Body Corporate S73368 v Rosalind Kay Otway (Now Rosalind Kay Wright) and Olphert Sandford Trustee Service Company Ltd

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeGendall J
Judgment Date19 Dec 2018
Neutral Citation[2018] NZCA 612
Docket NumberCA71/2018

[2018] NZCA 612

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

Court:

Miller, Mallon and Gendall JJ

CA71/2018

CA319/2018

Between
Body Corporate S73368
Appellant
and
Rosalind Kay Otway (Now Rosalind Kay Wright) and Olphert Sandford Trustee Service Company Limited
First Respondents
Philip Herbert Dorr, Sharon Lesley Dorr and Donald Raymond Pilbrow
Second Respondents
Between
Body Corporate S73368
Appellant
and
Rosalind Kay Otway (Now Rosalind Kay Wright) and Olphert Sandford Trustee Service Company Limited
First Respondents
Philip Herbert Dorr, Sharon Lesley Dorr and Donald Raymond Pilbrow
Second Respondents
Counsel:

S C Price and I J Stephenson for Appellant

G Brittain QC and J Delaney for Respondents

Leaky Buildings, Statutory Interpretation — dispute regarding the responsibility of apartment owners to pay for substantial repairs undertaken by the appellant on a leaking unit title apartment block — appellant sought contribution under Unit Titles Act 2010 (“UTA”) — relationship between s138(4) UTA (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) and s126 UTA (recovery of money expended for repairs and other work — substantially benefits 1 or some units only; or benefits 1 or more of the units substantially more than it benefits others)

The evidence indicated the membrane problems were only one of a number of defects in the original design and construction of the building's storm water disposal system which necessitated the work undertaken. The BC therefore could not recover repair costs under the fault provision in s127 UTA.

Any perceived conflict between s138(4) UTA and s126 UTA and s127 UTA could be resolved with the latter sections where they apply prevailing over s138(4) UTA which, if necessary, was to be read down. There was no need for a specific mechanism to apply and guide a body corporate when choosing among them. That avoided the risk that a body corporate would abuse its powers by requiring one unit owner to bear the cost of remedial work that substantially benefited others.

There was no ability for the BC to recover costs from O and A on the basis of s138(4) UTA. Section 138(4) UTA and s126 UTA were not alternative modes of recovery and there was no jurisdiction under s138(4) UTA to order that the first-floor apartment owners pay for the new joinery installed in their apartments.

The HC had used the wrong test (that repair work had to benefit a unit by a “distinct and ascertainable amount”) when considering recover under s126 UTA. The presence of “distinct and ascertainable benefit” did not trigger the application of s126 UTA. Rather, s126 UTA provided for recovery where there was “substantial benefit” to or for one or more units. The term “distinct and ascertainable benefit” referred to one of two bases for apportioning recoverable costs, s126(2)(a) UTA and s126(2)(b) UTA.

The HC had been correct to find that the balcony works were not substantially for the benefit of the respondents' first-floor units and did not benefit those units substantially more than the remaining units in the building. The repairs fixed an important part of the storm water system for the entire building. Recovery under s126 UTA was not available.

The appeal was dismissed.

  • A The appeals are dismissed.

  • B The appellant must pay the respondents one set of costs for a standard appeal on a band A basis and usual disbursements.

JUDGMENT OF THE COURT
REASONS OF THE COURT

(Given by Gendall J)

Introduction
1

Maintenance and repair issues in unit title developments and the question of who pays for required repairs have caused some difficulty recently, particularly in the context of leaky buildings. 1

2

This appeal concerns a dispute regarding the responsibility of the respondent apartment owners to pay for substantial repairs undertaken by the appellant Body Corporate on a leaking unit title apartment block at Mount Maunganui. The Body Corporate appeals the substantive decision on this dispute given by Woolford J in the High Court of 20 December 2017, 2 and his costs decision of 17 May 2018. 3

Background
3

The respondents own two apartments on the first floor of the 12 storey mixed residential and commercial unit title development known as Oceanside Tower Two, located across the road from the beach at Mount Maunganui. The first floor has large decks which sit above ground-floor shops and the public footpath. The decks are

formed by a concrete slab sitting on structural steel beams. Previously, the concrete slab was covered by a butyl rubber membrane with ceramic tiles laid on top. These decks had been leaking since at least 2009, due in large measure to the premature failure of the waterproof membrane
4

The Body Corporate requested the respondents, as the owners of the decks, to repair them but they refused. This refusal continued for some years and the decks continued to leak into the ground-floor commercial shop units.

5

In 2014, the Body Corporate began to carry out repairs to the decks and the building pursuant to the Unit Titles Act 2010 (the UTA 2010). The work was completed and a code compliance certificate issued on 17 November 2014. The repair costs totalled $841,838.56. This cost was met initially by levies imposed by the Body Corporate on all unit owners in the development. The Body Corporate broke these repair costs into three categories:

  • (a) balcony works (excluding joinery and drainage Works) — $591,459.64;

  • (b) joinery works — $183,739.46; and

  • (c) drainage works — $66,639.46.

6

The Body Corporate elected to treat the drainage works as infrastructure for the building as a whole so it did not pursue that cost from the respondents. The Body Corporate, however, sought $290,830.43 from each of the respondents for the balcony works and the joinery works. 4

7

In 2015, the Body Corporate carried out other work relating to these repairs. This involved removing soffit linings, repairing structural steel under the decks, replacing the soffits and painting them (the podium and soffit works). This work was

completed at a total cost of $115,129.09. The Body Corporate sought from each of the respondents $24,488.05 for this work
8

The basis on which the Body Corporate sought recovery of the repair costs under the UTA 2010 was:

  • (a) The s 127 claim — given that the Body Corporate said that the decks were the respondents' unit property, they were obliged (from at least 2009 to 2012) to repair and maintain their decks pursuant to r 1(e) of the then Body Corporate Rules. 5 The respondents did not do so in breach of that obligation which resulted in the Body Corporate having to undertake the work. This work was completed on the basis the Body Corporate was entitled to recover from the respondents the resulting repair costs pursuant to s 127 as a fault provision.

  • (b) The s 138(4) claim — again, on the basis that the decks were the respondents' unit property, the Body Corporate said it was entitled to recover from them the costs of repairing these decks (being building elements that served or related to more than one unit) pursuant to s 138(4) of the UTA 2010.

  • (c) The s 126 claim — this claim was advanced alternatively in the event that recovery under the fault section, ss 127 and/or 138(4), proved not to be available. If this was found to be the case, the Body Corporate sought part recovery of the repair costs under s 126 on the basis that the

    repairs to the respondents' decks were said to benefit their first-floor units (and the ground-floor units) substantially more than the other units in the apartment block.
The Unit Titles Act 2010
9

Provisions in the UTA 2010 of relevance here are:

126 Recovery of money expended for repairs and other work

(1) This section applies where the body corporate does any repair, work, or act that it is required or authorised to do, by or under this Act, or by or under any other Act, but the repair, work, or act–

  • (a) is substantially for the benefit of 1 unit only; or

  • (b) is substantially for the benefit of some of the units only; or

  • (c) benefits 1 or more of the units substantially more than it benefits the others or other of them.

(2) Any expense incurred by the body corporate in doing the repair, work, or act is recoverable by it as a debt in any court of competent jurisdiction (less any amount already paid) in accordance with the following:

  • (a) so far as the repair, work, or act benefits any unit by a distinct and ascertainable amount, the owner at the time when the expense was incurred and the owner at the time when the action is instituted are jointly and severally liable for the debt; or

  • (b) so far as the amount of the debt is not met in accordance with the provisions of paragraph (a), it must be apportioned among the units that derive a substantial benefit from the repair, work, or act rateably according to the utility interest of those units, and in the case of each of those units, the owner at the time when the expense was incurred and the owner at the time when the action is instituted are jointly and severally liable for the amount apportioned to that unit.

(3) Despite subsection (2)(b), if the court considers that it would be inequitable to apportion the amount of the debt in proportion to the utility interest of the unit owners referred to in that paragraph, it may apportion that amount in relation to those units in the shares as it thinks fit, having regard to the relative benefits to those units.

127 Recovery of money expended where person at fault

(1) This section applies if the body corporate does any repair, work, or act that it is required or authorised to do, by or under this Act, or by or under any other Act, and the repair, work, or act was rendered necessary by reason of any wilful or negligent act or omission on the part of, or any breach of the Act, the body corporate...

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