Ultiqa Village Resort Limited v Deale

Catchwords: LAND LAW – co-ownership – statutory trust for sale – application by plaintiffs under Conveyancing Act 1919 (NSW) s 66G(1) – timeshare resort operated by company on property – where property is co-owned by hundreds of defendants – where company passed resolutions to authorise certain co-owners to make application to the Court for the appointment of trustees for sale in respect of the property – whether it is appropriate to appoint trustees for sale – no reason to refuse relief – trustees for sale appointed

Legislation Cited: Conveyancing Act 1919 (NSW) ss 66F(2)(a), 66G
Corporations Act 2001 (Cth)
Real Property Act 1900 (NSW) s 46C
Uniform Civil Procedure Rules 2005 (NSW) r 10.6

Cases Cited: Boyd v Thorn (2017) 96 NSWLR 390
Ferella v Official Trustee in Bankruptcy [2015] NSWCA 411
Tory v Tory [2007] NSWSC 1078
Vacation Club Limited v AGG Properties Pty Ltd [2019] NSWSC 1357

Texts Cited: Nil

Category: Principal judgment

Parties: Ultiqa Village Resort Limited (first plaintiff)
Gevieson Nominees (second plaintiff)
Gregory Edward Deale and 760 other defendants

Representation: Counsel:
H Mann (plaintiffs)
Solicitors:
Bartier Perry (plaintiffs)

File Number(s): 2024/00396317

Publication restriction: Nil

JUDGMENT

Introduction

1. This is an application pursuant to s 66G of the Conveyancing Act 1919 (NSW) (the Act) for the appointment of trustees for sale of certain land situated at Hastings River Drive, Port Macquarie, NSW (Property). Upon that land is a timeshare resort known as Ultiqa Village Resort (Resort).

2. The resort is operated by the first plaintiff (Ultiqa). The second plaintiff is a part owner of the Property. The Resort has been exempt from the managed investment schemes provisions in the Corporations Act 2001 (Cth).

3. There are 761 defendants, including the second plaintiff. They are tenants in common in relation to the Property, each being a current or former member of Ultiqa. The Property is divided into 16,032 shares.

4. On 22 May 2024, an extraordinary general meeting of members of Ultiqa was held at which several resolutions were passed, including permitting the commencement of these proceedings seeking orders pursuant to s 66G of the Act. For the reasons set out below, I am satisfied that each of the defendants has been served with the proceedings. None has chosen to appear. In these circumstances, which are similar to those considered by Darke J in Vacation Club Limited v AGG Properties Pty Ltd [2019] NSWSC 1357 (Vacation Club), the Court has determined to deal with the issue on the papers.

5. The Court has received written submissions from counsel for the plaintiffs.

Overview of the facts

6. Ultiqa was incorporated on 26 May 1987 to operate the Resort.

7. The Resort has been open to members since May 1987. It contains 32 fully self-contained three-bedroom bungalows (Bungalows) established on acreage with landscaped gardens. Facilities include barbeque areas, indoor heated pool, spa and sauna, fitness centre, games room, tennis courts, kayaks, and putt-putt golf.

8. Broadly speaking, there are two types of interest in the Resort:

(a) real property interest – meaning the person owns a land title, or a portion of the Resort land (Real Property Interest); and (b) time share interests - meaning the person owns a right to use the Resort facilities (Timeshare Interest).

9. A “member” is defined in clause 4.3 of Ultiqa’s Constitution (most recently amended on 14 November 2019) (Constitution) as a person who becomes a member in accordance with the law and the Constitution and is a holder of a Timeshare Interest in the Resort (Member).

10. Ultiqa currently has 575 Members, comprising:

(a) 550 Members who hold 14,046 Real Property Interests (Members with Title) as defined in clause 4.3 of the Constitution, that is, are co-owners of the Property. Of these 539 hold the same Real Property and Timeshare Interests, meaning all of their interests are “with title”, and 11 hold a combination of interests with and without title; and (b) 25 Members who hold 75 Timeshare Interests (Members without Title) (that is, are not co-owners of the Property).

11. In addition, there are 111 people and entities who hold 186 Real Property Interests, but do not hold a Timeshare Interest (Non-Member Title Holders). These people are not “Members” for the purposes of clause 4.3 of the Constitution, and are recorded by Ultiqa in a list of “defaulting members”.

12. The defaulting members became so when they ceased paying fees to Ultiqa. Under the Constitution, the board may, in its discretion, forfeit interests of defaulting members. When this occurs, an obligation is created for the Resort to sell those Timeshare Interests. In the present case, the board has not determined to forfeit the interest of defaulting members, but rather have transferred them to a “defaulting members” list.

13. The 14,046 and 186 Real Property Interests referred to above comprise the 16,032 titles which make up the Property.

14. On or about 14 May 2024, a Notice of Extraordinary General Meeting (EGM) was served, by email or post in accordance with the Register of Members of Ultiqa.

15. The reasons for the resolutions proposed at the EGM were set out in the explanatory memorandum to the Notice of EGM, and include the following:

(a) the lack of exit opportunities for members resulting in a low demand for timeshare investments where it is difficult for members to sell their timeshares if they wish to exit the scheme; (b) the increasing prevalence of unpaid levies by members and the pressure this placed on Ultiqa to make up lost levy income; (c) the desire of some members to exit the scheme due to health and financial matters; (d) the increasing inability of some members to afford the financial burden of the levies which will also increase the prevalence of defaulting members moving forward.

16. The EGM was held on 22 May 2024 and 36 Members were present representing 67 Timeshare Interests. In addition, 104 Members representing 871 Timeshare Interests were present by way of proxy.

17. Nine resolutions were passed at the EGM, including those permitting the commencement of these proceedings and seeking the relief sought.

Service of the proceedings

18. The Register maintained by Ultiqa includes contact details for each Member as provided or updated. Clause 27 of the Constitution regulates the manner in which notices can be given to Members of Ultiqa. This includes (clause 27.1), notice by pre-paid post and by email to an address nominated by the Member (and recorded in the Register). Clause 27.3 provides that for those Members whose address is not known, service is deemed to have occurred if the notice is exhibited in the Ultiqa office for a period of at least 48 hours.

19. Rule 10.6 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) provides:

(1) In any proceedings, any document (including originating process) may be served by one party on another (whether in NSW or elsewhere) in accordance with any agreement, acknowledgment or undertaking by which the party to be served is bound.

….

(2) Service in accordance with sub-rule (1) is taken for all purposes (including for the purposes of any rule requiring personal service) to constitute sufficient service.

20. For the reasons given by Darke J in Vacation Club at [26] – [27], I am satisfied that the Constitution constitutes an agreement between the parties and that service in accordance with the Constitution satisfies UCPR r 10.6.

21. The evidence demonstrates that service has been effected in accordance with the Constitution.

22. Four of the registered owners are companies which are now de-registered. As a result of the deregistration, the property of those companies vested in ASIC. ASIC has therefore been provided with notice of these proceedings as well, and no objection has been received from ASIC.

Encumbrances on the Title

23. There are six caveats registered on the sub-folios. Letters in relation to these proceedings were sent to the caveators on 21 November 2024 and 13 January 2025. No objection was received. Further, two mortgages are registered on the sub-folios. Letters in relation to these proceedings were sent to the mortgagees on 10 and 13 February 2025 and, again, no objection was received.

Determination

24. A co-owner of the Property within the meaning of s 66G of the Act is entitled to orders for the appointment of trustees for sale “almost as of right” unless it would be inequitable to allow the application: see Ferella v Official Trustee in Bankruptcy [2015] NSWCA 411 at [38], citing Tory v Tory [2007] NSWSC 1078 at [42]. The Court accordingly has only a limited discretion to decline relief under s 66G.

25. No notice has been received of any opposition to the application. I am not aware of any reason to refuse the orders sought. I note that in Vacation Club, in facts materially similar to the present case, Darke J determined to make orders for statutory sale and ancillary relief.

26. I am satisfied that it is appropriate to make the orders sought by the plaintiffs for the appointment of statutory trustees and ancillary relief.

27. The proposed trustees are appropriate and have consented to act.

28. The only other two orders that I need to make a comment on are orders 4 and 6 sought in the summons.

29. Order 4 of the summons is in the following terms:

In the alternative to order 3, order that the Trustees be vested with authority to make a request under s 46C of the Real Property Act 1900 (NSW) that the Registrar-General:

(a) cancel all the sub-folios for the Land;

(b) create a new folio for the Land recording the Trustees as the registered proprietors.

30. Given the current large number of sub-folios, there is a clear practical benefit in obtaining one sub-folio to facilitate the future sale process. All that proposed order 4 seeks is that the trustees be vested with authority to make a request under s 46C of the Real Property Act 1900 (NSW) (the RPA). The order is perhaps unnecessary, given that the Property will become vested in the trustees by operation of statute, although there is no downside in confirming the position of the trustees.

31. Section 46C of the RPA appears broad enough to provide for the Registrar-General to cancel the multiple sub-folios and create a new folio. If any difficulty arises in this regard, I will grant liberty to apply and the matter can be raised again with the Court.

32. Proposed order 6 in the summons is in the following terms:

6. Order that any proceeds from the sale of the Land net of the Sale Costs (Net Proceeds) be distributed to each person based on the number of sub folios held by that that person in the Land , in the following manner:

(a) where the person has a debt to the Village:

(i) firstly, an amount sufficient to discharge the person's debt to the Village under cl. 12 of the Villages' Constitution is to be paid by the Trustees to the Village in discharge of that person's debt; and

(ii) secondly, the balance (if any) remaining after retention of any amount equal to that person's debt owing to the Village is to be paid by the Trustees directly to that person;

(b) where the person has no debt to the Village, the person's full share of the Net Proceeds is to be paid by the Trustees directly to that person;

(c) where the Trustees are left with unclaimed funds belonging to a person who cannot be located, for such funds to be paid into Court so that the Trustees can be released and discharged from their duties by the Court.

33. Order 6 is intended to address the fact that some of the co-owners are not up to date with payment of the fees relating to their rights in the timeshare scheme. The orders seek that such outstanding fees are deducted from the relevant owner’s share of the sale of the Property and paid to Ultiqa.

34. If a Member does not pay the fees invoiced to the Member, the outstanding amount is recorded next to their name in the Register. As of 10 October 2024, the total of those outstanding balances was $928,558.77 (for Members), and $1,047,694.84 (for former Members).

35. Clause 8 of the Constitution regulates procedures on payment default. Clause 8.3 to 8.17 include a procedure for forfeiture and sale of the interest in the Property by Ultiqa, including distribution of the net proceeds, starting with the payment of the outstanding fees to Ultiqa.

36. The forfeiture procedure in clause 8 has not yet been followed in relation to the outstanding fees owed by the relevant defendants. To date, the outstanding fees have also not been the subject of any judgments against the relevant co-owners/defendants.

37. Clause 8.12 of the Constitution however, provides that Ultiqa holds a mortgage over each Members “Real Property Interest” to secure any outstanding amounts. In these circumstances, Ultiqa is a “co-owner” of the Property, as it is an “incumbrancer”.

38. Section 66F(2)(a) of the Act clearly permits what is sought to be done by order 6 and the proposed order is appropriate in the circumstances: see, for example, Boyd v Thorn (2017) 96 NSWLR 390 at [48].

Orders

39. The Court makes the following orders:

40. Orders pursuant to the Conveyancing Act 1919 (NSW), section 66G, that:

(a) Michael Brereton, corporate restructuring advisor and insolvency practitioner of William Buck, Level 29/66 Goulburn St, Sydney NSW 2000, and Sean Wengel, liquidator of William Buck, Level 29/66 Goulburn St, Sydney NSW 2000 (Trustees) be appointed jointly and severally as Trustees for the sale of the land comprised in Lot X in Deposited Plan XXXXXX being the land situated at and known as XXX Hastings River Drive, Port Macquarie NSW 2444 (Property); (b) the Property be vested in the Trustees subject to any encumbrances affecting the entirety of the Property but free from any encumbrances affecting any undivided shares, to be held by the Trustees upon statutory trust for sale pursuant to part 4 of the Conveyancing Act 1919 (NSW).

2. Orders that the Trustees:

(a) be vested with authority to retain a real estate agent and any other necessary third parties to prepare, market and sell the Property; (b) have all the powers of the lessor under the lease of the Property to the first plaintiff (Village), registered on the title of the Property with folio identifier Lot X in Deposited Plan XXXXXX; (c) have the power to execute all necessary conveyance or other documents and to do all such things as are necessary in relation to the sale of the Property; and (d) have the power to execute a surrender of, or to terminate or otherwise dispose of, the lease to the Company, as lessors, as and when they consider appropriate for the purposes of or related to the sale of the Property.

3. Order that the Trustees be vested with authority to make a request under section 46C of the Real Property Act 1900 (NSW) that the Registrar-General:

(a) cancel all the sub folios for the Property; and (b) create a new folio for the Property recording the Trustees as the registered proprietors.

4. Order that the proceeds of the sale shall be distributed by the Trustees in the following order:

(a) costs of the sale of the Property (including but not limited to statutory government charges, legal costs, advertising costs and agent's commission); (b) Trustees' fees and costs incurred in the sale; (c) costs incurred by the plaintiffs in bringing this application; and (d) all rates, taxes and insurances and other outgoings on the Property.

(Sale Costs)

5. Order that any proceeds from the sale of the Property net of the Sale Costs (Net Proceeds) be distributed to each person based on the number of sub folios held by that that person in the Property, in the following manner:

(a) where the person has a debt to the Village:

(i) firstly, an amount sufficient to discharge the person's debt to the Village under cl. 12 of the Villages' Constitution is to be paid by the Trustees to the Village in discharge of that person's debt; and (ii) secondly, the balance (if any) remaining after retention of any amount equal to that person's debt owing to the Village is to be paid by the Trustees directly to that person;

(b) where the person has no debt to the Village, the person's full share of the Net Proceeds is to be paid by the Trustees directly to that person; (c) where the Trustees are left with unclaimed funds belonging to a person who cannot be located, for such funds to be paid into Court so that the Trustees can be released and discharged from their duties by the Court.

6. Grants liberty to apply in respect of the execution of the statutory trust for sale.

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Amendments

25 March 2025

anonymising case name