BODY CORPORATE 328392 v NORTHERN TRUSTEE SERVICES (NO. 145) LTD [2020] NZHC 235

BODY CORPORATE 328392 v NORTHERN TRUSTEE SERVICES (NO. 145) LTD [2020] NZHC 235 [21February 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-871[2020] NZHC 235IN THE MATTER of ss 319 and 320 Property Law Act 2007IN THE MATTER of an application under Part 19, Rule 19.5High Court Rules 2016BETWEEN BODY CORPORATE 328392ApplicantAND NORTHERN TRUSTEE SERVICES (NO.145) LIMITEDRespondentHearing: 19 February 2020Appearances: M L Thornton for ApplicantG R Grant for RespondentJudgment: 21 February 2020JUDGMENT OF LANG J[on application for orders under s 319 and 320 Property Law Act 2007]This judgment was delivered by me on 21 February 2020 at 3.30 pm,pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateSolicitors:Michael Thornton, Solicitor, AucklandRainey Law, AucklandG R Grant, Barrister, Auckland[1] The applicant in this proceeding, Body Corporate 328392 (the body corporate),is a body corporate incorporated under the Unit Titles Act 2010 to administer theaffairs of an apartment and retail complex situated at 148 Arthur Street, Onehunga.The complex suffers from weathertightness issues and this Court approved a schemeof arrangement to enable remedial work to be carried out in December 2017.[2] In order to carry out the remedial work the body corporate wishes itscontractors to have access to a neighbouring property on its eastern boundary. Therespondent, Northern Trustee Services (No. 145) Ltd (NTS), is the owner of theneighbouring property.[3] The body corporate and NTS have been unable to reach agreement regardingthe terms on which the body corporate's contractors could have access to NTS's land.The body corporate has therefore applied for orders under ss 319 and 320 of theProperty Law Act 2007 granting its contractors access to NTS's land for the purposeof carrying out the remedial work.The scope of access sought[4] The body corporate seeks access to the land owned by NTS so that itscontractors can carry out remedial work to balconies and balustrades on the easternside of the body corporate's property. It wishes to erect scaffolding on NTS's land toenable that work to be carried out. The scaffolding will extend approximately 1.5metres into NTS's land and will remain in place for the duration of the remedial work.[5] At present there are two dwellings on NTS's property. The principal buildingis a dwelling situated towards the front of the property. The second is a smallerbuilding, best described as a sleepout, situated at the rear of the property. Access toboth dwellings is by means of a driveway on the eastern side of the property. Inaddition, a footpath on the western boundary of the property leads to Arthur Street.[6] Once the scaffolding is in place, the footpath on the western boundary will bereduced in width but pedestrian access to Arthur Street down the western side of theproperty should still be possible. The driveway on the eastern side of NTS's propertywill not be affected by the scaffolding or the remedial works the body corporate wishesto carry out on its own property.[7] At this stage it is not known when the remedial work will commence becausethe body corporate has not yet obtained a building consent from the Auckland Council.It anticipates, however, that the building consent will be available within the next 14days. It will then let the remedial work out for tender. On current estimates, it seemsunlikely that remedial work will commence before May 2020. It is also unknown howlong the remedial work will take to complete. It seems likely, however, that it willtake at least 12 to 14 months.[8] The scaffolding will be taken onto NTS's land from vehicles parked on thestreet. The body corporate's contractors will only require vehicular access to NTS'sland at the beginning and end of the project when they relocate and then replace acontainer currently sitting on the rear western boundary of NTS's land. Whilst theremedial work is underway the body corporate's contractors will gain access to thescaffolding from the body corporate's property. They will not be required to crossNTS's land for that purpose.The statutory framework[9] Sections 319 and 320 of the Act relevantly provide as follows:319 Owner or occupier of land may apply to court for orderauthorising entry onto or over neighbouring land(1) A person may apply to a court for an order under section 320 if theperson is an owner or occupier of any land who wishes to enter ontoor over any neighbouring land for any of the following purposes:(a) to erect, repair, alter, add to, paint, or demolish the whole or anypart of any structure on the applicant's land; or(b) to do any other necessary or desirable thing in relation to theapplicant's land.320 Powers of court making order authorising entry onto or overneighbouring land(1) On an application under section 319(1), the court may make an orderauthorising the applicant to do either or both of the following things:(a) to enter and re-enter onto or over the neighbouring land atreasonable times, with or without any employees, agents, orcontractors and any aircraft, boats, vehicles, appliances,machinery, and equipment that are reasonably necessary for thepurposes specified in the order:(b) to store on the neighbouring land any materials required for thepurposes, and in the quantities, specified in the order.(2) An order under subsection (1) must specify—(a) how and when entry is to be made; and(b) any other conditions that the court thinks fit to impose.(3) Those conditions may relate to all or any of the following matters:(a) the period of time during which the entry onto or over theneighbouring land is authorised:(b) the hours of the day or night during which the work may bedone:(c) the preservation of the safety of persons or property on theneighbouring land:(d) the maintenance of adequate access to the neighbouring land:(e) the restoration of the neighbouring land to its former condition:(f) the provision of security or indemnity to secure the performanceof any condition of the order:(g) the making good of any damage caused by the entry onto orover the neighbouring land or the reimbursement of the ownerand, if applicable, the occupier of the neighbouring land for anycosts, expenses, or loss arising from the entry:(h) any other relevant matters.(4) Before exercising any powers conferred by an order made undersubsection (1), the applicant must serve the order on the owner and, ifapplicable, the occupier of the neighbouring land concerned.[10] Section 319 has only been the subject of comment in this Court on oneoccasion. In Body Corporate 329331 v Escrow Holdings Forty One Ltd,1 Jagose Jmade an order under s 320 authorising the applicant to enter part of the respondent'sland to carry out repairs to its building. The order was subject to the Courtsubsequently setting the terms and conditions on which entry was to be authorised.The parties to that proceeding must have resolved these issues because there appearsto have been no need for the Court to deliver a subsequent judgment.[11] There is no previous authority of this Court in which orders have been made toreimburse the owner of a neighbouring property for "costs, expenses or loss arisingfrom the entry". In Norfolk Trustee Co Ltd v Tattersfield Securities Ltd,2 Priestley Jobserved that the predecessor to s 319, s 128 of the Property Law Act 1952, permittedthe Court to order compensation. In Escrow Holdings Jagose J observed that this isnow placed beyond doubt through the enactment of s 320(3)(g).Preliminary issue[12] On 14 February 2020 NTS filed an updating affidavit by Mr David Ward, aproperty manager who has been advising NTS regarding the issues that have led tothis proceeding. The body corporate objected to the Court receiving the affidavitbecause NTS had given no warning that the affidavit was to be filed and the bodycorporate was concerned it would need to respond to matters contained in the affidavit.[13] The affidavit related to plans by NTS to develop the property by establishingeight chalets on its property. It proposed to undertake that project in the near futureand this would render access to NTS's land by the body corporate impracticable.[14] I declined to receive the affidavit because no provision had been for it in thetimetable leading up to the hearing. Furthermore, the hearing of the presentapplication has already been adjourned on one occasion and it is important that theapplication be heard as scheduled. Any further adjournment to allow the body1 Body Corporate 329331 v Escrow Holdings Forty One Ltd [2019] NZHC 600, (2019) 20 NZCPR396.2 Norfolk Trustee Co Ltd v Tattersfield Securities Ltd HC Auckland CIV-2004-404-3668, 30 March2005 at [59]corporate to respond to matters contained in the affidavit would be highly unfortunate.I therefore put the contents of the affidavit to one side for present purposes.The issues[15] By the commencement of the hearing NTS had accepted it was appropriate foran order to be made granting the body corporate's contractors access to its land so thatscaffolding could be erected on the western boundary. The issues to be determined atthe hearing were:(a) The terms on which an order granting access to NTS's land is to bemade.(b) The means by which NTS is to be protected from any losses, damageand/or costs it might incur as a result of the body corporate's contractorshaving access to its land.(c) Whether, and if so to what extent, the body corporate should be requiredto meet NTS's legal costs and disbursements in relation to theapplication.The terms on which an order granting access to NTS's land is to be made[16] It is not possible at this stage to specify the precise date from which the bodycorporate's contractors are to be permitted to have access to NTS's land. Tenders forthe remedial work have not yet been let and the commencement of work is still somemonths away. The terms on which access should be granted may also need to beamended to some extent once the appointed contractor has produced a MethodStatement.[17] During the hearing, however, the parties were able to reach agreementregarding the terms on which the body corporate's contractors should be permitted tohave access to NTS's land. These are set out in an appendix to this judgment. As willbe evident, the agreed terms permit the parties to return to the Court should anyamendment of the terms be required.The means by which NTS is to be protected from any losses, damage and/or costsit may incur[18] The two dwellings on the property are currently rented out to tenants, althoughthere is little evidence before the Court regarding the terms of the tenancies. NTS isparticularly concerned to ensure it is protected from any reduction in the rental it mayreceive as a result of the intrusion onto its land of the scaffolding.[19] The parties have therefore agreed that the body corporate will provide NTSwith an indemnity in the following terms:Body Corporate 328392 unconditionally indemnifies Northern TrusteeServices (No. 145) Limited (NTS) against all losses, costs and expensessuffered or incurred by it arising out of the entry into 150 Arthur Street. Forthe sake of clarity, this indemnity extends to any loss of rental income sufferedby NTS and/or any amounts which NTS may become liable to pay to itstenants in consequence of the works undertaken on 150 Arthur Street. NTSwill act reasonably to minimise any such losses or costs.NTS shall submit a schedule of any such losses or costs to the applicant,together with supporting documentation, at the expiration of each three monthperiod commencing on the day on which the applicant's contractors enter therespondent's land pursuant to these orders. If the parties cannot reachagreement regarding those issues within seven days, they have leave to returnto the Court by memorandum.[20] Clause 3.2.2 of the terms on which access is to be granted requires the bodycorporate to provide Mr Ward with 14 days notice of the date on which the bodycorporate's contractors will first have access to NTS's property in accordance with theorders made by the Court. It is obviously important that NTS provides full details ofall tenancies in existence as at that date. This will provide a yardstick against whichany changes in tenancy that may occur during the course of the project can bemeasured. I therefore direct that Mr Ward is to file and serve an affidavit containingthis information within seven days after receiving notice from the body corporate ofthe date on which its contractors will be entering NTS's land in accordance with theseorders.[21] Once the body corporate's contractors have gained access to NTS's land it willalso be important for NTS to provide the body corporate with full information andsupporting documentation to substantiate any claims for losses or expenses it incursduring the remedial process. Claims must obviously be based on losses suffered as aresult of the body corporate having access to NTS's land rather than as a result of theremedial works that occur on the body corporate's land.[22] NTS also seeks compensation in the sum of $40,000 to recognise the fact thatthe use of its property by the body corporate will delay or frustrate its plans forredevelopment of its property. In support of this claim it relies on the followingevidence by its valuer, Mr David Wigmore:24. The applicant has not defined a start date for the proposed works,however it is likely that the proposed works will frustrate the owner'sability to undertake any development until the proposed works havebeen completed.25. As a result it is difficult to establish the likely financial impact of thedelay in development of 150 Arthur Street. However, it is, in myopinion, entirely logical that the frustration and delay caused will havea material impact on the value of the property as at the effective dateof this proceeding. The expectation being that a property ready foradd-value development, being put to the market for sale withoutrestrictions on timing of development, would sell at a better price thanone where the development potential must be deferred by proposedworks to an adjoining property and over the subject property for aminimum of 35 weeks.26. There is no market evidence which would assist in determining thevalue adjustment for this frustration factor, however in my opinion alump sum adjustment of say $40,000 including GST would be areasonable and conservative value adjustment in the subject case.This level of adjustment is 2.86% of the present assessed market valueof the property of $1,400,000.27. In my opinion, re-development of the subject property is overdue.There are six nearby medium and high density residential projectscurrently underway which demonstrate the locality can support thistype of development. The property's location directly opposite theDress Mart shopping complex and proximity to the Onehunga towncentre and railway station are also factors supporting a redevelopmentof the subject property in the short to medium term.[23] I view this as being largely a claim for lost opportunity. As Mr Wigmoreacknowledges, it is very difficult to quantify compensation to reflect loss NTS maysuffer by not being able to re-develop or otherwise deal with its land for the next 15months.[24] The dwellings on the property are old and refurbishment is unlikely to providethe optimum return on the land for NTS. As Mr Wigmore points out, the land is ripefor re-development because it comprises a large section on the fringe of thecommercial precinct in Onehunga. A large retail shop occupies the ground floor of thebody corporate's complex fronting onto Arthur Street. NTS may therefore be able tore-develop its land for commercial purposes as well. Furthermore, the land sits withinthe Town House and Apartment Building zone which permits high density multi-unithousing. It could therefore be used for that type of re-development. NTS has notsuggested, however, that it proposes to use the land for either of those purposes.[25] One option may be for NTS to sell the land. The location and size of theproperty suggests it is unlikely to decrease in value over the next 12 to 15 months. Ialso consider it improbable that the value of the land will be materially affected by thepresence of scaffolding on the western boundary during that period. Prospectivepurchasers will no doubt be keen to realise its potential through re-development. Theyare unlikely to be deterred by the fact that this will need to await the removal of thescaffolding. If, however, NTS was able to demonstrate that it achieved a lesser pricefor the land because of this factor it may be able to recover its loss from the bodycorporate under s 320.[26] I therefore consider this aspect of NTS's claim is premature. There is nocertainty at this stage that NTS will suffer any loss flowing from its inability to re-develop its land for the next 15 months or so. If such a claim is to be advanced, thatshould be done when the effect of the body corporate's use of the land is known. Itherefore do not share Mr Wigmore's view that a lump sum award of compensationshould be made at this stage based on a percentage of the current value of the land. Itfollows that I decline to make any award under this head at this stage.[27] The body corporate is concerned that issues will arise regarding futureaccounts rendered by Mr Ward to NTS for his services in relation to the bodycorporate's use of the land. The body corporate will obviously need to reimburse NTSfor the cost of Mr Ward's services provided these relate to the issue of access to NTS'sland. By way of example, NTS may legitimately ask Mr Ward's to supervise therelocation of the container. He may also be required to investigate complaints byNTS's tenants regarding the manner in which the body corporate's contractors conductthemselves. Once the scaffolding has been erected, however, I do not anticipate therewill be much scope for Mr Ward's further involvement.[28] I anticipate that most claims for compensation will be the subject of agreementbetween the parties. This flows from the requirement that NTS is to providesupporting documentation to substantiate its claims. Where the parties cannot reachagreement, however, I reserve leave for the dispute to be referred to me for resolutionby memorandum. Any memorandum in response is to be filed and served within 48hours, and any memorandum in reply is to be filed and served within 24 hoursthereafter. I anticipate being able to resolve such disputes on the papers and withoutthe need for a hearing. Should a hearing be necessary, I will endeavour to ensure ittakes place by way of telephone conference to minimise the costs to both parties.Costs and disbursements[29] There is a significant dispute between the parties regarding the issue of costs.NTS will seek costs against the body corporate on the basis that the orders I have madeamount to an indulgence, albeit an indulgence granted by statute.[30] Issues also arise in relation to disbursements for which NTS seeksreimbursement. These include both the fees it has been required to pay to experts andthe fees rendered by Mr Ward.[31] Costs are to be dealt within the usual way. Counsel have agreed the followingtimetable:(a) Counsel for NTS is to file a memorandum in support of an applicationfor costs and disbursements no later than 4 March 2020.(b) Counsel for the body corporate is to file a memorandum in response by25 March 2020.(c) Any memorandum in reply is to be filed and served no later than 8 April2020.Lang JAPPENDIXORDERS1. The originating application made by Body Corporate 328392 on 9 May 2019and as later amended on 11 December 2019 was determined by Justice Langon 19 February 2020.2. The determination was made with the consent of the parties.3. The following orders were made:3.1 Access is permitted to the applicant and employees, agents, orcontractors, to enter and re-enter onto or over the respondent's land toundertake the following on the respondent's land ("neighbouringworks"):(a) Moving a shipping container onto the respondent's land situatedwithin approximately 300mm of the boundary between theapplicant's land and the respondent's land (boundary) to anotherlocation on that land agreed in advance with David Ward topermit the erection of scaffolding;(b) Erecting scaffolding within approximately 1.5 metres of theboundary to repair the applicant's balconies, balustrades, andreclad the facades, and removing the scaffolding at thecompletion of the project.(c) Replacing the shipping container to the respondent's preferredlocation on the respondent's land, subject to compliance withbuilding regulations; and(d) Undertaking any other works to remedy damage to therespondent's land or property caused by the applicant's entry onto the respondent's land ("Make Good Works").3.2 The neighbouring works shall be performed on the following terms:3.2.1 The applicant is to undertake a condition assessment of 150Arthur Street prior to commencing the works at its cost andprovide this to the respondent's agent David Ward by email;3.2.2 After no less than 14 days' notice of the works commencing byemail notification to the respondent's agent, David Ward;3.2.3 At any time during normal construction working hours of 7.30am and 5.00 pm, Monday to Friday (excluding public holidays)or at any time outside those hours in the event of emergency;3.2.4 Ensuring access to the respondent's property is maintained viathe driveway on the eastern side of its land and the front stepsand door of the bungalow;3.2.5 In compliance with the Method Statement which the BodyCorporate shall require its main contractor to prepare inadvance for the works, any regulatory consents and scaffoldingsuppliers' requirements. A copy of the Method Statement is tobe supplied to the respondent's agent, David Ward, by email inadvance of work commencing on site;3.2.6 With any vehicles, appliances, machinery or equipmentreasonably necessary for that purpose;3.2.7 Permitting vehicular access to be gained to the respondent'sland solely for the purpose of moving the container as set out in3.1(a) and (c);3.2.8 Until completion of the repair works, the negotiating works andthe Make Good Works, estimated to be 39 weeks aftercommencement of the repair works, or such further time as maybe required;3.2.9 That the applicant will ensure it and/or any main contractorappointed has adequate insurance to indemnify the respondentin respect of any accidental damage to the respondent'sproperty (including occupants' property) that may be caused bythe repair works, the neighbouring works or the Make GoodWorks;3.2.10 The applicant's contractors will not use the driveway or parkingareas at 150 Arthur Street and shall not impede use of thedriveway or parking areas by the respondent's tenants;3.2.11 The applicant will remove the fence and materials storedadjacent to the container on or near the western boundary of therespondent's land and will replace the fence and materials atcompletion of the works, at its cost;3.2.12 The applicant will deposit a cash bond in the sum of $60,000which is to be held in the trust account of Pidgeon LawSolicitors as stakeholder pending satisfaction of all conditionsimposed in the order. Payment is to be made prior to any workscommencing on the respondent's land.4. Leave is reserved to both parties to apply by memorandum for these orders tobe amended should circumstances require that to be done.