Crown readies C+M appeal

Capital and Merchant Finance director Wayne Douglas, director Neal Nicholls and former CEO Owen Tallentire. Photo / Sarah Ivey

Crown prosecutors are trying to appeal against the acquittal of two Capital + Merchant directors and appeared in Auckland yesterday as part of their bid to get the courts to take another look at the case.

Wayne Douglas and Neal Nicholls, the founding directors and beneficial owners of failed finance company Capital + Merchant, were found not guilty in July on one charge of theft by a person in a special relationship and two of making false statements in a prospectus.

This case, brought by the Serious Fraud Office, concerns loans of about $14.5 million made to three companies that converted two Palmerston North office blocks into student accommodation - a project called "the Hub".

Crown lawyers argued during the trial that the pair stood to benefit from these transactions and said Nicholls and Douglas knew they needed to disclose them to Capital + Merchant investors and the company's trustee, but did not.

While they were acquitted in this case, the two men - both in their 50s - were found guilty of three Crimes Act charges in a separate trial, where Justice Ed Wylie found the pair loaned investor money for their own benefit in ways that breached Capital + Merchant's trust deed.

On these charges, also brought by the SFO, Nicholls and Douglas were in August handed 7.5 years in jail each - the longest sentences given to failed finance companies bosses to date.

Former C+M director and chief executive Owen Tallentire, who is in his mid-60s, was also found guilty of two charges in this case and sentenced to five years in jail.

Nicholls, Douglas and Tallentire have appealed against their sentences and convictions. Although Nicholls and Douglas received long jail sentences, the Crown is trying to appeal against the not guilty verdicts of the first trial.

In relation to this appeal Crown lawyers appeared before Justice Wylie in the High Court at Auckland yesterday, where Nicholas Davidson, QC, said the decision in the Hub trial could have consequences for other cases. Davidson, who did not appear for the Crown during the original trial, put forward an application for Justice Wylie to state a case to the Court of Appeal, identifying questions of law the Crown wants referred on.

If Justice Wylie decides to do so, then the case can proceed to the appellate court.

But the lawyer for Nicholls and Douglas, Bruce Gray, QC, said parts of the Crown's application were not appropriate.

"The accused are entitled to regard the matters as being at an end," Gray said yesterday.

Justice Wylie reserved his decision on the application.

The case: Concerns loans of about $14.5 million made between 2002 and 2004 to three companies that converted two Palmerston North office blocks into student accommodation - a project called "the Hub".

The charges: One of theft by a person in a special relationship and two of making false statements in a prospectus.

The verdicts: Not guilty, but the Crown wants to appeal.

The accused: C+M directors Wayne Douglas and Neal Nicholls.

The company: Collapsed in 2007 owing $167 million to about 7500 investors. No funds are expected to be recovered.