German executive faces big penalty
20 February 2004
WELLINGTON – The German director of a shipping company that collapsed six years ago has been ordered by a New Zealand court to pay about USD seven million (EUR 5.5 million) to creditors after being found guilty of reckless trading, according to news reports on Friday.
The award against Klaus Lower, which includes interest and costs, is believed to be the country’s biggest personal penalty for reckless trading imposed on a businessman, the New Zealand Herald reported.
It quoted Peter Davey, lawyer for Lower, who is reportedly in Germany, as saying an appeal would be lodged against the decision.
Lower was the majority shareholder in South Pacific Shipping, which operated up to 11 German-owned cargo vessels trading between Australia and New Zealand and Pacific island countries, the paper said.
Lower had an ownership interest in eight of the ships which were chartered through other overseas companies in which he was a large shareholder.
The company went into liquidation in 1998, six years after it was established, owing tens of millions of dollars to creditors, the Herald said.
It said two other directors, Ross Fast of Christchurch and Australian Stuart McAllum, negotiated confidential settlements with liquidator PricewaterhouseCoopers after the company’s collapse.
Judge William Young said claims against the other directors were settled or not pursued “largely for economic reasons”, and Lower was the only remaining defendant. He said the company was not profitable made forecasts that were not met, its directors’ meetings were infrequent, and Lower showed “unwillingness or inability to implement orthodox governance practices”.
The judge said the potential for Lower to derive “substantial collateral advantages” from the charter arrangements and vessel ownership “encouraged him to gamble with the funds of his creditors”.
Gary Traveller, of PricewaterhouseCoopers, told the paper he had been given legal advice the money could be chased through the German courts and he was confident of retrieving it.
He said the company should have stopped trading in late 1993 or early 1994, when “the projections of profit were hopelessly adrift and the trading environment was becoming increasingly difficult”.
Instead, it expanded its charters and assumed NZD one million (EUR551,800) in liabilities of a related company.
Traveller said creditors were claiming about NZD 20 million and millions more was owed to related companies which would not rank for payment.
Subject: German news