An Auckland town centre developer/owner lost his $87 million battle against Auckland Council and Auckland Transport over whether services and funding he claimed were agreed on had been delivered to his ever-expanding multibillion-dollar hub.
Mark Gunton’s Westgate Town Centre, Westgate Properties and NZRPG Management failed to have claims upheld in Justice Gerard van Bohemen’s June 12 High Court at Auckland decision.
The case ran for weeks last February, March and April with Bruce Gray KC heading Gunton’s legal team and Richard Lange mounting the successful defence.
Gunton’s companies sought $87,775,175 damages: $69,575,175 for property capital value loss and $18,200,000 for rental income loss plus interest and costs.
The judge refused Gunton’s companies’ case, rejected the claims and ruled that the authorities were entitled to costs for defending themselves in the long-running action, first filed in 2018.
NZ Retail Property Group claimed the two authorities’ contractual breaches meant its town centre development had not proceeded in the integrated, cohesive manner intended. That rendered the town centre “dysfunctional” and meant property value and rent losses were suffered.
At issue were plans for a public transport bus interchange, funding construction of a new bridge over State Highway 16 to connect the centre’s northern end to the motorway and changes to streets including Maki St South and Fred Taylor Dr which intersects the old and new Westgates.
The question in dispute was whether Auckland Council and Auckland Transport - successors to the Waitakere City Council - had breached contractual undertakings to Westgate Town Centre.
If such breaches were established, how much damage had been caused and if Gunton’s New Zealand Retail Property Group could claim for those damages was at the heart of proceedings, the judge said.
The authorities hit back at Gunton, referring to him being under financial pressure and that - more than any contractual failures on their behalf which they disputed anyway - was at the nub of the issues.
“The defendants...say that the plaintiffs’ difficulties with the development of the Westgate Town Centre are the product of the commercial circumstances in which the plaintiffs found themselves after losing their principal funder as a consequence of the Global Financial Crisis.
That was a reference to Gunton’s funder being the Bank of Scotland.
“As a result, the plaintiffs had to sell off to a rival developer the land on which they were developing the new Westgate mall and to grant that rival developer a peppercorn lease over, and a right to acquire, the desirable commercial land in the town centre. The defendants say, however, that none of those matters had anything to do with the contracts between the plaintiffs and the defendants,” the decision said.
That sale to a rival developer was to DNZ Holdings owned by NZX-listed landlord Stride Property Group, which developed Westgate’s NorthWest Mall after buying land from Gunton.
Bank of Scotland pulled out of New Zealand last decade, causing Gunton’s companies to have issues.
The decision highlighted how the global finance crisis “had an impact, particularly on NZRPG which entered into a set of new financing arrangements when its primary funder withdrew from New Zealand. While these developments did not prevent NZRPG from continuing its activities in Westgate, they resulted in NZRPG selling its interest in the NorthWest Mall, its primary initial focus in the new town centre, and forfeiting control of the “cruciform” land bordering Maki Street and the Town Square”.
The decision also cited the Auditor General’s 2017 inquiry into west Auckland council funding. Lyn Provost urged then-Mayor Phil Goff and councillors to get more involved, noting a lack of transparency, openness and governance after probing $200m funding.
“In my view, the risks involved with this development warrant greater involvement by Auckland Council’s governing body in overseeing this project, including its costs,” said Provost at the time.
Judge van Bohemen’s decision this month referred to NorthWest mall’s 2015 opening, sparking traffic problems in the new town centre, which the authorities blamed partly on Gunton’s business.
“Soon after the NorthWest Mall opened, complaints were made about traffic passing through the town square. On 7 October 2015, the Henderson-Massey Local Board chair emailed Auckland Transport expressing concern at the traffic danger in the town square caused by the mall. The email said there was gridlock in the square and speeding on Kohuhu Lane,” the decision noted.
NZRPG wanted the old Waitakere City to contribute financially to its development but that council was concerned Gunton would be unable to continue with his huge project “particularly when international financing arrangements came under stain as a result of the GFC. Waitakere City went so far as to write letters to the Treasury of the United Kingdom who were underwriting the Bank of Scotland - NZRPG’s principal funder at the time,” the decision said.
Matters go back 19 years when in 2004 Gunton’s company, IMF Westland, and Waitakere City signed a memorandum of understanding, agreeing to work together to achieve shared goals for Westgate Town Centre.
Gunton claimed the authorities had subsequently:
* Failed - when widening Fred Taylor Dr - to build the road and intersections in the way intended to integrate the original or old Westgate with the new town centre;
* Failed to build the connecting motorway bridge over SH16 at the new town centre’s northern end to cut traffic volumes on Fred Taylor Dr and within the new town centre;
* Failed to operate the town centre and adjacent roads as intended;
* Failed to upgrade Maki St South;
* Failed to accept there was an agreed location in the new town centre for the bus interchange;
* Failed to carry out contractual obligations and give effect to good faith obligations in contracts entered into by Waitakere City and Auckland Council.
Tensions arose in 2011 with letters and meetings between NZRPG and the council where the developer “expressed concern and frustration in relation to matters affecting the delivery and financial viability of the development of the town centre”.
But in their defence, the two statutory authorities challenged Gunton to prove his claims and also challenged the accuracy and reliability of aspects of his evidence. Many of the documents presented were irrelevant to determining contractual breaches, Lange said.
The defendants didn’t dispute the Westgate vision nor that it had not yet been achieved.
“They deny, however, that they are contractually responsible,” Judge van Bohemen said.
Some of the contractual obligations alleged by NZRPG do not exist. To the extent obligations alleged by NZRPG exist, those had either been satisfied either by the timely and satisfactory construction of required works or by good faith negotiations and their endeavours to reach agreement with NZRPG.
Ex-Waitakere Mayor Sir Bob Harvey, ex-deputy mayor Penny Hulse, ex-Waitakere City director Graeme Campbell and former Waitakere City consultant planner Mark Tollemache gave evidence for Gunton. The judge said that was a notable aspect of proceedings.
Fred Taylor Dr claim
Auckland Transport had reduced the volume of traffic on Maki St following traffic problems encountered into the town square after the 2015 opening of NorthWest mall, the decision said.
“I am satisfied that the restrictions on north to south traffic on Maki St across Fred Taylor Dr are the result of Auckland Transport exercising its regulatory powers to ensure traffic safety after NZRPG was unwilling to cooperate in finding a solution to the relocation of the Westgate Sign,” he said.
Both sides were using that big sign advertising retail tenancies as “leverage” in their wider disputes. That huge sign is above Transpower cables, the judge noted.
It was clear that there will only be a solution to problems with the Westgate sign and the consequent restrictions on traffic movement if the plaintiffs and Auckland Transport are prepared to cooperate and find a solution that satisfies the plaintiffs’ desire for prominent signage for the old or original Westgate without compromising traffic safety and responsible traffic management.
“Finding such a solution, however, is outside the scope of this proceeding,” the judge said.
Bus interchange claim
Lange said Auckland Transport had no contractual obligations for the bus interchange. It had been negotiating with Gunton over that until 2014 when he “broke off discussions with Auckland Transport, citing a range of issues of which the bus interchange was one”.
The judge didn’t accept Gray’s submission “that responsibility for the breakdown in negotiations on the bus interchange lies with Auckland Transport”.
Motorway connection claim
On funding the bridge to make the motorway connection, Lange for the authorities said there was no dispute that the link from Northside Dr West to Trig Rd was always intended. But it was not contractually committed to. Waitakere City could not commit to its construction because it had to go through the processes to buy the necessary land and secure the rights to the airspace over the motorway.
The early construction of the western embankment of the bridge provides no basis for inferring any contractual commitment to build the bridge and Northside Dr East at any particular time, Lange argued successfully.
The decision also cited NZRPG’s never-executed initial public offering plans, citing evidence from general manager Campbell Barbour: “Restructuring was to simplify the corporate structure in preparation for an initial public offering as part of a possible listing on the New Zealand Stock Exchange. In the event, the IPO did not proceed”.
In 2018, the company filed legal proceedings
The judge rejected NZRPG’s case.
Gunton’s calculation of damages was based on the assumption that all alleged breaches by the authorities would have been established and that, as a consequence, the Westgate Town Centre was dysfunctional, and he suffered losses of 15 per cent of the capital value of NZRPG’s properties in the new town centre and original Westgate and a 5 per cent reduction in rental income compared with the capital value and rental income had the alleged breaches not occurred.
But he wasn’t entitled to that money because he didn’t win.
“Because I have not upheld any of the plaintiffs’ claims for breach of contract, there is no basis for any award of damages. I find that the plaintiffs have not made out any of the contractual breaches alleged against the defendants,” the judge concluded.
Auckland Council and Auckland Transport were therefore entitled to costs and if there was any dispute about those, they should file within 30 working days, he said.
* Anne Gibson has been the Herald’s property editor for 23 years, having won many awards, written books, founded the National Business Review’s property section in 1985 and covered property extensively here and overseas. She joined the Herald in 2000.
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