A developer leading companies 25 companies that collapsed owing $11m was also rebuked for using an Aston Martin company car (not the car pictured). Photo / Supplied
A developer leading companies 25 companies that collapsed owing $11m was also rebuked for using an Aston Martin company car (not the car pictured). Photo / Supplied
A businessman planning a controversial new Auckland development argued he was cutting costs when he downsized a $280,000 Aston Martin company car for a $158,000 Porsche Cayenne, it can now be revealed.
Andrew Fawcet had, at the time, been in charge of 25 companies that would later go on tocollapse owing $11 million to creditors, a 2017 report – recently obtained by the Heraldunder the Official Information Act - said.
The deputy registrar of Companies subsequently banned Fawcet in May 2017 from running any business for three years due to his mismanagement playing a role in some of the companies’ collapse.
However, the deputy registrar’s report also noted Fawcet had since taken steps to learn from his mistakes.
And - besides the Aston Martin – it said Fawcet hadn’t led a “luxury lifestyle” at creditors’ expense.
Fawcet told the Herald in response to the report that his companies failed because of the Global Financial Crisis, and that he was now more concerned with completing a new 467-house development, 33km north of Auckland, dubbed Strathmill.
“What is important news is the significant benefits of the Strathmill development in Orewa rather than something historic that happened over 10 years ago as an unfortunate consequence of the GFC,” he said.
“I have conveyed how difficult and and complex that time was to navigate and am unclear what the motivation is to bring this up again.”
As director of a company called Shildon, Fawcet is now spearheading efforts to win building approval for the new Orewa development, saying it will bring affordable houses and jobs to the region.
Matthews and the residents hope to reduce the project’s size, saying they originally believed it would only include 201 homes.
An artist's impression of the Strathmill development in Orewa. Photo / Supplied
They claim Fawcet has doubled the planned number of homes to more than 400 in what they believe is opportunistically squeezing in as many houses as possible.
Auckland Councillor John Watson has also slammed the development, saying he believes it is “a quantum leap” above the level of housing density envisaged for the area.
But Fawcet said Strathmill will give first-home buyers a rare chance to buy in Orewa.
“The demand for Strathmill has been unprecedented with sales now exceeding 180 sections to local builders who are keen to deliver the finished homes,” he said.
“The Strathmore development meets Auckland’s need for high-quality, designed residential housing that are more affordable homes – these homes will generally be lower than the average price for stand-alone residences within the Hibiscus Coast area.”
Deputy registrar Peter Barker said in his 2017 report it was accepted the companies owed more than $11m to the Inland Revenue Department and other creditors,
A number of these companies traded while failing to pay overdue debts in what was a breach of Fawcet’s director’s duty to creditors, Barker said.
This “mismanagement” was at least partially the reason for the companies’ failure, Barker said in outlining why he banned Fawcet from running companies for three years.
Aston Martin downsized for Porsche
Fawcet’s love of a fast car came under specific criticism from Barker.
Fawcet was director of a company called Strawberry that had been making payments on a $280,000 Aston Martin since 2007.
The Ministry of Business, Innovation and Employment - in its submission to deputy registrar Barker seeking to have Fawcet banned - alleged Strawberry was still making down payments on the car just months before the company failed to pay its tax bill.
“It would have been clear” to Fawcet at this time “the company was in a precarious financial position”, MBIE claimed.
But Fawcet replied by saying the Aston Martin was bought in 2007 – years before the company failed to pay its tax debts, Barker wrote in the report.
Fawcet said once Strawberry’s finances deteriorated in 2011, “he took action” to reduce its payments by trading the Aston Martin in for a Porsche that cost $122,000 less.
Barker gave Fawcet credit for selling the Aston Martin but said he should have acted earlier.
He also said that even if there had been justification for Strawberry to buy a luxury company car in 2007, that had “evaporated” by 2008.
He also didn’t believe Strawberry had reason to then go and replace the Aston Martin with a Porsche.
The greenfields site (left) at Orewa where all the new residences are planned. Photo / Google Maps
Two apartments sold for $45,000
Barker used the 2017 report to outline what he viewed as management issues at some of the companies Fawcet had been director of.
Each of these companies had been set up to represent a specific building project, Barker said.
Under law that meant a director has a legal duty to represent the best interests of each individual company.
Fawcet, however, apparently viewed each company as being interconnected within a bigger group called the Globe Group, Barker said.
And - in trying to juggle the finances of the entire Globe Group - Fawcet sometimes failed to act in the interests of the creditors of individual companies, an act that breached his director duties, Barker said.
As one example, Barker pointed to a 2013 High Court case against Fawcet launched by the liquidators of a company called Luxta.
Luxta had earlier agreed to sell two townhouses to another company called Contorto – which Fawcet was also listed as the director of – for $857,500.
But Luxta transferred the townhouse titles to Contorto before it received full payment.
It meant Luxta was only ever paid $45,000 for the two townhouses - far less than the actual value of the buildings.
Associate Justice John Matthews’ judgement concluded “without hesitation” Fawcet breached his duty to Luxta and its creditors by selling assets without being paid in full for them, deputy registrar Barker said in his report.
Matthews noted Luxta already owed more than $2m to the IRD at the time of the sale and was “under some pressure to pay”.
Barker said while it was commercially sensible for Luxta to sell assets to pay its IRD debt, he believed that had it been sold to an unrelated customer, the company would’ve only ever transferred the titles only once full payment had been made, not before.
Global Financial Crisis hits
Fawcet told Barker the collapse of his businesses were largely due to the Global Financial Crisis.
Barker acknowledged the GFC’s shock and said it “probably did play a significant” part in the companies’ collapse.
However, he said Fawcet did not adapt adequately to the changing circumstances and said there were credible steps he should have taken to try to avoid the companies’ failure.
That included among other points, not starting too many projects at once, having a more formal process for when two companies he was the director of transacted with each other and recognising his duty to each individual company and its directors.
But Barker also paid credit to Fawcet.
He said Fawcet had since learnt from his mistakes and set new management structures up at the companies he was involved in.
He also paid credit to him for continuing to file correct GST returns even if the taxes weren’t paid.
“Many might exhibit ostrich type behaviour and not file returns at all or else falsify them” in such circumstances, he said.
He was also impressed with Fawcet’s resilience for having taken steps to re-establish himself after Fawcet said he lost all his net wealth during the GFC.
Barker also acknowledged Fawcet had completed other successful housing projects prior to the GFC – including some that achieved NZ Institute of Architects awards.
