It’s back to New Zealand for an appeal against the Bridgecorp directors’ and officers’ (D&O) decision after the Centro shareholder class action was settled last week without resolving the question of D&O insurance being applied to damages.

The Bridgecorp decision threw the D&O market into turmoil last year when the NZ High Court ruled that a receiver had first claim on D&O policy proceeds when that claim might exceed the amount of cover, effectively denying company directors and executives funding for legal defence costs.

Litigants in major commercial actions in Australia and New Zealand sought to have the decision applied to their cases, and it spread to the shareholder class action against failed New Zealand carpet manufacturer Feltex and to the Centro action here.

Parties on both sides of the Tasman have been waiting to see which case would get a court ruling first, as the judgement will be used to argue later cases.

Centro became Australia’s largest class action settlement last week when the parties settled for $200 million, but because they reached an agreement there is no judgement on the D&O issue.

Now it will be up to the NZ Court of Appeal, which has not set a date to hear the Bridgecorp appeal but is expected to allow it to be heard along with arguments over who is entitled to policy proceeds from Feltex, since the core issue is the same.

Last Wednesday the NSW Court of Appeal sat to hear the Centro dispute as to whether a charge existed over the D&O insurance policy that Centro bought from Chartis.

The dispute was based on an assertion by the class action lawyers, Maurice Blackburn, that the NSW Court should follow the Bridgecorp decision, which dealt with a similar provision to section 6 of the NSW Law Reform Miscellaneous Provisions Act.

The court declined to hear the case because the day before the Centro parties had announced they were close to a settlement.

Although the court decided that hearing the dispute would largely be an “academic exercise”, it decided to reschedule it if a settlement was not reached or the Federal Court did not approve it.

The Centro agreement settled six proceedings against the property company’s entities and PricewaterhouseCoopers, the group’s auditor in 2007 and early 2008. The case centred on disclosure in the accounts for that period, including the full extent of maturing debt obligations and the risk of Centro companies not being able to refinance them.

Centro Group will contribute $10 million to the $200 million settlement, PWC will pay $67 million, Centro Retail Australia $85 million and insurance proceeds will pay $38 million.

The funds will be allocated between legal firms Maurice Blackburn and Slater & Gordon, who ran the actions. Litigation funder IMF has told the Australian Securities Exchange it expects to gain $60 million from the proceedings.

The Federal Court still has to approve the settlement. If it does, the proceedings will be dismissed without admission of liability.