Berachan Investments Ltd v Body Corporate

JurisdictionNew Zealand
JudgeArnold J
Judgment Date19 June 2012
Neutral Citation[2012] NZCA 256
Docket NumberCA592011
CourtCourt of Appeal
Date19 June 2012
BETWEEN
Berachan Investments Limited
Appellant
and
Body Corporate 164205
Respondent

2012 NZCA 256

Court

Glazebrook Arnold and Harrison JJ

CA592011

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal from High Court decision that Body Corporate (“BC”) was only responsible for replacing the 20 per cent of the roof that was common property–80 per cent of roof attached to unit owned by appellant–whole roof needed replacing–building developed and brought within Unit Titles Act 1972“UTA” in the 1990s–before any units sold default Body Corporate Rules in the UTA were amended to provide that it was BC's responsibility to repair and maintain the roof and common property “rule 2(a)”–BC argued successfully in High Court that rule was ultra vires –whether amended rule 2(a) was incidental to the BC's obligations in respect of the common property, in particular to keep it in a state of good repair

Counsel:

K W Berman for Appellant

T J Herbert for Respondent

  • A The appeal is allowed.

  • B The declaration made by the High Court is quashed, as is the order for costs in that Court.

  • C The respondent must pay the appellant costs for a standard appeal on a band A basis plus usual disbursements. Costs in the High Court are to be determined by that Court in light of this judgment.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Arnold J)

Table of Contents

Para No

Introduction

[1]

Factual background

[5]

Statutory background

[14]

High Court decision

[20]

Basis of appeal

[24]

Discussion

[29]

(i) The authorities

[30]

(ii) Evaluation

[47]

Decision

[53]

Introduction
1

The appellant, Berachan Investments Ltd (Berachan) owns unit 12A in a 12 story building in Albert Street, Auckland. The building is an older building that is used primarily for commercial purposes but also contains some apartments. It was developed and brought within the Unit Titles Act 1972 (the Act) in the 1990s.

2

The roof of the building is in a state of disrepair and needs replacing. 80 per cent of the roof forms part of accessory unit AU3, which is attached to unit 12A, and 20 per cent is common property. Despite this, the roof is physically and functionally a single entity, so that the whole roof must be replaced and that must be done as a single project. A dispute has arisen as to who bears responsibility for the roof's replacement.

3

Under the Body Corporate Rules, which have been in their present form since immediately after the building was brought under the Act, it is the Body Corporate's responsibility to replace the roof. However, the Body Corporate considered that it should be responsible only for the replacement of the 20 per cent of the roof that is common property and that Berachan, as the proprietor of AU3, should be responsible for the remainder. It issued proceedings against Berachan, in which it argued that the Body Corporate Rules were ultra vires to the extent that they purported to provide otherwise. Allan J upheld the Body Corporate's contentions. 1 Berachan now appeals.

4

For the sake of completeness, we should mention that under the Unit Titles Act 2010, the Body Corporate would have the obligation to repair or replace the roof in the present case. 2 That Act does not, however, have this effect until 1 October 2012. 3

Factual background

5

The building at issue contains around 50 principal units and a number of accessory units. Unit 12A comprises about half of the twelfth floor. There are several accessory units attached to unit 12A, including AU3. As we have said, around 80 per cent of the roof is within AU3.

6

The building has a central core which contains an elevator shaft, stairwell and other facilities. There is a plant room above this shaft, which sits above the normal roofline of the building. The roof of the plant room is part of the common property and is not relevant to the present dispute. Rather, it is the roof that forms part of what we have described as the building's normal roofline that is at issue. We shall refer to this as the roof for ease of reference.

7

Obviously, the roof abuts the base of the plant room on all four sides. An area of the roof out from the base of the plant room is designated as common property, again on all four sides. The result is that the plant room is surrounded by roof which is part of the common property. This comprises approximately 20 per cent of the roof. The remainder of the roof is part of AU3 although physically it covers units 12B and 12C as well as unit 12A.

8

There is no physical indication in the roof at the point that it changes from common property to being part of AU3. The roof looks and functions like a single entity. As Mr Berman for Berachan said, there is simply a line on a drawing to

indicate the extent of the common property component. It is accepted that the roof must, as a practical matter, be replaced as a single entity. Moreover, workers access the roof for various reasons, for example, to set up outlet pipes, air conditioning units, television aerials and such like and to access the building's parapets and external walls for window cleaning, painting and similar purposes. In this context, it is relevant to note that the unit boundaries go to the internal face of external glass and walls, so that the exterior of the building is common property and accordingly the responsibility of the Body Corporate
9

There are two rain water collection gutters running the length of the roof, through both common and unit property. These collect rainwater from the roof and take it to downpipes adjacent to the plant room and to overflow downpipes at the edge of the building. Mr Berman submitted that these gutters are the responsibility of the Body Corporate, a contention that the Body Corporate disputed in correspondence. On the face of it, however, whatever the outcome of the present dispute, it does appear that the gutters fall within the Body Corporate's

responsibilities under r 2(b) of its rules. 4

10

The building was redeveloped and brought within the Act when the unit plan was deposited on 14 November 1994. Under the Act, the Body Corporate Rules set out in schs 2 and 3 to the Act applied at the outset (the default rules). However, before any units were sold, the default rules were amended.

11

Rule 2(a) in sch 2 provides that the body corporate shall:

[R]epair and maintain all chattels, fixtures, and fittings (including stairs, lifts, elevators, and fire escapes) used, or intended, adapted or designed for use, in connection with the common property or the enjoyment thereof.

This rule was amended to read:

Repair and maintain the roof and common property together with all chattels, fixtures and fittings (including without limitation stairs, lifts, elevators, fire

escapes, security or fire protection systems used, or intended, adapted, or designed for use, in connection with the common property or the enjoyment thereof: …

(Emphasis added to indicate changes.)

12

There was also an amendment in relation to the duties of proprietors. Rule 1(e) in sch 2 provides that a proprietor shall:

[R]epair and maintain his unit, and keep it in sufficiently good order, repair, and condition to ensure that no damage or harm shall ensue to the common property or any other unit in the building of which his unit forms part: …

This was replaced by the following clause:

Repair and maintain the interior of the unit and its fittings, fixtures and equipment in good, clean order, repair and condition and in the event of the interior of the unit or the fixtures, fittings or equipment in the unit being damaged or destroyed in any manner, immediately repair and reinstate the same in a proper and workmanlike manner to ensure that no damage, harm or diminution in the value or enjoyment shall ensue to the common property or any other unit:

(Emphasis added.)

13

There are, then, two features of the amended rules that are relevant for present purposes:

Statutory background

  • (a) First, the responsibility to repair and maintain the roof is expressed to be that of the Body Corporate.

  • (b) Second, the proprietors' relevant obligations are expressed to be limited to the interior of their units.

14

Several provisions in the Act are relevant to the discussion which follows. We do not propose to set them all out in this section of the judgment but rather will address them as they arise in the discussion. We deal with three provisions at this stage, namely ss 15, 16 and 37.

15

Section 15 is a lengthy provision setting out the duties of a body corporate. The more relevant elements of it are as follows:

Duties of body corporate

  • (1) The body corporate shall–

    • (a) subject to the provisions of this Act, carry out any duties imposed on it by the rules:

    • (b) insure and keep insured all buildings and other improvements on the land to the replacement value thereof (including demolition costs and architect's fees) against fire, flood, explosion, wind, storm, hail, snow, aircraft and other aerial devices dropped therefrom, impact, riot, and civil commotion, malicious damage caused by burglars, and earthquake in excess of indemnity value:

    • (f) keep the common property in a state of good repair:

    • (h) subject to this Act, control, manage, and administer the common property and do all things reasonably necessary for the enforcement of the rules:

  • (2) The body corporate shall also–

    • (a) establish and maintain a fund for administrative expenses sufficient in the opinion of the body corporate for the control, management, and administration of the common property, and for the payment of any insurance premiums, rent, and repairs and the discharge of any other obligations of the body corporate:

    • (b) determine from time to time the amounts to be raised for the purposes aforesaid:

    • (c) raise amounts so determined by levying contributions on the proprietors in...

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