Defence takes floor in Bermuda Fire suit
Gabriel Moss, lawyer for Bermuda Fire Insurance Co. liquidators, is expected to wind up his opening argument today in the lawsuit against the company's former directors, auditors and legal advisor.
Now it's the defendants turn as they attempt to chop down his hair raising allegations of negligence made against five of Bermuda's top businessmen, Cooper & Lines, and legal firm Conyers Dill & Pearman before Puisne Judge Vincent Meerabux.
Elizabeth Gloster, lawyer for BF&M Ltd. and a group representing about 800 shareholders, is expected to lead off with her opening presentation to counter Mr. Moss' charges.
Robin Potts, representing the five former directors, will take the floor next.
He is representing William Cox, Donald Lines, Gregory Haycock, Michael Collier and Charles Collis -- now deceased. The liquidators are claiming damages against Mr. Collis' estate. Mr. Collis was also chairman of the board.
Conyers Dill & Pearman lawyer Geoffrey Vos will be up next followed by Coopers & Lines lawyer Ian Croxford. Cooper & Lines was the predecessor to partnership PricewaterhouseCoopers.
The defendants are expected to take anywhere from a couple days to a week each in making their individual presentations.
On Friday Mr. Moss continued with his theme of hammering home the allegation that the defendants knew -- or suspected -- Bermuda Fire was insolvent or about to become insolvent in the months leading up the September 1991 creation of BF&M.
By the end of 1990, Bermuda Fire & Marine Insurance Co.'s directors were in a race against time to save the local domestic business from collapsing under the weight of the millions of dollars in claims hitting the international division, he told the court.
Due to the pending insolvency of the company's underwriting management agency in London reinsurers had stopped paying Bermuda Fire's claims.
Mr. Moss alleged the five directors on the finance committee were attempting to conceal the company's problems until they could extricate it from the international mess.
"One of the badges of fraud is the concealment that runs through the story,'' he said.
During early 1991 the effort to separate profitable domestic assets from Bermuda Fire became more urgent as written documents between the defendants show, Mr. Moss claimed.
Charles Collis -- who died last year -- wrote in one letter that the directors were "working flat out'' to complete the reorganisation of the company.
"The taps had been turned off,'' Mr. Moss said. "The the reinsurance recoverables were not coming in. The demands for claims were coming in.'' Defence phase opens in trial of BF&M five In a May 20, 1991 letter to Glenn Titterton, Conyers Dill & Pearman lawyer John Collis, Mr. Collis' son, wrote about his concerns over the reorganisation.
He added that it was "difficult to make the distinction between the domestic and international policyholders'' in attempting to complete a proposed scheme of arrangement in separating the domestic business from the international business, according to Mr. Moss.
He also noted that the international policyholders "could have substantial objections'' to any reorganisation which removed the profitable domestic assets from Bermuda Fire.
The liquidators are claiming that the defendants were party to a "fraudulent transaction'' in 1991 which saw the profitable domestic assets stripped out of Bermuda Fire, leaving the company insolvent.
Bermuda Fire was split in two in 1991 with newly created company BF&M Ltd.
holding the profitable domestic business. The deal was done in such a way that BF&M paid Bermuda Fire through a share issue and $10 million in borrowed cash for the domestic business.
Bermuda Fire shareholders then received a special share dividend in BF&M.
Bermuda Fire went into liquidation in 1993 owing about $450 million to international creditors.
The liquidators claim the 1991 split was an illegal transaction because the defendants knew or suspected Bermuda Fire was insolvent.
Bermuda Fire's 1991 five former directors, Cooper & Lines, and Conyers Dill & Pearman have denied the liquidators' claims. The defendants have said they acted in the best interests of the shareholders and policyholders, who include the creditors.
The civil case continues today.
Lawyer Elizabeth Gloster will lead off the defence for BF&M and a group of shareholders