The liquidator for failed lender Five Star Finance has lost its bid to void a series of transactions worth some $929,000.
In the High Court at Auckland, Associate Judge Roger Bell turned down an application by liquidators Gerald Rea and Paul Sargison of Gerry Rea Partners to void payments by Five Star Finance to Bowden No 14 Trust between September 2006 and August 2007, according to a judgment this week.
The trust borrowed funds from Westpac and Five Star Consumer Finance and was involved in Auckland property projects, which were properly documented, but other transactions between Five Star Finance had "no basis in reality".
The judge said the $929,000 payments were in "restoration of property unlawfully misappropriated from the trust" and the liquidators were not entitled to an order to set them aside.
The liquidators were seeking to enforce personal liability for a voidable transaction against the trust's then-trustee, Ronald Russell.
His role was to oversee the trust's asset position and make investment decisions based on advice from Five Star managing director Nicholas Kirk, who dealt with administrative matters but was not granted the right to make trust decisions.
The Five Star group called in receivers in 2007. Five Star Finance owes creditors $43.8 million, of which $551,000 has been recovered.
"It is common ground that the person responsible for moving funds between the company and the trust was Mr Kirk," the judge said. "At all times he was both managing director ... and the agent responsible for administration of the trust." Because Kirk's decisions were not t within the mandate granted by Russell, the judge accepted that Kirk had no authority to transfer trust funds into Five Star Finance, so his actions could not be attributable to Russell.
In 2010, the Serious Fraud Office investigated the collapse of the Five Star group and laid charges against four former directors and a so-called "de facto" director. Three pleaded guilty, while two are expected to defend the charges in June.