CPI loses $5 million case against Stora Enso

CPI maintains it should have been told that Boomerang was in debt to Stora Enso Australia and failing to meet its obligations. It accused company representatives of misleading it over Stora Enso Australia’s intentions towards Boomerang. Stora Enso sued for the money on invoices CPI undertook to effectively underwrite for paper delivered to Boomerang.

In his judgement Justice Moore found the invoicing deal was a gross commercial misjudgement by CPI, “at least with the benefit of hindsight.” It left CPI liable for invoices on Giroform Carbonless paper delivered to Moore Business Systems shortly before Boomerang went bust in January 2004. Both CPI and Boomerang were accredited merchants for the Mill.

Bernard Cassell, MD of CPI, maintained two Stora Enso executives, Mr Fabrello and Mr Ellenberg withheld vital information from him concerning the true state of affairs between the company and Boomerang. He also claimed they misled him on a proposal to halt supplies of paper to the beleagured paper merchant. This would have derailed CPI’s proposed takeover bid, so CPI undertook to take over the invoicing for Boomerang in order to maintain supply.

In finding for Stora Enso, Justice Moore said that since CPI was conducting due diligence on Boomerang at the time and was in possession of the company’s accounts there was no need for the Stora Enso people to go into the unhappy credit history. He also found that Stora Enso was seriously considering halting supplies of carbon paper to Moore Corporation. (These were delivered straight from the Mill, Mitsubishi Hitee Paper in Germany, and invoiced through Boomerang.) CPI maintained this was simply a ruse to apply pressure to close the deal.

The amount in dispute was $3.968 million along with $1.15 million interest and costs. CPI issued a statement saying it was very disappointed with the judgement, “which centred around representations made to the company.” It is considering whether to appeal.