The Federal Court yesterday rejected Mr Gore’s application to restrain Mr Warner from acting as trustee.

Mr Gore had sought Mr Warner’s removal just hours after creditors appointed him on December 23 to oversee Mr Gore’s record-breaking $495 million personal insolvency agreement.

The Federal Court yesterday rejected Mr Gore’s application to restrain Mr Warner.

Mr Gore’s creditors — including the Australian Taxation Office, Mayfair Group and former close friend Kevin Kalkhoven — sought Mr Warner’s appointment after questioning oversight of the insolvency agreement by former trustee Max Prentice, of BPS Recovery.

While Mr Gore said he welcomed a new trustee, he argued that Mr Warner, of CRS Warner Kugel, was “conflicted”.

Last year, CRS Warner Kugel partner Steven Kugel took a hard line in his examination of failed Gore company Secured Capital & Finance Pty Ltd, describing its operation as “akin to a Ponzi scheme”.

In his affidavit to the Federal Court on December 23, Mr Gore sought the appointment of Nicholas Crouch, of Crouch Amirbeaggi, as an alternative trustee.

This also was rejected.

Despite the rebuff, Mr Gore claimed yesterday’s ruling as a “success”.

“In my view Mr Warner is on notice to perform in the best interest of creditors,” he said.

In another blast for major creditor Mayfair, Mr Gore said his former UK backer wanted to bankrupt him ahead of a court hearing later this month in which he is challenging Mayfair’s status as a creditor with debts of $152 million.

Mr Gore said Mayfair did not want this month’s hearing to proceed and that it would find a way to delay it.

“The only way to stop the action is to have me bankrupted,” he said.

“I don’t believe they ever want to take it to court.

“Shane Stone (Mayfair’s chairman) will never want to take the witness box.”

But Mr Stone yesterday laughed off the suggestion.

“He clearly doesn’t understand or know me,” the former Northern Territory chief minister said.

“Mayfair will never lie down on that issue and no executive of Mayfair will have any hesitation in being prepared to give evidence on oath.”

— Nick Nichols, Business Editor

Ariff’s lack of contrition counted against him when Judge James Bennett imposed a non-parole period of three years and six months from his September conviction.

Parole authorities will decide in March 2015 whether Ariff will be released under supervision for the remaining two years and six months.

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Judge Bennett said he agreed with a submission from the Australian Securities and Investments Commission that a ‘’significant” sentencing factor was general deterrence.

Ariff was ”well aware” of the community’s expectations of his ”role and status” as a liquidator whereby he had control of the assets and responsibility for the conversion of cash, the payment of creditors and the distribution to members, the judge said.

He found that Ariff was motivated primarily by a desire to save his struggling practice, Stuart Ariff Insolvency Administrators, from collapse.

It would have been obvious that ”the only course he should have considered” was to seek independent advice on whether the firm could survive, Judge Bennett said.

His clean record was of little weight because he was able to perpetrate his crimes through his reputation for integrity.

Judge Bennett read from a pre-sentence report containing Ariff’s comments to a prison doctor.

In it he criticised the jury and blamed employees for the transfer of funds from the bank accounts of a Newcastle family company, HR Cook Investments, 13 times, and the falsification of six forms lodged with ASIC.

”He feels that the jury didn’t examine the evidence in detail,” the report said, noting the deliberation took only four hours after a six-week trial.

Ariff said to the doctor: ”At the end of the day it was under my watch and I take the blame for that but I don’t take responsibility for the carrying out of the specific transactions and the preparing of the documents.”

Asked if he blamed someone else, he said: ”Yes, and that person was the prime witness for the DPP.”

The Commonwealth Director of Public Prosecutions gave an indemnity from prosecution to the manager Ariff assigned to the HR Cook liquidation, Tina Battye.

Judge Bennett said there was ”glaring and irrefutable” evidence that ”the offender and his company were the intended beneficiaries” of the crimes.

”I reject the proposition that the offender was not the principal in all that occurred,” he said.

Even if others had participated, the judge said he rejected the notion that he did not know what was happening.

He took into account Ariff’s age of 48 and that a life ban from the insolvency profession would make it difficult for him to find a job when he left prison.

The stress on his family and his mother’s ill health were also mitigating factors.

by Elisabeth Sexton

Giving reasons for revoking Ariff’s bail, Judge James Bennett, SC, said the prosecution had presented a ”formidable” case.

”The allegations are serious allegations and upon the material that I have before me, it would seem inevitable that the offender will suffer a period of incarceration,” Judge Bennett said.

A sentencing hearing has been listed in November.

Ariff, 48, took $1.18 million in 13 transactions between 2006 and 2008 from a company he was winding up, HR Cook Investments Pty Ltd.

More than $700,000 went to pay legal bills for other companies where he was liquidator, almost $400,000 went into the bank account of his practice, Stuart Ariff Insolvency Administrators, and $50,000 went to his mother, Barbara Ariff.

Susan Shedden, whose parents set up HR Cook in 1960 as a family investment company, said she was ”absolutely on top of the world” at the outcome of the four-week trial.

Trish McDonald, SC, for the Australian Securities and Investments Commission, successfully applied for Ariff to be taken into custody immediately after the jury delivered 19 guilty verdicts.

Thirteen of Ariff’s offences, for transferring funds from HR Cook with intent to defraud, carried a maximum penalty of 10 years’ jail each, Ms McDonald said.

”It will be the Crown’s submission that a period of full-time imprisonment is the only sentence that would be available to your Honour in the circumstances,” she said.

The other six offences, of falsifying HR Cook’s accounts, carry a maximum fine of $22,000 or imprisonment for five years or both.

ASIC charged Ariff in August last year, three years after a consultant’s report commissioned by aggrieved creditors of a company under his control concluded he ”knowingly and deliberately made claims for items which were not appropriate or did not actually exist”.

The regulator brought civil proceedings in the NSW Supreme Court in 2009, which led to Ariff’s ban from the insolvency profession for life, and an order that he pay $4.9 million in compensation to creditors of 16 companies where he was liquidator or administrator. He became bankrupt two months later without paying the compensation.

The judge who banned him, Justice Patricia Bergin, noted that a liquidator was an officer of the court and described his conduct as ”quite appalling”.

HR Cook, one of the 16 companies in the Supreme Court case, was put into liquidation voluntarily in 2006 by Ms Shedden, her mother Joan Cook and a trustee for her niece and nephew.

Ariff’s task was to distribute the proceeds of a $3.2 million share sale, sell two investment units and pay capital gains tax.

Ms Shedden, who gave evidence of threatening to replace Ariff as liquidator in 2009, and her mother received their full entitlements from HR Cook, but tax of $612,000 was never paid and her niece and nephew did not receive dividends of $584,000

Elisabeth Sexton

Rachel Francois said any such investigation could be fully answered, but her client should not be subjected to the embarrassment of public questioning in the Federal Magistrates Court on a matter ”of an incredibly serious kind”.

Ms Francois repeatedly objected to questions about the March 2009 sale of a commercial property in Newcastle by a company associated with Mr Ariff to a company associated with his sister.

At issue was whether Ms Ariff’s family company paid $700,000, the amount shown on land title records and the contract, or $930,000.

The court heard an earlier draft sale contract for $700,000 contained an annexure saying Ms Ariff’s company would lend the vendor a further $230,000.

Asked the ”total value of the consideration proffered to acquire the property”, Ms Ariff said $700,000.

Ms Francois said there was ”an aspect about this which indicated that the loan was in fact potentially considered consideration and there are answers to all of that but if that were so it exposes the witness to something else in another forum in another context.

”It should not be allowed that a matter which has been aired in correspondence as involving an offence should be investigated here when it just relates to Ms Ariff and has nothing to do with her brother,” she said.

Last year Mr Ariff’s bankruptcy trustee, Anthony Warner, said he intended to investigate whether the property, where Mr Ariff conducted his insolvency practice until the NSW Supreme Court banned him from the profession last year, was bought for less than its real value.

A trustee has the power to overturn such transactions for the benefit of a bankrupt’s creditors.

Mr Warner’s barrister, David Ash, said if the sale price was $930,000 and his client was satisfied that sum was received by an entity associated with Mr Ariff, ”then, vamoose, there’s no concern to anyone”.

Ms Francois said the evidence showed there could be no benefit to creditors from investigating the sale, but public questions about whether it involved a ‘’sham element” were aimed at the ”improper purpose” of embarrassing her client.

Ms Ariff, an accountant, worked as a consultant to her brother’s insolvency practice in Newcastle.

Mr Ariff was banned for life after he admitted to misappropriating funds and other misconduct in 16 liquidations and voluntary administrations.

He was bankrupted after the court ordered him to pay $4.9 million in compensation to creditors of those 16 companies.

by ELISABETH SEXTON

Payfair List of  Creditors

by Susannah Moran, The Australian

He was being questioned yesterday in the Federal Magistrates Court in Sydney by David Ash, a barrister acting for Mr Ariff’s trustee in bankruptcy, CRS Warner’s Anthony Warner.

The NSW Supreme Court banned Mr Ariff from acting as a liquidator for life and ordered him to pay $4.9m compensation. But he was later declared bankrupt, based on claims for more than $11m lodged with Mr Warner. Mr Ariff was questioned yesterday on a number of bank accounts, loans and credit card payments. He said two credit cards, whose bills totalled about $1.8m over a six-year period, could have been held by contractors to his companies, who would then claim back work-related expenses.

The court also heard of two payments totalling $20,500 made by a roof insulation business to a company associated with Mr Ariff.

“And you have no idea what these payments are for?” Mr Ash asked. “No,” replied Mr Ariff, rejecting a suggestion they were a result of Mr Ariff working as a home insulator in October.

Mr Ariff was also asked about a dishonoured $515,000 cheque drawn on his personal account in February last year. Mr Ariff said it was a lot of money but he could not recall signing the cheque, and one of his staff would have filled in the amount.

“Is it possible to say you signed a cheque for half a million dollars without regard for what you were signing?” Mr Ash asked.

“Correct,” Mr Ariff replied.

Two Australian Federal Police officers accompanied him to the court in Goulburn Street, half a kilometre from the police station in Surry Hills where he stayed the night.

The registrar, Paddy Hannigan, discharged the police but warned Mr Ariff that she did not want to issue another warrant if he absconded.

Mr Ariff is due back in court today to answer more questions as his trustee, Anthony Warner, tries to recover funds for creditors.

The largest group of creditors are yet to receive the $4.9 million Mr Ariff was ordered by the NSW Supreme Court to pay in compensation for misappropriating funds from companies of which he was the liquidator or administrator.

Yesterday, he broke down when he was asked to give his name and date of birth for the court record.

When he was handed documents relating to his financial affairs he said: ”I’m not looking through any bundle of documents today; what I’ve been through last night was amazing.”

Later he said: ”I’ve had two hours’ sleep staring at a light bulb so I’m a bit blurry”.

He also became tearful when he spoke about strains in his marriage and said he was unable to remember much of the events of 2008 and 2009 because of ”what I have been through in the last couple of months, with my mother being very sick”.

In contrast, he was forthright when answering questions about family trusts and companies involving his wife, Kathleen Clark, his parents, Yusof and Barbara Ariff, and his sister, Yazni Ariff.

Asked about claims on his bankrupt estate from relatives and their companies for hundreds of thousands of dollars, he said they were owed the money because they had paid his legal bills.

Mr Ariff was bankrupted in October, two months after Justice Patricia Bergin ordered him to pay the $4.9 million and banned him for life from the insolvency profession.

The judge said his ”appalling” misconduct included using creditors’ funds to pay for holidays and failing to pay employee superannuation.

Ms Clark and Yazni Ariff have been summonsed to appear at the examinations in August.

ELISABETH SEXTON
July 2, 2010

He broke that law by failing to appear at the Federal Magistrates Court in Sydney yesterday and on Monday, under a June 9 summons to answer questions on oath from his bankruptcy trustee, Anthony Warner, a partner of the insolvency firm CRS Warner Kugel.

Mr Ariff was bankrupted last year, after the NSW Supreme Court ordered him to pay $4.9 million in compensation for misappropriating funds from companies of which he was liquidator or administrator.

Justice Patricia Bergin also banned Mr Ariff from the insolvency profession for life after he admitted to misconduct including using creditors’ funds to pay for family holidays, lodging false accounts and failing to pay employee superannuation.

Mr Ariff is believed to be living in Melbourne and last year surrendered his passport to Mr Warner.

The warrant, issued under the Bankruptcy Act, gives the Australian Federal Police the power to bring Mr Ariff to the court for his examination and to detain him in custody.

Mr Ariff faxed the court a handwritten letter on Friday asking to be excused on medical grounds, but the only doctor’s certificate he provided was two weeks old, addressed to Centrelink and related to his capacity for work, not for attending court.

A court registrar, Geoffrey Segal, said on Monday that there was ”no clear evidence he’s unfit to give evidence and the lateness of the application [to be excused] does colour the genuineness of the application”. After giving Mr Ariff 24 hours’ grace, Mr Segal ordered the warrant yesterday.

Mr Warner’s barrister, David Ash, told the court that after Monday’s hearing his client had contacted the doctor who signed the Centrelink certificate.

”The conversations that have taken place with the doctor show … that not only does Mr Ariff not see the doctor at the moment but he has no intention of getting a medical certificate in an appropriate form,” Mr Ash said.

ELISABETH SEXTON
June 30, 2010

He faxed a copy of the Centrelink document to the court on Friday and attached a handwritten letter in which he said he had depression and was ”heavily sedated”.

A court registrar said he would issue a warrant this morning if Mr Ariff did not provide a ”new and different” medical certificate overnight.

”There’s no clear evidence he’s unfit to give evidence and the lateness of the application [to be excused] does colour the genuineness of the application,” said the registrar, Geoffrey Segal.

”If he’s unfit to give evidence he should be excused from being here but we are not at that point at the moment.”

The registrar also deferred until August the examination of Mr Ariff’s wife, Kathleen Clark, to allow her to undergo medical treatment.

Ms Clark’s solicitor, Peter Wright, told Mr Segal his client had ”an appropriate medical certificate” and a supporting sworn affidavit. The court has set aside time in August for the trustee, Anthony Warner, to examine Mr Ariff’s sister, Yazni Ariff, who worked at his firm, Stuart Ariff Insolvency Administrators.

Mr Ariff was banned from the insolvency profession for life last year after the Australian Securities and Investments Commission prosecuted him for acting against the interests of creditors during 16 liquidations and voluntary administrations.

Mr Ariff admitted the allegations, which included using creditors’ funds to pay for family holidays, lodging false accounts, improperly receiving fees from collapsed companies under his control and failing to pay employee superannuation.

Justice Patricia Bergin said his conduct was ”quite appalling” and ordered him to pay $4.9 million compensation to creditors of the 16 companies. He did not pay and was bankrupted in October.

The court set aside three days this week and one day in August.

by ELISABETH SEXTON