Hastie: further liposuction on audit claims

Hastie liquidators' claims on audit firm losing fatCourts stripping the fat from audit claims
Hastie Group liquidator Craig Crosbie after Deloitte audit division

PPB’s Craig Crosbie: Hastie audit proceedings still on foot.

PPB Advisory’s Craig Crosbie and his fellow Hastie Group liquidators seem to be fighting a losing battle in their bid to generate recoveries for the creditors of the failed construction firm, and by creditors SiN means Hastie’s banks, they being the only parties with a hope of winning a decent drink from litigation that over the last five years has come to resemble trench warfare.

Crosbie is lead appointee on the Hastie liquidation and in less than a year the courts have pared the scope of his claims against Deloitte, which performed the Hastie Group’s audits, back to the bone.

Delays, errors, amendment applications and a substantial period without funding have combined to make the liquidators and their lawyers’ efforts to prosecute the claims appear almost inept and this week a hefty judgment was dropped by NSW Supreme Court justice Julie Ward.

Dismissing the claims against Deloitte for the 2010 financial year audit, the judge ordered that any amendments the liquidators want to make in regards to Deloitte’s 2011 audit be served no later than October 3, 2017 and her reduction of the scope of Crosbie’s claims follows on from the decision of  NSW Supreme Court justice Michael Ball, who in December 2016 dismissed the so-called 2014 and 2015 proceedings the liquidators had on foot.

In Hastie Group Ltd (in liq) v Bourne; Hastie Group Ltd (in liq) v Moore [2017] NSWSC 709 (6 June 2017) Justice Ward recounted the nature of the claims the Hastie Group entities under Cosbie’s control have against the former auditors.

“In oral submissions (but not in terms in the pleadings) the complaint is that Deloitte failed to report the “endemic” failure of the Hastie Group entities to obtain approval for variation works as required under the terms of the particular construction contracts (which differed from project to project).

“The claim against the auditors is broadly that they should have ascertained the inadequacy in the Hastie Group’s internal controls, should have notified this to the Hastie Board, and should have concluded that the relevant accounts did not demonstrate the true and fair position of the Hastie Group companies,” the judge said.

In resisting the liquidators’ applications for leave to amend, Deloitte stuck to the detail, arguing that it didn’t know from the relevant proposed amended commercial list statement, what case it was that it had to meet or, as the judge put it, “what precisely they did or did not do which is alleged to have been a breach of duty and the causal nexus between that breach and the loss claimed. Understandably, they contend that they should not have to speculate,” the judge said.

The further this goes on the more you have to wonder why Cosbie and his co-appointees – PPB chairman Ian Carson and Ian McEvoy – are bothering. The only creditors in line for any potential dividend are the banks, which have refused to fund the litigation. That gig was picked up by the Maurice Blackburn-backed Claims Funding Australia (CFA).

Further reading:

PPB Cops Pasting For Lack Of Haste

PPB Granted Leave In Hastie Privilege Skirmish

About the Author

Peter Gosnell
Insolvency News Online illuminates the practice of insolvency Australia-wide, highlighting the triumphs and travails of the nation’s registered practitioners and the accounting and legal professionals who work with them. INO is produced by Peter Gosnell, former business editor and senior business reporter at The Daily Telegraph newspaper. During a decade-long career, your correspondent reported on such notable corporate collapses as HIH, One.Tel, Westpoint and Fincorp as well as some of the nation's highest profile bankruptcies and the investigations and prosecutions arising from Australia's most notorious instances of white-collar crime.

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