Signature Developments acted in a high-handed manner when it tried to railroad investor Robert Downer into purchase of a Pukekohe early childhood centre after switching out the previously agreed tenant, the High Court ruled. Signature was ordered to repay Mr Downer’s $466,000 deposit.
Robert Downer has been investing in commercial property for over thirty years. In 2017, he was offered a package deal by developer Signature Developments Ltd. He agreed to pay $4.6 million for an early childhood education centre to be constructed in Kitchener Road, Pukekohe, with a named subsidiary of Auckland Kindergarten Association as long-term tenant. With net assets in excess of $25 million, the Association was a bankable tenant.
The High Court was told that unbeknown to Mr Downer, the Association’s business model was subsequently revised. It was drawing back from long-term private lease arrangements like that proposed for Kitchener Road. A new tenant was required for Pukekohe. The Educare group, controlled by Alan and Jacqueline Lints, agreed to come in as tenants. Mr Downer was kept in the dark. Progress reports on construction gave no inkling of a change of tenant. Signature claimed Mr Downer had to accept whoever it put forward as tenant.
Justice van Bohemen said wording of the 2017 contract was specific: Mr Downer was purchasing a property with a named Auckland Kindergarten Association subsidiary as long-term tenant. That was an important term of the contract. This tenant, coupled with a promised Kindergarten Association rent guarantee, was an attractive commercial proposition. A change of tenant required Mr Downer’s approval. Signature was in breach of contract by installing a different tenant. Mr Downer was entitled to cancel and recover his deposit.
Downer v. Signature Developments Ltd – High Court (23.09.20)
20.155