Property victory for ‘bitter’ rich-lister
Global credit crunch helps end friendship, writes Bevan Hurley.
Rich-lister Eric Watson has won a High Court decision against a former business partner and close friend with whom he fell out over a property deal potentially worth ‘‘tens of millions’’ of dollars.
The Warriors rugby league club owner alleged breach of contract by Auckland businessman Julian Brown at Kauri Investments, a London-based property investment firm they were a 50-50 partners in.
In 2008, at the height of the global financial crisis, Brown tried to convince Watson’s firm, Cullen Investments, to invest several hundred thousand euros into the redev- elopment of residential properties in Germany.
Brown was employed as Kauri Investments chief executive on a salary of $150,000, and was prohibited from making property transactions in his personal capacity unless he gave the company first right of refusal, and the transactions concerned did not materially affect his duties there.
Brown wanted an extra $312,000, but with cashflows of Cullen Investments tight at the time, according to a London High Court judge, Watson and his financial advisers were not prepared to accept the terms being offered.
In an email shown to the court, Brown had grown frustrated at what he saw as unnecessary delays.
Justice Barling said one of the reasons for Watson’s ‘‘somewhat lukewarm and indecisive reaction’’ was the ‘‘financial pressure Cullen found itself under as a result of the global financial crisis and credit crunch’’.
After numerous holdups, Brown decided to put his own money into the property venture. He testified that at two separate meetings with Watson he had discussed plans to raise funding privately.
However, Watson said Brown had not mentioned that he was going to personally invest in it.
Brown borrowed $156,000 to invest in the property development, and made half a million dollars.
His investment came to light only in March 2012, when a payment from Kauri Investments to Brown’s personal account was queried. In an email, Brown explained: ‘‘I didn’t disclose this because it was critical for me that Kauri survived and I believed, following my complex discussions with Cullen, that disclosing my participation increased the risk for further complications and therefore increased the risk of Kauri failing.
‘‘Without Kauri I would not achieve my UK visa.’’
Watson swiftly cut ties with Brown and brought a breach of contract case.
Justice Barling found Watson to be an honest witness, but said his evidence was ‘‘surprisingly vague at times, even allowing for the passage of time’’.
‘‘He was clearly embittered by what he saw as misconduct on Julian’s part.’’
The judge found Brown was in breach of his contract to Cullen and Watson was entitled to ‘‘an account of profits’’ from the investment. Watson declined to comment. Brown, who is now living back in Auckland and is chairman of the Takapuna Beach Business Association, said: ‘‘I’m very disappointed with the judge’s finding on this contractual issue. However the decision is currently under review so it’s not appropriate that I comment further at this time.’’
Watson, 58, had an estimated wealth of $448m in the 2017 Sunday Times Rich List.