International developer pulls out of local deal

Bulgaria-based international Kiwi property developer Richard Macdonald has won a case allowing him to cancel a contract to buy a Christchurch apartment.

Richard Macdonald recently achieved media profile through a report about how he and partner Myles Summerfield have been involved in a multi-billion dollar development in Rio de Janeiro, Brazil. 

The headline of the article trumpeted the involvement of US developer Donald Trump as part of a consortium to build six 50-level waterfront buildings in Rio ahead of the 2016 Olympics.

But closer to home, Mr Macdonald refused to settle on two apartment units in a 2007 hotel development by Ernest Duval in Gloucester St, Christchurch. It is one of a handful of central city hotels that have survived the earthquakes almost undamaged.

The price was $2.6 million and Mr Macdonald paid a deposit of $195,000. He subsequently alleged breach of contract, seeking a return of the deposit.

The arguments hinged on communications that took place in mid-2008 with Mr Macdonald.

According to the evidence presented in court, Mr Macdonald wanted to change the configuration of the unit and have two apartments created for when he and his family visited New Zealand.

This would allow a nanny to come and go directly into her suite without the need to pass through the main living area, but the home was to be used practically as one apartment.

Anton Summerfield, a director of AMC Construction and South Island Construction, was involved in the discussions before AMC was placed into voluntary liquidation in October 2008 and the building was then completed by South Island Construction.

He is also Mr Macdonald’s brother-in-law. Mr Summerfield gave evidence that he had discussions in May 2008 with Mr Macdonald and developer Mr Duval about changing the design of the units.

But Mr Summerfield denied telling Mr Duval he was authorised by Mr Macdonald to ultimately make any changes to the design and that Mr Macdonald had always wanted it in two titles. 

Mr Duval wrote to Mr Macdonald (via lawyers) seeking clarification in June 2009.

The court heard that unfortunately, at the time, Mr Macdonald was seriously ill. He did not recover from his illness until about October 2009.

He could not recall when he first saw the correspondence from Mr Duval’s solicitors, but in cross-examination he accepted that his personal assistant may have given him the correspondence when he recovered.

Mr Macdonald said that when he recovered, he went back to work at a time when there was a recession in full flow in Europe.

His property development company suffered significant losses as a result of the decline in property values. He had to merge four companies with 200 staff and cut costs by cutting about half the staff.

He said there was plenty on his plate at that particular time and he could not recall whether or not he had looked at the letter of June 2009.

In the event, there was no response to the June 2009 letter until Mr Macdonald’s solicitors sent one cancelling the agreement on March 23, 2010.

Justice Ed Wylie concluded there was no variation to the agreement for sale and purchase and Mr Macdonald was entitled to a refund of his deposit.

He also awarded costs to Mr Macdonald.

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If this building survived the earthquakes "almost undamaged", why is the building still unoccupied almost two years later? I have seen major work going on in the building.

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It has been in the cordoned CBD red zone and therefore not open to the public. I am assured that the repair work is relatively minor albeit it required cladding to be removed and replacement of a couple of girders

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It has been out of the Red Zone now for several months (6 or more), so could have been opened some time ago. Clearly the amount of damage to the building is more substantial than anyone is admitting.
The steel girders being replaced appear to have failed - why they failed is a bit of a mystery given that similar items in other buildings suffered no damage.

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