The State Government will move today to prevent a potential $1 billion embarrassment by pushing through laws governing the distribution of the bounty from successful litigation over Alan Bond's failed Bell Group.
Amid fears that the Insurance Commission of WA could be deprived of a reward for spending $200 million-plus funding a two-decade legal battle, Treasurer Mike Nahan is to introduce legislation into State Parliament this afternoon.
The State Government was tight-lipped about the proposed laws last night. Dr Nahan's office would not answer questions from _WestBusiness _ about how its planned laws would interplay with Federal laws governing company matters, including bonuses for creditors funding litigation.
The push begins eight days before Dr Nahan hands down his second State Budget and six days before crisis talks in Singapore aimed at overcoming a legal impasse over distribution of $1.7 billion in litigation proceeds.
Liquidator Tony Woodings led a settlement in 2013 with 20 banks that put receivers into Bell Group in 1991 and pulled all the cash and assets out of the Bond-controlled companies on the strength of mortgages granted when it was insolvent.
With support of successive State Governments, ICWA has funded the litigation in a bid to recover $150 million owing to it under subordinated bonds bought by the State in WA Inc deals after the October 1987 sharemarket crash.
However, the distribution of the $1.7 billion settlement has been caught up in legal rows in WA and London over whether ICWA is entitled to receive more than half of the proceeds under litigation funding deals started 20 years ago.
Sources close to the case say there is a danger that ICWA will win orders from the WA Supreme Court that it is entitled to the lion's shares of the proceeds under the old Corporations Law only for the money to be mandatorily paid as a dividend to a London-based company that is the actual creditor as trustee of the junk bonds held by ICWA.
Interests linked to Dutch distressed debt specialist Louis Reijtenbagh have launched litigation in London aimed at preventing the trust company paying ICWA as a subordinated creditor until all other Bell Group creditors are paid out.
If successful in the London litigation, Mr Reijtenbagh stands to get the lion's share of the proceeds as the major holder of $300 million in unsubordinated bonds issued by a Bell subsidiary and as an early funder of the litigation.
Other unsecured creditors, including the Australian Taxation Office and a syndicate led by veteran litigation funder Hugh McLernon, also stand to get significant payouts.
Mr McLernon said last night he had not seen the State Government's legislation. He did not know its contents. "We are waiting with great interest to see how the government thinks it can change the goalposts halfway through the game," he said.
Dr Nahan said the legislation would "inject some certainty into the timing of the distribution of funds to creditors".
"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 in the statement.