Interests associated with property developer David Henderson paid $100,000 to buy a South Canterbury second mortgage security over Tuam Ventures Ltd, one of his former Christchurch property developments. They get nothing in return after a High Court ruling that they cannot enforce the South Canterbury mortgage and they cannot share in some $3.5 million held by Tuam receivers.
Receivers took control of South Canterbury Finance Ltd assets in 2010 after a $1.6 billion government-funded payout to depositors. They took over South Canterbury’s $1.1 billion loan book, looking to sell these loans and repay government. FTG Securities Ltd, with David Henderson’s wife Kristine Buxton as director, paid $100,000 to buy up a South Canterbury second mortgage over Tuam Ventures Ltd, a Christchurch property company formerly controlled by Mr Henderson. He is currently barred by court order from managing any business until December 2022.
FTG’s rights to enforce this mortgage were challenged by Bank of New Zealand; a 2007 refinancing of Tuam Ventures when Mr Henderson was in control saw Canterbury Finance agree it could not sell its second mortgage without approval from first mortgagee BNZ. The High Court was told receivers of Tuam Ventures are currently holding cash of about $3.5 million for distribution to mortgagees. FTG Securities is not entitled to any of this money; a series of cases through the High Court and the Court of Appeal ruled South Canterbury’s agreement not to sell the mortgage was enforceable.
Government interests through Crown Asset Management Ltd alone are allowed to collect on South Canterbury’s second mortgage, Justice Osborne ruled. Evidence was given that FTG Securities borrowed $105,000 in 2015 from Christchurch-based Secured Finance Ltd to fund purchase of the currently uncollectable South Canterbury second mortgage.
Gower & Tubbs v. FTG Securities Ltd – High Court (10.08.20)
20.138
Post judgment note: BNZ is seeking to wind up FTG Securities Ltd alleging it is insolvent following non-payment of $43,133 legal costs awarded in favour of the Bank.