This article is from the Australian Property Journal archive
The corporate regulator and the Commonwealth Government yesterday said they will vigorously defend the constitutional challenge brought by KPMG.
KPMG is seeking a declaration that section 50 of the ASIC Act is unconstitutional. It contends that, insofar as section 50 empowers ASIC to begin and carry on a proceeding in the name of a company, it affects an acquisition of property otherwise than on just terms contrary to the provisions of section 51 (xxxi) of the Constitution, and is accordingly invalid.
If successful, it would mean that ASIC would not have powers to continue the action to obtain compensation against KPMG for the benefit of Westpoint investors.
KPMG’s proceedings follow several successful cases launched by ASIC on behalf of Westpoint investors. Earlier this week, ASIC settled a fifth Westpoint compensation case with Glenhurst Corporation Pty Ltd and its insurer QBE Australia for $2.5 million. This is in addition to the State Trustees Ltd for $13.5 million; Professional Investment Services Pty Ltd for $5.9 million; Bongiorno Financial Advisers Pty Ltd and Bongiorno Financial Advisers (Aust) Ltd for $2.6 million.
Liquidators have also recovered approximately $49.2 million. In overall terms, investors will see a potential return to date of around $100 million of the $388 million invested.
ASIC will maintain that section 50, in empowering it to bring proceedings for the benefit of investors who have suffered loss and might otherwise never be compensated, is valid.
ASIC used those powers to pursue a case against KPMG over its auditing of the companies in the Westpoint Group. The action claims compensation in the order of $200 million.
ASIC is claiming negligent conduct by KPMG for the audits of financial accounts of various Westpoint companies for the years ended 30 June 2002, 2003 and 2004. ASIC also alleges that KPMG should have notified ASIC that it had grounds to suspect that breaches of the Corporations Act were taking place within the Westpoint Group, including breaches of director’s duties and laws against insolvent trading.
If successful, the action could potentially benefit up to 80% of investors in Westpoint. It represents a significant phase in ASIC’s program to obtain compensation for Westpoint investors who have suffered loss.
In August last year, ASIC accepted enforceable undertakings from three partners of KPMG’s Perth office, Brett Charles Fullarton, Robert Charles Kelly and Jonathan Grant Robinson, who were involved in auditing activities relating to Westpoint Group companies, not to practice as registered auditors for periods ranging between 9 months and 2 years. The EUs arise out of audits performed by the KPMG partners of Westpoint entities before the group collapsed in 2006.
Australian Property Journal
