| Cause of Action: | Geneva Finance Ltd (Receiver & Manager Appointed) carried on business in Perth in the late 1980's as a general financier. Geneva issued debenture stock under the terms of a trust deed pursuant to which Perpetual Trustees WA Ltd was the Trustee. The trust deed provided for borrowing limitations that, in effect, prohibited Geneva from raising funds by issuing debenture stock to the public if certain borrowing limitations were breached.
As a result of numerous bad loans, Geneva was placed into receiveship by Perpetual Trustees in July 1990 at which time about 2,500 debenture holders were owed approximately $34m. The action is by Geneva against the former partners of the chartered accounting firm Horwath & Horwath who were Geneva's auditors at all relevant times.
The claim is made in respect of 6 audits conducted by Horwath & Horwath as well as in relation to the preparation and verification of various financial reports pursuant to certain provisions of the trust deed.
In particular the claim relates to the way Horwath & Horwath reported on, and failed to conclude that the provision for bad and doubtful debts in Geneva's financial statements ws materially understated. It also concerns their failure to report on how Geneva did not have in place and maintain a satisfactory system of internal controls, as a result of which it followed poor lending practices. Geneva is claiming damages for the losses it sustained by making a number of significant un-recovered loans after the date of the various breaches of duty by the auditors. The damages claim is for breach of the audit contract, negligence, breach of the Companies Code (WA) and breach of the Fair Trading Act (WA) and runs in to many millions of dollars. |
