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Banks lose in $1.6b Bell case
Pay up: Liquidator Tony Woodings at court today. Picture: Michael Wilson/ The West Australian

A syndicate of 20 banks, including three of Australia’s big four, could be forced to hand over more than $2 billion after failing to overturn a landmark court ruling over their dealings with Alan Bond’s failed Bell Group.

In a major win for the State Government’s third party insurer, three Court of Appeal judges upheld key parts of a 2008 judgment by Supreme Court judge Neville Owen that they should hand back money snatched out of Bell when it collapsed in April 1991.

And they could be forced to hand over hundreds of millions dollars more after the trio of judges upheld a counter appeal by the liquidators over how interest on the original $283 million taken out of Bell should be calculated.

The banks include Westpac, National Australia Bank and Commonwealth Bank, and 17 foreign-owned banks that had bankrolled Bell Group’s aggressive expansion in the 1980s.

Acting court of appeal judges Malcolm Lee, Christopher Carr and Douglas Drummond handed down their ruling today after a 44-day appeal heard between April and June last year.

Bell Group liquidators launched the legal action in 1995 and have since been involved in what is believed the most complex and costliest court case this State has seen, with bills believed to be well above $500 million.

The Insurance Commission of Western Australia is estimated to have spent more than $250 million over 17 years bankrolling the liquidators in a campaign that began in the Federal Court before being moved to the Supreme Court.

The insurer, which became enmeshed in Bell by buying junk bonds in WA Inc deals in the late 1980s, stands to be a major beneficiary if the banks fail in their last ditch appeal to the High Court and then the Supreme Court rules that creditors funding the litigation should be rewarded for their risk.

This was a little over a year after gaining sweeping charges over group assets. The financiers had previously been unsecured creditors and had no priority claim on Bell assets, which included The West Australian publisher WA Newspapers.

Justice Owen found in 2008 that the banks got the charges over Bell assets because directors breached their duties and the banks knew of the breaches. The directors were at the mercy of the banks in getting funds they needed for Bell to survive long enough for an effective restructure, he said.

But he rejected claims that the banks took deceitful advantage of others, saying the Bell directors were experienced commercial people and the financiers owed no duties to the other creditors.

In their appeal last year, the banks claimed the judge’s ruling ignored Bell’s commercial reality.

Banks lawyer Tom Bathurst said directors Tony Oates, Peter Mitchell and David Aspinall had the choice of either allowing Bell companies to fall into liquidation or agreeing to a debt restructure that gave the banks security.

Mr Bathurst said the judge should have found the directors did not breach their duty because they believed the loan scheme was in the interests of all Bell companies.

Mr Aspinall testified he believed the scheme would have given Bell time to restructure and finish important transactions, including buying brewing assets from Bond-related companies.

Lawyers for Mr Woodings said the banks’ appeal involved isolated attacks on parts of Justice Owen’s 2643-page judgment and did not look at the full force of his findings.

Justice Neville Owen originally ordered the banks hand over $1.6 billion.

But Justice Lee and Justice Drummond found Justice Owen’s interest rate calculations had been too low and found the banks should pay more. Justice Carr disagreed and would have reduced the amount calculated by the Supreme Court judge.

Liquidator Tony Woodings called on the banks to bring the 17-year legal fight to and end and hand over the money so it could be distributed to creditors, which included the banks.

He said the final amount could be in the range of $2 billion to $3 billion, but he was yet to read the judgment