Halifax New Zealand managing director Andrew Gibbs says his lifestyle is “chalk and cheese” compared with his Australian counterpart Jeffrey Worboys.
On Wednesday, the Halifax administrators issued a report indicating Worboys is living a luxury life complete with a Bentley and pre-paid rent on his residence, all paid for with the insolvent company’s funds.
“I’m living in a 69 square-metre apartment with my wife and two kids,” Gibbs told BusinessDesk.
“It hasn’t been great financially for me. It’s been a bit of a disaster.”
His children are aged three and four; it could have been worse if they were teenagers.
The outcome for the about 2,100 New Zealand investors is reasonably positive – the administrators estimate they may get 85-95 cents in the dollar back from trust funds and would join the other unsecured creditors in claims for the remaining money.
The administrators estimate an overall shortfall for the group of about A$19.7 million.
And they expect it will take at least six months after courts in Australian and New Zealand give directions on “many complex issues and matters” before any funds can be distributed to the 12,600 investors in total.
Wednesday’s report showed Halifax Group pre-paid half Worboys’ rent and deposit – Worboys claimed this was to cover the use of a home office – and loaned him the rest of the residence’s cost.
Assuming the A$6,087 bond paid in June last year was four weeks’ rent, Halifax pre-paid Worboys’ rent for about 65 weeks. The A$39,377 payment of the Bentley lease was paid on Nov. 21 last year, two days before the Australian company appointed administrators.
Worboys and former Australian director Matthew Barnett were also paid a combined A$3.4 million in wages and superannuation two days before the administration.
The administrators of Halifax New Zealand and its Australian parent, Morgan Kelly, Stewart McCallum and Phil Quinlan of Ferrier Hodgson, were appointed to the New Zealand arm on Nov. 27, four days after the Australian company went into voluntary administration.
Their report on the New Zealand arm shows all the suspicious transactions relating to the Halifax group occurred in Australia. The New Zealand arm only became insolvent when the Australian parent did.
The report on the Australian parent released two days ago said it had been trading while insolvent since at least January 2017.
“I didn’t know they were insolvent. I was always asking Jeffrey, how’s business going? His answer was always that things were going OK,” Gibbs says.
“I also monitored their audited financials to make sure they were a stable counter-party. The audited reports looked as if the business was making good profits.”
Gibbs first became involved with Worboys in 2013 when Gibbs was running his own business, Strategic Capital Management, and the Halifax group took a non-voting 50 percent stake.
The situation changed when the Financial Markets Conduct Act 2013 was passed – it came fully into effect from Dec. 1, 2014.
“It was really the change in the law that forced my hand – I had to allow them to get more involved,” Gibbs says.
The law required the business to get a derivatives dealer licence which included maintaining a $1.1 million term deposit to support the licence. The business turned into a mainstream derivatives trading operation with Halifax gaining control and 70 percent, he says.
The administrators’ New Zealand report recommends investors vote for liquidation at a meeting in Auckland on March 22.
“Our preliminary investigations have revealed that the company may not have traded while insolvent for a material period of time, if at all. It is likely the company became insolvent on or after Nov. 23, 2018, being the date administrators were appointed to Halifax Australia,” their report says.
That meant the New Zealand arm could no longer rely on Halifax Australia for administrative and treasury support.
“The administrators agree with the director’s (Gibbs) assessment as to the reason for the company’s failure,” the report says.
Even excluding the $1.1 million term deposit supporting the derivatives licence, the New Zealand company “still maintained a working capital surplus” as well as a net asset surplus, a stark contrast to the mess the administrators found in Australia.
“From a preliminary review of the books and records, trade creditors were paid within trading terms and there is no evidence of significantly overdue creditors,” their New Zealand report says.
“A review of the company’s banking records does not reflect a history of dishonoured payments. The company’s books and records do not indicate any outstanding statutory payments as at the date of our appointment,” it says.
The administrators said their preliminary investigations did not reveal any evidence of falsification of records or any evidence of false or misleading statements.
Neither could the administrators find any unfair preference payments or loans, in stark contrast to the Australian company.
Neither have the administrators identified any offences by Gibbs that require reporting to the Financial Markets Authority.
The Australian report said there appear to be contraventions of both the Client Money Rules and the Australian Corporations Act 2001 so the administrators are working closely with the Australian Securities and Investments Commission on these and other lines of investigation.
Gibbs says he expects to spend the next six months to a year helping whoever is appointed liquidator and that after that he will be seeking either a new job or starting a new business.