Brian Johnson sold management rights for Admiralty Lodge motel on Whitianga’s Buffalo Beach for $950,000 in late 2019 being aware revenue was about to plummet. Buyers Vinod Sharma and Ena Chaudrey claim damages, saying Admiralty management rights they purchased proved worthless.
When the motel was constructed, resource consent prohibited Admiralty unit owners from living in their units permanently. Owners gave Mr Johnson’s company the job of managing lets and maintaining the site. In 2019, the Admiralty body corporate got council consent allowing permanent occupation by owners. This looked to be an existential crisis for Mr Johnson’s management contract; owners were likely to take up personal residence, no longer renting out their unit.
Evidence was given that Mr Johnson’s company, Admiralty Lodge Motel (2016) Ltd, negotiated a ten year extension of its management rights in August 2019. Three months later, these management rights were up for sale. Dr Sharma and Ms Chaudrey bought the rights for $950,000 with a later agreement that $475,000 of the purchase price would be a vendor loan secured over the Admiralty apartment owned as part of the management contract. Dr Sharma has extensive experience in the hospitality industry, having involvement in VR Group and Kiwi Hospitality LLC.
The two allege comments about future profitability made by Mr Johnson during negotiations breached both the Fair Trading Act and the Contract and Commercial Law Act. Each side sued the other; Dr Sharma and Ms Chaudrey alleging misrepresentation; Mr Johnson seeking to enforce his $475,000 vendor loan.
Following a ruling under its fast-track summary judgement procedure, the High Court ordered payment of the $475,000 loan. This was put on hold by the Court of Appeal.
The Court of Appeal said there is too much unresolved evidence to allow a fast-track decision. In particular, a need to identify what exactly Mr Johnson said about future profitability and the extent to which there had been appropriate disclosure about motel units potentially being removed from the rental pool.
Ena Holdings Ltd v. Admiralty Lodge Motel (2016) Ltd – Court of Appeal (31.08.23)
23.146