December 6, 2021

Kiwis sue over Van Eyk ‘conspiracy’ [in Cayman Islands]

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7dcb6d033000664d2c1e4c1daaae708dBy BEN BUTLER From The Australian

New Zealand businessmen ­George Kerr and Russell Naylor have launched legal action in the Cayman Islands accusing fund managers and two New Zealand government bodies of an unlawful conspiracy to remove them from running a fund caught up in the Van Eyk collapse.

The lawsuit, the latest in a blizzard of litigation enveloping the Van Eyk saga, names as conspirators Sydney funds management group Millinium, Millinium director Tom Wallace, New Zealander Greg Marshall, who runs Logic Fund Management, Crown Asset Management (CAML), the Accident Compensation Corporation of New Zealand (ACC) and its investment manager Nicholas Bagnall.

Mr Marshall declined to comment and Millinium and CAML did not respond to inquiries.

An ACC spokeswoman said the allegations against it and Mr Bagnall were “wholly unfounded” and the claim was “an abuse of process and without merit”.

The Torchlight fund, run by Mr Kerr and Mr Naylor, looked after at least $30 million invested in Van Eyk’s $450m Blueprint International Shares (VBI) fund.

Once a respected research house and fund manager, Van Eyk collapsed in 2014 after Macquarie, which was the responsible entity of the VBI fund, became concerned Van Eyk had pumped investors’ money into another Cayman Islands fund, Artefact Global Opportunities, which was outside its mandate.

Artefact, which has since collapsed, then invested in Torchlight through an asset swap.

Macquarie has accepted it breached the Corporations Act by failing to properly monitor VBI or address the risks associated with the Artefact investment and is due to face the NSW Supreme Court this morning for a hearing at which it will seek approval of a penalty deal struck with the Australian Securities & Investments Commission.

Neither Macquarie nor ASIC would comment on the deal, ­although it is believed to include a monetary payment.

Meanwhile, Macquarie has had some success pursuing Artefact for investors’ money in court in Britain.

In a letter to VBI investors in May, Macquarie Investment Management boss Roger Cartwright said Artefact’s liquidators had advised “that Artefact has received the full amount owing to it from its underlying investment” and would pay this up the chain “in due course”.

So investors did not have to wait for this to happen, Macquarie filled the gap itself.

However, in the Cayman ­Islands, action against Torchlight GP, the Cayman Islands vehicle through which Mr Kerr and Mr Naylor manage the Torchlight fund, continues.

The lawsuit was filed in June last year by investors, including the ACC and CAML, represented by Aurora Funds Management, a subsidiary of corporate raider Nicholas Bolton’s brainchild, the ASX-listed Keybridge Capital. Mr Bolton ran Keybridge until December, when ASIC slapped him with a three-year directorship ban.

The Aurora investors, who together controlled more than $90m of an estimated $216m to $259m in the fund, want Torchlight GP removed as manager of the fund.

They accuse Mr Kerr and Mr Naylor of getting the fund to buy NZ property from Mr Kerr and sell it back to him at a loss; engaging in share trades with Mr Kerr’s NZ-listed Pyne Gould Corporation to the fund’s detriment; and failing to provide ­financial accounts and paying themselves inflated management fees totalling $25m.

Mr Kerr and Mr Naylor are fighting the allegations and have appealed against court rulings forcing them to hand over documents covering the move of the fund from NZ to Cayman, related party transactions, financial accounts and a legal dispute with WorleyParsons chairman John Grill’s private company, Wilaci, over a $33.6m loan he made to the fund.

Wilaci sought more than $2m a month in penalty fees after the remnants of the Kiwi arm failed to make repayments, but lost a NZ High Court lawsuit in October last year.

In January, the Cayman Islands Grand Court also ordered Torchlight GP not to transfer fund assets to related parties without the consent of Aurora or a court order.

Torchlight GP claims the discovery sought by Aurora is a fishing expedition. Its appeal is to be heard by three judges of the Cayman Islands Court of Appeal on Monday.

Separately, Torchlight GP last month filed its new legal action, accusing each defendant of “unlawful means conspiracy”, “breach of contract and/or breach of confidence”, “procuring or inducing a breach of contract and/or confidence” and “unlawful interference”.

Details of the claim were not available but it is believed Torchlight GP alleges the defendants conspired to replace it with a new manager in order to get their money out early.

It is believed the legal action brought last year is also impugned as being launched in bad faith and based on false and misleading evidence.

Mr Kerr declined to comment.

IMAGE: New Zealand businessman George Kerr.

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