Collapse has changed the legal landscape

IT HAS been a long wait for Justice Robert Austin's judgment on Jodee Rich and Mark Silbermann, but its delivery yesterday does not mark the end of One.Tel's large contribution to Australian legal history.

The telephone company's 2001 collapse has sparked two changes to federal law, two judgments in the High Court, six in the NSW Court of Appeal, one in the Family Court and 83 in the NSW Supreme Court.

These cases have traversed the duties of company directors, the privileges of defendants pursued by regulators, the rights of insurers to avoid policies and the interaction of family law and insolvency law.

In 2004, Federal Parliament amen-ded the Family Law Act after Justice Stephen O'Ryan found it appeared that a binding financial agreement between Jodee Rich and Maxine Rich had been signed "to defeat the interests of third parties" rather than due to concern about the financial future of the wife and children in the event of marriage breakdown.

Three years later, the Corporations Act was changed after Mr Rich and Mr Silbermann won a High Court case about a defendant's entitlement to claim privilege during legal proceedings against exposure to a ban on company directorship.

Still to be determined are the fate of a mooted $230 million damages case against One.Tel's biggest financial backers, Publishing & Broadcasting Ltd and News Ltd, and an attempt by One.Tel's liquidator to call on a directors and officers insurance policy written by CGU Insurance and HDI Gerling Insurance.

The potential damages suit against News and PBL (now Consolidated Media Holdings) is under the control of One.Tel's special purpose liquidator, Paul Weston. On Monday the NSW Supreme Court gave Mr Weston an extension until next May to decide whether to proceed.

In previous hearings, Mr Weston's lawyers have suggested he will argue that at One.Tel's final board meeting in May 2001, the decision to call in administrators should have been made before a decision to abandon a $132 million rights issue, which News and PBL had agreed to underwrite.

Mr Weston would argue that the administrators could have continued with the rights issue by calling on the underwriters, his lawyers said. At best, the proceeds could then have been used to negotiate with creditors to allow One.Tel to keep trading. At worst, they could have been distributed to creditors as dividends in the winding-up.

Lawyers for PBL and News have indicated the rights issue could never have proceeded because by May 29 it had become apparent that One.Tel needed more than $132 million to remain solvent.

CGU has maintained since One.Tel collapsed that it has no liability because the policy it wrote "ceased to exist because of serious and significant issues of non-disclosure, and therefore there was never a valid policy in place to meet any claim against the company directors".

The insurance dispute has already been to the High Court once, and on October 30 CGU filed for special leave to appeal on a new aspect relating to insurance cover for the former chairman, John Greaves.