Associate:
Dated: 30 January 2019
APPENDIX
STATEMENT OF AGREED FACTS PURSUANT TO SECTION 191 OF THE EVIDENCE ACT 1995 (CTH)
(Footnotes omitted)
I. INTRODUCTION
1. This statement of agreed facts, pursuant to section 191(3)(a) of the Evidence Act 1995 (Cth), is made jointly by the applicant (ASIC) and the 6th Respondent (Grochowski), for the purpose of ASIC's application, under s 206D(1) of the Corporations Act 2001 (Corporations Act), that Grochowski be disqualified from managing corporations.
2. In the circumstances set out further in sections IV and VI below, Grochowski was an officer of Bilkurra Investments Pty Ltd (Bilkurra Investments) and Foscari Holdings Pty Ltd (Foscari) when those companies failed within the meaning of s 206D(2) of the Corporations Act.
3. Grochowski's involvement in the affairs of the First Defendant (PMA), Midland Hwy Pty Ltd (Midland) and each of the Second, Third and Fifth Defendants (collectively, the Project Companies), as may be relevant to the Court's consideration under s 206D(a), is set out further in sections III, V and VII to IX below.
II. GROCHOWSKI AND PMA
4. Grochowski has been the sole shareholder and director of PMA since its registration on 4 July 2011.
5. As described further below, PMA has:
5.1 entered into Project Management Agreements with; and
5.2 opened and operated project bank accounts for
each of Midland, Bilkurra Investments, Foscari, Brookfield Riverside Pty Ltd (Brookfield), Bilkurra West Pty Ltd (Bilkurra West) and Gillies Road Pty Ltd (Gillies Road). The project bank accounts are bank accounts of PMA but in the name of each project.
6. Grochowski was the sole signatory to each of those bank accounts.
7. Through the operation of the bank accounts, Grochowski had control of the money paid into the accounts for each project.
8. In accordance with the Project Management Agreements, and through the operation of the bank accounts, Grochowski was responsible for and had the oversight and ability to direct the property development activities of each of Midland, Bilkurra Investments, Foscari, Brookfield, Bilkurra West and Gillies Road.
9. Investors invested:
9.1 approximately $23.8 million in option fees in the Bendigo Hermitage scheme, originally operated by Midland;
9.2 approximately $858,000 in option fees and approximately $1.5 million in deposits for off-the-plan purchase contracts in the Foscari scheme, operated by Foscari;
9.3 approximately $13 million in option fees and approximately $800,000 in deposits for off-the-plan purchase contracts in the Veneziane scheme, operated by Brookfield Riverside; and
9.4 approximately $744,000 in deposits for off-the-plan purchase contracts for lots on the land that Bilkurra West had entered into contracts to purchase.
10. The Project Management Agreements provided that PMA was entitled to charge project management fees (of between $2,200 and $4,400 per lot), that became payable upon an investor entering into an option agreement or off-the-plan purchase contract with the relevant company. The project management fee was payable irrespective of whether the project was completed.
11. PMA received:
11.1 at least $2.95 million in project management fees from Midland;
11.2 around $387,600 in project management fees from Foscari; and
11.3 around $973,000 in project management fees from Brookfield Riverside.
12. Under the Project Management Agreements, PMA was permitted to make interest-free loans of funds in the project bank accounts to other project companies and to itself. Significant transfers of funds were made:
12.1 between project bank accounts[;]
12.2 from the project bank accounts to PMA; and
12.3 from PMA to the project bank accounts.
13. Through the above mechanisms:
13.1 PMA's financial affairs were inextricably bound up with the financial affairs of each of Midland, Bilkurra Investments, Foscari, Brookfield Riverside, Bilkurra West and Gillies Road; and
13.2 Transfers of funds resulted in money paid by investors towards a particular property development being mixed with money paid by investors for other property developments; and
13.3 Money paid by investors towards a particular property development was utilised by other property developments without consideration given as to whether that money would be available to complete the particular project for which that money was raised.
14. Ultimately, none of the companies' schemes has been carried through to completion, and the companies have been wound up in circumstances in which three companies - Midland, Foscari and Brookfield Riverside - were unable to refund the option fees paid in by investors.
15. Under the project management agreements, PMA was required to keep and maintain financial records and prepare annual financial reports for Brookfield Riverside, [Bilkurra West] and Gillies Road. While PMA maintained MYOB records for the projects, it did not prepare such annual reports.
III. MIDLAND AND THE BENDIGO HERMITAGE SCHEME
16. Midland was incorporated in September 2011. John Wood, the original owner of the Bilkurra land, was appointed as Midland's sole director on 17 October 2011 and continued in that role until his death on 28 July 2014.
17. On 18 October 2011, PMA entered into an agreement to purchase two lots of land on Midland Highway, Bagshot (the Bilkurra land) from Bilkurra Investments, for a total purchase price of $7.4 million.
18. On 1 November 2011, Wood entered into an "Appointment of Director Agreement" with Grochowski and Midland. John Wood therein agreed that:
18.1 he would not act for, nor assume any responsibility or obligation on behalf of, Midland, other than as authorised in writing by Grochowski;
18.2 he would not deal with any funds or assets of Midland other than as authorised in writing by Grochowski;
18.3 he would sign a power of attorney appointing Grochowski as Midland's attorney; and
18.4 he would sign a resignation of director form to be held by Grochowski "on trust" pending removal of Wood as director and company secretary "for whatever reason".
19. On 10 November 2011, PMA nominated Midland as its nominee purchaser of the Bilkurra land.
20. On 14 December 2011, PMA entered into a Project Management Agreement with Midland (the Midland Project Management Agreement). In it, Midland granted PMA the exclusive right to project manage the execution and completion of the Bendigo Hermitage project. Midland was also required to:
20.1 execute all documents and do all things that PMA required in connection with the project, including entering into [any] sale contract or other transaction document relating to the Bilkurra land; and
20.2 do all other things that PMA reasonably required in connection with the project.
21. Together, the Appointment of Director Agreement and the Midland Project Management Agreement gave Grochowski and PMA oversight and control over the development of the Bendigo Hermitage project, and sought to prevent John Wood from acting independently from Grochowski.
22. Further, under the Midland Project Management Agreement:
22.1 PMA was required to hold a bank account, into which Midland was required to deposit all revenue received in respect of the project: cl 8.1(a)-(b);
22.2 all transfers from the project bank account were required to be drawn in the name of, and signed or approved in writing by, PMA: cl 8.1(d);
22.3 PMA was entitled:
(i) to take a loan on an interest-free basis; and
(ii) to provide a loan on an interest-free basis to or for the benefit of Midland's related entities,
of any or all of the funds that PMA held on trust for Midland: cll 7.3(a), 7.4(a); and
22.4 PMA was obliged to maintain all necessary and proper receipts and expenditure invoices to enable Midland to prepare accounts and accounting and other financial records: cl 9.2(a).
23. In accordance with the Midland Project Management Agreement, PMA maintained a project bank account for Midland (the Midland project bank account), of which Grochowski was the sole signatory.
24. Between October 2011 and June 2013, investors entered into approximately 700 option deeds and 107 off-the-plan purchase contracts for parcels of the Bilkurra land. Option fees of $23.8 million were received into the trust account of Evans Ellis Lawyers. By Grochowski's directions to [Benjamin] Skinner, which were carried out by Skinner, $23.0 million of that revenue was deposited into the Midland project bank account.
25. Under the option agreements that investors entered into with Midland:
25.1 the option fee was stated to become the absolute property of Midland, and that Midland was free to direct and use the option fee as it sees fit and for any purpose whatsoever; and
25.2 Midland was required to refund the option fee to the investor in certain circumstances, including:
(i) when the purchase contract relating to the project land was not completed for any reason whatsoever; or
(ii) if planning approval is not obtained prior to the expiry of the option term.
26. Grochowski negotiated marketing and commission arrangements for the Bendigo Hermitage scheme between Midland and Property Choice Pty Ltd (Property Choice), under which Property Choice received a 30% commission for marketing the scheme to investors. Grochowski did not obtain any alternative quotations for marketing services before making that arrangement with Property Choice.
27. Between 18 October 2011 and 19 June 2012, Midland paid $1.4 million in instalments to Bilkurra Investments towards the purchase of the Bilkurra land.
28. On 28 June 2013, Midland's purchase of the Bilkurra land was cancelled, under a Deed of Release and Cancellation made between Midland, Bilkurra Investments and PMA. Grochowski executed the deed on behalf of PMA, and John Wood executed the deed on behalf of Midland (as its sole director), and on behalf of Bilkurra Investments (as one of its two directors). Under the deed, Midland was required to pay Bilkurra Investments a cancellation fee of $600,000, which was said to be accepted in full satisfaction of Midland's claim to the forfeited deposit.
29. The cancellation of Midland's purchase of the Bilkurra land triggered Midland's obligation to refund to investors the $23.8 million in option fees.
30. By a Deed of Assignment and Consent, also entered into on 28 June 2013 between Midland and Bilkurra Investments, Midland purported to "assign" the option agreements between Midland and its investors to Bilkurra Investments. Wood executed the deed, both as sole director of Midland and as one of two directors of Bilkurra Investments.
31. Midland was never in a position to meet its obligation to refund the $23.8 million it had received from investors in the Hermitage Bendigo scheme. All of the moneys invested in the scheme by investors have been paid out as described below.
32. Between October 2011 and January 2015, of the $23.0 million that was paid into the Midland project bank account:
32.1 around $2.0 million was applied towards Midland's purchase of the Bilkurra land (including the $600,000 cancellation fee payable under the Deed of Release and Cancellation);
32.2 around $7.3 million was paid to Property Choice Pty Ltd, as commission for marketing of the scheme;
32.3 at least $3.25 million was paid to PMA;
32.4 Midland advanced around $4.8 million to Foscari;
32.5 Midland advanced around $2.0 million to Brookfield Riverside;
32.6 Midland advanced around $350,000 to Gillies Road; and
32.7 around $1.7 million was applied to works necessary for obtaining a planning permit for the proposed subdivision or otherwise progressing the development.
33. The inter-company loans made by Midland noted in [paragraphs 32.4] to 32.6 above were made at Grochowski's direction, and were never recorded in any loan agreement.
34. John Wood died on 28 July 2014.
35. Midland had no director between 28 July 2014 and 26 May 2015, when John Wood's son, Russell Wood, was appointed director. During that period, Grochowski acted on Midland's behalf in entering into a deed of variation of a settlement deed in October 2014, and swearing an affidavit in a proceeding to which Midland was party on 8 February 2015.
36. Midland was wound up under s 447A of the Corporations Act on 3 December 2015, in circumstances where the Court found that Midland was insolvent, and in the further circumstances described in section V below.
IV. BILKURRA INVESTMENTS
37. Pursuant to a Deed of Option to Purchase Shares that was entered into on 28 June 2013 (together with the agreements referred to in paragraphs 28 and 30 above), Greater Bendigo Consolidated Pty Ltd (GBC) became the sole shareholder of Bilkurra Investments from 1 July 2013.
38. GBC's sole shareholder is Evans Ellis Management Pty Ltd (EEM), as trustee of a trust called the Property Trust. EEM in turn holds:
(i) 95 units in the Property Trust, as trustee of the Urban Property Trust; and
(ii) 5 units in the Property Trust, as Trustee of the M Prop Trust.
The Urban Property Trust and the M Prop Trust are discretionary trusts, having 5 and 6 specified beneficiaries respectively, including persons related to Grochowski.
39. Bilkurra Investments continued to carry on the Bendigo Hermitage project after 28 June 2013, albeit that investors' option contracts entered into with Midland had not been effectively novated to Bilkurra Investments (as Beach J found in December 2015).
40. On 25 November 2013, Benjamin Skinner, a principal of Evans Ellis Lawyers, was appointed sole director of Bilkurra Investments.
41. On or around 12 December 2013, Bilkurra Investments entered into a Project Management Agreement with PMA, in materially identical terms to the Midland Project Management Agreement.
42. From around 13 March 2014, PMA established a project bank account for Bilkurra Investments (the Bilkurra project bank account) and directed Evans Ellis to pay money received from investors in the Bendigo Hermitage project to that account.
43. Together with Foscari, Bilkurra Investments obtained loans:
43.1 of approximately $6 million from Adelaide Properties and Lezak Nominees (Adelaide/Lezak), at a "discounted" interest rate of 12.75% per annum and "agreed rate" of 18.75% per annum; and
43.2 $220,000 from Laycon Investments, at an interest rate of 3% per month.
44. Bilkurra Investments also received related-party transfers of:
44.1 around $550,000 from PMA;
44.2 around $700,000 from Foscari; and
44.3 around $621,500 from Brookfield Riverside,
each calculated on a net basis. Those inter-company payments were made by Grochowski.
45. Bilkurra Investments was wound up on 15 April 2016 in insolvency, and on the just and equitable ground.
46. Although not formally appointed a director, Grochowski was an officer of Bilkurra Investments at all material times until it was wound up in insolvency on 15 April 2016.
V. BILKURRA INVESTMENTS' 2015 DOCA PROPOSAL FOR MIDLAND
47. In June 2015, after being appointed as director of Midland, Russell Wood resolved to appoint Nicholas Martin and Craig Crosbie as administrators of Midland.
48. At the first meeting of creditors on 14 July 2015, Skinner attended and successfully proposed a resolution replacing Messrs Martin and Crosbie with substitute administrators. Skinner proposed and passed that resolution with the benefit of proxies.
49. ASIC then applied to the Court to remove the administrators appointed at Skinner's proposal and to reappoint Messrs Martin and Crosbie, which application was granted on 5 August 2015.
50. Bilkurra Investments provided the administrators with a [Deed of Company Arrangement (DOCA)] proposal for Midland on 29 July 2015, and a revised DOCA proposal on 12 October 2015.
51 On around 16 October 2015, Bilkurra Investments wrote to option holders in the Bendigo Hermitage scheme, asking them to vote in support of Bilkurra Investments' proposed DOCA and enclosed a letter to option holders signed by Stephens as director of Bilkurra Investments.
52. A draft of the letter to option holders was sent to Grochowski, who sought approval from Stephens as director of Bilkurra before agreeing that it could be sent out.
53. On 3 December 2015, in response to ASIC's application under s 447A of the Corporations Act, Beach J ordered that the creditors' resolution approving the DOCA be set aside, and that Midland instead be wound up.
VI. FOSCARI AND THE FOSCARI SCHEME
54. Foscari was incorporated on 8 May 2012. Foscari's sole shareholder is EEM, under the same trust structure as for GBC, as described in [paragraph 38] above.
55. On 29 May 2012, David Bracka entered into a purchase contract with the Chilean Club of Victoria for land at Truganina (the Foscari land) for $3.3 million.
56. Skinner was appointed director of Foscari on 8 June 2012, which role he retained until replaced by Stephens from 1 October 2014.
57. On 11 June 2012, Foscari entered into a Project Management Agreement with PMA (the Foscari Project Management Agreement), in materially identical terms to the Project Management Agreements entered into by Midland and Bilkurra Investments, save that the project management fee was $3,300 for the first 70 lots and $2,200 for all subsequent lots.
58. The Foscari scheme was marketed by Market First Property Consulting Pty Ltd (Market First) on behalf of Foscari.
59. In accordance with the Foscari Project Management Agreement, PMA opened a project management account for Foscari, into which deposits and withdrawals of $18.1 million were made between January 2014 and March 2015. Grochowski was the sole signatory to the Foscari project management account.
60. In December 2013, Foscari (together with Bilkurra Investments) entered into a loan agreement with Adelaide/Lezak, for a loan of $3.35 million, at a "discounted" interest rate of 12.75% per annum and an "agreed rate" of 18.75%.
61. There were 149 investors in the Foscari scheme by way of:
61.1 around 41 who entered into option deeds, investing around $858,000 in option fees; and
61.2 around 108 who entered into off-the-plan purchase contracts and paid around $1.5 million in purchase deposits.
62. The option deed that Foscari entered into with investors included the same terms regarding use and refund of option fees as in the option contracts for the Hermitage Bendigo project.
63. Inter-company transfers were made to Foscari from:
63.1 Midland, in the net amount of $5.8 million; and
63.2 Brookfield Riverside, in the net amount of $1.5 million.
64. Between May 2012 and April 2016, Foscari also paid:
64.1 approximately $5.0 million, to Evans Ellis;
64.2 approximately $1.3 million, to Market First;
64.3 approximately $1.0 million, to PMA, together with net transfers of a further $380,000 in favour of PMA; and
64.4 net transfers of approximately $700,000 to Bilkurra Investments; and
64.5 approximately $8.1 million on site development costs.
65. On 16 October 2014, Foscari made a payment of $400,000 to [Evans Ellis's] trust account towards the deposit on a purchase contract entered into by the Fourth Defendant (Bilkurra South).
66. The payments and transfers from Foscari to PMA and Bilkurra Investments, and in respect of Bilkurra South's purchase contract were made by Grochowski.
67. From December 2014, Foscari experienced difficulties in meeting its loan commitments. As a result:
67.1 it extended and increased its existing loan facilities with Adelaide/Lezak and Bourke & Queen; and
67.2 on 5 June 2015, Foscari entered into a loan agreement with NWC Finance Pty Ltd to borrow $1.12 million, at a lower interest rate of 24% per annum and a higher rate of 60% per annum;
67.3 on 25 September 2015, Adelaide/Lezak issued a notice of default to Foscari; and
67.4 on 30 November 2015, NWC Finance [Pty Ltd] appointed receivers and managers to the assets of Foscari.
68. As of November 2015, Foscari had obtained a planning permit for the Foscari scheme but had not obtained endorsed plans or satisfied the further requirements for development approval. It had encountered contamination issues affecting the site.
69. As a consequence of its failure to complete the subdivision and redevelopment of the Foscari land, Foscari became indebted to option holders for the refund of the option fees of at least $858,000 that remained invested in the Foscari project.
70. Foscari was not in a position to meet its obligation to refund the $858,000 in option fees that it received from investors in the Foscari scheme. All of the moneys invested in the scheme by investors who entered into option contracts have been expended including as set out at [64 and 65] above.
71. On 15 April 2016, Foscari was wound up in insolvency, and on the just and equitable ground. [TPC (Vic) Pty Ltd] entered into possession of the Foscari land on 27 May 2016.
72. Although not formally appointed a director, Grochowski was an officer of Foscari at all material times until it was wound up in insolvency on 15 April 2016.
VII. BROOKFIELD RIVERSIDE AND THE VENEZIANE SCHEME
73. Brookfield Riverside was incorporated on 21 June 2012. Skinner was appointed as its sole director, which role he retained until replaced by Stephens from 1 October 2014.
74. Although he was not formally appointed as an officer or director of Brookfield Riverside, Grochowski exercised control over the financial affairs and project development activities of Brookfield Riverside pursuant to the Brookfield Project Management Agreement as described below.
75. Brookfield Riverside's sole shareholder is EEM, under the same trust structure as for GBC, as described in [paragraph 38] above.
76. On or around 6 July 2012, Brookfield Riverside entered into a Project Management Agreement with PMA (the Brookfield Project Management Agreement), which Grochowski prepared.
77. The Brookfield Project Management Agreement was in substantially identical terms to the Midland Project Management Agreement, save only that:
77.1 it included a new cl 6.1(c), which obliged the Owner to "keep in a separate account any and all Revenue amounts arising from the Project from time to time and part of such Revenue amounts if and where requested by the Project Manager";
77.2 cl 8.1(a) provided that "the Project Manager has been authorised by the Owner to maintain a trading account with [a bank] nominated by the Owner";
77.3 cl 8.1(b) provided that "the Project Manager and Owner agree to deposit all monies received in respect of the Project ... on investment deposit with the account ("Project Bank Account")";
77.4 cl 7.3(a) provided that "the Project Manager shall be hereby entitled to take a loan on an interest-free basis of any or all of the funds the Project Manager holds on trust for the Owner and/or the Owner's Related Entities and/or the Project" (underlining added to show key differences from the Midland Project Management Agreement);
77.5 cl 9.2(b) and (c) provided that the Project Manager (rather than the Owner) was responsible for completing accounts for the project for each financial year, including financial reports, projected budgets, balance sheets, cash flow statements and profit and loss statements; and
77.6 the project management fee was $3,300 per lot.
78. The Veneziane scheme was marketed by Market First, which received a commission of around 35% for each lot for which investors entered into an option contract or an off-the-plan purchase contract.
79. On around 9 July 2012, in accordance with the Brookfield Project Management Agreement, PMA opened two project accounts in respect of Brookfield Riverside, of which the primary account was the Brookfield 5318 account. Grochowski was the sole signatory for the Brookfield 5318 account.
80. Between 9 July 2012 and 18 June 2016, about $20 million was deposited into, and withdrawn from, the Brookfield 5318 account.
81. Between June and October 2012, David Bracka entered into three purchase contracts, and a call option, in relation to four parcels of land in Brookfield (the Brookfield land). On the day after he entered into each agreement, Bracka nominated Brookfield Riverside as the purchaser or option holder. The aggregate consideration under those contracts was about $27 million, with settlement due to occur between April 2016 and July 2017. Aggregate deposits of about $4.2 million were payable in respect of the 3 contracts of sale.
82. These deposits were funded in part by about $2.055 million advanced from Midland to Brookfield Riverside, which Grochowski paid, and for which no written loan agreement was entered into.
83. In July 2015, Brookfield Riverside paid the $1.5 million option fee in respect of the fourth parcel of the Brookfield land, and entered into a purchase contract for that land, for which settlement was due to occur on 30 April 2016.
84. Between 2012 and 2014, Brookfield Riverside operated the Veneziane scheme and raised approximately $13.8 million in funds from 359 investors;
84.1 around $13 million in option fees were paid by 247 investors who entered into option contracts; and
84.2 around $800,000 was paid by way of deposits on off-the-plan sale contracts by a further 112 investors.
85. Like the option contracts for the Bendigo Hermitage scheme, the option contracts for the Veneziane scheme stated that:
85.1 any option fees paid by the investor would become the absolute property of Brookfield Riverside, and that Brookfield Riverside was free to direct and use such funds as it sees fit for any purpose whatsoever: cl 4.2; and
85.2 the option fee shall be refunded to the investor:
(i) if the investor has not received written notice of planning approval from Brookfield Riverside at the expiration of the option term (10 years from the date of the deed): cl 14.1; or
(ii) in the event that Brookfield Riverside's purchase contracts for the Brookfield land are not completed for any reason whatsoever: cl 15.3.
86. The option fees were paid by investors to a trust account operated by Evans Ellis and were then transferred to the Brookfield 5318 account at the request of Grochowski or one of his staff (which request was confirmed by Skinner). Between June 2012 and July 2016, Evans Ellis paid at least about $12.3 million into the Brookfield 5318 account.
87. Transfers in the following aggregate amounts were made to and from the Brookfield 5318 account:
87.1 around $3.5 million in payments to Market First;
87.2 around $2.07 million from Brookfield Riverside to Foscari, and around $364,000 from Foscari to Brookfield Riverside;
87 .3 around $695,000 from Brookfield Riverside to Bilkurra Investments, and around $64,500 from Bilkurra Investments to Brookfield Riverside;
87.4 payments to PMA, described as "PMA Inv", totalling about $828,000;
87.5 additional payments to PMA, described as "Brookfield to PMA", of about $822,000, and receipts from PMA, described as "PMA to Brookfield" of about $321,500.
88. Other significant payments were made from the Brookfield 5318 account to provide funding towards land purchases by the other Project Companies, namely:
88.1 a payment of $350,000 to Bilkurra West on 15 May 2014: see [para 100] below; and
88.2 a payment of $145,000 to Gillies Road on 10 July 2014: see [para 116] below.
89. The payments and transfers from Brookfield Riverside to Foscari, Bilkurra Investments, Bilkurra West, Gillies Road, PMA and Market First were made by Grochowski.
90. Settlement of Brookfield Riverside's purchase contracts for the Brookfield land has not occurred, and the settlement date under each contract has passed. Accordingly, the $13 million in option fees paid by investors has become refundable in accordance with the terms of the option agreements.
91. Brookfield Riverside was never in a position to meet its obligation to refund the $13 million it had received from investors who entered into option contracts for the Veneziane scheme. All of the option fees invested in the scheme by investors have been expended as set out at [paragraphs 87 and 88] above.
92. Since June 2017, pursuant to instructions given by Stephens[,] Evans Ellis has commenced refunding deposits to off-the-plan investors in the Veneziane scheme. To November 2017, Evans Ellis had refunded around $280,000 of approximately $800,000 in deposits paid by investors who entered into off-the-plan purchase contracts.
93. Brookfield Riverside was wound up on the just and equitable ground, and in insolvency, on 16 July 2018.
VIII. BILKURRA WEST
94. Bilkurra West was incorporated on 11 April 2014. Skinner was appointed as its sole director, which role he retained until replaced by Stephens from 23 October 2014.
95. Although he was not a director of Bilkurra West, Grochowski exercised control over the financial affairs and project development activities of Bilkurra West under the Bilkurra West Project Management Agreement as described below.
96. EEM is Bilkurra West's sole shareholder, under the same trust structure as for GBC, as described in [paragraph 38] above.
97. On around 30 April 2014, Bilkurra West entered into a Project Management Agreement with PMA. The agreement is in materially identical terms to the Brookfield Project Management Agreement ([para 76] above), save only that:
97.1 cl 6.1(c) of the Brookfield Project Management Agreement was not included; and
97.2 cl 8.1(a) provided that the Project Manager shall utilise the Bilkurra project bank account. Grochowski was the sole signatory of that account.
98. On 14 November 2013, David Bracka entered into contracts of sale for three parcels of land adjacent to the Bilkurra land (the Bilkurra West land). The aggregate price for the land was $8 million. Deposit payments of $200,000 were due on the day of sale, with a further $200,000 due 6 months after the day of sale (13 April 2014). The settlement date for one contract was 14 November 2015, and for the other two contracts was 14 November 2016.
99. On around 11 April 2014, Bracka signed nomination forms nominating Bilkurra West as the purchaser under each contract.
100. On 15 May 2014, Brookfield Riverside made a deposit of $350,000 into the Bilkurra project bank account; and on the same date two debits of $100,000 were made, with narrations referring to the two parcels of Bilkurra West land for which deposits of $100,000 were due on 13 April 2014.
101. Brookfield Riverside made those advances out of Brookfield Riverside's option fee revenue, towards Bilkurra West's purchases of the Bilkurra West land.
102. The Bilkurra West land was marketed to investors as part of the Hermitage Bendigo scheme. Between July 2014 and February 2015, 47 investors entered into off-the-plan purchase contracts with Bilkurra West to buy lots in the proposed subdivision of the Bilkurra West land, paying around $744,000 in deposits.
103. Bilkurra West did not complete its purchase contracts for the Bilkurra West land.
104. Since June 2017, pursuant to instructions given by Stephens[,] Evans Ellis has commenced refunding deposits to off-the-plan investors in relation to the Bilkurra West land. To November 2017, Evans Ellis had refunded around $654,000 of approximately $744,000 in deposits paid by investors who entered into off-the-plan purchase contracts.
105. Bilkurra West was wound up on the just and equitable ground, and in insolvency, on 16 July 2018.
IX. GILLIES ROAD AND THE GILLIES ROAD SCHEME
106. Gillies Road was incorporated on 21 May 2013. Skinner was appointed as its sole director, which role he retained until replaced by Stephens from 1 October 2014.
107. Although he was not a director of Gillies Road, Grochowski exercised control over the financial affairs and project development activities of Gillies Road under the Gillies Road Project Management Agreement as described below.
108. EEM is Gillies Road's sole shareholder, under the same trust structure as for … GBC, as described in [paragraph 38] above.
109. On or around 5 June 2013, Gillies Road entered into a Project Management Agreement with PMA (the Gillies Project Management Agreement) on materially identical terms to the Brookfield Project Management Agreement. Grochowski drafted the Gillies Project Management Agreement.
110. On around 12 June 2013, in accordance with the Gillies Project Management Agreement, PMA opened two project accounts in respect of Gillies [Road], of which the primary account was the Gillies 7489 account. Grochowski was the sole signatory for the Gillies 7489 account.
111. Between 12 June 2013 and 11 January 2016, approximately $673,500 was deposited into, and withdrawn from, the Gillies 7489 account.
112 On or around 30 May 2013, Gillies Road entered into a call option deed and a contract of sale in relation to two adjoining properties on Gillies Road, Miners Rest (the Gillies Road land). Under the call option, an option fee was payable in two tranches of $250,000 plus GST, the first due on the day of signing, and the second due on 1 May 2014. Under the purchase contract, a deposit of $1,000 was due on the day of signing. The aggregate purchase price of the Gillies Road land was approximately $48.75 million.
113. The option period for exercise of the call option expired on 1 May 2016. The purchase contract was expressed to be conditional upon:
113.1 the property being rezoned residential;
113.2 Gillies Road obtaining planning approval for the development; and
113.3 Gillies Road exercising the option under the call option deed,
by 30 May 2016.
114. Grochowski gave guarantees to the vendors of the Gillies Road land in respect of Gillies Road's performance of both the option deed and the purchase contract.
115. On 30 May 2013 (and before the Gillies 7489 account was opened), Midland transferred $250,000 to a bank account maintained by PMA (the PMA 8129 account). On 31 May 2013, two cheque withdrawals of $275,000 and $1,000 were made from that account, in payment of the option fee and deposits due on signing of the option deed and purchase contract for the Gillies Road land.
116. On 10 July 2014, Brookfield Riverside transferred $145,000 to the Gillies 7489 account. On the same day, a payment was made from that account to the vendor of the Gillies Road land, in part payment of the second tranche of the option fee that was due on 1 May 2014.
117. The advances made to Gillies Road by Midland and Brookfield Riverside were transacted by Grochowski, and while recorded as loans in the MYOB accounts, were not documented by written loan agreements.
118. Gillies Road did not enter into option contracts or off-the-plan sale contracts with investors.
119. Gillies Road did not exercise the call option or obtain rezoning or planning approval by May 2016. Accordingly, both the call option and the purchase contract have lapsed.
120. Gillies Road was wound up on the just and equitable ground, and in insolvency, on 16 July 2018.
Date: August 2018