Body Corporate 166208 v York Trustees Limited
[2020] NZHC 2463
•21 September 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2018-404-2623
[2020] NZHC 2463
UNDER Declaratory Judgments Act 1908 and the Unit Titles Act 2010 IN THE MATTER
of Body Corporate 166208
BETWEEN
BODY CORPORATE 166208
First Plaintiff
ROGER MURRAY BELL and WEBB ROSS JOHNSON TRUSTEES LIMITED
Second Plaintiffs
MASAMI TODA
Third Plaintiff
DAVID JOHN COLLIS and JILLIAN KAY GAPES
Fourth Plaintiff
PAMELA TAYLOR
Fifth PlaintiffAND
YORK TRUSTEES LIMITED
First Defendant
LYON TRUSTEE NO 10 LIMITED
Second Defendant
Hearing: 2 June 2020 Appearances:
J Heatlie and J P Wood for the Plaintiffs D J Barr for the Defendants
Judgment:
21 September 2020
JUDGMENT OF DUFFY J
This judgment is delivered by me on 21 September 2020 at 4:00pm pursuant to r 11.5 of the High Court Rules.
Registrar / Deputy Registrar
BODY CORPORATE 166208 v YORK TRUSTEES LIMITED [2020] NZHC 2463 [21 September 2020]
[1] The applicants, who are the defendants in this civil proceeding, apply for an order striking out the plaintiffs’ statement of claim. The strike out application is opposed by the plaintiffs.
[2] The plaintiffs are the body corporate of a unit title development consisting of 60 apartment dwellings situated at 30 York Street Parnell Auckland and four owners of the said apartments, each of which is referred to respectively in the statement of claim as: units Y22, Y23, Y28 and Y16.
[3] The applicants are the former and present owners of another apartment within this development, which is referred to in the statement of claim as Unit G.
[4] The plaintiffs allege that a failure to carry out proper maintenance work has led to some of the apartments suffering leaks which largely seem to be coming from deck areas above the respective apartments. Some of the affected apartment owners entered into agreements with the body corporate for remedial work to be undertaken. The owners of Unit G did not, and they would not agree to the body corporate having access to Unit G to undertake maintenance and repair work.
[5] The trigger for the plaintiffs bringing this proceeding is foul water which is alleged to have come from the base of Unit G and dripped onto the courtyard of Unit Y16 on or about 27 September 2017. There are alleged additional internal leaks, the source of which is not pleaded, that are also alleged to affect the units adjoining and or below Unit G.
The pleadings
[6] The plaintiffs allege the applicants have breached various obligations that they owe under s 80 of the Unit Titles Act 2010 (UTA); namely:
(a)to permit the body corporate or its agents to enter Unit G pursuant to s 80;
(b)to undertake repairs and maintenance to Unit G necessary to prevent damage to common property, building elements and other units;
(c)to prevent harm, being loss of amenity to other unit owners;
(d)to prevent foul water from leaking into other units; and
(e)to prevent economic loss to the owners of the apartment building resulting from the failure to maintain the units.
[7] The relief the plaintiffs claim is in the form of declarations under the Declaratory Judgments Act 1908 with the following declarations being sought:
(a)A declaration that building work set out in Schedule 1 to the statement of claim is required to be undertaken to Unit G pursuant to ss 80 and 138 of the UTA;
(b)A declaration that the body corporate is entitled to carry out the work in Schedule 1 pursuant to s 138 of the UTA;
(c)An order that the applicant (second defendant) permit the body corporate on reasonable notice to enter Unit G to investigate the foul water leak and/or carry out the work set out in Schedule 1;
(d)A declaration that:
(i)to the extent the body corporate may be liable for the affected owners’ losses, the body corporate is entitled to recover the affected owners’ losses from the applicants pursuant to s 127 of the UTA; alternatively
(ii)the applicants are liable to the second to fifth plaintiffs for the affected owners’ losses;
(e)A declaration that:
(i)the body corporate is entitled to recover the cost of the work in Schedule 1 from the applicants as detailed in Schedule 2 of the
statement of claim to the extent the cost relates to Unit G’s deck areas pursuant to ss 126 and 138(4) of the UTA notwithstanding that some of the work will be undertaken outside the unit boundary of Unit G; alternatively
(ii)the body corporate in undertaking the work in Schedule 1 owes no obligation to the applicants to reinstate any building element that does not fall within the boundaries of Unit G.
[8] Schedule 1 to the statement of claim sets out the repair and maintenance work which the body corporate thinks will be required. The work includes:
(a)removal and replacement of waterproofing membrane;
(b)repairs and maintenance to balustrades; and
(c)installation of concrete nib wall along the perimeter of unit wall.
[9] The body corporate also thinks consequential work will be required which includes, but is not limited to:
(a)removal of existing tiles and membrane back to slab level;
(b)installation of screed to create fall;
(c)removing and replacing or refitting aluminium joinery where necessary to install nib and/or membrane, removing skirting tiles and existing plaster to create membrane upstands;
(d)work to remediate or replace cladding of directly adjacent wall areas (as required);
(e)deck/roof parapet capping replacement (as required);
(f)review and updates to design and specification in light of any other work that may became apparent in the course of further investigation (as required);
(g)consenting process (as required); and
(h)making good (as required).
[10] Schedule 2 to the statement of claim sets out the estimated costs of all the maintenance and repair work which are estimated to be $385,199.98.
[11] The application for strike out is brought on the grounds there is no reasonably arguable cause of action or case appropriate to the nature of the pleading because:1
(a)the work in issue constitutes repairs to building elements that relate to or serve more than Unit G and to common property;
(b)the building elements in issue are primarily contained within the principal unit owned by another owner (being the unit below Unit G);
(c)the body corporate does not allege the work will be substantially for the benefit of the applicants only and the cost of the work cannot be recovered solely from the applicants under ss 138(4), 126(1) and (2)(a);
(d)the body corporate has no power to recover the cost of the work from the defendant without its agreement or an order from the Court to settle a scheme pursuant to s 74 of the UTA;
(e)the applicants do not agree with the body corporate’s allocation of costs and such allocation has not been sanctioned by the Court pursuant to a scheme under s 74;
1 See Rule 15.1(a) of the High Court Rules
(f)the present proceeding is an attempt to unlawfully substitute the plaintiffs’ proposed approach for that provide in s 74;
(g)the proceeding has no prospect of success and should therefore be disposed on by strike out;
(h)strike out will not prejudice the plaintiffs because the body corporate has power to raise levies on all owners to undertake the repairs, to execute those repairs and to recoup the costs under ss 138(4) or 126 or to apply for a scheme under s 74.
Discussion
[12] The principles for strike out are well settled.2 Relevant here are the principles that: (a) pleaded facts are assumed to be true; (b) the cause of action or case appropriate to the nature of the pleading must be clearly untenable, which means the Court must be certain that it cannot succeed; (c) the jurisdiction should be exercised sparingly;
(d) the jurisdiction is not excluded by the need to decide difficult questions of law;
(e) Courts are typically reluctant to strike out parts of a claim.
[13] A common feature throughout the strike out grounds is an argument that essentially questions whether the Court has jurisdiction to make the declaratory relief the plaintiffs seek. The plaintiffs have responded by arguing that the applicants cannot challenge jurisdiction by way of strike out and it is now too late for them to make a jurisdictional challenge because by filing a statement of defence they have submitted to the Court’s jurisdiction.
[14] I find the plaintiffs’ approach misguided. The challenge the applicants make is not to the Court’s jurisdiction to hear the proceeding, but rather to its jurisdiction to grant the relief sought in the circumstances of this case. Whether a Court has jurisdiction to grant declarations in any given case depends upon whether those seeking this relief can make a case in fact and in law for them to be granted. In Gazley v Attorney-General the Court of Appeal denied the declarations sought on the grounds
2 See Attorney-General v Prince [1998] 1 NZLR 262 (CA); endorsed by the Supreme Court in
Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725.
there was no jurisdiction to entertain the proceedings and secondly, if there was, it would exercise its discretion to withhold relief.3
[15] In the present case, if the applicants can establish there is no legal basis for making the declarations the plaintiffs seek, it is better that legal question is determined now rather than after the eight-day trial which is presently allocated for later this year. Accordingly, I see no bar to the applicants making legal arguments relevant to vires by way of strike out, which if successful would bring the proceeding to an end.
[16] The next question is whether the plaintiffs can use the Declaratory Judgments procedure in the way they attempt. In Mandic v Cornwall Park Trust Board the Chief Justice said:4
…application for declaratory order is inappropriate when there are questions of fact to be determined (as is implicit in the terms of s 3).
[17] The views of the Chief Justice on the appropriateness of resort to declaratory relief were expressly approved by William Young P who gave the majority judgment of the Supreme Court.5
[18] In Re Sloan Hardie Boys J refused to grant a declaratory order where, inter alia, the facts were in dispute: 6
A further impediment to Mr Sloan’s application is that the Court will not entertain an application under the Declaratory Judgments Act where the facts are in dispute. If evidence is required, then it is proper for the issue to be determined in the ordinary way. …The reason is that an answer given on a hypothesis is of no value as declaratory of rights of the parties inter se; and so does not achieve the purpose for which the Courts exist.
[19] Here the key facts on which the declarations would rest are disputed.7 Some background is helpful. The unit title plan for this development is unusual insofar as it
3 Gazley v Attorney-General (1995) 8 PRNZ 313 (CA).
4 Mandic v Cornwall Park Trust Board [2011] NZSC 135, [2012] 2 NZLR 194 at [5].
5 At [82].
6 Re Sloan [1990] 1 NZLR 474 (HC) at 482 footnotes omitted.
7 The applicants have not pleaded to the most recent statement of claim. However, the amended statement of claim does not alter the claim other than to include three of the unit owners as plaintiffs and for them to make a claim for recovery against the applicants. The core issues are the same as was pleaded in the earlier first amended statement of claim to which the applicants have filed a statement of defence which denies the core factual allegations on which the plaintiffs rely. Further, the grounds for the strike out include disputes regarding the factual basis on which the plaintiffs rely for the declarations they seek.
provides that the lower extent of each unit is generally coincident with or above the finished floor level of that unit. With Unit G the lower legal extent of this unit, including the deck area adjacent to the unit, is above the finished floor level of Unit
G. In short, the deck area adjacent to Unit G, and which can only be accessed from Unit G, falls within the legal boundary of the unit/s below. Body Corporate 166208 v Temple 88 Ltd, is a case involving the same body corporate and another unit owner in this apartment complex.8 In that case, leaks from this unit’s deck affected the units below. Much like in the present case, the deck of the other unit also fell within the boundaries of the units below. However, unlike here, in that case the owner had agreed with the body corporate for repair work to be done, but then a dispute arose over the terms of this agreement. Justice Lang found that s 138(4) of the UTA would not permit the body corporate to recover the cost of repairs from the owner of the unit adjacent to the deck.9 This was because s 138(4) permitted a body corporate to recover repair costs from the unit owner when the repair work was done to a building element contained within that unit owner’s unit and there the deck was legally outside this description. The same reasoning would apply to any attempt to recover repair costs relevant to the deck adjacent to Unit G in this case.
[20] As to the anticipated work in Schedule 1, which may affect Unit G only, s 138(1)(4) will only provide a means of recovery if no-one else benefits from the work. Where the weathertight character of a building complex is affected, repairs to one unit can physically and economically benefit other units as well. In such circumstances the appropriate provision for recovery of repair costs is s 126.10
[21] The plaintiffs contend the leaks track from the poorly maintained deck adjacent to Unit G into the units below causing them water damage. However, the applicants deny this. They contend the leaks do not come from Unit G and they would derive no substantial benefit from repair to the decks. This last point is relevant to apportioning costs. If costs cannot be recovered by the body corporate under s 138(4), which must be the case when the repairs are to building elements outside the legal boundaries of Unit G, costs can still be recovered under s 126, but only insofar as those costs
8 Body Corporate 166208 v Temple 88 Limited [2020] NZHC 1678.
9 At [28] – [31].
10 Body Corporate S73368 v Otway [2018] NZCA 612, (2018) 20 NZCPR 477 at [52].
substantially benefit specific unit owners. Otherwise the costs are borne by the body corporate, which has the legal obligation to repair any building elements and infrastructure that relate to or serve more than one unit, as must be the case here where the subject area and the alleged water damage may involve, to an unknown extent, Unit G and the units below.
[22] The anticipated work in Schedule 1 seems to go beyond the scope of the work specifically pleaded in the statement of claim, however, insofar as references in the statement of claim to Schedule 1 bring in the more extensive work, my reading of the statement of defence indicates this is denied. Accordingly, I am satisfied the applicants’ dispute that the Schedule 1 work is required.
[23] Until the repair work is done it is difficult to see how anyone could ascertain the extent of the repairs required, the location (both factual and legal) of the building elements to be repaired, the cost of those repairs, and for whom, if at all, were those repairs to a substantial benefit such that the costs of those repairs warranted recovery in accordance with the statutory process provided in s 126. These matters are all in dispute and before the declarations sought can be made such disputes would need to be determined. However, no crystal ball is available to permit the Court to see what the repairs will be, to whose property will they be made and at what cost. The best the Court could do in such circumstances is to reach its own hypotheses on what it thinks will come to pass, and then make binding declarations of right based on those hypotheses. They may prove to be accurate, but then again, they may not. Once the repair work commences the damage may prove greater than expected or less than expected. The extent and costs of the repairs may be well out of kilter with the Court’s declarations in that regard. The benefits the repairs bring to the affected unit owners may not align with the Court’s hypothesis of where those benefits would fall. This all goes to show the academic character of the exercise the Court is being asked to undertake.
[24] The other problem is that if the Court’s prognosis of how these disputed issues will in fact turn out proves to be wrong the parties will then be faced with the problem of what do about the binding declarations. If the cost of the actual repairs is different from the hypothetical sum the Court has fixed in a declaratory order, what is to happen
then. There is no room for making interim declarations that can be revisited or fuzzy declarations that contain enough slack to allow for the contingency that matters may not turn out how they were expected to.
[25] If the parties chose to agree a particular set of facts as to how matters will eventuate in the future and seek declarations of right on the basis of those facts the Court can then oblige because the parties’ agreement on what the future outcome will be is then binding on them; it changes a hypothesis into a reality. But that has not happened here.
[26] The findings I have made provide enough reason to strike out the claim on the grounds the relief it seeks is untenable. However, I shall also deal with the applicants’ arguments based on the UTA precluding the Court from granting the declarations sought.
[27] The applicants contend that the UTA does not permit the making of the declarations sought. This is a different question from the applicants asserting that a different procedure, such as a scheme under s 74 of the UTA, should have been utilised, which is how the plaintiffs have sought to frame the applicants’ case. The Court will not strike out a proceeding on the basis an alternative procedure offers a better approach. However, here the applicants contend that absent the agreement of all concerned or a scheme under s 74 (neither of which apply here) there is nothing in the UTA that would allow the Court to make the type of declarations the plaintiffs seek.
[28] Section 138(1)(d) provides that the body corporate must repair and maintain any building elements and infrastructure that relate to or serve more than one unit. The circumstance where there is a paved deck outside Unit G that can only be accessed from Unit G (thus in practice it relates to or serves Unit G) but this deck lies below the legal boundaries of Unit G and is within the legal boundaries of the units below (thus it legally relates to the units below) seems to me to fall squarely within s 138(1)(d). However, s 138 is silent on how the body corporate should recover repair costs from building elements or infrastructure that falls within s 138(1)(d). For recovery of those costs the body corporate must look elsewhere in the UTA. The same
arguments can be applied to the proposed work in Schedule 1 which seeks to remedy weathertight issues said to arise from Unit G’s poor maintenance, but which may in fact entail more significant work that has a wider benefit for other unit owners as well. Thus, taking costs recovery for this work outside the scope of s 138(4).
[29] Section 126 authorises the body corporate to recover money expended for costs for repairs and other work that the body corporate is required or authorised to do under the UTA when the repair work substantially benefits one or more units. Work done under s 138(1)(d) could in principle qualify under s 126. However, the rights of recovery s 126 provides seem to me to arise only once the repair work has been carried out. Until the body corporate has done the repair work and incurred the costs of doing so s 126 is not engaged. This means that presently the body corporate has no legal rights pursuant to s 126 on which declarations could be made.
[30] The statement of claim also seeks a declaration based on rights of recovery given to the body corporate by s 127 of the UTA. However, those rights only arise once the body corporate has done the repair work. Once again that means there are presently no legal rights pursuant to s 127 on which the declarations could be made.
[31] The declarations set out at [7](a), (b), (c), and (e) herein are all predicated on the repair work being the work set out in Schedule 1 of the statement of claim. The work described in that Schedule is no more than the plaintiffs’ estimate of what the repair work might involve. The applicants dispute the work described is required. For the reasons already given I find the Court cannot make declarations on what are no more than disputed estimations of the repair work believed to be required.
[32] I have considered whether the declaration sought at paragraph 7(c)(i) could be granted as a stand-alone declaration that the applicants permit the body corporate on reasonable notice to enter unit G to investigate the foul water leak. A declaration on those terms is present focussed. However, I understand from the submissions of the applicants made at the hearing, they do not object to such investigative work being carried out. Also, in the face of earlier objections the body corporate obtained orders to investigate the repairs from the Tenancy Tribunal.11 Accordingly, a modified
11 See paragraph 26 of the second amended statement of claim.
declaration in the form I have outlined is unnecessary. Also, this is such a small element of an otherwise untenable claim that I am not prepared to make the modification. The real dispute between the parties revolves around how to progress effecting repairs which are thought to be required rather than identify the need for them.
[33] The plaintiffs seek a declaration that the applicants are liable to the second to fifth plaintiffs. The plaintiffs have not identified the legal authority on which such liability might rest. None is obvious to me in the UTA. Insofar as the plaintiffs would seek to rely on some common law liability for this recovery they would need to properly plead and bring such claim as an ordinary proceeding. There is no present basis to support this type of declaration.
[34] I accept the applicants’ argument that the plaintiffs are not without remedy. They can either proceed to do repair work and then seek recovery of costs under s 126 or, they can first apply for a scheme under s 74 of the UTA. These are well established procedures for dealing with the weathertight issues. The plaintiffs’ attempt to draw in the Declaratory Judgments Act fails to recognise the barriers this legislation presents to what they need to do to address the issues they face.
[35] Accordingly, I find there is no tenable basis to support the Court making the declaratory relief the plaintiffs seek. The claim is hopeless, and it should be struck out.
Result
[36]The plaintiffs’ second amended statement of claim is struck out.
[37]The parties have leave to file memoranda as to costs.
Duffy J
Solicitors: Rainey Law, Auckland
Simpson Grierson, Auckland
0
4
1