By Mark Hawthorne
TWO Merrill Lynch executives have repeatedly told the Supreme Court of Victoria they have "no recollection" of alleged conversations they had with former client David Waterhouse concerning a bank guarantee provided to cover his massive options trading losses.
Merrill Lynch subsidiary Berndale Securities is suing How Trading, the options trading company operated by Mr Waterhouse, for $9.8 million of accrued losses. How Trading has launched a $3.9 million counter-claim against Berndale and Merrill Lynch for misleading and deceptive conduct.
Day five of the legal battle was dominated by testimony from Merrill Lynch general counsel Michael Horrax and former Australian head of global markets financing John Laws.
Both men were read sections of Mr Waterhouse's witness statement describing a meeting between the men at Merrill Lynch headquarters in Sydney on December 5, 2007.
The witness statement details conversations in which Mr Waterhouse says he was assured by Merrill Lynch and Berndale executives that they would not "buy protection" to cover his options positions.
Mr Waterhouse wanted those assurances before his wife, Janette Waterhouse, signed over a $4 million bank guarantee taken out on her harbourside property.
Counsel for Mr Waterhouse, Don Grieve, QC, read sections of the alleged conversations to Mr Horrax and then to Mr Laws. Both men continually stated: "I have no recollection of that."
Asked by Mr Grieve if they denied the conversations took place, both men said they did not.
Both men denied parts of the conversation particularly references Mr Waterhouse says he made about the advice of family financial adviser Tony Tighe ever took place.
Janette Waterhouse provided the $4 million Westpac bank guarantee to Berndale so that Mr Waterhouse could keep control of his account after failing to pay a $4.8 million margin call in November 2007.
According to Mr Grieve, his client was "hoodwinked" into borrowing against the value of the Sydney house as Merrill Lynch had already started buying protection against How Trading's failed options positions by using another account.
Mr Laws told the court he was "made redundant" by Merrill Lynch in September last year.
Mr Laws also confirmed he was a defendant in a $4 million lawsuit made by Janette Waterhouse against Merrill Lynch and Berndale in the Federal Court in NSW, and that Merrill Lynch had given him "indemnity" against any personal liability that may arise from that case.
That indemnity was given before Mr Laws signed his witness statement in the case before the Victorian Supreme Court.
The hearing continues today.