FORMER EXECUTIVES AND DIRECTORS OF DICK SMITH TO FACE LEGAL ACTION OVER COMPANY COLLAPSE

EIGHT former senior company leaders who worked for Dick Smith are being sued in connection with the high-profile collapse of the electronics chain which left $400 million owing to creditors.

Former CEO Nick Abboud, ex-CFO Michael Potts, and former directors Bill Wavish, Phil Cave, Rob Murray, Jamie Tomlinson, Robert Ishak and Lorna Raine are all facing legal action in the NSW Supreme Court.

Ferrier Hodgson, acting for Dick Smith creditors, launched the action and accused them of breaching their duty to exercise reasonable care ahead of the company's financial collapse in January 2016. It's alleged they failed to put in place adequate systems to manage rebates and inventory.

The statement of claim lodged also claims the company earnings in 2015 were inflated by pursuing a rebate maximising strategy which resulted in management buying stock that was driven by the rebates, rather than consumer demand which created a stockpile of "unsaleable" products.

Ferrier Hodgson is seeking to recover amounts equal to Dick Smith's 2014/2015 interim and final dividends, totalling about $28.4 million, and losses of at least $60 million from poor management of inventory.

The law firm representing Murray, Tomlinson, Raine and Ishak said the four non-executive directors will vigorously defend the receivers' allegations that they failed to put in place adequate systems to manage supplier rebates and inventory.

The statement said the directors acted at "all times conscientiously, with care and diligence".

Dick Smith's lenders, National Australia Bank and HSBC, have brought separate legal action against Abboud and Potts in relation to the circumstances under which finance was provided to the company.

Insurers that provided cover for the directors and executives are also being investigated by the receivers.

Business News Australia