The state government will introduce legislation into parliament tomorrow designed to finalise the long-running Bell Group legal case, in which the Insurance Commission of WA and other creditors are fighting over a $1.7 billion payout.
The state government will introduce legislation into parliament tomorrow designed to finalise the long-running Bell Group legal case, in which the Insurance Commission of WA and other creditors are fighting over a $1.7 billion payout.
Treasurer Mike Nahan said he would introduce the Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Bill 2015 into parliament but his office declined to provide any details.
The case is one of Australia’s longest running and most expensive legal disputes.
Bell Group collapsed in 1991, leaving creditors to recover money from 20 Australian and international banks.
After almost 20 years of litigation principally financed by the Insurance Commission of Western Australia (ICWA), settlement between the liquidators of Bell and the banks was finalised in June 2014.
“ICWA has advanced the liquidator about $200 million since 1995 before the final settlement was reached with the banks,” Dr Nahan said in a statement.
However, litigation has recommenced in WA and the United Kingdom between the remaining creditors of Bell Group to determine how the $1.7 billion settlement will be divided.
“We have seen this case already consume 20 years of court and public resources and there is limited confidence there will be a timely conclusion that does not involve further complex and protracted litigation across multiple jurisdictions,” the Treasurer said.
“We do not intend to allow this litigation to consume a third decade, as well as a great deal more time, money, and the precious limited resources of this State.”
Dr Nahan said there are now effectively only four major creditors of Bell: the Insurance Commission of WA, the Australian Tax Office, and two parties which are, or which represent, professional litigation funders or distressed asset speculators.
These parties are believed to be associated with Dutch billionaire Louis Reijitenbagh and Perth-based Hugh McLernon, who is also a director of litigation funder IMF Bentham.
Mr Reijitenbagh funds and controls Plaza BV, which funds and controls Bell Group NV (in liquidation), which in turn is a creditor of Bell Group and Bell Group Finance. Bell Group NV provided some of the early funding to the liquidator in the 1990s.
Mr McLernon is understood to be associated with private company WA Glendinning Pty Ltd, which bought a ‘worthless’ debt owed by Bell for a token sum in 1991 but has not provided any funding to the liquidator.
On the basis of that debt, WA Glendinning is believed to be seeking a $200 million return.
Dr Nahan said “introducing this legislation will inject some certainty into the timing of the distribution of funds to creditors".
Bell Group was the flagship company of the late Robert Holmes a Court, but after the 1987 stockmarket crash, it came under the control of another prominent Perth entrepreneur, Alan Bond.
The legal action was commenced in 1995 by Bell Group liquidator Tony Woodings, with financial backing from the Insurance Commission of WA.
Mr Woodings’ key claim was that two banking syndicates, including Westpac, Lloyds, National and Commonwealth, knew that Bell Group was insolvent when they obtained security over its assets in 1990.
The banks put Bell Group into receivership in 1991 and subsequently recovered $265 million from asset sales, leaving nothing for other creditors, who have been trying ever since to claw back some of that money.
With inflation and interest, the amount in dispute has increased to $1.7 billion.
The case commenced in the Supreme Court in 2003 with the original judgement handed down in 2008, largely finding in favour of the liquidator.
Justice Owen ordered the banks to repay approximately $350 million principal, together with compund interest, resulting in a $1.66 billion award.
In 2012, the Court of Appeal (by majority) confirmed Justice Owen's findings and increased the interest rate applicable, lifting the total payout to $2.7 billion.
The bank's subsequently paid $718 million to the liquidator. As creditors of Bell Group, the banks stood to gain some of the funds available for distribution.
In 2013, the matter was due to go to the High Court, before the banks and other parties negotiated a conditional settlement in September of that year.
The litigation was finalised in June 2014 when the conditions of settlement were satisfied. The effect of the settlement was that the banks relinquished all claims in Bell, leaving $1.7 billion with the liquidator for distribution between the remaining creditors.
The liquidators accepted the figure of $1.7 billion, recognising that the difference between that sum and the judgement sum of $2.7 billion made allowance for the notional dividend the banks would have received as creditors and for a discount to avoid the risk of an adverse judgement in the High Court.
In its latest annual report, the Insurance Commission said there were a number of issues between the creditors that may prolong the distribution.
"If these issues end up being contested through litigation, distribution may take a decade or more."
The outstanding matters led to more legal action last year.
In August, the liquidator took action seeking orders for the payment of liquidators' expenses, the repayment of money advanced by funding creditors, and an award to funding creditors for the significant risk they took in funding the litigation.
In October, the Insurance Commission said it had commenced its own action in the Supreme Court "seeking to resolve numerous outstanding issues".
