Liquidator cleared to sue by High Court
A High Court decision has cleared the way for a liquidator to sue the directors and auditors of the main vehicle for Christchurch bankrupt David Henderson’s property exploits.
Accountancy firm PricewaterhouseCoopers (PwC) – the auditors of Property Ventures Ltd (PVL), which went into liquidation in July, 2010, owing about $70m – tried to stop the action by liquidator Robert Walker and other plaintiffs. It argued the proceedings were an abuse of process and against public policy.
In a decision released this week, Justice Brown rejected the arguments and cleared the way for the proceedings to continue.
The action is closely watched by PwC’s insurers, Vero Liability Insurance and QBE Insurance (International Ltd), which both have third party status. Property Ventures and its subsidiaries had major interests in Queenstown and Christchurch.
The other defendants include Henderson, prominent lawyer Austin Forbes, QC, Gordon Hansen, Adolf de Roos and Daniel Godden.
Robert Walker, as liquidator of PVL and other companies connected with Henderson, is spearheading the action.
The case has its origin in 2006, when PVL, still years away from liquidation, granted Auckland company Hanover Finance Ltd a security agreement to secure loans by Hanover to another Henderson company, Five Mile Holdings Ltd.
Hanover sold the security to Allied Farms Investments Ltd in 2009. Five Mile went bust the same year and after it sold land holdings it still owed Allied $39m. In November 2012, PVL (in liquidation) began court action against the directors of PVL and PVL’s auditors, PwC.
The action is backed by litigation funding company SPF No.10 Ltd which is connected to investors’ advocate and businessman Bruce Sheppard.
In March 2013, SPF took over the security agreement and the debts and securities owed to Allied including rights of action against parties including PwC.
SPF paid a fee of $100,000 to Allied and agreed to pay Allied five per cent of the net amount recovered in the court action.
At a hearing in June, PwC asked the High Court in Christchurch to strike out the action, arguing it was an abuse of process and a misuse of the liquidators powers for SPF to be both a funder of the litigation and a secured creditor of PVL.
PwC said SPF stood to make an excessive and disproportionate profit because the penalty interests on the loans to Five Mile would mean by June 2017, when the trial could be expected, the debt would be worth $188m. The firm argued SPF would take that amount and was also entitled to a service fee of $140m.
Justice Brown said the arrangement was not objectionable because no rule existed that a litigation funder could not hold an interest in proceeds of litigation.
The judge awarded costs against PwC.