Trustees pursue Leroy’s “unauthorised withdrawals”

Fugitive ex-bankruptcy trustee Paul Leroy would’ve been conspicuous by his presence if he’d appeared this week in response to an application brought by the trustees of the bankrupt estate of Kathryn Jackson, an estate Leroy gleefully plundered before fleeing the jurisdiction in late 2023.

SV Parters Fabian Micheletto and Michael Carrafa applied to the Federal Court in October for an order that in making a series of “unauthorised withdrawals” in the sum of $886,000.00 Leroy had breached his duties as trustee of what’s called the second bankrupt estate of Katherine Jackson, because in the scarcely believable history of Victoria’s health sector unions, why have a national secretary bankrupted just the once?

During hearing of the application on Wednesday Federal Court judge David O’Callaghan was told that between 2022 and 2023 Leroy engaged in lengthy correspondence with Slater & Gordon’s industrial and employment law head Geoff Borenstein.

Borenstein has been representing the Health Services Union (HSU) (since renamed the Health Workers Union) in its bid to recover costs and damages awarded after it sued Jackson for $1.4 million in the wake of the 2014 Royal Commission into union corruption. Jackson has since been discharged and is no longer a bankrupt.

Leroy suggested that the HSU might have to claim in the first bankruptcy, rather than the second.

The relevance of this was that Jackson had been named as a beneficiary in the deceased estate of Sydney QC David Rofe, who died in 2017 aged 87.

Her share, which was likely to pay much if not all of the HSU’s claim, was almost certain to be designated as property of Jackson’s second bankrupt estate.

Borenstein was vigorous in advocating for the position that the HSU’s proof of debt should be lodged in the second Jackson estate and was chasing Leroy for detail about when Rofe’s executor would make distributions.

Leroy, who plied his trade at Hall Chadwick for nearly 30 years, was at the time operating as a sole practitioner through Integrated Accounting Solutions Pty Ltd (IAS).

The court heard how a staff member at IAS emailed Borenstein in November 2022 querying how the HSU could prove all of its debt in the second bankrupt estate.

Another IAS staff member told Borenstein in a separate email around the same time that the trustee had yet to receive an anticipated second and sizeable tranche of funds from the Rofe estate executor.

The tranche – some $1.76 million – had in fact landed with Leroy on June 8, 2022.

And on December 23, 2022 Matthews Folbigg principal Hayley Hitch told Borenstein that the executors hadn’t issued the final substantive payment from the Rofe estate when in fact all three payments had already been distributed.

Christopher Brown KC for Micheletto and Carrafa assured the judge Hitch and Matthews Folbigg would have been acting on instructions and there should be no question in respect of the solicitor’s conduct.

His clients he said were seeking orders requiring Leroy to disgorge payments made to him before he shut IAS and moved to Domenic Calabretta’s mid-tier insolvency firm Mackay Goodwin in June 2023.

When the judge asked if any payments stolen after Leroy joined Mackay Goodwin had been “made good” Brown said his clients no longer pressed any claims for that period, which ended on January 19, 2024 when Mackay Goodwin terminated Leroy’s employment after discovering that the bank accounts for the second Jackson estate among others had been emptied and closed months earlier.

On the same day it terminated his employment Mackay Goodwin reported Leroy to Inspector-General in Bankruptcy Tim Beresford.

Without the professional indemnity cover he’d enjoyed courtesy of his employment with Mackay Goodwin Leroy was an uninsured trustee, making it straightforward for Beresford to cancel the malefactor’s registration.

In concluding Brown said that his clients would likely apply for freezing orders in respect of Leroy’s assets in Australia, and that would require Micheletto and Caraffa putting other parties on notice.

“The whole thing beggars belief” Justice O’Callaghan said while making the orders sought and agreeing to provide written reasons by the end of the month.