One.Tel 'bad blood' troubles judge

'There is a liquidator who has animosity towards his creditors.' Justice Patricia Bergin

THE animosity displayed by One.Tel's special purpose liquidator in correspondence to creditors of the failed phone company was troubling, regardless of the reasons for it, a senior NSW Supreme Court judge said yesterday.

After hearing evidence from executives of Optus and Telstra, the chief judge in equity Justice Patricia Bergin told the liquidator's barrister she was "really troubled" by the fractured relationships.

Optus, out of pocket by $65 million because of the 2001 collapse, wants Justice Bergin to replace the liquidator, Paul Weston, or order an inquiry into his conduct.

Justice Bergin told Mr Weston's barrister, Nigel Cotman, SC, that the "lack of faith" raised questions of Mr Weston's role as an officer of the court and as trustee of the interests of One.Tel's 535 creditors owed $325 million.

She said this was "irrespective of the merits of people's opinions or their personalities, that they may not get on with each other, or one is truculent and the other isn't".

Mr Cotman said the bad blood arose partly because in 2008 the committee of inspection, representing creditors, "sought to usurp a significant part of the liquidator's role" by conducting negotiations to settle the case with Publishing and Broadcasting Ltd (PBL) and News.

"Yes I understand that, but the fact that that infection is there is worrying me, that there is a liquidator who has animosity towards his creditors," Justice Bergin said.

Creditors passed a no-confidence motion in Mr Weston at their annual meeting in 2009, and another asking him to resign the following year.

"This has been going on for so long and the lack of confidence has been present for so long," the judge said.

The court appointed Mr Weston, a partner of the accounting firm Pitcher Partners, in 2003 to investigate suing the former One.Tel directors including James Packer and Lachlan Murdoch for $132 million plus interest, now about $120 million.

The rest of the liquidation is under the control of the insolvency firm Ferrier Hodgson.

Mr Weston filed a suit against Mr Packer and Mr Murdoch and companies associated with them, including PBL and News Ltd, in 2007 and activated it by serving it on the defendants in 2010.

Pending the outcome of an appeal, that case has been dismissed under the statute of limitations and Mr Weston is considering bringing replacement claims not subject to time constraints.

Optus's chief complaint is that Mr Weston has spent more than $13 million, including his own remuneration and legal fees, without producing a result in the case against PBL and News.

Optus's barrister, John Sheahan, SC, said some of the expenses were for matters creditors should not have to pay for, such as investigations of commercial links between Optus and PBL. It was not clear what Mr Weston intended to achieve by having a lawyer review the long C7 decision jointly defended by Optus and PBL, Mr Sheahan said.

The case continues.

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