Developer Morgenstern staves off bankruptcy action

Property developer and former rich-lister Arthur Morgenstern has avoided bankruptcy action. Photo / Anendra Singh

A property developer ordered to pay $3.5 million for breaching director's duties has staved off bankruptcy action and settled with the liquidators pursuing him.

The developer, former rich-lister Arthur Morgenstern, was behind a $67 million apartment and retail unit project in the Auckland suburb of St Lukes that ran into issues with resource consents.

His shares in the project were sold for $3.5 million in 2007 to another company he directed so he could pay his overdrawn current account. These shares were subsequently sold for $1 in the following year.

Liquidators of the company that took on his shares in 2007, Morning Star Enterprises, later sued the Californian-born developer, claiming the amount paid for the shares was excessive.

This was found to be so by the High Court, which last year ordered Morgenstern to pay $3,499,999 for his breaches of director duties when authorising the deal.

His challenge to the Court of Appeal was dismissed last September and the Supreme Court then declined to take the case.

The liquidators of Morning Star Enterprises, Stephanie Jeffreys and Timothy Wilson of Grant Thornton, launched bankruptcy action against Morgenstern and the matter was due to be heard in the High Court at Auckland yesterday.

However, the liquidators' bankruptcy application has now been withdrawn after a confidential settlement.

While Jeffreys could not disclose the amount paid, she said it will be revealed in the liquidators' next report.

Jeffreys' and Wilson's latest report says four unsecured creditors are claiming $1.29 million from Morning Star Enterprises.