Bondholders may sue Krukziener

By Coran Lill

Thursday 8th April 2004

Trustees Executors, the company representing the interests of the 1800 bondholders in Auckland's Metropolis tower, is considering all options to recover money owing to bondholders including suing the brains behind the apartment building, Andrew Krukziener.

Mr Krukziener never gave a personal guarantee to bondholders that the money would be repaid. Instead, one of Mr Krukziener's companies, Courthouse Capital, guaranteed repayment.

Courthouse Capital, which was put into receivership in March 2003, has a subordinated second mortgage over Metropolis' apartments and retail spaces.

But the receivers, Grant Graham and Michael Stiassny of Ferrier Hodgson, are running out of assets to sell, according to Trustees Executors general manager Glenn Clark. "Grant Graham is getting toward selling down the property assets. We can say we are looking at all avenues [to recover money]."

When asked if that included suing Mr Krukziener personally, Mr Clark said: "Well, it includes all avenues. Once we do make a decision, we will let you and the bondholders know."

Mr Clark said he was unable to say when a decision might be made and who might be involved in any action.

An associate of Mr Clark's at Trustees Executors, John Foote, said if a decision was made to pursue Mr Krukziener for the debt it may be something taken in conjunction with another Krukziener company, Duvall, which is in liquidation.

Duvall was lent $14.6 million by Courthouse Capital Trust, which the company Courthouse Capital was a trustee of.

Duvall's liquidator, Stuart Robertson, said the issue of Duvall being a part of any court action to recover outstanding money had not been raised with him, nor was it something he had considered.

Mr Graham said it was something a liquidator would consider in due course because "bondholders would want answers" and to that end he would co-operate where possible.

Mr Krukziener had structured the Metropolis bonds issue so he had minimal liability, Mr Foote said, "but you can never remove yourself completely."

Mr Foote also suggested that monitoring of proceeds from Metropolis sales had not been stringent enough, saying there needed to have been "much tighter control of Andrew Krukziener and his companies.

"Proceeds of Metropolis sales didn't all end up in lenders' hands," he said.

Mr Foote suggested ANZ, which had a first mortgage over Courthouse No 1, allowed that to happen. "I think as time has gone on people have looked harder [for new avenues]."

Mr Krukziener, through two of his lawyers, Chapman Tripp partners John McKay and Shelley Hodge, said bondholders were scraping the bottle of the barrel.

"There is no basis for legal action against Mr Krukziener personally," they said.

"The risk [to bondholders] was identified crystal-clear in the prospectus." Mr Krukziener also suffered a substantial commercial setback for reasons beyond his control, Mr McKay said.

"He has co-operated fully with receivers and we are not aware of any grounds for legal action. It would be remarkable if after this amount of time the bondholders came up with a new avenue."

The most common provisions for suing company directors personally were under the Companies Act and related to not acting in the best interests of the company and trading while the company was insolvent, Phillips Fox partner Martin Thomson said.

Mr Krukziener's lawyers denied these would be valid grounds for any action against their client.

Actions are typically taken by liquidators, and Simpson Grierson partner Andrew Lewis said it was getting "significantly easier" to penetrate corporate veils. "The courts have been quite tough on directors of late."

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