Strategic Finance receiver PwC fails in bid against auditor
Strategic Finance receiver PwC has failed to get a settlement from the lender's auditor, BDO Spicers, and the dispute will hit the courts if last-ditch mediation in May is unsuccessful.
Separate settlements involving Strategic Finance's directors are likely to be affected if the lawsuit against BDO goes ahead.
PwC sued BDO Spicers last year. In its latest update to Strategic Finance investors it said it was still trying to resolve the issue through mediation.
"We have filed and served proceedings against BDO Spicers in relation to the audit of Strategic Finance's 2007 financial statements," receiver John Fisk said.
"These proceedings are now continuing and BDO Spicers' statement of defence is due to be filed in May 2014.
"In conjunction with the court proceedings, we are also in a mediation process with BDO Spicers. The final mediation is scheduled to take place in the first week of May and will be mediated by a former High Court Judge."
Late last year Strategic's trustee, Foundation Corporate Trust, wrote to investors expressing optimism that "a satisfactory outcome will be achieved for investors" in the first quarter of this year.
Strategic investor John Lacey said he was not surprised no settlement was reached and questioned the further delay in legal action against directors.
"They're all full of p... and wind," he said.
In the latest report, Fisk said the purpose of the mediation was to attempt to bring the claims against BDO Spicers to a speedier resolution than would be achieved under a court process.
"If the mediation process is not successful, then we would have not lost any time, because the court process is continuing as well."
However, he said settlement negotiations have a finite time frame and "the available window for completing all settlement discussions is closing".
Fisk said PwC's settlement discussions with the directors of Strategic Finance were effectively complete, subject to the resolution of "certain outstanding matters", understood to include the proceeding against BDO.
The FMA's settlement talks with the directors are at the same point.
Fisk said the directors of Strategic Finance did not have directors' or officers' insurance, meaning that any settlement would have to be paid from the directors' assets.
He again forecast a return to secured debenture holders of 12-20 per cent of the $367.8 million owing when Strategic Finance was placed into receivership in March 2010. Investors have received 10 cents in the dollar since Strategic defaulted on its debts in 2008.
- Fairfax Media