Jihong Lu pictured in 2019 aboard the luxury yacht Templar. Photo / Facebook
An 84-foot luxury yacht co-owned by the son of former National Party leader Judith Collins has been caught up in legal efforts to untangle the estate of colourful Auckland entrepreneur Jihong Lu.
Lu, a former Mission Bay resident who staged the lavish 2018 musical comedy City of 100 Lovers at SkyCity, which cost millions to stage but bombed spectacularly, died in Taiwan in January 2020, aged 56.
A court in April last year ordered his estate to be administered by forensic insolvency specialist Dennis Parsons. Three months later Parsons successfully applied for a freezing order against the My Templar company, an entity associated with Lu, to restrain the motor vessel Templar, contending it was the property of Lu's estate.
In a later affadavit Parsons told the High Court his concerns about the Auckland-based yacht's future "proved to be valid" as he had discovered it was subject to a sale and purchase agreement.
Parsons told the Herald the buyer was Templar Charters, a company equally owned by James David Wong-Tung of St Heliers and Daniel Nakhle of Papakura, according to the Companies Register. Templar Charters was registered in June last year.
James Wong-Tung is understood to be the son of Collins and businessman David Wong-Tung.
Collins did not respond to several Herald approaches and James Wong-Tung could not be contacted.
A former lawyer, Collins is understood to have represented Lu in the past. Photos on Lu's Instagram account suggest Collins and her husband were his dining companions. Companies office filings show the couple were co-directors and shareholders with Lu in Warrington Property Investments in the late 90s.
Parsons and My Templar came to an agreement which allowed the sale of the yacht (to Templar Charters) to go ahead "on the basis the proceeds of the sale were frozen", according to a High Court judgment in May this year. The judgment dismissed a bid by My Templar to set aside Parsons' statutory demand against Lu's estate for $2.97m.
The yacht purchase price was $800,000, said the judgment. The price was based on an expert valuation commissioned by Parsons. His statutory demand includes the proceeds of the yacht.
Parsons has received claims from unsecured creditors in Lu's estate for around $9.5 million, according to court documents. Around $5.6m of that total claim is from a Lu family company.
Complicating matters, last month My Templar was put into voluntary liquidation.
According to liquidators Rees Logan and Andrew McKay of BDO, this was because the company "was not in a position to repay the statutory demand".
Parsons told the Herald the liquidation does not change the requirement for proceeds from the sale of the vessel "to be realised and accounted to us for the benefit of creditors and beneficiaries".
Parsons said My Templar holds the mortgage on the yacht. The liquidators in their first report confirmed the yacht was to be paid for "over time".
The vessel, formerly called L'Affaire, was built in 1993 by Alloy Yachts. It is available for cruises and celebrations through charter management company Decked Out Yachting for $1000 an hour if taken out for 4-8 hours. The day hire rate is $8000, according to DOY's website. For longer or shorter rental periods, different rates apply. All rates are GST exclusive. To hold an event or occasion while the yacht is berthed costs $750 an hour. The boat has capacity for 44 daytime guests and nine overnight guests.
Herald efforts to speak to Daniel Nakhle and Judith Collins have been unsuccessful.
Aside from the failure of his musical comedy which opened in late 2018 with an unprecedented budget of $12m, Lu may be remembered by Aucklanders as the man behind a failed plan to finance a $1.5 billion development of Britomart in the late 1990s through his then-company Savoy Equities.
A Malaysian engineering firm had the former concert pianist declared bankrupt in 1999 over a $2.3m debt.
In 2009 he was reported to have been arrested leaving Shanghai, where he had business dealings. At the time he was reported to have been commuting between New Zealand and China, arranging commodities deals and listing stocks on US exchanges such as the Nasdaq.
His musical comedy closed suddenly in February 2019 after poor ticket sales and reports cast, crew and contractors had been unpaid for weeks. Soon afterward, Lu told the Herald the prospects for creditors to be repaid depended on whether he could raise millions of dollars in additional capital to reopen the production. Casino operator SkyCity was understood to be the biggest creditor.
This year's May judgment by associate judge Peter Andrew said Parsons contended the yacht was owned by Lu and was sold to My Templar, wholly owned by another Lu family company, Templar Funds.
Parsons contended the proceeds and cash advances associated with the yacht were a debt owing to Lu's estate. Parsons had provided to the court documents which supported the claim Lu had owned the yacht and that My Templar had never paid anything for it, the judgment said.
But My Templar argued there was a genuine and substantial dispute as to the existence of the debt.
My Templar said Lu purchased the yacht (in 2017) on the company's behalf, using Templar group funds. It claimed Lu did not have any wealth of his own or any obvious sources of income other than from his role in My Templar and the group. The yacht was never his to sell. For this reason, My Templar contended it had a resulting trust over the proceeds of the sale of the yacht.
The judgment said My Templar could not establish that it paid any funds for the yacht.
"On the contrary, the evidence establishes that it was Jihong who paid for the yacht from funds out of his own personal account."
Before his death, Lu was the sole director of My Templar. At the time of the judgment - and the liquidation - the sole director was his brother and estate executor Bin Lu.
The judgment said Jihong Lu had management and control of the Templar group, including My Templar, between 2015 and January 2020.
The group comprised TCG Trust Limited, the ultimate holding company, Templar Fund Limited and Templar Investments. Of the companies in the group, Templar Investments had the most cash reserves, said the judgment.
The judgment said Parsons' inquiries revealed that Lu advanced funds to, and received funds from, the Templar companies at his discretion. He was able to receive and use funds received into his personal bank accounts from related companies (including Templar Fund and Templar Investments) and from overseas investments as required.
"It appears that these funds enabled Jihong to have a lavish lifestyle," the judgment said.
The story of Lu and his pride and joy yacht began in 2016 when he bought a half share in the boat from Gym Properties. One year later he bought the remaining interest for $1.12m, according to the judgment.
Between June 2016 and November 2016, $977,435 was paid from Lu's bank accounts to Gym Properties in varying instalment amounts.
Parsons investigations did not identify any payments from My Templar for the purchase of the yacht.
Between May 2016 and December 2017 Templar Investments paid Lu $1.62m by way of cheques drawn down by Lu. My Templar contended these funds were used by Lu to pay for the purchase of the yacht "as it was a family decision".
My Templar was incorporated in August 2017 to hold the yacht asset.
The judgment said in May 2018, a Templar Fund representative sent a signed sale and purchase agreement for the yacht to the group's lawyers.
The agreement was signed by Lu as the vendor of the yacht and by a director of My Templar at the time.
The agreement recorded a purchase price of $2.6m and "that the purchase price would not be paid in cash but would be left outstanding as a debt owed from My Templar to the deceased", the judgment said.
Parsons' investigations showed Lu made additional cash advances to My Templar of $370,914.
Parsons report to the court said the My Templar company initially traded at a loss, and at March 31, 2018 had only been able to operate with the support of shareholder funds from Lu.
Parsons believed it was technically insolvent at that time.
In his will Lu appointed Bin Lu as his executor.
The judgment said the will provided, among other things, assets including real estate, securities, a Stockton art collection, jewellery, shares and property in China and the yacht.
The will said the Templar yacht was worth around $3m, "disposal of which is entrusted to the executor to complete in an appropriate manner".
Parsons told the Herald the will named eight beneficiaries, all but two being family and extended family. The will included specific bequests.
In his decision, associate judge Andrews said "it is accepted that the way in which Jihong operated the various Templar group companies was not in accordance with good management practices or in accordance with company law obligations."
"Whenever the Templar group purchased assets, rather than directly applying its funds from its bank accounts, Jihong withdrew funds of varying, and often significant, amounts from one of the companies' banks accounts into his personal account, from which the outgoing payment was made, creating a confusing and circular trail of transactions.
"It seems likely that Jihong worked to keep up appearances despite his own declining financial situation. The series of transactions were not at all well documented, but all of the Lu family shared an understanding that Jihong was to act to benefit the Templar group and the Lu family.
"The ways in which Jihong acquired and disposed of various Templar group assets was confused ... "
The judge said Parsons was a very experienced insolvency practitioner and chartered accountant, and a certified anti-money laundering specialist. An independent court-appointed expert specialist, he had conducted "a significant and detailed analysis" of the Templar group's own documentation.
"One of the fundamental problems for My Templar is that it seeks to have the Court disregard critical legal and commercial arrangements that it itself put in place in relation to the sale of the yacht from Jihong to itself," the judgment said.
"This is not a case where Jihong was 'off on his own frolic' acting wholly independently of My Templar, who was unaware of what he was doing. Furthermore, none of the trust or agency arrangements which My Templar now contends for are recorded in writing.
"The My Templar generated documentation clearly records that Jihong was the owner of the yacht ... No plausible explanation has been put forward by Bin (Lu) as to why the Court should ignore the formal legal structures put in place. My Templar simply seeks to take advantage of what it says is a confused situation, in circumstances where it cannot deny that it has played a role and has responsibility for some of that confusion.
"If the yacht was to be purchased, in the first instance, by Templar Investments, it could readily have been purchased in the name of that entity. Instead, Jihong accessed funds in his personal bank account, which included an advance from Templar Investments, to acquire the yacht in his own name.
"If some sort of agency or trust arrangement was intended, this could readily have been completed."
The judge said it was clear from the evidence that Lu received funds from Templar Investments and was free to apply those funds as he considered appropriate.
"The contention by My Templar that all of the Templar group assets should be treated as 'family funds' is nothing other than a mere assertion and ignores, as I have emphasised, the legal structures and the transactions entered into between them."
The judge concluded My Templar had not established a credible or plausible resulting trust and/or agency arrangement in support of its claim that Lu never owned the yacht.
"I find there is no genuine and substantial dispute as to Jihong's ownership of the yacht and Jihong's estate maintains the right to call up the debt owed to it by My Templar."
Parsons told the Herald search warrants had been executed on storage facilities in Auckland to retrieve artworks from the Lu estate.
"The hunt goes on," he said.
Liam Dann talks to Hannah McQueen, founder of financial strategy firm EnableMe.