Having purchased a fifty per cent stake in Whitford Properties Ltd at public auction enforcing a court judgment, Owen Harnish is suspicious an avalanche of claims against the company, now in liquidation, will leave his shareholding worthless. The High Court refused his application to inspect creditors’ claims.
Litigation surrounding Whitford Properties has kept the courts busy in recent years. The company went into receivership and then liquidation after failed attempts to subdivide 8.6 hectares of rural land near Whitford Golf Club in south Auckland. Whitford Properties founding shareholder Robert Bruce had his fifty per cent stake in the company forcibly sold to enforce a court judgment against him for an unpaid loan. Mr Harnish bought the Bruce shares at auction. At that point, Whitford Properties’ major asset was pending litigation over the manner in which its land was sold when threatened with a mortgagee sale. A series of court cases saw some four million dollars compensation paid to Whitford Properties’ liquidator. Whitford’s mortgaged land was sold in 2014 for ten million dollars to interests associated with financier Gregory Hayhow. The High Court was told this land was then onsold two years later for some $22 million.
Mr Harnish complains the Whitford Properties’ liquidator wrongly re-advertised for creditor claims after receiving the four million dollars compensation. This resulted in claims by unsecured creditors increasing roughly one hundred fold. What had appeared to be a solvent liquidation with a return for himself as shareholder was now potentially an insolvent liquidation with nothing for shareholders. He asked the High Court for permission to access the liquidator’s files. He alleges the liquidator has pre-judged some of these claims, to his detriment as a shareholder. The liquidator objected. Associate judge Smith refused access. The liquidator has the right to control the manner in which creditor claims are assessed. There was evidence of insolvency practitioners readvertising for creditor claims in some instances. They have a duty to ensure all creditors are identified. The court was told two large unsecured claims (one for one million dollars and another for $2.8 million) have been submitted; neither has been yet admitted for payment. The liquidator’s inquiries as to their legal validity are still underway. One $100,000 creditor claim submitted after readvertising has already been rejected.
Harnish v. Whittfield – High Court (29.10.18)
18.216