Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Testimony may pose ‘real difficulties' for MFS Pacific claim

Former MFS Pacific CFO’s testimony may pose ‘real difficulties’ for receiver’s claim, says judge

By Paul McBeth

April 3 (BusinessDesk) - Testimony by former MFS Pacific Finance chief financial officer Nigel Lane could frustrate a bid by the failed lender’s receiver to sue auditor Sherwin, Chan & Walshe, though not before the case reaches a formal hearing.

Justice Robert Dobson dismissed Sherwin, Chan & Walshe’s application for a partial strike out of the receiver’s claim that the auditor breached its obligations in relation to the lender’s 2007 financial statements, according to a March 12 judgment in the High Court in Wellington. Still, Justice Dobson said Lane’s “evidence may well create some real difficulties for the plaintiff’s claims” if it isn’t discounted after cross-examination.

The former executive for MFS, now known as OPI Pacific Finance, disputed the events as advanced by receiver Colin McLoy of PwC, claiming “the company’s directors were well aware of the extent of non-performing loans in the company’s loan book, and their deterioration over time,” the judgment said.

“Mr Lane described MFS Pacific as being ‘… increasingly utilised as a depositary for non-performing loans from another fund under the MFS umbrella …’,” the judge said.

Lane considered the directors’ view on whether to exercise a put option, where the Australian parent Octaviar would pay the face value of loans in arrears for more than three months, “were conflicted by their position as either executives and/or directors of Octaviar or other entities linked with the parent.”

Even if the auditor had sought a different accounting treatment for the loans and the impact of the put option, “this would not have altered the course of conduct pursued by the directors,” the judgment said.

The receiver claims that if the audit had been completed competently, the lender would have stopped trading earlier, which would have prompted directors to exercise a put option requiring Octaviar to pay MFS the $61.6 million face value of loans in arrears rather than the $23.1 million payment made under the option.

Sherwin, Chan & Walshe sought to strike out the application, saying “there is no tenable basis on which the plaintiff could make out that any of the errors or omissions alleged against SCW could have been causative of certain components of the losses that have been claimed,” the judgment said.

The auditor pursued the partial strike out on the basis the finance company’s directors’ extension of a prospectus in December 2007 overtook the audited financial statements several months earlier.

In seeking to strike out the put option claim, counsel for Sherwin, Chan & Walshe said the majority of the MFS directors were either executives or directors of Octaviar, and inferred there was a conflict of interest, the judgment said.

On both counts, the receiver’s counsel argued that until the evidence was tested at trial it couldn’t be discounted as untenable.

“I cannot be satisfied that there is no tenable prospect for MFS Pacific to make out a sufficient causative link between any alleged negligence in the auditors’ approval of the treatment of the valuation of loans, and the deferral of a decision to exercise the put option in relation to the major loans that were then in arrears,” Justice Dobson said.

“The argument has identified difficulties for this part of the plaintiff’s claim, but none of them can be determined in the context of a strike out application as existing to the level that renders the pleaded causative link to be untenable,” he said.

The decision was recently published on the Justice Ministry’s website.

Last November, the Financial Markets Authority charged former OPI Pacific directors Mark Lacy, Jason Maywald, David Anderson and Craig White under the Securities Act with making untrue statements in the 2007 offer document. They appeared in December and are scheduled to appear in the Auckland District Court next month.

OPI Pacific went into receivership in September 2009 after a 16-month moratorium and was put into liquidation in November 2011. At the time of the receivership it owed almost 11,000 investors about $256 million, of which 3.25 cents in the dollar has been repaid, on top of the 22.2 cents investors received during the moratorium.

(BusinessDesk)


© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

I Sing The Highway Electric: Charge Net NZ To Connect New Zealand

BMW is turning Middle Earth electric after today announcing a substantial contribution to the charging network Charge Net NZ. This landmark partnership will enable Kiwis to drive their electric vehicles (EVs) right across New Zealand through the installation of a fast charging highway stretching from Kaitaia to Invercargill. More>>

ALSO:

Watch This Space: Mahia Rocket Lab Launch Site Officially Opened

Economic Development Minster Steven Joyce today opened New Zealand’s first orbital launch site, Rocket Lab Launch Complex 1, on the Mahia Peninsula on the North Island’s east coast. More>>

Earlier:

Marketing Rocks!
Ig Nobel Award Winners Assess The Personality Of Rocks

A Massey University marketing lecturer has received the 2016 Ig Nobel Prize for economics for a research project that asked university students to describe the “brand personalities” of three rocks. More>>

ALSO:

Nurofen Promotion: Reckitt Benckiser To Plead Guilty To Misleading Ads

Reckitt Benckiser (New Zealand) intends to plead guilty to charges of misleading consumers over the way it promoted a range of Nurofen products, the Commerce Commission says. More>>

ALSO:

Half A Billion Accounts, Including Xtra: Yahoo Confirms Huge Data Breach

The account information may have included names, email addresses, telephone numbers, dates of birth, hashed passwords (the vast majority with bcrypt) and, in some cases, encrypted or unencrypted security questions and answers. More>>

ALSO:

Rural Branches: Westpac To Close 19 Branches, ANZ Looks At 7

Westpac confirms it will close nineteen branches across the country; ANZ closes its Ngaruawahia branch and is consulting on plans to close six more branches; The bank workers union says many of its members are nervous about their futures and asking ... More>>

Interest Rates: RBNZ's Wheeler Keeps OCR At 2%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2 percent and said more easing will be needed to get inflation back within the target band. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news