Legal fight between ASIC, managed fund and Melbourne property developer may be delayed

The Federal Court has approved Deloitte’s plan to pay Keystone’s investment management fees to CF Capital, despite a dispute about how the fees are calculated.

Director Paul Chiodo from Melbourne-based property developer Chiodo Constructions.

Independent managers of an under-fire investment fund will pay its trustee fees after securing advice in its favour from the Federal Court, while the fund flags plans to push back a key looming court date.

Deloitte’s Jason Tracy and Lucica Palaghia were appointed by the Federal Court in late June to verify payments and manage the bank accounts of Keystone’s Shield Master Fund, amid an Australian Securities and Investments Commission investigation and concern for investor money.

On Thursday, the Federal Court agreed with Deloitte’s plan to pay Keystone’s investment management fees to CF Capital, despite some dispute about how the fees are calculated and the possibility of future legal action from investors.

Deloitte’s barrister Robert Craig KC told the court “minds may differ as to whether the payment now is in the best interests of unitholders or investors” but making the payments would “allow the preservation of the status quo until a final hearing”.

ASIC chair Joe Longo. Picture: Josie Hayden/NewsWire

ASIC and former Keystone director Paul Chiodo – who is also defending ASIC’s case – did not oppose the plan.

But Keystone’s barrister, Stewart Maiden KC, said given his client recently changed solicitors from King & Wood Mallesons to Arnold Bloch Leibler it was likely they will apply to vacate an upcoming hearing on August 27.

Mr Maiden said there are a “large number” of ongoing proposed payment approvals sitting with Deloitte.

“(Keystone) needs to engage lawyers to give it a proper opportunity to respond to ASIC allegations. Money sought under (proposed payment approvals) are necessary,” he said.

“If the negotiations with Deloitte don’t bear adequate fruit in the immediate future, we may need to come back to court to seek orders compelling the resolution of the (proposed payment approvals).”

In June, ASIC won orders from the Federal Court preventing Keystone Assets Management — who is the responsible entity for Shield — from selling, transferring or dealing with Shield’s assets, other than to make some payments that must first be approved by Deloitte.

Some of the regulator’s concerns about risks to investors include that Keystone has failed to lodge Keystone’s and Shield’s audited financial statements for the 2023 financial year.

As well, in a statement it said “a large proportion of the funds held by Shield have been directed to a fund which made loans to various companies associated with Mr Paul Chiodo, a former director of Keystone to fund property developments”.

Deloitte was appointed to assess whether payments are in the best interests of Shield investors. They have also prepared a financial report on the position of Shield.

An early ASIC bungle and bizarre case of mistaken identity resulted in Mr Chiodo’s passport being returned to him after it was previously frozen, but with a promise to give ASIC written notice 14 days before going overseas.

The Federal Court originally granted freezing orders after ASIC documents purported to show the property developer booked flights in and out of Australia between August and September.

But the orders were modified after lawyers for Mr Chiodo alleged the travel plans were ­actually based on a Swiss-based executive of a similar name who had plans to travel in Australia in the coming months.