Body Corporate 417948 v Bryant

[2019] NZHC 777

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2019-470-000003

[2019] NZHC 777

UNDER

the Unit Titles Act 2010

IN THE MATTER OF

an order settling Scheme under section 74

BETWEEN

BODY CORPORATE 417948

Applicant

AND

ROSS NOEL BRYANT and ORS

First Respondent

Respondents continued over

Hearing:

10 April 2019

Appearances:

C Baker for the Applicant

No Appearance of, or for the Respondents

Judgment:

10 April 2019

(ORAL) JUDGMENT OF EDWARDS J

Solicitors:    Price Baker Berridge, Auckland

BODY CORPORATE 417948 v BRYANT and ORS [2019] NZHC 777 [10 April 2019]

ASB BANK LIMITED

Second Respondent

TSB BANK LIMITED
Third Respondent

ANZ BANK OF NEW ZEALAND
Fourth Respondent

FM CUSTODIANS LIMITED
Fifth Respondent

BANK OF NEW ZEALAND

Sixth Respondent

WESTPAC NEW ZEALAND LIMITED
Seventh Respondent

HONG KONG and SHANGHAI
BANKING CORPORATION LIMITED
Eighth Respondent

NOUVELLE VIE TRUSTEE LIMITED
Ninth Respondent

PETER MURRAY BRIDGES
Tenth Respondent

RONALD JEFFREY BRIDGES
Eleventh Respondent

JOHN RICHARD RAINFORD
Twelfth Respondent

SUSAN CLINTON RAINFORD
Thirteenth Respondent

[1]    The applicant is the Body Corporate of a 70-unit complex at 8 Maunganui Road, Mount Maunganui, known as the Pacific Apartments. It applies for an order under s 74 of the Unit Titles Act 2010 (the Act) to settle a scheme of repair (“Scheme”).

[2]    All those with an interest in the units have been served. There is no opposition to the application. Accordingly, the hearing today proceeds by way of formal proof.

The Pacific Apartments

[3]    The building complex at issue comprises an 11-storey rectangular apartment building containing 70 units with commercial and retail units on the ground floor and accommodation units on floors 1 to 11.

[4]    It is of concrete and steel construction, with cantilevered balconies, aluminium composite material cladding, tiled decks, and, what is described in the affidavits in support of the application as “podium and metal trapezoidal roofing”.

Legal principles

[5]    The approach to applications under s 74 of the Unit Titles Act 2010 was set out by the Court of Appeal in Tisch v Body Corporate 318596.1 Although that decision related to a scheme under s 48 of the Act’s predecessor, the principles continue to apply to applications under s 74.

[6]The Court of Appeal set out a three-step approach:

(a)Step 1: the Court must be satisfied that the building has been damaged or destroyed;

(b)Step 2: 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;

1      Tisch v Body Corporate 318596 [2011] NZCA 420.

(c)Step 3: if the Court decides the scheme is appropriate, it must then decide what the terms of the scheme should be.

[7]    The Court of Appeal also considered five guiding principles emerged from relevant case law, namely:

(a)A scheme with broad support is to be preferred;2

(b)The scheme should be appropriately detailed;3

(c)The order can have retrospective effect, as long as the Body Corporate has acted in accordance with the scheme prior to the Court’s approval;4

(d)Normally work is to be done to the same standard and at the same time;5 and

(e)The terms of the scheme are not to depart from  the Act  and  the Body Corporate Rules any more than reasonably necessary to achieve fairness between unit holders in the circumstances.6

Has there been damage to the building?

[8]    Mr Gray, the Body Corporate’s building surveyor, has sworn an affidavit in support of the application. He deposes to the building suffering from a large number of building defects which affect both the common property and the private units in the complex.

[9]    Extensive repairs are now required to remedy these defects. It is estimated that the cost of these repairs could exceed $13.5 million, excluding GST. Those repairs include the removal and replacement of aluminium composite material cladding, the

2 At [45].

3 At [46].

4 At [47].

5 At [48].

6 At [49].

installation of firestopping to service penetrations throughout the building, and the removal and replacement of asphaltic concrete on the external drive and parking area.

[10]   On the basis of this evidence, I am satisfied that the building has been damaged and there is a need for a scheme of repair.

Is the Scheme appropriate in the circumstances?

[11]   The Scheme provides for repairs to most parts of the building comprising both common property and private property. Mr Gray has set out in his affidavit the extensive nature of those repairs required to nearly every part of the building.

[12]   Building consultants engaged by the Body Corporate have identified the repairs as being necessary for the building to achieve  compliance  with  the  Building Code. A building consent will be necessary to carry out the building repairs.

[13]   Ms Barreto, on behalf of the Body Corporate secretary, has deposed to the Body Corporate’s view that, because of the nature of the building and the extent of the remedial work required, it is not practical to design a remedial solution for only parts of the building for which the Body Corporate is responsible. Indeed, it appears practically impossible to separate out the work to be done to the common property from that to be done to the private units in some respects. Accordingly, it is proposed to carry out the work at the same time, under a single construction contract.

[14] Ms Barreto also deposes, and I accept, that the Body Corporate needs to provide a total solution so that it can meet its obligations under the Act and satisfy requirements of the Local Authority for building consent under the Building Act 2004.

[15]   In addition, Ms Barreto deposes that unless repairs are carried out under a single repair programme, warranty issues and arguments are likely to arise in the event of any future defect or failing. Accordingly, the most practical and fair method to repair the complex is to have a single repair programme as set out in the Scheme.

[16]   That evidence addresses one of the five factors set out by the Court of Appeal in Tisch, namely that normally work is to be done to the same standard and at the same time. As the Court of Appeal noted in that case, the reasons for that principle are “self- evident: maximising efficiency; minimising cost and disruption”.7 Accordingly, I am satisfied that the Scheme is appropriate in the circumstances.

Terms of the Scheme

[17]   A copy of the proposed Scheme is annexed to the affidavit of Ms Barreto and to the originating application. It is a comprehensive document which is appropriately detailed.

[18]   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 powers of the Body Corporate in that respect, and its commensurate duties, are set out in the Scheme in some detail.

[19]   The Scheme also addresses the costs of the repairs, and the contributions of each unit owner. Counsel for the Body Corporate informs me that these are the only parts of the Scheme that depart from the provisions of the Act. However, as with all of the terms of the Scheme, these provisions have been unanimously endorsed by all unit owners.

[20]   Accordingly, the terms of the Scheme follow the Act and any departure is minimal and justified in the circumstances.

[21]   I am satisfied that the terms of the Scheme balance the interests of each unit holder in a way that achieves the fairest outcome to all unit holders in the circumstances.

7      Tisch v Body Corporate 318596 [2011] NZCA 420 at [48].

Other factors

[22]   In addition, the Scheme has broad support. At the annual general meeting held on 5 October 2018, those present resolved by way of unanimous resolution to approve the draft Scheme. Further, as already noted, all respondents have been served and no notices of opposition to the application have been filed or served.

[23]Finally, I note that the issue of retrospectivity is not engaged in this case.

[24]   For these reasons, I am satisfied that the application should be granted and the Scheme approved accordingly.

Correction of errors in the naming of parties

[25]   Counsel for the Body Corporate draws my attention to errors in the naming of the parties. John and Susan Rainford are identified as the owners of unit 23 in the schedule of owners included as “first respondents”.  In fact, the unit is owned by  CJR 2000 Ltd, the sole director of which is their son, Clinton Rainford. John and Susan Rainford have a mortgage over the unit and should have been named as the twelfth and thirteenth respondents respectively. Counsel seeks orders amending those errors. All parties have been served, and there is no prejudice to any of the parties in making the orders sought. I am satisfied that orders correcting these errors should be made.

Result

[26]The parties to the originating application are amended by:

(a)Removing John Richard Rainford and Susan Clinton Rainford from the schedule of first respondents;

(b)Adding John Richard Rainford and Susan Clinton Rainford as the twelfth and thirteenth respondents; and

(c)Adding CJR 2009 Ltd to the schedule of first respondents.

[27]   The originating application (as amended above) is granted. I make the orders set out in paragraphs 1.1 to 1.4 of the originating application dated 17 January 2019 annexing the draft Scheme.

Edwards J