Tennis legend Ken Rosewall’s Ficema loses Supreme Court rally to BBY liquidators

Tennis great Ken Rosewall’s trust has been ordered to pay $3.3m plus interest to liquidators dealing with the collapse of stockbroker BBY.

Ken Rosewall’s entity Ficema has been ordered to pay liquidators of the two BBY entities $3.3m plus interest. Picture: Dan Himbrechts

Tennis great Ken Rosewall has lost a NSW Supreme Court case over the collapse of stockbroker BBY, which saw him ordered to pay liquidators $3.3m plus interest.

Supreme Court of NSW Judge Fabian Gleeson delivered a judgment on Friday that handed KPMG, liquidators of BBY and its related entities, a victory after it claimed preferential payments were made to Mr Rosewall while the broker was essentially insolvent.

An entity associated with Mr Rosewall, Ficema, was the defendant in the case.

BBY - which was run by Mr Rosewall’s son Glenn - was placed into administration in 2015 given it was unable to repay a loan to St George bank and had been caught up in questionable transactions.

Ken Rosewall, 87, was a BBY board director alongside Glenn, who was executive chairman, and lawyer David Perkins.

The court found BBY “consistently failed to pay” when debts were due to creditors.

“Having regard to the whole of the evidence, I am well satisfied that the plaintiffs have proved that each of BBY Holdings and BBY was in fact insolvent throughout the period 1 January 2014 to 17 May 2015,” Justice Gleeson said in one part of the judgment. “Both companies were suffering from an endemic shortage of working capital throughout that period, rather than simply a temporary lack of liquidity.”

He ordered Mr Rosewall’s entity Ficema pay liquidators of the two BBY entities $3.3m plus interest, and also awarded KPMG costs in the proceedings. Interest payments will be back dated to May 2018.

Mr Rosewall can appeal the judgment.

His barrister Richard Scruby, SC, argued in late 2020 that the court should not presume that BBY was insolvent in January 2014, as reflected in a separate judgment handed down by Judge Kelly Rees in 2019.

Justice Gleeson’s judgment found otherwise, though, saying it was evident BBY “consistently failed to pay” when debts were due to creditors in 2014 and 2015, even after it had entered payment plans with entities including the state revenue offices.

“This was another indicator of inability to meet its debts as and when they fell due,” the judgment added.

The court’s ruling comes as KPMG prepares to deliver the final payment to ­almost 6000 BBY customers caught up in the collapse, which is slated to occur in February. Client claims amount to about $65m with a shortfall in their accounts of about $35m, given customer funds were mixed with the firm’s money to keep the broker afloat.

The corporate regulator has been probing the collapse for seven years.

An Australian Securities and Investments Commission spokesman on Friday said the BBY investigation was “very much ongoing”, but declined to comment further.

The liquidator started pursuing Ken Rosewall - nicknamed Muscles during his tennis days - after being unable to recover funds from Glenn, who filed for bankruptcy in 2019.

KPMG had argued the $3.3m loan repayment to the Ken Rosewall-associated entity was voidable because it reflected preferential treatment.

Funds were tipped into 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.

KPMG has been able to recover some funds in the liquidation process in financial settlements with insurers and BBY’s auditor BDO East Coast Partnership.

BBY’s customers have, however, confronted a challenging seven-year period to reclaim some of their funds.

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

But the majority are only receiving a proportion of what they entrusted to BBY. Share trading customers will receive 73c in the dollar, exchange traded options clients 59c, and customers linked to Interactive Brokers 44c. Customer classes including foreign exchange and futures will receive just 26c in the dollar.

The funds awarded in Friday’s hearing will not make their way to the pool that is being used to repay BBY customers. There is another pool of funds for BBY creditors which has also had to fund legal action and the broader liquidation process.