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

 

Finance: Major Campaign To End "Gross Overtaxation Of Savings"

The campaign – which includes a special web site through which New Zealanders can e-mail their own and other MPs and party leaders – is backed by Age Concern, Consumer NZ, the Financial Services Council and the Taxpayers’ Union. More>>

ALSO:

Scoop Business: Leighton-Led WGP To Build, Manage Transmission Gully

The Wellington Gateway Partnership, led by a unit of ASX-listed Leighton Holdings, has won the $1 billion contract to build the Transmission Gully road north of Wellington. More>>

ALSO:

Gareth Morgan: The Government’s Fresh Water Policy – Revisited

Fresh water quality is the latest area to be in the sights of Gareth Morgan and his research organisation The Morgan Foundation... They found that the fresh water policy was a bit murkier than the Environment Minister let on. More>>

ALSO:

Interest Rates: RBNZ Hikes OCR To 3.5%, ‘Period Of Assessment’ Now Needed

Reserve Bank governor Graeme Wheeler raised the official cash rate as expected, while signalling a pause in rate hikes to assess the impact of moves so far this year. The kiwi dollar sank after Wheeler said its strength was “unjustified” and that the currency could have “a significant fall.” More>>

ALSO:

Fonterra: Canpac Site 'Resize' To Focus More On Paediatrics

Fonterra is looking at realigning its packing operations at Canpac, in the Waikato, to focus more on paediatric nutritionals... The proposed changes could mean around 110 roles may not be required at the site which currently employs 330. More>>

ALSO:

Scoop Business: Postie Plus Brand Gets 2nd Chance With Well-Funded Pepkor

The Postie Plus brand is getting a new lease of life after South Africa’s Pepkor bought the failed retailer’s assets out of administration and said it will use its purchasing power to reduce costs of stock and fatten margins. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news