Corporate owners of unit title offices with unpaid levies can avoid threats of winding up by offering mortgage security for delayed payment. Body corporate administrators must give genuine consideration to any offer and cannot refuse without proper reason.
For the first time, the High Court was asked to rule on validity of offers giving security for unpaid levies. The novel case concerned a block of Lower Hutt commercial units registered under the Unit Titles Act. The High Court was told Luxe One Ltd had defaulted on levy payments totalling $61,323. The body corporate took steps to put Luxe One into liquidation. Luxe’s then director, Michael Kooiman, said his company had some $420,000 equity in its unit and offered mortgage security over the unit for the unpaid debt. Companies Act rules block winding up applications where creditor and debtor agree ‘to secure payment of the debt.’ Associate judge Johnstone said offers require genuine consideration by body corporate administrators; offers cannot be refused without good reason.
There were reasonable grounds to reject Luxe One’s offer. Investigations identified Luxe One held no equity in its unit; there were three mortgages already registered against the unit title, contrary to Mr Kooiman’s representation that there was only one. Luxe One Ltd was ordered into liquidation as insolvent.
Body Corporate 68792 v. Luxe One Ltd – High Court (22.06.20)
20.109