The Court of Appeal dismissed out of hand claims by brothers Malcolm and Anthony Herbert that they were no longer liable to pay $510,000, the unpaid balance of compensation promised after they cancelled a lease to the Sarin Group for a Napier hotel then under construction.
Auckland-based Sarin family manage a chain of hotels throughout New Zealand in conjunction with recognised international hotel brands. USAR Napier Ltd, a Sarin investment company, agreed to lease a Napier building under construction by Thackery Trust. USAR intended to operate under the Hilton brand. Anthony Herbert and Stephen Lunn control Thackery. The deal turned sour when Thackery cancelled USAR’s lease; it was pursuing a more favourable deal with hotel chain Swiss-Belhotel with Swiss-Bel to receive a management fee and the Herberts retaining all other income. USAR sued.
The court was told of last hour negotiations prior to a December 2020 court hearing. Thackery agreed to pay USAR $625,000 damages in instalments for cancelling the lease with payment guaranteed personally by the Herbert brothers. The first tranche of $115,000 was paid. Subsequent tranches were not. Malcolm Herbert said payment was delayed because of circumstances beyond his control. He did not respond when asked what were these circumstances. Delayed payment with money sourced from Fiji was offered. A request for proof of funds held in Fiji was ignored.
USAR sued for recovery of the $510,000 settlement balance plus agreed interest for late payment running at 18.25 per cent. The Herberts alleged USAR itself was in default; failing to promptly take down online listings for future hotel accommodation bookings under the Hilton brand prejudiced attempts by Swiss-Bel to take forward bookings, they said. If Swiss-Bel were able to take online bookings sooner, they would have been able to borrow against this anticipated future income stream to finish construction of the Napier hotel quicker, the Herberts said. Malcolm Herbert claims delays in taking down the Hilton listing cost Swiss-Bel one million dollars in forward bookings.
The Court of Appeal questioned why the Herberts brought up this issue only after being sued. If the status of listings were critical, why was it not included as part of the negotiated settlement agreement, it asked. The court was told Hilton removed its Napier listing promptly when requested. Malcolm Herbert’s assessment of the volume of pre-bookings Swiss-Bel might have attracted and the possibility of then getting finance to complete hotel construction lacked credibility, the Court of Appeal said. New Zealand borders were closed and local covid-19 lockdowns were in effect while the hotel was under construction.
Now open, the hotel operates as Swiss-Belboutique Napier.
Herbert v. USAR Napier Ltd – Court of Appeal (4.07.22)
22.118