THE insurance company holding the professional indemnity policies for former Centro directors and executives wants the New South Wales Supreme Court to declare who has first rights over any payout.
The Federal Court in Melbourne, which is hearing a multiparty class action brought by thousands of Centro shareholders, yesterday heard that Chartis Insurance wants clarification over the priority of payouts as legal expenses in the case climb ever higher.
More than 50 lawyers and barristers, crowded along four bar tables, have been deployed to the case, and barring a settlement - which at this point looks remote - they may still be there in early June.
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The shareholders are suing Centro and Centro Retail Trust, which has joined the group's former auditors, PricewaterhouseCoopers, as co-defendants. PwC in turn is suing Centro and all the former directors and executives who presided over the group's near-fatal demise in late 2007.
With millions of dollars earmarked for the legal teams, the shareholder plaintiffs want to know where they stand if the insurance proceeds are directed to paying costs incurred by Centro's directors, its former chief executive, Andrew Scott, and former chief financial officer Romano Nenna.
It is not yet clear when Chartis will file an application in the NSW Supreme Court.
In the meantime, the court yesterday sat through several hours of cross-examination of Mr Scott as lawyers for PwC tried to glean more about the nature of Centro's relationships with its banks and the progress of refinancing negotiations from mid-2007.
PwC alleges Centro failed to give its audit partners all relevant information and, specifically, that the property group failed to reveal that in mid-2007 its banks were skittish about extending more credit.
Mr Scott was shown emails, board papers and other documents dating from mid-2007, including a letter from Mr Nenna to a senior manager in JP Morgan's commercial mortgage-backed securities division.
In the letter, Mr Nenna expressed his ''very serious concerns'' about something purportedly relayed to another US-based JP Morgan executive which, according to Mr Nenna, ''very directly and severely talked down/diminished our corporate reputation and good-standing'' with the JP Morgan executive and other US credit providers.
The court heard Mr Nenna was later assured by JP Morgan that there had been no damage to Centro's reputation in the US.
Centro has blamed its auditors for errors in 2006-07 accounts that resulted in some $3.1 billion of debt being wrongly classified.
The full extent of the error was not confirmed until early 2008, but when the group told the market in December 2007 that it was having difficulties refinancing its short-term debt, the share price plunged by more than 70 per cent.
CRF Price at posting:
$1.86 Sentiment: Buy Disclosure: Held
