Perron Group insolvency scheme benefits to directors questioned

The insolvency scheme proposed by failed Perron Group directors Cameron Marsh and Mark Perriam gives them significant benefits but creditors are still in the dark about how much returns they will receive.

The developer duo owes more than $142 million, and has presented an insolvency scheme that would see them make a one-off $123,000 payment then each retain the first $80,000 of any income earned as a base salary.

Commonwealth Bank of Australia rejected the payment scheme and tried to bankrupt the developers. The matter is now going through the High Court.

Repayments to creditors would come from the balance after the $80,000 is retained, in a complicated system with unique payment details for each of the secured creditors.

But the three year payment plan states only half of the income above the $80,000 each is earmarked for creditors. The developers would pocket the rest.

“There is no evidence that there will be any likely return to creditors,” Associate Judge Sargisson said at the latest hearing on Friday, pointing out there was no indication provided of what the developers’ new income streams might be.

“Proportionately, it’s an extremely small payment,” Commonwealth Bank of Australia’s counsel Bob Hollyman said.

The bank lent $42 million to the developers for the purchase of a Takapuna property, but only got $21 million back when it was sold in a mortgagee transaction to Crown Asia Pacific earlier this year.

While $80,000 may seem a generous salary for people who are in debt $124 million, their counsel Michael Whale said Mr Perriam was the father of four children and now separated from his wife so $60,000 would be going towards child support and rent. Mr Marsh has two children.

”They are both likely about to lose their homes,” Mr Whale said. “Rent on the average three bedroom house is $500 per week. You might think it’s general but the issue is, is it unreasonable in the circumstances?”

While the cost of living in Auckland with children to support is high, why do the developers want to retain half of anything earned over the $80,000 as well?

“It’s not just keeping the $80,000 after tax, it’s also keeping half of whatever’s above that. It is a reasonableness point as to how much the insolvents are allowed to keep in this proposal,” Mr Hollyman said.

The creditors knew they faced the risk of losing their money if anything went wrong, Mr Whale said.

“These are not small time mum and dad investors who need the court to protect them because they lack commercial understanding, but sophisticated creditors.”

Mr Perriam and Mr Marsh had “not been reckless” with their finances, Mr Whale said, but were professionals who had been caught up in the collapse of the property development market.

What of the Beach Rd property the developers have yet to sell which is worth approximately $50 million?

They could sell it themselves and retain a commission, said Commonwealth Bank of Australia’s lawyer Mr Hollyman.

“The standard real estate commission is about 4 to 5% these days, which even at the lower end of 3% will be $1.2 million – which will not be available to creditors,” Mr Hollyman said, adding that there had been no mention of where the proceeds from the sale will go.

Associate Judge Sargisson has reserved her judgment.