The insured created a special purpose vehicle (SPV) to house a controlling interest in a listed mining company (target). The multi-million-dollar purchase price for the shareholding was agreed. At the time of the purchase, the directors verbally agreed in principle with a third party for the financing of the acquisition.
The third party failed to follow through with its agreement to provide financing and the purchase did not proceed. The SPV was wound up and a liquidator was appointed.
The liquidator initially conducted public examinations of the directors and company secretary of the SPV and then consequently commenced proceedings against the directors and company secretary of the SPV alleging they had traded whilst insolvent and failed to act with the requisite degree of care and diligence.
The quantum of the claim was almost AU$30 million plus interest and costs, however the claim was settled by the insurer for a significantly smaller sum. Approximately $500 thousand in defence costs were incurred in dealing with the public examinations, and in defending the claim against the directors and company secretary of the insured and SPV.