Body Corporate 328392 v Kim

[2017] NZHC 3113

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-2795 [2017] NZHC 3113

BETWEEN

BODY CORPORATE 328392

Applicant

AND

INSOO KIM AND YOUNG SOOK WE & ORS

First Respondents

ANZ BANK NEW ZEALAND LIMITED Second Respondent

NEW ZEALAND HOME LENDING LIMITED

Third Respondent

ASB BANK LIMITED Fourth Respondent

WESTPAC NEW ZEALAND LIMITED Fifth Respondent

ANZ NATIONAL BANK LIMITED Sixth Respondent

Hearing:	On the papers
Appearances:	C Baker for Applicant No appearance for Respondents
Judgment:	14 December 2017

JUDGMENT OF LANG J

[on application for approval of scheme under s 74 of the Unit Titles Act 2010]

This judgment was delivered by me on 14 December 2017 at 10.30 am, pursuant to Rule 11.5 of the High Court Rules.

BODY CORPORATE 328392 v KIM [2017] NZHC 3113 [14 December 2017]

Registrar/Deputy Registrar

Date……………

[1]      In this proceeding the body corporate responsible for managing the affairs of a unit title development situated at 148 Arthur Street, Onehunga applies for an order under s 74 of the Unit Titles Act 2010 (the Act) approving a scheme for extensive repairs to be carried out to the complex to resolve weathertightness issues.

Background

[2]     The development comprises a single building containing 13 two storey residential units built above a retail development that occupies part of the ground floor. The balance of the ground floor comprises a car parking area for residents of the complex.

[3]      The complex suffers from significant weathertightness issues that will require substantial remedial work including re-cladding of the exterior wall of the complex. The walls that separate the decks of individual units will also need to be replaced, as will the retaining wall on the eastern side of the complex.

[4]      At an extraordinary meeting held on 20 October 2017 the unit owners voted unanimously in favour of authorising the body corporate to undertake the repairs and to levy them for the costs that will be incurred as a result.  Unit owners also voted in favour of a resolution that the Court should be asked to approve the scheme presented to them setting out the basis on which the repair process is to be undertaken. The body corporate filed this proceeding as a result.

[5]      The application and supporting documents have now been served on all unit owners and mortgagees.  None of those parties have filed documents in opposition to the body corporate’s application.

Approach

[6]      The approach to be taken in determining an application for approval of a scheme under s 74 is now well established through cases such as Tisch v Body

Corporate 318596.1   Although that case related to a scheme under s 48 of the Unit Titles Act 1972, the same approach is appropriate when dealing with an application for approval of a scheme under the current Act.  In short, the Court must be satisfied that  the  complex  needs  to  be  repaired  and  that  a  scheme  under  the Act  is  the appropriate method of undertaking the repair process.  The Court must then satisfy itself that the terms of the proposed scheme are appropriate.

The proposed scheme

[7]      In the present case it will be necessary for repairs to be carried out to both common property and individual units.   The body corporate would ordinarily be responsible for the former whilst unit owners would meet the cost of any work necessary to repair their units.  Unit owners have agreed that it would be inefficient and impracticable for the repair work to be carried out on a piecemeal basis.  For that reason the scheme provides for the body corporate to be responsible for organising and managing the entire repair process by means of a single construction contract.

[8]      The body corporate will meet the cost of the work by means of levies to be imposed on unit owners.  The levy regime set out in the scheme mirrors the model contained in the Act. As a result, the cost of repairs to common property will be met by levying  unit  owners  in  accordance  with  the utility interest  assigned  to  their respective units.   The cost of repairing individual units will be assessed before construction work commences.   Levies reflecting these assessments will then be imposed on individual unit owners. Any shortfall at the completion of the work may be recovered by imposing further levies on unit owners.

Decision

[9]      I  am  satisfied  that  the  remedial  work  is  necessary  and  that  it  is  most appropriately undertaken within the auspices of a scheme under the Act.  I am also satisfied that the terms of the proposed scheme provide the most effective and efficient

means of undertaking that work.

1      Tisch v Body Corporate [2011] NZCA 420.

[10]     Importantly, the scheme includes within the scope of authorised work any repairs that are found to be necessary once the remedial work begins.   It is very common once repairs begin for damage to a complex to be more significant than is originally contemplated.   In addition, the scheme recognises the importance of achieving code compliance for the complex.   It expressly authorises the body corporate to incur costs that are necessary to meet code compliance, engineering and other building regulation standards.  The importance of this provision flows from the fact that it is necessary for the remedial work to achieve code compliance if value is to be restored to the complex. It is not uncommon for the repair process to reveal that existing insulation, electrical or drainage facilities do not meet current code compliance standards.  As a result, the body corporate requires the power to rectify these issues so that the remediated complex can achieve code compliance.

[11]      I therefore make an order under s 74 of the Act approving the scheme.

Lang J

Solicitors:

Price Baker Berridge, Auckland