The High Court recently granted leave to appeal on the Bell Group case, which, as the case page notes, is part of the infamous, long-running Bell litigation, involving twenty applicant banks and thirty respondent companies and liquidators. There have been rumours of settlement since July, and recent reports suggest that the case has been adjourned for six months and withdrawn from the High Court list in preparation for a settlement. If settlement occurs, this may be good news for Western Australians, as the litigation has been funded by the WA State Government-owned Insurance Commission of Western Australia (ICWA). Western Australian motorists had to pay an annual levy of $50 on third party insurance from 1993 to 1996 to assist ICWA, known as the WA Inc levy.

As The Western Australian article linked above notes:

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.

From my own perspective as a legal academic, however, it will be a pity if the case does not go to the High Court. The majority of the Court of Appeal of Western Australia held in Westpac Banking Corporation v The Bell Group Ltd (in liq) (No 3) [2012] WASCA 157 that the respondents had lost the right to elect for an account of profits properly speaking, but that ‘then the equitable compensation provided in lieu had to reflect the cardinal principle of equity that there be disgorgement of profits gained’ (at [1236]). In other words, the respondents could use the loss-based remedy of equitable compensation to strip the applicants of their profits. Thus the court awarded compound interest on the equitable compensation payable in order to effect disgorgement of profit. The rate imposed was 2 per cent greater than the rate the trial judge had imposed, which had the effect of increasing the award from $1.6 billion to between $2 and $3 billion (see Dan Butler, ‘Equitable Remedies for Participation in a Breach of Directors’ Fiduciary Duties’ (2013) 31 Company and Securities Law Journal 207).

With respect I disagree with the conclusion of the majority of the Western Australian Court of Appeal. If you have said a party is not entitled to elect to take a gain-based remedy (the account of profits) then surely it undermines that decision to then use a loss-based remedy to effect profit stripping. My hope was that the High Court would clarify that loss and gain are distinct measures which should not be confused in this fashion.