Douglas v Body Corporate 102029

[2025] NZHC 983

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-002182

[2025] NZHC 983

UNDER

Section 141 of the Unit Titles Act 2010

IN THE MATTER

of an appointment of an administrator

BETWEEN

ANDREW ALEXANDER DOUGLAS, IAN STUART PETRY, LEONARD

ELLSWORTH KURPUIS and JOHN FRANCIS MATHER
Applicants

AND

BODY CORPORATE 102029

First Respondent

Continued overleaf

On the papers

Counsel:

P Spring, H Cheng for Applicants J Wood for First Respondent

S E Wroe Second, Third, Fourth and Fifth Respondents

Date:

30 April 2025

JUDGMENT OF ANDERSON J

[Final orders]

This judgment was delivered by me on 30 April 2025 at 3.00 pm pursuant to r 11.5 of the High Court Rules 2016.

………………………………

Registrar/Deputy Registrar

Solicitors:      Lane Neave, Auckland

Court One, Auckland

Alexander Dorrington Limited, Auckland

DOUGLAS v BODY CORPORATE 102029 [2025] NZHC 983 [30 April 2025]

MAUD JOHNS LIMITED

Second Respondent

JOANNE LEE UNDERDOWN
Third Respondent

VEER CHARAN
Fourth Respondent

LE MANS PROPERTY LIMITED
Fifth Respondent

[1]    By my interim judgment of 6 November 2024 (the Interim Judgment),1 I made an order under s 189 of the Unit Titles Act 2010 (the Act) cancelling the unit plan of the Napier Street Body Corporate (the Body Corporate), on application by owners representing the majority of the ownership interest (the majority owners) under s 187 of the Act. I made an associated order sought by the majority owners for sale of the land formerly owned by the Body Corporate under s 339 of the Property Law Act 2007. The orders were opposed by the owners representing the minority of the ownership interest (the minority owners). I left the parties to agree final orders giving effect to this judgment.

[2]    The parties have been able to agree all aspects of the final orders with two exceptions. They remain in dispute over whether the Court should direct that no reassessment of ownership interest be undertaken on cancellation of the unit plan. They also disagree on costs, which I will address in a separate judgment.

[3]    Under s 188(2) of the Act, on application by a unit owner under s 187, the Court can make a declaration authorising the cancellation of the unit plan if it is just and equitable to do so, having regard to the relevant interests. Section 188(3) provides that when the Court makes such a declaration, it may by order impose any conditions or make such directions it thinks fit for the purposes of giving effect to the declaration. Certain non-exhaustive examples are given. These include orders as to the distribution of the body corporate’s assets. The Court may vary or modify such conditions at any time before the unit plan is cancelled.2

[4]    Section 189 applies where the Court has made a declaration under s 188 authorising cancellation of the unit plan and all conditions and directions imposed or given by the Court have been complied with.3 In that event, the applicant for cancellation or its successor in title may apply to the Registrar for cancellation of the unit plan.4 This application:5

1      Douglas v Body Corporate 102029 [2024] NZHC 3695 (Interim Judgment).

2      Unit Titles Act 2010, s 188(4).

3      Section 189(1).

4      Section 189(2).

5      Section 189(5)(aa). This sub-section was inserted in 2017 by s 45(3) of the Regulatory Systems (Building and Housing) Amendment Act 2017. Section 45(3) also amended other aspects of s 189, including s 189(2) and 189(3).

… must be accompanied by a certificate from a registered valuer showing the ownership interests and proposed ownership interests (if any) reassessed for all the units in the unit title development, unless the High Court directs otherwise.

[5]    If an application under s 189 is made in accordance with s 189(3), the Registrar must cancel the unit title.6

[6]    Under the above statutory provisions, reassessment of ownership interests upon the cancellation of a unit title after a declaration under s 188 is the default statutory position.7 The majority owners seek a direction “otherwise” from the default position of a reassessment.

Legal test for dispensing with re-assessment

[7]    The minority owners say that the question for the Court in whether to dispense with a reassessment of ownership interests is whether it would be just and equitable to do so. They refer to Lake Hayes Property Holdings Ltd v Petherbridge as source authority.8 That decision addressed whether it was just and equitable to order cancellation in the first instance under s 188(2).

[8]    However, in OM Hardware Ltd v Body Corporate 303662, Dunningham J applied a test of whether it was just and equitable to order reassessment of ownership interest where the parties were agreed that the body corporate should be cancelled.9 The Court considered:10

[32]      The second avenue for cancellation of a unit plan is that invoked in the present case, being cancellation of  a unit plan by the High Court under   s 188. In those circumstances, the requirement under s 177(7) to have a registered valuer reassess the ownership interests applies, as does vesting of the relevant estate in the land, in shares proportional to those ownership interests under s 180(2), “unless the High Court directs otherwise”.

6      Section 189(4).

7      Also relevant is that where a body corporate applies for cancellation, s 177(3)(b)(i) provides that before applying to the Registrar for cancellation of the plan, the body corporate must “arrange for an assessment of the ownership interests and proposed ownership interests (if any) of all the units in the unit title development by a registered valuer, and assign the reassessed interests to the relevant units”.

8      Lake Hayes Property Holdings Ltd v Petherbridge [2014] NZHC 1673.

9      OM Hardware Ltd v Body Corporate 303662 [2015] NZHC 190, (2015) 15 NZCPR 921

10     At [32]-[34], footnotes omitted

[33]      Turning back to the test in s 188, cancellation can be ordered if it is “just and equitable” for the Body Corporate to be dissolved and the unit title plan cancelled. As the applicants point out, the present case does not directly engage that test because the parties agree that those orders should be made. Rather the dispute between the parties relates to the appropriate conditions or directions to be made under s 188(3), when that section simply provides a broad discretion for the Court to impose any directions or conditions “it thinks fit”.

[34]      I accept the applicants' submission that where there is a question as to what directions to make under s 188(3), the same test is engaged as under s 188(2)(a), as the determination of whether cancellation is just and equitable, depends on the consequences that it will have for the parties. In other words, s 188(2) drives the exercise of the discretion in s 188(3) so that the Court should be satisfied that the directions it makes under that subsection ensure the circumstances of cancellation are “just and equitable”.

[9]    The legislature has not explicitly carried through an express “just and equitable test” to the conditions or directions imposed under s 188(3) when a plan is cancelled, or as the basis for the “direction otherwise” contemplated by s 189(5)(aa). I prefer to adopt an approach of considering whether there is a proper justification for dispensing with reassessment in all the circumstances of the case. That approach is substantively equivalent to a “just and equitable” test, in any event, because it involves considering what is fair in the overall context in which cancellation is occurring. As has been commented, the legislature’s intention is to ensure a rational and fair allocation of the proceeds in the particular case and for the particular parties.11

Analysis

[10]   The minority owners advance the following reasons why the default position (reassessment) should apply:

(a)Significant time has passed since the original assessment in or around 1985, approximately 40 years ago.

(b)Some of the units have undergone significant changes, including:

(i)the installation of a swimming pool as referred to in [73] of the Interim Judgment; and

11 Dominion Finance Group Ltd (in rec and liq) v Body Corporate 382902  [2012] NZHC 3325, (2012) 14 NZCPR 252 at [42]. Fogarty J considered the applicable principles in this case, albeit on markedly different facts.

(ii)significant landscaping works.

(c)A reassessment is consistent with the Act and is expected on cancellation.

[11]   However, on the current facts, I do not consider reassessment of ownership interests is appropriate. I find the following factors, advanced by the majority owners, persuasive:

(a)A reassessment is intended to reflect a loss or gain in market value.12 Here, the units are beyond repair and their value is in the base land.

(b)The parties have been dealing with the issues that have led to the demise of the Body Corporate for over ten years. Throughout that period, the costs of investigation and Body Corporate litigation have been shared according to the current ownership interests.

(c)The minority owners seek a reassessment that will account for the addition of a swimming pool to one of the units and further landscaping. In that event, the proceeds of sale would be allocated on a different basis to how the owners have paid costs for many years.

(d)The impact of the damage due to weathertightness issues and the unstable ground has been greater in some units. Maud Johns Ltd's (MJL’s) unit has been empty for years and is badly damaged. Part of that damage is due to the invasive and destructive testing carried out on that unit for the benefit of all owners. MJL's unit would not fare well on a relative reassessment based on comparative improvements. That is inequitable where all owners must take equal responsibility for the defects not being addressed sooner.

[12]   To adopt the arguments of the minority owners would be to ignore the realities of the present case, in particular the associated order for sale of the property.

12     Dominion Finance Group Ltd (in rec and liq) v Body Corporate 382902, above n 11, at [135].

In substance, the Court’s decision to authorise cancellation under s 188 of the Act reflected that the improvements made to the base land, namely the buildings, are at the end of their economic life, given the level of work required to repair the buildings. The owners are not selling the improvements made to the land. They are effectively selling the base land itself. Given this reality, ownership interest (whether the current or reassessed) is a somewhat inapt tool for assessing what percentage of the proceeds of sale each owner will receive.13

[13]   Accordingly, maintaining the current ownership interests can at least be justified by the fact that past  costs have been allocated on the current  interests.      A revised assessment would have no such relationship with the past. Nor would it be connected to a just allocation of relationship of the sale proceeds. In my view, the fairest outcome is to split the proceeds according to current ownership interests.

Result

[14]   I make a direction under s 189(5)(aa) of the Unit Titles Act 2010 that any application to the Registrar to cancel the unit plan does not need to be accompanied by a certificate from a registered valuer showing the ownership interests and proposed ownership interests (if any) reassessed for all units in the unit title development (Order 3).

[15]   In addition, by consent, the Court makes the other final orders as set out in Annexure A to this Judgment.

[16]   The Court stays the implementation of the final orders pending appeal against the Interim Judgment. Order 3 dispensing with reassessment will be stayed in the event of (and pending) any appeal against this decision. Order 3 will otherwise take effect if the appeal against the Interim Judgment is dismissed.

Anderson J

13 The majority owners do not seek an order that division be on the basis of respective shares in the base land. Their position is rather that if the Court was to order a reassessment, it should be on the basis of the parties’ respective shares in the base land.

ANNEXURE A – FINAL ORDERS

1.An Order by declaration under s 188(2) of the Unit Titles Act 2010 (UTA) authorising cancellation of Unit Plan 102029, such cancellation to take effect contemporaneously with sale.

2.An Order under s 188(3)(c) of the UTA extinguishing any registered mortgages in any principal units in Body Corporate 102029 (but, for the avoidance of doubt, such extinguishment shall not discharge any liability that the principal unit owners listed in Schedule 1 may have to the mortgagees under any loan agreement).

3.A direction under s 189(5)(aa) of the Unit Titles Act 2010 that any application to the Registrar to cancel the unit plan does not need to be accompanied by a certificate from a registered valuer showing the ownership interests and proposed ownership interests (if any) reassessed for all units in the unit title development.

4.An Order by declaration under s 188(2) of the UTA dissolving Body Corporate 102029 upon completion of the sale of the base land and the distribution of the proceeds of the sale of the base land in accordance with the Orders set out below.

5.An Order under s 339(1)(a) of the Property Law Act 2007 for the sale of the base land for Unit Plan 102029 being 1,704 square metres more or less, Lot 3, Deposited Plan 93055, on the following terms and conditions:

(a)      The sale of the base land is to be conducted by Body Corporate 102029, the Chairperson(s) of which are appointed as agent(s) for the co-owners of the base land being the persons listed in Schedule 1 of this application for the purpose of:

(i)Retaining lawyers of the firm Pidgeon Judd and sale agents, Ray White Commercial to prepare the necessary documentation for the sale of the base land including the form of agreement for sale by tender (or such other conveyancing solicitor or real estate agent as may be agreed by the owners of at least 5 principal units);

(ii)Marketing the base land and obtaining offer(s) for the base land by way of tender;

(iii)Entering into an agreement for sale and purchase of the base land on obtaining the approval of the owners of at least four (4) of the principal units provided that where less than 5 of the principal units approve accepting the offer, any owner has leave to apply urgently

(within three working days of approval) without notice (on a Pickwick basis) for Orders to prevent the Chairperson(s) accepting the offer, and entry into such agreement is to be deferred pending the outcome of the Pickwick application;

(iv)Managing the base land pending sale;

(v)Attending on settlement and executing an authority and instruction form to transfer to complete the sale of the base land as required by the terms of any agreement for sale and purchase entered into by Body Corporate 102029 pursuant to Order 5(a)(iii) above, including without limitation the execution of any land transfer tax statements required for that purpose on behalf of the co-owners (and for which such co-owners shall be obliged to provide their IRD number and any other details required for such statements);

(vi)Accounting to the Owners and their mortgagees (former or present) for the proceeds of sale of the base land less all costs incurred by Body Corporate 102029.

6.An Order for the division of the net proceeds from the sale of the base land and the distribution of the assets of the Body Corporate as follows:

(a)      The Body Corporate shall receive the net proceeds of the sale of the base land on behalf of the co-owners listed in Schedule 1 and their mortgagees (former or present) for distribution as soon as practicable after the funds are received ("the Date of Distribution") on the terms set out below.

(b)     The net proceeds of the sale of the base land shall be allocated to all of the co-owners of the base land in proportion to their ownership interest in the Body Corporate as particularised in Schedule 1 ("the Initial Allocation").

(c)      From the Initial Allocation made to each owner, the Body Corporate shall deduct all outstanding levies and other charges that the Body Corporate has raised on unit owners up to the Date of Distribution (including any additional levies raised on unit owners which are necessary to pay any outstanding creditors of the Body Corporate).

(d)     After deduction of the amount provided for in Order 6(c), the Body Corporate shall make a final distribution of funds to the co-owners of the base land comprising:

(i)The balance of the Initial Allocation after deduction of any amounts under Order 6(c); and

(ii)A share of the remaining assets of Body Corporate in proportion to the ownership interest of each of the co-owners of the base land;

("the Final Distribution").

(e)      The Body Corporate shall pay the Final Distribution to the co-owners of the base land as follows:

(i)For each of the persons shown in Schedule 1 where there is a mortgagee listed, the payment of the share each former unit owner is entitled to from the Final Distribution shall be made to the mortgagee listed in Schedule 1 (and if more than one in order of priority of the prior registered mortgages) to repay any amounts owing by the relevant owner under their loan agreements with the mortgagee; and the balance of the Final Distribution (if any) will be made to the persons listed in Schedule 1.

(ii)For the avoidance of doubt, the payment of funds by the Body Corporate under Order 6(e)(i) shall discharge all claims that the mortgagee(s) may have against the Body Corporate or in relation to the Final Distribution; but shall not discharge any liability that the persons listed in Schedule 1 may have to the mortgagee(s) under any loan agreement.

(iii)For each of the persons included in Schedule 1 where there is no mortgagee listed, payment of the share each former unit owner is entitled to from the Final Distribution shall be made to the owner.

7.The administrator Anthony Woodworth is removed.

8.Leave is reserved for any party to apply for further Orders or Directions necessary to give effect to Orders 1 to 7 above.

SCHEDULE 1

Unit	CT	Owner(s)	Mortgagee(s)	Ownership Interest
A	NA57B/770	Andrew Alexander Douglas	ASB Bank Limited	141
B	NA57B/771	Ian Stuart Petry and Leonard Ellsworth Kurpuis	-	137
C	NA57B/772	John Francis Mather	ANZ Bank New Zealand Limited	137
D	NA57B/773	Veer Charan	-	137
E	NA57B/774	Joanna Lee Underdown	Bank of New Zealand	137
F	NA57B/775	Maud Johns Limited	-	148
G	NA57B/776	Le Mans Property Limited	ASB Bank Limited	163