Chuan Wu v Body Corporate 366611

JurisdictionNew Zealand
JudgeElias CJ,McGrath,William Young,Glazebrook,Tipping JJ
Judgment Date09 October 2014
Neutral Citation[2014] NZSC 137
Docket NumberSC 20/2013
CourtSupreme Court
Date09 October 2014
Between
Chuan Wu
Appellant
and
Body Corporate 366611
First Respondent
Theta Management Limited
Second Respondent

[2014] NZSC 137

Court:

Elias CJ, McGrath, William Young, Glazebrook and Tipping JJ

SC 20/2013

IN THE SUPREME COURT OF NEW ZEALAND

Appeal relating to Court of Appeal and High Court decisions as to whether the respondents had committed a private nuisance by refusing to supply access cards to the common areas of a building thereby restricting the appellant's access to his unit — first respondent was the body corporate of and the second respondent was the building manager — the building was run as a student hostel—appellant and a small number of other owners wished to manage and let their units themselves—the respondents required those owners agree to a Security and Access Protocol and pay a security deposit as a condition of access to the building before access cards would be issued—whether the Unit Titles Act 1972 (UTA) allowed the imposition of the security deposit or permitted the imposition of conditions of access—whether all “rules” had to be made under s37 UTA—whether there was power to impose the measures under s16 UTA—whether the respondents’ wrongful interference with the appellant's ability to access his unit constituted private nuisance and/or trespass — whether there had been a failure to mitigate by refusing an offer of a reduced security deposit.

Counsel:

B P Rooney for Appellant

N R Davidson QC and G Burgess for First Respondent S C Price and D M Cross for Second Respondent

A The appeal is allowed and the judgment of Asher J on the first cause of action is reinstated.

B The cross appeal is dismissed.

C The respondents are to pay to the appellant costs of $25,000 plus reasonable disbursements (to be set by the Registrar if necessary).

D The costs orders made in the Court of Appeal are set aside and the costs and interest awards in the High Court reinstated. If costs cannot be agreed for the Court of Appeal, costs should be set by that Court in light of this judgment.

JUDGMENT OF THE COURT
REASONS

Para No

Elias CJ, McGrath, Glazebrook and Tipping JJ

[1]

William Young J

[152]

ELIAS CJ, McGRATH, GLAZEBROOK and TIPPING JJ

(Delivered by Glazebrook J)

Table of Contents

Para No

Introduction

[1]

Background

[11]

Restructuring of the building's management

[16]

Problems in the building

[20]

The access issue

[24]

The dispute moves to the District Court

[39]

Settlement offer

[46]

Events culminating in the current proceedings

[52]

Judgment on preliminary question

[55]

The High Court judgment

[58]

The Court of Appeal judgment

[62]

Relevant legislative provisions

[69]

Issues

[75]

Interpretation of r 3.10

[76]

The parties' submissions

[78]

Our assessment

[81]

Power to impose the security deposit and Protocol?

[83]

The parties' submissions

[85]

The issues

[90]

Power to impose security deposit?

[91]

Power to impose conditions on access?

[97]

Section 37

[102]

Section 16

[110]

Conclusion

[113]

Trespass

[114]

Conclusion on trespass

[118]

Nuisance

[119]

Use or enjoyment of land

[122]

Rights over and in connection with a plaintiff's land

[126]

Conclusion on nuisance

[132]

The cross appeal

[133]

Mitigation of loss

[134]

Damages

[144]

Results and costs

[147]

Introduction
1

Mr Wu, an Australian resident, owns a unit in the Empire Apartments building in Auckland. Body Corporate 366611 is the building's body corporate. Theta Management Ltd (Theta) is the building manager. The building is run as a student hostel. Most of the owners lease their units to Theta, which in turn licences them to students.

2

Mr Wu and a small number of other owners wished to manage their units and lease them to students themselves. The respondents required such owners to sign the building Security and Access Protocol (the Protocol) and pay a security deposit as a condition of access to the building. Mr Wu issued proceedings, 1 claiming that this wrongfully interfered with his ability to rent his unit. In his first cause of action, he claimed in both private nuisance and trespass.

3

In the High Court, Asher J found in favour of Mr Wu and held the respondents to be liable to Mr Wu in nuisance. 2 The Court of Appeal allowed the respondents' appeal in part, finding in favour of Mr Wu on a more limited basis. 3 In both courts below, it was held that signing the Protocol was an unreasonable step that Mr Wu was not required to take to mitigate his loss.

4

On 3 May 2013, this Court granted leave to appeal and cross appeal. 4

5

We have decided that neither the Body Corporate Rules nor the Unit Titles Act 1972 5 gave the respondents the power to require owners or occupiers of owner–

managed units to sign the Protocol and to pay the security deposit as a condition of access to the building. In any event, the Protocol purported to impose “informal rules” on owners and occupiers, circumventing the rule-making provisions of the Unit Titles Act
6

As indicated above, the pleadings contained actions in private nuisance and trespass. At the hearing of this appeal, the Court indicated to the parties its doubts about whether the appropriate cause of action lay in private nuisance. We have decided that the doubts were well-founded and we have decided that that the respondents are liable in trespass for ousting Mr Wu from the common property, which he part owns.

7

While it was not strictly necessary to discuss nuisance, given the conclusion with regards to trespass, we consider that, attached to a unit holder's unit title, there is a natural right of access to the unit. There could therefore, by analogy with the cases regarding access to and from a public highway, be a good argument that the respondents committed a private nuisance by substantially and unreasonably interfering with Mr Wu's access right.

8

We agree (by majority) with the finding of the Courts below that Mr Wu took all reasonable steps to mitigate his loss. Mr Wu was not required, in mitigation, to accept the offer made by the Body Corporate to pay a reduced security deposit and accede to the Protocol. We have also upheld Asher J's quantification of damages.

9

We therefore allow the appeal, dismiss the cross appeal 6 and reinstate the damages awarded in the High Court.

10

We now discuss the facts and the procedural history in more detail, summarise the judgments below and set out the relevant legislative provisions, before analysing in more detail the issues in the appeal and cross appeal.

Background
11

The Empire Apartments building is 19 storeys high and contains 313 residential units, virtually all of which are overseas owned. The building was purpose-built for student accommodation with shared facilities and services to units. When fully occupied, approximately 800 students can be accommodated.

12

The Empire development was undertaken by Sanctuary Developments Empire Ltd (Sanctuary), which owned the land on which the Empire was built. On 29 March 2006 it deposited a unit plan, which had the effect of creating a stratum estate in freehold for each individual unit. 7 Sanctuary acquired each of the strata titles that were created and became (as the sole owner) the Body Corporate. 8 Sanctuary passed a unanimous resolution amending the default rules under schs 2 and 3 of the Unit Titles Act to a new set of rules. 9

13

Before selling any of the units, Sanctuary entered into a lease of each unit to an associated company, Academic Accommodation Management (3) Ltd (Academic). This was a company formed by Mr Groves, the principal of Sanctuary. Individual units were sold subject to that lease and on 1 August 2006 Academic was appointed as the building manager to manage the rental of the units. These in turn were rented to students under licences to occupy. 10

14

Academic contracted to pay a fixed rent to the purchasers of the units, the units having been marketed in New Zealand and overseas on the basis that each investor would receive a fixed rent amounting to eight per cent of the purchase price of each unit for the first two years.

15

Mr Wu entered into an agreement to purchase Unit 810 in 2004 (with settlement in 2006). He acquired (like the other owners) the unit not for personal occupation but as a passive investment.

Restructuring of the building's management
16

On 22 August 2007, Academic sent a letter to all owners advising that it was unable to continue its role in dealing with student occupiers. It resigned, effective from 31 August 2007, and, as from that date, terminated all the occupational licences with the students. Academic also made it clear that it could not perform its obligation to pay the fixed rent to the owners. Academic was placed in liquidation on 12 September 2007. On 28 November 2007, Academic's liquidators disclaimed the leases with the owners as onerous property.

17

In the letter of 22 August 2007, unit owners had been advised by Academic that Mr John Chen had resigned from Academic 11 and formed a new company, Theta, which had been appointed as building manager. It was indicated that Theta would be soliciting their business and that Academic would help in any transition arrangements as required.

18

Theta sent out to unit owners a standard form letter, dated 29 August 2007, asking them to sign a Theta management lease appointing Theta to manage the units. The leases that Theta invited owners to sign were not on the same terms as the original Academic leases. In particular, they did not provide for fixed rental returns. Between August and October 2007 Theta signed leases with the majority of the unit owners and proceeded to licence those units to student occupants.

1...

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8 cases
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    ...BEMA Property Investments Ltd v Body Corporate 366611 [2017] NZCA 281, [2018] 2 NZLR 514 at [57] and n 72. 45 Wu v Body Corporate 366611 [2014] NZSC 137, [2015] 1 NZLR 215. In Wu, the Supreme Court held there was an exception to the usual requirement for there to be a “emanation”. The Cour......
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    ...Statute Law in New Zealand (5th ed, LexisNexis, Wellington, 2015) at 338. 16 (5 March 2009) 652 NZPD 1713. 17 Wu v Body Corporate 366611 [2014] NZSC 137, [2015] 1 NZLR 215 at [98]. 18 It was not suggested that there was any practical difference between “affect” as used in s 80(1)(a)(ii) an......
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