A group of 109 mostly Singaporean and Malaysian investors who bought apartments in New Zealand lost a total of NZ$10 million (S$9.2 million) in deposits when the developer went bankrupt in the wake of the global financial crisis.
Not only did the investors fail in a legal bid to recover their deposits, they have now been stung for another NZ$36 million (S$33 million) in a counter-claim by the firm run by the receivers, to recover losses during the global financial crisis in Queenstown. In February, the High Court of New Zealand ruled that Kawarau Village Holdings was entitled to deposits and the NZ$36 million from the group of Asian investors.
This group - none New Zealanders - invested in the failed NZ$2 billion (S$1.8 billion) Kawarau Falls development in the South Island between 2006 and 2009.
Court documents said the investors bought off the plan units in Lakeside West and Kingston West, to be constructed on the shores of Lake Wakatipu, near Queenstown.
About the lawsuit
SOME CLAIMS BY INVESTORS/ PLAINTIFFS
•Kawarau Village changed Lakeside West from solely residential use to mixed use - in breach of agreements and hurting the value of the units.
•One title issued for Kingston West included offices, a cinema and ducts between floors, and was not authorised.
•Kawarau's cancellation of the agreements was a wrongful repudiation of them.
•Kawarau Village was not ready to settle at the time it served the settlement notices or at the time of cancellation.
COUNTERCLAIM BY KAWARAU VILLAGE HOLDINGS
•Damages of NZ$36million (S$33 million) in addition to the NZ$10 million deposits - the difference between the contract price and market value of the units at the time of cancellation.
HIGH COURT JUDGMENT
•Kawarau Village did not materially breach its obligations as vendor under the sales and purchase agreements.
•The investors/ plaintiffs were obliged to settle when called upon to do so in 2011.
•Kawarau Village is entitled to the deposits together with accrued interest and damages for balance of the amount represented by the difference between the market value of the units at the date of cancellation and the contract price.
The buildings were to be Stage 1 of a three-stage integrated lakeside resort development known as Kawarau Falls Station, set to become a world-class resort with 13 hotels and serviced apartment complexes.
Conceived in 2005, the buildings were part of Auckland developer Nigel McKenna's ambitious project during a buoyant period for property development there. The units were marketed for sale in Asia by Austpac Investment Consultancy.
Singaporean Alex and wife Lisa went to Austpac's Collyer Quay sales launch in 2006. Under two weeks later they opted to buy a one-bedder Kingston West serviced unit for NZ$369,000. The pair, who asked to be known by only their first names, told The Straits Times they paid NZ$70,000 in deposits by 2007.
Housewife Lisa, 48, said: "We were promised a guaranteed rental yield of 6 per cent a year after completion. And we were told that we would be able to stay in the apartment for two to three days a year."
Businessman Alex, 50, added: "We wanted to own a second property but we could not afford one here. So we looked for one overseas... we thought the worst-case scenario would be to lose our deposits."
Another Singaporean who declined to be named said he travelled to Queenstown before sinking about NZ$150,000 in deposit for a two-bedroom apartment at Lakeside View, costing over NZ$1 million. He faces about NZ$700,000 in damages, and says he has already spent $30,000 in legal fees.
In 2009, the original developer Peninsula Road was bankrupted by the global financial crisis and placed in receivership in 2010.
Some time in 2011, the group of investors were served settlement notices by the receivers for their purchases - to pay up the full amount. But none of them settled, alleging that Kawarau Village has breached the contract they had signed.
In March 2012, Kawarau Village proceeded to cancel all of the sales and purchase agreements and forfeited the deposits. The group of investors jointly sought a court order for the return of their deposits. Last March, Kawarau Village started legal proceedings against Mr David Yuen who runs Austpac over a guarantee to buy the units if buyers defaulted.
Lawyer Phil Creagh of Anderson Creagh Lai, representing over 30 investors, told The Straits Times in an e-mail that fewer than 10 of them have come to a settlement with Kawarau Village. The rest have proceeded with a joint appeal against the judgment to be heard next August.