RE BELL GROUP NV (IN LIQ); EX PARTE INSURANCE COMMISSION OF WESTERN AUSTRALIA [No 2] [2015] WASC 114 (7 April 2015)

Supreme Court of WA|2015-04-07|Before: McLelland J

1 MASTER SANDERSON: These reasons deal with yet another application in an interminable and intractable dispute known as 'the Bell litigation'. On 4 June 2014, on the application of Mr Trevor the liquidator of Bell Group NV (BGNV), I made, relevantly, the following order:

Pursuant to section 479(3) of the Corporations Act 2001 (Cth) Mr Trevor, in his capacity as liquidator of Bell Group NV, would be justified in opposing:

4.1 any step to release or vary the Undertakings; and

4.2 any step to amend the provisions of the TBGL Trust Deed or the BGF Trust Deed referred to in the Undertakings.

2 Before setting out the background facts which will explain these orders it is worth making two points. First, Mr Trevor's application was supported by his affidavit sworn 27 May 2014. Mr Trevor sought an order that his affidavit be marked confidential and not be opened without further order of a judge or master. The intent was of course the affidavit would not be available for inspection save so far as the court ordered. I made that order.

3 Second, the application was made ex parte. Section 479(3) of the Corporations Act 2001 (Cth) reads as follows:

The liquidator may apply to the Court for directions in relation to any particular matter arising under the winding up.

4 It is invariably the case applications made under s 479(3) are made ex parte. The consequence of the making of orders under the section is explained in Ford's Principles of Corporations Law (14th ed) [25.150] as follows:

Directions will protect an external administrator against persons claiming within the particular external administration ... in respect of anything the external administrator does in accordance with the court's directions but not other persons.

5 Both parties were prepared to accept that statement of principle. But it is not actually what the section says. The history of s 479(3) was traced by McLelland J in Re G B Nathan & Co Pty Ltd (in liq) (1991) 5 ACSR 673. Nonetheless it is curious that the legislature did not see fit to expressly provide for the protection of an external administrator who acts in accordance with directions of the court. That position stands in contrast to the Trustees Act 1962 (WA) where s 95 offers explicit protection to a trustee acting in conformity with directions. While, for the purposes of this application, I am prepared to assume the principle advanced in Ford's Principles of Corporations Law is correct I would not preclude an argument to the contrary being raised in other proceedings.

6 The summary of the factual background which follows is taken from the written submissions filed on behalf of the applicant. The Undertakings referred to in the directions were given on 7 October 2004 by:

(a) The Bell Group Ltd (in liq) (TBGL), Bell Group Finance Pty Ltd (in liq) (BGF) and their liquidators Mr Geoffrey Totterdell and Mr Anthony Woodings, in proceedings commenced by the liquidators to recover amounts various bank lenders to the Bell Group of companies (Banks) had appropriated to themselves from the sale of the assets of those companies over which they claimed to hold security (Main Proceedings); and

(b) TBGL, BGF, their liquidators and the Law Debenture Trust Corporation plc (LDTC), the trustee of certain bonds issued by TBGL and BGF of which the Insurance Commission of Western Australia (ICWA) is the sole registered holder (TBGL and BGF Bonds), in Supreme Court of Western Australia proceedings CIV 2061 of 1996, commenced by the Banks to prevent TBGL, BGF and LDTC from amending the Trust Deeds for the TBGL and BGF Bonds.

7 The Undertakings prevent those parties from amending the TBGL Trust Deed and the BGF Trust Deed in the manner contemplated by Second Supplemental Deeds dated 1995 (SSDs). Prior to the Undertakings being given in favour of the Banks in the main proceedings certain steps had been taken in relation to effecting amendments to, in particular, cl 5 and cl 9 of the TBGL Trust Deed and the BGF Trust Deed which contained subordination and turnover provisions. The Banks claimed, among other things, that (absent the amendments contemplated by the SSDs) they were the beneficiaries of those subordination and turnover provisions, and accordingly sought to prevent those amendments.

8 The main proceedings against the Banks have been resolved by way of settlement and the liquidator of TBGL and BGF have received approximately $1.7 billion. These funds will be distributed among the creditors of TBGL and BGF subject to the resolution of various legal issues affecting the distribution of the funds.

9 The Undertakings continue to operate to restrict the ability to amend the TBGL Trust Deed and the BGF Trust Deed in the future in a manner which would potentially have a significant effect upon the flow of funds to ICWA and other parties in the winding up of TBGL and BGF. As a consequence of the settlement certain steps are required to be taken by the relevant parties in relation to the release of the Undertakings.

10 BGNV is required by the terms of an agreement dated 4 July 1997 it entered into with the Commonwealth, ICWA and LDTC (Confirmation Agreement) inter alia to:

(a) not take any action in the 'Actions' (defined to include, amongst other things, CIV 2061 of 1996 and any other action, suit or counterclaim commenced by LDTC, ICWA, TBGL, BGF and/or the liquidators of TBGL and BGF relating to the execution of any deed or deeds to amend the Trust Deeds in a manner substantially the same as the SSDs) of any kind whatsoever to delay, oppose or hinder claims made by LDTC and ICWA in the Action; and

(b) not bring any action, suit or claim against LDTC, ICWA, TBGL, BGF or the liquidators of TBGL or BGF which opposes or resists their position to amend the Trust Deeds in the manner proposed in the SSDs.

12 In addition, the purpose of the Confirmation Agreement was for BGNV to confirm its support for, inter alia, the TBGL InterCreditor Agreement dated 21 March 1995 between the Commonwealth, ICWA, LDTC and BGNV (which in turn states that the parties intended that if possible the TBGL Trust Deed and the BGF Trust Deed be amended) and make the agreements in the Confirmation Agreement notwithstanding the appointment of the curators and Mr Trevor as the Australian liquidator of BGNV.

13 As a priority creditor and ultimate beneficiary of the amendments proposed to the TBGL Trust Deed and the BGF Trust Deed, ICWA will likely be affected by any breach of the Confirmation Agreement which may be brought about by the liquidator acting in accordance with the directions. The liquidator was prepared to accept that was the case. ICWA therefore said it required access to documents to assist it to understand the decision to make the directions and assess whether in obtaining those directions the liquidator complied with his obligations to make full disclosure to the court of all facts and matters material to the making of the directions and, in particular, to determine whether to apply to have the directions set aside.

14 Put in that way it might have been thought ICWA would have made an application for preaction discovery pursuant to O 26A of the Rules of the Supreme Court 1971 (WA). In fact this application is brought under O 67 r 11(1)(a) (c), and the inherent jurisdiction of the court.

15 The application, as it was framed, sought access to Mr Trevor's affidavit on an unrestricted basis. It will come as no surprise to anyone to learn that affidavit included an opinion from counsel as to whether the proposed directions should be made and as to the likely outcome of any proceedings. In any circumstances that opinion would be subject to legal professional privilege. During the course of his submissions counsel for ICWA acknowledged there would have to be some limits in the right to inspection. After all if an application was made for preaction discovery and if that application was successful what would be provided was an affidavit of discovery in which privilege could be claimed over certain documents. It would be an illogical result if access granted under O 67 was more extensive than would be available on a successful O 26A application.

16 ICWA's application was opposed on a number of different bases. It is not necessary for me to go through these submissions in detail. It is enough if I say the authorities are all one way. While it is well recognised that open justice is important to the community generally it is in the public interest that when external administrators seek directions from the court they do so on the basis the material they place before the court is private and confidential. If that were not so then the system would be unworkable and s 479(3) of the Corporations Act would be effectively inoperative. The position was fully explained by Barrett J in McGrath Re HIH Insurance Ltd [2005] NSWSC 731. His Honour's comments have been supported by Debelle J in Re JN Taylor Holdings Ltd (in liq) [2007] SASC 193; (2007) 62 ACSR 695, Simmonds J in Re Bell Group NV (in liq); Ex parte Troika Holding BV [2009] WASC 309, and Gilmour J in Jones, Saker, Weaver & Stewart (Liquidators), in the matter of Great Southern Ltd (in liq) (Receivers & Managers Appointed) [2012] FCA 1072. Further support for this approach is found in the decision of Templeman J in Re The Bell Group Ltd (in liq); Ex parte West Australian Newspapers Ltd [2000] WASC 94.

17 In my view there is no merit in this application and it ought be rejected.

18 The liquidator sought an order for indemnity costs. Essentially it was submitted the position was so clear no party reasonably advised could possibly have made the application.

19 While I accept costs should follow the event I am not satisfied this is a case where indemnity costs ought be ordered. I have reached that conclusion for two reasons. First, this is an area where there exists some uncertainty. While all of the authorities are consistently against disclosure the principles of open justice make it reasonable every case should be examined on its merits. Second, there is no doubt ICWA has a real interest in the approach to be adopted by the liquidator. While it has failed in this application it is understandable that it wished to take all steps to ensure its position was not compromised.

20 The orders will be the application be dismissed with ICWA to pay the costs of the application including the reserved costs.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (26 paragraphs)