Leon Bowker of KPMG, acting as liquidator for Watson’s company Cullen Investments that was ruled in 2019 toowe Inland Revenue more than $112m in back taxes and interest, said legal wheels were now in motion.
“We’re looking to effectively enforce the judgment and get the money from him. And then if he doesn’t pay, we’ll proceed to bankruptcy,” Bowker said.
Bankruptcy would first require the High Court to issue a bankruptcy notice - effectively a final demand for repayment - which then needs to be publicly advertised. If the debt was not settled within 10 days, KPMG would be in a position to apply to the High Court and declare Watson bankrupt.
Bankrupts see their affairs managed by the Official Assignee, with limits placed - typically for a three-year period - on their ability to own assets, travel internationally and direct or manage New Zealand-registered companies.
“Bankruptcy can be somewhat inhibiting to people, and how they manage their financial lifestyles. We hope that will encourage him to pay up,” Bowker said.
However, the prospect of bankruptcy has already been considered by Watson, who told the Herald in early 2021 his fear of it had diminished after enduring a stint in London’s Pentonville prison for contempt in a separate court case.
“I thought that might really f*** me up, business-wise, having a bankruptcy. But now I’ve had prison,” he said earlier.
This morning liquidators’ claim for summary judgment totaling $57,463,306.61, plus interest and costs, was accepted by High Court at Auckland Justice Neil Campbell and entered against Watson.
Watson was neither present nor represented in court.
“This is a straightforward claim for the net balance owing ... as a result of advances made the plaintiff to the defendant over a series of years,” Justice Campbell said.
“I am satisfied the defendant has no defence to the claim.”
Once among New Zealand’s most famous businessmen, Watson decamped for London and non-dom preferential tax status in 2002, and is facing claims from liquidators of his Cullen Investments that he owes the collapsed company $57m.
KPMG was appointed to a swathe of Watson’s companies in late 2019 to chase more than $112m owed to Inland Revenue after a complex Cayman Island restructuring was found by the High Court to amount to tax avoidance.
Earlier: Watson claims no knowledge of court action in his homeland
Watson is in London and was not expected to be present in court today, telling the Herald over the weekend that he was unaware of the lawsuit.
“I’m just completely oblivious to it - seriously,” he said.
Court minutes reveal liquidators had gone to extraordinary lengths to serve him legal documents.
The latest report said they had entered into negotiations with Watson years ago over repayment, but after these broke down lines of communication were found to be unable to transmit legal service.
Businessman Eric Watson says claims from liquidators of his Cullen Investments are erroneous and typified by "Keystone Cops" behaviour. Photo / Greg Bowker
Attempts to serve Watson in person also proved unsuccessful.
“The liquidators were informed that the occupants of Mr Watson’s address repeatedly refused to accept delivery of documents from the courier,” the report said.
KPMG successfully sought orders from the High Court allowing substituted service, while also simultaneously employing a “private agent” to press for delivery of the lawsuit in Ibiza.
“The agent was able to complete delivery and service was effected on 7 November 2022,” the report said.
Watson said he disputed the claim he owed money to Cullen.
“That’s just a load of horseshit. There are no loan agreements and any relationship between me and the company would not be by way of loans, and if it were there’d be a side letter saying they’re not really loans,” Watson said.
“They’re the Keystone Cops: The liquidators have my phone number and could call me any time for my address or email.”
Issues over delivery of legal service are near-identical to those faced by the US Securities and Exchange Commission (SEC), which in 2021 named Watson in a complaint alleging insider trading over the 2017 crypto rebranding of his Long Island Ice Tea drinks company.
After also being unable to find Watson to serve him legal papers, the SEC successfully applied to US courts to substitute service with advertisements placed in the New York Times.
Recent court filings indicate Watson is now listed as being in “default” and has not responded to, nor appointed representatives, to defend the SEC’s civil claim.
Watson said he had attempted to engage with the SEC through representatives in London. “But we heard nothing back,” he said.
This New Zealand legal action is separate to a titanic legal dispute - largely fought in United Kingdom courts over the past decade - with former business partner Sir Owen Glenn that has seen Watson saddled with tens of millions of pounds in costs and damages awards, and imprisoned for three months over contempt of court.
Watson told the Herald he had spent the past six months travelling internationally and raising $300m for a “property and special situations fund”.
