Mark Roufeil and Brad Tonks will be on tenterhooks as they await a Federal Court ruling that will determine if they can pursue insolvent trading and voidable transaction claims worth millions.
Roufeil and his lawyer Thomas Russell turned up at the Federal Court yesterday to assist their barrister Andrew Fernon SC make a number of applications
One was for the entry of Roufeil and Tonks into a retainer with Piper Alderman to formalise work Russell and his Piper’s colleagues have been undertaking “on spec” for the PKF pair in their capacities as liquidators of Vaucluse 29 Pty Ltd, One Lake Macquarie Pty Ltd and Bayview 66 Pty Ltd.
The companies were incorporated to hold various residential properties, some of them extremely valuable.
A falling out between shareholders however saw Roufeil and Tonks appointed provisional liquidators in December 2022 and liquidators by the court in June 2023.
Inadequate books and records, a lack of funding, and litigation in respect of One Lake Macquarie with related parties, have impeded progress since.
Roufeil and Tonks want to publicly examine director Changjin “Jack” Li and others but litigation with Li’s ex-wife Changren Cheng has taken precedence. After Cheng sought and obtained orders for security for costs in respect of the litigation in the NSW Supreme Court, Roufeil and Tonk had to seek funding.
Inevitably, that meant they also needed court approval to enter into the funding deed they’d subsequently arranged with Kovi Paneth’s Pretium Funding, hence yesterday’s appearance.
As the application progressed it became clear that Federal Court judge Nick Owens was dissatisfied with three aspects.
One related to the time it had taken for the PKF pair to seek funding. One was the time it took for them to apply for approval to enter into the funding agreement. The final aspect was the lack of detail.
Judges hate delay with good cause. An extended timeline, inadequately documented, can harbour all manner of irregularities, potentially casting shadows over a judge’s reasons for making orders as sought.
In their September 2023 statutory report to creditors Roufeil and Tonks had flagged their intention to conduct examinations of Li, Cheng, her company Athena Rose Capital and “other associated parties”.
Up till that time they’d been funding on spec with Russell dong the same, though on the condition that there’d be a 25 per cent fee uplift for Piper’s if the claims succeeded.
Clearly aware of this the judge demanded Fernon explain why his clients hadn’t turned their mind to funding much earlier.
Fernon told Justice Owens that Roufeil and Tonk decided to seek litigation funding after the security for costs application was brought against them in 2024.
Fernon referred to an affidavit filed by Russell. The judge said it was no more than a list of what had been done. It didn’t explain the reasons for the delay.
It then emerged that a condition of the funding from Pretium was that it be provided by bank guarantee, and the liquidators had subsequently been required to renegotiate those terms.
Looking at the resistance the liquidators have encountered from the director and related parties and the fact that amounts likely to be due to the tax office in respect of unpaid capital gains on property sales have yet to be quantified, Roufeil and Tonks may not have been in a position to obtain funding much earlier.
Maybe it will be enough to satisfy the judge. We should know by late this afternoon.
Editor’s Note: Roufeil and Tonks won their reprieve.
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