Court of Appeal rules against Charlie's founder Lepionka over Hawke's Bay plot

Thursday 7th April 2016

The co-founder of the Charlie's juice company, Stefan Lepionka has lost a dispute with an architect over a Hawke's Bay lifestyle block in the Court of Appeal in a ruling that found Lepionka & Co "was arguably acting in bad faith".

The complex case centres around a 24-hectare block on the banks of the Tukituki river. The architect, Andrew Coltart, was granted an option to one undivided lot from a company called GLW Group in 2009 for $650,000. Despite not having security of title, he then spent more than $1.5mn on improvements. GLW later agreed to sell four other undivided lots to Lepionka & Co, a separate lot to Stefan Lepionka and another as trustees of a family trust for $4.63 million.

Last year, GLW defaulted on its mortgage to Westpac. Lepionka & Co was formed and bought the mortgage from the bank. Lepionka & Company cancelled the architect's option to buy an undivided lot and declined his offer to buy the property at market value.

At an earlier hearing in the High Court, Associate Judge Warwick Smith ruled that Coltart's equitable interest was extinguished in April 2015 by the mortgagee's valid cancellation of his right to buy the homestead lot and removed his caveats over the property. Lepionka & Company argued the architect's caveats were preventing it from completing the subdivision and giving title.

In their judgement today, Justice Ellen France, Justice Harrison and Justice Stephen Kos ruled that "from the moment of acquiring Westpac's charge the Lepionka mortgagee owed Mr Coltart and all others with an interest in the redemption of the mortgage a duty to act in good faith when exercising its powers of sale". However, they note that "we are satisfied that the Lepionka mortgagee was arguably acting in bad faith at the relevant times" in refusing Coltart's offer to buy the property at market value.

They rule that the Associate Judge erred in exercising his discretion to remove Coltart's caveats. However, they ordered his caveats to be removed on condition that new caveats are created against lots 2 and 7 of the proposed subdivision. Lepionka & Company was ordered to pay Coltart's costs.

(BusinessDesk)

BusinessDesk.co.nz

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