Body Corporate 331094 v McMillan-Rourke
[2015] NZHC 3050
•2 December 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-002167 [2015] NZHC 3050
BETWEEN BODY CORPORATE 331094
Applicant
AND
SHIRLEY ANNE MCMILLAN- ROURKE AND ERIC JOHN MCMILLAN AND PAUL JOHN ROURKE AND OTHERS
First Respondents
ASB BANK LIMITED Second Respondent
WESTPAC NEW ZEALAND LIMITED Third Respondent
ANZ NATIONAL BANK LIMITED Fourth Respondent
NEW ZEALAND HOME LENDING LIMITED
Fifth Respondent
…/continued
Hearing: 2 December 2015 Counsel:
C Baker and KC Muldrew for Applicant
No appearance for RespondentsJudgment:
2 December 2015
JUDGMENT OF ASHER J
Solicitors:
Price Baker Berridge, Auckland.
Copy to:
Traxx Investments Ltd, Auckland.
BODY CORPORATE 331094 v MCMILLAN-ROURKE & ORS [2015] NZHC 3050 [2 December 2015]
KIWIBANK LIMITED Sixth Respondent
THE HONG KONG AND SHANGHAI BANKING CORPORATION LIMITED Seventh Respondent
MORTGAGE HOLDING TRUST COMPANY LIMITED
Eighth Respondent
TSB BANK LIMITED Ninth Respondent
THE CO-OPERATIVE BANK LIMITED Tenth Respondent
TEA CUSTODIANS (BLUESTONE) LIMITED
Eleventh Respondent
EQUITABLE PROPERTY HOLDINGS LIMITED PREVIOUSLY KNOWN AS TEA CUSTODIANS (EQUITABLE) LIMITED
Twelfth Respondent
COMMONWEALTH BANK OF AUSTRALIA
Thirteenth Respondent
BANK OF NEW ZEALAND Fourteenth Respondent
PEPPER NEW ZEALAND (CUSTODIANS) LIMITED Fifteenth Respondent
PATRICK DOMONIC ENRIGHT AND JOSEPHINE MARY ENRIGHT Sixteenth Respondent
AUCKLAND COUNCIL Seventeenth Respondent
…/continued
VERO INSURANCE NEW ZEALAND LIMITED
Eighteenth Respondent
DISTRICT LAND REGISTRAR Nineteenth Respondent
MARIA FERLIN YAP HONTANOSAS AND JOHN ROBERT LETHBRIDGE TRIP
Twentieth Respondent
ODETTE MARIE ALLEYNE Twenty-first Respondent
NEW ZEALAND HOME BONDS LIMITED
Twenty-second Respondent
PRICE BAKER BERRIDGE Twenty-third Respondent
MARIA KATRINA DAVENPORT Twenty-fourth Respondent
Introduction
[1] There are two multi-storey apartment buildings in Parnell collective known as The Landings. They comprise a total of 221 residential units. One building is seven-storeys high and the other 10. There is a swimming pool and gymnasium. Construction consists predominantly of pre-cast concrete walls and floors with in-fill fibre cement cladding. The buildings are described as suffering from leaky building syndrome. They leak and the leaks are likely to get worse. There are problems with the cladding in the walls, the joinery, the courtyard and walkways, the boundary walls, the garden areas, the decks and the swimming pool.
[2] The applicant in this proceeding is the Body Corporate Administration (the BCA) created pursuant to the provisions of the Unit Titles Act 2010 (the UTA). The BCA pursuant to the provisions of the UTA comprises the owners of all the land and buildings. The application before me is an application under s 74 of the UTA for an order that the Court settles a scheme for work on the building so that it no longer leaks, and for any damage that has been suffered to be repaired. The scheme is intended to empower the BCA to undertake repairs both to common property under the UTA and also to the private property of individual unit owners.
[3] All the unit owners, save for two, have been served in accordance with a process to which they have all agreed. Four owners have been personally served. There is an affidavit of service on the file and I am satisfied that there has been adequate service on all owners save for two, who did not consent to the agreed process of service. These were the owners of units 4A and 5L. There were directions given dispensing with the service on these unit owners who had not for some time participated in the usual body corporate activities of unit owners. In respect of the owners of unit 5L, there had been responses to emails which indicate that they are aware of the application. In respect of the owner of unit 4A there have been extensive efforts made to contact him and I am satisfied that all that can be done, has been done.
[4] Only one owner has opposed the application for the approval of the scheme. That is Traxx Investments Ltd (Traxx). It has filed a notice of opposition which
contains some detail, but no affidavit has been filed. No lawyer appears to have been briefed and the notice of opposition was filed by an “authorised officer” Mr Jaswant Sailendra Singh. Mr Singh on behalf of Traxx notified counsel and the Court last week he would not be appearing. In the email he has sent today he states it seems as a reason for his non-appearance “my mother has just passed away”. He has not given any further detail and is well aware that the matter is proceeding today. Traxx has not sought any adjournment and it appears to be assumed by Traxx that the application will be heard and determined today.
[5] In the circumstances I intend to proceed despite Traxx’s absence. I take the view that they have had ample opportunity to expand on their opposition and appear today if they wished to do so. There is an element of urgency in relation to the scheme as a building contract has been entered into, and obviously the sooner the legal position is finalised, the better.
Approach
[6] The approach to applications of this type is now well understood, and I propose to follow the steps set out in the leading case of Tisch v Body Corporate 318596.1 That case was decided under the now repealed 1972 Act, but the relevant section in that Act, s 48, has been essentially replicated in s 74 of the UTA. I see no need to summarise the approach, which is now well settled.2
Step one
[7] The first step is that the Court must be satisfied that the building has been damage or destroyed. The notice of opposition filed by Traxx appears to take issue on this point asserting that the level of damage does not justify a scheme, and that since only parts of the building leak it may not be suffering from leaky building syndrome. However, Traxx has not responded to the affidavit of the applicant’s building surveyor Richard Cullingworth, an expert experienced in weathertightness investigations, who states that the building generally suffers from many features in
construction details that are unsatisfactory due to the high risk of water entry. It is
1 Tisch v Body Corporate 318596 [2011] 3 NZLR 679.
2 It has been recently affirmed in St John’s College Trust Board v Body Corporate 197230
[2013] NZCA 35.
clear from his affidavit and the affidavit of the general manager of the company providing body corporate services to the applicant, Paula Beaton, that damage has been suffered within the building as a consequence of the leaks, and this will continue.
[8] It may well be that there are some parts of the building that are not damaged. I am satisfied that there is a sufficient level of damage, being the deterioration of building components, to treat step one as being established. I am satisfied that the building has been damaged.
Step two
[9] The next issue is whether a scheme should be settled. It is clear that the apartments require significant repair works. These will affect both the common property and individual property. I am satisfied that all proprietors will benefit from the remediation works that are proposed, an issue upon which I expand later.
[10] I have no doubt that by far the best way forward is for all work to be done as part of a common scheme and a common contracting process, and to be conducted within a set timeframe and sequence, and to a set standard. Indeed the alternative of ad hoc repairs without there being a scheme would in my view be quite contrary to the interests of the unit owners, and contrary to the underlying purposes of the UTA.
Step three
[11] A Court having decided that a scheme is appropriate, as the third and final step, must then decide what the terms of the scheme should be. There were five factors helpfully summarised in Tisch:
(a) A scheme with broad support is to be preferred; (b) The scheme should be appropriately detailed;
(c) Past repairs if approved and in accordance with the objectives of the scheme, can be part of the scheme even if the effect of the order will be retrospective;
(d)Work should normally be done to the same standard and at the same time; and
(e) The terms of the scheme should depart from the UTA and from the body corporate rules no more than is reasonably necessary to achieve what is fair between unit owners in the circumstances.
[12] In the relation to the first two of these items, it can be noted immediately that this scheme has the support of the vast majority of owners with only one owner (owning three units) actively opposing. It can be fairly described as having broad support. I have examined the scheme and it appears to me to be appropriately detailed.
[13] Turning to the third factor, the approval of past repairs, it is one of the grounds of opposition of Traxx that:
The applicant has made in error in levying all unit owners for remedial levies that had not been settled by way of a scheme under the Unit Titles Act 2010.
[14] No particulars are given of that objection, and on the face of the scheme insofar as it retrospectively approves past work, that work is in accordance with the general interests of the unit owners and in accordance with what is proposed by way of repairs in the future.
[15] I therefore do not accept that ground of opposition and find that there are no difficulties in the retrospective effect of the scheme.
[16] The fourth issue is the desirability of having everything done to the same standard and at the same time. This scheme plainly is in accord with that goal.
[17] As to the fifth and final matter, the need to depart from the terms of the scheme and from the body corporate rules no more than is reasonably necessary to
achieve what is fair as between unit owners, this again appears to be a basis for the opposition by Traxx. Traxx refers to the scheme being:
…manifestly unfair in that it allocates costs related to the remediation of building elements related to the private property of specific principal units owners to all unit owners.
[18] It is the case that under the proposed scheme some of the work on private units will be at the common expense of unit owners. However, I accept Mr Baker’s submission for the BCA to me that where private units are repaired at the common expense, that is in situations where the repairs to private units have a common benefit to other unit owners. To put it another way, if they are not repaired other unit owners in addition to the particular unit owner will suffer from the leaking.
[19] Traxx has not specified its objection in any way. As best as I can interpret the scheme, the work that has been paid for by the unit owners collectively does in one way or another benefit the body corporate as a whole and not just an individual unit owner. I am therefore not satisfied that the ground of objection is made out, and I accept that insofar as there is some departure from the scheme of the Act and the body corporate rules, it is no more than is reasonable necessary to achieve what is fair and practical.
[20] It may be that as Traxx asserts it owns three principal units and none of the units suffer from any known or visible leaking problems. Whether or not that is so, all unit owners claim benefits from use of the common areas, and it hardly needs to be said that while units might be experiencing no leaking problems right now, without the scheme being carried out there may be worsening leaking problems in the future. I do not accept that ground of opposition.
[21] My view as to the general benefit of the proposed scheme is confirmed by the fact that save for the three units owned by Traxx, the owners of all the other 218 units either support or do not oppose the scheme.
Conclusion
[22] For reasons I have set out, I consider that this scheme should be settled on the basis of the draft scheme that is attached to the application.
[23] Traxx has been unsuccessful in its notice of opposition, but as far as I can discern it has not by its actions put the BCA to any additional costs. The applicant would have had to appear in support of the application and the issues that I have traversed, which do touch incidentally on matters raised by Traxx, are matters that would in any event have been necessarily covered in any decision.
[24] I have asked Mr Baker whether there have been any particular legal costs that have been incurred in dealing with the Traxx opposition and he is unable to point to any. In all the circumstances I will make no order of costs against Traxx.
[25] I record my thanks to Mr Baker and Ms Muldrew who have given the Court comprehensive and helpful submissions.
……………………………..
Asher J
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