Body Corporate 199380 v Cook and Another

• Jurisdiction: New Zealand
• Judge: Van Bohemen J
• Judgment Date: 30 May 2018
• Neutral Citation: [2018] NZHC 1244
• Docket Number: CIV 2017-404-1852
• Court: High Court
• Date: 30 May 2018

Under the Unit Titles Act 2010

And the Residential Tenancies Act 1986

In the Matter of an appeal from the District Court

Between

Body Corporate 199380

Appellant

and

Alison Cook & Michael Van Den Blink

First Respondents

and

Mary Webb

Second Respondent

[2018] NZHC 1244

CIV 2017-404-1852

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA

TĀMAKI MAKAURAU ROHE

Leaky Buildings, Statutory Interpretation — appeal against a decision of the District Court which upheld a Tenancy Tribunal decision that s 126 Unit Titles Act 2010 (“UTA”) (recovery of money expended for repairs and other work) applied where the repairs to a principal unit substantially benefited one or more other unit owners so that the repair costs must be apportioned among the owners of the principal units that substantially benefitted from the repair — dispute concerned repair of decks on first floor which served as the ceiling of the unit below — clarification of the relationship between s126 UTA and s138(4) UTA (Body corporate duties of repair and maintenance — costs incurred by the body corporate that relate to repairs to or maintenance of building elements and infrastructure contained in a principal unit are recoverable from the owner of that unit as a debt due to the body corporate) — guidelines for bodies corporate in deciding which section to recover costs under

Appearances:

S Price and I Stephenson for Appellant

J P Wood and J Heatlie for Respondents

JUDGMENT OF Van Bohemen J

1 The leaky building problem has been challenging building owners and managers for over 20 years. The challenges have been acute in the context of unit developments where the powers and responsibilities of unit owners and bodies corporate under the Unit Titles Act 1972 were not always adequate for dealing with situations that arose. The Unit Titles Act 2010 addressed some of the deficiencies of the earlier Act, notably by giving bodies corporate greater powers to repair unit property that is important to the integrity of a building. However, the new Act raises questions about responsibility for payment of repairs to unit property carried out by bodies corporate exercising these new powers because two sections, ss 126 and 138(4), provide different bases on which a body corporate can recover its costs. As demonstrated by this appeal, the two sections can produce very different results for owners of apartments in a unit development.

2 This appeal seeks clarification of the relationship between those two sections and asks whether one section is intended to apply only when the other cannot apply, or, if they can both apply, on what basis should the body corporate decide which section to apply when it makes repairs within a unit title that have benefits for other unit titles and, possibly, for the building as a whole.

3 Counsel for the appellant body corporate says the specific question raised on appeal is:

Does s 138(4) apply only where the repairs to an owner's principal unit do not “substantially benefit” any other units in the circumstances provided for in s 126?

4 The body corporate says the answer to the question is “no” and it has a choice as to whether to recover the costs of repair under s 138(4) or under s 126 in circumstances where both sections apply regardless of the question of benefit to other units. Under this interpretation, a body corporate may elect to recover under s 138(4) all the costs of repair from the owners of the principal units that were repaired even if the repairs substantially benefitted one or more other principal units. The body corporate says this interpretation is consistent with the purposes of the UTA 2010 and the UTA 1972 and decisions under the earlier Act.

5 The respondent unit owners and the District Court and Tenancy Tribunal below say the answer is “yes” and s 126 applies in circumstances where the repairs to a principal unit substantially benefit one or more other unit owners so that the costs of the repairs must be apportioned among the owners of the principal units that substantially benefitted from the repair. The unit owners say this interpretation is fair and consistent with the purpose of the UTA 2010 as compared with that of the UTA 1972, and with the intentions of Parliament when enacting the UTA 2010.

6 Although the amount in dispute in this appeal is relatively modest – a little over $100,000 – counsel for the body corporate says the decision is likely to have wider significance because it is the first to consider the relationship between ss 126 and 138(4).

Factual context

7 The Sebel Suites building is situated at the north-west corner of the intersection of Customs Street West and Hobson Street in Auckland and fronts onto the Viaduct Harbour on the Auckland waterfront. The respondents, Ms Cook and Mr van den Blink on the one hand and Ms Webb on the other, own Units 108 and 109 respectively on the first floor of the building. Next to them are Units 110 and 111. The four units have large outside decks which form a single continuous whole that is divided into four separate parts, each contained within the title of the four individual units. Beneath the four units is Unit S, which operates as a restaurant. The decks of the four first-floor units form part of the ceiling of Unit S but the decks themselves are wholly within the titles of the first-floor units.

8 It is common ground the deck is a “building element” as defined in s 2 of the UTA 2010 and serves more than one unit and under s 138(1) of the UTA 2010 the body corporate had a responsibility to maintain and repair the deck. It is also common ground the deck tiling and the membrane underneath the deck needed repair and, if not fixed, there was a risk of water getting underneath the decks and into the ceiling cavity of Unit S.

9 On 30 March 2015, the body corporate resolved at its annual general meeting to undertake those repairs. The repairs were completed at a total cost of $104,150.90 (including GST). In accordance with the advice of its solicitors that the owners of Units 108 – 111 were required to meet these costs under the UTA 2010, the body corporate invoiced each of the owners of the four first-floor unit owners the sum of $27,187.73 for the total cost of the repair plus ancillary charges. The owners of Units 110 and 111 paid the sums invoiced. Ms Cook and Mr van den Blink and Ms Webb separately disputed the claims against them.

The Tenancy Tribunal decisions

10 In June 2016, the body corporate brought claims to the Tenancy Tribunal seeking to recover the invoiced amounts pursuant to s 138(4) of the UTA 2010, which provides that the costs of remedial work undertaken by the body corporate to building elements contained in a unit are recoverable from the unit owners. Ms Cook and Mr van den Blink argued in response that the costs of repair should have been recovered in accordance with s 126 of the UTA 2016 which allocates liability for repair costs undertaken by the body corporate by reference to whether the repairs were substantially for the benefit of one of more units and, therefore, some of the repair costs were recoverable from Unit S.

11 Before the Tenancy Tribunal, the body corporate argued that Unit S did not substantially benefit from the repairs which were carried out to ensure that the first-floor unit owners were not in breach of their common law obligation not to create a nuisance. The body corporate asserted that it could not be said that Unit S substantially benefitted from other unit owners complying with their common law responsibilities. Accordingly, s 126 of the UTA 2010 did not apply. The body corporate also argued that, even if Unit S did benefit substantially from the repairs, the body corporate could still recover the costs from the owners of the first-floor units under s 138(4) rather than under s 126 because all the work had been undertaken within those principal units.

12 The Tenancy Tribunal held that Unit S did substantially benefit from the repairs because the repairs had been intended not only to allow the decks to drain adequately but also to ensure water did not leak into the ceiling cavity of Unit S. The Tribunal also held that if there was to be overlap in the operation of ss 126 and 138(4), that overlap would be understandable only if the outcome of applying one section or the other would be the same and not where, as in this case, the results would be vastly different. It said it would be contrary to the intention of the UTA2010 to allow bodies corporate to choose to require one unit holder to shoulder the entire cost of repairs when more than one unit holder substantially benefitted from those repairs. The Tribunal found, therefore, that s 126 and not s 138(4) applies where more than one unit holder substantially benefits from the repairs done.

13 The Tribunal held that the costs of the repairs should be apportioned among the units that benefitted. As the body corporate had not decided on apportionment, the Tribunal held that the costs should be apportioned by utility interest in accordance with s 126(2)(b) of UTA 2010. The result was Ms Webb and Mr van den Blink were held responsible for 10.2 per cent ($10,623.39) of the total costs of repair and Ms Webb for 7.8 per cent ($8,123.77) of the costs, being their respective utility interests. In subsequent decisions, the Tribunal awarded costs of $6,600 in favour of Ms Webb and Mr van den Blink on the one hand and Ms Webb on the other, as determined by reference to s 102(2)(b) of the Residential Tenancies Act 1986.

The District Court decisions

14 The body corporate appealed the Tenancy Tribunal's decisions to the District Court on the grounds that the Tribunal had:

• (a) Erred in law in holding that the body corporate recovery rights...