BODY CORPORATE 378351 v ANZ BANK NEW ZEALAND LIMITED [2017] NZHC 2274

BODY CORPORATE 378351 v ANZ BANK NEW ZEALAND LIMITED [2017] NZHC 2274 [20 September 2017]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2017-404-001773[2017] NZHC 2274BETWEEN BODY CORPORATE 378351ApplicantAND ANZ BANK NEW ZEALAND LIMITEDFirst RespondentAND ASB BANK LIMITEDSecond Respondent(Continued following pages)Hearing: 13 September 2017Counsel: A Burling for ApplicantNo appearance for RespondentsJudgment: 20 September 2017JUDGMENT OF WHATA JThis judgment was delivered by me on 20 September 2017 at 4.00 pm,pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate: .Solicitors: Rainey Law, AucklandAND MORTGAGE HOLDING TRUST COMPANYThird RespondentAND BANK OF NEW ZEALANDFourth RespondentAND BASECORP FINANCE LIMITEDFifth RespondentAND KIWIBANK LIMITEDSixth RespondentAND TSB BANK LIMITEDSeventh RespondentAND THE CO-OPERATIVE BANK LIMITEDEighth RespondentAND SOUTHLAND BUILDING SOCIETYNinth RespondentAND WESTPAC NEW ZEALAND LIMITEDTenth RespondentAND AUCKLAND COUNCILEleventh RespondentAND AIG INSURANCE NEW ZEALAND LIMITEDTwelfth RespondentAND CATHERINE RACHEL KEMPThirteenth RespondentAND AYUSH RAJOURAFourteenth RespondentAND STEPHEN CHRISTOPHER BUSHELL AND CAROLE CRYERFifteenth RespondentsAND PAUL JOHN FOLWELL AND PAULINE ANNE FOLWELLSixteenth RespondentsAND OP PROPERTIES LIMITEDSeventeenth RespondentAND GEORGEANNE LIMITEDEighteenth RespondentAND PRAVIN INVESTMENTS LIMITEDNineteenth RespondentAND AMIN SAMNANI AND MINAZ JALIATwentieth RespondentsAND DIAMOND NEST INVESTMENTS LIMITEDTwenty First RespondentAND GILLIAN KAY STOREYTwenty Second RespondentAND QING CHENTwenty Third RespondentAND EMMA LOUISE HAWKINSTwenty Fourth RespondentAND FIONA CATHERINE SHEPPARD AND THOMAS WILLIAM SHEPPARDTwenty Fifth RespondentsAND NOLAN INVESTMENTS LIMITEDTwenty Sixth RespondentAND MUGGO HOLDINGS LIMITEDTwenty Seventh RespondentAND OWEN INVESTMENTS NZ LIMITEDTwenty Eighth RespondentAND BERNARD JOHN DUTHIE AND ROBYN JULIE DUTHIETwenty Ninth RespondentsAND MAURICE CHARLES BROWN AND HELEN JENNIFER BROWNThirtieth RespondentsAND JILL FRANCES JACKSONThirty First RespondentAND K W ENTERPRISES LIMITEDThirty Second RespondentAND STKT INVESTMENTS LIMITEDThirty Third RespondentAND FANNIN HOLDINGS LIMITEDThirty Fourth RespondentAND YING LIThirty Fifth RespondentAND ALAN DOUGLAS BAILEY, VANESSA ANN BAILEY AND STEPHEN ALAN BAILEYThirty Sixth RespondentsAND YI-HSIN CHUNGThirty Seventh RespondentAND P & C YOUNG INVESTMENTS LIMITEDThirty Eighth RespondentAND DAVIDALE PROPERTIES LIMITEDThirty Ninth RespondentAND PETER ROWSON SHAW AND WEST AUCKLAND TRUSTEES LIMITEDFortieth RespondentsAND WILWAY ENTERPRISES LIMITEDForty First RespondentAND MWB ENTERPRISES LIMITEDForty Second RespondentAND MARDAV INVESTMENTS LIMITEDForty Third RespondentAND TOBY ANDREW SHEPHARD AND MATTHEW JAMES SHEPHARDForty Fourth RespondentsAND FIVE OCEANS LIMITEDForty Fifth RespondentAND HAYDEN JOHN WIIG, GERRIT REMMELZWAAL AND CATHERINE GRACE WIIGForty Sixth RespondentAND GIGGLES ENTERPRISES LIMITEDForty Seventh RespondentAND STEPHEN GARY CHONG, LILLIAN MARGARET CHONG AND MAY-LEE ANN CHONGForty Eighth RespondentsAND JIMANNE INVESTMENTS LIMITEDForty Ninth RespondentAND LIBRA ENTERPRISES LIMITEDFiftieth RespondentAND MAKORORI INVESTMENTS LIMITEDFifty First RespondentAND MITRE VIEW LIMITEDFifty Second RespondentAND MAKI HANYA AND WAYNE ROBERTSON CLARKFifty Third RespondentsAND CRAIG & INEZ INVESTMENTS LIMITEDFifty Fourth RespondentAND JIE PING LIFifty Fifth RespondentAND XUAN LUFifty Sixth RespondentAND TRIPLE A INVESTMENTS LIMITEDFifty Seventh RespondentAND ANDERSON INVESTMENT GROUP LIMITEDFifty Eighth RespondentAND P & R YOUNG INVESTMENTS LIMITEDFifty Ninth RespondentAND ELIZABETH LOUISE MILNESixtieth RespondentAND MARLENE DORSixty First RespondentAND BEVAN ROSS LANGSixty Second RespondentAND BAYBURN PROPERTY HOLDINGS LIMITEDSixty Third RespondentAND CHANG LIUSixty Fourth RespondentAND PATRICK JOHN MARTIN AND JACQUELINE GAY MARTINSixty Fifth RespondentAND TM & TH LIM PROPERTY INVESTMENT LIMITEDSixty Sixth RespondentAND SIMICA DOROTICH AND DEREK GEORGE RAILEYSixty Seventh RespondentsAND ROGER JEAN GELISSixty Eighth RespondentAND 3DK LIMITEDSixty Ninth RespondentAND SUCIU INVESTMENTS LIMITEDSeventieth RespondentAND HILVERSUM HOLDINGS LIMITEDSeventy First RespondentAND YANG WANGSeventy Second RespondentAND KATHARINE MARY CLARKSONSeventy Third RespondentAND TWIN SKIERS LIMITEDSeventy Fourth RespondentAND SCOTT MATHEW BARKLEYSeventy Fifth RespondentAND PUKEHEMA INVESTMENTS LIMITEDSeventy Sixth RespondentAND SAJAD BASSAM TABAR, KAZEM BASSAM TABAR AND MOSTAFA MOHAMMADIAN NASAB ZAHIRABADSeventy Seventh RespondentsAND KAIYUAN ZUOSeventy Eighth RespondentAND YING LUSeventy Ninth RespondentAND DANIELL INVESTMENTS LIMITEDEightieth RespondentAND SHEPHERD PROPERTY INVESTMENTS LIMITEDEighty First RespondentAND KW & SM MURPHY LIMITEDEighty Second RespondentAND PYRONICAL TRUSTEE LIMITEDEighty Third RespondentAND MISTY HAYTON LIMITEDEighty Fourth RespondentAND MARSHALL AND O'HAGANINVESTMENTS LIMITEDEighty Fifth RespondentAND TYLER CAMPBELL ASHWORTH AND SARAH EDWINA ASHWORTHEighty Sixth RespondentsAND RIO MADRID LIMITEDEighty Seventh RespondentAND CHIA HSING LIPSCOMBE TIERNEYEighty Eighth RespondentAND KAR HOLDINGS LIMITEDEighty Ninth RespondentAND NGOCHANH DONinetieth RespondentAND JOHN SHIRLEY LIMITEDNinety First RespondentAND AHEAD PROPERTY INVESTMENTS LIMITEDNinety Second RespondentAND J & C ABBOTT LIMITEDNinety Third RespondentAND WEI PING CHUANG AND KWEE KENG KWEKNinety Fourth Respondents[1] This matter came before me on the Duty Judge list. It is an application for an order settling a scheme for the repair of buildings on the base land of Body Corporate 378351 (the Body Corporate) pursuant to s 74 of the Unit Titles Act 2010 (the Act). These buildings are known as the Washington Apartments. I made the order sought. My reasons follow.The scheme[2] The scheme is described in Schedule 1 to the application, which is attached as Appendix A. It is self-explanatory. In short, it is directed to the repair of serious weather damage to the Washington Apartments. All owners are affected to varying degrees. Expert advice recommended a comprehensive, co-ordinated package of repair. The cost of repair is to be allocated amongst the owners in proportion to their utility interests. The Body Corporate is seeking broad powers to implement the scheme, including the power to enter into contracts for works and raise levies to meet its obligations pursuant to the scheme. Subject to the provisions of the scheme, the Body Corporate is required to make all decisions in furtherance of the scheme in accordance with the Act.[3] The Body Corporate must account for all monies raised from the owners to meet the obligations under the scheme, and is required to keep a permanent record of all payments received and payments made. The accounts prepared under the scheme are to be audited annually by an independent auditor. The Body Corporate is also required to keep the owners fully appraised of details of the repairs and progress over the period of the scheme by reporting every three months.[4] Finally, leave is reserved to any party affected by the scheme to apply to the court for further orders. Under the scheme, the Body Corporate members jointly indemnify and hold harmless the Body Corporate chair and members of the Body Corporate committee for all acts and omissions done in furtherance of the scheme, except in the case of wilful misconduct or gross negligence.Support for the scheme[5] The scheme was considered by the Body Corporate at an owners' committeemeeting. An Extraordinary General Meeting was called to vote on whether to establish a scheme pursuant to s 74. At the meeting, the Body Corporate decided to proceed with the s 74 scheme application to the High Court.[6] On 19 May 2017, the scheme was approved. Of the 59 owners that voted by postal ballot, 57 voted in favour of the scheme, which apportioned the repairs by utility interest, while two voted against the resolution. The 25 votes that were not returned were taken as "against" votes, pursuant to the requirements of the Act.A procedural issue[7] At an early stage in this proceeding there was an issue as to service on the second named thirty sixth respondent, Ms Vanessa Bailey. Venning J adjourned the present application on 6 September 2017, observing she had not been served until 16 August 2017. He asked counsel to advise whether she had voted in favour of the scheme, and provided further opportunity for her to register an objection.[8] By further memorandum, Ms Burling advised the applicant was unable to ascertain whether she had voted in favour of the scheme, but concluded she did not. Nevertheless, I am satisfied she has been served and adequately provided an opportunity to participate in this matter. The time to register an objection has now elapsed, and she has chosen not to participate. I do not consider this feature remains an impediment to the matter being determined in her absence.Framework[9] I am grateful for the detailed submission provided by Ms Burling and Mr Heatlie. Given this matter is unopposed, it is not necessary to repeat them.[10] Section 74 states:74 Scheme following destruction or damage(1) This section applies if any building or other improvement comprised in any unit or on the base land is damaged or destroyed, but the unit plan is not cancelled.(2) The High Court may, by order, settle a scheme on the application of—(a) the body corporate; or(b) if the unit title development is in a layered unit title development, the body corporate of the head unit title development or any subsidiary unit title development in that layered unit title development; or(c) an administrator; or(d) the owner or one of the owners of a unit; or(e) a registered mortgagee of a unit.(3) A scheme under subsection (2) may include provisions—(a) for the reinstatement in whole or in part of the building or other improvement; or(b) for the transfer of units to the body corporate so as to form part of the common property.(4) If an order is made under subsection (3)(b), sections 58(1)(c) and 59apply to the transfer, so far as applicable, but subject to any order of the High Court to the contrary.(5) A notice of any application made under subsection (2) must be lodged with the Registrar who must enter on the supplementary record sheet a notification that the application has been made.(6) On any application to the High Court under subsection (2), the following persons have the right to appear and be heard:(a) any person having or claiming to have any estate or interest in any unit or in the whole or part of the base land; or(b) any insurer who has effected insurance on the buildings or other improvements comprised in any unit or in the whole or part of the base land.(7) In the exercise of its powers under subsections (2) and (3), the High Court may make any orders that it considers expedient or necessary for giving effect to the scheme, including orders—(a) directing the application of any insurance money; or(b) directing payment of money by or to the body corporate or by or to any person; or(c) directing the deposit of an appropriate new unit plan; or(d) imposing any terms and conditions that it thinks fit.(8) The High Court may cancel, vary, modify, or discharge any order made by it under this section.(9) The High Court may make any order for payment of costs that it thinks fit.[11] As set out by the Court of Appeal in Tisch v Body Corporate No 318596, a three-step process is required for the purpose of settling a scheme under s 74:1(a) Step One: the Court must be satisfied that the building has been damaged or destroyed.(b) Step Two: if so satisfied, the Court must decide whether to settle a scheme. That is, the Court must decide whether a scheme is appropriate in the circumstances.(c) Step Three: if the Court decides the scheme is appropriate, it must then decide what the terms of the scheme should be.[12] The overall aim at the third stage should be to balance the interests of each unit holder in a way that imposes terms that achieve the outcome fairest to all unit holders. Five (non-exhaustive) factors are particularly relevant to the assessment of terms the scheme should be settled on:2(a) A scheme with broad support is preferred. The greater level of support from owners for the proposed scheme, the more likely it is that the scheme does justice between owners.(b) The scheme should be appropriately detailed (the more detailed the scheme, the less scope for misunderstanding and disagreement).1 Tisch v Body Corporate No 318596 [2011] NZCA 420, [2011] 3 NZLR 679 at [35]. While Tischconcerned the Unit Titles Act 1972, it was decided after the passage of the Unit Titles Act 2010, and the Court noted at [26] that s 74 is "essentially the equivalent" of s 48 in the previous Act.2 See Tisch v Body Corporate No 318596 at [44]-[49].(c) The order has retrospective effect, provided the Body Corporate hasacted in accordance with the scheme prior to the Court's approval.(d) Normally, work should be done to the same standard at the same time. The rationale is such an approach is fair between proprietors, maximises efficiency, and minimises cost and disruption.(e) The terms of the scheme should not depart from the Act and the Body Corporate Rules any more than was reasonably necessary to achieve fairness between the unit holders in the circumstances.Assessment[13] Step one is a technical requirement, triggering the Court's assessment. Thereis no issue here; the building was plainly weather damaged and repairs are necessary. This point has been the subject of an expert report.[14] As to step two, the settling of a scheme, as the Court of Appeal observed inTisch, is a remedy of last resort.3 Even so, in this case a comprehensive approach to repair is in the best interests of all owners. I am satisfied the scheme is appropriate in the circumstances. I am also satisfied that the terms of the scheme are fair and balanced.[15] The decision to settle a scheme, and the terms on which it is settled, are discretionary. I am guided by the five factors identified in Tisch:Level of support(a) 57 of 59 owners who voted favoured the scheme. Even counting the25 votes that were not returned as "against" votes, over two thirds ofthe owners voted in favour.3 At [37], citing Fraser v Body Corporate S63621 (2009) 10 NZCPR 674 (HC) at [97], per Heath J.Level of detail(b) The scheme is based on independent expert advice and provides a clear, detailed vehicle for the purposes of achieving what will be a difficult and complex repair process.Retrospective effect(c) Ms Burling notes that while the scheme may have retrospective effect, the repairs have yet to be commenced and the scheme is intended to have prospective effect for stage two of the building work.Standard of work(d) The complex comprises one building and it needs to be repaired at the same time to the same standard. As noted by Mr Nolan in his affidavit in support of the application, the Weathertight Homes Resolution Service report concluded that the primary fault in the complex is that the cladding, balcony, walkway, garden planters and courtyard are not weathertight. This means they will fail to remain durable and gradually deteriorate if left unremedied. A comprehensive, contemporaneous repair approach is therefore contemplated.Extent of departure from the Act(e) As noted by Ms Burling, the scheme is similar to previous schemes deemed to be consistent with the scheme of the Act generally, save for the following:4(i) It ensures the Body Corporate has the power to complete all the repairs.4 These exceptions are also consistent with those approved in Body Corporate 202692 v Jamac Holdings Ltd [2016] NZHC 1226. For other comparable schemes which were approved, seeBody Corporate 205373 v Baltazaar [2015] NZHC 2827, and Body Corporate 201161 v Keung[2016] NZHC 1827.(ii) The Act contemplates repairs to the building elements being made first, then the cost of the repair being recouped from the owners. This scheme makes clear the owners may be levied up front.(iii) The scheme ensures that utility interest is the only method to be used, consistent with s 126 of the Act, as no unit owner benefits substantially more than any other.Result[16] Accordingly, for the reasons set out above, I granted the orders as sought (without opposition) pursuant to s 74.Appendix A