Body Corporate 39826 - [2022] NZHC 2518

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CIV-2022-441-23

[2022] NZHC 2518

IN THE MATTER of the Unit Titles Act 2010

AND

IN THE MATTER

of an application by Body Corporate 39826

Hearing: 8 September 2022

Appearances:

L J Blomfield for the Applicant

B Thorpe on behalf of the Ray Thorpe Trust

Judgment:

3 October 2022

JUDGMENT OF COOKE J

(Cancelling body corporate)

[1] By application dated 13 April 2022 the applicant, Body Corporate 39826, seeks orders for the cancellation of Unit Plan 39826 (the Unit Plan) under s 187 of the Unit Titles Act 2010 (the Act). The application is opposed by the Ray Thorpe Trust.

[2] The application is supported by affidavits from Errol Clark, the sole director of Murcia Holdings Ltd (MHL) which owns a majority of the shares of the Body Corporate, Ian Silver, the chairperson of the Body Corporate, and Shelly Mitchell- Jenkins, an accountant who provides evidence of the voting at the relevant extraordinary general meeting. Several affidavits of service have also been provided, and there are affidavits from Messrs Clark and Silver in reply to an affidavit filed by Mr Blair Thorpe opposing the application. An affidavit in reply is also provided from Gordon McGregor, a local real estate agent.

RE BODY CORPORATE 39826 [2022] NZHC 2518 [3 October 2022]

Background

[3] Body Corporate 39826 (the Body Corporate) is the body corporate for a series of units located at 31-33 Rutherfurd Lane, Nukahau, Taupō known as “The Retreat”. The Retreat is comprised of 8 Units (Units A–H), and an additional unit, Unit J. Unit J is a homestead owned by MHL.

[4] The Retreat is owned through a body corporate operated on a timeshare basis. Each of Units A–H are broken into 51 weekly timeshare entitlements. Owners purchased these weekly entitlements. This means for Units A–H there were 408 timeshare weeks available for ownership. MHL’s interests own 225 of these weeks. MHL also owns Unit J, which is not part of the timeshare arrangement but is a unit title in the Body Corporate. Unit J carries one vote where body corporate voting is required.

[5] MHL was established to acquire 182 timeshare weeks in The Retreat in addition to Unit J when the original developer was placed into liquidation. Since then, MHL’s primary objective has been to protect the quality, character and direction of The Retreat. Its intention was to reduce its financial exposure through the sale of certain timeshare weeks. But MHL now effectively owns 225 timeshare weeks in The Retreat and it meets over half of the associated costs through levies paid.

[6] In April 2021 an Annual General Meeting (AGM) was held. A proposal to sell the entire property was considered at this stage, and later investigated. Following the AGM, the Clark Family, which has been financially sustaining MHL, said it could no longer support MHL’s funding of the majority of timeshare weeks in The Retreat. Mr Clark explains it is…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Body Corporate 39826

Details

AGLC: Body Corporate 39826 [2022] NZHC 2518
Case: [2022] NZHC 2518
Decision Date: 3 October 2022

CaseChat Overview and Summary

The High Court of New Zealand was asked to decide on an application by Body Corporate 39826 to cancel a Unit Plan under the Unit Titles Act 2010. The Body Corporate, which manages a timeshare property known as "The Retreat," sought to cancel the Unit Plan and sell the property, distributing the proceeds to the owners based on their ownership interests. This application was opposed by the Ray Thorpe Trust, a family trust that owned two timeshare weeks in the scheme.

The legal issues the court needed to decide included whether the Body Corporate had followed the correct process to pass a special resolution for the cancellation, whether the process was fair and equitable, and how the sale proceeds should be distributed among the timeshare owners. The court considered the rights and interests of creditors, the Body Corporate, and all persons with an interest in the units or base land. It also examined whether the distribution of sale proceeds was fair and equitable, and whether the sale process was appropriate.

The court found that the Body Corporate had followed the correct process for passing a special resolution, with over 75% of eligible voters supporting the resolution. The court noted that while the Ray Thorpe Trust raised concerns about equity and the process, these concerns did not undermine the validity of the special resolution. The court also determined that the sale of the property as a freehold title and the distribution of proceeds based on a valuation report was a fair and rational approach, given the complexities of valuing individual timeshare weeks. The court further ruled that the costs of sale should be allocated according to the relative values of the units and that the refurbishment fund should only be distributed among the timeshare owners of Units A-H.

The final orders granted the application for cancellation of the Unit Plan and directed the sale of the property, with the proceeds distributed among the timeshare owners based on their ownership interests. The court also ordered that a copy of the judgment be provided to all timeshare owners and that each owner have leave to apply to the court if any significant inequities were discovered. The court left open the possibility of allowing the Clark or Silver families to purchase the property if their offer was the best one available.

Orders