20 August 2012 7:20am
The lack of insider histories of banks is a periodic lament of this newsletter. But, thanks to the hubris of the 20 banks involved in what is Australia's most complex court case, one such history has emerged thanks to the efforts of a succession of judges of the Supreme Court of Western Australia.
The litigation over Bell Resources deals with events stretching from 1985 to 1990, and turns, in part, on such quaint details as whether a particular protagonist received a fax or even used a particular fax number at that time.
Speculation on the contents of the mind of Robert Holmes à Court – the owner of Bell before selling the business to Alan Bond – also rates a mention.
For students of banking, the evidence advanced by the banks in the pursuit of their claim for priority in the Bell Group liquidation includes many gems highlighted by the trio of rulings by the judges of the court of appeal.
One memorandum, in May 1986, from Phillip Deer, then general manager of corporate banking at Westpac, to the board of Westpac, dealt with the request by Robert Holmes à Court for the first A$500 million of the jumbo facility he was relying on in his attempt to take over BHP.
Deer referred to Westpac needing to "actively compete in this deregulated environment", and noted that ANZ and NAB had made large commitments on an urgent basis, which Westpac would also have to be able to deal with.
The judgement of Douglas Drummond notes that "the board agreed the next day to provide the A$500 million to [Bell]."
Robert White, Westpac's managing director at the time, in a memorandum of 16 October 1986, spelled out to the bank's chief general manager his increasing concerns about "the practice being adopted by major banks of providing very substantial backup or underwriting facilities to make possible bids for control of large listed companies."
The judgement notes "the other evidence of the pressures various appellant banks felt from these competitive forces... [including] weaken[ing] the already weak prudential controls" that the banks had over Bell.
Drummond also mentions his exasperation over the conduct of the banks over a case begun in 1995, the subject of a three-year trial from 2003 to 2006, and then a three-month appeal last year.
"This case has been underway for two decades. It should not have become one of [such] extraordinary complexity. The position of the Bell group companies as at January 1990 was relatively straightforward.
"These are not my words but the opening written submissions of the appellants. They are made, so far as I can see, without any ironic intent. I agree with them."