Cooper & Lines auditors involved in the 1991 reorganisation of Bermuda Fire & Marine Co. Ltd. were yesterday likened to "mechanics'' who worked on instructions and therefore cannot be held responsible for the 1993 collapse of the company, a court heard yesterday.

Ian Croxford, lawyer for Cooper & Lines, said yesterday the firm was involved in Bermuda Fire's 1991 reorganisation only to the extent as auditors who prepared financial statements on instructions.

Bermuda Fire liquidator Ernst & Young alleges the reorganisation led to profitable assets being stripped from the company and was a fraud on creditors. Cooper & Lines is being sued for negligence in the Supreme Court case.

Mr. Croxford claims the firm was not hired by Bermuda Fire to give business advice, did not underestimate the company's potential liabilities and so were not negligent in their duties.

Supreme Court Puisne Judge Vincent Meerabux questioned if the firm had more of a role since its accountants David Lines and Tom Miller were "involved in the design of the structure'' of the reorganisation.

Mr. Croxford denied the suggestion, arguing instead that the concept of separating the domestic business into BF&M was a decision made by the board of directors' finance committee.

Cooper and Lines and law firm Conyers Dill & Pearman had initially proposed a group of sister companies which separated various parts of the business under a holding company.

However the finance committee, whose five members are being sued as well, instructed the two firms to look into the creation of a completely separate company to hold the profitable businesses. The auditors were acting as "mechanics'' he said.

"The professionals had to go away and work out the nuts and bolts of the strategic decisions that had been taken by the finance committee,'' Mr.

Croxford said.

Mr. Justice Meerabux asked whether the firm acted as a sort of "technician'' in the setting up of the reorganisation. Mr. Croxford agreed and claimed the firm would have "washed its hands'' of the reorganisation if it had suspected any attempt to defraud creditors.

"They didn't suspect there was anything improper in what they were being asked to do or in what the directors were seeking and intending to do,'' Mr.

Croxford said. "The simple reason for that is that there was nothing improper. There was certainly nothing that appeared to be improper to any of these people involved, be they the professionals, the individual directors, management or any of the other ladies and gentlemen who formed the greater makeup of the board, the other directors. What happened to be going on here was a perfectly sensible and appropriate rearrangement of the scheme of things at BFMIC (Bermuda Fire) in order better to face the challenges of the future.'' The concept of restructuring can be traced back to a March 27, 1988 meeting of the finance committee and four senior staff members. In the meeting Bermuda Fire chairman Charles Collis suggested that there was a need to segregate the international business and other parts of the company. Mr. Croxford noted that Cooper & Lines, the company's auditor, was not present at the meeting.

It wasn't until 1990 that the finance committee proposed asking Cooper & Lines to prepare a report on the liabilities being incurred by the international business, and actuarial firm Tillinghast's estimates of those liabilities.

Another issue was the bad debt caused by the failure of the company's reinsurers to pay claims.

Cooper & Lines subsequently produced a report presented to the board of directors on May 7. At the meeting the potential restructuring was not discussed Mr. Croxford said.

Cooper & Lines was later asked to produce a proposal on a potential reorganisation of the company. By August Tom Miller, who will appear as a witness for Cooper & Lines, produced a memorandum which referred to the "necessity of going all the way'' in the reorganisation of Bermuda Fire through the creation of a holding company.

BUSINESS BUC