Body Corporate 126001 v Hannam

[2022] NZHC 158

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-002003

[2022] NZHC 158

IN THE MATTER

of the Unit Titles Act 2010

AND

IN THE MATTER

of an application under Part 19, Rule 19.2(za) High Court Rules

BETWEEN

BODY CORPORATE 126001

Applicant

AND

GARY KEITH HANNAM and PATRICIA JOY DRAPER

First Respondents

…/2

Hearing:

4 February 2022

Appearances:

T J G Allan for Applicant

D Bigio QC (by VMR) and S N Zellman for First Respondent K M Bates for Twenty-fifth to thirty-sixth, thirty-eighth and

thirty-ninth Respondents

S L Cogan for Thirty-seventh Respondents T Hu for Fifty-first Respondent

Judgment:

11 February 2022

JUDGMENT OF VENNING J

This judgment was delivered by me on 11 February 2022 at 11.30 am, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Grove Darlow & Partners, Auckland

Grimshaw & Co, Auckland

Jeff Morrison & Associates, Auckland Wilson Harle, Auckland

Lee Salmon Long, Auckland

Counsel:D Bigio QC, Auckland S Cogan, Auckland

BODY CORPORATE 126001 v HANNAM & ORS [2022] NZHC 158 [11 February 2022]

KEITH OLIVER DIPROSE, LYNETTE PATRICIA CHAPMAN and STUART ISAN CHAPMAN

Second Respondents

MIKAELE CHARLES WESTERLUND
Third Respondent

JEFFREY LAURENCE FISHER and LISA FIONA FISHER
Fourth Respondents

SUSAN MARY KINGSTON
Fifth Respondent

AVRIL BARBARA SCOTT and DAVID IAN HAIGH

Sixth Respondents

BRIAN JOSEPH HINCHCO and SELENA JANE HINCHCO

Seventh Respondents

NIGEL KING
Eight Respondent

SARAH KATE GREENAWAY
Ninth Respondent

SNEZANA DACIC
Tenth Respondent

LEANNE JOY GREENHALGH and PAUL RICHARD GREENHALGH

Eleventh Respondents

COLIN GRANT KENYON and JANINE LOIS KENYON

Twelfth Respondents

TONY ALAN HOPKINS and TRACEY ANN HOPKINS

Thirteenth Respondents

JAMES ANTHONY YOUNG, JENNY JUNE TONG and NATALIE SAMANTHA TONG

Fourteenth Respondents

ANNA GABRIELLE SOTHERAN and HAYDEN ROBERT HYAMS

Fifteenth Respondents

FRANCES ANNE SIMEON and JOHN MICHAEL SIMEON

Sixteenth Respondents

DONELLE MARIE THOMPSON and PAUL ALISTAIR CRAIGIE

Seventeenth Respondents

ERIK TORE OLOFSSON
Eighteenth Respondent

ANN SANDRA EVERARD and GRANT IAN HALLY

Nineteenth Respondents

KAREN ANN COTES
Twentieth Respondent

DAVID ALEXANDER LLOYD and TRINA MAREE LLOYD

Twenty-First Respondents

DAVID JAMES WAY
Twenty-Second Respondent

CHERL ROSEMARY DWYER, WAYNE DAVID KEEN and KM TRUSTEE

SERVICES LIMITED
Twenty-Third Respondents

PHILLIP ANDREW JONSTONE and

STEPHANIE ROCHELLE JOHNSTONE
Twenty-Fourth Respondents

PAUL FRANCES QUINLIVAN,

SHIELLEY ROZANNE QUINLIVAN and NEW ZEALAND TRUSTEE SERVICES LIMITED

Twenty-Fifth Respondents

CAMERON ROSS GRIBBEN
Twenty-Sixth Respondent

JAMES KENNINGTON WATSON and WENDY MIRIAM WATSON-EKSTEIN

Twenty-Seventh Respondents

MELT INVESTMENTS LIMITED

Twenty-Eighth Respondent

ALISON STUART SMITH, ALLEN DONALD SHANKS and SCOTT SHAW SMITH

Twenty-Ninth Respondents

JON RIVERS LAMB, LAWREEN LAMB and BEECH HILL TRUSTEE LIMITED

Thirtieth Respondents

ANGELE MARY GREENHALGH and BARRY GREENHALGH

Thirty-First Respondents

DOUGLAS SMERDON CARTER,
PARTICIA EMILY CARTER and SOONG YUAN CHAU
Thirty-Second Respondents

HAULTAIN PROPERTIES LIMITED

Thirty-Third Respondent

AVANTI APARTMENT LIMITED
Thirty-Fourth Respondent

MARGARENT ELIZABETH WATTS
Thirty-Fifth Respondent

JOHN ANDREW BEDKOER
Thirty-Sixth Respondent

CLIVE MARIO FERNANDES and ELIZABETH SCOTT JOHNS

Thirty-Seventh Respondents

PETER DAVID BONE and SHALE CHAMBERS

Thirty-Eighth Respondents

JOHN NORMAN SISSONS, SUZANNE ELIZABETH SISSONS and ATACH

LIMITED
Thirty-Ninth Respondents

GERARD JOHN RENNIE, IAN MARTIN GUILFORD and TRISH JANE
Fortieth Respondents

WESTPAC NEW ZEALAND LIMITED

Forty-First Respondent

ANZ BANK NEW ZEALAND LIMITED
Forty-Second Respondent

ASB BANK LIMITED
Forty-Third Respondent

BANK OF NEW ZEALAND
Forty-Fourth Respondent

NZ HOME LENDING LIMITED
Forty-Fifth Respondent

MORTGAGE HOLDING TRUST COMPANY LIMITED

Forty-Sixth Respondent

SOUTHLAND BUILDING LIMITED
Forty-Seventh Respondent

CHUBB INSURANCE NEW ZEALAND LIMITED

Forty-Eighth Respondent

GRANT JENSEN CASHMORE and PETER GRANT STODDARD CASHMORE and SELLAR BONE TRUSTEES (2015) LIMITED

Forty-Ninth Respondents

KALPANA CHIMANLAL and SURESH
CHIMANLAL Fiftieth Respondents

WESTERN PARK SUBSIDIARY BODY CORPORATE (493826)

Fifty-first Respondents

GREGORY IAN VARLEY and LAURA ALICE DONALDSON

Fifty-second Respondents

LISTON TRUSTEE SERVICES

LIMITED, MARY WALLACE FRANCIS and WILLIAM PETER FRANCIS

Fifty-third Respondents

TSB BANK LIMITED
Fifty-fourth Respondent

Applications

[1]There are two applications before the Court:1

(a)an application by Body Corporate 126001 (the BC) for the allocation of a priority fixture and associated orders;

(b)an application by the first and thirty-seventh respondents for orders enabling experts to access and inspect units  401–403,  501–503,  601– 603, 701–703, 802, 803 and 901 on terms.

[2]        At the conclusion of the hearing the Court confirmed that, the BC’s application for a priority fixture and the related order as to the assignment of a judge to manage the file was approved in principle but the allocation of a trial date would have to follow further consideration of the trial requirements to be clarified at a case management conference.

[3]        The Court also confirmed that the more limited application for access orders was approved and invited counsel to agree terms of such orders for access and testing.

Background

[4]        The factual background to the substantive proceeding which is an application for approval of a scheme under s 74 of the Unit Titles Act 2010 can be taken from a decision of Davison J dated 3 September 2021:2

[5]        The Western Park residential complex in which the applicants’ [the current thirty-seventh respondents] unit is situated comprises 16 original residential units. This building was constructed in 1988 and is administered by the BC. The applicants’ unit 801 is situated on level 8. The Western Park complex also comprises a second building comprising 28 residential units which is operated under a subsidiary body corporate (Subsidiary Body Corporate 493826).

1      The original application was made on 11 November 2021. In counsel’s submissions for the first respondents dated 21 January 2022 it was confirmed the applicant no longer sought to take samples and/or undertake destructive testing with the consent of the owner.

2      Body Corporate 126001 v Hannam & Ors [2021] NZHC 2307.

[6]        Mr Gary Hannam and Ms Patricia Draper (the first respondent)3 are the trustees of the GK Hannam Family Trust (GHFT) and owners of unit 9014 located on levels 9 and 10 of the building, which are the top two levels. Mr Hannam or his associated interests have owned unit 901 since around 1999.

…

[12]      Following a period overseas, the applicants returned to New Zealand in January 2017 and moved into unit 801. In February 2017 they experienced water leaking into their apartment after it had been raining. Mr Fernandes contacted the first respondent and suggested meeting for a discussion. In an emailed reply Ms Draper explained that as she was away from Auckland, she had asked her nephew who was also living at unit 900 to contact them to see what could be done about the leak. She explained: “We are indeed working hard to resolve the situation with the Body Corp so that we can go ahead with our proposed solution to make the decks completely waterproof.”

[13]      During February 2017 the first respondent undertook waterproofing repairs to the deck of their unit, however they proved ineffective and water leaks into unit 801 continued to occur. Further attempts during the following six months were similarly ineffective.

The 2017 application for approval of the s 74 scheme

[14]      During 2017 the BC decided that having regard to its obligations under s 138 of the Act to repair and maintain, it would carry out repairs to the deck on level 9, which would involve work being carried out within the unit property of the apartments on level 8, including unit 801.5 On 30 August 2017 the BC filed an originating application seeking an order approving a scheme under s 74 of the Act pursuant to which it would carry out work on the deck area of level 9 to remedy water leaking from level 9 into the units of owners on level 8 and lower levels, and allocate the cost of the repairs between the unit owners (the s 74 proceeding). Mr Hannam and Mr Graeme Clark (deceased) were named as the respondent as trustees of the GHFT.

…

[18]      On 6 September 2017 the BC applied for interim orders authorising it to effect temporary repairs to the building pending determination of its application for approval of the Scheme. Following the filing of a joint memorandum by counsel on 13 November 2017 Justice Peters made consent orders pursuant to which the first respondent was prohibited from undertaking any construction or repair work to the surface of the level 9 deck without the consent of the BC or the Court, and afford the BC and its agents reasonable access to the level 9 deck between 7.30 am and 5.00 pm to enable it to carry out and install a temporary repair solution in respect of the water leaking into unit 801.

3      When this proceeding was commenced Mr Graeme Bruce Clark (deceased) was named together with Mr Hannam as a respondent. Ms Patricia Joy Draper who is Mr Hannam’s partner has since been appointed as a trustee, and she was added as the second-named first respondent by order made on 12 November 2019.

4      Also referred to as Unit Q.

5      Unit Titles Act 2010, s 138.

[19]      A second proceeding was also commenced by the BC in 2017 regarding its imposition of levies on the first respondent (Mr Hannam) for costs it had incurred in relation to legal and consultant fees during 2015 for consideration of his re-development plans for levels 9 and 10, and for consultant fees for investigating and developing a remedial solution for repairs to the level 9 deck, which it had on-charged to him (the levies proceeding). 6 The amount involved was approximately $100,000.

…

[22] On 30 April  2018 the BC filed an  amended originating  application (the amended application) for an order sanctioning and settling an amended s 74 scheme. This amended application named all of the unit owners, the registered mortgagees, and the building’s insurer, as respondents. A copy of the proposed scheme was attached to the application. The applicants as owners of unit 801 were named as the thirty-seventh respondents.

…

The 12 November 2019 consent orders

[33] As noted in Grove Darlow’s 28 August 2019 letter to the applicants’ solicitor Mr Jeff Morrison, [footnote omitted] the two proceedings had been set down for a two week hearing to commence on 11 November 2019. Shortly before the hearing commenced, counsel for the BC and counsel for Mr Hannam as first respondent, filed a “Consent Memorandum” dated 11 November 2019 (the consent memorandum) stating that they had agreed terms of settlement of both the s 74 proceeding, and the levies proceeding. As regards the levies proceeding the memorandum advised that it had been settled by the parties and the Court was asked to note that the proceeding was discontinued, with no issue as to costs.

…

[38] By Minute issued on 12 November 2019 the Court made orders approving the Scheme in the form proposed and as annexed to the joint memorandum. Orders were also made deferring the date upon which the Scheme would become operational until 11 November 2020, and granting leave to the applicant and respondents to apply for any other ancillary orders or directions as necessary.

…

[47] The applicants as trustees of the MFT and owner of unit 801, say that although they were served with the BC’s amended s 74 application on 3 May 2018 they were not served with the revised s 74 scheme which was the basis on which the BC sought the consent orders made by the Court on 12 November 2019. They say that they did not consent to those orders and as a consequence of not being served with the revised scheme, they were not heard on the issue of the allocation of costs as between unit owners. They say that the BC ought reasonably to have known that they disputed the issue.

6      Body Corporate 126001 v Gary Keith Hannam & Ors CIV-2017-004-1845.

[5]    Ultimately and for reasons it is unnecessary to canvas in this decision on these interlocutory applications, Davison J accepted that the proper course in the circumstances that had arisen was for the Court to cancel the consent order made on 12 November 2019 approving the Scheme. The Judge directed the BC to effect service of the revised scheme on the applicants and all other unit holders and parties entitled to be heard from regarding the scheme.

[6]The BC has re-served the Scheme and seeks approval of it by the Court.

[7]    The first and thirty-seventh respondents, (being the owners of 901, the penthouse, and 801, Mr Cogan’s clients), do not consent to the Scheme in its current form. It is unnecessary for the Court on these interlocutory applications to consider the merits of that opposition.

Priority fixture

[8]    The practical situation is that staged temporary repairs have been required to the first respondent’s property at unit 900 and it is presently uninhabited. The staged temporary repairs were required to prevent leaking into units below it, including units 801, 803 and 402. While it will take an estimated two years to redesign and obtain a building consent for the rebuild or redevelopment of unit 900 with a permanent structure complying with the building code (and it will then take a further period to construct the permanent structure) the BC says the parties need to know the basis upon which the costs of that work are to be allocated.

[9]    Further, the temporary repairs have a limited life. All property owners within the building are affected by the present situation. Relevantly this proceeding has been on foot since August 2017 and, although apparently resolved by consent orders as a result of the judgment delivered in September last year, the Scheme that had been approved was set aside by the Court.

[10]   While the application for priority fixture was initially formally opposed by Mr Bigio QC’s and Mr Cogan’s clients, that was on the basis of a concern that if a priority fixture was allocated at this time it might frustrate their ability to pursue the access and inspection of the units as sought in the access application. As discussed with

counsel that is not an issue. In light of that practical situation, the opposition fell away. It is still for the Court, however, to determine that the case warrants priority over other cases waiting for hearing.

[11]   The particular circumstances of this case which support a priority are the length of time the proceeding has been on foot, the fact that the matter was initially settled, but that consent was set aside by the Court for the reasons given by Davison J in his judgment of September 2021 and also that the temporary repairs have a limited life.

[12]   In those circumstances and given that background, I accept in principle that this case should be heard in priority to other cases of the same or similar length and the Registrar should bear that in mind when allocating fixtures.

[13]   However, as discussed with counsel, in the absence of clarity at present as to an accurate estimation of the time required for the fixture (Mr Allan properly noted that the longest trial ever recorded concerning a s 74 scheme took six days) and the voluminous affidavits in this proceeding, the Court is not in a position to allocate a definite fixture at this time. As discussed with counsel, if it were possible to refine the issues and agree a limited basis of cross-examination so that the hearing could be kept within four to five days that would affect the likelihood of the Court being able to allocate a fixture within a more palatable timeframe than would be the case if the case was to need a second week of trial time.

[14]The orders the Court makes on that aspect of the application for priority are:

(a)this case is to be allocated priority to other cases requiring the same length of fixture time;

(b)the file is to be assigned to a judge for case management;

(c)a case management conference is to be convened by the assigned judge at a time convenient to the judge within the next two months by which time counsel are to be in a position to file memoranda confirming the

extent of hearing time required and a timetable to ensure the proceeding can realistically be dealt with within the time proposed; and

(d)costs are reserved on that application.

The access application

[15]   The first and thirty-seventh respondents’ access application seeks access to the units identified in the application to enable visual inspections of any part of the units, photographing of any part of the units, and the taking of air spore samples from any locations within the units. The applicants no longer pursue the request for destruction sampling (with consent).

[16]   It is said that the inspection is necessary because the proposed Scheme seeks a costs apportionment on the basis that each owner will pay for the cost of repair to their own units but the BC considers that repairs are only required on levels eight to 10 of the building and has not accepted the suggestion that moisture is penetrating the external envelope on other levels or that repairs are required to other levels at this time.

[17]   The first and thirty-sevenths respondents say that there is evidence available (historical evidence in relation to unit 402, for example) of moisture ingress from the external envelope on other levels and that the external envelope on levels four to 10 requires a co-ordinated, holistic and remedial solution. If the external envelope requires replacement that is a factor which supports the cost apportionment proposed by the first and thirty-seventh respondents, namely an ownership interest cost apportionment. It is also relevant to whether the Scheme as framed should be approved given the BC’s limited repair proposal.

[18]   The access sought will assist their building experts in determining risk factors and current conditions of the units on levels four to 10, the need for further investigations and remedial work on levels four to 10, and the need for holistic repairs to the external envelope of levels four to 10.

[19]   Mr Allan confirmed the BC opposed the application, primarily because of concern that the application appeared to be a response to BC’s application for a priority

fixture. He accepted that the application principally raised issues for the individual unit owners.

[20]   Ms Hu confirmed her clients on levels one to three were not affected and abided the decision of the Court.

[21]   Ms Bates, as counsel for the twenty-fifth to thirty-sixth and thirty-eighth and thirty-ninth respondents, confirmed her clients were opposed to the application.

[22]   Ms Bates notes that the units were already subject to routine six monthly inspections by the BC. Her clients did not consider there was any need for any further inspections which included spore testing. They opposed any invasive form of testing. Ms Bates suggested that the unit owners she represented would have no objection to the first and thirty-seventh respondents’ experts attending with the BC expert on the routine bi-annual inspections. She submitted that the appropriate time for the issue of exterior cladding to be considered was in the future in accordance with the proposals by the BC. Generally she supported the BC’s opposition. Ms Bates submitted it was not necessary for the Court, when determining whether to approve the proposed scheme of arrangement, to determine the scope of the repairs plan at this time.

[23]The application for inspection is made under r 9.34:

9.34     Order for inspection, etc

(1)        The court may, for the purpose of enabling the proper determination of any matter in question in a proceeding, make orders, on terms, for—

(a)the inspection of any property:

(b)the taking of samples of any property:

(c)the observation of any property:

(d)the measuring, weighing, or photographing of any property:

(e)the conduct of an experiment on or with any property:

(f)the observation of a process.

(2)An order may authorise a person to enter any land or do anything else for the purpose of getting access to the property.

(3)In this rule, property includes any land and any document or other chattel, whether in the control of a party or not.

[24]   As the rule confirms, the Court may make an order for inspection if satisfied that the inspection may enable the proper determination of any matter in question in the proceeding.7 Any order is discretionary.

[25]   The BC’s principal objection to the application for inspection was concern as to the impact on its application for the priority fixture. For the reasons given above that is no longer a concern.

[26]   Mr Allan also emphasised that the Scheme permits any and all repairs irrespective of how it is characterised: limited, urgent, co-ordinated, holistic, gradual or incremental and suggested that in accordance with the principles established in Tisch v Body Corporate No. 3 3185968 whether or not the exterior cladding to levels four to 10 requires repair is a decision about the merits of one repair plan over another. Considering how, when and sequencing a decision about such repair work is for the BC and not the Court. Further, the Scheme already provides an extensive definition of repair. Insofar as there may be differences of view about the merits of one repair over another, that too is provided for in the Scheme through a dispute resolution processes.

[27]   On a practical basis Mr Allan suggested that the ongoing monitoring of the building had included monitoring by Messrs Gray and Ferens, bi-annual spore testing of external unit walls by Mr Englund, and reports from other experts who have been monitoring the building for a number of years. He submitted that none of those reports suggested that the long-term maintenance plan is not achieving its purpose or that there is a spore count in the walls to indicate cladding is failing. A number of unit owners have sworn affidavits stating their units do not have water ingress issues and have confirmed that to be the position as recently as December 2021.

[28]   As a fall back, Mr Allan suggested that if the Court was to make orders for access it should be subject to strict and satisfactory terms. Counsel should be able to

7      Trott v Barnett [2017] NZHC 478.

8      Tisch v Body Corporate No 318596 [2011] NZCA 420.

confer and agree and any such testing should be integrated into any timetable for a priority fixture.

[29]   While Mr Allan is correct that the definition of repairs is broadly phrased in the proposed Scheme, it is clear from the evidence and approach taken by the BC that its current intent is to restrict the repairs to levels nine and 10. If, however, the exterior envelope of levels four to 10 as a whole required remediation that would be relevant to whether the Court might approve the Scheme, or on what terms it may approve it. There is potentially a significant difference between an approach where costs are allocated according to ownership interests as opposed to dividing the cost according to the units in which the work is required to be undertaken. The Court has a broad discretion under s 48(5) to:

… make such orders as it considers necessary for giving effect to the scheme

…

[30]   In my judgment the inspection is potentially relevant to the second and third steps identified by the Court of Appeal in Tisch.9

[31]   As the Court of Appeal in Tisch confirmed the aim is to balance the interests of each unit holder in a way that imposes terms that achieve the outcome fairest to all.10 As the Court also observed, the work should normally be done to the same standard and at the same time.11

[32]   Against Mr Allan’s argument that the issue is for the BC rather than the Court there are the provisions of the Unit Titles Act, particularly s 74(7) that if, during the course of consideration of the application the Court may impose any terms and conditions that it thinks fit if it considered specific work was required. The inspection might provide information which enables the Scheme to be more detailed. That is a different situation to the BC undertaking repairs in accordance with expert advice in which case the BC would be entitled to determine how the recommended repair is to be undertaken once the scope is resolved.12

9      Tisch v Body Corporate No 318596, above n 8.

10 At [44].

11 At [48].

12     Wheeldon v Body Corporate No 342525 [2015] NZHC 884 at [74].

[33]   There are a number of issues between the parties which the Court cannot resolve and which it need not resolve on this interlocutory application. However, on balance the applicants satisfy the Court that non-invasive, non-destructive testing is appropriate as the results may assist the Court in its determination of whether the Scheme in its current form (including cost sharing) ought to be approved. For those reasons the Court directed that the application for inspection would be approved. The Court then invited counsel to discuss appropriate conditions.

[34]   As yet, counsel have not been able to agree the appropriate conditions. Counsel are to file a consent memorandum confirming the terms of inspection by 25 February 2022. The memorandum is to be referred to me to confirm the terms of inspection.

[35]Costs on this application are also reserved.

Venning J