CORPORATE RECOVERY - McGrathNicol...D14 -080701-WMLGMAN01-Circular to creditors-mmk CORPORATE RECOVERY 4 July 2008 To the Creditor as Addressed Dear Sir/Madam Westpoint Management

D14-080701-WMLGMAN01-Circular to creditors-mmk

CORPORATE RECOVERY

4 July 2008

To the Creditor as Addressed

Dear Sir/Madam

Westpoint Management Ltd (In Liquidation) (Receivers and Managers Appointed) (“WML”) ACN 074 148 431

I refer to my appointment as Liquidator of WML on 11 April 2006.

I have convened a meeting of creditors to be held at Level 1, 5 Mill Street, Perth WA 6000 on Tuesday 22 July 2008 at 12:00pm.

The purpose of this meeting is to:

+ provide creditors with an update on the progress and conduct of the liquidation;

+ seek creditors’ approval to enter into an agreement that:

- compromises a debt of the company of more than $20,000, as required by section 477(2A) of the Corporations Act 2001 (“the Act”); and

- extends beyond three months, as required by section 477(2B) of the Act;

+ seek creditors’ approval of the Liquidators’ remuneration; and

+ discuss any other relevant business which may arise.

Accordingly, I enclose:

+ statutory notice convening the meeting (Form 529);

+ proof of debt form (Form 535);

+ proxy form (Form 532);

+ information sheets to assist the completion of the proof of debt and proxy forms; and

+ liquidators’ report to creditors

Attendance and voting requirements

Creditors who intend to vote at the meeting, and who have not already done so, must lodge a proof of debt with the Liquidators prior to the meeting.

Creditors who are unable to attend the meeting and wish to be represented should ensure that either a proxy form, power of attorney or evidence of appointment of a company

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representative pursuant to section 250D of the Corporations Act (“the Act”) is validly completed and provided to me prior to the meeting.

If a faxed copy of a proxy or power of attorney is provided prior to the meeting, the original of the instrument must be received by me within 72 hours of my receipt of the faxed copy.

Alternatively, proxy forms can be e-mailed to [email protected]. Proxy forms lodged via e-mail must be validly executed by signing and scanning the completed form.

Corporate creditors who wish to attend the meeting should note that they may only be represented by an individual if that person is validly granted a proxy or power of attorney by that corporation, or appointed as a company representative pursuant to section 250D of the Act.

A creditor is not entitled to vote at a meeting unless a claim has been admitted by the Liquidator or the debt or claim has been lodged with the Liquidator. If you have already lodged a Proof of Debt with this office, you are not required to lodge another one, unless the amount of your claim has changed.

If you have not yet lodged a proof of debt, or are require to provide a proxy form or power of attorney, please complete and return the relevant form/document to this office by no later than 4:00pm on Monday 21 July 2008.

Remuneration

The Liquidators’ remuneration can only be fixed by resolution of creditors, a resolution of a committee of inspection or by application to the Court. The Liquidators will seek approval of their remuneration at the above meeting of creditors as follows:

+ Liquidators’ fees of $311,144.10 plus GST for the period 6 July 2007 to 27 June 2008; and

+ Liquidators’ fees for the period 28 June 2008 to 21 July 2008, with details to be provided at the meeting.

If you have any queries, please contact Melinda Kubank on (08) 6363 7636.

Yours sincerely Westpoint Management Ltd (In Liquidation) (Receivers and Managers Appointed)

Simon Read Liquidator Enclosures: Statutory notice of meeting (Form 529) Proof of Debt (Form 535) Proxy form (Form 532) Notes for guidance on completing the proof of debt and proxy forms Report to Creditors

FORM 529

Corporations Act (2001)

Subregulation 5.6.12 (2)

NOTICE OF MEETING OF CREDITORS OF COMPANY IN LIQUIDATION

Westpoint Management Ltd

(Receivers and Managers Appointed)

(In Liquidation)

ACN: 074 148 431

(“the Company”) Notice is given that a meeting of the creditors of the Company will be held at the offices of McGrathNicol, Level 1, 5 Mill St, Perth, WA 6000 at 12:00 PM on 22 July 2008. 1. To provide creditors with an update on the progress and conduct of the liquidation. 2. To seek creditors’ approval to enter into an agreement that:

(a) compromises a debt of the company of more than $20,000, as required by section 477(2A) of the

Act (b) extends beyond three months, as required by section 477(2B) of the Act.

3. To seek creditors’ approval of the Liquidators’ remuneration. 4. To discuss any other relevant business which may arise. Dated 4 July 2008.

Simon Read Official Liquidator McGrathNicol Level 1, 5 Mill Street, Perth WA 6000 Tel: (08) 6363 7600 www.mcgrathnicol.com

*Do not complete if this proof is made by the creditor personally.

Australian Company Number: 074 148 431

FORM 535 Subregulation 5.6.49(2)

Corporations Act (2001)

FORMAL PROOF OF DEBT OR CLAIM

(GENERAL FORM)

To the Liquidators of Westpoint Management Ltd (Receivers and Managers Appointed) (In Liquidation): 1. This is to state that the company was on 8 February 2006, and still is, justly and truly indebted to: _________________________________________________________________________________ (full name and address of the creditor and, if applicable, the creditor's partners. If prepared by an employee or agent of the creditor, also insert a description of the occupation of the creditor) for $_______________and______cents.

Date Consideration (state how the Debt arose)

Amount $ c

Remarks (include details of voucher substantiating payment

2. To my knowledge or belief the creditor has not, nor has any person by the creditor's order, had or received any satisfaction or security for the sum or any part of it except for the following: (insert particulars of all securities held. If the securities are on the property of the company, assess the value of those securities. If any bills or other negotiable securities are held, show them in a schedule in the following form).

Date Drawer Acceptor Amount $c Due Date

*3. I am employed by the creditor and authorised in writing by the creditor to make this statement. I know that the debt was incurred for the consideration stated and that the debt, to the best of my knowledge and belief, remains unpaid and unsatisfied.

*3. I am the creditor's agent authorised in writing to make this statement in writing. I know that the debt was incurred for the consideration stated and that the debt, to the best of my knowledge and belief, remains unpaid and unsatisfied.

........................................... Dated Signature Name: Occupation: Address: Phone Contact: Creditor’s ABN:

If you are a business creditor, failure to quote your ABN may result in withholding of tax of 48.5% from any dividend by the Official Liquidators.

Proof of Debt Reference:

FORM 532

Corporations Act 2001

Regulation 5.6.29

Westpoint Management Ltd (Receivers and Managers Appointed)

(In Liquidation) ACN: 074 148 431

APPOINTMENT OF PROXY

I/We (1) ________________________________________________________________________________________ of

_________________________________________________________________________________________________

a creditor/member of Westpoint Management Ltd (Receivers and Managers Appointed) (In Liquidation) appoint

(2)_____________________________________________ or in his/her absence

(3) _____________________________________________as my/our general/special proxy to vote at the meeting of creditors to be held on 22 July 2008 at 12:00 PM or at any adjournment of that meeting.

DATED this ___________ day of ________________________ 20

(4) Signature ___________________________________

CERTIFICATE OF WITNESS - only complete if the person given the proxy is blind or incapable of writing.

I, ____________________________________________ of _______________________________________________

certify that the above instrument appointing a proxy was completed by me in the presence of and at the request of the person appointing the proxy and read to him before he attached his signature or mark to the instrument.

DATED this ___________ day of ________________________ 20

Signature of witness ___________________________________

Description ___________________________________

Place of residence ___________________________________

___________________________________

Notes:

(1) If a firm strike out "I" and set out the full name of the firm.

(2) Insert the name of the person appointed.

(3) If a special proxy, “add the words „to vote for‟ or the words „to vote against‟ and specify the particular resolution”.

(4) If the creditor is a sole trader , sign in accordance with the following example: “A.B., proprietor”.

If the creditor is a partnership, sign in accordance with the following example: “A.B., a partner of the said firm.”

If the creditor is a company, then the form of proxy must be under its Common Seal or under the hand of some officer duly authorised in that capacity, and the fact that the officer is so authorised must be stated in accordance with the following example: “for the company, A.B.” (duly authorised under the Seal of the Company).

Proxy forms should have been completed and returned by no later than 4:00 PM on 17 July 2008 to be eligible to vote at the meeting.

RETURN TO: Westpoint Management Ltd (Receivers and Managers Appointed) (In Liquidation)

of care of McGrathNicol

Address: GPO Box 9986, Perth WA 6848

Phone: +61 8 6363 7600

Fax: +61 8 6363 7699

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Address: Level 1, 5 Mill Street, Perth WA 6000 Contact Name: Melinda Kubank Contact Number: (08) 6363 7636

Proofs of Debt Notes for your guidance

(Please read carefully before filling in Form 535 or Form 536)

It is a creditor’s responsibility to prove their claim to our satisfaction.

When lodging claims, creditors must ensure that:

(a) the proof of debt form is properly completed in every particular; and

(b) documentary evidence, such as that detailed below, is attached to the Form 535 or Form 536.

Directions for completion of a Proof of Debt

1. Insert the full name and address of the creditor.

2. Under “Consideration” state how the debt arose, for example “goods sold to the company on …………..”.

3. Under “Remarks” include details of any documents that substantiate the debt (refer to the section titled “Information to support your claim” below for further information).

4. Where the space provided for a particular purpose is insufficient to contain all the required information in relation to a particular item, that information should be set out in an annexure.

5. An annexure to the form must have an identifying mark and be endorsed with the words:

“This is the annexure of …… pages marked …… referred to in the Form 535/536 signed by me and dated …………………

…………………………………… ……………………………………………………..

Signature(s) Name of Signatory IN BLOCK LETTERS”

and signed by each person signing the form to which the document is annexed.

6. The pages in the annexure must be numbered consecutively.

7. Where a document, copy of a document or other matter is annexed to a form, reference made in the form to the annexure shall be by its identifying mark, the number of pages in it, and a brief description of the nature of the document and its contents.

8. A reference to an annexure includes a document, copy of a document or any other matter accompanying, attaching to or annexed to a form.

Information to support your claim

Please note that your debt is not likely to be accepted unless evidence to support its existence is provided. Detailed below are some examples of the type of debt creditors may be claiming and a suggested list of documents, copies of which should accompany a proof of debt for that class of creditor.

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Trade Creditors

+ Statements and supporting invoices(s) showing the amount of the debt; and

+ Advice(s) to pay outstanding invoice(s) (optional).

Guarantees/Indemnities

+ Executed guarantee/indemnity;

+ Notice of Demand served on the guarantor; and

+ Calculation of the amount outstanding under the guarantee.

Judgment Debt

+ Copy of the judgment; and

+ Documents/details to support the underlying debt as per other categories.

Deficiencies on Secured Debt

+ Security Documents (eg. mortgage);

+ Independent valuation of the secured portion of the debt (if not yet realised) or the basis of the creditor’s estimated value of the security;

+ Calculation of the deficiency on the security; and

+ Details of income earned and expenses incurred by the secured creditor in respect of the secured asset since the date of appointment.

Loans (Bank and Personal)

+ Executed loan agreement; and

+ Loan statements showing payments made, interest accruing and the amount outstanding as at the date of appointment.

Tax Debts

+ Documentation that shows the assessment of debts, whether it is an actual debt or an estimate, and separate amounts for the primary debt and any penalties.

Employee Debts

+ Basis of calculation of the debt;

+ Type of Claim (eg. wages, holiday pay, etc);

+ Correspondence relating to the debt being claimed; and

+ Contract of Employment (if any).

Leases

+ Copy of the lease; and

+ Statement showing amounts outstanding under the lease, differentiating between amounts outstanding at the date of the appointment and any future monies.

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Proxy

Notes for your Guidance

+ Insert full name and address of creditor, contributory or member on the top line.

+ On the second line, insert the name of the person you appoint as your proxy. You may insert “the Chairperson of the meeting” if you wish.

+ You may appoint an alternate proxy on the third line who may act if your first appointed proxy cannot attend the meeting. You may insert “the Chairperson of the meeting” if you wish.

+ If the proxy is a general proxy the form requires no addition.

+ If the proxy is a special proxy the form must include instructions regarding the use of the proxy (i.e. details of the resolution and whether the proxy holder is to cast a vote in favour or against the resolution or abstain from voting).

+ Date and sign the Proxy form using one of the following various forms of execution:

- Sole Trader - Sign the proxy yourself.

- Partnership - e.g. sign - “Smith & Associates Per John Smith - Partner”

- Company - (i) By a director or secretary, e.g. “J Smith – Director”. (ii) By a person duly authorised to sign on behalf of the

company, e.g.

“Smith & Sons Pty Ltd. ACN: ______________ Per: J Smith A person duly authorised to sign on the company’s behalf”. OR

“Smith & Sons Pty Ltd. ACN: ______________ By its duly constituted attorney J Smith”.

NB: If signing on behalf of a company the following example is not sufficient: ”Smith & Sons Pty Ltd. ACN: _______________ Per: J Smith”

+ “Certificate of Witness” is only to be used where the Proxy is being completed on behalf of a person who is blind or incapable of writing. In all other cases a witness to the signature of the person appointing the Proxy is not required and you may ignore the section headed “Certificate of Witness”.

CORPORATE RECOVERY

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C O R P O R A T E A D V I S O R Y | F O R E N S I C | T R A N S A C T I O N S E R V I C E S | C O R P O R A T E R E C O V E R Y

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Westpoint Management Ltd (In Liquidation) (Receivers and Managers Appointed)

ACN 074 148 431

Report to Creditors

4 July 2008

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Contents

Glossary 3

1 Executive Summary 4

2 Introduction 6

3 WML’s financial position 7

3.1 Cash 8

3.2 Debtors 8

3.3 Investments 8

3.4 Term deposits 8

3.5 Other assets 8

3.6 Court application costs 9

3.7 Unsecured creditors 9

4 Receipts and Payments 11

4.1 Liquidators’ fees 11

4.2 Liquidators’ disbursements 12

4.3 Legal fees 12

5 Chocolate Factory Apartments Ltd (“CFAL”) litigation 13

6 Summary of trusts and MISs 14

6.1 Westpoint Income Fund (“WIF”) 15

6.1.1 Proposed settlement with Lanepoint 15

6.2 Warnbro Fair Syndicate (“WFS”) 17

6.3 Paragon Commercial Syndicate (“PCS”) 17

6.4 Warwick Cinema Syndicate Trust (“WCST”) 17

6.5 Paragon Apartments Trust (“PAT”) 18

6.6 Murray Street Trust 18

6.7 Market Street Trust 18

7 Liquidators’ remuneration 19

8 Creditors’ meeting 20

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Glossary The Act The Corporations Act 2001

ASIC Australian Securities and Investments Commission

CFAL Chocolate Factory Apartments Limited

Elderslie Elderslie Property Limited

ERV Estimated Realisable Value

LLM Litigation Lending Management Pty Ltd

LM LM Investment Management Limited

Market Street Trust 60 Market Street Trust

Murray Street Trust 297 Murray Street Trust

MIS Managed Investment Scheme

PAL Paragon Apartments Limited (Receivers and Managers Appointed)

PAT Paragon Apartments Trust

PCS Paragon Commercial Syndicate

Perpetual Perpetual Trustee Company Ltd

St George St George Bank Limited

Suncorp Suncorp Metway

WCST Warwick Cinema Syndicate Trust

WIF Westpoint Income Fund

WFS Warnbro Fair Syndicate

WML Westpoint Management Ltd (In Liquidation) (Receivers and Managers Appointed) ACN 074 148 431

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1 Executive Summary The purpose of this report is to:

+ provide an update since my last report dated 20 June 2007 on the status of:

- the liquidation of WML in its own right

- the winding up of trusts and managed investment schemes for which WML is either the trustee or responsible entity

- the CFAL litigation

+ explain a proposed agreement concerning Westpoint Income Fund, for which I am seeking creditors’ approval

+ provide details of the liquidators’ fees incurred since the last meeting of WML’s creditors

A summary of the status of WML and each of its trusts and managed investment schemes is as follows:

+ WML (see section 3)

- WML has a net asset shortfall of approximately $46 million and there is unlikely to be a return to WML’s creditors

+ Westpoint Income Fund (see section 6.1)

- The only likely realisable asset of WIF is the Lanepoint loan. However, the amount of this loan is disputed by Lanepoint

- A conditional agreement has been negotiated with Lanepoint in order to settle this dispute. The key terms of the agreement are explained further in section 6.1.1.

- I estimate that WIF’s unsecured creditors will be paid in full and WIF’s investors will receive a return of more than 20 cents in the dollar.

+ Warnbro Fair Syndicate (see section 6.2)

- WML was replaced as responsible entity of WFS and all matters in relation to WFS are now complete.

+ Paragon Commercial Syndicate (see section 6.3)

- The Deed of Release has been executed and I recovered $4 million from the PCS Receivers and Managers

- I estimate that PCS’s unsecured creditors will be paid in full and PCS’s investors will receive a return between 5 and 20 cents in the dollar.

+ Warwick Cinema Syndicate Trust (see section 6.4)

- A new solvent trustee was appointed to WCST and WML has no further role in relation to this trust.

+ Paragon Apartments Trust (see section 6.5)

- I estimate that PAT’s unsecured creditors will receive a dividend of around 10 cents in the dollar.

+ Murray Street Trust (see section 6.6)

- There may be surplus funds or properties available after ING’s debt is repaid

- I am continuing to await the outcome of the ING receivership

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+ Market Street Trust (see section 6.7)

- The Receivers and Managers of the Market Street development are selling the apartments for the benefit of the first-ranking secured creditor, Perpetual, who will suffer a shortfall on its debt

- There will be no return to mezzanine noteholders or to WML

I am convening a meeting of WML’s creditors to be held at 12:00pm on Tuesday 22 July 2008 at Level 1, 5 Mill Street, Perth WA to:

+ provide creditors with an update on the progress and conduct of the liquidation;

+ seek creditors’ approval that the liquidators of WML may enter into an agreement with Lanepoint that:

- compromises a debt of the company of more than $20,000, as required under section 477 (2A) of the Corporations Act 2001 (“the Act”); and

- has obligations lasting more than three months, as required under section 477 (2B) of the Act (see section 6.1.1)

+ seek approval of the Liquidators’ fees of $311,144.10 plus GST for the period 6 July 2007 to 27 June 2008 and fees for the period 28 June 2008 to 21 July 2008 with details to be provided at the meeting. These fees relate to the various entities which WML is trustee and responsible entity of and, will be payable from the assets of the relevant trusts and managed investment schemes, to the extent that those assets are sufficient. Full details of the Liquidators’ fees are included in section 7 and Appendix 1.

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2 Introduction Andrew Birch and I were appointed Official Liquidators of WML on 11 April 2006.

The purpose of this report is to:

+ provide an update since my last report dated 20 June 2007 on the status of:

- the liquidation of WML in its own right

- the winding up of trusts and managed investment schemes for which WML is either the trustee or responsible entity

- the CFAL litigation

+ explain a proposed agreement concerning Westpoint Income Fund, for which I am seeking creditors’ approval

+ provide details of the liquidators’ fees incurred since the last meeting of WML’s creditors

If you would like a copy of my previous reports, please contact Melinda Kubank on (08) 6363 7636.

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3 WML’s financial position I am continuing to realise WML’s assets. However, I remain of the view that the realisable value of WML’s assets is unlikely to cover the costs of the liquidation and there is unlikely to be a return to WML’s creditors.

Table 1 summarises WML’s estimated financial position at 4 July 2008, which indicates a deficiency of approximately $46 million.

Table 1 – WML’s estimated financial position at 4 July 2008

Liquidators’ ERV $’000

Notes Min Max

Assets

Cash 3.1 176 176

Debtors 3.2 86 388

Investments 3.3 27 Withheld

Term deposits 3.4 0 0

Other assets 3.5 Withheld Withheld

Total assets1 289 564

Liabilities

Court application costs 3.6 5 5

Unsecured creditors 3.7 46,900 46,900

Total Liabilities 46,905 46,905

Net asset surplus/(deficiency) (46,616) (46,341)

1 Subject to future costs of the liquidation (see section 4)

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3.1 Cash

I have secured WML’s cash at bank at the date of my appointment of $176,009.

3.2 Debtors

I estimate that debtors of between $86,000 and $388,000 are realisable, of which $85,800 has already been collected [Table 2].

Table 2 – Debtors

Liquidators’ ERV $’000

Min Max

Paragon Apartments Trust - 1

Paragon Apartments Limited - 8

Warnbro Fair Syndicate 86 86

Warwick Cinema Syndicate Trust - -

Paragon Commercial Syndicate - 225

Westpoint Income Fund - 68

Total 86 388

3.3 Investments

WML had investments with a book value of $28,000 in unlisted shares and units.

I have not disclosed the details of these investments or their estimated realisable value as doing so may prejudice their sale.

However, I have received distributions of $26,800 from these investments during the liquidation to date.

3.4 Term deposits

WML had $131,000 invested in a term deposit at St George. The term deposit was subject to a Deed of Set-off in favour of St George, which secured funds advanced to other Westpoint entities.

I understand that properties of the other Westpoint entities have been realised and the proceeds were sufficient to repay St George’s debt in full.

However, I do not believe the term deposit will be available to WML. I have requested that the lawyers of St George provide an accounting of the application of the funds.

3.5 Other assets

WML owns an apartment in the Paragon building, which was also subject to security in favour of St George.

This apartment was not required to be sold to satisfy St George’s debt and should therefore be available for the liquidation of WML. However, I am still awaiting confirmation of this.

I have withheld the value of the apartment as disclosing this information may compromise its sale.

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3.6 Court application costs

The directors’ taxed costs of placing the company into provisional liquidation receive a priority under section 556 of the Act. These costs, which totalled $4,807, have been paid.

3.7 Unsecured creditors

WML’s actual and contingent claims that I am aware of to date are summarised in Table 3.

Table 3 – WML’s unsecured creditors at date of appointment

Creditor Amount $

Alsco Pty Ltd 176

ASIC 65

Australia Post 2,980

Blake Dawson Waldron 23,768

Chubb Fire & Safety 1,031

Commander Australia Limited 874

Derek McLaughlan Pty Ltd 270

Freehills 35,452

Ken Paterson Architects 134,062

KPMG 33,762

Optus 1,509

Market Street Mezzanine Pty Ltd (In Liquidation) 43,103,443

QBE 3,562,656

Williams & Hughes 345

Total 46,900,393

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Further contingent claims of WML, which arise from its capacity as trustee and responsible entity, total $38.664 million as summarised in Table 4.

Table 4 – Creditors of WML’s schemes and trusts at date of appointment

Creditor Creditor of Amount $

ASIC PCS 573

ASIC WIF 573

Australian Taxation Office Murray Street Trust 4,062,830

Australian Taxation Office PCS 45,850

BellCourt Strata Management PCS 753

CB Richard Ellis Pty Ltd WIF 9,350

Centreways Refurbishment Syndicate Trust PCS 2,280,416

Freehills PCS 638

KPMG WIF 58,473

KPMG Market Street Trust 4,268

KPMG PCS 4,274

Paragon Apartments Limited PAT 548,069

Perpetual Nominees Pty Ltd WIF 8,250

Westpoint Corporation Pty Ltd PAT 324,066

Westpoint Corporation Pty Ltd Murray Street Trust 14,858,046

Westpoint Corporation Pty Ltd Market Street Trust 16,458,041

Total 38,664,470

These creditors are entitled to be paid from assets of the relevant scheme/trust to the extent available, but are otherwise creditors of WML.

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4 Receipts and Payments Table 5 sets out the receipts and payments made during the liquidation to date.

Table 5 – Receipts and Payments for the period 8 February 2006 to 4 July 2008

Notes Amount

Receipts

Cash at bank 3.1 176,009

Investment 3.3 26,800

Litigation funding Error! Reference

source not

found.

166,200

Debtors 3.2 85,800

Interest 7,946

GST Refund 16,491

Total Receipts 479,246

Payments

Liquidators’ fees 4.1 -

Liquidators’ disbursements 4.2 -

Legal fees2 4.3 246,253

Legal disbursements 6,451

Court application costs 3.6 4,807

Security for costs 45,000

Bank charges 76

Consulting fees 22,816

CFAL settlement 17,500

Other miscellaneous costs 1,142

Total Payments 344,046

Cash at bank at 4 July 2008 135,200

4.1 Liquidators’ fees

To date, no Liquidators’ fees in relation to WML have been paid. However, the outstanding Liquidators’ fees for WML to 27 June 2008 are $313,719, of which $274,446 has already been approved [Table 6]:

Table 6 – Liquidators’ fees for WML

Type of fees Approved Period Amount

Provisional Liquidators’ fees Approved by Court 8/2/06 – 10/4/06 99,635

Official Liquidators’ fees Approved by creditors 11/4/06 – 5/7/07 174,811

Official Liquidators’ fees To be approved 6/7/07 – 27/6/08 39,273

2 This includes legal fees paid by the CFAL litigation funding

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Total 313,719

Further fees will be incurred to progress and finalise the liquidation.

The Liquidators’ fees which relate to the various entities of which WML is trustee or responsible entity will be payable from the assets of the relevant trusts and managed investment schemes, to the extent that those assets are sufficient. Some of the trusts may not have sufficient assets to pay the Liquidators’ fees. Accordingly, those fees will be payable by WML.

4.2 Liquidators’ disbursements

Liquidators’ disbursements incurred, but not yet paid, to date are $21,224.

4.3 Legal fees

To date, legal fees of $246,253 have been paid, including fees paid by the litigation funder in the CFAL litigation matter (see section Error! Reference source not found.)

However, further legal fees of $506,295 have been incurred and remain outstanding [Table 7]

Table 7 – Legal fees incurred and unpaid for the period 8 February 2006 to 4 July 2008

Entity Amount

WML 433,947

WFS3 72,348

Total 506,295

3 Further legal fees incurred in relation to WFS that were not paid from the settlement with

Elderslie

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5 Chocolate Factory Apartments Ltd (“CFAL”) litigation My previous reports to creditors provided a detailed analysis of the CFAL litigation.

In summary:

+ CFAL and I appealed the judgements made against each other in the NSW Supreme Court. The decision to appeal on behalf of WML was taken because of the potential to recover over $1 million and was based on legal advice that the appeal had a strong chance of success.

+ At the meeting of creditors held on 6 July 2007, creditors approved my entering into a litigation funding agreement with Litigation Lending Management Pty Ltd (“LLM”), which included a payment of $166,000 by LLM to meet past and future costs of the appeal.

The appeals were heard on 26 July 2007 and on 20 September 2007, the Court of Appeal determined that:

+ WML’s appeal should be dismissed with costs; and

+ CFAL’s appeal should be allowed in part.

Given the criterion required for the grant of special leave to appeal to the High Court, and based on an opinion received from a Queen’s Counsel on the outcome of the appeal, it was decided that WML should not pursue this matter any further.

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6 Summary of trusts and MISs WML is/was trustee or responsible entity of the following trusts and managed investment schemes:

+ Westpoint Income Fund

+ Warnbro Fair Syndicate4

+ Paragon Commercial Syndicate

+ Warwick Cinema Syndicate Trust4

+ Paragon Apartments Trust

+ 297 Murray Street Trust

+ 60 Market Street Trust

A summary of the status of each trust and MIS is provided below.

I have been reporting separately to the members of these trusts and schemes.

4 WML has been replaced as trustee/responsible entity since the appointment of Liquidators

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6.1 Westpoint Income Fund (“WIF”)

I am continuing the process of collecting WIF’s loan assets for the benefit of its creditors and investors. The following table provides a summary of the status of the loan assets [Table 8].

Table 8 – WIF loans

Borrower Balance5 Comments

Goldtag $2.0M + The Goldtag property was sold for $16 million

+ The first-ranking secured creditor, LM Investment Management Ltd (“LM”), has advised that there is no surplus available to WIF from the sale proceeds

+ I have requested further documentation from LM to support the application of $1.78 million of the sale proceeds, but LM has failed to respond. I will be commencing Court action to obtain a response.

Kingdream $6.5M + It is not expected that there will be any surplus available to WIF from this loan after the first ranking secured creditor, LM, has been repaid.

Lanepoint $2.3M + The first-ranking secured creditor (Suncorp) has been paid in full

+ The WIF-appointed Receivers and Managers are in the process of marketing the remaining properties for sale

+ The amount of WIF’s loan to Lanepoint is disputed. I believe that the debt could be over $7 million. In order to settle this dispute, I have negotiated with Lanepoint a conditional agreement which is explained in section 6.1.1

At this stage, I estimate that:

+ WIF’s unsecured creditors will be paid in full

+ WIF’s investors will receive a return of more than 20 cents in the dollar

My continuing role for WIF is to:

+ recover the Lanepoint loan (see section 4.1.1 below)

+ report any findings from my investigations to investors, creditors and ASIC

+ distribute the surplus funds to WIF’s unsecured creditors and investors

6.1.1 Proposed settlement with Lanepoint

According to WIF’s records, the book value of WIF’s loan to Lanepoint at the date of my appointment was approximately $2.3 million.

However, a number of questionable transactions during December 2005 and January 2006 had the effect of reducing the loan balance from $6.4 million to $2.3 million:

+ In December 2005, approximately $2.34 million of the Lanepoint debt to WIF was transferred to the Kingdream debt to WIF, to correct purported earlier errors in drawdown requests;

5 This is the book value according to WIF’s accounts at the date of my appointment. The

Lanepoint loan balance is disputed.

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+ A “payment” of $2 million was receipted against the Lanepoint loan in January 2006, which was immediately on-lent to Goldtag.

If these transactions are deemed invalid and are reversed, the Lanepoint loan will increase to more than $6 million as at January 2006. In addition, penalty interest has been accruing on this loan subsequently, which could increase the debt to over $7 million.

I have prepared evidence in support of WIF’s claim and requested legal advice on the merits of the claim. The preliminary verbal legal advice I have received indicates that WIF has a reasonably strong case to argue that the debt was over $6 million as at January 2006. Mr Norm Carey argues that the debt owed by Lanepoint to WIF is only $2.3 million.

Regardless of the true value of the Lanepoint debt, I estimate that the realisable value of Lanepoint’s assets to meet the debt is in the range of only $3.4 million to $4.7 million, of which I have recovered $780,000 to date.

Mr Carey has informed me that he intends to commence Court proceedings to challenge the amount of the debt owed by Lanepoint and to seek injunctions preventing the WIF-appointed Receivers and Managers from realising Lanepoint’s remaining properties.

If I am required to defend WIF’s position in Court proceedings, further significant costs and delays in the sale of Lanepoint’s remaining property will be unavoidable.

I have negotiated a conditional agreement with Lanepoint and Mr Carey that will facilitate the sale of all of Lanepoint’s remaining assets to repay the loan from WIF, free from any claims by Lanepoint or Mr Carey.

In summary, the key terms of the agreement are as follows:

+ Lanepoint will make available to WIF all of its currently held assets, less an agreed settlement sum of up to $200,000

+ The settlement sum to be retained by Lanepoint comprises:

- up to $50,000 for the reasonable accounting and legal costs incurred in preparing the tax returns of Lanepoint (which resulted in Lanepoint receiving a $1.28 million tax refund); and

- a further sum of $150,000 from the proceeds of the sale of the properties

+ The WIF-appointed Receivers and Managers of Lanepoint will be free to realise the remaining properties and any other assets of Lanepoint

+ Mr Carey, Lanepoint and its director(s) will release and discharge:

- the Suncorp-appointed Receivers and Managers

- the WIF-appointed Receivers and Managers

- the Liquidators of WML

- the Receivers and Managers of WML

+ The agreement is subject to approval by creditors of WML pursuant to sections 477(2A) and (2B) of the Act.

I believe that entering into this proposed agreement is commercially beneficial for WIF because:

+ it will save the time and costs that would be incurred if the debt were to be argued in Court. I estimate that such litigation could last 18 months or more and could cost more than the settlement sum in legal fees and Liquidators’ costs;

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+ it will enable the WIF-appointed Receivers and Managers to realise Lanepoint’s remaining properties without interference; and

+ the Suncorp-appointed Receivers and Managers currently retain $650,000 from their asset realisations as a provision to defend potential legal proceedings threatened by Mr Carey and Lanepoint against them. Under this agreement, Mr Carey will be releasing the Suncorp-appointed Receivers and Managers, thereby making these funds available to WIF.

Accordingly, I recommend that WIF enter the agreement with Lanepoint.

Section 477(2A) of the Act requires a liquidator to obtain approval of the Court, Committee of Inspection or creditors to compromise a debt to the company if the amount claimed is more than $20,000 and section 477(2B) of the Act requires a liquidator to obtain approval to enter into an agreement which has obligations extending 3 months or more.

Accordingly, creditors will be asked to approve the agreement with Lanepoint under sections 477(2A) and (2B) of the Act at the forthcoming meeting of creditors.

6.2 Warnbro Fair Syndicate (“WFS”)

As noted in my previous reports, WML was replaced as responsible entity of WFS by Elderslie on 4 August 2006.

Elderslie has now paid the agreed amounts for my outstanding fees and costs and WML’s outstanding management fees.

All matters in relation to WFS are now complete.

6.3 Paragon Commercial Syndicate (“PCS”)

The receipt of surplus funds from the PCS Receivers and Managers was delayed due to lengthy negotiations over the terms of a Deed of Release, insisted upon by the PCS Receivers and Managers as a condition of paying over the surplus funds.

The Deed of Release has now been executed and I recovered $4 million from the PCS Receivers and Managers in late June 2008.

At this stage, I estimate that:

+ PCS’s unsecured creditors will be paid in full

+ PCS’s investors will receive between 5 and 20 cents in the dollar

Now that the surplus funds have been received, I will:

+ continue to pursue PCS’s outstanding debtors

+ adjudicate and pay PCS’s unsecured creditor claims

+ distribute the surplus funds to PCS’s members

6.4 Warwick Cinema Syndicate Trust (“WCST”)

A new solvent trustee was appointed to WCST in April 2007 and WML has no further role in relation to this trust.

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6.5 Paragon Apartments Trust (“PAT”)

PAT, together with a related entity, Paragon Apartments Limited (Receivers and Managers Appointed) (“PAL”), were equal joint venture partners in the construction of the Paragon Apartments in Hay Street, Perth.

ING appointed Receivers and Managers to realise PAT’s property assets, which were pledged to secure debts of other Westpoint entities to ING.

PAT’s only asset of value is cash at bank, currently approximately $93,000.

At this stage, I estimate that PAT’s creditors will receive a dividend of around 10 cents in the dollar, but there will be no return to unitholders in PAT.

My continuing role for PAT is to:

+ await the outcome of the ING receivership

+ adjudicate and pay PAT’s unsecured creditor claims

+ complete the winding up of the trust

6.6 Murray Street Trust

Receivers and Managers remain in control of the Murray Street Trust’s properties, which are being realised for the benefit of ING.

There may be surplus funds or properties available after ING’s debt is repaid. I will review the Receivers and Managers’ calculation for any claims of contribution, subrogation and indemnity to protect the trust’s interests.

My continuing role for the Murray Street Trust is to:

+ await the outcome of the ING receivership

+ realise the remaining properties (if any)


6.7 Market Street Trust

The Receivers and Managers of the Market Street development are selling the apartments for the benefit of the first-ranking secured creditor, Perpetual.

Perpetual will suffer a shortfall on its debt. Accordingly, there will be no return to mezzanine noteholders or to WML.

My continuing role for the Market Street Trust is to:

+ await the outcome of the Perpetual receivership


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7 Liquidators’ remuneration Under a Court order obtained on 30 June 2006, the Liquidators are entitled to recover their remuneration incurred in each of the schemes and trusts from the assets of the relevant scheme/trust. If insufficient funds are available in the relevant scheme/trust, the Liquidators are entitled to recover their remuneration from WML’s assets.

At the meeting of creditors to be held on 22 July 2008, I will be seeking approval of the following fees:

+ Liquidators’ fees of $311,144.10 plus GST for the period 6 July 2007 to 27 June 2008 as follows [Table 9]:

Table 9 – Liquidators’ Fees for the period 6 July 2007 to 27 June 2008

Entity Amount $

WML 39,272.85

WIF 163,861.25

PCS 92,400.00

PAT 8,342.50

Market Street 409.50

Murray Street 6,858.00

Total 311,144.10

+ Liquidators’ fees for the period 28 June 2008 to 21 July 2008 with details to be provided at the meeting.

I enclose at Appendix 1 details of the fees for which approval is being sought.

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8 Creditors’ meeting I have convened a meeting of creditors of WML to be held at 12:00pm on Tuesday 22 July 2008 at Level 1, 5 Mill Street, Perth WA.

The purpose of the meeting is:

+ to provide creditors with an update on the progress and the conduct of the liquidation;

+ to seek creditors’ approval that the liquidator of WML may enter into an agreement with Lanepoint that:

- compromises a debt of the company of more than $20,000, as required by section 477(2A) of the Act; and

- has obligations lasting more than three months, as required by section 477(2B) of the Act;

+ to seek creditors’ approval for the Liquidators’ remuneration

Creditors who require further details should please contact Melinda Kubank of this office on (08) 6363 7636.

Simon Read Liquidator