Pt Royal Bali Leisure & Anor v Hutchinson & Co Trust Company Ltd, Court of Appeal - Chancery Division, May 13, 2004, [2004] EWHC 1014 (Ch)

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Pt Royal Bali Leisure & Anor v Hutchinson & Co Trust Company Ltd, Court of Appeal - Chancery Division, May 13, 2004, [2004] EWHC 1014 (Ch)

Neutral Citation Number: [2004] EWHC 1014 (Ch)

Case No: HC02CO2699

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 13/05/2004

Before :

THE HONOURABLE MR JUSTICE DAVID RICHARDS

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Between :

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Sean Brannigan (instructed by Charles Russell) for the Claimants

Richard Southall (instructed by Herrington & Carmichael) for the Defendant

Hearing dates: 21, 22, 23, 26, 27, 28, 29 & 30 January 2004 and 2, 3 & 4 February 2004

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Judgment

Mr Justice David Richards:

Introduction

1. The claims in this action arise out of two timeshare developments in Bali, Indonesia. The first Claimant, PT Royal Bali Leisure (RBL), is a company incorporated in Indonesia. It developed a timeshare resort called the Peninsula Beach Resort. The second Claimant, PT Jazirah Pemasaran Internasional, trading as Peninsula Marketing International, (PMI) is also incorporated in Indonesia and was established to market the Peninsula Beach Resort. Before that resort was ready to market, PMI was engaged by an unconnected developer to market a separate timeshare resort called Villa Lalu. Both Claimants are owned and operated by two brothers, Roger and Alan Thomas.

2. Timesharing is a relatively recent phenomenon. It operates on the basis that a developer of a resort, hotel or other property sells to purchasers the right to use the property or part of it for a particular week or other period each year for a fixed number of years. Frequently developers engage marketing companies in order to market the timeshares. Timeshare exchange companies exist to enable timeshare owners to exchange use of their timeshare in one resort for use of another timeshare in a different resort. A resort's membership of a popular timeshare exchange is a strong selling point.

3. There are obvious risks associated with timesharing which have resulted in a good deal of adverse publicity. From the purchaser's point of view, the most obvious risks are that, having bought and paid for a timeshare, the developer fails to develop or maintain the resort; that the timeshare rights are defeated by a sale of the resort; that there may be over-selling of timeshare rights; or that the developer or resort owner may become insolvent. Other participants also face risks. A marketer may find that he sells timeshares which the developer is unable to provide. A developer may be defrauded by a marketer who collects payments for the sale of timeshares but does not account for them to the developer. A timeshare exchange may admit a resort, facilitate exchanges and then find that timeshares in a particular resort are unavailable for any of the reasons mentioned above. These problems are compounded by the fact that timesharing is an international business, with resorts in a large number of different countries, each with their own property laws, and timeshare owners also coming from a large number of different countries.

4. There is therefore pressure to find means whereby protection can be provided to all participants, so that each can feel a reasonable level of confidence in the performance by the others of their obligations. The provision of such protection is the business of the Defendant, Hutchinson & Co Trust Company Limited (HTC). It is owned by Peter Hutchinson who set it up in 1990. His previous experience was in the travel industry, more recently in providing collection agency services for resorts, including some operating as timeshares.

5. The particular form of protection developed by HTC is intended to combine English trust law with the local property law of the country of the resort. A separate trust is established in respect of each resort with HTC as the trustee. The principal asset of the trust are the shares in a non-trading company, usually incorporated in England, to which is transferred title to the resort. Title may be freehold or leasehold or the equivalent under local law. This ensures that the developer cannot dispose of or encumber title to the resort to the disadvantage of the timeshare owners. Similarly it provides protection to timeshare exchange companies. The beneficiaries of the trust are the timeshare owners and the developer, securing their respective interests. The trust is governed by English law, while title to the resort is transferred and held subject to the local property law. HTC does not itself market the resorts nor is it responsible for their management. Its function is limited to protection of the legal rights of occupation of the timeshare owners. Maintenance of the resort and other continuing obligations are a matter for the timeshare owners and development or management companies. HTC may also act as a stakeholder for money paid for the purchase of timeshare interests, but that function does not feature in this case.

6. HTC is currently truste...

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