Body Corporate 210720 v ASB Bank Limited
[2020] NZHC 1478
•29 June 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-351
[2020] NZHC 1478
UNDER The Unit Titles Act 2010 and Part 19 of the High Court Rules IN THE MATTER
of 22 Emily Place
BETWEEN
BODY CORPORATE 210720
Applicant
AND
ASB BANK LIMITED AND SIXTY-ONE OTHER RESPONDENTS
Respondents
Hearing: 14 May 2020 (further affidavits filed on 5 and 12 June 2020) Appearances:
J P Wood for Applicant
K L Wendt for V Smith (37th Respondent)
No appearance for remaining Respondents (no steps taken)Judgment:
29 June 2020
JUDGMENT OF LANG J
[on application for approval of scheme of arrangement under s 74 of the Unit Titles Act 2010]
This judgment was delivered by me on 29 June 2020 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
Solicitors:
Rainey Law, Auckland
BODY CORPORATE 210720 v ASB BANK LTD [2020] NZHC 1478 [29 June 2020]
[1] This proceeding concerns an apartment complex situated at 22 Emily Place, Auckland. It comprises a single ten storey building containing 62 residential units. The affairs of the complex are managed by the applicant, a body corporate incorporated under the Unit Titles Act 2010 (the Act).
[2] The building suffers from weathertightness issues. Most of these have been caused by defects relating to the roof and upper walls of the complex. At an Annual General Meeting (AGM) on 13 November 2018, the body corporate resolved to engage solicitors to prepare an application to this Court for approval of a scheme of remedial work under s 74 of the Act.
[3] The body corporate held a further AGM on 20 November 2019. At that meeting a majority of those present resolved that the body corporate should apply to the Court for approval of a draft scheme, a copy of which was attached to the notice of the AGM. This judgment determines that application.
Relevant principles
[4] The principles to be applied in the present context are now well established through cases such as Tisch v Body Corporate No 318596.1 An application for approval must show that a building has been, or is likely to be, damaged and that a scheme of repair is appropriate. The proposed scheme needs to balance the interests of all unit owners and must be sufficiently detailed to enable unit owners and the Court to judge its effectiveness. Remedial work is generally to be carried out to the same standard in relation to all units and at the same time. A scheme with broad support of unit owners is also preferable. Finally, the terms of the scheme should not depart from the Act and the relevant body corporate rules any more than is reasonably necessary to achieve fairness between unit holders.
This case
[5] When the application first came before me on 14 May 2020 I was satisfied the proposed scheme met all the requirements set out above other than one. I was concerned the draft scheme may not have the broad support of owners even though none had taken steps to formally oppose the application. This concern was based on the fact that only 29 unit owners had voted at the AGM on 20 November 2019. This is less than one-half of those entitled to vote. Eighteen unit owners attended in person,
1 Tisch v Body Corporate No 318596 [2011] 3 NZLR 679 (CA) at [36]–[44].
eight provided a proxy vote and three tendered a postal vote. Furthermore, and unusually in a case of this type, not all those who voted were in favour of the proposed scheme. Twenty unit owners voted in favour of approving the scheme, eight voted against approval and one unit owner abstained from voting.
[6] This means that less than one-third of all unit owners have voted in favour of asking the Court to approve the scheme. This prompted me to require the body corporate to provide the Court with further evidence setting out the reasons why so few unit owners appear to have attended and voted in favour of the scheme at the AGM on 20 November 2019.
[7] I subsequently received a further affidavit from Mr Clive Harvey, the chair of the body corporate committee. He explained that opposition to the scheme largely relates to the fact that a considerable amount of remedial work will need to be done to the walls and roofs of upper level units. These structures are common property, and for this reason the body corporate has always considered it appropriate that all unit owners contribute to the cost of repairs. This led to resentment on the part of some unit owners on lower levels who believe the proposed scheme will result in the owners of units on the upper levels having their units improved at the cost of unit owners as a whole.
[8] Some of the owners of upper level units did not support the scheme because the remedial work will require them to vacate their units for a considerable period whilst this will not be the case for unit owners on lower levels. The unit owners on the upper levels will therefore need to meet the cost of alternative accommodation or will lose the rental income they would otherwise derive from their units. These unit owners will still be required, however, to pay their share of body corporate levies. They believe they should receive compensation from the body corporate to reflect these factors. The body corporate did not consider it could go to the extent of paying compensation to these unit owners.
[9] I then received an affidavit filed by Ms Vanessa Smith, the 37th respondent. She explained she did not file documents in opposition to the application because she did not wish to incur the expense of doing so. She was also concerned about the possibility of the body corporate being put to further cost. It is entirely understandable that she should take that view. I have nevertheless been assisted by receiving Ms Smith’s explanation for why she opposes the scheme being approved at this stage.
[10] Ms Smith accepts that repairs are required to the complex. Her concerns relate to the process the body corporate has undertaken in promoting the proposed scheme to unit owners. Ms Smith does not consider the body corporate provided unit owners with sufficient information regarding the proposed scheme prior to the AGM on 20 November 2019. She says she raised this issue with Mr Harvey on 17 November 2019 and also at the AGM three days later. Ms Smith’s concerns are recorded in the Minutes of the meeting. Furthermore, Ms Smith does not consider the outcome of the vote that was held at that meeting can properly be regarded as the exercise of the “collective will” of the unit owners as a body.
[11] Ms Smith also points out that those who attended the AGM were told the remedial work would commence in April 2020 and would take approximately eight months to complete. She says the work has not yet started and that the body corporate has recently notified unit owners that the project will not be progressed further for the time being. Ms Smith is therefore concerned that some of those who voted in favour of the proposal did so on the understanding that the work would commence and be completed within the time frames referred to at the AGM when that will not now be the case. She is also concerned that the body corporate committee has not provided unit owners with copies of the Minutes from any committee meetings held during 2020. This contrasts with the position in 2019, when unit owners received copies of all Minutes of committee meetings.
Decision
[12] Overall I am satisfied the proposed scheme represents an appropriate compromise between the views advanced by the competing factions. Although opposition to or dissatisfaction with the proposed scheme still exists on the part of some unit owners that may be inevitable in the circumstances of this particular body corporate.
[13] However, I consider the issues Ms Smith has raised need to be taken into account. Her affidavit makes it clear that she is a person who has a thorough grasp of the legal principles that apply to the present application. She also has prior experience of being involved in the remediation of an apartment complex with weathertightness issues and therefore understands the practical issues that can arise. I consider her views are entitled to considerable respect.
[14] It is important for a scheme such as the present to enjoy the broad support of unit owners from the outset because there is always the potential for significant
conflict to arise after a scheme of repair is implemented. That risk is much greater if the scheme does not have considerable support from unit owners when it is approved. It is therefore preferable to take a cautious approach at this stage in order to lessen the risk of acrimony between unit owners in the future.
[15] I remain concerned that the scheme may not enjoy the broad support of the unit owners. In the present case there is effectively a silent majority whose views are not yet known. I am therefore prepared to approve the scheme in its present form but only on a conditional basis. Approval will be granted subject to the following conditions:
(a)The body corporate committee is to provide all unit owners with a copy of this judgment together with updated information regarding the estimated start date, duration and cost of the remedial project within 28 days of the date of this judgment.
(b)The committee is to convene an Extraordinary General Meeting of unit owners within 21 days of providing this material to the unit owners.
(c)Approval for the scheme will only take effect once the required majority of unit owners votes in favour of the proposed scheme in its present form at the meeting.
[16] It is now for the unit owners to ensure they take this opportunity to vote on the proposed scheme in light of the information they are receive from the body corporate committee. Those who do not take that opportunity cannot be heard later to say they were opposed to it.
[17] I would be grateful if counsel for the body corporate could file a memorandum within seven days after the meeting is held to advise the Court of the result of the vote.
Lang J
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