Top business leaders face probe over Ansett duties

By DANIEL RIORDAN

Some of Australasia's biggest business names, including ANZ chairman Charles Goode, ASB Bank's managing director Ralph Norris and prominent director Liz Coutts, are among the 13 Ansett Holdings directors under investigation by the Australian Securities and Investments Commission.

The investigation will focus on possible breaches of directors' duties under Australia's Corporations Act, ASIC chairman David Knott said yesterday.

"These will include investigating compliance with the insolvent trading provisions of the act, and the potential liability of Ansett's holding company, Air New Zealand, under those provisions."

Singapore Airlines chief executive CK Cheong and Brierley Investments chief executive Greg Terry, who this week committed their companies to support for Air NZ, are also facing the ASIC investigation.

The ASIC has also written to the New Zealand Securities Commission requesting that it conduct inquiries into the adequacy of financial disclosures made by Air NZ - disclosure obligations which fall outside ASIC's jurisdiction.

A key question is whether Ansett was operating while insolvent - an issue similar to that addressed on this side of the Tasman by the liquidators of Tasman Pacific (alias Qantas NZ).

Ansett's administrator, PricewaterhouseCoopers, had told Mr Knott it had yet to form a view about whether Ansett had been trading while insolvent. However Peter Hedge, of PWC, is insistent the company can be salvaged despite being grounded.

Phillips Fox partner Michael Bos said the general principles under Australian corporate law were similar to those in New Zealand, and directors found liable could face financial penalties.

The grey area is where a company might have liabilities greater than its assets, but directors continue trading, hoping they can clinch deals with creditors or investors that would postpone payment of their debts.

But directors' hopes that the company might trade its way out of difficulties have to be "reasonable," said Mr Bos.

The difficulty for directors would have been assessing on a day-by-day basis the company's prospects, as its major shareholders haggled over how much money they would pump in and negotiations with the New Zealand and Australian Governments continued.

Ansett had been losing $1.6 million a day, but so long as there was a chance of a rescue plan for the Air NZ group that might also have involved its subsidiary, directors would presumably argue they were justified in keeping the airline flying.

Air NZ acting chairman Dr Jim Farmer, QC, has denied Ansett was trading while insolvent.

Air NZ chief executive Gary Toomey stepped down from Ansett Holdings' board, and other directorships in the Ansett group, on August 24.

Australian media have speculated that the resignations were related to Ansett's pending collapse. However, Air NZ company secretary John Blair said the resignations were for "purely administrative reasons."

The NZ Institute of Directors said in a statement that one of the main issues was whether the directors had a clear understanding of Ansett's financial position both before and after acquisition.

"Commercial best practice and common sense dictate that rigorous due diligence be undertaken to establish the feasibility of the acquisition and the appropriate price to pay.

"Should a bidding war ensue, due diligence should set a ceiling beyond which the acquisition no longer becomes commercially viable.

"It is disturbing to note that the chairman and chief executive of Air NZ reportedly had no clear picture of the financial position of Ansett Australia when presumably they conducted due diligence before the initial acquisition of 50 per cent of the company.

"Furthermore, since acquisition they have had substantial board representation and there appears to have been little progress in identifying and remedying the problem of lack of profitability."

DIRECTORS IN THE GUN

Dr Jim Farmer - Air NZ acting chairman.

Sir Selwyn Cushing - Air NZ former chairman.

Philip Burdon - professional director (NZ).

Sir Ron Carter - chair Beca Carter.

Liz Coutts - professional director (NZ).

Ralph Norris - ASB Bank managing director.

Bill Wilson - Queen's Counsel.

CK Cheong - chief executive Singapore Airlines.

John Curtis - chair Allianz Australia.

Charles Goode - chair ANZ Bank.

Michael Tan - executive vice-president Singapore Airlines.

Greg Terry - CEO Brierley Investments.

John Rose - professional director (Aust).*

* CORRECTION: In the original version of this report, Sean Wareing was wrongly named as one of 13 Ansett Holdings (and Air New Zealand) directors under investigation by the Australian Securities and Investments Commission and the NZ Securities Commission. Mr Wareing resigned his directorship last November and was replaced by fellow Australian John Rose.

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