Body Corporate 128255 v Walden-Jones
[2023] NZHC 2223
•17 August 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-1385
[2023] NZHC 2223
UNDER The Unit Titles Act 2010 for a Unit Title Development at 11 Cowan Street, Auckland BETWEEN
BODY CORPORATE 128255 (COWAN STREET)
Applicant
CARDUNSKI LIMITED
Second ApplicantsAND
JOELLE WALDEN-JONES
First Respondent
KAREN ANNE MORUNGA
Second RespondentCHRISTINE ANN BEVERIDGE
Third RespondentJAMES CHRISTOPHER LAHATE, REBA AMANDA LAHATTE AND FAMILIA FIDUCIA LIMITED
Fourth Respondents Continued over……
Hearing: On the papers Appearances:
T J Rainey for Applicants
No appearance for or by Respondents (no steps taken)
Judgment:
17 August 2023
JUDGMENT OF LANG J
[on application for order cancelling unit plan and directing sale of land]
This judgment was delivered by Justice Lang on 17 August 2023 at 3.30 pm
Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar
Date:…………………………
BODY CORPORATE 128255 (COWAN STREET) v WALDEN-JONES [2023] NZHC 2223 [17 August 2023]
JACOB BARRY DRAPER AND PATRICK JOSEPH DRAPER
Fifth Respondents
WILLIAM JAMES PLATT AND CARMEL EVELYN PLATT
Sixth Respondents
KERRIANE MARGARET ANDERSON
Seventh Respondent
ALFOCO HOLDINGS LIMITED
Eighth Respondent
LORNE PATERSON BRODIE WEIR
Ninth Respondent
SCOTT JAMES REILLY
Tenth Respondent
CARDUNSKI LIMITED
Eleventh Respondent
11L COWAN LIMITED
Twelfth Respondent
ASB BANK LIMITED
Thirteenth Respondent
WESTPAC NEW ZEALAND LIMITED
Fourteenth Respondent
ANZ BANK NEW ZEALAND LIMITED
Fifteenth Respondent
BANK OF NEW ZEALAND LIMITED
Sixteenth Respondent
CHUBB INSURANCE NEW ZEALAND LIMITED
Seventeenth Respondent
Solicitors/counsel:
Alexander Durrington/T J Rainey, Auckland
[1] The parties to this proceeding are the body corporate, unit owners, mortgagees and insurer of an apartment complex situated on the corner of Cowan and Bayard Streets in Ponsonby. The complex is a unit title subdivision under the Unit Titles Act 2010 (UTA). It is described in Unit Plan 128255, a unit plan registered against the title to the property under the UTA. Each unit comprises a strata estate in freehold that may be sold or otherwise dealt with individually. The affairs of the complex are managed by the applicant, Body Corporate 128255, a body corporate established under the UTA for that purpose.
[2] The complex suffers from significant problems with moisture ingress. These have led the unit owners and body corporate to conclude it is now uneconomic to attempt to repair the complex. They therefore wish to sell the base land for multi-unit re-development. Before they can do so they must obtain orders cancelling the existing unit plan and permitting them to sell the land. This proceeding addresses those issues.
Background
[3] The complex comprises 12 principal and 15 accessory units. Of the accessory units, 12 are carparks and three are courtyards attached to ground floor units. The principal units are contained in a single two-storey building on a relatively flat piece of land that measures 930 square metres.
[4] The building was originally constructed in 1964. At that time the exterior façade of the building was constructed of concrete block, weatherboard and fibrolite. Timber decks and balconies were added to the complex in 1989 when the property was converted to a unit title development.
[5] In 1997 several significant alterations were made to the building. These included changes to balconies and, importantly, replacement of the weatherboard cladding with fibre cement sheets. These were fixed directly to the timber wall framing and covered in plaster.
[6] It has now been discovered that the alterations carried out in 1997 resulted in the complex suffering significant weathertightness issues. The body corporate has commissioned extensive investigative work to identify the nature of the defects and the
likely cost of rectifying them. They have engaged the appropriate professionals to assist them in that task. However, it now transpires that the cost of the remedial work will, in all likelihood, be too great for the unit owners to absorb.
[7] The unit owners have therefore voted in favour of seeking a declaration under s 188(2) of the UTA authorising the cancellation of Unit Plan 128255. They also seek an order under s 188(3)(c) of the UTA extinguishing any registered mortgages and principal units in body corporate 128255. Such an order will not discharge the personal liability any of the unit owners may have to their respective mortgagees. By way of ancillary order, the unit owners seek a direction under s 189(5)(aa) of the UTA that any application to the Registrar to cancel the unit plan does not need to be accompanied by a certificate from a registered valuer showing the ownership interests and proposed ownership interests (if any) reassessed for all units in the unit title development.
[8] Finally, the unit owners propose to sell the complex on an “as is where is” basis. They seek an order under s 339(1)(a) of the Property Law Act 2007 (PLA) permitting them to sell the base land subject to specified terms and conditions. They also seek orders prescribing the manner in which the sale proceeds are to be distributed.
Service
[9] The proceeding has been served on all unit owners, as well as financial institutions who hold mortgages over units in the complex and the insurer of the complex. No documents in opposition have been filed by any party.
Cancellation of the unit plan
Section 188(2) of the UTA provides as follows:
Cancellation of unit plan by High Court
…
(2)The High Court may authorise that the unit plan be cancelled if—
(a)the High Court is satisfied that it is just and equitable that the body corporate be dissolved and the plan cancelled having regard to—
(i)the rights and interests of any creditor of the body corporate; and
(ii)the rights and interests of every person who has any interest in any unit or in the base land or in any part of the base land; and
(b)no principal unit in the unit title development to which the plan relates contains a subsidiary unit title development.
…
[11] Section 188(2) is worded differently, but in substance is in identical terms to s 46 of the Unit Titles Act 1972. Like s 188(2), s 46 permitted the Court to make an order where it was “just and equitable” to do so. In Lake Hayes Property Holdings Ltd v Petherbridge, Panckhurst J observed:1
[48] I think that the test is best understood by reference to the words of s 188(2). This Court may authorise the cancellation of a unit plan if it is satisfied it is just and equitable that the body corporate be dissolved and the plan cancelled, having regard to the rights and interests of the creditors of the body corporate and the rights and interests of every person having an interest in a unit or the base land. The phrase “just and equitable” means equitable justice, the justice of the individual case. All matters relevant to the rights and interests of creditors or interest holders must be considered. And, importantly, the evaluation must be conducted with proper regard to the scheme and purpose of the Act.
[12] In the present case, unlike in Petherbridge, the views of all parties are aligned. They all accept that the only practical solution is to cancel the unit plan. There would be no reasonable basis for the Court to take a different view. It must respect the conclusion the parties have reached because they have arrived at it on a fully informed basis and they are the only parties affected by the proposed outcome. I therefore make a declaration as sought in paragraph 1 of the notice of originating application dated 26 June 2023.
Ancillary orders
[13] There is similarly no reason to depart from the views held by the parties regarding the consequential or ancillary orders required to give effect to the cancellation of the unit plan and dissolution of the body corporate. I therefore also
1 Lake Hayes Property Holdings Ltd v Petherbridge [2014] NZHC 1673, (2014) 15 NZCPR 590.
make the following ancillary orders as sought in paragraphs 2 to 4 of the originating application:
(a)an order under s 188(3) of the Unit Titles Act 2010 extinguishing any registered mortgages and any principal units in Body Corporate 128255 (but, for the avoidance of doubt, such extinguishment shall not discharge any personal liability the unit owners may have to their mortgagees under any loan agreement);
(b)a direction under s 189(5)(aa) of the Unit Titles Act 2010 that any application to the Registrar to cancel the unit plan does not need to be accompanied by a certificate from a registered valuer showing the ownership interests and proposed ownership interests (if any) reassessed for all units in the unit title development; and
(c)an order by declaration under s 188(2) of the Unit Titles Act 2010 dissolving Body Corporate 128255 following sale of the base land and the distribution of the proceeds of the sale in accordance with the orders set out below at [18].
Sale of the base land
[14]Section 339(1)(a) of the PLA provides:
339 Court may order division of property
(1)A court may make, in respect of property owned by co-owners, an order—
(a)for the sale of the property and the division of the proceeds among the co-owners; or
(b)for the division of the property in kind among the co-owners; or
(c)requiring 1 or more co-owners to purchase the share in the property of 1 or more other co-owners at a fair and reasonable price.
…
[15] In exercising the power under s 339 the Court may have regard, to the extent they are relevant, the considerations set out in s 342, which provides:
342Relevant considerations
A court considering whether to make an order under section 339(1) (and any related order under section 339(4)) must have regard to the following:
(a)the extent of the share in the property of any co-owner by whom, or in respect of whose estate or interest, the application for the order is made:
(b)the nature and location of the property:
(c)the number of other co-owners and the extent of their shares:
(d)the hardship that would be caused to the applicant by the refusal of the order, in comparison with the hardship that would be caused to any other person by the making of the order:
(e)the value of any contribution made by any co-owner to the cost of improvements to, or the maintenance of, the property:
(f)any other matters the court considers relevant.
[16]Further, the court has a broad range of powers available to it under s 343:
343Further powers of court
A further order referred to in section 339(4) is an order that is made in addition to an order under section 339(1) and that does all or any of the following:
(a)requires the payment of compensation by 1 or more co-owners of the property to 1 or more other co-owners:
(b)fixes a reserve price on any sale of the property:
(c)directs how the expenses of any sale or division of the property are to be borne:
(d)directs how the proceeds of any sale of the property, and any interest on the purchase amount, are to be divided or applied:
(e)allows a co-owner, on a sale of the property, to make an offer for it, on any terms the court considers reasonable concerning—
(i)the non-payment of a deposit; or
(ii)the setting-off or accounting for all or part of the purchase price instead of paying it in cash:
(f)requires the payment by any person of a fair occupation rent for all or any part of the property:
(g)provides for, or requires, any other matters or steps the court considers necessary or desirable as a consequence of the making of the order under section 339(1).
[17] The leading authority in relation to the approach to be taken to applications under s 339 is the decision of the Court of Appeal in Bayly v Hicks.2 In that case the Court observed that s 339 provides a broad discretion that turns on whatever factor appears to the Court to be relevant when the broad range of factors in s 342 and the broad range of powers in s 343 are considered.3
[18] In the present case the unit owners have reached agreement as to what should happen to the base land and the proceeds of any sale. The mortgagees and insurer have not sought to persuade the Court to a different view. I am therefore satisfied it is appropriate to make orders as sought in paragraphs 5 and 6 of the application.
[19] I also note that the situation in the present case is virtually identical to that in Body Corporate 210106 v Respondents as set out in Schedule 1 to the Application.4 In that case Campbell J made essentially the same orders as the body corporate seeks in the present case.5
Leave reserved
[20] I reserve leave to all parties to apply further (by memorandum in the first instance) for any further orders or directions that may be necessary to give effect to the orders I have made.
Lang J
2 Bayly v Hicks [2012] NZCA 589, [2013] 2 NZLR 401.
3 At [27].
4 Body Corporate 210106 v Respondents as set out in Schedule 1 to the Application [2022] NZHC 255, (2022) 22 NZCPR 808.
5 At [24], [32] and [34].
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