Facing a
$21 million leaky building claim from owners of St Paul’s apartments in
Thorndon, Wellington City had the High Court bring liquidated developer
Salamanca Investments back to life so it could chase Salamanca’s holding
company for a contribution to repair costs.
Developers commonly create single project
companies to undertake property developments, liquidating the company quickly
after extracting their profit. Others
are left to carry the can should building defects later emerge. Local authorities are often left as “last man
standing” with any money to pay repair costs.
St Paul’s was built at Mulgrave Street,
Thorndon in the late 1990s as a staged development. Salamanca, then part of the Newcrest Group,
was developer. Salamanca’s shareholders
liquidated their company in 2005. Three
years later, St Paul’s owners made a claim for repair costs through the
Weathertight Homes Resolution Services Act.
An assessor’s report estimated repair costs at $5.1 million. St Paul’s owners are claiming $21 million. Wellington City is being sued because it
issued the Building Act compliance certificate for the construction.
The High Court was told Wellington City
suspects the Newcrest Group made about three million dollars from St Paul’s. The City asked that the now liquidated
developer, Salamanca Investments, be revived and be restored to the register so
that Salamanca could be joined as a party to the Weathertight claim. Wellington City proposes to “follow the
money”, attempting to extract from Salamanca’s holding company any amount the
Weathertight Tribunal might find as being Salamanca’s share of the repair
costs.
Company law allows unpaid company creditors,
with court approval, to reinstate an already liquidated company to get what
they are owed. Salamanca said this
should not apply to Wellington City: the City was not a creditor when the
company went into liquidation. In 2005
there were no building defects apparent.
Judge Bell ruled that Wellington City had status as a creditor with what
the judge styled as a “future tort”.
Contingent claims can be made in a liquidation. St Paul’s owners had a contingent claim
against Salamanca as at the date the company was liquidated even though the
building’s defects were not then apparent. Wellington City similarly had a contingent
claim for a contribution from Salamanca for repair costs as at the date
Salamanca went into liquidation.
Judge Bell reinstated Salamanca Investments to
the companies register. This brought
Salamanca back into legal existence. The
company remains in liquidation. Wellington
City are allowed to take action against Salamanca in the Weathertight Tribunal
to determine how much money, if any, Wellington City is entitled from Salamanca
as a contribution towards St Paul’s repair costs. In other cases, the courts have divided
liability between developer:council in the ratio 4:1.
Salamanca
Investments v. Wellington City – High Court (26.03.15)
15.026