Lawyer Brian Ellis of Ellis Law is one of the directors being pursued by liquidators of a failed infant formula company for $775,000.
Ellis, who has been convicted for compromising an SFO investigation, won a case that prevented the liquidators of the company, Wenztro Cooperation (formerly Trojan Foods), from investigating his financial accounts to determine whether he is ‘collectible’ or not.
Mr Ellis was convicted in 2002 and fined $25,000 on a charge of destroying or concealing documents with the intent to defeat an SFO investigation into his client’s affairs.
A Law Talk issue at the time says he was fined and censured but the New Zealand Law Practitioners Disciplinary Tribunal did not strike him off.
He also hit the headlines when a former client posing as a banker was jailed for a multi-million dollar fraud in the United States and who had been using his Auckland law office address as his own.
Auckland lawyer Brian Ellis said he recently discovered Morgan – a former client – had continued to use the Auckland address of his firm Ellis Law.
“I was horrified when I discovered he was using my address for purposes I imagined were nefarious. One of the problems in New Zealand is it is too soft and too easy to form companies here,” he said at the time.
The Wenztro liquidation has been through four different liquidators over five years, finishing up with Boris van Delden of McDonald Vague.
The Auckland-based company used to export infant formula but it failed in 2013 after less than three years of operation when it incorrectly labelled a shipment’s expiry date and a Chinese importer won judgment against it, according to the company’s first liquidators report in 2012.
NBR reports that the presiding liquidators are now going after the current and former directors — Mr Ellis, Gerald Norman Williams and Francis Clifford Graham — for approximately $775,000 plus interest.
They have backing from Wenzhou Hongiang Trading Co, the Chinese importer and the main creditor. Liquidator Ms Finnigan says there are further claims (subject to court direction) of up to $3 million, mainly from Wenzhou.
The liquidators asked the three directors if they would supply personal financial documents. Messrs Williams and Graham agreed but Mr Ellis refused.
The liquidators then went to the High Court to try to force Mr Ellis to hand over his private information. Mr Ellis accused them of going on a “fishing expedition,” according to Associate Judge Hannah Sargisson’s metaphorically colourful judgment.
“Fishing expeditions are a popular pastime for many people,” the judge said. “The fisher does not know, of course, what he or she might reel in – trout, salmon, or nothing at all. Nonetheless, the line is thrown out in the hope, and the expectation, that something will bite. And then there is the alluring possibility that today, or maybe tomorrow, the hook will find that ‘perfect catch’.”
She said the liquidators’ “perfect catch” would be evidence that Mr Ellis has the assets to be “judgment-worthy.”
Associate Judge Sargisson’s judgment said the trial promises to be lengthy and expensive.
“Quite understandably, therefore, the liquidators want some reassurance that the costs and risks associated with continuing proceedings are outweighed by the possible return to the creditors,” she said.
Invasion of privacy
Associate Judge Sargisson described the liquidators’ application as “novel and controversial” because no New Zealand court has expressly addressed whether liquidators are entitled to find out the financial position of defendants.
The liquidators wanted to see his personal tax returns from 2012 to 2016, bank statements from 2015 to 2016, trusts he is associated with, and documents recording his assets and liabilities.
The judge described their application as “careless” because they “cast their net” too wide and it was an invasion of Mr Ellis’ privacy.