A retired Court of Appeal judge says the convictions of four Lombard Finance directors, including former justice ministers Sir Douglas Graham and Bill Jeffries for misleading investors was a "grievous miscarriage of justice".
The central piece of evidence relating to a schedule of loan repayments relied on to convict the directors was a shambles, Sir Edmund Thomas said.
"You would never ever convict a dog on the basis of the schedule," Sir Edmund said.
In a scathing 40-page critique of the Lombard Finance judgments by the High Court and Court of Appeal, Sir Edmund said the courts had been influenced by the public "clamour" for directors of failed finance companies to be held to account, rather than dealing with the facts.
Lombard was put into receivership in April 2008, leaving about 3600 unsecured investors $111 million out of pocket, just four months after issuing the amended prospectus.
The Lombard directors were found by the High Court in June last year to have omitted details from a December 2007 prospectus and related documents about late loan repayments and falling cash reserves.
Last month the Supreme Court, New Zealand's highest court, dismissed an application by Graham, Jeffries and fellow directors Lawrence Bryant and Michael Reeves to appeal against their convictions, but they will be allowed to appeal their sentences which include home detention.
"We see no appearance of a miscarriage of justice in relation to the critical findings" of the Court of Appeal, the panel of three judges said. The proposed appeal also did not raise a point of law that was of general or public importance, the court found.
But Sir Edmund said "the Court of Appeal's grasp of the facts was incomplete and its reasoning suspect or flawed in a number of respects".
If the same standard of justice was applied to people charged with murder, robbery or rape, they would not have been convicted on the standard of evidence presented in the Lombard case, he said.
Sir Edmund said the central piece of evidence relied on by High Court Justice Robert Dobson in his judgment was based on wrong calculations to ascertain Lombard's liquidity position during the last four months of 2007.
The evidence compared a schedule of loan repayments Lombard expected to receive between September and December 2007 to the actual repayments received over that time.
Although the schedule purports to show that $71million was due in loan repayments between September and December 2007, no evidence was produced to back up the figure during the trial, Sir Edmund said.
Justice Robert Dobson in his judgment also did not refer to the defence rebuttal to the claim. "I find that astonishing," Sir Edmund said.
The Court of Appeal also accepted the schedule as being illustrative of Lombard Finance's liquidity when it could have chosen to describe the evidence as "a shambles", he said.
Despite convicting the directors, the High Court accepted the Lombard directors were honest and that they genuinely believed that the prospectus was true.
Unlike the prosecution of directors of other failed finance companies, there was no finding of fraud, negligence or mismanagement in the Lombard Finance case, Sir Edmund said.
The Lombard prospectus clearly warned investors that a collapse of the property market might result in the loss of their capital.
Sir Edmund said the Lombard collapse was the result of banks stopping all lending to property developers and their customers early in 2008 in the lead up to the Global Financial Crisis that followed later that year.
Those borrowers were reliant on bank finance to repay their loans to Lombard.
At that point the directors made the responsible decision to put the company in receivership, Sir Edmund said.
Before the so-called "bank lock-up", Lombard still had just under $10m in cash reserves and was able to repay investors deposits as they fell due, Sir Edmund said.
Sir Edmunds said his comments were likely to upset the judges involved in the case. But he said he wrote the critique in his academic position as a distinguished fellow at the Auckland Law School.
The article was not a crusade in support of Graham or Jeffries, but was motivated by the miscarriage of justice, he said.
"And to a large extent, I am angry with the court. The court has got to rise above popular sentiment and act judicially. I feel that the court just didn't do that."
For the directors "it has been six years of living hell" for them and their families, he said.
"In this case I don't have the slightest doubt the court got it wrong, not the slightest doubt," Sir Edmund said.
- Fairfax Media