NZF Money's receivers sue, allege insolvent transaction
NZF Money's receivers are taking legal action against NZF Group and an unspecified number of its past and present directors alleging an insolvent transaction and are seeking to freeze its assets.
Thursday, April 5th 2012, 12:38PM
by Jenny Ruth
"The proceedings will be rigorously defended, says NZF Group chief executive Mark Thornton.
The receivers' action follows the Serious Fraud Office's announcement on March 22 that it is investigating NZF Group with a primary focus on alleged related party transactions going back to 2006.
Thornton says the receivers, Grant Graham and Brendon Gibson of KordaMentha, have advised they intend filing proceedings against the company and "certain past and present directors who were directors as at October 20, 2010 of NZF Group."
Thornton is the only current director who was a director at that date.
The others are former managing director John Callaghan, who resigned on March 15, 2011 for reasons of ill health, former chairman Richard Waddel, resigned on December 31, 2010, Peter Huljich, resigned on April 12, 2011, Pat O'Connor, resigned on January 9, this year and James Sclater, who had been an alternate director for O'Connor and who resigned on December 7, 2010.
"The proceedings relate to an internal restructuring of NZF Homeloans Limited in October 2010 which is alleged to be an insolvent transaction," Thornton says. NZF Homeloans is part of NZF's home loans division which also includes other subsidiaries.
In their report on March 19, the receivers said a trust associated with O'Connor, Hillview Trust, had claimed an interest "in the proceeds of certain loans in priority to the trustee's interest. The receivers do not yet agree Hillview Trust's claim is valid."
NZF Group's last annual report said in the section about director's interested transactions that sometime during the year ended March 31, 2011, O'Connor provided NZF Money with a $2.3 million term loan on which $82,783 was paid in interest and the full principal was still owing at balance date.
In a later section on related party transactions, the report said: "Loans provided by the Hillview Trust to NZF Money Limited under a loan participation arrangement are secured against certain first mortgage loans" and that they totalled $3 million at balance date.
No mention was made in the report or to the stock exchange of any restructuring within the home loans division which it said made a $2.5 million operating profit for the year.
Late last year, NZF sold 80% of its home loans division to Australia-based non-bank lender Resimac.
Thornton says the receivers have also applied for a freezing order over NZF's assets. A hearing date has not yet been set.
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