Former RAM investors Duncan, Nora Priest win case against RAM liquidators to get shares back

Duncan and Nora Priest have won a High Court case against the liquidators of Ross Asset Management, successfully arguing that they were in a different position to other investors in David Ross's Ponzi scheme because they didn't give the jailed fraudster discretionary powers over their funds.

In a High Court judgment today, Justice Denis Clifford ruled that the Priest holdings, which amounted to about $2 million of the residual pool of $10.26 million found in the accounts of companies that Ross used to run his Ponzi scheme, were held on "bare trusts for the sole benefit of the Priests and at the sole direction of Mr Priest."

The judge ordered Ross Asset Management (in liquidation) and Dagger Nominees to transfer to the Priests "all dividends, shares, proceeds, interest and other returns earned in respect of the Priest holdings held by each of them." Priest holdings that had been transferred to the third defendant, Nessock Custodians, were also deemed to have been held by RAM and Dagger on bare trusts, the judgment says.

The liquidators, PwC's John Fisk and David Bridgman, had opposed the Priests application, arguing that all investors with David Ross were entitled to the benefit of the Priest holdings in the same way any other funds recovered would be shared in proportion to investors' losses.

The High Court appointed Fisk and Bridgman as receivers of RAM in November 2012 and as liquidators a month later.

Since the Priest case, the position of the liquidators has been challenged in the Supreme Court by another RAM investor, Hamish McIntosh, who appealed a Court of Appeal ruling that he must repay $454,000 in fictitious gains from an investment in RAM of $500,000. The liquidators of RAM are cross-appealing that they should be entitled to claw back his principal as well.

Fisk and Bridgman originally took their action against McIntosh as a test case and had previously said they would pursue other investors who pulled out their funds before RAM's collapse. Defrauded investors are expected to receive 3 cents for every dollar invested.

In the High Court, Justice Alan MacKenzie had ruled the liquidator's bid to claw back funds from former Ross investors didn't need an 'all or nothing' approach, and the principal invested could be viewed as separate from the investment scheme's fictitious returns. But in the Supreme Court, McIntosh said it was "completely artificial to bifurcate that amount."

Wellington-based Ross built up a private investment service by word of mouth, producing regular reports for shareholders indicating healthy but fictitious returns. Between June 2000 and September 2012, Ross reported false profits of $351 million from fictitious securities trading as part of a fraud that was the largest single such crime committed by an individual in New Zealand. McIntosh today said his broker recommended Ross to him and the investment was accepted by both his accountant and bank.

In June last year, the Court of Appeal turned down a bid by Ross to reduce his 10-year, 10-month jail term, which carries a minimum non-parole period of five years and five months.

(BusinessDesk)

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