Ken Rosewall’s legal team accuses BBY liquidator KPMG of skewed analysis

Tennis great Ken Rosewall’s legal team has accused BBY liquidator KPMG of skewed analysis in its solvency and creditor reports.

Ken Rosewall faces questioning over the collapse of stockbroking firm BBY. Picture Renee Nowytarger / The Australian

Tennis great Ken Rosewall’s legal team has accused BBY liquidator KPMG of skewed analysis in its solvency and creditor reports, including the firm’s assessment of the failed stockbroker’s financial accounts.

The arguments were made at a NSW Supreme Court hearing on Wednesday as Mr Rosewall’s team faced off against KPMG’s legal team.

KPMG is pursuing Mr Rosewall in a civil case over $3.3m repaid to Ficema, an entity associated with him, before the 2015 demise of BBY.

KPMG argues the loan repayment reflected preferential treatment of Mr Rosewall, making it voidable given BBY was already insolvent.

But Mr Rosewall is disputing the matter. He was a BBY board director alongside his son Glenn, who was BBY executive chairman, and lawyer David Perkins.

Ken Rosewall’s barrister Richard Scruby, SC, said KPMG had excluded information from its analysis — including an overdraft and customer receivables — that would have showed BBY could meet its current liabilities ahead of its collapse.

“If you make those two assumptions you end up with a current ratio of about one,” he said, noting on his numbers that ratio at BBY was “slightly more” than one.

Mr Rosewall’s team was highlighting that BBY’s current assets when divided by current liabilities were positive, meaning the company could meet its short-term obligations.

Mr Scruby questioned why KPMG didn’t analyse the balances of BBY’s exchange traded options customers in its solvency report, or draw more from BBY’s 2014 financial accounts lodged with the corporate regulator.

But KPMG’s restructuring services director Stephen Vaughan pushed back at those suggestions, telling the court the BBY accounts were “fundamentally wrong”.

Judge Fabian Gleeson will hear from Mr Rosewall via video link from Queensland on Thursday. PCI insolvency partner John Melluish is also slated to appear as an expert witness for his legal team.

Mr Scruby also used Wednesday’s questioning of Mr Vaughan to ask why KPMG excluded several trust accounts from its analysis. “Your working capital analysis should include … the balance of trust account four at the time you perform your assessment,” he said. “I want to suggest to you that you haven’t included either account.”

On Tuesday, the court heard Mr Rosewall was earning interest on a loan he made to BBY in the months before its collapse. Board and other documents suggest the loan was initially earning 15 per cent per annum, which Mr Rosewall then reduced to 7.5 per cent.

Former BBY chief executive Arun Maharaj and the stockbroker’s ex-strategy manager April Yuen have provided court statements in the case. Both were also granted protection against self-incrimination by the judge, under the Evidence Act, so that evidence given in this case cannot be used against them in any subsequent prosecution.

The liquidator is pursuing Ken Rosewall after being unable to recover funds from Glenn when he filed for bankruptcy last year.

When BBY failed KPMG put the shortfall in customer accounts at about $20m, and clients of the broker had been tied-up in a complex process to retrieve their money.

The case continues.