I can't pay $19m in damages - Birnie

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Auckland investment banker Bill Birnie and his associates could not stump up the $19 million in damages being claimed by two aggrieved shareholders in one of his companies, Birnie Capital Property Partners (BCPP), if they won a court case against him, the High Court at Auckland has been told.

According to NBR's 2009 rich list, Birnie is worth $100m.

Also at issue is a $6.5m mortgage to the BNZ over BCPP-owned property on Kawau Island which is in default, Mr Birnie's lawyers told the court.

Mr Birnie has guaranteed this loan to the tune of $2.5m and his lawyers say they fear the BNZ will call up this mortgage if the two aggrieved shareholders, Allen Peters and Bernard Quinn, succeed in their action.

So far, court documents indicate the bank is watching the situation closely but has made no demand on either BCPP or any other Birnie entity.

As of yesterday, BCPP had only $530,000 in the bank. Mr Birnie's lawyers say the BNZ has security over this money and it cannot be used by Mr Peters as a litigation fund. Mr Peters, however, says he is prepared to fund his action himself.

Justice Raynor Asher has made it clear the solvency, or otherwise, of Mr Birnie's companies will be a central issue for him to consider when deciding whether to allow Mr Peters and Mr Quinn to bring a derivative action against Lion Rock Developments.

Lion Rock, a company owned by Mr Birnie's interests, is part of a $37.5m property portfolio Mr Birnie sold to Mr Peters and other sophisticated investors, including South Canterbury Finance founder Allan Hubbard and his wife, in 2007.

Those investors paid $19m for Lion Rock and now want their money back, claiming the right to exercise a put option over the property if one of two other BCPP deals fell through.

This, they claim, has happened. But the BCPP board is deadlocked over the issue, with Mr Birnie and fellow director Steve Norrie opposing the put option, and Mr Peters and Mr Quinn voting in favour.

Mr Birnie's lawyer, Michael Reed, QC, told the court a derivative action against Mr Birnie and Mr Norrie as vendors of Lion Rock would be pointless as his client could not pay.

But Mr Peters' lawyer, Zane Kennedy, says he is not so sure that Mr Birnie and Lion Rock do not have sufficient assets to meet Mr Peters' demand if he won his case.

"It is not in BCPP's best interests to turn its back on the recovery of $19m simply because the Lion Rock vendors [Mr Birnie and Mr Norrie] say, `Sorry, we're not up for it'," Mr Kennedy told the court.

In an interview late yesterday, Mr Birnie said he was not personally insolvent and the solvency of Lion Rock was "not an issue" as the company did not trade. He also said he was "not in default with any facilities at the bank". "My position is tight, but manageable, like about 90 per cent of the country," he said.

He said there was still value in the Lion Rock development project on the Pureru Peninsula in the Bay of Islands.

When the case began in the High Court on Wednesday, his lawyers applied for a blanket suppression on the proceedings. Justice Asher made an interim order which he lifted yesterday morning after hearing argument from the media.

But suppression orders on some of the affidavits were not lifted until later in the day when Mr Reed decided not to appeal against the decision to allow the media to report the proceedings.

Mr Reed had been seeking permanent suppression of what he described as sensitive commercial information in those affidavits, along with everything said in court during the hearing.

- © Fairfax NZ News