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Fraudulent Roofing Contractor Sam Oliver Spence Imprisoned For Breaches Of Company & Insolvency Laws

On 5 May 2020, Sam Oliver Spence, a roofing contractor who operated predominantly in the Auckland region, was sentenced in the Auckland District Court to five years and six months imprisonment on 11 charges filed under the Companies Act 1993 and Insolvency Act 2006.

This is the first prosecution in New Zealand for serious breach of director’s duties under s 138A of the Companies Act, and also includes breaches of the Companies Act phoenix trading provisions.

The judge considered that a sentence below the maximum sentence of five years imprisonment available for any one charge would not reflect the seriousness of Mr Spence’s offending, which he described as prolonged and systemic and with a calculated criminal aspect.

Between 2011 and 2018 Mr Spence was the director of, or involved in the management of, several roofing companies which operated under the trade name “Compass Roofing”, including Compass Roofing Ltd, Compass Group Ltd and Caspian Engineering Ltd.

Through his mismanagement of these companies, Mr Spence caused significant losses to the companies themselves, totalling over $1,000,000. He also caused losses of over $1,000,000 to creditors, including the Inland Revenue Department through unpaid tax, as well as to customers, some of whom paid thousands of dollars for work which was never done or done in a defective manner.

Mr Spence managed the various Compass Roofing entities until they incurred significant debt and became insolvent. He would then place the company into liquidation, but before the liquidator took control, he would transfer the assets to a new company at a significant undervalue and divert money the company received in order to continue trading under the Compass Roofing brand, thereby engaging in phoenix company offending.

Mr Spence was adjudicated bankrupt in February 2018, meaning that he could not be a director of, or take part in, the management of a company without the consent of the Official Assignee. To avoid this restriction Mr Spence’s de facto partner Jessica Brechelt became the named director and the face of the various Compass Roofing entities. However, in this role she permitted Mr Spence to continue managing the business under the guise of being employed as a quantity surveyor.

For her role in this offending, Ms Brechelt was sentenced in the Auckland District Court on 16 January 2020 to 6 months community detention, 150 hours community work and 12 months supervision on charges of being a director of a phoenix company. This included for aiding or abetting Mr Spence to take part in the management of a phoenix company, and aiding or abetting Mr Spence to take part in the management of a business whilst bankrupt.

Once his financial mismanagement had come to light, Mr Spence refused to comply with both the liquidators and the Official Assignee. He failed to provide the liquidators with the books and records of the liquidated companies, failed to provide a statement of affairs setting out his financial position to the Official Assignee, and misled the Official Assignee. His non-compliance was further aggravated by the racist, sexual and homophobic abuse which he directed towards the liquidator.

His abusive behaviour continued throughout 2018, with threats being directed towards elderly and vulnerable customers, creditors and other people whom Mr Spence came into contact with during the course of his management of Compass Roofing.

“Mr Spence has persistently breached his obligations and responsibilities as a director, and then as a bankrupt. He has caused real harm in the community, including to vulnerable consumers. The sentence he has received, which follows a thorough investigation by MBIE’s Integrity and Enforcement team, provides an emphatic message that this type of financial mismanagement and fraudulent conduct will not be tolerated,” says Registrar of Companies and Official Assignee, Ross van der Schyff.

Mr Spence is still to be sentenced on charges of attempting to pervert the course of justice and forgery. These charges arose from a fraudulent statement which Mr Spence filed with the Court in an attempt to secure his continued bail whilst the Companies and Insolvency Act charges were before the Court.

Mr Spence remains an undischarged bankrupt, and following his conviction is automatically disqualified from being a director or promoter of, or taking part in the management of a company for a period of five years.

Offences:

Mr Spence was convicted of the following offences:

· Serious breach of director’s duties (x 2) – Companies Act 1993, s 138A;

· Taking part in the management of a phoenix company (x 2) – Companies Act 1993, s 386A;

· Being a director of a phoenix company – Companies Act 1993, s 386A;

· Failing to file a statement of affairs – Insolvency Act 2006, ss 67 and 433;

· Misleading the official assignee – Insolvency Act 2006, s 440;

· Failing to comply with a s 261 notice (x 2) – Companies Act 1993, s 261; and

· Taking part in the management of a company whilst bankrupt (x 2) – Insolvency Act 2006, ss 149 and 436.

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