Owners of Mangawhai Lake View Estate control their private subdivision the Court of Appeal ruled, putting to an end to claims by rival developers that they had a right of veto over subdivision plans.
Development of a two hundred hectare private subdivision off Devich Road near Mangawhai in Northland has been cursed by over a decade of disputes, financial and otherwise.
At the turn of the century, entrepreneur Philip Cotton envisaged a lifestyle development in harmony with nature while providing extensive recreational facilities.
Local authority consent to the initial subdivision required formation of a legal entity to manage roading, utilities and communal facilities. The Lake View Estate Residents Society Incorporated was born.
Mr Cotton ensured the Society’s constitution was drafted to give veto powers in favour of his development company: Mangawhai Developments Ltd. Given the status of ‘controlling member,’ it could block any resolutions passed by owner/members.
By 2007, work was underway to develop what was intended to be 56 rural-residential lots of less than four hectares, and 14 rural-lifestyle lots larger than four hectares.
Pre-sale of many lots foundered when speculative investors defaulted on their contracts to buy following the severe recession in 2007-2008 styled as the Global Financial Crisis.
Mangawhai Developments was propelled into receivership, owing fifteen million dollars. Few companies trade their way out of receivership. Mangawhai Developments did; exiting receivership in 2022.
Much had happened during the intervening twelve years.
In particular, land intended to be developed as stage two came into the ownership of Chris and Karen Ruiterman. They were to later join forces with Edward Sundstrum and his company Vermont Street Partners Ltd. Mr Sundstrum, through a family trust, lived on the Lake View Estate. Together, they put up proposals for an extension to Lake View, subdividing what historically was stage two land.
Heads butted. Mr Cotton and the Ruitermans had differing views about further developments.
With Mangawhai Developments now out of receivership, Mr Cotton reclaimed what he said was his company’s right of veto as ‘controlling member.’ The Ruitermans claimed they were now the ‘controlling member’ having purchased the land intended for stage two.
The Court of Appeal ruled neither had status as controlling member.
Wording in Lake View Estate’s constitution cancelled the controlling member’s right of veto when the development was completed. There was no definition of ‘completion.’
The court ruled that development of stage one and sale of all remaining undeveloped land owned by Mangawhai Developments amounted to completion.
Constitutional references to a ‘controlling member’ are now redundant. Lake View owners, as members of their Society were now in control of their own destiny.
New rules approved at the Society’s 2019 annual general meeting became operative, the Court of Appeal ruled. Reference to having a ‘controlling member’ sitting on the Society’s management committee was removed, with future Estate management decisions to be approved by a simple majority of those Lake View owners appointed to the committee.
Mangawhai Developments Ltd v. Lake View Estate Residents Society Inc. – Court of Appeal (26.07.24)
24.180