Australian Securities & Investments Commission v Lanepoint Enterprises Pty Ltd

Background 9 The background is uncontroversial and the following is taken substantially from ASIC's closing submissions. Lanepoint redeveloped the Regency Motel site on Great Eastern Highway, Rivervale in Western Australia. This was financed, in part, by secured funds obtained from Suncorp Metway Limited and Westpoint Management Pty Ltd as responsible entity for the Westpoint Income Fund ("WIF"). Westpoint Management was a related or associated company within the Westpoint Group and WIF was a managed investment scheme, which raised funds from the public for use in relation to Westpoint Group projects. 10 The first stage of the Regency Motel redevelopment was undertaken for Lanepoint by Westpoint Constructions Pty Ltd. As a result of the redevelopment 40 strata title lots were almost completed for sale and one lot was left vacant for the second stage. Adjacent to the redeveloped property are three lots, which were proposed for the third stage. 11 Suncorp appointed receivers to Lanepoint on 3 March 2006. The appointment was made pursuant to a floating charge. 12 The Suncorp appointed receivers took possession of the near completed Regency Motel redevelopment, completed the redevelopment and proceeded to settle contracts for the sale of the strata title lots. 13 The Suncorp receivers' appointment is continuing. The receivers have paid the secured debt owed but await clearance from income tax obligations and a release from anticipated litigation before returning any surplus funds to Westpoint Management for the WIF as the next secured creditor. 14 Westpoint Management appointed receivers to Lanepoint on 9 March 2006. The appointment was made pursuant to a floating charge. The Westpoint Management appointed receivers have possession of the balance of unsold Lanepoint property and have yet to recover the secured debt. 15 Since the appointment of receivers Lanepoint has ceased property development. Although Lanepoint has sold developed units, it is in the process of selling the balance of its property and has earned income on deposited funds. 16 Lanepoint's case for its solvency relies on the following points: (a) Lanepoint's receivers will or should retire on receipt of payment easily obtained from the sale of Lanepoint's property. (b) Lanepoint has available to meet its debts: cash in the hands of receivers of $1,280,900; a credit for taxation paid of approximately $1,283,000; and, the value of the balance of the Regency Apartments development being $3,168,000. (c) The claim of the secured creditor Westpoint Management for the WIF is either nil or limited to approximately $750,000, the income tax payable is or will be nil and the only other liability, an inter company liability of $495,000, may be ignored as a demand will not be made. 17 ASIC submits that: (a) The receivers have not retired and while they remain there is no prospect of paying any creditor other than the secured appointor. (b) The claim of the secured creditor Westpoint Management for the WIF loan exceeds the aggregate value of the remaining assets. 18 It is now common ground that Lanepoint has assets amounting to $5,729,837 rounded to the nearest dollar figure. This comprises: (a) Cash with receivers $1,280,900 (b) Land valued at $3,168,000 (c) Tax refund held in Lanepoint's Solicitors' Trust Account $1,280,936.77 19 Karen Carey is the sole director of Lanepoint. She was appointed as a director on 12 April 2006. Ms Carey swore an affidavit on 29 November 2007 and supplemented it by another affidavit sworn on 19 March 2008. By her affidavit on 29 November 2007 Ms Carey produced accounts prepared for Lanepoint as at 30 September 2007. In evidence Ms Carey indicated the accounts were prepared by Lanepoint's bookkeeper from information provided by the receivers. Ms Carey asked her brother Norman Carey, a previous director of Lanepoint, to review them and after that review she signed the accounts. 20 ASIC submits, and I accept that the accounts of Lanepoint alone are insufficient to discharge the onus of overcoming the presumption.

Liability to WIF 21 This issue, concerns the amount of Lanepoint's indebtedness to Westpoint Management. Its resolution, irrespective of Lanepoint's indebtedness otherwise,will determine the present application. It is common ground that Lanepoint had a facility with Westpoint Management the responsible entityfor the WIF by which Lanepoint received funding. 22 Mr Carey was a director of Lanepoint, Westpoint Corporation and Westpoint Management from 30 August 2004 until 30 November 2005 23 In late 2005 Westpoint Corporation, to the knowledge of Mr Carey, was in serious financial difficulties at least as the result of the appointment of receivers and liquidators to Westpoint Group companies. 24 Westpoint Management for the WIF raised money by public subscription. On 25 October 2005 and 15 November 2005, ASIC issued interim Stop Orders and on 23 November 2005, a final Stop Order on further fundraising by WIF. As the WIF's money was advanced to Westpoint Group projects, the Stop Orders limited the ability to pay WIF investors their claims unless those obligations were rolled over. According to Mr Carey the Stop Orders affected the ability of WIF to honour its loan obligations to Lanepoint. ASIC submits that this is not correct.

WIF Facility Balance 25 The liquidator of WIF claims that Lanepoint owes WIF approximately $6.6 million. 26 Lanepoint submits that there is credible evidence that the WIF liability cannot possibly be $6,600,000 or anything like it and it points to the observation of Westpoint Management's receiver,Mr Read at [15] in his affidavit sworn on 25 February 2008 in these proceedings that "I have not made an agreement on the amount and I have not made an agreement as to how that amount may be settled." The liability, Lanepoint submits,is somewhere between 0 - $2.5m. 27 Accordingly, Lanepoint submits that there is a genuine dispute as to the amount of its indebtedness to WIF. In an appropriate case the Court may exercise its discretion to determine such a dispute rather than to stay the winding-up application to await the curial resolution of the dispute: Ocean City Ltd v Southern Oceanic Hotels Pty Ltd (1993) 10 ACSR 483 at 486-487. 28 A great deal of evidence was adduced in this respect including detailed cross-examination of, amongst others,Mr Carey, Ms Karen Carey and Mr Gregory Nairn, a former senior Lanepoint executive. No suggestion was made that there was other relevant evidence available going to the resolution of this question. If such an alleged dispute is raised and can be resolved during such an application then in my opinion it ought to be. It would only add to the costs of the parties as well as to the public to put it off. 29 Lanepoint submits that the affidavit of ASIC's expert, Mr Honey, sworn on 27 October 2006 confirms the following: (i) The work in progress on the Regency Motel redevelopmentwas, as at 31 January 2006, about $7 million. That work in progress is also estimated by Ernst & Young at $6,544,235 according to the affidavit of Mr Fraser, one of Lanepoint's receivers, sworn on 11 March 2008, based on information provided but that the Receiver and Managers were not able to determine the final quantum of renovation costs." (ii) In relation to liabilities as at 31 January 2006, the Suncorp Metway loan stood at $4,855,000 and WIF at $2,267,000. (iii) There were intercompany loans to Westpoint, Keypoint and Keyworld at $864,000 but there were other sources of finance of some $700,000 30 It follows Lanepoint submits that it could not have received from WIF through Westpoint anything like $6,600,000. It also refers to the fact that Suncorp Metway put Lanepoint into receivership in April 2006 for an amount in excess of $5,500,000.

Reasoning on WIF liability issue 31 I indicated earlier that Lanepoint borrowed from Suncorp to fund the acquisition, construction and financing costs of the Regency Motel redevelopment. Suncorp advanced funds against progress certificates relating to the progress of the redevelopment signed by a quantity surveyor. As at 31 March 2006, the amount drawn from Suncorp including interest was $5,535,949.64. 32 Mr Carey was cross-examined as to these matters. He conceded that the Westpoint Group was under professional management where the accounting administration and finance functions were delegated. Each entity had a general manager and a financial manager who was a senior accountant. Financial controls were delegated to a group of senior chartered accountants across four States in Australia. They were assisted by amongst others, Mr Gregory Nairn. Reporting on financial matters went from a senior financial accountant who would "sign off" then Mr Nairn, or a Mr Rundle, who would also "sign off" and then find its way to Mr Carey. He would "sign off" he said, on the basis of their "sign off". Mr Carey said that the various systems of reporting and signing off were implemented to avoid fraud. 33 Lanepoint did not have a bank account. Lanepoint's income and expenditure was channelled through Westpoint Corporation central treasury. When Lanepoint drew down against its WIF facility the money was paid direct to Westpoint Corporation central treasury account and this would be credited as an inter-company loan. 34 Unlike funding from Suncorp the loan facility arrangement which Lanepoint had with WIF had no requirement for a quantity surveyor to certify that costs had been incurred on the Regency Motel before making payment on behalf of Lanepoint. Mr Carey agreed that Lanepoint had loaned money to other Westpoint Group companies such as Keypoint Developments and Keyworld Investments whose projects did not relate to redeveloping the Regency Motel. 35 Lanepoint's 2007 tax return was compiled by Mr Duncan Melbin, a chartered accountant and a director of the accounting firm DPM Consulting (WA) Pty Ltd. This firm had been Lanepoint's accountants since about September 2006 with some input from Mr Carey, who accepted that he was satisfied that the financial accounts required to prepare the return were in order. He said that in the normal course he would review the return. Although he couldn't actually recall doing so in respect to this particular return he remembers it "coming in". He said he was monitoring this tax return because Lanepoint wanted to get it done. Lanepoint's tax returns aggregate the costs of the Regency Motel redevelopment in the amount of $8,920,557 and interest expenses of $1,001,601. These amounts are significantly higher than Lanepoint says were its costs of redeveloping the Regency Motel. 36 Mr Carey said that he was not aware that Lanepoint had applied to WIF for an advance of $6m in January 2005. He said his understanding was that it was $4m but that he was not personally involved. He may have had in mind that under the Loan Agreement made between Westpoint Management for WIF, as lender, Lanepoint, as borrower and Perpetual Nominees Ltd, as custodian of 23 March 2005 the Facility Limit was $4m. However, the amount originally sought from WIF by Lanepoint as contained in its written Investment Proposal to WIF was indeed $6m. He said that he did not read or understand the WIF loan facility document when he signed it. This I take it to be a reference to the Lanepoint/WIF Loan Agreement. In his written evidence Mr Carey set out in some detail just how Lanepoint's drawings from the Suncorp facility were utilised for the Regency Motel redevelopment. He was the Westpoint Group managing director. I do not accept that he did not know the amount for which Lanepoint had applied from the WIF, the extent of its approved facility or the effect of the terms of the WIF Loan Agreement. 37 Mr Carey acknowledged that he signed the relevant Lanepoint draw down notices for the Regency Motel redevelopment against the WIF facility. For example, when asked about a draw down notice for $500,000 said to be for the Regency Motel redevelopment, he accepted this to be a significant amount of money and that a number of employees would check this and other such transactions. Mr Carey would not accept that his signature was required for the draw down notice to be put into effect. Nor would he concede that his signature was a necessary check that the proposed draw down was in order. I do not accept his evidence in that respect. Were he to have conceded these propositions to be correct there would have been little if any doubt as to the extent of Lanepoint's liability to the WIF. I find that thisrefusal to make these concessions was motivated by his appreciation of this fact. There are four draw down notices dated 13 October 2005, 19 October 2005, 20 October 2005 and 25 October 2005 for the amounts of $500,000, $700,000, $500,000 and $800,000 respectively. Each notice is headed "ref: drawdown on regent loan (lanepoint) - westpoint income fund" and specifies the benefactor as being "Perpetual Nominees Ltd a/c Westpoint Income Fund and the beneficiary as being "Westpoint Corporation Pty Ltd". Westpoint Construction was Lanepoint's construction company for the Regency Motel Redevelopment. Each notice states that "this payment is a drawdown on the "Regent Development Loan" and is signed by both Mr Carey and Mr Nairn. "Regent Development Loan" is plainly, in context, a reference to Lanepoint's Regency Motel redevelopment financed by loans from WIF. 38 Lanepoint was part of a corporate group with sophisticated accounting systems designed, amongst other things, to stop fraud. I do not accept that the draw down notices, amounting to $2.5m and signed by Mr Carey, were the result of errors not only on his part but also on the part of others within the group responsible for financial administration. 39 Mr Carey strenuously denied that the October 2005 draw down notices were made in the context of ASIC's inquiries about the WIF. It was put to him that Lanepoint drew down funds under the WIF facility and placed with Westpoint Corporation central treasury to meet Lanepoint's actual and anticipated costs on the Regency Motel redevelopment. Mr Carey denied this. Mr Carey's understanding, however, was that the effect of the ASIC Stop Order of 25 October 2005 which was issued immediately after Lanepoint's drawings on WIF was that WIF could not thereafter lend money. 40 Mr Gregory Nairn, a former general manager for special projects as well as Group Financial Controller for the Westpoint Group, said that in December 2005 Mr Chris Glasson, a Lanepoint accountant responsible for looking after Lanepoint's records, came to see him together with Mr Chin Liew, a WIF accountant or fund manager. They told him that there was an imbalance between Lanepoint's loan balances and the WIF. They thought this involved an amount of $2m. The WIF Facility Limit had been exceeded. This, said Mr Nairn, indicated to him that there was a problem. He said that he would normally have asked Mr Chris Fairman, the finance manager of the Westpoint Funds Management Group, to look into this but said that he had "dropped the ball" concerning funding, financing and accounting matters so he carried out his own investigation. He said he discovered three draw downs from mid to end October 2005 totalling $2m that had been incorrectly recorded as draw downs to Lanepoint or by Lanepoint. These funds he said belonged to a project being operated by Kingdream Pty Ltd in Melbourne and had been incorrectly debited to Lanepoint's Regency Motel redevelopment. He said he had, at the time, prepared a schedule regarding these matters but did not have it with him because ASIC had it. He then described other errors in the accounting for WIF draw downs under the "stewardship" of Mr Chris Fairman. Mr Fairman did not give evidence nor was that failure explained. He was also highly critical of the role played by Mr Craig Francis, the WIF manager in Sydney. He said that on prior occasions he had had to correct draw down notices prepared by him which showed on their face the incorrect borrower. Again Mr Francis was not called nor was the failure to call him explained. He concluded Lanepoint had been advanced somewhere between $3.5m and $4m as at October 2005. The loan balance with WIF was $6.5 million which was $2.5m outside Lanepoint's approved facility limit. Mr Nairn "corrected" the accounting entries for these three draw downs by reducing the WIF balances with Lanepoint and increasing the WIF balance with Kingdream by $2m in each case. 41 Mr Nairn said he did not specifically report major outflows of money to Mr Carey and that this was the responsibility of Mr Ray Ellis. Mr Nairn was a director of Westpoint Management Ltd. He acknowledged that the reason that he and Mr Carey signed draw down notices was to ensure that appropriate levels of authority attached to them: two directors of Westpoint Management Pty Ltd had to sign. 42 Mr Nairn agreed that before signing the draw down notices he checked with Mr Craig Francis, an accountant, that the funds drawn were appropriate and required and within the approved facility limit of $6m. Mr Nairn said he saw no other documentation supporting the draw downs. It is to be remembered that his earlier evidence was that he had concerns about the reliabilityof Mr Francis. 43 Mr Nairn acknowledged his concern was to establish why the two loan accounts did not agree between the two entities, that is, why the balances in the ledgers were different. He said that his analysis of expenditure on the Regency Motel redevelopment as against the funding sources disclosed that Lanepoint could not have drawn down $2m that had been allocated to it. 44 However, he conceded that he did not make inquiries as to the costs actually incurred and whether these had been paid or were payable. Nor did he consider the possibility that Lanepoint had drawn down excess funds in anticipation of costs to be incurred on the Regency Motel redevelopment. Mr Nairn accepted that he did not consider costs outside of the Regency Motel redevelopment, including Lanepoint's investment in projects in its subsidiary companies Keypoint Developments Pty Ltd and Keyworld Investments Pty Ltd. 45 These concessions by Mr Nairn diminish the probative value of the investigation by Mr Nairn. The possibility that Lanepoint drew down the WIF facility for reasons unconnected with the Regency Motel redevelopment is rendered more probable in light of Mr Carey's evidence that Lanepoint had loaned money to other companies within the Westpoint Group for purposes unrelated to the Regency Motel redevelopment. 46 Mr Nairn was questioned about his involvement in the so-called $2m run-around. I deal with this in some detail below. He authorised or approved the recording of the transactions in the $2m run-around in the general ledgers but said that he only checked with Mr Ray Ellis that they had occurred. He said he did not check any underlying reason for the various transfers. I do not accept Mr Nairn's evidence in this respect. Mr Nairn held a very senior position within the Westpoint Group. I do not accept that his approvals to record very large and significant transactions were in effect a mere 'rubber stamp' approval absent an appreciation of the underlying reason for each transaction. 47 The submissions of Lanepoint, to the extent that they rely upon the affidavit evidence of Mr Honey, to which I have referred, are misconceived. 48 In his report, Mr Honey concluded that as at 2 June 2006 Lanepoint was insolvent. It was however not tendered in evidence by ASIC. It obviously did not have regard to evidence given at the hearing in March 2008. Significantly in this respect at para 4.30 Mr Honey, in his report recognised the controversy over the amount of Lanepoint's indebtedness to WIF. He deposes: In a letter dated 27 September 2006 from Brian McMaster, one of the WIF Receivers, to Simon Read as liquidator of Westpoint Management Ltd, the responsible entity of the Westpoint Income Fund, Mr McMaster expresses the opinion that the secured debt owing to Westpoint Income Fund as at 31 January 2006 is $6,607,978 and not $2,266,557. The difference arises as a consequence of two series of transactions totalling $4,341,422, the validity of which are being challenged by the WIF Receivers and the liquidators of Westpoint Management Ltd. I do not have sufficient information available to determine the precise consequences for the balance sheet of Lanepoint of the relevant transactions being found to be invalid other than it will result in the Westpoint Income Fund loan increasing to $6,607,978. 49 Furthermore, Mr Honey's affidavit does not take into account the continuing interest on the WIF loans due and payable after 2 June 2006. Mr Honey's opinions do not assist Lanepoint. 50 Mr Read, one of the liquidators of Westpoint Management, in addition to the passage relied upon by Lanepoint set out at [26] above, also said at [14]: I have not conceded and am not in a position to concede that the amount owing by Lanepoint to Westpoint Management is other than as indicated in my affidavit sworn on 29 September 2006 being $6,607,978.41 excluding interest, costs, taxes and disbursements. 51 I do not accept that the above WIF draw downs were incorrectly made. It follows that these amounts remain a liability of Lanepoint to WIF. The true position is as found in Lanepoint's financial records before these were "corrected" by Mr Nairn. 52 When the draw downs in question were effected it was in the context of an ASIC investigation. I find that Mr Carey approved them and did so to ensure the funds were available prior to funding being stopped, as he thought would be the case because of the looming ASIC Stop Order of 25 October 2005. 53 I find that Lanepoint did draw down the WIF funds in the amount of $6.6 million and is obliged to repay those amounts. That amount will, of course, now be substantially more because of interest. This amount alone exceeds Lanepoint's total assets of $5,729,937. The transactions in the form of the $2m run around and Kingdream transfers which purported to reduce or extinguish the amount of Lanepoint's indebtedness to WIFwere, I find, ineffective or liable to be set aside. These findings alone are sufficient to dispose of this application.

Kingdream transfer and $2m run-around 54 These transactions were the subject of very lengthy and detailed affidavits, in particular Mr Kevin Chin, sworn 28 February 2007 and Mr Richard Gomm sworn 27 October 2006. Both are ASIC investigators. 55 In January 2006 Mr Nairn wrote to the trustee of WIF advising that the draw downs of 19, 20 and 25 October 2005 were incorrectly recorded and should have been disclosed as draw downs by Kingdream. As a result the WIF loan accounts of Lanepoint and Kingdream were altered so as to disclose repayment by Lanepoint to WIF of $2m and an increase in borrowings by Kingdream from WIF in the same amount. 56 Lanepoint's development was near completion and close to the stage where sales could be made. Accordingly, repayment to the WIF was likely in those circumstances. By contrast, Kingdream's development had barely commenced. I accept ASIC's submission that the detriment for Westpoint Management arising from transferring the $2m loan to Kingdream was, in effect, to reduce the ability of the WIF to recover its investment and be in a position to meet its obligations to its public investors as they fall due. The ASIC Stop Orders meant that the obligations could not be paid from fresh funds. 57 On 1 March 2006, a receiver was appointed to Kingdream and on 6 December 2006 Mr Simon Read was appointed its liquidator. 58 Mr Simon Read expressed the opinion that it is unlikely that any distribution will be made to the unsecured creditors of Kingdream and that it is unlikely that any payment of a dividend if one were possible, would be made at any time in the near future. 59 In January 2006 Bowesco paid $2m cash to WIF, who paid the cash to Goldtag Pty Ltd, trustee of the Cinema City Property Trust which paid it back to Bowesco. 60 These payments were not recorded that way in the Westpoint Group accounts. They showed that Bowesco paid $0.7m to Lanepoint and $1.3m to Westpoint Corporation which paid that amount to Lanepoint which thenpaid $2m to WIF. WIF's records disclose a $2m loan to Goldtag which amount it then paid to Westpoint Corporation which repaid Bowesco the $1.3m Westpoint Corporation had loaned and paid Bowesco a further $0.7m on behalf of the Centreways Refurbishment Syndicate Trust. This was described in the proceeding as the "$2m run-around" transaction. 61 Unlike Lanepoint's Regency Motel redevelopment Goldtag's development project at the Cinema City site between Hay Street and Murray Street, Perth had hardly begun. Transferring the $2m loan to Goldtag in effect reduced the ability of the WIF to recover its investment and be in a position to meet its obligations to WIF public investors as they fell due. 62 The cash position for Bowesco resulting from the $2m run-around was neutral because it had paid and received the $2m, although its accounts disclosed a $0.7m debt owed by Lanepoint and the same amount owed to the Centreways Refurbishment Syndicate Trust. The net effect of the $2m run-around reduced the recoverability of WIF loans because Goldtag became a creditor in place of Lanepoint. The detriment to WIF was that it had imminent obligations to repayWIF investors. The ASIC Stop Orders meant that those investors could not be paid from fresh funds. 63 Mr Carey was taken to the documents by which Bowesco provided funds to Lanepoint to repay the WIF facility in January 2006 and by which a series of transactions were recorded that switched the WIF debtor from Lanepoint to Goldtag, aWestpoint company but with a different development (the $2m run-around). Mr Carey conceded that his children were the beneficiaries of the Dyson Family Trust for which Bowesco is the trustee. Mr Carey agreed the transactions involved in the $2m run-aroundreduced Lanepoint's exposure to the WIF thereby increasing Lanepoint's net value and so Bowesco's value for his children. 64 Mr Carey refused to acknowledge any involvement in the transactions the subject of the Kingdream transfer by which Lanepoint's obligations to WIFwere purportedly reduced. 65 ASIC submits that Mr Carey refused to make a concession which he knows to be contrary to Lanepoint's case. The WIF loan to Goldtag was almost completely irrecoverable, there being no surplus from the sale of its principle asset, the Cinema City site, after paying the secured creditor. The position in respect to the WIF loan to Kingdream was the same. 66 Westpoint Management the responsible entity for WIFand Westpoint Corporation are each being wound up. 67 On 2 February 2006, Permanent Trustee Australia Limited was appointed controller to Goldtag's property and on 6 December 2006 it went into liquidation. Mr Read was appointed its liquidator. 68 Mr Read has expressed the opinion that it is unlikely that any distribution will be made to unsecured creditors of Goldtag and it is unlikely that any payment of a dividend, if one were possible, would be made at any time in the near future. 69 The liquidator of Westpoint Management, as the responsible entity for WIF, Mr Read and Mr Andrew Birch do not concede the legitimacy ofthe Kingdream or $2m run-around transactions and asserts its entitlement to recover $6.6m approximately beingthe amount of the WIF loans to Lanepoint before those transactions were made. 70 I find that the Kingdream transfer and the $2m run-around were improper transactions put into effect to conceal the true position that Lanepoint was indebted to WIF in approximately $6.6m and to render it unlikely that WIF could recover those funds. I accept the submission of ASIC that they were ineffective transactions. 71 ASIC makes the following alternative submissions that the Kingdream transfer and $2m run-around transactions are liable to be set aside as they were insolvent trading transactions within Part 5.7B of the Act. 72 The Corporations Act provides in Part 5.7B, Div 2, s 588FE that certain transactions are voidable and by s 588FF the court on the application of the liquidator of a company, on being satisfied that the transaction is voidable may make certain orders relating to the effect of the transactions. 73 The word "transaction", by s 9 of the Act, includes a payment made by the body corporate. The transactions relevant here are: (a) insolvent transactions which are uncommercial transactions - s 588FB; (b) unreasonable director related transactions - s 588FDA. 74 The elements of an insolvent transaction are that the company (a) is insolvent at the time of the transaction; or (b) becomes insolvent because of matters including the transaction. 75 For an uncommercial transaction the transaction must be "not reasonable" in the sense that it is one where "it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction, having regard to: (a) The benefits (if any) to the company of entering into the transaction; and (b) The detriment to the company of entering into the transaction; and (c) The respective benefits to other parties to the transaction of entering into it; and (d) Any other relevant matter." 76 An unreasonable director related transaction, does not require that the company be insolvent but does require relevantly the following three elements: (a) Payment by the company. (b) The payment is made to a close associate of the director. (c) The same "not reasonable" element required for uncommercial transactions. 77 ASIC says that the transaction involving the recording ofa loan payment of $2m to Kingdreamby which Kingdream's indebtedness to WIF was increased and a corresponding reduction in Lanepoint's indebtedness to WIF was anuncommercial transaction within the meaning of s 588FB(1) of the Act as well as unreasonable director related transaction within the meaning of s 588FDA(1)(a) and (b) of the Actand are on either basis likely to be set aside by the liquidator of Westpoint Management as voidable transactions within the meaning of s 588FE(6A) of the Act.

Uncommercial transactions 78 I accept so much of the submission of ASIC as followsthat a reasonable person in Westpoint Management's circumstances would not have entered into the transaction having regard to: (a) The benefits the transactions conferred on Lanepoint (and through Lanepoint and its parent Bowesco, the beneficiaries of the Dyson Family Trust being the children of Norman Carey the relatives of Karen Carey). That benefit was in the form of a reduced exposure to Westpoint Management a company to which receivers and managers had been appointed and which was likely to require the repayment of Lanepoint's obligations (b) The detriment imposed on Westpoint Management in the form of: (i) The extension of its credit to Kingdream in circumstances where the recovery of that further credit was not likely in the short term or longer term. (ii) The creation of a credit to Goldtag in circumstances where the recovery of that further credit was not likely in the short term or longer term. (iii) The extinguishment of its rights of recovery against Lanepoint whose redevelopment of at least part of the project was complete and likely to see at least some repayment in the short term. (iv) The consequent extinguishment of its limited remaining liquidity or ability to meet its obligations to repay the investment of unit holders in the WIF in the very short term, thereby exposing Westpoint Management to claims from the investors if not causing Westpoint Management to become insolvent. 79 At the time Westpoint Management was insolvent or by reason of the transactions became insolvent. As a consequence the transactions are insolvent transactions within the meaning of s 588FC of the Act and liable to be set aside at the instance of the liquidator of Westpoint Management. 80 Accordingly, the Kingdream transfer and $2m run-around may not be relied on by Lanepoint as reducing Lanepoint's obligations to Westpoint Management and the WIF to the level asserted.

Unreasonable director-related transactions 81 ASIC submits that these transactions were put into effect and had the consequence of conferring a benefit upon "close associates" of Westpoint Management's directors Mr Carey and Karen Carey namely the children of Mr Carey who were the beneficiaries of the Dyson Family Trust. A "close associate" of a director includes a relative of that director: s 9 of the Act. 82 There are two problems with this submission. First,at the time of the transactions, which were payments made by Lanepoint in January 2006, neither Mr Carey nor his sister were directors of Westpoint Management. Mr Carey resigned his directorship on 21 December 2005. Karen Carey has never been a director. The only director of the company as at January 2006 was Mr Gregory Nairn. 83 It was not contended that as at January 2006 Mr Carey was a "director" of Westpoint Management within the extended definition of s 9. I am not, in that circumstance, prepared for present purposes to find that he was a director of Lanepoint at that time although it may well be that he was. 84 Second, Karen Carey is Mr Carey's sister. His children are not her relatives for the purposes of s 588FDA of the Act. They do not come within the definition of "relative" under s 9 and there is no provision in respect to s 588FDA for an extended meaning of "relative" to include niece and nephew as there is, for example, by virtue of Reg 7.1.17(3) referrable to s 761E(5) of the Act. 85 Accordingly, the transactions do not meet the unreasonable director related transactions provision of s 588FDA(1) of the Act.

Conclusion as to WIF Liability 86 I find for the above reasonsthat Lanepoint is indebted to Westpoint Management as the responsible entity for WIF in the amount of not less than $6.6m.

income tax 87 By letter dated 28 November 2008 the Deputy Commissioner of Taxation threatened to institute proceedings against Lanepoint in the event that income tax of $1,208,797.31 was not paid by close of business on 9 December 2008. This amount has not been paid and remains owing.

other liabilities 88 Lanepoint admits intercompany loans of $495,000 are owed to Keyworld Investments Pty Ltd. 89 Lanepoint makes no provision for the estimated costs of the appointed receivers. Counsel for Lanepoint put to Mr Fraser in cross examination that his estimated costs to complete his administration of $100,000 would not be required if the administration were completed quickly and without further complication. Mr Fraser conceded the costs would depend on the time taken. The evidence does not permit me presently to make a precise finding. There will inevitably be costs of this kind but because of the conclusions to which I have come, otherwise, it is not necessary to assess these.

conclusions 90 There is, as I have found, a significant shortfall in assets to pay liabilities. Lanepoint did not tender a cash flow statement. Lanepoint is no longer developing property and has not traded since the appointment of receivers. It has insufficient recurrent income, which is in the nature of interest earned, to pay the secured liability let alone the other liabilities. Its debts to the secured creditors are due and payable and have not been paid. It does not have current assets in an amount sufficient to meet the claims of the secured creditors currently in possession of the property of Lanepoint. Its investment in the property is not in an amount sufficient to meet the claims of secured creditors. Its tax liability remains unpaid. 91 Suncorp, through its appointed receiver, retains some of Lanepoint's property in the form of a cash deposit. Until released by the company directors and the Australian Taxation Office, the receiver is unlikely to retire. Until that retirement, the cash held is not available for the payment of Lanepoint's debts as they fall due. 92 The liquidator of Westpoint Management, through its appointed receiver for the WIF, may proceed to recover the WIF debt as if the $2m run-around and Kingdream transfer transactions had not occurred. The value of the remaining Lanepoint real estate is insufficient to meet the liability to the WIF. The WIF receivers are unlikely to retire until the WIF liability is paid. Until they retire, the property held by Lanepoint is not available for the payment of Lanepoint's debts as they fall due. 93 Lanepoint has failed to establish its solvency and, thereby, rebut the statutory presumption. It is not able to pay its debts as they fall due and payable. Leave ought be granted under s 459P(2)(d) and there should be an order that Lanepoint be wound up. 94 Simon Guy Theobald has consented to his appointment as liquidator of Lanepoint and I would so appoint him. I would also order that ASIC's costs be taxed and be reimbursed out of the property of Lanepoint in accordance with s 466(2) of the Act.

I certify that the preceding ninety-four (94) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour.

Associate: Dated: 14 May 2009 Counsel for the Applicant: Mr C Slater

Solicitor for the Applicant: Australian Securities & Investment Commission

Date of Hearing: 25, 26, 27 March 11 April, 11 June, 8 August, 3 September 2008