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The JBL collapse hurt investors and creditors and damaged the reputation of New Zealand’s small entrepreneurial community. It had all the ingredients of a soap opera – family rivalry, greed, negligence and malfeasance. The only people to emerge looking good were the government and Doug Hazard, the receiver it appointed in place of the one appointed by the major creditor, the ANZ Bank.
In 1956, Jeffs Brothers Ltd was set up in Ruawai on the Kaipara Harbour. It was a contracting and manufacturing company owned by Jim, Kevin and Vaughan Jeffs.
By 1965 JBL was based in Auckland, where it put up commercial buildings, tenanted them and then sold the tenanted building. In 1967 it pioneered real estate syndication – forming syndicates for commercial property investment, with less than 25 members so as not to be liable for company tax. Small investors flocked.
At its height JBL had 52 companies, including fishing, cosmetics and mineral exploration, and had offices in Australia and Japan. It was about to move the corporate headquarters to London in 1972 when it collapsed due to a shortage of working capital, poor investments and failed partnerships, problems partly hidden by its lax accounting systems.
Hazardous job
Doug Hazard, the receiver appointed by the government in the JBL collapse, spent 25 years unravelling the mess. He restructured several units of the group and sold them off. Almost $19.6 million was paid to secured creditors, who were paid in full, and $2.5 million paid to unsecured creditors, who were paid in part.
About 3,500 investors and 2,500 creditors were affected. Jim Jeffs was sentenced to jail (serving six months) and his brother Vaughan was fined, along with four other executives – though the Court of Appeal quashed all convictions except those of the brothers.
Cornish Lamphouse (1974) and Securitibank (1976) The failure of JBL was seen as an aberration. But it was followed by a decade of corporate failures including Cornish Lamphouse in 1974 and the finance company Securitibank in 1976. The Public Service Investment Society nearly collapsed in 1979.
Securitibank was not a listed company and many investors lost all their money. Its collapse led the National government to pass the Securities Act 1978 to ensure that people who invested had a registered prospectus with full and proper disclosure. It led to further securities legislation, including the policing of insider trading (where friends or associates of a company profit from inside information).