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April 26th, 2011

Centro case tests duty of directors

Hervey Bay has a Centro shopping centre

Leonie Wood
April 26, 2011

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IT IS, perhaps, the most elementary aspect of financial analysis. Faced with a company balance sheet, the line item examined before all others is current liabilities: short-term debt, or what must be paid in the next year.

So it is a little difficult to understand how Centro directors in September 2007, applying their full faculties, overlooked this line when examining the property group’s final accounts.

The blunder became apparent later in 2007 when Centro faced a catastrophic loss of investor confidence after being forced to reveal it was struggling to refinance its loans. Eight Centro directors and officers are now defending allegations by the corporate regulator that they were negligent.

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That the directors did overlook the item is not in dispute in the Federal Court. What is disputed is the extent to which directors are required to probe the company’s accounts or go behind what management and auditors tell them.

Justice John Middleton is being asked to consider if Centro directors were plainly negligent in their duties, as the Australian Securities and Investments Commission contends, or whether this case represents a reaching up by the corporate regulator for some ever-higher and impossibly perfect standard of care by directors, as the Centro directors claim.

Lawyers for Centro directors suggested that to raise issues already checked by management and auditors meant board members risked being ”laughed at effectively for making the blunder that a first-year accounting student wouldn’t”.

But ASIC argues the issue is not a difficult one. It’s fair to note that the spectre of Blind Freddy – he who would see the glaring error or obvious mistake, even if blind – has been raised many times.

What Centro directors missed was billions of dollars of debt. About $1.1 billion of loans, wrongly classified as long-term debt in the August preliminary accounts, surfaced as current liabilities in the September final accounts but directors apparently didn’t notice it.

It was several months before the errors of incorrect classifications were fully analysed at Centro, leading the group to discover another $2 billion of short-term debt and $US1.7 billion of guarantees, which had been approved after balance date and should have featured in a note to the accounts. What the non-executive directors and former chief executive Andrew Scott want the court to accept is that the board took reasonable steps to carry out its duties as best it could by putting in place processes designed to ensure that errors were not made.

They point out that Centro employed teams of accountants and finance staff, and it commissioned external auditors from PricewaterhouseCoopers to examine the accounts.

It had a fully functioning audit committee, headed by non-executive Sam Kavourakis, and it did page-turn examinationsof financial statements and accounts.

The internal accountants and the auditors wrongly classified the debt and

failed to alert the board.

So to ASIC’s claim that the directors were negligent, the directors say: ”What more could be done?”

Indeed, counsel for the non-executive directors, Alan Archibald, QC, launched into full hyperbolic flight on this, claiming ASIC was seeking to impose an ”intolerable burden” on directors because, as he fashioned it, ”every single line, almost every single word and every single number has to be scrutinised by each director separately”.

”Boardrooms of Australia will empty overnight if this is the tenor and the rigour of the obligation to be imposed on them,” Mr Archibald argued. ”Nobody would expose themselves to those responsibilities.”

As Justice Middleton replied: ”That is the balance the court has to reach, isn’t it?”

What more could be done? ASIC contends there is a simple answer to that. The directors should have brought their own experience, their own curiosity, the cumulative wealth of their individual experiences to bear on the accounts, and – importantly – they should be looking for obvious mistakes. The kind that ”Blind Freddy” would see.

In other words, putting in place ”processes” is not enough. The directors should not leave themselves to be bare automatons, duly nodding when management presents them with accounts and then blithely signing the accounts because management and auditors say the statements are in order. They must engage their minds to carry out their individual fiduciary responsibilities.

ASIC’s argument, however, is not that directors must have a detailed understanding of every accounting standard.

The regulator instead is saying that directors should have a general knowledge of certain fundamental aspects of accounting and they should be asking questions that focus on those issues.

And in this particular case, the Centro directors had been informed via board packs about the short-term debt and the necessity to refinance. Leslie Glick, SC, for Mr Scott suggested that when the judge was weighing up whether Blind Freddy would have tripped across the debt, the fact that Centro’s auditors, its internal accountants and the chief financial officer also overlooked it ”has to go into the mix”.

ASIC would say that doesn’t matter. The regulator contends the Centro directors ”had to bring the knowledge that they had acquired over the period of their directorships and the material that they had been given in the process of reviewing”.

When the case resumes on May 2, all the directors will be called to give evidence and each one can be sure there will be much scrutiny of what he did in September 2007.

Sourced & published by Henry Sapiecha


October 8th, 2010

Embracing Business Online

The Embracing Business Online Program is an Australian Government initiative funded under the Small Business Online program representing outstanding value.

  • Develop a web strategy to support your business goals
  • Grow your web presence
  • Personal mentoring
  • Online workshops
  • Unfold the power of the internet for your business

Hervey Bay Workshops commence Friday, 12 November.

Cost only $33 – Spaces are limited.
Click Here to download Flyer and registration details.

Received & published by Henry Sapiecha


August 24th, 2010

Come to QWESTNet and find out what new transport technologies and practices are available now and in the future to save you money, reduce your emissions and
put your business ahead of the game.

Hear about the future of freight and what that means to your business.

Discover what LNG, CNG, and BioFuels could do for your future transport fuel requirements.

Learn from case studies of other business experiences on how to save fuel through driver training and fleet car projects, and the creation of an Electric Vehicle Rental Car Project.

The Keynote speaker is Mark Gjerek, of RARE Consulting, a national consulting firm specialising in practical solutions to today’s contemporary transport and environmental challenges.

Who should attend?

Fleet operators
Logistics companies
Hire & rental companies
Freight and courier companies
Taxi owners/operators
Bus and coach companies,
and general business owners……
any business that uses transport, has commercial vehicles
or has staff that travel to their workplace

Register Now

Wednesday 15 September 2010

9:00am – 1:00pm (registration opens at 8:30am)

Brisbane Technology Park, Eight Mile Plains, Brisbane

$44 (incl. GST)

QWESTNet Future Transport Agenda

Register Here
Before: 2pm Friday 10 September 2010
or phone (07) 3330 5433

Received & published by Henry Sapiecha


August 16th, 2010


Something to brighten up this week, our next Business Hervey Bay is:

Date: Friday, 20 August

Where: The Pavilion by the Pier
1 Pier Street, Urangan

Time: 5.30pm – 7.30pm

Cost: Gold Coin Donation

Thank you to our sponsors who are:

Pavilion by the Pier

Mission Australia Employment Solutions

You can find out more about these sponsors by checking out the website at

So come along on the night and network with your friends in business. See you there and don’t forget to pass this along to other business people you may know who would be interested in joining us.

For more information on Business Hervey Bay or to register to receive a regular email update on the monthly functions log on to

We look forward to seeing you there.

Received & published by Henry Sapiecha


August 16th, 2010

Mr Henry Sapiecha

Dear Henry,

I am writing to inform you that Northern Energy Corporation Limited (NEC) has lodged the Environmental Management Plan (EMP) for its proposed Colton mine project with the Department of Environment and Resource Management (DERM) for their review.

We at NEC have made every effort to ensure that we keep all interested community members informed about the proposed Colton mine project. You are receiving this email because you have indicated to us that you would like to be kept up to date about our progress, and you provided us with your email address. We have written you a letter as well, and this should arrive in the coming days.

Activities we have undertaken to inform people about our project include holding community information sessions in Maryborough, Howard and Aldershot, introduction of various feedback mechanisms including the 1800 information line, updated project information on the company website and efforts to promote awareness of the EMP process and the Plan itself to enable community members and other interested parties to comment and provide feedback on the plan.

The EMP for Colton mine project includes reports with baseline studies on all project related issues and highlights measures proposed by NEC to ensure that the project’s environmental impacts are managed appropriately.

DERM will undertake an initial review of the EMP and will advise statutory requirements for further advertising and public comment in due course.

In the meantime, if you are interested in getting a copy of the EMP for your own review you can visit the project website and download a copy for yourself. You will see that there are quite a few files, and some of them are quite large. We have done our best to break them down into small reports and have provided enough detail in the title block to allow you to make a decision about which parts of the report you wish to download.

The address to access the full EMP, including all of the appendices and supporting reports, is:

Queries or comments may be directed to the project

toll free number on 1800 266 296

or email at

Yours sincerely

Mark Turner

Chief Operating Officer

Northern Energy Corporation

Received & published by Henry Sapiecha


August 13th, 2010

CCIQ Business Updates.

you have problems viewing this eNewsletter please use this link:

Chamber of Commerce Queensland and Industry Queensland Business Update
30 July 2010

Commonwealth Bank CCIQ Pulse Survey of Business Conditions
June Quarter 2010

This quarter has seen a dramatic downturn in business confidence and conditions

at both a State and National level with all indicators falling sharply. This confirms

fears from the last quarter that the Queensland and Australian economies may not

yet be clear of the effects of the global economic uncertainty and outlook.

What is apparent from the June Pulse Survey is that more than ever, business and

consumer confidence and economic and political uncertainty have a profound

impact on the stability and performance of our economy. In the three months to

June 2010 a number of significant policy decisions and events including the

announcement and subsequent scrapping of the Resource Super Profits Tax,

the change of leadership in Federal Parliament and the ongoing speculation

on the federal election have culminated to depress consumer spending and

business profitability and growth.

CCIQ brings the above and attached information to your attention and kindly

requests you to take this into account in your deliberations over coming months.

Graph - 12 month outlook for Queensland and Australian economies

> Click to forward this email to a friend or colleague

Further information

For further information please contact the CCIQ Policy Team by calling

07 3842 2267 or email

Commonwealth Bank logo

Contact t: 07 3842 2267 | e: | w:

This email was sent to

from Chamber of Commerce & Industry Queensland

Recieved & published by Henry Sapiecha


June 19th, 2010



In Property

Glenn Rufrano Michael Cameron
Westpac Greg Goodman
Matthew Quinn Macquarie Group
Kevin Rudd Nicholas Bolton
Glenn Stevens Nick Collishaw
Harley Dale Steve Mccann
James Packer Harry Triguboff
Citigroup Keith De Lacy
Matthew Chun Nic Lyons
Christopher Joye Charles Moore
Eric Lucas Tim Lawless
Wayne Swan Frank Lowy
Laurie Brindle Craig James
Bob Johnston Steve Keen
Ross Daley Michael O’brien


In Property

Asia-Pacific Economic… GPT Group
Centro Properties Group Mirvac Group
Westfield Group Commonwealth Bank Of …
Stockland Goodman Group
Lend Lease Corporation Sunland Group
Dexus Property Group Trinity Group
Centro Retail Group National Australia Bank
Macquarie Group Australia and New Zea…
Payce Consolidated Wesfarmers
AMP Lend Lease Group
Commonwealth Property… Woolworths
RP Data ING Office Fund
Macquarie DDR Trust Charter Hall Group
Valad Property Group

Sourced and published by Henry sapiecha