The directors of failed lender Lombard Finance & Investments should have picked up on and relayed the lender's precarious position to investors in the lead-up to its collapse, the Crown prosecutor says.

A company director's role "is not a delegable duty" and they needed to "determine for themselves what reflected the position of the company," Colin Carruthers told the High Court in Wellington today.

The Crown, which is concluding its case today, contends Lombard Finance directors Doug Graham, Bill Jefferies, Lawrence Bryant and Michael Reeves made untrue statements in a 2007 prospectus, investment statement and advertising material.

"The issue for the Crown is the requirement to make disclosure," Carruthers said. "It's not about the ways in which business was conducted."


The three main areas the directors failed in their duty were in communicating to investors the dwindling cash position of the company, an increasing squeeze on liquidity, and difficulties in enforcing loan repayments in line with forecasts, Carruthers said.

The directors should have been aware of the deterioration in the property market and how this was impacting on Lombard Finance's ability to recover loans at full value. Because of that, investors should have been told how parlous the company's state was, he said.

"It's clear from the company's own records it no longer had faith in its long-term business model" and that it was looking for ways to recapitalise, Carruthers said.

In response to a question from Judge Robert Dobson, Carruthers said there wasn't any specific milestone the company missed in its analysis of impaired loans that should have been reflected in the offer documents, rather it was the continued deterioration of its position.

"The quantification isn't actually an issue - the issue is the disclosure of the sort of effect to the prospect of recovery of these loans by Lombard Finance," he said.

"Getting the whole loan back was not a reasonable prospect," he said referring to its advance on the Brooklyn Rise property development in Wellington, its biggest exposure at some $40.6 million.

Lombard went into receivership on April 10, 2008, owing approximately $111 million to about 3,900 debenture holders, $10 million to 310 capital note holders, and $4 million to subordinated note holders. It is unlikely that secured debenture holders will receive more than 24 per cent of their investment back. Unsecured creditors are likely to receive nothing.

Counsel for the defence will make their closing arguments over the next three days.

The trial is continuing.