Body Corporate S73368 v Otway
[2017] NZHC 3265
•20 December 2017
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2015-470-000146 [2017] NZHC 3265
BETWEEN BODY CORPORATE S73368
Plaintiff
AND
ROSALIND KAY OTWAY (NOW ROSALIND KAY WRIGHT) AND OLPHERT SANDFORD TRUSTEE SERVICE COMPANY LIMITED First Defendant
PHILLIP HERBERT DORR, SHARON LESLEY DORR AND DONALD RAYMOND PILBROW
Second Defendant
Hearing: 20 - 24 November 2017 Appearances:
S Price, I Stephenson and J Scoberg-Evans for the Plaintiff
G Brittain QC and J Delaney for the DefendantsJudgment:
20 December 2017
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Wednesday, 20 December 2017 at 3:30 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Counsel: G Brittain QC, Tauranga
Solicitors: Minter, Ellison, Rudd & Watts, Solicitors, Auckland
BODY CORPORATE S73368 v OTWAY & ORS [2017] NZHC 3265 [20 December 2017]
Introduction
[1] The body corporate of a tower block situated at 1 Marine Parade,
Mt Maunganui (the property), seeks to recover repair costs from two first-floor apartment owners who have extensive decks over ground-floor commercial units. The apartment owners have already paid a share of the repair costs based on their unit entitlement along with all the other unit owners, but the body corporate says that they should pay more because the water damage suffered by the ground floor commercial units originated from the decks which they had failed to maintain and/or they benefitted substantially more from the repair work than any other unit owner or owners.
Factual background
[2] The property is a 12-storey tower block situated at 1 Marine Parade,
Mt Maunganui. It was completed in about 1996.
[3] The property is made up of a below-ground basement level for parking, a ground-floor level directly above which forms retail units, office and plant rooms, and then a further 10 storeys of residential apartments above that. Construction is predominantly concrete and steel frame. The basement and the ground floor have a larger footprint than the 10 storeys of apartments above. The roof over the ground- floor units is a concrete slab supported by structural steel beams. It also forms large deck areas for three apartments on the first floor, including the defendants’ apartments. The same large deck areas extend beyond the line of the ground-floor retail units to form a canopy overhang over the street below.
[4] The first-floor decks were originally waterproofed with a butyl rubber membrane covered with ceramic tiles. Each residential apartment above the first floor has a balcony and the main tower block is covered by a flat roof. The window joinery is single-glazed powder-coated aluminium.
[5] Water had been leaking from the first-floor decks into the ground-floor commercial units for many years (from at least 2009). The water ingress caused damage to the interior of the ground-floor commercial units and disruption to
businesses in those units. Correspondence ensued between the affected unit owners, the owners of the first-floor apartments and the body corporate.
[6] The body corporate initially requested the first-floor apartment owners and the ground-floor commercial unit owners to sort out the problem. They were, however, unable to do so and the leaks continued. The body corporate therefore stepped in, utilising powers under s 138 of the Unit Titles Act 2010 to repair, maintain and renew building elements that relate to or serve more than one unit. Repairs were physically effected during 2014 and 2015. The repair costs were initially met by all unit owners through levies imposed by the body corporate.
[7] The body corporate has characterised the repair work as:
(a) Balcony work – removing ceramic tiles and sheet membrane on balconies located on level one of the property, grinding and repairing concrete slab, applying screed for falls, applying membrane to balconies.
(b)Joinery work – removing joinery to Units 1C, 1E and 1F on the first floor of the property, installing raised nib, installing new glazing and joinery, replastering walls.
(c) Drainage work – plugging existing gutters and outlets, cutting through balustrade nib on the first floor of the property to create outlets and installing new stainless steel rainheads and removing existing piping and re-routing pipe system from rainheads.
(d)Podium and soffit work – removal of soffit linings, repair to structural steel, replacement of soffit linings and paining.
[8] The repair costs (inclusive of GST) have been allocated by the body corporate as follows:
(a) Balcony work - $591,459.64.
(b) Joinery work - $183,739.46.
(c) Drainage work - $66,639.46.
(d) Podium and soffit work - $115,129.09.
Unit boundaries
[9] A preliminary issue arose as to the floor levels of the first-floor apartments. The defendants say that their floor boundaries are slightly above the concrete floor slabs in their apartments and slightly further above the concrete floor slabs which constitute their decks. If that is the case, the apartment owners say they are not responsible for the decks which are owned by the ground-floor commercial units or are common property.
[10] The Deposited Plan records “Unless otherwise shown boundaries between unit floors is top of conc. floor slab respective to unit”. The defendants say that the proper boundaries are “otherwise shown” in what are described as reduced levels also recorded on the Deposited Plan. In the case of the floor of the first-floor apartments, the reduced level is 8.59 metres above Moturiki datum.
[11] A survey has confirmed that the floor level of the tiles inside the first-floor apartments is 8.57 metres, while the floor level on their decks just outside the doors to the apartments is either 8.51 or 8.52 metres. The decks were built on a slight slope to assist drainage and so the floor level of their decks just above the deck drains is either
8.44 or 8.45 metres. The defendants therefore say that the concrete floor slabs in their apartments and the concrete floor slabs which constitute their decks are owned by the ground floor commercial units or are common property. They also say that there is a shallow strip of air space just above the concrete floor slabs ranging from two centimetres in the apartments to 15 centimetres at the edge of their decks, which is also owned by the ground floor commercial units or is common property.
[12] The defendants say there is no issue in terms of trespass because they have actual possession of the strip of air space in question to the exclusion of the ground- floor commercial unit owners and the body corporate. They say, therefore, they cannot
be sued for trespass. Trespass is a tort, which actually protects them as occupiers of the shallow strip of air space against others who may wish to use the air space.
[13] Having carefully considered all the evidence and submissions, I am of the view that the reduced levels shown on the Deposit Plan do not override the written reference to the boundaries between floor units as being the top of the concrete floor slab of the unit. My reasons are as follows:
(a) At the time of the deposited plan, reg 41(8) of the Survey Regulations
1972 required an elevation of all multi-storey buildings showing all floors, basements and roof areas to be plotted together with their levels, which should be referred to a permanent bench mark established on or close to the site. Regulation 41(8) made no reference to legal boundaries. It was concerned with elevations of physical aspects of the building (the levels of floors, basements and roof areas).
(b)Regulation 41(6) actually provided for legal boundaries. It provided that unless otherwise stated on the plan, the common boundary or part of the common boundary of the unit or flat with another unit or flat or with the common property shall, where that boundary or part thereof lies within a wall, fence, floor or ceiling, be the median of that wall, fence, floor or ceiling. The references to floors in reg 41(6) would be otiose if the legal floor boundaries were established by the elevations required to be plotted by reg 41(8).
(c) There is no longer a requirement to include reduced levels on deposited plans under the Rules for Cadastral Survey 2010. This reinforces my view that the plotting of levels has no relevance to determining where the legal boundaries lie.
(d)The use of reduced levels as a legal boundary is obviously impractical in the case of the extensive decks which adjoin the first-floor apartments and which have a slight slope to assist drainage. The overall fall in the levels of the decks is seven centimetres.
(e) It cannot have been the intention of the surveyor, developer or any purchasers of units in the development for the legal boundaries of units to be located at a reduced level reference point without regard to the physical location of the elevations – that is, walls and floors.
(f) The assigned ownership interest of the first-floor apartments in the decks would require reassessment. There would also be possible implications for unit owners under mortgage covenants.
[14] Adopting a purposive interpretation of the Deposited Plan, I am of the view that the location of legal boundaries between unit floors in the tower block is the top of the concrete floor slab respective to that unit. The top of the concrete floor slab includes the top of the concrete floor slabs constituting the decks.
Cause, scope and liability for repair
[15] At an early stage, the body corporate took the view that the damage to the ground-floor commercial units was caused by the failure of the first-floor apartment owners to repair and maintain their decks. The body corporate pointed to r 1(e) of the Body Corporate Rules which required owners to repair and maintain their units and keep them in sufficiently good order, repair and condition to ensure that no damage or harm would ensue to the common property or any other unit in the building to which the owner’s unit formed part.
[16] On 23 February 2010, the body corporate wrote to the first-floor apartment owners and the owners of the ground-floor commercial units and stated that the responsibility for carrying out the repair works lay with the owners of the units involved. It told the shop owners and the apartment owners above to work together to review and establish any issues that they may have and resolve them. The body corporate told the owners that it required them to take the appropriate action as detailed in a report from Arnold & Johnstone Ltd, consulting civil and structural engineers, dated 23 November 2009.
[17] However, even at that stage, it was apparent that some of the damage was not the result of a failure on the part of the owners to keep their units in sufficiently good
order, repair and condition, but a failure during the construction process. The Arnold
& Johnstone Ltd report stated:
It is apparent that the original paint system to the speed floor trusses has been inadequate for the severe corrosive atmosphere environment during the construction of the building…The current extent of corrosion to the speed floor trusses is a combination of incomplete remedial painting during construction and water leaks through the balcony slabs.
[18] The report also identified inadequate painting of the structural steel beams during the construction process as partly causative of the corrosion to them.
[19] As noted above, the Arnold & Johnstone Ltd report also identified water leaks through the balcony slabs. The first-floor apartment decks had been built with a waterproof membrane on slightly sloping concrete slabs, on top of which ceramic tiles had been laid. It is accepted that the failure of the waterproof membrane was the major contributor to water leaks and consequential damage to the ground-floor commercial units.
[20] A registered building surveyor called by the body corporate,
Mr Matthew Earley, described the process as follows:
35 …
(i) Where water ingress is occurring during directly below a deck and that deck above is built with a waterproof membrane then the water ingress generally occurs because of defects associated with that waterproof membrane on the deck. The reasons for such defects can be multiple, such as poor or incorrect installation, incomplete installation, incorrect product specification or post-installation damage….
(ii) As the deck surface is subject to wetting by precipitated moisture, it penetrates via absorption or via hairline cracks through the tile grout and screed below until it reaches the waterproof membrane. Any location where the membrane is defective will then allow water to penetrate to the structural concrete deck below, which also forms the roof to units below. Typically, a body of water will then accumulate and spread out until it reaches a break in the structure such as a construction joint. At this point a gravity link will occur in a concentrated area below. Another common leak location is at drainage outlets where the membrane has not been adequately dressed into the outlet.
(iii) Inadequate falls can result in standing water, which generally exacerbates water ingress, but this does not cause water ingress in
itself, because there still needs to be a defect with the membrane that allows water to ingress. Inadequate falls can exist without leaking if the integrity of the waterproof membrane is sound.
[21] Mr Earley did not to specifically identify the reason or reasons for the defects in the waterproof membrane, but there is no evidence of any post-installation damage. I am therefore of the view that the defects must have been caused during the construction process through incorrect product specification, poor or incorrect installation, or incomplete installation.
[22] Of significance, Mr Earley goes on to state that any proposed remedial works requiring membrane replacement could not be deemed like-for-like repair and maintenance because of the premature failure of the membrane. He stated:
39.Building components such as waterproof membrane to decks are required to last a minimum of 15 years under B2 of the Building Code. The membrane for this building was installed in or about 1996 – based on the date of the Code Compliance Certificate. If one assumes the leaks were identified no later than 2009, then it is fair to assume failure of the membrane to continue to perform in preventing moisture
ingress for the required 15 years. Because it failed prematurely the membrane failed to meet the performance requirements and was in breach of E2 External moisture and therefore B2 Durability.
40.Because of the premature failure, any proposed remedial works requiring membrane replacement, could not be deemed like for like repair and maintenance. Repair and maintenance is exempted from requiring a building consent under Schedule 1 of the Building Act
2004. This is explained on page of 15 of the guidance document produced by Ministry of Business, Innovation and Employment
(Third Edition). A building consent for work to the deck is therefore
required and the scope of the work proposed under a consent application would be assessed by the consenting authority to ensure the deck complies with current building code requirements.
[23] I am therefore of the view that the damage caused by the defective membrane was not the result of a failure on the part of the first-floor apartment owners to keep their units in sufficiently good order, repair and condition, but a failure during the construction process.
[24] Mr Earley goes on to explain how substantial consequential work was required because replacement of the membrane could not, in this case, “be deemed like for like repair and maintenance”:
44.As a consequence of having to meet current building code requirements replacing the membrane would result in the following work being required:
(a) creating a new surface to be laid to falls to prevent standing water (Falls).
(b) suitable drainage outlets which needed to be numerous enough and of sufficient capacity to cope with anticipated volume of precipitated moisture year round (Drainage).
(c) construction of an upstand or nib threshold at the entry from units onto the deck, which provides a barrier to water ingress into the apartment and achieving additional height necessary to accommodate the newly formed Falls (Nibs).
(d) removing and altering or replacing window and door joinery to allow for the installation of the higher Nibs (Joinery).
(e) removal and reinstatement of the existing glass balustrades to allow installation of the new membrane with new compliant side attached fixing brackets as per good weathertightness design principles (Balustrades).
Discussion
[25] The body corporate relies on ss 126, 127 and 138(4) of the Unit Titles Act 2010 to recover repair costs from the defendants.
Section 126
[26] Section 126 enables the body corporate to recover repair costs if the repair work is substantially for the benefit of one unit only, is substantially for the benefit of some of the units only or benefits one or more of the units substantially more than it benefits the others or other of them. However, the repair work has to be shown to benefit a unit “by a distinct and ascertainable amount” before it can be recovered from a particular unit owner. Otherwise it must be apportioned among the units that derive a substantial benefit from the repair work according to the utility interest of those units. However, the Court retains a discretion under s 126(3) to apportion the cost of the repair works as it thinks fit, having regard to the relative benefits to those units.
[27] The body corporate claims $337,283.14 (including GST) from each of the two defendants on the basis that the repair work benefited them, a third first-floor apartment owner and in some cases the ground-floor commercial unit owners,
substantially more than it benefited other units.1 The total of $337,283.14 comprises
$221,897.14 for the balcony work, $68,933.29 for the joinery work, $25,001.04 for the drainage work and $21,451.67 for the podium and soffit work. The body corporate acknowledges that the sum of $20,343.47 should be set off against its total claim given the defendants have already paid this sum as part of a general levy of unit owners based on their unit entitlement.
[28] The body corporate called a registered valuer, Mr Gary Cheyne, to give evidence as to whether there had been a change in the value of the first-floor apartments following the remedial work undertaken on their decks and joinery. In his opinion, the first-floor apartments had appreciated in value in the order of 5 – 10 per cent or about $100,000 as a result of the work to the decks of those apartments. Mr Cheyne did acknowledge, however, that as a result of the works there were value implications for other apartments as well. He said there was potentially a small saleability enhancement.
[29] Assessing the benefit to the first-floor apartment owners, the ground-floor commercial unit owners and all other apartment owners, I note that the membrane on the decks above the ground-floor commercial units is an important part of the storm water system for the entire building. Mr Earley referred to the decks as a drainage plane. The replacement of the membrane necessitated all the other work, except for some of the podium and soffit work, to ensure that the requirements of the current building code were met. For example, as part of the repair works undertaken, a reconfigured layout of falls was created to prevent the pooling of water on the decks. Mr Earley notes that the original consented plans indicate the falls as constructed were less than the generally accepted industry standard at the time. In addition, the drainage system was substantially upgraded. The drainage outlets were increased in both number and capacity to better cope with the storm water run-off from the building. Mr Earley also notes that the nibs and joinery were consequential requirements of the falls and drainage work. The original difference in height between the internal floor levels of the first-floor apartments and the external deck levels is not in accordance
with the current accepted building code best practise. Because the nib wall eventually
1 The third first-floor apartment owner and the ground-floor commercial unit owners are not defendants and appear to have settled claims by the body corporate against them.
reduced the height of the opening between the apartment and the deck, the joinery had to be reduced in height in addition to the nib wall. Works were also required to the deck balustrades.
[30] With the exception of the joinery work undertaken to the first-floor apartments, I am of the view that the body corporate has not shown that the repair works benefited the first-floor apartment owners more than it benefited other units by a distinct and ascertainable amount. My reasons are as follows:
(a) The weathertightness of the entire building is interlinked and indivisible.2 The membrane on the first floor apartment decks is an important part of the storm water system for the entire building. Rain water which falls on the curtain walls, buttresses and windows of the tower block is directed onto and across the first-floor decks. That is not the case for the much smaller balconies attached to the upper-level apartments, which only collect the rain water which falls directly onto them.
(b)Although the first-floor apartment owners own the membrane as the boundary between unit floors is the top of the concrete floor slab, they do not own any of the concrete floor slab itself. The concrete floor slabs are owned by the ground-floor commercial unit owners or the body corporate as common property. A substantial portion of the concrete floor slab is in fact common property.
(c) The allocation of the repair costs has, with the exception of the joinery, been somewhat arbitrary. For example, of the contracted cost of
$30,554 for demolition, the body corporate has allocated $5,000 to itself and the remainder to the first-floor apartments in proportion to their deck areas. It does not appear to have allocated any of the cost of demolition to the ground-floor commercial units. While the amount
claimed is therefore quite clear, the repair contract did not differentiate
2 See also Body Corporate 198245 v Wong [2012] NZHC 2676, (2012) 14 NZCPR at [70].
on the basis of either ownership or benefit. A global figure was priced and paid.
(d)Each of the unit owners bought into the building as a whole, not just their individual units. They knew of the division between their private property and common property and knew of their responsibility to contribute to the repair and maintenance of the common property.3
(e) The sharing of common property repair costs on a unit entitlement basis necessarily contemplates that there may be an element of disproportionality.4
(f) If part of a building is not weathertight then that adversely affects the saleability and value of all units, regardless of whether they themselves are in fact leaky.5
(g)The first-floor apartment owners will pay proportionally more than almost all other unit owners based on their unit entitlements, which do take into account the floor area of their extensive decks.
[31] The exception is the new joinery installed in the first-floor apartments. As noted above, because the new nib wall essentially reduced the height of the opening between the deck and the apartment, the joinery had to be reduced in height. This can be achieved by sending the existing joinery units to a specialist joinery fabricator to dismantle and cut down or by simply replacing the units with new units of the correct size.
[32] Joinery units must meet the provisions of the Building Code, including weathertightness, for 15 years from the date of installation. The joinery units in the first-floor apartments had been installed for 18 years and had been subject to a harsh marine environment. They were showing some degradation. A decision was,
therefore, responsibly made to replace the existing joinery units with new units. This
3 Body Corporate 198245 v Wong, above n 2, at [70(d)].
4 At [70(e)].
5 At [70(b)].
was a distinct and ascertainable benefit for the first-floor apartment owners. I assume that the joinery in other apartments may also show signs of degradation because of the harsh marine environment. Other owners may therefore be faced with the prospect of replacing the joinery in their apartments at their own cost at some stage in the future. I am, therefore, of the view that the first-floor apartment owners should pay for the new joinery installed in their apartments. Jurisdiction to order such a payment is derived from either s 126(2)(a) in that replacement of the joinery units benefited the first-floor apartments by a distinct and ascertainable amount, or under s 126(3), which gives the Court a general discretion to apportion repair amounts in shares as it thinks fit.
[33] The cost of the joinery for the two first-floor apartments owned by the defendants was:
Unit 1A Unit 1B Aluminium joinery 33,313.53 33,313.53 Variations - WH01 470.80 470.80 WH05 – Item 1 870.92 870.92 WH05 – Item 9 3,905.40 3,905.40 Sub-total 38,560.65 38,560.65 GST 5,784.10 5,784.10 Total 44,344.75 44,344.75
Section 127
[34] Section 127 enables the body corporate to recover repair costs from a unit owner if the repair was rendered necessary by any wilful or negligent act in breach of the Act or the body corporate operational rules by the owner.
[35] The body corporate claims $581,660.86 from both defendants on the basis that they were in breach of their obligations under the Act or the body corporate operational
rules by failing to maintain their property. The total of $581,660.86 comprises of
$443,794.28 for the balcony work and $137,866.58 for the joinery work.
[36] In the present case, I am of the view that the first-floor apartment owners have not committed any wilful or negligent act in breach of the Act or the body corporate operational rules. The waterproof membrane on the decks failed prematurely and therefore did not meet the requirements of the Building Code. Likewise, the ground- floor commercial unit owners have not committed any wilful or negligent act in breach of the Act or the body corporate operational rules. They cannot have been expected to repaint the speed floor trusses above their units as part of their repair and maintenance obligations. The failure to adequately paint the trusses was a failure during the construction process.
[37] The body corporate therefore cannot recover any of the repair costs under s 127.
Section 138
[38] Section 138(4) enables the body corporate to recover costs incurred by it that relate to repair to, or maintenance of, building elements and infrastructure contained in a principal unit.
[39] The body corporate claims $290,830.43 from each of the two defendants on the basis that some of the repair work related to maintenance of building elements and infrastructure contained in their units (being apartments and decks). The total of
$290,830.43 comprises $221,894.14 for the balcony work and $68,993.29 for the joinery work.
[40] Counsel for the defendants submits that s 138(4) is limited to circumstances where s 126 does not apply. I am of the view, however, that the natural meaning of the words of s 138(4) are not capable of restraining the application of the provision in that way. They are alternative modes of recovery. Section 138(4) specifically addresses the costs of repair and maintenance of building elements contained in a unit while s 126 provides a broad basis for recovery on the basis of substantial benefit.
There is therefore jurisdiction also under s 138(4) to order that the first-floor apartment owners pay for the new joinery installed in their apartments.
[41] I note that the body corporate seeks an order that each of the defendants pay
$68,993.29 for the joinery work. However, to the actual cost of the aluminium joinery the body corporate has added a substantial portion of the contracted sum of $19,710.00 for General – P & G, $39,959.00 for scaffolding and $30,554.00 for demolition. These sums cannot be directly connected with the installation of new aluminium joinery in the first-floor apartments. For instance, scaffolding was not required for the installation of the new joinery. In those circumstances, I adopt the figures set out on page 17 in Schedule 2 to the evidence of a quantity surveyor called by the body corporate, Andrew Pollock, which I have itemised above at [34].
Result
[42] The plaintiff succeeds in part in its claim. I hereby:
(a) declare that the location of legal boundaries between unit floors at the property is the top of the concrete floor slab respective to that unit. The top of the concrete floor slab includes the top of the concrete slab constituting the first-floor decks; and
(b)order the defendants to each pay $44,344.75 to the plaintiff as their share of expenses incurred in the joinery work undertaken in their first- floor apartments.
[43] If the parties are unable to agree on costs, memoranda are to be filed by
31 January 2018 and a decision will be made on the papers.
Woolford J
2