groves ready to answer wife's $44m claim

Colin Kruger
December 23, 2008



EDDY GROVES has probably been called a few things in his time, especially since the $1.6 billion collapse of his child-care empire last month, but this time it is personal.

This week he is expected to lodge his legal defence against allegations by his estranged wife, Le Neve Groves, that he and two margin lenders defrauded her of tens of millions of dollars.

Neither party has been willing to comment on the legal battle that also entangles the margin lenders Citigroup Global Markets and Westpac subsidiary, BT Securities, over loans that were secured against millions of Mr Groves's shares in ABC Learning and allegedly guaranteed by his wife, with whom he has been estranged for a number of years.

Dr Groves seeks $64.2 million from Mr Groves and the two margin lenders plus interest and court costs.

Mr Groves is being sued for $44.2 million, including $10.7 million in dividends paid on Dr Groves's shares between 2001 and March this year, which she claims he pocketed.

Dr Groves says her shares in ABC Learning should not have been sold from beneath her because she never guaranteed the loans her husband made with the two margin lenders.

It is unclear whether the margin lenders spoke with or met Dr Groves about her alleged guarantee of the margin loans when it was made in 2004, or if they relied entirely on her signature on legal documents.

It raises a potentially sticky question when the matter finally goes before the Queensland Supreme Court: if it is not really her signature on the documents underpinning the guarantee then whose is it?

Documents lodged in Citigroup's defence against the action say Dr Groves acted as guarantor for a $15 million margin loan her husband took out in March 2004.

Dr Groves allegedly completed a form and attested that "she relied upon her own judgment (not Citigroup's) together with any independent financial or legal advice she may have received, in deciding to enter into the guarantee".

When Citigroup made a margin call against Mr Groves's loan last February Dr Groves lost 4.6 million shares lodged in a guarantor account with Citigroup in a forced sale to help pay back Mr Groves's loan.

Dr Groves is even mentioned in the settlement of the margin loan on March 7 in which she "acknowledged and agreed" among other things that the contract and "guarantee were valid and enforceable", Citigroup said.

In her statement of claim lodged in October Dr Groves contradicts this, saying that "at no time" did she have a margin loan with Citigroup, or guarantee any loans made by Citigroup, or BT Securities.

In relation to the margin loans with Citigroup and BT Securities Dr Groves says her estranged husband, Citigroup and BT were "unjustly enriched" at her expense.

http://business.smh.com.au/business/groves-ready-to-answer-wifes-44m-claim-20081222-73lt.html