Published 8 June 2011
Justice Mary Peters reserved her decision yesterday on whether to allow the Official Assignee’s application to extend land developer Kim Spencer’s second bankruptcy by another 3 years.
The judge closely questioned Crown counsel Nick Malarao on why any extension should be granted when the under-resourced Official Assignee had done little in the past 2 years to advance its investigation of Mr Spencer’s affairs.
She gave Mr Malarao until 2pm on Friday to file a further affidavit as to the assignee’s future intentions.
Mr Malarao began a public examination of Mr Spencer in the Auckland High Court yesterday by asking him a question out of page 1245, volume 6, of the hefty document file relating to the bankruptcy.
After a morning of questioning, some going back to whether money that disappeared during his first bankruptcy ended up in his wife’s family trust, Mr Spencer left the witness box and carried on out the door of the court. Called back by Justice Peters, Mr Spencer turned down an invitation to stay to hear Mr Malarao’s submissions, which continued into the late afternoon.
“I don’t really understand it,” Mr Spencer told the judge, adding that his lawyer wasn’t there to help, so he left.
A couple of hours further on, Justice Peters told Mr Malarao: “The point I’m really interested in hearing is where to from here if the term of the bankruptcy is extended. Is that covered in here (the 6 volumes of documents)?”
Despite the large volume of paper amassed on Mr Spencer’s affairs, Mr Malarao conceded that investigations hadn’t proceeded as well as they ought to have – and hadn’t proceeded “for the last couple of years” – because the Official Assignee was short of money.
Justice Peters: “He hasn’t been asked any questions for 3 years now. It’s difficult to say he’s not co-operating until today. It would be different if the Official Assignee were writing to him every 6 months and getting ‘I don’t recall’ or no answers back…..
“Some constructive purpose has to be served in extending the duration of a person’s bankruptcy, either because everything they touch has a history of turning to dust, or there’s an anticipated course of action by the Official Assignee of where this is going to go.”
Mr Spencer was bankrupted the first time from 1997-2000 and again on 1 August 2007. Ordinarily, under an automatic discharge, he would have been released from the second bankruptcy 10 months ago.
On the way through questioning, Mr Malarao established that Mr Spencer lived on a farm at Vipond Rd, just off State Highway 1 between Te Hana & Topuni north of Wellsford, which was managed by his partner, Robyn Todd.
The farm’s owner was Honk Cows Ltd (now called TG Cows Ltd), a company in the Honk group of Andrew Tauber & Paul Webb.
Mr Spencer said he had “probably got the longest hours and I would be classed as the biggest lackey – fix things, milk cows, do whatever” – but he wasn’t paid: “Mr Tauber will not employ me whilst I’m bankrupt. He loans me money until I am no longer bankrupt.” Mr Spencer said those loans amounted to $4000/month, without a written contract.
Mr Malarao tried to establish that Mr Tauber’s ownership of the farm – and of vehicles & boats there – was a front for Mr Spencer until his bankruptcy was over.
But Mr Spencer responded: “I had purchased the farm and couldn’t settle it because I went bankrupt and Andrew bought it from the original owner, Skip Whitmore.” Mr Spencer said his purchase would have been “the same way I would always buy, a partner put the funding up. I did a lot of deals with (lawyer) Kerry Knight & (property developer) Bob Wickham. Andrew already knew the farm because he’d bought neighbouring properties.”
When Mr Malarao once more put it to Mr Spencer “that Mr Tauber is just fronting it and will put it back to you”, Mr Spencer retorted: “Well that’s just laughable, when Westpac (one of Mr Spencer’s 2 main creditors) have backed him. And they know I live there. Andrew’s a seriously hard businessman, you don’t get a free ride out of him.”
In submissions, Mr Malarao told Justice Peters: “Mr Spencer’s lifestyle doesn’t appear to have been greatly affected by his being bankrupt. He seems to have access to properties, vehicles, and the fact of bankruptcy doesn’t seem to have been hindering him.”
Justice Peters: “That’s the Official Assignee’s position but you didn’t put it to him.”
Mr Malarao said the interests of creditors was a factor that weighed against discharge. Mr Spencer’s estate owed $4.8 million and his creditors – primarily Westpac, Auckland Finance Ltd and KordaMentha, the receivers of a Spencer company, Phantom Charters Ltd, which owned one of the boats – hadn’t had any dividend.
On the public interest, Mr Malarao said: “The reference there is to the 3 convictions (over Mr Spencer’s visit to Australia in 2008 without notifying the Official Assignee), the overwhelming view that he doesn’t respect any of the restrictions the bankruptcy has placed upon him. Furthermore, there is more than a suspicion that a lot of the assets Mr Spencer has had involvement with seem to have ended up in Mr Tauber’s companies and it doesn’t equate with happening legitimately, and this is something the Official Assignee wants to investigate further…..
“There have been some recoveries in the estate of Susan Spencer (his ex-wife) which will flow back to the Kim Spencer estate. The Official Assignee’s been put to considerable expense. There have been 3 applications for asset preservation orders, but nonetheless the assets all ended up in the Honk companies.”
A feature of Mr Spencer’s business life was that he signed personal guarantees although he didn’t have any assets those guarantees could be enforced against.
Justice Peters: “Wouldn’t a bank obtain a statement of assets & liabilities? There’s no evidence of whether Mr Spencer gave an accurate account of his personal affairs or not.”
Mr Malarao said the commercial community needed protection from Mr Spencer’s type of behaviour: “It’s evident from the Official Assignee’s private examinations and his evidence today there is a lack of insight into the trouble his activities cause. It doesn’t seem that he thinks he’s done anything wrong and it doesn’t seem he’s going to change his ways when he comes out of this bankruptcy.”
Justice Peters: “There’s absolutely no evidence of that at all. He said he was going to become a farm manager, which he obviously knows a lot about. There’s no evidence when he’s discharged he will return to property development.”
In her wrap-up of the day’s proceedings, Justice Peters said: “If the reality is the Official Assignee doesn’t have the resources, then I think it would be better to confront that reality now. On the other hand, if it’s to take steps in the short term, getting documents, examining him again… if there was evidence as to that, I would consider it relevant and would look at it….
“If it is extended it will be on a definite timetable of what the Official Assignee’s proposing. It won’t be on ‘If the OA gets x time, steps will be taken’. And if it’s not going to do that, it needs to be said now. You’ve got until 2pm on Friday to serve a further affidavit as to the assignee’s future intentions.”
23 October 2008: Spencer gets 120 hours of training time for Insolvency Act breaches
16 July 2008: Equinox takes control of Spencers’ Pah Farm project
U: The names behind the action, the week to 6 July 2008, part 5, Susan Spencer bankrupt
U: The names behind the action, the week to 5 August 2007, part 1, Kim Spencer bankrupt
20 July 2007: Kroon & Weller not guilty in Spencer kidnap trial
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Attribution: Court hearing, story written by Bob Dey for the Bob Dey Property Report.