Northlake Investments Ltd has lost the breach of contract case it took against Wanaka Medical Centre Ltd, relating to a "healthcare hub" planned for its subdivision in Wanaka.
It was seeking $338,309.21 in damages.
A six-day hearing was held in the High Court at Invercargill in October and November, and Justice Osborne issued his decision on Thursday.
He ordered judgement for Wanaka Medical and ordered Northlake to pay its costs and disbursements — amounts yet to be set.
Northlake Investments is part of property company Winton Group established by Chris Meehan, who is also Northlake’s chief executive.
Discussions between Northlake and Wanaka Medical began in 2016 involving, among others, Northlake general manager Marc Bretherton and Drs Andrew McLeod and Mark Feeney.
Wanaka Medical became Northlake’s preferred potential tenant for part of the hub and the parties signed a heads of agreement.
Wanaka Medical argued the heads of agreement was not a contract to lease premises at Northlake, which Justice Osborne accepted.
He noted it was drafted by Northlake’s own lawyers and it stated it was "subject to contract".
At a meeting of the parties in October 2016 there was a lot of discussion about keeping the building costs under control, and Justice Osborne noted Wanaka Medical said it would need the "commercial terms" before "anything concrete could be agreed".
According to the minutes of the meeting, Mr Meehan said Northlake "was wanting a 5% return on investment".
Northlake’s concerns about costs continued and Mr Bretherton emailed Mr Meehan: ... "the numbers look horrible".
While the Northlake project team explored ways to reduce costs, Wanaka Medical continued to wait for commercial terms.
In September 2017, Mr Meehan emailed Jane George, who was managing the design process for Northlake.
The email said in part: ‘‘I am more than a bit miffed that you guys have not yet agreed commercial terms with the tenants, and in most cases, still haven’t worked out what the hell those commercial terms should be.
"If the next package of information is not accurate, complete and coherent, you have my assurance that I will completely lose it."
Ms George "abruptly left the organisation", Justice Osborne said.
Delays followed but in a letter in September 2017, Mr Bretherton informed Wanaka Medical a 6% return on the cost of development would be considered a "minimum return" and the proposed annual rent would be $546.93 per sqm.
"Dr McLeod stated ... it was immediately clear that the rent was a lot higher than Wanaka Medical had anticipated," Justice Osborne said.
No "break fee" was in place to cover reimbursement of Northlake’s expenses "in the event of inconclusive negotiations".
Justice Osborne referred to a meeting where Mr Meehan reaffirmed the 6% return.
"Dr Feeney recalls a demand by Mr Meehan that Wanaka Medical accept the rent within seven days or he will build townhouses."
The doctors considered they had been delivered an ultimatum.
Justice Osborne listed the concerns the doctors had about the commercial terms and said they were reflecting on "whether they wished to be in a long-term relationship as tenant with this particular landlord".
"I am satisfied on the evidence of both Dr McLeod and Dr Feeney ... that they had each come to have genuine concerns about the style and future performance of Northlake (and in particular Mr Meehan)."
After a meeting of the board of Wanaka Medical, Dr Feeney advised Northlake it would not go ahead with the lease.
Justice Osborne found it was Mr Meehan’s own approach to negotiation at the meeting on November 2017 "which caused the disengagement which followed".
"Northlake is not entitled in this court to assert that both Drs McLeod and Feeney should have known Mr Meehan’s stated position of being non-negotiable on the 6% return on investment was mere bluff and somehow an invitation to make a counter-offer."
"Mr Meehan and Northlake have only themselves to blame for the fact that [Wanaka Medical] believed Mr Meehan when he said he was not negotiable on the rate of return."
Mr Meehan declined to comment.
