High-profile property developer Richard Gu has been portrayed as an outrageous villain in the liquidation drama of his property development company AXF group, upon Sydney Morning Herald (SMH) ’s weak proofs.
The Chinese entrepreneur in Australia is the founder of AXF Group, the Australian arm of his property tycoon father’s Shanghai development company Xiang Fu. The Group had investments in high-end real-estate market as well as substantial holdings in two ongoing businesses, Tasmanian bottled water company Cape Grim and the Gold Ridge gold mine in the Solomon Islands.
As the Group is met with the liquidation, newspaper headlines jump on the issue, and the property developer has been illustrated as a villain.
Mystery money + no record?
SMH’s report on 22 August is headlined “‘Nothing adds up’: Sydney tycoon’s mystery $200m confounds ex-liquidator”. However, as APAC news argued a few days later, the Group’s largest funding was a $50 million line of credit and the Supreme Court said, “The arrangement appears to have been comprehensively documented.”
In addition, SMH indicates that Gu refused to “provide books, records or company accounts covering the past five years.” According to the entrepreneur’s lawyers, they submitted 3,000 pages of documents pertaining to AXF Group while Howell was the liquidator. It is believed that the liquidation files, since handed over to Grant Thornton, have been more than 6,000 pages.
The “facts” provided by SMH did not justify the removal of the ex-liquidator Malcolm Howell. It is true that Howell was appointed to be the liquidator of the Group by the court, but the SMH overlooked Howell’s conduct during the liquidation, which results in his removal and Gu’s lawyers issuing complaints in May.
As APAC News shows, one of the creditors commented on Howell: “The way he ran this liquidation was a disaster, before he even achieved anything of substance Howell racked up a million dollars in legal fees.”
In addition, APAC News also shows that by the time Howell was removed, “not on dollar of creditors’ funds had been recovered.
Howell once commented that his sacking was “a blatant abuse” of the insolvency laws, and as he told SMH, “In this case I was faced with very powerful related parties”.
As APAC News argues, Howell went to one funder only – Maurice Blackburn backed Claims Funding Australia (CFA); while according to experts, liquidators should invite at least three funds to propose funding arrangements.
The complaint letter by Gu’s lawyers to Lander and Rogers (Howell’s lawyers) in May 2020 expresses their concerns over Howell’s conduct. It says Howell signed an agreement with CFA on 28 February, which CFA countersigned on 3 March 2020.
According to APAC News, “that agreement would have delivered CFA all of their funding money plus another 15% of any funds recovered in the liquidation – not bad going in a $200 million liquidation.”
Gu’s lawyers also said, the creditors were not informed of the funding arrangement. According to the Chinese businessman, “The funding agreement was only notified to a handful of creditors on the same day as the application to court for its approval.” He says Howell provided no information about the details of the funding required and gave them a day and a half to put together an alternate proposal.
Refuse to meet with creditors
The ex-liquidator refused to hold a meeting with creditors and even took the matter to the Victorian Supreme Court. However, he lost the case. The judge dismissed Howell’s complaints against Richard Gu and his AXF Group.
Richard Gu’s 26-meter motor yacht “Fat Fish” also plays a key role in the liquidation drama. SMH reports that the yacht was repossessed by the National Australia Bank (NAB), awaiting to be sold. However, it is otherwise according to a simple reading of the Supreme Court judgement against Howell.
Gu’s lawyers emailed Howell on 12 February stating the yacht was not an asset subject to seizure and that he, or his agents, would be committing a “trespass” if they attempted to seize the yacht.
According to Howell there was no trespass, “It was an asset of the company and Mr. Gu had transferred the registration days before my appointment. I seized the vessel and subsequently handed it over to NAB.”
According to Gu’s lawyer, Fat Fish was not impounded by NAB. Gu also indicates that Howell was forced to agree to hand the vessel back to him and NAB only got involved after Howell’s possession of the boat was terminated by the Supreme Court.
Bad liquidation reputation
According to APAC News, Howell has involved in “controversial liquidations”:
“… in February, this year he was removed as the liquidator for Stellar Developments following a ruling in the NSW Supreme Court. In that case the court found that Howell did not conduct a poll on a motion to have him removed, he ruled the motion defeated on ‘voices’.
The creditor who voted to oust Howell was owed $102 million, the court identified the two main creditors who supported Howell were owed a paltry $1,090.90 and $495.00 respectively. In 2018 he was subject to proceedings in the Victorian Supreme Court where Justice Randall found that, as liquidator of a group of petrol stations he’d entered into a side agreement for which the liquidators’ “motivations… [were] unreasonable” and the process was “flawed from the start.”
Last month, in a case involving his firm Jirsch Sutherland one its liquidators was criminally charged by ASIC for allegedly misappropriating $238,502.23 in funds from four liquidations.”