FEDERAL COURT OF AUSTRALIA

BCI Finances Pty Limited (in liq) v Binetter (No 6) [2018] FCA 500

ORDERS

THE COURT ORDERS THAT:

1.    Judgment be entered for the second applicant against the ninth respondent in the sum of $4,986,533.71.

2.    Judgment be entered for the second applicant against the tenth respondent in the sum of $24,263,278.15.

3.    Judgment be entered for the third applicant against the eighth respondent in the sum of $3,056.60.

4.    Judgment be entered for the third applicant against the tenth respondent in the sum of $3,023,337.36.

5.    Judgment be entered for the fourth applicant against the eighth respondent in the sum of $13,833,875.25

6.    Judgment be entered for the fourth applicant against the tenth respondent in the sum of $28,281,066.70.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

GLEESON J:

1    On 15 December 2017, I made orders following a hearing concerning the orders to be made consequent upon my judgment in BCI Finances Pty Limited (in liq) v Binetter (No 4) [2016] FCA 1351; (2016) 117 ACSR 18 (“liability judgment”): BCI Finances Pty Limited (in liq) v Binetter (No 5) [2017] FCA 1524 (“Binetter (No 5)”).

2    In brief, I made orders concerning the costs of the windings up of the various applicants and the costs of the proceeding, and ordered the parties to file an agreed short minute of orders to give effect to my reasons to the extent that they were not reflected in the various costs orders.

3    On 22 December 2017, I made orders in accordance with an agreed short minute of orders, giving judgment for the various applicants in various money sums. The orders included the following notation:

22.    The applicants accept the maximum recovery of each of the applicants in these proceedings, excluding any orders for any of the applicants' costs of winding-up to be paid by the relevant respondents or any costs orders, is as follows:

(a)    for the first applicant, the sum of $13,087,428.58;

(b)    for the second applicant, the sum of $46,857,201.51.;

(c)    for the third applicant, the sum of $21,634,089.60; and

(d)    for the fourth applicant, the sum of $29,121,155.80.

4    The parties were unable to agree on the orders to be made in favour of the second applicant (“EGL”) against the ninth respondent (“Ligon 159”) and the tenth respondent (“Ligon 158”). Accordingly, the making of those orders was adjourned to 9 February 2018.

5    The 22 December 2017 orders made no orders in favour of the third applicant (“Ligon 268”) or the fourth applicant (“Binqld”) against Ligon 158 or the eighth respondent (“Erma”).

6    On 6 February 2018, I made the following order:

1.    By 8 February 2018, the applicants are to file and serve draft orders for which they contend arising from the judgment given on 15 December 2017 in respect of the monetary judgments between:

(a)    the second applicant as against the ninth and tenth respondents;

(b)    the third applicant as against the eight and tenth respondents; and

(c)    the fourth applicant as against the eight and tenth respondents,

together with an outline of written submissions outlining the basis for which they contend for those orders.

Competing orders

7    The applicants seek the following orders:

Second Applicant

1.    Judgment be entered for the Second Applicant against the Ninth Respondent in the sum of $38,012,356.59.

2.    Judgment be entered for the Second Applicant against the Tenth Respondent in the sum of $47,505,877.01.

Third Applicant

3.    Judgment be entered for the Third Applicant against the Eighth respondent in the sum of $21,933,719.66.

4.    Judgment be entered for the Third Applicant against the Tenth Respondent in the sum of $21,933,719.66.

Fourth Applicant

5.    Judgment be entered for the Fourth Applicant against the Eighth Respondent in the sum of $29,524,238.88.

6.    Judgment be entered for the Fourth Applicant against the Tenth Respondent in the sum of $29,524,238.88.

8    Erma and Ligon 158 seek the following orders:

Second Applicant

1.    Other than in respect of the orders entered on 15 December 2017 and 22 December 2017 against the Tenth Respondent, judgment be entered for the Tenth Respondent against the Second Applicant.

Third Applicant

2.    Other than in respect of the orders entered on 15 December 2017 and 22 December 2017 against the Eighth Respondent, judgment be entered for the Eighth Respondent against the Third Applicant.

3.    Other than in respect of the orders entered on 15 December 2017 and 22 December 2017 against the Tenth Respondent, judgment be entered for the Tenth Respondent against the Third Applicant.

Fourth Applicant

4.    Other than in respect of the orders entered on 15 December 2017 and 22 December 2017 against the Eighth Respondent, judgment be entered for the Eighth Respondent against the Fourth Applicant.

5.    Other than in respect of the orders entered on 15 December 2017 and 22 December 2017 against the Tenth Respondent, judgment be entered for the Tenth Respondent against the Fourth Applicant.

9    Ligon 159 did not seek to be heard in relation to the competing orders, accepting that its position is analogous to that of Ligon 158.

Binetter (No 5)

10    At [81] and following of my judgment in Binetter (No 5), I addressed the liability of the corporate respondents. At [84], I noted that I had found (at [983] of the liability judgment) that conduct of the corporate respondents amounted to participation in the various directors’ breaches of fiduciary duty in procuring drawdowns and in procuring payments to Israeli banks in furtherance of the scheme. I also noted the finding (at [982] of the liability judgment) that the knowledge of Erwin, Emil and Andrew Binetter about the scheme, to the extent that they were directors of the corporate respondents, must be imputed to those companies.

11    At [85], I addressed the liabilities of the corporate respondents to the first applicant (“BCI”).

12    At [86] and [87], I addressed the liability of Erma and the seventh respondent (“Milgerd”) to EGL, and its quantification. I did not address the liability of Ligon 158 and Ligon 159 in these paragraphs.

13    At [88] and [89], I observed:

[88]    Each of the corporate respondents participated in the breaches of duty by the directors of EGL to the extent that those companies received funds procured by EGL from IDB as identified in EGL’s SOFIC, and were therefore the beneficiaries of the scheme as implemented by EGL.

[89]    If my conclusions at [85] to [87] are wrong, then Milgerd and Erma are liable to compensate EGL to the extent that their respective benefits are referrable to EGL’s tax liabilities, if that can be determined from the evidence. Similarly, Ligon 158 and Ligon 159 are liable to compensate EGL to the extent that their respective benefits are referrable to EGL’s tax liabilities.

14    On reflection, I think that [89] contains an error. It should commence with the words “If my conclusions at [86] to [87] are wrong”.

15    My conclusions at [86] to [87] were addressed to the liabilities to EGL arising from particular forms of conduct, namely, provision of guarantees and receipt of loans from EGL. I did not find that Ligon 158 or Ligon 159 had done either of these things, and accordingly, I did not find that either of those companies was liable to pay compensation to EGL on the basis articulated in those paragraphs.

16    I found that Ligon 158 and Ligon 159 are liable to compensate EGL “to the extent that their respective benefits are referrable to EGL’s tax liabilities”. This requires an identification of the relevant benefits and a conclusion about whether and to what extent those benefits are referrable to EGL’s losses.

17    Contrary to the submissions made on behalf of Ligon 158, this quantification is not intended as an account of profits but as a quantification of the compensation payable for losses suffered by EGL as a result of the knowing participation of Ligon 158 and Ligon 159 in the relevant breaches of fiduciary duty.

18    In their submissions dated 12 February 2018, the applicants have quantified the benefits received by Ligon 158 and Ligon 159, referrable to EGL’s tax liabilities, in the following amounts:

(1)    Ligon 158    $24,263,278.15

(2)    Ligon 159    $4,986,533.71

19    Although Ligon 158 did not concede that the applicants’ calculations are correct, it did not point to any particular error in the calculations. Senior counsel, Mr Cook SC, contended that the calculations involve double counting but I do not accept that this is correct. As noted above, the applicants have accepted that they are not entitled to receive more than the amounts calculated as their actual losses.

20    The relevant benefits are the amounts received by Ligon 158 and Ligon 159 from funds advanced by the Israeli Discount Bank (“IDB”) to EGL. The applicants’ calculations have identified those amounts and then sought to identify the tax liabilities to which those amounts are referable. In the absence of any identification of any error in the applicants’ calculations, I will accept the applicants’ calculations of the compensation payable to EGL by Ligon 158 and Ligon 159 for the purpose of ordering judgments against those two respondents

21    It follows that I will also make the orders proposed by the applicants for judgment in favour of Ligon 268 and Binqld based on their calculations using the “benefit methodology” referred to in the 12 February 2018 submissions. As Mr Cook SC pointed out, at [91] of Binetter (No 5), the reference to Ligon 268 in the first line of that paragraph is incorrect and should be replaced with “Ligon 158”.

Associate:

Dated:    16 April 2018

SCHEDULE OF PARTIES