Body Corporate 198900 v Bhana Investments Ltd

• Jurisdiction: New Zealand
• Judgment Date: 10 July 2015
• Neutral Citation: [2015] NZHC 1620
• Date: 10 July 2015
• Docket Number: CIV-2013-404-4263
• Court: High Court

BETWEEN

Body Corporate 198900

Plaintiff

and

Bhana Investments Limited

First Defendant

and

Cowboys Properties Limited

Second Defendant

and

Sheriff Properties Limited

Third Defendant

and

Sun Ock Limited

Fourth Defendant

and

Jgm Investments No. 2 Limited

Fifth Defendant

[2015] NZHC 1620

CIV-2013-404-4263

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Application pursuant to the Declaratory Judgments Act 1908 that a verandah was common property and the plaintiff was entitled under the Unit Titles Act 2010 and its Body Corporate Rules to remove the awnings attached to the verandah and to charge the owners of units for the cost of doing so — ground floor commercial units had erected awnings that were attached to the verandah by bolts — the body corporate claimed the awnings were on and over common property and that the owners of the commercial units had not obtained permission for them — also said that the word “determinable” in a rule permitting the granting of privileges over common land meant that any such privileges had to be granted by special resolution — resolution for commencing proceedings had been phrased so as to set up a budget but did not directly authorise proceeding whether the declaratory judgment procedure was appropriate — whether the verandah was common property or was a building element under the UTA which was neither unit property nor common property — whether the rules and body corporate resolutions should be interpreted as if they were statutory provisions or whether the principles of contractual interpretation applied — whether authorisation for the awnings had to be given by special resolution under the rules — whether the BC had validly authorised the commencement of the proceeding by resolution or by ratification.

Appearances:

T Rainey and JP Wood for plaintiffs No appearance for first defendant

K Davenport QC and R Lewis for second and third defendants M Benvie for fourth defendant (excused from appearing)

R Latton for fifth defendant

JUDGMENT OF TOOGOOD J

This judgment was delivered by me on 10 July 2015 at 3:30 pm Pursuant to Rule 11.5 High Court Rules

Introduction

1 When construction of The Quays building in Auckland's Viaduct Harbour was completed at the end of 1999, the unit plan for the development was deposited and the plaintiff, Body Corporate 198900 (“BC198900” or “the body corporate”), came into existence under the Unit Titles Act 1972 (“the 1972 Act”). 1 The body corporate has 71 principal units, the majority of which are residential units on the first to fourth floors. The remaining units, on the ground floor, are commercial units.

2 The Quays has a verandah which is alleged by the body corporate to be attached to the common property of the building at or just above the ground floor, extending along the southern, western and northern sides of the building. On the western side, the verandah overhangs land that was originally common property, but that land now belongs to Auckland Waterfront Development Agency Limited (“Waterfront Auckland”). At issue in this proceeding are the awnings, affixed by a few bolts underneath the verandah, which have been erected by the occupiers of the commercial units on the western and northern sides of the building. Those units are operated as restaurants and bars.

3 The body corporate seeks a declaratory judgment clarifying the extent of its power to remove the awnings. Specifically, it seeks a declaration that:

The Body Corporate is entitled under the Unit Titles Act 2010 and its Body Corporate Rules to remove the additions to the common areas north of the building and under the verandah to the west of the building and to charge the owners of units D, G, H and I jointly and severally for the cost of doing so.

4 The five defendants are the commercial tenants and owners who occupy the ground floor on the northern and western sides of the building. The first defendant, Bhana Investments Limited (“Bhana”) owns Unit D and leases it to the fifth defendant, JGM Investments No. 2 Limited (“JGM”), which operates The Sports Grill in the space. The second defendant, Cowboys Properties Limited (“Cowboys”) and the third defendant, Sheriff Properties Limited (“Sherriff”) own Units G and H

respectively and occupy those units together as Cowboys Bar. 2 The fourth defendant, Sun Ock Limited (“Sun Ock”) leases Unit I to JGM, which operates The Food Store in the space

5 Bhana did not actively defend the proceedings and Mr Benvie for Sun Ock, whose interests align with those of JGM, was excused from appearing. The defendants' case, therefore, was argued by Ms Davenport QC for Cowboys and Sherriff, and by Mr Latton for JGM.

History

6 The Waterfront Auckland land below the verandah on the west side of The Quays is used by The Sports Grill, Cowboys and The Food Store to accommodate patrons. Each establishment has a seating area adjacent to the building which has been enclosed by the addition of awnings to the underside of the verandah. The Foodstore also uses the land to the north of Unit I, which remains common property, in a similar fashion.

7 The occupation of these outdoor areas occurred progressively over time:

• (a) On 16 February 2009, the body corporate Committee received an application from the previous tenant of Unit D to erect a canopy overhanging the land immediately outside the unit; on 25 March 2009 the Committee noted that it had been erected.

• (b) In 2010, the tenant of Unit H requested permission to erect an awning, like the awning on Unit D, overhanging the land outside. The Committee approved the request, including as to the style and colour of the awning, on 14 October 2010.

• (c) In July 2010, JGM took over the lease to Unit I. It wished to erect an awning to match the one on Unit D, along with making other

  alterations to Unit I. JGM says the Committee approved the alterations in general on 14 October 2010.

• (d) At the same time as the awnings were added to Units H and I, a similar awning was added to Unit G.

• (e) Following the commencement of the proceedings, the tenants of Units G and H entered into a lease with Waterfront Auckland for an area of Market Square beneath the verandah on the western side of the building. Similarly, JGM says that the land outside Unit D has also been leased from Waterfront Auckland.

• (f) There is no evidence of a lease for the common property encased by the awning on the northern side of Unit I.

The broad issue

8 The body corporate claims that the verandah and all attachments that overhang the land belonging to Waterfront Auckland are common property. It says the awnings are objectionable because they are affixed to the underside of the verandah and thus are on and over common property, and that the proprietors of the commercial units in question never obtained written permission. 3 Furthermore, it claims that it never gave permission for the tenants in Unit I to occupy the common property on the northern side of the building. The body corporate is said to have voted at its annual general meeting in 2013 to authorise the body corporate Committee to require the commercial proprietors to remove the awnings at their own expense. It seeks confirmation that it is entitled to do so.

9 This issue is underpinned by a tension between the proprietors of the commercial units and the residential proprietors. Many of the residential proprietors would prefer that the commercial units are not operated as bars because those

operations tend to impact upon the quiet enjoyment of their residential units. The body corporate also claims that the awnings prevent maintenance access to other parts of the building and that the awnings have caused damage to the verandah in the form of cracking and ‘ghosting’. The defendants deny these allegations

Issues

10 The parties agree that there are five essential issues which the Court is required to determine. The issues, in the order in which they are dealt with below, are:

• (a) Is the declaratory judgment procedure appropriate to resolve the issues in this case and should the Court exercise its discretion to issue a declaration as sought by the plaintiff?

• (b) Is the verandah common property?

• (c) Did the body corporate validly approve the use of the common property by any or all of the commercial unit proprietors?

• (d) Is the body corporate estopped from denying that it validly approved the use of common property?

• (e) Did the body corporate validly authorise the commencement of the proceeding by resolution or by ratification?

11 There are subsidiary questions about the principles to be applied in the interpretation of the rules of a body corporate and the interpretation of resolutions of a body corporate, the answers to which inform the determination of questions (c) and

(e) above. Should the rules be interpreted as if they were statutory provisions, being an extension of the unit titles legislation, or should the principles of contractual interpretation apply, on the basis that the rules form part of a contract between unit holders and the body corporate? The subsidiary questions are answered below. 4

Is the declaratory judgment procedure appropriate to resolve the issues in this case and should the Court exercise its discretion to issue a declaration as sought by the plaintiff?

12 The body corporate seeks a declaration under the Declaratory Judgments Act 1908 that:

The Body Corporate is entitled under the Unit Titles Act 2010 and its Body Corporate Rules to remove the additions to the common areas north of the building and under the verandah to the west of the building and to charge the owners of units D, G, H and I jointly and severally for the cost of doing so.

13 Section 3 of the Declaratory Judgments Act provides:

Where any person has done or desires to do any act the validity, legality, or effect of which depends on the construction or validity of any statute, or any regulation made...