Trends Publishing International, which claims it was left in a cash squeeze after Callaghan Innovation rescinded its research grant, has challenged a High Court decision to set aside a compromise deal it struck with creditors that the court found had been manipulated.
Trends made its case in the Court of Appeal yesterday before Justices Mark Cooper, Raynor Asher and Denis Clifford.
The respondents, also known as the challenging creditors - Advicewise People, Callaghan Innovation, Mediaworks Radio and Webstar (part of Blue Star Group) - had opposed the compromise under which Trends would pay creditors 15 cents in the dollar, saying the vote of creditors was manipulated by "insider creditors" including Thecircle.co.nz, whose sole director is Trends shareholder and chairman David Johnson. Thecircle.co.nz waived a security held over Trends for about $3.1 million in order to qualify as an unsecured creditor and cast a vote in favour of the plan.
High Court Justice Paul Heath found in favour of the four respondents, who were owed about $3.2m in total but were outgunned in the creditor vote for the compromise deal, which was approved by 39 of the 48 total creditors, including 22 minor creditors owed less than $1,000 apiece. Heath said in his September 7 judgment that his decision to set the compromise aside and award costs against Trends "was premised firmly on the basis that Trends, through its directors (as proponents of the compromise) had manipulated the majorities so as to secure a result favourable to insiders".
Callaghan paid Trends a total of $313,537 in April and June 2014 but as a result of an investigation later that year it concluded the grant money had been secured with "false representations as to Trends' financial position", according to Heath. As a result, it terminated the contract and demanded repayment. Trends initially sued Callaghan for defamation over a media release that said the government funding body had called in the Serious Fraud Office but that suit was dropped.