Disputes
over control of shares in a land-holding company cannot support caveats against
title to the company’s land, ruled the Court of Appeal in another round of
litigation between Auckland property developers Neville Mahon and Tim
Edney. Their dispute is over company
shares, not land. This court ruling has
ramifications for joint venture projects structured as one-off special-purpose
companies.
After operating side by
side for a number of years as property developers, Mr Mahon and Mr Edney have fallen
out. Mr Edney claims he is owed
significant sums of money. Mr Mahon
denies anything is due and alleges Mr Edney welshed on a deal to warehouse for
him a Queenstown property. The Court of
Appeal dismissed Mr Mahon’s claim to caveat the Queenstown title, saying even
if there were a warehousing deal he has no enforceable interest in the land
itself.
Their dispute has its
origins in a 2015 acquisition of properties in Park Road, Queenstown. Short of cash for the five million dollar
purchase, Mr Mahon sought funding from Mr Edney. The court was told the two disagree over what
was planned. Mr Edney says he was to
take full control of the venture through his company Station at Waitiri
Ltd. Mr Mahon says the deal envisaged
him buying back into the project at a later date. The Court of Appeal said there is evidence
supporting both views, but this factual dispute is not relevant to the narrow
legal question of whether Mr Mahon could lodge a caveat against Waitiri’s Queenstown
land.
Mr Mahon alleges he has
an option to purchase shares in Waitiri, the company taking over the
project. As a company, Waitiri is a
legal person in its own right. It owns the land. Mr Mahon’s claim is to an
interest in the company as shareholder; not to the land as an asset of the
company. Developers often use corporate
structures to carry out specific projects.
Having used a corporate structure for the benefits it brings, developers
cannot then when it suits them disavow the legal consequences which follow, the
Court ruled. Mr Mahon was not entitled
to block the Queenstown project by lodging a caveat over Waitiri’s land.
Mahon
v. Station at Waitiri – Court of Appeal (5.09.17)
17.112