It has already sparked controversy in PNG with politicians raising concerns about how the $43 million fund, which belonged to the government-owned entity known as the Motor Vehicle Insurances Limited (MVIL), was sent out of the country in 2009. The money was entrusted to private investment management company Woodlawn Capital, which is directed by Timothy James McNamara, 43, and Timothy Patrick Breen, 40. Woodlawn Capital had an agreement with MVIL to invest the cash for a period of some years. The company also paid a large referral or introduction fee to sports administrator Malcolm Giheno – the son of former prime minister John Giheno – in relation to the company getting to invest the funds, Fairfax has learnt. In 2011, the PNG Government sought to terminate the investment agreements and Woodlawn Capital repaid $4.2 million but demanded $23 million, which included termination fees and other charges, despite the total of the fund dropping by about $10 million in value under the company's watch, according to evidence given in the court.

The demands prompted MVIL to launch legal action in the NSW Supreme Court against Woodlawn Capital and its directors, rejecting the fees and demanding the return of the money and interest. Late last month, Justice James Stevenson issued part of his ruling, finding that Woodlawn Capital had acted in breach of the investment management agreement and justifying MVIL's right to terminate. Justice Stevenson also found Woodlawn Capital was not entitled to any fees beyond those accrued at the date of termination. He found the most significant breach had been when Woodlawn Capital invested in particular derivatives in July and August of 2011. He also found that Woodland Capital had engaged in "deceptive conduct" because it did not have an appropriate financial services management licence when it was managing the money.

He noted that the Australian Securities and Investment Commission had written to Woodlawn Capital in 2009 warning that the company needed an appropriate licence. But Woodlawn had not obtained the licence, arguing it was acting only as the Australian agent for the investor and that it had been given legal advice to reflect this fact. The court has also heard critical evidence about the performance of Woodlawn Capital in managing the fund, which dropped in value from about $43 million to about $30 million. MVIL's expert witness Robert Risk, a financial assets trader in Australia specialising in derivative trading and financial investment, alleged that in June 2011, Woodlawn's investment strategy exposed MVIL to "substantial risk". Mr Risk alleged it did this by causing the company to have "large negative notional exposure to the falling market, through the purchasing of future contracts, the selling of Index Put Options and equities in predominantlyresource focused companies among other strategies".

The company officer responsible for taking the positions was McNamara, who told the court he had had unjustifiable confidence in the strength of the Australian economy. "If I had the benefit of hindsight at the time I would have taken reverse positions and been hailed as a hero," McNamara said. "In the events which happened my confidence in the strength of the Australian economy and its markets was not justified and I lost my client money. "That unhappy experience comes with the territory". Mr Risk also alleged that Woodlawn's trading strategy was "not one of competent or careful trader" especially in light of the negative economic news at the time. "With volatility spiking it was difficult to argue that the Australian market would not become embroiled in an aggressive selloff," Mr Risk said.

Justice Stevenson agreed with Woodlawn's submissions that Mr Risk's propositions were generic and did not express any strategy that would have been adopted to achieve a neutral performance. He said Mr Risk had agreed that August 8 and 9 were the single-largest loss-making days in the history of world financial and equities markets. The case also revealed how Woodlawn Capital had co-mingled funds when it withdrew $1.5 million rather than $150,000 from MVIL's account and transferred the money to its own account in 2010. On another occasion on August 8, 2011, Woodlawn withdrew $32,135,206 from MVIL's account and paid it into Woodlawn's account with Suncorp Metway. On the same day, $5,000,000 of the money was transferred to another MVIL account. The next day another $5,000,000 was transferred to another MVIL account. The balance remained in the Woodlawn account and was not returned until September 15, 2011. McNamara stated the transfers occurred as a result of banking errors and were promptly corrected by Woodlawn. MVIL has brought claims against Mr McNamara and Mr Breen for "accessorial liability" but Justice Stevenson deferred these until the parties have a chance to consider the reasons in this judgment.

Mr McNamara declined to comment for this article. Mr Giheno, when contacted last week and asked why he received a referral fee, said it was a matter before the courts and he did not have much to say. "I am not a director of Woodlawn nor do I have anything to do with MVIL," he said in an email. "I have never worked for any government body or even once had formal employment with a public company in PNG." He said the only capacity he had acted in was "introducing individuals to potential opportunities in PNG".

"I am given a fee for the introduction but that is it. I do not negotiate or play an active role in any of this". When asked if the fee was about $300,000, he declined to confirm how much he received.