Director fights for help from receivers

Allan Ludlow (pictured), Carol Braithwaite and Anthony Banbrook appeared in the Auckland District Court yesterday. Photo / Supplied

Receivers for National Finance 2000 could be ordered to provide its directors with information to help with their defence against charges laid by the Companies Office, a court heard yesterday.

The National Finance 2000 directors, Anthony Banbrook, Carol Braithwaite and Trevor (Allan) Ludlow appeared in the Auckland District Court yesterday on the first day of their depositions hearing.

Banbrook and Ludlow have been excused from the hearing because they conceded there is a case to answer.

In 2008, the Companies Office laid criminal charges against the directors that relate to alleged untrue statements in the company's registered prospectus and failure to comply with financial reporting standards.

The prosecution is being carried out by the Ministry of Economic Development's (MED) National Enforcement Unit. The directors did not enter a plea.

The directors are charged under the Financial Reporting Act (FRA) for their alleged failure to disclose material transactions between the company and related parties such as Payless Cars companies and Great North Management. Both companies have been liquidated and were owned by Ludlow.

Crown lawyer Tom Molloy said two separate loans, one for $200,000 and another for $313,000, were not disclosed as related party lending in the company's financial statements and no interest accrued on the loans.

The directors are further charged under the Securities Act for allegedly saying they had made proper and adequate provisioning for bad debts, and that loans were secured by general security agreements, which they were not.

Ludlow faces additional charges under the FRA for allegedly making false or misleading statements in relation to bad debt provisioning, related party lending and general security agreement.

Ludlow, who represented himself yesterday, said receivers PricewaterhouseCoopers (PWC) and Covenant Trustees had not been forthcoming in providing crucial information to the defendants.

He told the court he would file orders that would force PWC and Covenant Trustees to give evidence on why particular information was not being made available to the defence.

If convicted on the Securities Act charges, the directors face imprisonment not exceeding five years or a fine not exceeding $300,000, and if convicted on the FRA charges, they face fines of up to $100,000.

Ludlow also faces a further five-year prison term or a fine not exceeding $200,000 if he is convicted of the additional charges.

National Finance 2000 was placed into receivership in 2006. Its core business was providing finance for cars.

Shortly after the company collapsed, various related companies were also placed into receivership and/or liquidation.

PWC estimated around $24 million is owed to investors, and secured investors would receive less than 50 per cent of their investment back.

The receivers added that second-tier investors and other unsecured creditors were unlikely to recover anything from the receivership.

In October 2008, the directors were banned by the Registrar of Companies from further directorships.

The Companies Office claimed the directors mismanaged the company and it was this mismanagement that contributed to the company's failure.

The allegations included reckless trading, failure to comply with its prospectus, breach of director's duties and failure to maintain adequate records.

Banbrook is banned from being a director from October 14, 2008, for four years, and Ludlow and Braithwaite banned for four and a half years. The Serious Fraud Office is also conducting an investigation into the company.