'Compelling evidence' against NZF Group

Peter Huljich, a director of NZF Money at the time of the sale. Photo / Richard Robinson

The receivers of finance company NZF Money have "compelling evidence" in their civil claim against five NZF directors, a High Court judge says.

Justice David Collins also ruled today that the asset freeze of publicly-listed NZF Group should stay in place.

NZF Group's assets were put of ice in an interim order at the High Court earlier this month ahead of the civil action against the company and five of its former and current directors.

The receivers of NZF Money claim the finance company sold its home loan division to its parent (NZF Group) for $3 million less than it was worth.

In doing so NZF Money directors at the time of the sale - Peter Huljich, Pat O'Connor, Mark Thornton, John Callaghan and Richard Waddel - allegedly breached their duty to act in the company's best interest.

At the time, the five were also directors and held a substantial amount of shares in NZF Group.

Receivers KordaMentha are now seeking up damages and compensation from the defendants, who have denied any wrongdoing.

According to court submissions, NZF Homeloans shares were sold to NZF Group by NZF Money for $1000 in October 2010.

But 10 months' later NZF Group gained $3.03 million from the sale of the same assets as part of a deal with Australia's Resimac.

NZF money fell into receivership in July last year and owed small retail investors around $16.4 million.

It is anticipated investors will receive between 25 and 42 cents in the dollar back.

KordaMentha was back in court today arguing the freeze orders should be maintained to ensure there is money available if their civil suit is successful.

The receivers' lawyer, Bruce Stewart QC, claimed NZF Group's asset position had deteriorated and that "there will be nothing left shortly" for investors.

But NZF Group's lawyer, Phillip Rice, said the plantiff was looking to "freeze the very lifeblood" of the company and its ability to buy and sell investments.

Rather than a risk of assets disappearing, he said there was clear evidence of NZF Group having "ample assets to meet the plantiff's claim" should it be successful.

Rice called for the freezing orders to be set aside.

However, Justice Collins did not agree and believed there was a "serious risk" of the assets' dissipation.

The judge also said the receivers had "significant facts" to support their argument.

"Most significantly the fact the shares in question were sold for $3.03 million 10 months' after they were sold for $1000 constitutes compelling evidence that the directors of NZF money may have failed to discharge their responsibilities," Justice Collins said.

"There is in my view sound evidence to support the submission that the directors of NZF Money were focusing on the interests of NZF Group to the detriment of NZF Money," he said.

No date for the hearing has been set.

The Serious Fraud Office and the Financial Markets Authority announced last month they have been assessing a range of allegations about the conduct of the NZF companies.