This article is from the Australian Property Journal archive
NORM Carey has had a short lived victory in the Federal Court after the corporate regulator said it would start fresh proceedings against the former director of the disgraced Westpoint Group.
Carey had won a challenge in the Federal Court yesterday against the Australian Securities and Investments Commission unsuccessfully taking over proceedings against the directors of Westpoint by PricewaterhouseCoopers, the liquidators.
On November 08 2007, ASIC announced proceedings under section 50 of the ASIC Act against the directors including Norman Carey, Richard Beck, John Dixon, Lynette Schiftan and Graeme Rundle.
ASIC sought compensation on the grounds of breach of directors duties for an amount of $245 million.
But rather than commence new proceedings, ASIC applied to takeover existing proceedings brought against the directors by PWC and Carey challenged whether or not ASIC could take over existing proceedings.
The Federal Court of Australia yesterday agreed with Carey that ASIC does not have power to carry on existing proceedings commenced by the liquidator of Ann Street Mezzanine Pty Ltd and York Street Mezzanine Pty Ltd which owes investors $67 million and $55 million respectively.
Justice Ray Finkelstein held that whilst ASIC did not have power to take over existing proceedings he said ASIC could commence fresh proceedings against Carey and the other directors.
In his ruling, Justice Finkelstein said ‘…in the circumstances of this case, the answer is somewhat academic. The parties accept that if Carey’s view prevails ASIC can and will simply begin new proceedings in the name of each plaintiff. Moreover, I have pointed out to the parties that in such event, I would, most likely, make an order deeming each step taken in the existing proceedings to have been taken in the new proceedings…’
ASIC’s chairman Tony D’Aloisio the decision clarifies a point of law.
“And we will immediately institute fresh proceedings.
“Let me reassure Westpoint investors that the decision does not affect the substance of the cases which we are pursuing in which we are seeking compensation for them,” he added.
ASIC will commence new proceedings on behalf of Ann Street Mezzanine and York Street Mezzanine and is in the process of commencing proceedings to be filed by July 15 2008 in relation to a number of other mezzanine companies within the Westpoint group.
ASIC is also suing five financial planning companies which the regulator alleged did not comply with their obligations under the conditions of their Australian financial services licences to recoup $63.2 million.
The companies named were Bongiorno Financial Advisors; Dukes Financial Services Australia (In Liquidation); Glenhurst Corporation; Masu Financial Management; Professional Investment Services;
And on December 20 2007, ASIC added two more companies to its compensation action and they were Strategic Joint Partners and State Trustees Limited.
ASIC alleges that, in selling products with the risk and financial characteristics of Westpoint, Strategic Joint Partners did not comply with its obligations under the conditions of its Australian financial services licence and under the law. ASIC will allege that State Trustees, as the trustee of an unsecured mezzanine note issued by Market Street Mezzanine Ltd (in liquidation), breached its duty to the mezzanine note holders and failed to comply with its obligations under the Corporations Act.
In May, Neil Burnard, a former Westpoint fundraiser who raised $143 million was found guilty of nine criminal charges under the Crimes Act of NSW of obtaining a financial advantage for various Westpoint Mezzanine companies by making or publishing a statement which he knew to be false in a material particular.
Burnard had made statements that he was a director of Kebbel Investment Bank, an entity associated with Westpoint director Richard Beck which did not exist because it was not a “bank”.
Australian Property Journal
