It stemmed from landowner Green and McCahill Holdings Ltd (GMHL) claiming it suffered massive losses because of a “botched” Weiti Bay subdivision near Whangaparāoa.
The project had aimed to deliver more than 1200 homes on 900ha of waterfront land, but failed to generate lucrative sales.
That led a Taiwanese-based director from the landowning company to claim the project felt like a “money scam”, and that his family was “duped and conned” by a Kiwi puppet-master.
The company also complained that when creditors forced a mortgagee sale of its land, its development partner was able to make a surprise purchase of the land in what GMHL labelled a “sham” process.
However, Justice Andrew Becroft rejected the landowner’s arguments, siding with the development companies in five related High Court claims.
He said the landowner had grown frustrated with the lack of sales and tried to “tank” the project despite knowing it would lead creditors to come calling.
It was a high stakes game of “chicken” that backfired on GMHL “with disastrous consequences”, Justice Becroft said.
“As hard as this may be for GMHL to accept, its own conduct is the reason for its loss,” he said.
Justice Becroft’s judgment attempted to recreate a history of the complex case and assess each witness’ credibility.
A gated entrance to Weiti Bay housing development near Whangaparāoa and Stillwater. Photo / Anna Heath
Central to the case – that involved 40 court dates and events spanning 15 years – was determining what each party understood about the project’s risks at each stage.
“Large scale property development is not for the faint-hearted. It is a risky business,” Justice Becroft wrote.
He said the Taiwanese director, Tong Kuang Liu, tried to present himself in court as an old and “stupid” man.
However, Justice Becroft judged him a sophisticated and intelligent businessman overseeing investments in Taiwan, Canada, France and other countries.
That meant GMHL was aware of the “risk and reward” stakes at play, he said.
Piecing the story together
Land for the development was originally bought in 1956 by a holding company owned by Green and McCahill, part of a business run by the famous rich-lister Green family.
However, Liu’s Taiwanese investors acquired the land in 1991 and kept the company name, Justice Becroft said.
The judge described Liu as the key protagonist on the landowning side of the project and Evan Williams as the key actor on the development side.
Williams was a former lawyer turned property developer.
Justice Becroft said the relationship between the parties developed into a complex joint business structure.
A 2015 business arrangement marked a point of no return in which the parties were financially locked together, Justice Becroft said.
A failed housing project at coastal Weiti Bay, south of Whangaparāoa, became the background for an epic legal showdown between tough businessmen and millions of dollars in losses. Photo / Jason Dorday
That involved GMHL mortgaging part of its Weiti Bay land to secure loans from banks and other lenders.
Land sales in the Weiti Bay development had been projected to yield $60m, with two more developments set to follow – known as Village 1 and Village 2 – that would bring more revenue.
That meant the parties considered it low risk to mortgage the land as security for loans, expecting to earn more revenue from sales than the amount borrowed, Justice Becroft said.
However, by 2019, the relationship between Liu and Williams collapsed, the judge said.
Sales from the initial Weiti Bay subdivision hadn’t repaid the bank loans. It also became clear GMHL would not be “paid the agreed amount for its first section of land”, Justice Becroft said.
When Williams suggested bringing in a new investor to help turn the project around, Liu rejected it.
Liu walked out of the meeting expressing “overwhelming malevolence” towards Williams, before later telling his son Williams was “worse than a snake”, Justice Becroft said.
“I infer that from this point Mr Liu lost the desire to work with Mr Williams,” the judge said.
‘Playing chicken’: high stakes business brinksmanship
Justice Becroft believed GMHL then took to strategising and upping the stakes.
The company stopped working with the developer, demanding it be paid for land already used in the development before money was repaid to lenders.
Justice Becroft found this action violated the parties’ business agreements.
Property developer and philanthropist Sir Mark Dunajtschik donated and helped build Wellington Children’s Hospital. Photo / Mark Mitchell
He ruled Williams had been a more credible and reliable witness than Liu.
“I unhesitatingly conclude that Mr Williams is a reliable and credible witness,” Becroft said, while noting Liu’s evidence was “neither reliable nor credible”.
The judge believed the development was not yet “doomed” and GMHL had been contractually-obligated to complete it.
But GMHL chose a different path, Justice Becroft said.
The debt owed to lenders Lambton Quay – which had by this stage taken over BNZ’s lending stake – now amounted to about $54m.
Justice Becroft believed GMHL tried to force Lambton Quay into a mortgagee sale on the land GMHL earlier put up as security for the initial loans.
That included 33 unsold lots in the first stage Weiti Bay development and undeveloped Village 1 land.
Justice Becroft ruled GMHL gambled that no one else would be willing to buy the mortgaged land. Anyone who did would find it hard to develop without GMHL’s co-operation.
That’s because GMHL owned neighbouring property which meant access to Village 1 land needed permission from GMHL.
Put simply, GMHL aggressively calculated that if no buyers emerged, it could potentially buy the land back cheaply and force a desperate Lambton Quay to take a “haircut” on the debt owed, Justice Becroft believed.
The tables are turned
However, in a series of complicated negotiations, Williams surprised Liu by stepping in with a new arrangement.
He set up new companies that agreed to buy the unsold Weiti Bay lots and Village 1 mortgagee sale land from Lambton Quay for $35m.
He was able to do this by raising $20m from a new overseas lender, Clearwater Capital Partners, and making complex arrangements for the other $15m, including taking out new loans with Lambton Quay itself.
Justice Becroft accepted that for Lambton Quay, the new deal was about making the best of a bad situation.
Wellington businessman and philanthropist Sir Mark Dunajtschik was Lambton Quay’s sole director.
He described his involvement in the project as among the “worst commercial decisions” of his life.
Land in the area is close to Auckland’s northern suburbs and near stunning coastal scenery. Photo / Jason Dorday
Dunajtschik’s initial loan was supposed to have been short-term finance. He used money he didn’t need immediately but which had been earmarked to help build the Wellington Children’s Hospital, Justice Becroft said.
The sale allowed Lambton Quay to recover an immediate $20m and the chance to be repaid more later.
Final piece of the puzzle
After the mortgagee sale about $20m was still owed to Lambton Quay – being the total $54m debt minus the $35m purchase price.
But rather than chase GMHL in court, Lambton Quay assigned the right to pursue the debt to a new company formed by Williams.
Williams admitted in court that securing the right to force GMHL to repay the remaining $20m was about gaining leverage.
The development companies still needed GMHL to co-operate if the project was going to be saved.
And so the threat of debt enforcement could be used in the negotiation, Justice Becroft said.
GMHL “smelt a rat” and suspected the developer acquired the land and remaining debt by “subterfuge”.
It claimed the complicated arrangement Williams devised was a “sham” and conspiracy against it.
But Justice Becroft rejected this, considering the move a rational business tactic.
He ultimately ruled against GMHL in all five claims and counterclaims, saying the company chose a risky strategy that led to its losses.
Williams told the Herald: “The High Court judgment speaks for itself, and I am satisfied in the outcome of these lengthy proceedings”.
“As some processes with the court are ongoing, it would not be appropriate for me to provide further comment at this stage.”
The Herald also sought comment from Liu and Dunajtschik but they did not respond.
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