Jaffe examined in court over assets
Eric Jaffe’s tormenter for the day, lawyer Tim Allan, scored a telling point during a public examination in the High Court in January, but after another session in court today none of this inquisition is likely to bear much fruit for out-of-pocket investors.
The two occasions were the public examination before Master Gambrill of Mr Jaffe, as director of Australia-registered Industrial Banking Corporation, a company whose New Zealand assets have been placed in liquidation. Question was, and still is after the examination, what those assets might amount to and where the liquidators might find information about more than they are laying claim to.
Acting for the liquidators of the New Zealand assets of IBC, Mr Allan got Mr Jaffe to tell the court that all his company’s assets were in his head.
Mr Jaffe’s head, along with the rest of the 78-year-old company director’s body, was in New Zealand. Therefore the intellectual property belonging to the company which Mr Jaffe has for years maintained would see creditors right, the concepts in his head, must be New Zealand assets.
Mr Jaffe wrote a few lines for the court about these concepts, not for further dissemination because they are the property of the company, registered in Australia. The Jaffe concepts are worth millions of dollars, according to IBC’s audited balance sheet. Valued at $A162 million in 1995, they were in the accounts at $A216.5 million in 1996.
Those accounts were signed off on 14 May 1997, Mr Allan said. “The day after that was signed, the New Zealand assets were put into liquidation because the New Zealand court felt it [IBC] couldn’t repay the investors,” Mr Allan suggested to Mr Jaffe today.
“I don’t agree with that. The company was never put into liquidation. It was a New Zealand asset that was attacked, not the company. The company would have repaid all its debts ahead of time if it hadn’t been attacked,” Mr Jaffe responded.
Mr Allan exhorted Mr Jaffe today to help those creditors, who put about $2.7 million into IBC redeemable preference shares and debentures five years ago and have seen nothing back. Their shares were to have been redeemed on 1 September 1997.
Mr Jaffe said he was happy to help but the assets were the company’s, not his, and as the company was Australian-registered he would have to consult accounting and legal advisors to see what he should do.
Numerous times, Mr Jaffe referred Mr Allan to documents which he said he no longer had. Company documents were either with its auditors in Sydney or had been picked up by the Australian Securities Commission (now ASIC, the Australian Securities and Investments Commission).
Mr Jaffe unsuccessfully sought name suppression today, claiming a media vendetta against him (essentially by me, because I have written about Mr Jaffe’s business affairs from time to time in various publications over the past 20 years, since he told creditors about his concepts during a public examination over his bankruptcy in 1980). Master Gambrill refused the application.
Shares in IBC were offered to New Zealand investors, mostly elderly people approached by broker Christopher Evatt, in 1995. Mr Jaffe told the court today he did not offer these shares to investors himself, but that Mr Evatt had taken out a contract to sell $3.6 million of shares and debentures, with IBC paying for access to Mr Evatt’s portfolio of investors, plus 5% commission.
Mr Evatt’s business then was called Managing Effectively. In the 1980s he ran the Financial Management Services Group, which collapsed.
Sales fell short of the intended total because of official intervention. In 1996 the Securities Commission issued an order prohibiting advertising of the shares because it said the offer required a prospectus or “authorised advertisement”.
The Reserve Bank also entered the fray in 1996, ordering IBC to stop using the word “bank” in its title when operating in New Zealand because it had no authority to use the word, as required under s66 of the Reserve Bank Act.
Mr Jaffe also criticised official intervention today for preventing an American’s investment in IBC, which would have salvaged the position for investors. “Somebody in authority in this country,” on learning who his American investor was (Frank Adamson, a trustee of the American Fidelity Trust), advised him not to come here, he said.
When that point was raised before Justice Salmon in a 1998 High Court hearing, the judge said Mr Adamson’s letter offering $US6 million for 20% of IBC and another $US6 million advance in fact provided no undertaking. The judge then proceeded to order the liquidation of IBC’s New Zealand assets.
Tangible assets now appear to be about $300,000 held in court after the mortgagee sale of four townhouses on Ring Tce, overlooking Auckland’s Westhaven marina. Mr Jaffe, his wife and a caveat-holder are all claimants to that money, as well as the NZ-assets liquidators. The issue has yet to be resolved.
Those townhouses were sold at mortgagee auction in 1998 for $2.1 million, with Mr Jaffe bidding openly and successfully at the auction.
Land transfer documents showed a Jaffe family company, Jaffe Trust Co Ltd, was the buyer, and that a fortnight after that transfer went through the townhouses were onsold to Tai Cheng Liao, of Rotorua, for $3.1 million.