REASONS FOR JUDGMENT
1 On 10 February 2009 the Australian Securities and Investments Commission ("the Commission") filed an application seeking urgent interlocutory relief against two individuals and eight companies, the defendants in this proceeding. The relief sought was the preservation of the assets of all the defendants and a restraint on the disposition of any of those assets. The Commission further sought orders against the first and second defendants restraining them from applying for passports or leaving Australia.
2 On 11 and 12 February 2009 I made orders operative for a very short time restraining the defendants from disposing of their assets and restraining the first and second defendants from leaving Australia. On 13 February 2009 I made further orders restraining the defendants from disposing of their assets and restraining the first and second defendants from leaving Australia pending further order. That order contained provisos allowing for the defendants to pay operating and living expenses up to a maximum amount per week. I also allowed for the payment of legal costs for the defendants. Those orders were continued in a modified form on 26 February 2009 and on 12 March 2009 until 4.00pm on 19 March 2009.
3 On 12 February 2009 the Commission filed an amended originating process in which it applied pursuant to ss 459 and 464 of the Corporations Act 2001 (Cth) ("the Corporations Act") for an order to wind‑up the tenth defendant, Elite Wealth Builders Pty Ltd and also applied for the appointment of a provisional liquidator of the tenth defendant.
4 On 26 February 2009 the Commission filed a further amended originating process in which it applied to wind‑up each of the third to tenth defendants and also applied for the appointment of a provisional liquidator of the third to tenth defendants. That application was made pursuant to ss 459 and 461(k) of the Corporations Act.
5 At the hearing on 12 March 2009:
(a) counsel appeared for the first, second, third and seventh to tenth defendants and said that he was not making any submissions in respect of the first, third, eighth and ninth defendants and that he would be making submissions on behalf of the second, seventh and tenth defendants who would oppose the application for the appointment of a provisional liquidator to the seventh and tenth defendants;
(b) counsel appeared for the fifth defendant who said that she was instructed that the fifth defendant had no opposition to the Commission's application;
(c) a director of the fourth and sixth defendants appeared and announced that those defendants had no objection to the orders sought by the Commission.
6 I heard submissions on behalf of the Commission that a provisional liquidator should be appointed to each of the third to tenth defendants and I heard submissions on behalf of the second, seventh and tenth defendants opposing the appointment of a provisional liquidator to the seventh and tenth defendants. I was satisfied on the material placed before me, having regard to the submissions of the Commission, that the grounds for the appointment of a provisional liquidator of the third, fourth, fifth, sixth, eighth and ninth defendants had been made out and that there was a reasonable prospect that a winding‑up order would be made at the final hearing on the grounds relied upon by the Commission. Accordingly, I ordered that Simon Wallace‑Smith be appointed provisional liquidator of each of those companies. I reserved my decision on the Commission's application to appoint a provisional liquidator of the seventh and tenth defendants and also reserved my decision on whether I should make further restraining orders in relation to the first and second defendants.
7 The power to appoint a provisional liquidator of a company is derived from s 472(2) of the Corporations Act which provides that:
"The Court may appoint an official liquidator provisionally at any time after the filing of a winding up application and before the making of a winding up order or, if there is an appeal against a winding up order, before a decision in the appeal is made."
It can be seen that the Court has a wide and unfettered discretion whether to appoint a provisional liquidator, the only jurisdictional precondition being that a winding‑up application in relation to the company has been filed.
8 The principles which apply where a court is considering whether to appoint a provisional liquidator are well established and the following propositions can be extracted from the authorities:
(a) the applicant for the appointment must satisfy the Court that there is a reasonable prospect that a winding‑up order will be made at the final hearing: Australian Securities Commission v Solomon (1996) 19 ACSR 73 at 80;
(b) an applicant must establish that there is good reason for the Court intervening prior to the final hearing of the winding‑up application on the basis that the appointment of a provisional liquidator is required in the public interest or to preserve the status quo or to protect the company's assets from dissipation: Allstate Explorations NL v Batepro Australia Pty Ltd [2004] NSWSC 261 at [30];
(c) the appointment of a provisional liquidator pending the determination of a winding‑up application is a drastic intrusion into the affairs of a company and should not be made if other measures are adequate to preserve the status quo: Zempilas v JN Taylor Holdings Limited (No 2) (1990) 55 SASR 103 at 107; Lubavitch Mazal Pty Ltd v Yeshiva Properties No 1 Pty Ltd (2003) 47 ACSR 197 at [217].
9 Although the power of the Court to appoint a provisional liquidator is unfettered by statute the factors which are often taken into account in determining whether to appoint a provisional liquidator typically include:
(a) whether there is a real risk that the assets of the company will be dissipated prior to the time at which a winding‑up order is to be made;
(b) whether there is a prima facie case for a winding‑up order to be made;
(c) whether the company's affairs have been conducted in a manner without regard to legal requirements or accepted principles of corporate management: Montgomery Windsor (NSW) Pty Ltd v Ilopa Pty Ltd (1984) 2 ACLC 224; Australian Securities Commission v Solomon (supra) at 80;
(d) whether in the public interest there is a need for an independent examination of the accounts and financial transactions of the company which are in disarray: Australian Securities Commission v Solomon (supra) at 80.
10 I have had regard to these principles and authorities in preparing these reasons and reaching my conclusions. I consider that the approach to take on an application such as is made by the Commission in the circumstances of this case is usefully summarised by Tamberlin J in Australian Securities Commission v Solomon (supra) at 80:
"The relevant principles relating to the appointment of a provisional liquidator which require consideration include the following:
(a) The court should only appoint a provisional liquidator where it is satisfied that there is a valid and duly authorised winding up application and that there is a reasonable prospect that a winding up order will be made: see Debelle J in Re J N Taylor Holdings Ltd; Zempilas v J N Taylor Holdings Ltd (1991) 3 ACSR 516; 9 ACLC 1 at 12‑3.
(b) The fact that the assets of the corporation may be at risk is a relevant consideration.
(c) The provisional liquidator's primary duty is to preserve the status quo to ensure the least possible harm to all concerned and to enable the court to decide, after a further examination, whether the company should be wound up: Re Carapark Industries Pty Ltd (in liq) (1996) 9 FLR 297; 86 WN (Pt 1) (NSW) 165 at 171.
(d) The court should consider the degree of urgency, the need established by the applicant creditor and the balance of convenience: Re Club Mediterranean Pty Ltd (1975) 11 SASR 481 at 484 per Bright J. The power is a broad one and circumstances will vary greatly. Commercial affairs are infinitely complex and various and it is inappropriate to limit the power by restricting its exercise to fixed categories or classes of circumstances or fact.
(e) It may be appropriate to appoint a provisional liquidator in the public interest where there is a need for an independent examination of the state of accounts of the corporation by someone other than the directors: Tickle v Crest Insurance Co of Australia Ltd (1984) 2 ACLC 493.
(f) Where the affairs of the company have been carried on casually and without due regard to legal requirements so as to leave the court with no confidence that the company's affairs would be properly conducted with due regard for the interests of shareholders, it may be appropriate to appoint a provisional liquidator: see Montgomery Windsor (NSW) Pty Ltd v Illopa Pty Ltd (1984) 2 ACLC 224."
11 I was satisfied that it was appropriate, and in a number of respects necessary to appoint a provisional liquidator of the third, fourth, fifth, sixth, eighth and ninth defendants for a number of reasons which included prima facie evidence of insolvency of some of the defendants. There was also a considerable body of evidence led by the Commission that there were numerous instances of inter‑company transactions and loans involving substantial sums of money which were not documented. As I observed in my earlier reasons for judgment on 13 February 2009 when I put in place a number of restraining orders, all the corporate defendants in this proceeding, at relevant times, were controlled, or had involved in their activities, one or both of the first defendant, Mr Clestus Weerappah, and the second defendant, Ms Andrea Hawkins: Australian Securities and Investments Commissions v Weerappah [2009] FCA 164. I set out in those reasons for judgment a summary of relevant parts of evidence which was given by Ms Hawkins and Mr Weerappah.
12 In par [31] of those reasons for judgment I said:
"…I am particularly concerned about Ms Hawkins' seeming inability to identify the particular borrowers and lenders involved in a number of transactions which were the subject of evidence by her, and her inability to distinguish which company in the group of companies with which she was involved is entitled to receive, or obliged to pay moneys, or discharge liabilities of other companies in the group.
Subsequent to the delivery of those reasons for judgment, Ms Hawkins swore two affidavits in which she explained a number of the financial transactions which are under investigation by the Commission. However, those affidavits, particularly in the light of other evidence relied upon by the Commission, still leave significant doubt and concern in my mind as to the credibility of Ms Hawkins' explanation for a number of those financial transactions, particularly those transactions which have not been documented properly or at all.
13 The background to the commencement of this proceeding by the Commission is set out in my earlier reasons for judgment and I do not repeat that background. It should be read in conjunction with these reasons for judgment.
14 I turn to the defendants in respect of which I have already appointed a provisional liquidator. The third defendant, Bennett Street Developments Pty Ltd was not the subject of any submissions although it was represented by counsel. The third defendant is the trustee of the Bennett Street Property Trust. Evidence led by the Commission discloses that although money was obtained from investors in that Trust, the moneys obtained were not deposited with the third defendant. Mr Andrew Price, a Senior Manager with the Commission, has sworn affidavits in which he sets out a number of matters which raise serious issues as to that the third defendant and Mr Weerappah may have misled investors in the Bennett Street Property Trust, that they failed to deal properly with the funds of unit holders in the Bennett Street Property Trust and that they may have misappropriated those funds. There is also material which demonstrates that the third defendant has failed to maintain properly or at all, appropriate financial and banking records. In those circumstances, I considered it necessary and appropriate that a provisional liquidator be appointed of the third defendant for the purpose of enabling an independent person to investigate its activities and records and also to ensure that no further funds of it are dissipated.
15 The fourth defendant, Altitude Property No 1 Pty Ltd (Controller Appointed) did not oppose the appointment of a provisional liquidator. It is the trustee of the Bennett Street Unit Trust which it appears has raised money from the public. There is evidence that Westpac Banking Corporation has recently appointed itself as Controller of the fourth defendant pursuant to a mortgage over a property at 25 Bennett Street, Balwyn. On 2 February 2009 a director of the fourth defendant, Mr Stephen Lewis, sent an email to Mr Weerappah in which he said that there was no funding available to make payments due to Westpac Banking Corporation under the mortgage to it and that the property had to be sold. It would appear that the fourth defendant is insolvent and having regard to the manner in which it received funds from Bennett Street Property Developments Pty Ltd, it is desirable that a provisional liquidator be appointed to it to ensure that its affairs may be properly investigated.
16 The fifth defendant, My Building No 1 Pty Ltd, was represented by counsel who announced that it had no opposition to the Commission's application. It is the registered proprietor of the property situated at 81 Lorimer Street, Port Melbourne. There is evidence that the mortgagee of the property either has repossessed, or is about to repossess, the property on the basis that there is default under the mortgage. There is therefore evidence that the fifth defendant is likely to be insolvent and also that its affairs have not been conducted in a proper manner. For example, on 16 January 2004 Mr Dale Robertson signed an ASIC form lodging a charge granted by the fifth defendant in favour of Dollarforce Financial Services Pty Ltd. Mr Robertson was not a director of the fifth defendant on that date. There is also considerable doubt about a Deed of Release dated 20 November 2003 between Alamanda Property Investments No 2 Pty Ltd (of which Mr Weerappah was the sole director) and the fifth defendant (of which Mr Weerappah was the sole director) whereby Alamanda Property Investments No 2 Pty Ltd forgave a debt owed to it by the fifth defendant of $2,479,235.12. There are a number of problems about this release. Mr Lewis, a director of Altitude Property Limited, said in the course of an examination under s 19 of the Australian Securities and Investments Commission Act 2001 (Cth) ("the ASIC Act") that the release occurred around 2006. Mr Price's searches of the Commission's records disclose that there was no company named Alamanda Property Investments No 2 Pty Ltd on 20 November 2003 and that that company only came into existence on 15 January 2004.
17 There is also an issue about an event when the fifth defendant drew $1.4 million from a loan secured against the property at 81 Lorimer Street, Port Melbourne to pay Alamanda Property No 2 Pty Ltd in circumstances where it does not appear that that company is entitled to that payment.
18 For all these reasons I considered it desirable and necessary that a provisional liquidator be appointed of the fifth defendant in order that its affairs may be properly investigated by an independent person.
19 The sixth defendant, Altitude Property Limited, did not object to the appointment of a provisional liquidator. The Commission has led a considerable body of evidence which discloses a number of serious issues about the conduct of the affairs of the sixth defendant. It is a public company. It issued a prospectus to the public to subscribe for shares in it on 6 October 2006 which appears to have contained misleading information in relation to the purchase of all the outstanding units in the Darling Street Unit Trust which was on offer. The prospectus stated that that cost would be $1.8 million but it did not disclose that the sixth defendant had already agreed to pay further consideration to Alamanda Property Investments No 2 Pty Ltd. Mr Weerappah, in the course of cross‑examination on 11 February 2009, agreed that the sixth defendant agreed to pay Alamanda Property Investments No 2 Pty Ltd incentive payments if the value of the property purchased from it increased and that there was no maximum amount of such incentive payments. Mr Weerappah agreed that there was no reference to the incentive payment agreement in the prospectus which he had signed. He said that he believed that all the material was given to the solicitors but he was "very shocked" if the matter of the incentive payments was omitted. According to evidence led by the Commission the last incentive payment of approximately $1.4 million was paid by the sixth defendant in or about July 2008. It appears that that payment was obtained from the drawdown of a loan facility the sixth defendant had with Australian Securities Limited. Two of the three directors of the sixth defendant have given evidence in s 19 of the ASIC Act examinations that they did not authorise or agree to the payment of $1.4 million. It will be recalled that all the shares in My Building No 1 Pty Ltd are owned by the sixth defendant and that My Building No 1 Pty Ltd acts as the trustee of the Darling Street Unit Trust, all of the units of which are owned by the sixth defendant.
20 In the events which occurred the Commission has also led evidence that the books, records and financial accounts of the sixth defendant have a number of inconsistent entries in them which require further investigation. The Commission has obtained a document which appears to be a minute of a meeting of the sixth defendant's directors on 25 November 2008 in which two of the directors express their "grief and disappointment" that Mr Weerappah had not made them aware that entities owned and controlled by the sixth defendant were entering into arrangements without their consent or agreement. In a s 19 of the ASIC Act examination Mr Weerappah denied attending that meeting.
21 I was therefore satisfied that it was appropriate and necessary to appoint a provisional liquidator of the sixth defendant in order that an independent person could properly investigate its affairs both in relation to financial and property matters.
22 I consider the eighth defendant, Lewmac Investments Pty Ltd ("Lewmac"), and the ninth defendant, Ivory Property Group Pty Ltd, together. The necessity for the appointment of a provisional liquidator of each of these defendants arises out of an apparent transaction entered into on 26 September 2006.
23 The ninth defendant is a trustee company and acts as trustee of the Ivory Property Trust. Members of the public subscribed for units in this Trust. According to Mr Weerappah, the ninth defendant entered into a contract to purchase the property at 107 Riversdale Road, Hawthorn from the eighth defendant on 26 September 2006. The purchase has not been completed and, curiously, caveats were not lodged in respect of the purchase until 28 January 2009, which is more than two years and four months after the agreement was said to have been entered into. The caveats claim an interest on behalf of the ninth defendant pursuant to an agreement dated 26 September 2006. The Commission has obtained a copy of that agreement which does not have any operative provisions. It purports to have been made between the eighth defendant as vendor and the ninth defendant as purchaser. It contains recitals which refer to four other or separate contracts of sale dated 5 July 2006 but after the words "NOW THIS AGREEMENT WITNESSETH" there is no further text.
24 The Commission has also led evidence in relation to another purchase by the ninth defendant of a property from Dollarforce Financial Services Pty Ltd. That purchase remains uncompleted. A caveat was only lodged in relation to it on 28 January 2009 and, again, there is an agreement between Dollarforce Financial Services Pty Ltd and the ninth defendant which contains no operative provisions. Mr Price has produced financial accounts of the ninth defendant which disclose as a current asset, a receivable of $1,538,922 being an unsecured loan to Dollarforce Financial Services Pty Ltd. The Commission contends that this loan was a serious breach of trust by the ninth defendant.
25 Having regard in particular to the property transactions to which I have referred, I considered that it was appropriate and necessary that a provisional liquidator be appointed to each of the eighth and ninth defendants to enable an independent person to investigate the affairs and transactions of each of those companies and if necessary, take preventative steps to protect and preserve any further interests they may have.
26 I turn to the relief sought against the second, seventh and tenth defendants by the Commission. The Commission seeks the appointment of a provisional liquidator of the seventh and tenth defendants for the purpose of:
(a) securing the assets of those companies and preserving the status quo pending the final hearing and determination of the winding‑up application; and
(b) charging an independent expert, an officer of the Court, with the task of investigating those companies' affairs and reporting back to the Court.
For the reasons to which I shall refer I am satisfied that both those purposes are made out in relation to the seventh and tenth defendants and that there is a reasonable prospect that a winding‑up order will be made in relation to the seventh and tenth defendants at the final hearing on the basis that it is just and equitable to do so and that Elite Wealth Builders Pty Ltd may well be insolvent and particularly if a number of the transactions to which I refer are impugned.
27 The Commission also seeks the continuation of restraining orders against the second defendant, Ms Hawkins, in relation to disposal of assets and applying for a passport or leaving Australia. The Commission seeks the appointment of a provisional liquidator of the seventh defendant and the tenth defendant on the grounds, generally, that they have received funds to which they are not entitled, which funds have arguably been obtained from funds subscribed by investors in various of the entities, trust companies and projects under the previous control of Mr Weerappah or Ms Hawkins and that they have entered into transactions whereby they have received monies to which they are not entitled.
28 The relevant amounts or transactions are as follows. Ms Hawkins received money to which she was not entitled being:
(a) $62,000 from Dollarforce Financial Services Pty Ltd; and
(b) $10,000 from Altitude Property No 1 Pty Ltd, the fourth defendant.
The seventh defendant ("Retail Treasury") received $330,000 from Twentieth Green Pty Ltd to which it was not entitled.
The tenth defendant ("Elite Wealth Builders") received money to which it was not entitled being:
(a) $115,000 from Lewmac, the eighth defendant;
(b) $33,000 from Alamanda Pty Ltd;
(c) $32,000 from Elite Equities Pty Ltd;
(d) $267,000 from My Building No 1 Pty Ltd, the fifth defendant; and
(e) $35,000 from Elite Equities Pty Ltd.
29 The Commission also contends that Elite Wealth Builders has received, and will continue to receive, money initially payable to Dollarforce Financial Services Pty Ltd by way of trailing commissions as a result of acquiring its business and clients. A Purchase Agreement dated 1 May 2008 has been produced upon which Ms Hawkins and Elite Builders rely but the Commission contends that such document has been backdated and is ineffective.
30 Ms Hawkins has filed affidavits in which she explains how each of these transactions, and the receipt of such funds, arose and contends that Elite Wealth Builders, as well as herself, was entitled to receive those funds and that none of them fall into the category of either funds which belong to, or can be traced as belonging to, or being subscribed by, investors in other companies, trusts or entities. Elite Wealth Builders and Ms Hawkins acknowledge that the amounts referred to by the Commission have in fact been received by them but say that they are entitled to retain those amounts which were not received by them improperly.
31 A significant asset now possessed by Elite Wealth Builders is the right to receive trailing commissions to which Dollarforce Financial Services Pty Ltd had been entitled in the past. The Commission has been conducting an investigation in relation to the activities of the defendants and, in particular, that Dollarforce Financial Services Pty Ltd may have operated an unregistered managed investment scheme. According to the Commission, a number of investors invested money with Dollarforce Financial Services Pty Ltd in circumstances where their funds appear to have been dissipated. As a result of Mr Price's investigations, he believes that Dollarforce Financial Services Pty Ltd and its related companies raised about $20 million from about 200 investors without complying with relevant provisions of the Corporations Act. Dollarforce Financial Services Pty Ltd was placed into liquidation pursuant to a creditor's voluntary winding‑up on 16 December 2008. It appears that Dollarforce Financial Services Pty Ltd has substantial liabilities.
32 Ms Hawkins has given evidence that on 1 May 2008 Elite Wealth Builders purchased from Dollarforce Financial Services Pty Ltd its loan book, that is to say its customer list and the rights to the trailing commissions to which Dollarforce Financial Services Pty Ltd had previously been entitled. Ms Hawkins relies upon a Contract of Sale which is dated 1 May 2008. That Contract of Sale provided for a purchase price of $150,000 payable by a deposit of $1,000 on the signing of the contract and the balance to be paid over the ensuing nine months but not to exceed 31 March 2009. Mr Price has been unable to identify from Elite Wealth Builders' bank account records at Westpac Banking Corporation covering the period 14 May 2008 to 14 January 2009 any payments from Elite Wealth Builders to Dollarforce Financial Services Pty Ltd recording the payment of monies payable under the contract.
33 Ms Hawkins has given evidence that $1,000 was paid on the signing of the contract but there is no documentary evidence in support of that statement. Ms Hawkins has produced a "Quickbooks extract" which records a number of financial transactions said to have been carried out by Elite Wealth Builders. There is no evidence which verifies the manner in which that Quickbooks extract has been prepared. The Quickbooks extract purports to evidence, or identify money apparently paid to or on behalf of Dollarforce Financial Services Pty Ltd. Ms Hawkins says that it shows that since 1 May 2008 Elite Wealth Builders paid $140,822.93 to Dollarforce Financial Services Pty Ltd "by way of paying DFS staff, rent, invoices, credit card payments and other expenses over a period of time". Ms Hawkins says that the payments detailed in the Quickbooks extract are corroborated by entries in Westpac Banking Corporation account statements of Elite Wealth Builders which have been produced by Mr Price. However, the bank statements do not corroborate that a number of the payments were either made for or on behalf of Dollarforce Financial Services Pty Ltd or, more importantly, that any of them are referable to payments made under the Contract of Sale.
34 The Commission now contends that the Contract of Sale was not in fact entered into or dated on 1 May 2008 but was rather backdated to that date around 11 December 2008. As a liquidator of Dollarforce Financial Services Pty Ltd was appointed on 16 December 2008, if the Contract of Sale was only executed within a few days before that date, the backdating will have a significant effect on claims the liquidator may have in relation to the assets of Dollarforce Financial Services Pty Ltd.
35 Mr Price has given evidence that in the course of his investigation he used forensic software to analyse documents relating to Elite Wealth Builders. The use of this software generated reports in relation to documents stored on a hard drive. Mr Price produced a report relating to an email sent on 11 December 2008 from "Clestus Weerappah" to "Ms Liz Clegg". The email states:
"Liz,
Can you run your eye over this please. Think it is generally ok.
Thanks
CW".
There was attached to this email a document entitled "Contact of Sale of Business".
36 Mr Price said that:
(a) the attached contract appeared to be the same document as he had earlier produced which was the contract to which Ms Hawkins had referred and upon which she relies;
(b) the earlier contract purported to have been signed on 1 May 2008 by Ms Hawkins and Mr Weerappah;
(c) the forensic software report for the email sent on 11 December 2008 from Mr Weerappah to Ms Clegg revealed that the email was created on 11 December 2008 at 12:32:35pm;
(d) the forensic software report for the attached contract revealed that the document was created on Thursday 11 December 2008 at 12.31pm by an author with the identifier "Clestus".
37 The Commission submitted that I should infer that the Contract of Sale dated 1 May 2008 was not in fact signed and executed on that date but was rather created on 11 December 2008 and falsely backdated.
38 An examination of the contract attached to the email of 11 December 2008 shows that there are differences between it and the Contact of Sale dated 1 May 2008 upon which Ms Hawkins relies. These differences are as follows (and I refer to the contract attached to the 11 December 2008 first):
(a) on the front sheet of the contract the "VENDORS" are shown as "Clestus Weerappah - Director" whereas on the signed contract the "VENDOR" is shown as "Clestus Weerappah, Director";
(b) on the front sheet of the contract the "PURCHASERS" are shown as "Andrea Hawkins/and or Nominee" whereas on the signed contract the "PURCHASER" is shown as "Elite Wealth Builders Pty Ltd";
(c) on the front sheet of the contract the "BUSINESS" is shown as "Dollarforce Financial Services and Alamanda Property Investments" whereas on the signed contract the "BUSINESS" is shown as "Dollarforce Financial Services";
(d) in the Particulars of Sale in the contract the purchasers are shown as "Andrea Hawkins and/or Nominee" whereas in the Particulars of Sale in the signed contract the purchasers are shown as "Elite Wealth Builders Pty Ltd". The type of business is changed from "finance broking loans" to "finance broking - residential loans";
(e) in the Particulars of Sale of the contract dated 1 May 2008 there is a section entitled "EMPLOYEE ENTITLEMENTS" which is not set out in the Particulars of Sale of the contract attached to the 11 December 2008 email; and
(f) the Restraint of Trade provision in the Particulars of Sale in the contract is two years and ten kilometres whereas in the Restraint of Trade provision in the signed contract the period is one year and the distance is one kilometre.
39 This comparison of the two documents suggests to me that there is a strong inference that the Contract of Sale dated 1 May 2008 was not in fact dated on that date but that the contract was only finally prepared and engrossed and signed on or shortly after 11 December 2008. Counsel for Ms Hawkins drew my attention to the fact that in the forensic software report relating to the email of 11 December 2008 and its attachment there is stated opposite the words "last printed" the words "Monday, 27 October 2008 3:15:00 PM EST". Counsel submitted that this entry demonstrated that the contract attached to the email of 11 December 2008 could not have been printed for the first time on that date but had certainly come into existence earlier, for example, on or before 27 October 2008. Counsel for the Commission was unable to explain that entry in relation to the date 27 October 2008. Counsel for Ms Hawkins submitted that the forensic software report was unreliable and could not provide an accurate report as to the date of creation of the Contract of Sale as it could not both be created in December 2008 and last printed in October 2008.
40 I am not able to make a final determination as to whether the document upon which Ms Hawkins relies dated 1 May 2008 is genuine or has been backdated or is capable of being set aside by the liquidator of Dollarforce Financial Services Pty Ltd or as to what the reference to 27 October 2008 on the forensic software report means. One explanation for that date may be that the document attached to the 11 December 2008 email was last saved on that date but had earlier been printed on the last previous occasion on 27 October 2008. Even if I assume that the document had been printed on 27 October 2008 so that it did not come into existence for the first time on 11 December 2008, that still leaves open the inference that the Contract of Sale dated 1 May 2008 was in fact backdated because there was a draft of it in existence, not yet signed and indeed, not finalised as to its text or terms on 27 October 2008.
41 Nevertheless, I consider that in all the circumstances there is a very strong inference that the Contract of Sale dated 1 May 2008 was backdated and only signed and executed within five days or so of a liquidator of Dollarforce Financial Services Pty Ltd being appointed. Certainly the inference I can draw from the email of 11 December 2008 is that Mr Weerappah was asking Ms Clegg to look at the draft contract and to consider whether it was alright for it to be executed. Counsel for Ms Hawkins submitted that there was nothing in relation to the documentation to support the proposition that whatever Ms Clegg was being asked to cast her eye over had anything to do with the contract dated 1 May 2008 as opposed to the draft document being used as "a template for something else". I do not consider that the terms of the email of 11 December 2008 are suggesting that the document be used for a template for anything other than the contract for the sale of the business referred to in it. Counsel for Ms Hawkins submitted that there was another inference which was equally open, given the content of the email, which was that the document was being "bandied around for any number of purposes". But no particular purpose was advanced by counsel.
42 Counsel for Ms Hawkins submitted that there was evidence that Ms Hawkins or Elite Wealth Builders had made payments to Dollarforce Financial Services Pty Ltd after 1 May 2008 of the order of $143,000 and he posed the question - why would someone be paying that money pursuant to a contact that had not been executed?
43 There is a short answer to that question which is that the payments upon which Ms Hawkins relies are not identified in the Quickbooks extract as payments made pursuant to, or by reference to, the Contract of Sale dated 1 May 2008. Those payments consist of a considerable number of payments relating to Dollarforce Financial Services Pty Ltd. But they are not stated to be referable to, or payments in relation to, the contract dated 1 May 2008. I have already referred, in par [31] of my earlier reasons for judgment, to Ms Hawkins' inability to distinguish which company in the group of companies with which she was involved, is entitled to receive, or obliged to pay moneys, or discharge liabilities of other companies in the group.
44 I am not satisfied that the amount of $140,822.93 shown in the Quickbooks extract upon which Ms Hawkins relies relates to moneys which at the time they were disbursed by Elite Wealth Builders were in reduction of, or were intended to be in reduction of, any amount payable as the purchase price under a contract of sale for the purchase of a business from Dollarforce Financial Services Pty Ltd. If those payments were so intended by Ms Hawkins or Elite Wealth Builders, why would the Quickbooks extract show a payment of $15,729.90 on 21 August 2008 in relation to Dollarforce Financial Services Pty Ltd recorded as "Loan Dollarforce (to cover wages)"? Why would the extract show a payment of $824.25 on 25 August 2008 recorded as "Loan Dollarforce - Telemarketing"? I make similar observations in relation to the amounts of $6,087.15 on 16 October 2008 recorded as "Loan Dollarforce - Payment of DFS wages", $2,202.00 on 20 October 2008 recorded as "Loan - DFS Sam Pays" and $271.04 on 1 December 2008 recorded as "Loan DFS ‑ Corp Executive Office CEO". The description of these payments as "Loans to Dollarforce" is quite inconsistent with Ms Hawkins' proposition that the component amounts of the $140,822.93 were in fact, or were intended to be, payments in reduction of an amount owing to Dollarforce Financial Services Pty Ltd by Elite Wealth Builders under the contract of sale of Dollarforce Financial Services Pty Ltd's business.
45 The issues relating to the Contract of Sale are such that the benefits and the receipt of trailing commissions to which Elite Wealth Builders claims to be entitled, and which will continue to be paid should be under the control of an independent person until the Commission concludes its investigation and its application to wind‑up Elite Wealth Builders is determined. It is important that those benefits and commissions not be dissipated and that they should be preserved and controlled by an independent person, someone other than Ms Hawkins whose track record in relation to the management of companies and the manner in which they enter into, and record, significant financial transactions is less than satisfactory. For that reason alone it is appropriate and necessary, consistently with the principles and authorities to which I have referred, to appoint a provisional liquidator of Elite Wealth Builders.
46 I appreciate that such an appointment is a drastic step and that it will be a most significant intrusion into Elite Wealth Builders' commercial affairs. Nevertheless, I have weighed those considerations with the nature and consequences of the financial transactions to which I have referred in these reasons, with which Ms Hawkins has been involved. I am satisfied that the public interest and the necessity to protect the interests of investors in the companies controlled by Mr Weerappah and Ms Hawkins requires that control of Elite Wealth Builders be taken out of the hands of Ms Hawkins and placed in the hands of an independent person.
47 According to Mr Price's investigations Elite Wealth Builders received the sum of $267,000 from My Building No 1 Pty Ltd, the fifth defendant, between 18 July 2008 and 28 August 2008. Ms Hawkins said that according to Elite Wealth Builders' Quickbooks books of account the amount received was $263,188.58. For present purposes, the difference between the two amounts is of no consequence. Ms Hawkins contends that she lent $200,000 to My Building No 1 Pty Ltd on 28 March 2006. She also contends that the amount of $263,188.58 was repayment of that loan together with interest. As with many of the transactions under consideration in this proceeding these financial transactions are not documented or corroborated in any way. There is evidence that $200,000 was deposited into the account of My Building No 1 Pty Ltd with Westpac Banking Corporation on 28 March 2006 but there is no documentation which records the source of that deposit. The Quickbooks extract relied upon by Ms Hawkins is dated 15 February 2009. Ms Hawkins has not produced any record of the initial making of the loan of $200,000 or of the terms of the loan. There is therefore considerable doubt as to whether Elite Wealth Builders is entitled to retain this amount.
48 I therefore consider that this is another transaction which needs to be investigated by an independent person to determine whether the amount of $263,188.58 is the subject of a claim by My Building No 1 Pty Ltd. The desirability of preserving the assets of Elite Wealth Builders to ensure that they are not dissipated if such a claim is made is another reason to appoint a provisional liquidator of Elite Wealth Builders.
49 Elite Wealth Builders received amounts totalling $115,000 from Lewmac on 12 and 17 June 2008, 10 July 2008 and 4 September 2008. Ms Hawkins contends that the amounts totalling $115,000 were received by Elite Wealth Builders in part satisfaction of an amount due in respect of a debt due by it to Mr Weerappah who assigned the debt to Ms Hawkins. This financial transaction, again not corroborated or documented in any way is said by Ms Hawkins to arise out of the development of a property at 107 Riversdale Road, Hawthorn by Lewmac.
50 According to Ms Hawkins the following events occurred. Lewmac was using BuildRite Developments Pty Ltd ("BuildRite") to develop a property. BuildRite became financially unstable and Mr Weerappah borrowed $1 million of which he directed that the lender disburse $600,000 directly to BuildRite. Mr Weerappah made that payment on behalf of Lewmac in order to ensure that BuildRite completed the construction of the property at 107 Riversdale Road, Hawthorn. At this point a debt of $600,000 was owed to Mr Weerappah by Lewmac. Mr Weerappah assigned this debt to Ms Hawkins and she instructed Lewmac to pay the money to Elite Wealth Builders. No documentation has been produced by Mr Weerappah or Ms Hawkins in relation to the terms of the payment of the $600,000 or the assignment of the debt or the instruction to pay the money to Elite Wealth Builders.
51 Mr Weerappah said that BuildRite approached him as a director of Lewmac and indicated it had underquoted on the contract for the construction of the property at 107 Riversdale Road, Hawthorn and that it would be unable to complete the development without an increase in the contract price. Mr Weerappah agreed to increase the amount payable to BuildRite by $600,000. No documentation was produced by Mr Weerappah in relation to this transaction.
52 Ms Hawkins' explanation and Mr Weerappah's explanation for the payment by Lewmac to BuildRite is contradicted by Mr Robert Walpole, a Director of BuildRite, now in liquidation.
53 According to Mr Walpole, in 2006 Mr Weerappah expressed an interest in investing in BuildRite and Legal Entity Developments Pty Ltd, another development company of which Mr Walpole and Mr David Hanna were directors. Mr Walpole and Mr Hanna discussed with Mr Weerappah an investment of $1.2 million. As a result of those discussions documentation was prepared to document the investment. The initial agreement was that Mr Weerappah's interests would purchase a one third interest in Mr Walpole's companies and business for $1.2 million. Mr Weerappah transferred $600,000 to BuildRite. Mr Walpole disputes what Mr Weerappah says was the reason for the payment of the $600,000. He says that the $600,000 was part payment of the $1.2 million that Mr Weerappah had agreed to pay for a 25% share in BuildRite and a 33% share in Legal Entity Developments Pty Ltd. (The amount of the interests agreed to be purchased apparently changed.) In April 2007 BuildRite received a further $200,000 from Mr Weerappah. BuildRite received a total of $2,261,513 from Lewmac in relation to the construction of the development. Mr Walpole's evidence is corroborated (and Mr Weerappah's and Ms Hawkins' evidence is contradicted) by an email sent by Mr Weerappah to Mr Hanna at 8:52am on Monday 22 January 2007 which stated:
"Hi David,
Over the weekend we discussed the balance of the funding proposal. As agreed there was a price of $1.2million to be paid to gain a share of the following entities:
Buildrite Developments - 25%
Legal Entity - 33%
The first tranche of funds is to be paid this week and the balance on completion of the funding proposal through the NAB. …"
54 I am not able on this interlocutory application in the absence of cross‑examination of relevant witnesses to determine finally the evidence which I should accept and the evidence which I should reject in relation to this transaction involving the payment of $600,000 by Mr Weerappah to BuildRite. Nevertheless, there is a strong case made out, based on Mr Walpole's evidence and the email dated 22 January 2007 that the $115,000 Elite Wealth Builders received from Lewmac is recoverable by it from Elite Wealth Builders. There is also considerable doubt that there was any proper or effective assignment by Mr Weerappah to Ms Hawkins in respect of what he says is a debt due to him by Lewmac, if in fact that debt existed.
55 Ms Hawkins produced a Quickbooks account extract for Lewmac as at 24 February 2009 which she says records that Lewmac owes her $635,979.41 which she contends is the outstanding part of the $600,000 paid by Mr Weerappah to BuildRite plus interest. Ms Kohary, a Financial Investigator in the financial accounting practice of the Commission, who has sworn affidavits in which she analyses records of the defendants obtained by the Commission, has examined the books and records of Lewmac including its general ledgers as at 30 June 2007, 30 June 2008 and 31 December 2008. Ms Kohary says there is no loan account in the general ledgers for Ms Hawkins, that is to say, there is no debt recorded in the general ledgers as being owed to Lewmac by Ms Hawkins.
56 The characteristics of this transaction are such that it provides a further reason why a provisional liquidator should be appointed to Elite Wealth Builders in order to ensure that an independent person can investigate this and the other transactions and ensure that the assets and funds presently held by Elite Wealth Builders are not dissipated whilst this investigation is undertaken.
57 I turn to the submission of the Commission that Retail Treasury, the seventh defendant, received $330,000 from Twentieth Green Pty Ltd to which it was not entitled. Retail Treasury was previously owned by Dollarforce Financial Services Pty Ltd and controlled by Mr Weerappah as its sole director. It appears that Retail Treasury owns units in the Twentieth Green Unit Trust and the Rose Anna Unit Trust which have valuable assets. Mr Ross Booth was engaged by Mr Weerappah in or about August 2008 and companies controlled by him to reconcile and put in order the financial accounts of the various entities which Mr Weerappah controlled. Mr Booth said that during one of his meetings with Mr Weerappah on or about 2 and 3 September 2008, Mr Weerappah told him that Retail Treasury was due to receive $1.2 million in the current financial year.
58 The evidence is inconsistent as to the circumstances in which Ms Hawkins acquired the shares in, and control of, Retail Treasury. In the course of a s 19 of the ASIC Act examination on 6 February 2009, Ms Hawkins said that she did not buy the company but took it over from Mr Weerappah because he no longer wanted, or needed, the company and she did. In the course of Mr Weerappah's s 19 of the ASIC Act examination on 6 February 2009, Mr Weerappah said that he had no need for Retail Treasury from a few years ago and that Ms Hawkins was after an entity and "we transferred it across at the time". Mr Weerappah said that he did not believe that there was any consideration paid by Ms Hawkins for Retail Treasury. Ms Hawkins, in an affidavit sworn on 24 February 2009, said that when she said in the s 19 of the ASIC Act examination that she did not purchase Retail Treasury, she was referring to the period of time, that is, 2006. Even if I accept this explanation for her answer in the examination on 6 February 2009, it still remains that she said that she took over Retail Treasury from Mr Weerappah without saying that she paid for it.
59 In her affidavit sworn on 24 February 2009, Ms Hawkins responded to a number of the issues and evidence raised by the Commission. In relation to her purchase of Retail Treasury she said the following. Mr Weerappah borrowed $1 million from Traditional Values Management Limited (pursuant to a Loan Facility Agreement dated 25 January 2007). Mr Weerappah used $600,000 of that loan to pay a debt owed to BuildRite by Lewmac (this characterisation of the payment is contested by the Commission) and agreed to lend Ms Hawkins the remaining $400,000 so that she could purchase Retail Treasury from Dollarforce Financial Services Pty Ltd. On 25 January 2007, $375,000 was deposited into Dollarforce Financial Services Pty Ltd's bank account. At the time Mr Weerappah and Ms Hawkins agreed that he would lend her $400,000, she had expressed an interest in purchasing all the shares in Retail Treasury from Dollarforce Financial Services Pty Ltd. She believed the value of those shares to be between $300,000 and $400,000. Eventually they settled on a figure of $330,000 for the purchase of all the issued shares in Retail Treasury from Dollarforce Financial Services Pty Ltd. Ms Hawkins then said "the purchase price of $330,000 had already been (more than) deposited into the account of DFS by way of the $375,000 obtained from TVM".
60 None of these financial transactions referred to, and relied upon, by Ms Hawkins are documented in any way. In relevant material respects Ms Hawkins' evidence is not corroborated and, indeed, is inconsistent in relation to her purchase of the shares in Retail Treasury. Her evidence in the s 19 of the ASIC Act examination (and also Mr Weerappah's evidence in the s 19 of the ASIC Act examination) is quite inconsistent with her paying $330,000 for the purchase of the shares in Retail Treasury. At this point of time I am not prepared to accept Ms Hawkins' uncorroborated and undocumented evidence in relation to the financial transactions she relies upon in relation to the purchase of the shares in Retail Treasury. Again, I refer to her inability to identify the manner in which particular payments have been made to, for or on behalf of, or by various companies in the group of defendants with which she was involved with Mr Weerappah.
61 There is therefore a significant issue to be determined, namely whether Ms Hawkins is entitled to be the owner of the shares in Retail Treasury and the identity of the person entitled to the benefit of the assets held by it in the two trusts. In these circumstances, I consider that it is appropriate and necessary that an independent person be appointed to investigate this issue and that steps be taken to ensure that the assets of Retail Treasury are not dissipated. Accordingly, I consider it appropriate to appoint a provisional liquidator of Retail Treasury.
62 There is a further issue which, in my view, warrants the appointment of a provisional liquidator to Retail Treasury. Retail Treasury has no bank account and it is therefore, not easy to identify financial transactions which involve moneys coming to and being paid by it. According to the records analysed by Ms Kohary, units in the Twentieth Green Unit Trust and the Rose Anna Unit Trust were purchased by Retail Treasury not from money that came from it but rather from other companies in the Dollarforce group. Ms Kohary has identified that $94,500 for that purchase came from Ivory Property Group Pty Ltd, the ninth defendant. As that company was a trustee company it was not open to it to use its funds in this way.
63 I should also point out that even if Ms Hawkins did pay Dollarforce Financial Services Pty Ltd $330,000 to acquire the shares in Retail Treasury and accordingly acquire the benefits of the two unit trusts held by that company, the commerciality and justification for the amount of that payment is in question. The relationship between Mr Weerappah and Ms Hawkins was such that the transaction was not an arms length transaction. The consideration of $330,000 appears to be totally inadequate. For example, in April 2008 amounts totalling $330,000 were deposited into the Dollarforce Financial Services Pty Ltd's bank account and in January 2009, amounts totalling $360,000 were deposited into Elite Wealth Builders' bank account. The consequence is that the liquidator of Dollarforce Financial Services Pty Ltd may be able to set aside that transaction on the basis that Mr Weerappah entered into that transaction as a director of Dollarforce Financial Services Pty Ltd in breach of his duty to Dollarforce Financial Services Pty Ltd and that Ms Hawkins was privy to and part of that breach of duty.
64 I am satisfied that it is necessary that an independent person be appointed to investigate these transactions involving Retail Treasury and the unit trusts it owns and the payments paid to Elite Wealth Builders to determine whether there has been misappropriation of funds which should properly belong to Dollarforce Financial Services Pty Ltd or other companies or persons. I am also satisfied that a provisional liquidator should be appointed to Retail Treasury to ensure that its assets are not dissipated. The manner in which Ms Hawkins has been involved in the earlier financial transactions of Dollarforce Financial Services Pty Ltd and the other defendants and her explanations for those financial transactions which have not been documented properly or at all, lead me to the conclusion that she should not continue to be in control of Retail Treasury whilst its affairs are being investigated by the Commission and whilst there are live issues as to whether it is in possession or control of funds and assets which properly belong to other persons or which can be traced as belonging to other persons.
65 There are also significant doubts as to whether Ms Hawkins was entitled to receive $62,000 from Dollarforce Financial Services Pty Ltd and $10,000 from Altitude Property No 1 Pty Ltd. There is also significant doubt as to whether Elite Wealth Builders was entitled to receive $33,000 from Alamanda Pty Ltd and $32,000 and $35,000 from Elite Equities Pty Ltd.
66 Ms Hawkins says that Alamanda Pty Ltd entered into a contract with Elite Wealth Builders to provide various services to it including accounting and administration for a number of companies. Ms Hawkins says that the payment of $33,000 relates to an invoice for those services being rendered to Alamanda Pty Ltd. No invoice or document relating to that contract was produced. Ms Hawkins did produce a Quickbooks extract purporting to show the amounts owing by Alamanda Pty Ltd to Elite Wealth Builders. The amount of $30,000 is recorded as "Start up capital" and the amount of $3,000 is recorded as "Loan - Alama".
67 Ms Hawkins says that Elite Equities Pty Ltd entered into a contract with Elite Wealth Builders to provide various services for it. Ms Hawkins says that the payment of $32,000 relates to an invoice for those services being rendered to Elite Equities Pty Ltd. No invoice or document relating to that contract was produced. Ms Hawkins produced a Quickbooks extract purporting to show the amounts owing by Elite Equities Pty Ltd to Elite Wealth Builders. The amount of $20,000 is recorded as "Transfer of F…" and the amount of $12,000 is recorded as "Transfer of F…"
68 It is not necessary, having regard to the findings I have made in relation to the other transactions to analyse these transactions further, other than to say they support the proposition that a provisional liquidator should be appointed to Elite Wealth Builders pending further investigation of the transactions involving Mr Weerappah, Ms Hawkins and Elite Wealth Builders.
69 I therefore propose to make orders appointing a provisional liquidator of Elite Wealth Builders and Retail Treasury and orders restraining Ms Hawkins and Mr Weerappah from applying for passports or leaving the country. I will hear from the parties as to whether I should make any further and, if so, what orders restraining Mr Weerappah and Ms Hawkins from disposing of their assets.