Bell Group payout to be a Dutch treat
A very big pay day is soon to arrive for an unlikely trio: the Australian Taxation Office, the Insurance Commission of Western Australia and ... wait for it ... an enigmatic Dutchman who was once investigated for smuggling a Rembrandt out of the US.
To be fair, it was his Rembrandt. As were the handful of Picassos, the Monet and the Modiglianis in his apartment in Trump Tower overlooking Central Park that were once seized by the New York sheriffs.
Wall Street investment bank Credit Suisse once sued him, too, for $US750 million in a separate matter, claiming "brazen conspiracy ... to cheat and deceive on an unmatched scale". The case was settled.
Meet billionaire speculator Louis Reijtenbagh, a savvy Dutch speculator who bought some debts in the failed Bell Group in the 1990s, then threw his hat in with the ATO and Western Australia's insurance commission in a litigation funding deal.
The Bell Group action turned into the longest and most expensive commercial contest in this country's legal history.
Fifteen years on, the original claim of $280 million is poised to deliver a settlement of up to $2.5 billion, of which the menage a trois of the ATO, the insurance commission and Louis Reijtenbagh will take the lion's share.
The Supreme Court of WA approved the Bell Group settlement on Thursday. It paves the way for a historic payout, and one that might have been avoided without 15 years of litigation and up to $500 million in legal costs, had the banks settled the case
WA legal sources believe they could have buried it for $150 million.
A remaining condition to be met before the payout is a vote by the bondholders.
The original claim hinged on the wrongful transfer of just $265 million in assets to a syndicate of 19 banks as Sir Robert Holmes a Court's Bell Group danced on the precipice of insolvency in 1991.
It was during the height of the financial crisis in October 2008 that the banks had their big setback. Justice Neville Owen found they had been knowing and improper recipients of Bell Resources' trust assets.
He made orders for the syndicate to pay $1.58 billion to the liquidators. The banks appealed. The costs escalated. They subsequently lost on appeal.
The split is yet to be revealed but 64 per cent of the monster payout is to be shared by the three plaintiffs. They assumed all the risk, they funded the tortuous 15-year lawsuit, so there can be little quibbling. Still, the sheer magnitude of the settlement is sure to have the critics of litigation funding rattling their sabres.
Ironically, from the perspective of the banks, it may have been worthwhile.
Though they could have squared the action away at one-tenth of the cost in the early '90s, the marathon Bell Group defence sends the message nonetheless: Don't fight us; we are prepared to splash hundreds of millions of dollars in silk and solicitors.
And the taxpayers pay twice: one, they fund the court system; and, two, companies get a tax deduction for litigation as a legitimate expense of doing business.
The other development of note in litigation-funding circles of late has been the advent of Mark Elliott.
Elliott, a former partner of Minter Ellison, has ruffled the odd few feathers with two quick-fire class actions: against Leighton Holdings and Treasury Wine Estates for the bribery allegations and the wine inventory imbroglio in the US.
Elliott, who is already running the Banksia class action, looks to have a good case in Leighton, while the Treasury writ is yet to be filed. But he is taking a massive risk fighting these two without oodles of funding.
Searches show his company, Melbourne City Investments is only a year old. Elliott is sole director, secretary and shareholder, and his company is the lead applicant in both claims.
Besides the inevitable security for costs orders, he can expect to field claims that his company has not suffered a loss but rather bought shares to engage in class-action opportunities.
The class actions automatically include all investors, so the question is, are they all bound by the fate of Mark Elliott's actions and his ability to fund the claims?