Key Takeaways
- A New Zealand High Court has ruled in favor of a development company in a dispute over a failed housing project at Weiti Bay, near Whangaparāoa.
- The project’s landowner, Green and McCahill Holdings Ltd (GMHL), claimed it suffered massive losses due to a "botched" development and accused the development company of a "sham" process.
- The court found that GMHL’s own conduct was the reason for its loss, and that the company had tried to "tank" the project despite knowing it would lead to creditors coming after them.
- The development company, led by Evan Williams, was able to purchase the mortgaged land from Lambton Quay for $35m, using a complex arrangement involving a new overseas lender and new loans.
- The court rejected GMHL’s claims of a "sham" process and conspiracy, ruling that the development company’s actions were a rational business tactic.
Introduction to the Case
The Weiti Bay housing project, located near Whangaparāoa, was a massive undertaking that aimed to deliver over 1200 homes on 900ha of waterfront land. However, the project failed to generate lucrative sales, leading to a bitter dispute between the landowner, Green and McCahill Holdings Ltd (GMHL), and the development company. The case, which spanned 15 years and involved 40 court dates, centered on determining what each party understood about the project’s risks at each stage. Justice Andrew Becroft’s judgment attempted to recreate a history of the complex case and assess each witness’ credibility.
The Parties Involved
At the heart of the case were two key protagonists: Tong Kuang Liu, a Taiwanese director of GMHL, and Evan Williams, a former lawyer turned property developer. Liu’s company, GMHL, had acquired the land in 1991, while Williams was the key actor on the development side. The relationship between the parties developed into a complex joint business structure, with a 2015 business arrangement marking a point of no return in which the parties were financially locked together. Justice Becroft described Liu as a sophisticated and intelligent businessman overseeing investments in Taiwan, Canada, France, and other countries, contradicting Liu’s attempts to present himself in court as an old and "stupid" man.
The Collapse of the Relationship
By 2019, the relationship between Liu and Williams had collapsed, with sales from the initial Weiti Bay subdivision failing to repay bank loans. Liu rejected Williams’ suggestion to bring in a new investor to help turn the project around, and the two parties’ working relationship came to an end. Justice Becroft believed that GMHL then took to strategizing and upping the stakes, stopping work with the developer and demanding payment for land already used in the development before money was repaid to lenders. This action, Justice Becroft found, violated the parties’ business agreements and marked a turning point in the case.
The High-Stakes Game of Chicken
Justice Becroft believed that GMHL tried to force Lambton Quay, the lender, into a mortgagee sale on the land GMHL had put up as security for the initial loans. GMHL gambled that no one else would be willing to buy the mortgaged land, and that it could potentially buy the land back cheaply and force a desperate Lambton Quay to take a "haircut" on the debt owed. However, Williams surprised Liu by stepping in with a new arrangement, setting up new companies that agreed to buy the unsold Weiti Bay lots and Village 1 mortgagee sale land from Lambton Quay for $35m. This move, Justice Becroft accepted, was a rational business tactic that allowed Lambton Quay to recover an immediate $20m and the chance to be repaid more later.
The Aftermath
The sale allowed Lambton Quay to recover some of its losses, but GMHL was left owing $20m to the new company formed by Williams. GMHL claimed that the complicated arrangement Williams devised was a "sham" and conspiracy against it, but Justice Becroft rejected this, ruling that the development company’s actions were a legitimate business tactic. The court ultimately ruled against GMHL in all five claims and counterclaims, saying that the company chose a risky strategy that led to its losses. Williams told the Herald that the High Court judgment spoke for itself, and that he was satisfied with the outcome of the lengthy proceedings. Liu and Lambton Quay’s sole director, Sir Mark Dunajtschik, did not respond to requests for comment.
Conclusion
The Weiti Bay case highlights the risks and complexities involved in large-scale property development. The court’s ruling serves as a reminder that businesses must be aware of the potential consequences of their actions and that attempting to "tank" a project can have disastrous results. The case also demonstrates the importance of credibility and reliability in business dealings, with Justice Becroft finding that Williams was a more credible and reliable witness than Liu. As the parties involved in the case move forward, it is clear that the legacy of the Weiti Bay project will serve as a cautionary tale for businesses and investors alike.
