Thursday, 7 June 2018

Court orders requested against Borders council's "funders"


Directors of the bankrupt offshore investment fund which was lined up by Scottish Borders Council to bankroll a £23 million waste treatment plant are the subject of applications to the Isle of Man courts after refusing to be interviewed by liquidators probing their company's spectacular failure.

Now it is hoped the four men who presided over the collapse of Premier New Earth Recycling & Renewables [Infrastructure] Ltd. (NERR) will be quizzed under oath as a lengthy investigation seeks to establish what happened to tens of millions of pounds of cash owed to creditors and investors.

Councillors in the Borders handed a £80 million contract to Dorset-based New Earth Solutions Group (NESG) in 2011 in a bid to resolve problems linked to the disposal and treatment of the region's household rubbish.

But the deal was rendered worthless in 2015 after NESG could not deliver the technology to power the new waste plant while funding partners NERR could not come up with the money to pay for the project.

There seems little doubt that the council's four year involvement with NESG and NERR gave both of those businesses credibility neither of them warranted, and SBC was left with a £2.4 million loss which the local authority spent on expensive consultants and lawyers for no return.

Some 3,250 investors worldwide are understood to have placed a total of $292 million in NERR which was controlled and managed by Premier Group Isle of Man, now also totally insolvent like NESG and NERR. But over a number of years well over £20 million was taken out of the fund in management fees and charges for promoting and marketing NERR.

The latest twist in the complicated mystery has emerged in a progress report to creditors by NERR liquidators Alexander Adam and David Craine, of Deloitte's Isle of Man branch. They are currently wading through an estimated 200,000 documents linked to the disaster.

Their report says:"As you are aware, the Company’s assets were principally investments by way of equity and unsecured loans in three companies, which were located in the United Kingdom: 1. New Earth Solutions Group Limited (“NESGL”) 2. New Earth Solutions Facilities Management Limited (“NESFM”) 3. New Earth Energy Facilities Management Limited (“NEEFM”) (together the “UK Trading Companies”)

"As set out previously, the value of those investments at the date of winding up was close to nil. The role of the Joint Liquidators is therefore principally to: investigate the reasons for the failure of NERR; determine whether liability for the failure can be attributed to one or more parties; working alongside our legal advisers, establish whether there is any legal recourse against one or more of those parties which could result in a recovery to the Company’s estate; and  to the extent that that those third parties are expected to have the resources to meet any successful claim, seek to recover value from them."

 Following a review of the Company’s records together with information provided by various third parties, the liquidators attempted to conduct formal fact-finding interviews with the Company’s directors.

"The reason for this is that the directors were the individuals with day to day responsibility for the management of the Company and therefore the appropriate people to clarify the Joint Liquidators understanding of the Company’s affairs and dealings and provide additional information as appropriate.

"Two of the four directors attended for an initial interview. However, all four have, through their legal advisers, informed the Joint Liquidators that they are now unwilling to be orally interviewed in relation to this matter and have indicated that they will only provide written answers to any questions put to them. In the opinion of the Joint Liquidators, attempting to clarify the affairs and dealings of the Company over a period of several years through written correspondence is both impractical and inefficient."

The report reveals that an application has therefore been made to Court, pursuant to the provisions of the Isle of Man Companies Act 1931, for those directors who have yet to be interviewed, to be examined in Court on oath. Assuming that the application is successful, Mr Adam and Mr Craine anticipate conducting the examinations during the course of the next few months, depending on the availability of Court time.

It is explained in the report that investigations are focusing on the matters that resulted in a direct loss to the Company. That is, the value of investments made in the ultimately insolvent UK trading companies and the fees paid by the Company to the various service providers.

"Our initial investigations into the fees charged by one third party service provider highlighted concerns around the basis for such payments.
"A letter of claim for restitution or damages to be paid by that entity has been issued by the Joint Liquidators. That entity has acknowledged receipt of the letter of claim and a substantive response is awaited. Further updates on this matter will be provided in due course as appropriate."

And the report concludes: "Our review of the documentation and records of the Company remain ongoing as we, in conjunction with our legal advisors, continue to refine our initial analysis of the data to support any potential third party claims. However, as previously noted in our updates, we are limited in what information we can share with you on potential causes of action so that we do not prejudice any potential claims. 

"We remain confident that our investigations will result in further claims being identified which, if successfully pursued, would result in recoveries being made for the benefit of creditors and shareholders in due course."

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