Body Corporate 328392 v Northern Trustee Services (no. 145) Limited

[2020] NZHC 235

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-871

[2020] NZHC 235

IN THE MATTER

of ss 319 and 320 Property Law Act 2007

IN THE MATTER

of an application under Part 19, Rule 19.5 High Court Rules 2016

BETWEEN

BODY CORPORATE 328392

Applicant

AND

NORTHERN TRUSTEE SERVICES (NO.

145) LIMITED Respondent

Hearing:	19 February 2020
Appearances:	M L Thornton for Applicant G R Grant for Respondent
Judgment:	21 February 2020

JUDGMENT OF LANG J

[on application for orders under s 319 and 320 Property Law Act 2007]

This judgment was delivered by me on 21 February 2020 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date……………

Solicitors:

Michael Thornton, Solicitor, Auckland Rainey Law, Auckland

G R Grant, Barrister, Auckland

BODY CORPORATE 328392 v NORTHERN TRUSTEE SERVICES (NO. 145) LTD [2020] NZHC 235 [21

February 2020]

[1]    The applicant in this proceeding, Body Corporate 328392 (the body corporate), is a body corporate incorporated under the Unit Titles Act 2010 to administer the affairs of an apartment and retail complex situated at 148 Arthur Street, Onehunga. The complex suffers from weathertightness issues and this Court approved a scheme of arrangement to enable remedial work to be carried out in December 2017.

[2]    In order to carry out the remedial work the body corporate wishes its contractors to have access to a neighbouring property on its eastern boundary. The respondent, Northern Trustee Services (No. 145) Ltd (NTS), is the owner of the neighbouring property.

[3]    The body corporate and NTS have been unable to reach agreement regarding the terms on which the body corporate’s contractors could have access to NTS’s land. The body corporate has therefore applied for orders under ss 319 and 320 of the Property Law Act 2007 granting its contractors access to NTS’s land for the purpose of carrying out the remedial work.

The scope of access sought

[4]    The body corporate seeks access to the land owned by NTS so that its contractors can carry out remedial work to balconies and balustrades on the eastern side of the body corporate’s property. It wishes to erect scaffolding on NTS’s land to enable that work to be carried out. The scaffolding will extend approximately 1.5 metres into NTS’s land and will remain in place for the duration of the remedial work.

[5]    At present there are two dwellings on NTS’s property. The principal building is a dwelling situated towards the front of the property. The second is a smaller building, best described as a sleepout, situated at the rear of the property. Access to both dwellings is by means of a driveway on the eastern side of the property. In addition, a footpath on the western boundary of the property leads to Arthur Street.

[6]    Once the scaffolding is in place, the footpath on the western boundary will be reduced in width but pedestrian access to Arthur Street down the western side of the property should still be possible. The driveway on the eastern side of NTS’s property will not be affected by the scaffolding or the remedial works the body corporate wishes to carry out on its own property.

[7]    At this stage it is not known when the remedial work will commence because the body corporate has not yet obtained a building consent from the Auckland Council. It anticipates, however, that the building consent will be available within the next 14 days. It will then let the remedial work out for tender. On current estimates, it seems unlikely that remedial work will commence before May 2020. It is also unknown how long the remedial work will take to complete. It seems likely, however, that it will take at least 12 to 14 months.

[8]    The scaffolding will be taken onto NTS’s land from vehicles parked on the street. The body corporate’s contractors will only require vehicular access to NTS’s land at the beginning and end of the project when they relocate and then replace a container currently sitting on the rear western boundary of NTS’s land. Whilst the remedial work is underway the body corporate’s contractors will gain access to the scaffolding from the body corporate’s property. They will not be required to cross NTS’s land for that purpose.

The statutory framework

[9]Sections 319 and 320 of the Act relevantly provide as follows:

319       Owner or occupier of land may apply to court for order authorising entry onto or over neighbouring land

(1)A person may apply to a court for an order under section 320 if the person is an owner or occupier of any land who wishes to enter onto or over any neighbouring land for any of the following purposes:

(a)to erect, repair, alter, add to, paint, or demolish the whole or any part of any structure on the applicant's land; or

(b)to do any other necessary or desirable thing in relation to the applicant's land.

…

320Powers of court making order authorising entry onto or over neighbouring land

(1)On an application under section 319(1), the court may make an order authorising the applicant to do either or both of the following things:

(a)to enter and re-enter onto or over the neighbouring land at reasonable times, with or without any employees, agents, or contractors and any aircraft, boats, vehicles, appliances, machinery, and equipment that are reasonably necessary for the purposes specified in the order:

(b)to store on the neighbouring land any materials required for the purposes, and in the quantities, specified in the order.

1. An order under subsection (1) must specify—

(a)how and when entry is to be made; and

(b)any other conditions that the court thinks fit to impose.

(3)Those conditions may relate to all or any of the following matters:

(a)the period of time during which the entry onto or over the neighbouring land is authorised:

(b)the hours of the day or night during which the work may be done:

(c)the preservation of the safety of persons or property on the neighbouring land:

(d)the maintenance of adequate access to the neighbouring land:

(e)the restoration of the neighbouring land to its former condition:

(f)the provision of security or indemnity to secure the performance of any condition of the order:

(g)the making good of any damage caused by the entry onto or over the neighbouring land or the reimbursement of the owner and, if applicable, the occupier of the neighbouring land for any costs, expenses, or loss arising from the entry:

(h)any other relevant matters.

(4)Before exercising any powers conferred by an order made under subsection (1), the applicant must serve the order on the owner and, if applicable, the occupier of the neighbouring land concerned.

[10]   Section 319 has only been the subject of comment in this Court on one occasion. In Body Corporate 329331 v Escrow Holdings Forty One Ltd,1 Jagose J made an order under s 320 authorising the applicant to enter part of the respondent’s land to carry out repairs to its building. The order was subject to the Court subsequently setting the terms and conditions on which entry was to be authorised. The parties to that proceeding must have resolved these issues because there appears to have been no need for the Court to deliver a subsequent judgment.

[11]   There is no previous authority of this Court in which orders have been made to reimburse the owner of a neighbouring property for “costs, expenses or loss arising from the entry”. In Norfolk Trustee Co Ltd v Tattersfield Securities Ltd,2 Priestley J observed that the predecessor to s 319, s 128 of the Property Law Act 1952, permitted the Court to order compensation. In Escrow Holdings Jagose J observed that this is now placed beyond doubt through the enactment of s 320(3)(g).

Preliminary issue

[12]   On 14 February 2020 NTS filed an updating affidavit by Mr David Ward, a property manager who has been advising NTS regarding the issues that have led to this proceeding. The body corporate objected to the Court receiving the affidavit because NTS had given no warning that the affidavit was to be filed and the body corporate was concerned it would need to respond to matters contained in the affidavit.

[13]   The affidavit related to plans by NTS to develop the property by establishing eight chalets on its property. It proposed to undertake that project in the near future and this would render access to NTS’s land by the body corporate impracticable.

[14]   I declined to receive the affidavit because no provision had been for it in the timetable leading up to the hearing. Furthermore, the hearing of the present application has already been adjourned on one occasion and it is important that the application be heard as scheduled. Any further adjournment to allow the body

1      Body Corporate 329331 v Escrow Holdings Forty One Ltd [2019] NZHC 600, (2019) 20 NZCPR 396.

2      Norfolk Trustee Co Ltd v Tattersfield Securities Ltd HC Auckland CIV-2004-404-3668, 30 March 2005 at [59]

corporate to respond to matters contained in the affidavit would be highly unfortunate. I therefore put the contents of the affidavit to one side for present purposes.

The issues

[15]   By the commencement of the hearing NTS had accepted it was appropriate for an order to be made granting the body corporate’s contractors access to its land so that scaffolding could be erected on the western boundary. The issues to be determined at the hearing were:

(a)The terms on which an order granting access to NTS’s land is to be made.

(b)The means by which NTS is to be protected from any losses, damage and/or costs it might incur as a result of the body corporate’s contractors having access to its land.

(c)Whether, and if so to what extent, the body corporate should be required to meet NTS’s legal costs and disbursements in relation to the application.

The terms on which an order granting access to NTS’s land is to be made

[16]   It is not possible at this stage to specify the precise date from which the body corporate’s contractors are to be permitted to have access to NTS’s land. Tenders for the remedial work have not yet been let and the commencement of work is still some months away. The terms on which access should be granted may also need to be amended to some extent once the appointed contractor has produced a Method Statement.

[17]   During the hearing, however, the parties were able to reach agreement regarding the terms on which the body corporate’s contractors should be permitted to have access to NTS’s land. These are set out in an appendix to this judgment. As will be evident, the agreed terms permit the parties to return to the Court should any amendment of the terms be required.

The means by which NTS is to be protected from any losses, damage and/or costs it may incur

[18]   The two dwellings on the property are currently rented out to tenants, although there is little evidence before the Court regarding the terms of the tenancies. NTS is particularly concerned to ensure it is protected from any reduction in the rental it may receive as a result of the intrusion onto its land of the scaffolding.

[19]   The parties have therefore agreed that the body corporate will provide NTS with an indemnity in the following terms:

Body Corporate 328392 unconditionally indemnifies Northern Trustee Services (No. 145) Limited (NTS) against all losses, costs and expenses suffered or incurred by it arising out of the entry into 150 Arthur Street. For the sake of clarity, this indemnity extends to any loss of rental income suffered by NTS and/or any amounts which NTS may become liable to pay to its tenants in consequence of the works undertaken on 150 Arthur Street. NTS will act reasonably to minimise any such losses or costs.

NTS shall submit a schedule of any such losses or costs to the applicant, together with supporting documentation, at the expiration of each three month period commencing on the day on which the applicant’s contractors enter the respondent’s land pursuant to these orders. If the parties cannot reach agreement regarding those issues within seven days, they have leave to return to the Court by memorandum.

[20]   Clause 3.2.2 of the terms on which access is to be granted requires the body corporate to provide Mr Ward with 14 days notice of the date on which the body corporate’s contractors will first have access to NTS’s property in accordance with the orders made by the Court. It is obviously important that NTS provides full details of all tenancies in existence as at that date. This will provide a yardstick against which any changes in tenancy that may occur during the course of the project can be measured. I therefore direct that Mr Ward is to file and serve an affidavit containing this information within seven days after receiving notice from the body corporate of the date on which its contractors will be entering NTS’s land in accordance with these orders.

[21]   Once the body corporate’s contractors have gained access to NTS’s land it will also be important for NTS to provide the body corporate with full information and supporting documentation to substantiate any claims for losses or expenses it incurs during the remedial process. Claims must obviously be based on losses suffered as a

result of the body corporate having access to NTS’s land rather than as a result of the remedial works that occur on the body corporate’s land.

[22]   NTS also seeks compensation in the sum of $40,000 to recognise the fact that the use of its property by the body corporate will delay or frustrate its plans for redevelopment of its property. In support of this claim it relies on the following evidence by its valuer, Mr David Wigmore:

24.The applicant has not defined a start date for the proposed works, however it is likely that the proposed works will frustrate the owner’s ability to undertake any development until the proposed works have been completed.

25.As a result it is difficult to establish the likely financial impact of the delay in development of 150 Arthur Street. However, it is, in my opinion, entirely logical that the frustration and delay caused will have a material impact on the value of the property as at the effective date of this proceeding. The expectation being that a property ready for add-value development, being put to the market for sale without restrictions on timing of development, would sell at a better price than one where the development potential must be deferred by proposed works to an adjoining property and over the subject property for a minimum of 35 weeks.

26.There is no market evidence which would assist in determining the value adjustment for this frustration factor, however in my opinion a lump sum adjustment of say $40,000 including GST would be a reasonable and conservative value adjustment in the subject case. This level of adjustment is 2.86% of the present assessed market value of the property of $1,400,000.

27.In my opinion, re-development of the subject property is overdue. There are six nearby medium and high density residential projects currently underway which demonstrate the locality can support this type of development. The property’s location directly opposite the Dress Mart shopping complex and proximity to the Onehunga town centre and railway station are also factors supporting a redevelopment of the subject property in the short to medium term.

[23]   I view this as being largely a claim for lost opportunity. As Mr Wigmore acknowledges, it is very difficult to quantify compensation to reflect loss NTS may suffer by not being able to re-develop or otherwise deal with its land for the next 15 months.

[24]   The dwellings on the property are old and refurbishment is unlikely to provide the optimum return on the land for NTS. As Mr Wigmore points out, the land is ripe

for re-development because it comprises a large section on the fringe of the commercial precinct in Onehunga. A large retail shop occupies the ground floor of the body corporate’s complex fronting onto Arthur Street. NTS may therefore be able to re-develop its land for commercial purposes as well. Furthermore, the land sits within the Town House and Apartment Building zone which permits high density multi-unit housing. It could therefore be used for that type of re-development. NTS has not suggested, however, that it proposes to use the land for either of those purposes.

[25]   One option may be for NTS to sell the land. The location and size of the property suggests it is unlikely to decrease in value over the next 12 to 15 months. I also consider it improbable that the value of the land will be materially affected by the presence of scaffolding on the western boundary during that period. Prospective purchasers will no doubt be keen to realise its potential through re-development. They are unlikely to be deterred by the fact that this will need to await the removal of the scaffolding. If, however, NTS was able to demonstrate that it achieved a lesser price for the land because of this factor it may be able to recover its loss from the body corporate under s 320.

[26]    I therefore consider this aspect of NTS’s claim is premature. There is no certainty at this stage that NTS will suffer any loss flowing from its inability to re- develop its land for the next 15 months or so. If such a claim is to be advanced, that should be done when the effect of the body corporate’s use of the land is known. I therefore do not share Mr Wigmore’s view that a lump sum award of compensation should be made at this stage based on a percentage of the current value of the land. It follows that I decline to make any award under this head at this stage.

[27]   The body corporate is concerned that issues will arise regarding future accounts rendered by Mr Ward to NTS for his services in relation to the body corporate’s use of the land. The body corporate will obviously need to reimburse NTS for the cost of Mr Ward’s services provided these relate to the issue of access to NTS’s land. By way of example, NTS may legitimately ask Mr Ward’s to supervise the relocation of the container. He may also be required to investigate complaints by NTS’s tenants regarding the manner in which the body corporate’s contractors conduct

themselves. Once the scaffolding has been erected, however, I do not anticipate there will be much scope for Mr Ward’s further involvement.

[28]   I anticipate that most claims for compensation will be the subject of agreement between the parties. This flows from the requirement that NTS is to provide supporting documentation to substantiate its claims. Where the parties cannot reach agreement, however, I reserve leave for the dispute to be referred to me for resolution by memorandum. Any memorandum in response is to be filed and served within 48 hours, and any memorandum in reply is to be filed and served within 24 hours thereafter. I anticipate being able to resolve such disputes on the papers and without the need for a hearing. Should a hearing be necessary, I will endeavour to ensure it takes place by way of telephone conference to minimise the costs to both parties.

Costs and disbursements

[29]   There is a significant dispute between the parties regarding the issue of costs. NTS will seek costs against the body corporate on the basis that the orders I have made amount to an indulgence, albeit an indulgence granted by statute.

[30]   Issues also arise in relation to disbursements for which NTS seeks reimbursement. These include both the fees it has been required to pay to experts and the fees rendered by Mr Ward.

[31]   Costs are to be dealt within the usual way. Counsel have agreed the following timetable:

(a)Counsel for NTS is to file a memorandum in support of an application for costs and disbursements no later than 4 March 2020.

(b)Counsel for the body corporate is to file a memorandum in response by 25 March 2020.

(c)Any memorandum in reply is to be filed and served no later than 8 April 2020.

Lang J

APPENDIX

ORDERS

1.The originating application made by Body Corporate 328392 on 9 May 2019 and as later amended on 11 December 2019 was determined by Justice Lang on 19 February 2020.

2.The determination was made with the consent of the parties.

3.The following orders were made:

3.1Access is permitted to the applicant and employees, agents, or contractors, to enter and re-enter onto or over the respondent’s land to undertake the following on the respondent’s land (“neighbouring works”):

(a)Moving a shipping container onto the respondent’s land situated within approximately 300mm of the boundary between the applicant’s land and the respondent’s land (boundary) to another location on that land agreed in advance with David Ward to permit the erection of scaffolding;

(b)Erecting scaffolding within approximately 1.5 metres of the boundary to repair the applicant’s balconies, balustrades, and reclad the facades, and removing the scaffolding at the completion of the project.

(c)Replacing the shipping container to the respondent’s preferred location on the respondent’s land, subject to compliance with building regulations; and

(d)Undertaking any other works to remedy damage to the respondent’s land or property caused by the applicant’s entry on to the respondent’s land (“Make Good Works”).

3.2The neighbouring works shall be performed on the following terms:

3.2.1The applicant is to undertake a condition assessment of 150 Arthur Street prior to commencing the works at its cost and provide this to the respondent’s agent David Ward by email;

3.2.2After no less than 14 days’ notice of the works commencing by email notification to the respondent’s agent, David Ward;

3.2.3At any time during normal construction working hours of 7.30 am and 5.00 pm, Monday to Friday (excluding public holidays) or at any time outside those hours in the event of emergency;

3.2.4Ensuring access to the respondent’s property is maintained via the driveway on the eastern side of its land and the front steps and door of the bungalow;

3.2.5In compliance with the Method Statement which the Body Corporate shall require its main contractor to prepare in advance for the works, any regulatory consents and scaffolding suppliers’ requirements. A copy of the Method Statement is to be supplied to the respondent’s agent, David Ward, by email in advance of work commencing on site;

3.2.6With any vehicles, appliances, machinery or equipment reasonably necessary for that purpose;

3.2.7Permitting vehicular access to be gained to the respondent’s land solely for the purpose of moving the container as set out in 3.1(a) and (c);

3.2.8Until completion of the repair works, the negotiating works and the Make Good Works, estimated to be 39 weeks after commencement of the repair works, or such further time as may be required;

3.2.9That the applicant will ensure it and/or any main contractor appointed has adequate insurance to indemnify the respondent in respect of any accidental damage to the respondent’s property (including occupants’ property) that may be caused by the repair works, the neighbouring works or the Make Good Works;

3.2.10The applicant’s contractors will not use the driveway or parking areas at 150 Arthur Street and shall not impede use of the driveway or parking areas by the respondent’s tenants;

3.2.11The applicant will remove the fence and materials stored adjacent to the container on or near the western boundary of the

respondent’s land and will replace the fence and materials at

completion of the works, at its cost;

3.2.12The applicant will deposit a cash bond in the sum of $60,000 which is to be held in the trust account of Pidgeon Law Solicitors as stakeholder pending satisfaction of all conditions imposed in the order. Payment is to be made prior to any works commencing on the respondent’s land.

4.Leave is reserved to both parties to apply by memorandum for these orders to be amended should circumstances require that to be done.