A disagreement between a Warkworth property investor and its financial backer went to court, resulting in interim liquidators being appointed to the business.
Justice Ian Gault in the High Court at Auckland yesterday granted an application from lender Warkworth Retail to have two Waterstone Insolvency staff appointed to the land owner and borrower, Warkworth Holdings.
A dispute between the parties arose over default on a loan to buy bare land on Falls Rd, Warkworth which the judge said was worth "significantly in excess of $42m".
A deal to sell it for $50m had been struck last month, the judge noted.
Landowner Warkworth Retail bought the real estate with loans from lenders Warkworth Holdings and Arena.
But the borrower was in default on the approximately $47m loan and also owed interest on top of that amount, according to the decision.
So court action was taken.
The decision named Damien Grant and Greg Sheriff of Waterstone Insolvency as interim liquidators of the landowning company. Grant is also the voluntary administrator of a troubled housing development scheme in South Auckland.
He was appointed last month to Ormiston Rise, the company behind plans for more than 700 residences at Totara Park near Manukau.
At the Warkworth site, the dispute was over the non-repayment of the loan money.
Lender Warkworth Retail's directors are Hong Chen and Hao Wang. Landowner Warkworth Holdings' directors are Andrew Guest, Kerry Hitchcock, Marcus Jacobson and Todd Strathdee.
Guest is also a director of The Neighbourhood Ormiston which a spokesman said plans to buy that housing site in south Auckland on Friday.
The Warkworth court decision said about $14.2m was due to the plaintiff lender, interest was continuing to mount and Warkworth Holdings had become insolvent.
"WHL is in default on approximately $47 million of loans including interest, including approximately $14.2 million due and owing to the plaintiff. Despite demand, WHL has failed to repay the plaintiff. WHL has also failed to comply with a Property Law Act notice issued by Arena in May 2021 in respect of $36 million due and owing to it. Interest continues to accrue. The plaintiff says that WHL is insolvent," the decision said.
On Thursday last week, BDO's Andrew McKay and Rees Logan were appointed receivers of all landowner Warkworth Retail's assets. Their appointment was under Arena's security deed.
Lender Warkworth Holdings sought orders to appoint an interim liquidator to preserve the assets, pending the resolution of a more substantive court application. Bob Hollyman for the plaintiff said there was a need for interim control of the company.
But Sean Gollin, representing the BDO receivers, argued against any liquidators being appointed.
"He submitted that the appointment of receivers obviates any need for an interim liquidator also to be appointed. With receivers in place and given their function, appointment of an interim liquidator is not necessary or expedient in order to maintain the value of the assets nor are those assets in jeopardy, particularly since the primary asset is the land and the concern is an alleged sale at an undervalue," the decision said.
The BDO receivers were appointed under a security over all the assets and they had authority and control over all the assets, which effectively displaced the control of the directors, Gollin said. The directors remained in place technically, but their authority has was now supplanted by the BDO men, Gollin argued.
But the judge didn't agree with him. Justice Gault said the lender plaintiff had raised serious questions about the appropriateness of some of the dealings of landowner Warkworth Holdings, including in relation to its shares.
That was a reference partly to landowner Warkworth Holdings' moves to try to sell the land for $42m to The Neighbourhood Stubbs Farm. But that company is owned by Todd Strathdee, associated with Arena and also a director of landowner Warkworth Holdings. Andrew Guest is also a director of The Neighbourhood Stubbs Farm, the judge noted, as well as a director of landowner Warkworth Holdings.
Therefore, landowner Warkworth Holdings' assets were in jeopardy because some dealings may not be in its best interests, the judge said.
Justice Gault said it was expedient for the purposes of maintaining the value of assets owned or managed by Warkworth Holdings to appoint interim liquidators.