HWD NZ Investment Co Limited v Body Corporate 392418

[2025] NZHC 1755

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-809

[2025] NZHC 1755

BETWEEN

HWD NZ INVESTMENT CO. LIMITED

Plaintiff

AND

BODY CORPORATE 392418

Defendant

Hearing:	24 – 27 June 2024
Appearances:	J Haig and D McKenzie for the Plaintiff T J G Allan and B Bao for the Defendant
Judgment:	30 June 2025

JUDGMENT OF POWELL J

[Redacted Version]

This judgment was delivered by me on 30 June 2025 at 4.00 pm.

Pursuant to R 11.5 of the High Court Rules.

…………………..

Registrar/Deputy Registrar

HWD NZ INVESTMENT CO. LIMITED v BODY CORPORATE 392418 [2025] NZHC 1755 [30 June 2025]

[1]    132 Stancombe Road, Flat Bush is an apartment complex (the complex) administered by the defendant, Body Corporate 392418 (Body Corporate) pursuant to the Unit Titles Act 2010 (the UTA). The complex consists of three apartment blocks containing a total of 47 apartments, 21 in Block A, 14 in Block B and 12 in Block C. The three blocks of apartments are located around a central “podium” area with an underground basement carpark below the podium and extending under each of the apartment blocks.

[2]    Block B and the podium/underground carpark were completed by the original developer, Flatbush Limited, following which the incomplete development was purchased by the plaintiff, HWD New  Zealand  Investment  Co.  Limited (HWD),  in 2011. HWD subsequently contracted for the construction of Blocks A and C which were completed between late 2013 and early 2014. Following completion of Blocks A and C, HWD has retained ownership of nine of the apartments, six in Block A and three in Block C, which together comprise 18.05 per cent of the total unit entitlement.

[3]    In 2016, as a result of a range of defects identified in the complex, including weather-tightness and passive fire protection issues, the Body Corporate, together with the owners of 37 of the 47 apartments (the participating owners), but excluding HWD, commenced proceedings against five defendants, including the Auckland Council and HWD in its capacity as the developer of parts of the property (the defects litigation).

[4]    While the defects litigation was underway, the Body Corporate sought and obtained a Scheme under s 74 of the UTA (the s 74 Scheme).1 The s 74 Scheme authorised the Body Corporate “to reinstate the property” by undertaking remedial work necessary “to rectify the defects and associated damage to the property”. It also provided the Body Corporate was authorised to carry out the repairs “irrespective of whether the repairs are to Common Property or to Principal units or Accessory Units.” With regard to funding the repairs, the background section of the s 74 Scheme noted:

The Property contains three distinct blocks of units, and the scope of the Repairs differs between each block. It is intended to apportion the cost of the Repairs based upon the scope of work for each block and each unit’s ownership interest share of common property works. Further, despite the roofs of each block being the unit property of the adjacent units, it is intended

1      See Body Corporate 392418 v Chan [2022] NZHC 503.

to apportion the cost of repairing each roof amongst the Owners of all the units in each block by ownership interest.

[5]Clause 13 in the body of the s 74 Scheme then relevantly provided:

In levying funds from the Owners for the cost of the Repairs under this Scheme the Body Corporate may issue credits to the Owners to the extent of any funds the Body Corporate receives on behalf of the owners as a result of any legal proceedings issued to recover compensation for losses associated with the Defects, whether the funds received arise from a Body Corporate claim or owner claim.

[6]    The claims of the Body Corporate and participating owners in the defects litigation were eventually settled in October 2021 following payment of [a confidential settlement sum] by Auckland Council, after which the Body Corporate and the participating owners discontinued proceedings against all of the defendants, including HWD. The proceedings remained on foot but were subsequently brought to a conclusion following the payment of [a confidential settlement sum] by HWD to Auckland Council in full and final settlement of all claims between the Council and HWD.

[7]    The costs of repair have exceeded the amount recovered by the Body Corporate and the participating owners from Auckland Council, although the final shortfall was not known at the date of hearing. The shortfall has been funded by levies raised by the Body Corporate from the owners including HWD, but the amounts levied against the participating owners have been offset against their share of the net settlement proceeds calculated pursuant to a Conduct and Distribution Agreement entered into between the Body Corporate and the participating owners on 13 September 2021 (CDA). Clause 3.2 of the CDA provided that any funds received in settlement of the defects litigation would be distributed as follows:

(a)Firstly, be used to pay all outstanding fees and charges incurred by the Body Corporate or the Proprietors in relation to the Proceeding including legal and expert fees.

(b)Secondly, the balance of the settlement funds shall be apportioned between the claims in the Proceeding for:

(i)     direct remedial costs arising from the Remedial Work and required to be paid by the Proprietors who are current unit owners in the Proceeding; and

(ii)   (where applicable) claims by former owners for loss on sale

in the proportions that these categories of claim represent to the overall claim (excluding general damages, legal costs and interest).

The settlement funds apportioned to claims by former owners for loss on sale shall be paid to the former owners who claimed for loss on sale in the Proceeding unless such claim has been validly assigned to a current unit owner, in which case it shall be added to the settlement funds held.

(c)Thirdly, the balance of the settlement funds shall be apportioned between the Common Property and Unit Property claims in the Proceeding based on the latest assessments of the expert cadastral surveyors and expert quantity surveyors engaged for the Proceeding.

In respect of the settlement funds apportioned to the Common Property claim, the amount of those funds representing the total utility interest for the Units that are not listed in Schedule 1 (“minority units”), subject to first deducting the minority units’ shares of all fees and charges incurred by the Body Corporate in relation to the Proceeding in proportion to 10/47ths of the Common Property share of all legal and experts fees and costs, shall be deposited into a trust account administered by the Body Corporate manager or law firm selected by the Settlement Committee.

(d)Finally, be applied by the Body Corporate to refund or credit to the Proprietors all levies it has issued to the Proprietors for all legal and expert fees or any costs outstanding or due in relation to the Proceeding and refund any other costs incurred by the Proprietors in relation to the Proceeding.

[8]    HWD appropriately do not challenge paragraphs (a) and (d) enabling payment of invoices outstanding at the date of settlement and reimbursement of the earlier costs of the defects litigation. However, HWD contends that the balance of the settlement funds after payment of costs and disbursements (the net settlement proceeds) should have been applied to the repairs and remediation carried out by the Body Corporate and as a result HWD has consistently challenged the remainder of the CDA and in particular, its apportionment between common property and unit property claims.2

[9]    Given this position, HWD has issued these proceedings seeking a proportionate share in the net settlement proceeds. In the first instance HWD contends that as all of the repairs and remediation required fall within the definition of “building elements” as defined in the UTA, then, as a result of s 138 of the UTA, the Body

2      See HWD NZ Investment Co Ltd v Body Corporate 392418 [2022] NZHC 3472, at [13]–[18].

Corporate has no basis for differentiating between the participating owners and HWD (and also the owner of apartment B24, the other owner not party to the defects litigation) in benefitting from the net settlement proceeds, and submitted that to do so breaches various statutory and fiduciary duties, and/or a duty of care owed by the Body Corporate to HWD.

[10]   In response, the Body Corporate says it was not required to conceptualise its claims in the defects litigation as one for building elements, and that it was and remains entitled under the terms of the s 74 Scheme to distribute the monies received from the Auckland Council in accordance with the terms of the CDA.

[11]   In addition, and notwithstanding the amount set aside pursuant to cl 3.2(c) in favour of the non-participating owners (HWD and the owner of apartment B24), it is the Body Corporate’s position that HWD can have no claim against any part of the settlement funds received from Auckland Council, either:

(a)because it is estopped from making any such claim because no such claim was raised in the defects litigation; or

(b)through operation of what is known as the “look-through” principle, that because HWD was a developer of the complex, for HWD to benefit from the amount paid by the Auckland Council would be to profit from its own wrong.

[12]The following issues stand to be determined:

(a)Was the Body Corporate required to sue only in respect of building elements rather than making claims for the repair and remediation of common property, and, as a result, is it required hold and apply the net settlement proceeds for all owners including HWD?

(b)If not, is any claim by HWD to the net settlement proceeds otherwise precluded by:

(i)Estoppel; and/or

(ii)Operation of the look-through principle?

(c)If no, what is the correct sum payable?

Issue 1 — Was the Body Corporate required to sue only in respect of building elements rather than making claims for the repair and remediation of common property and, as a result, is it required to hold and apply the net settlement proceeds for all owners including HWD?

[13]   As  noted,  HWD  has  pleaded  three  causes   of   action   against   the   Body Corporate—claiming breaches of statutory duty, fiduciary duty, and duty of care. As Mr Allan, on behalf of the Body Corporate observed, each cause of action is based on the proposition that because the defects that were the subject of the defects litigation can be classified as “building elements” as defined in s 5 of the UTA, and pursuant to s 138 of the UTA, it is the Body Corporate that was solely responsible for remedying all of these defects.

[14]   As a result and because HWD claims there were no true repairs required to any of the principal units owned by the participating owners, HWD submitted there was no basis for apportioning the monies received between common property and unit entitlement, as provided for in the CDA, and as would have been necessary under the Unit Titles Act 1972 (the 1972 Act).

[15]   Instead, HWD submitted the Body Corporate needed to hold and apply all the net settlement funds so as to carry out its obligations under s 138. Any shortfall after use of the net settlement proceeds could then be met by raising levies in proportion to ownership interests, rather than unevenly as between the participating and non- participating owners, which is what has occurred.

[16]   In HWD’s submission, such an uneven apportionment was not permissible as it breached the Body Corporate’s obligation to act even-handedly to all owners.3 Instead, it submitted the approach taken by the Body Corporate in the CDA breached the Body Corporate’s obligations under s 138 of the UTA, and effectively required HWD to pay for a disproportionate share of the Body Corporate’s s 138 obligations.

3      Jewett Investments Ltd v Body Corporate 204096 [2011] NZCA 232, at [15].

Discussion — Issue 1

[17]   Section 138 sets out a Body Corporate’s obligation to repair and maintain the property for which it is responsible in the following terms:

138     Body corporate duties of repair and maintenance

(1)The body corporate must repair and maintain—

(a)the common property; and

(b)any assets designed for use in connection with the common property; and

(c)any other assets owned by the body corporate; and

(d)any building elements and infrastructure that relate to or serve more than 1 unit.

…

(3)The body corporate may access at all reasonable hours any unit to enable it to carry out repairs and maintenance under this section.

(4)Any costs incurred by the body corporate that relate to repairs to or maintenance of building elements and infrastructure contained in a principal unit are recoverable by the body corporate from the owner of that unit as a debt due to the body corporate (less any amount already paid) by the person who was the unit owner at the time the expense was incurred or by the person who is the unit owner at the time the proceedings are instituted.

…

[18]Common property is defined in s 5 of the UTA as:

(a)all the land and associated fixtures that are part of the unit title development but are not contained in a principal unit, accessory unit, or future development unit; and

(b)in the case of a subsidiary unit title development, means that part of the principal unit subdivided to create the subsidiary unit title development that is not contained in a principal unit, accessory unit, or future development unit

[19]The same section defines building elements as including:

… the external and internal components of any part of a building or land on a unit plan that are necessary to the structural integrity of the building, the exterior aesthetics of the building, or the health and safety of persons who occupy or use the building and including, without limitation, the roof,

balconies, decks, cladding systems, foundations systems (including all horizontal slab structures between adjoining units or underneath the lowest level of the building), retaining walls, and any other walls or other features for the support of the building …

[20]   There is no doubt s 138 imposes a clear obligation upon the Body Corporate to ensure it repairs and maintains not only the common property as was the case under the 1972 Act, but also the broader essential components of a building that fall within the definition of building elements, regardless of where they are located. Section 138 however, does not take away the obligation on individual principal unit owners for work on building elements and infrastructure within their own unit, noting that should that work be undertaken by the Body Corporate, the costs can be recovered by the Body Corporate from the owner.4 The responsibility of the owner of a principal unit to undertake repairs and maintenance of building elements within their own unit is therefore preserved.

[21]   More fundamentally, and as Mr Allan pointed out in his submissions, in this case the repair and remediation work necessary to rectify the complex was not carried out pursuant to s 138, but rather pursuant to the s 74 Scheme approved by this Court.

[22]   It is the s 74 Scheme rather than s 138 that authorises the Body Corporate to repair the whole of the complex, regardless of whether it constitutes repairs to common property, principal units, or accessory units. The power of the Body Corporate to carry out these repairs is therefore not dependant on whether particular repairs fall within the scope of s 138(1) of the UTA, but rather cl 2 of the s 74 Scheme which provides:

The Body Corporate is, subject to the provisions of this Scheme, to carry out the Repairs irrespective of whether the Repairs are to Common Property or to the Principal units or Accessory Units as designated in Deposited Plan 392418.

[23]   As provided for in cl 7 of the s 74 Scheme, the Court specifically approved the Body Corporate to levy and collect from the owners:

… such funds as it considers necessary in order to undertake and complete the Repairs and fulfil its obligations under the Scheme on the basis that the Owners shall pay all such costs in accordance with the allocation summary

4      Section 138 should be read as subject to ss 126 and 127 of the Unit Titles Act 2020. See Body Corporate S73368 v Otway [2018] NZCA 612.

prepared by BQH (“BQH allocation summary”) and annexed at Schedule 1 subject to clause 13 below.5

[24]   The BQH allocation summary referred to calculates the relative proportions of common property and unit entitlement for each unit. Clause 8 of the s 74 Scheme then goes on to note:

The proportions and BQH Allocation Summary shall apply, notwithstanding that costs in relation to any particular block or common property may vary from that originally forecast. One of the Scheme’s purposes is to ensure that all costs are addressed by the proportions in the Scheme to avoid the further costs of attempting to track costs and allocate between units, blocks and common property. It is further acknowledged that all levies raised to date by ownership interest shall be recalculated to reflect the percentages contained in the BQH Allocation Summary …

[25]   As can be seen, the s 74 Scheme makes it quite clear that the claims at issue in the defects litigation were not required to be conceptualised as a single overriding claim in respect of building elements.

[26]   The underlying premise of HWD’s argument on this issue is in any event flawed. Effectively, HWD’s submission is that because the Body Corporate had an obligation to repair and maintain both the common property and the building elements and infrastructure, in terms of s 138(1) of the UTA, the participating owners could have no claim in their own right in the defects litigation and, as a result could claim no specific interest in the net settlement proceeds that could be subsequently offset against the levies raised by the Body Corporate for the remedial works.

[27]   While it is clear that since the enactment of UTA 2010, the Body Corporate is able to sue on behalf of all owners,6 it was, and remains, not required to do so.

[28]    In any event it is clear from the statements of claim filed in the course of the defect litigation that the Body Corporate and the participating owners did not differentiate whether any particular damage was to common property or principal units, or a mixture of both. It was a single claim for damages (representing the cost of repairs) brought by both the Body Corporate and the participating owners which

5      See above at [5] for cl 13.

6      Gore Street Apartments also known as “Harbour Oaks” v Amer Ltd [2024] NZHC 32 at [122]– [126] and [131]–[132].

ultimately totalled $13,640,505 including GST by the time the fourth amended statement of claim was filed on 22 October 2021.

[29]   However, in addition to the joint claims for repairs, the participating owners each had specific claims in respect of their principal units. As detailed in the fourth amended statement of claim, the participating owners’ specific claims against the Auckland Council totalled $2,588,612.97. This consisted of claims for consequential losses ($961,612.97), general damages ($960,000) and a specific claim for loss on sale in respect of apartment B 15 in the sum of $667,000. Each of these claims was separate from the joint claims brought with the Body Corporate in respect of the building repair costs to the common property and individual units.

[30]   In the event that any settlement did not come close to covering the total claims of $16,229,117.97, it is clear that the Body Corporate and the participating owners would have to reach agreement on how their claims would be compromised. That was the purpose of the CDA, having been negotiated prior to the settlement and before the settlement quantum was known. As it happened, the net settlement proceeds did not come close to covering the total claims. In circumstances where the claims of both the Body Corporate and the participating owners were settled without any findings as to the merit or otherwise of any of the claims detailed in the fourth amended statement of claim, it is difficult to see that the apportionment of the settlement sum between the common property and principal units—as recorded in the CDA—can be challenged at this point.

[31]   In particular, there can be no basis for HWD to now submit that the settlement sum paid by Auckland Council reflected only the claims advanced by the Body Corporate for what could be described as “building elements”, as opposed to the joint claims by the Body Corporate and participating owners for repairs to both common property and principal units. There is even less basis to argue that the specific claims of the participating owners,7 brought to an end by the settlement, can now simply be ignored. In these circumstances I am satisfied the apportionment as recorded in cl

7 Above at [29].

3.2(c) of the CDA, based as it is on a compromise between common property and principal unit claims in the proceeding, was reasonable in the circumstances.

Issue 2 — To what extent are HWD’s claims estopped?

[32]   As the Body Corporate submitted, HWD made a deliberate choice in not bringing its own claims in the defects litigation for any damage to any of its own principal units. It was on notice that claims in respect of the principal units would not be part of the defects litigation. Immediately before the defects litigation proceedings were filed counsel for the Body Corporate and participating owners notified HWD:

1As you know we act for the Body Corporate and unit owners who, at the meeting you attended on 27 October 2016, instructed us to file proceedings in the High Court at Auckland relating to building defects identified in the property. HWD NZ INVESTMENT CO. LIMITED (HWD) is the developer of Blocks A and C and is therefore named as a defendant in the proceedings.

2HWD owns the following units in the property: Unit A15(17), A23(24), A27(23), A33(34), A36(35), and A37(33). The law is unclear whether a developer can sue the council and others for building defects in relation to a property it developed. In any event this firm would be in a position of conflict and unable to represent HWD if it wished to sue as a plaintiff. Please note therefore that HWD is not included as a plaintiff in the proceedings. In other words, we are not acting for HWD in its capacity as an owner of several units. What this means of course is that as an owner the company will be levied its share of the repair costs, but will be unable to recover any of those levies through the litigation process. For these reasons we recommend that HWD seeks independent legal advice on its ability to participate in the anticipated proceedings as a plaintiff. Your lawyer should feel free to contact us to discuss this.

3Finally, we understand HWD is in the process of selling Unit A37(33). Because of the imminent legal proceedings we advise against transferring or in any way encumbering the remaining units owned by HWD. Our clients reserve their rights to apply for freezing orders if HWD takes any such steps.

[33]   Not only therefore was HWD not included as a plaintiff in the defects litigation, it did not, at any subsequent point, assert any form of claim in respect of any of its principal units—whether against the Auckland Council or any other person. It failed to bring any claims notwithstanding that at all times it was a party to the defects litigation in its capacity as the third defendant, and knew that the cost of repairs of the HWD principal units had been removed from the third and fourth amended statements

of claim by the Body Corporate and participating owners and indeed advised the Court hearing the s 74 Scheme application that it could not “take issue with its units not forming part of the claim”.

[34]   It was likewise apparent to HWD prior to the settlement with Auckland Council, that the terms of the s 74 Scheme would require levies be raised for the cost of repairs based on the size of unit entitlements and that credits could be given by the Body Corporate:

… to the extent of any funds the Body Corporate receives on behalf of the Owners as a result of any legal proceedings issued to recover compensation for losses associated with the Defects, whether the funds received arise from a Body Corporate claim or Owner claim.

[35]   Despite that, even after the Body Corporate and participating owners had settled with Auckland Council, HWD nonetheless did not bring any specific claims in respect of its own units and ultimately allowed the Body Corporate and participating owners claims against it to be discontinued. HWD then settled separately with Auckland Council.

[36]   In the circumstances, I am satisfied that HWD can have no claim against the amount of the net settlement proceeds set aside for unit property claims in terms of the first part of cl.3.2(c) of the CDA.

Issue 3 — Does the “look-through” principle prevent HWD from benefitting in the settlement proceeds attributable to the common property claims?

[37]   The situation is different with regard to the amounts of the net settlement proceeds set aside in relation to the claims in respect of common property. As noted, the CDA contains specific provision for both HWD and the owner of apartment B24 to share in the sums apportioned from the net settlement proceeds for the common property claims. As set out above, cl 3.2(c) relevantly provides:

In respect of the settlement funds apportioned to the Common Property claim, the amount of those funds representing the totally utility interest for the Units that are not listed in Schedule 1 (“minority units”), subject to first deducting the minority units’ shares of all fees and charges incurred by the Body Corporate in relation to the Proceeding in proportion to 10/47ths of the common property share of all legal and experts fees and costs, shall be

deposited into a trust account administered by the Body Corporate manager or a law firm selected by the Settlement Committee.

[38]   The Body Corporate’s position was that this clause had been required by counsel for the Body Corporate and participating owners in the defects litigation as a form of indemnity for counsel, following issues arising with the distribution of settlement proceeds in other litigation. The provision was however against the wishes of the manager of the Body Corporate, Craig Leishman.

[39]   Although, as noted, the cost of repairs to the HWD units had, by the time the defects litigation was settled, been taken out of the third and fourth amended statements of claim filed on behalf of the Body Corporate and participating owners. No comparable reduction had been made with regard to HWD’s share of claim in respect of common property. Instead, throughout the defects litigation, the entire costs of the repairs to the common property were pursued by the Body Corporate, including, logically, the proportion attributable to both HWD and the owner of apartment B24.

[40]   That position is reflected in the settlement agreement reached between the Body Corporate, the participating owners, and Auckland Council. The settlement agreement records that while the participating owners were only required to warrant they were “the current or former registered proprietors of their units as listed … in the fourth amended statement of claim” and were “authorised to enter this agreement both on behalf of themselves and any other person holding a beneficial interest in respective units”, the Body Corporate warranted that it was the only party entitled to sue in respect of the common property.

[41]   It follows that the settlement could not and did not exclude the claims of HWD or the owner of apartment B24 in respect of the repair and remediation of the common property. HWD’s share of those claims, which were at all times part of the defects litigation, were therefore included in the settlement. In such circumstances it was clearly necessary to provide a mechanism to enable both HWD and the owner of apartment B24 to participate proportionately in the net share of the settlement proceeds attributed to the common property claims, as calculated in accordance with cl 3.2(c) of the CDA.

[42]   Given this position, the question is whether, as the Body Corporate submitted, the “look-through principle” precludes such participation in the case of HWD. It must then be determined whether the sum has been calculated correctly.

[43]   There is no doubt, as Mr Allan submitted, that there is a long line of authority originating under the 1972 Act that precludes a developer who has caused damage though a fault of its own workmanship from claiming compensation against a local authority. This, in combination with the “look-through” principle,8 confirmed by the Supreme Court in 2010,9 was run as a defence against the specific claims of the participating owners by both Auckland Council and HWD in the defects litigation.10 However although the principle is clear, whether it applies in this case is dependent on whether it has, in fact, been established that HWD, through its construction of Blocks A and C, was responsible for the damage to all or part of the complex.

[44]   The issue of developers’ responsibility has never been determined in this case. Rather, as with the claims in respect of the individual units brought by the participating owners against Auckland Council,11 the claims against HWD, whether brought by the Body Corporate, the participating owners, or Auckland Council, ultimately remained unsubstantiated in the defects litigation. The same is true of the assertions of contributory negligence raised by the Council against specific participating owners. There was simply no determination of any of the allegations of negligence and/or contributory negligence, whether against HWD or any of the other participating owners.

[45]   Likewise, there is no indication in the settlement agreement that the amount paid by Auckland Council was, in any way, reduced to account for any fault on the part of HWD. There is in fact nothing in the settlement agreement to indicate whether there was any particular part of the common property claims that was not accepted by Auckland Council, notwithstanding specific defences raised by Auckland Council, let

8      Three Meade Street Ltd v Rotorua District Council [2005] 1 NZLR 504 at [54]; Body Corporate 189,855 v North Shore City Council HC Auckland CIV-2005-404-5561, 25 July 2008; and Body Corporate 207624 v Grimshaw & Co [2023] NZHC 979 at [254].

9      North Shore City Council v Body Corporate 188529 (Sunset Terraces) [2010] NZSC 158.

10 Body Corporate 406198 v Argon Construction Ltd [2023] NZHC 3034; and Gore Street  Apartments also known as “Harbour Oaks” v Amer Ltd, above n 6.

11 Above at [6].

alone that the quantum was reduced as a result of any actions or omissions on the part of HWD. Instead, as noted, the terms of the settlement simply enabled Auckland Council to pursue HWD directly, which it did before reaching settlement with HWD and discontinuing its claims which, again, was prior to any determination of fault by either party. Indeed, the settlement agreement between Auckland Council and HWD specifically recorded that the agreement reached “does not in any way constitute an admission of liability on behalf of either [Auckland Council or HWD]”.

[46]   Taking these various matters together, it is clear that although allegations were pleaded against HWD and specific participating owners in the course of the defects litigation, this did not actually lead to any identifiable deduction from the common property claims, or, indeed, the principal unit claims of any of the participating owners. Instead, in accordance with the terms of the CDA, the participating owners have all received their full apportionment from the net settlement proceeds for both common property and unit entitlement in accordance with sch 1 of the CDA without reduction, notwithstanding the allegations made against a number of them in the course of the defects litigation.

[47]   In the circumstances, I consider it is impossible to see any basis for concluding that HWD is not entitled to its proportionate share of that part of the net settlement proceeds apportioned to common property, which as noted, amounts to a total of 18.05 per cent.

Issue 4 — What is the correct figure?

[48]   The final issue to be determined is whether the amount set aside pursuant to cl 3.2(c) of the CDA is sufficient.

[49]   For the reasons set out above I have concluded there can be no basis for challenging the apportionment of the net settlement proceeds between the common property and principal unit claims as recorded in the CDA. However, it is difficult to understand why the figure set aside for non-participating units (the nine HWD apartments and apartment B24) was calculated as the balance of the non-participating owners’ share of the net settlement proceeds apportioned to common property claims less those owners’ share “of all fees and charges incurred by the Body Corporate in

relation to the proceeding in proportion to 10/47ths of the common property share of all legal and experts fees and costs”. Those “fees and charges” were calculated by  Mr Leishman to be $519,998.09 in relation to HWD.

[50]   Although it is not disputed that neither HWD nor the owner of apartment B24 contributed to the costs of the defects litigation, the terms of the CDA (specifically  cl 3.2(a) and (d)) operated to reimburse both the participating owners and the Body Corporate for all the costs previously incurred, as well as the outstanding fees and charges incurred by the Body Corporate and participating owners that were not paid prior to the settlement with Auckland Council. As a result, neither the Body Corporate nor the participating owners have had to bear the costs of the defects litigation and are not therefore out of pocket.

[51]   Given that position, I can see no reason why either HWD or the owner of apartment B24 should be required to have their unit proportion of the costs of the litigation permanently deducted before being credited with their respective shares of the common property claim based on their unit entitlement. On the contrary, I consider the permanent imposition of costs on HWD and/or the owner of B24 would amount to an unjustified penalty when those same costs are not being carried by the participating owners. Instead, it is clear that both HWD and the owner of B24 are entitled to their respective proportionate shares of the claims apportioned to common property without deduction, which, as noted, in the case of HWD amounts to a total of 18.05 per cent, and 2.15 per cent for the owner of apartment B24.12

Decision

[52]   For the reasons set out above, HWD is entitled to an 18.05 per cent share in the net settlement proceeds apportioned to common property. For the avoidance of doubt, HWD is not entitled to any share of the net settlement proceeds apportioned to unit entitlement.

12     Calculated in accordance with the BQH allocation summary annexed to the s 74 Scheme.

[53]   Leave is granted for both parties to file further submissions and/or evidence as to whether my conclusions give rise to any claim for interest by HWD, taking into account the timing of:

(a)the payment of levies by HWD;

(b)the timing of credits given to participating owners; and

(c)the timing of HWD’s claim against the settlement proceeds relating to the common property claims.

[54]   Should HWD pursue an interest claim, submissions on behalf of HWD are to be filed within four weeks of the date of this judgment and any response by the Body Corporate within a further four weeks. I will then determine any issue relating to interest on the papers.

[55]   As both parties have succeeded to an extent, my preliminary view is that costs should lie where they fall. Should either party seek costs, memoranda are to be filed within four weeks of the date of this judgment and memoranda in reply within a further two weeks, following which I will determine costs on the papers.

Powell J