Tennis great Ken Rosewall ‘favoured’ by bankrupt firm

Tennis great Ken Rosewall was earning interest on a loan he made to stockbroker BBY.

Tennis great Ken Rosewall is facing off against BBY liquidator KPMG in court. Picture: James Croucher

Tennis great Ken Rosewall was earning interest on a loan he made to stockbroker BBY in the months before its collapse, even as the firm’s executives were shifting funds around and had their hands “in the till”, a court was told.

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

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

KPMG barrister Daniel Krochmalik didn’t hold back in his arguments in court on Tuesday, accusing BBY of a “blatant and aggressive” breach of customer trust and of moving funds around to hide the fact it didn’t have the capital to pay creditors and other obligations.

When a contract between BBY and trading firm Saxo was changed in 2014 and Saxo demanded millions in client funds be transferred back to it, the transaction had to be done in three tranches.

“BBY didn’t have its client moneys available,” Mr Krochmalik said. “BBY already had its hand in the till” of customer money, he alleged.

BBY collapsed in 2015 and KPMG put the shortfall in customer accounts at about $20m.

Mr Rosewall was required to loan BBY money when a $192m trade in Aquila shares went awry in mid-2014, spurring the firm to meet an ASX call for more capital.

Judge Fabian Gleeson asked about the loan terms sought by Mr Rosewall, although Mr Krochmalik said they were unknown, besides that interest was being paid and KPMG inferred the funds were repayable on demand.

KPMG argues the loan repayment reflected preferential treatment of Ken Rosewall and is voidable given BBY was already insolvent.

Mr Rosewall’s barrister, Richard Scruby, SC, on Tuesday questioned former BBY strategy manager April Yuen over her recollection of events, and in particular a conversation she had about the funds loaned to the broking firm by Ficema.

Mr Scruby also took aim at KPMG’s Stephen Vaughan saying the firm excluded several offsetting items in its calculations of shortfalls in BBY client accounts, including a surplus in Interactive Brokers, equities and exchange traded options accounts.

Mr Scruby said KPMG had wrongly excluded amounts from its analysis of BBY’s working capital. “It is just not there … it’s just a mistake isn’t it?”

Mr Vaughan admitted while an error was possible, there was also potentially a “valid reason” within the analysis to exclude some of the amounts.

The court also heard about BBY’s overdue payments to creditors including the Australian Taxation Office, state revenue offices, then venture partner Jefferies and markets software firm Iress. A first offer to the ATO of a payment plan by BBY was rejected before an arrangement was reached. BBY also owed commission payments to some of its stockbrokers.

“That itself is a strong indicator of insolvency,” Mr Krochmalik said, noting that several key events and a decision to move to self-clearing of trading saw BBY “effectively starved” of capital.

He argued that from January 2014 until May the following year there was “always a deficiency” in BBY’s working capital.

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

Former BBY chief executive Arun Maharaj is a witness in the case and Ken Rosewall is scheduled to appear via video link from Queensland.

The case continues.