Body Corporate 406198 v Housing New Zealand Limited
[2021] NZHC 769
•13 April 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2020-404-1776
[2021] NZHC 769
BETWEEN BODY CORPORATE 406198
First Applicant
YAN HEI TOMMY YU
Second ApplicantAND
HOUSING NEW ZEALAND LIMITED
First Respondent
HAIXIN WANG
Second RespondentContinued over page
Hearing: 4 March 2021 (AVL) Appearances:
D R Bigio QC and I J Stephenson for the Applicants Y K Law (86th Respondent) in person
Judgment:
13 April 2021
JUDGMENT OF CAMPBELL J
This judgment was delivered by me on 13 April 2021 at 11:30 am Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
BODY CORPORATE 406198 v HOUSING NEW ZEALAND LIMITED AND OTHERS [2021] NZHC 769 [13
April 2021]
HHTS LIMITED
Third Respondent
ZIYING ZHU
Fourth Respondent
THIAM CHYE CHONG
Fifth Respondent
CHAN KEITH KEISHUN AND CHENG SOW PENG
Sixth Respondent
PROPERTY OPPORTUNITIES LTD
Seventh Respondent
RETIREMENT 2050 LIMITED
Eighth Respondent
THI THU HANG LE
Ninth Respondent
BRENDA YAP
Tenth Respondent
USAR INVESTMENTS LIMITED
Eleventh Respondent
HIGH PROPERTY LIMITED
Twelfth Respondent
MENGYA JIA
Thirteenth Respondent
HUI-PO LIN AND KUAN-YING CHEN
Fourteenth Respondent
SIOW GUAN TANG AND SOH THAN ONG
Fifteenth Respondent
DEAN MAXWELL STANTO AND ANTHONY JOHN STANTON
Sixteenth Respondent
TG LINK INVESTMENT LIMITED
Seventeenth Respondent
SHAN HE
Eighteenth Respondent
TIN WEI LEO
Nineteenth Respondent
NAVEEN KUMAR
Twentieth Respondent
YAO TONG
Twenty first Respondent
Continued over page
CHYE HUA EE
Twenty Second Respondent
YUNNAN INVESTMENT AND DEVELOPMENT LIMITED
Twenty third Respondent
CALEDONIAN INVESTMENTS LIMITED
Twenty Forth Respondent
ANNE DEBORAH McCREATH, JOHN McCREATH, MACANN INVESTMENT TRUSTEE LIMITED
Twenty Fifth Respondent
JIAYUAN WANG
Twenty Sixth Respondent
KIM ENG TAN AND KAH FONG TAI
Twenty Seventh Respondent
KIM PONG TAN AND HELEN KWA
Twenty Eighth Respondent
QIUSI JI
Twenty Nineth Respondent
ATIG LIMITED
Thirtieth Respondent
WENJIE RAN
Thirty First Respondent
J BODLE 101 LIMITED
Thirty Second Respondent
JANE EVELYN PERKINS, S&J PERKINS TRUSTEES LIMITED, STEPHEN RAYMOND
Thirty Third Respondent
YAN HEI TOMMY YU
Thirty Fourth Respondent
YINLING LINDA WU
Thirty Fifth Respondent
Continued over page
CHONG MEND TEO AND SIEW HANG TAN
Thirty Sixth Respondent
ANNA WEI LERN YEO
Thirty Seventh Respondent
KENG WENG LEONG AND YIM PENG WONG
Thirty Eighth Respondent
KEVIN FRASER GASKELL AND VIRGINIA MABILANGAN GASKELL
Thirty Nineth Respondent
CHING-JUNG TSAI
Fortieth Respondent
MAN-CHING CHUANG AND SHU LIN LIN
Forty First Respondent
WEI WU
Forty Second Respondent
KIWI HOLIDAY INSURANCE LIMITED
Forty Third Respondent
MEGAN QIN WEI LIEW
Forty Forth Respondent
NSJ HOLDINGS LIMITED
Forty Fifth Respondent
LUI LAM AND CHIT WAH
Forty Sixth Respondent
ZIHE WANG
Forty Seventh Respondent
YOSUA TIMOTHY
Forty Eighth Respondent
YI CHIA LEE
Forty Ninth Respondent
CHUNG CHENG TSAI
Fiftieth Respondent
Continued over page
SAI MA AND NAN ZHANG
Fifty First Respondent
CHUNLAI SHEN
Fifty Second Respondent
MARK JOSEPH WILSON, DINGXIANG LIU AND SH TRUSTUEE SERVICES (CNZ) LIMITED AS TRUSTEES OF THE CNZ TRUST
Fifty Third Respondent
CLIVE KHOON LIP TAN AND JOLENE WEILING TAN
Fifty Fourth Respondent
XUN ZHANG AND XIAOYU HAN
Fifty Fifth Respondent
SHU MEI CHIU
Fifty Sixth Respondent
KOK HONG RUPERT TAI AND MAN LIN CHEW
Fifty Seventh Respondent
KIM LOON SOON STEPHEN AND LAI KWAI WONG
Fifty Eighth Respondent
ANNIE ATTIA AND BRUNO COGINARD
Fifty Ninth Respondent
DONALD GIORGIO
Sixtieth Respondent
DAVID XI XIE
Sixty First Respondent
GE SHEN
Sixty Second Respondent
GS PROPERTY INVESTMENTS (NZ) LIMITED
Sixty Third Respondent
CUIXIAN CHEN
Sixty Forth Respondent
Continued over page
JEYASOTHY T PALAKRISHNAR AND RAJINI PARARAJASINGAM
Sixty Fifth Respondent
QINCHAO LIN AND QING WANG
Sixty Sixth Respondent
JNA INVESTMENTS LIMITED
Sixty Seventh Respondent
LEE MEE THEN AND LIAN SOON KOH
Sixty Eighth Respondent
CLAIRE DAWN SIEW KOON YIO AND JOANNE YAN HUA SEOW
Sixty Seventh Respondent
KOK SENG HUI
Sixty Eighth Respondent
YOUGUI WANG
Sixty Ninth Respondent
MIAN QU AND SUQIN HE
Seventieth Respondent
828 INVESTMENT PROPERTY LIMITED
Seventy First Respondent
CHIN-CHIEN LIN AND KUN LIN
Seventy Second Respondent
WEIJING LU
Seventy Third Respondent
HAIRONG SHI
Seventy Fourth Respondent
JIALE ZHANG
Seventy Fifth Respondent
JOSHUA JAMES GOOLEY AND VEY DESITA HADINOTO
Seventy Sixth Respondent
CHEE LEONG WONG AND SIEW ENG YEO
Seventy Seventh Respondent
Continued over page
YANCE UTAMA
Seventy Eighth Respondent
MCK ENTERPRISES LIMITED
Seventy Nineth Respondent
DIMEI LU
Eightieth Respondent
CHANG LIU
Eighty First Respondent
FADAK INVESTMENT LIMITED
Eighty Second Respondent
JIANG XUN
Eighty Third Respondent
YULAN HAN
Eighty Forth Respondent
MICHAEL LYE HEE KOH AND Al CHOO BASILISA
Eighty Fifth Respondent
YONG KIANG LAW
Eighty Sixth Respondent
SIN MIN BENJAMIN YEO AND MEARN HWA LIM
Eighty Seventh Respondent
JESSICA NGOH MEI JANG AND TSE MING TOH
Eighty Eighth Respondent
YU LIU
Eighty Nineth Respondent
WEI LI
Ninetieth Respondent
CHEE WAH LOW AND TZU LIN CHIA
Ninety First Respondent
KWOK SHEN ALVIN KIEW
Ninety Second Respondent
MAN NAH HO
Ninety Third Respondent
Continued over page
BANGLUN CHEN
Ninety Fourth Respondent
SHAHRZAD SHAHBAZ
Ninety Fifth Respondent
MALCOLM LINDSAY GRANT AND KWAN YING JUDY CHAN
Ninety Sixth Respondent
JINGJING HE
Ninety Seventh Respondent
XI YUN ZHANG
Ninety Eighth Respondent
CHENYAN XIAO
Ninety Ninth Respondent
DONG YUAN YANG
One Hundredth Respondent
BLAIR NORWOOD KNIGHT AND MILOS PEJOVIC
One Hundred and First Respondent
TSUNG HSUAN HSIEH
One Hundred and Second Respondent
YONG KIANG LAW AND PHUONG MAI LE DINH
One Hundred and Third Respondent
YUE ZHOU
One Hundred and Fourth Respondent
GPS PROPERTY HOLDINGS LIMITED
One Hundred and Fifth Respondent
IKJONG AUM AND SEONG SOOK JANG
One Hundred and Sixth Respondent
GREGORY EWEN MORGAN AND PAUL KAYE WELLS JANG
One Hundred and Seventh Respondent
THIM CHIEW WONG AND LI KIAN CHAN
One Hundred and Eighth Respondent
Continued over page
CHENG ME NGU AND SIENG YIENG LAW
One Hundred and Ninth Respondent
MUI LING LEE
One Hundred and Twentieth Respondent
JOYCE PING LEE AND NOi KENG KOH
One Hundred and Twenty First Respondent
CHANG KUEI CHUE
One Hundred and Twenty Second Respondent
ANZ BANK NEW ZEALAND LIMITED
One Hundred and Twenty Third Respondent
WESTPAC NEW ZEALAND LIMITED
One Hundred and Twenty Forth Respondent
BANK OF NEW ZEALAND |
One Hundred and Twenty Fifth Respondent
ASB BANK LIMITED
One Hundred and Twenty Sixth Respondent
SOUTHLAND BUILDING SOCIETY
One Hundred and Twenty Seventh Respondent
BASECORP FINANCE
One Hundred and Twenty Eighth Respondent
JENNIEER FONG AND RAYMOND GIN
One Hundred and Twenty Ninth Respondent
MORTGAGE HOLDING TRUST COMPANY LIMITED
One Hundred and Thirty Respondent
Continued over page
KOOKMIN BANK
One Hundred and Thirty Second Respondent
INDUSTRIALAND COMMERCIAL BANK OF CHINA (NEW ZEALAND) LIMITED
One Hundred and Thirty Third Respondent
TSB BANK LIMITED
One Hundred and Thirty Forth Respondent
FINANCE DIRECT LIMITED
One Hundred and Thirty Fifth Respondent
NATIONAL PREMIUM LIMITED
One Hundred and Thirty Sixth Respondent
ROBERT GEORGE BRYING AND SAMANTHA ELIZABETH HARDWOOD
One Hundred and Thirty Seventh Respondent
WEI LI
One Hundred and Thirty Eighth Respondent
SAO LENG WONG
One hundred and Thirty Ninth Respondent
CHANG ZHANG
One Hundred and Fortieth Respondent
STEFANO VIO
One Hundred and Forty First Respondent
K 3 LEGAL LIMITED
One Hundred and Forty Second Respondent
Introduction
[1] Bianco Off Queen (Bianco) is a unit title development located in Auckland Central. The development consists of two building towers of 157 residential units.
[2] Bianco was built between 2007 and 2009. Investigations have revealed that there are a number of defects in the two buildings. Those defects have already caused extensive damage.
[3] The first applicant is the Body Corporate for Bianco. On 29 September 2020, the Body Corporate applied to settle a scheme under s 74 of the Unit Titles Act 2010 (the Act) for the remediation of the buildings. The application has been served on 176 persons. They are the registered owners of the units, those having some other interest in the buildings, and the insurer of the buildings.
[4] Of the 176 persons served, only one has filed an opposition to the application. That is Mr Law, the 86th respondent. He is an owner of one of the units. Mr Law’s notice of opposition was supported by an affidavit made by Ms Wu, who is another unit owner and the 34th respondent. Ms Wu did not file a notice of opposition.
[5] Mr Law’s opposition does not raise any issue with the substance of the Body Corporate’s proposed scheme. Mr Law merely alleges that the Body Corporate did not have the necessary authority from the unit owners to apply for a scheme.
[6] The Body Corporate does not accept that it lacked authority. However, out of an abundance of caution, on 1 March 2021 the Body Corporate and Mr Yu (a member of the committee of the Body Corporate, who had made the principal affidavit in support of the Body Corporate’s application) applied to join Mr Yu to the proceeding as second applicant.
[7] I heard the joinder application, and the substantive application for a scheme, on 4 March 2021. The hearing took place by audio-visual link, because of COVID- 19 restrictions. Mr Bigio QC and Mr Stephenson appeared for the Body Corporate and for Mr Yu. Mr Law appeared in person. I was subsequently told that Ms Wu was
present on the audio-visual link, though this was not apparent to me (nor, I assume, to anyone else) at the hearing.
[8]The issues that arose on the two applications were:
(a)Should Mr Yu be joined to the proceeding as second applicant?
(b)Did the Body Corporate have authority from the unit owners to apply for a scheme?
(c)If, as a result of my decision on the first two issues, the application was properly before me, should I settle a scheme under s 74 (and, if so, on what terms)?
[9] To give context to the first two issues, I will first outline the Body Corporate resolutions that were passed (or failed to pass) prior to the Body Corporate applying for a scheme. I will also summarise Mr Law’s and the Body Corporate’s positions on the authority that those resolutions conferred on the committee of the Body Corporate.
Body Corporate resolutions
[10] An extraordinary general meeting (EGM) of the Body Corporate was held on 2 November 2019. At that EGM, an ordinary resolution was passed that $2 million be levied for the purpose of funding the remediation and remedial litigation.
[11] An annual general meeting (AGM) of the Body Corporate was held on 1 February 2020. At that AGM a special resolution was proposed that the Body Corporate delegate to the committee all of the Body Corporate’s duties and powers that it was able to delegate. This resolution was not carried, as it did not obtain the 75 per cent approval required for a special resolution.
[12] The minutes of that AGM record that a long discussion then followed. As a result, an amended form of the resolution was put. The amended form included the following limitation:
This delegation to the Committee does not extend to duties and powers of [sic] with respect to:
a)litigation levies
b)remediation levies
c)special levies
or any exercise of duties and powers which would necessitate additional litigation levies, remediation levies or special levies.
The intention of this limitation is not to limit any aspect of operational running of BC 406198.
Any litigation, remediation or special levies as above would require an EGM to be called.
This amended form of the resolution was passed unanimously.
[13] Following that AGM the committee was concerned that the limitation might hamper its ability to do certain work. The committee was intending to call an EGM to circulate a proposed scheme under s 74 and decided to propose at that EGM another resolution delegating powers to the committee, without the limitation that had been agreed at the 1 February 2020 AGM.
[14] That EGM was held on 21 March 2020. The minutes of that EGM record that a special resolution was put that the Body Corporate delegate to the committee all of the Body Corporate’s duties and powers that it was able to delegate. This was the same broad delegation, without any limitation, that had failed at the earlier AGM. At the EGM the resolution once again failed to pass. It obtained majority support, but not the requisite 75 per cent majority. At the same EGM an ordinary resolution was passed for the Body Corporate to apply to the High Court for a scheme under s 74.
[15] Mr Law’s position is that the failure of the delegation resolution at the 21 March 2020 EGM means that the committee had no delegated powers. Mr Law says that the rejection of that resolution implicitly revoked the earlier limited delegation to the committee. If Mr Law is correct, the effect of s 101(1) of the Act is that a special resolution, requiring 75 per cent support, was needed to authorise the Body Corporate to apply for a scheme. No such resolution was obtained.
[16] The Body Corporate says that the only effect of the failure of the delegation resolution at the 21 March 2020 EGM was that the proposed delegation did not take place. This failure did not affect the earlier limited delegation to the committee at the 1 February 2020 AGM. That limited delegation could only be revoked by special resolution. There had been no such resolution. The limited delegation, the Body Corporate says, therefore continued in force. That meant that only an ordinary resolution was needed to authorise the Body Corporate to apply for the scheme. That resolution was obtained.
[17]Those differing positions provide the context for the application to join Mr Yu.
Should Mr Yu be joined to the proceeding as second applicant?
[18] Against the risk of a finding that the Body Corporate did not have authority to apply for a scheme, the Body Corporate and Mr Yu sought joinder of Mr Yu. They said that the Court could join Mr Yu as an applicant under any of rr 4.2, 4.56, 7.43A or 19.11 of the High Court Rules 2016. They made brief submissions as to why Mr Yu should be joined.
[19] At the hearing I asked Mr Law whether he wished to make any submissions on this application. He said he did not.
[20] I made an order under r 4.56(1)(b)(ii) joining Mr Yu as second applicant. I said I would provide my reasons when delivering my judgment on the substantive application for a scheme.
[21]I made the order for the following reasons:
(a)Section 74 expressly provides that an owner of a unit may apply for a scheme. Making an application under s 74 is not the preserve of a body corporate.
(b)Mr Yu is a unit owner. He is therefore entitled to apply under s 74.
(c)Mr Yu is familiar with the matters in this proceeding. He is the chair of the Body Corporate committee. He made the principal affidavit in support of the s 74 application.
(d)There is no prejudice to any respondent in joining Mr Yu, because the joinder does not in any way change the substantive s 74 application that is before the Court.
(e)Mr Yu’s presence before the Court (as an applicant) may be necessary to adjudicate on and settle all questions involved in the proceeding (r 4.56(1)(b)(ii)). This is because the authority point raised by Mr Law, if valid, would mean that the question whether I should settle a scheme would not be resolved.
[22] After I made the order, Mr Law said that he did not want the order made if that meant that I no longer had to address the authority argument that he raised. Even if Mr Law had raised that matter before I made the order, I still would have made the order. That joinder of Mr Yu might make it unnecessary to resolve Mr Law’s authority argument is not a good reason for declining to join Mr Yu. This is because, as I have just explained, the respondents are not prejudiced in any way on the substantive application that I have to determine.
[23] In any event, as I signalled at the hearing, I am going to address Mr Law’s authority argument. This is because it is clear that it is of some importance to Mr Law and Ms Wu (and, it seems, to some other unit owners in their camp).
Did the Body Corporate have authority from the unit owners to apply for a scheme?
[24] I have already outlined the parties’ respective submissions on the authority of the Body Corporate to apply for the scheme.
[25] I accept the Body Corporate’s position on this matter. The Act states in s 111 that a delegation to the committee under s 108(1) may be revoked by special
resolution. It follows that, until a delegation has been revoked by special resolution, it continues in force.
[26] A limited delegation was made to the committee at the 1 February 2020 AGM. For that limited delegation to be revoked, a special resolution revoking the delegation was required. There was no such special resolution. All that happened was that a further resolution was proposed for an unlimited delegation. That resolution failed. But at no point was a special resolution proposed, let alone passed, to revoke the earlier limited delegation.
[27] Finally, I note in relation to the question of delegation that Mr Law claimed that there had been undue pressure applied to obtain the limited delegation at the 1 February 2020 AGM. This was not put in issue in his notice of opposition. I was not prepared to consider it in this proceeding. If Mr Law or other unit owners wished to challenge the validity of that resolution, they should have done so promptly (given that the Body Corporate would otherwise be relying on its validity) and clearly.
Should I settle a scheme under s 74 (and, if so, on what terms)?
[28] The scheme proposed by the applicants would establish the necessary powers, duties and obligations to enable the Body Corporate to plan and carry out the remedial work necessary to reinstate the buildings so that they are compliant with the Building Code. It would also confirm authority to access units to carry out the work, and the basis for raising funds from unit owners to pay for the remedial work.
[29] As I indicated earlier, Mr Law’s opposition did not raise any objection to the substance of the scheme proposed by the applicants. At the hearing he did say that he objected to the scheme. He said that he had not wanted to spell out his objection in his opposition, because of other litigation in which the Body Corporate is involved. He did not, however, explain to me what his objection to the scheme was.
Legal framework
[30] Section 74 of the Act empowers the Court to settle a scheme for the reinstatement of a building or other improvement comprised in any unit or on the base
land. The Court may settle a scheme if the building or other improvement is damaged, but the unit plan is not cancelled.1
[31] In Tisch, the Court of Appeal set out a three-step approach to determining applications under s 74:2
(a)As a threshold requirement, the Court must be satisfied that the building has been damaged or destroyed.
(b)If so satisfied, the Court must decide whether to settle a scheme. That is, the Court must decide whether a scheme is appropriate in the circumstances.
(c)If the Court decides that a scheme is appropriate, it must then decide what the terms of the scheme should be.
[32]I will now address each of these steps.
Are the buildings damaged?
[33] Mr Simon Paykel, a director of building consultant Maynard Marks, made an affidavit in support of the application. Among other things, Mr Paykel explains that various construction defects have caused the two buildings in the development to be damaged in a range of ways.
[34] I am satisfied, on the basis of Mr Paykel’s affidavit, that the buildings have been damaged. Indeed, Mr Law did not dispute this.
Is a scheme appropriate in the circumstances?
[35] In Tisch the Court of Appeal said that there should be a determined effort by unit owners to achieve agreement on the carrying out of repairs, and that a scheme
1 Section 74(1) and (2).
2 Tisch v Body Corporate No 318596 [2011] NZCA 420, [2011] 3 NZLR 679 at [35]. Tisch was a decision under s 48 of the Unit Titles Act 1972. Section 74 is in broadly similar terms to s 48.
under s 74 should therefore be a remedy of last resort.3 The Court also observed that there may be pragmatic considerations – such as the need to undertake work to both common property and unit property at the same time, and to the same standard – in favour of settling a scheme.4
[36] There is no doubt, based on the evidence before me, that the owners of the units in this development have tried hard to reach a unanimous agreement in relation to remedial work necessary on the buildings. No such agreement has been reached. It is also clear that the remedial work will be to both common property and unit property. It is sensible that all the work be carried out at the same time.
[37] For these reasons, I am satisfied that, in the circumstances, a scheme is appropriate. Mr Law did not make any submissions to the contrary.
What should the terms of the scheme be?
[38] As to the terms of the scheme, the aim is to balance the interests of each unit owner. The terms should therefore seek to achieve an outcome fair to all unit owners. A scheme with broad support is to be preferred. The scheme should be appropriately detailed, to limit the scope for later misunderstanding or disagreement. It should depart from the scheme of the Act no more than is reasonably necessary.5
[39] The applicants’ proposed scheme has an appropriate level of detail. It essentially provides a framework for facilitating the necessary repairs. Among other things, it imposes reporting obligations on the Body Corporate to unit owners, and makes provision for dispute resolution. It contains few if any departures from the scheme of the Act. The proposed scheme received broad support from unit owners at the 21 March 2020 EGM. Only Mr Law has filed a notice of opposition. I accept that he is informally representing some other unit owners who also oppose the proposed scheme. But it is not clear how many such unit owners are in his camp.
3 Tisch v Body Corporate No 318596 [2011] NZCA 420, [2011] 3 NZLR 679 at [37].
4 At [40].
5 Tisch v Body Corporate No 318596 [2011] NZCA 420, [2011] 3 NZLR 679 at [44], [45], [46] and
[49].
[40] Mr Law did not articulate any objections to the terms of the proposed scheme. However, at the hearing I raised with Mr Bigio concerns I had as to some particular terms of the scheme. These included matters such as the interest that the Body Corporate was entitled to charge in respect of unpaid contributions, and the interaction of two apparently overlapping provisions of the dispute resolution section. I invited the applicants to submit a memorandum, with an amended scheme, to address those concerns. I also allowed Mr Law to file a memorandum in response, should he wish.
[41] The applicants filed an explanatory memorandum and an amended scheme on 11 March 2021. Mr Law did not file any memorandum in response. I am satisfied with the explanations in the memorandum and the amendments in the amended scheme, subject to one further amendment. The schedule of owners in the amended scheme is still entitled “Schedule 2 – Owners”. That should be entitled “Schedule 1 – Owners”.
[42] I therefore conclude that it is appropriate to order that a scheme under s 74 be settled in the terms proposed by the applicants on 11 March 2021.
Costs
[43] Mr Bigio indicated that, if the applicants succeeded (which they have), they might seek costs. I invite the parties to attempt to agree costs. Failing agreement being reached, the applicants are to file and serve a memorandum by 30 April 2021. Mr Law is then to file and serve a memorandum by 7 May 2021. Each memorandum is not to exceed three pages (excluding schedules or annexures).
Result
[44] I make the orders set out in paragraph 1(a) and (b) of the (amended) notice of application dated 11 March 2021, subject to the further amendment in [41] above.
Campbell J
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