Liquidation
of David Henderson’s Property Ventures group sees a $302 million claim against
its directors and auditor PwC set down for a three month High Court hearing
next year. Litigation funder SPF has
been ordered to front up with $2.63 million as security for defendants’ anticipated
legal costs and expenses.
Mr Henderson’s Property
Ventures empire went belly up following the 2008 global financial crisis. Liquidators Robert Walker and John Scutter
have teamed up with private litigation funder SPF No. 10 Ltd to finance legal
action.
Liquidators allege that
directors traded whilst insolvent and that Pricewaterhousecoopers was negligent
in its conduct of Property Ventures’ 2006 and 2007 audits. They claim PwC ignored or failed to
acknowledge serious cash-flow problems, did not properly assess internal
controls given Mr Henderson’s well known autocratic management style and failed
to seek independent valuations of company assets. It is also alleged that PwC assisted Property
Ventures in improperly delaying accounting for $1.23 million in GST arising
from a Te Anau property development and that PwC knew about and assisted in
Property Ventures “loan washing”; hiding the level of borrowings and loan
defaults by setting up new companies as vehicles for refinancing.
As litigation funder,
SPF agreed to meet liquidators’ legal costs and any court order for defendants’
security for costs. If court action is
successful, SPF is entitled to the greater of 42.5 per cent of the proceeds or
twice the value of upfront costs plus 21.5 per cent interest.
Since SPF stands to
receive most, if not all, the proceeds of any successful claim and has no
interest in the litigation beyond the profit it hopes to derive, it should be
required as a matter of policy to contribute significantly to the defendants’
costs should the action be unsuccessful, Justice Lang said.
SPF is privately
owned. Executive director Mr Jonathon
Woodhams told the court SPF is a business collaboration between successful New
Zealand business and legal people. He
did not disclose names.
Walker
v. Forbes – High Court (6.06.17)
17.064