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“raised the bar” on director’s duties, according to Boardman. “Centro arguably raised the bar on directors’ duties and emphasised the requirement for all directors to apply an independent enquiring mind and not blindly rely on executives or external auditors when armed with contrary knowledge, at least not without asking relevant questions and being provided with appropriate answers,” he says. This was soon followed by Chubb Insurance Company of Australia Limited v Moore (Chubb v Moore), whereby a group of insurers who provided D&O policies to Great Southern directors were put on notice by the investors that the investors had asserted a charge over the relevant policies. Sparke Helmore Lawyers senior partner John Coorey says the D&O insurers were concerned that if they had advanced defence costs to the Great Southern directors pursuant to the policies, they may have been at risk if they had no legal basis to do so. The insurers, led by Chubb, subsequently sought clarification of their position from the Supreme Court of NSW, though the matter was referred directly to the Court of Appeal given its importance. “The key issue for determination by the NSW Court of Appeal was whether the statutory charge contained in Section 6 [of the Law Reform (Miscellaneous Provisions) Act 1946] prevented D&O insurers from advancing defence costs to the insured directors and executives,” says Coorey. “A second, highly important issue was the extraterritorial effect of Section 6. The provisions of Section 6 are unique to NSW, with comparable legislation in the Northern Territory and the ACT.”
July 2013: The full bench of the NSW Court of Appeal hands down its decision in Chubb Insurance Company of Australia Limited v Moore [2013] NSWCA 212. The case arose in the context of two class actions in response to the collapse of Great Southern Ltd and its subsidiaries (the Great Southern Group). The Great Southern Group collapsed in 2009 and triggered class actions by investors seeking damages against various former directors and executives.
“This is something clients are very concerned about ... they can end up paying defence costs and find out later they have to pay again” Shayne Thompson, Moray & Agnew The Court of Appeal found that the Great Southern investors could not bring claims under Section 6 because the proceedings were not being conducted by courts in the state of NSW, where legislation was based. The Court of Appeal confirmed that Section 6 had no extraterritorial operation and that it was only capable of creating a charge over insurance moneys in respect of claims brought in a court in that state. However, that decision can be overturned if the High Court allows the plaintiff to appeal and the appeal succeeds. The case is subject to a hearing in June, according to Moray & Agnew partner Shayne Thompson, who adds that the issue is something his clients are keeping a close watch on. “This is something clients are very concerned about. If the New Zealand position is followed [in Australia], they can end up paying defence costs and find out later they have to pay again, so they are very concerned about having some kind of certainty,” says Thompson.
October 2013: The Victorian Court of Appeal hands down its decision on a class action case involving failed agribusiness managed investment schemes group Timbercorp. In dismissing the investors’ appeal, the Court of Appeal held that Timbercorp directors did not have actual knowledge of a significant risk to viability until bank support wavered, even after publication of the last PDS and after the collapse of Lehman Brothers in late 2008, which was swiftly followed by the sudden termination of negotiations Timbercorp had been engaged in for the sale and leaseback of certain of its properties and forestry assets.
December 2013: Liquidators of Lehman Brothers Australia (now in liquidation) agree to settle the IMF-funded claims, conditional on court approvals. The settlement puts 69 councils, church groups and charities a significant step closer to having their claims for roughly $180m in damages lost on investments in collateralised debt obligations sold by Lehman’s Australian subsidiary up to 2007 resolved.
December 2013: The Supreme Court of New Zealand (by a split 3:2 majority) overturns a Court of Appeal decision involving failed finance company Bridgecorp. The Court held that defence costs should not erode the limit of cover available to a successful third-party claimant, on the basis that wording of the legislation does cause a charge to arise at the time the event giving rise to the liability occurs, and thereby secures the amount of any liability to the third-party channel.
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