Court fight after millions lost from failed Wānaka retirement village sale

Nicole Mathewson Reporter from Otago News

By reporter Debbie Jamieson:

Two men who planned to build a retirement village on the shores of Lake Wānaka have been ordered to pay $3.4 million to financial backers, after their company went into liquidation.

Roy’s Bay Estate Limited fought through the Environment Court to build a 73-unit retirement village on a 1.4ha block near central Wānaka.

However, it went into liquidation earlier this year with only 10 dwellings complete.

According to a November High Court decision, property development financier Senior Trust Limited financially backed the company.

But in September 2021, Roy’s Bay Estate was unable to meet its payments, following a third time extension.

Conscious that it would achieve a better financial result from a private sale than a mortgagee sale, Roy’s Bay Estate entered a conditional contract to sell the site to S5 Consulting Group Ltd for $24m, in October.

That deal became unconditional in December 2021 but was replaced with a new sale and purchase agreement also with S5 at a price of $22m.

The reduction related to consenting and works issues. It was due to settle on March 31, 2022.

However, it did not settle, and Senior Trust entered into a contract in May 2022 to sell the property, as mortgagee, to a company called Roy’s Bay GCO Limited – a subsidiary of S5.

That sale went through for $18m, and Senior Trust sought summary judgement of about $3.4m from Christopher Holmes and Anthony Hannon of Roy’s Bay Estate, for the debt shortfall.

Holmes was the director of Roy’s Bay Estate and Hannon was an indirect shareholder. They both provided a guarantee in respect of the company’s debt.

Holmes and Hannon argued to the court that Senior Trust had breached its duty to obtain the best price reasonably obtainable at the time of sale.

They also complained that Senior Trust’s actions were designed to exclude them from the development and were aimed at securing ongoing finance business as Senior Trust would provide finance to the purchaser.

Counsel for Holmes and Hannon argued that Senior Trust were aware of the previous agreement, but conceded Senior Trust was within its rights to proceed with a mortgagee sale.

Associate Judge Dale Lester found a proper test of the market produced the price of $18m – and that was negotiated from an initial offer of $12m.

He also found no evidence that Holmes, Hannon or Roy’s Bay Estate had asked Senior Trust to allow time for the $22m deal to settle.

Because some vendor’s warranties and two units were removed from the agreement, the discrepancy between the two sale prices was not as great as it appeared, he said.

The judge ruled that the men were to pay Senior Trust the full claim of $3.4m, plus costs.

Stoney Creek GCO Ltd is now building and selling luxury town houses on the site.