Developer Neville Mahon alleges fellow developer Tim Edney acting as mortgagee sold off at an undervalue his Auckland Coronation Gardens project. The two are still at arms-length in a dispute over what the project is worth.
The two have a long history of co-operating in property developments. A terraced townhouse development on Coronation Road in Mangere did not prove profitable. The High Court was told Mr Edney’s company, Small (2005) Ltd, initially sold the Coronation Road site to Mr Mahon’s Coronation Gardens Ltd in 2014 for $14.6 million. Funding was provided by Bank of New Zealand together with a mortgage back by Mr Edney’s Small Ltd. Mr Mahon personally guaranteed repayment of part of the Small mortgage. The project ran into financial difficulty. Inland Revenue had Coronation Gardens put into liquidation in September 2018 for unpaid GST and PAYE. Meanwhile, Coronation Gardens had defaulted on both the BNZ and Small mortgages. Mr Edney was then in control as the major secured creditor, through his Small mortgage and having bought the BNZ mortgage from the Bank.
Evidence was given that Mr Edney’s attempts to sell the project through a mortgagee sale met with little success. A July 2017 tender round saw 120 expressions of interest, only one unconditional offer at nine million dollars and conditional offers ranging from $6.4 million to $17.3 million. No sale was finalised. A further tender round in May 2018 resulted in only one conditional offer at seven million dollars plus sundry expressions of interest without any further offers. In July 2018, Mr Edney formed a new company, Golden Belt Mining Co Ltd, and sold Coronation Garden’s land to his new company for $11.75 million. The land has since been offered back to Coronation Gardens at a price of $17.25 million, described by Mr Edney as being at an approximate discount of $500,000 on what Coronation Gardens owes.
Mr Mahon sued asking the High Court for an interim injunction to stop Mr Edney further dealing with the land. He alleges Mr Edney’s sale to a related party was at an undervalue and prejudices Coronation Gardens. Justice Jagose refused an injunction. If there was a sale at an undervalue, Coronation Gardens gets damages, he said. That will require a further court hearing. With Coronation Gardens now in liquidation, it is not Mr Mahon’s decision whether his company continues with court action; this decision now lies with the liquidator.
Coronation Gardens Ltd v. Small (2005) Ltd – High Court (26.09.18)
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