2.25.4 Sale of the Client Book
367 As set out above, as a result of the pre-appointment meetings Mr Bettles knew that Capricorn Securities and Iridium Financial Planning were not to be placed into liquidation until after realisation of those companies' assets because to do otherwise could lead to termination of Capricorn Securities' AFSL and loss of the trailing commissions.
368 That was also discussed in Mr Bettles' teleconference on 28 July 2016 with Messrs Ramsden and Lavell (see [335] above). Mr Bettles' file note of the discussion provides:
369 Mr Bettles was not directly involved in the negotiations for the sale of the Client Book. They were undertaken by Mr Marlborough, as director of Capricorn Securities and Iridium Financial Planning. However, Mr Bettles was concerned to see that the sale progressed in a timely way and that Mr Marlborough obtained a valuation of the Client Book. He took a number of steps to ensure that those things occurred including:
(1) seeking updates on the progress of the sale and the obtaining of a formal valuation of the Client Book at Progress Meetings;
(2) following up to ensure that a formal valuation was obtained which was something that Mr Bettles insisted on from his early discussions with Messrs Ramsden and Lavell; and
(3) seeking legal advice from Grants Law as to the matters arising in relation to the sale of the Client Book.
370 In cross-examination Mr Jones explained that an electronic data room was set up for potential purchasers of the Client Book, there were about six interested parties and, based on his discussions with Mr Bettles, Mr Jones understood that Mr Bettles wanted the Client Book to be marketed to as many potential purchasers as possible.
371 Two offers were received to purchase the Client Book:
(1) an offer from Crest Wealth Pty Ltd which was included a letter dated 3 November 2016 to Iridium Financial Planning and Capricorn Securities, care of Ramsden Lawyers, which noted that subject to due diligence it was prepared to offer:
With No Restraint $800,000.
With a restraint from Richard Marlborough and Benchmark Private Wealth Pty Ltd and its Directors and associates $1,000,000.
(Crest Wealth Offer); and
(2) an offer from Advice First in a range of $885,000 to $1,005,000 depending on Mr Marlborough's remuneration package (Advice First Offer).
372 Ultimately Mr Marlborough decided to accept the offer from Crest Wealth for purchase of the Client Book.
373 Mr Jones gave evidence that, during meetings including Progress Meetings, he observed that while there was some discussion about sale of the Client Book to other purchasers such as Andrew Stonehouse or Sid Super, the understanding was always that the Client Book would be sold to Crest Wealth but there was discussion to the effect that it could not be sold to Crest Wealth without testing the market. Mr Jones said he never had any realistic expectation that the Client Book would be sold to someone else. In cross-examination Mr Jones accepted that this was not an expectation that Mr Bettles ever expressed at those meetings.
374 Mr Jones was closely involved in the sale of the Client Book to Crest Wealth as the lawyer for the vendor. He prepared the sale contract and carried out the settlement of the transaction. He recalls seeing the Crest Wealth Offer and also recalls that at about that time he was concerned that Capricorn Securities' AFSL may be cancelled with the result that the Client Book would then be worthless. He recalls that Mr Ramsden told him that he wanted to move quickly because the longer the Client Book remained with Iridium Financial Planning the greater was the potential risk that the AFSL would be cancelled.
375 On 4 November 2016 Ramsden Lawyers provided Mr Bettles with a copy of the Crest Wealth Offer. The email under cover of which that offer was provided included:
We note that other offers may be forthcoming noting that at this stage we have limited the interest to Advice First and Stonehouse Group. We also note however that the offer posed by Crest wealth may not be its final offer and they may be prepared to move if it felt it was at risk of losing the opportunity.
376 On 16 November 2016 Mr Ramsden informed Mr Bettles that two offers had been received for the Client Book: the Crest Wealth Offer; and Advice First Offer. Mr Bettles' file note of his conversation with Mr Ramsden states (as written):
Telephone in-John Ramsden from Ramsden Lawyers advising:
1. that they have received two offers for the trail book:
a) Crest Accountants have offered an unconditional $900,000 + a job for Richard Marlborough for two years at $200,000pa, on the basis that Richard and Benchmark are restrained from contacting the clients the subject of the trail book. Payment to be made in 7 - 14 days.
b) Advice First have offered a conditional $1 million + a job for Richard for two years at $150,000pa, on the basis that Richard and Benchmark are restrained from contacting the clients the subject of the trail book. Payment to be made in 7 - 14 days.
2. Richard has instructed Ramsden to prepare a sale contract for him to sign to accept the offer from Crest Accountants
3. John believes that Richard has the authority to accept the deal, but wants my agreement as the controller of the sole shareholder.
I said that I would need to see:
a) an explanation of the conditions being imposed by Advice First to determine if they were worth the $100,000 less that Crest is offering
b) written advice from WMS on the value of the book
4. Ramsden will send through an letter detailing the offers for me to consider.
377 On 17 November 2016 Mr Bettles had a telephone conversation with Mr Marlborough. During that conversation in relation to the sale of the Client Book Mr Bettles' file note records (as written):
Telephone out-Richard Marlborough regarding:
1. the offers on the trail book owned by Capricorn. Richard thought that Ramsden had prepared a sale contract. I said that I had spoken to Ramsden and they were sending me through a letter setting out the offers for me to consider and provide consent on the one chosen by Richard. I noted that neither of us could make a decision until we had the sign off from WMS. Richard confirmed the information provided to me by Ramsden on the offers and said that the offer from Advice First contained too many conditions around the $1 million and around his consultancy fee. He said he was prepared to sign a restraint, but not if there were conditions that could see it reduced to $100,000 over 2 years. …
378 On 17 November 2016 Mr Ramsden sent an email to, among others, Mr Bettles in which he wrote:
Further to our telephone discussion yesterday, I have received two offers from interested parties to purchase the business of Iridium Financial Planning Pty Ltd and Capricorn Securities Pty Ltd.
The two interested parties are Advice First and Crest Wealth.
Attached is the offer received from Advice First which is self-explanatory and presents three options for consideration. My instructions at the time to induce the offers, was to ensure that both parties understood they were to put forward their best offer to avoid lengthy negotiations, where it was explained to each interested party that the offer that was the cleanest deal, would most likely be preferred. It was also explained to each of the interested parties that restraints would not be provided by the vendors, and that any restraints would have to be by way of a consultancy agreement that the successful purchaser would enter into with Richard Marlborough and Benchmark. This being something that Richard could freely do once the business was sold, without being in breach of his directors or fiduciary duties (noting also that Capricorn Securities and Iridium Financial Planning would no doubt be placed into liquidation at some stage).
Having spoken with Aaron Lavell, I understand that the value of the Iridium Financial Planning business would be within a range of between $800,000 and $1 million. I understand that both parties were made aware of this before making their respective offers. Although we do not have any valuation from Aaron, nor a report that verifies his view, the delay in obtaining a formal report has placed at risk the ability to remain licenced with the ASIC. That said, I am confident that Aaron's report will reflect the aforementioned values.
Although I am yet to receive a written offer from Crest Wealth, I had a lengthy meeting with the key principal of that business, Peter Chesterton, and confirmed that the offer put forward for the purchase of the business as a going concern on an as is, on a walk in walk out basis, and is for the purchase price sum of $900,000 to be paid within 14 days from contract date. There may be a requirement for some retention monies merely to account for any monies that Capricorn Securities may receive during the transition where in the event Capricorn Securities fails to account to Chris Wealth, then those retention monies can be deducted accordingly. The purchase price however, does not vary.
I also advised that Crest Wealth are prepared to enter into a consultancy agreement with Richard and Benchmark for a two-year term to assist them in the transition of the assets from Iridium Financial Planning to Crest Wealth, for a consideration sum of $400,000 plus GST.
Accordingly, my instructions are to prefer the offer made by Crest Wealth and to draw contracts of sale present to Crest Wealth for them to execute and present as a formal offer for my client to thereafter sign and accept.
On the basis that you are the only shareholder and member of both Capricorn Securities and Iridium Financial Planning, I am instructed to seek your approval to accept the Crest Wealth deal. On the basis that the proposal from Advice First does appear to offer more return to the vendors, by way of option three in particular, it still nevertheless requires Richard Marlborough to consult with Advice First, which is entirely a prerogative of Mr Marlborough and one that he cannot be compelled to be bound to by you as the shareholder, which in turn would no doubt (should Richard refuse to consult), result in Advice First paying dramatically less then what has been offered. It is also viewed from Richard, that the Crest Wealth deal will be more seamless and have less conditions (albeit they too have required that X-Plan be paid out) then the Advice First deal.
If you could please provide me with your position on an urgent basis, that would be much appreciated so that we can proceed to drawing the relevant contract expeditiously. I am happy to discuss with you if you would like.
379 Mr Ramsden's email sought Mr Bettles' approval to accept the Crest Wealth Offer. However, Mr Bettles was not willing to consider approval of a proposed offer until at least he had seen a formal valuation of the Client Book, a matter which had been discussed from early on in his appointment to Iridium Holdings and subsequently raised with Mr Marlborough and his advisors on a number of occasions.
380 On 17 November 2016 Mr Lavell telephoned Mr Bettles. Mr Bettles' file note of that conversation records (as written):
Telephone in-Aaron Lavell from WMS regarding the offers from Crest and Advice First. Aaron said that without seeing the conditions (if any) imposed by Crest it is difficult for him to provide a comparison. I said I would point that out in my email to Ramsden about not being able to consider the offer until receiving written advice from WMS. Aaron said the conditions from Advice First were not that onerous and consequently it appeared that the $1 million offered by Advice First was better than the $900,000 from Crest, albeit he hadn't seen whether Crest's offer had any conditions. I noted that both offers seemed to require Richard to sign a restraint and without his restraint the offers would be lower. Obviously Richard wanted the best deal possible for him personally and would therefore lean towards the one that paid him the most for the restraint (ie. Crest). If it was that the offers without the restraint were lower than $900,000, then despite the Advice First offer being higher, it would seem commercial to take the Crest offer because whilst it is less than Advice First's offer it is more than would be obtained if Richard was not restrained.
381 On 18 November 2016 Mr Bettles received an email from Mr Lavell attaching a WMS valuation report for the Client Book addressed to Capricorn Securities and Iridium Financial Planning (WMS Client Book Valuation). The primary purpose of the WMS Client Book Valuation was "to assess the reasonableness of offers received by [Crest Wealth] and Advice First for the risk insurance trailing commission ("Risk Book") and funds under advice ("FUA") Advisor Fee assets". It was prepared by Mr Lavell "on the premise of forced sale". The reasons given for why that was so included:
(1) Iridium Holdings, the sole shareholder of both Capricorn Securities and Iridium Financial Planning, was in liquidation, which had attracted adverse national press;
(2) the appointment of a liquidator to a shareholder of an AFSL holder was a "default event" under the terms of the AFSL such that Capricorn Securities required ongoing consent from ASIC in order to continue to hold the AFSL which was a week to week proposition;
(3) the director and the shareholder's representative had provided a limited period for buyers to undertake due diligence and had indicated that limited, if any, warranties or contractual conditions would be acceptable;
(4) at the commencement of 2016 several key finance staff resigned for the MA Group and the general staffing levels started to diminish;
(5) on or about 10 February 2016 a subsidiary of the MA Group sold the finance broking trail book to an arm's length party based in Sydney;
(6) during 2016 there was attrition each month in the financial planning team;
(7) in late March 2016 the landlord of the Gold Coast head office provided a notice to vacate the premises which attracted significant adverse press coverage and accelerated the attrition of staff;
(8) certain suppliers who had unpaid accounts ceased providing services and/or products, including IRESS who license the primary financial planning software Xplan, and, as at the date of the valuation, the Xplan software remained inaccessible for potential purchasers undertaking due diligence;
(9) revenue streams began to diminish following the appointment of liquidators;
(10) by 8 November 2016 there were only two interested potential buyers; and
(11) the industry was affected by reforms which shifted it from a traditional commission-based income model to a time-based model.
382 The WMS Client Book Valuation calculated that the risk trail book was worth between $850,000 and $1,000,000 and the risk advisor fees had no value. It concluded:
We understand the Crest Wealth proposal is preferred by the Director. Based on the above, we believe the proposed terms fit within an acceptable range.
383 Once Mr Bettles had an opportunity to consider the WMS Client Book Valuation he took a number of steps including speaking with Mr Lavell and on 21 November 2016 he sent an email in response to Mr Ramsden's email dated 17 November 2016 (see [378] above). In that email he sought a copy of the draft contract for sale and a list of creditors of Capricorn Securities and Iridium Financial Planning together with the amounts owing to each creditor.
384 On 21 November 2016 Mr Bettles prepared the November Decision Memorandum. It relevantly included:
…
Ultimately two offers have been received, and Mr Marlborough wants to accept the offer from Crest Accountants ("Crest").
An important component of the sale was that it had no conditions. This is particularly important because neither the director nor the liquidator wanted the buyer to be able to withdraw from the contract and/or refuse to pay the sale price if the seller went into liquidation and/or Mr Marlborough was declared bankrupt. Mr Marlborough had also indicated that he was not prepared to sign a restraint (because with the demise of the Members Alliance business he needed to find new employment and that may be in same industry). I note that both offers require Mr Marlborough to sign a restraint, but they have offered employment to Mr Marlborough and the current responsible manager, Mr Anthoy Douglas. I understand that neither party is prepared to make an offer without Mr Marlborough's restraint. It seems Mr Marlborough is prepared to sign the restraint on the basis of the salary package he is being offered by Crest.
The offer from Crest is $900,000. The offer from Advice First depends upon the remuneration package of Mr Marlborough; ranging from $855,000 to $1,005,000. Obviously the $1,005,000 offered by Advice First is better than $900,000 offered by Crest, but Advice First's offer includes remuneration to Mr Marlborough of $200,000 over 18 months whereas Crests' offer is $400,000 over two years.
Obviously there is a conflict between the director and the shareholder over which offer to accept. The liquidators would prefer the Advice First offer but that means a lesser amount for the director, who would prefer the Crest offer but that means a lesser amount for [Iridium Holdings]. The liquidators cannot force the director to sign a restraint, and it seems that nobody is prepared to purchase the trail book without the restraint.
Determination: The options therefore seem to be:
1. Force the director to accept the Advice First offer, or replace Mr Marlborough with a director who is prepared to accept Advice First's offer. This is not practical because Mr Marlborough would refuse to sign the restraint which is a condition of the offer.
2. Force the winding up of [Capricorn Securities] and [Iridium Financial Planning] and have the liquidators accept the Advice First offer. Again this is not practical because of point 1 above, and that the agreements with the insurance providers/platform operators that give rise to the income earnt by [Capricorn Securities] contain clauses which provide for the termination of the agreements with [Capricorn Securities] should [Capricorn Securities] be wound up. If the agreements are terminated then [Capricorn Securities] and [Iridium Financial Planning] have nothing to sell.
3. Require the director to undertake another marketing campaign in an effort to elicit an offer of the magnitude of Crest's offer and not requiring Mr Marlborough's restraint. There are a number of comments in WMS's appraisal about the delicacy of the trail book (eg. questions over compliance, diminishing client base, AFSL being a 'week to week' prospect, previous sale campaign not eliciting any offers, etc.). Consequently, it seems improbable that better offers will be achieved and one would be concerned that the current offer would be lost by delays.
4. Consent to the director accepting the offer from Crest. Whilst it seems unpalatable to be forced into a position of agreeing to accept the lower of the two offers we should bear in mind that there is no offer without Mr Marlborough signing a restraint. Obviously Crest's offer is greater than zero.
Based upon the above the liquidators have determined to agree with Mr Marlborough to accept the offer from Crest to purchase the trail book, subject to seeing and agreeing with the terms of the sale contract.
385 On 21 November 2016 Mr Bettles sent a copy of the November Decision Memorandum to Mr Grant together with other relevant material.
386 By email dated 24 November 2016 Mr Jones informed Mr Lavell that Mr Bettles had requested a list of Capricorn Securities' and Iridium Financial Planning's creditors and the amounts owed to each. Mr Jones requested that the information be provided as a matter of priority. By email of the same date Mr Lavell provided a list which set out his understanding of the unsecured creditors and the amounts owed. Mr Bettles was copied into that email.
387 On 25 November 2016 Mr Bettles received an updated version of the proposed contract for sale of the Client Book from Ramsden Lawyers which he then emailed to Grants Law together with other material which had been provided to him. Mr Bettles sought advice from Grants Law on the liquidators' view that the Crest Wealth Offer should be accepted and whether any amendments were required to the draft contract for sale. In his letter of instruction Mr Bettles set out his comments on the draft contract as well as a number of issues for consideration. Mr Bettles instructed Grants Law to contact Ramsden Lawyers in relation to the proposed sale of the Client Book, which they then proceeded to do.
388 On 25 November 2016 Grants Law provided their advice in relation to the proposed sale of the Client Book (25 November 2016 Letter). In their letter Grants Law noted that:
Unfortunately, the draft contract does not provide answers to a number of issues that we need to consider in order to properly assess whether or not, and if so on what basis, you should consent to the proposed sale contract.
The author then went on to articulate those issues which included gaining an understanding of the nature of the business the subject of the sale and making enquiries of Ramsden Lawyers as to how they proposed that sale proceeds were to be distributed, particularly in circumstances where the business was said to be carried on by two entities, Capricorn Securities and Iridium Financial Planning. The letter continued:
This becomes very relevant insofar as it appears that Ramsden Lawyers, along with other entities, have securities over [Iridium Financial Planning] but not over [Capricorn Securities].
You should also seek from the director and the solicitor for the director an accounting of the creditors of [Capricorn Securities] and [Iridium Financial Planning] to ensure that you are aware that once the companies are placed into liquidation, you will be conscious of what amounts will be left following the payment of all creditors from them for the purposes of the liquidators of the sole shareholder. These enquiries should be made forthwith to both Ramsden Lawyers and Richard Marlborough in his capacity as director of the company.
And:
In the event that we properly understand the nature of the business and have an indication on the actual part of the sale proceeds that will be distributed to [Capricorn Securities] from the sale of the business, we then need to consider the steps that would immediately be taken to ensure that you control those funds.
The 25 November 2016 Letter then set out a possible scenario as follows:
(a) A deed should be entered which binds the director of the company and any other interested parties, whereby it is acknowledged that a certain portion of the proceeds of sale will be made available to the shareholders upon the sale of the business and that the company is to be placed into liquidation immediately upon settlement of the sale of the business;
(b) The director executes a resolution appointing the liquidators to [Capricorn Securities] and be provided to us prior to settlement upon an undertaking not to use same to place the company into liquidation until settlement is completed. This would enable you to immediately place the company into liquidation following settlement;
(c) We would be present at settlement of the sale of the business and collect a bank cheque made payable to our trust account on settlement. This would enable us to immediately place funds into our trust account and immediately following settlement you would then be in a position to place the company into liquidation and control those funds held in our trust account.
The 25 November 2016 Letter also recommended that once Mr Bettles had a better understanding of the issues and way forward, he should provide details to ASIC and seek their comment.
389 Between 25 November 2016 and 2 December 2016 Mr Jones negotiated the terms of the documents for sale of the Client Book with MacPherson Kelley, lawyers for Crest Wealth.
390 In the meantime, in accordance with its advice in the 25 November 2016 Letter, Grants Law raised a number of detailed queries with Ramsden Lawyers and there was an exchange of emails about those queries over several days.
391 On 1 December 2016 Mr Ramsden sent an email to Julian Blanchard of Grants Law copied to, among others, Mr Bettles which included (as written):
I advise that the purchaser is insisting on your client consenting to the sale in the above. At this present time, your request below are somewhat arduous and without regard to the fact that both Capricorn Securities Pty Ltd ('Capricorn') and Iridium Financial Planning Pty Ltd ('IFP') are not insolvent, and any liquidation of these companies would be by a members voluntary liquidation as resolved by both the director and your client as the sole member.
That said, I am prepared to offer the following in an attempt to address some of the misconceived issues your client may have with the transaction and the disbursement of the sale proceeds:
1. I believe that we have now drafted the contract with a clear outline as to who is the legal and beneficial owner of the assets to the financial planning business. Ultimately, it is the position of both Capricorn and IFP that the going concern business and all assets pertaining thereto were for the benefit of the IFP, notwithstanding the fact that Capricorn was the noted party to whom the income entitlement was in fact paid. The contract has been revised to state clearly that Capricorn was holding any interest to the business and its income as trustee, noting that in some instances as the holder of the AFSL this was required in any event. It is however clearly evidenced that the client database to which the goodwill is derived vests with IFP.
2. We are at present still calculating who will receive the net proceeds from sale. We can however advise that the secured parties will receive close to the full balance of which is not on retention, with the retention likely to remain with the company.
3. We advise that the only secured parties who will be paid out from settlement will be Crest, Members Winding UP (Downie), WMS and ourselves.
4. We have dealt with the Domingo security interest which was the one security interest that was questionably lodged without proper lawful basis. The other security interests, notably ours, is for fees we have rendered for the Iridium Group as the collective client as per our costs agreement which we sought security on a joint and several basis against each of the members to the Iridium Group, as the Iridium Group and all work we have undertaken at the outset has related to the common business of Members Alliance to which each member of the Iridium Group was responsible for. Our security is well within our rights to be secured for our fees and consistent with section 320 of the Legal Profession Act 2007 (Qld). We see no reason why we should be subjected to a form of scrutiny which is clearly unwarranted and, with respect offensive. I would also caution you from exerting that our fees are excessive when in fact you are not privy to the significant work which has been undertaken for the Iridium Group and Members alliance business. Should your client be in a position to apply to have our fees assessed then this is the appropriate forum in which to pursue any such issue with our fees.
5. All releases are being provided at settlement and the purchaser is aware of this.
6. You will be provided copies of all settlement statement when we have them but we see no reason why this would delay your client's consent to the sale.
7. Our client will not consent to the Capricorn or [Iridium Financial Planning] to be placed into liquidation as you have requested, but will consent to doing so once the final payment has been made to both the [Iridium Financial Planning] and the consultant which will be approximately 45 days from settlement.
8. We do not have copies of the company constitutions. You are more than welcome to ask Aaron Lavell who may have copies of these.
We have been advised by the purchaser that they require either a letter from you that will release them from any conceivable claim you could have against them and consent to the foreshadowed transaction insofar as it is commercial and without risk to them of being pursued for any claim you could have against them. Given that the sale is at arm's length and at fair market value, we see no reason why this cannot be given. Alternatively, you can consent to the sale as per our original proposed condition of sale, and any action you may wish to investigate against the director is a matter for your client. So your client appreciates the state of play at present; should the purchaser pull out of the contract because of your client's refusal to consent to the sale, when in fact the sale is arm's length and for fair market value, then each of the secured parties, including us, will seek to enforce our security against the other members of the Iridium Group, namely MM Prime Investments Pty Ltd. We would then anticipate that ASIC will most likely cancel the AFSL for Capricorn in which case the assets of the Iridium Group dissipate to a level which could place your client in a precarious position. I only say this to ensure we all understand that iridium Group is a house of cards, where it could essentially collapse to the point where only the secured parties will have something to salvage. We are hoping to avoid this, and would impress upon your client to see the commercial significance to accord with our request to give consent and to allow settlement to occur tomorrow as scheduled.
I am therefore respectfully requesting for your client's urgent consent to the sale as per the above contract of which you have received the final revision of, or a letter that qualifies consent insofar as it gives comfort to the purchaser that there is no risk that they or the transaction could be made voidable. I require this by 9.30 am tomorrow morning.
(Emphasis added.)
392 Following receipt of Mr Ramsden's email referred to in the preceding paragraph Mr Bettles sought further advice from Grants Law and on 2 December 2016 together with Mr Carey participated in a telephone conference with Grants Law at which Mr Carey was also present. Mr Carey's file note of that telephone conference records (as written):
Attended teleconference with liquidator and Grants Law regarding the proposed sale of assets. The liquidator has elected to not oppose the sale despite Ramsden not providing all the information requesting as to oppose the sale would create a situation where the sale will not go ahead and the asset will in all likelihood be lost or at least diminished. In the situation where the sale does settle, the significant portion of the moneys are directed to the secured creditors and a liquidator is then appointed, at least that liquidator will have powers to review the settlement disbursements, In the alternative, no (or less) funds will be realised from the asset with the result that the secured parties will then seek to enforce their securities over other companies within the group further diminishing the return to creditors.
393 On 2 December 2016 Grants Law also provided a written advice to Mr Bettles about the sale of the Client Book which included:
Further to our discussions on the morning of Friday 2 December 2016, I confirm my advice as follows:
1. Mr Ramsden's comments concerning the true owner of the Risk Book which forms a predominant part of the business failed to settle the issue of who is the owner of the actual asset being sold, however the most recent version of the Contract now at least protects that position somewhat, insofar as both Capricorn Securities Pty Ltd and [Iridium Financial Planning] are listed as the vendors in the Sale Contract. The manner in which the sale proceeds are distributed can be dealt with on a later occasion.
2. As anticipated, it is proposed that from the sale proceeds, all secured creditors will be paid in full from the sale proceeds, leaving little if anything remaining for other unsecured creditors and ultimately the shareholder company following a liquidation.
Whilst we have not been in receipt of the necessary material to ascertain the validity or otherwise of the securities being claimed, at the very least it protects the sale asset and preserves the position of a future liquidator to investigate the claims by creditors such as Ramsden Lawyers, Members Winding Up and Crest Accounting.
3. Mr Ramsden goes into significant detail with respect to the issue of his costs, however as discussed, this is an argument better left for another day. An argument over Mr Ramsden's fees should not jeopardise the Sale Contract from settling.
In saying this, Mr Ramsden's fees are concerning and despite his comments, we are yet to consider any client agreement, disclosure as to costs, or the securities that he alleges enables his firm to take the fees from the solvent company for work provided to other companies within the Members Alliance Group.
4. Mr Marlborough, the director of Capricorn Securities and [Iridium Financial Planning], has rejected the request to immediately place the company into liquidation following the settlement of the sale. It is the belief of Mr Ramsden that doing so would jeopardise retentions which are being withheld by the purchaser as part of the Sale Contract. We are in the process of properly considering this position and will advise you in due course.
5 I strongly advise you not to provide any releases to the purchaser, or any other party for that matter, in the manner sought or at all. I note in particular that Mr Ramsden advises that the purchaser is seeking a release from "any conceivable claim".
394 On 2 December 2016, in accordance with Mr Bettles' instructions, Grants Law sent a letter to Mr Ramsden which stated that "on basis of the information provided… the liquidators of the shareholder company do not oppose the sale contract".
395 Mr Jones attended the settlement of the sale of the Client Book and recalls that Messrs Marlborough and Young also attended. No representative of Crest Wealth attended and the settlement was effected remotely with Crest Wealth sending funds by electronic transfer. Three documents were executed by the parties to effect the transaction: a business sale contract between Capricorn Securities as seller and Crest Wealth as buyer (Client Book Sale Agreement); a deed of covenant of restraint executed by Mr Marlborough, Iridium Financial Planning, Capricorn Securities, BPW and Mr Young; and a consultancy agreement between Crest Wealth as trustee of the Crest Wealth Trust and BPW as consultant (Crest Consulting Agreement).
396 The fee payable under the Crest Consulting Agreement was $200,000 per annum. On 1 December 2016 Mr Jones requested Mr Young to provide an invoice for the consultancy fee of $200,000 plus GST made payable to Crest Wealth as trustee for the Crest Wealth Trust. The invoice was provided by BPW later that day.
397 For the purpose of preparing his affidavit Mr Bettles was shown a contract of sale between Capricorn Securities, Iridium Financial Planning and Crest Wealth for the purchase of the Client Book and a copy of the Crest Consulting Agreement. Based on his review of the file notes maintained by Worrells, Mr Bettles says that he did not receive a copy of either of these documents.
398 By reference to Ramsden Lawyers' trust account ledger Mr Jones gave the following evidence about the disbursement of the proceeds of sale from the Client Book:
(1) on 2 December 2016 the sale proceeds of $1,032,769.14 were received;
(2) on 6 December 2016 and 8 December 2016 payments totalling $547,568.40 were made to Ramsden Lawyers pursuant to the security the firm held over companies in the MA Group. Mr Jones observed that the total payments were consistent with the approximately $550,000 of work in progress notified by Mr Ramsden in his email dated 28 November 2016;
(3) on 6 December 2016 and 16 January 2017 respectively payments of $12,668.14 and $42,084.06 were made to WMS for past fees that firm claimed were owed to it;
(4) on 6 December 2016 a sum of $23,067.60 was paid to Bunnings Group Ltd with the narration "Settlement payment". Mr Jones said that was part of the agreement reached with Mr Domingo to release his security interest over Iridium Financial Planning. Mr Jones recalls that one of the building companies in the MA Group with which Mr Domingo was involved had a debt to Bunnings in this amount, Mr Domingo claimed to have a security interest over Iridium Financial Planning which was a potential impediment to finalising the sale of the Client Book and a settlement was reached with Mr Domingo which included payment of the debt to Bunnings from the proceeds of sale of the Client Book;
(5) on 6 December 2016 and 18 January 2017 respectively payments of $40,465 and $1,616.75 were made to Universal Consulting Network Pty Ltd. Mr Jones gave the following evidence about these payments:
(a) at about this time he arranged the incorporation of Universal Consulting and the creation of an associated trust, Universal Consulting Network Trust. Deborah was the sole director and shareholder of Universal Consulting, although Mr Jones received all instructions from Mr Marlborough;
(b) Mr Jones understood that Universal Consulting and the Universal Consulting Network Trust had been created, and Deborah was appointed as director, because of a concern that Mr Marlborough may soon become a bankrupt. The intent was to use the company and trust for payments to Mr Marlborough so that they would not later be available for his creditors and/or trustee in bankruptcy; and
(c) the payment on 6 December 2016 was stated to be part payment of the consultancy fee and was made under a direction from Mr Young of BPW;
(6) on 14 December 2016 payments of $84,943.64 and $85,939.41 were made respectively to Mercedes Benz Financial Services and Toyota Financial Services. These were payouts to the financiers of vehicles previously owned by Astro Holdings; and
(7) on 16 December 2016 a payment of $60,750 was made to Mr Douglas, the responsible manager listed on Capricorn Securities' AFSL, for fees owed to him.