Eric Watson wins London High Court case against Kiwi business partner
Richlister Eric Watson has won a High Court decision against a former business partner and close friend who he fell out with over a property deal potentially worth "tens of millions" of dollars.
The Warriors rugby league club owner alleged Auckland businessman Julian Brown had breached contract of a London-based property investment firm Kauri Investments 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 euro into the redevelopment 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 as long as he has given Kauri Investments first right of refusal, and as long as the transactions concerned will not materially affect his duties as chief executive.
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 advisors at Cullen Investments was not prepared to accept the terms being offered.
In an email shown to the court, Brown had grown frustrated at what he saw was unnecessary delays.
"It's practically impossible to manage this with the responses and timeframes we've been given from you, and very frustrating to juggle deals involving tens of millions because we can't confirm the availability of a €200k facility which we've spent time and money already negotiating," Brown said in an email.
Justice Barling said one of the reasons for Watson's "somewhat lukewarm and indecisive reaction to Julian's request" to draw down the funds was because of 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 venture.
He told the High Court in London he had discussed plans to raise funding privately to invest in the project, described as the "German Opportunity" in court, at two separate meetings with Watson.
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 from the investment.
The investment only came to light 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 breach of contract charges against him and his brother Quentin Brown, a London-based lawyer who was also a director in Kauri Investments.
Justice Barling found that Brown had not disclosed his personal interest to Watson for fear of how he would react.
"A fear which on the evidence appears well-founded."
The judge 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," Justice Barling said.
The judge found Brown was in breach of his contract to Cullen Investments and Watson was entitled to "an account of profits" from the Berlin investment. He said another hearing may be required to determine costs.
Watson, who is also tied up in a high stakes court case in London against another former business partner Owen Glenn, 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 judges 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 Richlist.
- Sunday Star Times