With their proposed joint venture Auckland property development in negative equity, Julian Brown had no further legal claim over the land after fellow investor Troy Flavell paid off the mortgage debt and claimed full ownership.
Plans to turn a profit on subdivision of an Auckland residential property were not realised after buying in for $1.4 million at what was near the top of the market in 2022.
The High Court was told each put in $200,000 cash, with the balance borrowed from a second-tier lender who took additional security with a mortgage over Mr Flavell’s Kumeu home.
Having to bail out two years later, they put the property up for auction.
No bids were received. A post-auction offer at $1.2 million was declined.
By time of notice threatening a mortgagee sale, their mortgage debt had climbed to $1.4 million.
Evidence was given of Mr Flavell then repaying the mortgage personally, transferring title to the land across to a company he controlled: TF5 Ltd.
Mr Brown then lodged a caveat on the title, claiming their joint venture agreement still entitled him to a half interest in the land.
Associate Judge Lester ruled Mr Flavell was entitled to assume full ownership of the land after paying off the joint venture debt; he could claim an indemnity from joint venture assets for the amount paid. The amount of the joint mortgage debt exceeded the market value of the joint venture asset.
The amount paid to clear the mortgage exceeded the price any third party buyer was willing to pay for the property at the time. There was no suggestion of Mr Flavell buying in at an undervalue.
Mr Brown’s shared interest in the property had vanished.
Brown v. TF5 Ltd – High Court (30.06.25)
25.149