Investors
buying into stage one of ill-fated Kawarau Falls development in Queenstown do
not have to pay up the Court of Appeal ruled because the full development was
not completed as promised. Refunds were
ordered for deposits totalling $10 million dollars. Creditors funding the project are now forced
to resell apartments at prices below original sale values.
Funding issues have plagued the grandiose
Kawarau Falls development which promised nearly one thousand extra tourist
rooms, boosting Queenstown accommodation by nearly thirty per cent. It was marketed as a three stage development
with promised hotel and conference facility, luxury apartments and serviced
apartments. Seventy overseas buyers signed
up for stage one each paying a ten per cent deposit. Most buyers came from Singapore or Malaysia;
none from New Zealand.
Sundry companies in control of the
development are now in receivership, or liquidation, or both. With insufficient working capital to complete
the whole project, stage one and its seventy associated sale contracts were
hived off into a series of separate companies in 2007 and then 2010 as extra
funding was needed. With stage one
completed in April 2011, developers demanded buyers settle up on their
purchases. They refused.
The Court of Appeal ruled buyers are
entitled to cancel their contracts and recover deposits paid. It was an essential term of sale that all
three stages of the development be completed, the Court said. Pricing included a premium of up to 25 per
cent to reflect the extensive facilities being available to buyers in a
completed development. With no progress
on stages two and three the developers were in breach of contract.
A December 2010 court order prevented any
deposits being released to developers before investors had their day in court. Evidence was given that market values for
stage one luxury apartments and serviced rooms have fallen since the original
buyers signed up.
Ho
v. Peninsular Road – Court of Appeal (9.09.16)
16.138