Reasons
- The Tribunal must consider applications filed by both the Body Corporate and Unit Owner. The dispute centres around the question of whether the Body Corporate was correct in passing on to the Unit Owner additional insurance costs, incurred on the basis that the units in question were being operated for social housing.
- The Body Corporate seeks orders for the payment of the additional insurance cost. The Unit Owner opposes that application and seeks various declarations around liability for the additional insurance charges.
BACKGROUND
- This dispute relates to a sizeable, multilevel unit titled complex in Taranaki Street, Wellington, known as ‘Peak Apartments’. The significant majority of the units are residential apartments, with a small number of commercial units.
- The applicant / respondent unit owner is Teem Investments Limited (the Unit Owner). The Unit Owner owns units 6F and 10D. There is no dispute between the parties that both units are simply apartment units, like most of the other units in the complex.
- The Unit Owner leased the units to a social housing provider. The social housing provider uses those apartments for housing people in need of housing, although there is no evidence before me as to the specific arrangements that apply between the social housing provider, and its occupants/tenants. But I accept that the social housing provider would be a sub-landlord and their social housing tenants the sub-tenants.
- The Unit Titles Act 2010 (UTA) required the Body Corporate to insure the building.
- The Body Corporate’s insurance broker or insurer, formed the view that given units 6F and 10D were being used for social housing, that they were no longer covered by the Natural Hazards Insurance Act 2023 (NHI Act), or the preceding Earthquake Compensation Act 1993 (EQC Act). I note an email from Aaron Sloss a Senior Risk Advisor for Affiliated, the insurance broker, explains that given the units could be used to house people for less than 28 days at a time, the units no longer met the definition of being a ‘dwelling’ under the NHI Act and therefore: - The fact that a tenant can stay in the unit for more than 28 days does not provide the level of detail to determine if the above clause is contravened. - As such we must then advise the Body Corporate committee that NHI cover is not available for these units and for the committee to act prudently ensuring that adequate cover for earthquake losses is taken with the private insurer. - This causes the cost increase as previously noted given the difference in premium rates for NHI cover against the private insurance market.
- I note at this time for context, that the Natural Hazards Commission (NHC), formally the Earthquake Commission, provides what is commonly known as ‘first-loss’ or ‘first-line’ insurance cover if the property is damaged by certain Natural Hazards. First-line cover means that the NHC will respond before the general insurers. Therefore, the NHC pays the initial portion of the loss up to a statutory maximum. In the event that the loss from a natural hazard is over the maximum the NHC can cover, then the remaining loss is paid by the general insurer.
- Returning to this case, in short, it was determined that units 6F and 10D would no longer be classed as dwellings (under the NHI Act anyway), and therefore, Natural Hazards cover would no longer be available as first-line cover, meaning that the general insurance premium needed to increase to cover a potential shortfall in cover.
- The general insurers (there are two) then charged a premium for these two units to cover any shortfall from the NHC cover.
- The Body Corporate’s manager invoiced the Unit Owner for the additional premium, which I will refer to in this decision as the ‘social housing premium’. Two invoices were raised for each unit, both dated 8 October 2024 and 17 June 2025. The social housing premium charged for each unit was a total of $11,004.47.
- The Unit Owner denied it was liable for the social housing premium and declined to pay it.
- An application was filed with the Tribunal by Counsel for the Body Corporate, seeking an order for the payment of the social housing premium, claiming a breach on the part of the Unit Owners of the following sections of the UTA. a. Section 80(1)(b), from failing to do all things necessary to give effect to decisions of the Body Corporate. b. Section 80(1)(j), by failing to comply with the Body Corporate operational rules; and c. Section 80(1)(k), by using the units in a manner that has breached or undermined the policy of insurance held by the Body Corporate.
- More recently, the Unit Owner has filed its own application via its legal representative, seeking declarations, and confirming its opposition to the Body Corporate’s claim.
- A hearing was convened in Wellington on 25 February 2025. Mr Baker attended for the Body Corporate, and Mr Henwood for the Unit Owner. I thank the parties for their patience in awaiting this order to be issued. MR WHITEHOUSE’S EVIDENCE
- Mr Whitehouse is the Body Corporate manager, and he had provided a written brief of evidence in advance. That was taken as read, but at the hearing Mr Henwood requested that he be able to put further questions to Mr Whitehouse, which then followed.
- Mr Whitehouse confirmed that he can recall sending out a notice to the unit owners, where he advised that the operation of social housing would be a commercial enterprise. Mr Whitehouse advised that it was the insurance broker who confirmed there would be additional levies.
- In short, Mr Whitehouse’s evidence was simply that it was the insurer or broker who raised the social housing premium, and the Body Corporate simply passed that on to the Unit Owner.
- Mr Whitehouse also confirmed that the two apartments in this case are residential apartment units, consistent with the other apartments in the complex.
BODY CORPORATES CASE
- Mr Baker appeared for the Body Corporate
- Mr Baker submitted that the question to be determined is whether section 127 would allow the Body Corporate to recover the social housing premium, given the operation of those two units.
- Reference is made to the statement from the Broker, which advised that given the units are used commercially, NHC cover no longer applied, and therefore the insurance cover shortfall fell to the general insurer, and the additional cost of that, therefore, falls to the individual unit owner.
- Mr Baker referred to the NHI Act, submitting why cover was no longer available.
- Mr Baker submitted that the issue was whether the insurer had charged a premium for these specific units, and if it has, then the costs can be recovered under section 127. That provision does not limit recovery to wrongdoing by the unit owner.
- In response to Mr Henwood’s submissions, Mr Baker submitted a. It is not relevant whether there is an argument that this is a dwelling or commercial property because the insurer has made that assessment. b. The funds paid by the Body Corporate to satisfy the invoice, including the payment for the social housing premium, were raised on a utility interest basis, and it is those funds which are now claimed under section 127. c. The decision of Godoy is relevant because it provided guidance around the ‘act’ of bringing proceedings. d. The Body Corporate is not arguing that there is a breach of the body corporate operational rules; the argument is that it has incurred a cost consequent to the operation of this unit, so that needs to be recovered.
UNIT OWNERS CASE
- I raised with Mr Henwood early, that I could not see that I would have jurisdiction to consider the question of whether the insurer should have charged a premium, the fact is that a premium has been charged, and therefore the only question I could consider is whether the Body Corporate was able to pass the social housing premium onto the Unit Owners. 1
- It was submitted that there was no resolution of the Body Corporate to pass the premium onto the Unit Owners.
- Nevertheless, the insurance can only be levied on the basis of a utility interest. The Body Corporate is attempting to circumvent section 121, which confirms how the Body Corporate must treat insurance.
- Mr Henwood referred to the Hart case, around the extent of what would need to be established to raise the additional charges under section 127.
- Mr Henwood submits that there is nothing in law that would prohibit these premises from being used for social housing; further, it is not breaching any requirement in the body corporate operational rules to rent the apartment that way.
ANALYSIS
- Again, the question is whether the Body Corporate could pass on the social housing premium to the Unit Owner.
Should the insurer have treated the units as commercial units?
- The parties have different views on whether these two units would fall within the NHI Act when operated as social housing. 1 I note that neither the insurance broker nor insurer were respondents in this case. The Tribunal has jurisdiction to consider claims against service contractors. A service contractor is a contractor engaged to provide services to the body corporate for at least one year.
- There has been no application to have either the broker or insurers included as parties as service contractors, and I have not heard from them.
- What remains is that as a matter of fact, the social housing premium has been charged by the insurers; I cannot go behind that, so the issue then falls to whether that can be passed to the Unit Owners. Body Corporate’s obligation to insure the building?
- The UTA requires that a body corporate must insure the building. That is confirmed in section 84 which relates to the powers and duties of a body corporate, which then refers to section 135, which is as follows:
- Body corporate to insure all buildings, etc (1) The body corporate must insure and keep insured all buildings and other improvements on the base land to their full insurable value. (2) The body corporate must take out any other insurance it is required by law to take out and may take out additional insurance if it considers it practical to do so.
- In order to meet that obligation, a body corporate must then raise funds from the unit owners to pay the insurance premiums.
- Insurance premiums would normally be paid from the body corporate’s operating account. Section 121 defines how funds are obtained for the operating account, and that is via levies charged proportionally to the unit owners’ utility interest. Taking that approach would see all unit owners contributing to the levies to fund the operating account and therefore the insurance premium based simply on a division using their respective utility interest. Therefore if the insurer charged more for units providing social housing, then all unit owners would contribute to that increased premium proportionately. Mr Baker confirmed that this is what has occurred to pay the insurance premium, including the social housing premium.
Can the social housing premium be recovered from this unit owner?
- The UTA does allow for recovery from particular unit owners, for amounts it has paid, in certain circumstances. In this case, it is the Body Corporate’s position that it correctly recovered the social housing premium from Teem Investments Limited, because the Body Corporate say that if it were not for how those units were operating, it would not have incurred those costs.
- The Body Corporate relies on section 127 of the UTA:
- Recovery of money expended where person at fault (1). This section applies if the body corporate does any repair, work, or act that it is required or authorised to do, by or under this Act, or by or under any other Act, and the repair, work, or act was rendered necessary by reason of any wilful or negligent act or omission on the part of, or any breach of the Act, the body corporate operational rules, or any regulations by, any unit owner or his or her tenant, lessee, licensee, or invitee. (2). Any expense incurred by the body corporate in doing the repair, work, or act, together with any reasonable costs incurred in collecting the expense, is recoverable 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 became payable or by the person who is the unit owner at the time proceedings are instituted.
- In order to recover any money expected by a body corporate under section 127, if put into the context of this case, there are two steps required: a. The Body Corporate must undertake some repair, work or act; and b. That act must be necessary because of a “wilful or negligent act or omission on the part of” the unit owner, or “any breach of the UTA, operational rules or regulations”. Undertaking some repair, work or act
- The first consideration looks to some action undertaken by the body corporate that is the subject of the cost that is then sought to be recovered from one or particular unit owners. In this case, the work or act was the paying of the social housing premium.
- Mr Henwood referred me to the High Court decision of Hart v Body Corporate 180455 CIV-2005-404-1429. While that was a case determined under the Unit Titles Act 1972, the Courts reasoning is applicable to the 2010 Act. The Court discussed section 34 of the 1972 Act, which is a similar provision to section 127 in the 2010 Act. The Court noted: A body corporate undertakes all kinds of tasks, which must be regarded as work, but do not involve any physical activity in relation to the premises. For example, a body corporate has the responsibility for insuring the property....
- I accept that the payment of the social housing premium would be work or an act that the Body Corporate was required by the UTA to undertake. This first step of the test is met
Was the work or act rendered necessary by the unit owner?
- The second step is to determine whether act or work (paying the social housing premium) was rendered necessary by reason of “any wilful or negligent act or omission” of the unit owner, or from a breach of any obligation the unit owner had.
- I will start by considering whether there has been a breach of some obligation on the part of the Unit Owner. The Body Corporate specifically refers to section 80(1)(b), 80(1)(j) and 80(1)(k).
- Section 80(1)(b) relates to a failure to do all things necessary to give effect to a body corporate decision. I cannot see any valid basis to find such a breach. The Body Corporate has no basis to simply say that the Unit Owners should pay the social housing premium, and then for the Unit Owners to have a liability arise for that. Mr Henwood is correct that if the Body Corporate seeks to recover the additional costs under section 127, it must traverse the statutory processes to do that, which would first require a resolution to be passed requiring recovery. Even then, the resolution must be a resolution the body corporate could lawfully pass, and as I will discuss below, I do not consider it would have been.
- Section 880(1)(j) requires a unit owner to comply with the Body Corporate operational rules, but I have not been pointed to any rule that has been offended, which resulted in the additional insurance charge being incurred.
- Section 80(1)(k) prohibits a unit owner from doing anything that may breach or undermine an insurance policy. That does not apply. The unit owner has not breached the policy or undermined it. This is simply a dispute over a premium raised. Once the Body Corporate paid the full premium (including the social housing component), it was fully covered.
- Returning to section 127, I do not consider it could be said that the Unit Owner acted negligently in renting the apartment for social housing, that is an entirely lawful activity.
- I also cannot see any argument that the Unit Owner has caused an omission that would not be relevant here.
- The question then becomes whether simply renting for social housing purposes would fall within the ‘wilful’ category, which was the trigger for the social housing premium. Of course the Unit Owners made a deliberate decision to rent the premises to a social housing provider, and presumably the social housing provider has made a deliberate decision to rent the premises for social housing (again, recognising no evidence from the social housing provider is before me confirming that, but for the purpose of this decision I will accept that is the case). The question then is whether simply taking those deliberate decisions falls within the category of wilfulness as contemplated in section 127, or does there need to be some ‘fault’.
- The High Court has considered how ‘wilful’ is to be interpreted in Hart, where that question was extensively considered by Courtney J. That was an appeal under the Unit Titles Act 1972, however section 34 of that Act is materially similar to section 127 under the current Act, as section 34 looks also to “Recovery of money expended were person at fault”, an identical heading. Both provisions consider the situation where the work or act “was rendered necessary by reason of any wilful or negligent act or omission...” by an owner or occupier. The decision records. Was the Defence of the Proceedings Rendered Necessary by a Wilful
Act?
[19] This leaves the question whether the defence of the legal proceedings was rendered necessary by the wilful act of Ms Hart. This depends on whether “wilful” means simply any deliberate act or whether it carries a connotation of fault. Mr Allan submits that in this context, the word simply means any deliberate act. He says that the purpose of s 34 is to ensure that unit holders meet costs connected with their units rather than unfairly burdening other unit holders. Therefore, the phrase “wilful or negligent” must have been intended to capture as wide a range of activity as possible and it would be inapt to construe it so as to import an overtone of fault. [20] Mr Darby says that s 34 should be construed in light of its heading “Recovery of money expended where person at fault” and that “wilful” means conduct that is wrongful in some way. He says that Ms Hart has done nothing wrong, as she was entitled to exercise her right to seek relief under s 43. [21] I accept that I am able to take the heading of s 34 into account by virtue of s 5 Interpretation Act 1999, though it would not override a plain meaning appearing from the section itself read in its proper context. [22] The Oxford English Dictionary gives several meanings for “wilful”. The most apt for present purposes is the following: 5 Done on purpose or wittingly; purposed, deliberate, intentional; not accidental or casual. Chiefly, now always, in bad sense, of an action either evil in itself or blameworthy in the particular case; often, with colour of sense (1) implying “perverse, obstinate”. Also transf of the agent, as wilful murderer, one who commits wilful murder [23] The cases in which “wilful” and “wilful act” have been considered vary as to whether they carry a negative connotation. Overall however, I think that the position is fairly represented by the statement in Wheeler v New Merton Board Mills [1933] 2 KB 669. The case involved a claim under the Workman’s Compensation Act 1925 and the meaning of “wilful act”. In considering whether the provision of a dangerous machine for use by employees was a wilful act Talbot J said:
“Wilful act” is plain English, and I can entertain no doubt that the installing of this machine without guard or fence for use in a factory was a wilful act by someone. It was an act, and it was intentional. It is true that though “wilful” and “intentional” are synonymous... “wilful” is more commonly used in modern speech of bad conduct or actions than of good, though it does not necessarily connote blame...(emphasis added) [24] I think that in current use “wilful” does carry a connotation of bad rather than good conduct. Interpreting “wilful” in this way would be consistent with the section and with other parts of the Act. While the heading is not decisive by any means, it is a helpful indicator and does not contradict anything in the wording of the section itself. Secondly, if Parliament had intended to capture all conduct, whether wrongful or innocent, it could simply have omitted the words “wilful or negligent” leaving only “act or omission”. The decision to qualify “act or omission” is consistent with the heading and indicates an intention to capture particular types of conduct rather than all conduct. [25] Finally, the likely intention is illuminated by s 33, which opens with identical words and specifically provides for the unequal imposition of expenditure where one unit benefits more than the others. This is the very objective that Mr Allan asserts s 34 is intended to achieve. Had Parliament intended to treat both innocent and wrongful conduct in the same way then s 33 alone would have been adequate. There is no apparent reason to add s 34 unless it was intended to make different provision for proprietors who acted wrongfully vis-à-vis their fellow unit holders. [26] I further consider that in order to constitute a wilful act the deliberateness of the act must be directed towards the harm complained of (Daniel v Accident Insurance Mutual Holdings (1996) 9 ANZ Insurance Cases 61-297 at 76,338). In this case, it would mean that Ms Hart must have intended that the Body Corporate would be put to cost through her application. I do not consider the fact that cost to the Body Corporate was an inevitable consequence of her bringing the application was sufficient to render it wilful for the purposes of s 34.
- The approach in Hart was endorsed in the later High Court decision of Aquila 2 , where Gordon J confirmed: The provision [section 127] gives no guidance as to which act should be preferred but a causative link to the damage, harm or loss caused would be the most relevant consideration. As Courtney J held in Hart v Body Corporate No 180455, “... in order to constitute a wilful act the deliberateness of the act must be directed towards the harm complained of”. A high degree of proximity between the two is required because the Body Corporate’s act must be rendered necessary by the act of another. This can be illustrated by way of 2 Body Corporate 170989 (In Administration) v Aquila Holdings Limited [2020] NZHC 758. physical damage to the property. For example, if a visitor to a unit, who is an invitee of a unit owner, damages an access door, the damage caused is a direct consequence of the action of the visitor.
- Like in Hart, the Court looked to the Interpretation Act 1999, to the section title to assist in the interpretation of section 127. That same approach is taken in the Legislation Act 2019, were section 10 confirms that headings form an indicator for the interpretation of the meaning of legislation.
- Ultimately, the Court in Aquila confirmed that to fall within the definition of wilful for the purpose of the Unit Titles Act, there needed to be bad or wrongful conduct, and that the conduct be directed toward the harm complained of.
- That is plainly not the case here with Teem Investments Limited. The Unit Owner, and its tenant, the social housing provider, were acting lawfully, and I am certain that neither the Unit Owner nor the social housing provider, would have acted in such a way, intending the Body Corporate would incur additional insurance costs – the harm complained of.
- For completeness, I cannot see any grounds to argue that the Unit Owner acted negligently. The Unit Owner has rented its unit for residential purposes to a social housing provider; there is nothing exceptional in that.
- I find, therefore, that the Unit Owner has not acted in any wilful or negligent way, as those terms are contemplated in section 127. The end result must mean that the Body Corporate was not able to apply section 127 to recover the social housing premium.
- What remains is that the UTA requires that the Body Corporate insure the premises, which is a benefit to all unit owners equally. The funding of the insurance premiums must be by way of contributions levied on the owners based on their utility interest in the usual way.
CONCLUSION
- The application of the Body Corporate for payment of the social housing premium is dismissed.
- The Unit Owner seeks a range of declarations, I find as follows. a. A declaration that use of the units for the purposes of social housing is permitted under the District Plan and is not a breach of the Act; i. Given the outcome above, it is not necessary to address this matter. However I note that the Body Corporate has not suggested that using the premises for social housing offends any legal restriction. b. That insurance is correctly levied in accordance with section 121(2) of the Act; i. The Tribunal declares that the levies raised to fund payment of the insurance premiums (including the social housing premium), are to be funded from the operating account, proportional to the unit owners’ utility interest. c. That any rules of directions of the Applicant which restrict utilising the units for social housing or which levy operating expenses outside of the provisions of the Act are ultra vires; i. I have not seen evidence that the Body Corporate has acted to prohibit the unit being rented for social housing purposes, so I cannot see any basis to make such a declaration, that matter is not disputed. ii. However, the Tribunal declares that any action to recover levies that fall outside the provisions in the UTA would be ultra vires.
COSTS
- The successful party in this case is the Unit Owner. Normally, costs follow the event, meaning that the Unit Owner would be entitled to a costs order. Costs are claimed.
- If the parties are unable to agree on costs, submissions are to be filed with the Tribunal, and I will consider the costs application on the papers. If submissions are necessary, I direct that a submission be filed by the Unit Owner, with reply submissions from the Body Corporate within 10 working days of the Unit Owner’s submissions being filed.
