By Tim Bates
In this month’s article I’ll review the High Court decision of Body Corporate 199380 v A Cook & Others, which dealt with the interpretation of two potentially conflicting sections of the Unit Titles Act 2010, and the reconciliation of that conflict.
This claim involved the Sebel Suites building located at the Viaduct Harbour on the Auckland waterfront.
It was an appeal brought by the relevant Body Corporate from a District Court decision which, in turn, was an appeal of the original Tenancy Tribunal decision.
Both lower court decisions found that the proper method of apportioning the cost of repairs was to do it based upon the utility interest of those units receiving a benefit from the repairs, in accordance with section 126 of the Unit Titles Act 2010.
The respondents were the owners of large outside decks which form a continuous whole that is divided into four separate parts. Beneath this large deck is Unit S, from which a restaurant operates.
The position advocated for the Body Corporate was that the deck is a “building element” which serves more than one unit and, pursuant to section 138(1), the Body Corporate had an obligation to repair the deck.
The repair involved repairs to the deck tiling and the membrane underneath the deck, as otherwise there remained a risk that water would enter into the ceiling cavity of Unit S.
On March 30, 2015, the Body Corporate resolved at its annual general meeting to undertake those repairs, which were completed at a total cost of $104,150.90.
Based upon advice the Body Corporate received from its solicitors, the owners which retained the decks were required to meet those costs in equal proportions. Two of the four unit owners met those costs. The two other unit owners disputed those repair levies.
Sections 126 and 138 of the Unit Titles Act 2010
The key issue for determination in the High Court was to reconcile the fact that both sections seemed to apply to the recovery of the cost of repairs of the decks but, depending upon which section was applied, the cost of repairs were to be apportioned differently.
As set out above, section 138(4) if applied, required the costs to be met by the owner of the principal units where the building element was located.
So, the owners of the four decks were required to equally contribute to the cost of repair. However, section 126 enabled the Body Corporate to levy those unit owners that substantially benefited from the repair based upon utility interest.
In this way, the owner of Unit S who had its ceiling remedied against leaks, was also required to contribute to the cost of repairs.
The appeal to the High Court
On appeal, the Body Corporate contended that it had open to it the option of recovering the cost of repairs pursuant to either section 126 or section 138(4) of the Unit Titles Act 2010.
On this interpretation, the Body Corporate was free to recover the cost of deck repairs only from the owners of the four decks.
Whilst the High Court agreed with the Body Corporate’s primary contention that section 138(4) applied even where there are unit owners other than the principal unit owners (where repairs are completed) that benefit from repairs, it did not agree with the submission that the Body Corporate was free to choose what section to collect under.
Judge Van Bohemen concluded that both sections could apply at the same time. He provided the following key principles to reconcile the two different sections:
• The starting position is that the cost of repair is to be met by the principal unit owner where the repair is carried out.
• A one size fits all approach is not appropriate, and that the nature of the particular building or complex had to be taken into account.
• The weathertightness of a building is interlinked and indivisible. All owners had a mutual interest in keeping the building weathertight and in good repair.
• A departure from allocation of costs of repair to unit property based on title is appropriate where reasonably necessary to achieve what is fair as between unit owners in the circumstances.
• Where the repairs result in a substantial benefit to other units in the terms of section 126, recovery under that section is likely to be appropriate.
• Where the repairs benefit the building generally but do not benefit one or more units substantially more than they benefit other units, recovery from all unit owners on the basis of utility interest may be appropriate.
Ultimately, the Body Corporate was unsuccessful on appeal, and recovery of the cost of repairs pursuant to section 126 was upheld by the High Court.
Note: This article is not intended to be legal advice (nor a substitute for legal advice). No responsibility or liability is accepted by Legal Vision or Building Today to anyone who relies on the information contained in this article.
Author’s further note: As I predicted in Building Today July, the French prevailed in winning the 2018 FIFA World Cup, defeating Croatia 4-2 in the final in Moscow recently.