Receivership: Low v. Body Corporate 384911

Receivership of Lighter Quay, the company leasing Auckland waterfront property to Westin Hotel, resulted in an arm wrestle for control of income received by Lighter Quay from operation of the hotel. Investors who funded construction of the hotel are trying to put a court-appointed administrator in charge.

Appointment of an administrator was put on hold pending a meeting of investors.

Westin Hotel’s rights to operate its hotel sits at the end of a complicated chain: freehold title to the land is held by a company called Viaduct Harbour; a lease over the land is held by Melview Viaduct Harbour; this leasehold interest is subdivided into residential units which have been sold to investors; and the units are sub-leased to a company called Lighter Quay which in turn contracted Westin to operate the hotel.

Many of the individual investors are offshore, particularly from Singapore and Malaysia. Their collective interest is represented by a Body Corporate, in which investors have voting rights much like a company.

Investors complain of getting a poor deal from the start of the project. They were promised a guaranteed rental for the first three years of their investment. By July 2010, overdue guaranteed rentals were in the region of $3.5 million. A group of 92 investors got together, getting a court order to cancel their sub-leases to Lighter Quay. This would allow them to take personal control of their rooms then in use for the Westin Hotel.

Events moved quickly with Lighter Quay put into receivership by a secured creditor.

The Body Corporate was at risk because ground rentals due to Viaduct Harbour were $150,000 in arrears. Insurance cover was at risk of lapsing because the annual premium was unpaid. These bills were unpaid because investors were unwilling to pay levies due to the Body Corporate. Instead, they paid the money into their solicitors’ trust accounts claiming they didn’t trust those in charge of the Body Corporate to pay the money across. Investors have two representatives only on the five member Body Corporate management committee.

Justice Heath said the case looked to be an instance of high level brinkmanship: with investors and the Lighter Quay receivers tussling over income from the continuing operation of the Westin Hotel.

He ruled it was premature for the court to intervene when the parties still had a chance to resolve their differences through a forthcoming annual meeting of Body Corporate investors.

Justice Heath warned that he would have no hesitation in appointing an administrator to handle Body Corporate affairs if the annual meeting was disrupted by technical arguments about meeting procedure.

Low v. Body Corporate 384911 – High Court (02.09.10)

09.10.002