Justice Geoffrey Venning put some more flesh on the Godfrey property companies story yesterday with a 35-minute oral judgment in which he ordered that an interim liquidator be appointed to First City Trust No 2 Ltd, former corporate trustee for the 409-unit Harbour City apartment development on the corner of Fort & Gore Sts.
In photo, Harbour City is the central tower between the Lumley Centre & Vero Centre. Click to enlarge.
The application for an interim liquidator was made by the liquidators of 2 other Godfrey companies, Eden Crescent Ltd & The 100 Ltd. Their principal creditor is Inland Revenue, claiming a total $12.5 million.
Inland Revenue withdrew its own application to wind First City Trust No 2 up on 11 September after that company’s role as corporate trustee of Colin Godfrey’s First City Trust was transferred to a newly incorporated company, Gore Street Trustee Ltd.
Inland Revenue failed earlier this week to have an interim liquidator appointed to Gore Street Trustee, settling on Tuesday for that company’s sole director, Doug Williams, to be replaced by insolvency practitioner Anthony McCullagh, managing director of Horwath Corporate (Auckland) Ltd, and for some arrangements securing payments for itself & unsecured creditors.
Justice Venning made the order appointing the Official Assignee as interim liquidator at 2.35pm on Thursday, largely on the evidence of David Levin (McCallum Petterson Ltd) as a liquidator of Eden Crescent & The 100, developers of 2 apartment blocks near the Auckland High Court, one Eden Crescent and the other called Century on Anzac, on Anzac Avenue.
The judge said Inland Revenue was owed $7.3 million from The 100, $5.2 million from Eden Crescent, and the liquidators were concerned that money would be dissipated when Harbour City settlements started at the end of October.
In one affidavit, Mr Levin said he’d found $931,000 had been transferred to the First City Trust from Eden Crescent between 1 April 2003-26 November 2004 and it was shown as a loan, with no indication it was for goods or services. Another $2.2 million was similarly transferred from The 100.
At that time, Mr Godfrey controlled all the companies. He was banned from being a company director for 4Â½ years from 4 May, bankrupted on 23 August and is now living on the Sunshine Coast. Mr Williams replaced him as director of the corporate trustees, but not as shareholder.
And in submissions to Justice Venning on Wednesday, Bran Dickey, counsel for the Eden Crescent & The 100 liquidators, said Mr Godfrey still controlled the First City Trust because he was appointor, settler & principal beneficiary.
Mr Dickey argued that Mr Williams, as a director of Godfrey companies for some time before Mr Godfrey’s bankruptcy, had also shown a persistent failure to provide proper accounts & records as required under the Companies Act.
Justice Venning said Mr Williams had transferred the Fort St development from First City Trust No 2 to Gore Street Trustee 7 days after the liquidators of Eden Crescent & The 100 had filed statutory demands for $3.15 million. An application to set that aside had yet to be heard. Meanwhile, the judge said, “Mr Levin believed Mr Williams had acted to strip Eden Crescent & The 100 of their assets.”
Justice Venning said there was an issue as to whether the First City Trust No 2 trust deed contained an exclusion from indemnity clause because Mr Levin hadn’t been able to see the whole trust deed. It was something Mr Williams could easily have sorted out, the judge said.
Mr Williams had also said money flowing through First City Trust No 2 wasn’t in the form of loans. He believed Mr Godfrey had used the company as a call account to send funds to First City Beijing.
Counsel for First City No 2, Geoff Clews, had argued there was no urgency or need for an interim liquidator because the settlement on Tuesday between Gore Street, Mr Godfrey (as defendants), Gore Street’s 3 secured creditors (ANZ National Bank, Structured Finance (NZ) Ltd & Bridgecorp Ltd) effectively protected the positions of Eden Crescent & The 100. But Justice Venning agreed that would be so only if an exclusion clause on the indemnity didn’t exist.
But the judge said the appointment could be made if found necessary or expedient, and given the lack of faith the plaintiffs & the court could have in present management, it was definitely expedient to make the liquidation appointment.
21 September 2006: Judge to rule on call for interim liquidator at second Godfrey company
Attribution: Court hearings, story written by Bob Dey for this website.