The NSW Court of Appeal has upheld findings that former GIO Australia Holdings CFO Geoffrey Vines contravened his duty of care on three occasions relating to profit forecasts during a takeover bid. However, the court reversed earlier findings on four other matters.

The decision relates to an AMP takeover bid for GIO late in 1998. The GIO reinsurance division was exposed to substantial claims as a result of Hurricane Georges, which struck Puerto Rico and the US Virgin Islands in September 1998.

The Australian Securities and Investments Commission began civil penalty proceedings in 2001 against Mr Vines and two other executives, Francis Robertson and Timothy Fox, in connection with a statement published by GIO during the takeover attempt that included an $80 million profit forecast from the reinsurance division.

The NSW Supreme Court handed down his findings on liability in August 2005, and Mr Vines lodged an appeal.

The Court of Appeal found the profit forecast to be of considerable significance in the context of a hostile takeover battle.

It said the standard of conduct required of Mr Vines and the other two men was influenced by a due diligence process designed to ensure adequate and materially complete disclosure.

The Court of Appeal found Mr Vines conducted a management sign-off without taking steps to tell GIO’s due diligence committee about the basis of assumptions underlying an $80 million profit forecast.

He told the committee he was comfortable with the integrity of the profit forecast and failed to give attention to whether it would be achieved before the takeover offer ended.