You know you’re on a winner when the self-described “restructuring specialist” you’ve fingered as a phoenix scheme architect offers to give back the dough.
You also know – because you’re an experienced insolvency practitioner who’s been around the block – that nothing is ever simple, and as is shown in the case of TSK QLD Pty Ltd (TSK), such offers are invariably conditional.
“After being approached in February 2021, he designed the scheme; drafted (or caused to be drafted) the various documents to give effect to the scheme; purportedly valued TSK’s assets at nil; and approved the payment of moneys. Further, almost $1.3 million flowed into the accounts controlled by him and his companies, and he and his companies retained about $431,000 of that amount.” Justice Kylie Downes.
As liquidators of TSK McGrathNicol Queensland partners Anthony Connelly and Jamie Harris had external accountant and advisor Ben Whitehouse and the corporate defendants he controls on toast, as Federal Court judge Kylie Downes explained In Connelly (liquidator) v Papadopoulos, in the matter of TSK QLD Pty Ltd (in liq) [2024] FCA 888.
“While they did not concede liability expressly, senior counsel appearing for the Whitehouse defendants made submissions to the effect that judgment should be entered against the Whitehouse defendants immediately in the amount of $431,000, which I construed to be tantamount to acceptance that the plaintiffs had established the liability of the Whitehouse defendants.
“Such a position is, with respect, the correct one, especially in circumstances where the Whitehouse defendants adduced no evidence to contradict the extensive and detailed evidence adduced by the plaintiffs,” her honour said.
The $431,000 was the figure Connelly and Harris identified as having flowed to Whitehouse and his companies during his involvement in the scheme, but the McGrathNicol duo had him in their sights for almost $7.3 million payable as a “debt pursuant to s 588M(2) of the Corporations Act 2001 (Cth), as damages pursuant to s 1317H of the Corporations Act 2001 (Cth) and as equitable compensation”.
That was not however to Whitehouse’s liking. Under public examination he’d told Connelly and Harris that he didn’t own or have an interest in any real estate and that being ordered to pay such a sum could force him into bankruptcy.
So at the trial Whitehouse proposed, through his counsel Matthew Jones KC, that any orders the court might make against him in respect of the larger amount be stayed and his liability activate only if and when TSK’s former chief executive Ciano Lopez defaults in respect of payments he’s undertaken to pay to TSK under the terms of a settlement entered into with Connelly and Harris.
Her honour wasn’t having it.
“First, the fact that the plaintiffs have entered a settlement with other defendants pursuant to which payments are likely to be made by those defendants in the future does not mean that the plaintiffs should be denied the opportunity of immediate recovery from the Whitehouse defendants,” she said.
“If such an opportunity bears fruit, that will be to the benefit of the creditors of TSK and would lead to an earlier finalisation of the liquidation. Viewed objectively, it is unlikely that the creditors of TSK would oppose such a course.
“Second, the submissions are premised on the Court exercising the power pursuant to rr 41.03 and 41.11 of the Rules to temporarily stay its orders, or execution of them, to avoid “irremediable harm” or “serious injury” to a party.
“However, there is no evidence to support a submission that enforcement of a judgment against the Whitehouse defendants will cause “irremediable harm” or “serious injury”.
“That Mr Whitehouse does not have real property in his own name does not mean that he does not have access to resources which would enable a judgment sum to be satisfied, and the position of the other Whitehouse defendants is not known,” the judge concluded.
Judge Downes has been around the block a few times too.
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