Body Corporate 146499 v Mg Partnership Limited

[2021] NZHC 2938

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-001820

[2021] NZHC 2938

IN THE MATTER

of an order settling scheme under s 74 of the Unit Titles Act 2010

BETWEEN

BODY CORPORATE 146499

Applicant

AND

MG PARTNERSHIP LIMITED & ORS

First Respondents

ASB BANK LIMITED
Second Respondent

BANK OF NEW ZEALAND

Third Respondent

WESTPAC NEW ZEALAND LIMITED
Fourth Respondent

CHARLES ROSS GEORGE
Fifth Respondent

ANDREW DAVIDSON WALKER

Sixth Respondent

Hearing:

1 November 2021

Appearances:

C Baker for Applicant

No appearance by or on behalf of Respondents

Judgment:

1 November 2021

JUDGMENT OF WOOLFORD J

Solicitors:           Price Baker Berridge (C Baker and C Makaza), Auckland

BODY CORPORATE 146499 v MG PARTNERSHIP LIMITED & ORS [2021] NZHC 2938 [1 November 2021]

[1]    The applicant, Body Corporate 146499 (the Body Corporate), is the body corporate of a unit title development at 18 – 22 Moselle Avenue, Henderson, Auckland. It comprises a two-storey building with a series of 19 terraced commercial/light industrial units. The development suffers from a number of building defects, which necessitates a remediation project.

[2]    The Body Corporate now applies for a Court order under s 74 of the Unit Titles Act 2010 (the Act) settling a scheme for the reinstatement of the development. By minute dated 5 October 2021, Davison J made directions as to service on all registered owners of each of the units, all mortgagees over any of the units, the caveator of Unit J, the insurer of the Body Corporate and the Registrar-General of Land. They have all been served.

[3]    No opposition to the application has been filed and the Body Corporate did not expect any such opposition. The scheme of repair was approved unanimously by a vote of 17 of the 19 unit owners at the Annual General Meeting on 17 December 2020. The registered owners of Units D and R neither sent apologies nor voted.

[4]    The leading authority in relation to the approval of s 74 schemes is Tisch v Body Corporate 318596.1 The Court of Appeal held that the Act imposed a three-step process on a Court considering an application to settle a scheme:

(a)The Court had to be satisfied that the development had been damaged or destroyed. Damage probably had to be substantial;

(b)The Court had to decide how to settle a scheme;

(c)The Court had to decide on the terms of the scheme. The aim was to balance the interest of each unit owner to achieve the fairest outcome to all unit owners.

[5]It also commented that five guiding principles emerged from the case law:

1      Tisch v Body Corporate 318596 [2011] NZCA 420.

(i)A scheme with broad support was preferred;

(ii)The scheme was to be appropriately detailed;

(iii)The order could have retrospective effect so long as the Body Corporate had acted in accordance with the scheme prior to the Court’s approval;

(iv)Normally work was to be done to the same standard and at the same time; and

(v)The terms of the scheme were not to depart from the Act and the Body Corporate Rules any more than was reasonably necessary to achieve fairness between unit holders in the circumstances.

[6]    I am satisfied from the affidavit evidence, in particular, the affidavits of Graham John Yukich, dated 11 August 2021,  and  Nicholas  Francis-Stead,  dated  30 August 2021, that the damage to the development through water ingress is substantial and justifies a s 74 scheme.

[7]    Extensive repairs are required to most parts of the development, comprising in part common property and in part private property. The type of work required cannot be undertaken economically on a piecemeal basis and would normally be carried out under a single construction contract.

[8]    As earlier noted, there is broad support for the scheme. The scheme is sufficiently detailed. It is eight pages in length and includes provisions about the division and allocation of costs and dispute resolution. Nor has any difficulty been raised over the proposed scheme’s retrospectivity.

[9]    I am of the view that it is highly desirable that the work be carried out under a single building contract. The reasons are self-evident – maximising efficiency and minimising cost and disruption. It would ordinarily be fair that the scheme follows the Act. All costs are to be raised by charging owners in accordance with the utility interest assigned to their respective units, other than additional work, (that is, work not

needed for the remediation, but requested by an owner) which is charged to the relevant owner in full. There is nothing in the proposed scheme which suggests to me that the interests of any unit owner or mortgagee are adversely affected.

[10]   There will, accordingly, be orders in terms of paragraphs 1.1 to 1.4 of the originating application dated 10 September 2021 settling the scheme.

Woolford J