Financial Markets Authority v CBL Corporation Ltd (In Liquidation) - [2025] NZHC 295
Date of Judgment
26 February 2025
Decision
Financial Markets Authority v CBL Corporation Ltd (In Liquidation) (PDF 1.5 MB)
Summary
Proceeding by Financial Markets Authority (FMA) against Mr Carden Mulholland alleging involvement in five contraventions of fair dealing and continuous disclosure provisions of the Financial Markets Conduct Act 2013 (FMCA) by CBL Corporation Limited (CBLC). Mr Mulholland was the chief financial officer of the CBL Group. The alleged fair dealing contravention is a misrepresentation to investors hat CBLC's operating profit for the half-year to June 2017 had been materially reduced because its subsidiary (CBLI) had made a "oneoff' increase to the amount it was reserving for future claims, in breach of FMCA ss 19, 22 and/or 23. The alleged continuous disclosure contraventions are a failure to disclose to the market from 24 August 2017 that approximately $35m of premium receivables due to CBLI were over a year past due, and their solvency impact; a failure to disclose to the market on/shortly after 11 October 2017 that CBLI signed a term sheet to sell the aged receivables to Castlerock Receivables Management Ltd; a failure to disclose to the market
on/shortly after 13 January 2018 that the Central Bank of Ireland (CBI) had directed CBLC's subsidiary (CBLIE) to apply a capital add-on essentially requiring it to hold additional cash reserves of €31.5m; and a failure to disclose to the market from 25 January 2018 until 5 February 2018 that CBLl's reserves needed strengthening by approximately $100m; all in breach of FMCA s 270 and the NZX Listing Rules cl 10.1. In the alternative to the continuous disclosure contraventions, the FMA alleges a failure to disclose to the market at least by the end of January 2018 the cumulative material effect of the information concerning receivables, CBI directions and conditions, and reserving, in breach of FMCA s 270 and Listing Rules cl 10.1. HELD: Accessory liability under s 533(1)(c) FMCA requires that the alleged accessory: (a) had actual knowledge of the essential facts giving rise to the contravention; and (b) intentionally participated by acts or omissions that had a practical connection with the contravention. RESULT: The FMA's second cause of action against Mr Mulholland (involvement in "one-off' representation) is not made out. The tenth cause of action (involvement in non-disclosure of aged receivables) is made out. The twelfth cause of action (involvement in non-disclosure of Castlerock transaction) is not made out - primary contravention by CBLC not established. The twenty-second cause of action (involvement in non-disclosure of CBI direction) is made out. The eighth cause of action (involvement in late disclosure of approximately $1 00m reserve strengthening) is made out. Declarations of contravention made in relation to the eighth, tenth and twenty-second causes of action. Penalty hearing to follow.
on/shortly after 13 January 2018 that the Central Bank of Ireland (CBI) had directed CBLC's subsidiary (CBLIE) to apply a capital add-on essentially requiring it to hold additional cash reserves of €31.5m; and a failure to disclose to the market from 25 January 2018 until 5 February 2018 that CBLl's reserves needed strengthening by approximately $100m; all in breach of FMCA s 270 and the NZX Listing Rules cl 10.1. In the alternative to the continuous disclosure contraventions, the FMA alleges a failure to disclose to the market at least by the end of January 2018 the cumulative material effect of the information concerning receivables, CBI directions and conditions, and reserving, in breach of FMCA s 270 and Listing Rules cl 10.1. HELD: Accessory liability under s 533(1)(c) FMCA requires that the alleged accessory: (a) had actual knowledge of the essential facts giving rise to the contravention; and (b) intentionally participated by acts or omissions that had a practical connection with the contravention. RESULT: The FMA's second cause of action against Mr Mulholland (involvement in "one-off' representation) is not made out. The tenth cause of action (involvement in non-disclosure of aged receivables) is made out. The twelfth cause of action (involvement in non-disclosure of Castlerock transaction) is not made out - primary contravention by CBLC not established. The twenty-second cause of action (involvement in non-disclosure of CBI direction) is made out. The eighth cause of action (involvement in late disclosure of approximately $1 00m reserve strengthening) is made out. Declarations of contravention made in relation to the eighth, tenth and twenty-second causes of action. Penalty hearing to follow.