Losing money in a foreign real estate investment gone bad is every property investor's nightmare.
But for dozens of Singapore and Malaysian investors who faced large losses and a legal quagmire after investing in a planned mega project in New Zealand, there is light at the end of the tunnel.
The Court of Appeal of New Zealand ruled earlier this month that the investors are entitled to the return of their NZ$10 million (S$9.9 million) in deposits, and do not have to fork out the NZ$36 million in damages sought as part of a counterclaim.
This overturns an earlier decision by the High Court of New Zealand.
"Finally, we won the case... We really learnt from this experience," said an investor, a Mr Tok, who paid about 15 per cent of a NZ$1.085 million townhouse. "I was so trusting with the marketing agent and didn't read in detail when it came to the sale and purchase agreement. But in reality, there can be many loopholes in legal interpretation, and similarity in legal system does not guarantee that everything operates as it does in Singapore."
The 109 investors had bought into the failed NZ$2 billion Kawarau Falls development - planned as an integrated world-class village resort with three five-star hotels, a four-plus-star hotel, and three serviced apartment buildings. It was a three-stage development on the shores of Lake Wakatipu near Queenstown. From 2006 to 2009, the investors agreed to buy off-plan units in two buildings in Stage 1.
I was so trusting with the marketing agent, and didn't read in detail when it came to the sales and purchase agreement. But in reality, there can be many loopholes in legal interpretation...
MR TOK, who paid about 15 per cent of a NZ$1.085 million townhouse.
But the global financial crisis hit and the developer was placed into receivership. Stage 1 was later completed by the receivers but progress on Stages 2 and 3 were stalled.
In 2011, the investors were served settlement notices for their purchases by a company which had been assigned the vendor's rights. But none settled, alleging breach of contract.
We consider it unlikely a purchaser would have proceeded to purchase a unit in a stand-alone building in the absence of an obligation to complete the overall development.
THE COURT OF APPEAL, on the vendors' obligation to complete Stages 2 and 3
The company then cancelled all the sale and purchase agreements. When the investors sought a court order for the return of their deposits, the company counterclaimed for damages for loss of bargain.
In the end, the Court of Appeal ruled that the vendors' obligation to complete Stages 2 and 3 should be treated as an essential term of the sale and purchase agreements.
"We consider it unlikely a purchaser would have proceeded to purchase a unit in a stand-alone building in the absence of an obligation to complete the overall development," the court said.
The vendors' breach of this essential term amounted to a repudiation which the investors "were entitled to accept... and cancel the sale and purchase agreements as they did".
The investors were also awarded 75 per cent of their legal costs. The sum is still being worked out.
Only 71 of the original 109 investors saw the case to the end. A number had previously settled to pay a portion of damages.
While an appeal can still be made to New Zealand's highest Supreme Court, the decision by the Court of Appeal is important as New Zealand is a capital importing nation which depends on foreign investment, including into property, said Mr Phil Creagh of Anderson Creagh Lai, who represents some investors.
One investor, who wanted to be known only as Ms Fan, in her 40s, said: "It was supposed to be a simple investment. We really couldn't accept the fact that just because the developer had financial difficulties, we had to pay in full and (not get what we agreed on) in return."