BACKGROUND
4 On 1 November 2018, ASIC applied ex parte for (and was granted) reporting orders and asset preservation orders against the defendants pursuant to s 1323(1) of the Corporations Act. As I explained in Australian Securities and Investments Commission v Marco [2019] FCA 466 (Marco (No 1)) (at [2]), the 'interim orders were sought to preserve the assets of the defendants and to maintain the status quo in order to protect the alleged "aggrieved persons" while allowing ASIC to continue to investigate claims that the defendants may be in breach of various provisions of the Corporations Act and the Criminal Code (WA).'
5 The 1 November 2018 orders provided that the relevant freezing orders would not prevent AMS Holdings and the AMS Holdings Trust from paying or otherwise incurring a liability for ordinary operating expenses up to $1750 per week or such greater sum as may be set by the Court. The orders have been amended from time to time.
6 In December 2019, as a result of investigations conducted thus far, ASIC sought further interim relief in the form of receiver orders and leave to amend its originating process. On 27 May 2020, that relief was granted and orders were made appointing Mr Robert Kirman and Mr Robert Brauer of McGrathNicol as interim receivers over the assets of the defendants (the Interim Receivers). The application was strenuously opposed by the defendants. The Interim Receivers were ordered to provide a report to the Court within 60 days that addressed a number of issues including the identification of the assets and liabilities of the defendants, an opinion as to the solvency of the defendants and the likely return to creditors, including investors, in the event that any scheme operated by Mr Marco were to be wound up. Leave to file an amended originating process was also granted: Australian Securities and Investments Commission v Marco (No 3) [2020] FCA 719.
7 On 28 May 2020, ASIC filed its amended originating process. Amongst other relief, by the amended originating process ASIC seeks orders:
(a) that the scheme be wound up and a liquidator be appointed for the purposes of winding up the scheme pursuant to s 601EE of the Corporations Act;
(b) that AMS Holdings be wound up and a liquidator be appointed for the purposes of winding up AMS Holdings and the AMS Holdings Trust pursuant to s 461(1)(k) of the Corporations Act;
(c) that each of the defendants refund the total amount of principal invested by each investor in the scheme and further, or in the alternative, invested with Mr Marco personally, together with all undistributed returns due and payable to them as at the date of the orders less the total amount of principal, if any, returned to each of them prior to the date of the orders; and
(d) to provide for various other relief including declarations, injunctions and publication orders.
8 On 24 July 2020, the Interim Receivers provided their report to the Court pursuant to the orders made on 27 May 2020 (the Interim Receivers' Report). The Interim Receivers' Report is annexed to the 2 October Lim Affidavit. Among other matters, the Interim Receivers' Report made the following salient observations:
(a) 'Mr Marco has consistently stated in the Proceedings and in his dealings with the receivers that, in his view, he and AMS [Holdings] are in effect one and the same and should be viewed collectively as a representation of his business dealings. Mr Marco admits that all of [AMS Holdings'] assets were purchased from investor funds provided to him' (Emphasis added.);
(b) 'with the exception of a $0.6 million business loan from Westpac (secured against a property located on McDonald Street West, West Osborne Park, Western Australia), all of [AMS Holdings'] funding was via an undocumented, related party loan of investor monies from [Mr] Marco';
(c) 'Mr Marco has informed the Receivers that there has been comingling of personal, investor and AMS [Holdings] funds in the bank accounts and that reconstructing separate accounts is unlikely to be possible';
(d) 'The Receivers have not identified any evidence to suggest that [AMS Holdings] traded in its own capacity … Mr Marco has also stated that AMS [Holdings] undertook no activities in its own right';
(e) there were 'limited records that have been maintained by Mr Marco to delineate between personal, investor or business funds';
(f) the Interim Receivers' view of the estimated realisable value of Mr Marco and AMS Holdings' net asset and liability position on a consolidated basis showed a high case scenario of a shortfall of $221,667,012 and a low case scenario of a shortfall of $362,605,964;
(g) in the Interim Receivers' view, investors were owed between $254.5 million (on Mr Marco's records) and $381.9 million (if an approximation of additional interest accrued was included up to the date of their appointment);
(h) the Interim Receivers' analysis of the estimated realisable value of AMS Holdings' assets included $237,400 in loans and $12,667,273 in property; and
(i) the Interim Receivers' analysis of the sources and uses of funds disclosed that '$18.4 million has been used to purchase, renovate or maintain property either directly by Mr Marco or indirectly by advancing funds to AMS [Holdings] or related parties'.
9 The Interim Receivers' Report also contains a detailed analysis addressing the identification of the assets and liabilities of each of the defendants; the solvency of each of the defendants; the likely return to creditors, including investors, in the event the defendants were to be wound up; and other information necessary to enable the financial position of the defendants to be addressed.
10 On 25 September 2020 at 11.46 am (WST), the day after their appointment, ASIC provided certain documents to the Administrators of AMS Holdings, including copies of the asset preservation orders, the orders and judgment of 27 May 2020 in Marco (No 3), ASIC's amended originating process and a copy of the Court's judgment approving the asset preservation regime in Marco (No 1).
11 On 25 September 2020 at 2.56 pm (WST), ASIC sent an email to Mr Shaw, of the Administrators, querying when the Administrators anticipated receiving a proposed Deed of Company Arrangement (DOCA) and what involvement, if any, the Administrators intended to have in the proceedings.
12 On 29 September 2020 at 3.36 pm (WST), ASIC received an email from the solicitors for the Administrators attaching:
(a) a letter in which the Administrators sought ASIC's consent to an adjournment of the proceedings and asserted that '[t]he Administrators act as statutory agent for the company under section 437B of the Act and only the Administrators can deal with AMS' property per section 437D'; and
(b) a notice headed 'Initial Information for Creditors and Investors', in which the Administrators (amongst other matters) stated that
(i) 'Mr Chris Marco is a Director of AMS Holdings (WA) Pty Ltd … and he appointed us as Voluntary Administrators of the Company';
(ii) '[t]he purpose of the appointment of an Administrator is to allow for an independent insolvency practitioner to take control of and investigate the financial affairs of a company';
(iii) Mr Shaw would 'prepare a report to creditors detailing [his] investigations into the Company's business, property, affairs and financial circumstances as well as provide [his] opinion on the future of the company with respect to the best interests of creditors';
(iv) that based on preliminary investigations, it was Mr Shaw's understanding that the assets of AMS Holdings were controlled by the Interim Receivers and that '[o]ngoing trade creditors should continue to liaise with the Receivers in this respect'; and
(v) given the early stage of the administration, Mr Shaw had 'not determined the rights of the investors to prove as creditors of the Company', though he invited such investors to attend a forthcoming creditors meeting on 7 October 2020.
13 Amongst the documents attached to the communication referred to above was a Declaration of Independence, Relevant Relationships and Indemnities (the DIRRI). That document set out meetings, telephone conversations and email correspondence that took place prior to the Administrators' appointment. It also provided a document titled 'Initial Remuneration Notice' which details the remuneration of the Administrators.
14 On 29 September 2020 at 3.56 pm (WST), ASIC sent an email to the solicitors for the Administrators confirming it would not consent to an adjournment of the hearing. The same email requested an indication of when the Administrators would be in a position to advise whether they would provide ASIC with their consent to proceed pursuant to s 440D(1)(a) of the Corporations Act.
15 On 29 September 2020 and 30 September 2020, there was further correspondence between ASIC and the Administrators, including correspondence by which ASIC provided the Administrators with its evidence and submissions in support of its amended originating process, which, as mentioned, is set down for a two day hearing on 28 and 29 October 2020.
16 The defendants were required to file any lay and/or expert evidence that they intend to rely upon at the final hearing by 28 September 2020. No evidence was filed in response to the Court's orders which established the timetable for the final hearing of the matter. The defendants filed their written submissions on 12 October 2020.