Delta #EpicFail —Epic Fraud #7 : The Long & Winding Back Road

dirt road west at night [gettyimages.com]Delta, dirt road west at night….

Received from Christchurch Driver [CD]
Sun, 17 Jul 2016 at 5:08 p.m.

Readers, tonight a post to keep things brewing, but please take that ridiculous tea cosy off your head, put it back on the teapot where it belongs – who do you think you are – Peter Tosh ? !

Firstly, Friday’s riddle and the background on the $3.39M; Mr Crombie proudly declaimed to Dunedin recently that by spending $3.39M of actual cash from Delta’s fast disappearing reserves to buy part of the Gold Band first mortgage, they will receive around $5.1M of the first mortgage debt, which means they THINK they have $1.7M of extra security for their very large core debt. This extra $1.7M is because Mr Crombie is ignoring the 22.50% interest on the $3.39M, ie there is no actual extra security, just Delta forgoing interest, which the other co-holders of the first mortgage are certainly not forgoing. Before we move on, readers should remember that Delta’s average annual profit over the last five years was just $2.6M, and so Mr Crombie and Co have just gambled the entire proceeds of more than an entire year’s profit on this venture, which is far from certain given the ongoing court cases about prior interest in the land. Readers may also want to bear in mind that Delta and the DCHL are in such terrible shape that they will not be paying a dividend to Council to defray rates rises over the next three years, a fact that Mayor Cull is desperate to hide from the public of Dunedin and thus far, the ODT are doing a very good job of assisting him in this endeavour.

In other words, the only beneficiaries of the $100M of work that Delta performed last year were the 70 Delta seat warmers who earned over $100,000 per year, and the Directors, who others, more unkind than your correspondent, have described as unrepentant troughers. Yes, readers, Delta is a corporate welfare scheme, providing a zero return to the ratepayers and is going to remain that way for the next two to three years. We know this because Ms Bidrose and Mr McKenzie explained that is why the city must retain Delta in their recent report on the DCHL companies, so it must be true.

Now as readers of Epic Fraud posts #3 – #6 will know, it is looking very (very) likely that DCHL, Delta and their lawyer Mr Smillie are going to get a comprehensive pasting in Court, the odds being they will be found to have not merely been a party to, but in fact have orchestrated a constructive fraud to ‘cheat a man of a known interest’ and openly flouted the provisions of the Property Law Act.

So what are the consequences of this ?

At the recent High Court hearing, Osborne J asked both Gold Band’s lawyer and the plaintiffs’ lawyer what it would mean if the first mortgage was unable to be partially assigned because the Property Law Act did not permit it.

Neither lawyer had an answer.

Subsequently, one set of lawyers has researched if there is any case law on the issue of partial assignments, and there apparently is not a one, which lends considerable weight to the argument that it is, as it says in the Act, not possible, ie illegal. Osborne J then said he would read up on the Property Law Act, and said that “maybe it meant that everything had to be wound back to before there were any partial assignments” or words to that effect.

Your correspondent would dearly love Mr Crombie (at a pinch, even Mr McKerracher would do) to explain what they think this will mean but, readers, you can guarantee a deathly silence, punctuated only by the sound of frenetic footsteps as there is a mad race to not be the one left standing, facing the inquisition following the court judgement.

Mr Smillie, Delta’s lawyer who cooked up the partial assignment, must be feeling a little anxious? (terrified?) at present. What a contrast to those heady days of early 2011, where it seemed he was on a tear, having schooled that old school crustacean Jim Keegan on the Property Law Act. He probably had a crack at actually walking on water that year, seemingly having pulled off the legal equivalent with the partial assignment. Alas, it appears to be a Febezzle, or “functionally equivalent bezzelment”, as defined by Charlie Munger, Warren Buffet’s cohort. This is where both parties feel wealthy, until the deception is revealed, but in fact it was Gold Band and Avanti doing the bezzeling, not the hapless Mr Smillie and Delta.

Here is what your correspondent thinks is the awful truth : If the first mortgage was “wound back” to pre April 2010, because Delta’s partial assignment was illegal, Delta may lose all of the $3.39M. It is no different than someone who has bought stolen goods and did not have the proof of ownership.

Grady, Graham, and Delta Directors, read this slowly and carefully – say the words out loud if it helps :

1. “An agreement for an illegal partnership will not be specifically enforced even though partly performed, nor can damages be recovered for a breach of it, and if the whole purpose of the partnership is illegal, the court will not recognise it, or enforce any right which the partners would otherwise have, especially when the parties have agreed to enter, as partners, into a transaction, which they knew to be illegal”

Let’s break this down for the Delta turnips :

a) Illegal partnership – check !
b) Partly performed – double check ! —Delta paid donated $3.39M to Gold Band and Avanti.
c) Damages not recoverable – check ! —Avanti and Gold Band get to keep the $3.39M.
d) Whole purpose illegal – check !
e) Knew it to be illegal – check ! (Tom Kain and Jim Keegan advised it couldn’t be done).

Readers, what are the chances of two small, opportunistic finance firms who are never likely to deal with Delta again, saying to Delta’s Directors:

“Well chaps, poor show, poor show indeed ! What about that Judge Osborne – a terrible time for him to have an attack of principles ! We shall not be sharing a drink with him at the Canterbury Club…. but don’t worry chaps, even though we don’t have to, and even though you or the courts can’t make us, and even though we have been put through the wringer first by NIL, then by the landowners, breached our trust deeds, had to pull our prospectus, and now been humiliated in court by your ineptitude, it’s all right, we will pay you back the $3.39m….

It should be enough to say it is Tom Kain’s favoured finance company we are discussing here.

We should also consider WWDD ? (What Would Delta Do – in that situation ?). Readers, I hardly need to tell you that Delta would have announced a record profit, up by $3.39M, and the CEO and Directors would have all recommended healthy increases to themselves in light of their exceptional performance.

The rustling of paper we hear is Grady, Graham and the Delta Directors editing their CVs to remove any mention of Delta (memo to DCC : complain to Institute of Directors about misleading and false advertising !) and writing the first draft of their resignations, “for personal and family reasons”, of course.

For Delta, the Noble Subdivision is no longer an intermodal multiple train wreck : it is a nuclear career conflagration that will consume all those involved with it.

█ For more, enter the terms *delta*, *noble* or *epic fraud* in the search box at right.

Posted by Elizabeth Kerr

Election Year. This post is offered in the public interest.

*Image: gettyimages.com

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21 Comments

Filed under Business, Construction, DCC, DCHL, Delta, Democracy, Design, Economics, Finance, Geography, Housing, Infrastructure, Name, New Zealand, OAG, Ombudsman, People, Politics, Project management, Property, Public interest, Resource management, Site, Town planning, Transportation, Urban design

21 responses to “Delta #EpicFail —Epic Fraud #7 : The Long & Winding Back Road

  1. Not Quite

    I disagree with some of that analysis, if the Deed were to be found unlawful then Delta should certainly have claim against Gold Band under both the Illegal Contracts Act and in the action of unjust enrichment for the recovery of the $3.39m advanced, albeit they may receive little sympathy on costs and the court may apply a harsh lens on the justice of the matter under either claim.

    {Your comment has been forwarded to the author of the post. -Eds}

    Christchurch Driver replies:
    The problem with ‘lawyers logic’ is that it will difficult for Delta to have a claim against Gold Band when Delta were the ones that wrote the “illegal contract” and forced Gold Band to sign it, knowing there was a very high chance it was illegal. Delta are the perpetrators here, not the victims. Yes there may be some partial relief, but we are agreed the court is going to be looking through a very harsh lens at Delta’s actions. In any event we should not lose sight of the main issue – Delta is acting like a corporate criminal, and it is a public, ratepayer owned company. WTH ? !!

  2. Gurglars

    And dear readers, don’t breath a word of this to any DCC councillors you may know, as this may lead them into a terrible pickle with those that they should be controlling, who in fact control them.

  3. Diane Yeldon

    But Delta has no relationship with Gold Band Finance. I’m sure I heard someone say this at a council meeting.

  4. Diane Yeldon

    Council meeting 22 Feb 2016
    50m 15 s into the meeting video
    Cr Calvert: What is the relationship between Gold Band and Delta – financially and any other ….?
    GCFO Grant McKenzie: So – um – there is no relationship. The only thing they have in common is an overdue debt.

    Could CD or anyone else clarify this?

    • Elizabeth

      In his posts, Christchurch Driver [CD] has been clear what the relationship is between Delta and Gold Band Finance – in particular through citing the Security Sharing Agreement dated 21 Dec 2011, which puts Delta in control of (dare not sneeze) Gold Band.

      For example, see the post Delta #EpicFail —Epic Fraud #3 : Security Sharing and not Caring….. who’s got that Constricting Feeling ? (30.6.15) where CD says:

      Delta is 70% owner and 100% controller of that mortgage. While Delta is not yet named in the Court action, Delta is hiding behind the name of their security sharing partner Gold Band. That is, Gold Band’s name is on the court papers with the authority and instruction of Delta who is controlling Gold Band.

      From the same post:

      The High Court was advised on 13 June 2016 that Delta and Gold Band Finance are to be joined to the existing proceeding against Noble Investments Ltd. [The joinder, in regards to the constructive fraud case being taken by the original landowners and caveators of the Noble Subdivision application.]

      CD has at various times dealt to that moment where Mr McKenzie was it, faltered in the Council meeting.

      • Diane Yeldon

        Okay, sorry, am a bit thick when it comes to finance. But the date of the Security Sharing Agreement 21 December 2011 was what I was checking, compared to the date of that council meeting 22 Feb 2016. So there is really no excuse for the two speakers explaining the situation to the councillors not to have known. There sure was plenty of time to find out.
        A Security Sharing Agreement MUST be a ‘relationship’ because it seems to be a contract to me. Well, at least one side must have believed it was a contract at one time or another (preceding 22 Feb 2016), although it looks like it will be the courts who work out what it actually all means.

        • Elizabeth

          The parties all signed off on the SSA.
          (There are two other SSAs as well, implicating Delta).

          In frequent posts CD takes readers through the complexities in a relatively easy-to-understand way. Enter the term *christchurch driver* in the search box at right.

        • Hype O'Thermia

          Security Sharing Agreement – the name says it: sharing.
          By contrast, “I’m entering into this agreement with me” – cue the entrance of white-coated professionals carrying straitjacket and generous quantities of cold-war army surplus Largactil.

    • Gurglars

      Having watched that part of the video (and just enough to determine that Diane must watch a large quantity of drivel!), I come to two questions.

      Councillor Kate Wilson. Just what role is she playing trying to per ert the cause of natural justice by not allowing questions by Hilary on what is a very spurious point of order.

      Councillor Hilary Calvert. Is very uncomfortable with numbers. Millions (meaningful) become thousands (trivial) and she is not quite up with CD’s explanation. She gets the dodginess, but not the devious design.

      And an observation.

      The rest of the council either do not grasp the significance or for their own survival do not want this chicanery exposed prior to the election.

      Cull as an example was squirming in his seat in avoiding the questioning.

      Memo to God.

      Please sir help us to get some real enquiring minds appointed to council this time.

      • Hype O'Thermia

        Gurglars, you ask: “Councillor Kate Wilson. Just what role is she playing trying to per ert the cause of natural justice by not allowing questions by Hilary on what is a very spurious point of order.”
        Understudying Cull’s role, using Hilary Calvert as Lee Vandervis substitute.
        A me-too, follow-the-leader, monkey-see monkey-do game, playing for visibility and perception of leadership qualities, pity she’s using an out of date how-to!

      • Diane Yeldon

        Gurglars: I find all sorts of interesting and entertaining nuggets amongst the dross. Have a look at this meeting video, starting from 6 m. 56 s into the video. Cr Vandervis asks a question about a report, which Mayor Cull first pays no attention to, then doesn’t understand but nevertheless believes he understands and pontificates over (!) and then over-rules. Then Cr Thomson makes exactly the same point which Mayor Cull listens to. Presumably purely because it’s Thomson raising it, not Vandervis. Mayor Cull seeks advice from staff which finally clarifies for him that the point Cr Vandervis was making was a clear-cut matter of fact regarding an error in the report. The matter is corrected and the meeting continues with no apology given to Cr Vandervis.

        Meeting of full council on 17 March 2016

        {Rehashing past comments and video references already published at other threads, Diane. Although, the video still shows two particular faces in the DCC gallery looking bemused, which we can all enjoy without naming. -Eds}

      • Hype O'Thermia

        Gurglars, re “The rest of the council either do not grasp the significance…” see Diane’s comment July 18, 2016 at 5:08 pm. Inability to understand, refusal to take on board information if one doesn’t like the person providing it.
        Spite, fear, gutlessness, gullibility, confusion and stupidity – let’s hope the election in October reduces these toxins to within safe limits.

  5. Calvin Oaten

    Of course council would adopt three monkeys trick on this, arguably the most financially dangerous time bomb the city has to contend with on top of the already crippling +$600million debt burden the citizens are carrying. Just how long this can be kept from public knowledge prior to the election is the Big ! question Dave Cull will be desperate to answer. The ODT seems happy to oblige indefinitely.

    • Elizabeth

      The courts may deliver well in advance of October. Crunch. Notwithstanding there’s the date of 29 July when the Noble Subdivision mortgagee sale goes unconditional. Oh, coincidence! The next full Council meeting falls on 1 August. Unless excitements happen via an Extraordinary meeting of the full Council any day soon – though business may be in non public. Eheu.

      Radiohead Uploaded on Nov 28, 2007
      Radiohead – Jigsaw Falling Into Place (thumbs down version)
      From the album In Rainbows, released 01.01.08.

      [put on your helmets, Delta, DCHL and friends] ? !

      Just as you take my hand
      Just as you write my number down
      Just as the drinks arrive
      Just as they play your favourite song

      As your blather disappears
      No longer wound up like a spring
      Before you’ve had too much
      Come back and focus again

      This place is on a mission

      I never really got there
      I just pretended that I had
      What’s the point of instruments

      Come on and let it out
      Come on and let it out

      Wish away nightmare, wish away nightmare
      You got a light, you can feel it on your back
      A light, you can feel it on your back
      Jigsaw falling into place

      • Diane Yeldon

        So there are two issues here – first, the pickle Delta has got itself into, and second, the quality of staff reporting to council meetings. In some ways, the second is just as important as the first because councillors can’t do their job properly if they don’t get accurate, properly researched and timely answers to their questions at meetings from staff.
        And when councillors are publicly asking questions in meetings, they are also usually asking what the members of the public following the meetings want to know. So this is an issue of the council being properly transparent and accountable.
        Hype: thanks for that, Tom Paxton is great. And the world often is like that – crooked. But it doesn’t have to be. However bad it is, it can be made better – and then better a little more. Or else why would anyone bother to be politically active?
        Anyway, I hope in future when DCC staff don’t know the answer to something, that’s all they will say: “I don’t know.”

        • Elizabeth

          You forget the third reich, the so-called subsidiaries reporting via DCHL…. not a flag to be seen any whar.

        • Hype O'Thermia

          Diane, it’s an unfortunate belief that saying “I don’t know” looks weak and incompetent – true only when there is no addition eg “I’ll do my level best to find out and report back ASAP.”
          Also “…if they don’t get accurate, properly researched and timely answers to their questions at meetings from staff” – sometimes it’s a matter of knowing there IS a question to be asked, and I suspect quite a lot of soothing noises and misdirection are employed to keep people, including councillors, from knowing there’s questionable stuff going down.

  6. Elizabeth

    CD ends his post with:
    “For Delta, the Noble Subdivision is no longer an intermodal multiple train wreck : it is a nuclear career conflagration that will consume all those involved with it.”

    But is it a wreck, if DCHL has recently instructed Aurora to hand over $10M ?

    Mind you, in dropping this news to two elected representatives soon enough, there has been no response, Zip…. the information is particuarly good, not piffle. Oh well.

    The cash demand has come at the same time Aurora is on notice to lines company regulator, the Commerce Commission, for material deterioration in network reliability, not meeting the ‘two out of three years’ quality standard, and lack of asset management.

    Then too DCHL has the undeniable history of bleeding council-owned companies dry as well as borrowing to pay dividends to Mayor and Politicians of the Sainted DCC in order for them to look good to ratepayers.

    Initially, it was thought the $10M might be for Cull to deliver dividends to offset rates as some dreadful 2016 electioneering stint. He is not averse to spending on cycleways any which way, as it were…. or giving lolly money for new staff to satisfy Jinters’ new policy regime at council. [Note : VOTE OUT J MACTAVISH]

    But then the thought was DCC may be on another Rort / mission, this time to buy Delta out of trouble at Noble… perhaps using one of the other companies to hold things up (although you’d have to hope this would also entail the resignations of Grady Cameron and many of the other “seat warmers” – some savings in this, given there might be pockets of Delta and Aurora worth retaining on a commercial footing. That, though, is way beyond the biscuit-dippers of DCC and DCHL to work out.

    I like it that Radiohead wears bike helmets just in case.

  7. Hype O'Thermia

    “Aurora is on notice to lines company regulator, the Commerce Commission, for material deterioration in network reliability” – well goodness gracious me.
    I just can’t help myself. My mind keeps making these weird associations, it’s that old primitive impulse to see patterns where there are none. But we’re all friends here, so I’ll share :-)
    South Dunedin had to be neglected, because doing all that tiresome maintenance and bringing up to improved standards would have eaten into the time and money wanted for flibberty-jibbertudes. Core business? Cor blimey, or to put it another way, it’s like apples. Take out the core and they can be stuffed. Cook in a medium oven, and be energy-wise, cook the books at the same time.

  8. Calvin Oaten

    Aurora to be fair have for years past been hamstrung by having to make $7.9million subvention payments to the stadium. It seems that the Stadium has had a bigger effect on Dunedin’s well-being than the ODT understands. CDs exposure of Delta’s problems is really bothersome for the staff and directors, and the contagion is affecting councillors at long last. It seems that an election sharpens the s of these misfits.

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