QC sees merit in case: broker

The Queen’s Counsel looking into potential legal action for South Canterbury Finance investors was part of the team who reached an $18.5 million settlement with Capital+Merchant Finance’s auditors.

A legal team fronted by Queen’s Counsel Chris Gudsell has spent three months researching whether or not it was worth investigating a claim that would try to recover funds for holders of South Canterbury Finance preference shares.

“The QC and the law firm have concluded that there is a case worth investigating and that they wish to do it,” share broker Chris Lee told a South Canterbury Finance investor meeting in Auckland yesterday. the company had not been communicated to the market.

These included when South Canterbury Finance’s trustees wrote to accounting firm McGrathNicol in August 2009 asking them to not accept any assignments from the company as they believed they were likely to appoint them as receivers in the near future.

That same year a report from

Lee raised a lawsuit launched against Capital+Merchant Finance’s auditors as to why Gudsell and the team were appointed in the first place.

That lawsuit was filed by the Official Assignee after Capital+Merchant’s receivers believed there was nothing more to collect from the company, Lee said.

The OA then referred the file to Gudsell and his team. “They decided there was, they proceeded and last year the QC and the legal team triumphantly settled the case against the auditor for $18.5 million. That’s an awful lot of money that someone else thought wasn’t worth pursuing,” Lee said. — Hamish Fletcher KordaMentha, who analysed the firm’s loan book, claimed the company’s collectable advances had been overstated by $170 million and it didn’t appear as though it would meet solvency tests.

Less than 12 months later in August 2010, the company was put into receivership with an expected shortfall of at least $600 million.

“Not once had any continuous