Body Corporate 156063 v Stylo Investment Limited

[2025] NZHC 231

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-003040

[2025] NZHC 231

UNDER

the Unit Titles Act 2010 and the Property Law Act 2007

IN THE MATTER OF

An application for cancellation of a unit plan and an application for orders for sale of the base land

BETWEEN

BODY CORPORATE 156063

First Applicant

GREGORY NEAL OATES
Second Applicant

AND

STYLO INVESTMENT LIMITED

First Respondent

ANZ BANK NEW ZEALAND LIMITED
Second Respondent

WESTPAC NEW ZEALAND LIMITED
Third Respondent

ASB BANK LIMITED
Third Respondent

KIWIBANK LIMITED

Fourth Respondent

Hearing:	13 February 2025
Appearances:	T Rainey and D Marsden for the Applicants No appearance by or for the Respondents
Judgment:	20 February 2025

JUDGMENT OF GARDINER J

This judgment was delivered by me on 20 February 2025 at 2.30 pm

Pursuant to Rule 11.5 High Court Rules Registrar/Deputy Registrar

BODY CORPORATE 156063 v STYLO INVESTMENT LIMITED [2025] NZHC 231 [20 February 2025]

Introduction

[1]The applicants seek by way of originating application the following orders:

(a)cancelling the unit plan with the effect of undoing the subdivision of the land into principal units under s 188 of the Unit Titles Act 2010; and

(b)sale and division of sale proceeds between the owners under s 339 of the Property Law Act 2007.

[2]        All owners and interested parties have been served and no steps have been taken in opposition. In the circumstances, I am prepared to deal with the matter on the papers.

Background

[3]        An affidavit provided by Dr Gregory Oates, chairperson of the Body Corporate committee, helpfully sets out the background to this proceeding. This matter relates to a multi-unit apartment complex at Grafton, Auckland, known as Seafield View Terraces (the Property). The building was originally constructed in 1963.  In 1993, the building was redeveloped into apartments with the addition of balconies, walkways, and other amenities. A unit plan for the subdivision of the building into apartments was deposited on 26 May 1993, and the titles of the development’s principal units were issued that day. Thirteen principal units and 12 accessory units were constructed.

[4]        Further building work was carried out in 2002, including the addition of roof canopies, central glazed roofing, and alterations to the north and south elevations of the building. Auckland Council issued a code compliance certificate for that work on 18 October 2005.

[5]        Like many apartment buildings constructed in the late 1990s and early 2000s, the Property was not constructed in compliance with the New Zealand Building Code. It was a leaky building.

[6]        Initial concerns about the building were raised in a report from Prendos Ltd dated 5 January 2001. The extent of the defects and damage to the Property was revealed after 2014. A report prepared by the Weathertight Homes Resolution Service confirmed that numerous defects had resulted in moisture ingress and damage to the building.

[7]        The Body Corporate engaged consultants to advise on the extent of the defects and   damage   and   the   remedial   work   required    to    rectify   those    issues.  On 19 November 2018, the Body Corporate held a meeting to discuss weathertightness issues  and  explore  two  available  options  for  remediation  of  the Property: a full demolition and rebuild or remediation involving a full reclad.   On 22 March 2022, the Body Corporate resolved by special resolution to pursue the latter option, a demolition and rebuild.

[8]        As matters transpired, the costs and risk associated with the redevelopment led the  Body  Corporate  to  consider  selling  their  property  on  an  “as   is”  basis.   On 12 June 2023, the Body Corporate resolved to postpone the redevelopment plans and instead pursue the sale of the property.

[9]          On 15 April 2024, the Body Corporate held an extraordinary general meeting to consider the Property’s marketing and a possible sale process. As Dr Oates explains in his evidence:

It was noted that, given the Body Corporate’s inability to economically discharge its duties of repair and maintenance under the Unit Titles Act 2010, and the lack of agreement among owners on funding an alternative approach of redevelopment, cancellation of the Unit Plan followed by the sale and division of the sale proceeds presented the only viable option.

[10]      On 15 July 2024, it was resolved that the Body Corporate would accept the offer deemed to provide unit owners with the greatest certainty at the best price.

[11]      At an annual general meeting on 5 August 2024, the Body Corporate passed a resolution approving entry into the offer for purchase of the Property from a Mr Rupa. The agreement is conditional on the Court making the orders sought in this application.

Cancellation of the unit plan

[12]      Section 188 of the Unit Titles Act provides that the High Court may authorise that the unit plan be cancelled if satisfied that  it  is  just  and  equitable  that  the body corporate be dissolved and the plan cancelled, having regard to the rights and interests of all interested parties.

[13]      The effect of the cancellation is to merge the estate held by the body corporate in that part of the base land that comprised common property and the estate in that part of the land that comprised units. That merged estate vests in the persons who were owners  of  the  units  in  shares   proportional   to   their   ownership   interest.1   Upon cancellation, the body corporate is dissolved.2

[14]      In determining whether to exercise its powers under s 188, the Court is required to balance all conflicting claims, giving proper weight to each consideration brought forward by the parties.3

[15]      I am satisfied that it is just and equitable in the circumstances to authorise the cancellation of the unit  plan and with it  the dissolution  of the  Body Corporate.    As explained by Dr Oates, the unit owners cannot afford to remediate the building to address the significant building defects in the property. Despite efforts to maintain the building so that it can continue to be used, the building is at the end of its economic life. The building cannot continue to be used as residential accommodation without remedial work which the Body Corporate lacks the resources to implement.

[16]      Most unit owners support the sale of the land, as evidenced by the votes on the resolution to accept the purchase offer. Where no formal support has been expressed, Mr Rainey indicates to me that those owners have informally indicated that they will simply abide by the Court’s decision. No unit owner has formally opposed the application, proposed any alternative for dealing with the defects in the units or demonstrated an ability to afford to remediate the building.

1      Unit Titles Act 2010, ss 180(2)(a) and 189(5)(b).

2      Sections 185 and 189(5)(c).

3      World Vision of New Zealand Trust Board v Seal [2004] 1 NZLR 673 (HC) at [64].

[17]      Accordingly, I am prepared to grant the orders sought, cancelling the unit title plan.

Sale and division of the Property

[18]      Section 339 of the Property Law Act vests in the Court a broad discretion to order the sale of property owned by co-owners and the division of those sale proceeds. The applicants seek orders confirming the sale of the base land in accordance with the conditional agreement for sale and purchase approved by resolution of the unit owners on 5 August 2024. The proposed orders would result in a distribution of net sale proceeds to unit owners in proportion to their ownership interest.

[19]      Mr Rainey submits the circumstances reflect those which were considered in Body Corporate 210106 v Respondents as set out in Schedule 1 to the Application, where the Court made orders in the same terms as sought.4

[20]      Having regard also to the mandatory considerations at s 342, I am satisfied that the sought orders for sale of the Property and division of sale proceeds should be made here. The applicants have provided an equitable and principled proposal for distribution of the proceeds to unit owners in proportion to their respective ownership interest. No party has identified any hardship that would arise from making such an order. No unit owner or mortgagee has taken steps to prevent the sale of the base land.

[21]      Mr Rainey recognises that the Body Corporate did not follow the designated resolution. However, all unit owners have had ample opportunity to raise any concerns and, as already indicated, none have been brought forward.

[22]I will also grant the orders sought under s 339.

4      Body Corporate 210106 v Respondents as set out in Schedule 1 to the Application [2022] NZHC 255, (2022) 22 NZCPR 808.

Result

[23]      I make the orders for the cancellation of the unit plan, sale of the land and division   of  sale  proceeds,  on  the  terms   set   out   in   the  draft  orders  dated   11 February 2025.

Justice Gardiner