Appeal Court rejects Robt Jones Holdings’ bid

Article – BusinessDesk

Appeal Court rejects Robt Jones Holdings’ bid to keep former Blue Chip unit payments

By Paul McBeth

Sept. 10 (BusinessDesk) – The Court of Appeal has rejected Robt Jones Holdings’ bid to retain some $752,000 of payments from former Blue Chip unit Northern Crest Investments.

Justices Mark Cooper, Helen Winkelmann and Joe Williams upheld a ruling in the High Court allowing Northern Crest liquidators Anthony McCullagh and Stephen Lawrence of PKF Corporate Recovery & Insolvency to claw back the 2010 payments. They were made when the former Blue Chip unit was insolvent.

The litigation had its origins in the years leading up to Northern Crest’s 2011 liquidation when two related parties covered unpaid rents after RJH stepped up demands when the firm fell behind its rental payments on a lease in Auckland’s Queen Street.

The real estate firm of Wellington mogul Bob Jones appealed the High Court judgment, saying the judge was wrong to dismiss evidence Northern Crest had a clear motive to create a sham arrangement. The appeal court bench agreed the fee arrangements were “unusual”, but said there was no evidence of it being a sham arrangement and that the High Court was entitled to rely on the accounting records available.

The Appeal Court also rejected two other grounds over the nature of the transactions. Irrespective of whether they were loans or licence fees, it said there was “ample evidence” that Northern Crest procured the payments to meet its obligations.

The judges also turned down RJH’s bid for relief “because of the liquidators’ failure to properly exercise their investigative powers and because they were motivated by the primary purpose of recovering their fee, which, RJH argues, amounted to an abuse of process”. The judges said it was “irrelevant” to the question of setting aside the transaction and added that there was nothing objectionable in the liquidators using the recovery to pay for the cost of the liquidation.

Northern Crest had been part of the Blue Chip group and licensed property investment services. It relocated to Australia, where it was listed on the ASX, after making its last payment to RJH. However, liquidators were appointed in 2011 when a former Blue Chip employee’s claim on the business was upheld, with associate judge Tony Christiansen deeming the firm was insolvent and that there were “significant reasons to expedite liquidation”.

The Blue Chip group of companies failed in 2008 owing $84 million to more than 2,000 investors. It became a pin-up for regulatory failures of the time after the Securities Commission said property investment schemes fell outside the law requiring an offer document.

The Supreme Court later rejected that view and ruled the investment scheme marketing between 2005 and 2007 required a prospectus. However, the Financial Markets Authority decided it wasn’t in the public interest to go further than reviewing the case as Blue Chip-funded developers had reached a settlement with investors.

(BusinessDesk)

Content Sourced from scoop.co.nz
Original url