Navigation

Archive | District court

Steel mesh supplier Brilliance fined for misleading representations

on Monday 20 August 2018 in Commerce Commission, Court, District court, Gainz, Regulation, Sectors 0

Auckland District Court Judge Robert Ronayne has fined Brilliance International Ltd (Wu Guanghui & Wu Donghui, both of Dannemora, Auckland) $540,000 for making false & misleading representations relating to its steel mesh products which are used to earthquake-strengthen buildings.

Following the judge’s decision, released on Friday, class action legal specialist Adina Thorn encouraged Brilliance steel mesh customers to join a proposed class action against several companies that have supplied non-compliant steel mesh product.

Judge Ronayne sentenced Brilliance on 20 charges brought by the Commerce Commission under the Fair Trading Act. Brilliance pleaded guilty to making false & misleading representations for its 147E steel mesh product, which it marketed & sold as being earthquake grade ‘500E’ steel mesh, between 30 September 2012 & June 2016.

11 charges were for making representations on the Brilliance website that were liable to mislead the public and on product tags that its 147E steel mesh complied with the Australian/NZ Standard for reinforcing steel suitable for structural use in an earthquake zone, when it did not comply.

The other 9 charges related to false & misleading representations on Brilliance’s website that the product had been tested by independent testing laboratory SGS NZ, when it had not. The charges relate to about 35 batches of 147E steel mesh, or 56,125 sheets.

Commission says non-compliance undermines NZ Building Code & Standards

Commerce Commission chair Dr Mark Berry said in response to the judgment: “The safety & durability of New Zealand’s buildings depend on them being constructed with materials that comply with the relevant standards. False & misleading representations about building products are a priority for the commission because compliance with standards is critical to both public confidence & safety,”

Judge Ronayne said in his judgment: “It is self-evident that standards are fundamentally important. The defendants’ conduct… plainly undermined the NZ Building Code & the objectives of NZ Standards in general.

“The defendant’s conduct is highly culpable because its behaviour has left consumers in a position of uncertainty, because it cannot now be known whether all of the [steel mesh] complied. This position of uncertainty is what the free trade agreement and the standard seek to avoid.”

Steel mesh cases

The commission filed charges against a number of companies relating to false & misleading representations about 500E steel mesh. In 500E, the ‘E’ stands for earthquake and the standard specifies strength & ductility (elasticity) requirements for steel reinforcing materials. The standard also specifies the procedures (ie, sampling & testing) that must be followed to produce steel of the specified standard, including:

  • manufacturing methods that must be used by steel manufacturers
  • chemical, mechanical & dimensional requirements of mesh
  • sampling & testing of every batch of mesh
  • identification & labelling of different grades of mesh.

To be sold in New Zealand as 500E grade steel mesh, the mesh must be produced in accordance with the requirements of the standard. If mesh is produced in any other way, it cannot be described as 500E mesh. The Ministry of Business, Innovation & Employment (MBIE) is the building regulator, and sets & enforces the standards & Building Code. The commission can investigate misleading or deceptive claims about compliance with the standard.

Investigations began in 2015

The commission has carried out a series of investigations into steel mesh following a complaint in August 2015. Following its investigations:

Links:
Commerce Commission case register, Brilliance Steel decision
Steel mesh class action

Earlier stories:
27 July 2018: Lawyer says interest in class action grows as steel mesh sentence awaited
26 April 2018: First companies sentenced arising from steel mesh investigation
29 November 2017: Steel & Tube owns up to mesh label & testing guilty pleas
8 June 2017: Updated: Commission files 29 charges against Steel & Tube over mesh
2 November 2016: Steel mesh testing rules tightened
25 April 2016: Commission lifts ‘stop’ on Euro Corp steel mesh
8 April 2016: Steel & Tube undertakes dual mesh testing
5 March 2016: Suppliers recheck as commission questions steel mesh, ministry not worried

Attribution: Decision, commission release, Thorn release.

Continue Reading

Lawyer says interest in class action grows as steel mesh sentence awaited

on Friday 27 July 2018 in Commerce Commission, Court, District court, Gainz, Regulation, Sectors, Securities – NZ, Steel & Tube

Class action specialist, Auckland lawyer Adina Thorn, said yesterday Steel & Tube Holdings Ltd’s 24 guilty pleas last November relating to false & misleading representations about steel mesh had boosted interest in a proposed class action.

Steel & Tube pleaded guilty in November to 24 of 29 charges laid by the Commerce Commission relating to false & misleading representations concerning 500E earthquake-grade steel mesh. A sentencing hearing was held in the Auckland District Court in May but no sentence has been handed down yet.

Ms Thorn said: “This has led to further owners from across New Zealand signing up for a proposed steel mesh class action against Steel & Tube.

“Our registrations of interest are currently running at a high level and we expect that the sentencing itself will encourage more owners to join the proposed class action against Steel & Tube.

“The proposed action is funded, which means that while funding is in place owners will face no out-of-pocket costs, as all the legal, technical & court costs involved in a claim of this scale will be picked up by the funder in return for them receiving a share of any proceeds of success.”

Ms Thorn said the proposed class action was designed to deliver compensation for the stress & uncertainty for property owners who had ended up with non-compliant steel mesh in their homes & driveways: “The mesh is there forever. Everyone wants to know their home is compliant. Steel & Tube cannot give that assurance – we know the mesh is non-compliant. What we don’t know enough about is performance of that non-complaint mesh in an earthquake. That uncertainty is stressful & unacceptable. We are seeking for owners to be compensated for that.

“This mesh was sold between about March 2012 & April 2016 and much of it was used in the rebuilding of Canterbury following the earthquakes there. However, the mesh people were buying was supposed to be earthquake-grade, when it wasn’t.”

Link: Steel class action

Earlier stories:
23 May 2018: Review puts Steel & Tube ebit loss at $38 million
29 November 2017: Steel & Tube owns up to mesh label & testing guilty pleas
8 June 2017: Updated: Commission files 29 charges against Steel & Tube over mesh
8 April 2016: Steel & Tube undertakes dual mesh testing
5 March 2016: Suppliers recheck as commission questions steel mesh, ministry not worried

Attribution: Thorn release.

Continue Reading

Lau jailed 2 more years for flagrant building site & dwelling breaches

on Thursday 12 July 2018 in Court, District court, Gainz, Sectors

Property developer Ee Kuoh (Augustine) Lau, 43, was sentenced in the Auckland District Court yesterday to 2 years’ jail for transgressing resource management & building laws.

That’s on top of a jail term of 2 months & 2 weeks he’s serving for felling native trees. He was also adjudicated bankrupt on 10 May.

Auckland Council said the 2-year sentence ordered by Judge Craig Thompson was unprecedented, and a strong warning to others who would consider this type of offending. The council said the previous longest jail term handed down under the Resource Management Act was 6 months.

Mr Lau faced 17 charges under the Resource Management Act & 10 under the Building Act, in addition to charges under the Companies Act, for undertaking illegal development of 6 properties around Auckland.

Judge Thompson said Mr Lau had completely ignored risks identified by others, and rejected any suggestion that the offending was impulsive. Rather, it was calculated & long-term.

“The offences he has committed in these instances were committed for financial gain. They were premeditated, he knew exactly what he was setting out to do and he knew that what he was doing was unlawful. He continued to do it nevertheless.”

Charges relate to 6 Lau-managed properties

Mr Lau managed the development of a number of properties around the Auckland region. These charges related to 6 of those properties – the 3 worst in Flat Bush, Paremoremo & Otahuhu.

The property in Flat Bush was allowed a single dwelling under the district plan, but it was converted into 2 dwellings. 2 former classrooms & a relocated house were also moved onto the property. As a result, there were 8 dwellings on the property.

4 were connected to the existing sewerage disposal system, which was overloaded as a result. The other 4 were connected to a newly constructed system which was completely inadequate and discharged raw sewage to a slope above a stream, which was contaminated by the discharge. This discharge area was immediately adjacent to the houses and was unsecured, creating health risks & unpleasant odours for the tenants.

Mr Lau ignored court enforcement orders. As a result, the council said it had to remedy the breaches at its own cost.

At Paremoremo, a property with a single house & a garage was also permitted to have one dwelling & one minor dwelling. Mr Lau took over management of the property, converted the original house into 3 dwellings, the garage into another dwelling, and relocated a house onto the property which was made into 5 dwellings – a total of 9.

Again, almost-raw sewage from a constructed system was discharged onto land where it could have entered a stream, and all related enforcement proceedings were ignored.

At an Otahuhu property Mr Lau managed, 900m³ of earthworks were undertaken without preparation or compaction and without consent. The council said it was unstable & unsafe.

The fill material used included rubbish & debris, and the top layer contained asbestos fibre and fines & fragments of asbestos-containing material. Interim enforcement orders were issued & again ignored. Instead, a pile of material, including more asbestos, was flattened into the site.

Councillor: clear message about illegal antics

Council regulatory committee chair Linda Cooper said: “This strong decision of the court shows that Aucklanders don’t have to put up with illegal antics from dubious developers. It sends a clear message that these actions, which affect things like water quality & public health, are not acceptable and will not be tolerated.

“While the council encourages development to meet the current housing shortage, the rules are there for a reason. Our officers won’t hesitate to take action if you’re doing it illegally, at the expense of the environment.”

Council regulatory compliance manager Steve Pearce welcomed the outcome as it would be a significant deterrent for other property developers tempted to follow Mr Lau’s offending.

“This has been a difficult and significant case that the council has been working on for a number of years. We are pleased to have reached this point and received such a significant penalty from the court.

“We generally take a graduated approach to enforcement and will help people to comply where we can, either by giving advice & warnings first or giving them the opportunity to apply for any consents & permits that might be necessary.

“However, in cases such as this, where there are significant adverse effects and an offender who continually ignores the council’s requests, we will use all of the enforcement tools available to us, including pursuing offenders through the courts.”

Attribution: Council release.

Continue Reading

Stephen Gubb’s wife admits role in joint Christchurch fraud

on Thursday 12 July 2018 in Court, District court, Fraud, Gainz, Sectors

Shirley Anne Johnston, 66, a Christchurch real estate agent & wife of jailed fraudster Stephen Rolf Gubb, has pleaded guilty to fraudulently obtaining commissions from the Selwyn District Council in Canterbury.

In the Christchurch District Court on Monday, Judge David Saunders remanded Ms Johnston on bail until sentencing on 20 September.

Mr Gubb, 62, a former Auckland property consultant, was jailed for fraud for a second time in May, this time for defrauding the Selwyn District Council over commission payments at its Izone business hub.

Mr Gubb was sentenced to 2 years 9 months in jail after admitting the charges, brought by the Serious Fraud Office. For his first fraud conviction, in Auckland in 2003 on fraud charges involving about $1.18 million, he was sentenced to 4 years’ jail.

The Serious Fraud Office evidence against Ms Johnston was that she obtained 13 commission payments from the Selwyn District Council between March 2007 & July 2015 for work she didn’t do. Nearly $150,000 of these payments was transferred into a bank account controlled by her & Mr Gubb, her husband & business partner.

Ms Johnston received the commissions on 13 land sales as a Phoenix Harcourts agent in Christchurch. However, she wasn’t the real estate agent for these property sales at Izone.

Mr Gubb, who was a property consultant at the business park, instructed Buddle Findlay to pay $300,829 in commissions to Phoenix Harcourts, which then paid Ms Johnston $149,094 for her purported work.

Mr Gubb was jailed for his part in the fraudulent scheme as well as a separate offence of submitting a false invoice to the Selwyn District Council.

Mr Gubb was employed by Hughes Developments Ltd as a property consultant. His primary role was to sell Izone land, leases and design-&-build packages.

Earlier story:
24 May 2018: Gubb jailed for fraud again

Attribution: SFO release.

Continue Reading

“Cynical & deliberate” repossession practices earn Allan Hawkins’ companies fines & refund orders, commission seeks banning orders

on Friday 1 June 2018 in Commerce Commission, Court, District court, Finance, Financiers, Gainz, Regulation, Sectors

2 finance companies headed by former Equiticorp boss Allan Hawkins – Budget Loans Ltd & Evolution Finance Ltd – were fined $720,000 in the Auckland District Court yesterday on 125 charges under the Fair Trading Act.Judge David Sharp also ordered the companies to pay $53,000 emotional harm reparations to 9 victims and $38,000 in refunds & credits to borrowers for repossession tactics he described as “cynical & deliberate”.

The Commerce Commission is seeking banning orders against Mr Hawkins, now 76, and his elder son, Wayne Hawkins, who was also a director at the relevant times, following this sentencing & the earlier conviction of Budget Loans on 34 charges under the Fair Trading Act in 2010.

6 years of misrepresenting repossession rights

The Commerce Commission’s general counsel for competition & consumer, Mary-Anne Borrowdale, set out the companies’ practices. She said that, over 6 years from 2009 until 2014, Budget Loans misrepresented its right to repossess goods and recover interest & costs from borrowers. It also misrepresented amounts borrowers were required to pay under attachment orders and made misrepresentations about the benefits of refinancing existing loans.

Budget bought the distressed loan books of National Finance 2000 Ltd in 2006 and Western Bay Finance Ltd in 2008, and has twice been convicted for its handling of them. After the company was fined in 2010, it undertook to return $500,000 in overcharged interest & fees to borrowers.

In 2016, Budget Loans was convicted on 106 charges but 19 charges were dismissed. The Commerce Commission successfully appealed the dismissal decision, and Budget Loans’ application for leave to appeal to the Court of Appeal was dismissed in November 2017.

Mr Hawkins founded 1980s high-flier, the Equiticorp group. After its demise in the 1987 sharemarket collapse, he & other Equiticorp executives & an advisor were tried in relation to financing arrangements behind the group’s $166 million purchase of NZ Steel Ltd from the Government in 1987. Mr Hawkins was sentenced to 6 years’ jail in 1993.

After yesterday’s court hearing, Ms Borrowdale said: “The court acknowledged today that Budget Loans attempted to create cashflow by getting Western Bay & National Finance borrowers to pay as much as possible for as long as possible. It continually added costs & interest to loans and then repossessed essential goods from borrowers without notice when they couldn’t pay, regardless of whether it was legally entitled to do so.  “The costs of the repossession were, for the most part, higher than the value of the goods and sometimes Budget Loans simply threw repossessed goods away rather than selling them. It also obtained judgments against some borrowers, but continued to add interest & costs and demanded more from borrowers than the courts had awarded, and to misrepresent its right to repossess.

“Where loans were not secured, Budget Loans sought to convince some borrowers to sign new, secured loans by telling them that they would get a discount on their loan balance. However, the amount of the discounted loan was higher than the amount the borrower was actually required to pay.

“Budget Loans’ conduct & misrepresentations kept vulnerable borrowers in a cycle of debt & repossession. It knowingly engaged in illegal repossessions of essential items from people that it knew were already living in hardship. The financial & emotional distress caused by this conduct to borrowers & their families should not be underestimated.”

83 of the charges were for misrepresentations around repossession, including where there was no valid right to repossess a secured item of property, such as a vehicle or household goods, or where there was no outstanding loan balance to be paid.

“In some cases Budget Loans stripped houses almost bare. In other cases, it repossessed items that it should have known were of low value, and dumped them. Its own loan notes include such comments as ‘someone’s great idea to undertake an illegal repo’ and ‘debtor not to know we can’t repo’.”

29 charges were for adding interest & costs to a loan balance after repossession, when that is not allowed under the Credit Repossession Act.

Ms Borrowdale said: “One borrower declared herself bankrupt when told her loan had ballooned from about $9000 to $57,000. In fact she had less than $2500 to pay at that time. 10 charges were for misrepresentations about adding interest to loans, beyond amounts in attachment orders issued by the courts. One borrower’s loan balance was $8600 following an attachment order, but it was ‘recalculated’ to nearly $56,000.”

The final 3 charges were for misrepresentations about the benefits of refinancing with Budget Loans.

Allan Hawkins is now sole director of Budget Finance & its shareholder, Cynotech Securities Ltd. He & his wife, Laurel, own 99.98% of Cynotech.

He is also sole director of Evolution Finance. Its owner, the previously NZX-listed Cynotech Holdings Ltd, went into liquidation in 2013 after close funding supporters decided they’d no longer pay its overhead & infrastructure costs.

Earlier stories:
19 April 2017: Judge told to reconsider 19 dismissed charges against Hawkins loan companies
118 July 2016: Hawkins’ finance companies guilty on loan contract enforcement
 7 December 2014: Commission files criminal charges against 2 Allan Hawkins finance companies
9 November 2013: Commission tells Allan Hawkins’ finance companies to stop repossessions
31 July 2013: Hawkins goes to McDonald Vague for Cynotech liquidation
11 July 2013: Cynotech share trading halted after backers end support
15 June 2011: Cynotech loss increases as it clears decks
12 August 2010: NZX refuses Cynotech request for waiver
11 August 2010: Cynotech suspended
4 August 2010: Cynotech talks departure, NZX talks suspension
28 July 2010: “Welcome letter” from Hawkins’ Budget Loans to National Finance borrowers came with an illegal $15 fee
16 June 2010: Cynotech slips to loss
14 April 2010: Remaining Cynotech shares to move to NZAX
20 January 2010: Hawkins renews Cynotech privatisation bid
23 December 2009: Hawkins withdraws Cynotech bid after Takeovers Panel asks questions
21 April 2008: Cynotech doubles receivables book to $60 million-plus in 4 months
9 October 2006: Allan Hawkins buys National Finance (Payless Cars) loan book

Attribution: Commission release.

Continue Reading

Gubb jailed for fraud again

on Thursday 24 May 2018 in Court, District court, Gainz, Sectors

Former Auckland property consultant Stephen Rolf Gubb, 62, was sentenced to jail for fraud for a second time yesterday, this time for defrauding the Selwyn District Council in Canterbury over commission payments at its Izone business hub.

Mr Gubb admitted the charges in March and had been remanded in custody. In the Christchurch District Court yesterday, Judge David Saunders sentenced him to 2 years 9 months in jail.

For his first fraud conviction, in Auckland in 2003, he was sentenced to 4 years’ jail.

Serious Fraud Office director Julie Read said: “The sentence reflects the seriousness of offending which was not only deliberate, planned & long running, but a repetition of previous offending. Stephen Gubb defrauded a government body of $300,829, took advantage of his position and betrayed the trust his employer had placed in him. Mr Gubb was given an opportunity to rebuild his life following his previous fraud convictions but instead chose to offend again.”

As an employee of Hughes Developments Ltd, Mr Gubb sold land, leases & design-build packages for Izone in Rolleston, Christchurch.

The Serious Fraud Office charged Mr Gubb with fraudulently obtaining 13 commission payments of over $300,000 from the Selwyn District Council between March 2007 & July 2015. Nearly $150,000 of these payments were eventually transferred into a bank account controlled by Mr Gubb & his co-defendant, who has name suppression.

The Serious Fraud Office alleges that the co-defendant was complicit in obtaining the commission payments.

Mr Gubb also obtained $10,500 by submitting an invoice to the council for services that weren’t provided.

Mr Gubb’s previous prosecution by the Serious Fraud Office on fraud charges involved about $1.18 million. Victims then included the property consultancy where he was a director & shareholder, Grafton Group Ltd, and another company where he & his second wife, Helen, were shareholders, Beauford Properties Ltd.

Attribution: SFO release.

Continue Reading

First companies sentenced arising from steel mesh investigation

on Thursday 26 April 2018 in Commerce Commission, Court, District court, Gainz, Regulation, Sectors

2 related companies, Timber King Ltd & NZ Steel Distributor Ltd, have been fined $400,950 for making false & misleading representations relating to their steel mesh products, which are used to strengthen buildings. NZ Steel Distributor imports steel from China and Timber King was the retailer.

They’re the first companies sentenced after Commerce Commission investigations into steel mesh sales, which began after the commission received a complaint from a Timber King customer in August 2015.

Auckland District Court judge Robert Ronayne heard the case in December and handed down his decision on Tuesday, fining Timber King on 5 charges and NZ Steel Distributor on 2 charges under the Fair Trading Act. The 2 companies pleaded guilty to making false, misleading & unsubstantiated representations relating to their TS10 steel mesh between June 2015 & February 2016.

From a starting point of $660,000, Judge Ronayne reduced the penalties by 10% for co-operation and 25% for early guilty pleas, and another 10% for claimed inability to pay a fine that big, although the judge was sceptical about the audit & accounting evidence provided to him.

Fake certificate

Judge Ronayne said the customer above bought 3 sheets of TS10 steel mesh from Timber King, noted the mesh had no tags and asked for a copy of the test certificate demonstrating compliance with the standard. After he received a photograph of a batch tag, the customer sought further verification of compliance. In reply, Timber King sent the customer a certificate on the letterhead of external building product testing laboratory SGS NZ Ltd.

Judge Ronayne: “As a result of further enquiries, it was revealed that the certificate was fake and had not been produced by SGS. SGS had not carried out testing of the mesh to determine compliance with the standard. Instead, the certificate had been created by an employee of Timber King using a genuine SGS test certificate that had been obtained in relation to testing of a different product and altering it so that it appeared to show that TS10 had been tested & found to comply.”

Jackie Liu is a director of both companies and, Judge Ronayne said, was for all intents & purposes the controlling mind of both companies. He owns 75% of the shares in Steel Distributor and effectively controls a 55% holding in Timber King through holding companies, Three Brothers Group Ltd & NZ Liu Family Trustees Ltd. He’s sole director of both.

Ringo Liu is also a director of both Timber King & Steel Distributor. He owns 25% of the shares in Steel Distributor and effectively controls a 45% holding in Timber King through Three Brothers.

This in a quake-prone country?

Judge Ronayne said: “It is quite obvious in New Zealand, given our history of earthquakes & the consequences of them, that there is a vital need for consumers to rely on representations as to standard compliance and, in particular, earthquake standard compliance.”

He concluded that the companies were “grossly negligent” in the steps they took to ensure that the product complied with the standard: “The creation of the fake certificate can only have been deliberately carried out in order to provide an additional false assurance of compliance with the standard.

“The use of non-compliant steel mesh, especially in the context of earthquake compliant mesh, has actual & potentially enormous consequences for consumers, for competitors and for the reputation of the building industry. Very strong specific & general deterrence is required in these circumstances.”

Mesh went into 32 homes

Timber King sold 2600 sheets of TS10 over a 9-month period, of which 614 are known to have failed both aspects of the standard and the others to have failed its testing requirements. Judge Ronayne said it appeared the 614 sheets went into the ground slabs for 31 homes and a suspended concrete floor of another home: “5 homes were considered to be high risk, 24 medium risk & 3 low risk. The 5 high risk homes were then referred to an engineer who considered one of them to be ‘of concern’. Obviously, this exercise has not been without cost.”

The judge added: “The misleading conduct appears to have been carried out with a focus to remain competitive in the market. It can therefore be assumed that this gave an unfair competitive advantage over compliant competitors.”

Background

The Commerce Commission has filed charges against a number of companies relating to false & misleading representations about 500E steel mesh. In 500E, the ‘E’ stands for earthquake, and the NZ Standard specifies strength & ductility (elasticity) requirements for steel reinforcing materials. The standard also specifies the procedures (ie, sampling & testing) that must be followed to comply including:

  • manufacturing methods that must be used by steel manufacturers
  • chemical, mechanical & dimensional requirements of mesh sampling & testing of each batch of mesh, and
  • identification & labelling of different grades of mesh.

To be sold in New Zealand as 500E grade steel mesh, the mesh must be produced in accordance with the requirements of the standard. If mesh is produced in any other way, it cannot be described as 500E mesh. The Ministry of Business, Innovation & Employment is the building regulator, and sets & enforces the standards & Building Code. The commission can investigate misleading or deceptive claims about compliance with the standard.

Other inquiries

The commission has carried out a series of investigations into steel mesh following the complaint in August 2015. Following its investigations:

  • Fletcher Steel Ltd was issued with a warning
  • United Steel Ltd & Pacific Steel (NZ) Ltd were issued with compliance advice
  • Brilliance Steel Ltd pleaded guilty to 20 charges and will be sentenced on 25 May
  • Steel & Tube Holdings Ltd pleaded guilty to 24 charges and is awaiting sentencing
  • The commission filed 59 charges against Euro Corp Ltd in December 2017.

Links:
Timber King & NZ Steel Distributor judgment
Fletcher Steel warning
United Steel & Pacific Steel compliance advice

Earlier stories:
29 November 2017: Steel & Tube owns up to mesh label & testing guilty pleas
8 June 2017: Updated: Commission files 29 charges against Steel & Tube over mesh
8 April 2016: Steel & Tube undertakes dual mesh testing
5 March 2016: Suppliers recheck as commission questions steel mesh, ministry not worried
25 April 2016: Commission lifts ‘stop’ on Euro Corp steel mesh

Attribution: Judgment, commission release.

Continue Reading

Judge told to reconsider 19 dismissed charges against Hawkins loan companies

on Wednesday 19 April 2017 in Court, Credit, District court, Finance, Gainz, High Court, Sectors

The Commerce Commission has won its appeal against a district court decision to dismiss 19 charges against 2 finance companies controlled by former Equiticorp chief Allan Hawkins.

In the Auckland High Court, Justice Rebecca Edwards found in the commission’s favour in a judgment issued on 11 April and remitted the 19 charges back to Auckland District Court judge David Sharp for determination.

Judge Sharp found the 2 companies guilty on 106 charges last year. Dismissing the other 19, he said they concerned representations about the companies’ right to charge interest & costs on contracts entered into before 6 June 2015, following repossession & sale of borrowers’ property where Budget & Evolution had security interest over multiple items.

The commission’s case was that, for loans entered into before 6 June 2015, lenders were prohibited under the Credit (Repossession) Act from charging interest & costs after the first security item had been repossessed & sold. Budget & Evolution argued that where a loan was secured over multiple items, all items had to be repossessed & sold before they needed to stop charging interest & costs.

Budget & Evolution also appealed all 106 convictions on multiple grounds, but Justice Edwards rejected all appeals.

Mr Hawkins headed the Equiticorp finance group in the 1980s but, after the 1987 sharemarket collapse, he ended up in civil & criminal trials over the group’s activities and was sentenced to 6 years’ jail for fraud.

He formed the Cynotech group of finance companies about 12 years ago, using the shells of his 1980s companies.

Mr Hawkins’ listed company, Cynotech Holdings Ltd, was delisted in September 2013 after his private company, Cynotech Securities Ltd, acquired 71% of the shares in 2010 in a bid to fully privatise it. In July 2013, Cynotech Holdings went into liquidation after his backers ended their support.

Mr Hawkins resigned as sole director of Budget Loans on 9 July 2013 but was reappointed on 13 August 2013. He remains a director of Broadway Mortgage Custodians Ltd, Cynotech Finance Ltd & Evolution Finance Ltd, and is one of 4 directors of Budget Loans Group Ltd (renamed from Cynotech Securities Group Ltd in July 2013; in liquidation November 2013).

Link:
Commerce Commission enforcement response register, including judgments

Earlier stories:
18 July 2016: Hawkins’ finance companies guilty on loan contract enforcement
17 December 2014: Commission files criminal charges against 2 Allan Hawkins finance companies
9 November 2013: Commission tells Allan Hawkins’ finance companies to stop repossessions
11 July 2013: Cynotech share trading halted after backers end support
28 July 2010: “Welcome letter” from Hawkins’ Budget Loans to National Finance borrowers came with an illegal $15 fee

Attribution: Commission release, judgments, Companies Register.

Continue Reading

SFO alleges fraud in Celestion development loan deal

on Friday 17 February 2017 in Apartments, CBD, CBD and fringe, Court, District court, Gainz, Learning Quarter, Market, Neighbourhoods, Sectors

The developer of the Waldorf Celestion apartments hotel at the foot of Anzac Avenue in Auckland, Tasman Cook Ltd owner Leonard Ross, and 3 associates were charged in the Auckland District Court yesterday on 4 Crimes Act counts of obtaining by deception and 2 of using forged documents.

The defendants with Mr Ross (50) are company director Michael James Wehipeihana (45), self-employed consultant Vaughn Stephen Foster (54) & one other. Their next appearance in court is scheduled for Wednesday 12 April.

The Serious Fraud Office, which laid the charges, said name suppression had been lifted on 2 of the defendants and wasn’t sought by another.

SFO director Julie Read said the charges arose in relation to allegedly making false statements & using forged documents to obtain a credit facility from the ANZ Bank NZ Ltd to allow the project company, Emily Projects Ltd, to develop the Waldorf Celestion, which opened in 2009. It’s alleged that a loan facility of about $40 million was obtained.

“The SFO alleges that the defendants conspired to mislead ANZ to secure a loan facility. The banks are entitled to expect that businesses will provide accurate information in support of their loan applications and a failure to do so may have cost implications for all.”

Emily Projects, 88% owned by Mr Ross, went into voluntary liquidation on 22 December 2011. Original liquidator Chris Horton was replaced in 2014 by Tim Downes & Greg Sherriff (Grant Thornton), who said in their final report in 2015 they’d recovered $610,244 of assets. 2 unsecured creditors claimed $671,000 and 53 investor claims totalled $2,890,951.

The one distribution to unsecured creditors was 11.8c in the dollar for a total $420,310.

The whole project was controversial because Mr Ross, who’d developed property for Mark Bryers’ Blue Chip NZ Ltd, acquired the Celestion site at mortgagee sale from a lender to Blue Chip.

A Blue Chip company bought the 1081m² site between Anzac Ave & Emily Place, on the eastern fringe of the cbd, for $4 million in 2004 and it was transferred in 2006 for $10.9 million to another of Mr Bryers’ companies.

Under Blue Chip, the development was known as the Emily and it was to have had 149 units. 85 were sold and investors paid an estimated $11.2 million in deposits.

Emily Projects bought the property after it was put up for mortgagee sale in 2008 by The NZ Guardian Trust Co Ltd, owed $4.475 million. The purchase price covered the Guardian Trust debt and Guardian Trust stayed in behind ANZ Banking Group Ltd as second mortgagee on the new project.

Earlier stories:                    
9 October 2009: Apartments at centre of Blue Chip case go on market
8 May 2009: Ross’ Emily Projects starts work on ex-Blue Chip site

Attribution: SFO release.

Continue Reading

SFO charges former Henderson solicitor Edward Johnston

on Wednesday 27 April 2016 in Court, District court, Gainz, Sectors

Former Henderson solicitor Edward Errol Johnston (59) appeared in the Auckland District Court yesterday on 3 charges of dishonestly taking or using document, brought by the Serious Fraud Office. He didn’t enter a plea and was remanded until Tuesday 17 May.

Mr Johnston was struck off by the Lawyers & Conveyancers Disciplinary Tribunal in 2013.

The charges relate to properties Mr Johnston owned in December 2011-January 2012, on which his bank loan repayments had fallen into arrears. The SFO alleges that, when faced with a requirement to reduce his debt, he submitted false sale agreements to his bank, which accepted the fictitious transactions, when, in reality, the properties were either sold for a higher price than he’d stated or transferred to another trust and refinanced with a loan from another bank. In January 2012, Mr Johnston submitted an allegedly false statement of assets & liabilities to the bank when obtaining the refinanced loan.

Mr Johnston was a sole practitioner in Henderson under the name Ed Johnston & Co. He was adjudged bankrupt in November 2012 and struck off the role of barristers & solicitors in July 2013. He was a director & shareholder of a long list of companies which owned properties around Auckland.

Attribution: SFO release.

Continue Reading
WordPress Appliance - Powered by TurnKey Linux