FEDERAL COURT OF AUSTRALIA
Australian Securities & Investments Commission In the Matter of Richstar Enterprises Pty Ltd ACN 099 071 968 v Carey (No 17) [2007] FCA 1395
CORPORATIONS – appointment of receivers and ancillary orders under s 1323 Corporations Act – orders affecting corporate members and officers of failed property development group – extensions of proposed orders – consent orders – criteria for acceptance of consent orders – whether within power and appropriate – provision for payment of ongoing salary to officers of corporate group – provision for fund out of which principal officer could meet legal and other expenses associated with pending actions and matters – avoidance of conflict of duties between court appointed receivers and receivers appointed under private instruments
Corporations Act 2001 (Cth) s 1323
WAD83 OF 2006
FRENCH J
4 SEPTEMBER 2007
PERTH
| IN THE FEDERAL COURT OF AUSTRALIA |
|
| WESTERN AUSTRALIA DISTRICT REGISTRY | WAD83 OF 2006 |
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 Plaintiff
| |
| AND: | First Defendant
GRAEME JOHN RUNDLE Second Defendant
CEDRIC RICHARD PALMER BECK Third Defendant
JOHN NORMAN DIXON Fourth Defendant
RICHSTAR ENTERPRISES PTY LTD ACN 099 071 968 Fifth Defendant
WESTPOINT REALTY PTY LTD ACN 050 218 954 Sixth Defendant
BOWESCO PTY LTD ACN 008 915 357 Seventh Defendant
REDCHIME PTY LTD ACN 117 947 805 Eighth Defendant
KEYPOINT DEVELOPMENTS PTY LTD ACN 115 507 232 Ninth Defendant
SILKCHIME PTY LTD ACN 066 849 429 Tenth Defendant
HEALTHCARE PROPERTIES PTY LTD ACN 075 401 955 Twelfth Defendant
|
| FRENCH J | |
| DATE OF ORDER: | 4 SEPTEMBER 2007 |
| WHERE MADE: | PERTH |
THE COURT ORDERS THAT:
A. In relation to the First Defendant:
1. Orders 2 to 27 made in these proceedings on 5 February 2007 in relation to the First Defendant are as at the date of these orders replaced by the orders below.
2. Until 31 January 2008 or further order, Brian Keith McMaster of KordaMentha, Chartered Accountants, of Level 11, 37 St George’s Terrace, Perth is appointed as receiver (Receiver) to all property (First Defendant’s Property) whether within Australia or overseas, of the First Defendant, other than the ‘Excluded Property’ (as defined in para 4 of these orders).
3. For the purpose of these orders, the ‘First Defendant’s Property’ includes property which falls within any of the following categories:
3.1 property held in the name of the First Defendant;
3.2 property held by the First Defendant as trustee for a trust or on behalf of or on account of another person;
3.3 property held jointly in the name of the First Defendant and one or more persons or entities (Third Party);
3.4 property held jointly in the name of the First Defendant and a Third Party for the express purpose of a joint venture;
3.5 property held by the First Defendant jointly with a Third Party, where both the First Defendant and the Third Party hold the property in their capacity as trustees for a trust or on behalf of or on account of another person;
3.6 property held by a Third Party as trustee of a trust or in its own right where the First Defendant is or becomes the effective controller or owner of the property. For the avoidance of doubt this includes property held by:
3.6.1 Healthcare Properties Pty Ltd as trustee for the Healthcare Properties Trust;
3.6.2 Dockpride Pty Ltd atf Dockpride Unit Trust;
3.6.3 Etnas Pty Ltd atf Etnas Trust;
3.6.4 Heca Nominees Pty Ltd atf Heca Nominees Trust Deed;
3.6.5 Jevwood Pty Ltd atf HH Unit Trust;
3.6.6 Huntingdale Village Pty Ltd atf Huntingdale Village Unit Trust;
3.6.7 Midpride Pty Ltd atf Midpride Trust;
3.6.8 Mossregal Pty Ltd atf Mossregal Unit Trust;
3.6.9 Westpoint Management Limited atf Paragon Commercial Syndicate (formerly Centreways Property Trust Deed);
3.6.10 Slatetop Holdings Pty Ltd atf Rockdale Property Trust;
3.6.11 Vannin Pty Ltd atf Vannin Trust;
3.6.12 Cinema City Investments Pty Ltd;
3.6.13 Dockpride Pty Ltd;
3.6.14 Dosius Pty Ltd;
3.6.15 Etnas Pty Ltd;
3.6.16 Healthcare Properties Pty Ltd;
3.6.17 Heca Nominees Pty Ltd;
3.6.18 Jevwood Pty Ltd;
3.6.19 Mossregal Pty Ltd;
3.6.20 Paquero Pty Ltd;
3.6.21 Sunchance Pty Ltd;
3.6.22 Vannin Pty Ltd;
3.6.23 Video Management Pty Ltd;
3.6.24 Westpoint Financial Services Pty Ltd;
3.6.25 Creations Management Pty Ltd atf Creations Management Trust;
3.6.26 Bridgeview Holdings Pty Ltd;
3.6.27 Creations Management Pty Ltd;
3.7 rights to operate any ‘Controlled Bank Account’ (as defined in para 6 of these orders) and any choses in action in relation to such Controlled Bank Accounts; and
3.8 any future or after-acquired property which would, had it been in existence as at the date of these orders, have been ‘First Defendant’s property’ because of any other application or applications of this definition.
4. For the purpose of these orders, the ‘Excluded Property’ is:
4.1 rights to operate the ‘Carey Account’ (as defined in para 5 of these orders) and any choses in action in relation to the Carey Account;
4.2 any distribution or loan from the Hilton Trust or the Healthcare Property Trust to or for the benefit of the First Defendant;
4.3 any property paid or payable to or for the benefit of, or received or receivable by or for the benefit of, the First Defendant as a result of in connection with or incidental to the compromise or settlement of any claim or other chose in action.
5. The First Defendant shall forthwith establish a bank account (Carey Account) in his name with a reputable bank, building society or financial instruction (Bank) into which shall be paid:
5.1 any money held by the Receiver in his capacity as the receiver of the First Defendant under the previous orders referred to in para 1 of these orders; and
5.2 any money referred to in order 4.2 and 4.3 above; and
5.3 any wages payable to the First Defendant.
The First Defendant must inform the Plaintiff and the Receiver of the account details for the Carey Account forthwith upon the opening of the Carey Account.
6. For the purpose of these orders, “Controlled Bank Accounts’ means accounts with any Bank which fall within any of the following categories:
6.1 accounts held in the name of the First Defendant, other than the Carey Account;
6.2 accounts held by the First Defendant as trustee for a trust or on behalf of or on account of another person;
6.3 accounts held jointly in the name of the First Defendant and a Third Party;
6.4 accounts held jointly in the name of the First Defendant and a Third Party for the express purpose of a joint venture;
6.5 accounts held by the First Defendant jointly with a Third Party, where both the First Defendant and the Third Party hold the property in their capacity as trustees for a trust or on behalf of or on account of another person; and
6.6 accounts held by a Third Party as trustee of a trust or in its own right where the First Defendant is or becomes the effective controller or owner of the rights to operate or choses in action in relation to the account. For the avoidance of doubt this includes all accounts held by the entities specified in para 3.6.
7. The Receiver must be appointed a required signatory to all the Controlled Bank Accounts.
8. Subject to para 8A the Receiver has, in respect of the First Defendant’s Property, the following powers:
8.1 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 First Defendant’s property for the benefit of potential creditors;
8.2 without limiting the generality of the power in the preceding subparagraph:
8.2.1 the power to enter into possession and take control of the First Defendant’s Property to the extent that the exercise of the power is reasonably necessary to achieve the purposes set out in the preceding sub-paragraph; and
8.2.2 the power to appoint a lawyer, accountant or other professionally qualified person to assist the Receiver.
8.3 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 First Defendant.
8A.1 The Receiver has no power or authority in respect of property held by:
(a) Huntingdale Village Pty Ltd (Receivers and Managers Appointed) atf Huntingdale Village Unit Trust; and
(b) Vannin Pty Ltd (Receivers and Managers Appointed); and
(c) Westpoint Management Ltd (Receivers and Managers Appointed) atf Paragon Commercial Syndicate (formerly Centreways Property Trust Deed).
8A.2 In relation to any claim made by the Receivers and Managers of Westpoint Corporation Pty Ltd (Receivers and Managers Appointed) (In Liquidation) (Westpoint Corporation Claims) against:
(a) Etnas Pty Ltd atf Etnas Trust;
(b) Dosius Pty Ltd;
(c) Paquero Pty Ltd;
(d) Westpoint Financial Services Pty Ltd; and
(e) Creations Management Pty Ltd,
the Receiver has no power or authority in respect of the Westpoint Corporation Claims or any transactions or matters relating to the Westpoint Corporation Claims.
8A.3 In relation to any claim made by the Receivers and Managers of Vannin Pty Ltd (Receivers and Managers Appointed) (Vannin Claims) against:
(a) Midpride Pty Ltd atf Midpride Trust; and
(b) Mossregal Pty Ltd atf Mossregal Unit Trust,
the Receiver has no power or authority in respect of the Vannin Claims or any transactions or matters relating to the Vannin Claims.
9. The power referred to in para 8.1 above shall not prevent:
9.1 the First Defendant or any other person or entity affected by this order carrying on any business or otherwise impeding their ability to carry on a business in an effective and efficient manner PROVIDED HOWEVER that the said limitation on the power of the Receiver shall not apply to the extent that the exercise of the said power is necessary to do the things referred to in para 8.1; or
9.2 the First Defendant and any persons or entities affected by this order, with the prior written approval of the Receiver, from:
9.2.1 selling the First Defendant’s Property; or
9.2.2 acquiring property with funds held in a Controlled Account; or
9.2.3 applying for new advances from any Bank; or
9.2.4 granting new security in favour of any Bank over the First Defendant’s Property (acquired prior to or after the date of this Order); or
9.3 the First Defendant from giving instructions as to or entering into a compromise or settlement of any claim or other chose in action specified in one or more of paras 14.1 and 14.2 of these orders.
10. Other than as permitted by para 9 of these orders, the First Defendant is hereby restrained from:
10.1 removing or causing or permitting to be removed from any State of Australia and from Australia; or
10.2 selling, charging, mortgaging or otherwise dealing with, disposing of or diminishing the value of; or
10.3 causing or permitting to be sold, charged, mortgaged or otherwise dealing with, disposing of or diminishing the value of;
all or any of the First Defendant’s Property.
11. The First Defendant by himself, his servants, agents or employees, must:
11.1 permit the Receiver ongoing access to the books and records which relate to the First Defendant’s Property including any computer system of the First Defendant;
11.2 use his best endeavours to assist the Receiver in the performance of his obligations.
12. Subject to any claim for privilege, the Plaintiff may provide the Receiver with any information or document in its possession, custody or control that the Receiver reasonably requests in the performance of his obligations.
13. Other than as permitted by paras 14 and 16 of these orders, the First Defendant is hereby restrained from:
13.1 removing or causing or permitting to be removed from any State of Australia and from Australia; or
13.2 selling, charging, mortgaging or otherwise dealing with (including making any withdrawal or transfer from the Carey Account), disposing of or diminishing the value of; or
13.3 causing or permitting to be sold, charged, mortgaged or otherwise dealing with (including making any withdrawal or transfer from the Carey Account), disposing of or diminishing the value of,
all or any of the Excluded Property.
14. The First Defendant is permitted to withdraw from the Carey Account, and pay on behalf of the First Defendant only and not for any other Defendant to these proceedings or any other third party:
14.1 reasonable legal, accounting and/or expert fees and disbursements in:
14.1.1 defending the action ASIC v Carey & Ors WAD 83 of 2006, up to a maximum of $15,000 (with liberty to apply to increase that amount if exhausted or in anticipation of it being exhausted);
14.1.2 defending the action QBE Insurance (Australia) Ltd v Carey & Anor in NSW Supreme Court No 50160 of 2006, up to a maximum of $15,000 (with liberty to apply to increase that amount if exhausted or in anticipation of it being exhausted);
14.1.3 defending the action McEvoy as Liquidator of Ann Street Mezzanine & Ors v Beck & Ors in VID 386 of 2007, up to a maximum of $15,000 (with liberty to apply to increase that amount if exhausted or in anticipation of it being exhausted);
14.1.4 making application to the Real Estate and Business Agents Supervisory Board for renewal of the First Defendant’s triennial licence under the Real Estate and Business Agents Act 1978 (WA), up to a maximum of $10,000;
14.1.5 seeking legal advice as to, and commencing and prosecuting an appeal from the Real Estate and Business Agents Supervisory Board decision to refuse renewal of the First Defendant’s triennial licence under the Real Estate and Business Agents Act 1978 (WA) if the legal advice concludes that an appeal has reasonable prospects of success, up to a maximum of $10,000 (with liberty to apply to increase that amount if exhausted or in anticipation of it being exhausted);
14.1.6 settling the actions Carey v Adams in CIV 1547 of 2003 and CAV 89 of 2005, up to a maximum of $10,000;
14.1.7 Carey v Robinson Cox in CIV 1410 of 2003, up to a maximum of $10,000 (with liberty to apply to increase that amount if exhausted or in anticipation of it being exhausted);
14.1.8 resolving the First Defendant’s living expenses allowance under the previous orders referred to in para 1 above, up to a maximum of $5,000;
14.2 reasonable legal, accounting and/or expert fees and disbursements in seeking legal advice, and commencing and prosecuting legal proceedings if the legal advice concludes that there are reasonable prospects of success, in respect of:
14.2.1 Management Liability Policy with American Home Company policy no. 111011 issued on 23 August 2005;
14.2.2 Investment Managers Insurance Policy with American Home Company policy no. 111323 issued on 31 August 2005; and
14.2.3 any right of indemnity, contribution or subrogation in respect of a guarantee,
up to a maximum of $30,000.00 in total (with liberty to apply to increase that amount if exhausted or in anticipation of it being exhausted);
14.3 reasonable legal or accounting fees to obtain advice in connection with requests, queries or demands made of him personally as a director or officer of a company, up to a maximum of $5,000.00 in total (with liberty to apply to increase that amount if exhausted or in anticipation of it being exhausted).
15. Any application to increase the allowances under one or more of paras 14.1, 14.2 or 14.3 of these orders:
15.1 be referred to a Registrar of the Court for determination as to what increased allowance, if any, is reasonable;
15.2 unless the Registrar requires the attendance of the parties, be determined on the papers.
16. The First Defendant is permitted to withdraw from the Carey Account, and pay, ordinary living expenses in an amount approved by the Receiver from time to time, and there be liberty to apply in respect of ordinary living expenses should the Receiver retire before 31 January 2008.
Persons Other than the Plaintiff and the First Defendant
17. This order does not prevent any Bank from exercising any right of set off it has in respect of any facility which it gave the First Defendant before it was notified of this order.
18. No Bank need inquire as to the application or proposed application of any money withdrawn by the First Defendant.
19. Except as follows the terms of this order do not affect or concern anyone outside Australia. The terms of this order will affect the following persons outside Australia:
19.1 the First Defendant and the First Defendant’s servants, employees and agents (except Banks and financial institutions);
19.2 any person (including a Bank or financial institution) who:
19.2.1 is subject to the jurisdiction of this Court; and
19.2.2 has been given written notice of this order, or has actual knowledge of the substance of the order and of its requirements; and
19.2.3 is able to prevent or impede acts or omissions outside Australia which constitute or assist in a disobedience of the terms of this order; and
19.3 any other person (including a Bank of financial institution), only to the extent that this order is declared enforceable by or is enforced by a court in a country or state that has jurisdiction over that person or over any of that person’s assets.
20. Nothing in this order shall, in respect of assets located outside Australia, prevent any third party from complying or acting in conformity with what it reasonably believes to be its bona fide and properly incurred legal obligations, whether contractual or pursuant to a court order or otherwise, under the law of the country or state in which those assets are situated or under the proper law of any contract between a third party and the First Defendant, provided that in the case of any future order of a court of that country or state made on the First Defendant or the third party’s application, reasonable written notice of the making of the application is given to the Plaintiff.
The ‘Travel Restraint’ Orders
21. Until further order, the First Defendant is restrained from leaving or attempting to leave Australia.
‘Reporting’ Orders
22. The First Defendant must at all times allow the Plaintiff and/or its solicitors electronic access to view bank statements and balances in respect of all Controlled Bank Accounts and the Carey Account.
23. The First Defendant must keep and maintain a record of all withdrawals and payments in accordance with paras 14 and 16 above. The record is to list:
23.1 the money withdrawn or paid;
23.2 the date of the withdrawal or payment;
23.3 other than in respect of any living expenses in an amount less than $500, the person in whose favour the withdrawal or payment was made;
23.4 the purpose of the withdrawal or payment;
and is to be kept and maintained so that the record can be produced to the Plaintiff or the Court within 72 hours after an order to do so.
24. Within ten (10) days after the end of each calendar month the First Defendant must provide to the Plaintiff’s solicitors a copy of the record kept and maintained in accordance with para 23 for that month.
25.1 as to the First Defendant’s Property:
25.1.1 the nature of each asset;
25.1.2 the estimated value of the asset;
25.1.3 the location of the asset;
25.2 as to the First Defendant’s liabilities:
25.2.1 the nature of the liability;
25.2.2 the amount of the liability;
25.2.3 the person to whom the First Defendant is liable.
26. The First Defendant must keep and maintain a record of all invoices for any legal, accounting and/or expert fees incurred as provided for in order in para 14 above and any living expenses incurred in an amount greater than $500 as provided for in para 16 above. The Plaintiff may by written notice to the First Defendant require within ten (10) days of the date of such notice the First Defendant to produce to the Plaintiff such invoices, and the First Defendant shall do so.
The ‘General’ Orders
27. The Plaintiff have leave to give to:
27.1 the relevant authorities that record, control and regulate the ownership of real property;
27.2 the relevant authorities that record, control and regulate the ownership of motor vehicles;
27.3 the relevant authorities that record, control and regulate the ownership of maritime vessels and craft;
27.4 any Bank with which the First Defendant operates any bank account;
27.5 any other person or entity holding or controlling property belonging to the First Defendant; and
27.6 any Third Party,
notice of these Orders by delivering a copy of these Orders to a person apparently in the employ of that entity or person.
28. The Receiver may report (orally or in writing) to the Plaintiff and to the Court at any time during the course of the receivership regarding:
28.1 the nature of the First Defendant's Property identified;
28.2 the assets and liabilities of the First Defendant and the solvency of the First Defendant;
28.3 the costs of the receivership, the future course of the receivership and the costs that may be incurred by the Receives in the future; and
28.4 any other information in relation to the First Defendant's Property that the Receivers thinks necessary to protect the interests of persons to whom the First Defendant is liable, or may become liable, to pay money, whether in respect of debt, by way of damages or compensation or otherwise, or to account for financial products or other property.
29. The Receiver may by written notice to the First Defendant require within seven (7) days of the date of such notice, the First Defendant to identify in writing any trusts of which the First Defendant is a beneficiary (including a general beneficiary of a discretionary trust), whether named or otherwise, and to provide the following information concerning such trust:
29.1 the name and address of the trustee;
29.2 a copy of the relevant trust deed (if he has possession, custody or control of the same); and
` 29.3 any further information or documentation regarding the trust and the management of the trust as requested by the Receiver and to which the First Defendant is entitled, including, but not limited to, the distribution history of the trust.
30. The First Defendant shall authorise the Receiver to, and the Receiver shall be entitled to, obtain information regarding the trusts referred to in the preceding paragraph from the trustees of such trusts, including the terms of such trusts, the classes of its beneficiaries and its distribution history, and the First Defendant shall sign all such documents and do all such things necessary to give effect to the granting of such authority.
31. If within ten (10) days of the Receiver or his legal advisers becoming aware of any matter or issue that may give rise to a conflict of interest, they shall seek the advice of counsel in respect of the possible conflict.
32. If counsel is of the view that the matter or issue gives rise to a possible conflict of interest, then the Receiver shall make an application to the Court for appropriate directions.
33. All documents produced to the Court’s Registry pursuant to para 10 of the orders made in these proceedings on 20 April 2006 in relation to the First Defendant, together with any affidavits filed pursuant to para 25 of these orders, shall be held by the Court’s Registry until further order.
34. The Parties and any third party affected by these orders have liberty to apply to the Court on the giving of reasonable notice.
B. As to the Fifth Defendant
1. Orders 2 to 24 made in these proceedings on 5 February 2007 in relation to the Fifth Defendant (Corporate Defendant) are as at the date of these orders replaced by the orders below.
2. For the purpose of these orders Brian Keith McMaster of KordaMentha shall be referred to as the ’Supervisor’.
4. Other than as permitted by Orders 7, 10 and 12, the Corporate Defendant is hereby restrained from:
4.1 removing or causing or permitting to be removed from any state of Australia and from Australia; or
4.2 selling, charging, mortgaging or otherwise dealing with (including making any withdrawal or transfer from a Corporate Bank Account), disposing of or diminishing the value of; or
4.3 causing or permitting to be sold, charged, mortgaged or otherwise dealing with (including making any withdrawal or transfer from a Corporate Bank Account), disposing of or otherwise diminishing the value of,
all or any of its property (whether within or outside Australia) (Corporate Property).
5. For the purpose of these orders, ‘Corporate Property’ includes property which falls within any of the following categories:
5.1 property held in the name of the Corporate Defendant;
5.2 property held by the Corporate Defendant as trustee for a trust or on behalf of or on account of another person;
5.3 property held jointly in the name of the Corporate Defendant and one or more persons or entities (Third Party);
5.4 property held jointly in the name of the Corporate Defendant and a Third Party for the express purpose of a joint venture;
5.5 property held by the Corporate Defendant jointly with a Third Party, where both the Corporate Defendant and the Third Party hold the property in their capacity as trustees for a trust or on behalf of or on account of another person;
5.6 property held by a Third Party as trustee of a trust or in its own right where the Corporate Defendant is or becomes the effective controller or owner of the property;
5.7 rights to operate any Corporate Bank Account (as that term is defined in Order 6) and any chose in action in relation to such an account; and
5.8 any future or after-acquired property which would, had it been in existence as at the date of these orders, have been ‘Corporate Property’ because of any other application or applications of this definition.
6.1 accounts held in the name of the Corporate Defendant including the Operating Account (as that term is defined in para 7);
6.2 accounts held by the Corporate Defendant as trustee for a trust or on behalf of or on account of another person;
6.3 accounts held jointly in the name of the Corporate Defendant and a Third Party;
6.4 accounts held jointly in the name of the Corporate Defendant and a Third Party for the express purpose of a joint venture;
6.5 accounts held by the Corporate Defendant jointly with a Third Party, where both the Corporate Defendant and the Third Party hold the property in their capacity as trustees for a trust or on behalf of or on account of another person; and
6.6 accounts held by a Third Party as trustee of a trust or in its own right where the Corporate Defendant is or becomes the effective controller or owner of the rights to operate or choses in action in relation to the account.
7.1 the Corporate Defendant must inform the Plaintiff and the Supervisor of the account details for the Operating Account;
7.2 the Supervisor is to transfer to the Operating Account from time to time such amount from the other Corporate Bank Accounts under the supervision of the Supervisor as is necessary or convenient, in the Supervisor’s opinion, to provide available funds for the purpose of payments permitted under para 12 of these orders.
8. The Supervisor must be appointed a required signatory to all Corporate Bank Accounts other than the Operating Account.
9. Subject to para 14 the Supervisor has, in respect of the Corporate Property, the following powers:
9.1 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 the Corporate Property (and the value of the Corporate Property) for the benefit of potential creditors;
9.2 without limiting the generality of the power in the preceding subparagraph:
9.2.1 the power to enter into possession and take control of the Corporate Property to the extent that the exercise of the power is reasonably necessary to achieve the purposes set out in the preceding sub-paragraph; and
9.2.2 the power to appoint a lawyer, accountant, valuer or property consultant or other professionally qualified person to assist the Supervisor;
9.3 the power to do all things necessary or convenient to be done for or in connection with, or as incidental to, the completion of a proposed Transaction which has been approved under para 10 of these orders. For the avoidance of doubt, this includes the power to make available at settlement sufficient funds to enable the proposed Transaction to proceed; and
9.4 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 Corporate Defendant.
10.1 purchasing or selling real property;
10.2 applying for and entering into an agreement for the taking of new advances from any Bank;
10.3 granting security in favour of any Bank over Corporate Property;
10.4 paying any creditor, where it is not permitted under paragraph 12.5 below;
10.5 developing and/or subdividing real property for sale;
provided that at least 10 days prior to entering into any such Transaction the Corporate Defendant provides to the Supervisor:
10.6 a summary of the proposed Transaction detailing:
10.6.1 any real property the subject of the proposed Transaction;
10.6.2 the other party or parties to the proposed Transaction;
10.6.3 whether any other party to the proposed Transaction is related to or associated with the Corporate Defendant or one or more of the other defendants to these proceedings, and if so, in what way;
10.6.4 the terms of the proposed Transaction (providing a copy of any proposed terms); and
10.7 a statutory declaration made by a director of the Corporate Defendant verifying in relation to the proposed Transaction that:
10.7.1 the information provided pursuant to para 10.6 of these orders is correct; and
10.7.2 the director is satisfied, due inquiry having been made, that the proposed Transaction is bona fide, commercially viable and in the best interests of the Corporate Defendant;
10.8 in the case of a proposed Transaction being the proposed purchase of any real property:
10.8.1 other than by public auction or public tender; or
10.8.2 where any other party to the proposed Transaction is related to or associated with the Corporate Defendant or one or more of the other defendants to these proceedings;
a valuation from a licensed valuer, expressed as being provided for the benefit of the Corporate Defendant and the Supervisor, which is not more than 60 days old, unless the Supervisor waives the requirement and accepts a market appraisal from an independent and reputable real estate agent;
10.10 in the case of a proposed Transaction being the development of real property, any information as may be reasonably required by the Supervisor.
11. The Supervisor may refuse to authorise any proposed Transaction if it appears to him that:
11.1 any other party to the proposed Transaction is related to or associated with the Corporate Defendant or one or more of the other defendants to these proceedings; or
11.2 the proposed Transaction is not bona fide; or
11.3 the information required to be provided by the Corporate Defendant pursuant to sub-paras 10.6 – 10.10 inclusive of these orders is incomplete, inaccurate; or otherwise unsatisfactory;
11.4 a reasonable person in the Corporate Defendant’s position would not enter into the proposed Transaction; or
11.5 in the case of a proposed Transaction being the proposed purchase of any real property above market value where a written valuation or appraisal is required under para 10.8 of these orders, the difference between the market value (as determined by the valuation or appraisal) and the proposed purchase price is more than 5% of the market valuation; or
11.6 in the case of a proposed Transaction being the proposed sale of any real property below the expected mean return revealed by the Marketing Submissions, the difference between the expected mean return and the actual sale price is more than 5% of the expected mean return; or
11.7 in the case of a proposed Transaction being the taking of new advances from any Bank or the granting of security in favour of any Bank, the terms are not normal commercial terms appropriate to that type of loan and the type of Bank.
12. The Fifth Defendant is permitted to withdraw from the Operating Account, on behalf of the Fifth Defendant only and not for any other defendant to these proceedings or any other Third Party, and pay:
12.1 reasonable legal, accounting and/or expert fees and disbursements in defending the following matter:
12.1.1 ASIC v Carey & Ors WAD 83 of 2006;
up to a maximum of $30,000.00 in total (with liberty to apply to increase that amount if exhausted or in anticipation of it being exhausted);
12.2 reasonable legal, accounting and/or expert fees and disbursements in seeking legal advice as to defending or otherwise resolving any claim or proceedings concerning the Richstar Assigned Loan (as that term is defined in para 3), and in defending legal proceedings concerning the Richstar Assigned Loan if the legal advice concludes that there are reasonable prospects of success, up to a maximum of $50,000.00 in total (with liberty to apply to increase that amount if exhausted or in anticipation of it being exhausted);
12.3 reasonable legal or accounting fees to obtain advice in connection with requests, queries or demands made of it, up to a maximum of $5,000.00 in total (with liberty to apply to increase that amount if exhausted or in anticipation of it being exhausted);
12.4 wages to the following in the following amounts:
12.4.1 Norman Phillip Carey – that amount represented by $5,769.23 gross per fortnight (provided that the net amount payable after all PAYG withholdings is deposited into his ‘Carey Account’ as defined in the orders made in relation to the first defendant on the same day as the date of these orders); and
12.4.2 Karen Sandra Carey-Hazell - that amount represented by $2,660.00 gross per fortnight; (inclusive of all PAYG withholdings);
together with compulsory superannuation contributions payable in relation thereto;
12.5 ordinary and proper business expenses bona fide incurred by the Fifth Defendant on behalf of the Fifth Defendant (including operating overheads), up to a maximum of $16,000 per month or such greater amount approved in writing by the Supervisor from time to time in respect of a particular month or months.
13. Any application to increase the allowances under one or more of paras 12.1, 12.2 or 12.3 of these orders:
13.1 be referred to a Registrar of the Court for determination as to what increased allowance, if any, is reasonable;
13.2 unless the Registrar requires the attendance of the parties, be determined on the papers.
14. In relation to any claim made by the receivers and managers of Westpoint Corporation in respect of the Richstar Assigned Loan:
14.1 the Supervisor has no power or authority in respect of the claims to recover the Richstar Assigned Loan by Westpoint Corporation or any transactions or matters relating to the Richstar Assigned Loan;
14.2 the Fifth Defendant must obtain the leave of the Court in respect of any transaction that arises out of or relates to the Richstar Assigned Loan that will result in a transfer or disposition of any part of the Corporate Property.
15. The Corporate Defendant, by itself, its servants, agents or employees, must:
15.1 permit the Supervisor ongoing access to the books and records which relate to the Corporate Property including any computer system of the Corporate Defendant (subject to any claims of legal professional privilege); and
15.2 use its best endeavours to assist the Supervisor in the performance of their obligations.
Persons Other than the Plaintiff and the Corporate Defendant
16. This order does not prevent any Bank from exercising any right of set off it has in respect of any facility which it gave the Corporate Defendant before it was notified of this order.
17. No Bank need inquire as to the application or proposed application of any money withdrawn by the Corporate Defendant.
18. Except as follows the terms of this order do not affect or concern anyone outside Australia. The terms of this order will affect the following persons outside Australia:
18.1 the Corporate Defendant and the Corporate Defendant’s servants, employees and agents (except Banks and financial institutions);
18.2 any person (including a Bank or financial institution) who:
18.2.1 is subject to the jurisdiction of this Court; and
18.2.2 has been given written notice of this order, or has actual knowledge of the substance of the order and of its requirements; and
18.2.3 is able to prevent or impede acts or omissions outside Australia which constitute or assist in a disobedience of the terms of this order; and
18.3 any other person (including a Bank of financial institution), only to the extent that this order is declared enforceable by or is enforced by a court in a country or state that has jurisdiction over that person or over any of that person’s assets.
19. Nothing in this order shall, in respect of assets located outside Australia, prevent any third party from complying or acting in conformity with what it reasonably believes to be its bona fide and properly incurred legal obligations, whether contractual or pursuant to a court order or otherwise, under the law of the country or state in which those assets are situated or under the proper law of any contract between a third party and the Corporate Defendant, provided that in the case of any future order of a court of that country or state made on the Corporate Defendant or the Third Party’s application, reasonable written notice of the making of the application is given to the Plaintiff.
‘Reporting’ Orders
20. The Corporate Defendant must at all times allow the Supervisor electronic access to view bank statements and balances in respect of all of its Corporate Bank Accounts (including the Operating Account).
21. The Corporate Defendant must keep and maintain a record of all withdrawals and payments in accordance with paras 10 and 12 above. The record is to list:
21.1 the money withdrawn or paid;
21.2 the date of the withdrawal or payment;
21.3 the person in whose favour the withdrawal or payment was made;
21.4 the purpose of the withdrawal or payment;
and is to be kept and maintained so that the record can be produced to the Plaintiff, the Supervisor or the Court within 72 hours after an order to do so.
22. Within 7 days after the end of each calendar month the Corporate Defendant must provide to the Supervisor a copy of the record kept and maintained in accordance with para 21 for that month.
23. Within 21 days after each 30 June and 31 December (‘Relevant Date’) the Corporate Defendant must file and serve an affidavit sworn by a director of the Corporate Defendant verifying as at the Relevant Date the Corporate Defendant’s Property and the Corporate Defendant’s liabilities detailing:
23.1 as to the Corporate Defendant’s Property:
23.1.1 the nature of each asset;
23.1.2 the estimated value of the asset;
23.1.3 the location of the asset;
23.2 as to the Corporate Defendant’s liabilities:
23.2.1 the nature of the liability;
23.2.2 the amount of the liability;
23.2.3 the person to whom the Corporate Defendant is liable.
24. The Corporate Defendant must keep and maintain a record of all invoices for any legal, accounting and/or expert fees, valuation fees and other expenses incurred as provided for in para 12 above. The Plaintiff or the Supervisor may by written notice to the Corporate Defendant require within ten (10) days of the date of such notice the Corporate Defendant to produce to the Plaintiff or the Supervisor such invoices, and the Corporate Defendant shall do so.
25. The Supervisor may provide any information obtained pursuant to these orders to the Plaintiff.
The ‘General’ Orders
26. The Plaintiff and the Supervisor have leave to give to:
26.1 the relevant authorities that record, control and regulate the ownership of real property;
26.2 the relevant authorities that record, control and regulate the ownership of motor vehicles;
26.3 the relevant authorities that record, control and regulate the ownership of maritime vessels and craft;
26.4 any Bank with which the Corporate Defendant operates any Corporate Bank Accounts;
26.5 any other person or entity holding or controlling property belonging to the Corporate Defendant; and
26.6 any Third Party,
notice of these Orders by delivering a copy of these Orders to a person apparently in the employ of that entity or person.
27. All documents produced to the Court’s Registry pursuant to para 10 of the orders made in these proceedings on 20 April 2006 in relation to the Corporate Defendant, together with any affidavits filed pursuant to para 23 of these orders, shall be held by the Court’s Registry until further order.
28. Within 10 days of the Supervisor or their legal advisers becoming aware of any matter or issue that may give rise to a conflict of interest, they shall seek the advice of counsel in respect of the possible conflict.
29. If counsel is of the view that the matter or issue gives rise to a possible conflict of interest, then the Supervisor shall make an application to the Court for appropriate directions.
30. The Parties, the Supervisor and any third parties affected by these orders have liberty to apply to the Court on the giving of reasonable notice.
C. As to the Sixth and Eighth Defendants:
The existing orders against the Sixth and Eighth Defendants are hereby discharged.
D. As to the Seventh, Ninth and Tenth Defendants:
The existing orders are hereby extended to 31 January 2008 unless otherwise discharged or varied.
E. As to the Twelfth Defendant:
1. From the Corporate Bank Account (being with Bankwest, account no 306-089, 206296-4);
(i) the sum of $200,000 may be paid to Westpoint Financial Services Pty Ltd (WFS) for the purpose of a loan in that amount to the First Defendant which is thereafter to be paid into the Carey Account in the name of the First Defendant established pursuant to the Order made in respect of the First Defendant and that sum otherwise be subject to those Orders; and
(ii) the sum of $13,640 be paid to the Twelfth Defendant’s accountants, LG Solutions for payment of their fees.
2. The balance of the moneys in the said Corporate Bank Account be retained and subject to any other Court order.
3. The Twelfth Defendant is hereby directed to notify all known potential claimants of these Orders.
4. In respect of the existing Orders made against the Twelfth Defendant:
(i) Orders 5 and 6 be discharged;
(ii) there be a further order that the Twelfth Defendant is entitled to pay from the Corporate Bank Account reasonable legal and accounting fees only incurred by it, and only up to a maximum of $30,000 with liberty to apply; and
(iii) the said orders otherwise be extended until 31 January 2008, unless otherwise discharged or varied.
F. As to the effect of these Orders on the Receivers:
1. None of the:
(a) changes to the receivership of the First Defendant;
(b) changes to receivership and management of the Corporate Property of the Fifth Defendant;
(c) termination of the receivership and management of the Corporate Property of the Sixth and Eight Defendants; and
(d) orders with respect to the Twelfth Defendant,
made by these Orders shall in any way prejudice or negatively affect the entitlements or rights (if any) of the Court appointed receivers:
(e) to assert:
(i) an equitable lien over; or
(ii) an indemnity secured against the First Defendant’s Property and the Corporate Property of the Fifth, Sixth, and/or Eight Defendants as security for the costs and expenses (including legal costs and expenses incurred or to be incurred by the Court appointed receivers arising from any claim or proceeding initiated against the Court appointed receivers with respect to such receiverships); or
(f) to establish a retention fund out of the First Defendant’s Property and the Corporate Property of the Fifth, Sixth and/or Eighth Defendants as such security;
(g) to apply for an order that the Plaintiff or any other person indemnify the Court appointed receivers for the costs and expenses (including legal costs and expenses) incurred or to be incurred by the Court appointed receivers arising from any claim or proceedings initiated against the Court appointed receivers.
G. Liberty to apply
1. The parties have liberty to apply to vary these orders in order to correct any errors or omissions therefrom on matters on which the parties are agreed.
2. There is liberty to apply generally.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
| IN THE FEDERAL COURT OF AUSTRALIA |
|
| WESTERN AUSTRALIA DISTRICT REGISTRY | WAD83 OF 2006 |
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)
| BETWEEN: | AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Plaintiff
|
| AND: | NORMAN PHILLIP CAREY First Defendant
GRAEME JOHN RUNDLE Second Defendant
CEDRIC RICHARD PALMER BECK Third Defendant
JOHN NORMAN DIXON Fourth Defendant
RICHSTAR ENTERPRISES PTY LTD ACN 099 071 968 Fifth Defendant
WESTPOINT REALTY PTY LTD ACN 050 218 954 Sixth Defendant
BOWESCO PTY LTD ACN 008 915 357 Seventh Defendant
REDCHIME PTY LTD ACN 117 947 805 Eighth Defendant
KEYPOINT DEVELOPMENTS PTY LTD ACN 115 507 232 Ninth Defendant
SILKCHIME PTY LTD ACN 066 849 429 Tenth Defendant
HEALTHCARE PROPERTIES PTY LTD ACN 075 401 955 Twelfth Defendant
|
| JUDGE: | FRENCH J |
| DATE: | 4 SEPTEMBER 2007 |
| PLACE: | PERTH |
REASONS FOR JUDGMENT ON PROPOSED CONSENT ORDERS
Introduction
1 These proceedings were commenced by the Australian Securities and Investments Commission (ASIC) on 29 March 2006 with the filing of an application seeking orders under s 1323 of the Corporations Act 2001 (Cth) (the Act) against companies forming part of the Westpoint Finance and Property Development Group (Westpoint Group). Orders were also sought against officers and former officers of those companies. The first to eighth defendants were those named as defendants when the proceedings commenced.
2 On 20 April 2006 receivers were appointed to the property of all of those named as defendants with exception of the seventh defendant, Bowesco Ltd which was subject to a private receiver appointed under a security. Freezing orders were made in relation to its property. The reasons for all the orders made were set out in Re Richstar Enterprises Pty Ltd; Australian Securities & Investments Commission v Carey (No 3) (2006) 232 ALR 577. Those orders commenced a long and winding trail of interlocutory processes involving the ultimate joinder of four additional defendants, orders in respect of each of them, other than the eleventh defendant, and variations to make all of the orders more effective and to deal with practical difficulties encountered in their administration.
3 The protective regime established by these proceedings has been extended from time to time. Orders presently in place in respect of the first, fifth to tenth and twelfth defendants have been further extended to 5pm today, 4 September 2007. Orders in relation to the second, third and fourth defendants, which are not before me for extension at this time, remain in force until 12 September 2007 in relation to the second and third defendants and the 26 September 2007, in relation to the fourth defendant. ASIC now seeks, by consent, to extend and vary the regime by orders which may broadly be described as follows:
1. Orders in terms of a proposed minute with respect to the first and fifth defendants.
2. The discharge of existing orders against the sixth and eighth defendants.
3. The extension of existing orders against the seventh, ninth and tenth defendants to 31 January 2008 unless otherwise discharged or varied.
4. The extension of existing orders against the twelfth defendant to 31 January 2008 subject to agreed amendments.
For the reasons that follow I am satisfied that the orders proposed should be made.
The Court’s approach to consent orders generally
4 When the Court is presented with a proposed order, agreed between the parties, it must be satisfied, before making it, that it is within the power of the Court to make it and that the proposed order is appropriate. The requirement that the order be “appropriate” does not mean that the Court will refuse to make it simply because it thinks a different order would be preferable. This is particularly the case where the parties are properly advised by competent legal representatives. An appropriate order is one which lies within the range of orders that could reasonably be made on the materials before the Court. The limiting factor is that in making any order the Court exercises the judicial power of the Commonwealth and cannot simply rubber stamp what is proposed without consideration of its substance.
The evidence in support of the orders
5 For the most part the orders proposed raise no concern which would stand in the way of the Court making them. There were, however, some specific issues which I raised with the parties at the hearing on 27 August 2007 which have since been addressed by the filing of additional affidavit material.
6 Before turning to that evidence it is clear that there is no difficulty with the proposed discharge of orders against Westpoint Realty Pty Ltd (Westpoint Realty) and Redchime Pty Ltd, the sixth and eighth defendants. Any extension of orders against them or against any of the defendants would have to be justified to the level at which the Court could regard such an extension as “within power” for the purposes of s 1323. If ASIC has concluded that it does not wish the existing orders under s 1323 to continue with respect to those defendants, then there is no basis for continuing them. As they lapse of their own operation, there is probably no real need to make an order discharging them. To put the matter beyond doubt however, I will do so.
7 In seeking the continuation of current s 1323 asset preservation orders against the other defendants, albeit subject to agreed variations, ASIC has filed submissions relying upon a number of affidavits in support of the application and on the assumption that the application was to be contested. In that connection I have had regard to the affidavit of Brian Keith McMaster sworn 24 November 2006. Mr McMaster is one of the current Court appointed receivers in respect of the first to sixth, eighth and ninth defendants. That affidavit exhibited a report on the receiverships dated 24 November 2006. A further affidavit sworn by Mr McMaster on 1 August 2007 exhibited additional reports. They were as follows:
1. Report dated 28 June 2007 on the receivership of the first defendant.
2. Report dated 4 July 2007 as a supplement to the report of 28 June 2007.
3. Report dated 19 June 2007 on the receivership of the fifth defendant.
4. Report dated 14 June 2007 on the receivership of the eighth defendant.
5. Report dated 14 June 2007 on the receivership of the ninth defendant.
Mr McMaster deposed in his affidavit to the truth of the contents of each of those reports to the best of his knowledge, information and belief.
8 An affidavit of Mr Jacobson, a solicitor employed by the Australian Government Solicitor, exhibited a decision of the Real Estate and Business Agents Supervisory Board (the REBAS Board), delivered on 7 June 2007 which dismissed Mr Carey’s application to renew his Real Estate and Business Agents Triennial Certificate – Individual under Pt III of the Real Estate and Business Agents Act 1978 (WA). Mr Jacobson’s affidavit also exhibited a copy of Mr Carey’s affidavit sworn 9 May 2007 in support of his application to the REBAS Board. In the course of that affidavit Mr Carey referred to his extensive experience in the property development industry, academic and trade qualifications and other matters. He denied any wrongdoing in the management of the Westpoint Group and maintained that as a director he had acted professionally in accordance with his duties and obligations. He blamed the collapse of the Westpoint Group upon the intervention by ASIC and ill-conceived and negligent legal advice. He also referred to his financial position both as to income and as to assets and liabilities. That material is relevant to the appropriateness of continuing the protective regime and also arrangements for ongoing salary payments to Mr Carey by Richstar Enterprises Pty Ltd (Richstar).
9 In describing his financial position Mr Carey said that he has ongoing salaries of $405,451 per annum from which he draws a living allowance of $4,000 per week with the surplus accumulating in a bank account. The weekly living allowance is that approved by the receivers pursuant to orders made in these proceedings. Mr Carey exhibited an “updated statement of assets and liabilities” to his affidavit. That statement showed assets with an estimated current value of $1,169,547, comprising employee entitlements of $27,000, a one-sixth share in a racehorse valued at $4,000, what appear to be interests in Healthcare Properties Pty Ltd (Healthcare) and Westpoint Realty valued at $700,000 and $400,000 respectively and superannuation valued at $32,547. There was a sum for personal property valued at $6,000. Liabilities were said to be nil. A contingent liability comprising a claim by QBE Insurance (Australia) Ltd (QBE Insurance) under a guarantee was said to be $200,000. A note to the statement indicated that the claim by QBE Insurance is being defended. That company claims $3,600,000 against 18 other guarantors. Mr Carey said that his contingent liability was based on the claim being successful and the liability being shared by the guarantors. He told the REBAS Board that the statement of assets and liabilities was sufficient to satisfy the Board that he had enough assets to call upon to satisfy his obligations under the Act. He also observed that while asset preservation orders were currently in place they were specifically worded to enable the continuation of the ordinary course of business. He said he was able to access his assets and income to provide significantly greater financial resources than could ever be required on a worse case scenario under business models which he intended to operate.
10 Jan Louise Redfern, Executive Director of the Enforcement Directorate of ASIC swore an affidavit on 3 August 2007. She is responsible for the management of ASIC’s investigations into the affairs of the Westpoint Group. She deposed that ASIC’s investigation into Westpoint continues to be of national significance and high priority. She said that significant resources at every level continue to be deployed across jurisdictions to meet the demands of that investigation and related litigation. The investigation team established by ASIC currently numbers 28 persons, some of whom are in Perth and some of whom have transferred to interstate ASIC offices. She said that to date ASIC has commenced 51 investigations nationally against 65 individuals in relation to the Westpoint Group.
11 Ms Redfern referred to the history of the asset preservation orders which it is useful to set out briefly here:
1. On 20 April 2006 asset preservation orders were made in relation to the first to eighth defendants.
2. On 10 May 2006 orders were made in relation to the ninth defendant.
3. On 7 August 2006 orders were made joining the tenth and eleventh defendants and interim preservation orders were made in relation to the property of the tenth defendant but not in relation to the eleventh defendant.
4. On 29 January 2007 and 5 February 2007 the Court made orders and extended existing orders in relation to the first, fifth to tenth and twelfth defendants. Those orders provided for receivers and asset preservation orders to continue in effect until 30 June 2007.
5. The Court has extended, by consent, existing orders relating to the second, third and fourth defendants from time to time to the following dates:
(i) in relation to the second defendant, 8 June 2006, 18 December 2006, 15 June 2007, 1 August 2007 and 15 August 2007;
(ii) in relation to the third defendant, 22 December 2006, 30 April 2007, 31 May 2007, 15 June 2007, 1 August 2007 and 15 August 2007;
(iii) in relation to the fourth defendant, 22 December 2006, 14 April 2007, 30 April 2007, 31 May 2007, 18 June 2007, 1 August 2007 and 15 August 2007.
6. On 8 March 2007 the Court dismissed ASIC’s application to make asset preservation orders in relation to the eleventh defendant.
7. By orders made on 20 July 2007 current orders as against the first, fifth, seventh to tenth and twelfth defendants were extended to 27 August 2007.
I would add that all existing orders in relation to the first, fifth to tenth and twelfth defendants have been extended to 5pm today.
12 Ms Redfern’s affidavit set out the progress of ASIC’s investigations. Given that the orders proposed are by consent it is not necessary to review the full detail of her evidence. She indicated that ASIC has identified possible contraventions by the defendants of the Act, the Australian Securities and Investments Commission Act 2001(Cth) (the ASIC Act) and/or relevant State criminal legislation. Two primary investigations are referred to as the “fund raising investigation” and the “asset stripping investigation”. An estimated time for completion of each of these investigations was said to be:
1. 31 December 2007 for the fund raising investigation.
2. 31 December 2007 for the asset stripping investigation.
She also referred to related investigations into the Kebbel Group of companies which found retail investors for the Westpoint Group. Orders have been obtained pursuant to s 1323 in the Supreme Court of New South Wales against Kebbel (NSW) Pty Ltd and its sole director, Mr Neil Burnard.
13 Ms Redfern stated that ASIC’s investigation into the alleged commission of serious criminal offences by persons of interest are continuing. She anticipates that briefs of evidence will be provided to the Commonwealth Director of Public Prosecutions for assessment at different stages by 31 December 2007. This may or may not involve ASIC undertaking further investigative work following an assessment of the evidence by the Commonwealth Director of Public Prosecutions. The question whether any criminal charges are laid would be a matter for the Director.
14 Logistical issues continue to affect the progress of the investigation. These include the complexity of the conduct under investigation and its relationship to other Westpoint related investigations. Documentary evidence has continued to grow. As at 7 June 2007 ASIC’s database contained 1,623,864 scanned hard copy documents and approximately 4,871,592 pages relevant to the Westpoint investigations. This represents an increase of 15,326 scanned hard copy documents or 45,978 pages. ASIC’s review of the documents has been, and continues to be, a significant part of the Perth Westpoint investigation team’s day to day activities. Other elements affecting the progress of the investigations include extensive forensic review of electronic information, management of witnesses and information and assessment of evidence given, availability of witnesses and the necessity to provide ongoing support to existing civil and criminal litigation including various winding up applications, the extension of freezing orders and the Burnard prosecution.
15 Ms Redfern said in her affidavit that ASIC seeks to ensure that the property the subject of the asset preservation orders continues to be preserved for the benefit of creditors and investors. She noted, inter alia, that external controllers have commenced or indicated they are likely to commence legal proceedings against some or all of the defendants for the ultimate benefit of creditors to the Westpoint Group. Liquidators of Ann Street Mezzanine Pty Ltd (In Liquidation) have instituted proceedings naming Mr Carey, among others, as a respondent. The ING receivers appointed to Westpoint Corporation Pty Ltd (Westpoint Corporation) have made demands upon Richstar and Silkchime Pty Ltd for payment of moneys and have indicated they will commence proceedings seeking recovery of the debts claimed. ASIC is presently considering whether to issue proceedings in the public interest under s 50 of the ASIC Act in the name of various entities within the Westpoint Group against, among others, Mr Carey, seeking the recovery of damages and, where appropriate, tracing claims.
16 It is sufficient for present purposes to say that these matters and additional material referred to in that affidavit indicate that the criteria in s 1323 of the Act which enliven the Court’s powers to make orders under that section would be satisfied.
17 In an affidavit of Mr De Kerloy sworn 24 August 2007, apparently sworn at the request of ASIC, he put various documents before the Court comprising email exchanges between his firm and the Australian Government Solicitor’s office (AGS) acting for ASIC and Corrs Chambers Westgarth, acting for the receivers. The affidavit exhibited a letter from AGS dated 16 August 2007 indicating ASIC’s understanding that it was proposed that Healthcare as trustee of the Healthcare Property Trust (the Trust) distribute funds from the Trust to Westpoint Financial Services Pty Ltd (WFS) or for WFS to direct Healthcare to make the payment to its sole shareholder, Mr Carey. The AGS expressed the view that it was necessary for Mr Carey to make application to the Court to obtain appropriate orders permitting his client to proceed with the proposed distribution. Various concerns about the distribution were raised by AGS. These were responded to by Mr De Kerloy on 21 August 2007. By a further letter dated 23 August 2007 the solicitors for the receivers and managers of Westpoint Corporation Pty Ltd (Westpoint Corporation) referred to the proposal for the treatment of funds forming part of the Trust and confirmed that the Westpoint receivers were not aware of any claim they might bring against Healthcare and would be bringing an action on behalf of Westpoint Corporation to recover the sum of $81,518 plus interest and costs from WFS. This is relevant to a proposed fund for legal expenses to be established in the name of Mr Carey subject to restrictions as to its application.
Proposed orders in relation to the first defendant, Norman Carey
18 The orders proposed in relation to Mr Carey would appoint Mr McMaster as receiver of his property save for “Excluded Property” which is defined, inter alia, as the right to operate an account known as the Carey Account set up for the purpose of meeting legal, accounting and/or expert fees and disbursements in relation to various legal actions and matters. The Excluded Property would also include any distribution or loan from the Hilton Trust or the Healthcare Property Trust for Mr Carey’s benefit. It would extend to any property paid or payable to Mr Carey in connection with the compromise or settlement of any claim or other chose in action. The property covered by the orders generally and subject to the control of the receivers includes that held in some 28 trusts which are listed in the order. Any wages payable to Mr Carey or distributions or loans from the Hilton Trust or the Healthcare Property Trust and any money held by the receiver under previous orders shall be paid into that account.
19 The receiver would have power to identify, preserve and secure Mr Carey’s property for the benefit of potential creditors. He would also be empowered to take possession and control of property but not to sell, let or encumber it without prior leave of the Court or Mr Carey’s consent. Mr Carey would remain free to carry on business. However he could not remove any property from any State of Australia or mortgage or deal with it or diminish its value. These restrictions also apply to the Excluded Property.
20 Clause 14 would allow Mr Carey to withdraw from the Carey Account legal, accounting and/or expert fees and disbursements in relation to various legal actions in which he is or has been involved and for securing legal, accounting and expert advice in relation to other specified matters. Maximum figures are payable for each of the actions and matters referred to. They total $125,000. The maximum could be increased by a Registrar of the Court.
21 Paragraph 16 provides that Mr Carey may withdraw from the Carey account and pay ordinary living expenses in an amount approved by the receiver from time to time and that there will be liberty to apply in respect of ordinary living expenses should the receiver retire before 31 January 2008. There are also travel restraint orders and record keeping and reporting obligations.
22 In my opinion the orders proposed in relation to Mr Carey are within power and are appropriate in the sense that they are within the range of appropriate orders that could be made. I am therefore prepared to make the proposed orders.
23 In order to deal with conflicts of interest that might arise the receiver has proposed an amendment to the orders in respect of Mr Carey by the insertion of a new paragraph 8A. I am prepared to make those orders.
Proposed orders in relation to Richstar
24 Similar orders are proposed in relation to Richstar. However Mr McMaster would be referred to as the “Supervisor” albeit with powers substantially the same as those he would exercise as receiver of Mr Carey’s property. The designation “Supervisor” was proposed to avoid difficulties with third parties arising from the use of the word “Receiver”. The difficulties were vaguely expressed. The difference is entirely cosmetic. However, a like term has been used in some other orders previously made. The appointment of Mr McMaster as “Supervisor” can only be justified as an exercise of the power under s 1323 to appoint a receiver of the company’s property. Having reflected upon the appropriateness of the title, I doubt that any third party likely to be concerned about the existence of the receiver would have any difficulty in discerning that the “Supervisor” is in truth a Court appointed receiver. Although I have some hesitation about this aspect of the order, the regulator which is properly concerned with the protection of the public interest, has agreed to the designation. In the circumstances, I do not think I should interfere with that agreement.
25 There is a specific proposal that Mr Carey be paid by Richstar wages in the amount of $5,769.23 gross per fortnight, the net amount after PAYG withholdings to be paid into the Carey Account. There is also provision for the payment of $2,660 gross per fortnight to his sister, Karen Carey Hazell, who is the sole director of Richstar. I required some affidavit evidence of their ongoing roles in Richstar to be satisfied that there is a proper basis for the proposed payments. Mr Carey filed an affidavit sufficient to satisfy me, having regard to the agreement between the parties, that there is such a basis for the proposed payments. He said he is employed by Richstar as a property consultant and has been so employed with the consent of the Richstar receiver since July 2006. He is currently paid the proposed amount per fortnight and the net amount, $3,865 is paid to his individual receiver from whom he then receives a living allowance.
26 I bear in mind that the orders made against Mr Carey and Richstar constitute a drastic interference with their freedom to deal with the various assets otherwise under their control. Neither has yet been found to be liable for anything. These orders are essentially “holding orders” while ASIC completes its investigation. They cannot be used to impose any kind of penalty because of liabilities, criminal or civil, which might be sheeted home to Mr Carey at some time in the future. The question of his liability (if any) will not be resolved in these proceedings. I am satisfied that the quantum of the salary proposed is not such that the Court should refuse to make the orders. It will be paid into the Carey Account. The amount of the living allowance which may be drawn down from that account, remains subject to the approval of the receiver. Ms Karen Carey Hazell has been receiving the same salary of $2,660 since 4 July 2006. She says that she undertakes a variety of duties as a director of Richstar. These are set out in her affidavit. There is nothing to gainsay that.
27 I am prepared to make the orders proposed in respect of Richstar subject to an amendment to [14.2] proposed by the receiver.
Orders proposed for the seventh, ninth and tenth defendants
28 I will make the orders proposed for the above defendants which merely extend existing orders to 31 January 2008.
Orders proposed for the twelfth defendant – Healthcare
29 The orders proposed for the twelfth defendant include provision for a sum of $200,000 to be paid into the Carey Account subject to the orders affecting Mr Carey and the operation of that account. That sum would be available for the payment of legal fees and expenses already referred to. ASIC does not consent to the order, but does not oppose it. At the hearing I required an affidavit to be filed in relation to the way in which the proposed payment was to be effected.
30 Mr Carey’s affidavit exhibited a letter of advice from Healthcare’s accountants dated 28 June 2007. In that letter the accountants advised that there is no tax liability payable for either Healthcare or its creditor, WFS. WFS was owed $934,852 by Healthcare as at 30 June 2006. That sum is currently in Healthcare’s account. The accountant pointed out that WFS could direct payment of the money to Mr Carey as its sole shareholder. What is now proposed is that the sum of $200,000 be distributed to WFS by Healthcare and lent to Mr Carey who would pay it into the Carey Account.
31 I am satisfied, given the purpose of the proposed expenditure and the way in which the proposed payment into the Carey Account is to be effected, that the order is appropriate. Mr Carey’s involvement in the administration of these orders and associated legal issues is not cost free. It is more efficiently handled with proper independent advice subject to controls on the maximum expenditures that may be incurred in respect of any individual item. I will make the orders proposed in respect of Healthcare.
Flow of information between publicly and privately appointed receivers
32 At the hearing on 27 August 2007 I directed that the receivers file an affidavit going to the question whether any conflict issue arose in relation to information flow between those occupying Court appointed offices and those acting pursuant to private appointments. Mr McMaster filed an affidavit in that regard. He and Mr Korda are currently jointly appointed Court receivers in relation to Mr Carey’s property. Under the proposed orders Mr McMaster will continue alone as receiver. Mr Korda will not continue.
33 In his affidavit, Mr McMaster made reference to relevant private appointments. He and Martin Madden were appointed on 16 January 2006 as receivers and managers of Westpoint Management Ltd (Westpoint Management), as trustee for the Paragon Commercial Syndicate by Perpetual Trustee Company Ltd. On 24 January 2006 Messrs Korda, Zohar and Winterbottom were appointed as receivers and managers of Westpoint Corporation and Huntingdale Village Pty Ltd (Huntingdale Village) in its own capacity and as trustee for the Huntingdale Village Unit Trust. They were also appointed as receivers for Vannin Pty Ltd (Vannin) in its own capacity and as trustee for the Hay Family Trust. Those appointments were all made by Perpetual Nominees Ltd acting as custodian of the ING Mortgage Pool. Mr McMaster said he had formed the view that the inclusion of the property of the Controlled Entities the subject of his receivership under the orders relating to Mr Carey and the private appointments mentioned above might give rise to potential conflicts of interest. The amendments which he proposed, and to which I have already made reference, have been agreed by the parties as an appropriate way to remove potential conflict.
34 Westpoint Management, Huntingdale Village and Vannin are all named in the orders relating to Mr Carey as trustees of property effectively under his control. Under the proposed amendments Mr McMaster would have no power or authority in respect of those matters although the property held by those companies would remain subject to the general freezing order.
35 Mr McMaster also referred in his affidavit to claims that Westpoint Corporation may have against a number of companies associated with the Westpoint Group. They arise out of loans assigned by Westpoint Corporation to other entities within the Group prior to the appointment of external controllers. Under the proposed amendments, Mr McMaster would have no power or authority in respect of those claims or any transactions or matters relating to them. At the time of swearing his affidavit he had not been privy to any confidential information in his role as Court appointed receiver, save for information made publicly available during the course of the hearing in respect of WFS. He also referred to claims that Vannin may have against certain Westpoint entities and again pointed out that under the proposed amendments he would have no power or authority in respect of those claims. He said he had not been privy to any confidential information in his role as Court appointed receiver in relation to those entities.
36 Although the position in this respect is not ideal, I accept that the steps which have been taken are practical and acceptable in the circumstances and on that basis will make the amendments proposed by Mr McMaster to deal with those issues.
Conclusion
37 In conclusion I note that the proposed period of the extension of these orders is relatively short and takes them through to 31 January 2008. The position will, of course, have to be reviewed in January.
| I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French. |
Associate:
Dated: 4 September 2007
| Counsel for the Plaintiff | Mr S Owen Conway QC with Mr J Vaughan |
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| Solicitor for the Plaintiff | Australian Government Solicitor |
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| Counsel for the 1st, 5th, 7th, 8th, 9th, 10th and 12th Defendants: | Mr MH Zilko SC with Ms ML Coulson |
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| Solicitor for the 1st, 5th, 7th, 8th, 9th, 10th and 12th Defendants:
Counsel for the Receiver:
Solicitor for the Receiver:
| Mony de Kerloy
Mr JA Thomson
Corrs Chambers Westgarth
Mr R Randall appeared for the Liquidator of Westpoint Finance. |
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| Date of Hearing: | 27 August 2007 |
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| Date of Judgment: | 4 September 2007 |
