Prosecutors bid to hear evidence from senior Treasury official about Crown retail deposit scheme is rejected.

A witness who prosecutors wanted to give evidence on the most serious charge faced by three South Canterbury Finance principals cannot be called.

Former SCF chief executive Lachie McLeod and two of the company's former directors, Edward Sullivan and Robert White, are defending charges brought against them by the Serious Fraud Office.

According to Justice Paul Heath, who is presiding over the trio's trial in the Timaru High Court, the most serious of the charges relates to SCF's application to join the Crown retail deposit scheme, which was managed by Treasury.

SCF went into receivership in 2010, owing about $1.8 billion, but because of the company's participation in the scheme, 35,000 SCF investors were bailed out by the taxpayer to the tune of $1.7 billion.


The Crown has alleged the trio knew documents provided to Treasury contained false statements and says if correct information had been disclosed, SCF's the application to join the scheme would have been deferred or rejected.

Before the trio's trial began, Crown prosecutors had not intended to call senior Treasury official Brian McCulloch to give evidence relating to this charge. However, during the trial the Crown told the defence that it wanted to call McCulloch as an additional witness.

Defence lawyers indicated they would oppose this and so the Crown applied for orders that McCulloch's evidence should be admissible.

Justice Heath, in his decision, said McCulloch's proposed evidence was relevant but of "marginal probative value".

The judge said the trial was on track to be completed at the end of June, although closing addresses could happen in July.

"I have no doubt that the need to allow time to the accused to prepare adequately for Dr McCulloch's cross-examination before closure of the Crown case would significantly delay the trial and put completion of the hearing within that time in severe jeopardy.

"By the end of June 2014, the trial will have been running for about four months. The need for further inquiries to be undertaken and the likely lengthening of the expected duration of the trial would add significantly to the cost being incurred by the accused in defending the charges," the judge said.

"This is one of those rare cases in which it is necessary to rule relevant evidence of the type proposed to be given by Dr McCulloch inadmissible on the grounds that the risk of an unfairly prejudicial effect on the proceeding outweighs the probative value."