Federal Court of Australia

Keystone Asset Management Limited (Receivers and Managers appointed) (in liquidation) v Filippini [2025] FCA 604

ORDERS

THE COURT ORDERS THAT:

1.    Until further order, pursuant to rr 1.32 and 1.34 of the Federal Court Rules 2011 (Rules), the Court dispenses with the requirement that the first to fourth respondents comply with rr 16.07 and 16.08 of the Rules on the grounds of privilege against self-incrimination and self-exposure to penalties by the first respondent insofar as those rules would otherwise apply in respect of their pleading to the allegations in the following paragraphs of the applicant’s further amended statement of claim: 48(a), 49, 50, 52, 53, 54A, 54, 55, 56, 57, 58A-58AS, 58, 59, 60, 61, 62, 63, 74, 76, 77, 78, 79, 80 and 81.

2.    The first to seventh respondents’ further amended interlocutory application dated 19 June 2025 otherwise be dismissed.

3.    The eighth and ninth respondents’ interlocutory application dated 6 June 2025 be dismissed.

4.    The costs of the first to seventh respondents’ interlocutory application be reserved.

5.    The costs of the eighth and ninth respondents’ interlocutory application be reserved.

6.    By 4.00 pm on 18 July 2025, the respondents file and serve defences to the further amended statement of claim.

7.    By 4.00 pm on 1 August 2025, the applicant file and serve any replies.

8.    There be liberty to apply.

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

REASONS FOR JUDGMENT

MOSHINSKY J:

Introduction

1    There are two interlocutory applications before the Court seeking a stay of the proceeding due to potential criminal proceedings. The applications are:

(a)    a further amended interlocutory application dated 19 June 2025 filed by the first to seventh respondents (the Filippini parties); and

(b)    an interlocutory application dated 6 June 2025 filed by the eighth and ninth respondents (the Chiodo parties).

2    In brief outline, the Filippini parties contend that: criminal prosecution of the first respondent (Mr Filippini) is “on the cards” or a “reasonable possibility”; there is a substantial overlap between the issues raised in this proceeding and the subject-matter of the potential criminal proceeding; Mr Filippini would suffer prejudice to his fundamental rights arising under the accusatorial system if this proceeding were not stayed; and the other Filippini parties would also suffer prejudice because they depend on assistance and instructions from Mr Filippini.

3    In the alternative to seeking a stay of the proceeding, the Filippini parties seek a dispensation from pleading to certain paragraphs of the further amended statement of claim (FASOC). This alternative relief is not opposed by the applicant, Keystone Asset Management Limited (Receivers and Managers appointed) (in liquidation) (Keystone).

4    Although the Filippini parties’ further amended interlocutory application also seeks, by way of alternative relief to a stay, a dispensation from making discovery, this aspect of the application was not pressed at the hearing. The position taken by the parties was that, if I declined to order a stay, the Filippini parties would have the opportunity to raise any objection to making discovery in the context of the parties’ conferral as to categories for discovery and, if any such objection could not be resolved, the issue could be raised with the Court (along with any other issues in dispute relating to discovery).

5    The Chiodo parties’ contentions are similar to those of the Filippini parties. They contend that criminal prosecution of the eighth respondent (Mr Chiodo) is “on the cards” or a “reasonable possibility”; there is a substantial overlap between the issues raised in this proceeding and the subject-matter of the potential criminal proceeding; and Mr Chiodo could suffer prejudice to his fundamental rights under the accusatorial system if the proceeding is not stayed.

6    Unlike the Filippini parties, the Chiodo parties do not make an application, in the alternative, for dispensation from the pleading rules.

7    Keystone submits that the respondents have not established that criminal prosecution of Mr Filippini or Mr Chiodo is “on the cards” or a “reasonable possibility”. Keystone submits that, in any event, the application for a stay is premature because further steps could be undertaken in the proceeding without causing prejudice to the Filippini parties or the Chiodo parties.

8    For the reasons that follow, I have concluded that it is not appropriate to order a stay of the proceeding (at least at this stage). While I find that criminal prosecution is a real possibility, I accept Keystone’s submission that further steps can be undertaken without causing prejudice to the Filippini parties and the Chiodo parties.

9    Accordingly, I will make the pleading dispensation order sought by the Filippini parties. I will otherwise dismiss their application. Further, I will dismiss the Chiodo parties’ application.

Evidence

10    The Filippini parties rely on three affidavits of Joseph Barbaro, a partner of Corrs Chambers Westgarth, the solicitors acting for the Filippini parties, dated 15 April 2025, 20 May 2025 and 18 June 2025.

11    The Chiodo parties rely on two affidavits of Seamus Ryan, a solicitor at Velocity Legal, the solicitors for the Chiodo parties, dated 6 June 2025 and 19 June 2025.

12    Keystone relies on three affidavits of Kimberley MacKay, a partner of Norton Rose Fulbright, the solicitors for Jason Tracy and Glen Kanevsky in their capacity as liquidators of Keystone and the Court-appointed Receivers and Managers of the property of Keystone. The affidavits are dated 3 June 2025, 17 June 2025 and 20 June 2025.

13    An order was made at the hearing that the evidence in the Filippini parties’ further amended interlocutory application be evidence in the Chiodo parties’ interlocutory application and vice versa.

Overview of the proceeding

14    Keystone’s claims are set out in the FASOC. It is alleged in paragraph 1 that Keystone is and was at the material times the responsible entity for the Shield Master Fund (SMF), a managed investment scheme registered with the Australian Securities and Investments Commission (ASIC), and is and was at the material times the trustee of the Australian Diversified Property Fund (ADPF), a wholesale unregistered property fund.

15    It is alleged that Mr Filippini was at all material times the sole director of the second respondent (City Built) and the third respondent (Force 1 Security). It is also alleged that he was at all material times since 15 December 2023 a director of the fourth respondent (Force 1 Constructions).

16    It is alleged that Mr Chiodo was at all material times a director of the ninth respondent (Chiodo Corporation).

17    Section C of the FASOC deals with the SMF. Section D deals with the ADPF. Section E deals with Chiodo Corporation and a development management agreement between Keystone (as trustee for the ADPF) and Chiodo Corporation.

18    Section F of the FASOC relates to the payment of funds from the SMF and the ADPF. It is alleged that, in the period 6 April 2022 to 31 May 2024, Keystone (as responsible entity for the SMF) made payments of about $305 million to Keystone (as trustee of the ADPF) for the purchase of units in the ADPF. It is also alleged that in the period 11 April 2022 to 3 September 2024, Keystone (as trustee of the ADPF) made payments of at least approximately $305 million to Chiodo Corporation.

19    In Section G of the FASOC, there are allegations about the receipt and use of funds by the Filippini parties. In paragraph 49 it is alleged that, from 11 April 2022, payments totalling at least $158 million were paid by Chiodo Corporation and by Keystone to accounts held by City Built and Mr Filippini. In paragraph 52, it is alleged that there were no written contracts between Chiodo Corporation and City Built or Mr Filippini with respect to any of the ADPF developments or other services provided by City Built or Mr Filippini to Chiodo Corporation. In paragraph 53, it is alleged that City Built was not required to and did not in fact submit any tenders or quotations for any of the work it undertook for Chiodo Corporation on the ADPF developments or any other development.

20    It is then alleged, in paragraph 54, that during the period 17 January 2022 to 28 May 2024, City Built issued invoices to Chiodo Corporation which referred to construction costs and expenses purportedly incurred in connection with the ADPF developments and other developments with a total value of approximately $142 million. It is alleged that, by these invoices, City Built represented that it had undertaken work or incurred expenses in connection with the identified developments as described in the invoices.

21    After a series of detailed allegations (paragraphs 58A to 58AS), it is alleged in paragraph 58 that City Built and Mr Filippini received payments for which the purported works or expenses were not in fact performed or incurred by City Built or Mr Filippini (defined as the “ADPF Development Overpayments”). Further, in paragraph 59, it is alleged that the total amount of the payments to City Built and Mr Filippini (approximately $158 million) exceeded the total amount of the invoices by approximately $15 million (defined as the “Unreconciled Payments”). In paragraph 60, it is alleged that the ADPF Development Overpayments and the Unreconciled Payments were received for no consideration and without any legitimate basis. It is convenient at this point to note that in Ms MacKay’s affidavit of 3 June 2025, she states in paragraph 9 that, based on the information available to date, she calculates that the claim made against the Filippini parties in the proceeding may be up to approximately $150 million; this is based on the $158 million paid, less the estimated value of the total construction undertaken by the Filippini parties during the period of the SMF. I note that in Mr Barbaro’s affidavit of 18 June 2025, at paragraph 21, he says that he has identified bases to challenge that calculation.

22    In paragraph 61, it is alleged that the representations made by the invoices were false. In paragraph 62, it is alleged that Mr Chiodo and Chiodo Corporation knew that the representations were false.

23    Importantly, for the purposes of the present applications, in paragraph 63, it is alleged that the payments made to City Built and Mr Filippini to the extent of the ADPF Development Overpayments and the Unreconciled Payments were “dishonestly misappropriated by City Built and Robert Filippini in pursuance of a fraudulent design with Paul Chiodo and Chiodo Corporation to authorise the payment of the City Built Invoices in circumstances where those payments were known by each of City Built, Robert Filippini, Paul Chiodo and Chiodo Corporation to comprise amounts for which City Built and Robert Filippini did not perform works or incur expenses entitling them to payment”.

24    Section H of the FASOC deals with alleged breaches of fiduciary duties by Mr Chiodo and Keystone. Section I deals with claims against Chiodo Corporation on the basis of the first limb of Barnes v Addy and relying on a Quistclose trust.

25    Section J deals with claims against City Built and Mr Filippini on the basis of the first limb of Barnes v Addy and on the basis of a Black v Freedman trust. Section K deals with claims against certain other Filippini parties, on the basis that they received some of the allegedly misappropriated funds.

ASIC’s investigations and search warrants

26    The affidavits of Mr Barbaro provide details of relevant investigations by ASIC and search warrants that have been issued. The purpose of that evidence is to establish that there is, at least, a reasonable possibility that criminal charges will be brought against Mr Filippini in relation to the matters that are the subject of this proceeding. I note the following facts and matters based on those affidavits.

27    On 18 February 2025, ASIC (with the assistance of the Australian Federal Police) executed a search warrant at the personal home of the first and fifth to seventh respondents. The search warrant stated that there were reasonable grounds to suspect that Mr Chiodo and Mr Filippini had committed certain indictable offences as there set out (see paragraph 15 of Mr Barbaro’s affidavit of 15 April 2025).

28    On 3 April 2025, ASIC issued a notice pursuant to s 19(2) of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) requiring Mr Filippini to appear at an examination. The notice stated that the examination related to suspected contraventions by City Built and Force 1 Security and their officers, representatives and related entities of ss 400.2B(1), 490.1 and 490.2 of the Criminal Code (being the Schedule to the Criminal Code Act 1995 (Cth)) (the Criminal Code), s 1041G of the Corporations Act 2001 (Cth) and ss 82 and 83 of the Crimes Act 1958 (Vic) in relation to the operation of the SMF. The reference to “officers” includes Mr Filippini.

29    Having regard to the nature of those offence provisions, Mr Barbaro expresses the view, which I accept, that there appears to be considerable overlap between Keystone’s allegations against Mr Filippini in this proceeding and the contraventions alleged against Mr Filippini in the search warrant and the section 19 notice, which are the subject of investigation by ASIC. There was no real issue in the applications before me about the question of overlap.

30    In Mr Barbaro’s affidavit of 20 May 2025, he provides details of a section 19 notice issued to City Built on 18 July 2024 and certain notices issued by ASIC pursuant to s 33 of the ASIC Act requiring City Built and Force 1 Security to produce certain documents.

31    In that affidavit, Mr Barbaro also refers to correspondence with ASIC as to the status of ASIC’s investigations and the prospect of criminal prosecution. In a letter dated 15 May 2025, ASIC responded that its “investigations in this matter are ongoing and no further comment can be made at this time”.

32    In Mr Barbaro’s affidavit of 20 May 2025, at paragraphs 53 to 54, he details media coverage of allegations against Mr Chiodo and Mr Filippini relating to the SMF and ADPF.

33    In that affidavit, at paragraph 58, Mr Barbaro states that he believes that each of the fifth respondent, the sixth respondent and the seventh respondent (who are individuals) require the assistance and evidence of Mr Filippini to defend allegations against them. I accept this. There was no challenge to that evidence.

34    In Mr Ryan’s affidavit of 6 June 2025, he provides details of a section 19 notice issued by ASIC to Mr Chiodo on 28 November 2023 relating to an investigation by ASIC into suspected contraventions of the ASIC Act and the Corporations Act. The notice refers to suspected contraventions of certain provisions by Keystone and/or its officers, representatives and related entities. The references to “officers” includes Mr Chiodo.

35    Mr Ryan’s affidavit of 6 June 2025 also states that on 18 February 2025 ASIC (with the assistance of the Australian Federal Police) executed search warrants in respect of the Chiodo parties. An extract from the warrants is set out at paragraph 19 of Mr Ryan’s affidavit. The extract refers to suspected contraventions by Mr Chiodo and Mr Filippini that overlap with the allegations in this proceeding.

36    In Mr Ryan’s affidavit of 19 June 2025, he states that on 18 June 2025, ASIC sent Mr Chiodo a further section 19 notice. The notice refers to suspected contraventions of the ASIC Act, the Criminal Code and the Corporations Act by Keystone; Keystone’s officers, representatives and related entities; City Built; City Built’s officers, representatives and related entities; and others in relation to the SMF.

Other factual findings

37    In paragraph 25 of Mr Barbaro’s affidavit of 15 April 2025 he states that he is instructed that Mr Filippini is the “controlling mind” of the corporate Filippini parties and makes all decisions for them. He states that Mr Filippini is the only person who can properly provide instructions on behalf of those respondents. I accept that evidence, which was not challenged.

38    Ms MacKay gives evidence in her 3 June 2025 affidavit, at paragraph 26, that Keystone brings this proceeding in its capacities as responsible entity for the SMF and as trustee of the ADPF; the sole unitholder of the ADPF is the SMF; accordingly, those that stand to benefit from the proceeding are the unitholders of the SMF. In paragraph 27 of that affidavit, Ms MacKay provides details of the largest unitholders of the SMF. In paragraphs 28 to 33, Ms MacKay provides details of the prejudice that will be suffered by unitholders and underlying investors who hold the beneficial interests in the SMF units if the proceeding were stayed. There was no real issue about this evidence, and I accept it for present purposes.

39    In Ms MacKay’s affidavit of 17 June 2025, at paragraphs 23 to 39, she refers to correspondence from investors in the SMF relating to prejudice. This evidence was not challenged and I accept it, at least for present purposes.

Applicable principles

40    I considered the principles applicable to an application for a stay of a civil proceeding pending the determination of related criminal proceedings in Australian Securities and Investments Commission v Australia and New Zealand Banking Group Limited [2019] FCA 964; 138 ACSR 42 (ASIC v ANZ) at [50]-[64]. I adopt that statement of the applicable principles.

41    The applicable principles have also been helpfully set out by Dowling J in General Manager, Fair Work Commission v Asmar (Stay application) [2025] FCA 67 at [21]-[31]. I also adopt that statement of principles. In particular, his Honour stated at [27]:

Sixth, the Court may stay a civil proceeding when a criminal prosecution has not commenced but is “on the cards” or “reasonably possible”: see Australian Securities and Investments Commission v Craigside Co Ltd [2013] FCA 201; 93 ACSR 176 and Websyte [Corporation Pty Ltd v Alexander (No 2) [2012] FCA 562] at [109].

42    Further, his Honour stated at [31]:

Tenth, in an appropriate case the civil proceedings may be allowed to proceed to a certain stage (for example, setting down for trial) and then stayed: see McMahon [v Gould (1982) 7 ACLR 202] at 207.

Consideration

43    The Filippini parties and the Chiodo parties contend that it is, at least, a reasonable possibility that Mr Filippini and Mr Chiodo will be charged with criminal offences in relation to the same subject-matter as this proceeding and, if so, they would be prejudiced if this proceeding were not stayed. This is because they would be required to take steps that would undermine their accusatorial rights in relation to any such criminal proceeding, in order to effectively defend this proceeding.

44    Further, in relation to the Filippini parties other than Mr Filippini, the Filippini parties submit that the assistance of Mr Filippini is necessary for them to defend themselves in the proceeding. However, were Mr Filippini to assist them, this would undermine his accusatorial rights in relation to any such criminal proceeding. Thus, it is submitted that, if the proceeding is not stayed, Mr Filippini would face an “invidious choice” similar to that described in the submission recorded in ASIC v ANZ at [88(a)].

45    The Chiodo parties’ submissions are similar to those of the Filippini parties.

46    In response, Keystone contends that the evidence does not establish that criminal proceedings are a “reasonable possibility”. Further, Keystone submits that the stay application is premature as there are steps that can take place in the proceeding without causing prejudice.

47    In my view, the evidence establishes that criminal proceedings against Mr Filippini and Mr Chiodo in relation to the subject-matter of this proceeding are a reasonable possibility. The evidence demonstrates that ASIC has ongoing investigations into suspected contraventions by Mr Filippini and Mr Chiodo of certain provisions of the ASIC Act, the Criminal Code and the Corporations Act and that the subject-matter of those investigations is the same as, or very similar to, the subject-matter of this proceeding. Not only are investigations on foot, but search warrants have been issued, premised on a reasonable suspicion of contravention. Further, the allegations in the FASOC are serious and of a nature that suggests that criminal proceedings are a reasonable possibility.

48    While I accept that criminal prosecutions are a realistic possibility, I do not accept that it is appropriate to stay this proceeding (at least at this stage). That is because there are further steps that can take place without causing prejudice to Mr Filippini’s and Mr Chiodo’s accusatorial rights. For example:

(a)    defences could be filed, with a dispensation from pleading to certain paragraphs (as noted above, Mr Filippini seeks such an order in the alternative, and this is not opposed);

(b)    discovery could take place, subject to any submissions Mr Filippini may wish to make about the scope and nature of this process to protect his accusatorial rights (I note that Mr Chiodo does not contend that there is any difficulty for him in making discovery);

(c)    a mediation could take place (I note that counsel for Mr Filippini did not contend there was any difficulty in Mr Filippini attending a mediation; to the contrary, he embraced the notion of a mediation); and

(d)    lay evidence could be prepared in draft, but not served.

49    There was discussion at the hearing as to whether there could be prejudice to Mr Filippini or Mr Chiodo if expert evidence were prepared in draft but not served. This raises issues relating to privilege that were not fully explored. This matter can be left for determination in due course, if necessary.

50    In the circumstances of the present case, a weighty factor is the prejudice that could be suffered by unitholders in the SMF and underlying investors. This is a powerful reason for progressing the proceeding rather than ordering a stay. While the Filippini parties submitted that the prejudice to unitholders/investors could be ameliorated in various ways, none of those proposals fully addresses the potential prejudice to unitholders/investors of being kept out of potential compensation for a significant period of time.

51    It is likely that the issue of a stay will need to be revisited later, once the proceeding is further progressed. Any such application will need to be determined on the basis of the facts and matters that exist at that time (as set out in the evidence before the Court on any such application). For example, the prospect of criminal prosecution may have increased or decreased, and this may affect the analysis. Likewise, the position regarding prejudice to unitholders and underlying investors may have changed.

52    For these reasons, I do not consider it appropriate to stay the proceeding (at least at this stage).

Conclusion

53    I will make a pleading dispensation order as sought in the alternative in the Filippini parties’ further amended interlocutory application. I will otherwise dismiss that application. I will also dismiss the Chiodo parties’ interlocutory application.

Associate:

Dated:    25 June 2025

SCHEDULE OF PARTIES