Financial Markets Authority v Ross

[2013] NZHC 2138

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2012-485-2314 [2013] NZHC 2138

UNDER

the Financial Advisers Act 2008 and

Parts 7 and 32 of the High Court Rules
2009

BETWEEN

FINANCIAL MARKETS AUTHORITY Plaintiff

AND

DAVID ROBERT GILMOUR ROSS First Defendant

ROSS ASSET MANAGEMENT LIMITED

Second Defendant

DAGGER NOMINEES LIMITED Third Defendant

BEVIS MARKS CORPORATION LIMITED

Fourth Defendant

MERCURY ASSET MANAGEMENT LIMITED

Fifth Defendant

ROSS INVESTMENT MANAGEMENT LIMITED

Sixth Defendant

ROSS UNIT TRUSTS MANAGEMENT LIMITED

Seventh Defendant

UNITED ASSET MANAGEMENT LIMITED

Eighth Defendant

MCINTOSH ASSET MANAGEMENT LIMITED

Ninth Defendant

FINANCIAL MARKETS AUTHORITY v DAVID ROBERT GILMOUR ROSS [2013] NZHC 2138 [22 August

2013]

THE TRUSTEES OF THE CHAPMAN ROSS TRUST

Tenth Defendant

THE TRUSTEES OF THE WOBURN ROSS TRUST

Eleventh Defendant

Hearing:

12 August 2013

Counsel:

R T Mattan for Plaintiff

F Tregonning for the Liquidators

G L Turkington for 1st Defendant
L Ord for 10th & 11th Defendants, Mrs Jill Ross (wife of

1st Defendant)

Judgment:

22 August 2013

JUDGMENT OF WILLIAMS J

[1]      On 31 July 2013, the receivers (Fisk and Bridgman) in relation to the Ross

Group applied for orders directing that cash and shares valued at approximately

$2.5 million should be released to the following investors: (a)           Jones Tredwyn Nominees Limited;

(b)      A J Seager;

(c)       Mr and Mrs A J Apperley;

(d)      Lyndale Farm (Wakefield) Limited; (e) Arthur Stewart 2006 Trust;

(f)       Mr G and Mrs B Sprot; and

(g)      A & J Payne.

[2]      The liquidators take the view that the funds held by these claimants within accounts controlled by Ross Asset Management Limited (RAM) or the wider Ross Group were not the property of the Ross Group.  Rather (with the exception of the account of A & J Payne), the accounts are broker accounts held with Craigs Investment Partners where the respondent, David Ross, had only signing authority. The liquidators take the view that the Ross Group and RAM in particular held no legal or beneficial interest in these accounts.

[3]      In respect of the A & J Payne accounts, these related to shares that had been purchased by the claimants and transferred into a holding account within RAM with instructions that they not be traded.  Once again the liquidators have concluded that the Ross Group had no legal or beneficial interest in these shares.

[4]      Orders are sought releasing these accounts to their owners subject to the terms and conditions set out in the application.

[5]      The liquidators filed affidavits from Richard Bodman and Marcus McMillan outlining the investigations that were undertaken, and the basis upon which the liquidators reached the conclusions that I have already outlined.

[6]      The  liquidators  then  sought  orders  that  the  application  and  supporting affidavits, together with exhibits, be kept confidential and not be available for search or provided to any third party without order of the court on notice to the parties.  The liquidators argued that information contained in the affidavits was personal financial and other information that ought not to be made widely available without good reason.

[7]      Leave was also sought to return to the court for further directions in the event (it was explained) that the liquidators’ investigations produced other accounts of a similar kind belonging to other investors.

[8]      The  liquidators  would  have  been  perfectly  within  their  rights  to  simply release the shares and associated cash on the basis of their opinion as to where the

legal and beneficial entitlements lie.  Understandably however, they seek the comfort of a court order before doing so.

[9]      Given that in addition to the release orders, the liquidators wanted all material to be kept confidential, there was a danger that the court would not have the benefit of hearing from potential contradictors, as the potential contradictors would not have notice of the application or any knowledge of the facts being put before the court.

[10]     I directed the liquidators to advise the Ross Group liquidation committee of the application before me, and to seek the committee’s views.  It seemed to me that if anyone was likely to challenge the removal of cash and shares from within the Ross Group during the course of the liquidation, then the committee would be such a candidate.

[11]     I received on 15 August 2013, through counsel for the liquidators, an affidavit from John Russell Strahl, a lawyer and chairman of the liquidation committee.  He advised that the liquidators had advised the committee on 19 April 2013 that there was a possibility of proprietary claims valued at approximately $3.7 million, and that approximately $2.5 million in shares were likely to be returned to claimants.

[12]     In July 2013, further information in relation to those claims (but by no means complete   information),   was   circulated   by  the   liquidators   to   the   liquidation committee.   According to the draft minutes of the liquidation committee meeting held on Tuesday, 6 August 2013, the committee resolved “that the liquidators should continue to undertake the verification of proprietary claims but should do so as expeditiously and economically as possible.”

[13]     Mr Strahl deposed:1

In respect of the seven claims which are the subject of the liquidators’ application, and as noted in the extract of the minutes…, I confirm that the liquidation committee was happy to support the liquidators’ application.  No further information regarding the liquidators’ application or the details of the relevant proprietary claimants’ claims was requested by any member of the liquidation committee.  There was no objection to the liquidators making the application.

1 Paragraph 12, affidavit of John Russell Strahl.

[14]    In light of that advice from the liquidation committee, and in light of the affidavits  of  Mr  Bodman  and  Mr  McMillan,  I  am  satisfied  that  no  further information is required and that the orders may be made as sought.  There will be orders therefore as follows:

(a)      the following assets are to be released from the freezing orders made on 2 November 2012 and renewed on 6 November 2012, and may be returned or transferred to the control of the respective investors named below:

(i)the  assets  held  in  the  Craigs  Investment  Partners  account number 262154 in the name of Mr G and Mrs B Sprot, subject to payment of $21,792.46 in outstanding management fees payable to Ross Asset Management Limited out of the assets held  in  Mr  and  Mrs  Sprot’s  Craigs  Investment  Partners account;

(ii)the  assets  held  in  the  Craigs  Investment  Partners Account number 272028 in the name of Lyndale Farm (Wakefield) Limited;

(iii)the  assets  held  in  the  Craigs  Investment  Partners Account number 252713 in the name of Arthur Stewart 2006 Trust;

(iv)the  assets  held  in  the  Craigs  Investment  Partners Account number 267201 in the name of Antony John Seager;

(v)the  assets  held  in  the  Craigs  Investment  Partners Account number 272301 in the name of Mr MA and Mrs JA Apperley;

(vi)the  assets  held  in  the  Craigs  Investment  Partners Account number 264147 in the name of Jones Tredwyn Nominees Limited;

(vii)6,220  Bouygues  shares  held  in  Ross  Asset  Management Limited’s (in liquidation) name with Credit Suisse UK, and that these shares be transferred to Mr Andrew and Mrs Julie Payne, together with the dividend payment of 6 May 2013 of

£5,868.50 (net) in respect of the 6,220 Bouygues shares which remains in Credit Suisse’s possession, and that all future dividends on these shares should accrue and be paid to Mr and Mrs Payne;

(b)this application and the supporting affidavits of Mr Richard Bodman and Mr Marcus McMillan and the exhibits thereto shall be kept confidential and shall not be searched or provided to any third party without further order of the Court on notice to the parties; and

(c)       leave to the applicants to apply for further directions is reserved.

Williams J