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BUSINESSDESK: An adviser for more than 30 years to the bread-making Yarrows family failed to disclose the company was insolvent, despite inquiries from both shareholder Paul Yarrow and Westpac Bank, Mr Yarrow alleges in an action progressing through the New Plymouth High Court.
Details of the allegations against Michael Finnigan, a 75-year-old retired chartered accountant and director of Yarrow the Bakers, emerged in a judgment of Associate Judge Tony Christiansen.
The 89-year-old family-owned baking empire, based in the Taranaki township of Manaia, was placed in receivership in May last year, owing $150 million. Yarrow is seeking $11 million in damages from Finnigan, who had been a close adviser to Yarrow's father, Noel, over a 30-year period and whose advice he claims he trusted.
Mr Finnigan sought surety that Yarrow would be able to meet costs if the criminal complaints brought against him were not proven, while Yarrow argued he was unable to provide surety because Mr Finnigan's "contumelious disregard" of his rights were the cause of his "impecuniosity".
Judge Christiansen ruled that Yarrow must put up $25,000 by December 4, ahead of the expected three-week trial, and that parties should expect awards of around $75,000 in costs to the successful party.
Paul Yarrow's claims for $11 million damages were "barely explained" and he was running other cases related to the Yarrows receivership, the judge ruled.
Mr Yarrow was previously unsuccessful in suing his brother, John, who bought the New Zealand assets of the baking business a year ago from the receivers, BDO. He had signed documents preventing legal dispute between the brothers.
Paul Yarrow's attempt to oust directors of Yarrow's Australian offshoot, including Mr Finnigan, was overturned in the Sydney High Court earlier this year.
The judgment also found Paul Yarrow had taken independent legal advice on at least one of the transactions where he alleged reliance on Finnigan's advice and that little evidence against Mr Finnigan so far existed, with Mr Yarrow claiming he could not find relevant emails and documents, or that advice was given orally.
A $22 million land purchase in Australia in August 2007 figures high in Mr Yarrow's allegations.
He claims Mr Finnigan failed to advise him Yarrows was insolvent, and that he failed to disclose $7 million of costs relating to the Australian purchase "because the posting of those journal entries would have revealed the insolvency of the Yarrow Group".
An alteration in 2009-10 to a family deed of agreement and transactions known as "the Finnigan plan" also feature, with Mr Yarrow alleging Mr Finnigan failed to advise "that the Finnigan plan and the DFA would fail if at the time the Yarrow Group was insolvent".