Hotchin details Nathans' troubles

Ex-Nathans director John Hotchin is giving evidence. Photo / Dean Purcell

Nathans Finance's parent company VTL experienced managerial and structural problems due to its fast growth in 2006 and 2007, former director John Hotchin told a court yesterday.

Hotchin took the stand for the second day in a row yesterday and discussed his role on both VTL and Nathans' board and VTL's Master Franchise Intelligent Vending, in California, and 24Seven in Australia.

Nathans was mainly set up as a funding vehicle for VTL and its associated entities, which purchased vending franchises from VTL.

Hotchin told defence lawyer Nathan Gedye that start-up companies that grow quickly create "a lot of problems".

Intelligent sold millions of dollars worth of licences in California but to the extent that the company could not cope, Hotchin said.

VTL did not have adequate strategies in place to ensure the sale was to a "person of character", and there wasn't enough time to train the franchisees on the smart technology used in the vending machines, he said.

Hotchin said on one hand the directors of VTL were "over the moon" and on the other they were very concerned about the pace Intelligent was growing at.

The Crown, however, showed evidence that 24Seven director Rob Seymour was finding it difficult to recruit franchisees due to a delay in vending machines being delivered to sites, and other issues such as machines breaking down and long delays in repairing broken machines.

In an email, Seymour said he had had the master franchise for three years, from 2003 to 2006, and the financial performance of the VTL entity was a long way from the financial projections that were forecast.

Seymour said it had been made clear to him by shadow director Gary Stevens, that were wasn't a future for him in VTL and he subsequently wanted the money he had invested in the company back.

The other Nathans directors, Mervyn Doolan, Donald Young and Roger Moses, are on trial for six alleged breaches of the Securities Act. They pleaded not guilty in March.

Hotchin pleaded guilty in February and agreed be to a Crown witness as part of his reduced sentence.

The directors are defending allegations that the statements they issued concerning related party lending (to VTL), the quality of Nathans loan book, its loan management practices and its management of liquidity were untrue. The case continues.