Archive | Court

Trial ends with 2 more guilty of $41 million Celestion development fraud

An Auckland High Court jury yesterday found the owner of Waldorf Celestion apartment hotel developer Emily Projects Ltd, Leonard John Ross (51), and a small shareholder & representative of it, Michael James Wehipeihana (46), guilty of fraudulently obtaining a large bank loan to build the downtown Auckland block.

Mr Ross & Mr Wehipeihana were convicted on 3 charges of obtaining by deception & 2 representative charges of using forged documents, brought by the Serious Fraud Office.

They made false statements and used forged documents relating to apartment unit purchases to obtain a $41 million development loan from ANZ Bank NZ Ltd to allow Emily Projects to construct the building between Emily Place & Anzac Avenue, on the eastern fringe of Auckland’s central business district.

They’ve been remanded on bail until sentencing on 26 September.

2 other men associated with the project were both sentenced to 10 months’ home detention after each pleaded guilty to one representative charge of obtaining by deception.

The lawyer who acted for Emily Projects, Timothy Upton Slack (56), was sentenced last September. He was adjudicated bankrupt in 2013 and automatically discharged in April 2016.

Vaughn Stephen Foster (56), a self-employed consultant to Emily Projects, pleaded guilty just before the 8-week trial began and was sentenced in June.

Site bought from Blue Chip mortgagee

The site was already controversial, because Mr Ross, who’d developed property for Mark Bryers’ Blue Chip NZ Ltd, acquired the Celestion site at mortgagee sale from a lender to Blue Chip.

A Blue Chip company bought the 1081m² site for $4 million in 2004 and it was transferred in 2006 for $10.9 million to another of Mr Bryers’ companies.

Under Blue Chip, the development was known as the Emily and it was to have had 149 units. 85 were sold and investors paid an estimated $11.2 million in deposits.

Emily Projects bought the property after it was put up for mortgagee sale in 2008 by The NZ Guardian Trust Co Ltd, owed $4.475 million. The purchase price covered the Guardian Trust debt and Guardian Trust stayed in behind ANZ Bank as second mortgagee on the new project.

The Celestion was developed as an apartments hotel, containing 119 non-permanent-stay apartments and run by NZ Waldorf Apartments Ltd. It has 16 levels fronting Anzac Avenue and 18 levels in a second tower on Emily Place.

Emily Projects, 88% owned by Mr Ross, 3% by Mr Wehipeihana, went into voluntary liquidation on 22 December 2011. Liquidators Tim Downes & Greg Sherriff (Grant Thornton) said in their final report in 2015 they’d recovered $610,244 of assets. 2 unsecured creditors claimed $671,000 and 53 investor claims totalled $2,890,951.

The one distribution to unsecured creditors was 11.8c in the dollar for a total $420,310.

Earlier stories:
26 September 2017: Lawyer gets home detention for Celestion project finance deception
12 April 2017: Remand on Celestion development fraud allegations
17 February 2017: SFO alleges fraud in Celestion development loan deal
8 May 2009: Ross’ Emily Projects starts work on ex-Blue Chip site

Attribution: SFO release, Companies Register.

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Lawyer says interest in class action grows as steel mesh sentence awaited

Class action specialist, Auckland lawyer Adina Thorn, said yesterday Steel & Tube Holdings Ltd’s 24 guilty pleas last November relating to false & misleading representations about steel mesh had boosted interest in a proposed class action.

Steel & Tube pleaded guilty in November to 24 of 29 charges laid by the Commerce Commission relating to false & misleading representations concerning 500E earthquake-grade steel mesh. A sentencing hearing was held in the Auckland District Court in May but no sentence has been handed down yet.

Ms Thorn said: “This has led to further owners from across New Zealand signing up for a proposed steel mesh class action against Steel & Tube.

“Our registrations of interest are currently running at a high level and we expect that the sentencing itself will encourage more owners to join the proposed class action against Steel & Tube.

“The proposed action is funded, which means that while funding is in place owners will face no out-of-pocket costs, as all the legal, technical & court costs involved in a claim of this scale will be picked up by the funder in return for them receiving a share of any proceeds of success.”

Ms Thorn said the proposed class action was designed to deliver compensation for the stress & uncertainty for property owners who had ended up with non-compliant steel mesh in their homes & driveways: “The mesh is there forever. Everyone wants to know their home is compliant. Steel & Tube cannot give that assurance – we know the mesh is non-compliant. What we don’t know enough about is performance of that non-complaint mesh in an earthquake. That uncertainty is stressful & unacceptable. We are seeking for owners to be compensated for that.

“This mesh was sold between about March 2012 & April 2016 and much of it was used in the rebuilding of Canterbury following the earthquakes there. However, the mesh people were buying was supposed to be earthquake-grade, when it wasn’t.”

Link: Steel class action

Earlier stories:
23 May 2018: Review puts Steel & Tube ebit loss at $38 million
29 November 2017: Steel & Tube owns up to mesh label & testing guilty pleas
8 June 2017: Updated: Commission files 29 charges against Steel & Tube over mesh
8 April 2016: Steel & Tube undertakes dual mesh testing
5 March 2016: Suppliers recheck as commission questions steel mesh, ministry not worried

Attribution: Thorn release.

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Lau jailed 2 more years for flagrant building site & dwelling breaches

Property developer Ee Kuoh (Augustine) Lau, 43, was sentenced in the Auckland District Court yesterday to 2 years’ jail for transgressing resource management & building laws.

That’s on top of a jail term of 2 months & 2 weeks he’s serving for felling native trees. He was also adjudicated bankrupt on 10 May.

Auckland Council said the 2-year sentence ordered by Judge Craig Thompson was unprecedented, and a strong warning to others who would consider this type of offending. The council said the previous longest jail term handed down under the Resource Management Act was 6 months.

Mr Lau faced 17 charges under the Resource Management Act & 10 under the Building Act, in addition to charges under the Companies Act, for undertaking illegal development of 6 properties around Auckland.

Judge Thompson said Mr Lau had completely ignored risks identified by others, and rejected any suggestion that the offending was impulsive. Rather, it was calculated & long-term.

“The offences he has committed in these instances were committed for financial gain. They were premeditated, he knew exactly what he was setting out to do and he knew that what he was doing was unlawful. He continued to do it nevertheless.”

Charges relate to 6 Lau-managed properties

Mr Lau managed the development of a number of properties around the Auckland region. These charges related to 6 of those properties – the 3 worst in Flat Bush, Paremoremo & Otahuhu.

The property in Flat Bush was allowed a single dwelling under the district plan, but it was converted into 2 dwellings. 2 former classrooms & a relocated house were also moved onto the property. As a result, there were 8 dwellings on the property.

4 were connected to the existing sewerage disposal system, which was overloaded as a result. The other 4 were connected to a newly constructed system which was completely inadequate and discharged raw sewage to a slope above a stream, which was contaminated by the discharge. This discharge area was immediately adjacent to the houses and was unsecured, creating health risks & unpleasant odours for the tenants.

Mr Lau ignored court enforcement orders. As a result, the council said it had to remedy the breaches at its own cost.

At Paremoremo, a property with a single house & a garage was also permitted to have one dwelling & one minor dwelling. Mr Lau took over management of the property, converted the original house into 3 dwellings, the garage into another dwelling, and relocated a house onto the property which was made into 5 dwellings – a total of 9.

Again, almost-raw sewage from a constructed system was discharged onto land where it could have entered a stream, and all related enforcement proceedings were ignored.

At an Otahuhu property Mr Lau managed, 900m³ of earthworks were undertaken without preparation or compaction and without consent. The council said it was unstable & unsafe.

The fill material used included rubbish & debris, and the top layer contained asbestos fibre and fines & fragments of asbestos-containing material. Interim enforcement orders were issued & again ignored. Instead, a pile of material, including more asbestos, was flattened into the site.

Councillor: clear message about illegal antics

Council regulatory committee chair Linda Cooper said: “This strong decision of the court shows that Aucklanders don’t have to put up with illegal antics from dubious developers. It sends a clear message that these actions, which affect things like water quality & public health, are not acceptable and will not be tolerated.

“While the council encourages development to meet the current housing shortage, the rules are there for a reason. Our officers won’t hesitate to take action if you’re doing it illegally, at the expense of the environment.”

Council regulatory compliance manager Steve Pearce welcomed the outcome as it would be a significant deterrent for other property developers tempted to follow Mr Lau’s offending.

“This has been a difficult and significant case that the council has been working on for a number of years. We are pleased to have reached this point and received such a significant penalty from the court.

“We generally take a graduated approach to enforcement and will help people to comply where we can, either by giving advice & warnings first or giving them the opportunity to apply for any consents & permits that might be necessary.

“However, in cases such as this, where there are significant adverse effects and an offender who continually ignores the council’s requests, we will use all of the enforcement tools available to us, including pursuing offenders through the courts.”

Attribution: Council release.

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Stephen Gubb’s wife admits role in joint Christchurch fraud

Shirley Anne Johnston, 66, a Christchurch real estate agent & wife of jailed fraudster Stephen Rolf Gubb, has pleaded guilty to fraudulently obtaining commissions from the Selwyn District Council in Canterbury.

In the Christchurch District Court on Monday, Judge David Saunders remanded Ms Johnston on bail until sentencing on 20 September.

Mr Gubb, 62, a former Auckland property consultant, was jailed for fraud for a second time in May, this time for defrauding the Selwyn District Council over commission payments at its Izone business hub.

Mr Gubb was sentenced to 2 years 9 months in jail after admitting the charges, brought by the Serious Fraud Office. For his first fraud conviction, in Auckland in 2003 on fraud charges involving about $1.18 million, he was sentenced to 4 years’ jail.

The Serious Fraud Office evidence against Ms Johnston was that she obtained 13 commission payments from the Selwyn District Council between March 2007 & July 2015 for work she didn’t do. Nearly $150,000 of these payments was transferred into a bank account controlled by her & Mr Gubb, her husband & business partner.

Ms Johnston received the commissions on 13 land sales as a Phoenix Harcourts agent in Christchurch. However, she wasn’t the real estate agent for these property sales at Izone.

Mr Gubb, who was a property consultant at the business park, instructed Buddle Findlay to pay $300,829 in commissions to Phoenix Harcourts, which then paid Ms Johnston $149,094 for her purported work.

Mr Gubb was jailed for his part in the fraudulent scheme as well as a separate offence of submitting a false invoice to the Selwyn District Council.

Mr Gubb was employed by Hughes Developments Ltd as a property consultant. His primary role was to sell Izone land, leases and design-&-build packages.

Earlier story:
24 May 2018: Gubb jailed for fraud again

Attribution: SFO release.

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“Cynical & deliberate” repossession practices earn Allan Hawkins’ companies fines & refund orders, commission seeks banning orders

2 finance companies headed by former Equiticorp boss Allan Hawkins – Budget Loans Ltd & Evolution Finance Ltd – were fined $720,000 in the Auckland District Court yesterday on 125 charges under the Fair Trading Act.Judge David Sharp also ordered the companies to pay $53,000 emotional harm reparations to 9 victims and $38,000 in refunds & credits to borrowers for repossession tactics he described as “cynical & deliberate”.

The Commerce Commission is seeking banning orders against Mr Hawkins, now 76, and his elder son, Wayne Hawkins, who was also a director at the relevant times, following this sentencing & the earlier conviction of Budget Loans on 34 charges under the Fair Trading Act in 2010.

6 years of misrepresenting repossession rights

The Commerce Commission’s general counsel for competition & consumer, Mary-Anne Borrowdale, set out the companies’ practices. She said that, over 6 years from 2009 until 2014, Budget Loans misrepresented its right to repossess goods and recover interest & costs from borrowers. It also misrepresented amounts borrowers were required to pay under attachment orders and made misrepresentations about the benefits of refinancing existing loans.

Budget bought the distressed loan books of National Finance 2000 Ltd in 2006 and Western Bay Finance Ltd in 2008, and has twice been convicted for its handling of them. After the company was fined in 2010, it undertook to return $500,000 in overcharged interest & fees to borrowers.

In 2016, Budget Loans was convicted on 106 charges but 19 charges were dismissed. The Commerce Commission successfully appealed the dismissal decision, and Budget Loans’ application for leave to appeal to the Court of Appeal was dismissed in November 2017.

Mr Hawkins founded 1980s high-flier, the Equiticorp group. After its demise in the 1987 sharemarket collapse, he & other Equiticorp executives & an advisor were tried in relation to financing arrangements behind the group’s $166 million purchase of NZ Steel Ltd from the Government in 1987. Mr Hawkins was sentenced to 6 years’ jail in 1993.

After yesterday’s court hearing, Ms Borrowdale said: “The court acknowledged today that Budget Loans attempted to create cashflow by getting Western Bay & National Finance borrowers to pay as much as possible for as long as possible. It continually added costs & interest to loans and then repossessed essential goods from borrowers without notice when they couldn’t pay, regardless of whether it was legally entitled to do so.  “The costs of the repossession were, for the most part, higher than the value of the goods and sometimes Budget Loans simply threw repossessed goods away rather than selling them. It also obtained judgments against some borrowers, but continued to add interest & costs and demanded more from borrowers than the courts had awarded, and to misrepresent its right to repossess.

“Where loans were not secured, Budget Loans sought to convince some borrowers to sign new, secured loans by telling them that they would get a discount on their loan balance. However, the amount of the discounted loan was higher than the amount the borrower was actually required to pay.

“Budget Loans’ conduct & misrepresentations kept vulnerable borrowers in a cycle of debt & repossession. It knowingly engaged in illegal repossessions of essential items from people that it knew were already living in hardship. The financial & emotional distress caused by this conduct to borrowers & their families should not be underestimated.”

83 of the charges were for misrepresentations around repossession, including where there was no valid right to repossess a secured item of property, such as a vehicle or household goods, or where there was no outstanding loan balance to be paid.

“In some cases Budget Loans stripped houses almost bare. In other cases, it repossessed items that it should have known were of low value, and dumped them. Its own loan notes include such comments as ‘someone’s great idea to undertake an illegal repo’ and ‘debtor not to know we can’t repo’.”

29 charges were for adding interest & costs to a loan balance after repossession, when that is not allowed under the Credit Repossession Act.

Ms Borrowdale said: “One borrower declared herself bankrupt when told her loan had ballooned from about $9000 to $57,000. In fact she had less than $2500 to pay at that time. 10 charges were for misrepresentations about adding interest to loans, beyond amounts in attachment orders issued by the courts. One borrower’s loan balance was $8600 following an attachment order, but it was ‘recalculated’ to nearly $56,000.”

The final 3 charges were for misrepresentations about the benefits of refinancing with Budget Loans.

Allan Hawkins is now sole director of Budget Finance & its shareholder, Cynotech Securities Ltd. He & his wife, Laurel, own 99.98% of Cynotech.

He is also sole director of Evolution Finance. Its owner, the previously NZX-listed Cynotech Holdings Ltd, went into liquidation in 2013 after close funding supporters decided they’d no longer pay its overhead & infrastructure costs.

Earlier stories:
19 April 2017: Judge told to reconsider 19 dismissed charges against Hawkins loan companies
118 July 2016: Hawkins’ finance companies guilty on loan contract enforcement
 7 December 2014: Commission files criminal charges against 2 Allan Hawkins finance companies
9 November 2013: Commission tells Allan Hawkins’ finance companies to stop repossessions
31 July 2013: Hawkins goes to McDonald Vague for Cynotech liquidation
11 July 2013: Cynotech share trading halted after backers end support
15 June 2011: Cynotech loss increases as it clears decks
12 August 2010: NZX refuses Cynotech request for waiver
11 August 2010: Cynotech suspended
4 August 2010: Cynotech talks departure, NZX talks suspension
28 July 2010: “Welcome letter” from Hawkins’ Budget Loans to National Finance borrowers came with an illegal $15 fee
16 June 2010: Cynotech slips to loss
14 April 2010: Remaining Cynotech shares to move to NZAX
20 January 2010: Hawkins renews Cynotech privatisation bid
23 December 2009: Hawkins withdraws Cynotech bid after Takeovers Panel asks questions
21 April 2008: Cynotech doubles receivables book to $60 million-plus in 4 months
9 October 2006: Allan Hawkins buys National Finance (Payless Cars) loan book

Attribution: Commission release.

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Gubb jailed for fraud again

Former Auckland property consultant Stephen Rolf Gubb, 62, was sentenced to jail for fraud for a second time yesterday, this time for defrauding the Selwyn District Council in Canterbury over commission payments at its Izone business hub.

Mr Gubb admitted the charges in March and had been remanded in custody. In the Christchurch District Court yesterday, Judge David Saunders sentenced him to 2 years 9 months in jail.

For his first fraud conviction, in Auckland in 2003, he was sentenced to 4 years’ jail.

Serious Fraud Office director Julie Read said: “The sentence reflects the seriousness of offending which was not only deliberate, planned & long running, but a repetition of previous offending. Stephen Gubb defrauded a government body of $300,829, took advantage of his position and betrayed the trust his employer had placed in him. Mr Gubb was given an opportunity to rebuild his life following his previous fraud convictions but instead chose to offend again.”

As an employee of Hughes Developments Ltd, Mr Gubb sold land, leases & design-build packages for Izone in Rolleston, Christchurch.

The Serious Fraud Office charged Mr Gubb with fraudulently obtaining 13 commission payments of over $300,000 from the Selwyn District Council between March 2007 & July 2015. Nearly $150,000 of these payments were eventually transferred into a bank account controlled by Mr Gubb & his co-defendant, who has name suppression.

The Serious Fraud Office alleges that the co-defendant was complicit in obtaining the commission payments.

Mr Gubb also obtained $10,500 by submitting an invoice to the council for services that weren’t provided.

Mr Gubb’s previous prosecution by the Serious Fraud Office on fraud charges involved about $1.18 million. Victims then included the property consultancy where he was a director & shareholder, Grafton Group Ltd, and another company where he & his second wife, Helen, were shareholders, Beauford Properties Ltd.

Attribution: SFO release.

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Hawkins to pay $13.4 million to fix leaky new school

Justice Mathew Downs has ordered Hawkins Construction to pay $13.4 million + gst for remediation of a Botany high school which opened only in 2004.

Hawkins Construction North Island Ltd built the school’s buildings between 2003-09. The company’s name was changed to H Construction North Island Ltd in 2017, when Downer NZ Ltd bought the construction business from the McConnell family.

The claim was taken to the High Court by the Education Minister, Secretary for Education and the board of trustees of Botany Downs Secondary College.

Justice Downs said in his decision, out today: “The sum is not small, but Hawkins was paid approximately $28 million to build the school; pupils & teachers have not had the benefit of healthy code-compliant buildings for 8 years; and the award reflects the amount necessary to repair the school, not more.”

Judgment: Botany Downs Secondary College decision

  • More to come on this judgment once I’ve been through the detail.

Attribution: Judgment.

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First companies sentenced arising from steel mesh investigation

2 related companies, Timber King Ltd & NZ Steel Distributor Ltd, have been fined $400,950 for making false & misleading representations relating to their steel mesh products, which are used to strengthen buildings. NZ Steel Distributor imports steel from China and Timber King was the retailer.

They’re the first companies sentenced after Commerce Commission investigations into steel mesh sales, which began after the commission received a complaint from a Timber King customer in August 2015.

Auckland District Court judge Robert Ronayne heard the case in December and handed down his decision on Tuesday, fining Timber King on 5 charges and NZ Steel Distributor on 2 charges under the Fair Trading Act. The 2 companies pleaded guilty to making false, misleading & unsubstantiated representations relating to their TS10 steel mesh between June 2015 & February 2016.

From a starting point of $660,000, Judge Ronayne reduced the penalties by 10% for co-operation and 25% for early guilty pleas, and another 10% for claimed inability to pay a fine that big, although the judge was sceptical about the audit & accounting evidence provided to him.

Fake certificate

Judge Ronayne said the customer above bought 3 sheets of TS10 steel mesh from Timber King, noted the mesh had no tags and asked for a copy of the test certificate demonstrating compliance with the standard. After he received a photograph of a batch tag, the customer sought further verification of compliance. In reply, Timber King sent the customer a certificate on the letterhead of external building product testing laboratory SGS NZ Ltd.

Judge Ronayne: “As a result of further enquiries, it was revealed that the certificate was fake and had not been produced by SGS. SGS had not carried out testing of the mesh to determine compliance with the standard. Instead, the certificate had been created by an employee of Timber King using a genuine SGS test certificate that had been obtained in relation to testing of a different product and altering it so that it appeared to show that TS10 had been tested & found to comply.”

Jackie Liu is a director of both companies and, Judge Ronayne said, was for all intents & purposes the controlling mind of both companies. He owns 75% of the shares in Steel Distributor and effectively controls a 55% holding in Timber King through holding companies, Three Brothers Group Ltd & NZ Liu Family Trustees Ltd. He’s sole director of both.

Ringo Liu is also a director of both Timber King & Steel Distributor. He owns 25% of the shares in Steel Distributor and effectively controls a 45% holding in Timber King through Three Brothers.

This in a quake-prone country?

Judge Ronayne said: “It is quite obvious in New Zealand, given our history of earthquakes & the consequences of them, that there is a vital need for consumers to rely on representations as to standard compliance and, in particular, earthquake standard compliance.”

He concluded that the companies were “grossly negligent” in the steps they took to ensure that the product complied with the standard: “The creation of the fake certificate can only have been deliberately carried out in order to provide an additional false assurance of compliance with the standard.

“The use of non-compliant steel mesh, especially in the context of earthquake compliant mesh, has actual & potentially enormous consequences for consumers, for competitors and for the reputation of the building industry. Very strong specific & general deterrence is required in these circumstances.”

Mesh went into 32 homes

Timber King sold 2600 sheets of TS10 over a 9-month period, of which 614 are known to have failed both aspects of the standard and the others to have failed its testing requirements. Judge Ronayne said it appeared the 614 sheets went into the ground slabs for 31 homes and a suspended concrete floor of another home: “5 homes were considered to be high risk, 24 medium risk & 3 low risk. The 5 high risk homes were then referred to an engineer who considered one of them to be ‘of concern’. Obviously, this exercise has not been without cost.”

The judge added: “The misleading conduct appears to have been carried out with a focus to remain competitive in the market. It can therefore be assumed that this gave an unfair competitive advantage over compliant competitors.”

Background

The Commerce Commission has filed charges against a number of companies relating to false & misleading representations about 500E steel mesh. In 500E, the ‘E’ stands for earthquake, and the NZ Standard specifies strength & ductility (elasticity) requirements for steel reinforcing materials. The standard also specifies the procedures (ie, sampling & testing) that must be followed to comply including:

  • manufacturing methods that must be used by steel manufacturers
  • chemical, mechanical & dimensional requirements of mesh sampling & testing of each batch of mesh, and
  • identification & labelling of different grades of mesh.

To be sold in New Zealand as 500E grade steel mesh, the mesh must be produced in accordance with the requirements of the standard. If mesh is produced in any other way, it cannot be described as 500E mesh. The Ministry of Business, Innovation & Employment is the building regulator, and sets & enforces the standards & Building Code. The commission can investigate misleading or deceptive claims about compliance with the standard.

Other inquiries

The commission has carried out a series of investigations into steel mesh following the complaint in August 2015. Following its investigations:

  • Fletcher Steel Ltd was issued with a warning
  • United Steel Ltd & Pacific Steel (NZ) Ltd were issued with compliance advice
  • Brilliance Steel Ltd pleaded guilty to 20 charges and will be sentenced on 25 May
  • Steel & Tube Holdings Ltd pleaded guilty to 24 charges and is awaiting sentencing
  • The commission filed 59 charges against Euro Corp Ltd in December 2017.

Links:
Timber King & NZ Steel Distributor judgment
Fletcher Steel warning
United Steel & Pacific Steel compliance advice

Earlier stories:
29 November 2017: Steel & Tube owns up to mesh label & testing guilty pleas
8 June 2017: Updated: Commission files 29 charges against Steel & Tube over mesh
8 April 2016: Steel & Tube undertakes dual mesh testing
5 March 2016: Suppliers recheck as commission questions steel mesh, ministry not worried

25 April 2016: Commission lifts ‘stop’ on Euro Corp steel mesh

Attribution: Judgment, commission release.

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Judge overturns year-old highrise consent next to heritage substation because of non-notification

High Court judge Rebecca Ellis has set aside a year-old resource consent for a 10-storey 39.5m building Equinox Capital Ltd proposes to build in central Wellington because the owners of a 2-storey heritage-listed former substation next door weren’t notified.

In her decision issued last Wednesday, Justice Ellis wrote: “In summary, I consider: (a) Sydney St Substation Ltd should have been given limited notification of Equinox’s resource consent application; (b) there was a material error in the 14 October 2016 decision not to publicly notify Equinox’s resource consent application; and (c) there were material errors in the 14 October 2016 decision granting Equinox’s resource consent application.

“There have been no matters raised which persuade me I should not exercise my discretion to grant relief here. I therefore make orders setting aside the notification decisions & the substantive resource consent decision, all of which are dated 14 October 2016.”

The dispute concerns buildings (heritage & proposed) a few doors from the courthouse, on what was Sydney St until 1993 and is now Kate Sheppard Place in Thorndon, a street noted for its “Elizabethan & Jacobean” architecture.

The category II heritage building is the old Sydney St substation at 19 Kate Sheppard Place, which has historical significance as one of the first substations constructed to distribute electricity in Wellington after the Mangahao hydro power station began operation in 1924.

Justice Ellis said it also had “some architectural significance due to what has been described as its ‘quirky mixture of architectural styles’”.

The lower of its 2 storeys originally housed the transformers & other substation equipment. The upper level has always been a home. “That unusual & experimental combination of utilitarian & residential design is regarded as adding to its architectural interest. A heritage covenant was placed on the building in 2011.”

In 2013 the Government sold the substation building to Sydney St Substation Ltd, owned by Trevor & Jillian Lord. They renovated & strengthened the building to some acclaim, with the assistance of a Wellington City Council grant. The entirety of the building is now used for residential purposes.

Justice Ellis concluded: “There can be no real doubt that the substation’s heritage value was highly influential in the decision to purchase it, and to renovate it at some expense. To suggest that an adverse effect on the substation’s heritage value does not, equally, adversely affect its owner seems unattractive. So if there is a minor adverse effect on the heritage value of the building there is a minor adverse effect on Sydney St Substation Ltd.

“Even if there is some flaw in that logic, there remains the further & more substantive (“anticipated development model”) issue. The views I have expressed about that strongly support the conclusion that the adverse effects on the owner of the substation (in terms of the matters of which discretion is restricted under rule 13.3.4, namely design, external appearance, siting & placement of building mass) have been understated and are at least minor.

“On any of the above analyses, therefore, Sydney St Substation Ltd was an affected person and should have received limited notification of Equinox’s resource consent application.”

In contrast with the judge’s view, the council notification said: “There are no affected persons in respect of this application (sections 95B/95E). It is noted that neighbours have registered an interest in works occurring on the subject site. Neighbour interest does not deem them to be affected parties under the tests of the act or qualify as special circumstances under the act in this case.”

The judge said most other buildings in the vicinity were multi-level office blocks “of limited street appeal”. The Lords sought judicial review of Wellington City Council’s approval of resource consent “authorising the construction of another such building immediately adjacent to the substation, on a site which is presently a carpark. In short, Sydney St Substation Ltd says that the council was wrong to grant the consent and also wrong to even consider it on a non-notified basis. They say that the substation will be significantly adversely affected by the proposed construction.”

Equinox (Chong Du Cheng & Kerry Knight) has plans for 63 apartments, a 39-room hotel with ground-floor lobby and ground-floor commercial space with a total floor area of 32,422m².

An important factor in the judge’s consideration was that the proposed building would exceed the height limit of 35.4m in the “low city” area, set out in the district plan.

According to the district plan guidelines, “Where a new development adjoins a heritage building that is 4 storeys or less, its height should be not more than one storey above the heritage building, over an area extending approximately 5-8m along & back from the street frontage at the common boundary with the heritage building”.

Link: Substation judgment

Attribution: Judgment.

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Lawyer gets home detention for Celestion project finance deception

Lawyer Timothy Upton Slack (55) was sentenced to 10 months’ home detention today for his role in getting finance for the Celestion apartments hotel project in 2008.

The development by Emily Projects Ltd (Leonard Ross) was close to not proceeding in the early days after the global financial crisis had started to impact, for lack of sales.

ANZ Bank NZ Ltd agreed to advance $41 million under an agreement signed in December 2008, provided Emily Projects had qualified presales on 80 of the proposed 127 apartments, all buyers unrelated to the developer & with cash deposits.

In the Auckland High Court today, Justice Kit Toogood said Mr Slack gave the bank several undertakings & personal assurances “that you knew were blatant lies”.

The judge said: “Although you said there was minimum risk to the bank, it was for the bank to decide that…. Deliberate & planned deception increases your culpability.” He said the bank was likely to reconsider its lending procedures.

Mr Slack made false representations that the preconditions had been satisfied. In fact, Justice Toogood said, “Emily Projects had in fact achieved few if any of those presales. The letters of acknowledgment were entirely false. In fact no deposits had been paid and no cash deposits were held.”

The judge said Mr Slack “had no idea the deposits & letters of acknowledgment were false”, but he went on to provide several false undertakings that his law firm held deposit funds in its account. The firm charged Emily Projects $488,000 in fees for its work.

The bank also didn’t lose out. The project, between Emily Place & the foot of Anzac Avenue in the Auckland cbd, was completed, the bank collected interest on its loan and the development finance was paid back.

Mr Slack pleaded guilty on 1 September to one representative Crimes Act charge of obtaining by deception. Justice Toogood said the maximum jail term was 7 years, but the agreed starting point in setting penalty was 4 years’ jail.

He told Mr Slack: “You were disciplined by the Law Society in 2005 for another misdemeanour. That disqualifies you from any discount for good character.”

However, the judge discounted the prospective jail term by 16% for remorse & future consequences and took the discount to 25% for an early guilty plea, plus 20% for the “moderate” degree of support he gave the Serious Fraud Office, which prosecuted.

Justice Toogood told Mr Slack: “Your complicity was essential to the deception [but] you did not devise the fraud scheme yourself.”

The judge also said Mr Slack’s humiliation & loss of income – and there is doubt that he will retain his certificate to practise as a lawyer – added to the discount, reducing the potential jail term to 22 months: “That means you are eligible for home detention.”

Justice Toogood did not explain how a longer jail term translated into a shorter period of home detention, but commented: “I regard your reactions to your disgrace that you have real insight into your offending & its causes and pose no risk of reoffending…. Imprisoning you would serve no useful purpose.”

Mr Slack was adjudicated bankrupt in 2013 and automatically discharged in April 2016.

The other 3 defendants in this case – property developer Leonard John Ross and 2 men who worked for him, company director Michael James Wehipeihana and self-employed consultant Vaughn Stephen Foster – will face trial on 5 June 2018.

Justice Toogood told Mr Slack: “I have made no findings at all about the guilt or innocence of your codefendants.”

Earlier stories:
3 September 2017: Celestion finance deal lawyer pleads guilty
12 April 2017: Remand on Celestion development fraud allegations
17 February 2017: SFO alleges fraud in Celestion development loan deal
8 May 2009: Ross’ Emily Projects starts work on ex-Blue Chip site

Attribution: Court sentencing.

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