Audits defence in property row

Former directors of Property Ventures will strongly contest claims by the company’s liquidators in a case scheduled for the High Court at Christchurch in February.

Property Ventures, whose main principal was Dave Henderson, was placed in liquidation in 2010.

Austin Forbes, QC, who was a director until 2008, said he and other directors relied on unqualified audit reports by accounting firms Grant Thornton and PwC.

PwC recently finalised a negotiated a settlement with the liquidators, Robert Walker and John Scutter.

Forbes said the audited accounts of Property Ventures at all material times disclosed an excess of assets over liabilities. In 2007 this was $66.1 million and the profit that year was $8.127m.

He said that all six directors successfully applied for security for costs against the liquidators in June – a process where the liquidator was required to put aside money for costs in case he is unsuccessful in his pursuit.

Justice Graham Lang ordered that a total of $2.78m be provided by liquidators Walker and Scutter, with $1.5m to be paid by July and the balance by October.

Following the settlement between the liquidators and PwC, the judge ordered that the payment due in October should be reduced by $560,000, leaving a total balance of $2.2m. Earlier this year additional security for costs of $450,000 had been provided.

A Supreme Court ruling issued on October 6 considered PwC’s objections over the way the liquidators’ case was being funded by a company called SPF No. 10.

Evidence presented to the court showed SPF could gain up to 42.5 per cent of any successful judgment against Property Ventures directors, and in one scenario, most of any settlement.

The court concluded it was not required to make a definitive ruling because PwC’s negotiated settlement had overtaken the course of the litigation.