The building at the centre of litigation between Mark Hotchin and Premier Property Developments, 2 Kitchener St in central Auckland. Photo / Google Street View
The building at the centre of litigation between Mark Hotchin and Premier Property Developments, 2 Kitchener St in central Auckland. Photo / Google Street View
Hotchin’s OHL successfully appealed the case against Premier Property Developments after his business bought units in the high-riseunit-titled building at 2 Kitchener St, central Auckland, opposite the Auckland Art Gallery Toi o Tāmaki.
The lawsuit was against the vendor of a retail unit bought six years ago, with Hotchin saying OHL spent nearly $200,000 evicting a pool hall tenant, the rent of which was being subsidised.
Mark Hotchin gives evidence in the High Court at Auckland last year. Photo / BusinessDesk
This month’s decision summarised the dispute between the two parties but came down firmly in favour of OHL, represented by Josh McBride and Elizabeth Gambrill.
The high-rise office building is divided into two units:
Unit A is the basement and ground floor with three hospitality tenancies;
Unit B, bought by OHL in February 2018, is two levels of car parks and 10 levels of commercial offices.
Hotchin is the director of OHL and other companies with property interests, including Omara Property Group, which in turn owns Karaka Land Holdings.
On OHL’s acquisition of Unit B, Omara took over as the body corporate’s manager. Kerry Finnigan worked for Hotchin at the time of OHL’s property transactions with Premier, the decision of September 5 decision noted.
Unit A was one of two properties owned by Premier, the other being a commercial property in Tauranga.
In August 2017, Premier appointed Colliers International New Zealand to sell Unit A, the Colliers team comprising Adam White, Gawan Bakshi and Simon Felton.
Colliers appraised Unit A as having an estimated likely sale value of $4 million to $4.2m, later extending the range to $4.4m.
Knowing Hotchin to be in the process of buying Unit B, White saw him as a prospective buyer and contacted Finnigan.
Hotchin understood Premier to be “seeking something like $4 million for Unit A, which [he] thought was too high”. White maintained contact with Finnigan over Hotchin’s potential interest in Unit A.
Colliers then embarked on a formal marketing campaign in July 2018. The information memorandum said Unit A and its three tenancies were “fully leased”.
In late October 2018, after another party withdrew, Hotchin signed an unconditional offer of $3.5m for the unit, paying a $350,000 deposit, with Westpac helping fund the deal.
Kerry Finnigan, who worked with Hotchin.
But then in November of that year, Hotchin discovered problems with the pool hall business and tenant Buza, including leaking, the air conditioning not working, and problems with plumbing and electrical wiring.
Litigation ensued between OHL and Premier. OHL claimed Premier’s waiver of rent and non-disclosure of the leaks in the basement constituted a misdescription of the property and sought compensation of $692,000 plus GST in last year’s High Court case.
But the High Court rejected OHL’s Fair Trading Act claims against Premier. Dissatisfied with that, OHL went to the Appeal Court and has now won.
The Court of Appeal judges did not agree with Justice Pheroze Jagose’s decision last year about a deal Premier offered to OHL to offset losses from problems in the building.
“We therefore disagree with the judge’s conclusion that it would have been reasonable for OHL to accept Premier’s offer of a rent underwrite and that the underwrite as offered would have completely eliminated OHL’s loss,” the Appeal Court decision said.
It was not an unconditional rent underwrite and did not put OHL in the position of having a fully leased property with three long-operating tenants providing increased income security.
“The High Court judgment is set aside and judgment is given for OHL in the sum of $400,000 plus accrued interest,” the September 5 decision said.
Interest was backdated to February 2019.
The decision was delivered by Justice Susan Thomas, who sat with two other Appeal Court judges. They heard the case on May 14.
Premier must pay OHL’s costs.
Josh McBride for Hotchin said his client was “pleased” with the decision.
Sarah Wroe who acted for Premier said no appeal was planned.
Anne Gibson has been the Herald’s property editor for 24 years, written books and covered property extensively here and overseas.
