It has been 18 months since Tauranga building company Bella Vista Homes went into liquidation. It's been 15 months since 21 of its houses were evacuated. And about seven months since the city council decided to buy all the properties for $14 million. But the saga continues. Scott Yeoman looks at the latest turn of events after four new reports were released this week – and what it might now mean for the failed company's director, Danny Cancian.
The liquidators of Bella Vista Homes and four related companies say they will be referring director Danny Cancian to the government official who has the power to ban people from running companies in New Zealand.
In four new reports released this week, the liquidators said Cancian would be referred to the New Zealand Registrar of Companies for consideration of a Prohibition Order.
If a Prohibition Order was issued, Cancian would not be able to act as a director or promoter of any company, or take part, directly or indirectly, in the management of any company.
The length of a ban depends on which section of the Companies Act 1993 a person is prohibited under.
Cancian, running for Mayor of Tauranga in the upcoming election, was sole director and shareholder of Bella Vista Homes when it went into voluntary liquidation in late November 2017, leaving behind unfinished houses and millions of dollars in outstanding debts.
Twenty-one of the building company's houses were suddenly evacuated by the Tauranga City Council in March last year and families lost their homes.
Cancian was also sole director and shareholder of Project Management Limited, Live Wire Limited, Lakes Engineering Limited and Ground Effects Limited, which were all put into liquidation last November by the Inland Revenue Department (IRD).
According to the latest liquidators' reports, the five companies owe more than $4.6 million to creditors.
Companies related to Bella Vista Homes put into liquidation
Bella Vista-related firms owe nearly $270,000: liquidators
When approached by the Bay of Plenty Times for comment about the liquidators' comments this week, Cancian said, via email via a third party, that he was not concerned and that the truth would eventually get out.
"And the public record etc. then and only then can be corrected."
He also said about the possibility of a Prohibition Order: "That will only add even more to the damages, harm and costs that the Tauranga ratepayers will have to be held to account for in the end."
Asked what he meant by that, he said: "That when the facts of the Bella Vista case and all else is revealed and publically available, then many (homeowners, contractors, creditors, myself and others) are going to want justice for what TCC (Tauranga City Council) has done. Regrettably, Tauranga ratepayers do not yet know the truth, but the actions of others to date will likely leave ratepayers with a significant bill."
Cancian has said in the past that he set up the four related companies so they could work for Bella Vista Homes, "so I could control the process of what happened on the jobs rather than outside contractors".
The companies are said to have provided administrative, electrical, engineering and earth moving services.
When Bella Vista Homes went into liquidation, the four related companies also stopped trading, Cancian said this week.
"Which is an inevitable consequence of Bella Vista being forced to cease trading and then voluntarily liquidated."
In the new liquidators' reports for those four related companies, released this week, the liquidators said: "Given the director has had multiple company failures, we will be referring him to the Registrar of Companies for consideration of a Prohibition Order."
One of the liquidators, Rhys Cain, a Christchurch-based insolvency practitioner with the company EY, told the Bay of Plenty Times that if a director is involved in two or more company failures within a certain period of time, they automatically become eligible for consideration of a Prohibition Order.
He said Cancian qualified for consideration.
"We will be sending a report through. The Registrar of Companies – if we didn't – would ask us to anyway.
"So we take a proactive stance and say, well look, the criteria has been met, we will put the information in front of the Registrar and the Registrar will make a decision."
A Companies Office spokeswoman told the Bay of Plenty Times that the Registrar of Companies had not yet received any information in relation to Danny Cancian from the liquidators.
"Given the director has had multiple company failures, we will be referring him to the Registrar of Companies for consideration of a Prohibition Order."
Meanwhile, the new liquidators' reports for Project Management Limited, Live Wire Limited, Lakes Engineering Limited and Ground Effects Limited also showed more than $210,000 in total creditors' claims.
The IRD alone is claiming more than $170,000 in unpaid GST, KiwiSaver and PAYE.
The liquidators have written to all known creditors, but some have not yet formally claimed in the liquidations.
The liquidators also said in the reports that they had identified a number of intercompany transactions between the four companies and related parties, and their review of those transactions was ongoing.
Their investigation into the whereabouts of various assets that were recorded in the four companies' Xero accounts at the date of liquidation – including vehicles, equipment, furniture and fittings – was also ongoing.
The latest liquidators' report for Bella Vista Homes, released in December, showed more than $4.4 million in total creditors' claims.
He and several other parties involved in the Bella Vista development are also involved in an ongoing court case against the council.
The case is due back in court on July 24.
Cancian has long blamed the council for the failure of Bella Vista Homes and its housing development at The Lakes.
This week, via email via the third party, he claimed that the Ministry of Business, Innovation and Employment (MBIE) review released in March, confirmed that.
"Obviously the liquidator has not read nor understood the MBIE report ... if anyone/thing should be banned from having a company/directorship then it must be TCC."
However, the ministry report, in fact, did not assign all blame for Bella Vista's failure on the council. It couldn't have, as it only looked at the council's role in the development.
"It did not make technical findings concerning Building Code compliance, the adequacy of individual building consents or code compliance certificates, or the competence of practitioners involved with the Bella Vista development," Paul Hobbs, who led the ministry review, said when Cancian's comments were put to him this week.
And so while the ministry report did find "significant" council failures , and highlighted when and how the council could and should have prevented certain risks, it did not conclude that those failures were solely responsible for what happened. That was outside the scope of the review.
In the 2018 financial year, the Registrar of Companies prohibited 47 individuals from being directors or managers of limited liability companies under section 385 of the Companies Act 1993.
Section 385 contains two grounds on which the Registrar of Companies (Registrar) or the Financial Markets Authority (FMA) may prohibit a director:
1. If the Registrar or FMA is satisfied that a person was a director of, or involved in the management of a single company in the previous five years and is also satisfied that the manner in which the affairs of that company were managed was at least partly responsible for its failure; or
2. If a person has been a director, or involved in the management of two or more failed companies in the previous five years, unless the candidate for prohibition satisfies the Registrar or FMA that either:
•the way in which they managed all, or all but one of, the companies was not at least partly responsible for their failure; or
•that for some other reason it would not be just or equitable to prohibit them.
The provisions of section 385 are subject to the requirements of natural justice.
This means that before the Registrar or FMA can exercise the power of prohibition a candidate for prohibition must first be given reasonable notice of the case against them and have the opportunity to make submissions.
This involves informing the candidate of the mismanagement alleged to have caused the failure of the company or companies they were involved with.
Where a person has been involved in two or more company failures, once the notice requirements have been satisfied, the onus then falls on that person to satisfy the Registrar or FMA that for all the failed companies that they were involved with, bar one, the failures were not wholly or partly caused by their mismanagement.