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David Henderson can get back to business – as a consultant

Article – BusinessDesk

May 18 (BusinessDesk) – Former Christchurch property developer David Henderson, twice bankrupted for his forays into property development, has won the right to re-engage with the sector, but only as a self-employed consultant providing services to the …Former bankrupt property developer David Henderson can get back to business – as a consultant

By Jonathan Underhill

May 18 (BusinessDesk) – Former Christchurch property developer David Henderson, twice bankrupted for his forays into property development, has won the right to re-engage with the sector, but only as a self-employed consultant providing services to the construction, land development and hospitality industries.

Associate Judge Rob Osborne, the judge who granted Henderson his conditional discharge from bankruptcy in January 2017, today partly approved Henderson’s application under the Insolvency Act 2006 for permission to trade as an unincorporated sole trader “providing consultancy services to the construction, land development and hospitality industries” subject to a series of conditions. His consultant services are limited to advising a client or negotiating on a client’s behalf; the work can’t include any management activities for the client, and it can’t involve his wife Katrina Buxton.

Henderson must also retain an approved financial supervisor, Brenton Hunt, and the court retains the right, on five days’ notice, to review, change or revoke the orders and conditions. In addition, “Leave is reserved to the Registrar of Companies and to the Official Assignee, if they receive information relevant to the performance by Mr Henderson or the supervisor,” Judge Osborne says in his ruling.

Further, Henderson isn’t allowed to employ staff and must enter and sign a consultancy agreement with the client, a copy of which must be given to Hunt. He’s also not permitted to rent premises and can open one bank account for the business (plus a sub-account for taxes), into which all payment for his services will be banked. His supervisor will have sole authority to make any payments from the account. As far as possible, the business must operate on a non-credit basis and when required to incur credit, he must make the prospective creditor aware of his previous bankruptcies.

Henderson must also register for GST and meet all his obligations to Inland Revenue. A separate set of conditions related to the supervisor’s role.

Judge Osborne imposed conditions on Henderson’s discharge last year including a permanent ban on giving personal guarantees for debts and a ban of being a director until December 2022. He lost an attempt to overturn the conditions in a challenge to the Court of Appeal last year.

Henderson was first bankrupted in 1996 and discharged in 1999. He was bankrupted for a second time in November 2010, with debts estimated to be between $100 million and $150 million. While he would have been automatically discharged from bankruptcy within three years under the terms of the Insolvency Act, the Official Assignee objected, triggering a public examination of Henderson’s affairs by the High Court, including his conduct post-adjudication. Judge Osborne granted the conditional discharge following that process.

Henderson’s appeal was based on the grounds that Judge Osborne imposed the conditions on his discharge without properly considering his post-adjudication conduct and that if he had, then less stringent conditions might have been imposed. But the Court of Appeal ruled that Judge Osborne wasn’t obliged to make specific findings about Henderson’s post-adjudication conduct and that he was “satisfied that the root causes of Mr Henderson’s bankruptcy were profound and endemic to his character.”

“He found that throughout his commercial history and continuing to the end of the public examination in October 2015, Mr Henderson ‘display[ed] a recklessness towards his tax responsibilities’; that Mr Henderson showed ‘no significant insight into the recklessness of his giving personal guarantees and … the cause of his own bankruptcy’; and that he did not understand his responsibilities towards a commercial enterprise and was unlikely to act differently in the future,” Justices Rhys Harrison, Forrest Miller and Murray Gilbert said in their Sept. 18 judgment in the Appeal Court.

Judge Osborne “was satisfied that if Mr Henderson was discharged from bankruptcy he was likely to ‘continue to take the entrepreneurial risks which have been a central part of his business life’.”

Henderson undertook major property developments in Queenstown, Christchurch, Dunedin, and Invercargill, principally through Property Ventures Ltd (PVL), which was put into receivership in 2010.

The Court of Appeal cited Judge Osborne’s findings on Henderson’s commercial history saying that Henderson “carefully structured his personal affairs both before and in the decade following his first bankruptcy so as to have no assets. But he provided personal guarantees for huge sums. Consequently, those creditors entitled to call on his guarantees would almost inevitably receive no payment on account of the guarantee if the company-borrower defaulted in adverse economic times.”

Henderson companies also made payments to financiers and suppliers “at the expense of meeting revenue obligations such as PAYE and GST” which “masked for a period the onset of corporate insolvencies.” After his second bankruptcy, Inland Revenue assessed his tax liabilities including penalties at about $2.3 million.

The Court of Appeal judgment also noted Henderson’s “unusually active history in both criminal and civil litigation and numerous offences under tax law, including 25 PAYE offences and 12 other tax offences.”

Henderson was ordered to pay costs to the Assignee. It was the second time in a little over a year that Henderson has failed in a Court of Appeal challenge. In October 2016 he failed in a bid to have tax convictions thrown out over claimed judicial bias. In his judgment today, Judge Osborne said Henderson’s present application differed from that covered in the appeal because he was now seeking to become a consultant not a manager.

“Having regard to the situations in which Mr Henderson proved himself to be unfit, I am satisfied that permission to be a self-employed consultant with the strict conditions proposed by Mr Henderson and some additional imposed by the Court, will maintain the purpose of protection lying behind the prohibition,” Judge Osborne said.

“As the judge who conducted Mr Henderson’s public examination before he was discharged from bankruptcy, I am fully informed as to the matters which led to the findings as to Mr Henderson’s unfitness and the way in which that had impacted on others,” he said.

(BusinessDesk)

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