By Craig Zammit
ADELAIDE: The South Australian Supreme Court yesterday heard arguments from both parties involved in the $240 million lawsuit being filed by the Harris Scarfe electrical retailer group against its former auditors, PricewaterhouseCoopers (PwC).
According to an article published in today’s Australian Financial Review, John Karkar QC, representing PwC, argued that Harris Scarfe’s collapse in April 2001 was brought about by the lack of diligence shown by its directors.
Harris Scarfe had formerly claimed that the company’s downfall was the fault of PwC’s incompetent accounting.
Karkar also argued that the group, in conjunction with ANZ Bank, failed to recognise that the business was experiencing terminal difficulties prior to going into administration.
Richard Whittington QC, representing Harris Scarfe, argued that PwC displayed negligence in four audits during 1998 and 1999, in which fraudulent treatment of accounts went unreported, causing the Harris Scarfe directors to continue expansion while ANZ increased the amount of money it loaned the retail chain.
Karkar countered Whittington’s claim by suggesting that ANZ was itself negligent by continuing to loan funds to Harris Scarfe, as it knew Harris Scarfe was suffering perpetual cash-flow problems.
The court’s verdict is yet to be determined.
Harris Scarfe currently operates 35 stores via the syndicate which purchased the ailing group in November 2001 – the unfolding events concerning Harris Scarfe relate to its previous incarnations, and do not refer to the business which is in operation today.