cost involved in retaining the deck and balcony of their unit given that it is located entirely within the unit title plan for their unit.
[30] The defendant has also presented evidence from Mr Andrew Gray, a building surveyor, who prepared a report on the risk and cost associated with retaining and rebuilding the decks and balconies, or removing them. Mr Gray prepared a scope of the remedial work addressing each of these options. He proceeded to assess cost on the basis that the work would be undertaken on all units at the same time and the same building materials and joinery used. He concludes that the extent of the work required to remove the decks and balconies without replacing them would be significantly less
than the cost of removing and replacing them, and he refers to the costing of his scope by a quantity surveyor, Mr Patrick Hanlon. Mr Hanlon has sworn an affidavit in which he says that he has estimated the cost of the work required to remove and replace each of the balconies and decks as being $223,100 (including GST), and of removing but not replacing the balconies and decks as being $185,150 (including GST).
[31] Mr Gray says further that in his opinion, enclosed decks constructed with solid handrails such as those on the development units, present a high weathertightness risk and rely heavily on careful design, construction, and regular maintenance to meet the performance requirements of the Building Code. He says decks and balconies of this kind present a greater weathertightness risk to the building than would be the case were the decks to be removed.
[32] The defendant has also presented evidence from a valuer addressing the question of whether removal of the other balconies would adversely affect the value of the plaintiffs’ unit. Mr Michael Sprague, who has held registration with the New Zealand Institute of Valuers since 1977 and has extensive valuation experience including the valuation of apartments in Auckland, undertook an evaluation of the units, reviewed the building plans, and inspected the interior and balcony deck of Unit
D. He says that while decks, balconies and outdoor loggias which provide and enhance indoor/outdoor flow are a desirable feature in good quality residential properties, this consideration does not apply to lower quality developments, where rental income is driven by bedroom capacity and size, rather than whether or not the residence includes a small deck. In his opinion, were one or more decks removed and others left in place, any resulting alteration in value would be negligible, and extremely difficult to measure.
[33] Mr Lawton, the plaintiffs’ expert valuation witness, agrees with the defendant’s valuation expert Mr Sprague, that removal of one or more of the decks would be unlikely to cause any significant alteration of the value of those units which retained their decks.
Submissions
The Plaintiffs’ Submissions
[34] Mr Herbert for the plaintiffs submits that the resolution passed at the 2017 AGM, by which the defendant granted its consent to all unit owners to remove the balconies of their units, was invalid.
[35] He submits that the balconies were an integral part of the original design of the development and each of the unit owners had purchased their units knowing that the exterior appearance and design of each unit was substantially uniform with the other units, and with each having a balcony which he says is an architectural and aesthetic feature of the development.
[36] Mr Herbert submits that the balconies are building elements within the definition of that term in s 5 of the Act, and are a building element that relates to or serves more than one unit. He says that the balconies of each unit relate aesthetically to the appearance of the other units and to the uniform and repeated design features of development. He submits that as the balconies of all five units relate visually to, and are referable to, all of the other units, and are aesthetically consistent with those on the other units, the defendant is required to repair and maintain them pursuant to the duty imposed on it by s 138(1) of the Act. Mr Herbert submits that the statutory duty on the defendant to repair and maintain the balconies as building elements, does not confer a power enabling the defendant to remove the balconies, unless they are to be replaced. Mr Herbert accepts that removal of the balconies would be a structural alteration to the units.
[37] Mr Herbert further says that in order for the defendant to discharge the duty to repair and maintain the balconies it must carry out the work itself. He submits that the defendant has no power to authorise the unit owners themselves to remove them. He says that the exterior of the building is to be repaired and maintained by the body corporate in accordance with its duty pursuant to s 138, and the units cannot be altered by means of a majority resolution of the body corporate, and submits that for such extensive alterations the defendant is required to obtain the approval of the Court pursuant to the provisions of the Act.
[38] Mr Herbert accepts that where there are options as regards repairing damage to units, the unit owners are themselves best placed to choose which option to adopt. However, he says that by means of the majority resolution of 9 June 2017, the defendant has delegated its responsibility to carry out the repair and maintenance of the balconies of the development to individual unit owners, and that the resolution is expressed broadly with no provision requiring the work to be done in a uniform manner and therefore no protection of the interests of other unit owners who may be adversely affected. He submits that the body corporate cannot by majority resolution disregard the statutory duty to repair and maintain, and the resolution was ultra vires and invalid. The plaintiffs accordingly seek a declaration to that effect.
Defendant’s Submissions
[39] Ms Wakelin for the defendant submits that the resolution passed at the 2017 AGM was valid and made pursuant to the defendant’s statutory powers and in accordance with its Operational Rules. She says that removal of a balcony is a structural alteration and the resolution was passed in accordance with s 80(1)(i) of the Act and rule 15(b) of the defendant’s Operational Rules which require an owner to obtain the written consent of the body corporate before making any addition or structural alteration to their unit that materially affects any other unit or the common property.
[40] Ms Wakelin says that contrary to the plaintiff’s submission, the duty to repair and maintain the development imposed by 138(1)(d) is not engaged here, because the balconies do not relate to or serve more than one unit.
[41] Ms Wakelin submits however that should s 138(1)(d) apply, the statutory obligation upon the defendant to repair and maintain the balconies may be discharged by the defendant effecting their removal, and without them being replaced. She submits that the defendant is required to perform its duties on a socially and economically sustainable basis. In accordance with its obligations, it intends to repair and maintain the façade of the development by means of the removal of the balconies, because that involves the least risk of the repairs proving ineffective.
[42] The defendant notes that the plaintiffs disagree with the repair plan approved by the majority of owners, but says the selection of one repair plan over an alternative is a matter best left to a body corporate to decide. Ms Wakelin submits that the issue to be decided here comes down to a difference in the views of the majority and the minority as to which repair plan should be adopted.
[43] Ms Wakelin notes that in each case the balconies are located entirely within the boundary of each unit. Further, that the challenged resolution expresses the decision of the majority of unit owners to permit removal of the balconies, which is a structural alteration of their premises as provided for by rule 15(b) of the Operational Rules and which requires the consent of the body corporate.
[44] The defendant notes that the parties agree that the development is a leaky building, and that the balconies have suffered damage caused by water ingress such as has rendered them unsafe. The defendant says that in order to make the units watertight, it is necessary to remove the balconies even if full reinstatement was the preferred method of repair. The defendant says that the balconies are located well apart from each other and there is clearly no structural interrelationship between them, so that a balcony could be dismantled and removed without structurally affecting any other unit. The defendants say that in the event that some, but not all of the balconies were removed, there would be no adverse effect on the external aesthetic appearance of the development, nor on the value of the units.
[45] The defendant further says that requiring the unit owners to replace their unwanted balconies will have a material impact on those owners, because the cost of replacing a balcony as part of a repair plan will be significantly greater than the cost of a repair that simply involves removal of the balcony.
[46] Ms Wakelin submits that the removal of balconies by those unit owners who wish to do so, will not have a material effect on any other unit. Further, she submits that even if removal did have a material effect on other units, by means of the 2017 resolution, the defendant has authorised and consented to the unit owners removing their balconies, as it was lawfully entitled to do.
Analysis
[47] The key issue is whether the Body Corporate’s 2017 resolution, permitting the removal of the balconies by those owners who wished to do so, was ultra vires.
Does s 138 of the Act apply?
[48]Section 138 of the Act provides:
Body corporate duties of repair and maintenance
(1) The body corporate must repair and maintain—
…
(d) any building elements and infrastructure that relate to or serve more than 1 unit.
…
(5) For the purposes of this section,—
…
the duty to repair and maintain includes (without limitation) a duty to manage (for the purpose of repair and maintenance), to keep in a good state of repair, and to renew where necessary.
[49] The term “building elements” is defined in s 5(1) of the Act. The definition includes “the 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”, and explicitly includes “balconies”.
[50] Section 138(1) imposes a duty on a body corporate to repair and maintain any building elements and infrastructure (both defined in s 5) that relate to or serve more than one unit. The Court of Appeal considered the phrase “relate to or serve” as it appears in s 138(1)(d) in Wheeldon v Body Corporate 342525, saying:1
[53] The ordinary meaning of “relate to” is “have reference to; concern”. This ordinary meaning is reflected in Harrison J’s statement in Young v Body Corporate 120066 that “[s]omething is incidental if it naturally attaches or is causally relevant to something else. The phrase ‘relate to’ has a similar meaning of reference to or concern with.”
1 Wheeldon v Body Corporate 342525 [2016] NZCA 247, (2016) 17 NZCPR 353 at [53] – [55].
[54] Although Young was decided under the different scheme of the UTA 1972, this statement is equally applicable in the present context. Muir J, correctly, drew on Harrison J’s statement to find that a building element or infrastructure relates to or serves more than one unit if it:
(a) naturally attaches to another unit (as in physically adjoining units); or
(b) is causally relevant to another unit whether physically or economically (as in non-adjoining units); or
(c) is referable to another unit whether physically or economically (as in both adjoining and non-adjoining units); or
(d) is concerned with another unit whether physically or economically.
In addition, Muir J considered that the inclusion of aesthetics in the definition of building elements and the emphasis on integrity of the development in s 3 means that the economic relationship should include those factors.
[55] We consider that Muir J’s approach and conclusion were right. The engagement of s 138(1)(d) does not turn on questions of remoteness or materiality. Building elements, by definition, are necessary to the structural integrity of the building, its exterior aesthetics and the health and safety of its occupants. But s 138(1)(d) is only engaged if the criteria set out there are met, namely that the building element or infrastructure relates to or serves more than one unit. There is no need for any gloss and no need to overlay s 138(1)(d) with new terminology. Whether a building element relates to or serves more than one unit is a question of fact.
[51] I find that the balconies and decks on the units are building elements that serve more than one unit. While each balcony and associated deck is quite independent of the others in terms of the structure of the complex, in my view the balconies are a sufficiently prominent element of the design and appearance of the complex to be building elements. The positioning of the balconies on the upper level of each unit and the repetition of this element on each unit contributes to an overall appearance of visual and aesthetic uniformity. While I agree with Mr Leuschke that the balconies are not a major aesthetic feature of the design, they are nevertheless sufficiently prominent and significant features of the complex, to fall within the statutory definition of building elements.
[52] Accordingly, pursuant to s 138(1)(d), the defendant as the relevant body corporate has a mandatory duty to repair and maintain the decks and balconies in the interests of all body corporate members.
[53] One of the purposes of the Act is to protect the integrity of the development as a whole.2 In s 74 the Act provides a mechanism for a body corporate, unit owner, administrator or mortgagee of a development to apply to the Court for settlement of a scheme to reinstate a building or other improvement comprised in a development which has been damaged or destroyed, but where the unit plan is not cancelled. An application to settle a scheme for the reinstatement of the premises may be made in respect of the whole of any part of the building, and any person having an estate or interest in any unit has the right to be heard on the application. The Court has the power to settle a scheme, and to make any orders that it considers expedient or necessary for giving effect to the scheme.3
[54] Thus the s 74 mechanism for a body corporate or unit owner to obtain the Court’s approval of a proposed scheme for the reinstatement of a damaged building or unit provides for and ensures that individual unit owners can make submissions regarding the proposal, and the Court can scrutinise the proposal and settle the scheme having considered the positions of all those having an interest in the development and having regard to the purposes and principles of the Act.
[55] Here the damage caused by the water ingress around the balconies is extensive. The extent of the damage is reflected in the estimated cost of remediating the decks and balconies, and by the proposal that they be removed altogether and replaced by cladding to achieve a more reliable watertight repair.
[56] Having regard to the extent of the damage caused to the balconies, it is clear that the provisions of s 74(1) are engaged. That being the case, the issue which arises here is whether a body corporate which is required to repair and maintain a building element may elect not to use the s 74 mechanism, and instead employ the provisions of its operational rules to authorise unit owners to undertake the repairs themselves, thereby avoiding the oversight of the Court that the s 74 mechanism entails .
[57]Rule 15 of the defendant’s Operational Rules relevantly provides:
15. Exterior of the Building
2 Unit Titles Act 2010, s 3(d).
3 Unit Titles Act 2010, s 74.
An Owner must
a) Repair and maintain the exterior of the unit (if required by the Body Corporate) and keep it in sufficiently good order, repair and condition to ensure that no damage, harm, or diminution in value occurs to the common property of any other unit.
b) Make no alteration or structural alterations to the unit or in any way alter the elevation or external appearance of the unit without the written consent of the Body Corporate.
…
f) Maintain any deck, balcony or courtyard forming part of the unit in a neat and tidy condition and not place any item other than outdoor furniture and plants on the deck or balcony without the written prior approval of the Body Corporate or its Agents, the Secretary or the Building Manager.
[58] In Wheeldon v Body Corporate 342525,4 the High Court addressed the interrelationship between the body corporate’s s 138(1)(d) duty to repair and maintain, and the individual unit owners’ s 80(1)(g) duty to repair and maintain. The High Court held that the duty of an individual unit owner to repair and maintain building elements that serve more than one unit, is subject to the body corporate’s s 138 duty to repair and maintain.5 Muir J said:
[47] In a flow chart attached to [his NZLS Unit Titles Intensive 2012],6 Mr Gibbons identifies the first question that requires determination where a building element or infrastructure may require repair as being whether the particular building element or infrastructure serves more than one unit. In the event that question is answered in the affirmative, Mr Gibbons identifies an obligation upon the Body Corporate to repair that building element or infrastructure. If in the negative, then the unit plan is to be checked to identify whether the building element or infrastructure is part of a unit or common property. If the former, then it is the unit owner’s responsibility to repair, and if the latter, the Body Corporate’s.
[48] In my view this analysis best reconciles the provisions of ss 80(1)(g) and 138(1)(d) and is consistent with the Court of Appeal’s obiter observations in Berachan. It also best ensures attainment of the Act’s objective to protect the integrity of the development as a whole. “Integrity” in that sense is not simply structural but, by virtue of the expansive definition of “building elements”, aesthetic as well. Exterior components of the building, like decks and associated balustrading that relate in an aesthetic sense to other units ( or indeed upon my analysis to common property) properly, in my view, fall
4 Wheeldon v Body Corporate 342525 [2015] NZHC 884, (2015) 16 NZCPR 829; Wheeldon v Body Corporate 342525 [2016] NZCA 247, (2016) 17 NZCPR 353.
Wheeldon v Body Corporate 342525 [2015] NZHC 884, (2015) 16 NZCPR 829 at [47] at [48].
Upheld on appeal, Wheeldon v Body Corporate 342525 [2016] NZCA 247, (2016) 17 NZCPR 353
at [42].
6 Thomas Gibbons Maintenance (New Zealand Law Society Unit Titles Intensive) 2012.
within the provisions of s 138. That reinforces an active role ( indeed duty) on the part of the Body Corporate to ensure works are carried out to a uniform standard and with uniform aesthetic outcomes. ….
[59] The statutory duty imposed on unit owners by s 80(1)(g) to repair and maintain their units is mirrored by an equivalent provision in the defendant’s Operational Rules, and the analysis of the interrelationship between ss 80(1)(g) and 138 as explained by Muir J in Wheeldon applies equally, in my view, to the repair and maintenance obligations on the unit owners provided for in the defendant’s Operational Rules. Where s 138 is engaged, the Operational Rules are subordinate to the statutory provisions.7
[60] Thus the s 138(1)(d) duty on the defendant to repair and maintain any building elements that relate to or serve more than one unit is not extinguished or displaced by the provisions of rule 15 and the obligation imposed on unit owners by that rule to repair and maintain the exterior of their units. The defendant cannot discharge, or avoid discharging, its duty to repair and maintain building elements that relate to or serve more than one unit by employing the Operational Rules to authorise individual unit owners to undertake the work necessary to effect the required repairs and maintenance that the body corporate must itself do. Furthermore, the s 138(1) duty on the defendant to repair and maintain cannot be avoided by employing the provisions of the Operational Rules by mis-categorising necessary repairs as alterations and by authorising individual unit owners to undertake the work themselves.
[61] Accordingly, where a building element which relates to or serves more than one unit requires repair and maintenance, the responsibility for carrying out the required work is that of the body corporate itself. The duties and responsibilities of the body corporate cannot be delegated other than pursuant to ss 108 and 109 of the Act.
Was the 2017 resolution lawful?
[62] The Operational Rules require unit owners to repair and maintain the exterior of their respective units, and to obtain the written consent of the Body Corporate before making any alterations to the appearance of a unit. The obligations imposed on the
7 Wheeldon v Body Corporate 342525 [2015] NZHC 884, (2015) 16 NZCPR 829 at [53].
unit owners by rule 15 are directed at maintaining the existing building as regards weathertightness, structure, and exterior appearance.
[63] Here the damage caused by the water ingress around the decks and balconies necessitates extensive and expensive repairs to the four affected units. The proposed remedial measure of removing four of the five balconies of the development will result in a significant alteration to the aesthetic appearance of the development. Alterations to the exterior of the development, such as will significantly alter its external appearance, do affect the integrity of the development.
[64] While the challenged 2017 resolution authorises the removal of the balconies it does not require them to be removed, leaving it to the individual unit owners to decide whether or when to remove their balconies. The resolution does not impose any time limit on when the removal of the balconies is required to be done. Accordingly this could lead to all four unit owners of units A-D removing their balconies or just some of them. Apart from requiring any removal and recladding to be done in accordance with a building consent, the resolution does not provide that the unit owners must obtain the Body Corporate’s prior approval for any proposed work. The resolution does not stipulate what the removed balconies should be replaced with; and there is nothing to require the remedial work to be carried out to a uniform standard using the same materials to achieve a uniform aesthetic outcome.
[65] In my view the provisions of rule 15 and the power of the Body Corporate to approve alterations to the external appearance of a unit are not unlimited, and do not include a power to approve alterations which will significantly impact the external appearance and aesthetic integrity of the development contrary to the purposes of the Act.
[66] The purposes of the Act include the protection of the integrity of the development as a whole and s 74 provides a mechanism for obtaining the Court’s approval for a scheme to repair a development following damage to the units. In deciding whether to settle a proposed scheme to effect repairs to a damaged development, the Court will have regard to the purposes of the Act and in particular its purpose of protecting the integrity of the development. The s 74 process and the
ability for all affected and interested unit owners to be heard before the Court settles a scheme, ensures that remedial work to be undertaken is in accordance with the provisions and principles of the Act. Parliament imposed a mandatory duty to repair and maintain the common property and any building elements that relate to more than one unit on the body corporate. It also provided, in s 74, a mechanism by which a body corporate can apply to the Court for approval of a scheme to effect repairs following damage. It has thus clearly signposted the limitations on the body corporate’s power to authorise unit owners to undertake alterations to the development in order to effect repairs to building elements that relate more than one unit.
[67] In the leading judgment on s 74 applications Tisch v Body Corporate 318596,8 Wild J, for the Court of Appeal, referred to s 48 (the historic equivalent to s 74),9 and said:10
[36] …There is no guidance in s 48 as to the amount of damage necessary to trigger the section… About all that can be said is that no-one is likely to apply under s 48 unless the damage is substantial…
[37] …Hopefully, a scheme will not be needed for most ‘leaky buildings’ or other cases where substantial repair work is required. The risks and costs of applying to the Court and the desirability of maintaining harmony between people living in the same building or complex surely call for a determined effort to achieve agreement between owners on the carrying out of the required repairs. We endorse Heath J’s observation in Fraser that “s 48 should be a remedy of last resort.”
[68] Unfortunately here the aspiration that the unit owners of the development should make a determined effort to achieve agreement as to the appropriate balcony repairs without the court’s assistance has not been achieved and it is clear that a consensus is most unlikely to be reached. As the background to this dispute summarised above makes plain, the present case arises from a long-running dispute between the unit owners as to how they should deal with the need to repair what is clearly significant damage to their development, and is a dispute which is most appropriately resolved by recourse to the s 74 mechanism.
8 Re Body Corporate 384825 [2019] NZHC 1006 at [12].
9 Tisch v Body Corporate No 318596 [2011] NZCA 420 at [26].
10 Tisch v Body Corporate No 318596 [2011] NZCA 420 at [36] – [37] (footnotes omitted).
[69] By erroneously treating the proposed removal of the balconies as being outside the scope of its s 138(1)(d) duty to repair and maintain, the defendant proceeded to address what is clearly a repair and maintenance matter as a matter falling within the scope of its Operational Rules dealing with approvals for the alteration of the exterior of the development.
[70] Having found that the defendant’s s138(1)(d) duty to repair and maintain cannot be discharged other than by the body corporate itself, I further find that the defendant’s resolution purporting to authorise the individual unit owners to carry out work required to repair the water damage caused by the leaky balconies by removing the decks and balconies of their respective units and not replacing them was ultra vires and unlawful.
[71] In the absence of unanimity amongst the unit owners of the development regarding removal of the balconies, the appropriate mechanism for the defendant to progress and resolve the matter is by way of an application to the Court pursuant to s 74 for the approval and settlement of a scheme which would set out the details of the proposed repairs to the development required to remedy the water damage in and around the balconies. A proposed scheme to effect the repairs by removing the balconies can then be considered by all unit owners who will have the opportunity to make submissions to the Court regarding their views of the scheme. The Court will then settle the scheme in accordance with s 74 and the principles of the Act.
[72] The plaintiffs submitted that this proceeding is at its heart, about which version of democracy is relevant to the Body Corporate’s decision-making process. However, that submission is misdirected. At its heart, this proceeding is about the scope of a body corporate’s powers and responsibilities in relation to repairing and maintaining the development. If the Body Corporate had passed an ordinary resolution consistent with the purposes and principles of the Act, then there is no question that its majority founded decision-making process would have been appropriate. The Unit Titles Act 2010 is clear that a body corporate may pass ordinary resolutions by a majority.11 Further, as noted by Associate Judge Bell in Singh v Boutique Body Corporates Ltd,
11 Unit Titles Act 2010, s 97(4).
there is a “strong policy of not interfering with the exercise of voting powers” of unit owners, and so “owners generally must take the consequences of decisions in general meeting[s] for better or worse.”12 However, for the reasons set out above, I find that the defendant’s resolution of 2017 failed to conform with the purposes and principles of the Act, and that it could have achieved its goal lawfully by applying under s 74. An application under s 74 would also have the effect of ensuring that any divergent views and interests of all parties are given due consideration by the Court in reaching a decision to settle the scheme.
Result
[73] I make a declaration pursuant to the Declaratory Judgments Act 1908 that the defendant’s resolution of 9 June 2017 was ultra vires and invalid. I accordingly make an order quashing the resolution.
[74] The plaintiffs are entitled to an award of costs and to recover their reasonable disbursements. The plaintiffs are to file and serve a memorandum setting out their claim for costs and disbursements within ten working days from the date of delivery of this judgment. The defendant is to file and serve a memorandum in reply within a further period of ten working days following receipt of service of the plaintiff’s memorandum. The costs memoranda of the parties are not to exceed five pages in length other than an annexed schedule and any annexures relating to disbursements.
Paul Davison J
12 Singh v Boutique Body Corporates Ltd [2019] NZHC 1707 at [42].