Property developer faces directorship ban
Bankrupt property developer Jamie Peters faces the possibility of being banned as a company director for up to five years, and is also the subject of a separate investigation into whether he has breached the Insolvency Act.
Peters was one of the country's highest flying property developers during the last property boom, and his projects included a large-scale residential development at Gulf Harbour north of Auckland, and what would have been one of the largest mixed-use residential and commercial developments projects in Auckland's CBD, had it proceeded, and numerous commercial buildings and apartment developments in Auckland's CBD.
But his property empire crumbled when he was bankrupted in October 2009, with personal debts of $14.5 million.
Most bankrupts are automatically discharged after three years, but the Official Assignee has refused to discharge Peters, and is instead seeking to have the bankruptcy extended by at least three years.
Peters has disputed the reasons the Assignee has advanced for continuing the bankruptcy and applied to the courts for a discharge.
The High Court has been considering arguments from both sides on the matter at a hearing set to continue on July 15.
In the meantime, the Insolvency Service's compliance unit and Registrar of Companies will be considering information sent to them by the Assignee about Peters' bankruptcy.
The Assignee's report into Peters' affairs said that most of his liabilities were the result of personal guarantees he gave and that the losses caused by his business activities was even greater when $125m of debts from his companies which had gone into receivership or liquidation was taken into account.
The report gave an overview of how Peters conducted his business affairs, which said that he "assumed significant personal guarantees despite not owning any assets in his personal name".
It gave details of numerous personal guarantees he had provided to creditors of his various companies and other business entities prior to his bankruptcy. These included a $1m loan from ANZ Bank, a $3m loan from Public Trust, guaranteeing the payments on Bentley and Mercedes Benz cars financed by Mercedes Benz Financial Services, a $3.4m loan from Dominion Finance and amounts owing on his various credit cards, issued by Diners Club, American Express and BNZ Visa.
"At the time of his bankruptcy, he declared no beneficially held assets, and declared that he had not disposed of any assets in the last five years.
"On that basis, Mr Peters' position is that he effectively has no assets and has not had any since at least 2004. However Mr Peters still granted various personal guarantees to various financial institutions, with the purpose of securing loans for his various entities.
"It could be said that these financial institutions could have taken more care in accepting such guarantees. However, Mr Peters nonetheless displays a cavalier attitude to false information that was provided to financial institutions," the report alleged.
In his response to the Assignee's report, presented at the High Court hearing, Peters described it as being "littered with unfounded assertion and speculation", and "non-expert opinion as to what may or may not be appropriate conduct, for example in granting of personal guarantees".
He described the Assignee's assertions as "bootstrap arguments" that had no evidential weight.
The Assignee's report also alleged that the way Peters managed his businesses increased the risk that third-party creditors would be left unpaid.
"Any material funds received by an entity are often transferred off to a related entity, which leaves creditors being owed a debt by an effectively assetless entity. This pattern can be observed in respect of entities operated by Mr Peters prior to adjudication [bankruptcy], and the entities Mr Peters has been associated with following his adjudication," the report said.
It also accused him of "recklessness" in his arrangements with creditors.
The report also noted the numerous related-party transactions that it said were a feature of his business dealings.
"The effect of this is that when an entity comes into funds, these funds are immediately ‘advanced' to a related party, leaving the original entity without assets and its creditors wanting . . .
"This modus operandi has caused the Assignee concern about the manner in which Mr Peters will continue to operate companies should he be discharged from bankruptcy. It is a recipe for leaving creditors unpaid.
"Notably, many of the companies previously under Mr Peters' directorship, and which have since been placed into liquidation or receivership, disclose a significant amount of related-party dealings.
"The total debts for these companies are in excess of $125m. This was another reason for the Assignee's referral to the Registrar of Companies, to investigate these matters and to consider Mr Peters for a banning order."
Peters rejected those allegations at his hearing, and described his business behaviour prior to his bankruptcy as "nothing other than usual property-industry practice", which he maintained did not expose his creditors to an unreasonable level of risk.
He also maintained that he complied with his obligations as a bankrupt and that any breach of those obligations was ‘inconsequential and/or minor".
Sunday Star Times