It had a difficult birth and now a lingering death. Chris Holmes and Tony Hannon have been ordered to pay a $3.4 million shortfall following Senior Trust Capital’s mortgagee sale of their unfinished Wanaka retirement village: Roy’s Bay. Their claim to be excused payment because Senior Capital sold for $4.0 million less than another buyer was willing to pay was dismissed in the High Court. They were not comparing ‘apples with apples’ given the differing conditions applying to each of the two deals, Associate judge Lester said.
The proposed lifestyle retirement village being built by Roy’s Bay Estate Ltd ran into substantial local opposition when first floated. Only ten of the 69 proposed units had been completed when in 2023 Roy’s Bay went into liquidation. Two years previously, the project was on its last legs. Roy’s Bay had defaulted on the third extension of its Senior Capital loan. Holmes and Hannon guaranteed repayment.
Trusting they could get a better price than Senior Capital would get on a mortgagee sale, Holmes and Hannon started marketing the unfinished project in late 2021.
The High Court was told they found a buyer; Auckland-based S5 Consulting Group Ltd, willing to pay $24 million. Four months later the price was reduced by agreement to $22 million. Due diligence had identified resource consent and work issues.
Meanwhile, secured creditor Senior Trust put in train the process for a mortgagee sale, ultimately selling to a subsidiary of S5 Consulting for $18 million dollars.
When sued by Senior Capital on their guarantee for the shortfall following sale, Holmes and Hannon claimed Senior capital could have got a better price given the pre-existing $22 million deal.
Judge Lester ruled it was doubtful whether the $22 million deal had become unconditional. In any event, the two contracts were materially different, he said. Excluded from the $18 million Senior Capital sale were two completed village units. In addition, the Senior Capital sale did not include vendor warranties contained in the prior $22 million contract.
Senior Trust Capital Ltd v. Holmes & Hannon – High Court (3.11.23)
24.006