Liquidator to decide on Capital + Merchant civil recovery

The liquidator of failed finance company Capital + Merchant says it expects to determine whether any civil recovery action is possible by the third or fourth quarter of this year.

Hamilton-based Official Assignee Les Currie was appointed liquidator of the company on December 15, 2009 following an application from the Registrar of Companies.

Capital + Merchant collapsed in 2007 owing 7000 retail investors $167 million.

Receivers Tim Downes and Richard Simpson of Grant Thornton have said debenture holders are likely to receive nothing back from their investment once prior charge holder’s debt and receivership costs are taken into account.

Previously undisclosed related party loans have been cited as the key reason for the wipe out of investor funds.

"In our view the only recoveries for debenture holders will be from any legal claims against various parties," the receivers said in their seventh report released in February.

Yesterday the Official Assignee released his latest liquidator’s report saying an investigation was progressing.

“An extensive amount of material has been collected and reviewed and is undergoing further analysis by our forensic investigations and solicitors.

"The Official Assignee as liquidator expects to be in a position by the third or fourth quarter of this year to make a final determination in respect of any civil recovery action that may be possible."

Two former owners and directors of Capital + Merchant are due to reappear in court on May 10 for a first callover on Serious Fraud Office charges.

Neal Nicholls and Wayne Douglas face six charges under the Crimes Act. brought by the Serious Fraud Office, relating to about $14.5 million of alleged related party lending between 2002 and 2004.

The Securities Commission has also laid charges against the two men along with Colin Ryan, Robert Sutherland and Owen Tallentire.

The charges laid by the commission allege the directors made untrue statements in the company's 2006 prospectus and investment statement, mainly by misleading investors about the investment risks.

In a separate development, local and Australian law firms are gearing up for possible class action proceedings against professional services firms such as trustees of finance companies.