Tuesday 22nd May 2012
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David Tauber's bid to settle $95.9 million of debt in his failed event management was turned down in the High Court in Auckland last month because the judge said it would reward his "policy of reduced accountability."
In an April 23 judgment, Associate Judge Roger Bell turned down Tauber's proposal to settle event management firm APG Holdings' outstanding debt, saying "he has arranged his affairs so that he will not have to answer to the full for the liabilities he has incurred."
The judgment was published on the Justice Ministry's website last week. "The law has to say to people who consciously arrange their affairs so that they will not have to answer to their creditors, that they ought to take the law's normal consequence, which is bankruptcy," Judge Bell said.
"To approve the proposal would reward Mr Tauber for adopting his policy of reduced accountability." Tauber had convinced most of his creditors to accept a proposal that would see him pay $500,000 to Dominion Finance and Heartland Building Society who were owed a total of $6.1 million, and $1,800 to six unnamed creditors owed $18,000.
Secured creditors owed $72.9 million wouldn't participate in any distributions, while entities associated with him wouldn't get any payment. The secured creditors included Westpac New Zealand, HSBC, Asia Syndicate Finance, Elite Corp and ASB wouldn't participate in any distributions, and Tauber's schedule identified HSBC as likely to face a $500,000 shortfall and Asian Syndicate Finance would miss out on $15 million.
Judge Bell said there was a "proper basis for the indignation in the community" at arrangements where "failed businessmen are still able to lead a life of comfortable circumstances while making minimal provision for their creditors."
HSBC and liquidators Colin McCloy and David Blanchett of PwC, who lodged a claim valued at $8.6 million by APG's trustee, opposed the application. "The liquidators' submission is pitched in terms of an insolvent dining at the rich man's table, but only giving crumbs to his creditors," the judgment said.
The liquidators are suing Tauber, alleging he was a director of APG and breached his duties under the Companies Act, Financial Reporting Act, and breached his fiduciary duty, by pulling out $2 million from the group and leaving it insolvent. Tauber is defending the claim, saying "he regards the chances of the liquidators' succeeding against him as remote," the judgment said. Judge Bell said both sides have arguable cases and it wasn't possible to determine the merits of the claim.
Tauber contested the settlement proposal didn't disadvantage the liquidators, as they would be "free to sue him and to enforce any judgment they might obtain." Judge Bell said that proposal is "defective" and it was "spurious" to consider the liquidators would have a "free run" at Tauber.
Though any claim's success was uncertain, there was no reason why the liquidators shouldn't be able to proceed. Tauber "has arranged his affairs so that he has minimal assets available for creditors," the judge said. "It is clear that if the liquidators obtain judgment against Mr Tauber they will find the cupboard bare and there will not be anything available for them."
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