The lawyer for directors of the failed Lombard Finance and Investments says they should not be held responsible for the unexpected shocks that led to the company's collapse.

In the Court of Appeal this morning Jim Farmer, QC, took the three judges through a series of events, global and domestic, that he said took down the company.

Lombard board chairman, Doug Graham, chief executive Michael Reeves, and fellow directors Bill Jeffries and Lawrence Bryant are appealing against their convictions for misleading statements made in a prospectus and other investment documents in late December 2007 and early 2008.

Farmer said that when two payments were not made at the end of March 2008, the directors realised "they were not going to make it".

Through the early part of that year the amount of cash the company had was falling, but it varied so much from day to day as loans were repaid that they continued to think the company would survive.

The directors - like everyone else - could not have predicted the crisis that was developing around them, Farmer said.

In the High Court the trial judge had accepted evidence that there had been a pattern of errors in forecasting repayment of major loans that the directors should have been alert to, but Farmer said the analysis of the forecasting was "grossly flawed" and the directors' scrutiny of the loan position had been of a very high quality.

The failure to include information in the prospectus about what the judge found was a pattern of delayed repayment of loans and the falling cash reserves, were omissions the judge had said made the four directors each guilty of four Securities Act charges.

From the date the prospectus was issued in December 2007 to the April 2008 collapse of the company, over $10m was invested or reinvested.

More than 4000 investors were owed about $127m at the time of the collapse.

The directors' appeal and a Crown appeal asking for their sentences to be increased, are expected to finish on Thursday.

Graham and Bryant were sentenced to 300 hours community work and to pay $100,000 reparation. Reeves and Jeffries were sentenced to 400 hours community work.

- © Fairfax NZ News