Published 1 June 2011
Updated 7 June 2011
The High Court was told on 31 May insolvent Auckland property developer David Henderson had signed a personal guarantee for a loan to the company which bought Victoria Park Market from him, and where he is working as project manager on the redevelopment.
This guarantee was on a loan from Number 120 Ltd, a Westpac NZ Ltd company, which had risen from $49.6 million to $63 million before falling back to $60 million on a creditor’s claim form presented in Mr Henderson’s second debt-compromise proposal.
The sharp & unexplained increase in this loan was one of the reasons cited by BankWest counsel Daniel Hughes for opposing Mr Henderson’s new insolvency proposal. Counsel for Mr Henderson, Daniel Grove, later explained that the increase wasn’t all an interest charge but included further advances.
Update: That matter wasn’t taken further in court. However, Mr Henderson said later: “Number 120 didn’t advance any money. It’s just a continuation of a guarantee for the old advance (from Westpac to his company). When that property was sold they would not release their mortgages. So it continued under my guarantee.”
Second update: As the argument over Mr Henderson’s second proposal began, Associate Judge Jeremy Doogue issued a costs order against Mr Henderson for the hearing of his first proposal last September and in February.
Associate Judge Doogue made an order for costs on a standard 2B basis (without setting out the dollar figures) against Mr Henderson, as the applicant, but rejected a claim for augmented costs because some creditors (notably BankWest) hadn’t been served properly. The judge also rejected claims by BankWest & Inland Revenue for costs orders against the scheme’s trustee, accountant David Ross.
BankWest, a creditor arising from its role as financier for a Sydney project which collapsed as the global finance crisis hit, didn’t receive the documents for Mr Henderson’s first insolvency proposal of $1.5 million to be paid over 3 years, while a second company for which he’s acting, Downer Construction Ltd, was excluded from voting on both proposals.
In court on 31 May, Mr Hughes told Associate Judge David Abbott that Associate Judge Doogue had found, in his decision to decline the first proposal, that if BankWest’s debt had been counted the proposal would have been defeated.
When it came time for the second proposal – essentially the same thing, but with different numbers on creditors’ proofs of debt – BankWest’s claim was reduced from $A26 million to $A13 million, the result of sale of the Sydney property.
Mr Henderson squeaked home on the second proposal by a margin of 0.68% over the required 75% threshold by value of creditors voting on it. BankWest and Inland Revenue continue to oppose any proposal Mr Henderson puts up, but yesterday’s hearing before Associate Judge David Abbott was not, after all, about the merits of the scheme but about 2 adjournment proposals.
Mr Grove opposed Inland Revenue’s application for an adjournment, sought to allow more time to present evidence and consider votes at the creditors’ meeting. In the second application, Inland Revenue counsel Paul Murray sought a trial on a preliminary question: whether or not the voting threshold requirements were met at the second creditors’ meeting in April.
Associate Judge Abbott said he would resolve the first issue first – Inland Revenue’s application for an adjournment – and reserved his decision on that. Once decided on that, he said he’d rule on the application for trial of the preliminary question, which Mr Murray said would save time in the long run.
Mr Henderson’s first proposal was considered by creditors in March 2010. He’s developed numerous apartment buildings around Auckland but redevelopment of Victoria Park Market was his last project. His company, Kitchener Group Ltd, bought the market for $14.1 million at the beginning of 2004. In 2007, Mr Henderson said he was assuming the role of development manager for it, instead of being the boss of a company working on the project. The $200 million project would include more than 100 freehold apartments, enhanced retail & restaurant facilities and become “an attraction where locals & tourists alike shop, live, work & play,” he said.
In Mr Henderson’s first insolvency proposal, Westpac was listed as his second-biggest creditor, owed $31.3 million (18.8% of acknowledged debt). The bank agreed to support the new market project.
The property was sold last year to a consortium of investors under the entity Victoria Quarter No 1 Ltd for about $25 million, half of a package which also contained other assets. Victoria Quarter No 1 is fronted by director & shareholder Mike Toepfer, a lawyer who moved to Wanaka this year after 17 years at Hesketh Henry in Auckland, where he led the commercial property team.
19 April 2011: Update: Henderson gets further bankruptcy reprieve
19 April 2011: Henderson gets bankruptcy reprieve
12 April 2011: Henderson defers creditorsâ€™ meeting
31 March 2011: Henderson holds Inland Revenue at bay with insolvency scheme
18 February 2011: Judge reserves decision on Henderson debt proposal
22 September 2010: Adjourned hearing leaves Henderson unbankrupted, uncompromised
9 February 2010: Henderson wins reprieve from bankruptcy with last-minute scheme
Want to comment? Go to the forum.
Attribution: Court hearing, story written by Bob Dey for the Bob Dey Property Report.