Trustee ok with director deals
Trustees of the failed finance company Capital + Merchant Finance had the power to investigate and force remedial steps if they were concerned over any transactions, the High Court has heard.
The defence is delivering its closing arguments in the trial of three former Capital + Merchant directors on theft charges.
The financier's trustee, Perpetual Trust, was obliged to take a proactive approach and was bound to act with reasonable diligence and care in establishing if a breach of the trust deed occurred, Bruce Gray QC told the court.
Gray, acting for founding directors Wayne Douglas and Neal Nicholls, said the trustees had given evidence that each of the four transactions the charges centred on were disclosed by the company.
The trustee had also agreed that if it had been concerned that the transactions were not in the ordinary course of business it had the power to investigate.
Nicholls and former chief executive officer Owen Tallentire face four counts of theft under the Crimes Act, while Douglas is charged with the first three of those counts.
The charges, which have a maximum penalty of 10 years in prison, have been brought by the Serious Fraud Office and stem from four separate transactions, referred to as Numeria 1 and 2 and Clyde 1 and 2. All involve Capital + Merchant Finance in some part of the transactions.
The Crown argues that the accused, knowing they had to deal with investors' funds in accordance with the trust deed, intentionally departed from those obligations.
But the trust deed allowed for related party loans to be made without the prior consent of the trustee if they were made in the ordinary course of business, Gray told Justice Edwin Wylie. The transactions met this test, he argued. They were consistent in scale with other loans, and were also consistent with other arms' length loans made for business purposes.
''The transactions were all disclosed as required to the trustee and no concern was expressed by the trustee,'' he said.
Christopher Lithgow, from Perpetual Trust, had given evidence that the trustee had a duty to ascertain if there was a breach, and if there was, it would give the company reasonable time to remedy that breach.
Lithgow had acknowledged that if a breach wasn't remedied, it could then use its enforcement powers, Gray said.
''As the trustee's requirements were not breached, because the trustee was not concerned, we say there cannot be (a conviction).''
There was ''continual and comprehensive'' disclosure to the trustee and if it had asked the company any questions, it would have received answers, Gray said.
The defence closing is expected to end tomorrow.
Capital + Merchant went into receivership in November 2007 owing 7500 debenture holders $167m. It is unlikely any of the funds will be recovered.
- © Fairfax NZ News
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