Auckland financier Commercial Factors, owned by the Haydon family, stuck with a Tongan hotel it does not want failed in High Court legal arguments that Scenic Hotels had taken the problem off its hands. Scenic pulled out of Tonga’s Fua’amotu Hotel in March 2019. The two are also arguing over control of insurance payouts due following damage by cyclone Gita in 2018.
Terry Haydon’s Commercial Factors Ltd financed construction of Fua’amotu by entrepreneur Sam Wong. The High Court was told repayments fell into arrears almost immediately. Owed $5.7 million, Commercial Factors took steps in 2011 to recover its money. It planned to buy the hotel, join forces with a hotel management company and then sell the business as a package deal. Negotiations commenced with Christchurch-based Scenic Hotel Group Ltd, controlled by Hagaman family interests. The High Court was told of extensive discussions between Commercial Factors and Scenic. Commercial Factors was under tight time constraints; it needed to line up its ducks before submitting a bid for Fua’amotu. The hotel’s forced sale was under control of a Tongan court-appointed receiver. Scenic was cautious; the level of Commercial Factor’s interest rates was critical to Fua’amotu’s future profitability. An interim hotel management agreement was concluded, part of negotiations for formation of a joint venture company. Commercial Factor’s bid to buy Fua’amotu for the value of its outstanding debt was successful. Pacific Hotels Ltd was subsequently set up with Commercial Factors and Scenic each holding a fifty per cent stake. Fua’amotu proved to be a big drain on cash. By March 2015, Pacific Hotels had an estimated negative equity of $2.8 million. With Commercial Factors refusing to provide further financial support, Scenic subsequently demanded Pacific Hotels repay $2.43 million it had poured into the company. Plans to liquidate Pacific Hotels stalled with Commercial Factors and Scenic at loggerheads over how tax losses would be used. With no resolution in sight, Scenic packed up and left, clearing its property out of Fua’amotu and telling guests to move.
In the New Zealand High Court, Commercial Factors argued Scenic had agreed to buy Fua’amotu. Justice Osborne ruled there had been no agreement for either Scenic or Pacific Hotels to buy the hotel. There was no concluded joint venture either at the time Commercial Factors purchased Fua’amotu, or subsequently. Their relationship was one of mutual co-operation; working together, until they fell out.
The High Court was told insurance payouts for cyclone Gita damage are being withheld; Commercial Factors and Scenic dispute who gets payment. An interim insurance payout of one million dollars sits in a Tongan trust account.
Commercial Factors Ltd v. Scenic Hotel Group Ltd – High Court (19.09.19 & 30.07.20)
20.127