28/10/2008 - 13:39

Judge rules against banks in Bell saga

28/10/2008 - 13:39

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The Supreme Court of Western Australia has ruled against a syndicate of 20 financiers, including three of the four major banks, in the Bell Group litigation saga, the longest-running civil trial in the nation.

The Supreme Court of Western Australia has ruled against a syndicate of 20 financiers, including three of the four major banks, in the Bell Group litigation saga, the longest-running civil trial in the nation.

Justice Neville Owen found that the syndicate of Australian and international banks knew the Bell Group, run at the time by entrepreneur Alan Bond, was almost insolvent but did not engage in any "conscious wrongdoing" or dishonesty in accepting loans to keep it afloat.

But the legal saga that stems from the 1991 collapse of the Bond Corporation subsidiary is far from complete, with Justice Owen today urging parties to mediate on any carve-up of the $1.7 billion being claimed by the liquidators.

The liquidators of the former Alan Bond entity argued the banks, including Westpac, National Australia Bank and Commonwealth Bank, took advantage of the Bell Group in its dying days by securing lucrative assets in return for refinancing.

They alleged that when the banks refinanced loans before the collapse, they knew the group's stable of more than 80 companies was close to insolvency.

Today Justice Owen said the Bell Group was insolvent as of January 1990, around the time the group's funds were given up to the banks.

"Did the directors know the companies were insolvent? No. But they knew the companies were nearly insolvent or of doubtful solvency," Justice Owen said in his written judgement.

"In causing the companies to enter into the transactions ... did the Australian (Bell Group) directors breach the duties they owed to the Australian Bell Group of companies? Yes."

Handing down his findings in a brief three-minute address to a packed courtroom, Justice Owen said the case could go on for years unless the parties sat down to mediate.

"Are the banks liable under any of the four heads on which the equitable fraud claims are based? No."

But he said the banks may be liable under other statutory claims.

Outside the court, liquidator Tony Woodings said the plaintiffs had established their main claim but it would take some time to determine some aspects of the case, which may well end up back in court.

He said lawyers would have to study more than 2,600 pages of findings to determine any carve-up of the $1.7 billion being claimed by the plaintiffs, which include the Insurance Commission of Western Australia, the Commonwealth of Australia, Bell Group Netherlands and Antilles, and the Lord Debenture Trust Corporation.

The banks that sold the Bell Group assets for $280 million also include Lloyds of London, France's Credit Lyonnais and Dresdner Bank in Germany.

Mr Woodings said he could not give any dollar figure on the entitlements of either party at this stage with the 2,600 page judgment still to be analysed by lawyers on both sides.

"The plaintiffs have always been ready and prepared to talk to the banks and that remains the case," he said.

The banks' lawyers said they would "give due regard to what his honour has said" about mediation, but stopped short of promising discussions would be successful.

Freehills partner John Vaughan said the banks had chalked up a significant win in the case.

But the plaintiffs had been victorious on several other fronts, he conceded.

Justice Owen today said the banks were liable for receiving trust property while the Bell Group was on the brink of collapse, knowing that it arose from a breach of Bell directors' duties.

The breach involved Bell entering into transactions that ultimately gave the banks control of its assets when its directors knew that the group was nearly insolvent.

However, Mr Vaughan said he was pleased Justice Owen had found that some creditors remained a lower priority behind the claims of the other creditors, including the banks.

"The banks are very pleased the judge has found in their favour on a number of important issues, including the subordination of the bond holders," Mr Vaughan told reporters.

"The banks' case that they rank ahead of the bond holders has been upheld.

"That will impact very largely on the final result."

State Attorney-General Christian Porter said he had received a copy of the judgment.

"Where it goes from here will be a matter for the liquidator," he said.

"In all likelihood the liquidator will consult the funding creditors, including the Insurance Commission and, in due course, the Insurance Commission will brief me on the progress of this stage of the legal action."

 

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