It stemmed from landowner Green and McCahill Holdings Ltd (GMHL) claiming it suffered massive losses because of a \u201cbotched\u201d Weiti Bay subdivision near Whangapar\u0101oa.<\/p>\n
The project had aimed to deliver more than 1200 homes on 900ha of waterfront land, but failed to generate lucrative sales.<\/p>\n
That led a Taiwanese-based director from the landowning company to claim the project felt like a \u201cmoney scam\u201d, and that his family was \u201cduped and conned\u201d by a Kiwi puppet-master.<\/p>\n
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 \u201csham\u201d process.<\/p>\n
However, Justice Andrew Becroft rejected the landowner\u2019s arguments, siding with the development companies in five related High Court claims.<\/p>\n
He said the landowner had grown frustrated with the lack of sales and tried to \u201ctank\u201d the project despite knowing it would lead creditors to come calling.<\/p>\n
It was a high stakes game of \u201cchicken\u201d that backfired on GMHL \u201cwith disastrous consequences\u201d, Justice Becroft said.<\/p>\n
\u201cAs hard as this may be for GMHL to accept, its own conduct is the reason for its loss,\u201d he said.<\/p>\n
Justice Becroft\u2019s judgment attempted to recreate a history of the complex case and assess each witness\u2019 credibility.<\/p>\n
A gated entrance to Weiti Bay housing development near Whangapar\u0101oa and Stillwater. Photo \/ Anna Heath<\/p>\n
Central to the case – that involved 40 court dates and events spanning 15 years – was determining what each party understood about the project\u2019s risks at each stage. <\/p>\n
\u201cLarge scale property development is not for the faint-hearted. It is a risky business,\u201d Justice Becroft wrote.<\/p>\n
He said the Taiwanese director, Tong Kuang Liu, tried to present himself in court as an old and \u201cstupid\u201d man.<\/p>\n
However, Justice Becroft judged him a sophisticated and intelligent businessman overseeing investments in Taiwan, Canada, France and other countries.<\/p>\n
That meant GMHL was aware of the \u201crisk and reward\u201d stakes at play, he said.<\/p>\n
Piecing the story together<\/p>\n
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. <\/p>\n
However, Liu\u2019s Taiwanese investors acquired the land in 1991 and kept the company name, Justice Becroft said.<\/p>\n
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.<\/p>\n
Williams was a former lawyer turned property developer.<\/p>\n
Justice Becroft said the relationship between the parties developed into a complex joint business structure.<\/p>\n
A 2015 business arrangement marked a point of no return in which the parties were financially locked together, Justice Becroft said.<\/p>\n
A failed housing project at coastal Weiti Bay, south of Whangapar\u0101oa, became the background for an epic legal showdown between tough businessmen and millions of dollars in losses. Photo \/ Jason Dorday<\/p>\n
That involved GMHL mortgaging part of its Weiti Bay land to secure loans from banks and other lenders.<\/p>\n
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.<\/p>\n
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.<\/p>\n
However, by 2019, the relationship between Liu and Williams collapsed, the judge said.<\/p>\n
Sales from the initial Weiti Bay subdivision hadn\u2019t repaid the bank loans. It also became clear GMHL would not be \u201cpaid the agreed amount for its first section of land\u201d, Justice Becroft said.<\/p>\n
When Williams suggested bringing in a new investor to help turn the project around, Liu rejected it.<\/p>\n
Liu walked out of the meeting expressing \u201coverwhelming malevolence\u201d towards Williams, before later telling his son Williams was \u201cworse than a snake\u201d, Justice Becroft said.<\/p>\n
\u201cI infer that from this point Mr Liu lost the desire to work with Mr Williams,\u201d the judge said.<\/p>\n
\u2018Playing chicken\u2019: high stakes business brinksmanship<\/p>\n
Justice Becroft believed GMHL then took to strategising and upping the stakes.<\/p>\n
The company stopped working with the developer, demanding it be paid for land already used in the development before money was repaid to lenders.<\/p>\n
Justice Becroft found this action violated the parties\u2019 business agreements.<\/p>\n
Property developer and philanthropist Sir Mark Dunajtschik donated and helped build Wellington Children’s Hospital. Photo \/ Mark Mitchell<\/p>\n
He ruled Williams had been a more credible and reliable witness than Liu.<\/p>\n
\u201cI unhesitatingly conclude that Mr Williams is a reliable and credible witness,\u201d Becroft said, while noting Liu\u2019s evidence was \u201cneither reliable nor credible\u201d.<\/p>\n
The judge believed the development was not yet \u201cdoomed\u201d and GMHL had been contractually-obligated to complete it. <\/p>\n
But GMHL chose a different path, Justice Becroft said.<\/p>\n
The debt owed to lenders Lambton Quay – which had by this stage taken over BNZ\u2019s lending stake – now amounted to about $54m.<\/p>\n
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.<\/p>\n
That included 33 unsold lots in the first stage Weiti Bay development and undeveloped Village 1 land.<\/p>\n
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\u2019s co-operation. <\/p>\n
That\u2019s because GMHL owned neighbouring property which meant access to Village 1 land needed permission from GMHL. <\/p>\n
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 \u201chaircut\u201d on the debt owed, Justice Becroft believed.<\/p>\n
The tables are turned <\/p>\n
However, in a series of complicated negotiations, Williams surprised Liu by stepping in with a new arrangement.<\/p>\n
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.<\/p>\n
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.<\/p>\n
Justice Becroft accepted that for Lambton Quay, the new deal was about making the best of a bad situation.<\/p>\n
Wellington businessman and philanthropist Sir Mark Dunajtschik was Lambton Quay\u2019s sole director.<\/p>\n
He described his involvement in the project as among the \u201cworst commercial decisions\u201d of his life.<\/p>\n
Land in the area is close to Auckland’s northern suburbs and near stunning coastal scenery. Photo \/ Jason Dorday<\/p>\n
Dunajtschik\u2019s initial loan was supposed to have been short-term finance. He used money he didn\u2019t need immediately but which had been earmarked to help build the Wellington Children\u2019s Hospital, Justice Becroft said.<\/p>\n
The sale allowed Lambton Quay to recover an immediate $20m and the chance to be repaid more later. <\/p>\n
Final piece of the puzzle<\/p>\n
After the mortgagee sale about $20m was still owed to Lambton Quay – being the total $54m debt minus the $35m purchase price. <\/p>\n
But rather than chase GMHL in court, Lambton Quay assigned the right to pursue the debt to a new company formed by Williams. <\/p>\n
Williams admitted in court that securing the right to force GMHL to repay the remaining $20m was about gaining leverage.<\/p>\n
The development companies still needed GMHL to co-operate if the project was going to be saved.<\/p>\n
And so the threat of debt enforcement could be used in the negotiation, Justice Becroft said. <\/p>\n
GMHL \u201csmelt a rat\u201d and suspected the developer acquired the land and remaining debt by \u201csubterfuge\u201d.<\/p>\n
It claimed the complicated arrangement Williams devised was a \u201csham\u201d and conspiracy against it. <\/p>\n
But Justice Becroft rejected this, considering the move a rational business tactic. <\/p>\n
He ultimately ruled against GMHL in all five claims and counterclaims, saying the company chose a risky strategy that led to its losses.<\/p>\n
Williams told the Herald: \u201cThe High Court judgment speaks for itself, and I am satisfied in the outcome of these lengthy proceedings\u201d.<\/p>\n
\u201cAs some processes with the court are ongoing, it would not be appropriate for me to provide further comment at this stage.\u201d<\/p>\n
The Herald also sought comment from Liu and Dunajtschik but they did not respond. <\/p>\n