Asian investors who refused to settle on Queenstown apartments during the global financial crisis have won a landmark $46 million case.
A Court of Appeal decision, centred on the Kawarau Falls hotels site, has overturned a High Court decision which stung investors for $36m in damages and $10m in deposits.
Appeal Court judges found investors’ contracts had been breached because the rest of the development wasn’t built.
The investors’ lawyer says the decision will help rebuild New Zealand’s reputation with Singaporean investors.
Wealthy Singaporeans and Malaysians agreed to buy 111 luxury apartments off-the-plans in buildings at Kawarau Falls.
But the GFC hit, crashing developer Nigel McKenna’s ambitious plans for a $2 billion “world-class village resort”.
Receivers completed stage one, but it became clear the whole development would never be finished.
The market value of the apartments dropped below the off-plan asking price – on average $300,000 – and the investors baulked on paying the balances in late 2011.
Lawyer Phil Creagh, of Auckland’s Anderson Creagh Lai, sees the judgement as “a victory for common sense”.
He says the sale agreements stated in numerous places the whole develop-ment would be completed over time, but it was clear the rest of the project had been “irretrievably abandoned”.
“[It] will do much to restore NZ’s reputation with Singapore investors in particular … as a fair place to invest and one whose courts holds developers to their promises and obligations.”
Creagh says in “numbers and complexity” it has been one of the most significant NZ property judgements.
The 71 investors who saw the court case through to the end will also get back their $5.5m deposits and interest.
That includes Singaporean Dr Ho Kok Sun, the lead name on the case, who paid a 10 per cent deposit on a $1.2m property.
And they were also awarded 75 per cent of their substantial legal costs.
Stage one of the development was completed – including the Queenstown Hilton and the buildings containing the investors apartments, Lakeside West and Kingston West.
Auckland receiver Andrew Bethell, of firm BDO NZ, did not respond to a request for comment before deadline.