IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE	
CIV-2018-470-107
[2019] NZHC 1311	

UNDER	The Unit Titles Act 2010	
IN THE MATTER	of an Originating Application for Orders establishing a Scheme under section 74 of the unit Titles Act 2010	
BETWEEN	BODY CORPORATE 87945
First Applicant

JOHN JOSEPH MOLLOY
DIANE ELIZABETH MOLLOY and
CUSTODIAN NOMINEE COMPANY LIMITED
Trustees of the JJ and De Molloy Family Trust Second Applicants	
AND	MARINE PARADE HOLDINGS LIMITED
First Respondent

THE OTHER RESPONDENTS LISTED IN SCHEDULE ONE TO THE ORIGINATING APPLICATION DATED 12 JULY 2018
Second and Subsequent Respondents	

Hearing:	7 December 2018 (Final submission received 24 May 2019)	
Counsel:	D Bigio QC and K Wendt for applicants
S L Cogan and J G Donkin for first respondent	
Judgment:	12 June 2019	

JUDGMENT OF KATZ J

This judgment was delivered by me on 12 June 2019 at 11:00 am pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar
Solicitors:	Pidgeon Law, Auckland
Jeff Morrison & Associates Limited
Counsel:	D Bigio QC, Shortland Chambers, Auckland K Wendt, Richmond Chambers, Auckland
S L Cogan, Quay Chambers, Auckland J G Donkin, Quay Chambers, Auckland

BODY CORPORATE 87945 v MARINE PARADE HOLDINGS LIMITED [2019] NZHC 1311 [12 June 2019]

Introduction

[1]	This is an application by Body Corporate 87945 (“the Body Corporate”) for an order settling a scheme under s 74 of the Unit Titles Act 2010 (“the Act”). The scheme relates to repairs to a unit title development located in Mt Maunganui known as “the Pavilions.” The Pavilions development contains twenty residential units and one commercial unit spread across four levels in a terrace-like or tiered construction, sometimes referred to as a “wedding cake” configuration.

[2]	The Pavilions has suffered substantial damage as a result of weathertightness issues and building and design failures. The s 74 scheme relates to extensive remedial work (including a full reclad of the building) that has been recommended to fix the various issues that have been identified. The Body Corporate proposes that the costs of the scheme be allocated to owners proportional to their respective utility interests.1 The Body Corporate believes that this is the fairest approach, because of the interrelatedness of building elements and infrastructure – a weathertightness failure of one part of the building within a unit's property may have a direct impact on another unit.

[3]	The first respondent, Marine Parade Holdings Limited (“MPHL”) owns two units in the Pavilions development. It opposes the scheme. MPHL’s opposition, however, is limited to the issue of how the costs of the remedial work should be allocated between unit owners. MPHL’s view is that apportioning costs on the basis of utility interest is unfair, because the repairs will benefit some units substantially more than others. MPHL says that the fairest way of apportioning costs is for each unitholder to pay for the remedial work undertaken on his or her unit and for only the costs of remedial work to common property to be allocated by utility interest.

1	Under the Unit Titles Act 2010 each unit is allocated an ownership interest and a utility interest. The ownership interest reflects the relative value of each unit to the other units in the development and is used to determine a range of matters including the unit owners’ beneficial share in the common property, and share in the underlying land if the unit plan is cancelled. By default, the utility interest of a unit is the same as the ownership interest (unless it is otherwise specified on the deposit of the unit plan or subsequently changed) and is used to calculate how much each owner contributes to the operational costs of the body corporate. (Refer  Unit Titles Act  2010,  ss 38-40). In this case the ownership interests and utility interests are the same.

Background

[4]	Construction of the Pavilions commenced in 1999. Grantham Developments Ltd (“Grantham”) was the developer. MPHL is associated with the developer, as David Shepherd, MPHL’s director, is also a director of Grantham.

[5]	The Pavilions is built over four levels and includes 21 principal units, comprising twenty residential units (ranging from one to three bedrooms) and one commercial unit. There are four principal units on the ground level and parking for all 21 units. The four ground level principal units have associated outdoor patio areas that do not form part of an elevated roofing system of any unit below. There are eight principal units on the second level, seven principal units on the third level and two principal (penthouse) units on the top level. All these elevated units have associated decks that form the roofs of the units below. Each unit has a different area of external wall, a different ratio of external wall to floor area, and a different area of deck.

[6]	Defects in the building were first identified in March 2003 and targeted repairs were first undertaken in 2004 and 2005. The full extent of the weathertightness issues became increasingly apparent over subsequent years.

[7]	In April 2016, Incodo Ltd was engaged to investigate the issues with the building. Incodo identified extensive weathertightness issues throughout the building, including systemic weathertightness defects in the building’s envelope and damage to exterior cladding, balcony membranes and tiling, and other building elements.

[8]	On 5 August 2016 an Extraordinary General Meeting (“EGM”) was held to discuss the Incodo report and remedial options. The owners resolved to proceed with a “liquid coating” repair option, rather than a full reclad. In the following months further investigations and other preparatory work was undertaken, involving the Body Corporate Committee, Incodo and the Home Owners and Buyers Association (“HOBANZ”). Incodo recommended a full reclad as the only realistic option.

[9]	At an AGM on 24 March 2017, HOBANZ explained to owners why comprehensive remediation was necessary and presented a Process & Timeline document which provided an overview of the remediation project process (including

a s 74 application). Following the HOBANZ presentation, owners resolved to engage a project manager (Watershed) and architects (Architectural Design Group) to prepare a scope of work and cost estimate to remediate the building.

[10]	In advance of an EGM scheduled for 4 August 2017, two documents prepared by HOBANZ were circulated to owners:

(a)	a Background Discussion Paper which explained the results of further building investigations since the 24 March 2017 AGM; and

(b)	a “Q&A” document, responding specifically to owners’ queries about the remediation project. In relation to cost apportionment, HOBANZ explained that the Body Corporate was obtaining a report from Yeomans Survey Solutions (“Yeomans”) on the unit/common property boundaries and that a meeting would be held in September for owners to discuss various matters, including cost apportionment.

[11]	At the 4 August 2017 EGM, owners discussed and voted on a concept design, chose a cladding system, and raised a design levy. A s 74 scheme was discussed, but at that stage the Body Corporate had not yet received the Yeomans report. Three weeks later a further EGM was held where owners voted again on a cladding system and on a balustrade design. An updated project estimate was provided to owners. Levying the costs on the basis of utility interest was discussed, but the minutes recorded that there would be further discussion on cost apportionment.

[12]	Following receipt of the Yeoman's Report on 14 September 2017 a draft s 74 scheme was circulated to owners for consideration. It included the proposed utility interest cost apportionment. Owners were recommended to seek independent legal advice before an EGM scheduled for 16 October 2017.

[13]	At the 16 October 2017 EGM the draft scheme was approved by the majority of the owners represented at the meeting. Owners of 18 of the 21 units were represented at the meeting. MPHL was the only owner to vote (by way of postal vote) against  the  scheme  and  proposed  utility-interest   based   cost   apportionment.  Mr Shepherd, by email, expressed his opposition to costs being allocated on a utility

interest basis. He submitted that “the proposal to levy owners on the basis of their utility interest is fundamentally wrong and inequitable”, and that “work against each unit should be levied against the unit concerned”. Mr Shepherd also provided an example, stating that “Unit 1B has minimal external wall area and no balcony and yet is being asked to pay well in excess of its actual upgrade costs”. Mr Shepherd’s reasons for opposing the scheme were recorded  in  the minutes of the subsequent   20 December 2017 EGM and in communications between HOBANZ, the Body Corporate committee and Mr Shepherd in May-June 2018.

[14]	Later, some non-material changes to the draft scheme were recommended by the Body Corporate's lawyers and approved by the Body Corporate committee in July 2018. That final scheme is the scheme the Court is being asked to settle under s 74 of the Act.

Schemes under the Unit Titles Act – the law

[15]	Unit owners are responsible for repairing and maintaining their own units and meeting the cost of doing so.2

[16]	Common property, however, is owned by the body corporate, with owners beneficially entitled as tenants in common in shares proportional to their ownership interest.3 The body corporate is accordingly obliged to repair and maintain common property. In addition, the body corporate has responsibility for the repair and maintenance of building elements and infrastructure (which can be contained in common or unit property).4

[17]	The body corporate must raise levies for repairs to building elements and common property by utility interest5 and, once the work has been completed, it can then decide whether to reapportion contributions amongst owners by recovering from certain owners greater contributions.6 However, s 138 does not set out specific guidelines as to how the costs of major repairs should be recovered.7 It is not designed

2	Unit Titles Act 2010, s 80(g).
3	Section 54.
4	Section 138.
5	Section 121.
6	Section 126 or 138. See also Body Corporate 199380 v Cook [2018] NZHC 1244 at [99].
7	LV Trust Holdings Limited v Body Corporate 114424 [2012] NZHC 3578 per Asher J, at [45].

to deal with systemic failures. That is the province of s 74 schemes, which generally relate to remediation of an entire complex that has suffered systemic or substantial damage. In such circumstances it will generally be impractical to leave the repair work to individual proprietors.

[18]	A body corporate may apply to the High Court under s 74 of the Act for an order settling a scheme in respect of any building or other improvement comprised in a unit that is damaged or destroyed, but for which the unit plan has not been cancelled.8 The scheme may include provisions for the reinstatement in whole or in part of the building or other improvement.9 The works are not limited to “essential” works. Work that will prevent or minimise damage can be included in a scheme.10

[19]	Each application to settle a scheme is determined on its own factual circumstances.11 In ordering the settlement of a scheme the Court has discretion to make any orders it considers expedient or necessary to give effect to the scheme. These include directing the payment of money by or to the Body Corporate or by or to any person and imposing any terms and conditions that it thinks fit.12

[20]	In Tisch v Body Corporate No 318596 the Court of Appeal established a three- step process for considering an application to settle a scheme of arrangement:13

Step 1: The Court must be satisfied that the building has been damaged or destroyed.

Step 2: If so satisfied, the Court must decide whether to settle a scheme. That is, the Court must decide whether a scheme is appropriate in the circumstances.

Step 3: If the Court decides a scheme is appropriate, it must then decide what the terms of the scheme should be.

8	Unit Titles Act 2010, ss 74(1) and (2).
9	Section 74(3).
10	Tisch v Body Corporate No 318596 [2011] NZCA 420, [2011] 3 NZLR 679 at [42].
11	Body Corporate 177519 v Lai [2014] NZHC 3381 at [18] and Body Corporate 194769 v Wheatley
[2016] NZHC 856 at [10].
12 Unit Titles Act 2010, s 74(7).
13 Tisch v Body Corporate No 318596, above n 10, at [35]. Although Tisch was decided under the  1972 Act, the relevant section of that Act (s 48) was essentially replicated as s 74 of the 2010 Act. The Tisch principles therefore continue to apply to applications made under s 74 of the Act.

[21]	The first step is a triggering requirement. While the Court of Appeal did not provide any guidance as to the extent of damage necessary to trigger consideration of a scheme, the Court indicated that a scheme is unlikely to be considered unless the damage is substantial.14

[22]	The second step is to determine whether a scheme is appropriate. Such consideration should not be founded in concepts of expedience and necessity.15 However, these may be relevant to the Court’s consideration of how to frame a scheme.16 A scheme is viewed as a remedy of last resort.17 As such, it may be appropriate where one unit proprietor refused to engage in consultation about remedial works and is opposed to the remedial work and/or scheme.18

[23]	The third step is to consider the terms of the scheme. The overarching consideration is that of fairness. In Tisch the Court stated that:19

[t]he aim should be to balance the interests of each unit holder in a way that imposes terms that achieve the outcome fairest to all unit holders.

[24]	The Court in Tisch identified five factors which are likely to be relevant to an assessment of appropriate terms. The Court noted:

[45]	First, a scheme with broad support is to be preferred. The greater the level of support from owners for the proposed scheme, the more likely it is that the scheme does justice between owners. This will not invariably be so, because a majority of owners may support a scheme that is unfair to the minority. …

[46]	Secondly, the scheme should be appropriately detailed. The more detailed a scheme, the less scope for later misunderstanding and argument about it.

[47]	Thirdly, providing that what has been done by the body corporate before the s 48 scheme is actually approved is in accordance with the scheme, the order has retrospective effect. …

[48]	Fourthly, work should normally be done to the same standard and at the same time. …

14	At [36].
15	At [38].
16	At [39].
17	At [37]. See also, Fraser v Body Corporate S63621 (2009) 10 NZCPR 674 (HC) at [97].
18	Body Corporate 205963 v Becker HC Auckland CIV-2009-404-006017, 21 April 2010.
19	Tisch v Body Corporate No 318596, above n 10, at [44].

[49]	Fifthly, … the terms of the s 48 scheme should depart from the scheme of the Act and from the Body Corporate Rules no more than is reasonably necessary to achieve what is fair as between unit owners in the circumstances. Thus, the Act and the Body Corporate rules remain relevant considerations. An exception to this fifth guiding principle is a scheme unanimously agreed to by all unit owners.

[25]	As the applicant, the Body Corporate carries the onus of satisfying the Court that the proposed scheme should be settled.20

Has the building been damaged? / Is a scheme appropriate?

[26]	Steps 1 and 2 are not in dispute in this case. MPHL accepts that the building has been damaged, and a scheme is appropriate.

[27]	I have carefully reviewed the comprehensive and helpful evidence filed by John Molloy, a committee member of the Body Corporate. Based on that evidence, I am satisfied that the building has been damaged, and that a s 74 scheme is appropriate. The evidence demonstrates that the building has suffered extensive damage resulting from weathertightness defects and building or design failures. There is a need for the entire complex to be remediated (including re-roofing, re-cladding, repairing balconies and replacing flashing) in order to ensure that it is weathertight. In the absence of a court approved scheme, it is likely that the condition of the Pavilions will continue to deteriorate, to the detriment of all unit owners.

What should the terms of the scheme be?

[28]	As I have previously noted, the terms of the scheme have been largely agreed. The only issue in dispute is how the costs of implementing the scheme should be apportioned between owners.

Is the utility interest approach fair as between owners?

[29]	The Body Corporate proposes that the costs of the scheme be allocated on a utility interest basis.

20	Gu & Ors v Body Corporate 211747 [2018] NZCA 396 at [58].

[30]	Mr Cogan, on behalf of MPHL, submitted that apportionment of the remediation costs on a utility interest basis does not result in an outcome that is fairest to all owners. He noted that the Court of Appeal had recently confirmed in Gu & Ors v Body Corporate, that there is no presumption that payment for body corporate work should be made on a utility interest basis.21 Rather, the onus is on the Body Corporate to satisfy the Court that the scheme should be settled and therefore that apportionment of costs by utility interest will achieve an outcome fairest to all unit holders.

[31]	The majority of external waterproofing is within unit property, not common property. Mr Cogan noted that each of the 21 units in the Pavilions is different, having a unique location within the building and each having a different orientation, layout, size and outdoor deck facility. The utility interest does not take this into account, it only reflects the overall value of the unit when compared to others in the same development. Mr Cogan submitted that the utility interest is therefore an imprecise mechanism by which to allocate the costs of the proposed remedial work, because it does not take into account the remedial work actually performed on a particular unit, and the associated variation in benefit that each unit will receive from the reinstatement process. As a result, some owners will overpay relative to the benefit to their units, because they have less decking or external cladding than other units. Other owners will underpay.

[32]	MPHL submitted that the fairest way of apportioning costs is for each unitholder to pay for the remedial work undertaken on his or her own unit and for the costs of remedial work to common property (only) to be allocated by utility interest.

[33]	Mr Shepherd has undertaken calculations, which he annexed to his affidavit, which are intended to demonstrate the unfairness of the utility interest approach, with reference to specific units. It became apparent during the course of the hearing, however, that Mr Shepherd’s calculations are deeply flawed. In particular, his calculations were undertaken in a “back of the envelope” way, in circumstances where Mr Shepherd simply did not have the necessary factual information to undertake accurate calculations. Nor does he have the relevant expertise to undertake the exercise, or the appropriate degree of independence. I therefore put Mr Shepherd’s

21	At [58].

calculations to one side. I have little difficulty accepting as a general proposition, however, that if costs were allocated on the basis proposed by MPHL some unit owners would pay more than they would on a utility interest approach, and some would pay less. It seems likely, however, that the differences would be significantly less than those suggested by Mr Shepherd.

[34]	The Body Corporate accepts that most of the proposed work is within unit property, not common property. Mr Bigio QC submitted, however, that because the Pavilions is designed in a “wedding-cake” configuration, there is a particularly close interrelationship between different parts of the building. For example, the decks of the elevated units form part of the roofs of the decks below. This interrelatedness of building elements and infrastructure is reflected in the Body Corporate's proposed utility interest-based approach to the allocation of costs to unit owners under the scheme. The Body Corporate therefore rejects the proposition that some owners will benefit from the work substantially more than others. The location and cost of the physical work to be undertaken does not directly correlate to the benefit gained. For example, if the building does not comply with fire regulations in one location, the whole building does not comply.

[35]	In my view, MPHL’s proposed approach is unduly simplistic and fails to adequately recognise the benefits that will accrue to all owners from the very comprehensive remediation project being undertaken. The benefits to individual unit owners are not limited to the specific repairs undertaken to their own unit, for example to their walls or decks. Rather, the primary purpose of the remediation project is to restore weathertightness to the entire building, to obtain code compliance, and to restore value to the building as a whole, which currently carries the stigma of weathertightness issues. Most of the increased value of specific units will be associated with the fact that the relevant unit, following completion of the remediation work, will be located in a weathertight and compliant building rather than because the unit has (for example) a new deck or balustrades.

[36]	This view is consistent with the conclusions reached in a number of previous cases which have considered similar types of buildings. For example, in Young v Body

Corporate, Harrison J made the following observations regarding a proposed s 74 scheme relating to a similarly designed building:22

All the apartments have decks, even though those on the ground level are built closer to the ground and not above units below. In a development of this configuration, a breakdown of any part of the exterior structure could affect any other part adversely. For example, a ground floor apartment such as the one owned by Mr Muckleston and Ms Farrant is particularly susceptible to damage from defects in both apartments on levels above. There is nothing inequitable in requiring them to contribute equally with the owner of the top level apartment.

[37]	Those observations are equally apt here. The owners of units in the Pavilions have a mutual interest in keeping the overall building weathertight and in good repair. Apportionment by utility interest reflects the main goal of the remedial project, which is to restore the integrity of the building and value of the apartments by bringing the whole complex up to the required building standards. The restoration of value is in respect of the building as a whole, not simply individual units.

[38]	Similarly, in Body Corporate 81340 v Knight, Thomas J rejected similar arguments to those being advanced by MPHL in this case. Her Honour observed that:23
[62]	… Thus it is clear that, while parts of the exterior wall, balconies and decks might be in private ownership, their integrity is necessary for the building’s weathertightness and, consequently, the health of occupiers.

[63]	In circumstances where the construction of a building element, such [as] a balcony or deck accessible via one unit only, has an effect on the weathertightness of other units, the fact such an element is private property is insufficient grounds on which to argue that it does not relate to more than one unit. For the same reasons as discussed above at [62], in the context of attempting to remedy weathertightness issues these building elements clearly relate to more than one unit.

[64]	It is also clear that the issues facing The Links are not isolated or recent. The issues are pervasive, pertaining to both poor detailing and/or construction of significant elements of the building and poor attempts to maintain and repair those elements. That the effects of the issues are not uniformly experienced but are concentrated in particular areas is not, in my assessment, a reason to depart from the view that the building elements concerned relate to more than one unit. Indeed, that the damage stems from pervasive problems with construction and maintenance indicates the issue is one affecting all units to a not insignificant degree.

22	Young v Body Corporate 120066 (2007) 8 NZCPR 932 at [52]. See also, Body Corporate 81340 v Knight [2018] NZHC 2953.
23	Body Corporate 81340 v Knight, above n 22.

[39]	On the issue of “fairness”, Thomas J observed that:

[78]	Fairness to all owners must necessarily be considered in the round. I am satisfied that the leak issues affecting The Links are complex and interrelated, and a leak to one area or unit has ramifications for owners of other units ...

[79]	The owners of The Links have a mutual interest in keeping the building weathertight and in good repair. Repairs to building elements in this case do not benefit one or more units substantially more than others, as discussed. The integrity and value of each apartment is closely linked to the overall performance  of  the  building.  Approaching  cost  allocation  under  s 138(4) would result in a somewhat random outcome and would be unfair.

[40]	I find her Honour’s reasoning compelling and, in my view, it applies equally to the facts of this case. I reject MPHL’s submission that the remediation project results in a significant disparity in benefits between units, such that a utility interest cost allocation approach is unfair. Comprehensive repairs are being undertaken to the whole of the building, not simply isolated or targeted repairs to one or more units. The primary purpose of the project is to restore weathertightness and therefore to restore lost value to the building as a whole, benefitting all unit owners (regardless of how much work was done to their particular unit).

[41]	I further note that, in practical terms, it would likely be difficult to accurately allocate costs to individual units within the overall project. For example, how should demolition costs be allocated, or the costs of scaffolding? Similarly, how should “indirect” construction costs such as “preliminary and general” costs be allocated? These include such things as costs incurred by the contractor to run the project, comply with health and safety requirements, provide facilities for staff and pay for the necessary insurance. The common approach appears to be for “indirect” construction costs to be allocated on a utility interest basis, for the reasons explained by the Court in Body Corporate 303953 v Wang:24
As there are significant economies of scale achieved by the owners working together to get their units repaired, I accept it is fair as between unit owners in the circumstances to share the indirect and associated costs of the repair work by utility interest in order to even out, to some degree, the amount each owner would need to contribute towards the overall project costs.

24	Body Corporate 303953 v Wang [2015] NZHC 2039 at [21].

In this case, indirect construction costs appear to comprise a majority of the total repair estimate.

[42]	For completeness, I also note that although the majority of the exterior weatherproofing fabric of the building is within unit property, there are some “ad hoc” exceptions (as set out in the Yeomans Report), namely:

(a)	for units 2A, 3A, 3C and 3D, some parts of their decks are common property;

(b)	some parts of the roof are common property; and

(c)	some parts of the vertical columns at the front of the building are common property.

[43]	It is not clear how these anomalies arose, but they do not appear to be based on differences of function or configuration of the particular units. These exceptions would result in inconsistencies and anomalies if repair costs were to be apportioned in the manner MPHL proposes. For example, an owner with an area of common property deck would pay for the cost of repairs to the part of the deck that is unit property and all owners would contribute by utility interest to the cost of repairs to the rest of the deck that is common property.

[44]	Ultimately, a scheme with broad support is to be preferred, and the greater the level of support from owners for the proposed scheme, the more likely it is that the scheme does justice between owners.25 The Body Corporate proposed the scheme to the Court with the support of 17 of the 21 unit holders (and only MPHL actively opposing the scheme). Unit owners who support the scheme include a number who will likely pay more under the scheme than if MPHL’s alternative cost allocation methodology was adopted.

[45]	The weathertightness issues affecting the Pavilions are complex and interrelated. In my view the utility interest cost allocation approach proposed by the

25	Tisch v Body Corporate No 318596, above n 10, at [45] and Body Corporate 81340 v Knight, above n 22, at [10].

Body Corporate appropriately balances the interests of all unit holders and achieves an outcome that is fair in all the circumstances.

Was the Body Corporate obliged to put forward alternative cost apportionment options for consideration?

[46]	As noted above, one of the factors supporting the conclusion that the scheme does justice between owners is that it has broad support. In this case, that broad support extends to all aspects of the scheme, including the cost allocation methodology. MPHL submitted, however, that little weight can be attributed to the broad support for the utility interest methodology, because the Body Corporate failed to present unit owners with an alternative methodology for their consideration. As a result, MPHL submitted, unit owners were presented with the utility interest approach as a fait accompli.

[47]	In my view this argument (even if accepted) would be unlikely to impact on the outcome, given my primary reasons for concluding that the utility interest cost allocation methodology is fair (as set out at [35] to [43] above). The fact that the proposed methodology has broad support provides a further degree of comfort that the proposed method is fair but would not have been determinative in its own right.

[48]	In any event, I do not accept the proposition that the Body Corporate was required to present unit owners with two (or more) alternative cost allocation methodologies for their consideration. The relevant factual background is set out at
[7] to [14] above. Overall, the Body Corporate appears to have engaged in a comprehensive and thorough investigation and consultation process. Its recommendations in relation to the draft scheme were considered and informed by expert advice. The Body Corporate was entitled to put forward the cost allocation proposal that it believed to be fair and appropriate in all the circumstances. All owners were advised to seek independent legal advice. Owners were entitled to put their own views forward (which MPHL did) and, ultimately, to reject or support the Body Corporate’s proposal. Ultimately, a very significant majority of owners chose to support the scheme, including the Body Corporate’s proposed cost allocation methodology.

Application to adduce further evidence

[49]	Finally, it is necessary to briefly address MPHL’s application (post hearing) for leave to adduce further evidence. MPHL seeks leave to adduce the minutes from the Body Corporate’s 8 March 2019 annual general meeting (“2019 AGM minutes”). In particular, MPHL submits that section 9 of those minutes is relevant. That section reads, in its entirety:

9.	MATTERS ARISING

Judy Field commented on the fact that the Section 74 had taken such a long time and was supposed to have been completed prior to the commencement of repairs.

It  was  confirmed  that  although  Hobanz  had  dropped  the  ball  after  Toni Walker’s resignation, there had been a lot more discovery required by David Bigio before proceeding to Court.

John and Diane Molloy had been very involved with the preparation of the case, spending many hours working on the Affidavit providing detailed history of the building in support of the body corporate’s position.

Appreciation to John & Diane Molloy was noted for their efforts in assisting with the preparation of the Section 74.

[50]	MPHL submitted that the 2019 AGM minutes support the proposition that there have been defects in the process by which the scheme was approved, and that the broad support for the scheme may well be at least partly due to those defects. Frankly, I find that a long bow to draw from a passing reference in the minutes to HOBANZ having “dropped the ball”. There is no reference to what HOBANZ may have dropped the ball in relation to. Given, however, that the context appears to be an explanation to unit owners regarding delays with the s 74 process, I infer that HOBANZ may have contributed to those delays, possibly due to a change in personnel.

[51]	Relevant evidence is admissible in a proceeding unless inadmissible or excluded under the Evidence Act 2006 or any other Act.26 Evidence is relevant in a proceeding if it has a tendency to prove or disprove anything that is of consequence to the determination of the proceeding.27 The 2019 AGM minutes are, at best, peripheral

26	Evidence Act 2006, s 7.
27	Section 7(3).

to the issues that I am required to determine. I am not satisfied that they have a tendency to prove or disprove anything that is of consequence to the proceeding. I accordingly decline the application to adduce the 2019 AGM minutes as further evidence.

Result

[52]	I make an order settling the scheme for reinstatement of the building comprising the unit property and common property of the body corporate development known as the Pavilions, pursuant to s 74 of the Unit Titles Act 2010, on the terms set out in the Body Corporate’s application dated 12 July 2018.

[53]	As the successful party, the Body Corporate is entitled to an award of costs. I accordingly order that MPHL meet the Body Corporate’s costs and disbursements of this proceeding, on a 2B scale basis.

Katz J