Liquidators still pursuing fund's 'controlling minds'.

EXCLUSIVE by DOUG COLLIE

The 3,000 investors who lost over £170 million in an offshore fund which was supposed to bankroll a major infrastructure project for Scottish Borders Council have been assured by liquidators that a lengthy investigation into the company's affairs is set to continue.

An Isle of Man judge has yet to rule on an application seeking to have Michael Richardson and JOhn Bourbon, directors of New Earth Recycling & Renewables [Infrastructure] Fund (NERR) brought before the courts to be interviewed on oath. The fund went belly up in 2016.

The Borders council expected NERR to fund a £23 million waste disposal facility at Easter Langlee, Galashiels as part of a £80 million 24-year contract with the now dissolved New Earth Solutions Group (NES). But the arrangements had to be scrapped in 2015 as a result of financial and technical issues with the project which could not be overcome. It later emerged that NES had been practically insolvent while the contract with SBC remained 'live'.

SBC's involvement with the two insolvent businesses cost local council taxpayers at least £2.4 million while investors in NERR both at home and overseas have been warned they may not get any of their money back.

The Manx court heard how, during their management of the NERR fund Mr Richardson collected over £900,000 in fees while Mr Bourbon's involvement earned him £128,000. Both men have refused to be interviewed by Alexander Adam and David Craine, of accountancy firm Deloitte's, joint liquidators of NERR. The liquidation is being funded by the Isle of Man Financial Services  Authority.

In the first update to shareholders and creditors since June, the liquidators write: "As you are aware, from our previous reports, the role of the Joint Liquidators is, in the circumstances of this case, to investigate the reasons for the failure of NERR, determine whether liability for the failure can be attributed to one or more parties and thereafter to consider whether there are viable claims which can be brought against those parties".

Reporting on their investigation, Mr Adam and Mr Craine tell creditors: "As previously advised, we have obtained several hundred thousand documents from various parties who were involved in advising or managing the Company. However, documentation in and of itself does not provide the full picture and for that reason we sought to conduct formal fact finding oral interviews of the Company’s directors.

"Whilst two of the directors have attended interviews and provided assistance in this regard, two have refused to do so. An application was therefore made to Court, pursuant to the provisions of the Companies Act 1931 (the “Act”), for those directors who have yet to be interviewed, to be examined in Court on oath.

"Whilst those directors were two of the Company’s ‘controlling minds’ and are therefore clearly able to provide details and context to the Company’s management, operations and ultimately the reasons for its demise, that application has been vigorously resisted by them.

"Whilst we are optimistic, given the directors’ fiduciary duties and the provisions of the Act, that our application will be successful, we have yet to receive the Court’s decision. Should the application be rejected then we will have no option but to engage in what is likely to be a protracted exchange of written correspondence with the directors which will be inefficient from both a time and costs point of view and is unlikely to provide the same context as would be obtained during an oral interview. In such a circumstance, we would anticipate returning to Court to seek a further order for oral examination".

The report adds that despite a number of requests from the Joint Liquidators, a substantive response has yet to be received from the third party service provider "to which we have submitted a letter of claim. We are considering the appropriate next steps to progress this matter with our legal advisers".

The liquidators indicate there is no change to the funding arrangement with the Isle of Man Financial Services Authority but add "you are aware, the funding of the liquidation remains subject to ongoing review by the FSA and can be withdrawn at any time"..