Body Corporate 78693 v Gibson Sheat Shelf Company no.28 Limited

[2019] NZHC 3344

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV 2019-485-314

[2019] NZHC 3344

UNDER

Unit Titles Act 2011

IN THE MATTER OF

an application to settle a section 74 scheme

BETWEEN

BODY CORPORATE 78693

Applicant

AND

GIBSON SHEAT SHELF COMPANY NO. 28 LIMITED

First Respondent

ALLEN BINSON GOH
Second Respondent

HILL VIEW HOLDINGS LIMITED

Third Respondent

Hearing:

12 December 2019

Counsel:

J K Mahuta-Coyle for Applicant

P W Michalik for First Respondent
L M McKeown for Second Respondent
Counsel for Third Respondent excused (memorandum supporting the first and second respondents filed)

Judgment:

17 December 2019

JUDGMENT OF MALLON J

Introduction

[1]    The applicant is the body corporate of a unit title development known as the Maison Cabriole Apartments (the development). It has applied for an order settling a scheme under s 74 of the Unit Titles Act 2010. A hearing of the substantive application has not been scheduled at this stage.

BODY CORPORATE 78693 v GIBSON SHEAT SHELF COMPANY NO. 28 LIMITED [2019] NZHC 3344

[17 December 2019]

[2]    Before me is the Body Corporate’s application for interim relief. This application seeks an order authorising the Body Corporate to demolish four units and to construct a temporary roof. In the alternative, it seeks an order that the owners of the four units pay 80 per cent of the cost of on-site private security until the date of judgment on the substantive application.

[3]    The interim relief is opposed by the owners of the four units the Body Corporate seeks to demolish.

Background facts

[4]The development is comprised of three buildings:

(a)a seven storey tower block consisting of 17 principal units all constituted as residential apartments (the Tower block);

(b)a two storey building containing a single commercial principal unit and five residential units, this building occupying the corner of Tory Street and Courtenay Place (the corner building); and

(c)a three storey building on Tory Street containing a ground floor with 11 carparks, some storage units and four residential units; a first floor with two residential units (units 24 and 25); and a second floor with two residential units (units 28 and 29) (the Tory Street block).

[5]    The first respondent (GS28) owns unit 29. The second respondent (Allan Goh) owns unit 28. The third respondent (Hill View Holdings) owns units 24 and 25. Their units have been unoccupied since November 2016 for the reasons I now discuss.

[6]    On 14 November 2016 the Kaikoura earthquake struck. The earthquake caused damage to a commercial carpark associated with Reading Cinemas adjacent to the northern side of the Tory Street block. The damage to this carpark necessitated its demolition. In carrying out that demolition, on 23 February 2017, the contractors (Naylor Love) dropped a large concrete column through the roof of unit 29 in the Tory Street block (the accident). This left a large hole in the roof and damaged other

building elements of the Tory Street block, including its northern and eastern exterior walls. Temporary weather protection was placed over the hole by Naylor Love.

[7]    The Body Corporate filed a claim under its building insurance policy with IAG. The claim was accepted and work to identify the scope of the damage and a plan to effect repairs got underway. On 28 April 2017 head contractors were appointed.  On 3 November 2017 a building consent was issued by Wellington City Council for the then planned repair works.

[8]    On 14 November 2017 work commenced demolishing or deconstructing the damaged structural elements of the Tory Street block. This entailed, amongst other things, deconstruction and removal of all the metal roofing cladding (about two thirds of the roof structure) of unit 29 and removal of the entire northern and eastern walls of the Tory Street block. Before the demolition works were commenced, to give the building some weather protection while it was exposed, a large “tent” consisting of a plastic building wrap over scaffolding was erected over the upper two stories of the Tory Street block.

[9]    On 5 January 2018 Wellington suffered a significant storm. The “tent” over the Tory Street block failed in this storm and a major flood into unit 25 and the carpark below occurred (the flood). In order to dry out unit 25, many of the linings, floorings, fixtures and fittings had to be removed. Unit 29 also suffered some water damage, but much of that unit had already been stripped out.

[10]   As a result of the earlier demolition works and the stripping required because of the flood, it became evident that all four units on levels 1 and 2 of the Tory Street block suffered from serious historic weathertightness damage. This historic damage was a consequence of the building’s design and construction methods. Further, the building had been constructed in a manner that significantly departed from the consented plans. This meant there were structural support issues for the eastern walls and balconies of the four units on level 1, as well as to the roofing of the ground floor carpark.

[11]   The Body Corporate obtained advice on options and their associated costs. As at 20 August 2018 the estimated costs of the four options then under consideration were as follows:

(a)Option 1: demolition of the upper two floors without reinstatement and installation of a temporary roof over the ground floor carpark (estimated cost of $156,630);

(b)Option 2: demolition of the remainder of unit 29, roofing and cladding around unit 25 to protect the remaining units (units 24 and 28) but not rendering unit 25 habitable (estimated cost of $99,245);

(c)Option 3A: reclad and repair all four affected units (estimated cost of

$2,374,754);

(d)Option 3B: demolish levels 1 and 2 of the Tory Street block, address carpark structure issues and rebuild four new apartments in a similar configuration to the existing (estimated cost of $2,625,791.40).

[12]   The insurer’s position was that it was responsible only for the damage caused by the accident and the flood. While all the identified damage needed to be dealt with in one go, cost attribution as between the accident, flood and other damage would be difficult. The insurer wished to settle the Body Corporate’s claim on a cash basis. The Body Corporate agreed to a cash settlement offer from the insurer of $336,155.37 in addition to the $251,216 it had already paid under the claim. There is a dispute between the Body Corporate and the respondents about whether the Body Corporate acted appropriately in accepting this offer and the basis on which they agreed to it.

[13]   The Body Corporate’s minutes show the following sequence relating to the insurance settlement. First, on 27 August 2018 the annual general meeting (AGM) of the Body Corporate was held. The respondents were not present. At this meeting the need to establish a contingency fund was discussed (“primarily to cover the works relating to the [Tory Street Block] and any other emergency expenses that may arise”).

It was proposed that this fund be generated from the Tory Street block insurance claims payouts. The meeting passed two resolutions:

Motion K: That the Body Corporate approves the settlement of the insurance claims of no less than $330,000.00

Motion L: That the Body Corporate establishes a contingency fund and transfers the total insurance claim payouts from the operating account to the contingency fund.

[14]   Next, on 11 October 2018 the Body Corporate chairperson met with the respondents to discuss the insurance. The minutes record the discussion as follows:

The Tory Street Block owners were asked to consider the settlement offer sent prior to the meeting. After much discussion around whether this offer was fair and reasonable, and given that the insurer is unlikely to change their position, all of the owners consented to accepting the settlement as tabled. The total settlement, less $114,000.00 being costs related to damage of claim, and some costs related to the pre-existing weathertight issues, would be available for distribution to the three owners.

[15]   At this meeting David Barton (the sole shareholder and director of GS28), a property developer himself, proposed that developers be approached to demolish the Tory Street block and build a bigger tower. He was given until 31 October 2018 to come up with a proposal.

[16]   An extraordinary general meeting (EGM) of the Body Corporate took place on 25 October 2018. The purpose of the meeting was to pass a resolution as to the use of the funds from the insurance settlement. None of the respondents were present. However, apologies were received from the first and third respondents.

[17]   The minutes record that there were two insurance settlement funds. One fund was for $335,905.37 and was for the damage caused by the accident. The other was for $114,264.91 and was for the water damage to unit 25 and the ground floor carpark from the flood. These funds had been placed in a contingency fund, designated solely for costs relating to the Tory Street block.

[18]The following special resolution was passed unanimously:

That the Body Corporate agrees that the insurance settlement funds, noted above in the explanatory note, may be used to reimburse existing funds

expended on Tory Street block B in the sum of $128,637.46, and that future funds from this contingency account may be utilised towards existing scaffolding and wrap-around or alternate weather-proofing systems to the north-east Tory Street building; plus any future demolition and/or reinstatement works to the north-east Tory Street building; plus any related consultancy fees, plus any compensation paid to affected owners.

[19]   On 8 November 2018 the Body Corporate chairperson met with Mr Barton. He wished to have more time to explore the option of a developer developing a multi- storey complex. Inside Design (instructed by the Body Corporate) were to fine-tune the rebuild like-for-like option during this time. Mr Barton also raised concerns about the allocation of the insurance funds.

[20]   On 26 November 2018 the Body Corporate Committee discussed that it seemed less and less probable that an agreement would be reached with the respondents who had consistently failed to attend meetings convened to try and resolve the issues. The Committee considered a s 74 application should be pursued. The Committee considered the respondents should be given back-dated relief from levies for cleaning of the common area, electricity, water and rubbish removal with any further relief being for the Court to decide.

[21]   On 13 December 2018 an EGM of the Body Corporate was held. Once again the respondents did not attend. At that meeting four resolutions were unanimously passed:

(a)the Body Corporate would carry out remediation work to reinstate the apartments fit for purpose for residential accommodation and to repair the ceiling of the carpark;

(b)the Body Corporate would instruct lawyers to advance an application for a scheme;

(c)the funds necessary to carry out the work were for an estimated budget of $2.626 million (inclusive of GST), and the cost of the works would be split between the owners of units 24, 25, 28 and 29 (contributing 80 per cent) and all other owners (contributing 20 per cent) subject to any different decision by the High Court; and

(d)the Body Corporate Committee was authorised to grant the owners of units 24, 25, 28 and 29 relief from levies for cleaning of common areas, electricity, water and rubbish removal charges on a fair and equitable basis.

The scheme application

[22]   The application for an order settling a scheme was filed on 31 May 2019. The applicant seeks an order approving a scheme as per Schedule One attached to its application.

[23]Schedule One provides:

1.3This scheme (the Scheme) governs repairs primarily to Units 24, 25,  28 and 29 (the affected Apartments) and to the carparks and storage areas below resulting from damage caused to the Building by a mixture of water ingress, earthquake damage, inherent building defects and damage caused by a large concrete block falling on the roof of Unit 29 from a crane while demolishing the neighbouring carpark building on 23 February 2017 (the Damage).

…

1.6 In order to effect the Repairs in full, it will likely be necessary to demolish Units 24, 25, 28 and 29 and completely rebuild them. This, in the Body Corporate’s view, is the most efficient and cost effective approach as opposed to further limited deconstruction and repair of those Units.

…

1.8The Scheme fixes and apportions responsibility for the Costs (as that term is defined in Clause 4) incurred in carrying out the Repairs primarily based on the Units that will substantially benefit from the carrying out of the Repairs. The contribution of  the  owners  of Units 24, 25, 28 and 29 (Affected Owners) is to be 80%, and apportioned on their respective relative utility interests. The remaining 20% contribution shall be borne by all other owners, also apportioned on their relative utility interests.

A schedule marked “C” shows the indicative cost splits between the owners based on the estimated cost of the Repairs being $2,626,000 inclusive of GST.

1.9There is no separate utility interest assessment so utility interests are the same as each Owner’s ownership interests.

…

1.10The Body Corporate resolved by an ordinary resolution at an Extraordinary General Meeting on 13 December 2018, which was approved of 100% of those Owners who voted, to apply to the High Court for an order under section 74 of the Unit Titles Act 2010. ...

…

3.1The term Repairs is to be given the widest possible meaning. The Repairs are generally to be completed in accordance with the outline plans and specification set out in the overheads produced by Inside Limited (Inside) a copy of which is annexed hereto and marked “E” (Plans and Specifications), or any amendment thereto that the Committee may approve as provided by the Scheme.

3.2Repairs shall include the removal (including any demolition of the Affected Apartments) …

3.3For the sake of clarity, Repairs may include replacement works but shall not be limited to:

(a)Demolition and replacement of the affected apartments;

…

4.3 The anticipated Costs of the Repairs, as set  out  in  the  schedule attached marked “C”, are Costs that may be Levied and collected from the Owners in accordance with the provisions of the Scheme.

…

7.1The Body Corporate is hereby authorised to levy (Levy), and the Committee is authorised to collect from each Owner from time to time such money (Levies) as the Body Corporate deems necessary for undertaking, progressing or completing the Repairs …

7.2All such Levies shall be calculated in the proportions set out in Schedule C attached.

…

[24]   Attachment “E” to the Scheme shows an indicative levels 1 and 2 of the Tory Street block and depicts a complete rebuild of the apartments on those floors.

Interim orders application

[25]   On 31 October 2019 the applicant applied for interim orders. It seeks an order authorising it to demolish levels 1 and 2 of the Tory Street block and to make good the exposed ground floor carpark by constructing a roof over that structure (the proposed interim works). Alternatively, an order is sought that the respondents pay 80 per cent of the cost of on-site security until final judgment on the substantive application.

[26]   The interim application was brought because, while the substantive proceeding awaits resolution, the state of the affected units is causing financial, social and physical safety issues for the Body Corporate and the unit owners.

[27]   Specifically, the Body Corporate is incurring significant ongoing hire costs in relation to the scaffold and plastic wrap. The Body Corporate pays slightly less than

$6,500 per month to rent the scaffolding structure. In addition, the Body Corporate incurs ongoing variable maintenance charges. The scaffolding is not being used as no repair work is taking place. Its current function is as a frame for the plastic wrap.

[28]   The structure containing the affected units is not weathertight, given that virtually all of unit 29 has been demolished and the entire north wall of the upper two floors has been demolished. Every time there is a serious weather event, rain pours into the building, which is absorbed and then gradually drips down into the accessory units/carparks on the ground floor below.

[29]   The wrap is also ineffective in preventing entry into the building by vandals and squatters. The building is frequented by squatters. In June of this year bedding was found in unit 25 along with a full ashtray. The facilities manager put the bedding in the skip in the carpark but a few days later the bedding had been put back in unit 25. There are no functional smoke alarms currently in the affected units.

[30]   In late July or early August 2019 the facilities manager found damage to a window to unit 24 and indications that the bed in the unit had been slept in. Some damage had been done to the furniture and whiteware. After this, the facilities manager has inspected the affected units every two to four days.

[31]   On 13 September 2019 thieves had tried to steal copper piping causing flooding to unit 25 and 29 and the carpark.

[32]   On 10 October 2019 the facilities manager found a woman and two boys living in unit 25. The unit had been damaged and a home-made bong was on the dining table. A large kitchen knife was in the bedroom and a makeshift baton was on the floor. The Police were called to remove the squatters. On 14 October 2019 further damage to

unit 25 was found apartment. On 21 October 2019 the Police were again called to remove a young woman who had been sleeping in unit 25. On 26 October 2019 four young men and one young woman were found to have been sleeping in unit 25. A long kitchen knife was found tucked behind a cushion.

[33]   The facilities manager then installed plywood to secure the units and removed the furniture. He inspected the units on 29 October 2019. No one was found in the units but someone had climbed through gaps in the shrink wrap on to the scaffolding and smoked cannabis there (an abandoned bong was found).

[34]   Evidence has been filed from a resident in the development. The affected units abut the entry walkway to the balance of the development. The residents can hear the noise of vandals during the middle of the night and worry about the fire risk. The owners and tenants in the development feel unsafe. The resident who filed the affidavit has had to chase youths from the upper levels of the fire escape. She moved out on 23 October 2019 for her personal wellbeing.

The respondents’ position

[35]   The first respondent is an investment company (GS28). Its sole shareholder and director is Mr Barton. At the time of the Kaikoura earthquake unit 29 was tenanted. As a result of the earthquake and the subsequent series of events, unit 29 has been unoccupied since that earthquake.

[36]   Mr Barton is unhappy with how the Body Corporate has handled the insurance claim. It is his view that the insurer needed to repair the damage and he does not understand why the Body Corporate settled the insurance claims for a cash payment instead. He disputes that he gave authority to the Body Corporate to settle on this basis.

[37]   Mr Barton considered the resolution at the October 2018 EGM to be contrary to the earlier discussion that the insurance proceeds would be paid to the affected owners. He considers the current scheme proposal to be uneconomic from his perspective. He considers further recovery should be pursued against the insurers and against Naylor Love. He considers a better proposal is to have the Tory Street block

severed from the title and for it to be sold to a developer on the basis that it could develop the site to a height above its existing height. I am told that there are negotiations with the Body Corporate about this proposal.

[38]   The second respondent is Allen Goh. He is aged 79.  He suffered a stroke on 6 March 2019. His health remains fragile and he currently resides in a retirement village.

[39]   Mr Goh owns unit 28. This unit is on level 2 of the Tory Street block, adjacent to unit 29. Mr Goh purchased unit 28 in September 2011. He purchased the unit with the intention of ultimately retiring to it. Between 2012 and November 2016 it was occupied by Mr Goh’s niece for a period. It was next used for storage and on about 22 October 2016 a friend of Mr Goh’s moved in to work on readying the apartment for Mr Goh. It has not been occupied since the Kaikoura earthquake.

[40]Mr Goh opposes the scheme. The indicative cost to him of the scheme is

$551,105.86 plus the continued monthly levies and insurance. This is too great an expense for him at his age and in his situation.

[41]   Like Mr Barton, Mr Goh believes it is an overstatement to say that the three affected unit owners agreed to the settlement of the insurance claim. He says the settlement was without their authority. He considers the insurance proceeds should be used as the affected unit owners’ contribution to the scheme.

[42]   Mr Goh would be prepared to agree to the removal of the scaffolding and (possibly) demolition if compensation was paid to the affected unit owners for the levies they have paid since November 2016 and if the insurance funds are allocated to them.

[43]   The third respondent is Hill View Holdings Limited. Hill View is a company owned by Sadie Wong. The information before the Court indicates that she opposes the scheme. She supports the position of the first and second respondents on the application for interim orders.

Jurisdiction

[44]   The Body Corporate submits there is jurisdiction for the interim orders it seeks under s 74(7)(d) of the Unit Titles Act. Section 74 provides:

74       Scheme following destruction or damage

(1)This section applies if any building or other improvement comprised in any unit or on the base land is damaged or destroyed, but the unit plan is not cancelled.

(2)The High Court may, by order, settle a scheme on the application of—

(a)the body corporate; or

(b)if the unit title development is in a layered unit title development, the body corporate of the head unit title development or any subsidiary unit title development in that layered unit title development; or

(c)an administrator; or

(d)the owner or one of the owners of a unit; or

(e)a registered mortgagee of a unit.

(3)A scheme under subsection (2) may include provisions—

(a)for the reinstatement in whole or in part of the building or other improvement; or

(b)for the transfer of units to the body corporate so as to form part of the common property.

(4)If an order is made under subsection (3)(b), sections 58(1)(c) and 59 apply to the transfer, so far as applicable, but subject to any order of the High Court to the contrary.

(5)A notice of any application made under subsection (2) must be lodged with the Registrar who must enter on the supplementary record sheet a notification that the application has been made.

(6)On any application to the High Court under subsection (2), the following persons have the right to appear and be heard:

(a)any person having or claiming to have any estate or interest in any unit or in the whole or part of the base land; or

(b)any insurer who has effected insurance on the buildings or other improvements comprised in any unit or in the whole or part of the base land.

(7)In the exercise of its powers under subsections (2) and (3), the High Court may make any orders that it considers expedient or necessary for giving effect to the scheme, including orders—

(a)directing the application of any insurance money; or

(b)directing payment of money by or to the body corporate or by or to any person; or

(c)directing the deposit of an appropriate new unit plan; or

(d)imposing any terms and conditions that it thinks fit.

(8)The High Court may cancel, vary, modify, or discharge any order made by it under this section.

(9)The High Court may make any order for payment of costs that it thinks fit.

[45]   The Body Corporate submits that s 74(7)(d) can be exercised from the outset before the Court considers whether a scheme is to be granted. It submits the power is wide enough to enable the Court to grant orders authorising the proposed interim works or the alternative orders.

[46]   I do not accept this submission. The orders in s 74(7) are available “in the exercise of its powers under subsections (2) and (3)” if the Court considers them “expedient or necessary for giving effect to the scheme”. Section 74(7) therefore presupposes that the Court has determined that an order for a scheme is to be made. Whether a scheme is to be ordered is for the substantive hearing.

[47]   The Body Corporate next submits that the Court could now determine that there is to be a scheme but leave for later the terms of the scheme. The Court would be granting an interim substantive judgment on the issue of whether there is to be a scheme and it would then have the power under s 74(7) to order the proposed interim works.

[48]   I accept the Court would have jurisdiction to make orders under s 74(7) via this route. Rule 11.2 of the High Court Rules 2016 enables the Court to make an interim judgment. Interim judgments have been given on applications for schemes.1 If the

1      See, for example, Body Corporate 183930 v Chua [2015] NZHC 2122 discussed on appeal in Gao v Body Corporate 183930 [2016] NZCA 458, [2016] NZAR 1313.

Court issued an interim judgment ordering that there be a scheme, the Court would have the power to make any orders it considered necessary or expedient to give effect to the scheme. Potentially that could include the demolition or security orders that are sought. I discuss below whether it is appropriate to make the orders sought via this jurisdictional route.

[49]   Lastly, the Body Corporate submits there is jurisdiction under the Court’s inherent jurisdiction and rule 7.36 of the High Court Rules. Rule 7.36 provides that an application for an interlocutory judgment can be made by a party before or after the commencement of a proceeding, whether or not an injunction is claimed in that proceeding. Here the proceeding is the application for an order to settle a scheme. Interlocutory injunctive relief is potentially available in relation to this proceeding. I discuss below whether it is available to achieve the interim orders sought in this case.

My assessment

Interim substantive judgment?

[50]   The Court of Appeal in Tisch v Body Corporate No 318596 set out the following steps when a Court is considering an application to settle a scheme:2

(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 (i.e. the Court must decide whether a scheme is appropriate in the circumstances); and

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

[51]   The Body Corporate submits that all the necessary evidence is before the Court to determine now steps 1 and 2. It submits there is no question about step 1. As to step 2, it submits that a scheme is inevitable. This is because of the multiple sources

2      Tisch v Body Corporate No 318596 [2011] NZCA 420, [2011] 3 NZLR 679 at [35].

of damage requiring repairs across multiple units and it would be impossible and irrational for individual units to be repaired on a piecemeal basis. A scheme will ensure that the Body Corporate acts lawfully in carrying out its duty to repair and ensure there is a fair allocation of costs prior the work being carried out. The Body Corporate further submits that demolition of units 24, 25, 28 and 29 is inevitable if a scheme is settled.

[52]   As matters presently stand, it does seem that a scheme will have to be settled. The Tory Street block has been in its damaged state for many months now. The respondents have not attended the Body Corporate AGM or EGMs at which the Body Corporate has endeavoured to reach agreement about how to proceed. For his part, Mr Goh is attracted to option 2 (see [11] above) which would leave his unit and the unit below him habitable but units 25 and 29 would not be reinstated. There are, however, difficulties with this option including that it does not address weather tightness issues for units 24 and 28 and aesthetically it is poor and may be rejected by the Council. Alternatively, Mr Goh may prefer to sell his unit “as is” rather than incur any further costs (including the costs of demolition).

[53]   For its part, GS28 prefers the idea of selling the Tory Street block to a developer provided the Body Corporate will relinquish “air space” to enable a high storied development. It is endeavouring to negotiate this at present. Under this option it accepts levels 1 and 2 would likely be demolished prior to any such sale. The Body Corporate responds  that  this idea will  still  require a scheme  (with an order under  s 74(3)(b) “for the transfer of units to the body corporate so as to form part of the common property” which the Body Corporate could then sell) unless the entire unit plan is to be cancelled.

[54]   GS28 does not accept the insurance claim has been validly settled. It contends the insurance policy was a composite one, and the settlement was with the Body Corporate for its interests but not one that bound the unit holders’ separate interests. It says the policy creates a right to reinstatement that has not been enforced by the Body Corporate and demolition of the property would prejudice the affected unit holders’ claims against the insurer. In any event, it submits that demolition now

prejudices the possibility that a different plan for reinstatement, utilising some part of the existing structure, may be the appropriate one.

[55]   GS28 also says there is no need for urgent orders at this juncture. None of the problems are of the affected owners’ making. They have been unable to occupy the units since November 2016 yet they have continued to be liable for outgoings. Better security should have been in place from the outset to stop the squatters and vandals. The appropriate response now is to improve the security rather than for the Court to make an interim substantive judgment.

[56]   I consider an interim substantive judgment should not be given at this stage. Doing so involves the Court in making an unnecessarily hasty decision on one aspect of the application without the benefit of having considered the whole application. It may be that when the substantive hearing takes place, options other than a full demolition of levels 1 and 2 will be advanced for consideration by one or more of the respondents. The application as presently drafted does not commit to a complete demolition and rebuild. For example, clause 1.6 states only that “it will likely be necessary to demolish Units 24, 25, 28 and 29 and completely rebuild them”. Clause

3.1 enables the plans to be amended.

[57]   Moreover, even if a scheme is to be settled and if it is to involve complete demolition of the affected units (both of which, on the material before me, seems at least a reasonable prospect), there is not insignificant cost with undertaking the proposed interim works in advance of a substantive hearing on other aspects of the scheme. To secure the carpark, it is proposed to install a temporary roof. This is presently estimated to cost $227,664. On its face, there appears to be some merit in GS28’s view that this is too much to spend on a temporary structure when other measures are available to deal with the damage and security issues that have arisen with the temporary protective measures that have been in place for many months.

[58]   Further, even if an interim substantive judgment was given ordering that there be a scheme and that, as a first step, it involve demolition of the affected units and construction of a temporary roof, this would need to be subject to the unit holders

authorising the latter. I am told the unit holders have not yet been asked to approved this proposal. It is possible they may not.

Interlocutory injunction?

[59]   An interlocutory injunction is a discretionary remedy intended to be temporary. Its purpose is to protect plaintiffs against injury for which they could not be adequately compensated in damages if they succeed at trial. While mandatory injunctions or injunctions that have the effect of final judgment can be given, it is more difficult to establish that such relief is appropriate.

[60]The established test for an interlocutory injunction involves considering:

(a)whether there is a serious question to be tried;

(b)where the balance of convenience lies; and

(c)assessing the overall justice.

[61]   The determining factor here is the balance of convenience. If demolition occurs now it cannot be undone. It would operate as a mandatory injunction with final effect. The interim relief would essentially accelerate part of the substantive application. For the reasons already discussed I do not consider this appropriate. The Court should consider the substantive application in the usual way.

[62]   The least harm option is to improve the security on the Tory Street block until a substantive hearing and to set the substantive hearing down for an early hearing. As discussed at the hearing on the application for interim orders, the Court can accommodate a fixture in the early New Year. The Body Corporate has obtained a quote for 24/7 hour security at a weekly cost of $5,506. It envisages this being necessary for three weeks to send a message that the place is no longer “available” to vandals and squatters. Thereafter lower level security could be put in place. I consider this option to involve the least harm pending an early substantive hearing, rather than ordering demolition to take place now.

[63]   Nor do I consider it is appropriate to grant the alternative order that the respondents pay 80 per cent of the cost of on-site security until final judgment. Carpark users and the existing residents would appear to be the principal beneficiaries from the increased security measures. Failing an agreement about this, this may be considered as part of the terms and conditions on which a scheme may be settled.

Result

[64]   The application is declined. It may be that the costs of this application should be reserved at this stage. However, if there is any issue as to costs, brief memoranda may be filed by 27 January 2020.

[65]   The substantive hearing is scheduled for a three day hearing starting 9 March 2020. The hearing time can be extended to five days if the parties consider that is necessary. The applicant is to liaise with the Registry about this.

[66]   The remaining steps necessary for a substantive hearing should be timetabled. The parties are to file a joint memorandum by midday Thursday 19 December 2019 with proposed timetable orders for my approval.

Mallon J