Adjusting
the sale price in a mortgagee sale to accommodate their own side deal cost
developer Robert Bruce and financier Gregory Hayhow $2.5 million following a
High Court ruling that they compensate Whitford Properties Ltd, now in
liquidation.
Whitford Properties
went into receivership and liquidation in 2014 after failed attempts to
subdivide 8.6 hectares of rural land near Whitford Golf Club in south Auckland. Finance together with disposal of sewage and
waste water proved insurmountable hurdles.
The High Court was told
ANZ Bank owed $8.5 million began the process for a mortgagee sale. Whitford Properties’ shareholders had
guaranteed the loan. They looked to
refinance, with financier Mr Hayhow expressing interest. An initial unconditional deal fell through
with Mr Hayhow forfeiting to ANZ his $1.25 million deposit. Evidence was given of a series of agreements
in July 2014 with Mr Bruce and interests associated with Mr Hayhow offering to
buy Whitford’s land at prices varying from ten million dollars to $7.4
million. The deal was eventually done at
ten million. A cash payment of $7.4 million cleared what remained of the ANZ
debt and $2.56 million was written off against money due by Mr Bruce to Mr
Hayhow: the $1.25 million deposit previously lost and $1.3 million Mr Bruce
personally owed Mr Hayhow. The court was
told Mr Bruce had borrowed $330,000 from Mr Hayhow nine months earlier to
alleviate a cash flow crisis with interest charged at four hundred per cent.
The sale process was
structured as a mortgagee sale with ANZ’s rights transferred to Mr Bruce as
guarantor. Whitford Properties’
liquidator sued, claiming a failure to properly account for proceeds of the
mortgagee sale.
Justice Duffy ruled the
best evidence of a market price for Whitford’s land was the agreed sale price
at ten million dollars. There was a
surplus of $2.56 million after paying ANZ.
This surplus belonged to Whitford Properties, not to Mr Bruce or Mr
Hayhow. They were ordered to hand over to
Whitford’s liquidator the $2.56 million surplus for the benefit of Whitford
Properties’ creditors and shareholders. Companies office records show founding shareholder Mr Wayne Allen’s
family as a fifty per cent shareholder with a Mr Owen Harnish holding the
balance. Mr Harnish purchased his stake
at a 2014 mortgagee sale of Mr Bruce’s fifty per cent shareholding. Mr Hayhow held a mortgage over these shares.
Whitford
Properties v. Bruce – High Court (4.04.17)
17.032