The Proprietors, Strata Plan No. 67 v HMC Holdings Ltd
| Jurisdiction | Turks and Caicos Islands |
| Judge | Adderley, JA |
| Judgment Date | 24 March 2023 |
| Neutral Citation | TC 2023 CA 7 |
| Docket Number | CIVIL APPEALS 5/2022 & No: 7/2022 CL AP 05/2022 CL AP 07/2022 |
| Court | Court of Appeal (Turks and Caicos) |
THE HON Mr Justice K. Neville Adderley, JA, President (Ag.)
THE HON Mr Justice Stanley John, JA
THE HON Mr Justice Sir Ian Winder, JA
CIVIL APPEALS 5/2022 & No: 7/2022
[FROM ACTION NO CL174/2019]
CL AP 05/2022
CL AP 07/2022
IN THE COURT OF APPEAL OF THE TURKS AND CAICOS ISLANDS
Mr Conrad Griffiths KC of Griffiths & Partners for The Appellant in CL AP 05/2022 and The Respondent in CL AP 07/2022
Mr Ariel Misick KC of Misick & Stanbrook and Deborah John-Woodruffe with him for The Appellant in CL AP 07/2022
This appeal arose out of a decision of Simons J (“the Judge”) given on 22 nd April, 2022, after a 3-day trial and a comprehensive judgment which gave relief for damages caused by the breach of duty by The Proprietors, Strata Plan No. 67 (“the Strata Corporation”) known as the Regency Grand Resort (“the Regent Grand”). The breach was in failing to repair the flat roof of one of their buildings following Hurricane Irma which resulted in damage to the interior of the Appellant's unit from water ingress over a sustained period up to and after the time of trial.
There was a separate claim by the unit owner for reimbursement for the cost of the replacement of external windows which The Strata Corporation replaced and billed to the unit owner, but the unit owner was of the view that the windows were common property, which ought to have been replaced at the expense of the Strata Corporation.
HMC Holdings Ltd. (“HMC”) is a Turks and Caicos Islands (“TCI”) company and the registered proprietor of the strata lot comprised in parcel No. 60905/206/K51 (“the Property”), located on the 6 th floor of the condominium hotel known as the Regent Grand.
The Strata Corporation located at Parcel 60905/206 is the statutory body for the Regent Grand established under section 4 of the Strata Titles Ordinance CAP 9.04 (“ STO”). The STO provides for the creation of strata lots, which are owned by individual proprietors and common property owned by the Strata Corporation on behalf of the proprietors.
The Strata Corporation is responsible for the maintenance, repair and management of common property, which includes, among other areas, the roofs of the buildings. It is governed by its by-laws which, under section 20 of the STO, bind The Strata Corporation and all proprietors of strata lots. It is, therefore, empowered by the STO and its by-laws to impose assessments on proprietors to defray the costs and expenses of discharging its duties and powers, including the repairing and maintenance duties. The legal framework under the STO is similar to what, under some other jurisdictions, are called condominiums.
The Regent Grand is a hotel/condominium resort development located in Grace Bay, Providenciales. It consists of four buildings, A, B, C and D and is constructed on Parcel 60905/206. The construction of these buildings was completed in 2007. Building A consists of 53 residential units. The Property known as Unit 603, which is the subject matter of this action, is located directly beneath Unit 702 and adjacent immediately to the WEST of Unit 602 on the sixth floor of the seven-floor Building A.
The proprietors acquired their property primarily for investment to earn rental income. Many of the proprietors in the Regent Grand rented their units as short-term holiday rentals. Some of them rented them using independent management companies and others rented without going through the agency of a management company.
By resolution duly passed on 6 June 2021 at the Annual General Meeting of The Strata Corporation the by-laws were amended to empower The Strata Corporation to appoint a Designated Rental Manager (“ DRM”) with power to undertake a wide variety of services with the exclusive right to provide management of residential strata lots for short term holiday rental use.
The operation of any rental, trade or business at the Regent Grand in relation to any short-term holiday rentals, other than through the DRM upon the terms and conditions prescribed by Executive Committee, was prohibited. “Short-term holiday rental” was defined to mean any rental on which tax is imposed under the Hotel, Restaurant and Tourism (Taxation) Ordinance 2019 and any Ordinance amending or replacing that Ordinance.
On 22 April 2018 at the Strata Corporation's AGM, White Sands on Grace Bay Ltd. was appointed the DRM. On 27 th July, 2018, the Executive Council of the Strata Corporation promulgated the Direct Renting Practices Rules, which imposed penalties on owners who rented their units outside the DRM. In the case of units of 5 bedrooms or more, which applies to the instant case, the penalty was US$550.00 per day for each day so rented.
By the proceedings below commencing on 4 th December, 2019, HMC asserted two causes of action:
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(1) breach of statutory duty by the Strata Corporation, in neglecting to repair the flat roof of Building A, which resulted in damage to the interior of the Property from water ingress over a sustained period from 2017, following Hurricane Irma.
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(2) restitution by way of reimbursement for the cost of replacing window damaged by the hurricane, which the Plaintiff claims was common property and so ought to have been replaced by The Strata Corporation at its own expense.
The Strata Corporation initially denied breach of duty but later admitted liability, and at trial contested only the heads and quantum of damages. On the second claim, The Strata Corporation denied that the windows were common property and asserted that HMC was estopped from denying that they were not part of the Property.
The Strata Corporation counterclaimed for rectification of the strata plan if it was found that the windows were common property.
There are two appeals before the court. The first appeal is Civil Appeal 5/2022 by the Strata Corporation, the Defendant in the Original Action and Plaintiff by Counterclaim. In this appeal, The Strata Corporation appeals against the decisions of the judge whereby he:
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(a) ordered an assessment of damages instead of fixing the amount in damages to be awarded to HMC, the Respondent and the Plaintiff in the Original Action. The Strata Corporation claims that the maximum amount to which HMC was entitled was US$50,000.00 which, according to its by-laws, was the maximum amount The Strata Corporation could pay a unit owner without a resolution of their Executive Committee.
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(b) awarded damages for loss of amenity to be assessed.
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(c) awarded pre-judgment interest.
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(d) awarded costs to HMC, except for those heads of loss relating to loss of rental income, the claim for injunctive relief and the claim for restitution of replacement costs of external windows.
The second appeal is Civil Appeal 7/2022 by HMC against the decisions of the Judge refusing:
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(a) to award damages for loss of rental income because such claim ran afoul of the illegality principle.
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(b) to order the reimbursement costs of windows (US$46,131.75), which were paid by The Strata Corporation but billed to HMC, which HMC claimed to be common property and the responsibility of The Strata Corporation.
The judge helpfully summarized the evidence and I repeat his narrative here: Mrs. Monique King and her husband Robert King are the beneficial owners of HMC; and Mrs. King gave evidence on its behalf. In her witness statement she gave details of the time (over a year) and money (over $1 million) spent on home improvement works at the Property which were completed in early 2013. The Property was then placed on the short-term rental market, which was the primary purpose of its purchase.
She related that over the years HMC developed a loyal customer base of returnee visitors and between 2014 to 2021 produced net annual averaged rent of $147,307.00 net of taxes, fees, penalties (after their implementation in July 2018), and other levies annually. Income was zero in 2020.
The damages that HMC claims arose from the Corporation's failure to repair the roof, and while those repairs were being carried out, it was unable to rent the Property and receive any rental income. Also due to the considerable damage caused by water ingression the consequent cost of repairs was high.
Unit 702 also sits directly above the Property. Kim Seabrook (along with her husband) is the beneficial owner of Regent Penthouse Ltd. which is the registered proprietor of Unit 702. Mrs. Seabrook is also a member of the Executive Committee of the Corporation and gave evidence on its behalf. She said that at least some of the water ingress into the Property came from a defective planter on the outside rear terrace of their unit.
The Judge noted that the water from the roof was continuing during his site visit on the first day of the trial.
The Judge accepted the evidence of Mrs. Seabrook regarding water ingress via the planter.
The Judge found that there could be only two possible sources of water ingress into the Property, namely the flat roof that partially covers the Property, and/or Unit 702 which is on the seventh floor, directly above it. This was challenged by the Respondent. He showed the Court pictures which he claimed evidenced water damage on the opposite side of the room in a dining room area.
The Judge reasoned that based upon the evidence of Mrs. King, on the experts' comments regarding the unpredictability of water flow within concealed spaces, on the drawings that were produced at the trial, and from the...
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