Body Corporate 95035 v Chang HC Auckland CIV-2011-404-2361

[2011] NZHC 2121

For a Court ready (fee required) version please follow this link

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-2361

UNDER  Part 19 of the High Court Rules

IN THE MATTER OF     the Unit Titles Act 1972

BETWEEN  BODY CORPORATE 95035

Applicant

ANDRONG YU CHANG, KAN HSIN HUNG CHANG AND KENNETH AH KEN KOO First Respondents

ANDCBD INVESTMENTS (NZ) LIMITED Second Respondent

ANDMARK DANIEL WATSON Third Respondent

ANDANDREW MILLWARD PAYNE AND JULIE MARGARET PAYNE

Fourth Respondents

ANDROGER HAMILTON STEWART Fifth Respondent

ANDSUE CROCKFORD GALLERY LIMITED Sixth Respondent

ANDPATRICK JAMES LOO Seventh Respondent

ANDJING GANG WANG Eighth Respondent

ANDBARRY MARSH Ninth Respondent

ANDCLAYTON JOHN HILLS AND MICHELLE YVETTE WILSON Tenth Respondents

BODY CORPORATE 95035 V CHANG HC AK CIV-2011-404-2361 [14 July 2011]

ANDLLOYD MARK GILMORE AND GRANT JAMES FOX

Eleventh Respondents

ANDRICHARD FRED ACKE Twelfth Respondent

ANDMARILYN LOIS REYNOLDS Thirteenth Respondent

ANDPROPERT-ABILITY LIMITED Fourteenth Respondent

ANDMUHAMMAD SHAHRIR BIN MUHAMMAD ARIFF AND GEOK LEE YEO

Fifteenth Respondents

ANDJONOTHAN NORRIS BRISCOE AND PATRICIA ANNE BRISCOE

Sixteenth Respondents

ANDIAN ASHSLEY PAUL MILLS AND ANNETTE JOAN MILLS Seventeenth Respondents

ANDVANESSA JEANNE JEANDIN Eighteenth Respondent

ANDHARRY ROY LAW AND SUK CHING LIAUW

Nineteenth Respondent

ANDANNE ELIZABETH MOLLOY AND BRIEN HERBERT CREE

Twentieth Respondents

ANDLINDA MARGARET BRADY AND BARRY MARSH

Twenty-first Respondents

ANDPETER IAN HILMER AND BEVERLY JOY KOHN

Twenty-second Respondents

ANDNOEL ALLAN PLAYLE AND MARGARET PLAYLE

Twenty-third Respondents

ANDPATRICIA ANNE NELSON Twenty-fourth Respondent

ANDFLOTSAM LIMITED Twenty-fifth Respondent

ANDMICHELLE JOY O'HALLORAN AND KELVIN HILL

Twenty-sixth Respondents

ANDMALCOLM CRAIG SMELLIE, ROBERT PHILIP SMELLIE AND LYNDSAY ANN SMELLIE

Twenty-seventh Respondents

ANDTAN CORPORATE TRUSTEE LIMITED Twenth-eighth Respondent

ANDGABRIELLE THERESE WILSON, MICHAEL ERIC MARRIS AND TRUSTS SB LIMITED

Twenty-ninth Respondents

ANDROSS NEVIN JOHNSON Thirtieth Respondent

Hearing:         7 June 2011

Appearances: P Sills for the Applicant

S Grant and E James for Respondents

Judgment:      14 July 2011

RESERVED JUDGMENT OF ELLIS J

This judgment was delivered by me on 14 July 2011 at 3 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:     Hornabrook Macdonald Lawyers, Auckland

Palmer & Associates, Auckland

Macky Robertson, Auckland

Counsel:       K Quinn, Level 22, 88 Shortland Street, Auckland 1140

P D Sills, PO Box 1990, Auckland 1140

S A Grant, PO Box 4338, Auckland 1140

[1]      Body Corporate 95035 (the Body Corporate) has applied for a declaration as to the ownership of the verandah affixed to the seven storey Endeans Building, which is located at 2 Queen Street in central Auckland and is now divided into unit titles.   A building by that name has  existed on that site since  shortly after the beginning of the twentieth century.  The ownership of the verandah is now in issue because it is in a state of considerable disrepair.  It is estimated that it will cost some

$500,000 to fix.

Background

The building and the land

[2]      The Endeans Building (the Building) was first constructed in 1905.  It was rebuilt after the original building was razed by fire in 1912.  Further alterations were done in 1922, 1934 and 1967.  Historical photographs suggest that a verandah was part of the original structure although it has never been shown on any title plan to the building.   Prior to its redevelopment in 1994, the building had been divided into ground floor shops and offices (on the other six levels).

[3]      The land upon which the Building is situated was, at the time of construction, owned by the Auckland Harbour Board (AHB).  For most of the twentieth century, the land was leased by AHB to the mining entrepreneur John Endean and (later) to Endeans Building Ltd.

[4]      On 15 April 1982, the land was subdivided into leasehold strata titles and the

Body Corporate was thereby established.

[5]      In 1983, a Mr Johns Stubbs was one of the lessees of office space on the first floor.  Through his company, J Stubbs Investments Ltd, he applied for and obtained a building consent to refurbish both the ground and first floor areas.

[6]      In the early 1990s, a property developer, Mr Arthur Morgenstern, sought to freehold the Building, through his company Allrich Investments Ltd.  Mr Stubbs (or entities associated with him) agreed to sell to Mr Morgenstern (or entities associated

with him) his leasehold interest in the first floor and to purchase the ground floor commercial units once freehold unit titles had been issued.

[7]      On 27 April 1994:

(a)      the land was transferred to Allrich Investment Ltd (58 per cent shares)

and Stubbs Investments Ltd (42 per cent shares);

(b)an application was registered under s 44 of the Unit Titles Act 1972 (the UTA) to deposit Unit Plan 95035 (the Unit Plan) and issue strata titles for the units on the plan;

(c)      under s 31 of the UTA the strata leasehold estates merged with the reversionary   estate   in   the   land   and   this   was   recorded   on Supplementary Record Sheet NA51A/760;

(d)certificates of title 51A/749-759 were cancelled and certificates of title NA93D/610-620 for strata estates in freehold were issued; and

(e)      a change in the rules of the Body Corporate was registered.

[8]      Units C to I are the seven commercial units on the ground floor (the GFUs). Thirty residential units are all located on floors one to six.

[9]      Unusually, the Unit Plan has on it a note stating that:

Unit boundaries are the exterior face of external walls and structures unless stated otherwise.

[10]     The  reasons  for  this  have  been  explained  by  the  Unit  Plan  surveyor (Mr Rogan Hampson of Hampson & Associates Ltd) in a letter to the director of the second respondent, Mr Qin, dated 5 October 2009:

I was told by Mr Morgenstern that there was reluctance on the part of potential commercial owners to be accountable for any part of the building that they did not derive direct benefit from.   I was instructed to divide up those parts of the building that commercial owners would be responsible from those that would be the responsibility of residential owners.  This was

achieved by minimising the amount of (percentage of) common property ... the  commercial  units  have  verandahs  on  the  ground  floor.    These  are attached to the exterior walls of the ground floor units and as such it is our opinion that the verandah should remain the responsibility of the owners to which the verandahs are attached ... the purpose behind dividing the building up in such as manner was that the responsibility for maintenance of most of the building remains with the unit owners rather than the [B]ody Corporate as a whole.   The intention was that the ground floor units would be responsible for maintenance of the areas below level 1, from which they gained benefits, i.e. the verandah‖.

[11]     That  this  was  indeed  the  intention  was  also  confirmed  in  a  letter  from

Mr Morgenstern to Mr Qin:

My intention was to create separate areas of responsibility for the commercial/retail owners and the mixed use/residential owners.   The residential owners would be primarily accountable for the areas above level

1 and the commercial owners for the areas below.  Following from this, as the verandah was located below level 1 and attached to the exterior walls of

the ground floor units, it was to be owned by, and the responsibility of, the

ground floor owners.  This intention was expressly articulated in Rule 2.2(g)

of the amended Body Corporate Rules.  The rule itself, however, was merely an explicit statement of how the plans had been drawn.‖

[12]     The subjective intentions expressed in these letters are objectively reflected not only in the ownership of the external walls but also in the number of auxiliary units created by the Unit Plan.  These auxiliary units, which include for example the large atrium area, are jointly owned (in equal shares) by the residential unit holders only.  Thus the auxiliary units have been constituted as a de facto form of common property owned by all unit holders other than the GFUs.

[13]     For present purposes, it is relevant to note that the atrium light well, which constitutes Auxiliary  Unit  Seven  (AU7),  is  owned  in  this  way,  namely  by  the residential owners in equal shares of 1/30 each.  A small segment of the verandah at issue in these proceedings is attached to the external wall of AU7.

The verandah

[14]     The verandah fronts onto Queen and Quay Streets and extends out from Units D, E, F, G, H and I.  No part of Unit C, which is also on the ground floor but on the Tyler Street side of the building, is appurtenant to the verandah (which does not

extend along the Tyler Street side).  As I have said, a small portion of the verandah also adjoins that part of the external wall of AU7 which lies between Units H and G.

[15]     In terms of structure and affixation the evidence showed that the Building verandah:

(a)       is permanently fixed to the Building;

(b)is for the most part affixed at the top of the mezzanine level to the relevant GFUs by steel beams which are attached to the structural steel frame of the Building, which is then encased in concrete; but

(c)      is also secondarily supported by 32 steel support stays bolted onto the outside faces of first floor residential units.

[16]     And  importantly,  because  the  Building  is  built  to  the  edges  of  the  land comprised in the Unit Plan, the verandah thus extends beyond the Unit Plan’s boundaries.  It overhangs the footpaths on both Quay and Queen Streets.

The relationship between the verandah and the airspace into which it extends

[17]     The land that was the subject of the original AHB lease to John Endean did not include the Quay and Queen Street land over which the verandah extends.  Nor has the airspace above the Quay and Queen Street land ever been the subject of a formally recorded easement.

[18]     In the interests of both possible formalisation in the future, and clarity in the present, it seems useful to set out the ownership of this land and airspace.  In terms of the historical matters which follow I record my indebtedness to the careful researches of Mrs Grant, whose (undisputed) findings I have simply summarised.

[19]   After the formation of the Auckland Harbour Board in 1871, planned improvements to the waterfront included a new Queen Street wharf and reclamation

of the seabed in the area around Quay Street.1   The reclamation commenced in 1879 and was completed in 1886.

[20]     After reclamation, the land abutting the corner of Queen and Quay Streets was taken under the Public Works Act 1882 for use as a road and became absolutely vested in the Crown in fee simple.2  The definition of ―road‖ included:3

...  a public highway,  whether carriage-way,  bridle-path, or footpath, and includes the soil [of certain defined lands] ... and all bridges, culverts, drains, ferries, fords, gates buildings and other things thereto belonging, upon the line and within the limits of the road.‖

[21]      In 1888, the land was brought under the land transfer system. 4

[22]     On 1 April 1979, all roads were vested, in fee simple, in the council of the district in which they were situated by virtue of s 316 of the Local Government Act

1974 (LGA 1974).  Thus, between 1 April 1979 and 31 October 2010, Queen and

Quay Streets were vested in the Auckland City Council.

[23]     On  1  November  2010,  Queen  and  Quay  Streets  vested  in  the Auckland Council.5  While the roads remain today in Council ownership, control of them is now primarily the responsibility of Auckland Transport, a Council-controlled organisation that was also established on 1 November 2010.6     The airspace into which the Building’s verandah intrudes therefore presently belongs to the Council.

[24]     Notwithstanding  the  absence  of  any  formal  easement  in  relation  to  the relevant Council airspace, it seems that the existence of the verandah on the Building is likely to have been a longstanding Council requirement.   Under cl 6.9 of the present  District  Plan,  for  example,  a  verandah  would  be  required  on  any  new building constructed on the Endeans site or in the event of any significant alteration

or construction of the existing Building.

1 This information comes from a summary prepared by the Historic Places Trust.

2 Pursuant to s 11 of the Public Works Act 1882. Part V of the Act also emphasises Crown ownership of roads.

3 Ibid, at s 78.

4 The foregoing information comes from a report prepared by Mr Barry Green, a specialist land consultant.

5 Local Government (Auckland Council) Act 2009, s 6(1).

6 Ibid, at s 38.

[25]     At the time the Building (and verandah) was first constructed, ss 61 and 62 of the Auckland City Bylaws 1904 provided:

No person shall erect or put up any portico or verandah upon or over any part of any street unless the same be constructed in the manner and position and of the materials and dimensions hereby required, or of such materials and better design as shall be in accordance with a plan and specification submitted to and approved by the Building Surveyor.

No person shall erect, alter, or repair any portico or verandah without the written permit of the Building Surveyor first obtained, and for every such permit for a new erection there shall be paid a fee of five shillings ...

[26]     It must be assumed that such a permit was obtained by Mr Endean.

[27]     The present Auckland City Council Bylaws7  place maintenance and repair obligations on the owner of the relevant building and the Council can also order removal or reconstruction.8

[28]     At the time of the hearing before me, Mrs Grant submitted that there must be either an implied or a prescriptive easement over the airspace in which the verandah is  situated.    However  on  the  basis  of  the  further  information  that  has  become available since the hearing, it seems to me that neither of those possibilities is

sustainable.9

[29]     Nonetheless, the fact that the verandah must have been permitted by the Council and is required to exist by law10 implies, at the very least, that there is some form of licence to occupy or encroach upon the relevant airspace.  No question of trespass can sensibly be thought to arise.   Arguably, the combined existence of a permit and the underlying legal obligation give rise to a greater right, in the general nature of an incorporeal hereditament: cf Telecom Auckland Ltd v Auckland City Council.11   The desirability of settling (and formally recording) the position with the

Council in due course is self-evident.

7 At Bylaw No 6-Construction 2008, 6.2.8.

8 At Bylaw No 6-Construction 2008, 6.2.9.

9 There can be no prescriptive easement because the relevant land was brought into the land transfer system in 1888. There can be no implied easement because the footpath and the land on which the building sits have never been owned by the same legal entity.

10 Both the District Plan and the Bylaws constitute subordinate legislation.

11 Telecom Auckland Ltd v Auckland City Council [1999] 1 NZLR 426 (CA) at 440-441.

The present application and the respective positions of the parties

[30]     The specific declaration sought by the Body Corporate in these proceedings is that:

The proprietors of the GFUs own the verandah attached to the Building in proportions equal to their ownership interests in the GFUs.

[31]     Implicit in the Body Corporate’s position, however, was the contention that the verandah formed part of the GFUs to which it was physically attached and was thus subsumed within the GFU stratum estates.  The Body Corporate’s starting point therefore was that the verandah’s use and maintenance remained subject to the unit titles regime and hence to a degree of oversight by the Body Corporate under the Act and/or the rules.

[32]     In that respect it is relevant to note that the Rules of Body Corporate 95035 provide (inter alia) that:

2.1A Proprietor shall in relation to any Unit of which that Proprietor is the registered proprietor:

...

(f)   make no additions or alterations to the Unit .... or in any way alter the elevation or external appearance of the Unit without the consent in writing of the Body Corporate.

[33]     The rule then goes on to say that the consent of the Body Corporate shall not be unreasonably or arbitrarily withheld or delayed provided the additions are not structural or do not alter the appearance of the Unit, the relevant insurances are in place  and  the  Proprietor  complies  with  any  reasonable  rules  and  regulations stipulated by the Body Corporate.

[34]     The first and second respondents contend (in other proceedings) that this rule is ultra vires.  If they are right in that, then the default rules contained at (1) of the Second  Schedule  of  the  UTA would  apply.    These  rules  merely provide  that  a proprietor of a Unit is to make ―no additions or structural alterations to the unit without the consent of the body corporate‖.  Even under that rule, however, the Body

Corporate potentially retains a modicum of control over the remedial work that is presently needed, if the Body Corporate’s position in this application prevails.

[35]      The proprietors of the GFUs (who are the first and second respondents) filed a notice of opposition to the application but, in general terms, supported it.  Their opposition was based on what is now agreed to be the mistaken inclusion of Unit C in the declaration sought by the Body Corporate.   As well, the first and second respondents said that ancillary orders should be made formally vesting the verandah in the proprietors of Units D – I and that ownership should be recorded on the record sheet.  Mr Sills indicated that the applicant takes no issue with the appropriateness of those ancillary orders.

[36]     More   fundamentally,   however,   the   position   of   the   first   and   second respondents diverges from that of the Body Corporate, in that they submit that the verandah  does  not  form  part  of  the  ground  floor  unit  titles  at  all  and  is  thus effectively separate property owned solely by the registered proprietors of those units, over which the Body Corporate has no control.  The reason the owners of the GFUs have taken this position is clear enough when one considers the content of rule

21.1(f), set out at [32] and [33] above.

[37]     A number  of  the  other  respondents,  (being  proprietors  of  certain  of  the residential units) also filed notices of opposition, contending (most relevantly) that the  verandah  is  common  property  and  is  thus  under  the  control  of  the  Body Corporate.  A ―common property‖ analysis was the most obvious alternative to the positions advanced by the applicant and the first and second respondents.

[38]     Of the other respondents who filed documents in this Court, it appeared that only the 28th and 29th had secured legal representation.  One of the 29th respondents, Mr Marris, also filed a comprehensive and helpful affidavit in which the history of the Building was set out.

[39]     On 2 June 2011, however, the 28th and 29th respondents filed a memorandum advising  that  they  wished  to  withdraw  their  opposition  and  their  counsel  was formally granted leave to withdraw at the commencement of the hearing before me.

[40]     None of the other respondents was represented or appeared at that hearing. At the time, I indicated to Mr Sills and Mrs Grant my concern that those other respondents might have mistakenly relied on their position being advanced at the hearing by counsel for the 28th and 29th respondents.

[41]     After the hearing had finished, I remained concerned that:

(a)       the interests of the 3rd to 30th respondents might be adversely affected by any declaration given; and

(b)      I had not heard argument on or any real analysis of the alternative

―common property‖ hypothesis.

[42]     Accordingly, I formed the view that the Court should seek the assistance of an amicus curiae.   Mrs Grant and Mr Sills agreed to that course.   As a result, Mr John Greenwood was asked to review the application, the relevant evidence and the  submissions  received.     I  record  my  thanks  to  him  for  the  constructive submissions he prepared under considerable time pressure.

Analysis: ownership of the verandah

[43]     There is no dispute that the verandah sits outside the legal boundaries of the land upon which the Building is situated and that it is not depicted or referred to in the Unit Plan.  In fact, as has been noted above, it protrudes into the airspace of land now owned by the Auckland Council.  There is also no reference to the verandah in the Body Corporate rules.

[44]     It is because of this absence from the Plan (and from the rules) that the first and second respondents submitted that although the owners of the GFUs own the verandah, it does not form part of their ―units‖ under the unit plan.12    More particularly, Mrs Grant submitted that the UTA neither contemplates nor permits a structure that is not on, over or under, the land delineated on a plan to form part of a unit.  She supported this submission by reference to:

(a)      Section  3(1)  of  the  UTA  which  provides  that  ―[t]he  registered proprietor of an estate in fee simple in a parcel of land under the Land Transfer Act 1952 ... may subdivide that parcel of land‖ into principal units, accessory units and common property, being ―so much of the land as is not comprised in any unit‖.   Mrs Grant said that the term

―land‖  in  this  context  can  only  refer  to  the  parcel  of  land  being subdivided and not to any other land.

(b)Section 11 of the UTA which provides for units and common property to have the benefit of pre-existing appurtenances (including rights of shelter) and which expressly states that ―[n]othing in this section shall affect any land other than the land to which the unit plan relates.‖ Mrs Grant relied in this respect on that statement by Hugh Williams J in Bando Holdings Limited v Floor2A Limited13 that:

Having regard to the definition of "land" in s 2 of the Act it would appear that the intention of s 11(4) was that it should make it clear that the s 11 rights apply only within the curtilage of the land on which the body corporate structure is erected. That appears to be clear having regard to the fact that the following subdivision and deposit of the plan the land as so defined is dealt with as required by statute but that pursuant to s 8 each stratum estate in the body corporate is entitled to a certificate of title for each of the units shown on the unit plan under s 4.

[45]     Mrs Grant also agreed, however, that ownership should be determined by reference to the law relating to fixtures.  Because I have formed the view that it is that law which determines the answer to the first and second respondents’ submissions to which I have just referred, it is to that I now turn.

[46]     In my view, there can be little doubt that the physical form of the verandah must either properly be regarded as part and parcel of the land (because it is an intrinsic part of the Building which is itself part and parcel of the land) or (at least) a fixture (which is also part of the land).  In terms of the difference between the two, I

find myself in respectful agreement with Lord Lloyd in Elitestone Ltd v Morris14

when he said at 690-691:

It will be noticed that in framing the issue for decision I have avoided the use of the word "fixture." There are two reasons for this. The first is that "fixture", though a hallowed term in this branch of the law, does not always bear  the  same  meaning  in  law  as  it  does  in  everyday  life.  In  ordinary language one thinks of a fixture as being something fixed to a building. One would not ordinarily think of the building itself as a fixture. Thus in Boswell v. Crucible Steel Co. [1925] 1 K.B. 119 the question was whether plate glass windows which formed part of the wall of a warehouse were landlord's fixtures within the meaning of a repairing covenant. Atkin L.J. said, at p.

123:

". . . I am quite satisfied that they are not landlord's fixtures, and for the simple reason that they are not fixtures at all in the sense in which that term is generally understood. A fixture, as that term is used in connection with the house, means something which has been affixed to the freehold as accessory to the house. It does not include things which were made part of the house itself in the course of its construction."

Yet in Billing v. Pill [1954] 1 Q.B. 70, 75 Lord Goddard C.J. said:

"What is a fixture? The commonest fixture is a house which is built into the land, so that in law it is regarded as part of the land. The house and the land are one thing."

[47]     It is because of the confusion thus arising that Lord Lloyd went on to say:15

For my part I find it better in the present case to avoid the traditional two- fold distinction between chattels and fixtures, and to adopt the three-fold classification set out in Woodfall, Landlord and Tenants, (looseleaf ed), vol. 1, para. 13.131:

"An object which is brought onto land may be classified under one of three broad heads. It may be (a) a chattel; (b) a fixture; or (c) part and parcel of the land itself. Objects in categories (b) and (c) are treated as being part of the land."

[48]     The answer to whether or not an object brought onto land has ceased to be a chattel is answered in any case by reference to the test enunciated by Blackburn J in

Holland v. Hodgson.16    While the assessment will depend on the circumstances of

14 Elitestone Ltd v Morris [1997] 1 WLR 687 (HL). Elitestone has been approved and applied in the leading contemporary fixtures case in New Zealand: Auckland City Council v Ports of Auckland Limited [2000] 3 NZLR 615 (CA) at [72].

15 At 691.

16 Holland v. Hodgson (1872) LR 7 CP 328 (Ex).

each case, there are two overriding factors: the degree of annexation to the land, and the object of the annexation.   In the present case little analysis is required to concluded that:

(a)      the degree of annexation to the land (through the Building) is great.

The verandah is permanent and has been part of the Building for as long as the Building has existed.  The Building is required to have a verandah.   The verandah could not be removed without structural alteration to the building); and

(b)the object of that annexation is directly related to the enjoyment and use of the  Building and  the surrounding land.   It  is  important  in particular to the functioning and enjoyment of the GFU shops and exists for the convenience of customers and for passers-by and pedestrians.

[49]     Thus there can, in my view, be no doubt that the verandah is properly to be regarded as real property and part of the land to which it is effectively attached; the verandah can therefore be said to be ―affixed‖ to the relevant freehold(s).

[50]     In the present case, the only ―freehold‖ to which the verandah can be affixed is the stratum estate (in freehold) that was created by the operation of s 4 of the UTA upon the depositing of the Unit Plan for the Endeans Building in 1994.

[51]     While I accept that the verandah extends beyond the boundary of the land shown on the plan, there is authority for the proposition that a conveyance or transfer of land may include a building or structure that extends beyond such a boundary.  In Truckell v Stock17 Lord Hodson said:18

... the plan is a ground plan and only shows the boundary of the plaintiff's property on the ground; whereas the conveyance of the house and the parcels show the actual physical thing conveyed. That a property—a house—may stick out over the land of the adjoining neighbour is a common feature which has caused trouble, as shown by the reported cases. Such a case was Corbett v Hill...  I need not refer to the facts of that case, but the particular feature

17 Truckell v Stock [1957] 1 AllER 74 (CA).

18 At 165.

which was the subject of the decision was...that there were overhanging portions of one house protruding over the land of another, and notwithstanding that it was held that ―the  vertical column of air over so much of the room as overhung the defendants’ site belonged, not to the plaintiff, but to the defendants‖.

So that, although the ground plan (as I understand it) would control the ownership of the air above, it does not in the least prevent the plaintiff owning the parts of his house which protrude over the line marked on the ground plan. [citation omitted]

[52]     In the present case the relevant transfers were not before me.  Given that it appears that the verandah has never been depicted on a plan of the Building, there can be little doubt that such a transfer would not refer to it.  But of course the point is that a conveyance will pass all fixtures without mention because they are part of the land and pass with it.19

[53]     In my view the only possible alternative analysis is that the verandah is to be regarded as common property.  Were it not for the particular and specific provision on the Unit Plan as to the separate ownership of the external walls, s 3(1)(b) of the UTA  would  automatically  give  rise  to  that  result.     The  connection  between ownership of the external walls and the ownership of a canopy or verandah that attaches to those walls is obvious.  If authority is necessary reference can perhaps be

made to Sturge v Hackett20  where it was held that the demise of part of a building

divided horizontally or vertically included the external walls which, in turn, included the decorative cornices attached to them.

[54]     An argument that the verandah is common property might be thought to glean some support from the only decision uncovered by Mrs Grant whose facts bear more than a passing resemblance to the present: Lily Tse Lai Yin v Incorporated Owners of Albert House.21    That was a Hong Kong case concerning liability for damage that occurred on the collapse of a large canopy that extended from the first floor of a four storey building that was in multiple ownership.  The incorporated owners argued that the canopy was part of the first floor unit and was owned by the registered proprietor

of that unit.

19 Megarry and Wade The Law of Real Property (7th ed, Sweet & Maxwell, London, 2008) at [8.045].

20 Sturge v Hackett [1962] 1 WLR 1257 (CA).

21 Lily Tse Lai Yin v Incorporated Owners of Albert House [1999] HKCFI 1534.

[55]     The Court held that the fact that the conveyance/assignment of the first floor unit included only those parts of an attached plan that were coloured pink meant that the canopy (which was included on the plan but not coloured pink) was not included and  was  common  property.   That  finding was  also  consistent  with  the relevant Building Management  Ordinance,  which provided that the external walls of the building were common property.

[56]     The decision in Lily Tse Lai Yin is of course not binding upon me.  But in any event, and for the reasons just given, I consider that it is readily distinguishable. More particularly, in the present instance:

(a)      the Unit Plan makes it clear that the external walls are not common property and are part of the individual units;

(b)the subjective intention of the parties to the subdivision that common property be minimised and that unit holders be responsible for maintaining only those parts of the building from which they obtained a direct benefit can objectively be ascertained from the Unit Plan; and

(c)      the verandah is not shown on any plan of the Building and is unlikely to  have  been  clearly  included  in  or  excluded  from  any  relevant transfer.  As I have held, however, the verandah was a fixture and, as such, was transferred with the land.

Conclusions

[57]     Accordingly and in conclusion:

(a)      the verandah is not common property and is, rather, owned by the registered proprietors of the units to which the verandah is attached; but

(b)the verandah is part of the freehold in those units and is thus subject to residual oversight and control by the Body Corporate as provided for

in the relevant rules or (to the extent any of the rules may be ultra vires) the default rules under the Act.

Analysis: appropriate ownership structure

[58]     These conclusions do not, however, entirely answer the questions posed by these proceedings.  That is because, by virtue of the multiplicity of the units to which the verandah is attached, the appropriate ownership structure also requires consideration.  The two critical issues that arise are, firstly, whether the owners of AU7 should be included in that structure and, secondly, whether each affected unit holder owns:

(a)       simply that section of the verandah which attaches to the external wall of that unit; or

(b)a share of the verandah that is determined in a way that reflects (and is proportionate to) either:

(i)       the respective unit entitlements of the relevant owners; or

(ii)      the area of the verandah that is attached to each unit.

[59]     In my view the ―purest‖ approach, and the one that is most consistent with my analysis of the ownership issue above, is that when the land was subdivided and stratum estates were created, the verandah was also (and similarly) subdivided.  On that analysis, each proprietor of the relevant GFUs and the 30 proprietors of AU7 own that part of the verandah which joins and extends directly from the external wall of their particular unit.

[60]     That said, however, I agree with Mrs Grant that a structure that is based on a literal application of the fixture analysis would be administratively and practically unworkable.  In particular the logical corollary – namely that the proprietor of each unit is only and separately responsible for the maintenance and repair of that part of the verandah which attaches to his unit – would likely be unworkable.   I consider

that a structure whereby the verandah as a whole was jointly owned but where respective shares are determined by reference to the relative areas of attachment would be both feasible and consistent with principle.

[61]     Calculations prepared on behalf of the first and second respondents show that on  this  basis  (for  example)  the  proprietors  of AU7  would  own  a  segment  that constitutes somewhere between 6.7 and 6.9 per cent of the total verandah.  I do not consider that such a percentage could fairly be disregarded as de minimis (as submitted by Mrs Grant) even when it is divided by 30.  For example if the needed repairs cost the expected $500,000, the contribution required of the residential unit holders (as owners of AU7) would collectively be nearly $35,000 and, individually, approximately $1150.

[62]     As well as the extent of their ownership not being de minimis, an ownership structure that includes the owners of AU7 more fairly reflects both the fact that the residential owners do receive some amenity value from the verandah and do have a continuing and legitimate interest in it.  It also more fairly reflects the conclusions I have reached in terms of the continued involvement of the Body Corporate in the future of the verandah.

[63]     Because it was the preferred approach of both the applicant and the first and second respondents, however, I have also carefully considered whether unit entitlement would nonetheless be an appropriate alternative means of determining respective ownership shares.

[64]     Unit entitlement is governed by s 6(1) of the UTA which provides that, at the time a unit plan is deposited, every principal unit and every accessory unit shall have assigned to it a unit entitlement that is based on each unit’s value relative to the other units.  Section 6(1) requires that this entitlement be fixed by a registered valuer.  In the  present  case,  for  example,  AU7  has  been  assigned  a  unit  entitlement  of

108/10000. GFUs D to I have unit entitlements that range between 483/10,000 and

933/10,000.

[65]     The first difficulty with allocating ownership of the verandah on this basis is that I simply do not know whether the existence of the verandah played a part in the assessment of relative value of the units concerned or, if so, in what way.  Given that the verandah does not appear on the unit plan, and given that the measurements of the units recorded on that plan do not include it, there is reason to doubt that the valuer did take it into account when determining the relevant unit entitlements.  That uncertainty is increased by the fact that ownership of the verandah was unascertained at the time the entitlements were assessed.

[66]     The second difficulty with the unit entitlement approach is that the purpose of unit entitlements is made very clear in s 6(1).   That purpose is to enable the determination of those matters listed in subsection (3), namely:

(a)     The proprietor's share in the common property in accordance with section 9 of this Act;

(b)     The extent of the proprietor's liability for damages and costs under section 14 of this Act;

(c)     The extent of the proprietor's obligation under section 15 of this Act in respect of contributions levied by the body corporate, and of his rights under that section on a distribution of any surplus money or personal property;

(d)     The extent of the proprietor's obligation for payment of rent and other money under section 26 of this Act;

(e)     The extent of the proprietor's share of the value of any buildings, fixtures, and other improvements under section 30 of this Act;

(f)     The  proprietor's  voting  rights  on  a  poll  pursuant  to  clause  27 of

Schedule 2 to this Act;

(g)     Subject to section 48(5) of this Act, the proportion in which money (if any) received or held by the body corporate for distribution among the proprietors is to be distributed among them in accordance with section

45(7) of this Act; and

(h)     The  share  in  the  land  which  is  to  vest  in  the  proprietor  under subsection (5) of section 45 of this Act upon the cancellation of the unit plan.

[67]     Thus unit entitlement is a menas of ascertaining shares in assets or liabilities that are otherwise common (and would otherwise be indeterminate).  By definition, it  is  not  the  purpose  of  a  unit  entitlement  to  determine  a  proprietor’s  share  in

property that  is  not  ―common‖;  such  ownership  is  decided  by reference  to  the relevant  principles  and  rules  that  are  and  ordinarily  applicable.    Here,  as  this judgment attempts to demonstrate, this is by reference to the common law relating to fixture and the ownership of the relevant freehold stratum estates.  Moreover, to treat the  verandah  as  if  it  was  common  property  for  the  purposes  of  determining ownership shares in it seems to me to run directly contrary to the positions taken by the applicant and by the first and second respondents (and accepted by me) in these proceedings.

[68]     For all these reasons, it seems to me to be wrong in principle that unit entitlements should dictate ownership shares in the verandah.

[69]     Accordingly, I consider that ownership of the verandah resides or should reside collectively in the proprietors of AU7 and Units D, E, F, G and I in shares that reflect the relative portions of the verandah that adjoin those units respectively.

[70]     The drawings prepared on behalf of the first and second respondents indicate that there is a (small) difference between the shares derived from comparing the relative lineal frontages of each of the units and those derived from comparing the relative square meterage of the verandah in front of each of the units.  Although this difference is not explained I assume it is because that portion of the verandah that surrounds Unit E (which is located on the corner of Queen and Quay Streets) has

more square meterage than its mere lineal frontage would suggest.22   If that is correct

it seems to me that it is the respective square meterage that should be used to determine ownership shares.

[71]     It follows from the conclusions that I have reached that a declaration cannot be made as sought.  Plainly, however, a declaration of ownership (and any necessary ancillary orders) should be made and I seek further assistance from counsel as to the precise form of that declaration and of any consequential orders. To that end, I direct that memoranda (or, I hope, a joint memorandum) be filed in that respect within five

working days of this judgment.

22 This is because its position on the corner means that those two portions of the verandah that extend directly out from the two relevant external walls of Unit E are necessarily joined by an additional, triangular ―wedge‖ of verandah.

[72]     I  end  by  saying  that  I  have  found  the  issues  raised  by  this  proceeding difficult.  Some of the evidence filed and the history of the matter suggests that I am, at least, not alone in this.   I simply record again my thanks to counsel and to

Mr Greenwood for their assistance.

Rebecca Ellis J