What is the impact on Babcock & Brown of the way Bookarelli has chosen to commence these proceedings.

The manner in which Bookarelli has commenced the multiple proceedings is such that Bookarelli has had the opportunity to refine the way in which the shareholders claims are formulated for the respective cases and hearings, which I consider to be substantially the same, and is also pleaded based on learnings from the outcomes of previous cases which have been lost.

The method that has been adopted by Bookarelli has led to the incurrence of significant costs in the Liquidation as I have been required to deal with five (5) separate proceedings rather than one (1) proceeding in respect of the shareholder claims.

What is the likelihood of Bookarelli commencing future proceedings which I consider to be an abuse of the Court process and what steps can be taken to prevent this from occurring?

The first point to note is that Bookarelli have made representations, although, at this stage, we have not seen any evidence, that they may still have a substantial number of further shareholder claims which would allow Bookarelli to bring further proceedings in respect of shareholder claims. As such, it is possible that Bookarelli may bring further claims on behalf of shareholders in the future, absent being prevented from doing so.

It is my view that Bookarelli’s strategy of continuing to commence proceedings in this manner and of the same, or of a similar nature, represents an abuse of the Court process. It is my view, that Bookarelli should have gathered all of the shareholder claims in one (1) proceeding and run all of its arguments in that one (1) proceeding, on a “once and for all” basis. It should not have run the same or similar arguments in separate proceedings over and over, in the hope that the result might change if they learn from the previous case.

As some of you may know, our success against Bookarelli in the previous proceedings have resulted in costs orders being made in our favour as a consequence of Bookarelli losing the respective cases. One of those costs orders has been paid however, there is a process that must be followed in order to recover our costs and obtain a Court order against Bookarelli for our costs to be paid by them. In this regard we are significantly advanced in this cost recovery process before the Court for the Masters, Broome & Wilhelm matters. However, the process is not straightforward one and of course Bookarelli takes objection to all matters it can in order to in my opinion delay any possible court order to pay our costs. The amount of costs that we think will ultimately be ordered against Bookarelli are substantial, and so it is unknown whether Bookarelli will pay these costs and this could cause Bookarelli to reconsider whether they wish to continue pursuing actions on behalf of shareholders in circumstances where the Court has made cost orders against them. We will also if Bookarelli does not pay seek recovery from the respective shareholders.

I would further note that on 29 October 2024, Bookarelli lodged six (6) new individual shareholder claims via proof of debts forms which are not connected with the Pain proceeding. Whilst I am presently attending to this matter with our legal team, we consider that this action is again indicative that Bookarelli will continue to lodge claims in the liquidation unless these claims are struck out by the Court and Bookarelli are prevented from bringing further claims of the same, or of a similar nature, on behalf of shareholders.

What options are there available to defend the multiple claims being brought by Bookarelli which I believe are an abuse of the court process?

The challenge that we have faced over the course of the Babcock & Brown liquidation is that Bookarelli has brought multiple separate proceedings with different applicants / shareholders rather than a class action or simply one action. The effect of Bookarelli conducting their litigation in this way is that the shareholders claims that were not part of previous proceedings and therefore are not precluded from participating in any later proceedings, whereas if the initial proceedings and claims were run as a class action or a single action, it would have bound all the shareholders other than those that opted out of the class.

Only Bookarelli is in a position to know if they are going to bring further proceedings, and if so, the form in which they are going to do so. Unfortunately, there is very little that I can do to prevent the commencement of further legal proceedings other than defend them on their merits if or when they are filed in Court. In saying this my legal team has considered each case and in particular the Pain proceedings where we have sought in Court to stay or strike out the Pain proceedings and in that regard we were successful. Please see the next question in our update below.

What legal actions have been taken to deal with the multiple cases brought by Bookarelli which in my opinion are an abuse of the Court process?

Together with our Legal team and Senior Counsel, we have sought legal advice and considered carefully the prospects and issues associated with commencing proceedings to strike out the Pain Proceedings as an abuse of the Court process. In considering an application to the Court to strike out the Pain proceedings we were mindful that Bookarelli had commenced and funded four (4) different sets of proceedings with their arguments being virtually the same case, and lost all four (4) of those cases. Accordingly, it was my view that the Court would, based on the relevant evidence, strike out the Pain Proceedings, therefore preventing Bookarelli from pursuing the Pain case at all. Therefore, based on Senior Counsel’s advice I commenced an application to strike out the Pain case. In this regard, on 21 November 2024, his Honour Justice Halley passed judgement in the Federal Court of Australia that the Pain Proceedings should be permanently stayed as an abuse of the Court process.

• In summary the Pain Proceedings Judgement was issued on 21 November 2024 where the Federal Court of Australia made orders to permanently stay the Pain proceedings as an abuse of process. Babcock & Brown were awarded costs and I intend to enforce them. The Pain proceedings were originally brought by Bookarelli on behalf of 312 shareholder applicants who acquired shares in Babcock & Brown and who sought compensation and a declaration that the company failed to disclose material information to the Australian Securities Exchange at the time they purchased their shares.
• The claims made in the Pain proceedings were effectively identical to the previous 4 proceedings save for Bookarelli advancing an alternative “no transaction” causation case. After hearing the case for a full day Justice Halley ordered the permanent stay of the proceedings based on an abuse of process where the issues have already been litigated and lost in other proceedings funded by Bookarelli.  

It is appropriate to note the following with respect to the judgement in the Pain proceedings:

• The Pain application that I brought to strike out the Pain case is not a straightforward application and requires me to demonstrate that the proceedings brought by Bookarelli was an abuse of the Court process.  As a result of the complexity of the issues in the Pain application this necessitated attempting to obtain further evidence via the public examination process. This evidence concerned how Bookarelli were running their case and the obtaining other documents from Bookarelli, and other persons, to demonstrate that Bookarelli had complete control as to what claims should be brought and when those claims should be brought. In this regard in the examinations, we obtained evidence that Bookarelli had complete and unfretted control of shareholder claims and could bring those claims whenever they wished and in the multiple proceedings.
•  In making the application to obtain an order from the court preventing Bookarelli from continuing to litigate the Pain Proceedings, legal costs were required to be incurred. However, I considered the legal expenses to be absolutely necessary to prevent Bookarelli from continuing to bring case after case therefore preventing the payment of a dividend and the finalisation of the Liquidation.
• Whilst the Judgement has now been delivered by the Honourable Justice Halley, Bookarelli will most likely seek to appeal the decision as they have all decisions by the Courts including all the way to the High Court. And I can now report that they have taken this step. As a result of the appeal this will have the effect of continuing to protract the finalisation of the liquidation. I understand that you would like to understand in detail my legal strategies going forward to deal with this appeal and any other steps taken that may be taken in the future by Bookarelli. However, as this is a public statement and has in the past been read by Bookarelli’s legal advisors, I am sure you understand that it would be imprudent and unwise of me to say anything concerning our future legal strategies in this update that might in any way compromise our future prospects of defending this matter and any future matters.
• Finally, as noted above we have received six (6) new proof of debt claims which are not connected to the Pain Proceedings and our legal advisors are reviewing and determining our response to these claims.

Why is it necessary to continue to defend the multiple Bookarelli proceedings.

Firstly, we have received Legal advice that the claims of Bookarelli are invalid and an abuse of the Court process. Whilst the multiple proceedings commenced by Bookarelli on behalf of shareholders are preventing the payment of a dividend to Noteholders, if the various actions were not defended strongly then a dividend to noteholders would be significantly reduced or there would be no dividend available.

Further, I note that in my opinion it would be a breach of my duties to simply admit the shareholder claims which have been advanced by Bookarelli when my legal advice is that the claims are invalid and should not be admitted. In addition, clearly, the Courts have found that the shareholder claims prosecuted by Bookarelli are invalid claims pursuant to the various Judgements issued by the respective Courts. Therefore based on the position before me I see no basis to admit shareholder claims.

Tax declaration to noteholders

Any future return to noteholders is contingent upon the outcome of the legal proceedings on foot. Therefore, the Liquidator is unable to issue a notice declaring that BBL subordinated notes have no value. It is recommended that noteholders obtain their own professional taxation advice in respect to their BBL note holdings.

Annual Administration Return

Separately, pursuant to section 70-5(6)(b) of the Insolvency Practice Schedule (Corporations) 2016, we provide notice that we have lodged our Annual Administration Return (Form 5602) with the Australian Securities & Investments Commission for the period ended 23 August 2024.

Queries

If you have any questions, please do not hesitate to contact us by email: bandbltd@deloitte.com.au