KPMG’s curve ball delivers tennis great Ken Rosewall more time on BBY legal defence

Liquidators are pursuing funds returned to tennis great Ken Rosewall ahead of the collapse of stockbroker BBY.

Australian tennis great Ken Rosewall – who was a director of failed broker BBY – with Bulgarian tennis’ Grigor Dimitrov and Britain's Jamie Murray. Picture: Brett Costello

Tennis great Ken Rosewall has until November to make any revisions to his legal defence, as liquidators pursue funds returned to him ahead of the collapse of stockbroker BBY.

Mr Rosewall, 85, was a director of BBY alongside his son Glenn, who was executive chairman, and lawyer David Perkins.

The stockbroker failed in 2015 and liquidator KPMG puts the shortfall in customer accounts at about $20m. The collapse followed questionable transactions as BBY attempted to stay afloat and meet capital obligations.

KPMG is pursuing Ken Rosewall in a NSW Supreme Court civil case over $3.3m paid to Ficema, an entity associated with him, before the 2015 demise of the firm.

KPMG says the funds were provided by Ken Rosewall to BBY when the stockbroker saw a $192m trade in Aquila shares go awry in mid-2014, spurring the firm to meet an ASX call for more capital.

But the return of the $3.3m to the Ficema entity is in dispute, as KPMG argues it reflected preferential treatment of Ken Rosewall and was voidable given BBY was already insolvent.

Judge Kelly Rees heard from both sides of the argument in court on Tuesday as the four-day hearing was meant to get underway. But the parties were instead focused on a new affidavit that was filed just before midnight the previous evening, by KPMG’s restructuring director Stephen Vaughan.

The new document clarifies that in KPMG’s view of working capital there was a $20m shortfall in BBY customer accounts in 2014.

That is linked by the liquidator to poor internal controls, and BBY transactions as far back as 2011 that left customer accounts short. KPMG’s findings have suggested the stockbroker was already insolvent around that time.

But Ken Rosewall’s barrister, Richard Scruby SC, said the $20m didn’t reconcile with earlier KPMG court filings which suggested a much smaller shortfall of $5m.

“It looks very odd,” Mr Scruby added. He said the new document would need to be properly assessed and the numbers re-examined.

Justice Rees asked both sides if the new affidavit “significantly moved the goalposts” in the case.

“I can see there is a problem … This is very regrettable,” she said, of the delay it would cause in the proceedings.

Justice Rees said given the legal matter had been in the system for some years and Ken Rosewall’s age, she felt it needed to be “determined promptly”.

She opted to delay the case, though, until November 10 to be heard by Judge Fabian Gleeson.

KPMG’s barrister Daniel Krochmalik told the court the firm was providing a more detailed view of BBY’s working capital and the shortfall in customer accounts.

He said there was a “substantial deficiency” in customer accounts at BBY, rather than a $5m shortfall that could be met by funds set aside by Ken Rosewall at the time.

Former BBY chief executive Arun Maharaj and strategy manager April Yuen are expected to appear as witnesses in the case, as are Mr Vaughan and Ken Rosewall, the latter by video link from Queensland.

PCI insolvency partner John Melluish is slated to appear as an expert witness for Ken Rosewall.

The collapse of BBY has revealed a trail of startling information over the past five years. That included Glenn Rosewall seeking advice on running the company from a psychic and vibrational healer spanning business decisions, corporate deals, hiring and firing and employee budgets and forecasts.

The liquidator is pursuing Ken Rosewall — who was dubbed “Muscles” during his tennis days — after being unable to recover funds from Glenn when he filed for bankruptcy last year.

Long-suffering BBY customers entangled in the failure will finally see a first distribution of monies returned on September 24, more than five years after the broker’s demise.

Over two payments, share trading BBY customers will have 73c in the dollar returned, while those that used exchange-traded options will receive 59c. A third category, including foreign exchange and futures customers of BBY, will get just 26c in the dollar.

The second payment will be made in the first half of 2021.

Some BBY customers were able to earlier draw on a compensation scheme managed by the National Guarantee Fund, while others had incorrect transactions reversed.