OM Hardware Ltd v Body Corporate 303662 - [2015] NZHC 190

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2013-409-1729 [2015] NZHC 190

BETWEEN
OM HARDWARE LIMITED

First Applicant

AND

N R SKJELLERUP Second Applicant

AND

BURGUNDY FLEUR INVESTMENTS LIMITED

Third Applicant

AND

T R BROWN and CAMBRIDGE TRUSTEE SERVICES LIMITED Fourth Applicants

AND

D C NOBES Fifth Applicant

AND

PANDORA PARNASSUS INVESTMENTS LIMITED Sixth Applicant

AND

BODY CORPORATE 303662
First Respondent

AND

BBS GROUP ENTERPRISES LIMITED Second Respondent

AND

OURWAY TOWER LIMITED Third Respondent

Hearing: 9 and 10 February 2015

Appearances:

J V Ormsby and SMK Hoffman for Applicants
J E Bayley for Respondents

Judgment:

17 February 2015

JUDGMENT OF DUNNINGHAM J

OM HARDWARE LIMITED AND ORS v BODY CORPORATE 303662 AND ORS [2015] NZHC 190 [17 February 2015]

Introduction

[1] Chamber Towers was one of many older commercial buildings in the central business district of Christchurch which had to be demolished following the Canterbury earthquakes. Fortunately the building was adequately insured and the owners of the building were indemnified for their loss. They have received an insurance settlement which, with interest accrued, exceeds $5 million. They do not wish to rebuild the building, but to sell the land and go their separate ways.

[2] The building was a unit title development, having been subdivided into unit titles in 2002. There is no dispute that the unit plan should be cancelled under s 188 of the Unit Titles Act 2010 (the 2010 Act). However, a dispute has arisen between the owners of the two commercial units, and the owners of the six residential units, as to their relative ownership interests.1 Until that is resolved, the insurance proceeds cannot be fully distributed.

[3] The residential owners say the ownership interests recorded on the unit title plan have been incorrect since that plan was deposited in 2002. They seek a reassessment of the ownership interests to reflect the market value of the units as at
21 February 2011.

[4] The commercial owners say that the original ownership interests should remain in place, but that if reassessment is ordered, it should not apply to the distribution of the insurance proceeds.

[5] The essential question for this Court to determine is whether, on the cancellation of the unit plan following the destruction of the premises, it is just and equitable to order a reassessment of the parties’ ownership interests for the purpose of determining their entitlement to the insurance proceeds and, in due course, to the
proceeds of sale of land.

1 I use the term “ownership interest” throughout, being the terminology of the 2010 Act, although under the 1972 Act the equivalent term was “unit entitlement”.

Issues

[6] Helpfully the parties are agreed on the issues which will determine this question. These are:

(a) whether, as a condition of cancelling the unit plan under s 188(2) of the 2010 Act, it is appropriate for the Court to direct, pursuant to s 188(3) of the 2010 Act, that the ownership interests for deposited plan 303662 be reassessed;

(b)whether it is impracticable for reassessment…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] NZHC 190
Decision Date: 17 February 2015

CaseChat Overview and Summary

In this case, OM Hardware Limited and others sought to have the ownership interests in a unit title development reassessed for the purposes of distributing the insurance proceeds and the proceeds of sale of the underlying land. The owners of the commercial units opposed the reassessment. The High Court found that the original assessment of ownership interests was flawed and that it was just and equitable to order a reassessment. The Court held that the reassessment should be undertaken as at 21 February 2011, being the last practical date when the individual unit properties could have been marketed and/or sold in the pre-crash state. The Court adopted the Ford Baker valuation for the purposes of the reassessment. The Court also held that the reassessment should apply to the distribution of the insurance proceeds and the underlying land. However, the Court decided that the commercial unit owners were not entitled to a reimbursement of Body Corporate levies paid since they had held a majority ownership interest and had benefitted from that position. Finally, the Court ordered the cancellation of the unit plan and the reassessment of the ownership interests in the unit plan.

Orders