After Primary Industries refused Denis Watson’s ManukaMed application to import royal jelly he was left with an unfunded $1.7 million property purchase hanging over his head. Attempts to buy time with a ‘lease to buy’ arrangement came to nothing; essential terms of any lease had not been finalised before the vendor resold, suing Watson for its $400,000 loss on resale.
In November 2019, Mr Watson agreed to buy a neighbouring Masterton building for $1.7 million. It was intended this extra space would be used to expand production of ManukaMed’s products, in particular a proposed new product mixing manuka honey with imported royal jelly, a honey bee secretion used to feed larvae. Primary Industries refusal a few days later for permission to import royal jelly forced a change of plan.
Five weeks prior to settlement, Mr Watson told the vendor he was stretched for cash. Pandemic lockdown rules had affected sales, slashing revenue by some half a million dollars, he said. Further investment capital was being sought.
He said the vendor could re-list the property for sale, with Mr Watson stating he would bear the consequences. At the same time, he floated the idea of a ‘lease to buy’ deal with settlement postponed and his business taking occupation in the interim as a tenant.
The Court of Appeal was told attempts to resell ran in tandem with negotiations over a potential ‘lease to buy’ arrangement. When Mr Watson learnt in June 2020 that a new buyer had been found at $1.3 million he sued, claiming prior rights on his ‘lease to buy scheme.’
The court ruled there was never any final agreement to lease; questions over a bond and the length of any lease had never been agreed. All lease negotiations had been made ‘without prejudice,’ making it clear the vendor kept open all rights to recover any loss on resale.
Mr Watson’s default occurred at a time when a covid-19 pandemic lockdown was imposed, limiting access for potential buyers and also hampering attempts to tidy up the property. The court said this may have contributed to a reduced price on resale, but that risk lay with Mr Watson as defaulting buyer.
Watson v. Masterton Investments Ltd – Court of Appeal (20.10.23)
23.180