Redactathon declared as Hastie gets heated

PPB has some battles to fight before it tackles Deloitte's audit division over the Hastie Group.
Hastie Group liquidator Craig Crosbie.

Hastie Group liquidator Craig Crosbie.

One measure of a litigation’s intensity is the effort each side expends seeing what the other side’s got. Hastie Group might’ve been in the refrigeration business before its 2012 collapse but in regards to the jockeying that precedes a hearing, Hastie’s hotting up.

In recent weeks three judgments have emerged from the Supreme Court of NSW detailing the argy bargy between Hastie’s liquidators PPB and the partners of Deloitte’s audit division, whom PPB is targeting for a professional negligence claim on the basis of audits Deloitte prepared for Hastie in 2008 and 2009.

On June 3 the liquidators served the relevant Deloitte partners with statements of claim. This was the last day they could be served according to ex-parte orders previously obtained allowing the liquidators more time to serve the claims.

Apparently the liquidators needed the extensions because they were having trouble securing litigation funding, which might not be so surprising when the defendant is as ubiquitous a service provider as Deloitte.

The applications for more time were supported with affidavits from PPB partner Craig Crosbie. On June 28, Deloitte filed notices of motion to set the extension orders aside. Shortly afterwards it served the liquidators with notices to produce documents associated with the applications to extend.

The liquidators argued that much of the material at issue contained details of strategy and tactics as well information about their attempts to secure litigation funding, and as such was subject to legal professional privilege.

On September 9 the parties slugged it out before Justice Robert McDougall. On September 14, he produced an on occasion irascible judgment in which he ruled that the documents should be produced. “In my view, privilege has not been established, although the possibility that there may be skerricks of privileged material within the documents cannot be entirely discarded,” Justice McDougall said.

To deal with the possibility of some material eligible for privilege being present, he made an order allowing the liquidators to “redact incidental parts of those documents in the manner that I have described”.

Inviting the liquidators to redact didn’t suit Deloitte. On September 20 it sought an order requiring PPB to deliver all documents covered by Justice McDougall’s order unredacted. Deloitte argued that the liquidators hadn’t justified their entitlement to redact. And all the while SiN had thought redaction was a fundamental human right.

This application was heard by Justice Jim Stevenson. On September 23 he published reasons. He found that on what had been put to him by the liquidators’ solicitors, a prima facie case for privilege had been established. A suggestion from the liquidators’ counsel that the judge inspect the redacted documents himself was accepted.

Subsequently on September 30 Justice Stevenson produced a second judgment declaring what was and what was not redactable.

There are communications between PPB manager Carl Hoerner and Henry Davis York’s Leonard McCarthy which the judge confirmed should stay redacted. There is a draft memorandum between PPB, HDY and Hong Kong-based Cosimo Borrelli of Borrelli Walsh. Whilst Borrelli Walsh is an insolvency firm, its co-founder also operates a substantial litigation fund and the judge ordered that parts of the memorandum be revealed.

Sections of a letter from lawfirm Maurice Blackburn to Crosbie were also redacted. The lawfirm was representing litigation funder Claims Funding Australia, whose shareholders are Maurice Blackburn chief executive Greg Tucker and the firm’s industrial law specialist Josh Bornstein. The judge declared the redactions unnecessary.

The same went for the redactions concealing portions of the time sheets for the liquidators and their staff. Unredact ’em the judge ordered.

Deloitte came out of it with most of what it wanted. The only document the liquidators seem particularly concerned about is the report of audit expert Chris Westworth of Westworth Kemp. Last Friday Justice Stevenson ordered that no privilege applied and that it be produced.

The liquidators appealed and are seeking an expedited appeal hearing because on November 10 and 11 Deloitte’s application to set aside the ex-parte extension orders is due to be heard.

It would be ironic indeed if monies supplied to PPB by Claims Funding Australia was spent pursuing the appeal and defending the extension orders, instead of the liquidators’ proposed claims against Deloitte. PPB declined to comment when contacted.

About the Author

Peter Gosnell
Sydney Insolvency News illuminates the practice of insolvency in Australia's largest city, highlighting the triumphs and failures of Sydney's registered practitioners and the accounting and legal professionals who work with them. SiN 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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