Attempted use of receivership as leverage by property developer Gregory Olliver in an acrimonious relationship property dispute with his former wife saw the Court of Appeal ruling Keith Harris and Iain Nellies were invalidly appointed as receivers of CIT Holdings’ assets and that they were not entitled to payment of their costs and expenses from CIT.
In 2016, CIT Holdings Ltd was put into liquidation by Inland Revenue for unpaid tax. CIT owned adjoining properties on Waimarie Street in the Auckland seaside suburb, St Heliers. Liquidators KPMG have spent two years negotiating with several players having an interest in CIT: Inland Revenue (who put up cash to help with the marketing of Waimarie Street); Bank of New Zealand (having a first mortgage over the properties); Bankhouse Trust Ltd (controlled by Mr Olliver and claimed to be a secured creditor of CIT Holdings) and warring spouses Gregory Olliver and Sarah Sparks as beneficial owners of trusts controlling CIT Holdings.
Selling Waimarie Street proved problematic with litigation delaying progress. The Court of Appeal was told Mr Olliver put commercial pressure on the liquidators, trying to force sale of selected CIT Holdings’ assets to him. When that failed, he threatened to have receivers appointed under a general security deed he held through Bankhouse Trust. In March 2017, Messrs Harris and Nellies were appointed. As receivers, they agreed to a highly conditional sale of CIT assets to GMO Trust Ltd, a company associated with Mr Olliver.
It all unravelled. The general security deed was invalidated by the High Court; it had the effect of elevating unsecured advances to the level of a secured debt. Liquidators KPMG challenged Mr Olliver’s appointment of receivers. The Court of Appeal ruled the appointments were invalid. Mr Olliver had acted in bad faith. Part of the deal with GMO Trust was sale by the receivers of legal claims CIT Holdings was pursuing against Ms Sparks and trusts associated with her. The principal purpose, perhaps even the sole purpose, of the receivership was a means for Mr Olliver to get control over these claims to debts due by Ms Sparks to CIT Holdings, the Court of Appeal said.
The receivers’ appointment was invalid. They had no right to charge costs of the receivership to CIT Holdings, the Court of Appeal ruled. This does not preclude the receivers getting payment from Bankhouse Trust if the Trust did agree to cover costs when appointing them. Their final receivers’ report filed at the Companies Office does not itemise their costs.
Fatupaito v. Harris – Court of Appeal (14.11.18)
18.225