<p><strong>Speaker 0</strong>: <span>Welcome to all to rising edge TV. Today we're launching a new series, the DNO Files. This is what you're going to learn about, Like what can go wrong in the corporate scandals and the role that insurers and the brokers solicitors may have in resolving, addressing mitigating the situation, hopefully, through the use of a decent DNO insurance policy.</span></p> <p><strong>Speaker 0</strong>: <span>So today, joining me from, uh, this panel, um, we have, um you are a solicitor and director, um, at coverage matters and you are specialising in the a wordings. Next to you, we have a Francis Francis Welcome. Uh, Francis Ken, you are, uh, a partner with the financial line teams at McGill's and Partners.</span></p> <p><strong>Speaker 0</strong>: <span>And, uh, next to Francis, we have James James. Welcome to you as well. James Cooper. Um, James, you are a partner at the law firm. Uh, and last but not least, our very own Owen DC that many of you know, from the very famous, uh, DNO podcast of Riding Edge. Um, Owen, Uh, you are our general counsel. Um, so I speak under your control, and you are also ahead of claims.</span></p> <p><strong>Speaker 0</strong>: <span>Uh, welcome to the four of you for this. Um this this panel? Um, so we thought that actually, it would be interesting to see, uh, the effectiveness efficacy of DNO insurance through the lenses of corporate scandals. Um, hence opening the DNO files. And today we opening the files of CARILLION. Um, so, Ed, uh, as a start, can you please, for bring everybody on the level playing field, tell us a little bit more about this case? Uh, what happened?</span></p> <p><strong>Speaker 1</strong>: <span>Thanks, Philip. Um, it's a really interesting case, actually. And it's probably one of the biggest and most noteworthy corporate collapses in the UK in recent years. Um, Clariion collapsed fairly spectacularly at the beginning of January 2018, and, um, really, a year before that, there had been very few signs of any problems. So you can see that in a year, the the company went from being very strong, looking to collapsing. So, you know, immediately there's something badly wrong in the company when that's something like that happens.</span></p> <p><strong>Speaker 1</strong>: <span>So, uh, at the time of its collapse, it had debts of £7 billion. Um, it employed 43,000 people, um, all of whom eventually lost their jobs. 18,000 of those were in the UK. It had grown very quickly over the prior 20 years. Uh, it had taken over some of the other household names in the construction industry that we're familiar with, like Alfred McAlpine, Mo. And, um, so they look, they looked strong. They weren't just a construction company. They also were a services company.</span></p> <p><strong>Speaker 1</strong>: <span>And in the those various roles, they were a household name. They had a lot of government contracts, uh, which I think made them especially noteworthy. Um, but also, they were involved, really? In all the towns and cities of this country, they they built schools, hospitals, prisons, um, airports, railways, they were involved in all of them. Uh, I remember hiking up to the top of Mount Snowden one year, and I was looking forward to a cup of tea and a biscuit at the top and was faced with a building side with a huge carillion side on it.</span></p> <p><strong>Speaker 1</strong>: <span>Uh, because the cafe was only half rebuilt at that time. Um, so I realised, you know, just just from my own personal experience, how common how common carillion was across the country. So it really was a big deal when it went bust. But at the end of 2016, when it published its annual report and accounts for for 2016, everything looked pretty rosy. And indeed, they paid a dividend to the shareholders in the middle of of 2017 of 55 million. And you don't pay a dividend</span></p> <p><strong>Speaker 1</strong>: <span>unless you're confident that the the company is a going concern. But at that point, it appeared that there had been some queries raised internally about, uh, revenue recognition and, uh, cash flow in particular. And it seemed as though that a lot of the contracts they were involved in a lot of these very lucrative looking contracts they're involved in in the UK Canada Middle East. They actually</span></p> <p><strong>Speaker 1</strong>: <span>were not paying as they should be. They weren't. The revenue from those contracts wasn't flowing as well as it should have been. Um, and it might have, in some cases, been overstated. Uh, so, um, and there wasn't really any provision for the for those contracts, not paying what they were supposed to. Um, So there were some queries being a being asked about internally by the accountants, and as a result of that, they released, Uh, they had an investigation, and they released,</span></p> <p><strong>Speaker 1</strong>: <span>uh, an H one half yearly trading update, which is an unusual step and a profits warning.</span></p> <p><strong>Speaker 1</strong>: <span>And in in those documents, they disclosed that the, uh, the CEO, uh, had left the group and was being replaced by, uh, the senior independent non-executive director, which again, is a dramatic step, Uh, without any warning.</span></p> <p><strong>Speaker 1</strong>: <span>Um, they also mentioned that they were going to cease trading in certain places. Uh, and, um, they weren't going to take any more A lot more Middle Eastern business. Um, and probably the most important part of that that trading update was the impairment charge of of more than £800 million. And impairment charge is essentially a warning to the company that they're not going to recover everything. They thought they would recover on on their contracts so immediately. It was sort of like a bad debt.</span></p> <p><strong>Speaker 1</strong>: <span>So in that case, um, um, the company was in much worse shape than people had expected, and this was a surprise to many to many in the market. As a result of that, the, um uh the share price dropped on the day of the announcement by some 30% and again over the following days that 30% turned into 70%. Um, so the share price really started to take an enormous hit because of this bad news.</span></p> <p><strong>Speaker 1</strong>: <span>Soon afterwards. Uh, the finance director who hadn't been in the role for very long. He'd been in there since the beginning of 2017. He was fired. Um, And then, uh, I and Y were appointed to help the group try to find more finance and to stabilise the the the cash flow chase debts, uh, and try and get a better idea of where the revenue was coming from.</span></p> <p><strong>Speaker 1</strong>: <span>Um, but after many attempts, uh, in the last few months of 2017, no more financing was forthcoming. They also went to the government, Uh, because they had so many contracts with the government, and it was to be the government and in a way that we most inconvenienced by care and going bust. Um, but the government didn't make any any significant contribution to the financing.</span></p> <p><strong>Speaker 1</strong>: <span>So really, by the end of 2017, the company was we think there was an area of inevitability that the company was going to go bust. Um, during the the those last couple of months, the impairment charge had gone up to more than a billion. So it was quite clear that things were getting worse, not better. Uh, more information was coming out, and, um, it was also clear that in the first half of the year, they'd made a thumping great loss. The company made a really big loss by comparison to 2016, where it had made a healthy profit.</span></p> <p><strong>Speaker 1</strong>: <span>So again, this tends to suggest that the the situation hadn't really changed in the company. But the information had gotten much better about what was really going on, and that was causing these updated numbers, and it was causing the tanking of the share price. So essentially, we arrived in the beginning of 2018 with a very difficult situation. Um, and the liquidators were called in in the middle of 2000 and, uh, January 2018. And</span></p> <p><strong>Speaker 1</strong>: <span>really, the rest is is history. I'm sure we'll get on to talk about the fallout, Um, after the after after I finished</span></p> <p><strong>Speaker 0</strong>: <span>here. So Thanks, Ed. You know, that's, um</span></p> <p><strong>Speaker 0</strong>: <span>um but so far it it sounds very much kind of like a I mean, a corporate collapse. You know, I, I don't hear so far Kind of like a what actually went so terribly wrong. But I guess something must have happened already at that stage. And since we're here to talk about the DNO insurance, I'm turning to you. And at that stage, I would imagine that notification must have been given to, uh, to to the market. What? I kind of like the initial stage of what would have happened would have had happened at that stage from a from an insurance standpoint.</span></p> <p><strong>Speaker 0</strong>: <span>Well, yeah, I think thinking in theory about what would happen in that in that scenario where there is a company, um, on the cusp, maybe. And then in liquidation, um, I would expect the first port of call to be the the insurance broker. Uh, well, first you need an awareness around that there is something that perhaps you might need to update the insurer on or notify the insurer of as you're sort of leading up to that that collapse. Um and then the first port of call, of course, is the broker.</span></p> <p><strong>Speaker 0</strong>: <span>And, um a review of the policy terms and conditions. What needs to be notified? How what kind of information would need to be presented? Um, and then the broken client would probably then be working to, um,</span></p> <p><strong>Speaker 0</strong>: <span>get information and think about how that's going to be presented to the insurer in some sort of notification. It might be if it hasn't if the If there are no claims yet, it might be a circumstance saying this is happening. This is unfolding. There could be claims. So we're letting you know, or or Um when there are claims. Of course, it's getting the claim document documentation sent sent over to the insurer as a notification. So by now, people start to talk about it. I think because it's high profile, as you said, Uh</span></p> <p><strong>Speaker 0</strong>: <span>and, um and so there there's like, um, something brewing right and and But then it goes. Even the situation gets even worse, right? I mean, so So what? What what happened? That actually makes this case quite particular.</span></p> <p><strong>Speaker 1</strong>: <span>I think one of the one of the interesting things and and in a big dealer collapse you'll have a number of different things that start happening and I'm sure the others will talk about those the But the very first thing that happened with with carillion, which was interesting, really, because of its government involvement was a parliamentary inquiry. And those you don't have those in every case that this was particular to carillion because of its involvement with the government. And it was such a high profile collapse, and so many people were affected by it</span></p> <p><strong>Speaker 1</strong>: <span>that it really caught. There was really a There was a had to be a parliamentary inquiry. There was a joint committee set up, uh, and the directors were given a good old grilling by by the MP S. Yeah, that's what happened.</span></p> <p><strong>Speaker 0</strong>: <span>Yeah, I understand it. It makes it interesting watching, uh, even a few years after the fact.</span></p> <p><strong>Speaker 0</strong>: <span>So indeed, let's not forget that DNO insurance is about the DS and the D OS. So you did mention that, you know, now individuals are being called and have to explain their decision making. Um And, uh, so maybe turning to to you. Uh uh, Francis. So what? What can you tell us in terms of like the, um from your experience?</span></p> <p><strong>Speaker 0</strong>: <span>You know what? How can you go from bad to worse. You know, like what? What? What are the missteps that are being taken? Maybe in that particular case or things that you have observed more generally,</span></p> <p><strong>Speaker 1</strong>: <span>I think the first thing to say Philippe is that insolvency is the worst possible nightmare for the directors. And for two main reasons. One, Because if you're a director, you would normally not bother yourselves. I suspect in most cases, with the terms of your DNO insurance, you rely on the company</span></p> <p><strong>Speaker 1</strong>: <span>to make sure that your defence costs were paid in the event that you got sued, you probably have an indemnity from that company and, um, the DNO insurance you might be aware of. But it sort of sits behind all of that. Of course, when the company goes bust, that indemnity immediately becomes worthless because the company has no money to pay it.</span></p> <p><strong>Speaker 1</strong>: <span>Uh, that's problem one. And problem two is that the company is now in the hands of the liquidator.</span></p> <p><strong>Speaker 1</strong>: <span>Uh, And so instead of it being, um, a normally run company where you have a responsibility as a director to report to the shareholders in annual general meeting, you now are responsible. Uh, through the liquidator directly to the creditors, and the company has become a vehicle through which that responsibility can be litigated. And that's indeed what has happened in the case of Carillion because</span></p> <p><strong>Speaker 1</strong>: <span>beyond what Ed was describing, um, which was the the first stage? The parliamentary Select Committee interviews There were then the inevitable interviews by the liquidator, uh, which they are statutorily required to do of directors. What on earth happened here with this company? How could this have arisen?</span></p> <p><strong>Speaker 1</strong>: <span>And those directors need, uh, significant legal representation in the context of those interviews that costs a lot of money. Those interviews, uh, can then be, uh, used or replicated by regulators and and potentially ultimately by</span></p> <p><strong>Speaker 1</strong>: <span>claimants in future proceedings. So all of that is going to be huge, expensive so far as the directors are concerned. And as I say, the company has, uh, shuttled off the mortal coil. So the only show in town at that point is the DNO policy.</span></p> <p><strong>Speaker 0</strong>: <span>Francis, do you feel that this comes as a surprise to directors in your experience in coming through through claims, not realising that, actually, the safety net of the companies with that indemnity disappears in case of insolvency and therefore how critical the DNO insurance policy is actually to to help them and also to protect their own personal assets. Because unless mistaking their their liability is unlimited, right?</span></p> <p><strong>Speaker 1</strong>: <span>If they had paused to think about it and they were sitting around a table similar to this, then, uh, no, it wouldn't come as a surprise to them because it's an obvious logical effect of the company ceasing to exist. But it nevertheless is always a shock to them because the practical reality of it is so stark and it leads on to, uh, consideration. Uh, and I'm sure, um, the others around this table will have some thoughts on this as to the</span></p> <p><strong>Speaker 1</strong>: <span>adequacy and effectiveness of the DNO insurance. Suddenly, which is a which is a product that's bought by the company on behalf of its directors. Now the company is shuffled off, and it's only the directors who are having to deal with the insurers. And there are some consequences of that in terms of coverage that I fall into three main categories that,</span></p> <p><strong>Speaker 1</strong>: <span>um, it would you know, directors would be well advised to give careful thought to before they are unfortunate enough if ever this happens to them to be involved in, um, an insolvency where they are still on the board.</span></p> <p><strong>Speaker 0</strong>: <span>So I can already hear in the distance the solicitors kind of like circling around right, James, because I mean between, like having the the notification going on. I guess. I mean so So firstly, help us understand. Kind of like the the the Geographies of Solicit</span></p> <p><strong>Speaker 0</strong>: <span>is involved in a case like this, you know, it's just not like one said they they they are. There are quite a few that are kind of going to be involved in, uh in, in, in in that right. So can you let us a little bit? Who gets involved in the representing whom at that stage so often the first firm that we get involved will be, um, the firm that acts for the liquidators, and so they will almost certainly have a law firm, um, retained quite quickly.</span></p> <p><strong>Speaker 0</strong>: <span>And then it it It's for each individual director after an insolvency to think about their own person position. And I think again, as as Francis said, there are some differences when companies go insolvent and how DNO responds</span></p> <p><strong>Speaker 0</strong>: <span>because in that situation you tend to find that most directors will, quite often certainly at an early stage, go off and appoint their own individual law firm. So you can have multiple law firms involved quite early on which then means that maybe the coordination isn't always there, as you would hope that can then sometimes streamline down a little bit later, as people start to understand the universe of the claims that they're potentially facing the investigations that they're facing</span></p> <p><strong>Speaker 0</strong>: <span>and then they can get comfortable with that. Actually, they're all aligned and you can get behind one law firm,</span></p> <p><strong>Speaker 0</strong>: <span>Uh, and then sometimes, um, the carrier. The insurance carrier will also, um, appoint, um, a law firm to help them, um, navigate usually not so much the coverage points at that stage. But just how are you grappling with lots of invoices coming in? How you grappling with protecting privilege around all these individual law firms, et cetera, so you can see law firms getting involved in three different areas for the liquidator, for the directors and then sometimes for the for the carriers.</span></p> <p><strong>Speaker 0</strong>: <span>So the the the scene is set, I think the characters, the main characters have showed up, right? We have a bunch of directors. Uh, we have some insurers in the picture. The brokers as well, having handled the notification kind of like an in and set of solicitors around. So,</span></p> <p><strong>Speaker 0</strong>: <span>um, so now we start getting into the meat of things. So coming back to you, So, um, I guess we're getting into that discovery stage, right? I mean, a member of the parliament asking questions, the liquidators asking questions and all that. So we're starting to peel the onion, right? I mean, so So what are we finding?</span></p> <p><strong>Speaker 1</strong>: <span>Well, uh, in this case, of course. Um, it was really the first public statement by the individual directors as to as to what happened, and they were given very uncomfortable. Um, they were given a very uncomfortable, uh, ride by the parliamentary committee. So, um, it it it Certainly. At that point, they would have, as Owen mentioned, they would have notified their insurers, and they would have been looking for</span></p> <p><strong>Speaker 1</strong>: <span>their costs of being advised in relation to that. That committee and their responses to it. Um So what? They what they don't want to appear like in those committees, though. is is relying 100% on their lawyers because that looks as though they've got something to hide. So in the end, they, they they they give a fairly sort of a fairly sort of open, um,</span></p> <p><strong>Speaker 1</strong>: <span>appraisal of what happened. Um, and as a result, the the the committee issued a report in May of 2018, which was pretty damning. So what did you say?</span></p> <p><strong>Speaker 1</strong>: <span>Well, it said it said that the, uh, the the the directors essentially were mostly concerned with their compensation, um, and had acted recklessly in relation to the management of the company and its and its affairs and had ignored warning signs. Um, and, uh, essentially had mis mismanaged the company in a fairly dramatic way</span></p> <p><strong>Speaker 1</strong>: <span>that that was the sort of summary of what they said they had. There was a lot. There were a lot of comments made in the report, but that I think would be a fair summary of what they'd said. And they they also, um, mentioned, which I think is quite unusual that, uh, the insolvency service should look into whether whether there had been a breach of directors duties and, uh, whether or not. It was appropriate to seek a disqualification order against those directors. So you can see that's quite a dramatic step fairly early on</span></p> <p><strong>Speaker 1</strong>: <span>in the proceedings. Um, because the meetings that, um uh, that France has mentioned with the liquidator they would be private, you know? So although they would have had meetings with the liquidator with lawyers, those the the outcomes of those meetings wouldn't be known, um, publicly that they might be recorded. As France has mentioned, they might be used against the directors in the future.</span></p> <p><strong>Speaker 1</strong>: <span>Uh, but the first real public, uh, assessment of what happened was the was the parliamentary report in in the middle of 2018. Um, and of course, that set the scene for what then happened next. You know, you you get other people getting involved and the next people to get involved were regulators.</span></p> <p><strong>Speaker 1</strong>: <span>So, I, I from</span></p> <p><strong>Speaker 0</strong>: <span>from the the description of the of this case, um, you know, this is not kind of like an unusual insolvency, though, because, uh, because of its size</span></p> <p><strong>Speaker 0</strong>: <span>and and how quickly it came. Right, Because you were saying that just a year before, Um, I guess I mean they successfully renewed the idea. No insurance policy. So I guess whatever was represented and analysed by the underwriters seemed OK. They distributed, um uh, a dividends mid mid year. So everything kind of like so? So it's a It's a sheer size and speed of how things melt down. And I would imagine at that stage</span></p> <p><strong>Speaker 0</strong>: <span>the directors that are kind of like front line of the kind of like, uh, answering questions. Has there been kind of like finger pointing, uh, started among themselves? So if we can't comment specifically about them, uh, maybe just generally speaking, in terms of experience. And they're therefore when you said that they each tend to appoint their own solicitor Uh, James in, in in your experience,</span></p> <p><strong>Speaker 0</strong>: <span>do you see that finger pointing? Starting and starting to have issues about conflict of interest, you know, in terms of like, different strategies in terms of defence strategy, it was not me. It was him. Um, I did not know I. I could not know. I was not told. I asked the question, but I was not given the answer. I mean, how how ugly does it become and is to become ugly frequently Or is it kind of like particular to that case? Yeah, I think that's an interesting point in the frequency, because when it gets ugly, it will get very ugly.</span></p> <p><strong>Speaker 0</strong>: <span>But in my experience, I wouldn't say it's frequent. I think quite often you will find that the board sticks together, that they don't see a conflict of interest, that actually they put forward a unified defence. And so, yes, mud slinging starts. And sometimes you see people peel off the edges. But I would say that's not perhaps as frequent as you would think. I think when you see something the size and the complexity of carillion and particularly the parliamentary inquiry getting involved so early,</span></p> <p><strong>Speaker 0</strong>: <span>it was perhaps always going to get a little bit messy, this one. But the vast majority of cases I wouldn't say you have that frequency, um, of conflicts of interest or certainly not a conflict of interest. Um, that arises early. Sometimes you'll see it a little bit further down the down the track where, um, the liquidator will start asking particular questions. Or a creditor brings a claim, which perhaps focuses on one individual, um or the other. And sometimes you'll see, um,</span></p> <p><strong>Speaker 0</strong>: <span>the civil claims may only implicate one or two directors and not the rest. So what do the rest of the board do? Um, et cetera. So it's not perhaps as frequent as you think, but when it does happen, it does get very ugly and very expensive. And that's when you start looking at things I'm sure.</span></p> <p><strong>Speaker 0</strong>: <span>And France is gonna come on to later about How do you protect the limits of a policy when you have quite so many law firms involved where there is either a conflict or even worse, just simply a perceived conflict? And you, as the carrier and the broker, are trying to manage that to make sure there is enough policy there to protect the people in the way that they should be protected.</span></p> <p><strong>Speaker 0</strong>: <span>So we'll come to that in in. Indeed, James, it's it's really interesting because, you know, uh, at the end of the day, insurance is to deal with the unforeseen, unusual kind of that not the usual occasion, right? I mean, so So this is at that stage. Indeed, France is that actually, it's It's the asset test for the insurance policy. Is it fit for purpose. So before we even talk about the limits, let's consider, like how it actually responds</span></p> <p><strong>Speaker 0</strong>: <span>in terms of like when you have all these directors coming in and saying, I want my own set of director, I want to So they sit there. Forgive me. I want to appoint them, um, myself, How do insurance policy respond to to this? I</span></p> <p><strong>Speaker 1</strong>: <span>think in fact, there's a prior question to that which is, uh, more existential around the nature of the cover and whether there actually is cover for all of the directors. But just before I get on to that one,</span></p> <p><strong>Speaker 1</strong>: <span>Uh, I agree with everything, James said, so far as the the number in practise of situations where there are conflicts so that the limit gets eaten up more quickly than you would otherwise expect. But I think it is worth making the general point that there is a natural divide, uh, not least in terms of the allegations that generally are faced by directors between the execs and the non execs,</span></p> <p><strong>Speaker 1</strong>: <span>because the non execs typically are faced with the allegation that they were asleep on the watch, that it was the execs who had all the egregious conduct or didn't do what they should have done. But it was the non execs job to, um, tap them on the shoulder and, uh, ask them and look in their eye and ask them what they've been up to. And so if if you wanted to take AAA rough rule of thumb in terms of</span></p> <p><strong>Speaker 1</strong>: <span>perhaps different, uh, interests needed in order to to to pursue defences, you'd look naturally at that divide between the execs and the and the non execs. That's that's his, as a general thought, going on to the the the coverage question and and and reverting to what I said about</span></p> <p><strong>Speaker 1</strong>: <span>the existential question before you get on to the the the fine detail as to whether there's there's cover for for individual directors and if so, what for The existential question really stems from something that that Owen was talking about around the fact that something would have been notified one hopes at some point, um, and in Carillion, perhaps before the insolvency balloon went up. But it really does matter what was notified,</span></p> <p><strong>Speaker 1</strong>: <span>Uh, because these policies all operate on what's known as a claims made principle, which means that they only respond to claims made against the directors during the 12 month period.</span></p> <p><strong>Speaker 1</strong>: <span>Uh, and, yes, you are allowed to, uh, notify circumstances which may give rise to a claim in that period so that you have the ability if you can, uh, foresee circumstances which may reasonably give rise to a claim to attach that future claim to the policy while it's still alive. But if you think about it in terms of insolvency,</span></p> <p><strong>Speaker 1</strong>: <span>there's a lot of luck involved. Because if the policy runs from the first of January to the 31st of December and the company goes boss bust in November,</span></p> <p><strong>Speaker 1</strong>: <span>you've only got, uh, two months left in which to notify all the circumstances which could give rise to a claim. The fact that the company has got insolvent isn't itself. I don't think a notifiable circumstance,</span></p> <p><strong>Speaker 1</strong>: <span>and you may well be struggling to be able to foresee in a way that will persuade insurers all the things that can happen down the road. And let's say some unexpected litigation is instituted against the directors a year after the, um, the liquidation,</span></p> <p><strong>Speaker 1</strong>: <span>Uh, and after the policy has expired, in my example, the the December time. There ain't no policy left to attach that claim to. And so the real the the the real threat for the directors, the most immediate and dangerous threat for them is that the policy will expire without them having effectively attached through a notification of circumstances everything</span></p> <p><strong>Speaker 1</strong>: <span>which could in the future. And, um, Ed talks about the rightly about the disqualification proceedings that were first mooted in 2018. They're still going strong now on the trial hasn't yet got under way for for some of the directors of that disqualification proceeding five years on.</span></p> <p><strong>Speaker 1</strong>: <span>So, um, all I'm saying is it's It's very important that everyone focuses on the expiry of the policy period because if you're unlucky to have the insolvency shortly before the expiry of the policy period and you haven't really carefully instructed lawyers to help you notify everything that can be notified, you will find yourself not just looking at whether there's coverage or not, but actually having a fight with insurers</span></p> <p><strong>Speaker 1</strong>: <span>about the fact that there is no cover for this particular claim because it doesn't attach to the</span></p> <p><strong>Speaker 0</strong>: <span>policy. Um, so Francis, at that stage, um, I would imagine It must be a bit of a difficult job for a broker to go back now to the insurer and ask for an extension,</span></p> <p><strong>Speaker 0</strong>: <span>knowing that actually, the house is on fire. But the notification hasn't kind of been made or kind of. Maybe that's not reasonable for some, some some reasons. So it must be difficult to kind of get an</span></p> <p><strong>Speaker 1</strong>: <span>extension, not just a difficult job. It's completely impossible. It it can never happen. Uh, no insurer would grant an extension in relation to a company. That's that that that's gone bust. And there's no money to provide for an, uh, a new policy. But even if there was money,</span></p> <p><strong>Speaker 1</strong>: <span>insurers wouldn't be prepared to accept it because they were disregarded as throwing it away for, um, a certain limit loss. So so it really is existential that everything is notified to the policy in the year in which the insolvency occurs. Otherwise, there's no other show in town unless you're fortunate enough to have a policy that allows, um, an extended reporting period. Uh, and that is possible.</span></p> <p><strong>Speaker 1</strong>: <span>Um, but far from uniform, Uh, so some policies will allow in the event of an insolvency. Uh, you to notify claims up to six years after the policy expiry, and that if I were a director and there was any</span></p> <p><strong>Speaker 1</strong>: <span>a hint of, um the the the conceivable possibility that the company might go insolvent, that's what I would want as one of my my main asks. Because, as I say, Why you buy this policy is just for this sort of scenario. Because otherwise, if the company is around insolvent and you've negotiated a good indemnity, you shouldn't you shouldn't as a director ever be troubled with any of this stuff.</span></p> <p><strong>Speaker 0</strong>: <span>And James I I suspect that, uh, for many reasons, the company can also can either set aside funds for the future, carving out kind of like, uh, putting them aside for only the purpose of defending the, uh, the NE DS that money goes into the general part to pay credit. Is that correct? That's correct. Yes. And the the company, as as uh, Francis said earlier, the company isn't your game in town. It doesn't exist anymore except as a vehicle.</span></p> <p><strong>Speaker 0</strong>: <span>So it can't help you anymore after it goes into insolvency. So, Ed, I mean, is the industry providing product a fit for purpose here.</span></p> <p><strong>Speaker 1</strong>: <span>I think it's a claims made policy as, uh, as France has mentioned, which which all, uh, direct officers liability policies are And it is possible as, uh, France has mentioned to by extended reporting, period. Um, but what's quite interesting is that you don't see an automatic extended reporting period for insolvency that often in these word acts, um,</span></p> <p><strong>Speaker 1</strong>: <span>you will see AAA baked in extended reporting period. Um, at the end of the policy period, if it isn't renewed by someone, of course, it isn't going to be renewed. Um, if the company has gone bust,</span></p> <p><strong>Speaker 1</strong>: <span>So in theory it is, it might be possible to trigger an extended reporting period, the existing one of maybe one year. That's in the policy for non renewal. Um, as long as, uh, insolvency isn't one of the events. Uh, which is, except was an exception to the to the offering of the of of that extension. So, for example, the definition of a transaction in the policy, which is usually a takeover or a merger,</span></p> <p><strong>Speaker 1</strong>: <span>um, that that doesn't usually generate an extended reporting period automatically. And if that definition also includes the on insolvency of the company then that right to to look for an extended reporting period at the end of the policy period for non renewal doesn't exist, so it do. You do have to look very carefully at the terms, but I think that the market is willing to embrace these situations because,</span></p> <p><strong>Speaker 1</strong>: <span>um, the market wants to provide a product that is that is useful to the directors and is there when the worst happens. You know, that is the general perception of the market. And, um, it's you still have to look at the terms and conditions to make sure that that is actually what will happen. Um, if the worst happens. So I think that there there is definitely, uh, an intent behind providing the best possible cover for directors in an insolvent situation.</span></p> <p><strong>Speaker 1</strong>: <span>But they are complex problems and and you know, we've mentioned some of the policy issues that arise. But there are usually quite a few policy issues that arise, and you have to look at the terms and conditions of the policy when you're buying it, to make sure that those types of situations are going to play out in a way that's expected and not unexpected. Otherwise, you will have a dispute.</span></p> <p><strong>Speaker 0</strong>: <span>Oh, and turning to you, uh, as, um, as a very experienced claims handler. Um, clearly, you know, when I was asking whether the product is fit for purpose, I mean, there must be some, um, uh, purpose that is being met, just judging by the amount of claims that actually the industry pays out. So So, So So So somehow, that is a good test of like, something can can kind of works, but in in your experience, uh, maybe back to the point of the limits.</span></p> <p><strong>Speaker 0</strong>: <span>Um, as the insurer, when you have everybody coming to you to fight for a limited plot that may start to be seriously depleted or when you already know based on where you sit that this is what we call in the industry. A full loss limit. IE, your full policy limit will be bars for this. You know, how do you determine who to pay? Uh, with that limited amount of fund available?</span></p> <p><strong>Speaker 0</strong>: <span>Well, I think it it starts with, um, the process, I think when When? Um, that situation arises with multiple people with multiple lawyers. Um, it's about expectation management. It's about everyone understanding how the policy operates. And you're basically coordinating. So, um, I think you have to, Um, some law firms have done work for insurance before some O. Others haven't some know about the consent requirements? Some don't.</span></p> <p><strong>Speaker 0</strong>: <span>Um, but I think if you do the upfront work in terms of setting out the expectations from each law firm in terms of yeah, you need consent. You need a budget. Um, this is the limit. Um,</span></p> <p><strong>Speaker 0</strong>: <span>uh, and you and you manage that Appropriately, Um, that that's the best you can do. Basically, um, you can't You can't just favour someone over another person. Everyone has to kind of play by the same rules. Um, and so once you've gone through that budgeting process, the approval of the budget, um, working, uh, through the strategy and agreeing the strategy. There are those kind of kind of key phases after coverage. Obviously, um, there is then another process, Of course, where the bills come in and they all have to be reviewed again,</span></p> <p><strong>Speaker 0</strong>: <span>Um, kind of fairly across the group in terms of what is covered under the policy. According to you know what's reasonable, et cetera. So, um, I think There's just a lot of upfront work in terms of, um, managing expectations and setting out your your own expectations about, um, how the policy is going to respond to them</span></p> <p><strong>Speaker 0</strong>: <span>and James. So from from your perspective, in terms of that, uh, kind of a debate about the limits, the invoice is being paid, not paid prioritised. Um, how is your experience in terms of, like, the engagement that you have with the liquidator? Uh, because I guess that to do one of the first phone call they must make is to figure out what sort of DNO insurance is available. I'd like to know because they'd quite like it please to put into the cost for the creditors. So we would always try to,</span></p> <p><strong>Speaker 0</strong>: <span>uh, to an extent keep the liquidator at arm's length because they're they're not a they. They may essentially legally be the policy holder, but they're not now the people taking the money from the policy. So it's much more about engagement with the directors who are then the policy, the insured persons, um, seeking the indemnity and and their law firms. So we we would be quite, um, resistant to having too much engagement with the liquidator for that reason.</span></p> <p><strong>Speaker 0</strong>: <span>And so it's much more about how do you engage with the law firm? As as Owen said,</span></p> <p><strong>Speaker 1</strong>: <span>222 quick points 11, a practical 11 going back to my theme of the non-executive, the the practical one, going right back to what I said earlier about the company, not existing anymore. Is that when Owen and his, um counterparts in in because bear in mind that these these are often towers of insurance. So it's not just one insurer you're dealing with, it's It's several insurers or could be many insurers when they start asking questions about fees from the about the lawyer's fees. And And that can be quite an extensive exercise,</span></p> <p><strong>Speaker 1</strong>: <span>uh, to justify the, um, the fees. And and that's a perfectly legitimate thing for the the insurers to want to do, not least in order to preserve the limit.</span></p> <p><strong>Speaker 1</strong>: <span>Nevertheless, the task of doing that is not something that's covered under the DNO policy. The company, as we've discussed, is no longer there to foot those sort of coverage costs. And so the only, uh, source for for for the time spent in dealing with insurers</span></p> <p><strong>Speaker 1</strong>: <span>is the director's own pockets, because that's not something that's covered in the DNM policy. So that's another thing that could be a nasty surprise for the directors. The other point I was going to make about the non execs, um, goes back again to to to what Owen was saying Where you you you make everyone aware, as he rightly said, What what the limits are and how you go about</span></p> <p><strong>Speaker 1</strong>: <span>you know what, what hoops You need to, uh, jump through in order to to to get your your bills paid. But the the general rule of thumb in all these cases is first come, first served. That's how the limit gets eroded. And if you think about what we were discussing earlier about the executives having to bear the main brunt of the regulatory investigation, the parliamentary investigation, the proceedings, whatever else it may be,</span></p> <p><strong>Speaker 1</strong>: <span>they're going to be using up the limit because they're going to need to spend the money rather more rapidly and extensively, perhaps, than the non execs. And so the non execs might be watching rather nervously the rate at which the limit is being eroded by the execs and So in discussing and deciding what the appropriate limit is, uh, long before the company goes bust, Um, it's worth the no execs bearing in mind that</span></p> <p><strong>Speaker 1</strong>: <span>first come first serve could could see them having the the limit substantially eroded before they have to start incurring the costs of being, uh, of of dealing with the accusation that they receive at the watch. That's a really good point, actually, um, the the most policies do actually have an extension for the just for the non execs. Uh, just as a special excess limit, uh, which, when the whole tower has been exhausted,</span></p> <p><strong>Speaker 1</strong>: <span>um, the non execs can tap into a special extra layer of insurance, Um, on the primary course, and it may go up the tower that that coverage as well, which then, um, essentially is just for them. And it is exactly the situation that Francis was was talking about, which is that the limits tend to get burned most vigorously by the execs quite quickly. They that's where a lot of the main action is,</span></p> <p><strong>Speaker 1</strong>: <span>and the the the the non execs is more of a slower burn the claims for them and and so they have that extra limit potentially available to them. Um, if the limits have been burned by the time things really hot up for them. That said in my experience, um, as some claims coverage law, I never saw that. I never saw that extension ever actually triggered. I don't know if anyone else on the panel has, but I've never seen it.</span></p> <p><strong>Speaker 1</strong>: <span>Although Korea might be the case, it might be the case because the non execs are still very much in the action right now with the, uh, disqualification.</span></p> <p><strong>Speaker 0</strong>: <span>But we are going to put you on the spot to answer that question, because it may No, no, I mean, I was just gonna say in my I'm not talking about carillion, but it has happened. And I have seen, um, cases where an entire tower has virtually been eaten up by a single executive. So it it does and and can happen. And, of course, when you think about, um, the pace of regulators and how long these things can take, Yeah, So 3 to 5 years,</span></p> <p><strong>Speaker 0</strong>: <span>I don't think that's even that long. You know, these things go on for longer, so, um yeah, it's absolutely possible that it can happen so precisely. I mean, it goes back to kind of like the conflict of interest or certainly maybe diverging strategies in in in defence strategies. And so, James, have you seen these cases where basically the interest of some directors, execs, or non exec is actually to settle early, admit liability, just get on with their lives, you know, versus some</span></p> <p><strong>Speaker 0</strong>: <span>that actually have far more at stake to having a favourable outcome of the process and therefore are playing the long run game And it seems, with just I mean, just looking at publicly available information again in the car carillion case. It seems to be the case because some</span></p> <p><strong>Speaker 0</strong>: <span>directors have actually settled early. So, um, they get into a slap on the on the hand quite severely. I think some significant fines, um, disqualified for 10 plus years. But at least they can move on with their lives when the others, um, they they will be still, um, they're still going through through the process. So So in terms of that, that that conflict, I mean, So have you seen this? Is it happening? Um, how does how does it get resolved?</span></p> <p><strong>Speaker 0</strong>: <span>Yeah, so we've definitely seen a few times. We had one. actually, that that settled, um, fairly recently where we had, um, four directors all being all with proceedings for disqualification against them. And it was very clear that the case was better against some than the other. They had four different law firms. They had very, very different defence strategies. Some of them wanted to run really, really hard to try to force the secretary of state to discontinue.</span></p> <p><strong>Speaker 0</strong>: <span>And others wanted to go a bit slower to see whether they could reach a settlement which had a slightly lower, um, period of disqualification, for instance. So yeah, trying to deal with that is really difficult. And the policies aren't really designed to do that, because in some ways, the policy is there to provide an indemnity for an individual. It's not always there to necessarily, um, deal with how do you direct the strategy of a case That's for the lawyers who are retained. It's not for the insurers to make that decision.</span></p> <p><strong>Speaker 0</strong>: <span>It's though, about the conversation with the insured with the lawyers and in particular with the brokers, about your real risk here of using your limit. You've got to start to get to grips with this as a whole, and that's the assistance that a good carrier can bring.</span></p> <p><strong>Speaker 0</strong>: <span>But it isn't something that the policy is actually designed to deal with. That's very much, Um, I think one of the roles that the brokers can play, um, in this because they are the one person who's really deep into what each of the individuals should be doing and thinking,</span></p> <p><strong>Speaker 0</strong>: <span>Francis, I mean, do you, um, in in terms of, like sitting as as a role and representing, you know, the the the the the brokers?</span></p> <p><strong>Speaker 0</strong>: <span>How do you kind of like engage and with the the the the clients that actually for them to really understand all the ramification and how critical this is going to be in a few rare instances where it's meant to kind of protect the personal liability of of of the directors? How difficult a job is it</span></p> <p><strong>Speaker 1</strong>: <span>getting the? I always say getting the attention of the board is, is my biggest challenge, Uh, rather than, um rather than, you know, uh, looking at competition in, In In the broken industry, it's it's It's focusing on the end users and getting the directors to start thinking about these issues rather than simply assuming, as is perfectly natural. Uh, while the company is, um existing that they don't need to get into the into this level of detail.</span></p> <p><strong>Speaker 1</strong>: <span>Insolvency is, is the game changer. And if if I had the ability to do so, I would certainly recommend that all boards had a a little sort of teaching or or or discussion around what the implications of that are for. For them, some of which are emerging in this discussion, clearly</span></p> <p><strong>Speaker 0</strong>: <span>ed your perspective on this,</span></p> <p><strong>Speaker 1</strong>: <span>uh, I. I don't disagree with anything that's just been said, I think, uh, if something's working well, if a claim is working, well, then there is a good dynamic between the insurer, the insurer's representatives, uh, the broker and the insured. And that's the best way in the end, usually to resolve these problems, Sometimes there are insurmountable conflicts between them and and that can't be helped, but in most cases, having that positive dynamic, a good flow of information. I think the insurer what What spooks the insurers normally</span></p> <p><strong>Speaker 1</strong>: <span>is silence when they they're reading about things in the press. They're reading that there's some sort of investigation started. They're reading that there's a US litigation that's commenced. No one said anything to them about it. That's the kind of thing that spooks the insurer. And if they're the last to hear about these things, it doesn't. It doesn't build trust with the insured.</span></p> <p><strong>Speaker 1</strong>: <span>It shouldn't. It needs to be as as much as legally possible open with the insurer in order to prevent those types of situations. It's a bit like going over with overdrawn with your bank. You know, if you've talked about it with the bank first, no problem. But if you go overdrawn, um, without saying anything, they're going to be on the phone and you're gonna be charged something. So these it's about building trust, um, with your insurer. And although your instincts may be not to not</span></p> <p><strong>Speaker 1</strong>: <span>want to talk to them about things, it is better that you do. Um, and your broker can certainly help with that conversation and your lawyers can as well and some. But sometimes the insured's own lawyers can be an impediment to that discussion, so they're kind of warning their clients not to say anything to the insurers there might be a good reason for that, but it might actually just be overly cautious behaviour, Uh, actually a free flowing conversation under a nondisclosure agreement. Um, that's sort of that's the sort of way that the industry likes to likes to handle these things.</span></p> <p><strong>Speaker 0</strong>: <span>I hear very often. And I'm turning to you, James, you know, the the benefit of having privileged conversations, you know, whether it's at the board level, you know, in terms of like keeping these conversation privileged in in ensuring having a solicitor, sitting on the board or as a company secretary into ring fencing. These discussions, um, what about these discussions? I mean, as Ed was suggesting in terms of engaging with the insurer</span></p> <p><strong>Speaker 0</strong>: <span>in terms of like keeping them informed? I mean, there's a limit of what you can share without putting yourself at risk. From a legal standpoint, how do you advise clients on that</span></p> <p><strong>Speaker 0</strong>: <span>this common interest privilege that exists between, um, an insurer and an insured, which I think you can rely on quite heavily? Uh, and that that's certainly our house style is we're very happy to enter into NDAS because that common interest privilege there already. Um usually an ND a doesn't</span></p> <p><strong>Speaker 0</strong>: <span>had anything. It it it doesn't. It's not usually required. But if it makes the lawyers on the other side feel more comfortable, we're very happy to do them. Um, and it does differ very much from jurisdiction to jurisdiction in the US. It's much more. It's perceived as much more an issue perhaps than it is here. And so I think, because so much of our work does have that cross border, um, element to it, trying to explain common interest privilege and understand</span></p> <p><strong>Speaker 0</strong>: <span>how under, for instance, in English law policy, common interest, privilege might work and whether it clashes with that when you go into the US or into Canada or somewhere else, um is a big part, I think of where we try to get people comfortable,</span></p> <p><strong>Speaker 0</strong>: <span>and I think maybe just a sort of, I suppose, a little shout out here for this line of business DNO particularly in insolvency situation. Certainly everyone around this table recognises we're not now dealing with a company we are dealing with, actually a person and a person's liberty or a person's asset. And you do find that, um, there are perhaps I think many less</span></p> <p><strong>Speaker 0</strong>: <span>real disputes in this area than there are in some other some other areas because everybody understands that there is an individual at the end of it who hasn't had to deal with this before and is being advised. Sometimes we're trying to coach their lawyers as much as them about Well, actually, what is this line of business? And again, another reason why I think having really good claims handler really good brokers involved is that coaching element of the lawyers who may never have had to deal with this before.</span></p> <p><strong>Speaker 0</strong>: <span>But it is, I think, AAA class of business and insurance where everybody is really striving for that end game to help an individual.</span></p> <p><strong>Speaker 0</strong>: <span>So we've learned a lot from the input and your experience that you kindly shared with us, Um, in terms of like, um uh, making sure that you have a clear understanding of how the policy works and I mean, that's that's that's one. But can we turn now in terms of the other lessons learned in terms of whether for the underwriter, uh to to not having spotted that something was coming was happening and the same learning for</span></p> <p><strong>Speaker 0</strong>: <span>Ned non exec directors to identify to be able to determine. Should I stay on this board or not? So what were the telltale signs that were missed in that particular case of of a carillion? Now that we have the benefit of of of hindsight, uh, Ed,</span></p> <p><strong>Speaker 1</strong>: <span>I haven't read all of the material it has on the Internet about this. Um, but the the parliamentary committee was very critical of the non executive directors as well as the executive directors. And that's that is quite unusual for the reasons that, uh, Francis mentioned, which is that generally you have these two sets. The execs are right in the middle of it. And by the way, car only had two executive directors on its board at any given time, the the the CFO and the CEO. They were the only two. So all of the other directors were non executive directors in carillion.</span></p> <p><strong>Speaker 1</strong>: <span>So immediately, you've got actually quite a lot of power concentrated in only a couple of people. Um and it makes it even more important. I think that the non execs are doing their job, but it it looks as though from the parliamentary committee report that the non execs were kept in the dark and didn't try that hard to gain an understanding of what was really happening.</span></p> <p><strong>Speaker 1</strong>: <span>Um, and that is obviously a red flag for, uh, for corporate governance. Uh, and if you're if you're an investor, that would be a red flag. But of course, people didn't know this. This stuff came out as time went on. It was if everyone knew that before the collapse happened, then</span></p> <p><strong>Speaker 1</strong>: <span>you know that things would have changed. Um, so really, it's only you tend to only find out about these things once something's happened. Bad corporate governance. I think you've told me this bad corporate governs everyone sports. No one supports good corporate governance because it because it works. Um, it's only when you have a collapse that we everyone realises the corporate governance was terrible. So there aren't too many things you can learn. The corporate governance code is being proposed to be updated again, um, with more more protections. But, uh, in the end, you know it's not going to stop</span></p> <p><strong>Speaker 1</strong>: <span>determine directors, uh, from keeping the nets in, in, in, in, in, in, in the shadow, you know, they they they'll they'll do what they can to hide some of the problems that they've got. I'm not sure that the Korean executive directors, um, you know, this is still being litigated. It's been said that they acted recklessly and in knowing disregard, which is pretty serious. But,</span></p> <p><strong>Speaker 1</strong>: <span>um, I also know from the reports that the that the financial information and the reporting and internal reports coming through to the board were not were not a very good quality. And so the management can't do its job if it's if it's if it can't. If it doesn't get good information about the health of the company, it's possible that that those were contributing factors to what actually happened. Um, and you know, what the Nets can do is help straighten out things like that. You know, they can see the reporting lines aren't clear enough. They can see</span></p> <p><strong>Speaker 1</strong>: <span>that the quality of board papers, the the the financial information coming through that we're on the board, they're gonna get a board pack for every board meeting. They're going to see the financials. They could be saying, You know, from my experience of of being a Ned in another company, this just isn't good enough this this type of information, it doesn't give me any comfort that that we're we're OK. But I think that what happened in car is that the NEDS got bound up with with all of it and and weren't independent enough potentially and and so</span></p> <p><strong>Speaker 1</strong>: <span>they weren't able to give that sort of scrutiny. Um, that was called upon that would would normally be called upon in a public company. Yes. It's going to be very interesting, isn't it? With I agree with everything you said. How how all that gets under the spotlight</span></p> <p><strong>Speaker 1</strong>: <span>when these directors disqualification proceedings, assuming they're not settled fully get underway, which is, I think, due to commence next next month or October. Middle of October.</span></p> <p><strong>Speaker 0</strong>: <span>So maybe by the time you listen to this, you'll have an outcome. And the</span></p> <p><strong>Speaker 1</strong>: <span>other thing is to do with, with, um, financial complexity of some of the underlying business that the company such as this was involved in. It's not just Korea,</span></p> <p><strong>Speaker 1</strong>: <span>but other financial services companies. Uh, again, with the 2008 crash we saw, you know, credit default swaps in the case of and it's how you go about recognising profit on very complex. Large, um, construction projects. And what? The non executive directors are no doubt saying, which may be the same as the insurers were saying</span></p> <p><strong>Speaker 1</strong>: <span>when they decided that they were going to, uh, grant cover to carillion is Well, we look, we looked at the financial statements and yeah, they they were pretty complicated. There were lots of notes to the accounts, but at the end of the day, uh, KPNG, I think it was, um, signed off and said, This is a true you know, true and fair view. And, you know, we as non executive directors. Or perhaps we as insurers,</span></p> <p><strong>Speaker 1</strong>: <span>uh, you know, can't can't be expected to to drill behind all of these complex notes to the accounts. If that's what, uh, KPNG say in their wisdom, Uh, they're the experts. Um, we are entitled to place some reliance on that. That's not we. We're not. Um, you know, some of us this may may or may not be the case. In no idea are not, um financially, um, we have no professional qualifications in</span></p> <p><strong>Speaker 1</strong>: <span>in finance. We're not accountants. Uh, we're on the board for other reasons. We bring other skills. Um, and it's not our job to second guess what? Uh, what the auditors, in their wisdom are, are prepared to accept, based on assurances from the executives. It tends to be the way it goes. So</span></p> <p><strong>Speaker 0</strong>: <span>before we turn to to James, I know in terms of whether they spotted some telltale signs I mean, if if I may, from from all the two description there could I may be offered that the fact that when</span></p> <p><strong>Speaker 0</strong>: <span>the CFO resigns, uh, and there's only he's only one of two executive director on the board, maybe as an NED is to have, like a a, uh, post resignation interview with that CFO saying, Can you tell me a little bit more why you're leaving? I don't know. I'm just offering this as one.</span></p> <p><strong>Speaker 0</strong>: <span>Uh, the the second one, I think, uh, Ed, at some point, you did mention that you know, the auditor had been appointed of since the inception of the company. Um, and and and I and I believe that, you know, in terms of like, uh um, all the good governance advice that everybody keeps giving to everybody. You know, I think considering replacing or changing</span></p> <p><strong>Speaker 0</strong>: <span>the, uh, for all time. But I think changing the auditors is is is a good practise. So to me that might be a second telltale</span></p> <p><strong>Speaker 1</strong>: <span>sign. That's the that's That's the job of the audit committee to manage that relationship and that is chock full of non executive directors. It is chaired by a non executive director, the the audit Committee. And, um, that's the whole point. So how KPMG came to be the auditor for, you know, 17 the whole 17 years of Carillon's 18 years of ions Existence,</span></p> <p><strong>Speaker 1</strong>: <span>um, is an interesting question. Um, KPMG were, incidentally, investigated by the FRC and were fined over £14 million by the FRC for this for their audit failings. Um, on that particular case on that particular case and the findings are very egregious, and a number of individual partners were also fined from KPMG were also fined.</span></p> <p><strong>Speaker 1</strong>: <span>Um, and the findings you can read because they're public on the FRC website, but they're pretty damning of, uh, the role of the auditor. And then there was also a civil case, wasn't there. There was a civil case. They were sued for 1.3 billion. Um, and, um uh, which I gather Settled. Um, so we don't know the details of that,</span></p> <p><strong>Speaker 0</strong>: <span>James, from your standpoint, any telltale sign that, um it's kind of like be taken as a lessons learned.</span></p> <p><strong>Speaker 0</strong>: <span>Well, I, I suppose one of the lessons learned is if you're one of six and only two of the directors are ex ex and the four Annes Think very carefully about the diversity of skills on that board. And do you have a trained accountant who sits and chairs the audit committee, for instance? If not, why not?</span></p> <p><strong>Speaker 0</strong>: <span>And then training as well. I think you need to make sure that that neds are, um, always updating their training looking for, um, changes in corporate governance. What does that actually mean? What's happening on ESG and what is happening around particularly carillion, for instance, what's happening around the politics of procurement and how are you procuring these government contracts? Because they the margins were so slim</span></p> <p><strong>Speaker 0</strong>: <span>you needed a massive company to make a relatively small profit. And so I think there are quite some some good learnings from Korea, but actually in that wider sphere, diversity of skills and training that you are given as a net on that board, I would say pretty much big red flags if you're not getting diversity and you're not getting training, um, then perhaps think again. It's interesting, because I do notice,</span></p> <p><strong>Speaker 0</strong>: <span>um, the, um emphasis that from an underwriting standpoint, So the market puts on, um uh, financial statements. Um, but, uh, indeed, if you rely only on that, and it turns out to be, uh, misstated. Um, then there there is really, um um no po potential. Good outcome.</span></p> <p><strong>Speaker 0</strong>: <span>Um, and I'm turning to you, Uh, Owen, in terms of, like, a lessons learned might be kind of like a good opportunity of, like, uh uh, mentioning again your your fantastic podcast. Because, uh, there is one about board effectiveness, uh, which, actually, I think touches upon on on all these topics. Because at the end of the day, this is where, uh, things happen Where? Governance. Where a company keeps its proper moral and business compass. It's at the board. What can you tell us about it?</span></p> <p><strong>Speaker 0</strong>: <span>Yeah, well, just I mean, going, going back to just some of the It's all with hindsight now, right? So we look at it and think, Oh, this This was a red flag. I think the fact that there there appears to have been no red flags raised for such a long period of time, where we can't get bad news is kind of the theme that comes out of a lot of the interviews. Um, maybe that's a red flag in itself. You know that there aren't any red flags, but firstly, um, just going back as well to the, um</span></p> <p><strong>Speaker 0</strong>: <span>the the role of the advisors II. I don't know whether it's a good defence or not. Um, but I don't know if that, um, of course, directors have duties to to exercise some sort of independent thought process as well. Over that, say, say yes. I relied on KPMG, but, um, coming to the learning development point kind of mixing in with that, Um, yes, but were you just accepting it, or were you actually reading and thinking about it, um, challenging it, questioning it. So I just think that's an interesting point that comes out of it. And, um</span></p> <p><strong>Speaker 0</strong>: <span>and then finally, on board effectiveness. Yes, we we have talked about this, um, and Ed was talking about it there. If you think about the the, um the board as being like the brain of the body. Um, the body can't function with the right information coming into it. And the brain can't make the right decisions. Uh, unless it's effective and if it's got the right information. So, um, if crappy information is coming up, then yes. I mean, it's gonna be difficult to make the right decisions. And it's all about decision making, Isn't it, as well. So,</span></p> <p><strong>Speaker 0</strong>: <span>um, having that structure and process in place of how you make decisions is is important.</span></p> <p><strong>Speaker 0</strong>: <span>Thank you, Owen. I think it's time now to actually close this file. Um, I want to thank again our our panellist Ed Francis James Owen. Thank you so much for for your insight. Um, and, uh, stay tuned for our next episode of, uh, DNO files. Thank you, Bye-bye.</span></p>