Body Corporate 182563 v Hadlow
[2021] NZHC 1358
•9 June 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-002228
[2021] NZHC 1358
BETWEEN BODY CORPORATE 182563
Applicant
AND
CHARLOTTE NAJA HADLOW and JOHN WILLIAM HUMPHREY & ORS
First Respondents
ASB BANK LIMITED
Second RespondentANZ BANK NEW ZEALAND LIMITED
Third RespondentBANK OF NEW ZEALAND
Fourth Respondent
WESTPAC NEW ZEALAND LIMITED
Fifth RespondentBASECORP FINANCE LIMITED
Sixth Respondent…/2
Hearing: 9 June 2021 Appearances:
C Baker for Applicant
No appearance for Respondents
Judgment:
9 June 2021
ORAL JUDGMENT OF VENNING J
Solicitors: Price Baker Berridge, Auckland
BODY CORPORATE 182563 v HADLOW & ORS [2021] NZHC 1358 [9 June 2021]
AND KANLUO YU
Seventh Respondent
JOHN LAURENCE ARMSTRONG and BRIDGET GEORGINA CHRYSTALL
Eighth RespondentNADEZHADA DUDKO
Ninth RespondentMING SHAN HOLDINGS LIMITED
Tenth Respondent
AUCKLAND COUNCIL
Eleventh Respondent…/2
[1] This is an originating application for an order settling a scheme under s 74 of the Unit Titles Act 2010.
Service
[2] The application has been served on the named respondents to the application save for the eighth and ninth respondents. There is affidavit evidence in relation to the attempted service on the eighth and ninth respondents. In relation to the eighth respondent Mr Baker details the attempts to serve Ms Chrystall and Mr Armstrong. Ms Chrystall has been served. In respect of Mr Armstrong I accept the evidence that Ms Chrystall is in touch with him and notwithstanding that she and he have apparently retired as trustees there has been no transfer to new trustees. Accordingly, I confirm service on Ms Chrystall as effective service on Mr Armstrong in relation to the position of the eighth respondents.
[3] In relation to the ninth respondent, Mr Bischkopf, a process server, confirms service on the ninth respondent’s daughter. The daughter advised that the ninth respondent was her mother who lives in Russia. She purported to accept service on behalf of her mother. Accordingly, I confirm substituted service on the ninth respondent in that way.
Background
[4] The applicant is the Body Corporate under the Unit Titles Act 2010 of a property at 3 Whitaker Place, Auckland. The building in issue is a 17-storey building with a total of 146 units known as Cintra. It currently suffers from a number of building defects. The building defects are summarised in an affidavit of Mark Callander, a senior partner of the architectural practice called Resolution Architecture Limited, which has been engaged by the Body Corporate to review and report on the building defects.
[5]In summary, the defects include:
(a)Light weight steel framing of the exterior walls, exterior IT walls and decorative fin structures are severely corroded in places and fibre
cement cladding which is directly affixed to the light weight steel is moisture affected such that its structural integrity is compromised in many areas.
(b)The light weight steel framing of the solid balustrades is corroded in places and the fibre cement cladding which is directly affixed to it is moisture affected such that its structural integrity is compromised in many areas.
(c)The light weight steel framing of the exterior face on the northern façade is corroded in places although the extent and severity of the corrosion is less than that exhibited by the intertenancy walls and solid balustrades.
(d)There is evidence of water ingress past the junction between the aluminium joinery and intertenancy wing walls. There is also evidence of such water ingress in a limited number of locations with no apparent significant effect on the adjacent structural elements.
[6] In summary, the building suffers from defects spanning both common property, unit property, and unit boundaries. Extensive repairs are required to significant parts of the building, comprising in part common property and in part private property.
[7] Mr Callander has also addressed the works required to remediate the defects. They include:
(a)A full re-clad of the northern elevation from level 4 to level 17, remedial work to the eastern elevations from level 4 to level 17 and remedial work to the western elevation from level 4 to level 17.
(b)Work to the balconies, including removing handrails or handrail walls, infill between balconies with new extended IT walls and to pack up to match the floor level with new tiles.
(c)Removal of aluminium joinery and fibre cement cladding, encapsulating existing balconies using a curtain walling system.
(d)The existing main roof, metal roofing and internal gutter membrane will be replaced, including remediation work to surrounding parapets.
(e)Existing plant room above the main roof will be re-clad on the northern, eastern and western elevations. Existing metal roofing and internal gutter membrane will be replaced.
(f)There will be passive fire and stopping works as required by Council and fire engineers, including extending sprinklers to the balcony enclosure areas.
(g)Works to mechanical services, comprising air transfer to some apartments, for fresh air.
(h)The existing concave membrane roof over the stairwell pop out on the southern elevation will be replaced with a new pitched metal roof. The stairwell pop out will be replaced with new metal profiled cladding.
[8] The issues regarding the defects to the building were addressed by the Body Corporate at various meetings. At a committee meeting held on 5 October 2018 a draft scheme was approved. On Thursday, 29 August 2019 there was a delegation to a committee by special resolution. The delegation was to enable consideration of the steps to address the issues with the building. The minutes of a recent Body Corporate meeting on 26 June 2020 record:
There was agreement to go ahead with the Section 74 scheme prepared by Price Baker Berridge.
[9] At a further Body Corporate meeting on 27 August 2020 the issue of the s 74 scheme was referred to again. It was confirmed that Mr Baker of Price Baker Berridge spoke to the necessity of having the s 74 scheme and explained how it operated. It was reiterated that the purpose of the s 74 scheme was to provide governance and a
structure to undertake the remedial works. The minutes recorded and included a copy of s 74 itself.
Parties
[10] The application has been served. As noted there is no opposition to the application.
Proposed scheme
[11] The proposed scheme in summary addresses the issues required by such schemes. It appoints the Body Corporate agent for each unit owner, and addresses the powers provided to the Body Corporate. It outlines the duties necessary to give effect to the proposed scheme and reinstate the buildings, including the power to charge for the cost of repairs.
[12] It outlines the duties of the Body Corporate necessary to give effect to the proposed scheme, and deals with the issue of additional work requested by a particular unit owner.
[13] It defines the costs, includes all costs associated with the repairs, confirms the owners’ obligations, including the requirement to provide access to the unit; and importantly deals with costs, contributions and charges, and the procedure by which the costs of repairs are to be raised by charging contributions from the owners in accordance with the utility interest assigned to the respective units.
[14] Where additional work is charged to an owner of a relevant unit that will be charged separately.
[15] The scheme confirms the Body Corporate has authority to borrow where necessary and to fix a charge on all owners.
[16] It also confirms the ability of the Body Corporate to fix a due date for charges and for amendment to the charges. It provides for payment refunds and cost recoveries
and records the position of what is to happen on the sale of a unit in relation to the obligations under the scheme.
[17] Finally, it provides for a dispute resolution process and indemnifies the Body Corporate committee and members, apart from where there is fraud or gross negligence. The above cover the issues which are expected to be contained within a s 74 scheme.
Approach to the application
[18] Counsel has helpfully set out the relevant principles in the memorandum in support of the application. In Tisch v Body Corporate 318596 the three-stage approach taken by the Court of Appeal was confirmed.1 The Court must be satisfied that the building has been damaged or destroyed. If so satisfied, the Court must decide whether to settle a scheme, and must decide whether a scheme is appropriate in the circumstances. If the Court decides a scheme is appropriate, it must decide what the terms of the scheme should be.
[19] In the present case the evidence of Mr Callander satisfies the Court that the building has been damaged or destroyed.
[20] The Court is also satisfied the scheme is appropriate in the circumstances given the damage referred to by Mr Callander and the necessary remedial work referred to by him.
[21] I agree with counsel’s submission that, given the extensive repairs required to most parts of the Cintra, in part common property and in part private property, the work could not be undertaken economically on a piecemeal basis and would usually most efficiently be carried out under a single construction contract.
[22] The terms of the scheme as summarised appropriately balance the interests of the unit holders in a way that imposes the fairest outcome on all.
1 Tisch v Body Corporate 318596 [2011] NZCA 420 at [35].
[23] As noted at the committee meeting held on 26 June 2020, the committee resolved to apply for a scheme under s 74. The resolution was unanimous amongst attendees. All respondents have been served and no notices of opposition have been filed.
[24]The scheme is sufficiently detailed.
[25]There is no issue as to retrospectivity.
[26] The terms of the scheme follow the Unit Titles Act 1972. All the costs under the proposed scheme are to be raised by charging owners in accordance with the utility interests assigned to their respective units, other than the costs related to the additional work, which is requested by owners, which is provided for and is to be charged to the relevant owner in full.
Result
[27] Accordingly, having regard to the above and the evidence filed in support of the application, the Court makes orders approving the scheme in accordance with paragraphs 1.1, 1.2, 1.3 and 1.4 of the originating application dated 13 November 2020.
Venning J