Body Corporate 314604 v Hay

[2019] NZHC 1041

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-424

[2019] NZHC 1041

UNDER

Section 74 of the Unit Titles Act 2010 and Part 19 of the High Court Rules

IN THE MATER

of a scheme of repairs for Villa Vanto

BETWEEN

BODY CORPORATE 314604

Applicant

AND

LESLEY ANNE HAY AND DAVID MAURICE HAY

First Respondent

ROBERT MIROA SIMPKINS AND SHARYN DYELL SIMPKINS

Second Respondents

Continued over

Hearing:	On the papers
Counsel:	M Ibram for the Applicant
Judgment:	13 May 2019

JUDGMENT OF MUIR J

This judgment was delivered by me on Monday 13 May 2019 at 4.00 pm Pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:…………………

Counsel/Solicitors:
Rainey Law, Auckland. (M Ibram and J Heatlie)

BODY CORPORATE 314604 v HAY [2019] NZHC 1041 [13 May 2019]

HINERANGIMARIE LIMITED

Third Respondent

WARWICK DONALD BROWN AND JANET HELEN BROWN

Fourth Respondents

NIROSHA UDAYANGANI HEWA WELLALAGE AND JAYANATH SANJEEWA JAYASUNDARA MUDALIGE DE ALWIS

Fifth Respondents

LUKE CLAUDE TAYLOR MCKENZIE

Sixth Respondent

BRUCE WILLIAM GENTLE AND FELICITY MARIE WILTON
Seventh Respondents

MANAOTERANGI ERNEST FORBES AND CHRISTINE GAY FORBES

Eighth Respondents

IVAN MUNKEDAL
Ninth Respondent

LISA ANN HERBISON
Tenth Respondent

ASB BANK LIMITED
Eleventh Respondent

WESTPAC NEW ZEALAND LIMITED

Twelfth Respondent

BANK OF NEW ZEALAND
Thirteenth Respondent

KIWIBANK LIMITED
Fourteenth Respondent

SOUTHLAND BUILDING SOCIETY
Fifteenth Respondent

IAG NEW ZEALAND LIMITED
Sixteenth Respondent

Introduction

[1]    Body Corporate 314604 applies to the Court for an order settling a Scheme for repair of the buildings located at 52, Fifth Avenue, Hamilton. The terms of the proposed Scheme are set out in a schedule to the application. The relevant development is known as the Villa Vanto complex.

[2]The purpose of the proposed Scheme is to remediate typical “leaky building”

damage. It has the broad support of the owners.

Requirements for a Scheme

[3]    For a Scheme of repair to be sanctioned by the Court, the applicant must show that:

[a]the buildings have been destroyed or damaged; and

[b]the Court’s discretion to grant the Scheme is appropriately exercised

and in the interests of all owners.1

[4]The Court of Appeal has identified five animating considerations:2

[a]A Scheme with broad support is preferred.

[b]The Scheme is to be appropriately detailed.

[c]The Court’s orders can have retrospective effects, as long as the Body Corporate has acted in accordance with the Scheme prior to the Court’s approval.

[d]Normally work is to be done to the same standard and at the same time.

1      Tisch v Body Corporate No 318596 [2011] 3 NZLR 679 (CA) at [36]–[44].

2      Tisch v Body Corporate No 318596 [2011] 3 NZLR 679 (CA) at [45]–[49].

[e]The terms of the Scheme are not to depart from the Unit Titles Act 2010 and the relevant Body Corporate Rules anymore than is reasonably necessary to achieve fairness between unit holders in the circumstances.

[5]    In the present case, the development has been investigated by the Weathertight Homes Resolution Service. It found a number of systemic weathertightness problems causing widespread and repetitive damage to the cladding, and framing and localised damage to interior finishes. Further damage will occur if these issues are not remediated. The Body Corporate has engaged experts to develop detailed remedial works’ designs. Defects and damage extend to the entire complex and a full reclad will be necessary to remedy them. The Body Corporate wishes all units in the development to be remediated at the same time and to the same standard and seeks approval of the Scheme to enable it to raise monies in advance of the repair.

[6]    The Scheme has been drafted on the basis that the costs of repairs are to be shared equally. The exceptions to this are: reinstatement work that exceeds the standard of repair required, upgrades to the units, and costs associated with work required to remedy bathroom leaks, all of which are to be borne by the unit owners.

[7]    A further exception is made in relation to unit 2. The other nine units in the complex undertook interim repairs in 2007 to address issues identified at that time, but unit 2 did not participate in this exercise. There is a possibility, therefore, that the damage to unit 2 is greater than in respect of other units. In that context, the Body Corporate decided it would be fair to recover from the owners of unit 2 any excess costs associated with the remedial works to that unit, if such exceeded the average costs of repair of the remaining nine units by 10 per cent.

[8]    Referring to the five factors I am required to consider, I make the following observations.

The Scheme has broad support

[9]    The draft Scheme was circulated to all owners on 2 November 2018 with a notice of EGM. On 9 November 2018 the Body Corporate held an EGM, at which the

Scheme was considered. Seven of the 10 unit owners attended the EGM and all voted in favour of the Scheme. The Scheme, therefore, represents the collective will of those proprietors sufficiently exercised about it to participate in the discussions.

[10]   In relation to unit 2, this Court took the added precaution (refer to Minute of Peters J, dated 2 May 2019) of requiring that the application be re-served and that the proprietors thereof have their attention specifically drawn to the requirements in     cl 12(c) of the proposed Scheme (providing for potential additional liability in the terms referred to above).

[11]   Such notification occurred on 6 May and by email timed 12.01 pm the proprietors of unit 6 confirmed that they were “happy with this process”. They further expressed the hope that “we can now move on and get the units fixed”.

[12]   In those circumstances, I am satisfied that the proposed Scheme has the broad support the Court requires.

The Scheme is appropriately detailed

[13]   The Scheme has a level of detail and is on substantially similar terms to various schemes approved by this Court over previous years, including:

[a]Body Corporate 205373 v Balthazaar (“Mays Road”).3

[b]Body    Corporate    202692    v    Jamac    Holdings    Limited    (“Retro Apartments”).4

[c]Body Corporate 201161 v Keung (“Gladstone Apartments”).5

3      Body Corporate 205373 v Balthazaar (“Mays Road”) [2015] NZHC 2827, Thomas J.

4      Body Corporate 202692 v Jamac Holdings Limited (“Retro Apartments”) [2016] NZHC 1226 Faire J.

5      Body Corporate 201161 v Keung (“Gladstone Apartments”) HC Auckland CIV-2016-404-1478, 8 August 2016, Gilbert J.

[14]   The Scheme details the allocation of repairs by equal shares, save for the exceptions in respect of betterment, bathroom repairs and excess costs related to unit

2. The Scheme provides the proposed remedial works are to be governed by its scope.

[15]I am satisfied that the Scheme is appropriately detailed.

Retrospective effect

[16]   In this case, the repairs are yet to be commenced and the Scheme is intended to be of prospective effect.

To the same standard and at the same time

[17]   The complex is comprised of five blocks of two standalone units. The Body Corporate wishes for it to be repaired at the same time and to the same standard.

Departs no more than necessary from the Scheme of the Act

[18]   As indicated, the terms of the Scheme are similar to those proved in previous schemes, and are consistent with the scheme of the Act, save that it addresses the following issues.

[a]It ensures that the Body Corporate has the power to complete all of the repairs. While Body Corporates have power to repair building elements that serve or relate to more than one unit (s 138), “building element” is inclusively defined, and the phrase “serve or relate” provides scope for interpretation. The Scheme removes any doubt as to the scope of the Body Corporate’s powers to do all the work required.

[b]The Act contemplates repairs to building elements being made first and then the cost of the repair recouped from the owners (s 126). The proposed scheme envisages that the owners may be levied in advance of repairs, which provides the necessary security for the Body Corporate to move forward with a repair programme.

[c]The Scheme ensures that the repairs are apportioned in an equitable way (primarily by equal shares, save for the exceptions listed in cl 12). In my view, this is consistent with s 126 of the Act, as no unit owner benefits substantially more than any other.

[19]   I am satisfied that the jurisdictional requirements for a Scheme are satisfied and that the proposed Scheme is one that is appropriately approved by this Court.

[20]I make orders accordingly.

Muir J