The Christchurch City Council has been left with egg on its face after the contractor initially chosen to run the Botanic Gardens café plead guilty to 21 charges of withholding tax and misapplying tax deductions of more than $300,000 in his previous business. The Council had ample opportunity to find this out but failed to do so, according to documents released under the Official Information Act. The error has prompted a shift in the way the Council operates its tendering process.
Jonny Schwass, a popular chef in the Christchurch culinary scene known for donating his time to charity events and his run of successful restaurants, was a director of Good Company Canterbury. The company was one of six applicants to run the Botanic Gardens café, now named ilex, and was accepted after an extensive tendering process.
However, Schwass failed to mention that his former company, BTS Restaurants, had gone into voluntary liquidation with debts of over $1 million just days before the tendering process opened last year. He ended up pleading guilty and is due to be sentenced soon.
The debts included $670,000 to the IRD, which was reduced to $450,000 after a legal settlement. Schwass admitted to withholding PAYE, Kiwisaver, student loans, and child support deductions from the IRD.
Documents show that candidates were asked to declare their track record with other businesses, and whether or not there were any factors which “could adversely impact on the financial ability of the respondent to successfully perform the obligations stated".
"When requesting proposals to lease premises, prospective tenants are required to provide information about any matters that may affect the offer of a tenancy, including bankruptcy and insolvency matters,” said Bruce Rendall, council head of facilities, property and planning.
"None of the information that was provided to the council at the time gave rise to concerns that would have affected the council's final decision whether or not to grant the lease."
Further to asking these questions, Christchurch City Council failed to conduct any of its own checks, including credit checks. The Council is now tightening up its tendering process, which will allow it to punish applicants who do not disclose important information. However, it is too late to go back on its original decision.
"While the Council could seek damages from the applicant, we would need to show that there had been a loss, which would be very difficult to do,” explained Rendall. “The lessee is meeting all lease requirements.”
"With no realistic, practical opportunities to apply sanctions, our focus is now on preventing the chance of future similar circumstances. To do this we are making changes to both future RFDs and lease documents allowing for us to disqualify applicants or take legal action if there is any misrepresentation."
Ilex café is being run by Dan Shanks, Schwass’ former business partner. He has refused comment on the ongoing situation, saying that he is too emotional.
