High Court appeal of the Masters, Broome and Wilhelm proceedings
Creditors will recall that three (3) separate groups of shareholders (all funded by Bookarelli) commenced proceedings against the rejection of proofs of debt lodged by them in the liquidation of Babcock & Brown Limited (In Liquidation) (BBL). Those proceedings (known as the Broome, Wilhelm and Masters Proceedings) were heard by the late Justice Foster in October 2016. His Honour delivered judgment in October 2019 in which he dismissed the Broome, Wilhelm and Masters Proceedings with costs finding that BBL did not breach the continuous disclosure regime in the Corporations Act 2001. In doing so, His Honour found that none of the shareholder suffered any loss.
The shareholders expectedly appealed to the Full Court of the Federal Court (the Appeal). The Appeal was heard by three (3) Judges of the Federal Court in November 2020. The Full Court delivered judgment in 2021 and dismissed the Appeal with costs. The Full Court found that, on the most part, BBL did not breach the continuous disclosure regime save in respect of two (2) instances. However the Full Court concluded that the shareholders suffered no loss from those two (2) breaches. Critically, the shareholders had also appealed on the grounds that the late Justice Foster took an inordinate period of time to deliver judgment, and thus his reasons and decision were infected by delay. The Full Court considered this factor and dismissed it.
The shareholders then sort special leave to appeal to the High Court of Australia. In that regard, creditors will note that there is no automatic right to appeal to the High Court. Instead, applicants must establish that there is something special about the matter to warrant the High Court’s consideration. The shareholders’ application for special leave to appeal was heard by the High Court on Friday 8 April 2022. The High Court dismissed the applications with costs. The High Court was satisfied that the shareholders had not disclosed a proper case to enliven the High Court’s special leave jurisdiction, that it didn’t even require our Counsel team to respond.
The effect is that those shareholder claims against BBL are now entirely eliminated. Moreover, BBL has a right to recover costs from the shareholders. Prior to the hearing of the High Court special leave application, we had instructed our solicitor to commence assessing the costs of the hearing before the late Justice Foster and the Full Court in anticipation that (based on advice received) the shareholder would not obtain special leave to appeal. We expect that we would recover approximately $1million is costs from the shareholders subject to the outcome of the cost application.
Remaining legal proceedings – Pain proceedings
One further shareholder action (commenced by Mr Pain and approximately 313 other shareholders) seeks similar claims to those that was heard in the Broome, Wilhelm and Masters Proceedings (Pain Proceedings). The Pain Proceedings have been largely in abeyance pending the result of the High Court. We have caused to be issued, various examination summons against the promotors of the Pain Proceedings to determine if those proceedings could be dismissed without a final hearing. We will update creditors with that matter as it progresses.
Tax declaration to noteholders
Any future return to noteholders is contingent upon the outcome of the legal proceedings. 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 tax 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 2022.
Queries
If you have any queries please do not hesitate to contact Alexander Shields of the Liquidator’s office on the details above.
