KPMG gives Rosewalls a serve over BBY collapse

Liquidators are ramping up their legal efforts to retrieve funds from former tennis champion Ken Rosewall and son Glenn.

Australian tennis legend Ken Rosewall.

Liquidators of collapsed stockbroker BBY are ramping up their legal efforts to retrieve funds from former tennis champion Ken Rosewall and son Glenn Rosewall, with the long-running saga set for a court showdown this year.

BBY spectacularly collapsed in May 2015 after run-ins with the exchange and corporate regulator and it being unable to repay loans from St George Bank.

The demise caught up client money in a complex corporate structure where funds were mixed together to keep BBY afloat.

After public court examinations and several unsuccessful attempts at mediation with the Rosewalls and a third board director, David Perkins, liquidator KPMG is seeking redress in the NSW Supreme Court.

“Nearly four years on, the former clients of BBY are yet to receive an explanation from the directors of BBY for the $20 million shortfall in trust funds uncovered by the liquidators, yet they refuse even to return the money paid to themselves when BBY was insolvent and heading for collapse,” KPMG director of restructuring services Stephen Vaughan told The Australian.

KPMG is seeking $3.1m against Ficema, a company associated with Ken Rosewall, and about $2.8m from Glenn Rosewall and an associated company.

After investigations into BBY’s affairs KPMG believes BBY was trading while insolvent since 2011 and found the company dipped into clients’ money to meet its capital obligations.

The funds that will be disputed in court are shareholder loans repaid by BBY to Glenn and Ken Rosewall 11 months before the company’s demise.

KPMG reports showed that when a $192m trade in Aquila shares executed by BBY went awry in 2014, the firm went into overdrive to meet an ASX call for more capital to be held against it.

KPMG believes about $8.6m in clients’ accounts was used along with company money and funds from Glenn Rosewall’s private super fund.

About $3m was also transferred to BBY from Ken Rosewall, but not in time to salvage the transaction.

KPMG alleges the loans from the Rosewalls should not have been repaid in 2014.

A self-represented Glenn Rosewall lodged cross-claims against KPMG, including that he was owed shares and other employee entitlements, which were heard on Friday by NSW Supreme Court judge Ashley Black.

“Myself and GARF [an associated company] have been oppressed by the liquidator abusing their power,” Mr Rosewall said. He also accused KPMG of a string of “administrative errors” through the liquidation and mediation process.

Justice Black dismissed Mr Rosewall’s claims and urged him to apply for the shares and investments in line with other former BBY clients, in a process set up by the liquidator. He was also ordered to pay KPMG’s costs.

“It would not promote the interests of the winding up,” Justice Black said.

KPMG is backed by litigation funder IMF Bentham in its court action against the Rosewalls, who were majority owners of BBY.

A directions hearing for Ken Rosewall’s case is scheduled for later this month and the matter against Glenn will next be heard on March 18.

Justice Black granted Glenn Rosewall an extension to file his defence by March 15.

Ken Rosewall declined to comment on Sunday when contacted by The Australian.

Separately, the corporate regulator is said to be continuing to examine legal action related to BBY’s demise.

For the thousands of former BBY clients it has been a long and arduous task to retrieve their funds, following a separate court hearing last year. Some are likely to see little returned unless KPMG’s latest actions are successful.

“The court has provided directions as to how the client moneys should be dealt with and distributed,” KPMG’s Mr Vaughan said. “Once preparations are complete, probably in late March, we shall contact clients with further details of the verification and adjudication process and explain what to do next.

“We anticipate that distributions of client moneys will commence in late 2019.”

KPMG has settled several claims relating to BBY, including reaching an agreement with the provider of directors’ insurance.

KPMG has faced criticism from many former BBY clients over the liquidation, which has spanned almost four years.