The Western Australian Court of Appeal has today delivered its judgment in the appeal of Westpac Banking Corporation v The Bell Group Ltd (in Liq) [2012] WASCA 157 ( The Bell Appeal ).  The Court substantially rejected the appeal.  The decision has important implications for directors, financiers and bondholder investors. It is a salutary reminder for financiers of the consequences of "knowingly receiving" a benefit from a breach of directors' duties. 

Background

Parent company guarantees and performance bonds are typically used in the construction and engineering industries to provide a developer with some security in the event that the contractor breaches the building or engineering contract or, in some circumstances, upon the contractor's insolvency.

In the current economic climate, contractor default is, unfortunately, even more prevalent in the construction and engineering industries, and so the issues surrounding parent company guarantees and performance bonds are very much in focus for developers.