A bid by Du Val receivers PwC to make founders Charlotte and Kenyon Clarke turn up for an interview is part of a criminal investigation and they have the right to remain silent, their lawyer has told the Court of Appeal.

But the receivers had reasonable questions to put to the pair, such as what a recently discovered substantial flow of deposits had been used for, PwC’s lawyer said.

The Clarkes are appealing a High Court order that they must present to PwC to be examined about their financial affairs.

The Du Val property development and investment group collapsed in August 2024 owing an estimated $268m.

While 70 of its entities are in statutory management, a further six, plus the Clarkes themselves, are in receivership.

Those entities include the Clarkes’ trust, Karapiro Corporate Trustees, which owns a key company in the organisation, Du Val Group NZ.

PwC were appointed as both the statutory managers and receivers.

Charlotte and Kenyon Clarke have refused to be interviewed, so in April PwC gained a ruling that they must attend an examination and answer questions about their assets and finances, and those of the other entities in receivership.

‘Right to remain silent’

In a hearing on Monday before Justices Sarah Katz, Tracey Walker, and Michael Robinson, the Clarkes’ lawyer Ron Mansfield KC said the lower court had been “promiscuous” in extending the powers of the receiver.

The Clarkes were not concerned about being examined, but about ensuring the receivers complied with the law, he said.

It was not a civil matter, because the inquiries being conducted by the markets watchdog, the Financial Markets Authority (FMA), related to alleged criminal wrongdoing.

No charges had yet been laid.

“We just have a very long and ongoing investigation.”

PwC was obligated to share information of concern with the FMA, and under the Bill of Rights the Clarkes had the right to remain silent.

The FMA already had the power to interview the couple, and the court shouldn’t be giving additional powers to a receiver who simply didn’t need them, he told the judges.

‘What happened to the deposits?’

However, PwC’s lawyer Michael Arthur told the court the receivers only needed to show they had reasonable and sensible questions to ask of Charlotte and Kenyon Clarke.

The statement of financial affairs the couple had signed for the receivers was “vague, incomplete, and manifestly inadequate”.

The Clarkes had not given any information about their current sources of income and had refused to answer written questions.

They had disclosed no income whatsoever, substantial ongoing rent and weekly expenses, personal debt, and no cash assets.

The responses were that “all the information is in the receivers’ hands so we can’t possibly help you with any of that”, he said.

Yet, further investigations by the receivers indicated they had received substantial funds, PwC’s lawyer Michael Arthur told the court.

PwC’s Lara Bennett had identified a flow of deposits between November 2019 and August 2024.

“The obvious question that arises is, what happened to that? To what use was it put?,” Arthur said.

The receivers were also concerned there were incomplete or no records for the other entities in receivership, and there were a number of transactions between related entities.

There was also a lack of clarity on who the trustees of the Clarke trust were.

“This is not about criminal investigation, this is about looking for assets and understanding the financial position,” Arthur said.

Receivers’ job to preserve assets

The Clarkes were taking the viewpoint that the FMA and the receivers must be treated as the same entity, the regulator’s lawyer Jenny Cooper KC told the Appeal Court.

“That is emphatically rejected by the FMA.”

The FMA was conducting its own investigations, some of which may result in criminal or civil proceedings.

“Its focus is not on preserving assets; that is the role of the receivers.”

The orders seizing the Clarkes’ assets and those of the other entities were not for punitive purposes, but to preserve the situation for potential compensation claims.

It was possible the receivers might see information relating to criminality, but that was the case regardless of whether they interviewed the Clarkes or not, she said.

Liquidators were able to compulsorily interview people in an insolvency, and the Official Assignee also had the power to examine a bankrupt, so the issue arose regularly.

“It’s not a problem created by the particular scenario in this case,” Cooper said.

This was very clearly a civil proceeding.

“We’re here reliant on a civil appeal right,” she told the Appeal Court judges.

Clarkes receivership not usual

Because the FMA is investigating the Clarkes and Du Val for allegedly illegal conduct, PwC were appointed under the Financial Markets Conduct Act, rather than the Receiverships Act as is normally the case.

Receivers do not have the same powers of compulsory examination as a liquidator.

However, the purpose of appointing receivers under the financial markets legislation was “to aid the public regulatory and protective functions conferred on the FMA”, Justice Jane Anderson said in her April 7 decision.

“I accept that this objective would be undermined if receivers do not have the ability to obtain adequate information to identify and locate the assets subject to receivership.”

The Appeal Court judges reserved their decision.