BusinessDesk report by Jonathan Underhill
General Finance has sought summary judgment against the mother of discharged Wellington bankrupt Terry Serepisos over some $275,000 owed on a defaulted mortgage, but her lawyer argued the mortgage lender ‘sabotaged’ the sale of the apartment and is to blame for the outstanding money.
Alliki Serepisos was the owner of a Wellington apartment financed via a mortgage with General Finance, but soon defaulted on the payments and the property was put up for sale. It sold in early May 2016 for $580,000, well below the valuation on which the mortgage had been provided. Before real estate firm Harcourts won the listing, it had appraised the value at $995,000 and evidence was given of a 2014 valuation by Telfer Young for about $715,000.
While there is no argument from the Serepisos family that the mortgage was in default, lawyer Kevin Smith argued that the mortgagee was the architect of its own misfortune by taking 18 months to sell the apartment and then failing to respond to a potential higher offer – before it had signed the sale and purchase agreement – that would have left Alliki owing very little.
Terry Serepisos was bankrupted in September 2011, when his portfolio of about 150 residential properties and commercial buildings was valued at $232.5 million, while his debts stood at $204 million. He was discharged from bankruptcy in October 2014. He became a high-profile celebrity in his heydey, holding the licence to the Wellington Phoenix football team and sponsorship of the 2009 Wellington Cup at Trentham racecourse. He is currently in the US, Smith told the court.
His mother’s lawyer Smith said Alliki was too elderly and frail to attend the hearing. He had initially sought an adjournment to the hearing in the High Court in Wellington and to rule himself out as her lawyer because he had acted for members of the family of the Harcourts Real Estate agent who handled the apartment sale but proceeded after Associate Judge Warwick Smith gave him a matter of hours to produce an affidavit, which Smith said wasn’t enough time.
Smith argued that General Finance hadn’t carried out its obligations as mortgagee in exercising the power of sale because it had failed to pursue a potentially higher offer. He said a Mr Chin had indicated in early May that he was interested in buying the apartment and was prepared to offer about $800,000 but had been unable to get access for a viewing.
Smith said the real estate agent had told Chin she didn’t have the key, an assertion later shown to be false. Associate Judge Warwick Smith repeatedly asked General Finance’s lawyer, Sean McAnally, why it hadn’t followed up on the potential higher offer before signing for the lower price.
McAnally said there was an offer on the table that might have been lost and that Chin hadn’t yet done due diligence on an apartment that was in a block which faced a range of issues including a low earthquake rating, leaky building concerns and high body corporate fees. “There was no reason to think Mr Chin was in a position to make an immediate offer,” he said.
The court heard there were a number of offers and one firm agreement before the apartment was eventually sold. They included one at $630,000 that was to settle in July 2015 but failed to close and proceedings were filed to recover the deposit, which would have been about $63,000. McAnally said that potential buyer is now in bankruptcy proceedings in Palmerston North.
McAnally said Chin was a friend of Terry Serepisos, which the defendant’s lawyer Smith denied. Smith also said there was no evidence the potential offer from Chin was a sham.
“He was very interested and wanted to proceed. The agent informed him they didn’t have a key. That effectively sabotaged the arrangement of a possible offer from Mr Chin. Perhaps a dishonesty in respect of that point. One wonders why.”
Associate Judge Warwick Smit reserved his decision.