Watson entity claims half a billion in Cullen liquidation

A trust linked to Eric Watson has claimed more than half a billion dollars in the liquidation of his Cullen Group, a second liquidator’s report discloses.

While Novatrust is listed as a secured creditor owed $513.4 million in the liquidation of Cullen Group and other entities linked to the former Warriors owner, it is not clear if liquidator Vivian Fatupaito has accepted the loan as valid.

KPMG’s Fatupaito was first appointed liquidator over Cullen Group late last year and now has nearly 20 entities under her control.

The entities were moved into liquidation following the insolvency of Cullen Group, which was told to pay $51.5 million by the High Court at Auckland for unpaid tax in March 2019. The Inland Revenue Department also claims another $66.9 million on top of that in interest, the report dated July 15 shows.    

The report said liquidators will not continue with an appeal of the tax ruling despite one being filed before Fatupaito took control of the companies.

She said the tax appeal was withdrawn after considering the probability of success and associated costs.

Fatupaito’s task is now to untangle what has been described as a “web of entities” linked to Watson and see what money can be recovered.

She noted that the information received so far has been “vast, and working through it has been time consuming.”

Her report said that investigations are ongoing and “largely cannot be disclosed in any detail to creditors at this stage to avoid prejudicing the liquidators’ position.”

Novatrust claim

Novatrust is listed as a creditor with a general security agreement owed $513.4 million in the report, but it is not clear if the liquidator accepts this claim.

The report said liquidators had reached an initial view in respect of the claim’s validity, “which has been communicated,” to the creditor.

“Discussions with the secured parties remain ongoing in this regard and as such the liquidators are unable to provide any further details in this regard at this time,” Fatupaito’s report said.

Novatrust is a Jersey-registered entity, most notably involved in Watson’s dispute with Owen Glenn, as it was the trust which advanced funds into their joint venture. Glenn’s Kea Investments sued Watson’s Novatrust in a dispute which has been settled. However, Glenn obtained a 43.5 million British pounds ruling against Watson personally, and continues to pursue him in the UK courts.

According to the March 2019 tax ruling of Justice Matthew Palmer, Novatrust was used in a tax restructure whereby preference shares in Cullen Group were transferred to the trust, funded by $587.5 million of debt, with Cullen shares used as security.

Similarly, there is a second general security agreement over Cullen Group, in favour of Braithwell Investments. However, the first six-monthly report indicates that Braithwell has not yet made a formal claim.

Related entities

The report lists several Cullen entities which purport to be owed millions from other group entities. While Cullen Investments is identified as the main asset company, the report’s creditor overview said of group entities, Bush Inn Properties is owed $5.8 million, Cullen Investments is owed $38.4 million, Watson Bloodstock is owed $7.2 million, Batty Roads is owed $1.0 million and Bendon Group $55 million.

The liquidators are also continuing to assess the transactions which led to Bendon being transferred to Naked Brand Group and subsequent share transfers but "at this stage it is too early to determine what, if any, action is available to the liquidators in this regard."

While hundreds of millions of dollars are claimed in the liquidation, Fatupaito said potentially the biggest asset of Cullen Investments discovered to date is a $17.5 million loan made to Watson’s brother, Richard. The loan is secured by land but its location is not specified in the report, which simply states, liquidators continue to review their position in relation to it. 

Other recoveries include about $30,000 in Cullen Investments’ bank account and $15 in cash from the office. The selling of artwork had generated $44,957.

Cullen Group's trade creditors are owed $916,634 while other group entities are owed $765,837.

The liquidators’ total fees to date have come in at more than $400,000, and KPMG noted that the IRD had provided $100,000 for the liquidation of Cullen Group.