$2.4m Lloyds payout
Lloyds of London has made a $2.4 million payout to investors in a New Zealand mortgage trust supposedly insured against losses.
The payout only goes part of the way towards repairing Kiwi investor losses from the Diversified Mortgage Trust No 1.
It was set up in 2006 to buy loans from Capital + Merchant, a property finance company that struggled for liquidity and went bust owing $167m, all of which has been lost.
At the end of March last year, the sum being claimed from Lloyds was just short of $11m, so the ultimate settlement is a lot lower than what investors were looking for.
Auckland lawyer Jack Porus, one of the trust's founding directors, would provide little detail on why Lloyds didn't pay out fully on the policies, which were supposed to cover losses on 11 loans, including one to a company operated by Blue Chip founder Mark Bryers.
Porus said the terms of the settlement were confidential. The deal had been done on the advice of Alan Galbraith, QC, in order to avoid the costs of a protracted trial and risk of an adverse costs order.
"Lloyds accepted some claims but rejected others made under the policies on various technical arguments which [Capital + Merchant's trustee] Perpetual and Diversified did not accept."
Some idea of what those technical arguments might have been comes from a civil case being taken by Capital + Merchant receivers Grant Graham and Brendon Gibson of KordaMentha.
The claim, against law firm Stace Hammond, alleges the trust structure invalidated the loan insurance and the law firm should have advised against it.
Stace Hammond denies the claim and says it did advise on the matter.
Though trust investors are out of pocket, Porus's law firm Glaistor Ennor earned $220,202.
- Sunday Star Times