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A hearing next year is to decide whether CGU Insurance, which provided
directors and officers indemnity cover to former OneTel directors Jodee Rich,
Mark Silbermann and John Greaves, is entitled to refuse to pay their claims.
The three former directors face millions in costs arising from marathon
legal actions spawned by last year's collapse of the former telco.
They are being sued by the Australian Securities and Investments Commission
as well as by OneTel's liquidators.
Yesterday in the NSW Supreme Court Justice Peter McClellan ordered that
separate determination of a number of questions relating to the insurance cover
would help sort out the matter.
The questions relate to whether, on the construction of the policy and in the
absence of an existing judgement, order or final adjudication adverse to the
directors, CGU can rely on policy exclusions to refuse to pay and whether the
company is entitled to seek a judgement, order or other final adjudication
adverse to a director or officer and thus avoid liability.
The clause being tested excludes CGU from liability for claims under certain
circumstances. The three former directors have brought proceedings against the
insurer claiming indemnity for the costs of their defence against ASIC
allegations.
CGU says the policy does not provide an indemnity against any claim if fraud
or dishonesty is proven or if directors or officers have improperly benefited
from securities transactions as a result of information not available to other
sellers or purchasers of the securities.
CGU claims information was withheld from the board of OneTel in circumstances
which involved dishonesty and fraud.
It is also alleging that false information was provided to the board and
pleading various breaches of statutory provisions.
CGU opposed an order for the separate trial of the questions. The directors
accept that the questions which they seek to have separately determined should
be decided on the assumption that the matters pleaded against each of them are
true that is, that there was dishonesty and fraud. This is a major concession
by the directors.
Justice McClellan said in his opinion the directors' submissions should be
accepted.
Correction on 22 Nov 2002
A report in Wednesday's business section stated that One.Tel directors Jodee Rich, Mark Silbermann and John Greaves were being sued by the Australian Securities and Investments Commission and One.Tel's liquidator. They are not facing action from the liquidator. The report also stated the three made a major concession in court over their legal dispute with CGU Insurance. This is not the case.
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