Kazaa execs agree to freeze assets

Executives associated with peer-to-peer software website Kazaa have agreed not to move, dispose of or disperse their private assets following a request made by record companies to the Australian Federal Court on Friday.

The Australian record companies were seeking a Mareva order - which covers freezing of assets -against the P2P software provider Sharman Networks and associated parties as part of the ongoing trial over alleged copyright infringing activity.

The applicants - the record labels - said they were seeking the Mareva orders in order to "restrain...the respondents from dealing with assets under their control so as to dissipate or remove them from the applicants' reach and thereby frustrate a potential judgment in the applicants' favour".

The applicants also requested that the respondents be ordered to file an affidavit of assets detailing the possessions of Sharman chief executive officer Nikki Hemming, Altnet chief executive officer Kevin Bermeister and his wife Beverly Bermeister, and Sharman accountant John Myers.

Counsel for the respondents sought an adjournment of the request for an affidavit of assets, saying it would "interrupt" them as they are currently preparing written submissions for the closing statements of the case. The submissions are due to be filed with the court on Friday, 11 March.

Justice Margaret Stone allowed the adjournment of the request for affidavit of assets following an assurance from the judge hearing the case, Justice Murray Wilcox, that he will make time to hear the applicants' request. The matter will be heard before the closing statements on 22 March.

The undertaking of the respondents' counsel guarantees to the court that no transfer of funds or assets will happen until the hearing with Justice Wilcox.

According to Michael Speck, Music Industry Piracy Investigations (MIPI) chief, the request to freeze the respondents' assets was prompted by "very serious concerns that there is a strong risk that the respondents are or may be in the process of moving or dissipating their assets".

Speck said the applicants became aware last week that Hemming sold her property in Castle Cove on 16 February, five days after the applicants served the closing submissions.

In his affidavit, Speck also said Hemming still occupies the property even after she sold it to Sharman's accountant John Myers for AU$2.1m. Speck said the property was the only one known to the applicants as having been owned by Hemming in Australia.

"In my view, unless Ms Hemming is restrained from the disposal or the transfer out of the jurisdiction of any proceeds she has received from the disposition of the Castle Cove property to Mr Myers, the applicants will be left without any access to Ms. Hemming's assets for the purposes of satisfying a claim for damages," Speck said in his affidavit.

"It is clear that Mr Myers has not engaged in an arms' length transaction to purchase the Castle Cove property. Unless Mr Myers is restrained, there is a danger that he may pass the Castle Cove property onto an innocent third party, thereby potentially defeating any claim by the applicants as judgement creditors," the applicants said.

He said that Bermeister also "mortgaged" his share of a property - co-owned with his wife - for AU$3.375m to his wife, Beverly Bermeister, in September last year.

The applicants admit that it is unclear as to whether any money changed hands and if so, what Hemming has done with the sale proceeds. They also added that there is no evidence to suggest that the property was listed for sale or sold at a public auction.

The record companies also believe that Altnet's latest "advertising fund" announced last week is a part of its plan to dissipate revenue from their joint venture. Altnet announced last week that it plans to share revenue generated by advertising on popular P2P applications with independent music labels.

"As we speak all the assets of the Sharman companies and their executives are frozen. This is an important victory for the record companies who will pursue huge damages against Kazaa if we are successful in the copyright infringement case which is drawing to a close in the Federal Court," said Speck.

"Neither Hemming nor Bermeister would front the court to give any evidence... they simply can't explain why these property deals have occurred in such suspicious circumstances," Speck said.

Kristyn Maslog-Levis writes for ZDNet Australia.