That financier Tim Edney should negotiate with property developer Peter Chevin, four times bankrupt and with a criminal conviction, as potential buyer in the forced sale of an unfinished Auckland development is not that unusual, Justice Wilkinson-Smith drily noted. Property development attracts high stake gamblers; it is a high-risk high return game.
Neville Mahon failed in his claim that Mr Edney did not properly market sale of a failed Mangere Bridge townhouse development, selling at an undervalue.
Mr Mahon was ordered to pay $6.5 million owed on his 2014 guarantee of Mr Edney’s vendor finance for the Coronation Road project.
The High Court was taken through a detailed examination of circumstances surrounding a 2018 forced sale of the unfinished development.
At heart of the litigation, Mr Mahon alleged Mr Edney rigged the sale; selling at $11.75 million to a company Mr Edney controlled: GB Ltd. In turn, Mr Edney alleged Mr Mahon attempted to manipulate the sale process with a preposterous late bid from an obscure Australian purchaser allegedly in league with Mr Mahon.
The two once worked hand in glove: Mr Mahon taking on property developments; Mr Edney providing finance. No longer. Many of their joint projects have subsequently collapsed into fiercely fought litigation.
The Coronation Road project got underway with Mr Edney’s company, Small (2005) Ltd, selling land in 2014 spread across five titles to a company controlled by Mr Mahon’s spouse: Coronation Gardens Ltd. The High Court was told Mr Mahon’s spouse was named as being in control of Coronation Gardens because of doubts that banks would lend to any business venture then controlled by Mr Mahon.
Small (2005) left in second mortgage vendor finance. The deal required Mr Mahon guarantee repayment.
When BNZ called up its first mortgage finance, Small (2005) paid off the bank, taking an assignment of its security.
A 2017 marketing campaign by Small (2005) to enforce its rights as mortgagee saw eight offers made. This campaign was disrupted with an unsuccessful court application by Coronation Gardens attempting to stop the phrase ‘mortgagee sale’ being used in advertising.
The only unconditional offer was at nine million dollars. Valuers agreed the land was worth some $14 million in 2017. The offer was not accepted.
The highest bid was at $21.7 million, submitted by email just after tenders closed. This offer came from Sydney. It was conditional on the property able to be used for a ‘place of worship;’ a change of use that would require resource consent.
The High Court was told Mr Edney was suspicious about the bona fides of this offer. The supposed offeror had never investigated the site, had downloaded tender documents just one day before tenders closed and had incorrectly completed the offer document by transposing the vendor and purchaser. Enquiries identified that the offer emanated from a business with the same Sydney street address as that doing work for Mr Mahon.
This offer too was rejected.
There were suspicions that this $21.7 million bid was an attempt by Mr Mahon to artificially raise the properties’ value in order to get sufficient new loan finance, then to reclaim control of the project.
Mr Edney’s later sale negotiations with Mr Chevin came to nothing. Mr Chevin wanted the entire purchase price left in by Small (2005) as vendor finance. Mr Edney wanted at least a one million dollar cash contribution from Mr Chevin.
In 2018, a further marketing campaign was launched. Market prices had fallen. One valuer priced the land then at $11.62 million, as a ‘forced sale’ valuation.
Marketing resulted in no offers above nine million dollars.
Mr Edney then arranged a sale to another of his companies, GB Ltd, at a price of $11.75 million.
This sale crystallised Mr Mahon’s liability on his guarantee.
The High Court was told GB Ltd onsold the land two years later for $22.7 million.
Justice Wilkinson-Smith ruled Mr Edney’s Small (2005) had taken reasonable care to obtain the best price. The price paid by GB Ltd was more than any other prospective purchaser offered unconditionally at time of sale.
Mr Mahon was ordered to pay $6.5 million; the balance of the unpaid guaranteed debt plus accrued interest.
Small (2005) Ltd v. Mahon – High Court (5.11.24)
25.026