YEE GOOD FORTUNE INVESTMENTS LTD v BODY CORPORATE 392619 [2017] NZHC 723

YEE GOOD FORTUNE INVESTMENTS LTD v BODY CORPORATE 392619 [2017] NZHC 723 [12 April 2017]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2016-404-2242[2017] NZHC 723UNDER section 119 of the Residential TenanciesAct 1986 and Part 20 of the High CourtRulesBETWEEN YEE GOOD FORTUNE INVESTMENTSLIMITEDAppellantAND BODY CORPORATE NO 392619RespondentHearing: 15 February 2017Appearances: N Dunning for the AppellantS Powrie for the RespondentJudgment: 12 April 2017JUDGMENT OF GORDON JThis judgment was delivered by meon 12 April 2017 at 4.30 pm, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors: Nat Dunning Law, WellingtonGrove Darlow & Partners, AucklandContentsIntroduction .......................................................................................................................... [1]Background ............................................................................................................................ [4]Tenancy Tribunal order ........................................................................................................ [10]District Court judgment ....................................................................................................... [17]Approach on appeal ............................................................................................................. [25]Delegation of powers to the Committee .............................................................................. [27]Section 85(2) of the Residential Tenancies Act 1986 .......................................................... [39]Power to impose levy for a particular purpose..................................................................... [46]The meaning of repairs and maintenance under s 138 of the Unit Titles Act 2010 [48]The power to raise levies for a fund [62]The decision to establish a contingency fund [87]Conclusion [94]The reference to Wheeldon v Body Corporate 342525........................................................ [96]Ratification of the contested resolutions ............................................................................ [100]Jurisdiction of the Tenancy Tribunal .................................................................................. [113]Conclusion ......................................................................................................................... [122]A further note ..................................................................................................................... [123]Result ................................................................................................................................. [126]Costs................................................................................................................................... [128]Introduction[1] The appellant, Yee Good Fortune Investments Ltd (YGFI), is the owner of aunit in the Bella Vista Apartments on Auckland's Te Atatu Peninsula. In 2012 the respondent, Body Corporate 392619, imposed a special levy upon members of the Body Corporate in order to meet costs associated with planned repairs to the Apartments. YGFI refused to pay, arguing that the levy was invalid. The Body Corporate therefore commenced proceedings in the Tenancy Tribunal to enforce the debt. The Tribunal found in favour of the Body Corporate. YGFI then appealed to the District Court, which again found in favour of the Body Corporate.1[2] YGFI now appeals to the High Court on six questions of law, which can be broadly stated as follows:(a) Did the Judge err in finding that the power to impose the levy had been properly delegated to the Body Corporate Committee?(b) Did the Judge err in applying s 85(2) of the Residential Tenancies Act 1986 (RTA)?(c) Did the Judge err in finding that the Committee had the power to impose the levy that it did, for the purpose that it did?(d) Did the Judge err in referring to the Court of Appeal decision inWheeldon v Body Corporate 3425252 in relation to s 74 of the Unit Titles Act 2010 (UTA)?(e) Did the Judge err in finding that the Body Corporate was able, as a matter of law, to ratify and confirm the contested resolutions?(f) Did the Judge err in failing to quash the order of the Tribunal on the ground that it lacked jurisdiction to hear the matter?1 Yee Good Fortune Investments Ltd v Body Corporate 392619 [2016] NZDC 14692.2 Wheeldon v Body Corporate 342525 [2016] NZCA 247, (2016) 17 NZCPR 353 [Wheeldon (CA)].[3] The Body Corporate opposes the appeal.Background[4] In 2012, the Body Corporate engaged CoveKinloch, a building consultancy practice, to undertake an assessment of the Apartments with a view to determining the extent (if any) of any construction defects therein. This report was completed in September 2012. In its report, CoveKinloch identified a number of problems including damage to or defects in the car park, external cladding, external balconies, roofing, guttering, windows and internal bathrooms. The report stated:The defects are currently allowing moisture to ingress, have the potentialto allow moisture ingress, and have caused and will continue to cause deterioration to the structural elements of the buildings unless remedial work is carried out.[5] On 18 September 2012, the Body Corporate held its Annual General Meeting. A representative of CoveKinloch was present at the meeting and detailed his findings in relation to the Apartments. After appointing a committee of Body Corporate members, the Body Corporate resolved:That the Committee is authorised to engage Cove Kinloch to carry out the preparation of plans and specifications and the tendering and the obtaining of a building consent for the repair of the defects. This authority was subject to the Committee being satisfied as to an offer of service from Cove Kinloch in this regard.[6] In the course of the 2012 AGM, the Body Corporate also resolved the following (the delegation resolution):The Committee is delegated the full powers and authority of the Body Corporate, subject to any prior direction given at any General Meeting of the Body Corporate or prohibition as contained in Section 108(2) of the Act.[7] The Committee met on 28 November 2012. The minutes of the meeting recorded under Item 5 the following (the levy resolution):In terms of the building works a formal proposal had been received from Cove Kinloch for all of the preliminary consultancy work up to the time of obtaining the building consent. This included estimates for their fees and the various subconsultants including the fire engineer, structural engineer and cladding engineer. It also included an estimate in relation to the quantitysurveyor's fees both during preliminary stages of cladding options and in also analysing the tenders.The total estimate [sic] fees are just over $160,000 plus GST.RESOLVED"That in principal [sic] the proposal from Cove Kinloch be accepted"It was recognised that further levies would be necessary to meet the cost of the consultancy fee and it was therefore:RESOLVED"That a special levy of $160,000 plus GST be raised to be payable in twoequal instalments, the first due on 10 February 2013 and the second on10 May 2013."The target is to have the building consent issued and a preferred tenderer selected in or around June or July 2013 for works to commence immediately thereafter. It was noted that further general meetings would be held to discuss the proposed building works and to sign off on the various stages.[8] Two days later, on 30 November 2012, the manager of the Body Corporate sent a letter to the members regarding the special levy. The letter stated:As previously advised to you the Body Corporate is proceeding to have completed a remediation design by Cove Kinloch. Following completion of the design the works will be tended [sic] and an Extraordinary General Meeting will be held at which approval will be sought to proceed with these works. Cost estimates are currently in the order of $2,000,000.00.In accordance with Section 138 of the Unit Titles Act the Body Corporate is responsible for maintaining the exterior elements of the complex. To do this, special levies will need to be raised to cover the cost of the building remediation including consultancy fees and the repair contract. These levies will be raised by ownership interest (the same proportion which you are currently levied for ordinary levies). An option does exist upon completion of the works for the Body Corporate to look to allocate the cost to private property owners where the repair works are related to private property. The Act does not provide for this allocation to be done in advance and accordingly the Body Corporate will be required to levy as indicated.Grimshaw & Co. had (sic) been engaged by the Body Corporate to launch proceedings against parties identified as being responsible for the defects. These proceedings will be drawn in the name of the Body Corporate as the first plaintiff and individual owners as second plaintiff. The need to have individual owners commit to the proceedings is because there will be private property repairs as well as common property repairs. Please be aware that failure to join the litigation will not result in you being exempted from meeting your share of the repair costs.(emphasis in original)[9] YGFI was assessed for two amounts, totalling $9,699.92. However, it refused to pay the special levy. On 15 January 2014, the Body Corporate lodged an application for an order of the Tribunal to recover body corporate levies under s 124 of the UTA and s 86(1) of the RTA.Tenancy Tribunal order[10] On 24 November 2014, the Tribunal made an order requiring YGFI to pay the outstanding levy.[11] The Tribunal found that the levy could be fairly seen as one which related to the management and governance of the units, the provision of services and amenities for the units, and/or a cost associated with statutory or regulatory compliance. On that basis, the Tribunal considered that the Body Corporate was entitled to raise the special levy for its operating account.3[12] In respect of the delegation resolution, the Tribunal found that a valid special resolution had been passed delegating the full powers of the Body Corporate to the Committee:The resolution was probably passed as a special resolution as there was nothing in the annual general meeting minutes or otherwise to indicate any dissent to the resolution at the meeting.It rejected YGFI's argument that the power to levy could not be delegated to the Committee.[13] The Tribunal also considered whether the Body Corporate was entitled toconduct intended works as "repairs and maintenance" within the meaning of s 138 ofthe UTA, or whether it was required to seek High Court approval of a scheme under s 74 of that Act. It found that the Body Corporate had an obligation to conduct the intended repairs, as the items requiring repairs were either common property or"building elements and infrastructure that relate to or serve more than 1 unit."4Repairs under s 138 could only be funded by levying the members of the Body3 See the Unit Titles Act 2010, s 115.4 Unit Titles Act, s 138(1)(a) and (d).Corporate. The correct approach was therefore to levy all members for the costs of repair and then recover the costs for repair of building elements contained in a principal unit from the unit owner. In light of those conclusions, the Tribunal foundthat it was unnecessary to consider the High Court's powers to approve a schemeunder s 74 of the UTA.[14] The Tribunal rejected a fourth argument that the decision to engage contractors was invalid for want of authority. YGFI argued that the resolution passed at the AGM was invalid, as it had not been listed on the agenda for the meeting; and that the Committee did not have the power to engage the contractors itself. The Tribunal accepted that the resolutions at the AGM were invalid, but found that the delegation resolution had granted wide powers to the Committee, including the power to engage the contractors.[15] The final point raised by YGFI was that the levy had been raised for work including testing of decks, but that of the 40 or so decks, only nine or ten had beentested. The Tribunal accepted the Body Corporate's submission that this point wasnot relevant to the power to levy.[16] YGFI appealed to the District Court.District Court judgment[17] The District Court largely accepted the reasons put forward by the Tribunal, with some minor differences.5[18] In respect of the delegation resolution, the District Court accepted theTribunal's finding that "[t]he resolution was probably passed as a special resolution"and reaffirmed its conclusion that the scope of the powers delegated to the Tribunal included the power to conduct repairs and maintenance in accordance with s 138. The Judge further stated:[17] In reaching that conclusion I am of the view that the Tribunal was acting according to s 85(2) of the Residential Tenancies Act 1986, in that it was correct in law to acknowledge that a special resolution was required to5 Yee Good Fortune Investments Ltd v Body Corporate 392619, above n 1.appoint the committee and that it could be safely inferred from the minutes of the relevant meeting that the requisite number of eligible voters had voted in support of the motion.[19] The Judge departed from the reasoning of the Tribunal in respect of the BodyCorporate's authority to impose the levy. This departure appears to be attributable to the submissions made by the Body Corporate on appeal, which differed from those made in the Tribunal:[28] Mr Leishman's argument was that s 118 permitted the establishmentof a contingency fund for repair or remediation. The section empowers a body corporate to establish one or more contingency funds, and all that is required is for such fund to be appropriately named and kept separate from other funds of the body corporate designated for other purposes.[20] The Judge did not make any explicit finding regarding the existence of a contingency fund; however from the paragraph set out above, it appears that he assumed such a fund existed and could provide a proper basis to raise the speciallevy. He did not refer to the Tribunal's finding that the special levy could be raised for the operating account.[21] The Judge then considered the purpose of the levy. He rejected a submission that the intended works exceeded the scope of s 138, citing the Court of Appeal decision in Wheeldon v Body Corporate 342525 (Wheeldon (CA)).6 He found thatthe works would clearly benefit YGFI's unit. The Judge concurred with the Tribunal's finding that the Committee was entitled to engage the contractors to carryout the work.[22] The District Court on appeal also considered the purported ratification of the delegation and levy resolutions. The ratification occurred only a few days prior to the Tribunal hearing and had not been considered by the Tribunal. The text of the resolutions was as follows:Without prejudice to its position that all resolutions previously passed by the body corporate at the AGM of 18 September 2012 were correctly passed, and solely out of an abundance of caution, all resolutions appearing in the minutes of the 2012 AGM meeting (sic) as adopted by the 28 August 2013 AGM are hereby ratified and adopted and all actions and decisions by the committee in consequence of any resolution of the body corporate delegating6 Wheeldon (CA), above n 2, at [27]–[29].to them authority to exercise powers and duties of the body corporate, whether those powers and duties are stipulated in an enactment or regulationare hereby ratified from the date when the committee's decision or actionoccurred.[23] The Judge held that it was clear a body corporate was entitled to ratify the actions of a committee appointed by it7 and that the ratification resolution had cured any deficiencies in the delegation and levy resolutions.[24] The District Court therefore dismissed the appeal.Approach on appeal[25] Section 119 of the RTA provides for a right of appeal to the High Court on a question of law. In order to succeed on appeal, YGFI must demonstrate:8(a) a misdirection of law which is apparent in the decision;(b) oversight of a relevant matter, or consideration or an irrelevant matter; or(c) a factual finding which is unsupported by any evidence, or an omission to draw an inference of fact which is the only one reasonably available on the evidence.[26] In the course of his submissions, Mr Dunning on several occasions invited the Court to draw new factual inferences regarding the background to the dispute and in particular, the purpose of the levy. However, aside from the very limited circumstances in [25(c)] above, there is no scope for this Court to reconsider the factual findings of the decision-makers below or to make new factual findings in an appeal on a question of law. I must therefore set those submissions to one side for the purpose of this appeal.7 Citing Guardian Retail Holdings Ltd v Buddle Findlay [2013] NZHC 1582, [2013] NZAR 988.8 Brown v R [2015] NZCA 325, (2015) 30 FRNZ 471 at [16], citing Bryson v Three Foot Six Ltd[2005] NZSC 34, [2005] 3 NZLR 721 and Vodafone New Zealand Ltd v Telecom New Zealand Ltd [2011] NZSC 138, [2012] 3 NZLR 153.Delegation of powers to the Committee[27] The first question of law which I must consider is whether the District Court Judge erred in finding that the power to impose levies had been properly delegated to the Committee.[28] Section 108 of the UTA governs the delegation of powers to a body corporate committee. It provides:108 Delegation of duties and powers(1) Except as provided in subsection (2), a body corporate may delegate any of its duties and powers, either generally or specifically, to the body corporate committee by special resolution and written notice.(2) The body corporate must not delegate any of the powers or duties set out in—(a) subsection (1) (which is the general power of delegation):(b) section 41 (which provides for the reassessment of ownership interests and utility interests):(c) section 105(3) (which requires the body corporate to comply with the body corporate operational rules):(d) section 136(4) (which relates to the application of insurance monies in or towards reinstatement of the development).[29] The focus of submissions on appeal was the requirement in s 108(1) that any delegation of powers to a body corporate committee be approved by specialresolution and written notice. Mr Dunning submitted that the Tribunal's finding, accepted by the District Court, that "the resolution was probably passed as a special resolution", was not justified on the basis of the evidence before it. Further, hesubmitted, the requirement in s 108(1) that the delegation be effected by "written notice" had not been met, because the agenda for the AGM had incorrectly statedthat the motion was to be passed by ordinary, rather than special, resolution. Mr Powrie, who appeared on behalf of the Body Corporate, submitted in reply that the question whether the motion had been passed by special resolution was a matter of fact and was not justiciable in an appeal on a question of law. Given that finding, he submitted, there were no grounds for a finding of invalidity.[30] I turn first to the question of whether a special resolution was passed. I agree with Mr Powrie that under normal circumstances, a court in an appeal on a question of law should not question the factual findings of the decision-makers below. However, there is one exception to that rule, as I have noted above. That exception exists where the factual finding in question is unsupported by any evidence. In thiscase, the Tribunal made a factual finding that the special resolution had "probably"been passed. That finding was then accepted by the Judge on the basis that YGFI had failed to prove that the finding was incorrect. However, I am not satisfied that the original finding was available to the Tribunal on the basis of the evidence before it.[31] Section 5 of the UTA defines a special resolution to mean "a resolution passed in accordance with section 98(4)." Section 98(4) provides that "[f]or a special resolution to pass, 75% of the eligible voters who vote on the resolution mustvote in favour of the resolution." Therefore, in order to make the factual finding thata special resolution was passed, the Tribunal needed to be satisfied that 75 per cent of those who were present at the AGM on 18 September 2012 had voted in favour of the delegation resolution.[32] The only evidence before the Tribunal on this matter was the minutes of theAGM, which stated that the resolution had been "carried". There was no referenceto a "special resolution". There was no indication in the minutes as to whether themotion had been carried unanimously, or if not, how many members had voted against. There was no evidence regarding the usual practices of the Body Corporate which might have indicated, as Mr Powrie submitted, that it was standard practice torecord "carried" when a motion had been passed unanimously. There was nodiscussion before the adjudicator about the number of members who had voted in favour of the motion. In short, there was no evidence from which the Tribunal couldlogically conclude that the word "carried" in the minutes of the AGM meant "carried as a special resolution", rather than "carried as an ordinary resolution".[33] The absence of such evidence before the Tribunal was understandable, since YGFI had not at any stage indicated that it intended to challenge this aspect of the delegation resolution. That challenge was taken up for the first time in the DistrictCourt. It is not clear why YGFI was permitted to pursue this course of action on appeal, given its failure to raise this issue before the Tribunal. On the other hand, the Body Corporate had sufficient notice that YGFI intended to pursue that ground of appeal. It could have made an application to file fresh evidence regarding the conduct of the 2012 AGM, but failed to do so. That omission is difficult to understand, particularly since the Body Corporate made an application to adduce other evidence relating to the ratification resolution. Both parties bear some of the blame for the unsatisfactory position that now exists. That position might have been avoided, had counsel been engaged at an earlier stage in the proceedings.9[34] The situation in the present case can be contrasted with that in Wheeldon v Body Corporate 342525 (Wheeldon (No 2)).10 In that case, there was a similar dispute regarding the existence of a special resolution. Muir J held:[22] Although neither the agenda nor the Minutes record the resolution as a special resolution, and the Minutes do not identify it as having been passed by the 75 per cent majority necessary for that purpose, the unchallenged evidence of Mr Leishman is that it was passed unanimously. He states in his affidavit, dated 3 February 2016 that it is his "normal recording practice inthe minutes when recording a resolution which has been passed unanimouslyor without anyone registering a dissenting vote" to simply record the resolution as "CARRIED". Further, the evidence in the case was ofunanimity among the body corporate members until Ms Stent's acquisition of the Wheeldon's [sic] unit. In the absence of any evidence to the contrary, I conclude that the resolution was passed unanimously. In Wheeldon (No 2), therefore, the Tribunal had the benefit of additional evidence from which it could reasonably draw the conclusion that at least 75 per cent of voters had voted in favour of the resolution. The same cannot be said in the present case.[35] I am therefore satisfied that the District Court Judge erred in law when heaccepted the factual finding of the Tribunal that a special resolution had "probably"been passed. There was no evidential basis for this finding.9 Both parties were entitled to appear by counsel in the Tribunal: Residential Tenancies Act 1986, s 93(2)(b). Both parties were also entitled to appear by counsel in the District Court: District Courts Act 1947, s 57. Although YGFI was legally represented in the District Court, the Body Corporate was not.10 Wheeldon v Body Corporate 342525 [2017] NZHC 87 [Wheeldon (No 2)].[36] However, I do not accept the second part of Mr Dunning's submission, that the special resolution (if passed) would have been invalid for lack of written notice. Mr Dunning interpreted this provision to mean that the members of the Body Corporate were required to have written notice that a special resolution would be required. However, it is clear from the Unit Title Regulations 2011 that the written notice referred to in s 108 is notice to the committee itself:22 Delegation to body corporate committee(1) A written notice of delegation of a duty or power by a body corporate to a body corporate committee under section 108(1) of the Act must—(a) contain the following information about each duty or power that is being delegated:(i) a description of the duty or power; and(ii) the restrictions (if any) on the body corporatecommittee's power to perform the duty or exercisethe power; and(b) specify the duration of the delegation; and(c) contain a statement that the notice of delegation is evidenceof the body corporate committee's authority to perform each duty or exercise each power that is being delegated; and(d) specify the frequency of the body corporate committee'sreports on the delegation to the body corporate.(2) A written notice of delegation must be served on each member of the body corporate committee.[37] It follows that there was no error in the Judge's decision in this respect.[38] As will become evident later in the course of this judgment, there are a number of issues which require rehearing in the Tribunal. Given that the Tribunal will be required to rehear argument on various aspects of this case, I consider it is appropriate to direct the Tribunal to reconsider the issue of whether the delegation resolution was passed in accordance with s 108(1) as well. In doing so, it would be appropriate to receive fresh evidence from those who were present at the meeting and who may be able to attest to whether the delegation resolution was passed by special resolution.Section 85(2) of the Residential Tenancies Act 1986[39] The second question of law raised on appeal is whether the Judge erred in applying s 85(2) of the RTA.[40] The conduct of proceedings in the Tribunal is governed by pt 3 of the RTA, including s 85.11 That section provides:85 Manner in which jurisdiction is to be exercised(1) Subject to the provisions of this Act and of any regulations made under this Act, the Tribunal shall exercise its jurisdiction in a manner that is most likely to ensure the fair and expeditious resolution of disputes between landlords and tenants of residential premises to which this Act applies.(2) The Tribunal shall determine each dispute according to the general principles of the law relating to the matter and the substantial merits and justice of the case, but shall not be bound to give effect to strict legal rights or obligations or to legal forms or technicalities.[41] Mr Dunning's objection to the Judge's application of s 85(2) appeared to betwo-fold. First, Mr Dunning submitted that the Judge had wrongly applied s 85(2) to escape the evidential inadequacies identified above in respect of the Tribunal'sconclusions regarding the special resolution. Second, Mr Dunning suggested that the Judge had wrongly permitted s 85(2) to flavour his entire decision, with the result that the Judge did not give sufficient weight to the formal procedural requirements set out in the UTA. He referred to Welsh v Housing New Zealand Ltd, a decision of the Full Court of the High Court, in which Doogue and Goddard JJ considered the correct application of s 85(2) in the context of the RTA:12[29] This issue raises an important point of principle as to the role of the Tenancy Tribunal under the Act. It seems to us to be very clear that under s 85(2) the Tenancy Tribunal must determine each dispute before it in accordance with the general principles of law relating to the dispute as well as the substantial merits and justice of the case. The provision does not create a licence for the Tenancy Tribunal to impose its views on the substantial merits and justice of the case upon one or other disputant unless its determination is based on general principles of law relating to the dispute.11 Unit Titles Act, s 176.12 Welsh v Housing New Zealand Ltd HC Wellington AP35/2000, 9 March 2001.[30] If a remedy is justified by the principles of law applicable to the matter, the Tenancy Tribunal will have to consider the merits and justice of the case and whether the strict application of the law gives rise to a fair result, but, if there is no remedy provided for by the law, it is not open to the Tenancy Tribunal to invent one.[42] In reply, Mr Powrie submitted that the Judge was right to uphold theTribunal's factual finding and therefore the Judge was not relying on s 85(2) to "invent" a remedy.[43] Turning first to the explicit application of s 85(2) in relation to the special resolution issue, I agree with Mr Dunning that the Judge could not rely upon s 85(2)to patch up the evidential inadequacies underpinning the Tribunal's findings.However, in all fairness to the Judge, I am not certain that was his purpose in referring to s 85(2). On my reading of the decision, it is at least possible that theJudge's intention was merely to endorse the Tribunal's approach to the specialresolution issue; namely, its willingness to consider the substance of what actually occurred at the meeting, rather than relying solely upon the written record of those events. In my view, that would be a legitimate application of s 85(2). However, given my finding above that there was no sufficient evidential basis for theTribunal's finding, s 85(2) can have no application in relation to this issue.[44] I do not think Mr Dunning's second criticism is sustainable on the face of the Judge's decision. The Judge considered each of the issues on appeal and came to aconclusion on the basis of the law, as he interpreted it to be. In any case, however, the Judge would be fully justified in taking that approach. Section 117 of the RTA provides:13117 Appeal to District Court(1) Subject to subsection (2), any party to any proceedings before the Tribunal who is dissatisfied with the decision of the Tribunal in the proceedings may appeal to a District Court against that decision.(4) The provisions of section 85, with any necessary modifications, shall apply in respect of the hearing and determination by a District Court of an appeal brought under this section.13 Section 117 of the Residential Tenancies Act 1986 applies to disputes such as the present by virtue of s 176 of the Unit Titles Act.[45] It follows that there was no error in the Judge's decision in this respect.Power to impose levy for a particular purpose[46] That brings me to the third question of law in this appeal, namely whether the Judge erred in finding that the Committee had the power to impose the levy that it did, for the purpose that it did. This question raises three interrelated sub-issues:(a) Whether the Judge erred in finding that the preliminary consulting work carried out by CoveKinloch could be categorised as repairs and maintenance work, pursuant to s 138 of the UTA;(b) Whether the Judge erred in finding that a body corporate may establish a contingency fund in accordance with s 118 of the UTA, for the purpose of funding large-scale remediation works; and(c) Whether the Judge erred in finding that under s 118, "all that isrequired is for such fund to be appropriately named and kept separate from other funds of the body corporate designated for otherpurposes."14[47] I address each question in turn.The meaning of repairs and maintenance under s 138 of the Unit Titles Act 2010[48] The first issue which must be determined is whether s 138 of the UTA empowered the Body Corporate to engage CoveKinloch to carry out preliminary consulting work in preparation for future repairs. YGFI submits that the decision to engage CoveKinloch fell outside the scope of the powers and duties set out in s 138 and was therefore ultra vires.15 If the action itself was ultra vires, YGFI apparently14 At [28].15 A body corporate has limited capacity and may only undertake actions in accordance with the powers and duties set out in the Unit Titles Act: Unit Titles Act, ss 77 and 78.argues, then it follows that the levy imposed upon members in order to pay for that action must also be ultra vires.[49] At the time when the present dispute arose in 2012, s 138 of the UTA provided as follows:138 Body corporate duties of repair and maintenance(1) The body corporate must manage, maintain, and keep in a good state of repair the common property and any assets owned by the body corporate or designed for use in connection with the common property.(2) The body corporate must maintain, repair, or renew all building elements and all infrastructure that relate to or serve more than 1 unit.(3) The body corporate may access at all reasonable hours any unit to enable it to carry out repairs and maintenance under this section.(4) Any costs incurred by the body corporate that relate to repairs to building elements and infrastructure contained in a principal unit are recoverable by the body corporate from the owner of that unit as a debt due to the body corporate (less any amount already paid) by the person who was the unit owner at the time the expense was incurred or by the person who is the unit owner at the time the proceedings are instituted.(5) For the purposes of this section,—(a) a subsidiary body corporate is to be treated as the unit owner of the principal unit that was subdivided to create the subsidiary unit title development; and(b) a reference in subsection (4) to a principal unit includes the common property and units of that subsidiary unit title development.[50] Subsection (2) was repealed on 5 December 2013 and its content amalgamated into subs (1).16 Section 138(1) now reads:(1) The body corporate must repair and maintain—(a) the common property; and(b) any assets designed for use in connection with the common property; and(c) any other assets owned by the body corporate; and16 Unit Titles Amendment Act 2013, s 15.(d) any building elements and infrastructure that relate to or serve more than 1 unit.[51] Both parties in their submissions referred to the current version of s 138, rather than the version that was in force in 2012. However, as will be evident from the text quoted above, the two versions are substantially similar. The distinction makes no difference to the outcome of the case.[52] Mr Dunning's principal submission in relation to this issue was that s 138 of the UTA could not empower the Body Corporate to conduct repairs in respect of private property. In the absence of any specific power or authority to conduct those repairs, Mr Dunning submitted, the Body Corporate was required to seek an order of the High Court settling a remediation scheme, pursuant to s 74 of the UTA. Mr Powrie disagreed. He submitted that the decision to engage CoveKinloch fell squarely within s 138 of the UTA, citing Wheeldon (CA).17[53] It is clear that s 138 of the UTA empowers (and in fact, requires) a body corporate to conduct repairs and maintenance work in relation to common property. In this respect, the UTA differs from its predecessor legislation, the Unit Titles Act 1972. Under the previous legislation, a body corporate could only repair and maintain the common property. However, s 138 also requires a body corporate to repair and maintain building elements and infrastructure that relate to or serve more than one unit. "Building elements" is defined in s 5 of the UTA as follows:building elements includes the external and internal components of any part of a building or land on a unit plan that are necessary to the structural integrity of the building, the exterior aesthetics of the building, or the health and safety of persons who occupy or use the building and including, without limitation, the roof, balconies, decks, cladding systems, foundations systems (including all horizontal slab structures between adjoining units or underneath the lowest level of the building), retaining walls, and any other walls or other features for the support of the building[54] In light of this definition, Mr Dunning's submission that the Body Corporatemay only levy contributions to repair the common property must fail. It is clear that the matters which must be repaired or maintained by the Body Corporate pursuant to17 Wheeldon (CA), above n 2.s 138 may include building elements which form part of one or more principal units, provided that the building elements in question "relate to or serve more than 1 unit".[55] When can it be said that a building element "relate[s] to or serve[s] more than 1 unit"? In Wheeldon (CA), the Court of Appeal held:[53] The ordinary meaning of "relate to" is "have reference to; concern". This ordinary meaning is reflected in Harrison J's statement in Young v Body Corporate 120066 that "[s]omething is incidental if it naturally attaches or is causally relevant to something else. The phrase 'relate to' has a similarmeaning of reference to or concern with."[54] Although Young was decided under the different scheme of the UTA 1972, this statement is equally applicable in the present context. Muir J,correctly, drew on Harrison J's statement to find that a building element orinfrastructure relates to or serves more than one unit if it:(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) is concerned with another unit whether physically or economically.In addition, Muir J considered that the inclusion of aesthetics in the definition of building elements and the emphasis on integrity of the development in s 3 means that the economic relationship should include those factors.[55] We consider that Muir J's approach and conclusion were right. Theengagement of s 138(1)(d) does not turn on questions of remoteness or materiality. Building elements, by definition, are necessary to the structural integrity of the building, its exterior aesthetics and the health and safety of its occupants. But s 138(1)(d) is only engaged if the criteria set out there are met, namely that the building element or infrastructure relates to or serves more than one unit. There is no need for any gloss and no need to overlay s 138(1)(d) with new terminology. Whether a building element relates to or serves more than one unit is a question of fact.[56] It is clear from the passage above that "building elements that relate to or serve more than 1 unit" may include elements that form part of an owner's privateproperty. It follows that, in some instances, a body corporate may have a duty torepair and/or maintain private property. This is consistent with the direction in s 80 that:(1) An owner of a principal unit—(a) must permit the body corporate (or its agents) to enter the unit at any time in an emergency and at all reasonable hours, and after giving reasonable notice, for any of the following purposes:(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.[57] I am satisfied that s 138 empowers a body corporate to conduct repairs and maintenance on private property, provided that the repairs and/or maintenance relate to building elements or infrastructure that relate to or serve more than one unit. Further, I am satisfied that the powers of a body corporate under s 138 extend to large-scale repairs and maintenance, such as those required to remediate construction defects.18 If that is the case then, in my view, s 138 must also extend to the preparatory work which is necessary in order to undertake such repairs and maintenance.[58] It follows that the decision of the Body Corporate in the present case to engage CoveKinloch to carry out preliminary consulting work, as a prelude to more wide-ranging repairs, was consistent with the powers and duties set out in s 138 of the UTA. The Body Corporate was not required to resort to a scheme under s 74 of the UTA in order to achieve this outcome.[59] Further, I am satisfied that a body corporate has the power to raise levies to enable it to perform the requisite repairs and maintenance, provided that it does so in accordance with s 121 of the UTA.19 It is true that, as YGFI has noted, s 138(4)18 See Wheeldon v Body Corporate 342525 [2015] NZHC 884, (2015) 16 NZCPR 829 [Wheeldon (No 1)], and see particularly [38]–[39]; Wheeldon (CA), above n 2; Wheeldon (No 2), above n10.19 Body Corporate 162791 v Gilbert [2015] NZCA 185, [2015] 3 NZLR 601 at [57]. See alsoWheeldon (No 1), above n 18, at [52].empowers a body corporate to recover the costs of repairs and maintenance from individual unit owners, after the works have been completed. However as noted by Muir J, that does not prevent a body corporate from raising the necessary funds bylevies in the first instance. If YGFI's contention were correct, then a body corporatemight well find itself in the invidious position of being required to undertake repairs and maintenance, with no means of financing those actions.[60] I do not consider that the Judge erred in this aspect of his decision.[61] There is one further point which must be considered in relation to this issue. In the course of his submissions on this point, Mr Dunning on several occasions urged the Court to draw an inference that the purpose of engaging CoveKinloch was not remedial, as claimed by the Body Corporate. Rather, Mr Dunning alleged, the purpose was to prepare for legal proceedings. That submission is outside the scope of this appeal. As I have said,20 this Court in an appeal on a question of law is not entitled to make fresh findings of fact. In any case, however, I do not think this allegation can be sustained on the basis of the evidence that was placed before the Tribunal.The power to raise levies for a fund[62] The second issue under this heading concerns the provision in s 121(1) of theUTA that a body corporate may impose levies to "establish and maintain [a] fund".The effect of this provision is that a body corporate that wishes to raise levies in order to fund repairs and maintenance work must ensure the levy is raised in respect of one of the funds set out in ss 115, 117, 118 or 119 of the UTA.[63] Two of those sections have particular relevance to the present case. Section 115 provides:115 Operating account(1) A body corporate must establish and maintain an operating account for the purpose of meeting the expenses described in subsection (2).(2) The expenses are—20 At [26] above.(a) those relating to the management and governance of a unit title development:(b) those relating to the provision of services and amenities for the benefit of the unit title development:(c) costs associated with statutory or regulatory compliance:(d) any ground rental or licence fees relating to the base land:(e) those incurred at least once a year relating to the maintenance of the unit title development.(3) The body corporate must establish a current account at a bank and may, by special resolution, nominate a person or persons who may operate the account and specify the manner in which it may be operated.[64] The Tribunal found that the expense of engaging CoveKinloch could fairly be seen as an expense falling within s 115(2). Accordingly, it held that the Body Corporate was entitled to impose a special levy to maintain its operating account.[65] Section 118 provides:118 Optional contingency fundA body corporate may establish and maintain 1 or more contingency funds to provide for unbudgeted expenditure.[66] The District Court Judge held that the Body Corporate was entitled to establish a contingency fund under s 118 for the purpose of completing the remediation works and that the Body Corporate could levy its members on that basis.[67] Mr Dunning submitted that the Judge erred in adopting that approach. In his submission, none of the funds described in ss 115 through to 119 of the UTA can be utilised for the purposes of remediation works. Mr Dunning relied heavily upon the decision of Judge Walker in Body Corporate 81340 v Newland (Newland (DC)) in support of this submission.21 In that case, the Body Corporate had similarly sought to raise funds for remediation works by the imposition of a special levy on its members. The Judge held:21 Body Corporate 81340 v Newland [2016] NZDC 1963 [Newland (DC)].[15] A Body Corporate must establish and maintain an operating account. This account is for the purpose of meeting the expenses described in the section and include expenses relating to the management and governance of a unit title development. Costs incurred on at least an annual basis relating to maintenance relating to maintenance of the unit title development are included within these expenses, as are the usual provision of services and amenities for the benefit of the apartment building. The operating account, clearly, is not intended to provide a fund for repairs and remediation work.[17] The Body Corporate must establish a long-term maintenance plan under s 116 of the Act. The purpose of a long-term maintenance plan is set out in s 116(3) as follows:(3) The purpose of a long-term maintenance plan is to—(a) identify future maintenance requirements and estimate the costs involved;(b) support the establishment and management of the funds;(c) provide a basis for the levying of owners of principal units; and(d) provide ongoing guidance to the body corporate to assist it in making its annual maintenance decisions.[18] The wording of the section contemplates making provision for future identified maintenance and supporting the establishment and management of funds for dealing with those future issues. The section contemplates the putting aside of funds for anticipated costs so that the burden does not suddenly fall on the owners at some future time. The section does not appear to contemplate the gathering in of funds to pay for already identified defects of the nature confronting this Body Corporate. These are not future maintenance requirements but past and present repair requirements.[20] Section 117(2) provides:(2) The fund may only be applied towards spending relating to the long-term maintenance plan.[21] Section 117(2) appears to me to preclude paying for remediation of existing defects out of a long-term maintenance fund.[68] On the basis of that analysis, the Judge in Newland (DC) concluded that there was no power to impose a special levy for the purposes of funding remediation works and that accordingly, the Body Corporate in that case was required to apply to the High Court for approval of a scheme under s 74 of the UTA. The BodyCorporate subsequently appealed other aspects of the Judge's decision, but did not challenge his finding regarding the necessity of a s 74 scheme.22[69] Mr Powrie on appeal submitted that the Body Corporate had raised the special levy for a contingency fund established in accordance with s 118. He noted, as did Judge Harrison in the District Court, that Judge Walker in Newland (DC) had not addressed the relevance of s 118 and that this omission was significant.[70] In my view, there are textual difficulties with Mr Powrie's contendedinterpretation of s 118. "Contingency" is variously defined as "the condition of being liable to happen or not in the future; uncertainty of occurrence or incidence" or "a chance occurrence; an event the occurrence of which could not have been, or wasnot, foreseen; an accident, a casualty."23 This is consistent with the direction in s 118that the purpose of a contingency fund is to provide for "unbudgeted expenditure"(emphasis added). The language of s 118 does not sit particularly comfortably with the present situation, in which levies have been raised to pay for the known and budgeted expense of obtaining preliminary consultation services, even if there were as yet unknown remediation costs still to follow.[71] However, the meaning of s 118 must be ascertained from its text and in the light of its purpose.24 Having regard to the purpose of s 118 and the UTA generally, I am satisfied that s 118 permits a body corporate to form a contingency fund for the purposes of undertaking remediation works.[72] Section 3 of the UTA sets out the purposes of the Act as follows:3 PurposeThe 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 individual owners and, in particular,—(a) 22 Newland v Body Corporate 81340 [2016] NZHC 1190.23 "contingency, n." OED Online (Oxford University Press, December 2016).24 Interpretation Act 1999, s 5.(b) to create bodies corporate, which comprise all unit owners in a development, to operate and manage unit title developments; 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.[73] In my view, the purposes of the UTA favour an interpretation of ss 115-121 which enables bodies corporate to respond flexibly to a range of situations, including those such as the present, where large scale remedial works are required in respect ofa unit title development. It is clear that such situations were in Parliament'scontemplation at the time of enacting the legislation.25 During debate on the Unit Titles Bill, a number of MPs specifically referred to the problems caused by leaky developments and emphasised that the Bill would assist in resolving these issues more quickly. Sue Bradford MP stated:26One provision we are particularly pleased about is that the need for unanimous body corporate decisions will be removed, so that in future only 75 percent agreement will be needed by those who vote at body corporate meetings. One is particularly put in mind of the leaky buildings situation, where people are desperate to try to get a decision so that they can make progress on solving leaky building problems. Where people are holding out on that, it has a detrimental impact on everybody involved in the building. At the moment it takes only one person to hold out for a whole process to be stopped.Maurice Williamson MP made similar remarks:27We are all aware of what other people call "leaky homes". I do not refer to them as that; I always call them "rotting homes", because "leaky homes" isnot the right phrase for them. We know that there are rotting buildings in those multi - unit title developments. Some of those owners are really in strife because the legislation does not give them the power to get agreement across body corporate members. There have to be only one or two standouts who are demanding something different and the majority can suffer. Getting some clearness and simplicity into this legislation for all the people involved—the developers, the individual owners, and the group appointed to represent a body corporate's rights and responsibilities to outsideorganisations—is a really good step in the right direction.25 See (5 March 2009) 652 NZPD 1713; (11 February 2010) 660 NZPD 8860; (16 February 2010) 660 NZPD 8933; (25 March 2010) 661 NZPD 9858; (30 March 2010) 661 NZPD 10216.26 (5 March 2009) 652 NZPD 1719.27 (5 March 2009) 652 NZPD 1722.[74] However, the purposes of the UTA in this respect can only be achieved if bodies corporate have some means of raising levies in order to fund the remedialworks. The UTA provides a finite list of "funds" which may be established ormaintained by a body corporate. It is therefore necessary to examine the legislation to determine which, if any, of those funds, could be used to pay the costs associated with large-scale remedial works.[75] Section 115 of the UTA provides that a body corporate must establish and maintain an operating account for the purpose of meeting the expenses listed in that section.28 The listed expenses include "costs associated with statutory or regulatorycompliance". In light of the finding above that the duties of a body corporate unders 138 can extend to carrying out large-scale remedial works, the cost of such works could in one sense be described as a cost associated with statutory compliance. However, read as a whole, it is clear that s 115 is intended to deal with the regular, day-to-day type of expenses that would normally be incurred in the operation of a unit title development, rather than the significant but hopefully one-off expense associated with a large-scale remediation project. This is particularly evidenced bythe reference in s 115(2)(e) to expenses "incurred at least once a year relating to the maintenance of the unit title development". I agree with Judge Walker's conclusionin Newland (DC) that the operating account of a body corporate is not a suitable fund from which to pay the costs of large-scale remedial works.[76] The next fund which is established under the UTA is a long-term maintenance fund. Section 117 of the UTA provides:117 Long-term maintenance fund(1) A body corporate must establish and maintain a long-term maintenance fund unless the body corporate, by special resolution, decides not to establish a long-term maintenance fund.(2) The fund may only be applied towards spending relating to the long- term maintenance plan.(3) The body corporate must, by special resolution, approve any amount to be spent on any 1 maintenance item if the amount exceeds the amount specified for that item in the long-term maintenance plan by more than 10%.28 The text of s 115 is set out at [63] above.[77] Section 117(2) imposes a strict limitation upon the types of expenses that may be met from the long-term maintenance fund. That subsection must be read in conjunction with s 116, which provides:116 Long-term maintenance plan(1) A body corporate must establish and regularly maintain a long-term maintenance plan.(2) A long-term maintenance plan must cover a period of at least 10 years from the date of the plan or the last review of the plan.(3) The purpose of a long-term maintenance plan is to—(a) identify future maintenance requirements and estimate the costs involved;(b) support the establishment and management of the funds; and(c) provide a basis for the levying of owners of principal units; and(d) provide ongoing guidance to the body corporate to assist it in making its annual maintenance decisions.[78] The reference to "future maintenance requirements" in s 116(3)(a) must beinterpreted to include some types of repairs or replacements.29 For example, the roof of a unit title development, being a building element that relates to or serves more than one unit, may need to be repaired from time to time and eventually replaced. This type of expense is predictable and the body corporate should incorporate such items into its long-term maintenance plan to ensure that the costs of repairs and replacement are apportioned over a number of years, rather than falling entirely upon the members of the body corporate in the year when repairs are carried out.[79] However, I do not consider that the term "future maintenance requirements"is intended to refer to the large-scale works that are required in order to remediate construction defects, including those occurring in leaky homes. As with the operating account, I consider that the long-term maintenance fund is intended to meet ordinary, expected expenses of maintaining a unit title development in a functional state. The expenditure which is associated with large-scale remediation is not only unexpected, but is usually very significant and would in most cases far29 Unit Titles Regulations 2011, reg 30(1)(e).outstrip the ordinary costs of maintaining and repairing a unit title development. In my view, the long-term maintenance fund is not a suitable fund from which to pay the costs of large-scale remedial works.[80] Under the UTA, a body corporate is required to establish and maintain an operating account and a long-term maintenance fund. However, there are two further types of fund, which a body corporate may establish if it chooses. The first of these is an optional contingency fund, as defined in s 118.30 The second is an optional capital improvement fund, which is defined in s 119 as follows:119 Optional capital improvement fundA body corporate may establish and maintain a capital improvement fund to provide for spending that adds to or upgrades the unit title development if that spending is not provided for in the long-term maintenance plan.[81] I accept that in some cases, the repair or replacement of part of a unit title development may constitute a capital improvement. This is reflected in the languageof s 119, which refers to capital improvement spending that "is not provided for inthe long-term maintenance plan". To continue with the roofing example used above,the replacement of an old roof with a modern one can be described in most cases as an upgrade. However, such replacement also falls under the category of routine (if irregular) repairs and maintenance. In contrast, the type of remedial works that are required to remedy large-scale construction defects cannot realistically be described as works which add to or upgrade the unit title development. Rather, the purpose of those works is to restore the unit title development to the state in which it should have been from the beginning. In my view, an optional capital improvement fund is not a suitable fund from which to pay the costs of large-scale remedial works.[82] That leaves only the optional contingency fund. As I have previously noted, the language of s 118 does not sit particularly comfortably with situations such as the present, in which levies have been raised to pay for large-scale remedial works. That is because the levies in question are not being raised to cover a contingency, in the sense of some future unexpected event. They are being raised to pay for a known and (at least partially) budgeted expense. However in my view, having regard to the30 The text of s 118 is set out at [65] above.purposes of the UTA to promote flexibility and to facilitate the effective management of unit title developments, s 118 must be read more broadly. Adopting that approach, s 118 can be interpreted as permitting a body corporate to raise levies for a purpose which was not previously foreseen but which now requires a co-ordinated response by the body corporate. Large-scale remedial works fall within this category, as does litigation brought by the body corporate to seek compensation from the parties responsible for the defects in construction. It is not consistent with the purpose of the UTA to suggest, in my view, that a body corporate must apply to the High Court every time it wishes to raise funds for a matter that does not fall neatly within the text of ss 115 and 116 of the UTA.[83] I acknowledge that this interpretation of s 118 means that in some cases, members of the body corporate may be required to expend large sums of money to fund a course of action with which they disagree. However, that is the nature of a unit title development. As Muir J said in Wheeldon (No 1):31[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 thatwas Parliament's expressed intention and that people who want to be able tochoose how and when they might repair building elements should carefully reflect on whether unit title ownership is appropriate for them. [84] Further, there are a number of safeguards in the UTA which protect the interests of body corporate members in this regard. Section 210 of the UTA provides for minority relief:210 General relief for minority where resolution required(1) In any case where this Act requires a resolution and the resolution is passed, any person who voted against the resolution may apply to the appropriate decision-maker for relief on the grounds that the effect of the resolution would be unjust or inequitable for the minority.(1A) Subsection (1) does not apply if the resolution is a designated resolution.31 Wheeldon (No 1), above n 18.(2) An application for relief under subsection (1) must be made within 28 days of the passing of the resolution.A unit owner is also entitled to apply to the High Court for a scheme under s 74, even if the body corporate does not.32 However, the Court of Appeal has previouslyheld that such a scheme "should be a remedy of last resort".33[85] Finally, this interpretation of s 118 would be consistent with the approaches adopted by the Court of Appeal in Tremont Holdings Ltd v Body Corporate 40180334and the High Court in Butcher v Body Corporate 342525.35 In both cases, the body corporate in question had utilised a contingency fund to pay expenses associated with large-scale remediation works. Neither the Court of Appeal nor the High Court considered whether s 118 permitted the use of a contingency fund for that purpose. Equally, however, neither raised any concerns about that aspect of the case.[86] I do not consider that Judge Harrison erred in holding that the Body Corporate could establish a contingency fund for the purpose of funding the repairs in this case.The decision to establish a contingency fund[87] The final issue which remains to be determined under this heading iswhether Judge Harrison was correct when he stated that under s 118, "all that isrequired is for such fund to be appropriately named and kept separate from otherfunds of the body corporate designated for other purposes."36[88] This question arose in the District Court in relation to a claim apparently made by the manager of the Body Corporate during the Tribunal hearing on 19 June 2014 that:37Part-way through the process the Body Corporate set up [a] separate building account so it deducted the second levy instalment of $23560 so give it ordinary, a balance on the ordinary account of $563956 and then the, just32 Unit Titles Act, s 74(2)(d).33 Tisch v Body Corporate 318596 [2011] NZCA 420, [2011] 3 NZLR 679 at [37].34 Tremont Holdings Ltd v Body Corporate 401803 [2015] NZCA 314, (2015) 16 NZCPR 509.35 Butcher v Body Corporate 342525 [2016] NZHC 3128.36 At [28].37 Transcript of Tenancy Tribunal hearing on 19 June 2014.under that we've added it back where it was transferred to the "building account", and there's been interest since that transfer on the Buildingaccount of $13476.[89] The Body Corporate maintained this stance on appeal. It cited the following passage from the High Court decision in Newland v Body Corporate 81340(Newland (HC)) in support of this submission:38[16] As far as the second ground of appeal is concerned a single bankaccount is expressly permitted by s 120(b), provided the funds are kept separate and are able to be identified. I accept that this may be particularly important where the levies in relation to the different funds are calculated ona different basis. But even assuming the prohibited intermingling of thefunds might be a ground for setting aside or not enforcing the levy (which is perhaps arguable) this ground has no merit. That is because Mr Nicholls has deposed that although the Body Corporate operates a single account, the payments made into the account are coded and kept separate by the BodyCorporate's Manager, who is an accountant. There is no evidence to thecontrary.[90] Mr Powrie submitted that the manager of the Body Corporate in the present case had similarly ensured that the payments were coded and kept separate in the building ledger, and that they were used for the purpose for which the special levy was raised. He submitted that this was sufficient to meet the requirements of ss 118 and 121 of the UTA.[91] Mr Dunning submitted that something more was required. He argued that theBody Corporate was required in law to "establish" a contingency fund and that the term "establish" connoted something more than merely coding payments to a building ledger.[92] I agree with Mr Dunning that something more is required here. In my view, the establishment of a fund requires a deliberate decision, made in accordance with the decision-making procedures set out in the UTA, or otherwise in accordance with the body corporate operational rules. This interpretation of s 118 is consistent with reg 31 of the Unit Titles Regulations 2011, which provides:38 Newland v Body Corporate 81340 [2016] NZHC 1190.31 Bank accountsA body corporate must resolve by ordinary resolution any matter relating to—(a) the establishment of a bank account; or(b) the addition of a fund to an existing bank account.[93] I am satisfied that Judge Harrison erred in law when he held that the coding of payments to a building ledger was sufficient to establish a contingency fund pursuant to s 118.Conclusion[94] I am satisfied that the Judge erred in finding that the Committee had the power to impose the levy that it did, for the purpose that it did. The Committee was in theory entitled to establish a contingency fund for the purposes of carrying out the repairs and to impose levies for that fund. However, in order to establish such a fund, the Body Corporate was required to make a deliberate decision in accordance with standard decision-making procedures. It was not sufficient, as Judge Harrison held, for the Body Corporate manager to simply code payments to a building ledger.[95] It is not appropriate for this court in an appeal on a question of law to determine whether the Body Corporate at any stage established a contingency fund in accordance with the law, as I have found it to be. This is a question of fact. It is therefore necessary to remit this matter to the Tribunal for further consideration.The reference to Wheeldon v Body Corporate 342525[96] The fourth question of law raised by YGFI on appeal asks whether the Judge erred in law when he referred to Wheeldon (CA) in relation to s 74 of the UTA.[97] The reference to Wheeldon (CA) occurred in the context of a submission in the District Court by Mr Dunning that, since there was no power under s 138 to carry out the intended remediation, there was no power to impose a special levy and therefore, the Body Corporate was required to apply to the High Court for a schemeunder s 74 of the UTA. The relevant section of the Judge's decision reads as follows:[29] Mr Dunning submitted that s 138 must be read subject to s 80(1)(g)of the Act which requires an owner of a principal unit to "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".[30] However, the Court of Appeal in Wheeldon v Body Corporate 342525 [2016] NZCA 247 did not agree. In upholding the decision of Muir J at first instance, the Court said:[27] As noted, the appellants say that the Judge erred infinding that a body corporate's duty to repair under s 138(1)(d)prevails over that of the unit owners under s 80(1)(g). Obviously, this ground of appeal concerns the proper interpretation of ss 80 and 138 of the UTA 2010. Mr Brill submitted in the High Court (and before us) that the scheme created by the UTA 2010 for repairs and maintenance to unit title developments places the primary obligation for necessary work to individual units on the unit owner, including work required to those building elements lying within the confines of the individual unit. In short, s 80(1)(g) should be interpreted as prevailing over s 138(1)(d).[28] Muir J rejected this argument. He held that s 138(1)(d) prevailed, having regard to the purposes of the UTA 2010 expressed in s 3: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 moreexpansive interpretation of s 138 than the "default provision" for which the plaintiffs contend.[29] Muir J referred approvingly to the approach suggested by the commentator, Thomas Gibbons, that if a building element or infrastructure serves more than one unit the body corporate has the obligation to repair it, and if it is part of a unitbut does not serve more than one unit then it is the owner'sresponsibility to repair, and if it is common property it is thebody corporate's responsibility.[98] It is clear from the Judge's decision that his purpose in referring to Wheeldon (CA) was to counter the first limb of Mr Dunning's argument, namely that the BodyCorporate did not have the power to conduct the intended remediation works under s 138 of the UTA. Although the Judge did not explicitly say so in his judgment, itfollowed that the second limb of Mr Dunning's argument was rejected. In my view, that was the logical way in which to deal with Mr Dunning's submission on thispoint. In fact, I have followed a very similar approach in this judgment on the same issue.[99] It follows that the Judge did not err in this aspect of his decision.Ratification of the contested resolutions[100] The next question of law which I must consider is whether Judge Harrison erred when he held that the Body Corporate was able, as a matter of law, to ratify and confirm the contested resolutions. The ratification resolution was passed on 10 June 2014 and is recorded in the minutes of that meeting as follows:RESOLVED (SPECIAL):"Without prejudice to its position that all resolutions previously passed bythe body corporate at the AGM of 18 September 2012 were correctly passed, and solely out of an abundance of caution, all resolutions appearing in the minutes of the 2012 AGM meeting as adopted by the 28 August 2013 AGM are hereby ratified and adopted and all actions and decisions by the committee in consequence of any resolution of the body corporate delegating to them authority to exercise powers and duties of the body corporate, whether those powers and duties are stipulated in an enactment or regulationare hereby ratified from the date when the committee's decision or action occurred."Moved: S CharterisSeconded: G MillarCARRIED (Without Noticed Objection however Proxy for GA-GC confirmed opposition later)[101] Mr Dunning submitted that there was no scope under the UTA for a body corporate to ratify an invalid resolution. Such a process, he argued, would permit a body corporate to effectively sidestep the specific procedural requirements imposed by the UTA, rendering those requirements nugatory. He acknowledged the law of agency provided for ratification in some circumstances, but submitted that the law of agency had no relevance in the context of body corporate decision-making. Mr Powrie, in reply, submitted that every unauthorised action, whether lawful or unlawful (except an action which is in its inception void) is capable of ratification. He submitted that since, for example, the Body Corporate had always had the powerto delegate its power to the Committee pursuant to s 108 of the UTA, there was no barrier to its later ratification of that action.[102] It is important to bear in mind that while the ratification resolution passed by the Body Corporate was very wide in its terms, this case is ultimately concerned with the question of whether YGFI is required to pay the special levy. There are two resolutions which are relevant to this question. The first is the resolution of the Committee on 28 November 2012 imposing a special levy on the members of the Body Corporate. Neither party has ever disputed that the special levy resolution was passed by majority vote in the Committee in accordance with s 113 of the UTA. The second is the 2012 resolution of the Body Corporate which delegated levying powers to the Committee. As noted above, there is no evidential basis upon which a decision-maker could conclude that the delegation resolution was passed in accordance with the UTA. Accordingly, that resolution must be presumed to be invalid. It follows that, as at 28 November 2012, the Committee did not have authority to impose a special levy upon the members of the Body Corporate.[103] The UTA does not make any provision for the ratification of body corporate decisions. This can be contrasted with the Companies Act 1993, which explicitly provides for ratification in some circumstances.39 The omission of any such provision can be read in three ways. The first possibility is that, as Mr Dunning contends, Parliament intended to enforce strict compliance with the provisions of the UTA, leaving no scope for a body corporate to later correct any procedural errors in its decision-making processes. However, such an approach would appear to be inconsistent with the stated purpose of the UTA "to establish a flexible and responsive regime for the governance of unit title developments" (emphasis added),40particularly in circumstances where the majority of body corporate members are likely to be laypersons. The second possibility is that Parliament considered this issue and determined that the existing principles regarding ratification in the agency and company law contexts could equally be applied in respect of bodies corporate, without making any explicit provision for those principles in the UTA. And the third39 See Companies Act 1993, s 177.40 Unit Titles Act, s 3.possibility, which appears entirely plausible, is that Parliament simply did not turn its mind to this issue at all.[104] As noted by Mr Dunning, there are policy considerations which militate against the recognition of any ratification-type processes in relation to decisions made by bodies corporate under the UTA. The decision-making procedures which are established by the UTA exist for good reasons and bodies corporate should endeavour to comply with those procedural requirements at all times. However, mistakes are inevitable, particularly when the decisions in questions are mostly undertaken by individual owners who in many cases will have little or no experience reading and complying with statutory provisions. If the UTA "is to provide a legalframework for the ownership and management of land and associated buildings and facilities on a socially and economically sustainable basis by communities ofindividual owners",41 then there needs to be some means of rectifying those mistakes. It would be preferable for such a mechanism to be set out within the UTA itself. However, in the absence of any such provisions, I consider that the law of agency may provide a partial solution.[105] In agency law, ratification is a process whereby the unauthorised actions of an agent may be retrospectively validated by the principal.42 It has wide application:43Every unauthorised act, whether lawful or unlawful, which is capable of being done by means of an agent (except an act which is in its inception void) is capable of ratification by the person in whose name or on whose behalf it was purportedly done.[106] Where the authority to execute a particular action is required to be in a certain form, such as by deed, the ratification of the action must also take that form.44 However, ratification will not be effective where to permit it would unfairly41 Unit Titles Act, s 3.42 Peter Watts and FMB Reynolds Bowstead & Reynolds on Agency (20th ed, Sweet & Maxwell, London, 2014) at [2-047].43 At [2-052] (footnotes omitted).44 At [2-080], citing Hunter v Parker (1840) 7 M & W 322; Kidderminster Corp v Hardwicke(1873) LR 9 Ex 13; Oxford Corp v Crow [1893] 3 Ch 535; Athy Guardians v Murphy [1986] 1 IR 65.prejudice a third party.45 The principle of ratification applies in the context of corporate bodies where (for example) a transaction undertaken without authority may later be ratified by the directors of the company, provided that the directors themselves had the power to enter into the transaction.46[107] Section 108 provides that a body corporate may delegate specified duties or powers to a body corporate committee. In my view, a committee which is appointed in this manner can appropriately be described as an agent of the body corporate. The committee has express authority to act on behalf of the body corporate in respect of the matters set out in the special resolution.[108] In the present case, however, there was no valid delegation resolution. Accordingly, the Committee did not have authority to impose a special levy upon the members of the body corporate. The special levy resolution can therefore bedescribed as an "unauthorised act which is capable of being done by means of an agent".47 It is not an act "which is in its inception void" since, as I have found, itwas open to the Body Corporate under the UTA to impose a special levy of this type for this purpose. I assume for the purposes of this discussion that it can be shown that the Body Corporate itself or by its Committee did establish a contingency fund in accordance with s 118 of the Unit Titles Act. If that assumption proves false then, in my view, the action would be ultra vires and any subsequent ratification would be ineffective.[109] Of course, since s 108 provides that the delegation of powers and duties to the Committee must be by way of special resolution and written notice, then any subsequent ratification or retrospective delegation of powers to the Committee would need to comply with these requirements also. The District Court Judge does not appear to have turned his mind to this issue and it is not open to this Court in an appeal on a question of law to determine, as a matter of fact, whether the procedural requirements were complied with.45 At [2-087]. See Smith v Henniker-Major & Co [2003] EWCA Civ 935, [2003] Ch 182; The Borvigilant [2003] EWCA 935, [2003] 2 Lloyd's Rep 520.46 At [2-067], citing Reuter v Electric Telegraph Co (1856) 6 E & B 341; Wilson v West Hartlepool Ry & Harbour Co (1865) 2 De GJ & S 475; Hooper v Kerr, Stuart & Co Ltd (1901) 83 LT 729;New Falmouth Resorts Ltd v International Hotels Jamaica Ltd [2013] UKPC 11.47 See [105] above.[110] Lastly, I turn to the question of whether ratification under these circumstances would be unfairly prejudicial to a third party, namely YGFI. What does "unfairly prejudicial" mean in this context? The authors of Bowstead & Reynolds on Agency identify three scenarios which may result in unfair prejudice:48(1) where it is essential to the validity of an act that it should be done within a certain time, the act cannot be ratified after the expiration of that time, to the prejudice of any third party;(2) ratification may not be recognised if it will affect proprietary rights in either real or personal property, including intellectual property rights, which have arisen in favour of the third party or others claiming through him since the act of the unauthorised agent;(3) the ratification of a contract can only be relief on by the principal if effected within a time after the act ratified was done which is reasonable in all the circumstances.[111] None of these scenarios are particularly relevant to the situation in the present case. The question therefore is whether there is any other reason why this Court should conclude that it would be unfairly prejudicial to YGFI (and other third parties) to permit the Body Corporate to ratify the special levy resolution. I do not consider any such reason exists. If the members of the Body Corporate are willing to ratify the actions of the Committee by special resolution, then I consider they should be permitted to do so. Both parties to the appeal acknowledged that the majority of owners have already paid the special levy. There is nothing in the decisions of the Tribunal and District Court to suggest that YGFI would be particularly disadvantaged, vis-à-vis the other members of the Body Corporate, if it were also required to pay the special levy. In my view, it would be unfairly prejudicial to the interests of other owners if YGFI as an individual owner were permitted to obstruct the remediation works.[112] The District Court Judge was correct to find that the Body Corporate couldratify the Committee's resolution imposing a special levy on the members of theBody Corporate. However, he did not turn his mind to the question of whether the ratification resolution had been passed by appropriate means. It is not appropriate for this court in an appeal on a question of law to determine, as a question of fact,48 Watts and Reynolds, above n 42, at [2-087] (footnotes omitted).whether the requirements identified at [109] were complied with. It is therefore necessary to remit this matter to the Tribunal for further consideration.Jurisdiction of the Tenancy Tribunal[113] The final question of law on appeal concerns the jurisdiction of the Tribunal to hear the matter.[114] Mr Dunning submitted that Judge Harrison erred in failing to quash the order of the Tribunal for want of jurisdiction. In reply, Mr Powrie submitted that YGFI had failed to raise any objection to jurisdiction in either the Tribunal or the District Court and was accordingly barred from raising the argument on appeal.49 In anycase, Mr Powrie submitted, the proceeding in the Tribunal concerned YGFI's failureto pay the special levy. The amount sought from YGFI came well under the jurisdictional limit of $50,000.[115] I agree that it would be inappropriate for this Court to entertain a new and substantive argument in an appeal on a question of law. However, the submission which Mr Dunning puts forward does not concern the substance of the case. His submission goes to the question of whether the Tribunal, and therefore the District Court and the present Court, had jurisdiction to entertain the matter at all. If Mr Dunning is correct on this point, then the Judge's decision to entertain the appealin the District Court was itself an error of law, notwithstanding that neither of the parties drew this matter to his attention:50The second situation exists where the objection is not simply that the matter lies outside the jurisdiction of the court, as conferred by the common law or by statute, but is one in respect of which jurisdiction has been actively withdrawn from the court and conferred on another tribunal. The position in such a case is stated by Asquith L.J. in Wilkinson v Barking Corporation[1948] 1 KB 721, 724:"It is undoubtedly good law that where a statute creates a right and,in plain language, gives a specific remedy or appoints a specific tribunal for its enforcement, a party seeking to enforce the rightmust resort to that remedy or tribunal, and not to others."49 Citing Tremont Holdings Ltd v Body Corporate 401803, above n 34, at [40].50 Rothmans Ltd v Saudi Airlines [1981] QB 383 (CA) at 375–376.Where the statute is of this kind, it is immaterial whether the parties wish the court to try the action. It must disclaim jurisdiction, since to continue with the action would be contrary to law. Still less can one party by unilateral act confer on the court a jurisdiction which Parliament has said it should not have. Entry of an unconditional appearance does not preclude the defendant from raising the objection at a later stage, since it is the duty of the court not to entertain the dispute.[116] This principle was affirmed by the Court of Appeal in Morris v Templeton.51In that case, the appellant sought leave to appeal a decision of the High Court on appeal on the basis that the District Court, which originally heard the proceeding, had exercised powers falling outside its jurisdiction. The respondent opposed leave on the basis that it was too late, in a second appeal, for the appellant to raise an objection to jurisdiction. The Court of Appeal held:[15] Finally, counsel for the respondent submitted that it was "simply far too late" for the applicants to raise this jurisdiction point now. While we sympathise with the respondent, it cannot be too late to raise a point of jurisdiction in a case where the original decision is a nullity, especially where the application for leave to appeal to this Court is within time. In the circumstances of this case, where there is an application for appeal pending, it is certainly not too late to raise such a fundamental matter as the DistrictCourt's jurisdiction.[117] The same reasoning applies in the present case. Accordingly, this Court must give genuine consideration to the question of whether the Tribunal had jurisdiction tohear the Body Corporate's original claim.[118] Section 171 of the UTA relevantly provides as follows:171 Jurisdiction of Tenancy Tribunals(1) Except as provided in this section, a Tenancy Tribunal (a Tribunal) constituted under section 67 of the Residential Tenancies Act 1986 has jurisdiction to hear and determine all disputes arising between any persons of the kind listed in subsection (2) in relation to a unit title development.(1A) To avoid doubt, and without limiting subsection (1), a unit title dispute may relate to a claim for unpaid levies.(4) The Tribunal does not have jurisdiction—51 Morris v Templeton (2000) 14 PRNZ 397 (CA).(a) to make an order requiring any person or body to pay any sum, or to do any work to a value, or otherwise incur expenditure, in excess of $50,000; or(6) An order of Tribunal that exceeds any restriction specified in subsection (4) is of no effect.[119] In its Notice of Appeal, YGFI referred to the High Court decision Boutique Body Corporate Ltd v J Star Property Management Ltd.52 In that case, the appellant had made an application to the Tribunal seeking an order terminating a building management agreement between the parties. Future management fees under the contract were likely to total more than $800,000. In a broad sense, Wylie J held, theorder sought by the appellant would cause the respondent to "incur expenditure" ofmore than $50,000 because it would be required to write off the value of an asset, being the management contract, in its books. The Judge held that the order soughttherefore exceeded the Tribunal's jurisdiction.[120] YGFI argues that the present case is factually analogous to Boutique Body Corporate Ltd v J Star Property Management Ltd in that YGFI disputes the validity of the special levy as a whole, the value of which exceeded $50,000. If YGFI had succeeded in the Tribunal, Mr Dunning submitted, the result would have been a finding that the special levy was invalid, causing the Body Corporate to "incur expenditure" in excess of $50,000. That reasoning is flawed, in my view. The ordersought by the Body Corporate in the present case was an order requiring YGFI pay the special levy and certain other costs. The total relief sought was only $9,699.92. Although YGFI raised a collateral challenge to the validity of the special levy, YGFI did not seek (and was not granted) any order that the special levy was invalid. There is no basis for challenging the jurisdiction of the Tribunal to hear the claim.[121] It follows that the Judge did not err in this aspect of his decision.52 Boutique Body Corporate Ltd v J Star Property Management Ltd [2012] NZHC 3169, (2012) 14 NZCPR 242.Conclusion[122] My conclusions in relation to each of the questions of law on appeal can be briefly summarised as follows:(a) Did the Judge err in finding that the power to impose the levy had been properly delegated to the Body Corporate Committee?Yes. There was no evidence from which the Tribunal could logicallyconclude that the word "carried" in the minutes of the AGM meant "carried as a special resolution", rather than "carried as an ordinary resolution". This matter is remitted to the Tenancy Tribunal forfurther consideration.(b) Did the Judge err in applying s 85(2) of the Residential Tenancies Act 1986 (RTA)?No.(c) Did the Judge err in finding that the Committee had the power to impose the levy that it did, for the purpose that it did?Yes. The Committee was in theory entitled to establish a contingency fund for the purposes of carrying out the repairs and to impose levies for that fund. However, the Judge did not turn his mind to thequestion of whether such a fund had been "established" in accordancewith s 118. This matter is remitted to the Tenancy Tribunal for further consideration.(d) Did the Judge err in referring to the Court of Appeal decision inWheeldon v Body Corporate 34252553 in relation to s 74 of the Unit Titles Act 2010 (UTA)?No.53 Wheeldon (CA), above n 2.(e) Did the Judge err in finding that the Body Corporate was able, as a matter of law, to ratify and confirm the contested resolutions?Yes. The District Court Judge was correct to find that the BodyCorporate could ratify the Committee's resolution imposing a speciallevy on the members of the Body Corporate. However, he did not turn his mind to the question of whether the ratification resolution had been passed by appropriate means. This matter is remitted to the Tenancy Tribunal for further consideration.(f) Did the Judge err in failing to quash the order of the Tenancy Tribunal on the ground that it lacked jurisdiction to hear the matter?No.A further note[123] The subject matter of the present appeal has revealed a number of difficulties in the interpretation and application of the UTA. There are two issues in particular which deserve further attention.[124] The first concerns the source of the power to impose a special levy to fund reparation works and/or litigation proceedings. As I have noted, the use of a contingency fund for this purpose is presently the only avenue available to a body corporate that wishes to undertake projects of this nature. However, the language of s 118 is not well-suited to that task. This uncertainty could be cured by legislative amendment.[125] The second issue concerns the ratification of body corporate decisions. The law of agency permits a body corporate to ratify the actions of a body corporate committee. However, there is no principle of agency law or even common law generally that would permit a body corporate to ratify its own illegal actions. Yet the absence of any such power could foreseeably lead to significant practical difficulties, particularly in cases where, as here, several years have gone by since the allegedly unlawful action took place. It may be helpful, to courts and unit title owners alike,for Parliament to consider whether a body corporate should have means to ratify past decisions and if so, what the parameters of that power should be.Result[126] The appeal is allowed in part.[127] The proceedings are remitted to the Tenancy Tribunal for determination of the following issues, in accordance with the law as this Court has found it to be:(a) Was the Body Corporate's resolution of 28 September 2012delegating various powers and duties to the Committee passed in accordance with s 108(1) of the Unit Titles Act 2010?(b) Did the Body Corporate or the Committee establish a contingency fund in accordance with s 118?(c) Was the Body Corporate's resolution of 10 June 2014 ratifying theprevious actions of the Committee passed in accordance with the procedural requirements set out in s 108 of the Unit Titles Act 2010?Costs[128] Each of the parties has achieved a measure of success in this appeal. That being the case, it is clearly inappropriate to award the indemnity costs sought by counsel for both parties. Without wishing to indicate any predetermination of the matter, this may be a case where it would be appropriate to let costs lie where they fall.[129] Counsel should attempt to reach agreement and if possible should file a joint memorandum on costs. In the event that counsel are unable to agree, counsel for YGFI should file his memorandum within 15 working days from receipt of this judgment and counsel for the Body Corporate within a further 5 working days thereafter.[130] Memoranda should not exceed six pages in length.___________________________________Gordon J