FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission, In the Matter of

Richstar Enterprises Pty Ltd (ACN 099 071 968) v Carey (No 4) [2006] FCA 644

CORPORATIONS – appointment of receivers to property of corporation – pending investigation by Australian Securities and Investments Commission – possible contraventions of Corporations Act 2001 (Cth) – possible liability of corporation to third parties – orders necessary and desirable – receivers appointed.

Corporations Act 2001 (Cth) s 1323

Australian Securities and Investment Commission; In the Matter of Richstar Enterprises Pty Ltd v Carey (No 3) [2006] FCA 433 cited

IN THE MATTER OF RICHSTAR ENTERPRISES PTY LTD (ACN 099 071 968); WESTPOINT REALTY PTY LTD (ACN 050 218 954); BOWESCO PTY LTD

(ACN 008 915 357); REDCHIME PTY LTD (ACN 117 947 805), KEYPOINT DEVELOPMENTS PTY LTD (ACN 115 507 232)

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v NORMAN PHILLIP CAREY, GRAEME JOHN RUNDLE, CEDRIC RICHARD PALMER BECK, JOHN NORMAN DIXON, RICHSTAR  ENTERPRISES PTY LTD

(ACN 099 071 968), WESTPOINT REALTY PTY LTD (ACN 050 218 954) and BOWESCO PTY LTD (ACN 008 915 357), REDCHIME PTY LTD (ACN 117 947 805)

and KEYPOINT DEVELOPMENTS PTY LTD (ACN 115 507 232)

WAD 83 OF 2006

FRENCH J

26 MAY 2006

PERTH

IN THE MATTER OF RICHSTAR ENTERPRISES PTY LTD (ACN 099 071 968)

WESTPOINT REALTY PTY LTD (ACN 050 218 954)

BOWESCO PTY LTD (ACN 008 915 357)

REDCHIME PTY LTD (ACN 117 947 805)

KEYPOINT DEVELOPMENTS PTY LTD (ACN 115 507 232)

In respect of the Ninth Defendant THE COURT ORDERS THAT:

A.        The Receiver orders:

1.         Until 20 October 2006 or until further order, pursuant to s 1323(1) (h)(ii) of the Corporations Act 2001 (Cth), Oren Zohar, Brian McMaster and Mark Korda of KordaMentha, Chartered Accountants, of Level 11, 37 St George’s Terrace, Perth are appointed jointly and severally as receivers and managers (‘the Keypoint Receivers’) to all property (‘the Keypoint Property’), whether within Australia or overseas, of the Ninth Defendant (‘Keypoint’).

2.         For the purpose of these orders, ‘Property’ means property which falls within any of the following categories:

2.1       property held in the name of Keypoint;

2.2       property held by Keypoint as trustee for a trust, or on behalf of, or on account of, another person;

            2.3       property held jointly in the name of Keypoint and a Third Party;

            2.4      property held jointly in the name of Keypoint and a Third Party for the express

                        purpose of a joint venture;

            2.5       property held by Keypoint jointly with a Third Party, where both Keypoint and the Third Party hold the property in their capacity as joint trustees for a trust or on behalf of or on account of another person;

            2.6       property held by a Third Party, as trustee for a trust, where Keypoint is a

                        beneficiary of the trust; and

            2.7       any Bank Account which is held in any of the capacities set out at paragraphs 2.1 to 2.6 above (‘Keypoint Accounts’).

3.         The Keypoint Receivers have, in respect of the Keypoint Property, the following

powers:

3.1       the power to do all things necessary or convenient to be done for or in connection with, or as incidental to, the identification, preservation and securing of all of the Keypoint Property for the benefit of potential creditors; and

3.2       without limiting the generality of the power in the preceding subparagraph:

3.2.1    the power to enter into possession and take control of the Keypoint

            Property to the extent that the exercise of the power is reasonably

            necessary to achieve the purposes set out in the preceding subparagraph; and

3.2.2    the power to appoint a lawyer, accountant or other professionally qualified person to assist the Keypoint Receivers.

4.         The preceding powers shall not extend to the sale, letting or encumbering of such

            property without prior leave of the Court or the consent of the defendant whose

            property it is.

5.         The Keypoint Receivers (or any one of them) must be appointed a required signatory

to all Keypoint Accounts.

6.         All electronic banking facilities available in relation to the Keypoint Accounts will be

cancelled and only reinstated upon the written request of the Keypoint Receivers and

at the relevant Bank’s discretion.

7.         These orders shall not prevent:

7.1       Keypoint by its officers, other than the Keypoint Receivers, from continuing to operate in the ordinary course of its business, provided that it must obtain the Keypoint Receivers’ prior consent to any transaction that would result in the transfer or disposition of any part of the Keypoint Property exceeding a value of in excess of $5,000 or a series of transactions that would result in the transfer or disposition of any part of the Keypoint Property totalling a value of in excess of $5,000 within any seven (7) day period; and

7.2       Keypoint, with the prior written approval of the Keypoint Receivers, from:

7.2.1      selling Keypoint Property over which a Bank holds security, to reduce

secured debt; or

7.2.2    applying for new advances from any Bank; or

7.2.3    granting new security in favour of any Bank over Keypoint Property

(acquired prior to or after the date of this Order); or

7.3       any Bank from:

7.3.1    exercising any right of set-off which it may have in respect of a facility

afforded by it to Keypoint prior to or after the date of this Order; and

7.2.3    enforcing or exercising any security right or interest existing now or in

the future in relation to the Keypoint Property.

8.         Subject to the Keypoint Receivers’ satisfaction as to the solvency of Keypoint, the

Keypoint Receivers may, in relation to Keypoint, approve:

8.1       payments by Keypoint to pay reasonable legal expenses incurred in these

proceedings, which includes the payment of monies on trust to solicitors on

account of such expenses;

8.2       reasonable expenses required to maintain or preserve assets;

8.3       periodical debits from any Keypoint Account required to effect a transaction

otherwise permitted by these orders; and

8.4        changes to security and facility arrangements with any Bank.

9.         Upon receipt of confirmation of the approval of the Keypoint Receivers (or any one of

them), no Bank need inquire as to:

9.1        the application or proposed application of any money withdrawn or periodically

debited from the Keypoint Accounts; or

9.2        whether a transaction or proposed transaction or any change to arrangements is

in contravention of these Orders.

10.        For the avoidance of doubt, all of the Banks’ rights are preserved under their respective

security and facility terms and conditions and it remains at the absolute discretion of

the Banks as to whether they will make available further funds or permit any changes

of facility or security arrangements, at the request of Keypoint and the Keypoint

Receivers.

11.        In exercising the discretion to consent or not to any payment, transfer or disposition

contemplated in these orders, the Keypoint Receivers have the power to make all

necessary and incidental inquiries into the affairs of Keypoint (including the power to

make inquiries in the name of Keypoint), including inspecting the books and records

and any other information held by Keypoint and or their agents relating to those affairs,

and Keypoint must give the Keypoint Receivers such assistance as is reasonably

requested by them in the course of such inquiries.

12.       Any Bank which holds confidential information in relation to its customers which may

assist in clarifying the Keypoint Accounts to which the scope of these orders applies,

must provide that information to the Plaintiff and to the Keypoint Receivers within a

reasonable time after having received a written request for that information.

13.        The Keypoint Receivers have leave to give to any Bank with which Keypoint or Third

Party operates any Keypoint Accounts a copy of the affidavits referred to in paragraph

14, so as to inform them of the bank accounts which are Keypoint Accounts.

Affidavit of assets orders:

14.        An order that Keypoint shall by 5 pm on Wednesday, 7 June 2006, deliver or cause

to be delivered to the Plaintiff and the Keypoint Receivers a full and detailed affidavit

sworn by its proper officers, setting out:

14.1      the name and address of any bank, building society or other financial institution

at which there is an account in the name of or under the control of Keypoint,

together with the number of such account, the name of such account and the

balance of that account at the date of this Order:

14.2      the name and address of any person or persons indebted to Keypoint at the date

of this Order, and the amount of the indebtedness;

14.3      an itemised inventory of Keypoint’s assets and liabilities;

14.4     an itemised inventory of any and all property whether real or personal:

14.4.1                         owned by Keypoint;

14.4.2              controlled by Keypoint; and

14.4.3              in which Keypoint has an interest,

and which includes details of the location of that property; and

14.5     in respect of any of the property referred to in sub-paragraphs 13.1 to 13.4

above, whether that property has been given as security for any debt, and, if so, the nature of the security and the debt so incurred.

15.       Keypoint, by itself, its servants, agents or employees:

15. 1    immediately deliver up to the Keypoint Receivers the Keypoint Property and the books and records which relate to the Keypoint Property; and

15.2     otherwise use its best endeavours to assist the Keypoint Receivers in

performance of their obligations.

Costs of Corporate Receivers

16.       The question whether the Keypoint Receivers’ reasonable costs and expenses properly incurred in the performance of their obligations and as approved by the Court shall be payable from the assets of the ninth defendant, is reserved.

Notification of orders:

17.       The Plaintiff have leave to give to:

17.1     the relevant authorities that record, control and regulate the ownership of real

property;

17.2     the relevant authorities that record, control and regulate the ownership of motor vehicles:

17.3     the relevant authorities that record, control and regulate the ownership of

maritime vessels and craft;

17.4     any bank, building society or other financial institution with which Keypoint operates any accounts; and

17.5     any other person or entity holding or controlling property belonging to Keypoint,

notice of this Order by delivering a copy of a minute of this Order to a person

apparently in the employ of that entity.

Other orders:

18.       Keypoint pay the Plaintiff’s costs of and incidental to this Interlocutory

Process.

19.       The Parties, third parties affected by the Orders and the Keypoint Receivers have liberty to apply to the Court on the giving of reasonable notice.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE MATTER OF RICHSTAR ENTERPRISES PTY LTD (ACN 099 071 968)

WESTPOINT REALTY PTY LTD (ACN 050 218 954)

BOWESCO PTY LTD (ACN 008 915 357)

REDCHIME PTY LTD (ACN 117 947 805)

KEYPOINT DEVELOPMENTS PTY LTD (ACN 115 507 232)

REASONS FOR JUDGMENT ON APPLICATION FOR APPOINTMENT OF RECEIVERS TO KEYPOINT DEVELOPMENTS PTY LTD

1                     On 20 April 2006 orders were made, on the application of the Australian Securities and Investments Commission (ASIC), appointing receivers to the property of four individuals and four companies associated with the Westpoint Property and Finance Group – Australian Securities and Investment Commission; In the matter of Richstar Enterprises Pty Ltd v Carey (No 3) [2006] FCA 433.  By an interlocutory application filed in Court on 23 May 2006 in the same proceedings ASIC now applies for the appointment of receivers to a further Westpoint Company, Keypoint Developments Pty Ltd (ACN 115 507 232) (Keypoint).  That company is named as ninth defendant.

2                     The ASIC application is brought under s 1323 of the Corporations Act 2001 (Cth).  Counsel for Keypoint indicated that it is not opposed.

3                     Most of the affidavit evidence relevant to the appointment of receivers ordered on 20 April 2006 was also relied upon in the present application.  The factual background disclosed by those affidavits is as set out in the earlier judgment and it is unnecessary to repeat it here. 

4                     In addition to the affidavits relied upon in the earlier application, ASIC relies upon the following:

1.         The affidavit of Brian Keith McMaster, one of the receivers already appointed to the other defendants – 4 May 2006.

2.         The affidavits of Nicholas Emil Gvozdin, the solicitor for ASIC – 5 and 18 May 2006.

3.         The affidavit of Rodney James Edgell, an officer of Westpac – 9 May 2006.

4.         Five affidavits of Cheryl Lorraine Harrison, process server – 28 April 2006 (x 2) and 1 May 2006 (x 3).

5.         The affidavit of Kevin Mayfield, process server – 12 April 2006.

5                     As appears from the previous reasons for judgment, ASIC determined on 17 February 2006 to conduct an investigation into Keypoint. 

6                     ASIC relies upon five matters which it submits warrant the appointment of receivers to Keypoint.  They are as follows:

1.         The assignment to Lanepoint Enterprises Pty Ltd (Lanepoint) by Westpoint Corporation on 10 January 2006 of a debt of $429,105.14 owed to it by Keypoint – as appears from Mr Zohar’s first affidavit.   Alan Carey, a brother of Norman Carey, is the sole director of Lanepoint.  All of its issued capital is owned by Bowesco Pty Ltd (Bowesco).  The effect of the assignment, on ASIC’s submission, was to take an amount available to the creditors of Westpoint Corporation and to put it in the hands of another company in the Westpoint Group controlled by Mr Norman Carey’s brother.

2.         On 24 and 25 November 2005, payments were made from Westpoint Corporation to Bowesco ($1.15 million), Renaissance Mezzaine Pty Ltd ($1 million) and Richstar Enterprises Pty Ltd ($1.37 million) (Richstar).  The moneys paid to Bowesco were the subject of two ‘Round Robin” transactions referred to in the earlier judgment at [54] to [65].  After completion of the Second Round Robin, $200,000 of the original $1.15 million paid by Westpoint Corporation to Bowesco was used by Keypoint for making payments to a number of its creditors as well as various creditors of Lanepoint and Keyworld Investments Pty Ltd.  The effect of the transactions was that Keypoint used $200,000 which, it is said, properly belonged to Westpoint Corporation for the purpose of satisfying its creditors and the creditors of other companies within the Westpoint Group controlled by Norman Carey and his relatives.

3.         The third transaction relied upon is the electronic transfer on 31 March 2006 of $875,000 from Richstar to Keypoint in breach of ASIC preservation orders made by Siopis J on 30 March 2006.  The evidence is that Mr Norman Carey caused the sum to be electronically transferred but at the time was not a director of either company.  ASIC submits that even accepting Mr Carey’s explanation that the transfer was carried out before he was personally served with Siopis J’s orders, it is a matter for concern that he did not bring the transaction to the Court’s attention.  Moreover when Mr McMaster asked Mr Carey to repay the sum of $875,000 to Richstar he did not agree to do so, but said he wanted to think about it.  ASIC contends that the circumstances surrounding this transaction raise serious concerns about those controlling Keypoint and the use of that corporate vehicle by Mr Carey. 

4.         The fourth transaction involves an attempt by Mr Carey to withdraw $600,000 from a Keypoint account which then had a balance of $1.06 million, including the sum of $875,000, and to pay that sum to Gemspark Pty Ltd (Gemspark).  Gemspark’s sole director and shareholder is Mr Carey’s sister, Karen Sandra Carey-Hazell.  ASIC submits that at the time of this attempted transaction Mr Carey knew that the bulk of the funds held by Keypoint had come from the Richstar payment of $875,000.  ASIC contends that this conduct casts further doubt over Mr Carey’s bona fides and his excuse for effecting the transfer of $875,000 to Keypoint. 

5.         The affidavit of assets and liabilities served on behalf of Richstar disclose that it had lent the sum of $917,739 to Keypoint on an unsecured basis.  That included the sum of $875,000 paid on 31 March 2006.  In addition to that sum, which has been the subject of a repayment order by the Court, Keypoint also holds $42,739 lent to it by Richstar on an unsecured basis.  ASIC contends that that money properly belongs to Richstar and should be returned to it forthwith.

7                     The conduct reflected in the five transactions is said to be consistent with the misuse of corporate vehicles by Mr Norman Carey with the intention of placing assets, which might otherwise be available to aggrieved persons, beyond their reach. 

8                     I am satisfied that the circumstances disclosed by the affidavits relied upon by ASIC and in particular the five transactions asserted, make it necessary and desirable for the purpose of protecting the interests of creditors of companies in the Westpoint Group and in particular creditors of Westpoint Corporation and Richstar, that a receiver be appointed to the assets of Keypoint in terms similar to the appointment of receivers to the other defendants.

9                     I will therefore make an order in terms of the order sought by ASIC save that I will deal with the question of the payment of the receivers of all of the corporate defendants in a separate decision shortly.

Associate:

Dated:              26 May 2006