Reid battles NSW setback

By Deborah Hill Cone

Friday 13th December 2002

Jubilant investors said yesterday Digi-Tech scheme promoter John Reid was being starved of the oxygen of cash to fund his litigation after losing the latest round in the appeal process of his Australian case.

Mr Reid asked the full bench of the New South Wales Appeal Court to order that the $A44 million Supreme Court judgment in his favour be enforced.

He had already been unsuccessful before a single judge and once again the three-judge bench ordered that the judgment be stayed.

That means Mr Reid does not stand to get a cent while the drawn out appeal process continues and he has to carry on funding his Australian appeal, which he has yet to lodge, as well as paying for his own defence in the Serious Fraud Office case against him in New Zealand.

Four investors in the Digi-Tech Australia scheme, Kalifair, Kalinick, Mclean Tecnic and AI McLean Pty, were found by NSW Supreme Court Justice Clifford Einstein in August to have failed to correctly exercise their options to exit the Digi-Tech investment and so were found liable for the rest of the money owing a total of $A44 million including interests and costs.

But the huge award is likely to be a pyrrhic victory for Mr Reid given that three of the four companies, two of which are linked to HR entrepreneurs Geoffrey Morgan and Andrew Banks, are shelf companies with no assets.

Lawyers told the court Kalifair, Kalinick and McLean Tecnic had no assets at all while AI McLean Pty had assets of about $A1.7 million.

"None of the four debtor companies is in a position to comply with the judgments, stay or no stay," the court heard.

Graham Brand, a Digi-Tech investor representing Mr Morgan and Mr Banks' interests in this case, said if the stay had not been granted it was likely Mr Reid would have liquidated the companies and sought to take legal action against the directors of the companies in a long-shot bid to make them pay the damages.

Mr Brand said his parties would seek security for costs from Mr Reid.

Some investors who paid money to Mr Reid to settle had "supplied him with the oxygen of cash" to run his case but this was now being denied him, Mr Brand said.

Mr Reid has until the end of next week to lodge an appeal after the courts extended the deadline for them to be filed.

Mr Reid told the Sydney Morning Herald in October his self-styled merchant bank, Milloy Reid Wong, had been unable to get more than five fee-paying jobs in the four years since the Digi-Tech scheme fell apart.

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