The High Court has granted leave to appeal the decision of the WA Supreme Court of Appeal in Westpac Banking Corp v Bell Group Ltd (in liq) [No 3]. This appeal is part of the infamous, long-running Bell litigation, which involves twenty applicant banks and thirty respondent companies and liquidators. After experiencing financial difficulties in 1990, The Bell Group restructured its loans with its unsecured bank creditors, who waived some defaults and maturities in exchange for additional guarantees and collateral by Bell. The restructure was unsuccessful and by April 1991, Bell had begun liquidation proceedings. When the banks attempted to recover funds from the guarantees and collateral, the liquidators sued on the basis that Bell was insolvent in 1990, and the guarantees and collateral were promised in breach of directors’ duties. At trial, Justice Owen found for the liquidators, and ordered the banks to repay the value of the assets plus interest (approximately $1.5bil in total). The WASCA affirmed Justice Owen’s decision and dismissed the banks’ appeal, and allowed various cross-appeals made by some of the respondents.

During the special leave hearing, counsel for the applicants indicated three broad grounds of appeal. First, the WASCA erred in holding that the directors’ duties breached by Bell were fiduciary duties. Second, the WASCA erred in its application of the ‘first limb’ of Barnes v Addy (receipt of an interest in trust property by a third party, where that party knows the interest is trust property that has been misapplied). Third, the WASCA misapplied the principles of equitable compensation by applying profit disgorgement principles to calculate an account of profits.

Although the Full Court was set to hear the appeal on 10 September 2013, that hearing was vacated, and the case has now settled.