Bell Group Ltd v Westpac Banking Corp

FEDERAL COURT OF AUSTRALIA

THE BELL GROUP LTD v WESTPAC BANKING CORPORATION

[2000] FCA 439

WAG 3067 of 1995

SUMMARY

Introduction

In accordance with the practice of the Federal Court in certain cases of public interest, I have prepared a brief summary to accompany the reasons for judgment that are being delivered today in relation to six motions in this matter.  But the only authoritative pronouncement of my reasons is that contained in the full reasons for judgment.  This summary is necessarily incomplete.

Summary of Judgment

The applicants comprise some 29 companies (all in liquidation) in what was formerly known as ‘The Bell Group” and two liquidators who, between them, are individual liquidators of 21 of those companies.  The respondents are numerous banks (“the Banks”), many of whom lent money to various companies in the Bell Group over a period stretching back to the early 1980s.

At that time the Banks were prepared to lend money to the Bell Group on the basis of what were called “negative pledge” arrangements.  That is, the borrowers agreed not to charge their assets by way of security to any other lenders.

The Bell Group also raised money during that period from other sources, principally in Europe.  Those debts were evidenced by the issue of bonds.  Between 1985 and 1987 the Bell Group issued bonds to the value of $400 million and £75 million.  $150 million of that amount was borrowed from Heytesbury Securities Pty Ltd, a company associated with the late Mr Robert Holmes à Court.  Generally speaking, the bonds were either redeemable for cash or could be converted into shares. 

The extent to which the rights of the present holders of those bonds were and are subordinated, or shall remain subordinated, to all other creditors of the Bell Group, and in particular the Banks has become a major issue, not only in this case but also in certain proceedings before the Supreme Court of Western Australia.

In 1990 the applicant companies charged all of their assets to the Banks to secure repayment of various loans.  Those loans then totalled about $260 million.  In the judgment I have described the security documents as “the Securities”.  I shall do the same in this summary.  When the applicants failed to repay the loans, the respondent Banks exercised their rights under the Securities and realised approximately $300 million upon the sale of the assets which were the subject of such security.

In the principal application in this matter (which has yet to be heard) the applicants seek to set aside the Securities and to obtain orders from the Court that the Banks pay to the liquidators of the applicant companies amounts equal to the total of such realisation, plus interest.

The applicants make their claims on numerous bases. I shall not try to summarise all of them. The main basis is that the applicants claim that some of their former directors and the respondent Banks wrongly caused the Bell Group of companies to execute the Securities…