Pigeon Island Development Company Ltd v The Landings Unit Plan No. D2/2007

• Jurisdiction: St Lucia
• Judge: St Rose-Albertini, J.
• Judgment Date: 13 July 2022
• Judgment citation (vLex): [2022] ECSC J0330-3
• Docket Number: CLAIM NO. SLUHCM2020/0028 formerly SLUHCM2018/0068
• Court: High Court (Saint Lucia)

EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE

COMMERCIAL DIVISION

Before:

The Hon. Mde. Justice Cadie St Rose-Albertini High Court Judge

CLAIM NO. SLUHCM2020/0028 formerly SLUHCM2018/0068

Between:

Pigeon Island Development Company Limited

Claimant

and

1. The Landings Unit Plan No. D2/2007

2. Landings Commercial Assets Ltd Formerly Landings Resort Management Company Limited

Defendants

Appearances:

Mr Deale Lee of Counsel for the Claimant

Mr Peter Foster QC with Ms Renee St Rose, Ms Marie-Ange Symmonds and Mr Mikel King of Counsel for the Defendants

1 St Rose-Albertini, J. [Ag]: The parties to this action are (i) the claimant, Pigeon Island Development Company Ltd (“PID”) who claims to be the current developer of the condominium development known as The Landings (“the development”), (ii) the first defendant The Landings Proprietors Unit Plan No. D2/2007 (“The Landings BC.”) which is the body corporate of the development, and (iii) the second defendant Landings Commercial Assets Ltd (“ LCA”) which is a nominee of The Landings BC, created to hold certain property on its behalf.

2 They are engaged in a dispute over PID's entitlement to appoint directors to the board of directors of The Landings B.C (“the Board”), which depends upon the meaning and effect to be given to a Memorandum of Understanding executed between the parties, a court order by consent, the Condominium Declaration, and the Condominium Bylaws.

3 PID claims to be entitled to appoint 4 directors to the Board and to a reduction of the Board size pursuant to the terms of the Memorandum of Understanding, in consideration for which it agreed to and did divest ownership of the commercial units of the development, in favour of LCA. Alternatively, PID claims that the right of appointment of directors is enshrined in the Condominium Bylaws, based on the current phase of the development.

4 The defendants contend that pursuant to the Condominium Bylaws coupled with a court order by consent, the directors are to be appointed by the owners of the residential and commercial units only. As PID is no longer the owner of the commercial units having donated these units to LCA under an Agreement for Donation and Deed of Donation, which together superseded the Memorandum of Understanding, PID is no longer entitled to appoint directors to the Board.

The Issues

5 The following issues arise for resolution:

• 1. Is the current composition of the board of directors of The Landings BC ultra vires the Condominium Declaration and Condominium Bylaws and therefore unlawful?

• 2. Is PID entitled to a declaration that the development is in Phase 2 and as such it is entitled to 5 seats on the Board of The Landings BC as the developer, pursuant to clause 2 of the Condominium Bylaws?

• 3. Alternatively, is PID is entitled to a declaration that the development is in Phase 3 and as such entitled to 3 seats on the Board of The Landings BC, as the developer, pursuant to clause 2 of the Condominium Bylaws?

• 4. Is the Memorandum of Understanding legally binding and enforceable? If the answer is yes, did The Landings BC breach same and should specific performance be ordered?

PID's Case

6 The Landings, which consists of residential and commercial units, common areas and other resort amenities was to be developed in 4 phases. On 4 ^th April 2007, The Landing Limited (“TLL”) as the original developer executed a Condominium Declaration in relation to Phase 1 which was registered on 2 ^nd July 2007, thereby creating The Landings BC and establishing its Bylaws. TLL subsequently completed Phase 2 and the Condominium Declaration was duly amended in 2008 to incorporate this Phase. However, after commencing Phase 3, TLL encountered financial difficulty, and was unable to complete that phase. Nonetheless, on 24 ^th November 2010, TLL further amended the Condominium Declaration to incorporate Phase 3 and announced its intention to begin Phase 4.

7 In 2012 a group of unit owners representing the majority, filed Claim No. SLUHCV2012/0222 (“the 2012 claim”) against The Landings BC, seeking to have a receiver appointed to manage the affairs of The Landings BC. The substantive claim was not adjudicated, as the parties entered into a consent order dated 27 ^th March 2012 (“the Consent Order”), which was approved by the court. It states the following:-

“1. The Board of The Landings shall effective immediately consist of 11 board members in accordance with clause 2.2 of the byelaws “At completion of phase 4” which is 8 residential unit owners and 3 commercial unit owners.”

8 According to PID, the Consent Order had the effect of transferring control of the development from TLL to The Landings BC, which left the question of completion of the development unresolved. The remainder of the development's land continued to be owned by TLL, which was unable to raise the financing necessary to complete the development. Further, having lost control of the development, TLL also lost the ability to use it as a source of funding. Consequently, TLL was placed in receivership by its main creditor.

9 To avoid the possibility of the assets of TLL being sold off piecemeal to entities whose interests did not coincide with that of The Landings BC, a group of 37 residential unit owners formed PID, to purchase TLL's assets and raise the funds to complete the development. The assets purchased were undeveloped lands, the commercial units and certain accounts receivable, at the price of US$8.4 million. Additionally, PID raised US$1.0 million to complete Phase 3. PID asserts that upon purchase it became the new developer but recognized that despite its obligation to complete the development, it had no say in the management of The Landings BC. As a result of its obligation to complete the development, it was necessary to be represented on the Board, thus it entered into a Memorandum of Understanding with The Landings BC on 18 ^th November 2014 (“the MOU”) to ensure its representation on the Board.

10 According to PID, clause 6 of the MOU states that it is legally binding on the parties. The parties agreed that PID would be entitled to appoint 4 directors to the Board, who would have the responsibility for all matters affecting construction of the development. It was also agreed that The Landings BC would take all necessary steps, including amending the Consent Order, to reduce the size of the Board from 11 to 7 directors. The consideration given by PID for the right to appoint directors to the Board, was:

• i. termination of the existing commercial lease between TLL and The Landings BC and grant of a new lease at a nominal rate;

• ii. the waiver of accounts receivable owing from The Landings BC to PID; and

• iii. transfer of the commercial units owned by PID to The Landings BC in the most tax efficient manner.

11 PID claims that it has complied fully with the terms of the MOU. In particular, by Deed of Donation executed on 28 ^th November 2015 and registered in the Land Registry, it donated the commercial units to LCA as the nominee of The Landings BC, for which it also obtained waiver of the stamp duty on transfer. PID says that the property donated was valued at US$5,416,000.00 at the time of transfer. PID says that initially it was permitted to appoint 3 and then 4 directors to the Board as agreed under the MOU, however, at a meeting of the Board on 26 ^th April 2018, by a majority vote, the Board passed a resolution purporting to remove the directors appointed by PID. Despite its requests, The Landings BC has failed to reinstate the directors and refused to take any action to reduce the size of the Board; and is therefore in breach of the terms of the MOU.

12 PID further says that the Consent Order on which The landings BC relies for composition of the Board violates the Condominium Act, the Condominium Declaration and the Bylaws, is therefore void for illegality and is unenforceable. In reality the development is at the end of Phase 2 with Phase 3 only partially completed, and the Consent Order has sought to establish the composition of the Board as at the end of Phase 4. It therefore conflicts with the actual phase of construction and the Condominium Declaration. Further bylaw 2.2 states that the composition of the Board is to be determined by the Phase of the development, bylaw 2.3 states the composition of the Board at each phase; and bylaw 2.4 provides that the number of directors shall not be changed until completion of Phase 4. Bylaw 14 provides that the Bylaws may be amended only by a special resolution, except for bylaws 2.2, 2.3, and 2.4 which can only be amended after the completion of Phase 4 of the development. Thus, the Consent Order disregards these provisions of the bylaws and breaches section 15(3) of the Condominium Act which provides that no amendment of the Bylaws shall have effect unless approved by a special resolution of the body corporate and registered in the Land Registry. No special resolution has been registered, approving a change to the composition of the Board.

13 Further and in the alternative, PID contends that the Condominium Declaration and Bylaws continue to be the constitutional and governing documents of The Landings BC. Bylaw 2, which specifies the composition of the Board has not been amended and cannot be amended until the development is completed. The current Board is therefore unlawfully appointed as is not in conformity with bylaws 2.2 to 2.4, and section 15(1) of the Condominium Act, which determine the nomination and election of the Board. It is said that the current Board consists of 8 residential unit owners and 3 commercial unit owners as at completion of Phase 4, despite the development being in Phase 3. Bylaw 2.3 provides that throughout the construction of Phase 3, the board is to be comprised as at completion of Phase 2, which is 4 residential unit owners, 2 commercial unit owners and...