Hanging up on One.Tel's unworkable situation

A Supreme Court judge asked the defunct telco's liquidator why he wanted to remain in the position, writes Elisabeth Sexton.

A Supreme Court judge asked the defunct telco's liquidator why he wanted to remain in the position, writes Elisabeth Sexton.

Almost three years after a majority of creditors passed a motion of no confidence in One.Tel's special purpose liquidator and 18 months after they told him to resign, a NSW Supreme Court judge asked the obvious question on Thursday. Why does Paul Weston want to stay?

"I am just trying to fathom why it is that he would wish to remain in a situation where he accepts it's unworkable," Justice Patricia Bergin said to Mr Weston's barrister, Nigel Cotman, SC.

Mr Weston has been at loggerheads with the creditors' committee of inspection at least since 2007.

"Your client had an obligation in one way or another for the benefit of the company to ensure that the relationship with the committee was one that would work," Justice Bergin said.

"A special purpose liquidator has an obligation to try and make sure that things don't get out of control. This was totally out of control."

An easy answer might be that Mr Weston, a partner of the accounting firm Pitcher Partners, wants the fees from his role of pursuing a $250 million damages suit against former One.Tel directors James Packer and Lachlan Murdoch. Since his appointment by the court in 2003, creditors have paid $13.5 million to Mr Weston and his lawyers.

But Mr Weston is risking damage to his reputation if Justice Bergin agrees to an application by Optus, One.Tel's largest creditor owed $65 million, to replace him.

Optus, supported by Cisco Systems, owed $55 million and Telstra, owed $49 million, also wants the judge to order an official inquiry into Mr Weston's conduct.

Complaints about his fees and legal expenses have been under investigation by the Australian Securities and Investments Commission since 2009.

Mr Weston chose not to give evidence so the answer to the judge's question came from Mr Cotman.

His client's experience and background were valuable to the liquidation and his future direct dealings with the committee of inspection would be minimal, Mr Cotman said.

Replacing him with another liquidator would be throwing the baby out with the bathwater and the cost of his replacement coming to grips with the detail of the job would be "prodigious", he said.

In addition to costs, the creditors are aggrieved at the time it took

Mr Weston to serve his suit on

Mr Packer and Mr Murdoch and his failure to try to reach a negotiated settlement.

Last year the claim against the two directors was dismissed because it was unfair on the defendants to wait so long after One.Tel's 2001 collapse to be sued.

Mr Weston has appealed against the dismissal, and has foreshadowed launching a fresh suit on a different legal basis if the appeal fails.

On Thursday, Optus's barrister, John Sheahan, SC, described Mr Weston's resistance to being removed as a "remorseless clinging" to the appointment.

In his opening address earlier this month, Mr Sheahan said members of the committee - "people who were sophisticated and experienced commercial litigants" - had urged Mr Weston to try to settle the case against Mr Packer and Mr Murdoch at the same time as seeking funding from a commercial litigation funder in case settlement talks failed.

"His financial interests are in the litigation continuing because that's the circumstance in which his revenue is maximised," Mr Sheahan said. "Settlement in the short term is bad for business, to put it bluntly."

The risk that the case would be dismissed "must have been apparent from December 2008 and that should have prompted an attempt to settle," he said.

"Mr Weston appears to have lost the ability to bring sound, dispassionate, commercial judgment to bear on the critical problems affecting this administration," he said.

In his submissions, Mr Cotman said Optus had led no expert evidence to show the expenses were unreasonable or unjustified, given the scope and complexity of the suit against Mr Packer and Mr Murdoch.

The outcome was still unknown, and even if the case produced no dividends for creditors, Mr Weston should not be judged in hindsight. Settlement was "highly strategic and highly subjective in nature," he said.

Justice Bergin will consider her decision after receiving supplementary submissions next week.

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