Windfall for WA as Bell deal looms

Neale Prior and Gary Adshead
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Windfall for WA as Bell deal looms

Long fight: Deal looms in Bell case.

The State Government is set for a $1 billion boost to its coffers with a settlement looming in a massive legal fight over the collapse of Alan Bond's Bell Group.

It is understood liquidators and the syndicates of 20 banks that stripped Bell of its assets 22 years ago are on the verge of settling a $2.7 billion-plus legal dispute with Bell liquidators.

The parties are hoping to get a deal finalised before they are due to face the High Court in September on a crucial aspect of a case that has so far gone against the banks.

Westpac, Commonwealth and National Australia, as well as British giant Lloyds, have already had judgments against them in the WA Supreme Court and Court of Appeal, exposing them to potential payouts exceeding $3 billion because of punitive interest rates.

A legacy of the WA Inc deals under the Labor State governments in the 1980s, the case against the banks is important to WA taxpayers and motorists because the litigation has been mostly funded by the State Government-owned Insurance Commission of WA.

WA motorists had to help ICWA's recovery from 1993 to 1996 through a $50 annual charge on third-party insurance premiums known as the WA Inc levy.

The insurer stands to collect more than 60 per cent of any winnings in return for bankrolling what was considered to be a high-risk, high-reward case.

A settlement and payout from Bell Group liquidators could provide ICWA with a one-off profit, possibly more than $1 billion, if the final settlement is near $2 billion.

It is unclear how much of any Bell Group winnings will go to WA motorists in the form of reduced premiums, with Treasurer Troy Buswell this year changing the rules so that the insurer could be forced to pay the State Government a dividends from its profits.

Court wins so far mean Bell liquidators will have more than $700 million to carve up to pay bills and creditors, including ICWA as the litigation funder.

Judges have found that Bell Group was effectively broke when banks took sweeping mortgages over the group in early 1990.

The mortgages were granted as Bell Group was being squeezed by massive debts and was having trouble paying its bills on time. The banks called in receivers in April 1991 and pulled out more than $280 million.

What remains in dispute in the High Court is whether Bell Group directors breached their duty by granting the corporate mortgages to the banks and whether the banks benefitted from that breach.

About $2 billion in compound interest rides on these issues.

Equally important is how the money will be carved up once the legal issues over the 1991 collapse are resolved and any settlement would have to clarify this process.

Bell Group had a messy structure of junk bonds, international financing arms and group financing arrangements that are a nightmare for liquidators and lawyers.

The latest deal would require either the explicit or tacit approval of more than 30 parties, including the banks, litigation funders and insurers.

One source said any deal would have to include guidelines for sharing proceeds among creditors.

It is understood recent negotiations have involved parties in Europe and Australia, with a source saying there was a major breakthrough in a meeting in Singapore last week.

A State Government spokesman declined to comment.