Property developer Andrew Fonagy was ordered to pay $850,000 on his guarantee of funding for a central Christchurch hotel project. Nervous creditors are hunting down assets allegedly moved off-shore.
The High Court was told of financial difficulties surrounding Mr Fonagy’s $14.4 million project proposed for Colombo Street in Christchurch. In September 2015, a mortgagee sale was threatened. Looking to refinance, Mr Fonagy met with David Short, a retired lawyer working as a property consultant. New cash came from interests associated with Mr Short. As well as interest on the funding, the deal promised a share of the finished project. Mr Fonagy guaranteed payment. The project fell over in mid-2018, with secured creditors recovering $1.35 million in a mortgagee sale. Primary Services New Zealand Ltd, which provided a credit line organised by Mr Short, claims Mr Fonagy owes it $1.1 million. It took immediate steps to sue Mr Fonagy on a signed guarantee for $850,000 and started identifying what personal assets he might own.
In the High Court, Mr Fonagy denied liability. He said he was conned into signing the guarantee: Mr Short said he was lawyer, when he no longer held a practising certificate; funding to complete the project was promised by Mr Short, but not delivered. Associate judge Paulsen ruled there was no contemporary evidence of a promise to fund the project to completion. It was ‘fanciful and contrived’ to say Mr Short was not a lawyer, he said. Mr Short was a solicitor; albeit a solicitor who did not hold a current practicing certificate. Mr Fonagy’s complaint that unbeknown to him Mr Short was subject of a complaint to the Law Society was irrelevant, Judge Paulsen said. This had no bearing on Mr Fonagy’s decision to sign the guarantee. The $850,000 guarantee was enforceable.
Primary Services allege Mr Fonagy is looking to transfer assets out of New Zealand to Cook Islands’ company Ora Trustees Ltd. Ora acts as a corporate trustee for the benefit of off-shore beneficiaries.
Primary Services New Zealand Ltd v. Fonagy – High Court (18.03.20)
20.060