In the latest article in our 25-year anniversary series, we look at the 2006 collapse of Norm Carey’s Westpoint group and the continuing legal battles.
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In the latest article in our 25-year anniversary series, we look at the 2006 collapse of Norm Carey’s Westpoint Group and the continuing legal battles.
Norm Carey established Westpoint Group in 1985 and spent the next 21 years building it into a national property development business with interests in financial planning, brokering, and money management.
At its peak, the business had 350 staff and more than $1 billion worth of property developments, held through dozens of companies across the country.
Its Perth projects included ambitious plans for apartment towers on the Emu Brewery site in central Perth.
It also owned shopping centres and office buildings through property syndicates.
The group had a complex structure with 157 corporate and trust entities, including 11 mezzanine finance companies.
Crucially, these companies raised an estimated $421 million from about 4,000 investors who were attracted by the high rates of interest on offer – and swayed by the high commissions reportedly paid to financial advisers.
The group started to unravel in 2005 when the property market weakened and the Australian Securities and Investments Commission cracked down on its mezzanine schemes.
Partners from insolvency firm KordaMentha were appointed receivers and managers of the main Westpoint companies in January 2006, and are still there today dealing with multiple contractual and legal disputes.
About $100 million has been returned to investors since the group’s collapse, leaving a shortfall of some $300 million, though the return has depended on which property development investors had funded.
KordaMentha boss Mark Mentha shed rare light on Westpoint in 2013, when he responded to a submission by Norm Carey’s sister, Karen Carey, to a Senate inquiry.
“At the date of our appointment the group was involved in more than 100 legal actions, most of which were commenced by the group against other parties,” Mr Mentha said.
He added that Mr Carey had launched 12 legal actions against KordaMentha and its lawyers.
Mr Mentha queried how this legal action has been funded.
“In affidavits sworn by Mr Carey soon after the date of our appointment, he stated that he had few personal assets,” the submission stated.
“Despite these statements Mr Carey has been able to conduct extensive, substantial litigation against us and other parties over the past seven years since the collapse of the Westpoint Group.”
Much of the legal action has been in the names of Westpoint companies in receivership, with Mr Carey using his residual powers as a director of these companies.
A current example is legal action pursued by Mr Carey and proprietary companies Huntingdale Village, Silkchime, Vannin, Warwick Entertainment Centre and Paragon Apartments against law firm Corrs Chambers Westgarth, which has been acting for the receivers.
The case started in 2010, when the five companies and Mr Carey requested Corrs provide itemised bills explaining its work for the receivers.
The Supreme Court rejected their request, but as often occurs with Westpoint litigation, an appeal was lodged.
In a ruling handed down this month, the Court of Appeal dismissed all grounds of appeal.
Another example involves Warwick Entertainment Centre taking legal action against Silkchime (Mr Carey was a director of both companies).
A Supreme Court ruling in 2012 found Silkchime owed $11.6 million to Warwick.
When Warwick sought to enforce the judgement, it was found that another entity named Earlmist held a mortgage over Silkchime property and claimed to be owed $9.8 million.
Warwick subsequently applied for a declaration showing Earlmist’s interest in the Silkchime property.
Silkchime and Earlmist responded by applying for Justice Rene Le Miere to recuse himself from the matter because of adverse findings he made against Mr Carey in the original matter.
Justice Le Miere is not the first judge to make adverse findings.
In the Federal Court in Melbourne, Mr Carey pursued a $400 million claim against Asic and law firm Herbert Smith Freehills.
In a ruling handed down in 2013, Justice Susan Kenny dismissed the claim and proceeded to deliver a withering assessment of the Westpoint boss.
“Mr Carey was not an honest and reliable witness,” Justice Kenny’s judgement stated.
“Given my findings with respect to the alleged presentation at the Westpoint Group’s offices in April 1998, I conclude that Mr Carey fabricated this evidence to support his case.
“More generally, Mr Carey’s evidence led me to conclude that, in the main, his evidence was either reconstructed with little and in many instances no independent recollection and/or that it was recently invented.
“Furthermore, Mr Carey was frequently evasive in cross-examination, providing lengthy non-responsive answers or answers that were not warranted by the relevant question.”
The legal disputes have included some notable wins by Mr Carey, however.
An asset stripping case collapsed after Asic belatedly presented a key document to the court.
In 2012, the State Administrative Tribunal ruled Mr Carey was entitled to keep his real estate agent certificate, however, the Court of Appeal overturned that ruling in 2014.