Download in the high court of new zealand whangarei registry civ-2014

IN THE HIGH COURT OF NEW ZEALAND
WHANGAREI REGISTRY
CIV-2014-488-0122
[2015] NZHC 884
BETWEEN
DEREK PETER WHEELDON AND
CAROL ANN WHEELDON, ANTHONY
JOHN BUTCHER AND RUTH
BARBARA ROGERS, LARRY
LAWRENCE SMALL AND
KM TRUSTEES SERVICES LTD, IVOR
ANTHONY MILLINGTON AND
NEVILLE EADE
Plaintiffs
AND
BODY CORPORATE 342525
Defendant
AND
ROBYN KATHLEEN STENT
Counterclaim Defendant
Hearing:
2-6, and 10-11 March 2015
Counsel:
B E Brill for the Plaintiffs and Counterclaim Defendant
TJG Allan and TJP Gavigan for the Defendant
Judgment:
30 April 2015
INTERIM JUDGMENT OF MUIR J
This judgment was delivered by me on 30 April 2015 at 4.30 pm
pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date:………………………….
Solicitors:
B E Brill Ltd, Kerikeri
Grove Darlow & Partners, Auckland
WHEELDON v BODY CORPORATE 342525 [2015] NZHC 884 [30 April 2015]
Introduction
[1]
Yet again the Courts are faced with a Body Corporate whose members have
strongly divergent views as to how it should respond to alleged weathertightness
issues. Together, they own the 22 apartments comprising the Bridgewater Bay
Development adjacent to an estuary on the outskirts of Paihia. The development was
constructed between 2003 and 2004.
[2]
In response to a detailed report by a specialist investigator 17 of the unit
owners wish to proceed with a comprehensive repair which would, among other
things, require regrading each of the apartment decks and remodelling (or replacing)
existing joinery suites on the northern façade of the development. The cost is
substantial. Although originally budgeted at approximately $1.7 million, recent
escalation in building costs and the absence of a competitive local market has seen
that budget increase to in excess of $3 million. During the course of the trial this
option came to be identified by the defendant as the “holistic repair”. It would
involve delivery of a development fully compliant with current Building Code
requirements and, says the Body Corporate, would mitigate, as fully as possible, the
current stigma attaching to the building.
[3]
The five plaintiffs, or at least those who owned apartments at the time, were
initially supportive of (or passively accepted) the holistic repair option. However,
with what they say is better information and in the face of escalating costs, they now
submit that the Body Corporate’s proposed works are ultra vires and/or have not
been properly authorised. They allege “capture” of the Body Corporate by the
Auckland based “leaky building industry” and cupidity on the part of individual
consultants. They contend for a limited or “targeted” repair, deny that there are any
systemic problems with the development and say that all that is currently required is
remedial work to the two timber-framed “penthouses” which sit on the fourth floor
of the building. They say that such work should be paid for by the owners of those
units and that although other elements of the building, and, in particular, deck
membranes for the remaining 18 apartments, may be nearing the end of their service
life, all that is, in due course, required is to lift and replace the membranes and tiles
at a cost unlikely to exceed $6,000 per unit.
[4]
In addition to their attacks on the vires and procedural regularity of the Body
Corporate’s repair plan, the plaintiffs also challenge various payments which the
Body Corporate has made and levies which it has raised in the context of
investigating defects and developing its plan. They say that the Body Corporate has
unlawfully “raided” a long term maintenance fund and that other payments were
similarly in breach of the Unit Titles Act 2010 (UTA 2010).
[5]
Each of the plaintiffs is, in turn, the subject of a counterclaim for outstanding
levies which is met by a comprehensive challenge to the legality and procedural
regularity of such levies.
There are multiple individual components to that
challenge.
[6]
The counterclaim defendant, Ms Stent, is a recent purchaser, having acquired
her apartment in March 2014 (settled July 2014) with full knowledge of the alleged
defects and at a price reflecting what was, at least at that stage, understood to be the
likely costs of repair in accordance with the Body Corporate’s plans. She is the wife
of counsel for the plaintiff. She is sued for outstanding levies on the same basis as
are the plaintiffs on the defendant’s counterclaim.
In its evidence the Body
Corporate claims that all of the current dissention, the voluminous exchanges of
correspondence which have occurred, the significant costs which have attended
major High Court litigation, the resultant delays in undertaking the remedial work
and the cost escalations which have followed can all be dated back to Ms Stent’s
acquisition of her unit. It expresses a high degree of frustration with the current
position.
Background
[7]
Because specific design details relating to the development are more
conveniently discussed in the section of the judgment relating to the requirement for
repair or maintenance, I provide only a brief overview at this stage. Likewise, the
history of the problems with the development and the Body Corporate’s response,
culminating in its various actions and resolutions, are better addressed in the context
of the plaintiffs’ specific challenges.
[8]
The Bridgewater development comprises four levels with the ground floor
(identified as level one in the proceedings) providing car parking, storage and entry
lobby.
Each of levels two and three comprise 10 apartments, eight with two
bedrooms and two of one bedroom. One bedroom apartments are centrally located,
with the building “fanning” out either side in a gentle north facing arc. To either side
of the one bedroom apartments are four two bedroom apartments. All apartments
therefore enjoy views of the adjacent estuary and beyond from a deck on their
northern side. Levels one, two and three are constructed of in situ concrete and
plastered concrete block. Level four consists of two three bedroom apartments
(referred to by the plaintiffs as “penthouses”).
Their construction consists of
monolithic cladding over timber framing. A number of issues emerge in relation to
the adequacy of that construction.
[9]
The development follows a “wedding cake” design whereby each of the level
three and four apartments are stepped back with their decks comprising the roofs or
part roofs of the apartments below. The effect is to reduce the overall scale and bulk
of the development and to maximise sun, privacy and fire separation.
[10]
Aesthetically, the central portion of the development is characterised by three
“fins” which are clad in an aluminium composite known as ACP panels. The centre
fin starts at level four and provides privacy between the two penthouse decks. In
turn it runs through to the car parking level providing the same privacy to the one
bedroom apartments on levels two and three. Additional “fins” pass through levels
two and three marking the other “boundary” of the one bedroom apartments. Decks
to the two bedroom apartments are in turn separated by plastered masonry walls.
[11]
The northern façade of the building (at apartment level) is substantially
glazed but each of the two bedroomed apartments also includes timber framed “titan
board” infill panels adjacent to the master bedroom.
[12]
Guttering both from the roof and decks is internal through the walls which
separate each of the decks. Connection to the relevant downpipes from the level four
decks is through drains in the relevant level three apartment ceilings. This internal
reticulation system has given rise to significant problems with water penetration
through level three ceilings and high moisture readings at the level one “rain heads”
indicating that, somewhere in this encased system, leaking is occurring.
[13]
Problems with the development have been evident for some time. As early as
2006 the plaintiff Mr Millington, who purchased apartment 307 from the developer,
was experiencing moisture problems in his ceiling which increased to the point that
water began to start “seeping down [his] walls and into [his] carpet”. The likely
source appeared to be the penthouse above whose owners he said had “long been
complaining about the ponding of rain water on the decks”.
[14]
decks.
As a result, certain remedial works were undertaken to the two penthouse
However, problems continued and after a further lengthy period of
complaints by Mr Millington he indicated an intention to bring a claim before the
Weathertight Homes Resolution Service (WHRS). That was not pursued because of
concerns about the development acquiring a leaky building stigma and eventually the
immediate problem affecting Mr Millington appears to have been resolved.
[15]
Long term (albeit not continuous) committee member, Mr Andrews, deposes,
however, that in the period prior to the January 2013 AGM he became aware,
through discussions with other owners and as a result of his own observations, that
there were a number of issues in respect of decks within the development, not
limited to those at level four. These included water ponding, cracked tiles, some
membrane failure and water cascading from the level three roof gutters onto the
decks of level two during heavy rainfall events.
[16]
These concerns were ventilated at the 2013 AGM which resolved that the
Committee be tasked to engage a consultant to investigate further.
[17]
AA Home Inspections (2000) Limited (AA) produced a report dated 22 April
2013. Its brief was limited to investigation of the level four decks and any other
deck which the owners requested be inspected.
In the event, six decks were
examined by it. The inspection was visual only with no invasive testing. The report
identified examples of water ponding and a requirement for remediation, including
where applicable, establishment of positive falls to deck outlets.
[18]
Receipt of this report alerted Mr Andrews and others to what they considered
may be more significant problems with the development. Those concerns were
compounded by the re-emergence of moisture problems in the ceilings of three of the
third floor apartments. AA was commissioned to provide a supplementary report
following removal of sections of the apartment ceilings and reported evidence of
current moisture ingress.
[19]
Mindful of impending limitation periods and on the advice of the Body
Corporate Secretary, the Committee, which at that stage comprised Ms Gray and Ms
Barr (supported by Mr Andrews and Mr Nimmo) then approached specialist leaky
building solicitors Grimshaw & Co for advice. That firm recommended that a
comprehensive review of the development be undertaken by Mr Andrew Gray of
Origin Construction Consultants Limited (Origin) (now Veron Limited).
Such
investigation, which included invasive testing, took place on 10 and 11 October 2013
with an extensive report and recommendations provided on 18 October 2013 (the
Origin Report). In summary, Mr Gray identified what he considered to be numerous
original construction and design defects in the development.
He proposed a
comprehensive repair plan (the Origin Repair Plan) consistent with current Building
Code requirements. The Origin Repair Plan represents the holistic repair advocated
for by the Body Corporate. Substantive components of that repair plan involve work
within the surveyed boundaries of individual units, that is, on private as opposed to
common property. This includes establishing code compliant falls to the decks and
all the associated works which regrettably derive from that. In that respect the Body
Corporate invokes s 138(1)(d) of UTA 2010. Application of that section and, in
particular, its interrelationship with s 80(1)(g) is a central issue in the case.
[20]
The Origin Report, together with the further documents described later in this
judgment, was then provided to the owners. An urgent Extraordinary General
Meeting (EGM) was convened on 9 November 2013 to discuss its implications. The
matters decided at that meeting and the actions subsequently taken by the Committee
and the Body Corporate are discussed in detail at [177] to [183] of this judgment.
Suffice to say, that the battle lines are now drawn between the 17 owners who wish
to proceed with the “holistic” repair option and the five owners who favour a
targeted approach.
Preliminary
[21]
In my Minute No 2, dated 2 March 2015, I recorded an oral application at the
commencement of trial by counsel for the defendant to amend paragraph 14 of the
defendant’s statement of defence which was formerly pleaded in terms of an
admission with stated reliance on the full term of the minutes of the 9 November
2013 EGM. Mr Allan for the defendant indicated that this was a mistake and that the
appropriate pleading was a denial coupled with reliance on the minutes. He said that
the admission was inappropriate because paragraph 14 of the statement of claim
alleged a delegation to investigate defects, but that word was not used in the relevant
resolution and because the delegation was, in reality, an instruction. At the time I
indicated that I was not persuaded that there would be any substantial difference in
the evidence if the admission were withdrawn, but acceded to Mr Brill’s request that
the matter be revisited in final submissions. At that point Mr Brill maintained his
objection although he was unable to identify any specific prejudice. I allow the
amendment.
Interim decision
[22]
Following closing submissions on 10 and 11 March 2015 I received a
memorandum from counsel for the defendant inviting the Court to issue, pursuant to
r 11.2, an interim decision restricted to the plaintiff’s first cause of action
(declarations and injunctive relief relating to the scope of intended remedial work)
and leaving the second cause of action and counterclaims (propriety of and nonpayment of levies) for later determination if required. This invitation followed
unsuccessful discussions between the parties about the basis on which these claims
might be adjourned by consent. There has been no response to the defendant’s
memorandum.
[23]
In my view the defendant’s proposal is sensible. The key issue facing the
Body Corporate and its members is the vires of the Body Corporate’s intended
remediation plans. Resolving that “bottleneck” is essential to finalising the plans,
obtaining tenders and undertaking the work.
That, in turn, allows the Body
Corporate to quantify the claims which it and all 22 owners have progressed against
parties whom they regard as responsible for the building’s defects. It places at a
premium swift delivery of judgment and resolution of any appeals. An immediate
focus on the key issues serves that purpose.
[24]
Moreover if (as I find) the Body Corporate’s intended plans are lawful and if
such judgment is either accepted or ultimately upheld on appeal, I consider there to
be a high probability that the many subsidiary issues relating to the propriety of
individual payments and levies will be self-resolving.
For example, if the
development is indeed to be fully remediated to current code standards, arguments as
to whether existing consultant payments were properly made from what the plaintiffs
claim is a long term maintenance fund within the terms of UTA 2010 (but which the
defendant denies was ever constituted as such) are likely to be academic. Likewise,
if a comprehensive repair is to take place, there are likely to be higher priorities than
whether the procedural requirements associated with an existing levy have been
satisfied.
[25]
Specifically, the defendant’s memorandum suggests that, following
determination of the first cause of action, the parties be given the opportunity to
resolve the second cause of action and counterclaim and that, only in default of that
occurring, would the Court be invited to give judgment on them. The defendant
suggests the right to seek a determination “after 10 working days following the
determination of the first cause of action”. This approach seems to me to be a
practical one, although the 10 day suggested period should, in my view, be enlarged
to 30 working days so that the issue can be considered in conjunction with appeal
rights.
Section 138(1)(d) UTA 2010. Interrelationship with s 80(1)(g)
[26]
Section 138(1)(d) of the UTA 2010 provides:
138
Body Corporate duties of repair and maintenance
(1)
The body corporate must repair and maintain –
…
(d)
any building elements and infrastructure that relate to or
serve more than 1 unit.
[27]
Section 80(1)(g) in turn provides:
80
Responsibilities of owners of principal units
(1)
An owner of a principal unit –
…
(g)
[28]
must repair and maintain the unit and keep it in good order
to ensure that no damage or harm, whether physical,
economic, or otherwise, is, or has the potential to be, caused
to the common property, any building element, any
infrastructure, or any other unit in the building:
Central to the plaintiffs’ case is the proposition that, other than in what
Mr Brill describes as a “Berachan type case”,1 the duties imposed on the Body
Corporate under s 138(1)(d) are subordinated to the duties imposed on the unit
owner under s 80(1)(g) in the sense that, only in the event of default by the unit
owner in his or her repair and maintenance obligations, does the Body Corporate
have the duty (and associated power) to effect the repair. In the case of building
elements requiring such repair, that would necessarily involve identification by the
Body Corporate of the required scope of works, notice to unit holders to undertake
the works, monitoring performance of that requirement, in default undertaking the
work itself and, in that event, effecting a recovery from the individual unit owner
under either s 138(4) or s 127.
[29]
Berachan concerned the replacement of the roof on a 12-storey property,
where only 20 per cent of the roof was common property. The Court of Appeal held
that the body corporate was entitled to assume responsibility in relation to the repair
and maintenance of unit property provided that duty could be fairly seen as
incidental to the duty to maintain and repair common property.2
[30]
The Court observed at [4] that had the case arisen under s 138 of the 2010
Act, the Body Corporate would have the obligation to repair and replace the roof.
Significantly, the Court of Appeal made that observation despite the fact that
s 80(1)(g) of the UTA 2010 would have prima facie applied to the owner of the unit
1
2
Berachan Investments Ltd v Body Corporate 164205 [2012] NZCA 256, [2012] 3 NZLR 72.
At [46].
who owned 80 per cent of the roof. Mr Brill’s exception is therefore inevitable in
light of the Court of Appeal’s comments.
[31]
Mr Brill submits that the distinguishing characteristic of the Berachan case is
that the building element concerned (the roof) was one which, in the words of the
Court of Appeal, “looks and functions like a single entity”. Only by a line on a
drawing could the separate components (those forming part of the unit and those
comprising common property) be identified. Moreover, the roof was intersected by
rain water collection gutters running its length through common and unit property.
[32]
Beyond this most obvious case, Mr Brill submits that the Body Corporate’s
duties under s 138 arise only in the case of unit holder default and, even in that
context, require what he terms a “particular and direct relationship” between the
relevant building element or infrastructure which requires repair or maintenance and
more than one unit in the development. The limits of such “particularity” and
“directness” (beyond the Berachan type situation) are not defined.
[33]
In support of that proposition Mr Brill taps a deep philosophical vein. He
invokes Lord Coke’s seventeenth century observation that “a man’s house is his
castle … and is his safest refuge”.3
Mr Brill says that, consistent with that
philosophy, the legislature must be taken as having preserved maximum sovereignty
in the hands of individual unit holders and not to have “gratuitously” moved that
sovereignty to the Body Corporate. He adopts a minimalist approach whereby only
such sovereignty as he says is “required” to be transferred to the Body Corporate,
passes to it. He says that concepts such as uniformity of appearance, consistency of
outcome, etc are “commercial values” which must be subordinated to “personal
values” such as uniqueness and refuge because “what we are dealing with here are
people’s homes”. He invokes s 79(d) of the UTA 2010 in terms that the owner of a
principal unit:
79
Rights of owners of principal units
An owner of a principal unit —
…
3
Semayne’s Case [1604] 5 Co Rep 91a, [1558-1774] All ER Rep 62.
(d)
[34]
is entitled to quiet enjoyment of his or her unit without interruption by
other unit owners or occupiers, or the Body Corporate or its agents,
except as authorised by this Act or the Regulations.
He says that where the Act recognises a joint responsibility on the part of a
unit owner and the Body Corporate for repairs and maintenance, its scheme is served
by “allowing the owners to be the players and the Body Corporate to be the monitor
and referee”. In support of that proposition he submits that:
(a)
Because full liability for the repair costs will likely fall upon the
owner he or she should have the opportunity to choose the contractor
and to negotiate the contract details;
(b)
As the owner will have to live with the outcome on a day to day basis
he or she ought to have the first opportunity to propose the nature,
extent and sensory impact of a repair that is to be introduced into their
own home;
(c)
The “right to repair” is a standard incident of property rights and
would ordinarily accompany the unit owner’s indefeasible title and
such a deeply ingrained right should be ousted only where the law and
the circumstances cannot reasonably permit any other course;
(d)
The
Body
Corporate
has
less
flexibility
in
relation
to
repair/maintenance in that it has no power to pursue a repair that
involves betterment, or that extends to any in-unit items other than
communal elements; and
(e)
Issues arise regarding the dispossession of owners for lengthy periods.
While ss 138(3) and 80(1)(a)(ii) of the UTA 2010 grant the Body
Corporate the right to obtain access at all reasonable hours and after
giving reasonable notice to effect repairs and maintenance on private
property, those powers fall well short of the lengthy periods of
dispossession which a body corporate’s intended repair plan may
involve.
[35]
I am unable to accept this primary submission which underpins much of the
plaintiffs’ approach in this litigation.
[36]
The UTA 2010 was passed against a background of tension within the
authorities about the powers of a body corporate to undertake work within unit
boundaries.
In Body Corporate 188529 v North Shore City Council (Sunset
Terraces)4 Heath J identified a clear distinction between common and private
property rights, holding that the Unit Titles Act 1972 contemplated corporate
responsibility for the maintenance and repair of common property only. In that case
the relevant plan had identified the boundary between private and common property
as the “external face of exterior walls and glass adjoining common property in
accessory units and to the centre line and walls between adjoining units”. So the
outside face of each exterior wall was part of an individual unit. On that basis
Heath J found that an amendment to r 2(b) of the default rules, whereby the Body
Corporate assumed an obligation to keep in a good state of repair the exterior and
roof of the building, was ultra vires the 1972 Act.5
[37]
By contrast, Harrison J in Young & Ors v Body Corporate 1200666 adopted a
more expansive role for the Body Corporate. In circumstances of disunity among
the owners (which closely mirror those in the present case) and where a majority of
owners contemplated a “complete and bespoke upgrade of the whole complex”,7
whereas the plaintiffs favoured “targeted repairs based on the individual needs of
each unit”,8 his Honour held that the unusual configuration of the complex (a
“wedding cake” structure again emulated in the present case) required the Body
Corporate to repair parts of the exterior that were not common property. His Honour
based that decision on the fact that leakage through a failure to keep the exterior in
good condition placed at risk the development as a whole including the common
property.9
4
5
6
7
8
9
Body Corporate 188529 v North Shore City Council [2008] 3 NZLR 479 (HC).
At [106]-[110].
Young & Ors v Body Corporate 120066 (2007) 8 NZCPR 932 (HC).
At [46].
At [10].
At [32].
[38]
I accept Mr Allan’s submission that the purposes and effect of the 2010 Act
was to enshrine the more flexible position contended for by Harrison J. To the extent
necessary, there is ample support for that proposition in the legislative history of the
Act. When introducing the then Unit Titles Bill to Parliament for its first reading,
the Minister for Housing noted that the Bill proposed a “fundamental rewrite of the
existing legislation” and that its “key changes include promoting sound property
management practices”.10 He observed that “a body corporate needs to be able to act
quickly and decisively on behalf of all unit owners and for the good of the
development as a whole when repairs and maintenance need to be done”. 11 He then
noted that the responsibilities of the Body Corporate for repair and maintenance
“will be widened to include building elements and infrastructure that affects more
than a single unit” and that “this will mean, for example, that if an apartment block
has a leaky roof, it will be the Body Corporate’s responsibility to fix it rather than the
responsibility of the owner of the top floor apartment”.12
[39]
At the Committee stage of the Bill there was specific reference to the
divergence in approach of the High Court authorities and to the fact that cl 122
(which became s 138 in the Act) followed the approach that the High Court took in
the Young case. Reference was made to the clause being a “practical, fair and
pragmatic contribution to solving the problem of leaky homes”13 and of it taking a
“common-sense and pragmatic approach”.14
[40]
However, in my view, recourse to this legislative history is unnecessary in
that the purpose of the Act, as set out in s 3, strongly militates against the
construction contended for by Mr Brill. That purpose is in terms:
3
Purpose
The purpose of this Act is to provide a legal framework for the
ownership and management of land and associated buildings and
facilities on a socially and economically sustainable basis by
communities of individuals and, in particular, -
10
11
12
13
14
(5 March 2009) 652 NZPD 1713.
(5 March 2009) 652 NZPD 1713.
(5 March 2009) 652 NZPD 1713.
(25 March 2010) 661 NZPD 9859.
(25 March 2010) 661 NZPD 9858.
(a)
To allow for the subdivision of land and buildings into unit title
developments comprising units that are owned in a stratum estate in
freehold or stratum estate in leasehold or licensed by unit owners,
and common property that is owned by the Body Corporate on
behalf of the unit owners; and
(b)
To create bodies corporate, which comprise all unit owners in a
development, to operate in managing the title development; and
(c)
To establish a flexible and responsive regime for the governance of
unit title developments; and
(d)
To protect the integrity of the development as a whole.
(Emphasis added)
[41]
Recognition of flexibility and responsiveness, the requirement to manage
buildings on an economically sustainable basis and the requirement to protect the
integrity of the development as a whole all, in my view, point strongly to a more
expansive interpretation of s 138 than the “default provision” for which the plaintiffs
contend. Indeed, in my view, the plaintiffs’ proposition involves the antithesis of
flexibility and responsiveness. In the event of identified repair, or maintenance of
building elements, with Mr Brill’s necessary “particular and direct relationship”, the
Body Corporate would be required to:
(a)
notify individual unit holders of the required works;
(b)
engage with each of them in terms of the work which the Body
Corporate regarded as necessary, inevitably inviting argument from
some owners (of which the five plaintiffs in this case are an example)
who would assert on-going performance of the relevant building
element and a requirement only to undertake the work at some future
stage;
(c)
monitor the workmanship of what could be a disparate group of
contractors so as to ensure a sufficiently adequate and uniform
standard to protect the integrity of the development as a whole;
(d)
invoke its default power in respect of unit owners who failed to
undertake the work required which (assuming others had undertaken
it) would involve a contract with no continuity and at an inevitably
higher price;
(e)
“referee” (Mr Brill’s word) the inevitable arguments between owners
as to their respective responsibilities for elements of the structure
which intersect their unit and other units and/or common property e.g.
flashings at the junction of inter-tenancy walls and common property;
(f)
manage potentially difficult insurance issues which would invariably
arise in respect of a part remediated building while those unresponsive
to the Body Corporate’s requirements were either prompted into
action or the work for which they are responsible was undertaken by
the Body Corporate. The difficulties in this respect are highlighted by
Harrison J in Young; 15 and
(g)
accommodate inevitable inconsistencies in timing and warranties (if
indeed the latter were available on anything other than a “one
contract” basis).
[42]
In many instances, while the Body Corporate would be brokering these
complex relationships, the building would continue to deteriorate, costs would
escalate and the health (and ultimately safety) of the occupants would be
compromised.
[43]
In my view this is the very outcome which the new Act was intended to
prevent.
[44]
In LV Trust Holdings Ltd & KP Trust Holdings Ltd v Body Corporate
114424,16 Asher J noted the provisions of s 3 and, in particular, the flexibility and
responsiveness recognised in it.17
15
16
17
Young & Ors v Body Corporate 12006, above n 6, at [38]-[40].
LV Trust Holdings Ltd & KP Trust Holdings Ltd v Body Corporate 114424 [2012] NZHC 3578.
At [57].
[45]
Academic commentators likewise have emphasised the point. Mr Gibbons in
his NZLS Unit Titles Intensive 2012 notes:18
s 138 further undermines [the “bright line” between unit property and
common property] by giving the body corporate responsibilities over
building elements and infrastructure, whether they are common property or
unit property. This can be seen to have implications for the property rights
of unit owners, as it allows a degree of intrusion by the Body Corporate into
their property; this intrusion is amplified by combining the responsibility
with the right of access. Fundamentally, a wall or balcony might be
“private” property but it is still subject to the Body Corporate right of access,
and limited sovereignty in respect of maintenance. However, while this
affects individual property rights it ensures the buildings can be properly
maintained for the benefit of all unit owners as a group.
[46]
Later, in his discussion of the decision in LV Trust Holdings Ltd v BC 114424,
Mr Gibbons points out that, while the various comments made in that case related
specifically to Schemes under the Act:19
… they illustrate that in relation to the division between common property
and unit property a more flexible approach may increasingly find favour
particularly given the scheme and purpose of the UTA 2010. The Court in
LV Trust paid particular attention to the purpose of the UTA 2010 including
the importance of a flexible and responsive “governance regime” and the
importance of a “socially and economically sustainable basis” for the
ownership and management of land and buildings: (At 56-57). In other
words the purpose of the UTA 2010 allows for a more “global” approach to
the integrity of an entire development, as opposed to the separation of unit
property from common property. That was often an important theme in
cases under the UTA 1972.
…
We must remember that this was a scheme case and schemes inherently
allow a more flexible approach than is normally allowed for maintenance
situations that do not allow schemes. However, the Court clearly pointed
towards the purpose of the UTA 2010 and specific provisions such as 138, as
allowing more attention to overall needs than to the niceties of lines on a
plan. Reading LV Trust together with Berachan we can look forward to a
more holistic approach to maintenance issues under the UTA 2010 than was
often the case under the UTA 1972, with the realities of the building in a
situation of primary importance in determining the outcome of future cases.
[47]
In a flow chart attached to that paper Mr Gibbons identifies the first question
that requires determination where a building element or infrastructure may require
repair as being whether the particular building element or infrastructure serves more
18
19
Thomas Gibbons Maintenance (New Zealand Law Society Unit Titles Intensive) 2012 at 66.
At 72.
than one unit. In the event that question is answered in the affirmative, Mr Gibbons
identifies an obligation upon the Body Corporate to repair that building element or
infrastructure. If in the negative, then the unit plan is to be checked to identify
whether the building element or infrastructure is part of a unit or common property.
If the former, then it is the unit owner’s responsibility to repair, and if the latter, the
Body Corporate’s.
[48]
In my view this analysis best reconciles the provisions of ss 80(1)(g) and
138(1)(d) and is consistent with the Court of Appeal’s obiter observations in
Berachan. It also best ensures attainment of the Act’s objective to protect the
integrity of the development as a whole. “Integrity” in that sense is not simply
structural but, by virtue of the expansive definition of “building elements”, aesthetic
as well. Exterior components of the building, like decks and associated balustrading
that relate in an aesthetic sense to other units (or indeed upon my analysis to
common property) properly, in my view, fall within the provisions of s 138. That
reinforces an active role (indeed duty) on the part of the Body Corporate to ensure
works are carried out to a uniform standard and with uniform aesthetic outcomes.
None of that can be achieved (or certainly it would be appreciably more difficult to
achieve) under the model Mr Brill proposes.
[49]
In the present case there is unchallenged evidence from the defendant’s
valuer Mr Taylor that in the absence of a “whole of building” repair effected under
one contract by the Body Corporate, those units which are repaired in accordance
with the Body Corporate’s intentions will, on account of the existence of
unremediated units in the complex (or units subject to the “targeted” repairs
eventually contemplated by the plaintiffs), have a value which is in the order of 10
per cent less than would otherwise be achievable. In Mr Taylor’s opinion, this
follows from the fact that there would be a “real” perception of continued risk and
uncertainty in relation to the 17 remediated units.
Mr Taylor identified four
individual components:
(a)
A perception of increased risk of buying a repaired unit within a
multi-level, multi-unit development where five units remain
unrepaired;
(b)
A perception of increased uncertainty regarding future events, namely
whether purchasers of the repaired units would be liable to contribute
to any future repair of the five remaining units;
(c)
A perception about the adequacy of the repairs done to the 17 units,
given the possibility of unforeseen defects and damage emanating
from the other units; and
(d)
A perception that the repairs to the 17 units might be compromised by
unremediated parts of the building.
[50]
Mr Taylor’s overall position is summarised in his comment that:
The concept of economic and aesthetic elements are interrelated in that the
value of the units or their economic wellbeing is obviously tied to the
market’s perception of the overall development’s structural, aesthetic and
watertight integrity.
[51]
Mr Taylor was not cross-examined and the plaintiffs called no expert
evidence to challenge his conclusions. In my view his opinions reinforce in a
practical way why maintenance of the integrity of the development as a whole is an
essential purpose of the Act. Only by doing so is it possible to manage the building
on a socially and economically sustainable basis, as s 3 itself recognises.
[52]
I accept the defendant’s submission that the plaintiffs should not be heard to
complain that it is unfair that they have to pay for the costs of repairs and
maintenance to building elements and infrastructure (within the terms of s 138(1)(a))
by ownership interests in the first instance, with the Body Corporate later deciding
what recovery steps it will take. I accept that was Parliament’s expressed intention
and that people who want to be able to choose how and when they might repair
building elements should carefully reflect on whether unit title ownership is
appropriate for them. Albeit in a slightly different context, the words of Duffy J in St
John’s College Trust Board v Body Corporate 197230 are apposite in terms:20
[52]
Insofar as it may appear to be unfair that owners of units in one
building must contribute to costs of common property located in another
20
St John’s College Trust Board v Body Corporate 197230 [2012] NZHC 827.
building, the answer is that this is a fundamental element of this strata title
development. The likelihood of this occurrence has been present from the
outset. Anyone who did not want to subscribe to this type of liability need
not have acquired a unit in this complex.21
[53]
That applies irrespective of the fact that the s 80(1)(g) obligation is repeated
in cl 14(b) of the Body Corporate’s residential operational rules. If the nature of the
building element is such that the duty in s 138 is engaged, then the operational rules
are necessarily “trumped” by the statutory obligations.
[54]
In summary therefore, I am satisfied that the Body Corporate was entitled to
embark on a repair of the whole building without first giving individual unit owners
the opportunity to effect their own repairs. Indeed, I see it as its obligation. In
saying that, I assume for present purposes vires (the issue to which I now turn) and
procedural regularity.
Section 138(1)(d) of the UTA 2010 – when does it engage?
[55]
I set out at [26] above the relevant provision of s 138(1)(d).
[56]
Section 138(5)(c) in turn provides that:
138
Body Corporate duties of repair and maintenance
…
(5)
[57]
The duty to repair and maintain includes (without limitation)
a duty to manage (for the purposes of repair and
maintenance), to keep in a good state of repair, and to renew
where necessary.
A corresponding obligation arises on the part of each owner of a principal
unit by virtue of s 80(1)(a)(ii) of the Act. This provides that such an owner:
80
Responsibilities of owners of principal units
(1)
An owner of a principal unit (a)
21
Must permit the Body Corporate (or its agents) to enter the unit
at any time in an emergency and at all reasonable hours and
Recognition that those who buy into body corporate developments agree to be bound by the
democratic processes which underscore them is also a feature of the reasoning in World Vision of
New Zealand Trust Board v Seal [2004] 1 NZLR 673 (HC).
after giving reasonable notice, for any of the following
purposes:
[58]
(i)
…
(ii)
To maintain, repair, or renew any infrastructure for
services and utilities that serve more than 1 unit and any
building elements that affect more than 1 unit or the
common property, or both.
It will be noted immediately that there are some unfortunate conflicts in what
were plainly intended to be complementary sections. These include:
(a)
The reference to maintenance, repair or renewal in s 80(1)(a)(ii)
whereas the s 138 reference is to repair and maintain. That however is
addressed by s 138(5)(c) which expands the duty to repair and
maintain to include “renewal where necessary”.
(b)
Where s 80(1)(a)(ii) speaks to infrastructure “for services … that
serve more than 1 unit” and building elements that affect more than
one unit, the s 138(1)(d) reference is to building elements and
infrastructure that relate to or serve more than one unit. So there is
substitution of the word “relate” for “affect” and whereas, under
s 80(1)(a)(ii), the word “serve” qualifies infrastructure and “affect”
qualifies building elements, under s 138(1)(d) the words “relate to or
serve” arguably qualify both building elements and infrastructure.
(c)
Significantly, whereas under s 80(1)(a)(ii) the owner of a principal
unit must permit entry by the Body Corporate for maintenance, repair
or renewal the building elements that “affect more than 1 unit or the
common property, or both”, the duty under s 138(1)(d) on its face
arises only in respect of building elements that relate to or serve
“more than 1 unit”.
[59]
In relation to the issue identified in [58(c)] this is, in my view, one of those
rare occasions where the Court should fill what I regard as an obvious omission from
s 138(1)(d). It is true, as the authors of Statute Law in New Zealand state that
“normally courts cannot write in what the legislature has not thought fit to
include”.22 However, as Cooke P pointed out in Northland Milk Vendors Association
Inc v Northern Milk Ltd, courts must try to make an Act work as Parliament
intended and must give an interpretation that accords best with the “intention” or
“spirit” of the Act. 23 Thus even where a purposive interpretation may not exactly be
able to fill the gaps it may “bridge a hiatus”.24 This decision has been followed in
others25 and as Messrs Burrows and Carter state, “has been used to produce a
sensible solution when a drafting error has given rise to a situation that is
untenable”.26
[60]
In my view, insertion of the words “or the common property, or both” into
s 138(1)(d) is justified for the following reasons:
(a)
Only by doing so are the two sections, which were clearly intended as
complementary, properly harmonised;
(b)
The most uncontentious of all the Body Corporate’s duties has always
been its obligation to maintain the common property. That obligation
is recognised in s 138(1)(a) and was the basis for the Court upholding
the vires of amended rule 2(d) in the Young decision. Relevantly
Harrison J observed:27
A body corporate must have all powers reasonably necessary
to protect the common property in a building including a
power to repair and maintain parts of the external structure,
the condition of which might expose the common property
to consequential physical damage. Leakage through a
failure to keep the exterior in good condition places at risk
the development as a whole, incorporating of course the
common property.
(c)
A duty to maintain and repair building elements within a unit which
relate to or serve more than one unit but not building elements in the
22
23
24
25
26
27
JF Burrows and RI Carter Statute Law in New Zealand (4th ed, LexisNexis, Wellington, 2009) at
212.
Northland Milk Vendors Assoc Inc v Northern Milk Ltd [1988] 1 NZLR 530 at 538 (CA).
Burrows and Carter, above n 22, at 212.
See Fleetwing Farms Ltd v Marlborough District Council [1997] 3 NZLR 257 (CA) at 267,
Walker v Allan [2002] 1 NZLR 278 (HC) and BR v RL (2008) 28 FRNZ 46 (HC).
Burrows and Carter, above n 22, at 213.
Young & Ors v Body Corporate 120066, above n 6, at [32].
same location which relate to or serve common property makes little
sense and leaves the common property exposed. Indeed, I go further.
I accept Mr Allan’s submission that throughout the country there are
likely to be hundreds of structures in which unit properties are
constructed on top of common property and that for a body corporate
to be under an obligation to repair both the common property and
every unit in the development relating to another unit but not those
units sitting on top of common property is “truly nonsensical”;
(d)
Any other approach is inconsistent with the stated purpose of the Act
in s 3(d) “to protect the integrity of the development as a whole”.
[61]
However, if I am wrong in that approach, Mr Allan urges a purposive
construction of the word “unit” in s 138(d) to include, in that context, the common
property.
[62]
Unit is a defined term meaning:28
In relation to any land, means a part of the land consisting of a space of any
shape situated below, on, or above the surface of the land or partly in one
such situation and partly in another or others, all the dimensions of which are
limited and that is designed for separate ownership.
(Emphasis added)
[63]
In terms of s 54 UTA 2010:
(a)
The common property is owned by the Body Corporate.
(b)
The owners of all units are beneficially entitled to the common
property as tenants in common in shares proportional to ownership
interest (or proposed ownership interest) in respect of their respective
units.
[64]
Mr Allan’s argument in this respect is that the “separate ownership”
referenced in the definition of unit may include ownership as tenants in common in
shares. Since that proposition is self-evidently correct in relation to any principal
28
Unit Titles Act 2010, s 5.
unit of which there are multiple proprietors as tenants in common, it is difficult to
resist his further proposition that a unit could include areas of the building in the
separate albeit common ownership of the respective proprietors.
[65]
However, I prefer to deal with the matter in the manner indicated, namely by
reading into s 138(1)(d) the same words “or the common property, or both” which
appear at the conclusion of s 80(1)(a)(ii).
[66]
In the context of the Bridgewater development this conclusion means that in
relation to the plaintiffs’ vires challenge I may look to the manner in which any
level 2 building elements relate to or serve the common property. As I will expand
on later in the judgment, that relationship is as obvious as the (conceded)
relationship which the level 3 decks have to level 2 units.
The Jurisdictional Facts
[67]
With that background there are accordingly three of what Mr Brill describes
as “jurisdictional facts” which underpin the Body Corporate’s s 138(1)(d) duties,
namely that:
(a)
repair, maintenance or renewal is necessary in respect of —
(b)
any building elements and infrastructure that —
(c)
relate to or serve more than one unit or the common property, or
both.29
[68]
In relation to each of these “jurisdictional facts” the plaintiffs assert a civil
onus on the defendants to satisfy the Court that the relevant criteria are established.
[69]
For its part the defendant says that it has no such onus and further that,
although it was obliged to act on expert advice and has done so, that is the limit of its
obligations and that, so long as there was some material that could justify the
29
The statement of claim and Mr Brill’s submissions were premised on the proposition (rejected
by me) that the body corporate has no duty in relation to building elements on private property
that serve common property.
decision made by it, even though contrary views were tenable, its decision to act
under s 138(1)(d) cannot be challenged.
[70]
In support of that proposition the defendant relies on the decision of Jaine J in
Re Bell30 as adopted by Heath J in World Vision of New Zealand Trust Board v
Seal.31
[71]
Re Bell involved an application for relief under s 42 of the former Act where,
absent relief, a unanimous resolution would have been required.
The relevant
resolution related to sale of the caretaker’s flat and was supported by 96 of the 99
proprietors. Jaine J noted that s 42 gave no guidance to the Court of the principles
upon which it was to act. He went on to say, however, that:32
The merits of the matter are best determined by those who are affected by it
and have personal knowledge of it and after the matter has been considered
by them with the opportunity for debate at a properly convened meeting of
the Body Corporate. It should not be for the Court to substitute its view on
the merits of the proposal and this Court is not persuaded that the reasons for
opposing the motions must be examined with a view to considering whether
the minority view on the merits of the proposal should be upheld with the
result that the wishes of the majority could not be given effect to.
This Court’s attention should be directed towards the procedures that led to
the passing of the resolutions rather than the merits of them and a
consideration of whether there was some material that could justify the
decision, even though a contrary view was tenable. If there was an
irregularity or impropriety in the procedures followed or it was apparent that
there was no information upon which any reasonable person could reach the
decision contained in the resolutions, then this Court may consider refusing
an order sought under s 42 even though the required majority was obtained.
[72]
I reject both the plaintiffs’ and the defendant’s arguments on this issue. In my
view, subject to the question of procedural regularity to which I will later return,
once a decision has been taken by a body corporate to discharge its duties under
s 138(1)(d) the onus is on any party (here the plaintiffs) to prove, on the balance of
probabilities, that the jurisdictional requirements of the section are not satisfied. In
so far as those jurisdictional requirements are concerned, however, I do not regard as
a complete answer the fact that the Body Corporate has acted on expert advice with
“some material” to justify its decision. I accept in that sense the plaintiffs’ reference
30
31
32
Re Bell HC Wellington M243/92, 22 October 1992.
World Vision of New Zealand Trust Board v Seal, above n 21.
Re Bell, above n 30, at 5-6.
to “jurisdictional facts”. If the plaintiffs are able to demonstrate on the balance of
probabilities that the various criteria of s 138(1)(d) are not engaged, then there can
be no duty to undertake repairs within unit property and the proprietor’s entitlement
to quiet enjoyment, under s 79(d), must prevail.
[73]
However, in my view, the observations of Jaine J are particularly apposite to
the next stage in any body corporate’s assessment – namely, having determined that
it must act, what the particular nature of its response should be. Such response will
inevitably be conditioned on expert opinion. That much is recognised in Brooker v
Body Corporate 154558,33 and in my opinion the merits of one repair plan over
another are best determined by those who are affected by and have to fund it, have
personal knowledge of it, have participated in any discussions relating to it at a
properly convened meeting of the Body Corporate, and have decided accordingly.
[74]
I accept therefore the defendant’s submission that, provided the Body
Corporate has acted on expert advice, that the expert engaged was suitably qualified,
and that the advice was given in good faith, how the Body Corporate chooses to act,
whether by way of the “holistic” solution proposed by the defendant or the targeted
repairs for which the plaintiffs vigorously contend, is a matter for the Body
Corporate and its decision should, ordinarily, be respected even if contrary views are
tenable. However, that position assumes vires.
[75]
This accords with the approach of Asher J in LV Trust Holdings Ltd v Body
Corporate 114424 where a distinction was drawn between the position of minorities
in relation to economic issues affecting them alone and the position of such
minorities with regard to decisions affecting the development as a whole. His
Honour noted in respect of the competing schemes before him:
[60]
The fact that the applicants are in a minority of one and the majority
of 14 are against their proposal is far from conclusive in the particular
circumstances of this case. The assumption referred to in Tisch that the
greater level of support from owners with the proposed scheme, the more
likely it is to do justice, does not in all circumstances follow. As the Court of
Appeal observed, the assumption does not invariably apply because a
majority of owners may support a scheme that is unfair to the minority.
33
Brooker v Body Corporate 154558 (2005) 6 NZCPR 953 (HC) at [64].
[61]
When the majority of owners will financially benefit and the
minority will financially suffer, the majority support may do no more than
reflect that unfairness. The position is different where the issue is one of
method or scope, or aesthetics. If, for instance there is broad support for a
particular colour scheme or design, that is likely to be highly persuasive.
Not so when it is just a question of who out of the various owners should pay
with division along payment lines.
(Emphasis added)
[76]
In this case, although the detail will be more fully discussed in later sections
of this judgment, the Body Corporate has acted on bona fide advice from an expert
with substantial experience and who was identified and instructed by solicitors with
specialist knowledge in the area. His advice to the Body Corporate was that the
complex did not comply with the Building Code at the date of its construction and
that remediation would involve reconstruction of the decks with adequate falls and
certain consequential changes to the northern facade. The Body Corporate was, in
my view, entitled to accept that advice and develop its scope of works accordingly.
It was entitled to do so despite the existence of contrary views. It is not for the Court
to substitute its own view on the merits of one repair plan over another or to
examine, in the words of Jaine J, “whether the minority view on the merits of the
proposal should be upheld with the result that the wishes of the majority could not be
given effect to”.34
Are each of the level 4, 3 and 2 decks building elements?
[77]
This question can be simply answered. The definition of building elements in
the Act is expansive and relevantly to this case specifically includes “decks” and
“horizontal slab structures between adjoining units”, or “other features for the
support of the building”.35
Are elements of infrastructure involved?
[78]
Again the answer is yes. Infrastructure is broadly defined to include:36
Infrastructure includes pipes, wires, ducts, conduits, gutters, watercourses,
cables, channels, flues, conducting, or transmission equipment necessary for
the provision of water, sewerage, drainage, stormwater removal, gas,
34
35
36
Re Bell, above n 30, at 5.
Unit Titles Act 2010, s 5.
Section 5.
electricity, oil, shelter, protection from fire, security, rubbish collection, air,
telephone connection, Internet access, radio reception, television reception,
or any other services or utilities to or from a unit or to or from the common
property.
[79]
I discuss in the next section how that definition is engaged and the nature of
the “relationship or service” with other units/the common property.
Do the relevant building elements and infrastructure relate to (or serve) more
than one unit (or the common property, or both)?
[80]
I have already identified the inconsistencies between s 80(1)(a)(ii) and
s 138(1)(d) in so far as issues of “service” and “relationship” are concerned.
Because s 80(1)(a)(ii) associates the verb “serve” with infrastructure, Mr Brill urges
that I should adopt a similar construction of s 138(1)(d) with the result that, in
relation to building elements, the relevant inquiry should be whether they relate to
more than one unit, and with regard to infrastructure, whether it serves more than
one unit. He further suggests that because s 80(1)(a)(ii) uses the word “affect” rather
than “relate” I should give a common meaning to both.
[81]
I do not consider that anything turns on these fine distinctions.
[82]
I adopt in respect of the expression “relate to” the meaning attributed by
Harrison J in Young where he said:37
Something is incidental if it naturally attaches or is causally relevant to
something else. The phrase “relates to” has a similar meaning of reference
to or concern with.
[83]
Such definition is wide enough to capture the concept of “affect” in
s 80(1)(a)(ii).
[84]
I accept that, typically, it may be more natural to talk of building elements
within private property “relating to” other units or common property than of them
“serving” such property and that the word “serve” typically is more naturally
associated with infrastructure in the nature of pipes, wires, ducts etc. However, there
may be building elements best described as serving more than one unit and
37
Young & Ors v Body Corporate 120066, above n 6, at [30].
infrastructure best described as relating to more than one unit and I would not
preclude such a construction.
[85]
Having regard to the purposes in s 3, I accept Mr Allan’s submission that
Harrison J’s approach means that s 138(1)(d) will be satisfied if the relevant building
element or infrastructure:
(a)
naturally attaches to another unit (as in physically adjoining units); or
(b)
is causally relevant to another unit whether physically or
economically (as in non-adjoining units) ; or
(c)
is referable to another unit whether physically or economically (as in
both adjoining and non-adjoining units); or
(d)
[86]
is concerned with another unit whether physically or economically.
I would add to this that the inclusion of aesthetics in the definition of
“building elements” and the emphasis on “integrity of the development” in s 3
means, in my view, that the economic relationship to which Mr Allan refers should
include those factors, which inevitably reflect in value.
[87]
As indicated, the present case engages both issues of building elements and
infrastructure.
[88]
As to infrastructure, it is not disputed that the deck outlets at all levels drain
into an internal piping system which runs ultimately through the inter-tenancy walls
at each of levels 3 and 2, thereafter entering the underground storm water reticulation
system in the common property at ground level.
[89]
From the deck drains at level 4 there is a piping system within the ceiling
cavity above level 3 involving two right-angle bends into the same system in the
inter-tenancy walls.
[90]
In each of levels 3 and 2 there are outlets on either side of the decks
connecting again into the same system. By virtue of this internal reticulation system
the defendant’s expert Mr Gray describes there being “an inter-relationship vertically
and horizontally for all of the units that have an inter-tenancy wall or slab forming
any part of their physical boundary”.
[91]
The significance of this feature is, in the words of Mr Gray, “acute”, because
he discovered at the base of every inter-tenancy wall what he described as
“extremely high moisture readings”. Indeed, having drilled vertically from the base
upwards into the boxed structure (in the nature of a rain head) within the common
property at ground level he found that “many of them had simply turned to mush”
indicating that the internal reticulation system is clearly leaking.
[92]
In respect of the decks, Mr Gray’s evidence was likewise that they related to
or served more than one unit. His evidence was in terms that:
As a physical element they [the decks] are required to shed water in such a
way that water cannot:
[93]
stated:
(a)
Track through the deck membrane to the concrete structure below
and/or through micro/hairline cracks in the concrete slab;
(b)
Track through penetrations in the concrete slabs such as pipes;
(c)
Track through gaps between deck elements such as slabs and walls
or floors and walls to the units below or beside;
(d)
Track or enter through other components in contact with the deck
such as cladding;
(e)
Cause or allow water ingress through insufficient clearances via
momentum driven rain (rainwater bouncing vertically off the deck
surface);
(f)
Tracking along the internal pipe work to units below and adjacent;
(g)
Tracking horizontally underneath inter-tenancy walls; or
(h)
Tracking through the porous slab into other parts of the property.
Mr Gray referred to these cumulatively as the “ingress risk factors” and
All of these potential ingress risk factors are present in Bridgewater as a
result of the combination of its design features which, from a physical
perspective involve the deck of one unit constituting the ceiling of another.
[94]
On that basis he rejected the plaintiff’s contention that the structure involved
a series of self-contained “cells” in a “honeycomb” structure. That view was not in
my assessment materially undermined in cross-examination and nor was there expert
evidence against it.
[95]
Mr Gray’s evidence was in turn fully supported by the expert evidence of
architectural designer David Bullen-Smith who the plaintiff did not cross examine.
His principal conclusions were:
(1)
That the exterior or “envelope” of a building “dovetails” into
economic value from two different architectural perspectives – a
physical one and an aesthetic one.
(2)
Absent a properly constituted envelope water can migrate vertically
and horizontally through a building structure, as concrete is porous.
(3)
There is no design detail in the consent documents reviewed by him
which ensures that water cannot track horizontally from one deck to
another through the intervening walls.
(4)
The storm water reticulation system was another example of interrelated structures in the development.
(5)
The decks were not compliant with Acceptable Solutions at the time
the building was originally constructed.
[96]
I am therefore left in no doubt that all decks within the development
constitute building elements relating to or serving more than one unit or the common
property or both. That is the inevitable conclusion from the “wedding cake” design.
Based on my construction of s 138(1)(d) (so as to include the additional words
identified) the plaintiffs’ concession relating to the level 3 decks inevitably informs
the level 2 position. And that conclusion is further fortified by the ability of water to
track horizontally, as Mr Grey deposes, which means that the level 2 units relate inter
se, satisfying the s 138(1)(d) criteria even without the additional words which I
believe are appropriately imported.
[97]
I accept that it is more difficult to say that the small in-fill panels which the
two bedroom apartments feature relate to or serve other units or the common
property. They are discrete items within the boundary of each unit, effectively
insulated from physical relationship with other units by glazing systems and/or the
solid inter-tenancy walls. But they do relate aesthetically to the other units and, on
the evidence of Mr Gray, are necessarily replaced as part of the exercise of
establishing adequate falls on the decks.
[98]
Accordingly, the plaintiffs fail to discharge the onus in relation to this
“jurisdictional fact” also.
Requirement to repair and maintain (including renewal)
[99]
Mr Brill’s argument in relation to repair and maintenance has two facets.
[100] Firstly, Mr Brill challenges, in a wholesale way, the adequacy of the expert
opinion on which the defendant relies, namely that of Mr Gray. He submits that
Mr Gray’s opinions are based on sufficiently ill-founded assumptions and inadequate
facts, and that the problems with his evidence are sufficiently pervasive that it should
be rejected in total as unlikely to offer “substantial help within the terms of s 26 of
the Evidence Act 2006.” He suggests that this submission is supported by, what he
calls, Mr Gray’s “wary, evasive and defensive” demeanour under cross-examination.
[101] Secondly, he submits that the repair plan proposed, involving as it does
adherence to the current Building Code and Acceptable Solutions, goes beyond
repair and maintenance (including renewal) and involves betterment to the
development which is beyond the Body Corporate’s powers and duties.
Mr Gray’s evidence
[102] Mr Gray’s substantive evidence was contained in a 193 paragraph affidavit
dated 2 February 2015. In addition, he provided a supplementary affidavit exhibiting
the full Origin Report, including photographs, which he prepared for the Body
Corporate in October 2013. He was cross-examined at length by Mr Brill on both
that affidavit and report and re-examined by Mr Allan.
[103] I address first the issue of demeanour and Mr Brill’s submission under s 26 of
the Evidence Act. I reject that submission, although there were occasions when
Mr Gray’s position did appear pedantic. An example was his response to attributed
comments at the EGM on 9 November 2013. However, in response to a question
from the Bench he candidly admitted that the minutes expressed the general tenor of
his comments, while not obviously being his precise words. Overall I found his
demeanour appropriate and that he endeavoured at all times to maintain objectivity
and independence which are pre-requisites for the receipt of his evidence. I address
separately criticisms of the content of the evidence.
Do the decks require repair and maintenance?
[104] At one level the answer to this question is obvious and not materially
disputed by the plaintiffs. That is because, demonstrably, at least some of the decks
are in need of immediate attention, as are all the drainage systems. I set out below
the problems which are currently occurring:
(a)
In respect of apartments 401 and 402 (the penthouses) there has been
a significant history of problems with the decks, which in part
comprise the living room ceilings of the units below.
Mr Gray
deposes that this history has its origins in three principal faults with
the decks. Firstly, he says they have inadequate falls (he identified a
0.6 per cent fall on the deck of unit 401 and a 0.1 per cent fall on the
deck of 402). Secondly, he says there is an inappropriate drainage
detail whereby the flange of the deck drain sits proud of the
underlying membrane with the result that water penetrating through
the porous joints in the tiles cannot be expelled.
Thirdly, and
significantly, he identifies non-performance of the membrane which
he says has “allowed it to soak up water like a sponge and allow the
moisture to pass through it to the surface below.” Indeed, he says that
if the membrane was “intended to have been a “waterproof
membrane” then self-evidently it has failed dismally”.
(b)
There is a history of water ponding on at least some of the decks. In
his evidence on behalf of the Body Corporate, long-term committee
member Mr Andrews says that ponding of water has been identified as
a problem for in excess of two years and rejects the suggestion of the
plaintiffs’ witness Mr Millington that historical discussion of water
ponding at general meetings was isolated to the level four decks. He
refers to a report commissioned on 22 April 2013 from AA which
viewed the decks of units 401 and 402, 304, 309, 201 and 209. The
report refers to evidence of “surface water ponding on the deck of
apartment 304” and, in its summary, to the fact that “water was
ponding in a couple of areas on the decks viewed”. In his evidence
Mr Gray says that he observed the physical evidence of water pooling
on the decks of apartments 201, 303, 309, 401 and observed residue
from the pooling of water on the decks of apartments 302, 401 and
402. In combination with the minimal falls which he measured on
five of the decks (402 – 0.1°, 401 – 0.6°, 301 –0.3°, 302 – 0.1° and
304 – 0.6°) he concluded that this pooling demonstrated noncompliance with cl E2 of the Building Code, and in particular cl
E2.3.1, which states the requirement to “shed precipitated moisture”.
(c)
There is a similar history of cracked and loose tiles which
Mr Andrews again deposes pre-dates the January 2013 AGM. That
problem was plain to see in the course of the site inspection. On one
deck (303) the tiles had become completely detached from the
substrate and were able to be removed and replaced. In other areas
movement in the tiles could be detected when weight was applied to
them. I also observed evidence of cracked tiles.
(d)
Throughout the development there are problems with the membrane
under the tiles. In relation to apartment 401 where remedial work was
undertaken approximately four years after the tiles were originally
laid, there is an apparent waterproof membrane under the tiles.
However, Mr Gray deposes that on testing there were blisters and fine
pin prick holes through the surface, such that when pressure was
applied to the membrane, water seeped through the holes indicating a
breach of the surface layer. In relation to the level 2 and level 3
apartments it appears the problem is even more significant. Where the
tiles had lifted in apartment 303 the matting beneath them can be
readily identified. There is as Mr Gray states, no evidence of any
waterproof membrane over the cork acoustic mat. As a result, the mat
has absorbed moisture which in evidence Mr Gray said will, over
time, rot the cork, affect its acoustic properties and lead to the
underlying screed becoming saturated with moisture. Mr Gray further
deposes that given all decks were built at the same time (March 2002
to December 2003) and that he has seen no evidence in the property
file to suggest there were multiple contractors involved with
construction of the same deck elements, he regarded it as a reasonable
assumption that the decks were constructed using the same
methodology and are therefore likely to have the same common
problems.
(e)
There are obvious problems with the internal drainage system, as
previously discussed in this judgment, with the result that the rain
heads have, in Mr Gray’s words, “simply turned to mush”. Testing at
that location indicated a 100 per cent moisture content.
(f)
In addition Mr Gray identified less significant problems involving
deck tile grouting in contact with the bottom edge of the cladding and
an insufficient cladding to deck clearance.
[105] Mr Gray summarised these problems in his affidavit in terms:
If, as I have observed, and as appears from the plaintiffs’ evidence … there
are cracked tiles, loose tiles, membrane separating from the slab,
waterlogged membranes beneath the tiles, porous screed and grout then the
individual constituent elements are not performing either individually or
collectively to shed precipitated moisture.
[106] In addition to problems with the decks Mr Gray also identified as problems
with the building:
(a)
what he described as consistently high readings in a high percentage
of the timber frames associated with the infill panels adjacent to the
glazing systems on the northern face of the building;
(b)
an absence of waterproofing membrane to the top of the plaster overwood framed parapet wall between units 401 and 402 resulting in
elevated moisture levels.
Photographs 51 and 52 annexed to the
Origin Report show recordings of 36.8 per cent and 31.8 per cent
respectively at that location.
(c)
numerous instances of cracking to the fibre cement sheet cladding at
the penthouse level;
(d)
problems with cladding being hard down on joinery head flashings;
(e)
absence of sealing in respect of metal cladding panels;
(f)
unsealed junctions between the express joint cladding; and
(g)
unsealed joinery jamb junctions and vertical cladding/wall junctions.
[107] However it is clear that Mr Gray’s approach to remediation is based not only
on currently observed defects and danger of water ingress, but on the wisdom of
preventative action which is a concept the Supreme Court recognised as appropriate
in Body Corporate 207624 v North Shore City Council.38
38
Body Corporate 207624 v North Shore City Council [2012] NZSC 83, [2013] 2 NZLR 297.
[108] Viewed in their totality, Mr Gray concludes that the multiple demonstrated
problems with the decks establish that they are, and were at the time of their
construction, non-compliant with cl E2.3.1 of the Building Code in that they do not
and did not “shed precipitated moisture”. He describes this as “original design or
construction defect” and says that although, with the exception of the apartment 401
and 402 decks, there may not currently be any visible sign of leaking, he does not
regard this as a determinant of repair or maintenance. He says he cannot preclude
the fact that there may already be leaking and concludes:
Regardless of whether or not leaking is occurring now across all units’ decks
in Bridgewater, the fact is that these decks – which form the roof of the
property below – are defective and did not meet the Code at the time of
construction and will not do so until repaired properly.
[109] And further that:
In my opinion, not only did the decks not comply with the Code at the time
of construction, in any event the decks either have failed or will likely do so
long before the end of the building’s life.
[110] The plaintiffs attack this evidence on a number of fronts.
[111] Firstly, they say that Mr Gray bases his entire findings of Code breach on an
incorrect understanding of the meaning of “must shed precipitated moisture” in cl
E2.3.1 of the Building Code.
Mr Brill submits that Mr Gray’s construction is
idiosyncratic and effectively identifies non-performance as occurring even in the
context of the “minutest of puddles”. He submits that the word “shed” means no
more than “to get rid of” with no implications regarding the speed with which this
must occur.
[112] I do not accept this submission. I agree with the interpretation underpinning
Mr Gray’s evidence that the process of shedding should commence immediately
after a rainfall event and should cease once, as Mr Gray puts it, “the principles
involved with gravity after the rain or water on the surface has (sic) ceased to act”.
Mr Gray went on to say that if, after a rainfall event, you were to look at the rest of
the surface of the roof and there were other areas where there was no water then at
that point you could reasonably assume that the shedding was done and that any
balance water on the surface had not been “shed” but rather was retained water
which would disperse only by evaporation. I accept that analysis. Evaporation does
not, in my view, equate to “shedding”. On that basis the evidence of “pooling”
previously referred to establishes that the decks concerned are not, in my view, Code
compliant.
[113] Secondly, the plaintiffs submit that Mr Gray adopts a “guilty until proven
innocent” approach with regard to the level 2 and 3 decks premised on the fact that
there was clear evidence of level 4 failure and with an assumption that level 2 and 3
decks will at some future point fail if they have not already. Mr Brill suggests that
Mr Gray’s interpretation of cl E2.2 of the Building Code’s requirement that buildings
must be constructed to provide adequate resistance to penetration by “moisture”
involves an affirmative proof of prevention. He suggests that Mr Gray has indulged
in “fact free speculation” rather than attempting to establish the facts or to apply
generally recognised standards. He identifies a number of inspections which he says
could have taken place to determine the exact level of performance of the level 2 and
3 decks.
[114] I accept that Mr Gray’s presentation at a committee meeting on Wednesday
7 May 2014 included (as recorded by the Secretary) the stated observations:
(a)
There is clear evidence that the decks on level 4 have failed;
(b)
That a visual inspection suggests the decks on all levels are
constructed the same;
(c)
It is a reasonable assumption that the decks on levels 2 and 3 will fail
at some point if they have not already failed; and
(d)
That evidence of failure had not yet been fully confirmed and would
occur in the remediation programme.
[115] There is, however, in my view, danger in taking that evidence out of context.
The minutes record the previous advice by Mr Gray was that although all of the level
2 and 3 decks had not yet been investigated, there was evidence that the walls around
the decks had been compromised as the result of moisture.
He subsequently
expressed confidence that a “complete solution” was the only sensible solution for
the complex’s design failings.
[116] Nor did Mr Gray’s evidence in this proceeding proceed on the basis of a
simple extrapolation from the level 4 failings.
There was direct evidence, for
example, of tile failure in level 3 apartments, including the evidence I was able to
observe myself during the course of the site inspection (I refer in that respect to lifted
and cracked tiles and to the fact that in places where adhesion had been lost with the
substrate there was evidence of retained moisture under the tiles which was
expressed through the grout when weight was applied to them). Moreover, the
submission overlooks the absence of waterproof membrane in apartment 303 which,
if anything, makes its position worse than that of either of the level 4 apartments.
Finally, there are all the other acknowledged defects at levels 2 and 3 including the
fact that the deck tile grouting was in contact with the bottom edge of the cladding,
the insufficient cladding-to-deck clearance and the inadequate falls which manifest
themselves in the instances of pooling which were identified.
[117] The third area of attack is related to the second and focuses on the drainage
detail to the deck of penthouse apartment 402 which is known to have leaked. As
previously indicated, that detail provides for the collar of the drainage outlet to stand
proud of what appears to be a waterproofing membrane (albeit not an adequately
functioning one) at that level. In turn, water is “encapsulated” (Mr Gray’s word)
under the tiles and cannot escape.
[118] On the basis that all of the decks were constructed by the same contractor,
Mr Gray extrapolates that detail to each of the level 3 and 2 decks. The plaintiffs are
critical of that extrapolation because of remedial work undertaken in 2007 on the
level 4 decks. They suggest that the drainage detail complained of is unique to level
4 and a result of that remedial work.
[119] That proposition was, however, rejected by Mr Gray.
[120] The following exchange summarises his position:
Q:
The point is there was extensive work including membrane work
done on that deck four years after the membranes were laid on the
apartment decks and yet you assume that what you see on 402, it is a
reasonable assumption to assume that all the apartment decks will be
just the same?
A:
When I looked at 402 the first time I was conscious that there had
been repairs and I was very careful, I believe to look for original
construction. You can tell what is new sealant, what is original
sealant. You can – we are familiar with looking at these junctions,
we are familiar with looking at series works and you get good at
identifying –
[121] The position is confused by the fact that further temporary repairs were made
in the vicinity of the apartment 402 “back” drain in 2013 and it was put to Mr Gray
that:
Q:
What you might have detected as being the difference between the
new and the old was in fact the difference between the 2013 work
versus the 2003 or 2007 work?
[122] Mr Gray responded to that by saying that it was “altogether possible” but that
he was, he believed, “quite thorough and careful”. His earlier evidence had been that
you could see evidence of two membranes – an original one which disappeared
without touching the edge of the tiles and a subsequent liquid applied membrane
painted up to the edge of the tiles as opposed to going under them. Mr Gray
expressed confidence that the original work he was looking at was that completed in
2003.
[123] Ultimately this issue falls to be determined on burden of proof principles. Mr
Gray was confident that he could identify original construction by reference to the
membrane which passed under tiles and the plaintiffs adduced no evidence that the
remedial work undertaken in 2007 involved construction of a unique drainage detail
in relation to apartment 401.
[124] However, even if there was such a unique detail and assuming it to be the
principal cause of the problems which occurred on level 4, there remain a number of
identified problems on the level 2 and 3 decks as previously discussed.
[125] Next the plaintiffs are critical of Mr Gray’s proposition that deck membranes
are building elements with a required 50 year life span in terms of sub-cl B2.3.1
(Durability) of the Building Code. His evidence in that respect was based on the
proposition that membranes were an element “difficult to access or replace” within
the terms of sub-cl B2.3.1(a)(ii). On this point the plaintiffs are, in my view, on
firmer ground. The decks constituted part of the “building envelope”. Such was
accepted by Mr Gray. The building envelope includes the exterior cladding and the
proposition that a deck membrane should have a greater durability requirement than,
for example, a wall cladding, seems to me a dubious one.
[126] In this respect the plaintiffs called evidence from a Mr Reed - a semi-retired
self-employed building contractor who stated that he was “surprised” by Mr Gray’s
view that the durability provisions of the Code required deck membranes to have a
service life of 50 years. He stated that Territorial Authorities almost always require
membrane suppliers to provide “producer statements” under the Building Act and
that he was unaware of any manufacturer which claimed its product will last 50
years without maintenance or renewal.
[127] Insofar as Mr Gray’s opinion was based on the “difficulty” identified in
subclause B2.3.1(a)(ii) there is nothing, in my view, to say that such replacement
was not simply “moderately difficult” within the terms of subclause B2.3.1(b)(i). If
that is the case then a 15 year durability requirement would apply.
[128] However, while accepting that the plaintiffs demonstrate an incorrect
approach in this regard, it does not, in my view, get them to the point they require.
For a start, there is compelling evidence from apartment 303 that there is in fact no
waterproof membrane (or no waterproof membrane in the location it should be)
under the deck tiles. Even if there was such a membrane it would, on the plaintiffs’
approach to the durability requirements, be nearing the end of its service life.
Moreover, such membranes as have been able to be identified are not performing. I
am not persuaded that when one looks at the combination of cracked tiles, loose
tiles, membrane separating from slab, waterlogged membranes and water-logged
acoustic matting, it is realistic to suggest that the decks are not currently in need of
repair or maintenance, taking into account that they were all constructed at the same
approximate time and by the same contractor.
[129] Finally, the plaintiffs are critical of Mr Gray’s evidence in relation to
moisture readings. In his written submission Mr Brill introduced this aspect of his
argument in terms:
Mr Gray’s recommendation for replacement of the whole northern elevation
of the building is based on moisture readings which he insisted in crossexamination are not merely indicative of potential problems but “absolute”.
[130] I do not regard that as a fair representation of why Mr Gray’s remediation
plans extend to (effective) replacement of the northern façade.
Although he
identified elevated moisture levels in the wooden framing associated with the façade
“in fill” panels (which I discuss in greater detail below) what the plaintiffs refer to as
“replacement of the whole northern elevation of the building” does not, it seems to
me, to have been significantly driven by that fact. Rather, such replacement follows
from Mr Gray’s assessment that remediation works to the decks need to be compliant
with the current Code, that this necessitates establishment of adequate falls which, in
combination with the required step down from the living room areas in turn requires
construction of a bulk head and either refurbished or replacement glazing systems. It
is not the moisture readings themselves which drive that replacement.
[131] Nevertheless, the moisture readings formed a significant part of Mr Gray’s
evidence of non-performance with sub-cl E2.3.2 (prevention of penetration of water
that could cause undue dampness) and his assessment that the B2 durability
requirements were not being met.
[132] That evidence was developed at length in his principal affidavit and is
supplemented by the moisture maps appended to his original report.
[133] At levels 3 and 4 those moisture maps were focused on the in-fill panels
adjacent to the northern elevation glazing systems.
[134] Some 28 readings of moisture levels were taken in and around that location
with the results ranging from between 15.5 per cent and 89.4 per cent. The 89.4 per
cent figure was an outlier and my calculations show that the average reading was
21.9 per cent at that location. As Mr Gray explains in his evidence, all recorded
percentages must, in turn, be adjusted upwards by two per cent to reflect the
assumed use of radiata pine in the relevant framing.
[135] In his evidence Mr Gray said that, for a building of this age and assuming
that there was a weathertight envelope, he would expect the framing in wall cavities
to have a moisture level of 8-14 per cent (which he described as the equilibrium
moisture content (EMC). Measured against EMC, he concluded that there were
“consistently high readings in a high percentage of the testing [he] conducted”. He
stated that “these readings were sufficiently high in my professional opinion to
establish a recommendation to repair”.
[136] That evidence is to be considered against the Department of Building and
Housing’s Guide to the Diagnosis of Leaking Buildings,39 which sets out a three
level analysis in the following terms:

39
Moisture content readings in this range fall
within the maximum allowable range for
untreated radiate pine as per NZS 3602:1995 for
members protected from weather and dry
conditions

While moisture content of this level could
indicate possible problems, it is generally
considered that this level will not support timber
decay

Moisture content readings in this range indicate
problems exist and excess moisture should be
immediately corrected

Such levels must be considered a warning that
remedial action is required to prevent future
damage

Mould growth may be common in wall cavities

Once decay is established, there is a significant
probability that ongoing decay can and will
occur at and close to 18% moisture content.

Moisture content of 24-35% will allow decay to
Up to 18%
18-24%
Department of Building and Housing Guide to the Diagnosis of Leaky Buildings (May 2011).
initiate depending upon the treatment of the
timber, however, once decay is established there
is a significant probability that ongoing decay
will occur at and close to 18% MC.
24% and
above.
[137] Under cross-examination Mr Gray further stated that whether the framing
timber in the Bridgewater Apartments was treated or not (he assumed not, given the
timing of the development’s construction) moisture at the levels he recorded would
mean that the framing elements would not meet the B2 durability requirements and
that, even if the timber was treated, toxigenic moulds would almost certainly grow
on the surface, even if no actual decay occurred.
[138] Mr Gray expressed the firm view that the durability requirement for the
timber framing was 50 years pursuant to sub-cl B2.3.1 on the basis that such framing
constituted a building element that was difficult to access or replace, and that what
was involved was in the nature of walls providing structural stability to the building.
The structural significance of the infill panels and associated framing is strongly
supported in the evidence of Mr Bullen-Smith.
[139] I agree that the juxtaposition of building elements such as floors, walls and
fixings in sub-cl B2.3.1(a) (requiring a 50 year lifespan) and elements comprising
the “building envelope” referred to in sub-cl B2.3.1(b)(i) supports the proposition
that structural framing behind a cladding system (the envelope) has a durability
requirement of a minimum 50 years. Moreover, failure of such elements could, in
my opinion, go undetected during both normal use and maintenance of the building
within the terms of sub-cl B2.3.1.(a)(iii). There is also the obvious difficulty of
replacing the framing systems which provide in-situ support for the deck glazing
systems and to which interior wall boards are attached.
[140] Mr Gray also relied for his opinions on an article published by Beagle
Consultancy Ltd whose principal, Dr Robin Wakeling, he described as the leading
authority in relation to the effect of moisture ingress on timber.
In his article
Dr Wakeling suggests, as a rule of thumb:
Once decay is established there is a significant probability that on-going
decay will occur at and close to 18% MC but for uninfected wood the MC
conditions required for decay are closer to the fibre saturation point,
probably 24-30%.
[141] Later in his report he identifies that fungal growth often occurs in the range
of 16-30 per cent.
[142] The plaintiffs in turn quote Dr Wakeling as saying that “when investigating
an unknown situation it is important not to rely on MC readings in isolation” and
that:
an important qualification is that all moisture content readings and cardinal
values used or referred to during investigation and remediation are
indicative, not absolute (including 18%).
[143] I accept that isolated readings in excess of the identified thresholds do not of
themselves indicate systemic problems. However, that is not the case here. Rather,
there is extensive evidence of readings which are sufficiently high to indicate, in the
words of the Department of Building and Housing’s Guide that “remedial action is
required to prevent future damage”. Indeed, the average readings are at the upper
limit of what the Department effectively identifies as the “danger zone” (allowing for
the two per cent adjustment previously referred to).
[144] In my view, Mr Gray was on solid ground in identifying excess moisture
problems in the north wall framing arising out of an original design or construction
defect. As I have already indicated,40 I do not regard the framing as relating
physically to other units by virtue of the solid inter-tenancy walls, but it supports an
aesthetic component (the cladding system) which does so relate and is indicative of
the fact that in their current construction the decks are not preventing the
“penetration of water that could cause undue dampness” within the terms of sub-cl
E2.3.2. Clearly the moisture is migrating from somewhere and the logical culprit is,
as Mr Gray suggests, a design construction defect with the decks.
[145] Similar problems with wooden framing arise in relation to the ACP clad
“fins” because the construction detail allows water which penetrates the tiles
(whether the result of cracks or simply the porosity of the grout) to travel under the
40
At [97] above.
ACP panels where they abut the deck surface. Mr Gray’s evidence is that behind
those panels is a timber frame which is significantly exposed to water ingress and
condensation.
Summary – repair and maintenance
[146] The plaintiffs, in my view, fall a long way short of discharging the onus of
establishing that repair and maintenance of the decks is not required.
Having
reached that point and having regard to the principles previously discussed,41 the
decision of the Body Corporate as to how (in terms of method or scope) it addresses
these problems is, in the words of Asher J in LV Trust Holdings Ltd v Body
Corporate 114424, “highly persuasive”. Only in the event that the Body Corporate’s
remediation plan went beyond repair and maintenance (including renewal) to a point
where betterment was contemplated, would I regard it as appropriate for the Court to
intervene. It is to that issue that I now turn.
Betterment
[147] The plaintiffs argue that the Origin Repair Plan, insofar as it contemplates
bringing the development to a standard of current Code compliance, constitutes
betterment which is beyond the repair and maintenance mandate of s 138 and is thus
ultra vires.
[148] The defendant acknowledges that works properly described as betterment
within unit boundaries cannot be undertaken by it (absent consent). To that extent it
recognises that proposals (for example, to install double glazing as part of the
remediation works) cannot be imposed on individual propositions unless mandated
by the relevant territorial authority as part of a building consent process. But it says
the essential works contemplated by it, albeit that they are designed to satisfy the
requirements of the current Code and to facilitate the issue of a new Code
Compliance Certificate, are not in the nature of betterment. Rather, they simply
reflect the reality of what is inevitably required to now lawfully remediate the
original design and construction defects in the building. So, unfortunate though it is,
41
See [73]-[76] above.
Mr Gray deposes that remediation cannot be effected by, for example, simply lifting
the current deck tiles, relaying a new membrane and retiling.
[149] The key consideration is the absence of proper falls to the decks as
constructed. That issue is developed at length in Mr Bullen-Smith’s unchallenged
evidence.
He says that under current Code requirements all decks require a
minimum of 1.5° fall, although some Councils (Auckland City being an example)
require that any deck functioning as a roof have a 2° fall, the rationale being that
construction to a minimum 1.5° requires a degree of accuracy which is not readily
available.
[150] In order to attain that fall the decks have to rescreeded. In turn, a problem is
created at the junction between the interior and exterior of the apartments. Currently
the ‘step down’ between the interior and the decks is between 60 and 70mm.
Although Mr Gray does not identify this as a specific building defect he does say
that it was non-compliant with the BRANZ “Good Membrane Practice Guide”
current at the time of the building’s construction, which specified for a minimum
100mm threshold.
In any event, creation of adequate falls now would all but
eliminate the existing step down and to comply with Code requirements a
“bulkhead” will need to be constructed with a 150mm threshold. As previously
indicated, that in turn flows through to a requirement to “cut-down” or replace the
existing joinery and replace the existing infill panels. It is for these reasons that the
costs of a fully Code compliant remediation so substantially exceed the costs (less
than $10,000 per level 2 and 3 unit) which the plaintiffs believe should be spent.
[151] To an extent the competing positions tended to focus on whether a building
consent was required for deck remediation works and the implications of s 112(1) of
the Building Act 2004 in so far as it allows alteration of existing buildings.
[152] In his evidence on behalf of the defendants, Mr Gray stated that in his
assessment the deck remediation required application for and grant of a building
permit. Such application has in fact already been made. He based that assessment
on his analysis of cl 1 of Sch 1 of the Building Act which exempts from building
consent requirements the “repair and maintenance of any component or assembly
incorporated in or associated with a building provided that comparable materials are
used”. However cl (1)(3) in turn provides:
1
General Repair, Maintenance and Replacement
…
(3)
However, subclauses (1) and (2) do not include the
following building work:
(a)
complete or substantial replacement of a specified
system; or
(b)
complete or substantial replacement of any
component or assembly contributing to the
building's structural behaviour or fire-safety
properties; or
(c)
repair or replacement (other than maintenance) of
any component or assembly that has failed to satisfy
the provisions of the building code for durability, for
example, through a failure to comply with the
external moisture requirements of the building code;
or
(d)
sanitary plumbing or drainlaying under the
Plumbers, Gasfitters, and Drainlayers Act 2006.
[153] Mr Gray’s position was that replacement of the deck tiles and membranes
required a building consent by virtue of sub-cls (a) and (c).
[154] In respect of sub-cl 3(a) Mr Gray’s reliance is misplaced. Specified systems
are defined in the Act to include identification as such by Order in Council. There is
no relevant Order in Council relating to any composite membrane/tile deck cladding
system.
[155] Mr Gray is, in my view, on surer ground in relation to sub-cl 3(c). The
durability requirements of the Code (cl B2 durability) have as their objective that a
building will, throughout its life, satisfy the other objectives of the Code. Those
objectives include the performance objectives of sub-cls E.2.3.1 and E.2.3.2. That is
in turn reinforced by the wording of cl (1)(3)(c) of Sch 1 of the Building Act.
[156] Whether a building consent is required is ultimately an issue of statutory
construction (informed in this case by expert opinion as to the existing building’s
satisfaction of performance criteria). In my view, having regard to the conclusions I
have previously reached on the evidence, Mr Gray is correct in his assessment that a
building consent is required to remediate the decks. The absence of adequate falls
across the development, the evidence of ponding on many of the decks, and the
absence or non-performance of deck membranes are sufficient to preclude
compliance with the Code’s durability (and associated performance) requirements.
[157] From this premise Mr Gray says the die is cast because it is “highly unlikely”
that any territorial authority will issue a building consent to remediate the decks to
the Code requirements applicable at the time the building was originally
constructed.42 Rather, in order to obtain such consent and the Code Compliance
Certificate which the defendant anxiously anticipates to restore value to the
development, compliance with current Code requirements will be necessary. That in
turn is the genesis of significant costs the Body Corporate now faces.
[158] Mr Gray’s evidence in this respect was supported by Mr Bullen-Smith and
was not, in my view, materially undermined on cross-examination. No contrary
evidence was called by the plaintiffs.43
[159] Mr Brill’s response to this evidence was to say that the matter fell to be
decided not on the basis of Mr Gray’s evidence but on the proper construction of
s 112 of the Building Act which he said authorised remediation of the decks to 2003
standards.
[160] I regard that submission as misconceived. Section 112 does not detract from
the s 17 Building Act requirement that all building work must comply with the
Building Code (or the ss 67-70 provisions relating to waivers or modifications which
are not, on the evidence, engaged in this case). Building Law in New Zealand
summarises the position as follows:44
42
43
44
Mr Gray’s recorded advice to the 2015 AGM was in terms “The Council would not allow the
complex to be rebuilt to the 2004 Code but required it to be remediated to the 2014 code”
(Minutes of AGM held 31 January 2015 at page 10).
Significantly, the expert evidence called by the plaintiffs from Prendos Director Mr Maiden and
which I ruled inadmissible following argument on the first day of trial, did not contradict Mr
Gray’s approach in this respect.
Building Law in New Zealand (online looseleaf ed, Thomson Reuters) at [BL112.02].
In other words:

Any new work must comply completely with the Building Code
subject to any waiver or modification granted by the territorial
authority (for example, if a shower compartment made of ordinary
glass is being replaced, then the replacement must be made of safety
glass as required to comply with the Building Code); and

After the alteration, the whole building must comply with the
Building Code to the extent specified by s 112.
[161] The “extent specified” is that the building will “continue to comply at least to
the same extent as it did then comply”45 but that is a reference to the building as a
whole. It is not a mandate for a repair or replacement of the particular element
which has failed in accordance with some historical and now superseded Code
requirement.
[162] Department of Building and Housing’s: Determination 2011/09346 is on point
and discussed in Building Law in New Zealand.47 The determination related to a
relocated house and associated alterations. It confirmed that s 112 applied to the
compliance of the building as a whole (after alteration) and not to the building work
itself. Therefore new stairs replacing rotten stairs in a relocated house had to comply
fully with the Building Code. They were not an existing building element simply
because they were located in the same place and built to the same dimensions and
configurations as the original stairs.
[163] In my view this conclusion follows logically from s 17 of the Building Act,
which provides:
17
All building work must comply with Building Code
All building work must comply with the Building Code to the extent
required by this Act, whether or not a building consent is required in
respect of that building work.
45
46
47
Building Act 2004, s 112(1)(b)(ii).
Departmet of Building and Housing Determination 2011/092 (21 October 2011).
Building Law in New Zealand, above n 45, at [BL112.02].
[164] Significantly, the section consigns to the point of irrelevance much of the
argument in the case about whether a building consent is necessary for the
membrane work to the decks. Exactly the same principles apply whether or not a
building consent is required.
[165] For these reasons I accept the defendants’ position that the scope of works set
out in the Origin Report does not constitute betterment and is thus authorised in
terms of s 138.
I exclude some of the improvements (such as double glazing,
addition of ranch sliders to bedroom suites etc) which have been mooted in some of
the defendant’s discussions. They should be presented to owners as effectively
“optional extras” at individual proprietor’s cost.
[166] I caveat the judgment also with the observation that, were there to be a lawful
basis on which the relevant territorial authority issued a building consent for a
reduced scope of works than that contemplated in the Origin Report, then the Body
Corporate would necessarily need to consider its position further. As desirable as the
objective of ensuring the building meets 2015 standards may seem to the defendant
and the majority of its members, this judgment is premised on that being a necessary
incident of required repair and maintenance and not a lawful objective in itself.
Alleged procedural irregularity
[167] The plaintiffs claim that, even if the Body Corporate has the power to
undertake the ‘holistic’ repair contemplated in the Origin Report, it has never
adequately authorised it. They do not question the Body Corporate’s commitment to
that plan as a matter of fact. Indeed, their own statement of claim pleads:
Despite the plaintiffs’ objections the Body Corporate intends to proceed with
the Origin Repair Plan, subject to minor adjustments. It proposes to fund
this work by levies, past and future, on all unit owners in proportion to their
ownerships interest under the Unit Titles Plan.
However, they say that there has never been a formal adoption of the Origin Repair
Plan or resolution to undertake remediation in its terms, as they say is required.
[168] That the Body Corporate by an overwhelming majority of votes wishes to
proceed with a comprehensive and co-ordinated repair under the supervision of a
single consultant and with the intention that the process deliver a building compliant
with the current code within as tight a timeframe as possible cannot be seriously
disputed. If any confirmation of that is required it is provided for by the 2015 AGM
which took place five weeks prior to the hearing of this claim. At that meeting a
motion, promoted by plaintiff Mr Small, was put in terms:
ORDINARY RESOLUTION:
a) “That the Committee’s advisers negotiate with tenderers for a staged
repair plan as follows:
i)
Stage 1 of the works to be limited to the repair plan for the
two penthouse decks (including any interior damage to
Units 3.5 and 3.6), the staircase and the control room, with a
target completion date of 1 May 2015; destructive testing
should be undertaken on all floors.
ii)
Stage 2 of the proposed works, being all the remainder of the
repair plan not included in Stage 1, be separately costed and
be the subject of further consideration at an EGM to be held
after the High Court decision in the injunction proceedings
is available.”
Moved:
V Bath (substituted J Nimmo)
Seconded:
K Jury
DEFEATED UNANIMOUSLY
[169] That motion received no support from the meeting.48 Even allowing for the
fact that the plaintiffs were precluded from voting as a result of non-payment of
levies related to the remediation programme (and the legality of which they
challenge in claims which are not addressed in this interim decision), the motion
would have been heavily defeated. The reality is that within a body corporate of 22
owners there are five only who wish to proceed other than on the ‘holistic’ basis
predicated in the Origin Report.
[170] In approaching this aspect of the plaintiffs’ claim I am mindful therefore of
the demonstrated wishes of the clear majority of owners. They should be respected
if at all possible. In my view it is not the role of the Court to submit the Body
Corporate’s resolutions to a pedantic or overly critical analysis. Albeit that often, as
in this case, body corporates will engage the services of a professional secretary,
48
It was moved by Mr J Nimmo (despite the fact he did not support it) in order to facilitate
discussion. Mr Small was precluded from voting because of unpaid levies.
allowance should, in my assessment, be made for the fact that they are often
comprised of non-professional people, and committees of volunteers. To expect the
same precision of language as one might, for example, in a commercial contract is in
my view unrealistic. In my assessment, the test should be whether, having regard to
the full context in which resolutions occur, it can be safely concluded that the Body
Corporate has indeed committed itself to the Origin Repair Plan.
[171] For the defendant Mr Allan submits that the UTA 2010 does not even specify
that a resolution is a prerequisite for a body corporate fulfilling its functions. He
says that it is not unlawful for a body corporate to do its duty under the Act without a
resolution and that such a resolution is “merely a record for future reference”.
[172] In my view that submission is difficult to align with the provisions of s 101 of
the Act. Subsection (1) provides that:
101
How matters at general meeting of body corporate decided
(1)
Any matters at a general meeting of a body corporate relating to an
exercise of a duty or power that may not be delegated … must be decided by
special resolution.
[173] In so doing the UTA 2010 recognises that even where a body corporate is
under a statutory duty (as for example that imposed by s 138), exercise of that duty
occurs via resolution, either “special” in terms of s 101(1) or “ordinary” in terms of
s 101(2).
[174] However, I agree that the fact that the Body Corporate is under a duty to
repair and maintain the common property, assets and building elements identified in
s 138(1) is an additional reason why a relatively benign approach should be adopted
to the meaning and effect of its resolutions in that respect.
[175] I make one further preliminary observation. If contrary to the conclusion I
have arrived at I had held that there was some inadequacy in the Body Corporate’s
adoption of the Origin Repair Plan and its commitment to undertake the works in the
manner Origin described, then I would have considered the appropriate course to
have been for any consequential orders in the plaintiffs’ favour to have lain in Court
for a period of two months in order to allow adequate opportunity for such
procedural/technical issues to be re-addressed. Again I would consider it the Court’s
function to facilitate and not obstruct the wishes of the majority of owners.
[176] I turn then to the relevant factual background and resolutions.
[177] The critical meeting is the EGM of the Body Corporate held on 9 November
2010. In its statement of defence the defendant pleads that at this meeting the Body
Corporate unanimously resolved to:
… effect a repair of the OCDD [original construction and design defects] by
a single contractor under the supervision of a single consultant for the whole
of the structure so as to render the defendants and owners structure code
compliant and thereby obviate the stigma attaching to the building and units.
[178] In considering the specific resolutions passed at that meeting the defendant
submits that context is everything. Specifically it refers to the following:
(a)
Against a history of ponding on some of the decks and water ingress
into level 3 apartments from the penthouse decks in August 2013,
reports were commissioned from first AA and subsequently Origin
into the weathertightness and performance of the building. The brief
to Origin occurred in the context of a looming limitation date in
respect of proceedings and sought advice as to whether Bridgewater’s
structure met the requirements of the Building Code at the time it was
constructed. Mr Andrews describes the purpose of the report as being
“to identify original construction and/or design defects in Bridgewater
for the Council proceeding”.
(b)
The Origin Report was published on 18 October 2013. It addressed in
detail identified original construction and design defects and set out
“remediation description”, the purpose of which was to summarise
the required works needed to repair the building and ensure that it
will continue to meet the future requirements of the NZBC. It is
common ground that the plan which Mr Gray describes is the
“holistic” option which the Body Corporate wishes to pursue. In
particular, it provides for removal and disposal of all existing infill
panels, deck tiles and membranes, removal of all exterior joinery
units to the north elevation, rescreeding decks to ensure adequate
falls, provision of adequate upstands, and installation of new deck
membranes with tiles on supporting deck jacks.
(c)
The Origin Report was distributed to all owners within four days of
receipt together with an agenda for the EGM to be held on 9
November 2013 and the necessary proxy postal voting forms.
(d)
On the same day all owners were provided with a copy of the
statement of claim dated 4 October 2013 which the Body Corporate
had lodged with the High Court in Whangarei in order to protect
relevant time limits. That statement of claim pleaded, inter alia, that:
19
As a result of the Defects and Damage the plaintiffs
will be required to carry out extensive repairs to the
Bridgewater Bay apartments to rectify the Defects and the
Damage.
Claimed losses included loss of rental income, costs of alternative
accommodation and moving and storage costs, all consistent with a
substantial repair and an inability to occupy the apartments while that
was taking place.
(e)
The agenda for the EGM consisted of a detailed introduction and then
a series of proposed resolutions, some with their own specific
introductory paragraphs.
(f)
The general introduction recorded the history of leaks from the fourth
floor penthouses and that the Committee had requested solicitors
Grimshaw and Co investigate the ability to recover associated
remedial costs from relevant parties. Grimshaw’s recommendation to
the Committee was to engage an expert to undertake a review of the
balance of the complex in case the problems were systemic. The
introduction noted the urgency with which this needed to be done in
view of relevant limitation periods. Reference was then made to the
attached report from Origin.
(g)
The following is then recorded in the minutes:
Unfortunately the report suggests that a complete recladding of the
northern face of the building is necessary along with re-working of
all the deck areas to create proper falls in a weathertight solution.
The ends of the buildings will also need attention as will Harditex
cladding on the two penthouses…
The Committee believes it is important that an extraordinary general
meeting be held to discuss the report and to enable owners to address
any questions they may have to Mr Gray or Grimshaws. The
meeting has been scheduled for Saturday 9 November 2013 at 10.30
am….
The Committee are very conscious that this communication will
come as a disappointment to all. However, now that the situation
has been largely assessed it is important that the Body Corporate
agree how to address them.
(h)
Under the “agenda” section the following appears:
3)
Receipt of Origin Building Consultants Limited October
2013 Report
It is anticipated that there will be a brief presentation by Mr
Gray followed by a full and frank discussion on the report
and its implications. Options available to owners if you are
not satisfied with the report include seeking verification of
Origin’s findings and recommendations by either:
i)
Having the report peer reviewed, or
ii)
Obtaining an independent report from the
government subsidised Weathertight Homes
Resolutions Service.
It is the Secretary’s recommendation to the Committee that if
verification is to occur by way of a review then the WHRS is
a useful vehicle for this.
Motion
“That the Body Corporate look to lodge a multi-unit claim
with the WHRS to obtain an independent report on the
buildings’ condition.”
(This requires 80% of owners to sign a consent form with
the WHRS)
4)
Repair Management
It will be necessary for the Body Corporate to engage an
appropriate lead consultant to manage the repair process.
This will either be an architect or consultant familiar with
remedial works arising from design and construction
failings. The role of the architect will be to design a
remediation solution, prepare plans and specifications
sufficient for tendering and building consent, manage the
tendering of the works and oversee the remediation.
Motion
“The Committee be delegated authority to investigate and
appoint a lead consultant to manage the building
remediation process.”
5)
Defect Litigation
Mr Paul Grimshaw of Grimshaw & Co will be available to
address the meeting. Grimshaw’s are NZ’s pre-eminent
legal firm in the area of representing plaintiffs in
construction defect claims.
Based on the information to hand Grimshaw’s believe a
sound case exists against a number of parties including most
importantly the Far North District Council. The importance
of Far North District Council as a defendant is that unlike
other defendants it cannot go broke and it has statutory
duties in terms of the building works which appear to have
clearly been breached.
Motion
“The Committee’s appointment of Grimshaw’s to instigate
defect litigation is ratified and Grimshaw’s be engaged to
represent the interest of the Body Corporate and owners in
the proceedings.”
(i)
In addition the Committee had, prior to the EGM, received an
estimate of the cost of remedial works from quantity surveyors
Kwanto Limited showing the cost of a “complete recladding of the
northern face of the building” as being $1.7 million. One of the
plaintiffs, Mr Butcher, deposes to having received a copy of this
estimate on or about 5 November 2013, albeit he was not at that stage
a committee member.
Plaintiff Mr Small said in evidence that
although he did not receive the report he was aware from the
discussion which occurred at the EGM of Kwanto’s estimate.
[179] Set out below are the relevant passages from the minutes relating to receipt of
the Origin Report and consequent resolutions:
4.0
BUILDING ISSUES
The Secretary introduced Mr Gray to the meeting.
commented:
1.
Andrew
There are two types of building reports that are generally
produced. The first deals with damage and the second with
liability. The report that has been presented to date deals
with damage. It responds to:
i.
ii.
iii.
iv.
Is there damage?
Does it need to be repaired?
What is needed to remediate?
What is the likely cost?
The second report about liability is about who is responsible and
why. Clearly if a decision is made to proceed down the litigation
route then this report will need to be prepared as well. If a decision
is made to repair prior to litigation then during the repair process the
necessary evidence will become available.
Andrew noted that the survey was not a complete survey as access to
some parts of the building was simply not available. Practical access
to the top areas was not available. As a result the report contained
some assumptions however the underlying scope of remedial repairs
is in his view sound. This includes:
a.
b.
c.
d.
The decks.
The walls inside the decks.
Inter-tenancy walls between decks.
The ends of the building (not the concrete elements)
and hoppers at ground level.
Andrew confirmed that the exercise carried out provides for a “likefor-like” replacement. This is to reflect the legal claim that would be
possible in terms of the complex. This is not to say that the remedial
work would need to be an exact like-for-like and it is likely it would
be sensible for the Body Corporate to consider changing cladding
options to improve design elements and to remove stigma.
Andrew noted that the next decision for owners is how to move
forward. This included a decision as to whether to pursue the claim
first or to repair first. He noted most people would repair first
gathering their evidence for trial during the remediation process.
The evidence needs to identify:
a.
b.
c.
d.
Why and how the buildings leaked.
How the construction compared to the consent
drawings.
How the construction compares with technical
details.
The quality of documentation and construction.
Mr Gray confirmed in response to questions:






Only the areas where damage has been identified will be
repaired.
Targeted repairs are generally not permitted under the current
Building Act.
Attempting to repair just around the windows where water
ingress was evident is not permitted.
To be compliant with the Building Code the building needs to
meet performance standards (E2 and B2). This essentially says
that the building should not suffer from external water sources
and the structural elements should have a 50 year life.
The joinery when removed needs to be refurbished. An
alternative is to replace with new joinery depending upon cost.
To achieve appropriate minimum falls the decks will need to be
taken up and re-screeded. Nibs will need to be created on which
the cut down joinery will be reinstalled.
A discussion took place in relation to the possibility of seeking to
register with the Weathertight Homes Resolution Service. This will
enable the Body Corporate to obtain a further report effectively
duplicating Andrew’s report at a cost of fifteen hundred dollars.
There would be a time delay of 3 – 6 months in accepting the report
even if the 80% owner approval threshold which is required for
registration was achieved. In carrying out the report destructive
testing would take place which would mean holes and patches cut
out of the cladding to assess the extent of damage behind. After
discussion it was resolved.
Mr Gray noted notwithstanding the fact that water ingress may not
be evident from the inside of the units the design and construction of
the complex was such that there was a strong probability of ingress.




The readings taken in terms of moisture ingress were
consistently high across the range of readings.
The number and extent of high readings are sufficient to make
an assessment of general failure.
Often it is not until the claddings comes off the extent of water
ingress and decay is evident.
Due to the timing of construction it is probable that the timber is
not treated. Even if treated, the level of treatment will leach out
over time and in likelihood would breach the 50 year durability
provision.
RESOLVED
“That the Body Corporate not lodge a claim with the WHRS.”
Moved:
J Nimmo
Seconded:
W Ludwig
CARRIED
4.0
(sic)
COMMITTEE
The next agenda item contemplated the Committee being delegated
authority to appoint a lead consultant. The need for the Committee
to be empowered reflected a timeline which would see building
works complete by December 2014. For this to be achievable it
would be necessary for the consultant to be appointed prior to
Christmas and the preliminary work undertaken for presentation to
the Body Corporate AGM in late January. Additional nominations
for the Committee were received from Tony Butcher, Neville Eade,
Phil Andrews, John Nimmo and Terry Gray.
Concern was expressed about the possibility of one unit being
represented by two Committee members and the optimum size for
the Committee together with the benefit of onsite owners. After
discussion it was:
RESOLVED:
“That the Committee be enlarged by three members being
Phillip Andrews, John Nimmo and Tony butcher to join Viv Bath
and Margaret Gray”.
Moved:
W Ludwig
Seconded:
V Bath
CARRIED
RESOLVED
“That the quorum for the Committee shall be fixed at three.”
Moved:
K Townsend
Seconded:
W Ludwig
The meeting then went back to Motion 4 and it was:
RESOLVED:
“That the Committee be delegated authority to investigate and
appoint a lead consultant to manage the building remediation
process”.
Moved:
K Townsend
Seconded:
L Small
CARRIED
The Secretary indicated that he had taken the liberty of contacting
four reputable consultants and requested that they put forward
proposals for the lead consultancy role by the previous Friday.
These had been received, collated and a scheduled distributed
together with copies of the proposal to the Committee. The larger
Committee would now be copied in.
The Secretary noted that four of the proposals were similar in cost
and in line with or under the Kuanto (QS) forecast. One was
significantly above. Three of the four consultants estimated a
timeline of 48-52 weeks from start to finish. Mr Gray noted that this
was consistent with his recommendation. Two, Context Architecture
and Resolution Architecture suggested that in addition to their
architectural services they would look to utilise the services of a
Building Surveyor/Clerk of Works for onsite management and
oversight. It was suggested to the Committee that consideration be
given to appointing either of Context or Resolution. The Committee
would meet in person or by email/teleconference to resolve this as
soon as possible.
At this point the meeting thanked Mr Gray for his attendance and he left the
meeting.
[180] In relation to the key resolution “that the Committee be delegated authority to
investigate and appoint a lead consultant to manage the building remediation
process”, the plaintiffs say that this does not address any of the who, what, why,
when, where and how questions relating to the process and that it is an inadequate
foundation for the pleading in the statement of defence previously referred to.
[181] In response the defendant says that, having regard to the context in which the
resolution was passed, the resolution is adequate authority for what is proposed. In
particular it says:
1.
The agenda specifically identified a full reclad as necessary.
2.
The agenda identified as options either acceptance of the Origin
Report or obtaining an independent peer report or a report from the
Weathertight Homes Resolution Service.
3.
The Body Corporate’s resolution in terms that it “not lodge a claim
with the WHRS” can be construed as an affirmative resolution
adopting the Origin Report, particularly given the reference in the
agenda to the circumstances (non-satisfaction with the Origin Report)
in which WHRS involvement might be sought.
4.
The statement of claim left nobody under any illusion that a
substantial repair was required.
5.
The discussion in the minutes under the heading “Committee”
indicated a desire on the part of the Body Corporate to move forward
speedily with the repair process and that it anticipated a December
2014 completion date.
6.
The resolution takes its flavour from the agenda and in particular the
explanatory material under the heading “Repair Management”. The
defendant says that, assumed within the appointment of the lead
consultant, is that such a consultant would design a remediation
solution, prepare plans and oversee the works, all as generally
contemplated in the Origin Report. Essentially the Body Corporate
invites a construction of the resolution in terms “We have decided to
do the job generally in accordance with the Origin Repair Plan. You,
the Committee, are now instructed to get on with the job, first by
investigating options for the appointment of a consultant and then
appointing such consultant to manage the process”.
[182] I have come to the conclusion this is the correct construction of the resolution
while acknowledging that it could, of course, have been more fulsomely expressed.
I do so for the following reasons:
(a)
The only repair plan before the owners at the EGM was that
developed by Origin.
(b)
The plan set out in comprehensive detail what the problems were with
the building and what was required to remediate them.
(c)
Mr Gray spoke to the report at length and the minutes record that he
was clearly interrogated in some detail about it by those present.
(d)
The meeting decided against options promoted in the event that it was
“not satisfied with the report”. I accept therefore the defendant’s
submission that it could be taken as having adopted the report – as
much so as if a specific resolution to that effect had been passed.
(e)
The key resolution refers to the appointment of a lead consultant “to
manage the building remediation process”. That can only refer to the
“process” already extensively discussed at the meeting and identified
in the Origin Report. As such the resolution implicitly accepts the
Origin Repair Plan. The only significant decision yet to be taken was
identification of the relevant consultant. That is confirmed by the
ensuing discussion which focuses on four options and concludes with
the statement that “the Committee would meet in person or by
email/teleconference to resolve this as soon as possible”.
[183] I also accept Mr Allan’s submission that the resolution was in fact in the
nature of an instruction rather than a delegation. Certainly the requirements of reg
22 of the Unit Titles Regulations 2011 sit uncomfortably with the content of the
resolution.
[184] I consider myself supported in this construction of the resolution by the
subsequent conduct of the parties. Although I do not regard the present case as
governed by the rules of contractual interpretation, I am guided by what the cases in
that context say about subsequent conduct as a guide to interpretation, namely that
the focus should be on actions which shed light on the shared intention of the parties
rather than the meaning intended or understood by one party only.49
[185] In my view the subsequent conduct best illustrative of what was actually
approved is that of the Body Corporate’s Committee. Among its members was Mr
Butcher, who is one of the plaintiffs in this proceeding.
Having appointed
Resolution Architecture as the consultant to manage the remediation process the
Committee went on, in the period January to May 2014, to:
1.
Approve Resolution Archiecture’s detailed design for the purposes of
preparing a building consent application;
2.
Approve a structural design quote from Cook Costello Engineers;
3.
Approve WSP Fire Consultancy to provide fire engineering
consultant services;
49
See for example Wholesale Distributors Ltd v Gibbons Holdings Ltd [2007] NZSC 37, [2008] 1
NZLR 277.
4.
Confirm ongoing consultancy arrangements with Veron Limited
(formerly Origin).
[186] In relation to the design approval document for building consent purposes the
following extract from the cross-examination of Mr Butcher is instructive:
Q
He asked you and your co-Committee members to sign the design
approval document, didn’t he?
A.
Well I’m not sure whether I signed it, to be quite honest.
Q
Just answer my question. He asked you to sign it didn’t he?
A
Yes, yes he did.
Q
And what did you do having received his email, asking you to sign
the design approval authority?
A
I’m not sure what I did to be quite honest.
Q
Well you certainly did not object to your other co-Committee
members signing it, did you?
A
That’s right.
Q
You were comfortable with them –
A
Yes.
Q
– signing the design approval authority?
A
Yes.
Q
And did you realise when this email came through, that this was the
remedial solution that the Body Corporate had instructed you to
proceed to put into effect?
A
Yes.
Q
And in putting it into effect, you were also aware the Body
Corporate had on the 25th of January 2014, given some instructions
to the architect to make some changes to the design, is that correct?
A
Yes that’s right.
Q
And you approved those design changes as well did you?
A
Again, I’m not sure whether I did or not.
Q
You certainly didn’t object to those design changes did you?
A
No I did not object to it.
[187] Also instructive is the plaintiff Mr Small’s correspondence to the Body
Corporate in September 2014 at which point he had decided no longer to support the
Origin Repair Plan. In that correspondence he refers to discussions with other
owners “who asked why I changed my view after originally voting in favour of the
complex rebuild”. Mr Small was an attendee at the November EGM and although in
his affidavits and under cross-examination he stated that all the EGM did was give
the committee authority to advance “to the next step of a full investigation towards
the repair of our building”. I consider his September 2014 statement as to what he
was voting for more compelling.
[188] In addition, and by way of backstop to the November 2013 EGM resolution
Mr Allan relied in closing on several subsequent resolutions of the Body Corporate.
In response Mr Brill took a pleading point saying that the statement of defence had
relied exclusively on the decisions taken at the meeting on 9 November 2013. Mr
Brill is correct in terms of how the matter is pleaded. Because of the conclusions I
reach in terms of proper construction of the November resolutions it is not ultimately
necessary for me to rely on Mr Allan’s identified “backstops”. However, had it been
necessary I would have been reluctant to see them determined on a pleading point
and would have granted an amendment to the statement of defence to accommodate
them, if formally sought.
[189] The matters to which Mr Allan refers are threefold:
(a)
(i)
At the AGM on 25 January 2014 an extensive presentation
was made by Messrs McLeay and Miram of Resolution Architecture
about the scope of the intended remedial works under headings
“Roof”, “Exterior Cladding”, “Decks”, “Lift and Plant Room”, “Fire
Protection” and “Other Issues”.
(ii)
The minutes record a general discussion about the wish of
members to progress the remedial work as expeditiously as possible
and their desire that consultants not be delayed in progressing the
remedial designs. To that end a resolution was unanimously passed in
terms that
“The meeting approve a design utilising the following key
components:
a) New wall aluminium weatherboarding;
b) Decks to be retiled with tiles on jacks;
c) Double glazing to be installed in new window joinery…”
(iii)
This resolution was not identified in the agenda and in terms
of s 101(3) of the Act therefore could not have been lawfully able to
be voted on.
(iv)
Mr Allan submits, however, that the adoption of the minutes
of that meeting at the next EGM of the Body Corporate, held on 20
May 2014, constitutes a ratification of the resolution. He relies in that
respect on the decision in BC172018 v Gundry.50
Although the
invalidity of the January resolution relates not to the content of the
resolution but the process adopted, I doubt whether it is possible to
ratify a resolution which the statute says was incapable of being voted
on in the first place, and no authority was cited in support of that
proposition.
That issue aside, I do not accept that the latter
confirmation of minutes at which an unauthorised vote took place can
of itself be considered an adequate act of ratification. The decision in
Body Corporate 172018 v Gundry does not assist. In that case an
express resolution ratifying earlier committee resolutions was passed.
(b)
(i)
Next Mr Allan relies on the decision of the Committee
previously referred to approving Resolution’s design for the purposes
of a building consent application. In that context Mr Allan refers to
the unanimous resolution of the Body Corporate carried at its AGM
on 25 January 2014 delegating to the Committee “the full powers and
authorities of the Body Corporate, subject to any prior direction given
at any general meeting of the Body Corporate or prohibition as
contained in s 108(2) of the Act. He also refers to the (uncontested)
50
Body Corporate 172018 v Gundry [2014] NZHC 954.
notice of that delegation given pursuant to the Unit Titles Regulations
2011.
(ii)
For the plaintiffs Mr Brill challenges that delegation on the
basis that the relevant resolution is not identified as “a special
resolution” in the agenda and minutes. However, it was so identified
in the postal voting or directed proxy form sent with the agenda and,
having received the requisite majority required for a special resolution
I consider it valid as such.
(iii)
I regard the Committee’s approval of the design as significant.
From that point on there cannot, in my opinion, be any realistic
argument that the Body Corporate had not, in a procedurally
acceptable way, committed to the “holistic” solution.
(c)
(i)
Thirdly, Mr Allan relies on the failed resolution promoted by
Mr Small at the 2015 AGM (refer [164] above).
(ii)
That resolution having been defeated, Mr Allan submits that
the corollary of the defeated propositions can be taken as accepted,
namely that the repair proceed on a comprehensive rather than
“staged” basis and that stage 2 (everything other than repair to the
penthouse decks, staircase and control room) not be deferred.
(iii)
I have already indicated my view that defeat of this resolution
indicates the consistency of the Body Corporate’s position throughout.
[190] As indicated I do not consider it is necessary to rely on these backstops.
[191] I make one final observation in respect of the minutes of the 9 November
2013 EGM.
[192] At page 5 there is a section which appears under the heading “Costs”. It
commences with the following:
In response to a query as to what levies would be necessary the Secretary
confirmed:
1.
Costs through to the annual general meeting scheduled for Saturday
25 January 2014 can be met from Body Corporate reserves.
2.
There is likely to be a need for a special levy at the AGM (of
between $50,000 and $100,000) to take the Body Corporate through
to the point where tenders had been obtained and a decision to
proceed with remedial work occurred. This will necessitate a major
levy.
[193] Initially I questioned whether these recorded observations contemplated a
later revisiting of the issue and a decision at that point only to adopt the Origin
Report. Ultimately, however, I was persuaded by Mr Allan’s arguments in terms:
1.
This item in the minutes records a matter of general discussion and
not an agenda item.
2.
It is not a discussion about whether it is intended to repair in
accordance with the Origin Report but rather how much money would
be necessary to get the Body Corporate through to the point when
tenders were called.
3.
The reference to “proceeding with the remedial work”, in context,
refers to acceptance of any specific tender or, in other words, a
decision to contract with someone for which there would need to be a
levy.
[194] I do not therefore regard this aspect of the Minutes as detracting from my
previous analysis.
Declarations and injunction
[195] The above findings are sufficient to dispose of the application for declaration
and injunction in paragraphs [A] to [D] of the plaintiff’s prayer for relief (first cause
of action).
[196] Prayer F relating to legal costs incurred in the context of the Body
Corporate’s claim against Far North District Council and others was abandoned in
opening.
[197] That leaves prayer E which seeks:
A declaration that the Body Corporate must recover the cost of repairs or
maintenance undertaken within any Unit from the owner of that Unit (except
where damage is caused by water leaked from another Unit).
[198] This declaration was addressed by Mr Brill in opening but not further
elaborated on in closing.
[199] The position is that the Body Corporate has not yet made any decision
pursuant to s 138(4) of the UTA 2010 relating to the recoverability of costs incurred
for “repairs or maintenance to building elements or infrastructure contained within
any principal unit”. Indeed, apart from consultant’s reports no such costs have yet
been “incurred” within the terms of the section because of the challenge made in the
present proceedings. In my view the Body Corporate should be entitled to consider
this issue as and when it arises without the prior dictate of the Court. The approach
it may choose to adopt in relation to a holistic repair may well be different to that
which may, for example have applied if the plaintiff’s have succeeded on their
primary claims and the only significant repairs contemplated were those at penthouse
level. Even if there was jurisdiction to make a declaration at this stage, which I
doubt given the prospective nature of the expenses, I would decline to exercise the
relevant discretion. The matter can be addressed at the relevant time.
Result
[200] I dismiss the claims for declarations and injunctions sought in paragraphs AE of the plaintiffs’ prayer for relief (first cause of action).
[201] I adjourn the plaintiffs’ second cause of action and the defendants’
counterclaims to be determined on application of any party no earlier than
30 working days following delivery of this interim judgment.
Costs
[202] I reserve costs to be addressed in the Court’s final judgment. In the event the
Court is not called upon to dispose of the plaintiffs’ second cause of action or the
counterclaims, and costs are unable to be resolved by the parties, I invite memoranda
(maximum five pages) which should proceed on the basis of a 2B award in the
defendant’s favour. In that event I invite the parties to exchange memoranda in draft
so as to limit areas of disagreement.
__________________________
Muir J