Disgruntled investors owning apartments in the same building as Sofitel Auckland Viaduct Harbour Hotel failed to overturn body corporate rules forcing them to contribute towards building security, part of their ongoing dispute with the Pandey family over hotel operations.
In 2011, most unit holders agreed to lease their apartments to Pandey-controlled CP Group enabling an Accor branded hotel to then operate from the site. Revenue from hotel operations was fed back to those apartment owners agreeing to lease. This arrangement came to an end with the covid-19 pandemic and collapse of inbound tourism.
After a $4.2 million refit, CP Group then relaunched hotel operations on site as Sofitel Auckland Viaduct. New leases were required for those unit owners wishing to have their apartments used in hotel operations. A minority of apartment owners, between them owning 45 per cent of residential units, refused the deal on offer.
There is a decades long back-story of bad blood between CP Group and Viaduct apartment owners, many of them from Singapore and Malaysia. Back in 2010, when the building was also under control of CP Group, apartment owners were in a legal tussle over rental arrears totalling some $3.5 million. In 2020, Prakash Pandey had a CP subsidiary acting as the hotel apartment-leasing agent put into liquidation. The then existing apartment hotel leases were disclaimed by the liquidator; the leases came to an abrupt end, leaving apartment owners with no revenue. A 45 per cent minority have refused to agree new terms for use of their apartments by the hotel. Pandey family is improperly loading hotel costs on to them through body corporate levies, they allege. Part of a campaign to force them into signing up to new hotel lease terms, they complain.
Back in court, disgruntled apartment owners challenged a body corporate resolution forcing them to share the cost of building security. Up to July 2020, cost of a security presence 24/7 in the hotel’s main lobby was a cost born by the hotel. On the hotel’s re-opening, two carefully-crafted resolutions were put to body corporate apartment owners. The first required 75 per cent support. It stated lobby security would be resumed at no direct cost to the body corporate. This resolution did not pass; the disgruntled minority voted against, telling the High Court this resolution was perceived as a back-door attempt to force them into a leasing arrangement with the hotel on Pandey family terms. The second resolution required only fifty per cent support. It required the body corporate pay security costs. The disgruntled minority did not have the votes to block this resolution. They went to the High Court challenging this resolution under the Unit Titles Act as being unjust and inequitable.
Justice Gordon dismissed their claim. All apartment owners get the benefit of security provided 24/7, she ruled. The resolution was not discriminatory in its application. The cost of about $151 per month for each apartment owner was reasonable, she said.
Een v. Body Corporate 384911 – High Court (1.04.21)
21.064
Post Judgment Note: The Court of Appeal subsequently set aside the second resolution as invalid. The resolution was unjust. It forced hotel-level security costs for 24/7 security on a minority who did not want or need this level of security. Security costs for residential apartments would be a fraction of this level.