Fuming? Well perhaps not quite. Disappointed? Definitely. The three FTI Consulting partners acting as liquidators of civil construction firm Akron Roads came very close to cracking open CGU recently, though ultimately a court found the insurer not liable to indemnify the company’s former business advisers.
The decision – handed down on November 11 in the Supreme Court of Victoria – means FTI’s Ross Blakeley, Michael Ryan and Quentin Olde are denied the opportunity to wrest at least $5 million from CGU, which had provided professional indemnity cover for Akron’s business adviser Crewe Sharp, which is also in liquidation.
Further it may well lead to an adverse costs order and given the legal firepower deployed by both sides, costs could be assumed to reside in the eye-watering category. At least the FTI three are fully funded and have the backing of Akron’s committee of inspection, such that an appeal may very well be on the cards, as Blakeley hinted in a reply to SiN’s queries.
“No order has been made as to costs at this stage,” Blakeley said. “This was a complex matter for a large claim. It is noted that the Judge did find that the policy prima facie responded to the trading whilst insolvent claim as alleged by the Liquidators and originally denied by CGU.
“However CGU’s liability was reduced to zero on other grounds. As the Liquidators were successful on the primary point of CGU’s liability under the policy, the Liquidators are considering appealing the decision,” he said.
In essence, the FTI trio effectively attempted to put themselves in the position of Crewe Sharp director Trevor Crewe in terms of his rights to claim against his professional indemnity insurance policy after entering into a deed of settlement with Crewe in March this year.
The FTI trio have been chasing almost $15 million for Akron’s creditors and this case has been to the High Court and back since proceedings were started against CGU in August 20, 2014.
As one would expect, CGU has put up fierce resistance and Victorian Supreme Court reserve judge Ross Robson has dismissed the liquidators’ application for declarations against CGU and dismissed their claim against Crewe Sharp as an alleged director of Akron.
That dismissal however is based on a technicality, one involving an insufficiently detailed declaration of the types of services Crew Sharp provided to clients when it made its policy application. Without that, the court’s finding that the policy was liable to respond to the insolvent trading might’ve seen CGU replace its litigators with mediators.
An appeal has to be an option but it would come as no surprise if costs also become a source of strife. Both parties legal expenses will be colossal.
The liquidators engaged Philip Crutchfield QC and Dr Oren Bigos. CGU brought David J O’Callaghan QC and director’s duties specialist Renee Enbom to the fight.
SiN has asked Blakeley about what has been determined in relation to each party’s costs and will update if there’s a response.