LDC investors sue failed firm's directors
The liquidators and several investors in failed Nelson finance company LDC are suing its directors, trustee, auditors and the accountancy firm Carran Miller Strawbridge - and expect it will be years before the case is heard.
The group lodged a statement of claim in the High Court at Nelson, naming the three LDC directors David Miller, Kevin Elliott, Christopher Hardiman, and businessman John Janetto as first defendants.
Carran Miller Strawbridge, formerly Carran Miller, of Halifax St, is second defendant, LDC trustee Perpetual Trust third defendant and auditors Sherwin Chan Walsh fourth defendant.
Liquidator Iain Shephard of Wellington insolvency practice Shephard Dunphy said yesterday he believed all the defendants had breached their duties and obligations to the company and its investors.
The action aimed to recover the $12.5 million belonging to secured and unsecured investors.
"We have looked at unsecured investors, secured investors and investors who were referred to LDC Finance in their capacity as clients of Carran Miller."
There were 878 investors at last count. Eight individuals and companies are named in the statement of claim, and Mr Shephard said the court was being asked to have them deemed to represent the entire list.
The liquidators had sought people willing to be named as plaintiffs and many more than the eight listed had been "very keen to help".
Mr Shephard said that until his firm got involved as liquidators, none of the individuals had a voice.
A hearing on whether the representative claim could be allowed was tentatively scheduled for February, with no date for the case itself.
"Before any of this proceeding ever came to court would be two years minimum, just because of the nature of the beast. But I can also say, they have finally got a voice, that people are actually trying to work on their behalf, and as liquidators we're trying to recover the monies they have lost. We're trying to better their position - we sure as hell can't worsen it."
The collapse of LDC was linked to the failure of another Nelson company, Finance and Investments, and the High Court ruled earlier this year that more than $8m in disputed LDC funds should go to F and I depositors. That decision is being appealed separately, with no court date set.
Shephard Dunphy were called in as liquidators following two sets of receivers for LDC, firstly Malcolm Hollis and John Fisk of PricewaterhouseCoopers, and then Richard Simpson and David Ruscoe, of Grant Thornton.
Mr Shephard said the liquidators were "also investigating claims against additional parties".
He said the cost of the case would likely run into hundreds of thousands of dollars and it was hoped to arrange funding through a litigation lender.
"What you don't want is Ma and Pa Kettle having to dip into their pockets to pay for it."
Chairman of the LDC Investor Recovery Group, Gary Wilson, could not be reached this morning. In a letter to investors a month ago he said that if the appeal over the $8m failed, "our only hope of recovery is to take action against the people who caused our losses".
"There are some some fairly damning findings in the judgment about the way LDC was run and the arrangements that were made with F and I," he said.
- © Fairfax NZ News
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