Fund directors avoid court grilling - for now

EXCLUSIVE by DOUG COLLIE

A bid by liquidators to have two company directors summoned to court to be examined under oath and explain how an offshore investment fund chosen by Scottish Borders Council lost over £170 million of 3,249 shareholders' cash has been rejected by the Isle of Man's top judge.

John Bourbon and Michael Richardson, two of the bosses of the New Earth Recycling & Renewables [NERR] Infrastructure fund which was supposed to bankroll a £23 million waste treatment plant at Galashiels, had refused to be interviewed orally by the joint liquidators of the firm.

Alex Adam and David Craine, of the accountancy firm Deloittes, are currently ploughing through over 200,000 documents, seized when the fund went down in 2016. The investigation into the loss of £171 million is being paid for by the Manx Financial Services Authority (FSA). The court papers reveal that NERR paid Premier Group, another business in which the two men held directorships, £28 million in fees for management and promotion.

In a 15-page judgment published today on the Isle of Man courts website, the judge Deemster Andrew Corlett refused the liquidators' oral examination request.

Mr Corlett explains the applications sought orders that Mr Bourbon and Mr Richardson, "shall be summoned to appear before this court to be examined on oath concerning the promotion, formation, trade, dealings and affairs of the fund".The application notes that Messrs Bourbon and Richardson have indicated that they are not prepared to provide oral answers to any questions put to them in interview and that the applicants believe that the oral examination would be in the interests of furthering the liquidation and has the potential to assist in the recovery of assets for the liquidation estate.

Mr Adam stated in his submission to the court that the primary objective of NERR and two feeder funds was to provide investors with long term growth by investing directly or indirectly in waste treatment facilities in the UK and in the development of such facilities. Two of the companies were feeder funds for the third and in turn investments were made in three companies in the UK. The companies had 3,249 investors and in total approximately £171 million was invested by them in the companies.

According to the liquidators as matters currently stand, no value will be recovered for investors, "unless opportunities for recovery are capable of being identified and successfully pursued".

Mr Adam stated that attempts were made to interview Messrs Bourbon and Richardson and a meeting was set up in the Isle of Man for 30th April 2018 to which he and others had travelled specially. Before the meeting a number of documents were made available to Miss Chiva Samani [counsel for the pair] and her clients, together with a list of topic areas for discussion.

However, at the outset of the two meetings Miss Samani made it clear that her clients would not be answering any questions but instead would rely upon a pre-prepared written response termed "the Position Paper". 

Mr Adam said he was extremely surprised and disappointed at this stance and he does not consider that Messrs Bourbon or Richardson have provided the requisite assistance to the joint liquidators. Their attitude is regarded as being in contrast to that of a Mr Fogg and a Mr Whittaker, two other directors of the companies, who have voluntarily attended and undertaken interviews with the liquidators.

Mr Jonathan Fogg and Mr David Whittaker are both former directors of New Earth Solutions Scottish Borders, the company specially formed to deliver the waste treatment facility for SBC.

The court judgment states: "It is relevant to add that the positions of Messrs Fogg and Whittaker appear to have altered significantly since they were interviewed by the liquidators in February and March 2018. According to a letter of 14th May 2018 from Reed Smith, Solicitors, they are now of the firm view that the process undergone to date has failed to ensure that they have been afforded an adequate opportunity to respond to the liquidators' enquiries with considered, full and accurate answers. The interview process is said not to be being used as a fact-finding exercise but 'has swiftly developed into something that appears to be far more accusatorial in nature'."

Mr Fogg and Mr Whittaker will continue to co-operate fully with the fact finding investigations through a written process of questions and answers, with documents and detailed questions allowing then for considered responses.

Mr Adam took the view that the Position Paper was of little assistance in understanding the affairs and the demise of the companies. The responses consisted largely of generic statements and references to documents already seen by the joint liquidators. They were not sufficiently detailed and did not progress the investigation materially or at all.

Said Mr Adam: "I do not believe, given the wide-ranging topics and detailed issues for enquiry over a long period of time, that providing questions for written answer would be viable. Such a procedure would be extremely time consuming and costly. This would not be conducive to the interests of the Companies' liquidation. 

"As the affairs of the Companies are complex, it was always anticipated that interviews with Mr Richardson and Mr Bourbon would be required. Many rounds of questions and written answers would be needed to cover ground that would be more easily and cost effectively dealt with orally. This would certainly take months to complete. All the more so, if the Position Paper is reflective of the answers that are likely to be produced by or on behalf of Mr Richardson and Mr Bourbon. 

"Further, the costs incurred by both sides in the generation of written answers would be enormous and potentially self-defeating. It would be considerably quicker and more cost effective for Mr Richardson and Mr Bourbon to attend interviews voluntarily as originally arranged with them. However, it is abundantly clear from the statements made by Ms Samani that neither Mr Richardson nor Mr Bourbon are prepared to attend and participate voluntarily in an interview and are only prepared to give written responses to specific pre-prepared questions.

 "Given the lack of real cooperation to date, Mr Craine and I have concluded that, in order to progress our investigations, it is necessary to apply for an order that Mr Richardson and Mr Bourbon be summonsed to attend upon dates to be fixed for the purposes of being examined on oath". 

TO BE CONTINUED...