Body Corporate 343476 v Jurgens

[2020] NZHC 1931

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-835

[2020] NZHC 1931

BETWEEN

BODY CORPORATE 343476

Applicant

AND

MATTHEW ANTHONY JURGENS & OTHERS

Respondents

On the papers

Appearances:

JP Wood for Applicant

No appearance for Respondents (no steps taken)

Judgment:

4 August 2020

JUDGMENT OF WALKER J

This judgment was delivered by me on 4 August 2020 at 3.30 pm Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

BODY CORPORATE 343476 v JURGENS & OTHERS [2020] NZHC 1931 [4 August 2020]

[1]    This is an Originating Application by Body Corporate 343476 (the Body Corporate) for an order establishing a scheme under s 74 of the Unit Titles Act 2010 (the Act). It relates to an apartment complex in Liverpool Street, Auckland (the Building).

[2]    The Building is a twenty-storey apartment complex of 165 residential apartments. It has five levels of car parks. The Body Corporate manages the affairs of the apartment complex under the Act.

[3]    The Body Corporate discovered a structural defect in the basement wall on the south-west elevation of the Building (levels 2, 3 and 4). This defect potentially threatens the structural integrity of the Building as a whole.

[4]    The only way to economically fix this defect is to thicken that wall. Thickening the wall will encroach into 15 car parking units on three carparking levels. The encroachment will make the carparks immediately adjacent to the wall unusable. An amended unit plan has been developed by Rogan Hampson, a cadastral surveyor, to overcome this. The Body Corporate now applies to the Court under s 74 of the Act to deposit a new plan shifting the boundaries of the units adjacent to the wall and the units beside each of them, so the car parks all remain usable, albeit reduced in size. The proposed scheme (the Scheme) also compensates the unit-owners for the loss of area associated with this plan, there being no measurable loss of value.

[5]    At an Annual General Meeting (AGM) on 11 February 2020, the Body Corporate voted in favour of making an application to the Court for the Scheme on the terms that have now been submitted to the Court. Ninety-four owners attended or gave proxies. The resolution was passed by all, bar one abstention.

[6]    The Body Corporate has served all of the owners, mortgagees and the Building’s insurer. No opposition to the orders has been filed.

Relevant Law

[7]    There are well established principles to be applied in the present context through cases such as Tisch v Body Corporate No 318596.1 The power of the Court under s 74 is discretionary and each application to settle a scheme is determined on its own factual circumstances.2

[8]    The application for approval must show that a building has been, or is likely to be, damaged and that a scheme of repair is appropriate.3 The proposed scheme needs to balance the interests of all unit owners. The Court in Tisch outlined five factors to be taken into account when considering the terms of a proposed scheme:4

(a)A scheme with broad support is to be preferred.

(b)The scheme should be appropriately detailed to enable unit owners and the Court to judge its effectiveness.

(c)The order could have retrospective effect so long as the Body Corporate has acted in accordance with the scheme prior to the Court’s approval.

(d)Remedial work is generally to be carried out to the same standard in relation to all units and at the same time.

(e)The terms of the scheme were not to depart from the Act and Body Corporate rules any more than is reasonably necessary to achieve fairness between unit owners in the circumstances.

Should the Court sanction the proposed scheme?

[9]    It is clear on the evidence of Wilhelm Wolfhaart, a structural engineer, that the Building needs repair. There is one serious defect. The south-eastern sub-basement wall had a build-up of ground water next to it, and the drainage had failed, leading to

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

2      Body Corporate 177519 v Li [2014] NZHC 3381 at [18]; Body Corporate 194769 v Wheatley

[2016] NZHC 856 at [10].

3 At [35].

4      At [45]-[40].

compromise of the wall’s structural integrity. The location of this wall threatened the stability of the Building as a whole.

[10]   A copy of the proposed Scheme is annexed to the Originating Application dated 5 June 2020. Under the terms of the Scheme, the owner of each unit appoints the Body Corporate to carry out the repairs, and to collect all costs involved in effecting the repairs. The estimated cost of the repairs has already been collected. The Body Corporate has the power to raise additional sums, although it is not anticipated that this will be necessary. The powers and duties of the Body Corporate required for/in respect of the repairs are set out in the Scheme.

[11]   The Scheme addresses the extent of the repairs in a level of detail commensurate with other applications approved by this Court in a number of recent decisions.5 Envivo Limited’s Report outlines the damage, as well as the plans and specifications for the remedial works. Although the exact extent of damage and the scope of works required will only be finally known once the remedial works are commenced, it is anticipated that the repairs will require work on common property and unit property adjacent to the southwestern basement wall in the Building, and will reduce the size of 15 car parks. The Scheme outlines that modest compensation will be paid to the owners of the 15 affected units according to a specified formula.6 It also provides that the remedial works, together with any other work required to repair any latent damage required for a Code Compliance Certificate to be obtained, is to be governed by the scope of the Scheme.

[12]   I am satisfied that the terms of the Scheme are appropriately comprehensive and detailed. Further, the repairs are being carried out to the same standard in relation to all units – and must be carried out under a single repair program given no individual owner could undertake the necessary structural repairs. Although I recognise the proposed order has some retrospective effect, the Body Corporate has acted in accordance with the Scheme thus far, and retrospectivity is no bar to the granting of

5      Body Corporate 205373 v Balthazaar (‘Mays Road’) [2015] NZHC 2827, Thomas J; Body Corporate 202692 v Jamac Holdings Limited (‘Retro Apartments’) [2016] NZHC 1226, Faire J; and Body Corporate 201161 v Keung (‘Gladstone Apartments’) CIV-2016-404-1478, Gilbert J.

6      The Court of Appeal confirmed that compensation may be paid under s 74 of the Act in Body Corporate 114424 v LV Trust Holdings Ltd (2014) 15 NZCPR 375

an order under s 74. Finally, the proposed Scheme departs no more than is reasonably necessary from the scheme of the Act and the body corporate rules. The departures identified by Mr Wood are necessary to achieve fairness between unit owners.

[13]The main issue, therefore, is whether the Scheme has broad support.

Does the scheme have broad support?

[14]   The Building has 165 residential apartments on levels 7 through 20, and car parking on levels 2 through 6. The car parks were created as principal rather than accessory units. This means they can be owned, sold or transferred independently of the ownership of apartments in the Building.

[15]   There are 15 affected car parks. On 7 August 2019 and 3 September 2019, the Body Corporate’s solicitors wrote to the 15 affected car park owners explaining the situation and requesting the owners’ consent to deposit a new plan under s 68 of the Act as a redevelopment. Four of the 15 affected owners did not consent to the proposed redevelopment. One owner could not be contacted. Without the written permission of all 15 directly affected owners, the Body Corporate was unable to proceed under s 68 of the Act to deposit a new scheme.

[16]   The Body Corporate considered that it would be fair for all owners for the new plan to be deposited as a part of the Scheme since the works are required to make the Building as a whole structurally sound, and all owners benefit from that work. Further, the physical constraints are such that the plan put forward is the only one that can work with the layout of the Building.

[17]   The Body Corporate held an AGM on 11 February 2020. At that meeting, the attendees voted for the Body Corporate to apply to the Court to approve the Scheme. Of the 15 affected car park units, 9 owners were present or gave proxies for the meeting.

[18]   When the application first came before me on 22 June 2020, I was satisfied that the proposed Scheme met all the requirements, with the exception of clarification around the proportion of unit owners who had approved the Scheme. This is because,

although there are 165 residential units, there are also car parks which are independently owned, and it was not clear whether all the affected unit owners were aware of, and in support of, the proposed Scheme.

[19]   I subsequently  received  further  material  on  behalf  of  the  applicant  on  30 July 2020. Counsel’s memorandum confirmed:

(a)Of the four affected unit owners who opposed the proposed plan in 2019, two attended the AGM. Those that attended the AGM raised concerns at the meeting. One objection was that they believed the units would not be able to be used after the works. That concern was assuaged when the Body Corporate confirmed that the car parks would still be usable. One owner also wanted additional compensation or for the body corporate to purchase the unit.

(b)One affected unit owner could not be contacted about the proposed redevelopment. The only address provided was a postal address.

[20]   This satisfies me that the Scheme represents the collective will of those proprietors who were sufficiently exercised about it to participate in the discussions. Thirty-two unique owners, representing 94 of the units, voted at the AGM. Of the affected unit owners, 9 were present at the meeting or gave proxies. None voted against the Scheme. In those circumstances, the proposed Scheme has the broad support the Court requires.

Conclusion

[21]   There is a clear need for repair, which triggers the need for a scheme. The Scheme is appropriate, fair and balanced in the circumstances, given the defects and damage are to both unit and common property.

[22]   I am satisfied that all five factors to be considered in accordance with the leading authority are met. I have considered the Scheme and the evidence. I am satisfied the Scheme has the level of detail necessary and is substantially consistent with other schemes approved by this court on prior occasions.

[23]Accordingly, I make the following orders:

(a)An order under s 74 of the Act settling a Scheme for the repair of the buildings on the base land of the Body Corporate, the terms of which are those set out in Schedule One of the Originating Application dated June 2020.

(b)Directing that the Registrar-General of Land accept for deposit the unit plan attached as “A” to the Scheme in substitution to the unit plan (deposited plan 343476) associated with the supplementary record sheet 182951, where it is accompanied by a sealed copy of the Scheme.

...................................................

Walker J