CIT Holdings' liquidators took legal action against Keith Harris and Iain Nellies
alleging they acted improperly as receivers of CIT assets with a sweetheart
deal likely to allow developer Gregory Olliver easy possession. Mr Olliver has made multiple attempts to
shake off BNZ’s mortgage over his proposed development in the Auckland seaside
suburb of St Heliers. Receivership was
blocked. The liquidators application to
have Harris and Nellies barred for five years from taking on any work as receivers
was refused by the High Court.
Vivian Fatupaito and
Andrew Hawkes from KPMG were appointed liquidators of CIT Holdings Ltd last
year. CIT owns multiple properties in
Waimarie and Glover Streets, St Heliers.
The company is owned by two family trusts, one controlled by Mr Olliver
and the other by his former spouse, Sarah Sparks. Mr Olliver has made multiple efforts to buy
the Waimarie and Glover properties from CIT, failing to reach agreement with
Bank of New Zealand which is by far CIT’s biggest creditor.
The High Court was told
Mr Olliver had arranged in January 2014 for a general security deed to be
signed by CIT in favour of Bankhouse Trust Ltd, a company he controlled. After further negotiations to buy CIT’s
assets failed in early 2017, Mr Olliver had Bankhouse Trust appoint Mr Harris
and Mr Nellies as receivers of all CIT assets in respect of a $2.5 million debt
he says CIT owes Bankhouse Trust. After
learning of dealings between Mr Olliver and the receivers, the liquidators challenged
the receivers’ actions and sued to set aside the January 2014 general security
deed. Through the receivership, Mr
Olliver was seeking to buy the Waimarie and Glover properties using another
entity he controlled: GMO Trust. The
liquidators were critical of the price on offer, the favourable conditions allowing
Mr Olliver access to properties without payment of any deposit or any rent and
ties preventing the receivers from seeking alternative offers. They allege the deal was uncommercial;
nothing more than an option to purchase on favourable terms for GMO Trust, with
no value for creditors. No sale
eventuated. The liquidators allege Mr
Harris and Mr Nellies as receivers were in breach of the Receiverships Act,
failing to act in good faith and for a proper purpose.
Justice Jagose set
aside the January 2014 Bankhouse Trust security. It was established at a time when CIT
Holdings was insolvent. It had the
effect of elevating unsecured advances to the level of a secured debt. As sole director of both CIT Holdings and
Bankhouse Trust, Mr Olliver had full knowledge of CIT’s perilous financial
position, His Honour said. He also
prohibited any future receivership appointment being made under the January
2014 deed.
The liquidators
deferred their claim to damages for alleged breaches of the Receiverships Act.
Justice Jagose declined
to bar Mr Harris and Mr Nellies from acting in future as receivers. Even if they did not comply with their
statutory duties in this instance, he said, prohibition requires proof of
“persistent” non-compliance. The
liquidators said Mr Harris has no formal accountancy or legal qualifications,
is not an accredited insolvency practitioner and had no direct experience as a
receiver or liquidator before joining Insolvency Management (Auckland) Ltd in
2013.
Harris
v. BNZ – High Court (29.09.17)
17.127