Westwind Properties Limited v Body Corporate 104724
[2023] NZHC 1767
•10 July 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-2453
[2023] NZHC 1767
BETWEEN WESTWIND PROPERTIES LIMITED
Plaintiff
AND
BODY CORPORATE 104724
Defendant
Hearing: 8 June 2023 Appearances:
K L Wendt for Applicant C Baker for Respondent
Judgment:
10 July 2023
JUDGMENT OF ANDERSON J
This judgment was delivered by me on 10 July 2023 at 3.00 pm pursuant to r 11.5 of the High Court Rules 2016.
………………………………
Registrar/Deputy Registrar
Solicitors:
Lovegroves Lawyers, Auckland Price Baker Berridge, Auckland
WESTWIND PROPERTIES LIMITED v BODY CORPORATE 104724 [2023] NZHC 1767 [10 July 2023]
The application
[1] The applicant, Westwind Properties Ltd (Westwind) is one of the owners in a commercial unit title development at 21 Lorien Place, East Tamaki. The respondent is the body corporate for the development (Body Corporate).
[2] Westwind was the original developer of the unit title development which now comprises two buildings. One building comprises the commercial units owned by six other unit owners constructed by around 1997 (Units A–I). The other building is Westwind’s warehouse building/residential unit that it constructed in around 2004. This later stage of development did not proceed in accordance with the proposed unit development plan that had been lodged for it under the then Unit Titles Act 1972 (UTA 1972).1 No complete unit plan has been deposited.
[3] In March 2020, Westwind contracted to sell its interests in the development. The purchaser requires the unit title position to be rectified in order to proceed. Westwind says that the Body Corporate has improperly refused to agree to this.
[4] By s 141 of the Unit Titles Act 2010 (UTA 2010) the High Court “may, in its discretion on cause shown” appoint an administrator on the application of any person having a registered interest in a unit. Westwind applies for orders appointing Timothy Jones as administrator of the Body Corporate with powers (in substance) to implement the necessary steps to correct the unit title issues. Westwind has provided draft terms of the proposed appointment. The Body Corporate opposes the appointment.
Statutory context
[5] To understand the factual context for the application, it is first necessary to discuss some aspects of the unit titles regime.
[6] The UTA 2010 allows unit title developments to be undertaken on a staged basis.2 First, a proposed unit development plan is lodged setting out the proposed
1 As amended by the staged development provisions of the Unit Titles Amendment Act 1979.
2 Unit Titles Act 2010 (UTA 2010), pt 2, sub-pt 3.
principal units, proposed accessory units and common property together with a first stage unit plan.3 As the development progresses, further stage unit plans are deposited which show the principal units and accessory units completed to date. With the lodging of a stage unit plan, units that are completed are shown as principal units and owners of those units obtain rights under the UTA 2010 associated with being an owner of a “principal unit”.
[7] Each stage unit plan also identifies “future development units” (FDUs).4 These are units that are proposed to be developed or subdivided into one or more principal units at a later stage of the development. Although FDUs create titles,5 unlike the owner of a principal unit, an owner of an FDU is not a member of the body corporate except for certain purposes set out in s 76 of the UTA 2010.6 Unless expressly stated in the UTA 2010, a body corporate does not owe duties to an owner of an FDU.7 An FDU, however, is bound by the body corporate operational rules.8
[8] Where an FDU is in use as a place of residence or business the owner is “treated as a member” of the body corporate for certain purposes. This reflects that an FDU owner who has developed the FDU should be subject to certain liabilities such as the payment of levies9 and also has a legitimate interest in a number of other steps that might be undertaken by the body corporate. The owner of an FDU that is in use as a place of residence or business is treated as a member for the purposes of redevelopment requiring a new unit plan;10 sale of, or addition to, common property;11 and cancellation of a unit plan.12
3 Sections 24(2)(a) and 25(1).
4 Section 24(2)(b) and subss 25(2) and (4).
5 Section 27.
6 Section 76.
7 Section 84(2).
8 Section 105(5).
9 Sections 40 and 121. By s 122 an owner of an FDU is required to notify the body corporate when all or any part of it is in use as a place of residence or business or otherwise within 10 working days of occupation. As soon as practicable after notice, the body corporate is required to send the owner notice of the amount of levies imposed and how they were calculated
10 Section 68 - a special resolution of the Body Corporate is required and owners of units materially affected must consent.
11 Sections 56 and 58.
12 Section 190. See also ss 177–189.
[9] Once all stages of a staged unit title development are complete, the final step is to lodge a complete unit plan.13 The complete unit plan is required to specify all the units and common property comprising the development as already erected on the land. Lodging a complete unit plan completes the staged subdivision process and leaves no FDUs remaining. All proposed principal units have been transformed into principal units, and all unit owners are members of the body corporate for all purposes.
[10] No stage unit plan and no complete unit plan may be deposited unless a certificate given under s 32(2)(a) includes a statement from the territorial authority that the plan is consistent with the proposed unit development plan.14 During a staged development, the body corporate can make alterations to what is proposed. However, this requires a substituted proposed unit development plan to be deposited which in turn requires a special resolution (75 per cent) of the body corporate15 and a designated resolution process.16
[11] Under the designated resolution process,17 if the special resolution passes, the body corporate must give notice to all unit owners, and persons with a registered interest/caveators or those with a notice of claim over any unit. Any of these persons can then object to the resolution. In that event, within the time period for objection, they must apply for relief with the High Court18 or the notice has no effect. The High Court has power to confirm or can overturn the resolution if satisfied that it is just and equitable to do so. This process acts as a mechanism for minority or interested person relief for certain major decisions affecting the body corporate.
[12] For resolutions that are not designated resolutions, s 210 entitles a member of the body corporate who has voted against a resolution passed by the body corporate to seek relief from the Court on the grounds that its effect would be “unjust or
13 Sections 24(2)(c) and s 25(3).
14 Section 25(5).
15 Section 30(2).
16 Section 30(4).
17 Sections 212–216.
18 The High Court is the “appropriate decision maker” for title issues under UTA 2010, s 215.
inequitable”.19 Section 210 will not usually apply to an FDU owner because they are not usually entitled to vote on a resolution.20
[13] The UTA 2010 permits body corporates to allow redevelopment to adjust the boundaries on a unit plan provided the adjustment does not: affect the common property; materially affect the use, enjoyment, or ownership interests of any unit of which the boundary is not being adjusted; or change the number of units.21 Redevelopments other than these can also be made but require a new unit plan to be deposited.22 These more complex redevelopments require a special resolution and engage the designated resolution process. Redevelopments are a mechanism by which the UTA 2010 ensures the social and economic sustainability of unit title developments.23 They also provide body corporates with flexibility – provided procedural requirements set out in the UTA 2010 are met.24 Relevantly for this case, redevelopments include the enlargement of one unit by the amalgamation of that unit with units with which it shares a boundary.25
[14] When the buildings were constructed for the development, the UTA 1972 as amended by the Unit Titles Amendment Act 1979 applied. The then regime had some significant differences including that deposit of a new proposed unit development plan or a complex redevelopment required unanimity of all unit owners affected by it, although there was provision to apply to force through decisions supported by 80 per cent of those entitled to vote.
Background facts
[15] The current unit plans deposited for the development in 1997 are a substituted proposed unit development plan and a fifth stage unit plan. Units A–I had been
19 The standard is a “high threshold of material unfairness or injustice”: Tremont Holdings Ltd v Body Corporate 401803 [2015] NZCA 314, (2015) 16 NZCPR 509 at [19]. The requirement to have voted against a resolution emphasises that minority relief is concerned with having a decision set aside and with frustrating the views of the majority, rather than the minority being able to force through an alternative proposal.
20 It may be that they are eligible for minority relief when treated as a member of the body corporate for special resolutions in the matters where they are “treated as members”.
21 UTA 2010, s 65.
22 UTA 2010, s 6.
23 See s 3.
24 Part 2, sub-pt 10.
25 Section 8(1)(b).
completed by this time and are shown as principal units. The balance of the site is shown as four proposed principal units, and several proposed accessory units (carparks) with a further accessory unit making up the rest of Westwind’s area. This reflected the then intention for four commercial units to be constructed on the balance of the site. There are equivalent FDUs marked on the fifth stage unit plan.
[16] Westwind did not complete the development in accordance with the above plan. Instead, Westwind’s building straddles several of the proposed units noted on the plan, albeit all within the boundary of the FDUs Westwind owns.
[17]The 1997 fifth stage unit plan currently deposited is set out below:
[18]Below is the as-built construction as set out in the proposed complete unit plan:
[19] Westwind acknowledges that in building as it did, it failed to comply with the UTA 1972 and now does not comply with the UTA 2010. As outlined above, the UTA 2010 requires building in accordance with the deposited proposed unit development plan. To be compliant, a further substituted proposed unit development plan ought to have been lodged prior to construction showing different proposed principal units. A revised stage plan ought to have been lodged showing the FDUs in a position reflecting the substituted proposed unit development plan. At the time of construction under the UTA 1972 this would have required unanimous agreement of the Body Corporate members, or agreement by 80 per cent and an application for relief.
[20] Westwind contracted to sell its interests in the development by agreement dated 5 March 2020. Mr Barwell, Westwind’s managing director, says that it is in the context of issues raised by the purchaser that he appreciated that the steps required back when
the building was constructed had not been undertaken. It is apparent from material from the property file produced by the Body Corporate that Westwind’s consultants had been conscious of the unit title requirements for the building back in the development period. Mr Barwell says that he himself was either not aware at the time, or that now some 16 years later he cannot recall whether it was raised. Either way, he says he never fully grasped the technicalities of the process and Westwind did not instigate the steps required.
[21] To rectify the position, Westwind wants the Body Corporate to now deposit a substituted proposed unit development plan and a complete unit plan for the development. The proposed plan substitutes the present configuration with one proposed principal unit, J1, across all of Westwind’s current FDUs. The proposed unit occupies the same quadrilateral space as Westwind’s FDU’s in the 1997 plan but creates one FDU in place of several. No specific carparking units are retained at the top of the plan. The proposed complete unit plan is included at [18] above. Reassessment of ownership interests is required to be lodged with the new plans.26 It appears to be common ground that Westwind’s proposal would remedy the unit title position.
[22] In submissions the parties appeared to agree that the deposit of a substituted proposed unit plan and complete unit plan in these particular circumstances would also engage the redevelopment provisions in s 68 of the UTA 2010. The relevant redevelopment is an amalgamation of Westwind’s units. I will describe the above steps as “the redevelopment”.
[23] The redevelopment requires special resolutions of the Body Corporate and triggers the designated resolution procedure. Although not discussed in argument, Westwind also wants the Body Corporate to consent to an easement creating a right to convey water and a right of way in favour of Council over parts of the common property. It appears this is simply a firefighting main and new hydrant connected off the public water main that was installed some time ago. That is, it is an existing facility
26 UTA 2010, s 38.
and access is needed for the Council to maintain it.27 This also requires a special resolution.
[24] Westwind’s application for appointment of an administrator is to enable implementation of the above steps in circumstances where it has been endeavouring to obtain the necessary Body Corporate resolutions since 2021.
[25] The current owners of the other units are Hitech Systems Ltd (Unit A); B & S Securities Ltd (Units B, C, F and G); Alan Cattle (Unit D); Southern Cross Marine Ltd (Unit E); Ian Steens, Chew Bee Goh and Goh Stevens Trustees Ltd (Unit H); and THR Holdings Ltd (Unit I). The principals of B & S Securities Ltd are Sue and Barry Martin. Before the Court was part of the property file for the development which included the certificates of title as at 11 July 2003. As best as I can tell from the names on these titles, Alan Cattle has owned his unit since at least 2003, with the other unit holders acquiring theirs subsequently.
Steps leading to Westwind’s application
[26] In 2021, Westwind arranged for its lawyers and consultants to prepare the documentation to implement the redevelopment and the associated steps at its cost, including paying the Body Corporate’s associated legal fees. There was a series of exchanges between the parties’ solicitors, addressing various queries from the Body Corporate with Westwind’s solicitors endeavouring to move things along. By around the end of July 2021 it appeared that the Body Corporate’s solicitors were going to move to call an Extraordinary General Meeting (EGM) to vote on the required resolutions.
[27] At the end of July 2021, a meeting was held of the Body Corporate members. The Body Corporate’s solicitors reported back that this was not an EGM to vote but an informal meeting to go over some queries the owners had before they would agree to vote on any proposal put forward.
27 This is the explanation provided by Westwind’s solicitors in July 2021 when this aspect was queried by the Body Corporate’s solicitors. It does not then seem to have been raised in any further correspondence, at least not in any correspondence that was before the Court.
[28] In early August 2021, in an exchange between the Body Corporate’s solicitors and the Body Corporate members (ie, not Westwind), the Body Corporate’s solicitors provided members with an updated reassessment of ownership interests from Westwind’s valuers addressing an issue that had been raised by the Body Corporate. In the covering email, the Body Corporate’s solicitors advised that they were also satisfied with the answer received to an outstanding surveying query. The email continued:
That being the case, before we can return to [Westwind’s] lawyers we need to know what matters the BC wants to bind [Westwind] to as part of any agreement to consent to the redevelopment proposal. You’ll also recall that the idea was floated to not proceed on any redevelopment but require [Westwind] to undertake a subdivision to separate from the BC entirely. As noted in our last email, this would be a major additional endeavour for [Westwind].
We look forward to hearing from the BC regarding the above so we can return to [Westwind’s] lawyers.
[29] Sue Martin replied to all (on behalf of B & S Securities) setting out certain conditions it wanted Westwind to meet. These were matters relating to paving, guttering and driveway maintenance, responsibility for keeping a retaining wall in good order, keeping up with shared costs of maintenance and outstanding levy issues.
[30]The email then said:
Absolutely NO transactions are to take place unless all conditions are fulfilled. NO exceptions!
…
We welcome any input from other unit owners.
[31]The Body Corporate’s solicitors responded to all:
Once we have a list of outstanding items, we can look at options to bind [Westwind] and future owners to comply.
[32]This was forwarded by Ms Martin to Westwind’s selling agent.
[33] On 17 August 2021, Westwind’s solicitors asked for an update on progress with the Body Corporate. The solicitors responded that:
I’m just waiting on confirmation from the owners as to matters they want attended before they will agree to move forward with the same.
[34] On 20 September, the Body Corporate’s solicitors advised that following discussion and correspondence with the other owners, the Body Corporate had some significant concerns relating to Westwind that they “require to be addressed before they would be agreeable to voting in favour of [Westwind’s] proposed redevelopment”.
[35]In summary the matters raised were:
(a)An invoice Westwind charged to the Body Corporate for works which it was said should not be covered by the Body Corporate and requiring the debt to be cleared.
(b)Requiring paving to be undertaken.
(c)Maintenance concerns with a retaining wall to be undertaken to the Body Corporate’s satisfaction.
(d)Issues around rubbish on common property.
(e)Requiring consent to a land covenant to address adequate maintenance of downpipes, guttering and drainage of Unit J1 to bind subsequent owners.
(f)That there were concerns as to Westwind’s use of certain common property (a driveway) and an asserted lack of trust between Westwind and the other Body Corporate members. Westwind was advised that the Body Corporate members required that this common property be converted to an accessory unit to be owned in equal shares by the other unit owners to prevent argument as to use by Westwind, but would be agreeable to a right of way easement being granted to Westwind over that area.
[36] On 11 October 2021, the Body Corporate solicitors issued Westwind’s solicitors an account for $8,305 plus GST and disbursements for work relating to the redevelopment proposal. They noted that there had not been any response to the 20 September proposal.
[37] A Body Corporate AGM was held on 21 October 2021. Westwind was not represented at it. No resolutions to implement the redevelopment were put to the meeting.
[38] There followed legal exchanges including without prejudice communications. The open correspondence included a response from Westwind’s solicitors to the 20 September list of requirements, sent on 26 November 2021 and subsequent exchanges on these. In large part the issues raised were queried or disputed. There were also requests by Westwind that an EGM be called for the purposes of considering the redevelopment resolutions. Westwind ultimately filed this application in December 2022. No EGM had been called to address the resolutions.
[39] After the application was filed, in late January 2023, the Body Corporate held an “emergency” EGM to “bring all owners coordinated, keeping them informed and discussing the action plan from [the] Body Corporate’s perspective”. On 23 May the Body Corporate circulated the redevelopment resolutions for owners to vote on by postal vote by 26 May 2023, advising that “[i]f you are against the resolution, you should not sign it or return it”. No owners responded so the resolutions did not pass.
Submissions for Westwind
[40]Westwind says in summary that:
(a)The construction of Westwind’s building was completed in or about 2004 and since then the Body Corporate and other units have not opposed or taken any steps in respect to the structure.
(b)There is no material impact or prejudice to other owners by the redevelopment, and the failure to pass the resolutions is improper and in bad faith. Westwind contends that, as a statutory entity, the
Body Corporate cannot make decisions irrationally or in bad faith and that accordingly, an individual owner cannot simply vote (or not vote) on the special resolutions in whatever manner they consider fit.28
(c)The Body Corporate has used Westwind’s predicament as leverage to try to obtain consent to collateral issues. Westwind suggests that the result of the vote derives from owners seeking to apply that leverage. It reflects a relationship breakdown with Mr Barwell, although for some owners it may be due to apathy.
[41] Westwind seeks the appointment of an administrator to resolve what it describes as the “current impasse”.
[42] Westwind say there is cause shown to appoint an administrator to implement the redevelopment. The terms proposed for appointment include the administrator exercising the powers and duties of the Body Corporate to apply for and deposit the substituted proposed unit development plan and complete unit plan; to sign the necessary authority and instruction to grant the easement in favour of Council; and dispensing with the requirement for designated resolutions.
Submissions for the Body Corporate
[43] On behalf of the Body Corporate, Mr Baker took me through the powers and duties of the body corporate and principal unit owners to submit that within the scheme of the UTA 2010, there is no basis for the Body Corporate owing any duties to an owner of FDUs. In particular, he said that the Body Corporate owes no obligation to Westwind in the present context. He emphasised that Westwind does not have the benefit of the minority relief regime.
[44] Mr Baker submitted that in exercising their right to vote on special resolutions, members of the Body Corporate are not constrained and can act in their own self- interest. He rejects any administrative law type overlay over body corporate decision- making or owner voting as contended for by Westwind.
28 Westwind relies on an article relating to the UTA 1972: Thomas Gibbons “Body Corporate Rules: Tensions” (2008) 16 WLR 167.
[45] While Mr Baker accepted that the owner of an FDU has standing to make an application for appointment of an administrator, he submitted there would be very limited circumstances in which such an application would have any merit. It would be limited to any of the particular requirements of a Body Corporate vis-a-vis an owner of an FDU, for example, to lodge any complete unit plan that was in accordance with the proposed unit development plan.
[46] The Body Corporate’s submissions emphasised the significance under the UTA 2010 and UTA 1972 of the unit title development proceeding in accordance with the unit plans as lodged. Mr Baker rejected Westwind’s characterisation of the steps proposed as simply fixing up an administrative matter. Instead, he submitted that it is a matter of substance, underlined by the fact that the redevelopment requires a 75 per cent resolution and there is the accompanying designation/objection process. He said it would be inconsistent with the statutory regime to appoint an administrator to implement these steps where an owner has proceeded to erect structures on its FDUs other than in accordance with the plan and where the necessary resolution has not passed. He also referred to the position existing under the previous regime under the UTA 1972 which required unanimous consent.
[47] Mr Baker raised that the terms and conditions of appointment of the administrator proposed by Westwind included a term precluding unit owners and interested persons from objecting under the designated resolution process. He submitted that if an administrator was appointed, this was not an appropriate or permissible term.
Appointment of administrator
[48]Section 141 of the UTA 2010 provides:
(1) The body corporate, a creditor of the body corporate, or any person having a registered interest in a unit, may apply to the High Court for the appointment of an administrator.
…
(3)The High Court may, in its discretion on cause shown, appoint an administrator for an indefinite period or for a fixed period
on such terms and conditions as to remuneration or otherwise as it thinks fit.
…
(5)The administrator, to the exclusion of the body corporate and the body corporate committee, has and may exercise the powers of the body corporate and the committee, and is subject to the duties of the body corporate and the committee, or such of those powers and duties as the High Court orders.
[49]Westwind has standing to apply as a person with a registered interest in a unit.
[50] The jurisdiction to appoint an administrator has been described as “open- textured”.29 In Gibson v Body Corporate 384911 Ellis J stated:30
… even if an act done or decision taken has the principal purpose or effect of furthering the legitimate interests of the majority, it might nonetheless be improper if it also causes unnecessary or gratuitous injury to minority proprietors. (Emphasis added)
[51] Ellis J provided a summary of suggested circumstances where cause for the appointment of an administrator may be shown:31
(a)the existence of any undemocratic or ultra vires decisions;
(b)the existence of any dysfunctionality or deadlock; and
(c)the existence of any majority decisions that:
(i)have been brought about by the improper influence of a third party; and
(ii)deliberately and/or unnecessarily harm the interests of the minority.
29 Low v Body Corporate 384911 (2010) 12 NZCPR 142 (HC) at [33].
30 Gibson v Body Corporate 384911 [2012] 1 NZLR 84 (HC) at [70].
31 At [71].
[52] The existence of one or more of these circumstances does not automatically require the appointment of an administrator and the reasons for their existence and any alternative remedies is relevant.32 Nor are these matters exhaustive.
[53] The Courts have held that “cause” within s 141 has broad application allowing a flexible response which in appropriate circumstances can go beyond misconduct or impropriety on the part of the body corporate.33 In particular, the Court has said:34
… the fact that no legal breaches can be made out does not necessarily require that the application to appoint an administrator cannot succeed, given the discretionary nature of that assessment.
[54] The appointment can be on the basis that the administrator takes control of all the body corporate’s affairs or only a particular aspect. Examples of the latter are appointment in relation to remedial work35 and appointment in relation to raising and collecting levies and payment of ground rental.36
Analysis
Westwind’s position in the context of the statutory regime
[55]The present position is as follows:
(a)The unit title development cannot currently proceed to a complete unit plan, being the last stage in the staged subdivision process. That is because the unit title development will never be in accordance with the proposed unit development plan lodged for it. The complete unit plan needs to reflect the proposed unit development plan.
(b)Westwind acknowledges that its non-compliance with the UTA and imperative to rectify are problems of its own making. Extracts from the Council property file shows its consultants knew that a new
32 At [72].
33 May v Body Corporate 329331 [2019] NZHC 3 at [37].
34 Tao v Strata Title Administration Ltd [2016] NZHC 814, (2016) 17 NZCPR 312 at [109].
35 May v Body Corporate 329331, above n 33, at [44].
36 Whai Rawa Railway Lands LP v Body Corporate 201036 [2021] NZHC 2893, (2021) 22 NZCPR 776 at [124].
proposed unit development plan would need to be lodged. Mr Barwell says that he never fully grasped the technicalities of the process. Having said that, Westwind must at least have been aware that it owns only FDUs and that it is not a member of the Body Corporate. It will not have been involved in Body Corporate decision-making and meetings.
(c)As it currently stands, Westwind (and successors) will never be able to become the owner of a principal unit and hence will always only be a member of the Body Corporate for limited purposes. It will always remain the owner of FDUs, and the FDUs it owns will not reflect the as-built construction. Any purchaser prepared to acquire its interest in the development will be in the same position.
(d)Conceivably, Westwind or a successor could alter or demolish the present building and then rebuild or redevelop four commercial units as proposed on the present plan. The unit title development could then proceed to a complete unit plan. While this possibility is noted in the Body Corporate’s notice of opposition as an avenue for Westwind, in oral argument Mr Baker stepped back from suggesting that this is a course that it is suggesting could or should occur. In answer to a question from me as to what the Body Corporate considers Westwind should do in the position it finds itself in, Mr Baker’s proposition was effectively that Westwind should do whatever it takes to obtain the positive votes of the Body Corporate members to enable the redevelopment it seeks.
(e)Neither party could identify to me any means of correcting the unit plan other than through the process proposed. Nor was there a suggestion of an alternative legal route other than through appointment of an administrator that could be used to implement the redevelopment in the face of the Body Corporate not to agree to it.
(f)In the meantime, since Westwind first used its building as a place of business in or about 2004, it has been paying contributions levied by the Body Corporate and has been entitled to be treated for limited purposes. The parties were unable to tell me the precise basis on which Westwind’s levies were originally set.
Should an administrator be appointed?
[56] This case does not have parallels with other cases where an administrator has been appointed. However, that of itself should not count against making the appointment. The cases referred to earlier emphasise that the s 141 jurisdiction is a broad one, albeit it is not one to be exercised lightly, and should be exercised on a principled basis.
[57] On the face of it, it is objectionable to contemplate the appointment of an administrator to, in substance, rectify the title of an FDU owner who has not built in accordance with the deposited plans. This is particularly so given the statutory regime provides careful special resolution and designated resolution processes to implement change. It will be rare where the facts of a case would justify overriding that. I agree with Mr Baker’s submission that the necessary deposit of the new plans is not simply an administrative exercise but a matter of significance.
[58] I also accept Mr Baker’s submission that the statutory scheme leaves an FDU owner with little status as regards conduct of a body corporate. I have taken this, as well as the careful staged development and redevelopment schemes of the UTA 2010 into account in assessing whether nonetheless this is a situation in which there is “cause” to appoint an administrator.
[59] However, I reject that just because the powers and duties of a body corporate are not owed to FDU owners unless expressly provided,37 that appointment cannot be appropriate. As the case law outlined at [48]-[54] confirms, a breach of legal duty is not a prerequisite for the appointment of an administrator. Rather the focus is on “cause”. The UTA 2010 empowers a body corporate to undertake a range of actions
37 Section 84(2).
that may affect an FDU owner. If these powers are exercised in a manner which, while not contrary to a legal duty, give rise to “cause”, in my view an administrator can be appointed to exercise any power of the body corporate in appropriate circumstances.38
[60] Most of the cases regarding appointment of an administrator involve actions of a Body Corporate under powers delegated to its Body Corporate Committee. The primary “action” of the Body Corporate in this case, or more appropriately “inaction” is that it does not agree to deposit the necessary plans to enable the staged development to be completed on the basis of the longstanding as-built position. The decision to agree (or not) is a decision of the Body Corporate that is not delegated to the Committee. It is a decision of the Body Corporate made through the Body Corporate passing, or not passing, a special resolution of its members.39
[61] The Body Corporate says that this vote by its members is entirely unfettered. There is reference in the relevant texts to the potential application of administrative law principles, or fraud on a power as it relates to body corporate conduct.40 For present purposes however I do not need to determine whether conceptually there is such an administrative overlay or whether fraud on a power is applicable. That is because I am entitled to examine the circumstances to decide whether cause can be shown which does not require a breach of legal duty or principle.
[62] In assessing whether there is “cause” my enquiry is into the conduct of the Body Corporate’s human agents. The Body Corporate decision by special resolution of its members not to agree to a course of action can constitute cause to appoint an administrator. In this case the Body Corporate is also acting through its members in dealing with the requests by Westwind prior to the resolution.
[63] In the present circumstances I have decided that there is cause to appoint an administrator for the limited purposes of giving effect to the redevelopment. The
38 See s 141(5) which gives to the administrator, to the exclusion of the body corporate, all powers of the body corporate and the body corporate committee.
39 UTA 2010, s 101(2).
40 See D W McMorland and Thomas Gibbon McMorland and Gibbons on Unit Titles and Cross- Leases (2nd ed, LexisNexis, Wellington, 2020) at [14.040] and [14.054]; Rod Thomas Brookers Unit Titles Handbook 2011 (Thomson Reuters, 2011) at 5.1(12)(e). See also Velich v Body Corporate No 164980 (2005) 5 NZ ConvC 194,138 at [48].
combination of the particular circumstances here, have led me to the view that it is appropriate to do so.
[64] Westwind’s building was constructed in 2004 with no owner raising any issues regarding construction otherwise in accordance with the plans.41 The owner of Unit D was a member while construction occurred. The other unit owners appear to have all acquired their units after the building was constructed and where the proposed unit development plan did not match the as-built construction. Until Westwind sought to rectify the position in the context of a sale, no unit owner raised any issue.
[65] In combination with this are the steps taken by the Body Corporate. Although Westwind invites me to find bad faith in the conduct of the other owners, I do not go that far. However, the exchanges I referred to earlier and the correspondence from the Body Corporate solicitors demonstrate that the other Body Corporate owners have used Westwind’s predicament as a form of leverage to seek to obtain advantages collateral to issues raised by the changes to the plans and unrelated to the merits of the proposal.42 In doing so the communications and minutes show a co-ordination of the Body Corporate members, with the Body Corporate communicating through its solicitors with Westwind. While several meetings were called, the Body Corporate deferred any vote until a postal vote on 26 May 2023 with three days’ notice. The Body Corporate did not agree to deposit the plan.
[66] It is correct, as Mr Baker submitted, that there is no visibility into the precise reasons for the resolution failing to pass. However, I infer from the communications that the basis lies primarily in an attempt at leverage, although I accept that apathy by some cannot be excluded. Either way, in my view the steps taken by the majority unnecessarily or gratuitously injure Westwind, which has a significant interest in implementing the redevelopment. The communications in which the Body Corporate set out its collateral requirements, were on behalf of the Body Corporate and its members as a whole, not individual owners. These are actions by the Body Corporate through its members.
41 Compare Duncan v Taylor (2010) 12 NZCPR 235 (HC) at [28]-[29].
42 See [28]-[38] above.
[67] Westwind invited me to characterise the present position of the Body Corporate as one of “dysfunction” as to its redevelopment decision-making. I do not accept that submission. It is correct that dysfunction need not relate to the activities of the Body Corporate generally. In Whai Rawa, the Body Corporate was held to be dysfunctional and an administrator was appointed when it deliberately stopped raising levies and paying ground rental even though its other activities were unaffected. However, in that case the Court held that the Body Corporate was knowingly in breach of its core statutory function under s 87 of the UTA 2010 to pay the lessor ground rent from levies collected. There is no breach of statutory duty here, as Mr Baker emphasised.
[68] I have had regard to whether any prejudice to other owners is caused by what Westwind proposes. I consider there is no relevant or sufficient prejudice.
[69] There is no change in the total overall unit area owned by Westwind. The total area is the same as the combined area of the present FDUs. There will be a 12 per cent increase in ownership interest for the combined Unit J1 arising from the new reassessment in comparison to the combined interests for the existing FDUs. This will result in Westwind or its successor being responsible for a greater share of operational expenses, relative to other unit owners, than is presently the case. As the Body Corporate accepted, this is a benefit of what is proposed.
[70] Westwind confirmed it has met or will meet all of the costs of the redevelopment process. This includes Westwind meeting the cost of the Body Corporate’s legal costs in respect to the redevelopment.
[71] The only potential prejudice raised by the Body Corporate was identified for the first time in submissions in opposition. It was said that the new plan does not allow for specific accessory units such as carparks at the north of the plan as the deposited plan had done. However, since its construction, Westwind’s building appears to have taken up space at the top of the site where these carparks are in any event. There is available space on the site for carparking.
[72] It was further said that the change in ownership interests resulting from a reassessment means that on becoming a principal member, Westwind’s Unit J1 will have a vote on a poll that in circumstances of a poll would thwart s 211(1) relief sought by a minority.43 There was an associated issue that passing ordinary resolutions will be difficult unless a full complement of other owners is present.
[73] Again, this had not been raised previously. It is an issue that arises due to reassessment of ownership interests upon the deposit of the new plans. Ownership interests are assigned for principal units and accessory units and proposed principal units and proposed accessory units.44 They are fixed based on the relative market value of the unit in relation to each of the other units.45
[74] As Ms Wendt submitted, had the structure been built as proposed under the present plans, the four principal units created would command some 30 per cent (4/13) of the vote on a resolution as compared to only one vote (1/13) for the one principal unit that Westwind will now have under the plans proposed to be deposited. Only if a resolution passes can it go to a poll based on ownership interest.46 For any special resolution, under the present deposited plans (if they proceeded to complete unit plans) Westwind could have blocked the matter going to a poll at all due to its number of units.
[75] Moreover, ownership interest is calculated dependent on relative market values. The overall area of Westwind’s interests is the same as it was under the previous plans. The reassessment has provided an updated and accurate assessment of ownership interest replacing an outdated assessment. Notably, Westwind’s percentage of ownership interest may potentially have been higher if four commercial units had been constructed in accordance with the proposed unit development plan.
[76] The ownership reassessment that was undertaken for the plans proposed to be lodged was circulated in 2021 and the only issues raised with it then by the
43 UTA 2010, s 111(2) provides that where a special resolution is not passed but 65% of eligible voters vote in favour of it, an eligible voter who voted for the resolution may apply for relief.
44 UTA 2010, s 38(1).
45 Section 38(2).
46 Sections 97-100.
Body Corporate members were addressed at that time by Westwind’s valuers. The valuers responded that there had been Council-consented alterations to some of the Units A-I that affected their ownership assessment relativity. I do not consider that on the information before me there is substance in the issue raised by the Body Corporate. What I can say is that it was only raised at the last minute in submissions rather than being a matter of concern raised in the correspondence.
[77] I have considered whether an administrator should be appointed given that this is a predicament of Westwind’s making and when the previous UTA required a unanimous resolution. Mr Barwell was not required to attend for cross-examination but I accept his evidence that he had not appreciated that the necessary technicalities were not complied with. That being the case, this is not, nor do I infer it to be, a case where the owner has sought to manipulate the situation. Nor should it be taken from my decision to appoint an administrator here that this is a refuge for any defect in unit title. Rather this is an appointment I am prepared to make on the facts of this case for limited purposes so that the staged development can be completed.
Terms of appointment
[78] Appointment of an administrator gives that person the ability to act in place of the body corporate. The appointment cannot give the administrator greater powers than the body corporate. A body corporate cannot dispense with the designated resolution process. Therefore, I agree with Mr Baker that the terms of appointment should not include a term sought by Westwind that would exclude that procedure as it applies to owners of registered units.
[79] The procedure gives owners of registered units in that capacity the right to object. It is of a different character to the action of the Body Corporate to agree or not agree to do something by resolution, which is an exercise of corporate power. In principle, through the designated resolution procedure, individual members could still object to the deposit of the plans and apply to the High Court for relief on the basis that it is just and equitable. The existence of that procedure is not grounds to refuse to appoint an administrator when the circumstances justify an appointment. Whether,
despite this view, there would be a basis for an individual owner to object is not for me to assess.
[80] I am satisfied Timothy Jones is an appropriate appointment. The terms of appointment are set out below.
[81] Westwind has been successful, and costs should usually follow the event. I would expect costs on a 2B basis to be appropriate. In the event that the parties cannot agree on costs, I direct memoranda for Westwind to be filed within 14 days from the date of this judgment and from the Body Corporate within another 14 days.
Anderson J
Appendix – Appointment terms
[1] The administrator may exercise all the powers of the Body Corporate to the exclusion of the Body Corporate, Body Corporate Committee for the limited purposes of implementing the steps below, and subject to all the duties of the Body Corporate.
[2] The administrator is to minimise administration overheads where practicable, including by delegating the management to the existing persons undertaking those day-to-day administrative processes on behalf of the Body Corporate where the administrator is satisfied it is appropriate to do so.
[3] Notwithstanding the ability to delegate, the administrator is to have overall control over any steps required to have the Substituted Proposed Unit Plan and Complete Unit Development Plan (the Plans) deposited.
[4]The administrator’s powers include the following:
(a)Signing the authority and instruction form to grant on behalf of the Body Corporate any easement in favour of Auckland Council over areas A and C necessary for the deposit of the Plans.
(b)Signing any application form required by Land Information New Zealand (LINZ) on behalf of the Body Corporate for the deposit of the Plans.
(c)Signing any authority and instruction form on behalf of the Body Corporate necessary for the deposit of the plans with LINZ.
(d)Giving such notices and obtaining such consents and certificates as are required to comply with the Act for the deposit of the Plans including the designated resolution procedure under s 216.
(e)Obtaining the consent of mortgagees or encumbrancers (if any).
(f)Signing any documents required under the Act necessary to comply with the requirements of the Act for the deposit of the Plans.
[5] The administrator is to report back to the Court and the parties regarding the Body Corporate’s compliance with its obligations within six months of the date of this judgment.
[6] The administrator’s appointment is to continue until further order of the Court but with the parties and the administrator having leave to apply or vary or end the administration within or after the six month reporting date.
[7] The administrator is entitled to be remunerated by the Body Corporate for his reasonable attendances at a rate of $420 per hour plus GST and reasonable disbursements.
[8]The administrator is to have access to any relevant records.
[9] Leave is granted to the administrator to seek directions from the Court relating to remuneration and any other matters arising from the administration.
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