Enterprises Pty Ltd (ACN 099 071 968) v Carey

Federal Court of Australia|2006-04-20|Before: French J

In respect of the First to Fourth Defendants THE COURT ORDERS THAT:

Until 20 October 2006 or further order, Oren Zohar, Brian McMaster and Mark Korda of KordaMentha, Chartered Accountants, of Level 11, 37 St Georges Terrace, Perth be appointed as receivers ('the Individual Receivers') to all property ('the Individual Property') whether within Australia or overseas, of each of the First, Second, Third and Fourth Defendants.

The Individual Receivers have, in respect of the Individual Property, the following powers:

2.1 the power to do all things necessary or convenient to be done for or in connection with, or as incidental to, the identification, preservation and securing of all of the Individual Property for the benefit of potential creditors;

2.2 without limiting the generality of the power in the preceding subparagraph, the power to enter into possession and take control of the Individual Property to the extent that the exercise of the power is reasonably necessary to achieve the purposes set out in the preceding sub-paragraph.

2.3 The preceding powers shall not extend to the sale, letting or encumbering of such property without prior leave of the Court or the consent of the defendant whose property it is.

The power referred to in paragraph 2.1 above shall not prevent:

3.1 the First to Fourth Defendants carrying on any business or otherwise impeding their ability to carry on a business in an effective and efficient manner PROVIDED HOWEVER that the said limitation on the power of the Individual Receivers shall not apply to the extent that the exercise of the said power is necessary to do the things referred to in paragraph 2.1; or

3.2 any bank, building society or financial institution from:

3.2.1 exercising any right of set-off which it may have in respect of a facility afforded by it to each or any of the First to Fourth Defendants prior to the date of this Order; and

3.2.2 from processing any automatic debits to a bank, building society or financial institution.

Except to the extent that a claim of privilege against self incrimination or exposure to civil penalty is made by any of the First, Second, Third and Fourth Defendants, each of the First, Second, Third and Fourth Defendants shall, by 5.00pm on Thursday 4 May 2006, deliver or cause to be delivered to the Plaintiff and the Individual Receivers full and detailed affidavits sworn by each of them, setting out:

4.1 the name and address of any bank, building society or other financial institution at which there is an account in the name of or under the control of the respective Defendant, together with the number of such account, the name of such account and the balance of that account at the date of this Order;

4.2 the name and address of any person or persons indebted to the respective Defendant at the date of this Order and the amount of the indebtedness;

4.3 an itemised inventory of the respective Defendant's assets and liabilities;

4.4 an itemised inventory of any and all property whether real or personal;

4.4.3 in which the respective Defendant has an interest,

and which includes details of the location of that property; and

4.5 in respect of any of the property referred to in sub-paragraphs 4.1 to 4.4 above, whether that property has been given as security for any debt, and, if so, the nature of the security and the debt so incurred.

In the event that any of the First, Second, Third and fourth Defendants refuse to provide in whole or in part the affidavit referred to in paragraph 4 above, based on a claim of privilege against self incrimination or exposure to civil penalty, that Defendant shall by 5.00pm on Thursday, 4 May 2006, file with the Court and serve on the Plaintiff, an affidavit specifying the grounds on which the claim is made.

PROVIDED that this Order shall not require that any of the First to Fourth Defendants disclose any information which would otherwise be protected from disclosure in accordance with the privilege which has been claimed.

An order that the First, Second, Third and Fourth Defendants, by themselves, their servants, agents or employees:

6.1 immediately deliver up to the Individual Receivers the books and records which relate to the Individual Property; and

6.2 otherwise use their best endeavours to assist the Individual receivers in performance of their obligations.

The question whether the Individual Receivers' reasonable costs and expenses properly incurred in performance of their obligations and as approved by the Court shall be payable from the collective assets of the First, Second, Third and Fourth Defendants is to be reserved for further submissions.

Any decision as to which if any of the First, Second, Third and Fourth Defendants is to ultimately bear the Individual Receivers' reasonable costs and expenses is reserved.

Until further order that each of the First, Second, Third and Fourth Defendants is restrained from:

9.2 from coming within one hundred (100) metres of an Australian point of overseas departure.

Each of the First, Second, Third and Fourth Defendants deliver to any Registry of this Court by 4.15pm on Wednesday 26 April 2006:

10.1 all passports held by them in their possession, custody or control; and

10.2 any airline tickets concerning any travel arrangements made for the twelve (12) month period commencing from the date of these Orders.

All documents produced to the Court's Registry pursuant to the orders made in paragraph 10 above, shall be held by the Court's Registry until further order.

12.1 the relevant authorities that record, control and regulate the ownership of real property;

12.2 the relevant authorities that record, control and regulate the ownership of motor vehicles;

12.3 the relevant authorities that record, control and regulate the ownership of maritime vessels and craft;

12.4 any bank, building society of other financial institution with which any of the First to Fourth Defendants operates any accounts; and

12.5 any other person or entity holding or controlling property belonging to each or any of the First to Fourth Defendants,

notice of these Orders by delivering a copy of these Orders to a person apparently in the employ of that entity or person.

The matter is stood over before Justice French on 3 October 2006 at 9am.

The Defendants pay the Plaintiff's costs of these proceedings.

The Parties, third parties affected by the orders and the Individual Receivers have liberty to apply to the Court on the giving of reasonable notice.

In respect of the Fifth, Sixth and Eighth Defendants THE COURT ORDERS THAT:

A. The Receiver Orders 1. Until 20 October 2006 or further order, Oren Zohar, Brian McMaster and Mark Korda of KordaMentha, Chartered Accountants, of Level 11, 37 St Georges Terrace, Perth, be appointed as receivers and managers ('the Corporate Receivers') to property ('the Corporate Property'), whether within Australia or overseas, of the Fifth, Sixth and Eighth Defendants as specified in this order. 2. The Corporate Receivers have the power to appoint themselves as a required signatory to all bank accounts of the Fifth, Sixth and Eighth Defendants. 3. These orders shall not prevent the Fifth, Sixth and Eighth Defendants by their officers other than the Corporate Receivers from continuing to operate in the ordinary course of its business, provided that they must obtain the Corporate Receivers' prior consent to any transaction that would result in the transfer or disposition of any part of the Corporate Property exceeding a value of in excess of $5,000or a series of transactions that would result in the transfer or disposition of any part of the Corporate Property totalling a value of in excess of $5,000 within any seven (7) day period. 4. In exercising the discretion to consent or not to any payment, transfer or disposition contemplated in paragraphs 2 and 3 above, the Corporate Receivers have the power to make all necessary and incidental inquiries into the affairs of the Fifth, Sixth and Eighth Defendants (including the power to make inquiries in the name of the Fifth, Sixth and Eighth Defendants), including inspecting the books and records and any other information held by the Fifth, Sixth and Eighth Defendants and or their agents relating to those affairs, and the Fifth, Sixth and Eighth Defendants must give the Corporate Receivers such assistance as is reasonably requested by them in the course of such inquiries. 5. The Fifth, Sixth and Eighth Defendants shall by 5.00pm on Thursday, 4 May 2006, deliver or cause to be delivered to the Plaintiff and the Corporate Receivers a full and detailed affidavit sworn by their proper officers, setting out: 5.1 the name and address of any bank, building society or other financial institution at which there is an account in the name of or under the control of the Fifth and Sixth Defendants, together with the number of such account, the name of such account and the balance of that account at the date of this Order: 5.2 the name and address of any person or persons indebted to the Fifth, Sixth and Eighth Defendants at the date of this Order, and the amount of the indebtedness; 5.3 an itemised inventory of the Fifth, Sixth and Eighth Defendants' assets and liabilities; 5.4 an itemised inventory of any and all property whether real or personal: 5.4.1 owned by the Fifth, Sixth and Eighth Defendants; 5.4.2 controlled by the Fifth, Sixth and Eighth Defendants; and 5.4.3 in which the Fifth, Sixth and Eighth Defendants have an interest, and which includes details of the location of that property; and 5.5 in respect of any of the property referred to in sub-paragraphs 5.1 to 5.4 above, whether that property has been given as security for any debt, and, if so, the nature of the security and the debt so incurred. 6. An order that the Fifth, Sixth and Eighth Defendants, by themselves, their servants, agents or employees: 6.1 immediately deliver up to the Corporate Receivers the Corporate Property and the books and records which relate to the Corporate Property; and 6.2 otherwise use their best endeavours to assist the Corporate Receivers in performance of their obligations. B. Costs of Receivers 7. The question whether the Corporate Receivers' reasonable costs and expenses properly incurred in the performance of their obligations and as approved by the Court, shall be payable from the assets of the Fifth, Sixth and Eighth Defendants is reserved. 8. Any decision as to which if any of the Fifth, Sixth and Eighth Defendants is to ultimately bear the Corporate Receivers' reasonable costs and expenses is reserved. C. The 'general' orders 9. The Plaintiff has leave to give to: 9.1 The relevant authorities that record, control and regulate the ownership of real property; 9.2 The relevant authorities that record, control and regulate the ownership of motor vehicles; 9.3 The relevant authorities that record, control and regulate the ownership of maritime vessels and craft; 9.4 Any bank, building society or other financial institution with which the Fifth Defendant operates any accounts; and 9.5 Any other person or entity holding or controlling property belonging to the Fifth Defendant, notice of these Orders by delivering a copy of these Orders to a person apparently in the employ of that entity or person. 10. The matter is stood over before Justice French on 3 October 2006 at 9am. 11. The Defendants pay the Plaintiff's costs of these proceedings. 12. The Parties, third parties affected by the ordersand the Corporate Receivers have liberty to apply to the Court on the giving of reasonable notice. In respect of the Seventh Defendant THE COURT ORDERS THAT: A. The mareva order 1. The Seventh Defendant ("Bowesco"), by itself, its servants agents and employees, is restrained until 20 October 2006 or further order, from removing, or causing or permitting to be removed from any State of Australia and from Australia, or selling, charging, mortgaging or otherwise dealing with or disposing of or causing or permitting to be sold, charged, mortgaged or otherwise dealt with or disposed of, all or any of its assets, whether held legally or beneficially by it. PROVIDED that this Order: 1.1 Shall not prevent John Patrick Cronin and Shaun Robert Fraser ("the Receivers") from exercising all rights, powers, privileges, benefits, discretions and authorities conferred upon them (either jointly or severally) by: 1.1.1 a Deed of Charge granted by Bowesco in favour of Suncorp-Metway Limited ("Suncorp"), dated 8 October 2004, registered with the Plaintiff and having charge number 1093803; 1.1.2 a Mortgage granted by Bowesco in favour of Suncorp, dated 8 October 2004, and registered in the Land Titles Office of Western Australia on and having number J056734; 1.1.3 a Deed of Appointment of Receiver made 3 April 2006 between Suncorp and the Receivers; and 1.1.4 section 420 of the Corporations Act 2001; 1.2 Shall not prevent Bowesco from paying costs reasonably incurred in these proceedings; 1.3 Shall not prevent any bank, building society or financial institution from: 1.3.1 exercising any right of set-off which it may have in respect of a facility afforded by it to Bowesco prior to the date of this Order; and 1.3.2 from processing any automatic debits to a bank, building society or financial institution. 1.4 Shall not prevent Bowesco from paying ordinary operating and living expenses up to an amount of four thousand dollars ($4,000) per week from a bank account nominated in writing to the Receivers. 2. Bowesco shall by 5.00pm on Thursday, 4 May 2006, deliver or cause to be delivered to the Plaintiff a full and detailed affidavit sworn by its proper officer, setting out: 2.1 the name and address of any bank, building society or other financial institution at which there is an account in the name of or under the control of Bowesco, together with the number of such account, the name of such account and the balance of that account at the date of this Order; 2.2 the name and address of any person or persons indebted to Bowesco at the date of this Order, and the amount of the indebtedness; 2.3 an itemised inventory of Bowesco 's assets and liabilities; 2.4 an itemised inventory of any and all property whether real or personal: 2.4.1 owned by Bowesco; 2.4.2 controlled by Bowesco; and 2.4.3 in which Bowesco has an interest, and which includes details of the location of that property; and 2.5 in respect of any of the property referred to in sub-paragraphs 2.1 to 2.4 above, whether that property has been given as security for any debt, and, if so, the nature of the security and the debt so incurred. 2. The 'general' orders 3. The Plaintiff has leave to give to: 3.1 The relevant authorities that record, control and regulate the ownership of real property; 3.2 The relevant authorities that record, control and regulate the ownership of motor vehicles; 3.3 The relevant authorities that record, control and regulate the ownership of maritime vessels and craft; 3.4 Any bank, building society or other financial institution with which Bowesco operates any accounts; and 3.5 Any other person or entity holding or controlling property belonging to Bowesco, notice of these Orders by delivering a copy of these Orders to a person apparently in the employ of that entity or person. 4. The matter is stood over before Justice French on 3 October 2006 at 9am. 5. The Defendants pay the Plaintiff's costs of these proceedings. 6. The Parties and third parties affected by the ordershave liberty to apply to the Court on the giving of reasonable notice. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

WESTERN AUSTRALIA DISTRICT REGISTRY WAD 83 OF 2006

IN THE MATTER OF RICHSTAR ENTERPRISES PTY LTD (ACN 099 071 968)

BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENT COMMISSION

REASONS FOR JUDGMENT Introduction 1 The Westpoint Group of Companies (Westpoint Group) has, for some years, been engaged in the business of property development and raising finance for that purpose. Its sources of funds have included banks and institutions and smaller retail investors in a form of finance known as mezzanine finance. A large number of such investors has paid a very large amount of money to Mezzanine Companies set up within the Group for the specific purpose of raising capital for particular projects. The Westpoint Group is now in a state of collapse. Many of the companies making it up are under external administration of one kind or another. 2 The Australian Securities and Investment Commission (ASIC) commenced an investigation into the affairs of the Group in mid 2005. Its investigations have uncovered evidence suggestive of widespread and serious misconduct in the conduct of the affairs of the Group up until quite recently. As a result the position of investors and other creditors may be significantly prejudiced. 3 ASIC commenced proceedings in this Court on 29 March 2006 seeking the appointment of receivers to the property of certain officers and former officers of companies in the Group and against four named corporate defendants which are members of the Group. The application was brought under s 1323 of the Corporations Act 2001 (Cth). Interim freezing orders affecting the property of the various defendants were made by Siopis J on 5 April 2006 and extended until today when the substantive application, which was heard on 12 April 2006, falls to be determined. 4 The evidence placed before the Court in support of the application was extensive and detailed and was not the subject of any substantial challenge. It is indicative of serious misconduct in the affairs of the companies and the very real possibility that there have been a number of contraventions of the Corporations Act and other laws by persons involved in the Group. Indeed there are aspects of the evidence suggestive of a ruthless disregard by the Westpoint Group's controllers of the interests of investors and other creditors in the way in which funds invested and assets of companies within the Group have been dealt with. Other aspects of the evidence, particularly emerging from examination of the former directors of the Mezzanine Companies, are indicative of a degree of carelessness and indifference on their part to their duties as directors. 5 It is not a necessary part of the Court's function at this stage to make a finding of any particular contravention or liability on the part of any person or company named as a defendant to the application. It is sufficient to say, for the reasons that follow, that I regard it as necessary and desirable, to protect the interests of investors and creditors of companies in the Group, that receivers be appointed to the property of each of the defendants, other than seventh defendant which already has receivers and managers appointed under an existing security, and that ancillary orders be made in aid of those primary orders. A freezing order will be made in relation to the seventh defendant. Investigative and procedural background 6 On 3 June 2005, 6 September 2005 and 11 October 2005 and on 7, 8 and 17 February 2006, ASIC made determinations, pursuant to subs 13(1) and 13(6) of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) to investigate suspected contraventions of the Corporations Act, the ASIC Act and the Criminal Code of Western Australia by a number of companies and individuals associated with the Westpoint Property and Finance Group of companies. The investigations covered the period from 1 July 2003. 7 The corporate entities in respect of which the determination were made fell into three groups referred to as 'the Companies', 'the Mezzanine Companies' and 'the Wider Westpoint Group'. A complete list of the entities and persons the subject of the determinations is set out in Schedule A to these reasons. 8 The Westpoint Property and Finance Group has until recently undertaken property development including the construction of apartment blocks in various parts of Australia. It raised finance for its undertakings from banks and other institutions subject to first ranking securities. It also raised, through so called 'Mezzanine Companies', finance from individual investors who were issued with promissory notes or debentures. To the extent that these investments were supported by securities held by companies in the Group, the securities ranked after those held by lending institutions, hence the reference to Mezzanine Companies. 9 Certain individuals have been closely associated with the activities of the Group. Norman Carey was its principal. He was the sole director and shareholder of the Westpoint Corporation Pty Ltd (Westpoint Corporation). He was also a director or sole director of many of the other companies in the Group. He was directly or indirectly the owner of many of the companies. The evidence suggests that he was effectively their controller. Graeme John Rundle was the Chief Financial Officer of the Group and the secretary of many of the companies in it. Cedric Richard Palmer Beck and John Norman Dixon were directors of the Mezzanine Companies. Another former director, Ms Lynette Rochelle Schiftan, resigned in October 2004. 10 The determination made by ASIC on 3 June 2005 was to conduct an investigation in relation to suspected contraventions by the directors of the Companies and the Mezzanine Companies of ss 184 and 588G of the Corporations Act, s 12DA of the ASIC Act and ss 373 and 409 of the Criminal Code (WA). Each of the determinations related to investigations into contraventions of those provisions. The later determinations widened the companies under investigation to cover the members of the Wider Westpoint Group as defined in the determination and additional members of the other groups of companies defined in the determinations as well as individual officers. 11 In aid of its investigations ASIC conducted examinations of a number of persons under s 19 of the ASIC Act. They were as follows: The second defendant, Graeme John Rundle, on 6 July 2005 and on 27 October 2005 The first defendant, Norman Phillip Carey, on 13 July 2005 The third defendant, Cedric Richard Palmer Beck, on 12 July 2005 and on 26 October 2005 Lynette Rochelle Schiftan on 23 August 2005 The fourth defendant, John Norman Dixon, on 24 August 2005 and 26 October 2005 Christopher Ezelym Fairman on 17 November 2005 At the commencement of each examination the ASIC officer conducting it directed the examinee not to disclose the questions asked or answers given in the course of the examination nor any information or documents provided to or by the examinee. The direction was said to remain in force until 31 December 2006 or further order. 12 Many documents were produced to ASIC in the course of its investigations. These included: 1. Information Memoranda issued to prospective investors in various of the Mezzanine Companies. 2. A product disclosure statement entitled Westpoint Income Fund Product Disclosure Statement issued 19 November 2003. 3. Standard form letters to investors in various of the Mezzanine Companies. 4. Security documents and loan agreements. 5. A construction contract relating to a property development at Ann Street in Brisbane. 6. General ledger records and construction invoices. 7. Westpoint Corporation Access Database contained on a compact disc supplied to ASIC on 19 September 2005. 8. Reports from joint and several administrators of various of the Mezzanine Companies and from the liquidator of Westpoint Corporation. 9. Financial records and computerised databases for promissory notes issued by the Mezzanine Companies. 10. Computer records of various companies in the Westpoint Group. 11. Books and records in the possession of the defendants Carey, Rundle, Beck and Dixon and one Gregory John Nairn. ASIC also undertook searches of property registered in the names of the various defendants. 13 The investigations so far have placed in ASIC's hands a very large number of documents, substantial transcripts of the examinations of individuals associated with the Westpoint Group and reports from receivers and managers appointed to companies within the Group and from the liquidator of Westpoint Corporation. 14 On 29 March 2006 ASIC filed an application in this Court seeking orders under s 1323 of the Corporations Act against four officers and former officers of companies associated with the Westpoint Property and Finance Group and against four associated companies. The orders sought are for the appointment of receivers and managers of the property of the defendants. Associated asset preservation orders and orders requiring disclosure on affidavit of the assets of the defendants as well as orders requiring surrender of the individual's passports were also sought. 15 On 30 March 2006 Siopis J made interim orders restraining the defendants from removing any of their property from Australia or from otherwise dealing with it except to the extent set out in the order. He also directed the surrender of their passports. His Honour published his reasons for those orders on 5 April 2006 - Australian Securities and Investments Commission, In the Matter of Richstar Enterprises Pty Ltd (ACN 099 071 968) v Carey [2006] FCA 366. 16 On 7 April 2006 I made orders extending the operation of the interim injunctions granted by Siopis J (subject to some undisputed variations) until 5pm on 12 April 2006 which was the date set down for the hearing of the substantive application. Following the hearing of the substantive application those orders were further extended to 5pm on Thursday 20 April 2006 subject to further agreed variations. Judgment on the substantive application was reserved to 2.15pm on Thursday 20 April 2006. 17 There was an application made on behalf of the second defendant for an order setting aside the ex parte orders made by Siopis J on the basis that there had not been full disclosure by ASIC of relevant evidence to the Court. The second defendant submitted that ASIC's evidence predominately related to transactions involving other defendants which were not relevant to the second. I am not satisfied that any material non disclosure is shown. In any event the interim freezing orders lapse today. The relief claimed 18 In its originating process ASIC claims orders for the appointment of receivers in the following terms: 'B. The Receiver orders: 6. An order, pursuant to section 1323(1)(h) of the Corporations Act, that until further order, Oren Zohar, Brian McMaster and Mark Korda of KordaMentha, chartered accountants, of Level 11, 37 St George's Terrace, Perth, be appointed as receivers and managers ("the Receivers") without security, to all property ("the Property"), whether within Australia or overseas, of each of the Defendants. 7. An order that the Receivers have, in respect of the Property, the following powers: 7.1 the power to do all things necessary or convenient to be done for or in connection with, or as incidental to, the collecting and securing of all of the Property for the benefit of potential creditors. 7.2 without limiting the generality of subparagraph 7.1, the power to: 7.2.1 enter into possession and take control of the Property; 7.2.2 lease, let on hire or dispose of the Property; 7.2.3 insure the Property; 7.2.4 convert the Property into money; 7.2.5 carry on the business of the Defendants; 7.2.6 execute any document, bring or defend any Proceedings or do any other act or thing in the name of and on behalf of any of the Defendants in respect of the Property; 7.2.7 use the seal of the Fifth, Sixth, Seventh and Eighth Defendants; 7.2.8 appoint a solicitor, accountant or other professionally qualified person to assist the Receivers; 7.2.9 appoint an agent to do any business that the Receivers are unable to do, or that it is unreasonable to expect the Receivers to do, in person; and 7.2.10 where a debt or liability is owed to any of the Defendants - to prove the debt or liability in a bankruptcy, insolvency or winding up and, in connection therewith, to receive dividends and to assent to a proposal for a composition or a scheme of arrangement. 8. An order that the Defendants, by themselves, their servants, agents or employees: 8.1 immediately deliver up to the Receivers the Property and the books and records which relate to the Property; and 8.2 otherwise use their best endeavours to assist the Receivers in performance of their obligations. 9. An order that the Receivers reasonable costs and expenses properly incurred in performance of their obligations, be payable from the collective assets of the Defendants. 10. An order that any decision as to which of the Defendants is to ultimately bear the Receivers reasonable costs and expenses be reserved.' 19 ASIC also seeks Mareva type orders for the preservation of the defendants' assets, affidavits of their assets and an order requiring the surrender, by the first to fourth defendants, of their passports and restraining them from leaving Australia or coming within one kilometre of an Australian point of overseas departure. As has already been noted, asset preservation orders and passport orders have already been made by Siopis J on an interim basis and renewed from time to time with some agreed variations pending judgment on the substantive application. Following the hearing of the application ASIC submitted minutes of proposed orders in respect of each of the defendants. The statutory framework - the Corporations Act 20 Section 1323 of the Corporations Act provides, inter alia: (1) Where: (a) an investigation is being carried out under the ASIC Act or this Act in relation to an act or omission by a person, being an act or omission that constitutes or may constitute a contravention of this Act; or (b) a prosecution has been begun against a person for a contravention of this Act; or (c) a civil proceeding has been begun against a person under this Act; and the Court considers it necessary or desirable to do so for the purpose of protecting the interests of a person (in this section called an aggrieved person) to whom the person referred to in paragraph (a), (b), or (c), as the case may be, (in this section called the relevant person), is liable, or may be or become liable, to pay money, whether in respect of a debt, by way of damages or compensation or otherwise, or to account for financial products or other property, the Court may, on application by ASIC or by an aggrieved person, make one or more of the following orders: … (f) an order prohibiting the taking or sending out of this jurisdiction, or out of Australia, by a person of money of the relevant person or of an associate of the relevant person; (g) an order prohibiting the taking, sending or transfer by a person of financial products or other property of the relevant person, or of an associate of the relevant person: (i) from a place in this jurisdiction to a place outside this jurisdiction (including the transfer of financial products from a register in this jurisdiction to a register outside this jurisdiction); or (ii) from a place in Australia to a place outside Australia (including the transfer of financial products from a register in Australia to a register outside Australia); (h) an order appointing: (i) if the relevant person is a natural person - a receiver or trustee, having such powers as the Court orders, of the property or of part of the property of that person; or (ii) if the relevant person is a body corporate - a receiver or receiver and manager, having such powers as the Court orders, of the property or of part of the property of that person; (j) if the relevant person is a natural person - an order requiring that person to deliver up to the Court his or her passport and such other documents as the Court thinks fit; (k) if the relevant person is a natural person - an order prohibiting that person from leaving this jurisdiction, or Australia, without the consent of the Court. (2A) A reference in paragraph (1)(g) or (h) to property of a person includes a reference to property that the person holds otherwise than as sole beneficial owner, for example: (a) as trustee for, as nominee for, or otherwise on behalf of or on account of, another person; or (b) in a fiduciary capacity. (2B) Subsection (2A) is to avoid doubt, is not to limit the generality of anything in subsection (1) and is not to affect by implication the interpretation of any other provision of this Act. (2) An order under subsection (1) prohibiting conduct may prohibit the conduct either absolutely or subject to conditions. (3) Where an application is made to the Court for an order under subsection (1), the Court may, if in the opinion of the Court it is desirable to do so, before considering the application, grant an interim order, being an order of the kind applied for that is expressed to have effect pending the determination of the application. (4) On an application under subsection (1), the Court must not require the applicant or any other person, as a condition of granting an interim order under subsection (3), to give an undertaking as to damages. (5) Where the Court has made an order under this section on a person's application, the Court may, on application by that person or by any person affected by the order, make a further order discharging or varying the first-mentioned order. (6) An order made under subsection (1) or (2) may be expressed to operate for a specified period or until the order is discharged by a further order under this section. (7) Nothing in this section affects the powers that the Court has apart from this section. (8) This section has effect subject to the Bankruptcy Act 1966. (9) A person must not contravene an order by the Court under this section that is applicable to the person. (10) An offence based on subsection (9) is an offence of strict liability. Principles governing the application of s 1323

21 The application before the Court is brought under s 1323 of the Corporations Act. Preconditions for the making of an order under that section are satisfied when:

(a) An investigation is being carried out under the ASIC Act or the Corporations Act in relation to an act or omission that constitutes or may constitute a contravention of the Act. (b) There is an application made by ASIC or an aggrieved person for one or more of the orders that may be made under that section. Those preconditions are satisfied in this case. There is an investigation being carried out and the relevant application has been made by ASIC. 22 Upon an application properly before it under s 1323, the Court can make the orders for which the section provides where: (i) There is a relevant person who is or may become liable to pay money whether in respect of a debt, by way of damages or compensation or otherwise, or to account for financial products or other property. (ii) The liability is to another person called 'the aggrieved person'. (iii) The court considers it necessary or desirable to make the orders 'for the purpose of protecting the interests of the aggrieved person'. 23 The liabilities, actual or potential, to which the section refers, may arise from a contravention of the Corporations Act or under the general law. The Court may have regard to known facts and circumstances in assessing their existence and potential existence - Lone Star Exploration NL v Corporate Affairs Commission (1988) 6 ACLC 1108 at 1113. Von Doussa J said in that case: '…the Court may have regard to all the known facts and circumstances, although in a particular case the Court may think it appropriate to consider whether the actual or potential liability is connected in some way with a particular contravention of the [Corporations Act].' 24 There is a variety of ways in which the interests of persons, to whom liabilities may be owed, can be protected by orders made under the section. The nature of the protection can vary according to the nature of the risks assessed. As Palmer J said in ASIC v Mauer-Swisse Securities Ltd (2002) 20 ACLC 1530 at [37]: '… there may be evidence to suggest that fraud has been perpetrated on a large scale and that many of the victims have no or little information about the extent of the fraud, no or little means for their own investigations, and no or little resources to prosecute their own claims. In such a case, the interests of such persons are protected, within the contemplation of s 1323, by enabling ASIC to conduct an investigation for the purpose of identifying the wrongdoers and exposing them not only to penalties under the Corporations Act and other legislation, but also to claims for compensation from the victims themselves.' `

25 The orders that can be made under the section are directed, inter alia, to the preservation of assets against which recovery may be sought in the event that liability to an 'aggrieved person' is established on the part of a 'relevant person'. The orders are made in circumstances where 'an investigation is being carried out', 'a prosecution has been begun' or 'a civil proceeding has been begun'. That is to say the orders can be made before liability is established and indeed before the evidence necessary to establish liability has been collected. While an application under the section is not interlocutory in an existing criminal or civil proceeding, it is interlocutory in a wider sense. It preserves the status quo and the assets of the relevant person pending the outcome of the investigation, prosecution or civil proceedings which are on foot - CAC v Lone Star Exploration NL( No 2) (1988) 14 ACLR 499 at 504. At the stage an order is sought the Court may not be in a position to identify with precision any particular liability owed by the person the subject of the proposed order. This consideration applies to final orders made under the section as well as to interim orders for which it expressly provides in s 1323(3). The final orders made under the section are necessarily of a temporary or holding character rather than finally disposing of the rights and liabilities of the relevant persons affected by them.

26 The circumstances in which the Court may make orders under s 1323(1) are wide as indicated by the words 'necessary or desirable … for the purpose of protecting the interests of a person …'. There is an element of risk assessment and risk management in the judgment the Court is called on to make. It follows, and has been accepted, that there is no requirement on the part of ASIC to demonstrate a prima facie case of liability on the part of the relevant person or that the person's assets have been or are about to be dissipated - Corporate Affairs Commission v ASC Timber Pty Ltd (1989) 7 ACLC 467 at 476 (Powell J); Australian Securities and Investment Commission v Adler (2001) 38 ACSR 266 at [7] (Santow J).

27 The nature and duration of orders made under s 1323(1) can be fashioned by the Court to reflect its assessment of any risk of dissipation of the assets of a person under investigation. But their legitimate purposes can go further. The interests of aggrieved persons may be protected not only by orders designed to protect dissipation of assets, but also by orders which create an opportunity for the assets of the person under investigation to be ascertained. 28 The appointment of a receiver may offer a more flexible response to the exigencies of the case presented to the Court than the imposition or continuation of a freezing order albeit they are not mutually exclusive remedies. The receiver can be equipped with the powers necessary to enable him or her to identify and locate a relevant person's assets and to prevent their dissipation or removal from the jurisdiction. The receiver can also ensure, without the necessity of specific applications to the Court to vary freezing orders, that bona fide dealings with assets which do not diminish the overall estate of the person under investigation and which allow that person to attend to their legitimate business affairs can be permitted. While ASIC has investigative powers which can be used to like effect, they do not necessarily give the capacity for short term responses and flexibility of action that a competent receiver armed with suitable powers may have. 29 It is not a necessary consequence of an order appointing a receiver that the receiver should deal with or liquidate the assets in question. The interlocutory and protective character of orders made under s 1323 must be borne in mind when defining the powers of the receiver. The appointment of a receiver has rightly been described as 'an extraordinary step' - ASIC v Burke [2000] NSWSC 694 at [8] (Austin J). However depending upon the nature of the powers conferred on the receiver it may be less drastic than a freezing order which can only be varied by order of the Court. The interlocutory history of this case has already demonstrated that circumstances not contemplated when the original interim freezing orders were made have required their variation from time to time. I accept, with respect, the observation made by Austin J in Burke at [8]: 'Without wishing to lay down any general rules, it appears to me that the extraordinary step of appointing a receiver may be justified, even though Mareva Orders are in place, in a case where there is real doubt about the existence and location of assets such as investments, and about the number and identity of claimants and the nature of their claims, and additionally the defendants are engaged in business activities which entail that any Mareva Orders must allow assets to be turned over in the course of business. Where these circumstances exist in combination, and especially where there are allegations of serious fraud involved, the Court may conclude …that the Mareva Orders are not enough to ensure that the assets are preserved and protected, and indeed identified and brought in for the benefit of investors.' The decision was cited with approval by Santow J in ASIC v Adler (supra) at 268-269. The evidence that may be relied upon 30 Section 1323 does not make any express provision for the nature of the evidence on which the Court may act in making orders under it. Applications made under the section have an interlocutory character albeit there are no other specific proceedings to which they may relate. The section does not require concluded findings of fact about liability or whether assets have been dissipated. For the reasons already canvassed the Court, in making orders under s 1323, engages in a risk assessment and management process. The logic of the section assumes that the Court will not always have before it evidence of the kind that would be necessary and admissible in proceedings to establish definitively the nature and extent of the assets of the persons under investigation and their liability to aggrieved persons. Nor will it necessarily have before it evidence of the kind that would establish definitively that dissipation of assets has occurred or is likely to occur or that flight is imminent. 31 The logic of s 1323 requires the Court to be able to act on evidence which might not be admissible in civil or criminal proceedings leading to a definitive determination of the rights and liabilities of the parties. Hearsay evidence may therefore be received and acted upon, not as proof of the truth of its content but as evidence of the existence of a risk or possibility that gives rise to the necessity for or desirability of a protective order. It is not necessary, in this context, to consider whether the proceedings are interlocutory for the purposes of the exception to the hearsay rule under s 75 of the Evidence Act 1995 (Cth) albeit that that exception is no doubt informed by similar considerations. Evidence may be received of the opinion of a suitably qualified person who has had the opportunity to review extensive documentation collected in the course of an investigation and to offer an overview of it for the benefit of the Court. In such a case the opinion or overview should be supported by reference to the relevant documentation and factual material. The opinion is received not for the determination of any ultimate issue of liability but as probative of the risk which the Court must assess in determining whether to make an order under the section. These considerations are relevant to the admissibility of some of the affidavit evidence which has been relied upon in this case. 32 Specific objection has been taken on behalf of the second defendant to the use of transcripts of examinations conducted under s 19 of the ASIC Act. It was submitted that pursuant to s 68(3) of the ASIC Act such transcripts are not admissible in evidence against the person who has signed the record in a proceeding for the imposition of a penalty. It was submitted that the present proceedings are, in truth, proceedings for the imposition of a penalty. This is on the basis that if interlocutory in nature, then they are interlocutory in respect of proceedings not yet commenced but which will inevitably be penalty proceedings. 33 Accepting that there is a possibility that penalty proceedings may be taken against one or more of the defendants in this case that does not, in my opinion, render the present application an application for the imposition of a penalty or an application incidental to such proceeding. As already noted, evidence may be relied upon of a hearsay or opinion character in these proceedings which might not be admissible in penalty proceedings. The same is true for s 19 transcripts. 34 It was submitted for the second defendant that because ASIC seeks an order that the reasonable costs of the receivers and managers whose appointment it seeks should be payable from the collective assets of the defendants, that fact itself gives the present application the character of a penalty proceeding. In my opinion however, the submission is misconceived. An order for the payment of costs out of the collective assets of the defendants would not of itself amount to the imposition of a penalty. Although it may effectively deprive defendants of some of their property that imposition is not by way of punishment for any contravention of the law. 35 Objection was also taken to the admissibility against the second defendant of transcripts of examinations of other parties conducted under s 19 of the ASIC Act. In this respect s 77 of the ASIC Act was relied upon. That section provides: 'Where direct evidence by a person (the absent witness) of a matter would be admissible in a proceeding, a statement that the absent witness made at an examination of the absent witness and that tends to establish that matter is admissible in the proceeding as evidence of that matter: (a) if it appears to the court or tribunal that: (i) the absent witness is dead or is unfit, because of physical or mental incapacity, to attend as a witness; or (ii) the absent witness is outside the State or Territory in which the proceeding is being heard and it is not reasonably practicable to secure his or her attendance; or (iii) all reasonable steps have been taken to find the absent witness but he or she cannot be found; or (b) if it does not so appear to the court or tribunal - unless another party to the proceeding requires the party tendering evidence of the statement to call the absent witness as a witness in the proceeding and the tendering party does not so call the absent witness.' It was submitted for the second defendant that ASIC has not adduced evidence in respect of the matters set out in s 77(a) and that therefore the s 19 transcripts of those parties that are not parties to the proceeding may only be tendered if the conditions set out in par (a) are set out. Counsel for ASIC on the other hand submitted that the second defendant had not required ASIC to call any absent witness as a witness in the proceeding and that therefore the condition of admissibility under s 77(b) of the Act was satisfied. Given the urgency with which the application has been made, it is perhaps a little unrealistic to require advance notice by the second defendant of the requirement that any absent witness whose s 19 transcript is relied upon be called as a witness in the proceeding. In my opinion, however, the transcripts of the examinations conducted under s 19 can be relied upon as tending to establish the possibility that circumstances exist which give rise to the necessity or desirability of a protective order. What is in evidence here is the fact that the statement was made in the course of a s 19 examination. The fact that the statement was made, rather like the hearsay evidence referred to earlier, may support an inference that circumstances exist that make a protective order necessary or desirable. It is not necessary to rely upon such evidence for the purpose of establishing the truth of the statement made. 36 For these reasons I reject the objections to the use of the s 19 transcript evidence which were raised on behalf of the second defendant. 37 Objections to the admissibility of other affidavit evidence were made on the basis that it involved statements of the deponent's belief about the purpose of transactions and argumentative opinions. So far as argumentative statements are concerned which are not able to be regarded as expert opinion or are unsupported by reference to factual material. I will disregard them. However, descriptions in the nature of syntheses or summaries, based on examination of the documentary and transcript evidence dealing with the operations of the Westpoint Property and Finance Group, its cashflows and specific transactions, will be received on the basis that they go to the existence of circumstances upon which the Court may determine that it is necessary or desirable to make orders of the kind sought in this application. The evidence before the Court 38 The following affidavits were read in evidence: 1. The affidavit of Oren Zohar sworn 29 March 2006. Mr Zohar is a partner of KordaMentha and one of the joint and several receivers of Westpoint Corporation with Mark Korda and David Winterbottom. Those three persons are also the receivers of another eight companies forming part of the Westpoint Property and Finance Group, having been appointed as such by Perpetual Nominees Ltd and Perpetual Trustees Company Ltd. Mr Zohar's affidavit covers the composition and structure of the Group, the role of Westpoint Corporation and the way in which projects undertaken by the Group have been conducted. His evidence also describes the way in which the flow of funds in Group developments would typically work and the interdependence of the affairs of different entities within the Group. His affidavit sets out what he describes as examples of 'irregular transactions' which he has identified based upon his investigations and upon discussions with Westpoint Corporation staff presently employed by the receivers. He describes transactions 'which appear to be designed to remove assets from Westpoint Corporation or other entities …'. These transactions include assignments of loans to the fifth defendant, Richstar Enterprises Pty Ltd (Richstar Enterprises), and a transaction which he describes as a '$2 million runaround' by Bowesco Pty Ltd (Bowesco), the seventh defendant. His affidavit also refers to transactions which he describes as the 'Renaissance Mezzanine loan transfer', 'the Bowesco option' and attempts to avoid GST liability for Westpoint Realty Pty Ltd (Westpoint Realty), the sixth defendant. Other transactions involve the withdrawal of funds in connection with the Europa Development in North Perth, and the creation of security interests. 2. Supplementary affidavit of Oren Zohar sworn 6 April 2006. In this affidavit Mr Zohar deposes to the appointments of himself and Messrs. Korda and Winterbottom on 29 and 30 March 2006 as the Receivers and Managers of property of Silkchime Pty Ltd (Silkchime), Earlmist Pty Ltd (Earlmist), Westpoint Management and Forestview Nominees Pty Ltd (Forestview). On 3 April 2006 Suncorp Metway appointed McGrath Nichol as Receivers and Managers of the seventh defendant, Bowesco. An updated list of companies in the Westpoint Group subject to external administration is exhibited to the affidavit. 3. Further supplementary affidavit of Oren Zohar sworn 12 April 2006. In this affidavit Mr Zohar says that he has continued to assist ASIC in providing information and documents that may be relevant to any potential offences by any directors or employees of Westpoint Corporation. He also refers, in answering an affidavit sworn by Glenn Anthony Tully, to access arrangements for Level 7, 160 St George's Terrace, Perth used by Mr Carey and Redchime Pty Ltd (Redchime). This use was under an arrangement with Mr Zohar as one of the Receivers and Managers of Westpoint Corporation. 4. Second further supplementary affidavit of Oren Zohar sworn 12 April 2006. In this affidavit Mr Zohar sets out his professional qualifications and experience. 5. The first affidavit of Richard Warren Gomm sworn 29 March 2006. In this affidavit Mr Gomm, who is an investigator in the Enforcement Directorate at ASIC's Western Australian regional office, describes the processes by which ASIC sought and obtained a large quantity of documents relating to the Westpoint Group. Based on a review of the documents produced to ASIC in compliance with its various notices and directions as well as a review of ASIC's own records, he expresses the opinion that the description in Oren Zohar's affidavit accords with ASIC's views in relation to the structure and composition of the Westpoint Group. I take this to be a reference to his own views. He describes the way in which the financing of each of the property developments undertaken by the Westpoint Group was effected with funds provided by retail mezzanine investors. He refers also to the Information Memoranda and Prospectuses issued in connection with the developments and describes what he calls 'the actual flow of funds raised by Mezzanine Companies'. He describes the accounting treatment of the funds and rollovers of the mezzanine investments. 6. The second affidavit of Richard Warren Gomm sworn 29 March 2006. Mr Gomm's second affidavit annexes transcripts of examinations conducted by officers of ASIC under notices served pursuant to s 19 of the ASIC Act. He deposes to transactions which appear to have been effected by entities within the Westpoint Group at a time when it was reasonable to expect that Westpoint Corporation and other entities would go into some form of external administration. He expresses the opinion that the transactions have had the effect of reducing the assets of the Westpoint Group available to meet the claims of third party creditors and of benefiting persons formerly in control of the Group. He specifically refers to dealings in funds received by Mezzanine Companies from investors. He describes what he calls 'round robin transactions' and the results of various accounting entries made and cheques drawn on companies in the Group. 7. The first affidavit of Kevin Chin sworn on 30 March 2006. Kevin Chin is also an investigator in the Enforcement Directorate at ASIC's Western Australian regional office. In his affidavit, which includes six volumes of annexures, he sets out the investigation determinations made under s 13 of the ASIC Act and company searches relating to the various companies in the Westpoint Group. He also exhibits transcripts of examinations conducted under s 19 of the ASIC Act. 8. The second affidavit of Kevin Chin sworn 6 April 2006. In his second affidavit Mr Chin refers to a computer database maintained by ASIC and called 'the Litigation Support System' (LSS). The function of the LSS is to allow ASIC to record matters relating to documents which it obtains. Mr Chin, after reviewing the LSS, identifies 11 information memoranda exhibited to his earlier affidavit as memoranda issued by York Street Mezzanine Pty Ltd (York Street Mezzanine). He exhibits three additional information memoranda also issued by that company. He then describes various cheques drawn by Richstar and payable to Bowesco. An internal Westpoint Corporation document entitled 'Seven Day Plan of Action' evidently prepared by in-house counsel for the Westpoint Group Mr Wayne Innis, is also exhibited. There were some seven versions of this document ranging in their dates from 15 December 2005 to 6 February 2006. 9. The third affidavit of Kevin Chin was sworn on 11 April 2006 and referred to a letter addressed to Michael Lurie of Blake Dawson Waldron by the third defendant, Richard Beck, and dated 14 May 2003. 10. The affidavit of Marcus Essex Claridge sworn 30 March 2006. Mr Claridge is a Team Leader in ASIC's Enforcement Directorate. He deposes to having carried out, or caused to be carried out, searches of databases for property held in the names of Messrs Carey, Rundle, Beck and Dixon, the first to fourth defendants. He sets out in his affidavit the results of those searches. 11. The affidavit of Calogero Tindaro Triscari sworn 11 April 2006 is relied upon by the sixth and eighth defendants. Mr Triscari is their financial officer. He deposes to Westpoint Realty's ongoing property management activities and its selling activities and receipt of commissions. He deposes to services provided to Westpoint Realty by Redchime to ensure settlement of various purchases. His affidavit is directed to show the ongoing legitimate business activities of Westpoint Realty. 12. The affidavit of Glenn Anthony Tully sworn 11 April 2006. It is relied upon by the fifth, sixth and eighth defendants and concerns an allegedly unauthorised entry by Mr Zohar into Redchime's premises at Level 7, 160 St George's Terrace, Perth. Mr Zohar's further supplementary affidavit of 12 April 2006 was sworn in response to it. I do not propose to have regard to these affidavits on this issue as they do not appear to bear in any material way on the decision which I have to make in this application. 13. The affidavit of Cedric Richard Palmer Beck sworn 11 April 2006. Mr Beck exhibits undertakings offered to the Court in lieu of the orders sought. In his affidavit he sets out what he described as his financial position. He states his preparedness to surrender his passport to the Court and to apply for its release if he wished to travel overseas. He denies the allegation made by ASIC in its submissions that, as a director of the Mezzanine Companies, he acted in accordance with instructions from Messrs Carey and Rundle. 14. The affidavit of John Norman Dixon sworn 11 April 2006. He denies the allegation that he acted in accordance with instructions from Messrs Carey and Rundle. He denies that he has taken any steps to hide or move any of his assets or those of any other person or entity out of reach of the creditors as a result of the collapse of the Westpoint Group. He proffers undertakings and is prepared to surrender his passport to the Court and to apply for its release in the event that he wished to travel overseas. He also gives details of his financial position. 15. The affidavit of Wayne John Carl Zappia sworn 11 April 2006 is relied upon by the second defendant, Mr Rundle. Mr Zappia is a legal practitioner employed by Lavan Legal. He deposes to details of facts stated to him in a telephone conversation with the second defendant, Mr Rundle. They go to Mr Rundle's personal circumstances and property owned by him.

39 The structure and general operation of the Westpoint Group was described in the affidavit of Oren Zohar sworn 29 March 2006. Mr Zohar has been a Chartered Accountant since 1995 and a Registered Liquidator since November 1999. He has been an Official Liquidator since August 2002. He has also been a Registered Trustee in Bankruptcy since February 2000. He has approximately 14 years experience as a corporate recovery specialist in all types of corporate and personal insolvency. He has acted as a voluntary administrator, receiver or liquidator of over 280 companies. I accept that he is appropriately qualified to identify and describe group corporate structures and operations based on an examination of public and company records. He is also qualified, in my opinion, to identify from company records financial transactions which may constitute or be indicative of contraventions of the Corporations Act or possible breaches of duty by directors or officers of the corporations worthy of further investigation. 40 Mr Zohar exhibited to his affidavit of 29 March 2006 a schedule of companies within the Westpoint Group including details of their current directors and shareholders. He also exhibited a Schedule of Controlled Entities being companies within the Westpoint Group which were subject to some form of external administration at the time of swearing his affidavit. The latter list of companies, as updated in the supplementary affidavit of 6 April 2006, is set out in Schedule B to these reasons. 41 Mr Zohar's affidavit exhibited a colour-coded Corporate Structure of the Westpoint Group also updated in his supplementary affidavit. It comprises approximately 157 corporate and trust entities. Thirty are under some form of external administration. Eleven are 'Mezzanine Companies', nine of which are under administration. Renaissance Mezzanine Pty Ltd (Renaissance Mezzanine) and Cinema City Mezzanine Pty Ltd (Cinema City Mezzanine) are not currently under the control of any external insolvency administrator. Mr Zohar's evidence, based on a search of the relevant company records, was that Mr Norman Carey, the first defendant, either directly or indirectly controls the four corporate defendants in the present proceedings, Richstar Enterprises, Westpoint Realty, Bowesco and Redchime. Bowesco, as noted earlier, has had a Receiver and Manager appointed to it on 3 April 2006. It is not in dispute on the material before the Court that the primary company within the Westpoint Group was Westpoint Corporation which is now in liquidation. Mr Norman Carey was its sole director and shareholder and Mr Graeme Rundle its secretary. The company was placed into administration on 24 January 2006 and a winding up order made on 16 February 2006. 42 Based on his examination of the Group records, Mr Zohar described Westpoint Corporation as a service provider to the majority of the members of the Westpoint Group. It provided staff, premises, a treasury function, accounting services, information technology services and management services. The registered office and primary place of business for most of the Group members, including each of the corporate defendants, is Level 9, 160 St George's Terrace, Perth. The receivers of Westpoint Corporation, including Mr Zohar, remain in possession of those offices. 43 Major projects undertaken by the Group were generally undertaken by special purpose development companies and funded by a combination of initial loans provided by Westpoint Corporation and funds provided by Mezzanine Companies or by a third party lender who would take security over the development company's assets. In order to understand the operations of the Group Mr Zohar spoke with a number of people including: 1. Ray Ellis, former head of treasury for Westpoint Corporation who continued to work for the corporation on behalf of the receivers until 7 February 2006 and now works for Redchime Pty Ltd with Mr Carey. 2. Brian Letts, the General Manager of Westpoint Realty, who continues to be employed by Westpoint Corporation to assist the receivers in realising and managing secured properties. 3. Brian O'Keefe, the General Manager of Finance at Westpoint Corporation who continued to work for the Corporation on behalf of the receivers until 15 February 2006. 4. Miss Tracey Fox, a chartered accountant employed by Westpoint Corporation who continues to be employed by it in order to assist the receivers in maintaining and understanding the books and records of the Group. 44 Based upon his discussions with staff at the Westpoint Corporation and his own investigations, Mr Zohar set out his general understanding of the operation of each of the Westpoint Group projects thus: (a) Westpoint Corporation would: (i) provide initial funding to enable a development company to undertake preliminary work; (ii) act as a central treasury, whereby it would lend money to Westpoint Group entities, and through the Westpoint Corporation central bank account pay the majority of the expenses of the Westpoint Group entities; (iii) from time to time transfer money between Westpoint Group entities as required to fund any particular project. Westpoint Corporation would keep the records of the loan accounts between those entities. (b) Westpoint Finance Pty Ltd (Westpoint Finance) would act as a licensed finance broker and earn commission revenue by finding prospective purchasers of properties the subject of the development, refer them to Westpoint Realty to sign up an agreement if they wished to proceed, and provide finance if required for the purchase of the property; (c) generally Westpoint Constructions Pty Ltd (Westpoint Construction) would undertake the construction of the development and was entitled to pre-invoice at least 65% of the contract price in advance for any project; (d) Westpoint Realty would act as the licensed real estate agent earning revenue from the sale and leasing of properties mainly on behalf of purchasers referred by Westpoint Finance and other Westpoint Group entities and third party owners. 45 Mr Zohar described his understanding of the flow of funds in the Westpoint Group corporations based upon his discussions with Westpoint Corporation staff and his own investigations. This was as follows: (a) Investors would provide funds to a Mezzanine Company which would be banked into an account held by that company. (b) Funds would be transferred as required by Westpoint Corporation from the Mezzanine Company to Westpoint Corporation's account and be recorded as a loan by the Mezzanine Company to the Development Company and then a loan from the Development Company to Westpoint Corporation. (c) Westpoint Corporation would pay the majority of the expenses of any development and record those expenses against the development company loan account. These would include payments to Westpoint Realty and to Westpoint Construction to complete the development. It would also cover administrative and overhead expenses not necessarily related to the specific project. (d) Westpoint Corporation would pay money to the Mezzanine Company by way of monthly interest and would also pay commissions to financial planners who procured investments from members of the public. These would be reflected in a loan account between the Development Company and Westpoint Corporation. As between the Development Company and the Mezzanine Company, the Development Company would record the cost as work in progress and the Mezzanine Company would record the transaction as revenue. (e) As properties were sold the funds received on settlement would be paid to clear secured debts and pay commissions and selling expenses but any excess funds would be paid to Westpoint Corporation. 46 Mr Zohar's affidavit exhibited a report as to the affairs of Westpoint Corporation submitted to ASIC and dated 23 February 2006. It was signed by Messrs Carey, Rundle and Nairn. In the report 35 intercompany loans were identified as owing to Westpoint Corporation, totalling $148,761,510.09. Only $23,770,731.26 was estimated to be realisable. A further 20 related party loan accounts were disclosed under which Westpoint Corporation owed a total of $71,176,415.26. From his review of the Westpoint Corporation records, Mr Zohar found 62 related party loans which he had identified during the course of the receivership to and from Westpoint Corporation as requiring further investigation. These included 38 loans owing from related entities totalling $143,766,703.33. Only $22,389,786.64 was estimated by Mr Carey as realisable in the report as to affairs. There were 25 loans owing to related entities totalling $75,029,895.59 of which Mr Carey admitted $71,176,415.26 in the report. 47 Mr Zohar stated that no meaningful reconciliation could be undertaken in relation to the recoverability of related party loans until a full investigation could be carried out in relation to each of the entities within the Westpoint Group given the level of intercompany indebtedness and intercompany debt assignments. 48 In Mr Gomm's first affidavit he referred to Mr Zohar's affidavit and in particular his descriptions of the Westpoint Group and what he called the 'Central Role of Westpoint Corporation'. Mr Gomm said, that based on a review of the documents produced to ASIC under various notices and directions which it issued as well as a review of ASIC's records, he agreed with Mr Zohar's description of the structure and composition of the Westpoint Group. He gave an account in his affidavit of the structure of the Mezzanine Companies and the way in which they operated to raise funds for Westpoint Group projects. 49 Mr Gomm said that the funding for each of the property developments undertaken by the Westpoint Group when using funds provided by retail mezzanine investors, derived from three sources: 1. Initial equity from within the Westpoint Group to provide funding for land acquisition and preliminary expenses such as development approvals - this equity was recouped when sufficient funds were raised from mezzanine investors. 2. Debt financing from special purpose Mezzanine Companies incorporated to raise funds from retail investors by the issue of promissory notes or debentures. 3. Senior financing from a bank or other financial institution granted a first ranking security over the property. This financing became available to be drawn down during the construction phase. In some cases, and in particular the Emu Brewery and Ann Street projects, senior financing was also obtained to assist in the purchase of the land. 50 The Mezzanine Companies had issued Information Memoranda for the offer of promissory notes to retail clients. The purpose of the raising of the funds was said to be the development of specific projects. Mr Gomm exhibited copies of the Information Memoranda produced to ASIC in the course of its investigations. By way of example, the first of those Information Memoranda exhibited to his affidavit related to a $25 million promissory note issue by Bayshore Mezzanine Pty Ltd (Bayshore Mezzanine). This referred to a 292 apartment complex to be located at 45 Bay Street in Melbourne, directly opposite another Westpoint development known as the Bayview Development. The Memorandum disclosed that the total funding required for the project was $105 million arranged as follows:

Bank debt - $70 million.
Mezzanine finance the subject of the Memorandum - $25 million
Project equity - $10 million The end project value was said to be $140 million. Under the heading 'The Promissory Note Offer' it was stated: 'Bayshore Mezzanine is seeking to raise $25 million by the issue of promissory notes. It will then lend this amount to the Trust to assist in funding the project on the terms and conditions set out below.' Each promissory note was required to have a minimum face value of $50,000. The Information Memoranda stated that Promissory Notes by nature are unsecured. It went on: 'However, to mitigate the lending risk, Bayshore Mezzanine, the issuer of the Promissory Notes and a single purpose company, will have security over the project as noted in the financing structure below.' A diagram followed which showed the development being carried on through the Bayshore Port Melbourne Trust. The financier, namely a bank, would hold a first ranking mortgage over the property and a first ranking charge over the Trust, ie the assets of the Trust. Bayshore Mezzanine would have a second ranking fixed and floating charge over the Trust and a second ranking mortgage over the property. Westpoint Corporation and associated entities would provide a guarantee for Bayshore Mezzanine up until the redemption of all promissory notes and satisfaction of all interest payments due under those promissory notes. The Information Memorandum went on to say that the Westpoint Group would act as development manager of the project and its construction company would act as the senior contractor for the project. The Information Memorandum promised prudent financial management by the Westpoint Group, which would carefully control costs and measure profit impact. Risk would be minimised and managed by the Westpoint Group through the stringent application of a range of mechanisms which were set out. A number of risk factors were also identified. Questionable transactions in the Westpoint Group 51 Mr Gomm said, in his affidavit, that a review of documents in ASIC's possession showed that moneys raised by the Mezzanine Companies were recorded in the accounting records of the Westpoint Group as having been lent to special purpose Development Companies incorporated for the purpose of undertaking that specific project. He exhibited to his affidavit copies of loan agreements entered into between the Mezzanine Companies and the Development Companies for a number of projects. The Mezzanine Companies would obtain a secondary security over the projects in exchange for the loans to the Development Companies. The moneys raised by the Mezzanine Companies were also guaranteed by entities related to the Westpoint Group. Each Development Company entered into a Lump Sum Design and Construction Contract with Westpoint Constructions for the construction of a specific project. Under a special condition inserted in some of the construction contracts, Westpoint Constructions was permitted to pre-invoice the Development Company an amount equal to or less than 65% of the value of the contract. 52 Mr Gomm described the actual flow of funds raised by Mezzanine Companies. Application moneys received from investors were banked into the respective Mezzanine Companies' bank accounts. He exhibited to his affidavit copies of application forms, general ledger printouts and bank statements in relation to Ann Street Mezzanine. From time to time, and sometimes daily, the money in Mezzanine Company bank accounts was paid directly to the bank account of Westpoint Corporation after deducting amounts for expenses such as commission. The funds were paid to Westpoint Corporation acting as 'treasury' for the Westpoint Group. There was no segregation, in Westpoint Corporation's bank account, of funds received from the various Mezzanine Companies. Mr Gomm exhibited copies of supporting documents including invoices, cheque requisitions, remittance advices and bank statements which gave examples of payments made from Westpoint Corporation's bank account that did not appear to relate to specific projects. His conclusion was that once moneys were received by Westpoint Corporation from the Mezzanine Companies they were used to make payments that did not necessarily relate to the specific projects for which the funds had been raised. 53 A matter of particular concern was the treatment of investor rollovers. Mr Gomm deposed that investors were regularly 'rolled over' into other projects being undertaken by the Westpoint Group when their promissory notes or debentures expired or were approaching expiry dates. Where investors were rolled over from one project to another they were issued with a new promissory note relating to the second project. There was no corresponding payment of money however from entities involved with project A to entities involved with project B. The rollovers were simply accounted for by a series of journal entries. As described by Mr Gomm, these journals reflected the following:

Counsel for the Plaintiff: Mr S Owen-Conway QC and Mr D Stack

Solicitor for the Plaintiff: Australian Government Solicitor

Counsel for the First, Fifth, Sixth and Eighth Defendants: Mr G Donaldson SC

Solicitor for the First, Fifth, Sixth and Eighth Defendants: Freehills Counsel for the Second Defendant: Solicitor for the Second Defendant: Counsel for the Third and Fourth Defendants: Mr ML Bennett Solicitor for the Third and Fourth Defendants: Counsel for the Nominated Receivers (by leave) Lavan Legal

Date of Hearing: 12 April 2006

Date of Judgment: 20 April 2006

SCHEDULE A The determination made by ASIC on 3 June 2005 to conduct an investigation pursuant to s 13 of the ASIC Act identified the following entitled as 'the Companies' in relation to which the investigation was to be conducted: Westpoint Corporation Pty Ltd (ACN 009 395 751) Westpoint Constructions Pty Ltd (ACN 009 399 740) Bayview Port Melbourne Ltd (ACN 091 344 946) Scots Church Development Ltd (ACN 091 686 323) Ann Street Brisbane Pty ltd (ACN 101 943 711) as trustee for Ann Street Brisbane Trust Westpoint Management Ltd (ACN 074 148 431) as trustee for 297 Murray Street Trust and 60 Market Street Trust Bayshore Port Melbourne Pty Ltd (ACN 090 795 734) as trustee for Bayshore Port Melbourne Trust Emu Brewery Developments Pty Ltd (ACN 103 133 848) as trustee for Emu Brewery Developments Trust Cinema City Development Pty Ltd (ACN 091 824 298) as trustee for Cinema City Development Trust Grenich Pty Ltd (ACN 009 453 552) as trustee for Eastern Venture Corporation The companies defined in the first determination as 'the Mezzanine Companies' were the following: Ann Street Mezzanine Pty Ltd (ACN 102 854 866) Bayview Mezzanine Pty Ltd (ACN 091 300 060) Bayshore Mezzanine Pty Ltd (ACN 097 759 272) York Street Mezzanine Pty Ltd (ACN 090 631 057) Market Street Mezzanine Pty Ltd (ACN 091 354 513) Market Street Mezzanine No 2 Pty Ltd (ACN 088 363 384) Bayview Heritage Mezzanine Pty Ltd (ACN 105 235 738) Emu Brewery Mezzanine Ltd (ACN 104 639 410) Cinema City Mezzanine Pty Ltd (ACN 090 584 820) The further determination to conduct an investigation made by ASIC on 6 September 2005 related to the Companies and the Mezzanine Companies but also to a larger group called 'the Wider Westpoint Group'. The Wider Westpoint Group, as defined in the determination of 6 September 2005, comprised: Westpoint Realty Pty Ltd (ACN 050 218 954 as trustee for Westgem Unit Trust Westpoint Consulting Group Pty Ltd (053 799 410) as trustee for Westpoint Consulting Group Unit Trust Forestview Nominees Pty Ltd (ACN 063 440 102) as trustee for Matheson Unit Trust Rompride Pty Ltd (ACN 074 524 824) as trustee for Erley Unit Trust Vannin Pty Ltd (ACN 067 610 271) as trustee for Hay Family Trust Adus Pty Ltd (ACN 009 366 205) as trustee for Adus Family Trust Andrianni Pty Ltd (ACN 005 458 720) as trustee for Andrianni Family Trust Juson Pty Ltd (ACN 008 998 927) Earlmist Pty Ltd (ACN 069 056 926) as trustee for Earlmist Unit Trust Warwick Entertainment Centre Pty Ltd (ACN 054 246 918) as trustee for Warwick Entertainment Centre Unit Trust Silkchime Pty Ltd (ACN 066 849 429) as trustee for Silkchime Unit Trust Goldtag Pty Ltd (ACN 085 432 239) as trustee for Cinema City Property Trust 297 Murray St Pty Ltd (ACN 088 363 384) as trustee for 297 Murray Street Trust Westpoint Management (Centreways) Pty Ltd (ACN 085 349 068) as trustee for Centreways Refurbishment Syndicate Trust Kingdream Pty Ltd (ACN 092 481 377) Swanport Nominees Pty Ltd (ACN 107 680 482) North Sydney Development Pty Ltd (ACN 107 037 838) Pagelight Nominees Pty Ltd (ACN 109 455 110) Matheson Holdings Pty Ltd (ACN 009 236 177) Quartz Nominees Pty Ltd (ACN 008 859 103) Lanepoint Enterprises Pty Ltd (ACN 110 693 251) Westpoint Finance Pty Ltd (ACN 072 812 803) KIS Investments (Global) Pty Ltd Westpoint Financial Services Pty Ltd (ACN 074 148 324) Eastlands Pty Ltd (ACN 009 349 053) Erley Pty Ltd (ACN 009 365 379) Westpoint Management Ltd (ACN 074 148 431) as Responsible Entity for Westpoint Income Fund (ARSN 105 925 620) Dosius Pty Ltd (ACN 009 449 450) Mossregal Pty Ltd (ACN 069 056 793 as trustee for Mossregal Unit Trust Midpride Pty Ltd (ACN 069 056 793) (sic) as trustee for Midpride Trust Forestview Nominees Pty Ltd (ACN 063 440 102) as trustee for Matheson Unit Trust as participant in the Forestfield Joint Venture Westpoint Corporation Pty Ltd (ACN 009 395 751) as participant in the Booragoon Joint Venture The determination of 11 October 2005 applied to the Companies and the Mezzanine Companies with the addition to the latter of the following: North Sydney Finance Ltd (ACN 107 354 610) Renaissance Mezzanine Pty Ltd (ACN 110 978 491) Mount Street Mezzanine Pty Ltd (ACN 086 176 052) It also applied to the Wider Westpoint Group as defined in the determination of 6 September 2005 but with the following additional companies incorporated in that Group: Westpoint Management Ltd (ACN 074 148 431) as Responsible Entity for Paragon Commercial Syndicate (ARSN 091 277 397) Westpoint Management Ltd (ACN 074 148 431) as Responsible Entity for Warnbro Fair Syndicate (ARSN 088 635 849) Paragon Apartments Ltd (ACN 087 200 413) Chocolate Factory (Winthrop) Limited (ACN 090 724 011) The further determination of 7 February 2006 applied to the same Group of corporate entities but extended to the natural persons Norman Phillip Carey, Graeme John Rundle, Cedric Richard Palmer Beck and John Norman Dixon. A further determination of 8 February 2006 applied to the same entities and individuals save that the Wider Westpoint Group the subject of that determination was extended to cover the following additional entities: Redchime Pty Ltd (ACN 117 947 805) Roseform Holdings Pty Ltd (ACN 117 884 652) Ferntree Financial Services Westpoint Management Ltd (ACN 074 148 431) Westpoint Realty Pty Ltd (ACN 050 218 954) Westpoint Money Management Pty Ltd (ACN 098 779 778) Quartz Nominees Pty Ltd (ACN) as trustee for the Quartz Trust Forestview Nominees Pty Ltd (ACN 063 440 102) Forestfield Shopping Centre Joint Venture Bennalong Holdings Pty Ltd (ACN 008 741 008) Bridgeview Holdings Pty Ltd (ACN 063 407 563) Bridgeview Family Trust HECA Nominees Pty Ltd (ACN 053 581 874) Foyl Pty Ltd (ACN 009 365 388) Acebid Pty Ltd (ACN 074 566 046) LS Family Trust Jevwood Pty Ltd (ACN 074 525 321) HH Unit Trust Greenleaf Holdings Pty Ltd (ACN 055 606 507) Greenleaf Unit Trust Vannin Trust Paquero Pty Ltd (ACN 003 540 556) Etnas Pty Ltd (ACN 056 599 350) Etnas Trust Halewood Holdings Pty Ltd (ACN 084 686 279) Chichester Nominees Pty Ltd (ACN 008 858 660) Silver Fox Investments Pty Ltd (ACN 081 888 048) Quahe Family Pty Ltd (ACN 106 994 530) Healthcare Properties Pty Ltd (ACN 075 401 955) Richstar Enterprises Pty Ltd (ACN 099 071 968) Bowesco Pty Ltd (ACN 008 915 357) Warwick Entertainment Centre Syndicate Trust KIS Realty Pty Ltd (ACN 100 871 314) Dyson Family Trust Centreway Refurbishment Syndicate Trust Westside Brisbane Developments Pty Ltd (ACN 116 479 013) On 17 February 2006 a further determination was made relating to the same individuals and entities and picking up some additional entities under the heading 'the Wider Westpoint Group'. They were: Keyworld Investments Pty Ltd (ACN 106 210 968) Keypoint Developments Pty Ltd (ACN 115 507 232) Rold Corporation Pty Ltd (ACN 009 358 276) [formerly Rold Pty Ltd]

SCHEDULE B CONTROLLED ENTITIES ENTITY Ann Street Brisbane Pty Ltd Ann Street Mezzanine Pty Ltd Bayshore Mezzanine Pty Ltd Bayshore Port Melbourne Pty Ltd Bayview Heritage Mezzanine Pty Ltd Bayview Port Melbourne Ltd Receiver & Manager Bowesco Pty Ltd Earlmist Pty Ltd Emu Brewery Developments Pty Ltd Emu Brewery Mezzanine Limited Forestview Nominees Pty Ltd Goldtag Pty Ltd Huntingdale Village Pty Ltd Kingdream Pty Ltd Lanepoint Enterprises Pty Ltd Receiver & Manager Market Street Mezzanine Ltd Market Street Mezzanine No 2 Pty Ltd Mount Street Mezzanine Pty Ltd North Sydney Development Pty Ltd North Sydney Finance Ltd Paragon Apartments Ltd Scots Church Development Ltd Silkchime Pty Ltd Receiver & Manager Receiver & Manager Vannin Pty Ltd Warwick Entertainment Centre Pty Ltd Westpoint Constructions Pty Ltd Court Winding Up Westpoint Corporation Pty Ltd Court Winding Up Westpoint Finance Pty Ltd Westpoint Management Ltd Receiver & Manager Receiver & Manager Receiver & Manager Receiver & Manager Receiver & Manager Receiver & Manager York Street Mezzanine Pty Ltd TYPE OF APPOINTMENT DATE OF APPOINTMENT OF EXTERNAL ADMINISTRATOR Receiver & Manager 19/01/2006 Court Winding Up 20/12/2005 Creditors Voluntary Winding Up 27/01/2006 Receiver & Manager 22/12/2005 Creditors Voluntary Winding Up 01/02/2006 Receiver & Manager 24/01/2006 08/02/2006 Receiver & Manager 03/04/2006 Receiver & Manager 29/03/2006 Receiver & Manager 24/01/2006 Creditors Voluntary Winding Up 15/02/2006 Receiver & Manager 13/03/2006 Mortgagee in Possession 02/02/2006 Receiver & Manager 24/01/2006 Receiver & Manager 1/03/06 Receiver & Manager 03/03/2006 09/03/2006 Creditors Voluntary Winding Up 06/02/2006 Creditors Voluntary Winding Up 06/02/2006 Creditors Voluntary Winding Up 14/02/2006 Controller 13/03/2006 Creditors Voluntary Winding Up 08/02/2006 Receiver & Manager 24/01/2006 Receiver & Manager 06/02/2006 Receiver & Manager 24/01/2006 29/03/2006 29/03/2006 Receiver & Manager 24/01/2006 Receiver & Manager 24/01/2006 Receiver 02/02/2006 22/02/2006 Receiver & Manager 24/01/2006 16/02/2006 Creditors Voluntary Winding Up 28/02/2006 Provisional Liquidator 9/02/2006 29/03/2006 22/12/2005 24/01/2006 19/01/2006 03/03/2006 25/01/2006 Court Winding Up 20/12/2005

Corporations Act 2001(Cth)s 1323, s

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