Federal Court Justice Kathleen Farrell refused leave sought by Sydney-based boutique accounting firm Bedford CA and director Murray Rose to add a professional standards scheme defence, saying the request had been made too late and there was no guarantee insurer Allianz would indemnify them, a guarantee required to make out the defence.

Bedford and Rose, who provided accounting services to Williams and his companies for 15 years, are the lone remaining defendants in the action, brought by liquidators Grant Thornton in August 2016. Williams, his brother, sister-in-law and the entities that acted as trusts through which Williams allegedly laundered stolen funds from the Cayman Islands-based Centaur were also named as respondents.

Centaur’s liquidators claim Williams and the trusts misappropriated $32.1 million through a revolving facility agreement and a share purchase agreement. An amended statement of claim filed in May last year added Bedford, Rose and Williams’ brother and sister-in-law, Cameron and Michelle Fisher, as defendants. The Fishers settled in October last year and, in July this year, a default judgment was issued against Williams, who is at large and was last known to be living in Thailand.

The liquidators claim Williams was a de facto director of Centaur and breached his fiduciary duties by misappropriating its funds through the two offerings, which were falsely represented as investments in litigation funding. Centaur collapsed in June 2015, owing investors about $140 million.

Bedford and Rose allegedly assisted Williams in disbursing more than $6 million in funds, partially through Bedford’s trust account, over the period August 2013 and December 2015. The case claims the accounting firm and its director are liable to compensate the liquidators for their involvement in Williams’ breaches.

In seeking leave to amend their defence on October 18, Bedford and Rose sought to plead reliance on the NSW Professional Standards Act 1994 and the Institute of Chartered Accounts in Australia scheme under the Act, which limits their occupational liability to $2.8 million, ten times the firm’s total fees charged to Williams, as long as they are insured. The two defendants said Allianz had agreed to indemnify them under an insurance policy for the claims against them.

Allianz has said it would cover them if they were successful in proving that the extent of their knowledge of Williams’ breaches was knowledge of circumstances which would indicate the facts to an honest and reasonable person, the so-called fourth category of knowledge.

The liquidators objected to the amended defence, saying the delay in seeking leave was unreasonable. They argued they would need to conduct searches to determine if Bedford and Rose had accounted for all invoices to Williams, obtain expert advice on the reasonableness of the fees charged and join Allianz to the suit. This would derail the hearing in the case, which began late last month and will resume November 19, they said.

In a judgment published November 9, Justice Farrell found the defendants had offered no explanation for their delay in raising the proposed amended defence.

“It was open at all times from 1 September 2017, for the defendants to seek to amend their defence to accommodate a claim under the Professional Standards Act and join the insurer to determine definitively the question of whether the policy responds to the plaintiffs’ claims having regard to any findings which the court might make,” she said.

The judge added that there was no guarantee Allianz would in fact indemnify the two defendants.

“While there is evidence that the [insurer’s] case officer charged with managing the insurance claim is currently minded to accept that Allianz has an obligation to indemnify the defendants if the plaintiffs are successful on the basis of the fourth category of ‘knowledge’, that issue is not settled,” the judge said.

“There is nothing in [the case officer’s] affidavit which indicates that she has authority to bind Allianz.  [Her] affidavit does not contain an undertaking to the court to give effect to her current opinion.”

The judge further found that it was too late to join the insurer in the proceedings.

“It was available to defendants to raise the defence earlier.  Had they done so, it would have been open to the plaintiffs (or the defendants) to seek leave to join the insurer to ensure that the jeopardy that the plaintiffs fear – that the court might find the defence to have been made out so as to cap the defendants’ liability but Allianz declines the defendants’ claim … because it is not bound by the finding – was not realised,” she said.

The liquidators are represented by Norton Rose Fulbright. Bedford and Rose are represented by Gilchrist Connell.

The case is Centaur Litigation Limited (in Liquidation) v Strong & Ors.