Former MP's property deals turn sour
A deal between John Tamihere's Waipareira Trust and a property developer is likely to cost the publicly funded trust more than $1 million.
Last week the High Court in Auckland heard Tamihere allegedly obtained the discharge of a mortgage held by his employer, the Waipareira Trust, to allow his property developer friend Brent Ivil to lend the former cabinet minister $500,000 to buy a house.
The trust's loss is likely to be amplified by the waived security.
However, Tamihere through his lawyers denied involvement in the mortgage waiver.
Tamihere has served as chief executive of Waipareira since 1991, a tenure interrupted only by his stint as a Labour MP and Cabinet minister from 1999 to 2005.
He has just rejoined the Labour Party and expressed a desire to stand against Cabinet minister Paula Bennett in the Waitakere seat at the 2014 general election.
The High Court in Auckland last week, hearing an application from the now-liquidated company West Harbour Holdings for a $500,000 summary judgment against Tamihere over the alleged loan, heard Ivil and the Waipareira chief executive had a friendship that extended into the commercial. Ivil is the sole director of West Harbour.
In February 2007, Tamihere advanced Ivil a $210,000 loan and, a year later, the court heard, Tamihere approached Ivil for a loan to settle the purchase of a new house.
Lawyer David Smyth, acting for West Harbour, alleged an arrangement was reached between Tamihere and Ivil to allow a West Harbour property mortgaged to Waipareira to be sold and the proceeds loaned to Tamihere.
On May 6 Waipareira's mortgage over one of West Harbour's townhouses, Clearwater Cove Unit 7d, was lifted and the property sold.
Property records show companies controlled by Tamihere and his wife settled the $1.36 million purchase of their new home on the Te Atatu Peninsula on the same day the mortgage was discharged.
Smyth, relying on an affidavit from Ivil, told the court the sale of 7d enabled $500,000 to pass to Tamihere: "It was Mr Tamihere himself who procured the discharge of the mortgage . . . so it could be converted into cash to lend to him."
Tamihere, said to be overseas, did not respond to questions from the Sunday Star-Times left on his mobile phone.
Grove Darlow & Partners, acting for Tamihere, said in a statement he was unable to comment as the matter was before the courts but noted Ivil's reliability as a witness had been called into question by the Weathertight Homes Tribunal.
In court, Tamihere's lawyer Timothy Allan did not dispute Tamihere received the loan but said his client was not responsible for the lifting of the mortgage on unit 7d.
Allan said Tamihere claimed Ivil, when the pair's relationship disintegrated, threatened to reveal the $500,000 loan to NZ First leader Winston Peters. Allan said this was "nothing short of a little bit of blackmail".
A request for Tamihere's affidavits in the case was declined.
The reduction in security for Waipareira would later come into sharp focus, when the commercial relationship with West Harbour broke down, with the prospect of mortgagee sales and large losses beckoning.
Josie Smith, chairwoman of the trust, was unwilling to discuss why the mortgage over 7d was lifted. She said Tamihere had declared his links to Ivil when the deals were signed.
She expressed "utmost confidence" in her chief executive.
"The board of trustees have taken independent advice and are very comfortable with the action taken by the chief executive," she said.
Smith denied any wrongdoing by Waipareira in the affair and said she would defend her organisation if it was defamed, but said Tamihere, "given his previous political standing, accepts as we do, reasonable scrutiny".
While Tamihere and Ivil were exchanging personal loans, a commercial relationship between the trust and West Harbour was developing.
On May 18, 2007, the trust extended a one-year $2.2m loan to Ivil's company West Harbour with security granted over five townhouses - later reduced to four after security over 7d was relinquished.
According to High Court judgments from 2012 concerning a dispute between West Harbour and Waipareira, the day the loan was due for repayment on May 18, 2008 - with $2,038,838 still outstanding - Waipareira agreed to suspend interest ahead of a proposed debt-for-equity swap in a joint-venture to develop a 20-storey hotel at the West Park Marina.
In November 2010, Waipareira advanced another $640,000 to West Harbour - this time attracting interest - secured by another mortgage.
But the joint venture soured with the collapsing property market and when weather-tightness issues were discovered in the townhouses, which required up to $2m in repairs.
A claim brought to the Weathertight Homes Tribunal by interests associated with Ivil against Fletcher Construction and the Auckland Council in 2011 was lost, with costs of $1m awarded against the claimants.
The Sunday Star-Times understands this costs award is still owed by West Harbour, but it is being appealed. According to liquidators' reports, an additional $100,000 is owed to Inland Revenue Department.
A High Court bid by West Harbour to enforce the joint-venture agreement and discharge the mortgages held by Waipareira was dismissed earlier this month, but the stalled development still leaves Waipareira exposed.
Smith was unwilling to disclose Waipareira's exposure to the development, but conceded a loss was likely and many property investments had turned sour during this period.
"The investment in West Harbour has not achieved the initial expectation . . . You will be aware over the 2007-11 period that billions of dollars and property investments have been lost," she said.
Smith was hopeful of recovering the capital part of its investment, adding the trust put the properties up for mortgagee sale.
The Sunday Star-Times understands Waipareira's exposure to townhouses stands at $4m, and a shortfall of $1.5m is expected.
According to audited financial accounts for the period 2009-11 provided to the Sunday Star-Times, Waipareira booked $670,000 in net impairments in these three years.
Notes to the accounts detailing these losses were not released by Waipareira, with the organisation's chief financial officer Christine Wu claiming they were a "private company" and were not required to share "sensitive commercial information".
In a late twist, Waipareira contested Ivil's appointment of Waterstone as liquidator of West Harbour and has called for a creditors' meeting to take place on April 5.
Last week Judge Pamela Andrews reserved her decision on West Harbour's claim for summary judgment against Tamihere and indicated a decision was weeks away.
- © Fairfax NZ News
Do you feel better off than at this time last year?