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 proceeds. The regime is broad and discretionary.4 I am satisfied it should be utilised in this case. The orders will affect all owners equally. No one has identified any particular hardship. A conditional sale and purchase agreement exists in relation to the complex (land). Orders would give effect to the agreement. And decisively, there is no practical alternative.

Result

[11]I make all orders sought, as identified in the appendix to this judgment.

……………………………..

Downs J

2      Unit Titles Act 2010, s 188(2).

3      Lake Hayes Property Holdings Ltd v Petherbridge [2014] NZHC 1673, (2014) 15 NZCPR 590.

4      Bayly v Hicks [2012] NZCA 589, [2013] 2 NZLR 401.

Appendix

1.An Order by declaration under s 188(2) of the Unit Titles Act 2010 authorising the cancellation of Unit Plan 177422.

2.An Order under s 188(3)(c) of the Unit Titles Act 2010 extinguishing any registered mortgages and any principal units in Body Corporate 177422 (but, for the avoidance of doubt, such extinguishment shall not discharge any liability that the persons listed in schedule 1 to this Order may have to the mortgagees under any loan agreement).

3.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.

4.An Order by declaration under s 188(2) of the Unit Titles Act 2010 dissolving Body Corporate 177422 upon completion of the sale of the base land and the distribution of the proceeds of the sale of the base land in accordance with the Orders set out below.

5.An Order under s 339(1)(a) of the Property Law Act 2007 for the sale of the base land for Unit Plan 177422 being 2689 square metres more or less, Lot 1, Deposited Plan 90718 on the following terms and conditions:

(a)The sale of the base land is to be conducted by Body Corporate 177422 which is appointed as agent for the co-owners of the base land being the persons listed in Schedule 1 to this Order for the purpose of:

(i)Retaining lawyers and sale agents for the purpose of marketing the base land for sale.

(ii)Entering into an agreement for sale and purchase of the base land.

(iii)Executing a transfer to complete the sale of the base land as required by the terms of any agreement for the sale and purchase    of    the     base     land     entered     into     by Body Corporate 177422 pursuant to Order 5(a)(i) above.

(iv)Accounting to the Owners and their (former) mortgagees for the proceeds of sale of the base land less all costs incurred by Body Corporate 177422.

6.An Order for the division of the net proceeds of the sale of the base land and the distribution of the assets of the Body Corporate as follows:

(a)The Body Corporate shall receive the net proceeds of the sale of the base land on behalf of the co-owners of the base land being the persons listed in Schedule 1 to this Order and their (former) mortgagees for distribution as soon as practicable after the funds are received (“the Date of Distribution”) on the terms set out below.

(b)The net proceeds of the sale of the base land shall be allocated to all of the co-owners of the base land being the persons listed in Schedule 1 to this Order  in  proportion  to  their  ownership  interest  in  the  Body Corporate as particularised in Schedule 1 to this Order (“the Initial Allocation”).

(c)From the Initial Allocation made to each owner, the Body Corporate shall deduct all outstanding  levies  and  other  charges  that  the  Body Corporate has raised on unit owners up to the Date of Distribution (including any additional levies raised on unit owners which are  necessary  to  pay  any  outstanding  creditors  of  the Body Corporate).

(d)After deduction of the amount provided for in Order 6(c) above the Body Corporate shall make a final distribution of funds to the co-owners of the base land being the persons listed in Schedule 1 to this Order comprising:

(i)The balance of the Initial Allocation after deduction of any mounts under Order 6(c) above; and

(ii)A share of the remaining assets of Body Corporate in proportion to the ownership interest of each the co-owners of the base land as particularised in Schedule 1 to this Order;

(“the Final Distribution”)

(e)The Body Corporate shall pay the Final Distribution to the co-owners of the base land being the persons listed in Schedule 1 to this Order as follows:

(i)For each of the persons listed in Schedule 1 to this Order where there is a mortgagee listed in Schedule 1, the payment of share each  former  unit  owner(s)   is   entitled   to   from   the   Final Distribution shall be made:

(1)To the mortgagee listed in Schedule 1 (and if more than one in Order of priority of the prior registered mortgages) to repay any amounts owing by the relevant owner(s) under their loan agreements with the mortgagee; and

(2)The balance of the Final Distribution (if any) to the persons listed in Schedule 1 to this Order.

(ii)For the avoidance of doubt, the payment of funds  by  the Body Corporate under Order 6(e)(i) above:

(1)Shall discharge all claims that the mortgagee(s) may have against the Body Corporate or in relation to the Final Distribution; and

(2)Shall not discharge any liability that the persons listed in Schedule 1 to this Order may have to the mortgagee(s) under any loan agreement.

(iii)For each of the persons listed in Schedule 1 to this Order where there is no mortgagee listed in Schedule 1, payment of the share each  former  unit  owner(s)   is   entitled   to   from   the   Final Distribution shall be made to the unit owner(s).

7.  Leave is reserved for any party to apply for any further Orders or directions necessary to give effect to Orders 1 to 6 above.

Schedule 1 – Owners

Respondent	Unit	Name(s)	Identifier	Ownership interest	Mortgagee
1	A	Ruth Eva Suzanne ALLEN	NA109B/672	788	Nil
2	B	Richard Paul ZANDER (half share) and Chandryn Thomasina Oliphant STEWART (half share)	NA119D/529	805	ANZ National Bank Ltd
3	C	Rachel Mary STACE	NA109B/674	805	ASB Bank Ltd
4	D	Berend Frederik WESTERA	NA109B/675	812	Pepper NZ Custodians Ltd
5	E	Debra Patricia FRASER	NA109B/676	811.6	ASB Bank Ltd
6	F	Housing NZ Ltd	NA115D/328	819	Nil
7	G	Carolyn Mary THEILER-PREBBLE	NA118B/34	819.6	Nil
8	H	Ian John Robert DAVISON and Tutbury Trustees (2008) Ltd	NA109B/679	818.6	Nil
9	I	Paul NICKEL and Philna VICTOR	NA109B/680	818.6	Nil
10	J	Gregory Brian HAGG	NA115D/329	873.6	Bank of NZ
11	K	Trusha PATEL	NA118B/35	861.8	ASB Bank Ltd
12	L	Graeme Raymond LONGDELL, Susie Wendy Marychurch LONGDELL and Braden Raymond LONGDELL	NA109B/683	926	Bank of NZ