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

• Jurisdiction: New Zealand
• Judge: Gendall J
• Judgment Date: 19 December 2018
• Neutral Citation: [2018] NZCA 612
• Docket Number: CA71/2018
• Court: Court of Appeal
• Date: 19 December 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

[2018] NZCA 612

Court:

Miller, Mallon and Gendall JJ

CA71/2018

CA319/2018

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

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)

Counsel:

S C Price and I J Stephenson for Appellant

G Brittain QC and J Delaney for Respondents

• 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 operational rules, or any regulations by, any unit owner or his or her tenant, lessee, licensee, or invitee.

(2) Any expense incurred by the body corporate in doing the repair, work, or act, together with any reasonable costs incurred in collecting the expense, is recoverable as a debt due to the body corporate (less any amount already paid) by the person who was the unit owner at the time the expense became payable or by the person who is the unit owner at the time proceedings are instituted.

…

138 Body corporate duties of repair and maintenance

(1) The body corporate must repair and maintain–

(a) the common property; and

…

(d) any building elements and infrastructure that relate to or serve more than 1 unit.

…

(4) Any 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 by the body corporate from the owner of that unit as a debt due to the body corporate (less any amount already paid) by the person who was the unit owner at the time the expense was incurred or by the person who is the unit owner at the time the proceedings are instituted.

…

The High Court substantive decision

10 We turn first to the Judge's substantive decision of 20 December 2017. Before the Body Corporate's claims under the UTA 2010 could be determined, the Judge had to resolve the preliminary issue as to where the floor boundaries of the respondents' units were located. Initially, the respondents had claimed their legal floor boundaries were some two to 15 centimetres above the concrete floor slabs in their apartments and decks. Thus, they denied they owned the decks and said that, given the decks were not their unit property, they were not responsible for the repairs required. The Body Corporate refuted this and argued that the concrete floor slabs of the decks in particular came within the respondents'...