Dick Smith chairman Rob Murray has endured a grilling in the New South Wales Supreme Court over the company's spectacular collapse on his watch.
Throughout a day of sustained questioning by receivers Ferrier Hodgson, Murray maintained that he was unaware of the factors that led to the electronics retailer's demise until it was too late, and defended the company's strategy of rolling out new stores and taking on more debt.
"There's a lot of wise people after the event," Murray said; "A book's a lot easier to write after the conclusion's been written."
He stood by the board's decision to pay AU$35.5 million ($37 million) in dividends to shareholders in fiscal 2015, before Dick Smith went down in a blaze of overstocked private label batteries and $400 million ($420 million) worth of debt on January 5 this year.
"I didn't have a crystal ball and wasn't aware of the trading challenges the company was about to encounter, so it seemed reasonable," Murray said, adding that he relied upon the sales forecasts provided by chief financial officer Michael Potts and chief executive Nick Abboud, who are due to give evidence this week.
He later learned that what he had thought were brick-and-mortar sales figures, in fact, included online purchases picked up in-store through the retailer's "click-and-collect" offering.
When he joined the board in December 2014, Mr Murray told the court, he was not aware of the company's true position.
"I was initially told the company had no debt," he said. "When I got into the role I quickly became aware that we had an $82 million ($86 million) facility with Westpac."
By the time the company collapsed, its debts would balloon to almost five times that amount as its inventory grew out of proportion to sales.
Murray, who critics have accused of failing to exercise proper oversight of Dick Smith's management team, took a swipe at ex-director Bill Wavish in a email to his former right-hand man Jamie Tomlinson.
Wavish's departure from the board was "a blessing ... in behavioural and leadership terms", although it would "leave a hole in terms of retail knowledge", the email said.
I didn't have a crystal ball and wasn't aware of the trading challenges the company was about to encounter, so it seemed reasonable.
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Asked to explain the context of this remark, Mr Murray told the court Wavish had harboured ambitions of chairing the board, but the other directors opposed this due to his "autocratic" and "intimidating behavioural style".
He said Anchorage Capital Managing Director Phil Cave, who represented the private equity firm on the Dick Smith board until early last year, preferred not to go to meetings chaired by Wavish, the architect of the rebates scheme that Ferrier Hodson blames for the retailer's downfall. The receivers argue that Dick Smith was disguising rebates as profits on its books.
Murray was also asked to explain what he meant when he reassured Tomlinson that while the board faced "classic retail challenges", it had "no horrible skeletons in the cupboard".
The challenges referred to were the reliance upon supplier rebates - incentives provided by suppliers for buying goods from them - which has become standard practice in Australia.
"It's an area where retailers are reliant on the goodwill of their suppliers," Murray told the court.
We believed that there was an opportunity to open more stores and, as long as those stores could trade profitably, then that was a good idea.
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He said he'd sought to "understand the process at board level so we could control it", and that "we relied on the analysis given to us by [accounting firm] Deloitte", which audited Dick Smith's books and found that its accounting practices had improved.
Asked whether, as chairman, he paused to "do a reality check in your own mind about Deloitte's conclusions", Murray replied: "If you look at the thoroughness of their reports, I had no reason not to trust them ... Did I go through every month reconciling? I didn't do that."
'IT DIDN'T SEEM EXCESSIVE'
Of the decision to raise Dick Smith's credit facility to $135 million, he said, "I could see the business was getting bigger and needed a bigger facility."
"We believed that there was an opportunity to open more stores and, as long as those stores could trade profitably, then that was a good idea," Murray said.
He described how a key board meeting took place while he was in the United Kingdom for his father's funeral.
"This was a difficult period for me ... I was involved in parts of the board meeting over the phone," he said.
"In the context of our total inventory of $39.7 million over the year in which we opened 17 Move stores, including a $50 million-a-year store at Sydney Airport, it didn't seem to me that the inventory increase year-on-year was untoward or excessive."
Asked if he knew that management "only attributed $14.1 million [of inventory] to new stores", he replied: "No, I can't recall."
He said a higher inventory around the peak Christmas trading period was to be expected, but unfortunately seasonal sales fell below expectations.
"I accepted management's view that out stock reduction target was realistic," Murray said; "I certainly believed that I should trust their professional competence."