Two More Roped Into Hih Court Tangle With $500m At Its Centre
The Age
Friday February 22, 2008
TWO former non-executive directors of FAI Insurance have been drawn into the $500 million damages suit over HIH's purchase of their company due to be heard in the NSW Supreme Court next year.
Ted Harris and Geoff Hill, who sat on the audit committee of the FAI board, were named at a directions hearing yesterday as "newly joined" defendants to a cross-claim. The pair have foreshadowed lodging their own cross-claims, adding to what is shaping as one of Sydney's most complex commercial trials. Justice Patricia Bergin was told yesterday that the plaintiff, HIH liquidator Tony McGrath, could call 150 witnesses, not counting experts. Mr McGrath's barrister, Alan Sullivan, QC, asked the judge to consider appointing independent expert witnesses but said the "daunting expert task of proving (FAI) worthless" could take a year. "We have found, to our cost and pain, there are very, very limited pools of expertise in this country or around the world on some of these issues and many of those experts have already been taken out of play, so to speak, in these proceedings," Mr Sullivan said. Mr McGrath wants to recover the $295 million HIH spent buying FAI in 1998, plus interest, on the basis that its true financial position was concealed. The nine defendants to the main case are three former FAI executives (Rodney Adler, Timothy Mainprize and Daniel Wilkie), a reinsurance company and its subsidiary (from the General Reinsurance group), a reinsurance broking firm (Guy Carpenter & Co) and an investment bank and two former executives of Goldman Sachs Australia, its former chairman, Malcolm Turnbull, and former vice-president, Russell Pillemer. Most of the defendants have lodged 14 cross-claims against each other, so that if any is found liable for damages the others might be ordered to contribute. Outside groups that will be targeted to share any damages awarded are FAI's auditor (the now-defunct firm Arthur Andersen), another reinsurer (National Indemnity), and the two non-executive FAI directors. The lawyer for Mr Harris and Mr Hill, DLA Phillips Fox partner Kerry Hogan-Ross, described the claim against them as "extremely weak". "For good reason, the HIH liquidator hasn't claimed against them, nor has any party other than Guy Carpenter," Ms Hogan-Ross said. Her clients intended to cross-claim against Guy Carpenter and other defendants, and "against Arthur Andersen, the auditors upon whom they relied". The former partners of Andersen have lodged their own suit, trying to recover compensation they agreed to pay Mr McGrath in an out-of-court settlement over the FAI audit.
© 2008 The Age
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