The facts, the issues, the law. The litigators’ mantra.
The death of Simon Broun was a fact. So was the drowning of the Dobsons. The street killing of Greg Stewart. The suicide case Gibbs had mentioned. There was at least one too many dead people here for my liking. Fact. Too many dead people about to get money.
There were three Melbourne law firms on South Pacific’s panel. I reached the one I wanted on my second call. I was doing an audit of sorts, I told the ‘relationship’ partner at Sutton Murphy & Jones. Some preliminary research prior to the tender South Pacific would be calling for the provision of legal services later that year. I was seeking information on random files. I had been asked to look at a professional negligence matter in which the plaintiff had committed suicide. A matter called . . . where’s my file gone . . . ?
‘Oh, Fadwell,’ the partner said. ‘Phil Smart handled that claim.’
‘Yes, Fadwell,’ I said. ‘Can you put me through to Phil, then?’
There was a pause. ‘I can,’ the partner said hesitantly. ‘What do you want to ask about, though? That file’s closed.’
Good question. There was nothing I could really ask that South Pacific wouldn’t already know. We had a file somewhere, it was just that I didn’t have it.
‘Just a few general things – more to analyse our internal procedures than to check up on you. My brief is to assess how we handled the claim before we sent it to you. To get your views – confidentially, of course – as to whether you think we should have done things differently before we referred it out.’
‘Oh, I see. Fine. I’ll put you through to Phil, then. Just a minute.’
‘Before you do,’ I said quickly, ‘do you mainly deal with Ang De Luca?’
‘Well, Angelo is our prime liaison point within your organisation, as National Head of Claims. I’m not quite sure what –’
‘Can you do me a favour?’ I asked. ‘My orders come from management. Who also asked me to chase some of these things up a lot more promptly than I have.’
‘I understand.’
‘I’d be grateful if you didn’t talk to Angelo about what I’m doing and when I’m doing it.’ There was no point in having De Luca ask me why I was ringing Melbourne solicitors about closed files. For the same reason, I’d gone to the lawyers rather than the Melbourne claims team.
‘Certainly. I mean, if Angelo asks me directly . . .’
‘Sure, but if he doesn’t . . .’
‘Then it’s between you, me and Phil.’
‘Great. Thanks.’
‘Not at all. I’ll just see if Phil’s in.’
He was. Terry Fadwell, he told me, had taken early retirement. When he did, his superannuation added up to a very tidy sum. His wife, Meg Fadwell, retired at the same time. With her own savings and retirement fund, and what her parents had left her when they died, she and Terry had more than a nest egg.
‘You know Melbourne at all?’ Smart asked me. The Fadwells lived in Brighton. Their home had grown considerably in value by the time of their retirement, and was entirely paid off. That’s when Terry Fadwell made the mistake of being talked into becoming entrepreneurial with his investments.
He had used the same financial advisers for more than a decade. They had livened up his super fund, taken care of disability insurance, life insurance – the whole package. They had helped him dip his toes into the sharemarket from time to time, just for fun. To see how the game worked. Then, as Terry was retiring, a clever young man from Equity Challenge presented him with an array of options. They could leave all their money in a cash management account if they wanted to. Was there a need to be so cautious, though? No sense in being totally risk averse, was there? They could invest in some more shares. What would their living expenses be? They might both live until ninety, so even a large sum needed to be properly managed. Did they plan to travel much? All of this was considered.
‘Your insured was put in charge of most of the money,’ Smart told me. ‘It came to him quickly, and went out just as quickly.’ He ran through the myriad investments. The Fadwells’ money had gone into a telecommunications company that slithered quickly into liquidation. Some Internet start-up companies that turned from supernovas to black holes in the usual silent, blinding flashes of light. There were investments in blue-sky mining companies that managed to find only rock. It seems that David, from the South-Pacific-insured Equity Challenge, was irresistibly drawn to invest in companies that went bust, or whose share price quartered, or worse, within days of his investment. Poor Terry Fadwell. Geographically he may have been in Brighton, Melbourne, but risk-wise his investment strategy suddenly became very High Rollers Room, Las Vegas, Nevada, before landing somewhere west of Shit Creek.
‘The insured insisted he had express instructions for every transaction,’ Smart told me.
‘Oral instructions?’
‘Yes, largely.’
‘I bet Equity Challenge is based in Sydney.’
‘Yes, it is,’ Smart said. ‘Do you know it?’
Nah, lucky guess. I could see young David from Equity Challenge, after the shit hit the fan, standing calmly by the harbour in his suit and tie, leaning on his Porsche, gesturing wanly at the smouldering ruins of the Fadwells’ retirement fund, explaining casually that he had his client’s express instructions for each and every unfortunate placement of shares. And he had, after all, made a lot of other people money. Including himself.
‘The insured had diary notes or memos for each transaction – almost all of them, anyway,’ Smart said.
‘Contemporaneous?’
‘So he said. To be honest, we didn’t think he’d make a great witness. We sent you an advice saying we were worried about it. Very worried, if you know what I mean.’
I did. This was lawyer code for saying that while the insured was a whole-hearted fabricator who would willingly perjure himself, it was unlikely that he would do so convincingly. Not a great witness. As distinct from those perjuring fabricators who are convincing. Although most of them are in parliament.
Things got worse for Terry Fadwell after his money leapt into the magic vortex of capitalism’s redistribution zone and ended up as liquidator’s remuneration. His wife was diagnosed with an inoperable cancer in the middle of the litigation. ‘They say stress can bring it on,’ Smart said. ‘All pretty tragic. We defended the claim, naturally. I mean, basically it came down to credit issues. Either Fadwell was telling the truth, or the insured was. Then I got the phone call from his lawyer. Right in the middle of discovery.’
Fadwell gassed himself in his car. He drank himself into a near stupor, hooked a hose up in his garage, and away he went. ‘Terrible business,’ Smart said, ‘but our analysis is that, despite our earlier misgivings about him, it probably supports the insured’s version of events.’
‘Based on?’
‘Well . . . the suicide.’
A man loses a fortune, his wife is about to die, and he’s engaged in protracted and bitterly fought litigation where he faces a massive exposure to legal fees. Naturally, the only conclusion anyone could come to about his suicide was that David from Equity Challenge was entirely honest and the plaintiff, the deceased, was not. I let it go.
‘What happened to the claim?’
‘Well, like I said, it was a credit issue. It was going to be his word against our blokes. Once Fadwell was gone – and his wife died not long after – the estate had no witnesses. Commonsense was more on our side, anyway. We settled for legal fees plus nuisance value. A pretty good result, given the potential exposure.’
‘Which was?’
‘The plaintiff had an accountant’s report setting out his damages at about four point seven,’ he said. ‘Add costs and interest to that and you’re looking at nearly six mil.’
The plaintiff had topped himself, and his wife had died of a terminal illness. Yep, pretty good result, you can’t argue with that.
As soon as I put down the phone I scribbled some notes on my pad. Dobson: 5–7 mil. Broun: 10–12 mil. Fadwell: 5–6 mil. The unexpected demise of these claimants had saved South Pacific somewhere between twenty and twenty-five million over the last twelve to eighteen months, less the relatively small amounts it had taken to ultimately settle each case. Dead plaintiffs are good for business.
The companies that own and run the world usually publish their financial results on their websites. This beneficial act of corporate glasnost means that anyone with access to the net can download the financial figures of the world’s powerhouses. Hook up a PC to a cable in an Asian sweatshop and the workers can proudly see exactly how much money they’re making for any number of western icons. Just like, from the relative luxury of my dog kennel at South Pacific, I could find my way through the company’s website to the annual results.
Before I got to the financials, the first thing that struck me was how many different lines of insurance it was offering. It’s ‘core’ lines of business covered the gamut of general insurance such as home and contents and motor vehicle, through to the riskier areas such as liability, aviation, professional indemnity and directors’ and officers’ cover. South Pacific may have started as a little bird in a little nest but it now had its mouth wide open, and was squawking for business.
The Statement of Operating Profit told me that South Pacific received $602 million in insurance premium income in the last financial year, up $125 million on the year before and nearly three times what it was when the company floated just over five years before. That seemed like a lot for a new player in the market. Then again, I wouldn’t know the insurance market or a balance sheet from my bankrupt elbow. Investment income was a modest $49 million, and after subtracting claims paid out and operating expenses, the grand profit of the insurance business was $102 million. Shareholders were getting a dividend of 28 cents per share.
Now, $100 million is a lot of money, I suppose, but if you added the potential payouts to the Dobsons and the Fadwells and Simon Broun to claims expenses, suddenly the profit would be down by about 25 percent, and the dividend with it. Any other claims like that, and profits and dividends are even less attractive to institutional investors. One thing I did know was that if you failed to attract them, the arse would fall out of your share price pretty quickly. Making profits, getting bigger, paying dividends is the name of the game, and $102 million in profit is a lot better than $77 million, or even less.
Profiles of the Board Members and the Executives were also on the website. An identity parade of the usual suspects. Some professional board members who were directors of other large companies, your standard big firm lawyer, your standard big firm accountant and your standard actuary. Some high profile dill to make everyone feel good. And four retired politicians, two from the New South Wales Labor Party and two from the Liberals. In other words, the conservative side of politics on the board led the left 4:0.
I read their corporate CVs with interest. Somehow the ex-politicians had forgotten to declare branch stacking, the dismantling of the separation of powers and the legislative removal of human rights on their list of achievements. Still, they looked content enough in their photos. Nothing like a director’s remuneration supplementing that indexed parliamentary pension for life to put a smirk on your face, I guess.
I wanted more information than the website could give me. I wanted to know exactly who the big shareholders were. I knew just the woman to help me. I phoned Gabrielle. She was buoyant when I called her, but not because I’d rung. The RSLC had just won a test case for a client in the Industrial Relations Commission.
‘Can I buy you a drink? To celebrate?’
‘We had a drink last night.’
‘I need your help,’ I said. ‘I want you to get me a Historical Corporate Affairs Search on South Pacific Group Insurance Ltd.’
‘Isn’t that where you work?’
‘I’ll pay whatever fees are involved. And I need you to check the Share Register and find out who the bigger shareholders are.’
There were a few moments of silence on the other end of the line. ‘What am I doing this for?’ she finally said.
‘You don’t have to open a file yet,’ I said. ‘I need your help and I can’t do it from here.’
‘Okay, but why am I doing it?’
Why? Gabrielle Shepherd’s sexual preference was for women. Solvent women, as distinct from bankrupt men. Fact. One that was going to require significant massaging if I was going to get anywhere. I resolved not to make a fool of myself. I was equally resolute, however, that I would not give up all hope. Plaintiff lawyers never do. Until the film starts rolling, anyway. Besides, if the Austrian entrant for the 1970 Mr Olympia contest can grope his way to Govenor of California via what remains of Camelot, nothing is impossible.
‘Can we discuss it tonight? I’ll buy you dinner.’ Mr Olympia 1970 is the Govenor of California. Mr Olympia 1970 is the Governor of California. Mr . . .
Gabrielle said yes, although she sounded either wary or reluctant, or perhaps both. ‘By the way,’ she said after I told her I’d call her back with a place and time, ‘there’s a paper bag here for you. Or, at least, for a client.’
‘What?’
‘Mr Fan . . . Fanuap . . .’
‘Toffee?’
‘Twenty grand cash in a bag. We had to count it and give the guy a receipt but he insisted we not keep a record ourselves. I take it we’re not involved in anything illegal. Are we? What exactly is going on with this file?’
I was about to make a call that would leave two Samoan illegals very, very happy. See, I told myself, nothing is impossible.