Fund director underwent "oppressive and aggressive" interview

DOUG COLLIE concludes our coverage of the New Earth Fund judgement by Isle of Man's top judge.

A former head of the Manx financial services regulator told an Isle of Man court in a written submission of a 'highly oppressive and aggressive'  interview he experienced by liquidators investigating the collapse of an investment fund of which he had been a director.

John Bourbon, who was involved in the management of the New Earth Recycling & Renewables (NERR) Infrastructure Fund along with fellow director Michael Richardson submitted a written statement outlining why he should not be subjected to oral cross-examination under oath by the joint liquidators of the failed fund (see part one of our story posted earlier today).

Deemster [judge] Andrew Corlett found in favour of the two men and rejected calls on behalf of the Financial Services Authority to have the NERR directors questioned in court.

Mr Bourbon's witness statement said he opposed an order that he submit to oral examination. He argued that if the court was minded to exercise its powers such examination should take the form of written interrogatories and written answers.

Deemster Corlett's judgement says: "He [Mr Bourbon] pointed out that he agreed to the liquidators seizing a large amount of electronic data in 2016 and he has sought to assist by way of written answers because he considers that "off the cuff" oral answers in the context of a highly detailed factual matrix involving the affairs and management of the Funds are unlikely to be particularly reliable. 

"He refers to what he regards as "a highly oppressive and aggressive interview" on 30th April 2018, and considers that it is regrettable that the liquidators did not agree to the proposal that he and Mr Richardson should continue to assist, albeit by way of written answers. He addresses the background to the Funds from their inception in 2006 to their cessation in 2016, the Funds investing directly and indirectly through special purpose vehicles in waste management/recycling facilities spread across the UK.".

One of those special vehicles was New Earth Solutions Scottish Borders, formed to carry out a multi-million pounds project for Scottish Borders Council. But the venture was an abject failure and had to be abandoned without a brick being laid after the local authority squandered £2.4 million of taxpayers' money. The NERR fund was incapable of funding the waste treatment plant planned for Easter Langlee.

 According to Mr Bourbon's statement quoted by the judge: "He considers the companies' affairs were, and are, well documented within accountants' reports, legal opinions, and other advisers' reports, detailed board minutes (board meetings were also audio recorded) and the usual emails and written board resolutions.

"In short, his position is that he is at a loss as to what information the liquidators could possibly need from Mr Richardson and himself which is not already in their possession. Every action and decision taken was documented, as was the basis upon which such decisions were made, together with details of discussions had surrounding such decisions.

"Oral examination would also be particularly oppressive because the factual detail is so complex and detailed that oral answers would likely not be reliable and accurate. He notes that asset searches have been carried out in relation to Mr Richardson and possibly himself also for the purposes, he presumes, of a claim by the liquidators, there being also the possibility of proceedings which might lead to him being disqualified to act as a director."

Mr Richardson had also provided a short witness statement dated 19th July 2018 which adopts the reasoning set out in Mr Bourbon's statement but also refers to his age (71 years old), together with various health issues from which he suffers. He also says that his memory has deteriorated significantly over recent years, this being another reason why he prefers to give written answers to further questions from the liquidators.

Joint liquidator Alex Adam, in a written submission, said: "We would like to understand from Mr Bourbon and Mr Richardson the valuation methodology applied to the Companies' assets - which showed continual growth - including the thought process behind the methodology adopted and the challenges to that process; the Companies paid, in total, an amount of approximately £28,000,000 to Premier Group (Isle of Man) Limited (PGIOM)in the period from 2009 to 2016. These fees related to agreements to act as Manager and Promoter of the Companies. Due to the fact that PGIOM was both Manager and Promoter and Mr Bourbon and Mr Richardson were officers of that entity we would wish to explore the thought process in approving the agreements and the challenges made to the level of fees being paid by the Companies and how any potential conflicts of interest were managed".

Miss Chiva Samani, counsel for Mr Bourbon and Mr Richardson, lodged  submissions including "her client's primary position is that the court should not make any form of order.The liquidators had simply failed to satisfy the "reasonable requirement" test, the burden being at all times on them. In this case, the indiscriminate nature of the application adversely affected its potency. There is no list of questions or even areas of proposed questioning. It would, as currently formulated, amount to a fishing expedition."

In his written decision, the judge said: "I agree with Miss Samani that the order sought is in the nature of a "carte blanche". The court requires to be satisfied that the liquidators have a reasonable requirement for the information.

 "I further consider that the liquidators ought to have pursued with the Respondents their offer made on 30th April 2018 to provide further written information and answers to specific questions.

"I add that I do not refuse the current application on the grounds of Mr Richardson's ill-health. In short, there is no adequate medical evidence to support his assertions and he would need to produce a more convincing case in order that I can consider this issue further, were it to arise.

"For substantially the reasons advanced by Miss Samani, I therefore dismiss the liquidators' application. As to the future, the liquidators will of course take their own legal advice. They are faced with the possibility of making written requests to Messrs Bourbon and Richardson for further written responses. 

"Alternatively they may wish to consider a further application under section 206, which sets out as part and parcel of the application as a minimum, the areas of proposed questioning. I agree with Miss Samani that the background to this application makes it clear that the liquidators are perfectly capable of setting out with more particularity the information which they seek."