Body Corporate 172108 v Meader and Ors

• Jurisdiction: New Zealand
• Judge: Heath J
• Judgment Date: 03 March 2010
• Neutral Citation: [2010] NZHC 187
• Docket Number: CIV 2009-404-6868
• Court: High Court
• Date: 03 March 2010

BETWEEN

Body Corporate 172108

Applicant

and

Joanne Monica Meader And Ors

Respondents

[2010] NZHC 187

CIV 2009-404-6868

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

Application seeking determination of costs following the determination of an application to approve a scheme for the remediation of a “leaky building” under s48 Unit Titles Act 1972 — one unit holder was engaged in adversarial litigation against the Body Corporate in relation to the extent of its contribution — whether all costs should be pooled and paid by the unit holders in accordance with their unit entitlement or whether the party opposing the Body Corporate be required to meet its own costs together with the costs it was responsible for under its unit entitlement.

Counsel:

M A Muir for Applicant

N Khouri for Manchester Securities Ltd (37th Respondent)

No appearance by, or on behalf of remaining 47 Respondents

M A Muir, PO Box 4234, Shortland Street, Auckland

JUDGMENT OF Heath J

Heath J

This judgment was delivered by me on 3March 2010 at 4.30pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Introduction

1 Body Corporate 172108 (the Body Corporate) seeks an order under s 48 of the Unit Titles Act 1972 (the Act), approving a scheme designed to facilitate remediation of damage caused to an apartment complex by severe water ingress. The apartment complex is situated at 196 Hobson Street, Auckland (Hobson Apartments).

2 Hobson Apartments is a high-rise unit title development, with one unusual feature. The Body Corporate owns the exterior of Levels 1–11 of the building. Level 12 was constructed separately. The exterior of Level 12 is owned by the individual proprietor, Manchester Securities Ltd (MSL). Unit 12A is the penthouse unit and covers the entire twelfth floor. It is clad substantially in a sandstone-based cladding, distinguishing it visually from the remainder of the building.

3 The Body Corporate and individual proprietors (but not MSL) have issued proceedings against the Auckland City Council (the Council), as the territorial authority responsible for issuing the building consent and carrying out inspections. A mediation has been scheduled for 23 March 2010. That has brought some urgency to the resolution of the present application.

4 The Body Corporate promotes a scheme that has been approved in a general meeting by all individual owners represented at it, save for MSL. MSL's grounds of opposition reduced to the following, during the course of the hearing:

• a) MSL does not consider that the Body Corporate should have any decision-making role in respect of remediation to Unit 12A.

• b) Remedial works have not been defined in sufficient detail and too broad a discretion is conferred upon the Body Corporate in relation to management of the proposed construction work.

• c) A more equitable apportionment of cost is required. MSL considers that the work to be undertaken on its own property is “relatively minor”, as opposed to “the major re-cladding work apparently required on the remainder of the building”.

The procedure adopted at the hearing

5 With the consent of counsel for both the Body Corporate and MSL, the hearing of oral evidence was undertaken on an unorthodox basis. It became clear that it was necessary to hear expert witnesses give evidence contemporaneously in order to understand better the competing views on issues such as the extent of work required and its management.

6 Following adjournment to a conference room, two experts, Mr Morrison and Mr Alvey, were sworn. They answered questions from counsel and myself as the hearing progressed. Once most of the critical issues had been explored in that way, I provided counsel with an opportunity to examine on any further issues, with cross-examination and re-examination of each witness, in turn, following. A transcript was taken of the evidence given and that has been made available to counsel.

7 I thank counsel for agreeing to this course of action. It proved of great value to me in understanding the issues with which I was being asked to deal.

Matters of context

8 As required by ss 48(4) and 50 of the Act, the present application was served on all individual proprietors, mortgagees and insurers of the land and buildings comprised in the complex. MSL is the only one of 48 respondents to oppose the application. Given the complex dynamics involving private and common interests raised by the ownership structure for the exterior of Hobson Apartments, MSL's opposition is unsurprising.

9 The Act draws a sharp distinction between individual units (for which each registered proprietor takes responsibility) and common property (the domain of the Body Corporate). That distinction is logical because, while individual registered proprietors can deal only with individual property, “common property” is owned by all proprietors and must be managed by the body corporate for the common good. The Body Corporate is the vehicle through which efficient management of common property is undertaken. 1

10 Although MSL owns the exterior of Level 12, the Body Corporate's position is that it must take full responsibility for repair work, so that all unit owners are protected from potential water ingress and a single code compliance certificate can be obtained from the Council. 2 In the absence of an order sanctioning a scheme, there would be no power for the Body Corporate to undertake repairs on individual property.

11 It is unnecessary to rehearse the positions taken before the hearing on the extent of works required to remedy weathertightness problems. These issues were narrowed by affidavits from Mr Templeman and Mr Morrison (a chartered building surveyor and a registered architect respectively, engaged by the Body Corporate) and Mr Alvey (a registered building surveyor engaged by MSL). Both Mr Morrison and Mr Alvey gave oral evidence before me.

12 During the course of the hearing, two options to the proposed scheme emerged:

• a) Mr Morrison suggested a “half-way house”. This solution was designed to limit the work to be undertaken on Level 12, while ensuring that units on Level 11 were adequately protected from water ingress from above. This proposal was subject to Council confirmation that the work would, if completed satisfactorily, result in a single unqualified code compliance certificate.

• b) Mr Alvey's proposal was to undertake a “flood test” on Level 12, in order to ascertain whether any water seeped through to units on Level 11. If the flood testing were to reveal water ingress into the units on Level 11 from areas other than directly beneath planter boxes (previously identified as a source of ingress), it would be necessary to lift all tiles and to complete re-cladding of the deck. Otherwise, Mr Alvey suggested “grafting” a new liquid membrane strip to an area under the planter boxes. The cost of the “grafting” proposal is significantly less than for a complete re-cladding.

13 As the hearing progressed, the issue became more refined. Ms Khouri, for MSL, (after taking instructions from its director, Mr Cummins) confirmed that if MSL were permitted to lay a wooden deck, it would both allow the sandstone tiles to be removed and meet the cost of all repairs on Level 12, including repairs involving common property.

14 The question of contribution towards costs of repair remains at large. Mr Muir, for the Body Corporate, contended that MSL was required, as a matter of law, to meet the costs associated with repair of its private property and, further, to meet 11.88% (being its unit entitlement 3) of all repairs undertaken with respect to common property. Ms Khouri submitted that, because damage to Level 12 was far less than other areas of the building, it would be inequitable to require MSL to meet contributions to costs of repairing common property, if it were to also meet the cost of repairs to its private property.

The nature of the scheme

15 The proposed scheme is set out in the Schedule to this judgment. Without getting into the minutiae of the particular clauses, the broad thrust of the scheme can be summarised as follows:

• a) The Preamble sets out the background against which the scheme comes to be approved.

• b) Duties and powers of the Body Corporate, in relation to the identification of and responsibility for undertaking repairs, are dealt with in cls 1, 2, 4 and 5.

• c) Concomitant obligations on individual owners, to facilitate repairs undertaken through the Body Corporate, are set out in cls 16, 17 and 18.

• d) The Body Corporate's ability to levy for costs of repairs authorised by the scheme are set out in cls 3, 6, 7, 8, 9, 10 and 19.

16 There are a number of other provisions of a mechanical nature involving such issues as accounting, reporting, insurance, indemnities and changes in ownership during the course of the scheme.

17 A dispute resolution clause is included to deal with disputes between individual owners and the Body Corporate, in relation to “matters arising under [the] scheme”. Clause 13 provides:

• 13 Dispute resolution

  • 13.1 The Body Corporate's decision shall be final in all respect all matters arising under this scheme, except where 5 or more Owners whose objection in monetary value cumulatively exceeds $30,000, or where one unit holder has an objection which in monetary terms exceeds $10,000, in which case on the Body Corporate receiving notice of such objection the matter shall be referred to arbitration.

  • 13.2 The Owners must give notice to the Body Corporate of their objection within 10 working days of receiving an assessment as to Costs or other notice from the Body Corporate which is the subject of the objection outlining the grounds on which such objection is made. On receipt of the notice the Body Corporate will refer the matter to an arbitrator (to be appointed by the President of the Quantity Surveyors Association) and...