Dave Henderson loses appeal against conditions imposed on bankruptcy discharge
The Court of Appeal has dismissed Christchurch property developer David Henderson's appeal against conditions imposed when he was discharged from bankruptcy including a permanent ban on giving personal guarantees for debts and a ban of being a director until December 2022.
Mr 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 $100-150 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. Associate Judge Rob Osborne granted the conditional discharge following that process.
Mr 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 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 toward a commercial enterprise and was unlikely to act differently in the future," Justices Rhys Harrison, Forrest Miller and Murray Gilbert said in their judgment.
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'."
Mr Henderson undertook major property developments in Queenstown, Christchurch, Dunedin, and Invercargill, principally through Property Ventures Ltd (PVL), which was put into receivership in 2010. He is among eight remaining defendants in a lawsuit taken by PVL's liquidator which is set for a hearing in early 2018. The ninth, PricewaterhouseCoopers, reached a confidential settlement with the liquidator last month. PVL had been the largest asset of failed finance company Hanover Finance, amounting to more than 20% of Hanover's assets, at the time the finance company's investors voted on a moratorium.
The Court of Appeal judgment cites Judge Osborne's findings on Mr Henderson's commercial history saying that Mr 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 Mr 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."
Mr Henderson was ordered to pay costs to the Assignee. It is the second time in a little over a year that Henderson has failed in a Court of Appeal challenge. In October last year he failed in a bid to have tax convictions thrown out over claimed judicial bias.