The
forced sale of properties owned by high profile Auckland barrister Barry John
Hart left him with a $20.5 million shortfall.
The High Court dismissed his claim that ANZ National sold the properties
at an undervalue.
Mr Hart garnered
considerable publicity in his campaign against ANZ Bank alleging the bank
failed to act properly in its forced sale of substantial landholdings on Highway
16 in west Auckland. At the time, Mr
Hart owed ANZ in excess of $30 million with interest accruing at $200,000 a
month.
The court was told ANZ
took action after loan payments fell into arrears. A “stand still” arrangement gave Mr Hart six
months to find a buyer or buyers for the properties. After that the Bank proceeded with mortgagee sales.
Mr Hart was highly
critical of the Bank’s forced sale process, claiming the properties were sold
at a gross undervalue. Properties he
claimed were worth in the region of $29 million were sold for $8 million.
Associate Judge Abbott
said a mortgagee is required to take reasonable care in the sale process to
obtain the best price reasonably obtainable at the time of the sale. There is no obligation to postpone a sale in
the hope of a better price later, or to break up assets and sell in a piecemeal
fashion. Specialist advice should be
taken in selling assets with unique characteristics. Descriptive advertising is required and must
reach the largest possible number of potential purchasers.
He ruled that ANZ Bank
had acted properly in conducting the sales.
It sought competitive tenders from three real estate agencies asking
them to highlight their expertise in selling properties of the type in question
and seeking their advice on the best marketing strategies. The Bank undertook a $55,000 marketing programme
spread over six weeks. The court was
told 116 people registered an interest.
Each was invited to tender for some or all of the properties on offer.
Mr Hart’s main
criticism centred on the sale prices.
Evidence was given
that ANZ Bank first obtained valuations from professional valuers Darroch. They valued the three main farming blocks
being sold at $14.3 million (market value) and $10.1 million (forced sale
value). They in fact sold for some $8
million.
Associate Judge Abbott
said the prices obtained were not so widely different from the Darroch forced
sale valuation to suggest the sale process was inadequate. The advice ANZ received was that $8 million
represented the best they could receive at the time.
The court was told
forced sale prices commonly range at a discount of 26%-30% below market prices,
but can reach discounts of up to 40%.
The discount in this case was 44%.
He dismissed Mr Hart’s
claim that the properties were worth $29 million; a valuation obtained from
valuers Colliers International in 2010. This valuation was two years old and was based
on an assumption that the farm blocks could be subdivided into residential
lifestyle blocks. A subsequent application for a zoning change had been
unsuccessful.
Hart
v. ANZ National Bank – High Court (29.10.12)
12.040