Wheeldon and Ors v Body Corporate 342525

• Jurisdiction: New Zealand
• Judge: Courtney J)
• Judgment Date: 07 June 2016
• Neutral Citation: [2016] NZCA 247
• Docket Number: CA290/2015
• Court: Court of Appeal
• Date: 07 June 2016

BETWEEN

Derek Peter Wheeldon and Carol Ann Wheeldon, Anthony John Butcher and Ruth Barbara Rogers, Larry Lawrence Small and Km Trustee Services Limited, Ivor Anthony Millington And Neville Eade

Appellants

and

Body Corporate 342525

Respondent

[2016] NZCA 247

Court:

Winkelmann, Courtney and Clifford JJ

CA290/2015

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against a High Court decision which refused to grant declarations and injunctive relief to prevent proposed remedial building work holding that a body corporate's duty to repair under s138(1)(d) Unit Titles Act 2010 (“UTA”) (Body corporate duties of repair and maintenance) prevailed over the obligations of unit owners under s80(1)(g) UTA (responsibilities of owners of principal units — must repair and maintain the unit — the appellant's owned units with weather — tightness issues — the respondent body corporate considered that they were significant issues and proposed substantial remedial work at an estimated cost of about $3,000,000 — the appellants (owners of five of the units) claimed that targeted repairs at less cost would be sufficient — whether s138(1)(d) authorised the respondent body corporate to undertake the work that related to more than one unit — whether a body corporate's duty under s138(1)(d) UTA prevailed over the obligation on unit owners under s80(1)(g) UTA to repair and maintain their units — whether the HC erred in the interpretation of s138(1)(d) UTA (any building elements and infrastructure that relate to or serve more than 1 unit) by reading additional words into the section and by misinterpreting the words “relate to” — whether the respondent's resolution to approve the work was invalid because it had purported to delegate to a consultant, the decision making in relation to the remedial work in breach of s109(2) UTA (body corporate committee must not delegate any of its delegated duties or powers).

Counsel:

C Baker and B E Brill for Appellants

T J G Allan and T J P Gavigan for Respondent

• A The application to adduce fresh evidence is declined.

• B The appeal is dismissed.

• C The appellants must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Courtney J)

Courtney J)

Introduction

1 The Bridgewater Bay apartment complex in Paihia has weather-tightness issues. Its Body Corporate considers that they are significant and proposes substantial remedial work at an estimated cost of about $3,000,000. The owners 1 of five of the units do not accept that the water-tightness issues require this response. They say that targeted repairs at less cost would be sufficient. These unit owners applied unsuccessfully for declarations and injunctive relief to prevent the proposed work proceeding. They appeal against Muir J's decision. 2

2 The appeal raises questions about the nature of the scheme provided under the Unit Titles Act 2010 (UTA 2010) for repairs and maintenance. Central to these issues is the interpretation of s 138(1)(d), which confers on bodies corporate the obligation to repair and maintain building elements that relate to more than one unit. The unit owners do not accept that s 138(1)(d) authorises the Body Corporate to undertake the work proposed to wall panel frames that form part of the northern façade of the building, or to the decks at levels two and three. 3 Their central proposition is that they have the primary obligation (and right) to repair and maintain their units, including building elements, such as decks, located within the units. On the appellants' case, the Body Corporate's obligation to repair and maintain building elements is limited to:

• (a) cases where the unit holder defaults in his or her primary obligation; and

• (b) cases where repairs and maintenance are required to infrastructure or common property that can only be accessed through another unit holder's unit.

3 The appellants say that if the Body Corporate is to act, it bears the onus of showing that the proposed work is necessary and that it falls within s 138(1)(d).

This Body Corporate has failed to discharge that onus. They also say that the Body Corporate has not been properly authorised by the unit owners to undertake the work

4 The appellants say that the Judge erred in: 4

• (a) finding that a body corporate's duty under s 138(1)(d) prevails over the obligation on unit owners under s 80(1)(g) to repair and maintain their units; 5

• (b) his interpretation of s 138(1)(d) by reading additional words into the section and by misinterpreting the words “relate to”; 6

• (c) finding that s 138(1)(d) was engaged in relation to the wall panels and the level two and three decks; 7

• (d) holding that the appellants bore the onus of proving that s 138(1)(d) was not engaged, 8 with the result that the appellants were wrongly precluded from adducing expert evidence;

• (e) finding that a resolution passed at the emergency general meeting (EGM) on 9 November 2014 was a valid instruction to the Body Corporate Committee to undertake the proposed work; 9 and

• (f) finding that the proposed work was not a betterment. 10

Background to the proceedings

The building

5 The apartment complex was built in 2003. At ground level, which is level one of the complex, there is a carpark that is common property. There are 10 units on level two, 10 on level three and two on level four. The complex is what is commonly known as a “wedding cake” style, with each floor set back from the one below; the decks of the level two apartments form the roof of the carpark, the decks of the level three apartments form the roofs of the level two apartments, and the decks of the level four apartments form the roofs of the level three apartments.

6 The base of each level is constructed from a single concrete slab. These slabs extend for the whole length and width of the levels and form both the inside floor and the outside deck of each apartment. Each apartment has its own individual deck. The individual tiled decks are separated by vertically-placed concrete block dividing walls erected at intervals along the slab. The tiles were laid over an acoustic cork mat sandwiched between liquid membranes. The membrane did not extend up the inter-tenancy dividing walls. It now appears that the membrane may not have been waterproof, contrary to what was previously thought.

7 The northern façade of the building at levels two and three is almost entirely glazed, save for timber framed “Titan board” panels in 16 of the 20 level two and three units.

8 The storm water reticulation system is largely internal. The level two and three decks have drain holes which allow water to drain into pipes located in the inter-tenancy dividing walls at levels two and three. From there, the water moves to the underground storm water system at the ground level. The level four decks drain into pipes located in the level three ceiling cavity before joining the system common to the other levels.

Problems

9 For some years prior to 2013 there were concerns about the weather-tightness of the level four apartments because of leaks into some level three apartments. However, because the level four apartments had a different drainage arrangement from the lower levels there was no concern that the problem might be more widespread. The possibility of weather-tightness problems beyond those directly associated with the level four units was first recognised in early 2013. The minutes for the annual general meeting (AGM) held on 26 January 2013 recorded a discussion about “the fact that some decks were experiencing problems with difficulties relating to deck falls, the ponding of water and the lifting of tiles”. It was resolved that the Body Corporate Committee would arrange a suitable consultant or contractor to investigate the affected decks with a view to identifying and recommending a repair process.

10 A report was obtained from AA Home Inspections (2000) Ltd. It inspected the decks of five apartments (none of which belonged to the appellants), noting that there were cracked or loose tiles and cracked mortar joints with some ponding of water. It noted the step-down between the inside floor and tiled decks was approximately 60–70 mm but said that this would have been compliant with the Building Code at the time of installation. The report concluded that the lack of a flexible sealant joint around the perimeter of the decks and wall junctions had contributed to the cracking in the tile joints, loss of adhesion and cracking of tiles. The report stated further that the waterproof membrane was nearing the expiry of its 10-year warranty. It recommended that the tiling on all decks be removed, the screed be checked, any decks that did not have a positive fall to the outlets be re-screeded, the waterproof membrane be renewed and the decks be re-tiled.

11 The AA Home Inspections report is now said by some of the unit owners to have been rather superficial. Within a few months there were complaints about further water ingress to certain level three apartments. AA Home Inspections provided a supplementary report which identified defects and considered that remediation work was required to ensure the weather-tightness of the building and compliance with the current Building Code.

12 On 3 October 2013 the Body Corporate secretary, Mr Leishman, advised of:

… [T]he discovery of major issues on two decks and evidence of significant leaks …

The forecast cost of repairs is not inconsequential (Estimate $30–40,000 per deck) to achieve a compliant solution. Whilst at this stage only two decks are leaking there is a potential other decks may share at least some of the defects.

13 Mr Leishman also advised that the Body Corporate Committee had obtained legal advice and, acting on that advice, had filed proceedings against the Far North District Council (FNDC) and others to avoid...