Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3)

[2012] WASCA 157

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT  :   THE COURT OF APPEAL (WA)

CITATION:   WESTPAC BANKING CORPORATION -v- THE BELL GROUP LTD (IN LIQ) [No 3] [2012] WASCA 157

CORAM:   LEE AJA

DRUMMOND AJA
CARR AJA

HEARD:   18 APRIL - 22 JUNE 2011

DELIVERED          :   17 AUGUST 2012

FILE NO/S:   CACV 52 of 2009

BETWEEN:   WESTPAC BANKING CORPORATION

First Appellant

SG AUSTRALIA LTD
Second Appellant

NATIONAL AUSTRALIA BANK
Third Appellant

HSBC BANK AUSTRALIA LTD
Fourth Appellant

STANDARD CHARTERED BANK
Fifth Appellant

COMMONWEALTH BANK OF AUSTRALIA
Sixth Appellant

LLOYDS TSB BANK plc
Seventh Appellant

BANCO ESPIRITO SANTO SA
Eighth Appellant

SEB AG
Ninth Appellant

BANK OF SCOTLAND plc
Tenth Appellant

CREDIT AGRICOLE SA
Eleventh Appellant

UNICREDIT BANK AUSTRIA AG
Twelfth Appellant

CREDIT LYONNAIS
Thirteenth Appellant

DRESDNER BANK AG
Fourteenth Appellant

KBC BANK VERZEKERINGS HOLDING NV
Fifteenth Appellant

SKOPBANK
Sixteenth Appellant

DZ BANK AG DEUTSCHE ZENTRAL-GENOSSENSCHAFTSBANK
Seventeenth Appellant

CALYON
Eighteenth Appellant

GENTRA LTD
Nineteenth Appellant

THE GULF BANK KSC
Twentieth Appellant

AND

THE BELL GROUP LTD (IN LIQ)
First Respondent

THE BELL GROUP LTD (IN LIQ) as trustee separately for each of DOLFINNE PTY LTD (IN LIQ) INDUSTRIAL SECURITIES PTY LTD (IN LIQ) MARANOA TRANSPORT PTY LTD (IN LIQ) NEOMA INVESTMENTS PTY LTD (IN LIQ)
Second Respondent

BELL GROUP FINANCE PTY LTD (IN LIQ) (RECEIVER AND MANAGER APPOINTED)
Third Respondent

BELL GROUP (UK) HOLDINGS LTD (IN LIQ) (IN ADMINISTRATIVE RECEIVERSHIP)
Fourth Respondent

BELL PUBLISHING GROUP PTY LTD (IN LIQ)
Fifth Respondent

BELL GROUP NV (IN LIQ)
Sixth Respondent

AMBASSADOR NOMINEES PTY LTD (IN LIQ)
Seventh Respondent

BELCAP ENTERPRISES PTY LTD (IN LIQ)
Eighth Respondent

BELL BROS PTY LTD (IN LIQ)
Ninth Respondent

BELL EQUITY MANAGEMENT LTD (IN LIQ)
Tenth Respondent

DOLFINNE PTY LTD (IN LIQ)
Eleventh Respondent

GREAT WESTERN TRANSPORT PTY LTD (IN LIQ)
Twelfth Respondent

HARLESDEN FINANCE PTY LTD (IN LIQ)
Thirteenth Respondent

INDUSTRIAL SECURITIES PTY LTD (IN LIQ)
Fourteenth Respondent

MARADOLF LTD (IN LIQ)
Fifteenth Respondent

MARANOA TRANSPORT PTY LTD (IN LIQ)
Sixteenth Respondent

WANSTEAD PTY LTD (IN LIQ)
Seventeenth Respondent

WESTERN TRANSPORT PTY LTD (IN LIQ)
Eighteenth Respondent

WIGMORES TRACTORS PTY LTD (IN LIQ)
Nineteenth Respondent

W & J INVESTMENTS LTD (IN LIQ)
Twentieth Respondent

DOLFINNE SECURITIES PTY LTD (IN LIQ)
Twenty-first Respondent

NEOMA INVESTMENTS PTY LTD (IN LIQ)
Twenty-second Respondent

TBGL ENTERPRISES LTD (IN LIQ)
Twenty-third Respondent

WANSTEAD SECURITIES PTY LTD (IN LIQ)
Twenty-fourth Respondent

WAON INVESTMENTS PTY LTD (IN LIQ)
Twenty-fifth Respondent

WESTERN INTERSTATE PTY LTD (PROVISIONAL LIQUIDATOR APPOINTED)
Twenty-sixth Respondent

GEOFFREY FRANK TOTTERDELL in his capacity as liquidator (with ALJ Woodings) of each of the First, Seventh, Eighth, Ninth, Eleventh, Fifteenth, Sixteenth, Seventeenth, Nineteenth, Twentieth, Twenty-second, Twenty-third and Twenty-fifth Respondents
Twenty-seventh Respondent

ANTONY LESLIE JOHN WOODINGS in his capacity as sole liquidator of the Third, Fifth, Tenth, Twelfth, Thirteenth, Fourteenth, Eighteenth, Twenty-first and Twenty-fourth Respondents
Twenty-eighth Respondent

GARRY JOHN TREVOR in his capacity as liquidator of the Sixth Respondent
Twenty-ninth Respondent

THE LAW DEBENTURE TRUST CORPORATION plc as trustee of the BGNV Trusts as defined in the schedule to the writ of summons in CIV 1464 of 2000
Thirtieth Respondent

ON APPEAL FROM:

Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA

Coram  :OWEN J

Citation  :THE BELL GROUP LTD (IN LIQ) -v- WESTPAC BANKING CORPORATION [No 9] [2008] WASC 239

File No  :CIV 1464 of 2000

Catchwords:

Agency - Implied agency - Imputation of knowledge of agent to principal - Syndicate of banks - Agency of lead bank - Agent for limited purpose - Distinction between imputed knowledge and inferred actual knowledge

Bankruptcy - Statutory claims - 'Disposition', 'settlement' or 'alienation' of property in insolvency - Share mortgages, directions and authorisations to give mortgages, guarantees and indemnities, fixed and floating charges, loan agreements, subordination agreements - Whether 'property' - Intent to defraud creditors - Application of Marcolongo v Chen - Proof of conscious wrongdoing not required - Good faith - Valuable consideration - Whether forbearance to sue was valuable in the circumstances - Bankruptcy Act 1966 (Cth) ss 6, 120 and 121

Bankruptcy - Statutory claims - Avoidance - Date at which voidance takes effect - Tracing - Dissipation of property - Effect of Brady v Stapleton - Availability of consequential relief in equity - Corporations Act 2001 (Cth) ss 565, 1400, 1401, 1371 and Part 5.7B - Whether s 565 available to a liquidator of foreign company registered after impugned transactions - Property Law Act 1969 (WA) s 89 - Imperial Acts (Substituted Provisions) Act 1986 (ACT) Schedule 2, Part 7 - Fraudulent Conveyances Act 1571, 13 Eliz 1, c 5

Contracts - Inferred and implied terms - Informal contract of on-loan from issuer of convertible subordinated corporate bonds to parent company - Whether term subordinating right of repayment was included in on-loan - Burden of proof - Objective theory of contract - Scope and utility of extrinsic evidence - Relevance of subjective assent - Contractual purpose - Rationale for treating debt as equity in financial statements - Who bore responsibility for setting the terms - Course of dealing in a corporate group - Turns on own facts - Enforceability by third party beneficiaries - Property Law Act 1969 (WA) s 11(2)

Contracts - Interpretation of contracts - Plain meaning - Resort to extrinsic evidence - Utility of post-contractual conduct

Corporations - Knowledge of - Aggregation of knowledge of employees and agents - Meaning of Krakowski v Eurolynx Properties - Whether it is necessary to identify a guiding mind

Equity - Fiduciary duties - Duties of company directors - Comparison with duties of trustees - Scope and standard of duties to act in the best interests of the company and for proper purposes - Relevance of directors' subjective judgment - Relationship with equivalent statutory duties - Relationship with the duty to exercise care and skill - Grant of securities by a corporate group in an insolvency context - Effect on individual companies in the group - Role of the interests of creditors - Relevance of directors' failure to carry out investigations - Relevance of a group context - Utility of the Charterbridge test

Equity - Fiduciary duties - Duties of company directors - Conflicts of interest - Distinction from duty to act for proper purposes - Non-pecuniary interests

Equity - Knowing receipt of property to which fiduciary obligations attach - First limb of Barnes v Addy - Application outside of trust relationship - Scope of property to which fiduciary obligations attach - Standard of knowledge required - Relationship with the standard for knowing assistance - Baden categories (iii) and (iv) - Deliberate abstention from enquiry and reckless indifference - Proof of conscious wrongdoing not required - Distinction between constructive knowledge and inferred actual knowledge

Equity - Knowing assistance in breach of fiduciary duties - Second limb of Barnes v Addy - Effect of Farah Constructions v Say-Dee - Meaning of 'dishonest and fraudulent design' - Proof of conscious wrongdoing not required

Equity - Equitable fraud - Imposition and deceit - Fourth limb of Earl of Chesterfield v Janssen - Modern role of - Necessity of identifying offence to public utility - Relationship with bankruptcy laws - Whether equal treatment of creditors is required prior to winding up - Scope of the composition cases - Frustration of a restructure available to a distressed company is not an offence to public utility - Not necessary to establish bad faith - Whether necessary to show that creditors were 'kept in the dark'

Equity - Equitable fraud - Unconscientious conduct - Necessity of establishing special disadvantage - Extent to which doctrine applies to commercial entities

Equity - Equitable defences and bars to relief - Abandonment - Election - Laches - Ratification - Restitutio in integrum - Set-off - Corporations Act 2001 (Cth) s 533C

Equity - Remedies - General principles - Practical justice - Distinction between disgorgement and compensation - Judicial discretion to deny the right to elect an account of profits - Public interest

Equity - Remedies - Constructive trust - Distinction between institutional and remedial constructive trusts - Tracing impractical on the facts

Equity - Remedies - Equitable compensation - Appropriate rate and period of compensatory interest - Whether deduction for taxation of compensatory interest should be made at each rest for calculation of compound interest

Equity - Remedies - Injunction - Remedial discretion exercised on the balance of convenience - Rights of non-parties

Estoppel - Estoppel by representation, estoppel by convention, equitable (promissory) estoppel - Continuing relevance of doctrinal divisions - Difference between promissory and proprietary estoppels - Promissory estoppel requires a clear and unambiguous representation - Must be made by party against whom estoppel is sought - Failure to show ongoing reliance - Turns on own facts

Evidence - Utility of hypothetical evidence - Rule in Jones v Dunkel

Limitation of Actions - Trusts and equitable causes of action - Whether claims by beneficiaries of constructive trusts are limited - Limitation by analogy - Distinction between fraud in equity and fraud in the common law - Limitation Act 1935 (WA) s 47

Trade practices - Misleading and deceptive conduct - Likely to mislead or deceive - Sophisticated commercial dealing - Mutually understood meaning not deceptive - Trade Practices Act 1974 (Cth) ss 52, 80, 87 - Competition and Consumer Act 2010 (Cth) Schedule 2 'Australian Consumer Law' s 232

Legislation:

Bankruptcy Act 1966 (Cth), s 6, s 120, s 121
Competition and Consumer Act 2010 (Cth), s 232, Sch 2
Corporations Act 2001 (Cth), s 533C, s 565, s 1400, s 1401, s 1371, Part 5.7B
Fraudulent Conveyances Act 1571, 13 Eliz 1, c 5
Imperial Acts (Substituted Provisions) Act 1986 (ACT), Sch 2, Part 7
Limitation Act 1935 (WA), s 47
Property Law Act 1969 (WA), s 11(2), s 89
Trade Practices Act 1974 (Cth), s 52, s 80, s 87

Result:

Appeal dismissed
Cross-appeals allowed in part

Category:    A

Representation:

Counsel:

All Appellants  :  Mr T F Bathurst QC, Mr D E J Ryan SC, Mr H K Insall SC, Mr S Habib SC, Mr M C Goldblatt, Dr R S Derham, Mr D F C Thomas & Ms K F Banks-Smith

First to Fifth,

Seventh to Twenty-eighth

and Thirtieth Respondents  :   Mr N J Young QC, Mr C G Colvin SC, Mr S M Davies SC, Ms E A Cheeseman, Mr J Barber & Mr D Jackson

Sixth And Twenty-ninth

Respondents  :  Mr N O'Bryan SC & Mr A A D'Arcy

Solicitors:

All Appellants                   :   Freehills

First to Fifth,

Seventh to Twenty-eighth

And Thirtieth Respondents :   Ashurst Australia

Sixth And Twenty-ninth

Respondents  :   Lipman Karas

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TABLE OF CONTENTS

LEE AJA'S REASONS
DRUMMOND AJA'S REASONS
CARR AJA'S REASONS
ATTACHMENT 1
ATTACHMENT 2

LEE AJA'S REASONS

INTRODUCTION

SUBORDINATION
Convertible Subordinated Bonds
NP Reports
Banks' Pleadings of Subordination in Contract and Estoppel

Banks' Pleaded Representational Documents
Banks' Pleaded Representations
Onus of proof on Banks' Pleadings of Contract and Estoppel

Analysis of Banks' Pleaded Representational Documents

Letters dated 11 December 1985, 15 April 1987 from TBGL to the Banks
NP Reports

a)     NP Report 31 December 1985

b)     NP Reports 30 June 1986, 31 December 1986, 30 June 1987

c)     NP Report 31 December 1987

d)     NP Reports 30 June 1988, 31 December 1988, 30 June 1989
NP Information Packages
Lloyds Information Memorandum
Proposal for Negative Pledge Guarantee
Three year Business Plan ('Business Plan')

Other matters referred to by his Honour

Accounting records
BGF (ACT) Ltd

Contracts

Contracts inter se

a)     Inferred contractual term

b)     Implied contractual term

c)     Capacity of Banks to enforce contracts 'inter se'

Contracts inter partes

Estoppel
Trade Practices Act 1974 (Cth)
STATUTORY CLAIMS
Dispositions of property with intent to defraud

Corporations Act, s 565
Property Law Act 1969 (WA), s 89
The ACT legislation
Onus of proof
Applicability of s 565 of the Corporations Act to BGNV Subordination Deed
Intent to defraud
Good faith
Valuable consideration

Dispositions by way of settlement

Corporations Act, s 565
Settlement of property
Relevant Transactions

a)           Share mortgages executed by TBGL as trustee and authorisations executed by beneficial owners

b)     PSD

c)     Guarantee and Indemnity

d)     Mortgage Debentures - Floating Charges

Relief on Statutory Claims
EQUITABLE FRAUD
Claims of respondents other than BGNV
Defence of laches
Claim of BGNV
CONDUCT OF DIRECTORS
Nature of fiduciary duties
Pleaded fiduciary duties
Duty to act bona fide in the best interests of the company by not causing company to prejudice interests of creditors
Duty not to exercise powers improperly
Duty not to have conflict of interest
Breaches of fiduciary duties

Duties to act bona fide in the best interests of the company by not causing company to prejudice interests of creditors and not to exercise powers improperly

a)     Australian directors

b)     UK directors

c)     Equity Trust
Duty not to have conflict of interest

Summary

Barnes v Addy
OTHER GROUNDS OF APPEAL AND CROSS-APPEALS
Loss of right of rescission by election to affirm
Rescission not available because restitutio in integrum not possible

Funds released by banks to bondholders not recoverable
Securities released by banks not recoverable

Ratification

Limitation

Election
Set‑off
Remedial Trust
Denial of right to elect an account of profits
Amount of equitable compensation
Liability to taxation
Injunctive relief

ORDERS

Generally

Costs
Orders of this Court
SCHEDULE 1
SCHEDULE 2
SCHEDULE 3

LEE AJA: 

INTRODUCTION

1. The basic facts from which the issues in this appeal arise are set out in the reasons of Carr AJA and it is unnecessary to repeat or add to them before dealing with the issues that arise for decision in the appeal and cross‑appeals.  In the main, but with some variations or additions, the following reasons adopt the abbreviations, acronyms, initialisms, and defining terms used by his Honour the trial judge set out in Schedules 38.1 and 38.2 of his Honour's reasons.  For convenience and ease of reference amended forms of those Schedules have been included as Attachments 1 and 2 to the reasons of the Court.

2. The case before his Honour concerned the collapse in the early 1990s of a corporate structure known as the Bell group of companies ('the Bell group') formed by a corporate entrepreneur, Robert Holmes à Court ('RHàC'), in the early 1970s.  The ultimate holding company of all companies in the Bell group was The Bell Group Ltd ('TBGL') of which RHàC was the principal beneficial shareholder.  The subsidiaries of TBGL, in the main, were companies incorporated in Australia ('the Australian companies'), but some companies were incorporated in the United Kingdom ('the UK companies') and elsewhere.

3. Expansion of the business operations of the Bell group in that period depended not only upon subscribed and accumulated corporate capital but also substantial borrowings obtained from Australian and international financial institutions ('the Banks') and from RHàC and foreign investors as subscribers to 'convertible subordinated bonds' ('Bonds') issued by TBGL, Bell Group Finance Pty Ltd ('BGF') and Bell Group NV ('BGNV').  Apart from a small overdraft facility provided to West Australian Newspapers Ltd ('WAN') the whole of the Bell group indebtedness to the Banks was borne by BGF, Bell Group (UK) Holdings Ltd ('BGUK') and TBGL.  As at 26 January 1990 that indebtedness stood at approximately $260 million.  At the same date the indebtedness of TBGL, BGF and BGNV to the holders of Bonds ('Bondholders') was approximately $548 million.

4. In broad terms his Honour had to decide whether the plaintiff Bell group companies and their liquidators ('the principal respondents') were entitled to orders that the Banks disgorge moneys obtained from the conversion of Bell group property transferred to the Banks on or about 26 January 1990, the effect of which alienation had been the exclusion of other creditors from access to that property.  It was asserted by the respondents that the transfer of that property to the Banks occurred in a situation of acknowledged insolvency.

5. The Banks contested that claim.  By a counterclaim based on pleadings of contract and estoppel the Banks submitted that the indebtedness to Bondholders was 'subordinated' to the indebtedness to the Banks and that, therefore, in any event, the property alienated to the Banks would have been applied to the discharge of the Banks' claims even if alienation of that property had not occurred and liquidations of the Bell group companies had been commenced instead.

6. Numerous contests at trial in respect of issues of fact and the construction of documents, required vast amounts of evidence to be examined in detail and resulted in very lengthy reasons for decision being published by his Honour.

7. The 'subordination issue' was identified by his Honour as a principal element of the controversy that his Honour had to settle.  His Honour said, at [2556], that it 'permeat[ed] almost every aspect of the case'.  His Honour's reasons for decision applied 440 pages to determination of that question.

8. His Honour accepted significant parts of the Banks' case on the 'subordination issue' but stated, at [4243], that:

   had the [B]anks not established the subordinated status of the on‑loans as at 26 January 1990, the case concerning the prejudicial and detrimental effects of the Transactions and the Scheme, a critical element in the [respondents'] causes of action, would have been unanswerable.

9. The grounds of the cross‑appeal as to whether the 'subordinated status of the on‑loans as at 26 January 1990' was duly established, therefore, raised a central issue in the proceeding and it is appropriate to address that question at the outset.

SUBORDINATION

1. It was the Banks' case that intra‑group loans made by BGNV to TBGL and to BGF from funds BGNV received from the subscriptions by investors to the Bonds it issued were made under contracts of loan in which BGNV agreed to subordinate its right to recover the loans to the rights of other creditors of TBGL and BGF in the event of liquidation of either company.

2. Alternatively, the Banks claimed rights in estoppel by reason of representations, it was said, that TBGL had made to the Banks in respect of the matter of 'subordination'.

3. As discussed later in these reasons, variations of, or alternatives to, the above were also pleaded but the nub of the Banks' case was as stated.

4. Before addressing how his Honour dealt with the relevant matters on which issue was joined on the pleadings, it is necessary to provide some background detail in respect of the relationship between the Bonds and the 'negative pledge reports' ('NP Reports') and to examine his Honour's understanding thereof, a significant factor in his Honour's reasoning [4254].

Convertible Subordinated Bonds

1. In the latter part of 1985 TBGL began investigating the merits of issuing Bonds to obtain funds for use in the businesses of the Bell group. TBGL understood that by issuing Bonds to overseas investors, funds could be acquired at acceptable cost provided that payments of interest going offshore were a deductible expense for the Bell group and met the requirements of s 128F of the Income Tax Assessment Act 1936 (Cth) ('ITAA') (as it then stood) in respect of the 'borrowing operation', and were not subject to withholding tax.

2. TBGL arranged for Bonds to be issued in December 1985, May 1987 and July 1987.  The companies involved in the Bond issues were TBGL, BGF and BGNV.  With two exceptions, discussed below, the Bonds were issued on European markets to offshore investors.

3. BGNV was incorporated in the Netherlands Antilles on 28 November 1985 as a wholly owned subsidiary of TBGL for the purpose of issuing Bonds to overseas investors [77] and to meet the requirements of s 128F of the ITAA. BGF was incorporated on 11 February 1986, as a wholly owned subsidiary of TBGL, with the intent that BGF act thereafter as the 'internal financier' of the Bell group [75, 178]. BGNV became a wholly owned subsidiary of BGF on 25 March 1987 [2781].

4. Other than the Bonds issued directly by TBGL to Heytesbury Securities Pty Ltd ('Heytesbury Securities'), discussed below, the Bonds consisted of two parts.  The first part may be described for the purpose of these reasons as a [Finance] Bond.  The face value, or principal amount, of the [Finance] Bond was the sum payable by the issuer of the Bond ('the Issuer') to a Bondholder on the date of maturity of the Bond.  The second part was a Conversion Bond issued by TBGL which was attached to, and not detachable from, the [Finance] Bond.  A Conversion Bond had the same face value, or principal sum, as the [Finance] Bond to which it was attached.  Conversion Bonds gave the Bondholder a right to elect, in the period of the Bond, to direct the Issuer to apply the principal sum repayable to the Bondholder on the [Finance] Bond to payment of the balance of unpaid principal of the Conversion Bond to TBGL, thereby obliging TBGL to apply the whole of the principal of the Conversion Bond to acquisition by the Bondholder of shares in TBGL at the price per share ('Conversion Price') stipulated in the Bond Issue Trust Deed.  Bond entitlements were exercisable by bearer. 

5. Upon issue by TBGL each Conversion Bond was paid up to 1 cent per $1,000 of face value (other than in Bond Issue 3 where the paid up amount was £0.01 per £1,000).  The balance of principal of a Conversion Bond became payable if the Bondholder exercised a right to elect to convert a Conversion Bond to TBGL shares.  If by the maturity date of a Bond the Bondholder had not elected to convert the Conversion Bond to shares in TBGL, TBGL undertook to redeem and cancel the attached Conversion Bond by paying to the Bondholder the amount paid up on the Conversion Bond (i.e. 1 cent per $1,000 of face value).

6. The first issue of Bonds ('Bond Issue 1') occurred on 20 December 1985 [309]. The combined principal sum of the issue was $150 million. TBGL and BGNV each issued Bonds worth $75 million. The BGNV‑issued Bonds were sold to overseas investors by underwriters and appointed selling agents and were listed on the Luxembourg Stock Exchange. The TBGL‑issued Bonds did not have an attached Conversion Bond. It was a single Bond which included a right to convert the Bond to TBGL shares. Those Bonds were issued to Heytesbury Securities and were unlisted. Heytesbury Securities was controlled by RHàC, the major beneficial owner of shares in TBGL. The purpose of that placement of Bonds was twofold. First, to protect RHàC's interests as principal shareholder by providing him with an option to obtain additional TBGL shares by converting the Bonds to TBGL shares and second, to meet the requirements of s 128F of the ITAA. At first it had been intended that RHàC take up $75 million of the $150 million Bonds to be issued offshore by BGNV but upon realisation that exemption from withholding tax would not be granted if an Australian resident subscribed to such a proportion of the Bonds issued, it was determined that RHàC's requirements were to be met by a separate domestic issue of Bonds by TBGL.

7. Subsequently, Bonds were issued by BGF and BGNV on 7 May 1987 ('Bond Issue 2') and by BGNV on 14 July 1987 ('Bond Issue 3') [310 ‑ 311].  The principal sum of the Bonds in Bond Issue 2 was $250 million of which $175 million represented Bonds issued by BGNV to offshore investors and $75 million Bonds issued by BGF to Heytesbury Securities.  The latter placement had the same purpose as the issue of Bonds to Heytesbury Securities by TBGL in Bond Issue 1.  The principal amount of the [Finance] Bonds issued offshore by BGNV in Bond Issue 3 was £75 million.  As with Bond Issue 1 the BGNV‑issued Bonds in Bond Issues 2, 3 were sold by underwriters and agents abroad to overseas investors and were listed on the Luxembourg Stock Exchange.

8. The Bonds issued by TBGL and BGF to Heytesbury Securities were originally recorded in short agreements dated 20 December 1985 [TBGL.03393.205] ('the first agreement'); and 6 May 1987 [TBGL.02127.142; TBGL.02127.142.001] ('the second agreement').

9. TBGL was included as a party to the second agreement as issuer of the attached Conversion Bonds and as guarantor of the performance by BGF of its obligation to redeem the Bonds on maturity.

10. Neither agreement included a form of the Bond or set out the terms or conditions thereof.  The first agreement provided that the Bonds were identical in all respects to the 'convertible notes' issued by BGNV save for differences 'with respect to rights and other issues, capital distribution and optional redemption as set out in … the Schedule' to the agreement.  The first agreement stated that such differences were 'in order to comply with the provisions of the [ITAA]'.  Why that was so was not made apparent in the content of the Schedule.

11. The differences set out in the Schedule to the first agreement appeared to make the terms of TBGL‑issued Bonds more favourable to Heytesbury Securities as Bondholder than the rights obtained by Bondholders under the terms of the Bonds issued by BGNV.  First, the condition for exercise by TBGL of an option to call in and redeem the Bonds in the first five years of the term of the Bonds was more restrictive in that the Schedule provided for the current market price of TBGL shares to be adjusted down for 'any bonus, rights issues, other cash issues and capital distributions' making it more difficult for the condition for exercise of the option, namely, that the 'ordinary share price' be 'at least 130 per cent of the conversion price for a period of 30 business days', to be met.  Second, Heytesbury Securities, unlike other Bondholders, had an entitlement to all 'bonus and rights issues (and) other securities' issued by TBGL during the term of the Bonds such entitlement to be exercisable upon conversion of the Bonds to TBGL shares.  In addition, the Schedule provided Heytesbury Securities with a commission of 2.5% on the principal sum of the Bonds for a 'management fee', 'underwriting fee' and 'selling concession', the effect of which, in the circumstances, was a discount of 2.5% on the cost of the Bonds.

12. The second agreement stated that subject to the terms of the Schedule to that agreement, the terms of the Bonds issued by BGF to Heytesbury Securities were 'terms which are standard to convertible bond issues in the Euro‑market at this time'. It did not state that differences from those terms were necessary in order to comply with the ITAA. The Schedule to the second agreement provided that Heytesbury Securities was to be paid a commission of 2.5% on the principal sum of the Bonds, but did not repeat the additional benefits recited in the Schedule to the first agreement.

13. It was not until 25 July 1988 that Trust Deeds for the Bonds issued by TBGL [TBGL.00003.003] and BGF [TBGL.00003.002] were executed [313] ‑ [319].  Under those Trust Deeds LDTC was appointed as Trustee for the Bondholder.  The Trust Deeds recited that they were restatements of the terms on which the Bonds were held.  On a date before 25 July 1988 Heytesbury Securities had transferred its interest in the Bonds to Drayton Capital Pty Ltd ('Drayton') and Drayton executed each Trust Deed as the Bondholder.  It appears to be assumed that Drayton was controlled by RHàC and that RHàC's financial commitment to the Bell group was not discharged until 28 July 1988 when the Insurance Commission of Western Australia ('SGIC') acquired the Bonds that had been issued by TBGL and BGF to RHàC's interests.

14. BGNV received the principal amount of the [Finance] Bonds it issued in Bond Issues 1, 2 and 3 less fees and commissions paid to selling agents, underwriters, managers of the Issues, and costs and expenses.  The net amounts received were transmitted by BGNV to TBGL in Bond Issue 1 and to BGF in Bond Issues 2, 3 and recorded as loans in the respective accounting records of each company.  The differences between the principal amounts of the [Finance] Bonds issued by BGNV and the sums remitted to TBGL and BGF were treated as borrowing costs incurred by BGNV on behalf of TBGL and BGF.  Those costs were debited by journal entry to the loan accounts of TBGL and BGF with BGNV.  The amount of each loan then matched the principal amount of the [Finance] Bonds issued by BGNV.  The amount of the TBGL loan account with BGNV abated with the exercise by Bondholders of the right to convert Conversion Bonds to shares in TBGL.  Between 20 December 1985 and 30 June 1988 $14.633 million was added to TBGL share capital and share premium reserves by application of the principal of the Conversion Bonds to the purchase of TBGL shares.  At the same time the TBGL loan account with BGNV, $75 million, was reduced by that amount [282.14.0004 Notes 7(e) p 31; 8(i)(a) p 32; 9 p 34; TBGL.03421.050 Notes 7(i)(a) p 21; 8(i)(a) p 22; 22 p 30].

15. Schedule 1 to my reasons sets out details of Bond Issues 1, 2 and 3.  Schedule 2 records the progressive liability of BGNV as the Issuer of Bonds.  Schedule 3 is a schedule of TBGL's liability as Issuer and Guarantor in respect of all Bonds issued.

1. Bond Issue Trust Deeds were executed by BGNV as Issuer, TBGL as Guarantor and LDTC as Trustee for the three Bond Issues by BGNV ((1): TBGL.08045.031 [cl 6(A)]; (2): TBGL.04554.001; (3): TBGL.45076.046 [cl 5(A)]).  It was provided in each Trust Deed that the rights of Bondholders to be paid the principal sum of the [Finance] Bonds were subordinated to the rights of other creditors of BGNV if BGNV were placed in liquidation.  Similarly, Bondholders' rights against TBGL, as guarantor of the amounts repayable to Bondholders by BGNV were subordinated to the rights of other creditors of TBGL in the event of the liquidation of TBGL, as was a Bondholder's right to receive from TBGL the paid up amount of a Conversion Bond upon redemption of the Conversion Bond [(1): cl 6(B); (2), (3): cl 5(B)].

2. The liability of TBGL as guarantor was described in the Bond Issue Trust Deeds [(1): cl 5(A), (F), (G), (H); (2), (3): cl 4(A), (F), (G), (H)] as a direct and unconditional obligation by which TBGL accepted liability as if it were the principal debtor, not merely a surety, and as a full liability that applied irrespective of the liability of BGNV or BGF.

3. The Banks' submissions to his Honour assumed that in addition to subscribing the face value of the [Finance] Bonds, Bondholders also paid the paid up amount of the Conversion Bonds.  The Banks relied upon that assumption for a submission that the moneys lent to TBGL (and presumably to BGF) by BGNV contained a component that represented the paid up amount of Conversion Bonds contributed by Bondholders.  On the hearing of the appeal counsel for the Banks was asked whether any of the accounting records of TBGL, BGF and BGNV supported that submission but no entry in the accounts to that effect was identified.

4. Counsel for the Banks submitted that moneys contributed by Bondholders as the paid up amount of the Conversion Bonds was 'subordinated money' (appeal ts 3494).  That description was part of the proposition that underlay all submissions put to his Honour by the Banks on the issue of subordination, namely, that 'bonds means proceeds', a proposition examined later in these reasons.  The reasoning behind the use of the term 'subordinated money' referred to above appeared to be as follows:  because the right of a Bondholder redeeming a Conversion Bond from TBGL to recover the paid up amount of a Conversion Bond was, if TBGL went into liquidation, subordinated to the rights of other creditors of TBGL, the paid up amount of a Conversion Bond could be described as 'subordinated money'.  Furthermore, as, so it was put, the paid up amount of the Conversion Bonds was part of the funds lent by BGNV to TBGL (and BGF), it could be assumed that the whole of those loans had been understood by BGNV, TBGL and BGF to be 'subordinated' loans at the time they were made.  Apart from the fallacy embedded in the description 'subordinated money', the following facts show that the foregoing submission cannot be sustained.

5. Under the Bond Issue Trust Deeds [(1):  cl 7(D); (2), (3): cl 6(D)] BGNV and TBGL undertook to issue, and deliver to a stakeholder for Bondholders a Global [Finance] Bond (in the case of BGNV) and a Global Conversion Bond (in the case of TBGL), each to have the same principal sum.  The principal sum of the Global Conversion Bond was to be 'initially paid up as to [1 cent per $1,000 (£0.01 per £1,000 in Bond Issue 3)] principal amount' upon delivery by TBGL.  Under the Subscription Agreements made between TBGL, BGNV and parties undertaking to underwrite and manage the issue of the Bonds ('the Managers') [(1): TBGL.00355.012; (2): TBGL.08043.034; (3): 395.22.0034] TBGL and BGNV agreed that BGNV would deliver to the Managers a Global [Finance] Bond for the purposes of the Trust Deeds.  That delivery was to be made against payment by the Managers to BGNV of the principal amount of the Global [Finance] Bond less 1.5% discount to selling agents, 1% commission to the Managers and other expenses [cl 6(C); cl 7; cl 6].  There was no provision in the Bond Issue Trust Deeds, or in the Subscription Agreements, for TBGL to receive any payment against delivery of the Global Conversion Bond paid up as to 1 cent per $1,000 (£0.01 per £1,000) of principal.

6. It does not appear from any other material brought to the attention of the court that subscribers to the Bonds made any payment on the Conversion Bonds.  If there had been such a payment it would have been necessary for those moneys to be paid to TBGL as part of its capital funds or, if received and retained by BGNV, recorded by BGNV as a loan received from TBGL.  There was no record of either event.

7. Indeed the following accounting record in the TBGL journal in respect of Bond Issue 1 demonstrates conclusively that no moneys were remitted to TBGL as moneys subscribed to the Conversion Bonds by Bondholders.

8. The TBGL journal entry [TBGL.02176.184] shows that, as forecast to investors in the Offering Circular [TBGL.08045.024, p 14], $73,025,000, being the net proceeds of the Issue, was remitted to TBGL as a loan.  Details were set out in the journal entry of the fees, costs and disbursements deducted from the funds subscribed to the BGNV Bonds, also treated as advances from BGNV to TBGL.  The amount of those outgoings was $1.975 million which brought the amount of the loan to $75 million.

9. The journal entry also recorded two further sums brought to account as receipts by TBGL (consistently with the TBGL assurance to the Australian Taxation Office ('ATO'), described later in these reasons, that BGNV would not obtain an 'offshore' profit from the Bond Issue) being interest earned on the funds whilst held as bank deposits between 20 ‑ 23 December 1985 and a foreign exchange gain on that money between the dates of deposit and withdrawal.

10. No part of the moneys accounted for in this journal entry represented a notation of the receipt and disbursement of a sum representing the paid up amount of the Conversion Bonds.

11. Those facts show that as stated in the respective Offering Circulars distributed before each Bond Issue, the Conversion Bonds were issued by TBGL as bonds paid up in the amount specified, and that Bondholders did not contribute that sum.

12. The amount endorsed as paid up on the Conversion Bonds seems to have been treated by TBGL as a nominal sum unnecessary for separate account as to its source from capital reserves pending conversion or redemption of the Conversion Bonds.  When Conversion Bonds were converted the entries made in shareholder funds and reserves recorded that the full principal sum of the Conversion Bonds was applied to shareholder funds and share premium reserves [TBGL Annual Report 30 June 1987:  TBGL.00008.004, p 31 Note 7(e), p 32 Note 8(i)(a); TBGL Annual Report 30 June 1988:  TBGL.03421.050, p 21 Note 7(i)(a), p 22 Note 8(i)(a)].

13. It is obvious that the paid up amount of the Conversion Bonds had no relevance to any proposition that the loans made by BGNV to TBGL and BGF included a term that BGNV's right to recover the loans was subordinated to the rights of other creditors of TBGL and BGF if those companies were placed in liquidation.

NP Reports

1. Between July 1983 and March 1987, Negative Pledge Agreements ('NP Agreements') were made between TBGL and nominated subsidiaries of TBGL (together 'the TBGL NP Group') of the one part and members of the Banks of the other [164].  Under the NP Agreements the participating TBGL subsidiaries were described as 'Indemnifying Subsidiaries'.  From time to time Supplemental Agreements added TBGL subsidiaries as Indemnifying Subsidiaries pursuant to cl 12.2 of the Second Schedule of the NP Agreements.

2. Under that clause TBGL undertook to have all wholly owned subsidiaries incorporated in Australia join the NP Agreements as Indemnifying Subsidiaries.  Pursuant to cl 9 of the Second Schedule of the NP Agreements, a wholly owned subsidiary of TBGL, incorporated outside Australia, could elect to join the NP Agreements as an Indemnifying Subsidiary subject to two provisos in cl 9 being satisfied.

3. In terms, the NP Agreements executed after the date of incorporation of BGNV contained a warranty by TBGL that BGNV was an Indemnifying Subsidiary and that it was a party to the NP Agreements (Second Schedule, cl 12.1).  However, BGNV did not execute any of those NP Agreements nor was it identified in the First Schedule to those agreements as a party to the agreements as an Indemnifying Subsidiary.  Although BGNV could have become an Additional Indemnifying Subsidiary bound by the NP Agreements by executing a supplemental agreement for that purpose pursuant to cl 9 of the Second Schedule, that step was not taken.

4. Under the NP Agreements, NP Reports were required to be presented to the Banks each six months.  The NP Reports informed the Banks whether ratio limits prescribed in the NP Agreements with regard to assets and liabilities of the TBGL NP Group were being met.

5. The NP Agreements defined 'Shareholders Funds' as 'all paid up capital and reserves appearing in the Latest Audited Consolidated Balance Sheet of [the TBGL NP Group]' (cl 1.1).  At all material times Coopers & Lybrand ('C&L') were the accountants and auditors of TBGL.  Accounts were audited as at 30 June each year for publication in the TBGL Annual Report.  It may be assumed that the parties to the NP Agreements contemplated that a balance sheet prepared at 31 December by C&L as accountants satisfied the requirements of the phrase 'Latest Audited Consolidated Balance Sheet'.

6. The definition of 'Total Liabilities' applied a more expansive concept of shareholder funds by excluding 'paid up share capital, reserves of any nature or undistributed profits of [the TBGL NP Group]' (cl 1.1).  The principal definition of 'Total Liabilities' was 'the aggregate amount (as disclosed by the Latest Audited Consolidated Balance Sheet) of all secured and unsecured liabilities of [the TBGL NP Group]'.

7. As shown later in these reasons the consolidated balance sheets of the TBGL NP Group between 31 December 1985 and 31 December 1987 treated the amount described as 'Convertible Bonds' as part of 'Shareholders Funds' for the purposes of the NP Reports and on that basis excluded the amount of that 'equity' from the amount of 'Total Liabilities'.

8. His Honour, at [3223] ‑ [3224], noted that the Banks were bound by the terms of the NP Agreements to receive NP Reports based on accounts prepared by C&L if those accounts did not include liabilities to redeem the Bonds as part of the 'Total Liabilities' of the TBGL NP Group.

9. On 30 July 1987 the NP Agreements were replaced by the NP Guarantee [2801]. Termination of the NP Agreements required the Banks to provide formal releases from the covenants of indemnity to all Indemnifying Subsidiaries. Those releases were completed at the end of September 1987.

10. The NP Guarantee restated the ratios to be maintained between assets and liabilities as now defined and redefined the TBGL NP Group as TBGL and 'Australian Subsidiaries' (cl 1.01).  The expression 'Australian Subsidiaries' did not exclude, necessarily, a foreign subsidiary of TBGL.  The terms of cl 15.02 of the NP Guarantee permitted TBGL, at any time, to nominate BGNV as an 'Australian Subsidiary'.

11. 'Shareholders Funds' was defined as 'Total Tangible Assets' less 'Total Liabilities' (cl 1.01).  The term 'Total Tangible Assets' was defined, generally, as the aggregate of book values of 'Tangible Assets' of TBGL NP Group on a consolidated basis.  'Tangible Assets', in broad terms, was defined as all assets other than intangible assets according to accounting principles generally accepted in Australia, but subject to the inclusion of intangible assets valued by an independent valuer approved by the auditor (cl 1.01).

12. 'Total Liabilities' was now defined as the aggregate amount of all liabilities of the TBGL NP Group on a consolidated basis being liabilities classified as such under accounting principles generally accepted in Australia, including contingent liabilities.  The direct inclusion of a contingent liability was a significant change from the definition of 'Total Liabilities' that applied under the NP Agreements in which the only contingent liability included was that for which provision for an estimated liability had been made in the consolidated balance sheet.  A further significant change from the previous definition in the NP Agreements was the exclusion of 'non current Subordinated Debt' from 'Total Liabilities' (insofar as that debt would otherwise be included in the aggregate).  'Subordinated Debt' was defined as 'the aggregate amount of all Borrowings that are expressly defined as subordinated and expressed in their terms to rank after all unsecured and unsubordinated debt of the Guarantor and/or the Australian Subsidiaries' (cl 1.01).

13. 'Borrowing' was defined to include the 'obtaining or undertaking of any financing liability' (cl 1.01).

14. It followed from the foregoing that the liability of TBGL (as guarantor of the obligations that BGF and BGNV undertook as issuers of Bonds) being a liability that would otherwise have been included within Total Liabilities for the purposes of the NP Guarantee was expressly excluded from Total Liabilities as a 'non‑current Subordinated Debt'.  (See:  appeal ts 3234 ‑ 3236.)

Banks' Pleadings of Subordination in Contract and Estoppel

1. It was not the Banks' case that BGNV was a mere 'cipher, agent or nominee' of TBGL or BGF in the borrowing transactions undertaken by BGNV in the Bond Issues (cf Re Polly Peck International plc (in administration) (No 4) [1996] 2 All ER 433, 440 (Polly Peck)).  The Banks accepted that all transactions in which TBGL, BGF and BGNV were involved in respect of the Bond Issues took place with legal effect according to the terms recorded in relevant documents and arrangements.

2. The Banks' pleadings of contract and estoppel were set out in [PLED.010.001, pars 11EA‑11ER].  The Banks pleaded that BGNV agreed with TBGL and BGF, in the contracts of loan made between those companies (described by his Honour as 'contracts inter se'), that the contracts contained a term to the effect that BGNV's right to recover loans made to TBGL, or BGF, was subordinated to the rights of other creditors of those companies in the event of either of those companies being placed in liquidation.  There was no direct evidence of such a contractual term and the existence thereof was said to be a matter of inference, or implication, made necessary by the circumstances [pars 11EA(a)(1); 11EF; 11EG].

3. The Banks further pleaded that there were contracts (described by his Honour as 'contracts inter partes') made in respect of Bond Issues 1, 2 between TBGL and the Banks that 'the liabilities of TBGL [and BGF] (or TBGL and others) … arising from the raising and deployment of funds' by those Bond Issues would, on a liquidation of TBGL and BGF, be subordinated to the liabilities of those companies to the Banks [pars 11EA(a)(3); 11EK ‑ 11EP].

4. His Honour rejected the pleading of contracts inter partes.  The Banks appeal from that finding.  His Honour upheld the pleading of contracts inter se, but found that the Banks lacked capacity to enforce those contracts.  The Banks appeal from the latter finding and the respondents cross‑appeal from the finding that contracts inter se contained a term subordinating BGNV's rights.

5. With regard to the pleading of estoppel, it was submitted that TBGL represented to the Banks, 'which induced the assumption held by the Banks' that the 'liabilities of TBGL and BGF pursuant to the fund raising arrangements' were subordinated [pars 11EA(a)(4); 11ED(72); 11ER].

6. Alternatively, it was pleaded that BGNV was estopped as against TBGL and BGF from asserting that the 'on‑loans … [were] unsubordinated' [pars 11EA(a)(2); 11EJ].

7. The pleadings of estoppel depended upon the same material relied upon to support the pleadings of contract.

8. His Honour upheld the Banks' pleading of estoppel against TBGL but found it unnecessary to reach a conclusion on the estoppel that the Banks claimed that TBGL and BGF could assert against BGNV.  The respondents cross‑appeal from the finding of estoppel and the Banks, by notice of contention, submit that his Honour erred in failing to make a finding on the pleading that TBGL and BGF could assert an estoppel against BGNV.

Banks' Pleaded Representational Documents

1. His Honour was satisfied that, as pleaded by the Banks, grounds for the findings in contract and estoppel could be found in representations said to have been made in the following documents:

   (a)Letters dated 11 December 1985 and 15 April 1987 from TBGL to the Banks [PLED.010.001, par 11ED(17), (43)];

   (b)Negative Pledge Reports ('NP Reports') [PLED.010.001, par 11ED(62)];

   (c)Negative Pledge Information Packages ('NP Information Packages') [PLED.010.001, par 11ED(66), (68)];

   (d)Lloyds Bank Information Memorandum April 1986 ('Lloyds Information Memorandum') [PLED.010.001, par 11ED(27)];

   (e)Proposal for Negative Pledge Guarantee ('NP Guarantee') [PLED.010.001, par 11ED(59), (59A);

   (f)Three Year Business Plan May 1988 ('Business Plan') [PLED.010.001, par 11ED(69)].

Banks' Pleaded Representations

1. The representations said to arise out of the foregoing documents were pleaded by the Banks as follows:

   (a)In the letter dated 11 December 1985 TBGL represented that:

   (i)'the liabilities of TBGL as a member of the [TBGL NP Group], arising from the raising and deployment of moneys in and about [Bond Issue 1] were, or would be, subordinated to the liabilities of TBGL to the [Banks]' [PLED.010.001, par 11ED(17)(i)];

   (ii)'[B]ondholder debt was, or would be, subordinated and ranked, or would rank, behind existing and future [B]ank borrowings of the [TBGL NP Group]' [PLED.010.001, par 11ED(17)(h)];

   (iii)'[the Bonds issued by TBGL and the Bonds issued by BGNV in Bond Issue 1] were, or would be, identical in terms of effective subordination' [PLED.010.001, par 11ED(17)(d)].

   (aa)In the letter dated 15 April 1987 TBGL represented that:

   (i)'the liabilities of TBGL and BGF as members of [TBGL NP Group] arising from the raising and deployment of moneys in and about [Bond Issues 1, 2 or, alternatively, Bond Issue 2] were, or would be, subordinated to the liabilities of [TBGL and BGF] to the [Banks]' [PLED.010.001, par 11ED(43)(k)];

   (ii)'[B]ondholder debt [in Bond Issue 2] was, or would be, subordinated and ranked, or would rank, behind existing of future [B]ank borrowings of the [TBGL NP Group] in the same manner as [Bond Issue 1] was so subordinated and was so ranked' [PLED.010.001, par 11ED(43)(j)];

   (iii)'[the Bonds issued by BGF and the Bonds issued by BGNV in Bond Issue 2] were, or would be, identical in terms of effective subordination' [PLED.010.001, par 11ED(43)(f)].

   (b)The NP Reports from TBGL to the Banks 'made representations to the Banks … consistent only with the exclusion of liabilities of companies in the [TBGL NP Group] to BGNV in the calculation of Total Liabilities' [PLED.010.001, par 11ED(63)].

   (c)The NP Information Packages from TBGL to the Banks 'represented that the funds raised pursuant to the issues of … [Bonds] … were, and could be treated as, a form of shareholders' funds' [PLED.010.001, par 11ED(67), (68)].

   (d)The Lloyds Information Memorandum, prepared from information provided to Lloyds by TBGL, 'represented that the liabilities of TBGL … arising from the raising and deployment of moneys in and about [Bond Issue 1] were subordinated to the liabilities of TBGL to [the Banks]' [PLED.010.001, par 11ED(30)(g)].

   (e)'During the course of the negotiation of the [proposed NP Guarantee] … TBGL represented to the Banks that the [B]onds had created non‑current subordinated debt of companies within the [TBGL NP Group]' [PLED.010.001, par 11ED(59A)].  [In the further and better particulars of this pleading provided by the Banks the source of the foregoing representation was confined to a letter from TBGL to various of the Banks dated 14 May 1987.]

   (f)In the 'Business Plan' TBGL represented that 'the [B]ondholders ranked behind the [Banks] in respect of recovery of moneys from assets of the Bell [g]roup' [PLED.010.001, par 11ED(70)(e)].

Sale proceeds of the publishing and communication assets

6.1The appellants respectively pay the amounts listed next to their name in Schedule A under the column titled 'Principal amount received' in the total amount of $222,291,022.22 to the third respondent.

6.2The appellants respectively pay the amounts listed next to their name in Schedule B under the column titled 'Principal amount received' in the total amount of $641,000 to the fifth respondent.

Sale proceeds of BRL shares

7.The appellants respectively pay the amounts listed next to their name in Schedule C under the column titled 'Principal amount received' in the total amount of $59,876,063.57 to the following respondents:

(a)to the tenth respondent:  the amount of $830,042.23;

(b)to the eleventh respondent:  the amount of $28,043,076.14;

(c)to the fourteenth respondent:  the amount of $5,906,887.21;

(d)to the sixteenth respondent:  the amount of $19,539,625.41;

(e)to the twenty‑first respondent:  the amount of $1,246,281.07;

(f)to the twenty‑second respondent:  the amount of $3,366,939.22; and

(g)to the twenty‑fourth respondent:  the amount of $943,212.29.

Interest

8.1The appellants do pay interest calculated upon the sum of $73 million at the official rate fixed by the Reserve Bank of Australia from time to time plus 1% compounded (in the manner referred to below) at annual rests to the respective respondents apportioned as between such respondents in the same proportion as each such respondent is entitled to the total of the moneys payable pursuant to orders 6 and 7 above and apportioned as between the appellants in the same proportion as each such appellant is obliged to make payment of the moneys payable pursuant to orders 6 and 7 above.

8.2The abovementioned interest shall be calculated from 31 January 1990.

8.3For the purposes of calculating interest in respect of each annual period from 31 January 1990 and on each anniversary thereafter, there shall be deducted an amount representing a notional calculation of income tax calculated at the rate payable by corporations from time to time under the Income Tax Assessment Act.  That notional amount of income tax shall be deducted from the interest to be carried forward for the purposes of compounding.

8.4Such interest shall be calculated to 29 May 2009.

8.5The liquidators of the respective respondents entitled to payment of interest pursuant to this paragraph shall hold such interest in separate accounts ('the separate accounts').  No part of the funds from time to time standing in the separate accounts shall be taken into account in calculating any entitlement of the appellants to any distribution in the relevant liquidations or be applied in making such distributions to the appellants but otherwise may be applied or distributed in accordance with applicable laws and par 5.3 above shall not apply to such distribution, dividend or other payment.

9.In the event that there is any dispute about the relevant official rate of interest published by the Reserve Bank of Australia or about the rate of income tax payable by corporations from time to time under the Income Tax Assessment Act, such rates shall be fixed upon enquiry by the Master who may make such directions as are required to resolve such disputes as speedily as possible.

Costs

10.All limits on costs prescribed by any applicable scale or fixed in any applicable statutory determination be removed. 

11.The appellants pay the main respondents' costs at first instance and on appeal arising out of or in relation to the following issues:

•insolvency of the Bell group (only at first instance);

•the issues (other than the issues listed in par 12 below) raised in the defence; and

•whether the Transactions, which have been declared on appeal to be void as against the relevant liquidators, were void by the application of s 121 of the Bankruptcy Act,

such costs to be taxed.

12.The main respondents and the sixth, twenty‑ninth and thirtieth respondents pay in relation to the issues referred to hereunder in this paragraph the costs of the appellants at first instance and the main respondents pay the costs of the appellants in relation to those issues in the appeal.  Those issues are as follows:

(a)all issues arising out of or in relation to whether the Bell group directors breached their fiduciary duties, including all issues relating to the application of Barnes v Addy;

(b)equitable fraud including unconscionability;

(c)all issues arising out of or in relation to whether the on‑loans were subordinated, whether contractually or otherwise including the estoppel and the Trade PracticesAct claims; and

(d)the issues in the appeal relating to whether his Honour should have granted the main respondents further relief.

As between the appellants and the sixth and twenty‑ninth respondents

13.To the extent that such costs are not the subject of any other orders herein, the sixth and twenty‑ninth respondents pay the appellants' costs in relation to the relief which the appellants sought in their counterclaim against them both at first instance and on appeal and also pay the appellants' costs in the sixth and twenty-ninth respondents' cross‑appeal. 

As to costs generally

14.Save as ordered above, each party shall bear and pay their own costs.

15.All previous costs orders made between the parties in the proceedings in this court or the Federal Court of Australia are vacated, except to the extent that the costs payable pursuant to any such orders, being orders made before the judgment at first instance, have been paid.

16.All security for costs provided by, or on behalf of, the respondents shall remain released in accordance with the terms of order 7.4 of the orders made by Owen J on 30 April 2009. 

SCHEDULE A

SALE PROCEEDS OF THE PUBLISHING AND COMMUNICATION ASSETS - BGF RECEIPTS

Bank	Date received	Principal amount received
Tranche 1
Westpac Banking Corporation	31 December 1991	$18,643,319.26
Commonwealth Bank of Australia	31 December 1991	$10,092,057.46
HSBC Bank Ltd	31 December 1991	$19,941,694.79
National Australia Bank Ltd	31 December 1991	$19,064,740.25
Standard Chartered Bank	31 December 1991	$12,165,299.15
SG Australia Ltd	31 December 1991	$24,244,976.44
Lloyds TSB Bank	31 December 1991	$1,113,477.38
SEB AG	31 December 1991	$1,113,477.38
Banco Espirito Santo SA	31 December 1991	$1,113,477.38
Bank of Scotland plc	31 December 1991	$1,113,477.38
Credit Agricole SA	31 December 1991	$1,113,477.38
Bank Austria Creditanstalt AG	31 December 1991	$1,113,477.38
Credit Lyonnais	31 December 1991	$1,113,477.38
Dresdner Bank AG	31 December 1991	$1,113,477.38
KBC Bank Verzekerings Holdings NV	31 December 1991	$1,113,477.38
Skopbank	31 December 1991	$779,434.19
DZ Bank AG Deutsche Zentral-Genossenschaftsbank	31 December 1991	$668,086.45
The Gulf Bank KSC	31 December 1991	$668,086.45
Gentra Ltd	31 December 1991	$668,086.45
Calyon	31 December 1991	$556,738.71
Lloyds TSB Bank	2 January 1992	$7,611,175.52
SEB AG	2 January 1992	$7,611,175.52
Banco Espirito Santo SA	2 January 1992	$7,611,175.52
Bank of Scotland plc	2 January 1992	$7,611,175.52
Credit Agricole SA	2 January 1992	$7,611,175.52

Bank	Date received	Principal amount received
Bank Austria Creditanstalt AG	2 January 1992	$7,611,175.52
Credit Lyonnais	2 January 1992	$7,611,175.52
Dresdner Bank AG	2 January 1992	$7,611,175.52
KBC Bank Verzekerings Holdings NV	2 January 1992	$7,611,175.52
Skopbank	2 January 1992	$5,327,822.86
DZ Bank AG Deutsche Zentral-Genossenschaftsbank	2 January 1992	$4,566,705.31
The Gulf Bank KSC	2 January 1992	$4,566,705.31
Gentra Ltd	2 January 1992	$4,566,705.31
Calyon	2 January 1992	$3,805,587.76
Total recovery available from tranche 1	$208,847,922.22
Tranche 2
Westpac Banking Corporation	18 March 1992	$1,382,200.95
Commonwealth Bank of Australia	18 March 1992	$589,779.08
HSBC Bank Ltd	18 March 1992	$1,189,811.51
National Australia Bank Ltd	18 March 1992	$1,133,298.61
Standard Chartered Bank	18 March 1992	$714,060.25
SG Australia Ltd	18 March 1992	$1,421,922.04
Lloyds TSB Bank	18 March 1992	$505,738.13
SEB AG	18 March 1992	$505,738.13
Banco Espirito Santo SA	18 March 1992	$505,738.13
Bank of Scotland plc	18 March 1992	$505,738.13
Credit Agricole SA	18 March 1992	$505,738.13
Bank Austria Creditanstalt AG	18 March 1992	$505,738.13
Credit Lyonnais	18 March 1992	$505,738.13
Dresdner Bank AG	18 March 1992	$505,738.13
KBC Bank Verzekerings Holdings NV	18 March 1992	$505,738.13
Skopbank	18 March 1992	$354,016.70
DZ Bank AG Deutsche Zentral-Genossenschaftsbank	18 March 1992	$303,442.88

Bank	Date received	Principal amount received
The Gulf Bank KSC	18 March 1992	$303,442.88
Gentra Ltd	18 March 1992	$303,442.88
Calyon	18 March 1992	$252,869.06
Total recovery available from tranche 2	$12,500,000.00
Tranche 3
Westpac Banking Corporation	23 July 1992	$104,402.42
Commonwealth Bank of Australia	23 July 1992	$44,671.48
HSBC Bank Ltd	23 July 1992	$89,471.61
National Australia Bank Ltd	23 July 1992	$85,603.86
Standard Chartered Bank	23 July 1992	$53,693.09
SG Australia Ltd	23 July 1992	$107,316.27
Lloyds TSB Bank	23 July 1992	$38,161.96
SEB AG	23 July 1992	$38,161.75
Banco Espirito Santo SA	23 July 1992	$38,161.75
Bank of Scotland plc	23 July 1992	$38,161.75
Credit Agricole SA	23 July 1992	$38,161.75
Bank Austria Creditanstalt AG	23 July 1992	$38,161.75
Credit Lyonnais	23 July 1992	$38,161.75
Dresdner Bank AG	23 July 1992	$38,161.75
KBC Bank Verzekerings Holdings NV	23 July 1992	$38,161.75
Skopbank	23 July 1992	$26,713.24
DZ Bank AG Deutsche Zentral-Genossenschaftsbank	23 July 1992	$22,897.06
The Gulf Bank KSC	23 July 1992	$22,897.06
Gentra Ltd	23 July 1992	$22,897.06
Calyon	23 July 1992	$19,080.88
Total recovery available from tranche 3	$943,100.00
Total recovery available from tranches 1, 2 and 3	$222,291,022.22

SCHEDULE B

SALE PROCEEDS OF THE PUBLISHING AND COMMUNICATION ASSETS - BGF RECEIPTS

Bank	Date received	Principal amount received
Westpac Banking Corporation	23 July 1992	$70,959.55
Commonwealth Bank of Australia	23 July 1992	$30,362.02
HSBC Bank Ltd	23 July 1992	$60,811.48
National Australia Bank Ltd	23 July 1992	$58,182.67
Standard Chartered Bank	23 July 1992	$36,493.76
SG Australia Ltd	23 July 1992	$72,940.02
Lloyds TSB Bank	23 July 1992	$25,937.66
SEB AG	23 July 1992	$25,937.53
Banco Espirito Santo SA	23 July 1992	$25,937.53
Bank of Scotland plc	23 July 1992	$25,937.53
Credit Agricole SA	23 July 1992	$25,937.53
Bank Austria Creditanstalt AG	23 July 1992	$25,937.53
Credit Lyonnais	23 July 1992	$25,937.53
Dresdner Bank AG	23 July 1992	$25,937.53
KBC Bank Verzekerings Holdings NV	23 July 1992	$25,937.53
Skopbank	23 July 1992	$18,156.27
DZ Bank AG Deutsche Zentral-Genossenschaftsbank	23 July 1992	$15,562.52
The Gulf Bank KSC	23 July 1992	$15,562.52
Gentra Ltd	23 July 1992	$15,562.52
Calyon	23 July 1992	$12,968.76
Total recovery available	$641,000.00

SCHEDULE C

SALE PROCEEDS OF THE BRL SHARES

Bank	Date received	Principal amount received
Tranche 1
Westpac Banking Corporation	28 May 1992	$637,030.59
Commonwealth Bank of Australia	29 May 1992	$272,488.10
HSBC Bank Ltd	29 May 1992	$524,373.67
National Australia Bank Ltd	29 May 1992	$521,695.67
Standard Chartered Bank	29 May 1992	$328,652.73
SG Australia Ltd	29 May 1992	$655,632.99
Lloyds TSB Bank	29 May 1992	$234,707.70
SEB AG	29 May 1992	$234,707.70
Banco Espirito Santo SA	29 May 1992	$234,707.70
Bank of Scotland plc	29 May 1992	$234,707.70
Credit Agricole SA	29 May 1992	$234,707.70
Bank Austria Creditanstalt AG	29 May 1992	$234,707.70
Credit Lyonnais	29 May 1992	$234,707.70
Dresdner Bank AG	29 May 1992	$234,707.70
KBC Bank Verzekerings Holdings NV	29 May 1992	$234,707.70
Skopbank	29 May 1992	$164,295.38
DZ Bank AG Deutsche Zentral-Genossenschaftsbank	29 May 1992	$140,824.61
The Gulf Bank KSC	29 May 1992	$140,824.61
Gentra Ltd	29 May 1992	$140,824.61
Calyon	29 May 1992	$117,353.84
Total recovery available from tranche 1	$5,756,366.07
Tranche 2
Westpac Banking Corporation	12 June 1992	$5,985,452.97
Commonwealth Bank of Australia	12 June 1992	$2,561,153.22

Bank	Date received	Principal amount received
HSBC Bank Ltd	12 June 1992	$5,122,381.46
National Australia Bank Ltd	12 June 1992	$4,915,493.28
Standard Chartered Bank	12 June 1992	$3,072,056.25
SG Australia Ltd	12 June 1992	$6,146,582.99
Lloyds TSB Bank	12 June 1992	$2,193,048.12
SEB AG	15 June 1992	$2,193,048.12
Banco Espirito Santo SA	15 June 1992	$2,193,048.12
Bank of Scotland plc	15 June 1992	$2,193,048.12
Credit Agricole SA	15 June 1992	$2,193,048.12
Bank Austria Creditanstalt AG	15 June 1992	$2,193,048.12
Credit Lyonnais	15 June 1992	$2,193,048.12
Dresdner Bank AG	15 June 1992	$2,193,048.12
KBC Bank Verzekerings Holdings NV	15 June 1992	$2,193,048.12
Skopbank	15 June 1992	$1,535,133.66
DZ Bank AG Deutsche Zentral-Genossenschaftsbank	15 June 1992	$1,315,828.85
The Gulf Bank KSC	15 June 1992	$1,315,828.85
Gentra Ltd	15 June 1992	$1,315,828.85
Calyon	15 June 1992	$1,096,524.04
Total recovery available from tranche 2	$54,119,697.50
Total recovery available from tranches 1 and 2	$59,876,063.57

ATTACHMENT 1

(SCHEDULE 38.1)

Glossary part 1:  entities

ABBREVIATION	DESCRIPTION
A&O	Allen & Overy
Academy	Academy Investments No 2 Pty Ltd
Albany Advertiser	Albany Advertiser Pty Ltd
Albany Broadcasters	Albany Broadcasters Ltd
Ambassador	Ambassador Nominees Pty Ltd
ATO	Australian Taxation Office
Australian banks	The six Australian banks involved in the January 1990 refinancing
Banco Espírito	Bank Espírito Santo SA
BBHL	Bond Brewing Holdings Ltd
BCHL	Bond Corporation Holdings Ltd
BDW	Blake Dawson Waldron
Belcap Enterprises	Belcap Enterprises Pty Ltd
Belcap Trading	Belcap Trading Pty Ltd
Bell Bros	Bell Bros Pty Ltd
Bell Bros Holdings	Bell Bros Holdings Ltd
Bell Equity	Bell Equity Management Ltd
Bell Press	Bell Group Press Pty Ltd
BfG	BfG Bank
BGF	Bell Group Finance Pty Ltd
BGF(ACT)	Bell Group Finance (ACT) Ltd
BGNV	Bell Group NV
BGUK	Bell Group (UK) Holdings Ltd
BIIL	Bell International Investments Ltd
BoS	Bank of Scotland
BPG	Bell Publishing Group Pty Ltd
BRF	Bell Resources Finance Pty Ltd
BRL	Bell Resources Ltd
Bryanston	Bryanston Insurance Company Limited
CBA	Commonwealth Bank of Australia
Citibank NA	Citibank
C&L	Coopers & Lybrand
Crédit Agricole	Caisse Nationale de Crédit Agricole

Crédit Lyonnais	Crédit Lyonnais
Creditanstalt	Creditanstalt Bankverein
Dallhold	Dallhold Investments Pty Ltd
DCT	Deputy Commissioner of Taxation (sometimes Australian Taxation Office or Federal Commissioner of Taxation)
DG Bank	DG Bank AG
Dolfinne	Dolfinne Pty Ltd
Dolfinne Securities	Dolfinne Securities Pty Ltd
Dresdner	Dresdner Bank AG
Equity Trust	Equity Trust (Curacao) NV
Gentra	Royal Trust Bank
Godine Developments	Godine Developments Pty Ltd
Group Color	Group Color (WA) Pty Ltd
Gulf Bank	Gulf Bank KSC
Harlesden Finance	Harlesden Finance Pty Ltd
Harlesden Investments	Harlesden Investments Pty Ltd
HHL	Heytesbury Holdings Ltd
HKBA	Hong Kong Bank Australia Ltd
Hocking	Hocking & Co Pty Ltd
Heytesbury Securities	Heytesbury Securities Pty Ltd (later GFH)
Indosuez	Banque Indosuez
Industrial Securities	Industrial Securities Pty Ltd
ITC	ITC entertainment Holdings Ltd and the ITC group of companies generally
JNTH	J N Taylor Holdings Ltd
Kredietbank	Kredietbank NV
LCAS	Lloyds Corporate Advisory Services Pty Ltd
LDTC	The Law Debenture Trust Corporation plc
Linklaters	Linklaters & Paines
Lloyds Bank	Lloyds Bank plc
Lloyds syndicate banks	The fourteen non‑Australian banks involved in the January 1990 refinancing
Maradolf	Maradolf Ltd

Maranoa Transport	Maranoa Transport Pty Ltd
MSJA	Mallesons Stephen Jaques (Australia)
MSJL	Mallesons Stephen Jaques (London)
NAB	National Australia Bank Ltd
NCSC	National Companies and Securities Commission
Neoma	Neoma Investments Pty Ltd
P&P	Parker & Parker
Q‑Net	Q‑Net Pty Ltd
RHàC	Robert Holmes à Court
S&M	Slaughter & May
S&W	Sly & Weigall
SCB	Standard Chartered Bank
SCBAL	Standard Chartered Bank Australia Ltd
SGIC	Insurance Commission of Western Australia
Skopbank	Skopbank
SocGen	Societe Generale Australia Ltd
Soditic SA	Soditic
South West Printing	South West Printing and Publishing Co Pty Ltd
SBCIL	Swiss Bank Corporation International Ltd
TBGIL	Bell Group International Ltd
TBGL	Bell Group Ltd
W&J Investments	W & J Investments Ltd
WA Broadcasters	WA Broadcasters Pty Ltd
WAN	West Australian Newspapers Limited
Wanstead	Wanstead Pty Ltd
Wanstead Securities	Wanstead Securities Pty Ltd
WAON	WAON Investments Pty Ltd
Western Interstate	Western Interstate Pty Ltd
Western Mail	Western Mail Pty Ltd
Western Transport	Western Transport Pty Ltd
Westpac	Westpac Banking Corporation
Wigmores Tractors	Wigmores Tractors Pty Ltd

ATTACHMENT 2

(SCHEDULE 38.2)

Glossary part 1:  miscellaneous

ABBREVIATION	DESCRIPTION	DOCUMENTARY REFERENCE
1986 Loan Agreement	The original loan agreement between the Lloyds syndicate banks and BGUK and BGF as borrowers, dated 19 May 1986	[353.09.0017]
8ASC	Amended eighth amended statement of claim dated 1 December 2004 with amendments to 30 August 2006.	[PLED.008.002.001]
ABFA	Australian Banks Facilities Agreement dated 26 January 1990	[TBGL.00001.002]
ABSA	Australian Banks Supplemental Agreement dated 26 January 1990	[TBGL.00072.002]
ADC	Amended defence and counterclaim dated 15 February 2005	[PLED.010.001]
Australian directors	David Aspinall, Peter Mitchell and Antony Oates, the directors of the Australian Bell group companies
Bell group (the)	The entire group of companies (in Australia and overseas) of which TBGL was the ultimate holding company
Bell Participants	71 Bell group companies that were party to one or more of the Transactions
BGF bond issue	The issue of bonds by BGF in May 1987
BGNV bond issues	The three BGNV bond issues (together)
BGNV on‑loans	The three BGNV on‑loans (together)
BGNV Subordination Deed (the)	A deed dated 31 July 1990 by which BGNV subordinated intra‑group indebtedness	[TBGL.00001.001]
BGUK group (the)	The sub‑group of the Bell group comprising UK companies and of which BGUK was the intermediate holding company

BIIL directors	Michael Edwards and Peter Whitechurch, the directors of BIIL
BIIL Subordination Deed	A deed dated 14 May 1990 by which BIIL subordinated intra‑group indebtedness	[TBGL.03594.145]
BPG group	The sub‑group holding the publishing assets and of which BPG was the intermediate holding company.
BRL shareholders	Bell group companies who held shares in BRL (referred to in the pleadings as ACIL shareholders)
BRL shares	The ordinary and preference shares held by Bell group companies in BRL (referred to in the pleadings as ACIL shares)
five convertible bond issues (the)	The three BGNV bond issues and the domestic bond issues, collectively
CPDD	Corporate Planning and Development Department of BCHL
domestic bond issues (the)	The TBGL bond issue and the BGF bond issue, collectively
first BGNV bond issue	The issue of bonds by BGNV in December 1985
first BGNV on‑loan	The loan by BGNV to TBGL of the proceeds of the first BGNV bond issue
Harlesden sale agreement	Share sale agreement between BPG, the receivers of BPG (vendors) and WANH (purchaser) dated 5 September 1991.	[TBGL.03300.031]
Information Memorandum	Information Memorandum dated April 1986 sent by Lloyds Bank to prospective members of the Lloyds syndicate	[333.02.0081]
ITAA	Income Tax Assessment Act (Cth) 1936
LSA No 1	Lloyds Supplemental Agreement No 1 (with RLFA No 1 as an appendix) dated 27 August 1987	[TBGL.03595.011]
LSA No 2	Lloyds Supplemental Agreement No 2 (with RLFA No 2 as an appendix) dated 26 January 1990	[TBGL.03635.003]

NP agreements	Negative Pledge agreements (existing before July 1987) between Bell group companies and banks	[199.07.0002] [TBGL.03785.011]
NP group companies	Bell group companies bound by an NP agreement or an NP guarantee
NP guarantees	Negative Pledge guarantees (existing after July 1987) between Bell group companies and banks in substitution for the NP agreements.	[199.07.0033] [TBGL.03593.012]
NP ratios	Financial ratios contained in the NP agreements and NP guarantees
plaintiff Bell companies	25 Bell group companies (all Bell participants) that are named as plaintiffs in this action
PP	Particulars to the amended eighth amended statement of claim dated 1 December 2004	[PLED.009.0001.001]
PR	Reply to amended defence and defence to counterclaim	[PLED.012.001]
pre-Transactions insolvency	The contention that Bell group companies were insolvent prior to 26 January 1990
Principal Subordination Deed	A deed dated 15 February 1990 by which most of the Bell participants subordinated intra‑group indebtedness	[TBGL.00002.013].
publishing assets	The assets of the BPG sub‑group, referred to in the pleadings as the Publishing and Communications assets
RLFA No 1	Form of Restated Lloyds Facility Agreement No 1, an appendix to LSA No 1 dated 27 August 1987	[TBGL.03593.012] [TBGL.03595.013]
RLFA No 2	Form of restated Lloyds facility Agreement, an appendix to LSA No 2, dated 26 January 1990.	[TBGL.03635.004]
Scheme	The scheme constituted by the Transactions and having the effect pleaded in 8ASC par 19A
Scheme Period	The period 8 January 1990 to on or about 31 July 1990.
second BGNV bond issue	The issue of bonds by BGNV in May 1987

second BGNV on‑loan	The loan by BGNV to BGF of the proceeds of the second BGNV bond issue
TBGL bond issue	The issue of bonds by TBGL in December 1985
Territory legislation (the)	Part 7 of Schedule 2 of the Imperial Acts (Substituted Provisions) Act 1986 (ACT)
third BGNV bond issue	The issue of bonds by BGNV in July 1987
third BGNV on‑loan	The loan by BGNV to BGF of the proceeds of the third BGNV bond issue
Transactions	The various documents brought into existence during (and as part of) the 1990 refinancing arrangements	[MISP.00031.039]
UK directors	Michael Edwards, Peter Mitchell, Alan Birchmore and Alan Bond, the directors of BGUK and TBGIL