ANZ, receivers under scrutiny for Burrup Fertiliser liquidation

0
SHARE
Illustration: John Spooner

“Find out what yanks their chain. Prepare to get PO in court as soon as possible. Wants dirt on PO” – ANZ chief risk officer Chris Page giving directions to liquidators PPB.

“PO” is Pankaj Oswal, the flamboyant Indian petrochemical billionaire who came to Perth and set up the Burrup Fertiliser plant.

ANZ put Burrup into receivership. Now Perth Federal Court judge AntonySiopis has ordered an inquiry into the conduct of the receivers PPB in the three receiverships involved.

Oswal has alleged PPB charged  $34 million over 13 months, including $13 million on lawyers Freehills Herbert Smith.

Besides the instructions from Page to get “dirt” on Oswal – contained in a file note of a conference call – a slew of embarrassing revelations has emerged in the Federal Court proceedings in Perth.

Here’s a taste: Oswal and his wife Radhika claim PPB spent 48 hours filling out a form (a “second form 524”) and charged $19,240. Further high charges were incurred for the filling out of another form (a “third form 524”), a task that apparently endured for 19 hours though, according to the allegations, the form was still not filled out correctly.

Responding for this story, ANZ said the Owals had refused to return to Australia to face serious allegations.

Before we delve further into the detail of these meaty charges, some context: belligerent billing by liquidators and lawyers is hardly news but there is broader significance in the Burrup case as it is one of two epic legal battles afoot where judges have actually stepped in and investigated the behaviour of the insolvency profession, even to the point of lifting the veil of legal secrecy.

The other is the Homeric legal battle between John Viscariello and the Adelaide establishment where judgment is slated to be handed down next week in the Supreme Court of South Australia.

In an interim judgment in August 2012, Chief Justice Chris Kourakis dealt the liquidator of Viscariello’s homewares business (Peter Macks, then also from PPB) and his solicitors Minter Ellison a brutal blow.

“I have formed the view that the proceedings were prosecuted recklessly, indifferent to the possibility that they might be an abuse,” he found.

The liquidator had chewed up half a million dollars chasing a debt of just $28,000. That $28,000 debt belonged to Viscariello’s girlfriend at the time, Tanya Hamilton-Smith. The case got personal. PPB and Minters tried to get at Viscariello’s assets by bankrupting Hamilton-Smith and a plethora of lawsuits ensued.

The dogged plaintiff Viscariello became a lawyer and funded the cases himself. In Burrup, the lawsuits have been funded by Oswal, a billionaire who feels slighted by the system, although his own conduct as chairman of Burrup had certainly not been beyond reproach.

“Mr Page’s colloquial language shouldn’t distract from the serious allegations Mr Oswal is currently facing. Given the gravity of the situation it was incumbent on ANZ to ensure these allegations were fully investigated,” ANZ said.

A statement from PPB said the firm “looks forward to addressing the matters you and Mr Oswal have raised in the appropriate forum: the Federal Court. The receivership of the Burrup Fertilisers assets involved very great complexity. PPB is proud of the outcome of the receivership and of the integrity of its people carrying out their roles.”

The Oswals claim the receivership of the Burrup Fertiliser plant ought to have been a relatively straightforward affair. The plant was not put up for sale. Aside from the departure of Pankaj Oswal, there were no major changes in its 100-strong workforce.

It was sitting on millions of dollars of cash and made a profit of $10 million a month. This was no distressed asset. Yet according to Oswal, what resulted was a no-holds-barred fee frenzy and he was obliged to pick up the tab. He has petitioned the court for a refund. He also wants each of the receivers deregistered, fined and banned from practice.

The central question for Justice Siopis in the Burrup matter is whether there was a “proper purpose” for the charges incurred by PPB and its assorted advisers.

Of the $34 million in receivership costs over just 13½ months, PPB raked in $14 million in fees, including $2.2 million in the last six weeks. PPB claims the receivership was a complex one with litigation to resolve. Legal fees in the last six weeks of the receivership were $1.4 million, mostly accruing to Freehills.

Here is a sample of some of Oswal’s claims.

  • PPB flew wives and personal assistants interstate for four nights over New Year’s Eve.
  • The unlawful charging of pre-appointment fees.
  • Discrepancies between timesheets and invoices.
  • Charging for work that was allegedly never performed.
  • PPB staff recording exactly 7.5 hours a day.
  • Charging for drycleaning, groceries, snacks, stationery and even a traffic infringement notice.
  • Using Burrup’s corporate box at the Fremantle Football Club.
  • Charging for the solicitation of post-receivership work.
  • Resourcing the receivership with its staff from Melbourne, whose travels cost Oswal a staggering $2.8 million.

PPB invoiced $765 for partner Brendan Rew’s “trip to Dalkeith and Peppermint Grove personal properties to conduct surveillance” on Pankaj Oswal. Another employee, Royden Saldana, was charged out for $620 for “travel to and from the directors’ properties”.

Among the large unitemised invoices to ANZ was $149,000 spent in the last three days of receivership.

Among the $2.8 million in travel costs was a hotel bill of $948 a night for a Joshua Stacks, an “Analyst/Intermediate 1”.

The receivership was also billed for “government liaison” – some $13,200 by Robert Fisher, who urged that Burrup renew its sponsorship and box at the Fremantle Football Club from September 2011 to January 2012.

“One of the reasons Mr Fisher identified for such renewal was that PPB staff had used the table at the President’s Suite along with the ‘prime position seating’ to the games and obtained access to government officials and business leaders,” claims the Oswal pleadings.

Then there were charges of $172,000 for PR firm Hintons, including $58,654.75 for “media monitoring services and press releases” in the last six weeks of the receivership.

Also included in the travel expense was a traffic infringement notice. Some $1.4 million went on “professional fees” for professionals travelling and conducting  “travel-related activities”. Of this, $573,000 was incurred for activities while on an aircraft.

PPB chose to send a lot of staff from Melbourne to Perth to conduct the receivership, and there were bills for flights to Los Angeles, New York, Singapore, Hong Kong, India and London.

Partners, of which there were many, flew business class. Also, their personal assistants were flown to Perth and put up in hotels.

One was flown from Melbourne to Perth for four nights over New Year’s Eve 2010 and was accommodated at the Duxton Hotel, and again in January. No activities related to Burrup have been cited, according to the claim.

Another PA also flew to Perth around New Year’s in 2010 for four nights.

Justice Siopis has reserved his judgment in an application by receivers and PPB partners Ian Carson, David McEvoy and Simon Theobold to strike out many of the allegations.

In a hearing on October 15, Oswal’s barrister Martin Goldblatt  said the  PPB documents obtained under discovery had “lifted the veil of secrecy under which this receivership was conducted”  and “reveal a systematic failure of administration and integrity right from the outset and until the very end”.

PPB’s legal team asked the court to limit the scope of the inquiry. The Oswals’ legal team has accused ANZ of “aiding, abetting or being knowingly concerned … in breaches of duty … by the receivers and others” and “conducting the receivership for improper purpose”.