Body Corporate 177422 v Allen - [2024] NZHC 121

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-002821

[2024] NZHC 121

UNDER the Unit Titles Act 2010

IN THE MATTER OF

an application to cancel a unit plan

BETWEEN

BODY CORPORATE 177422
First Applicant

TRUSHA PATEL
Second Applicant

AND

RUTH EVA SUZANNE ALLEN & ORS

Respondents

Hearing: 8 February 2024

Counsel:

TJ Rainey for Applicants

No appearance for Respondents

Judgment:

8 February 2024

ORAL JUDGMENT OF DOWNS J

Solicitors/Counsel:
Alexander Dorrington, Auckland. TJ Rainey, Auckland.

BODY CORPORATE 177422 v ALLEN & ORS [2024] NZHC 121 [8 February 2024]

The application

[1] Body Corporate 1774221 and Trusha Patel, an owner of one of the units and chairperson of the Body Corporate committee, apply for orders cancelling a unit plan; selling the underlying land; and ancillary orders.

[2]I heard the application this morning. It was not opposed.

[3]For the reasons recorded in this brief judgment, I grant all orders sought.

Background

[4] The application concerns a 12-unit residential complex at 8 Pratt Street, Freemans Bay, Auckland. The complex was built in or about 1984. Many of its building elements, including cladding and roof joinery, need to be replaced. Sadly, the complex leaks.

[5] Repairs are anticipated to cost approximately $4,500,000, in turn requiring contributions from each of the unit owners of between $350,000 and $420,000 each. Most of the unit owners cannot afford to pay these contributions. So, the Body Corporate is unable to meet its obligation to repair and maintain all building elements under s 138 of the Unit Titles Act 2010.

[6] The only realistic option is to realise the remaining value in the units by cancelling the unit plan and selling the land. This course has the support of 10 of the 12 owners. The remaining two owners have abstained. The Body Corporate has passed a special resolution to cancel the unit plan and sell the underlying land.

[7] The application has been served on everyone interested. As observed, the application is not opposed by anybody.

1 The Body Corporate.

Discussion

[8]The High Court may cancel a unit plan if satisfied:2

… it is just and equitable that the Body Corporate be dissolved and the plan cancelled having regarding 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.

[9] I am satisfied this test is met given the circumstances. The case is similar to Lake Hayes Property Holdings Ltd v Petherbridge, in which a unit plan was cancelled by Panckhurst J.3 Mortgagees will not be prejudiced because the orders will address their position.

[10] Under ss 339 and 342 of the Property Law Act 2007, the Court may order the sale of property and division of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2024] NZHC 121
Decision Date: 8 February 2024

CaseChat Overview and Summary

In the case of Body Corporate 177422 v Allen, the applicants sought the cancellation of a unit plan, the sale of the underlying land, and ancillary orders. The applicants, Body Corporate 177422 and Trusha Patel, who is also a unit owner and chairperson of the Body Corporate committee, sought these orders due to the significant repair costs needed for a residential complex at 8 Pratt Street, Freemans Bay, Auckland, which was built around 1984. The building elements, including cladding and roof joinery, require replacement, and the complex has been experiencing leakage issues. The estimated repair costs are approximately $4,500,000, requiring contributions from each unit owner ranging between $350,000 and $420,000. Most unit owners are unable to afford these contributions, making it impossible for the Body Corporate to meet its obligations under the Unit Titles Act 2010. The only viable option is to sell the land to realise the remaining value in the units. This course of action has the support of 10 out of 12 unit owners, with the remaining two abstaining. The Body Corporate has passed a special resolution to cancel the unit plan and sell the land.

The court was required to decide whether it was just and equitable to cancel the unit plan and dissolve the Body Corporate, considering the rights and interests of creditors, unit owners, and the absence of subsidiary unit title developments. The court also needed to determine if the sale of the property and division of proceeds under the Property Law Act 2007 was appropriate in these circumstances. The applicants argued that the orders would not prejudice mortgagees, as their position would be addressed, and there was no practical alternative to selling the property. The court needed to assess if the orders would affect all owners equally and if any particular hardship had been identified. Given the circumstances, the court found that the test for cancellation of the unit plan was met.

The court granted all orders sought by the applicants. It found that the cancellation of the unit plan and dissolution of the Body Corporate was just and equitable, considering the rights and interests of all parties involved. The court referred to the case of Lake Hayes Property Holdings Ltd v Petherbridge, where a similar decision was made. The court concluded that mortgagees would not be prejudiced and that the orders would address their position. The court also found that the sale of the property and division of proceeds under the Property Law Act 2007 was appropriate in this case. The orders would affect all owners equally, and no particular hardship had been identified. The court decided that there was no practical alternative to selling the property and that the orders would give effect to a conditional sale and purchase agreement in relation to the complex.

The court made several orders, including the cancellation of the unit plan, extinguishment of registered mortgages, direction to the Registrar regarding the cancellation of the unit plan, dissolution of the Body Corporate, sale of the base land, and division of the net proceeds of the sale and distribution of the assets of the Body Corporate. The court also reserved leave for any party to apply for any further orders or directions necessary to give effect to the orders.

Orders