'Little prospect' of recovery sees Capital + Merchant action dropped

The “little prospect of any recovery” for Capital + Merchant Finance investors has led the Financial Markets Authority to discontinue civil proceedings against the former directors of the failed finance company.

Capital + Merchant owed $167 million to about 7500 investors when it collapsed into receivership in 2007.

Civil proceedings were filed against directors Neal Nicholls, Owen Tallentire, Colin Ryan and Robert Sutherland in 2009, seeking declarations of civil liability and pecuniary penalties.

But these proceedings were parked while criminal charges against the four, as well as director Wayne Douglas, were simultaneously laid for untrue statements made in 2006 offer documents.

Nicholls and Douglas were both sentenced to more than seven and a half years’ imprisonment in August, 2012, after being found guilty of Serious Fraud Office charges following what was described as one of the most complicated finance company trials seen in this country.

These record-setting prison sentences were then increased to more than eight years after they both pleaded guilty to the FMA’s further charges, which all five directors pleaded guilty to in 2013.

The FMA today says it has dropped its civil claim against the directors in light of the outcome of criminal proceedings, which adequately addressed the misconduct.

Furthermore, it says the limited personal assets of the directors mean there would be “little prospect of any recovery for investors” if it pursued the claim.

Last year, Capital + Merchant’s former auditors BDO Spicers agreed to an $18.5 million settlement of a claim against it by the liquidator, which will begin to be distributed in the next two months.

A claim against the company’s former trustee and solicitor is still before the courts, with a four-day hearing set for September.

In April, Douglas, 61, was released from prison while Nicholls, 59, was released in May, both less than three years into their respective prison terms.

The pair were said to have found a love for gardening while in jail, for which they were both praised when being granted parole. 

Use MyNBR Tags to track people and companies — and receive key-word email alerts. Find out how here.