Less than twenty four hours after Christchurch developer Crawford Group Ltd was ordered to pay more than $1.4 million damages for defaulting on a property purchase, director Harry Shand tried to bury the corpse, changing Crawford Group’s name to CHCH Group Ltd.
CHCH Group (formerly Crawford Group) took a punt on profitable redevelopment in Christchurch’s eastern suburbs in November 2021 with a deal landbanking four adjoining Phillipstown residential properties. Settlement of the $3.5 million deal was due twelve months later.
The High Court was told CHCH Group found itself on the wrong side of a rapidly declining market. Tentative discussions six months out from settlement date seeking a contract extension came to nothing.
Come the November 2022 payment deadline, CHCH Group defaulted. The company accepted liability for breach of contract. The High Court was asked to rule on damages; the difference between market prices at date of cancellation and the agreed purchase price.
Evidence was given that the market for residential property peaked in late 2021/early 2022, declining from that date. The court was asked to rule on valuation of the Phillipstown properties as at May 2023, date the contracts were formally cancelled.
Vendors’ valuer said the properties’ market value had declined by some forty per cent. CHCH Group’s valuer said the drop was nearer twenty five per cent.
Associate judge Paulsen accepted the vendors’ valuation. Recent sales in the suburb had been taken into account. Judge Paulsen criticised CHCH Group’s valuer for relying on sale prices drawn from neighbouring suburbs at a time when the market was still near its peak and for assuming that a current sale could be made with all four properties sold as a job lot.
CHCH Group’s failed Phillipstown purchase had seen it agreeing to buy three properties on Ollivers Road from Blackwater Properties Ltd for $2.5 million plus an adjoining property from homeowners Andrew and Yvonne Smith for $1.05 million.
CHCH Group was ordered to pay Blackwater Properties $942,000 damages; the Smiths $476,000. Damages for the Smiths includes wasted expenditure of legal fees and a lost deposit on their intended purchase of a replacement home. CHCH Group was aware that the Smiths would look to buy elsewhere and that CHCH’s failure to pay would cause these losses, Judge Paulsen ruled.
Evidence was given that Blackwater Properties had Mr Shand sign a personal guarantee at the time CHCH agreed to buy. Judge Paulsen ruled Mr Shand personally is liable to pay Blackwater Properties $942,000 should CHCH Group go into liquidation insolvent. The Smiths do not have a guarantee.
Blackwater Properties Ltd v. Crawford Group Ltd & Smith v. Crawford Group Ltd – High Court (14.02.24)
24.056