Masterminds
behind a commercial fraud against investors in Belgrave Finance have been
ordered to pay $8.6 million dollars damages following action taken by
insolvency specialists KordaMentha.
Belgrave Finance went
into receivership in 2008. Subsequent investigations
found at least thirty per cent of the finance company’s loans were advanced to
parties associated with Belgrave, a lending policy grossly in breach of the
finance company’s trust deed which limited related party lending to two per
cent. Two Belgrave directors and
Belgrave’s legal adviser were jailed for their part in the fraud. Criminal penalties might give some
satisfaction to investors, but that alone does not put money back in their
pocket.
KordaMentha, acting as
both receiver and liquidator of Belgrave Finance took civil action to recover
compensation for funds lost. A detailed
investigation by KordaMentha identified that a Mr Raymond Schofield was the
driving force behind Belgrave Finance.
Whilst not a director, he “pulled the strings” controlling company
management. Through a web of companies
and a discretionary trust, Mr Schofield was the ultimate owner of Belgrave. Over thirty per cent of Belgrave loans went
to Mr Schofield and businesses associated with him. The court was told many of these loans had
unclear or inadequate documentation, and in some cases no documentation at
all. Accounting records were fudged to
hide the fact that Mr Schofield was the borrower.
Justice Fogarty ruled
that Mr Schofield was personally liable to pay damages for his part in
dishonestly assisting Belgrave directors with the improper transactions.
Belgrave director, Mr
Shane Buckley was also ordered to pay damages.
Justice Fogarty said Mr Buckley was in breach of his duties to the
company by making the Schofield loans and actively concealing them.
Mr Schofield and Mr
Buckley were held jointly liable to pay $8.6 million. The court was told Mr Buckley was adjudicated
bankrupt just after the High Court hearing.
Legal action by
KordaMentha against Mr Stephen Smith, another Belgrave director, was suspended
because Mr Smith became bankrupt prior to the hearing.
Belgrave
Finance Ltd v. Schofield & Buckley – High Court (12.09.14)
14.041