Hamish Fletcher

Business reporter for the NZ Herald

Bridgecorp director wins insurance fight appeal

Gary Urwin (left) and Peter Steigrad (right), two former directors of the failed Bridgecorp finance company. Pictures / Brett Phibbs
Gary Urwin (left) and Peter Steigrad (right), two former directors of the failed Bridgecorp finance company. Pictures / Brett Phibbs

Former Bridgecorp board member Peter Steigrad has succeeded in throwing out a High Court decision blocking him and two others of the failed finance company's directors from accessing an insurance policy worth up to $20 million.

Steigrad was convicted in April of making untrue statements in Bridgecorp's offer documents and in May was ordered to complete nine months of home detention, 200 hours of community work and pay $350,000 in reparations.

Before this trial, in which he found guilty of six Securities Act charges, Steigrad and two other Bridgecorp directors went to the High Court in a dispute over access to a directors and officers insurance policy that has a limit of $20 million.

The policy, taken out with QBE Insurance, indemnifies the men against liability they might incur as a result of their actions as directors. It also provides cover for costs they might incur in defending proceedings that seeks to establish this liability.

The High Court stoush over the insurance involved the receivers of the collapsed Bridgecorp companies claiming they had a "charge" over the money payable in the policy for the amount they intended to claim from the directors in civil proceedings.

After hearing the case, the High Court's Justice Graham Lang ruled last year the charge applied to the money, which then prevented Steigrad and fellow directors Bruce Davidson and Gary Urwin from having access to the insurance money.

The receivers have since filed a civil claim against Steigrad, Davidson and Urwin for $442 million, for an alleged "breach of duty".

Steigrad then went on to appeal the insurance decision in September, which was allowed today by Justices Mark O'Regan, Terence Arnold and Rhys Harrison.

"The declaration made by the High Court is quashed," the Court of Appeal Justices said this morning.

While this decision plays in the Bridgecorp director's favour, it doesn't necessarily mean the trio have access to the insurance policy.

Davidson's lawyer, Colin Carruthers QC, said this morning there was "still an issue" between the directors and QBE.

The Court of Appeal decision also dealt with an insurance issue involving former Feltex directors, Tim Saunders, Sam Magill, John Feeney, Peter Thomas, Craig Horrocks and Peter Hunter.

Carpet-maker Feltex floated in 2004 and raised about $250 million in public share subscriptions. The firm then collapsed in 2006 and a group of 3100 shareholders are trying to claim $150 million in damages from the firm's former directors.

The investor group is represented by Feltex shareholder Eric Houghton and alleges a prospectus issued by the carpet company included untrue statements.

Following Justice Lang's decision in the Bridgecorp case, Houghton issued Feltex's insurer, Chartis Insurance, a notice of charge over the proceeds of a prospectus liability policy which the company had taken out.

Chartis and the Feltex directors then went to the courts, wanting a declaration that the charge did not prevent the insurer from paying the directors' defence costs under the policy.

Houghton claimed the charge prevented the directors from accessing the insurance money from the policy to meet the defence costs of the shareholders' proceedings.

This case was heard at the same time as the Steigrad appeal.

Justices Mark O'Regan, Terence Arnold and Rhys Harrison said today that Houghton was not entitled to the charge over the insurance money.

- NZ Herald

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