Hugh
Edward Staples Hamilton, lawyer and former mayor of Central Hawkes Bay, has
been convicted of being party to theft by a person in a special relationship
following the 2008 receivership of Belgrave Finance. Overzealous support of an important client
caused Hamilton to cross the line, documenting and facilitating related party
lending in breach of Belgrave’s debenture trust deed.
The 1200 investors in
Belgrave Finance have received just under ten cents in the dollar from the
receivership. Investigations identified
that some $12.5 million of Belgrave’s $30.7 million loan portfolio were related
party dealings as loans to entities associated with a Mr Raymond Schofield. Schofield was not a director of Belgrave, but
was the driving force behind the finance company. The High Court was told Schofield negotiated
the purchase of Belgrave, arranged the funding, selected the directors and
developed Belgrave’s ownership structure which saw Schofield ultimately control
the finance company.
Evidence was given
that Belgrave’s named directors did as they were told. If Schofield told them to jump, they would
probably jump, Hamilton told investigators.
The prospectus issued by Belgrave Finance promised potential investors
that any lending to related parties would not exceed two per cent of tangible
assets. By providing legal assistance,
Hamilton intentionally facilitated steps taken by Schofield to circumvent this
limitation the High Court ruled.
Evidence was given
that Hamilton did not participate in loan approval procedures within Belgrave
Finance, but he did implement loan instructions coming from the company. He completed the necessary documentation, at
times backdating documents at the request of directors to disguise the fact
that funds had already been advanced to interests associated with Schofield. In
some instances, loan funds passed through Hamilton’s trust account with
instructions for on payment.
Justice Faire ruled
that Hamilton knew Schofield was a related party. Hamilton was familiar with the related party
rules in the Belgrave prospectus. Back
in 2005 he had emailed Schofield a summary of “dos’ and don’ts’” warning him that
he was a related party in respect of Belgrave Finance. Schofield was an important client for Hamilton
and Hamilton knew from their ongoing relationship that Schofield effectively
controlled Belgrave and its lending decisions.
Many legal documents regarding Belgrave were sent direct to Schofield,
rather than to the company’s directors.
Justice Faire said
Hamilton’s motive for his actions may have been financial in the form of
continuing legal fees or may have been to appease an important client, but the
effect of his actions was to intentionally facilitate the theft from Belgrave
Finance by providing legal assistance.
R.
v. Hamilton – High Court (16.05.14)
14.022