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Re Secured Mortgage Management Ltd (in liq)

 

[2017] QSC 254

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

In the matter of Secured Mortgage Management Ltd (in liq); Fletcher & Barnet in their capacity as liquidators of Secured Mortgage Management Ltd (in liq) & Anor [2017] QSC 254

PARTIES:

In the matter of SECURED MORTGAGE MANAGEMENT LIMITED (IN LIQ)

WILLIAM JOHN FLETCHER and KATHERINE ELIZABETH BARNET in their capacity as liquidators of SECURED MORTGAGE MANAGEMENT LIMITED ACN 089 571 184  (IN LIQ) and ANOR

(first applicants)

SECURED MORTGAGE MANAGEMENT LIMITED ACN 089 571 184 (IN LIQ) in its capacity as responsible entity of the SUMMIT MORTGAGE FUND ARSN 090 199 592

(second applicant)

FILE NO/S:

BS5779  of 2008

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

3 November 2017

DELIVERED AT:

Brisbane

HEARING DATE:

1 September 2017; supplementary written submissions on behalf of the applicants received 11 September 2017; further supplementary written submissions on behalf of the applicants received 29 September 2017

JUDGE:

Burns J

ORDERS:

The applicants are directed to bring in minutes of order to reflect these reasons

CATCHWORDS:

CORPORATIONS – MANAGED INVESTMENTS – WINDING UP – where the liquidators of a registered managed investment scheme applied to the court for directions pursuant to s 479(3), s 511 and s 601NF(2) of the Corporations Act 2001 (Cth) and/or s 96 of the Trusts Act 1973 (Qld) – where the scheme comprised a number of contributory mortgages whereby member investors contributed money which was loaned by the responsible entity to third party borrowers – where funds received from individual member investors were not pooled into a common fund – where each member’s investment comprised a separate trust – where the responsible entity offered members insurance against capital losses incurred in the event of a default by a borrower – where not all members elected to take up the offer of capital insurance – where the limit of indemnity in respect of any single claim under the capital insurance policy was $3,000,000 and the aggregate limit of indemnity under the policy was $5,000,000 – where members of the scheme who elected to insure the return of capital paid a premium by way of deduction from their monthly investment interest returns – where the liquidators made claims for indemnity under the insurance policy in respect of nine insured loans – where the liquidators pursued one claim in advance of the others for strategic reasons and that claim was accepted – where the eight remaining claims were settled by way of a single lump sum payment – where the capital insurance recoveries held on trust were less than the total due to all beneficiaries – whether all members have equal claims – whether the investors who paid an insurance premium in relation to the loans invested in by them constitute a separate class of beneficiaries – whether the costs and disbursements of pursuing the claims should be borne by the member investors equally – whether the net claim proceeds should be distributed rateably amongst the capital insured members

CORPORATIONS – MANAGED INVESTMENTS – WINDING UP – where the liquidators of a registered managed investment scheme applied to the court for directions pursuant to s 479(3), s 511 and s 601NF(2) of the Corporations Act 2001 (Cth) and/or s 96 of the Trusts Act 1973 (Qld) – where, in the course of winding up the scheme, the liquidators commenced a proceeding against a bank for equitable compensation in respect of the alleged knowing receipt of property held on trust by the responsible entity for investors in the registered management scheme – where two heads of compensation were sought – where the first head of compensation related to the assignment to the bank of a first registered mortgage securing a loan – where the second head of compensation related to the balance of an investment account conducted by the responsible entity with the bank – where the liquidators accepted a sum in settlement of the proceeding – where there was no apportionment within the settlement sum between the two heads of compensation – where, save for two exceptions, it was not practical to determine which members contributed to the balance of the investment account the subject of the second head of compensation – where the cost of the tracing exercise to determine which members’ funds were contained in the investment account would exceed the amount held by the liquidators in respect of that account – whether the balance of the funds recovered in respect of each of the claims, save for the two amounts that could be identified with respect to the investment account, should be distributed rateably to the beneficiaries of the claims – whether the costs and disbursements incurred by the liquidators should be borne by the members equally

CORPORATIONS – MANAGED INVESTMENTS – WINDING UP – where the liquidators of a registered managed investment scheme applied to the court for directions pursuant to s 479(3), s 511 and s 601NF(2) of the Corporations Act 2001 (Cth) and/or s 96 of the Trusts Act 1973 (Qld) – where the responsible entity made loans to two companies secured in each case by, inter alia, mortgages over real properties – where the loans went into default – where the liquidators appointed receivers and managers to one of the companies – where the receivers sold the mortgaged properties – where all but one of the properties achieved a net surplus after deduction of costs and expenses – whether the proceeds from sale should be characterised according to the amount received from the sale of each property before or after deduction of costs

Corporations Act 2001 (Cth), s 479(3), s 511, s 601EE(2), s 601FC(2), s 601ND, s 601NE, s601NF, s 601NF(1), s 601NF(2)

Insolvency Law Reform Act 2016 (Cth), s 1617(3)

Trusts Act 1973 (Qld), s 96

13 Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) (1999) 30 ACSR 377; [1999] FCA 144, cited

ASIC v Edwards [2009] QSC 360, cited

ASIC v Enterprise Solutions 2000 Pty Ltd [2001] QSC 82, cited

ASIC v Letten (No 7) [2010] FCA 1231, cited

ASIC v Tasman Investment Management (2006) 59 ACSR 113, cited

Corbiere & Anor v Dulley & Ors [2016] QSC 134, cited

Devaynes v Noble (Clayton’s Case) (1816) 1 Mer 572; 35 ER 781, cited

Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, cited

Joye v Beach Petroleum NL (1996) 67 FCR 275, cited

Mier v FN Management Pty Ltd [2006] 1 Qd R 339, cited

Parbery v ACT Superannuation Management Pty Ltd (2010) 79 ACSR 425, cited

Re Stacks Managed Investments Ltd (2005) 219 ALR 532; [2005] NSWSC 753, cited

Re Crust ‘N’ Crumb Bakers (Wholesale) Pty Ltd [1992] 2 Qd R 76, cited

Re G B Nathan and Co Pty Ltd (in liq) (1991) 24 NSWLR 674, cited

Re Hazelton Air Charter Pty Ltd v Mentha (2002) 41 ACSR 472; [2002] FCA 529, cited

Re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99, cited

Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361, cited

Re Timbercorp Securities Ltd (in liq) (No 3) (2009) 74 ACSR 626; [2009] VSC 510, cited

Rubicon Asset Management Ltd (Administrators appointed) (2009) 77 NSWLR 96, cited

COUNSEL:

C Wilson for the applicants

SOLICITORS:

McInnes Wilson Lawyers for the applicants

  1. Secured Mortgage Management Limited, a company in liquidation, is the responsible entity for a registered managed investment scheme known as the Summit Mortgage Fund. Both SMML and the Scheme are in the process of being wound up.
  2. The applicant liquidators, William Fletcher and Katherine Barnet, are in doubt about the manner in which certain proceeds realised during the administration should be distributed and as to how particular costs and expenses should be apportioned amongst members of the Scheme. They seek directions regarding these issues pursuant to ss 479(3), 511 and 601NF(2) of the Corporations Act 2001 (Cth) and/or s 96 of the Trusts Act 1973 (Qld).
  3. In deciding whether to give directions (and, if so, which directions), the court was greatly assisted by Mr Christopher Wilson of counsel who appeared at the hearing on behalf of the liquidators and subsequently provided supplementary submissions regarding a number of issues.

The Scheme

  1. The Scheme comprised a number of contributory mortgages. Pursuant to each, member investors advanced money to SMML to loan to third party borrowers, predominantly for the purpose of funding residential and commercial property developments. The loans were secured for the most part by first registered mortgages, fixed and floating charges and guarantees. When made, the funds were loaned in the name of SMML. Likewise, the securities (including mortgages) were granted and registered in favour of SMML.
  2. Under the Scheme, funds received from individual member investors were not pooled in a common fund; instead, they were applied to a particular loan. In this way, investments made by individual members were combined to fund the loan made to a particular borrower. In most cases, members identified the loan in which they wished to invest but, in other cases, SMML was given authority to invest their funds in such loans as SMML considered appropriate.
  3. Two other features of the Scheme should be highlighted:
  1. First, each member’s investment comprised a separate trust. That proposition emerges from a combined reading of s 601FC(2) of the Corporations Act (providing as it does that “the responsible entity holds scheme property on trust for scheme members”) and the following provision of the Constitution for the Scheme:[1]

2.6 Separate Funds

The Manager declares that it holds and will at all times hold each Member’s Fund on separate trusts and the Manager must maintain adequate records to identify each Member’s Fund. The Member’s Funds may be held together with any other Assets including in a single Bank Account and with other Member’s Funds”;[2]

  1. Second, because member contributions were in all cases referable to a particular loan, the loans were quarantined in the sense that the performance of one loan could not affect the performance of any other loans made by SMML. Expressed another way, returns or losses flowing from a particular loan were confined to those members who contributed to that loan. So much is made clear by this provision of the Constitution:[3]

2.8 Liability of Scheme and Funds

Each Member’s Fund will not be responsible for, or subject to, any claim in respect of a liability incurred in respect of another Sub Scheme or another Member’s Fund, except those Mortgage Investments or Specialised Investments which relate to more than one Member’s Fund may be shared between those Member’s Funds in such manner as in the opinion of the Manager is fair and equitable.”

The winding up

  1. On 19 June 2008, Dutney J ordered that SMML be wound up in insolvency and that Mr Fletcher and Ms Barnet be appointed liquidators. His Honour also ordered pursuant to s 601ND of the Corporations Act that the Scheme be wound up and, to that end, appointed the liquidators (pursuant to s 601NF(1)) to take responsibility for ensuring that occurs. At the time when those orders were made, the Scheme had in excess of 400 members and 22 current loans, the face value of which exceeded $100 million.
  2. The orders made by Dutney J made provision for payment of the liquidators’ remuneration.[4] On 19 November 2009, Douglas J varied that provision so that, once varied, the relevant paragraph was in these terms:

“7. William Fletcher and Katherine Barnet, as the persons appointed under section 601NF of the Act, be entitled to, from time to time, receive fair and reasonable remuneration for work done and to discharge their obligations under this order on the basis of the charges, particularised in the Affidavit of William John Fletcher, sworn 18 June 2008 from time to time and all reasonable out of pocket expenses with such remuneration and expenses to be deducted from the assets of the Scheme in the following manner:

  1. William Fletcher and Katherine Barnet (“Scheme Administrators”) be entitled to be remunerated on and from 1 August 2009 at the rates specified in the Schedule attached hereto and marked “A”;
  2. the remuneration and out of pocket expenses incurred:
  1. in respect of a particular loan/investment in the Scheme be paid from the funds realised in respect of that particular loan/investment and any deficiency form part of the ‘General Expenses’ of the winding up of the Scheme;
  1. incurred in respect of winding up the Scheme that are not directly referable to a particular loan/investment or that it is not practicable to apportion between various loans/investments in the Scheme (‘General Expenses’) be applied rateably against each loan calculated by reference to the gross realisation of an individual loan/investment as a percentage of the gross of all loan/investment realisations made in the winding up of the Scheme.”
  1. It should be made clear that the liquidators were unable to reliably estimate the proportionate cost of each aspect of this application.[5] However, none of the costs or disbursements to which reference will be made were incurred in relation to the winding up of SMML in its own capacity; rather, they were incurred in respect of the winding up of the Scheme and, further, were approved by the Committee of Inspection appointed with respect to the winding up of the Scheme.

Notice of the application

  1. The application was filed on 2 August 2017 and two days later, the liquidators caused a circular to be sent to all known members in the Scheme advising them of the filing of the application and the direction that would be sought. Investors were advised that a copy of the application and supporting affidavit material was available for inspection at the office of the liquidators or, alternatively, a copy could be sent to them on request.[6]
  2. Since then, one investor made a telephone enquiry about the application and requested a copy of the application and supporting material. They were subsequently provided to her, but nothing further was heard from her and she did not appear at the hearing.[7] She was the only member of the Scheme to request a copy of the application and supporting material.
  3. Enquiries were also received from 24 investors in relation to proofs of debt, the proposed interim dividend and other matters that did not involve particular queries about the application.[8]
  4. In addition, the liquidators arranged for various members of the Committee of Inspection for the Scheme, as well as a large investor in the Scheme, to be supplied with a copy of the application and supporting affidavit material.[9] None of those persons sought to be heard on the application.
  5. Lastly, a copy of the application and supporting affidavit material was served on the Australian Securities and Investment Commission on 3 August 2017. On 28 August 2017, correspondence was received from ASIC confirming receipt of the application and supporting material and advising that ASIC “considers that this is a matter properly left to the determination of the court and [confirming] that it does not propose to intervene in the proceeding or seek leave to appear at the hearing.[10]

Applicable principles

  1. Before turning to the issues in relation to which directions are sought, it is useful to identify the source of power to give such directions and to say something of the principles that are engaged by some of the issues raised.

The power to give directions

  1. As already observed, the directions were sought pursuant to ss 479(3), 511 and 601NF(2) of the Corporations Act and/or s 96 of the Trusts Act 1973 (Qld).
  2. Of those provisions, s 601NF(2) of the Corporations Act confers power on the court to “give directions about how a registered scheme is to be wound up if the court thinks it is necessary to do so”. That may be because the provisions in the scheme’s constitution are “inadequate or impracticable”, or it may be for another reason. Although it may be accepted that this power is narrower in its ambit than the power to make orders under s 601EE(2),[11] it has been held to be sufficient to give directions about the costs and expenses of the winding up.[12]  It is also sufficient in my view to empower the making of directions regarding the distribution of proceeds from the winding up of a registered scheme. Indeed, for the reasons that follow, it would be an odd result if I were to conclude otherwise.
  3. The Act, beyond s 601NE directing that a registered scheme must be wound up in accordance with its constitution, leaves the detail of the winding up in the hands of the court.[13] To facilitate this, the liquidators were appointed by the court pursuant to s 601NF(1) of the Act to take responsibility for ensuring that the Scheme is “wound up in accordance with its constitution and any orders under” s 601NF(2). The orders contemplated by that provision are directions about how a registered scheme is to be wound up and, even though the Act is silent as to the carrying out of that task, the process is a familiar one. As McPherson SPJ observed in Re Crust ‘N’ Crumb Bakers (Wholesale) Pty Ltd:[14]

“Winding up is a process that consists of collecting assets, realising in reducing them to money, dealing with proofs of creditors by admitting or rejecting them, and distributing the net proceeds, after providing to costs and expenses, to the persons entitled.”[15] [Emphasis added]

  1. Thus, where, as here, the winding up has resulted in the realisation of proceeds and the manner of distribution of those proceeds is not specified in the constitution for the scheme, a direction about how that should occur is plainly something which is properly the subject of an order pursuant to s 601NF(2)).
  2. It is therefore unnecessary to consider the alternate sources of power advanced on behalf of the liquidators, that is to say, ss 479(3) and s 511 of the Corporations Act[16] and s 96 of the Trusts Act.[17] The power conferred by s 601NF(2) of the Corporations Act amply supports the making of directions about how proceeds realised during the administration should be distributed to the members and as to how the costs and expenses should be apportioned.

Some principles governing the distribution of Scheme proceeds

  1. Although it has been observed in the context of an unregistered scheme that, in determining how a scheme should be wound up, the court will be guided by the approach taken to the winding up of companies, partnerships and trusts,[18] it has also been said that “care must be taken to avoid any unreflective application of company law ideas to enterprises organised as managed investment schemes, whether registered or unregistered”.[19] After all, there are well known differences between the winding up of a trust and the winding up of a company.[20] However, what is clear is that any determination must be in accordance with the applicable principles of law and equity and not by reference to what is “fair, appropriate, equitable or just”.[21]
  2. Relevant to the issues raised on this application, it is “necessary” in the sense that term is used in s 601NF(2) for the court to make directions regarding the apportionment of costs and disbursements amongst the members of the Scheme and the distribution of particular Scheme proceeds to the members in accordance with their entitlements. For the reasons just mentioned, they are matters that must be decided by reference to established principle and not by broad considerations of fairness, and that was the very point emphasised by Robson J in Re Timbercorp Securities Ltd (in liq) (No 3):[22]

“[T]here are well recognised legal principles for determining the rights of several property owners whose property is lost or converted into a common fund. The fund, if it is created, is not to be allocated between the property owners on the basis of bargaining power. The fund is not to be allocated on arbitrary measures that may appear to be a fair and reasonable division of the fund. Rather, as the authorities establish, the fund is to be divided ‘by reference to the proportionate share of the fund measured by the extent and value of the claims or rights given up in exchange for an interest in the fund’[23].”[24]

  1. That said, when the balance of an account containing funds on more than one trust is insufficient to satisfy all beneficiaries, it has been held to be inappropriate to apply the rule in Clayton’s case[25] that would, if it was applied, allocate the first payment out of the fund to the first payment made into it. Instead, the fund should ordinarily be distributed rateably between the beneficiaries, assuming that all beneficial classes have equal claims.[26]
  2. In Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq),[27] Campbell J said:

“The principles upon which tracing operates, and the proper scope of application of the rule in Clayton’s Case, both favour the rule in Clayton’s Case not being used to allocate losses suffered by beneficiaries whose funds are mixed. This conclusion is arrived at as a matter of principle, regardless of whether or not there is sufficient information to enable an allocation of withdrawals to deposits, in accordance with Clayton’s Case, to be made in any particular case.”[28]

  1. Accordingly, where the available fund on the winding up of a scheme is inadequate for reimbursement of the members in full, and identification of any particular fund as being the moneys of any particular member is impractical, the appropriate order is for a rateable distribution.[29] That, however, is subject to the important qualification expressed by Campbell J in Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq):[30]

“Rateable abatement does not automatically apply whenever there is a mixed fund because there is a preliminary question, the answer to which cannot be assumed, of whether all the claimants on the fund, in the form the fund takes at the time of the trial, have claims which are equal.”[31]

  1. There is one further point on the distribution of scheme proceeds. In attempting to answer that “preliminary question”, it may not always be possible to trace individual investors’ monies. In other cases, of which this case is but one example, considerable time and expense will be involved in doing so and that will only serve to further deplete the available fund for distribution. In such circumstances, it might be preferable to “yield to pragmatism”;[32] it being “to no-one’s advantage that a very long time and very large costs be spent in working out the entitlements”[33] of the various member classes or members.[34] Whether that is so will depend on the court’s assessment of whether the likely benefit to members of undertaking such an exercise outweighs the estimated cost to the fund of doing so.
  2. As to the costs and disbursements incurred in winding up the Scheme (including those incurred when realising the assets of the Scheme), it has already been observed (at [6]) that each member’s investment comprised a separate trust with SMML as the common trustee. The correct approach to the apportionment of the liquidators’ expenses in such circumstances was, in my respectful view, stated by Palmer J in Parbery v ACT Superannuation Management Pty Ltd,[35] as follows:

“… beneficiaries of a group of trusts are, in law, entitled to insist that the common trustee, or common administrators or liquidators of a common trustee, treat each trust separately and act in the best interests of each trust. The general equitable right of fiduciary loyalty in such a situation is clearly and expressly recognised in s 601FC(1)(c) of the CA, which provides that a responsible entity must act in the best interests of the members and, if there is a conflict between the members’ interests and its own interests, it must give priority to the members’ interests.

It is clear that the trustee of several separate trusts cannot charge the beneficiaries of one trust with the costs and expenses incurred in relation to work done for the benefit of another trust. If the trustee cannot, with some accuracy, apportion the expenses of administration between the various trusts, ‘the maxim that equality is equity should provide the solution to the problem of apportionment’: see In re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99 at 109 per King CJ; and 13 Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) (1999) 30 ACSR 377; [1999] FCA 144 per Finkelstein J.”[36]

  1. It follows that, if the costs and disbursements cannot be apportioned to the various trusts with some accuracy, they should usually be borne by the members equally. I would only add that where it is not practicable to apportion those expenses to the various trusts, the same approach should be taken, that is, they should abate rateably. Indeed, recognition of that very proposition appears in paragraph 7(a)(ii) of the winding up order, as amended by Douglas J on 19 November 2009.
  2. Those principles discussed, I turn to the issues in relation to which the liquidators seek directions.

Capital insurance claims

Facts

  1. On 7 June 2007, SMML took out a policy of insurance with Lloyd’s underwriters. The policy extended what was described as “mortgage indemnity and impairment cover” against capital losses in the event of a default by a borrower on an insured loan. The limit of indemnity in respect of any single claim (each claim being in respect of a specific insured loan) was $3,000,000. The aggregate limit of indemnity under the policy was $5,000,000.
  2. Once the policy was in place, SMML was able to offer “capital insurance” to investors in the Scheme. Members of the Scheme who elected to take up the offer paid a premium which was deducted from their monthly investment interest returns and then paid by SMML paid to the underwriters.
  3. Not all loans at the date of the winding up were insured against capital losses in this way. In fact, of the 22 loans that were current at that time, only 10 included member contributions that were covered by the policy. They were:
    1. A loan of $29.5 million to Mayaman Developments Pty Ltd (Mayaman) with respect to a property at Agnes Waters;
    2. A loan of $5.29 million to Dunes 33 Pty Ltd (Dunes) in respect of another property at Agnes Waters;
    3. A loan of $950,000 to Maryborough Developments Pty Ltd (Maryborough) in respect of properties at Raceview and Eagleby;
    4. A loan of $2.8 million to Tilgonda 3 Pty Ltd (Tilgonda) in respect of a property at Gowrie;
    5. A loan of $20.224 million to Platinum United II Pty Ltd (Platinum) in respect of a property at Golden Beach;
    6. A loan of $1 million to Milanese Enterprises Pty Ltd (Milanese) in respect of a property at Edmington;
    7. A loan of $1.25 million to Bamboo Developments Pty Ltd (Bamboo) in respect of a property at Torbanlea;
    8. A loan of $2.6 million to Black Amber Projects Pty Ltd as trustee for the Mangoes Trust (Mangoes) in respect of a property at Cardwell;
    9. A loan of $8.05 million to Strathpine Lodge Pty Ltd (Strathpine) in respect of a property at Strathpine; and
    10. A loan of $1.05 million to Destiny Projects Pty Ltd as trustee for the Supagrowth Trust (Destiny) in respect of a property at Rockhampton.
  4. Further, none of the insured loans were fully funded by “capital insured” contributions because some contributing members chose not to take up the offer of insurance. In consequence, the loans in question contained a mix of capital insured contributions and other contributions which were not insured. As Mr Fletcher deposed:

“[This] ‘intermingling’ arrangement operated such that the indemnity available in respect of each loan was limited to the same percentage of the sum recoverable under the terms of the Policy as the proportion the insured funds bore to the full amount of the loan.”[37]

  1. The proportion of insured to uninsured funds across the 10 loans was, in percentage terms, as follows:[38]

Loan

Full Amount of Loan

Capital Insured Funds

Capital Insured Percentage

Mayaman

$29,500,000

$6,161,988

20.89%

Dunes

$5,290,000

$4,810,000

90.93%

Maryborough

$950,000

$720,000

75.79%

Tilgonda

$2,800,000

$175,000

6.25%

Platinum

$20,224,000

$703,000

3.48%

Milanese

$1,000,000

$33,000

3.3%

Bamboo

$1,250,000

$10,000

0.8%

Mangoes

$2,600,000

$5,000

0.19%

Strathpine

$8,050,000

$848,012

11.09%

Destiny

$1,050,000

$11,000

1.05%

  1. Save for the Destiny loan, each of the other nine loans made a capital loss. The liquidators eventually made claims for indemnity under the policy with respect to those loans, but there was a process to be followed. The first step was notification to the underwriters that events of default under the loans had occurred. Notice was given on 30 June 2008, just 11 days after the winding-up order was made.[39] Thereafter, the solicitors for the liquidators provided the underwriters with regular written updates as to the status of their recovery actions. These updates accompanied monthly bordereau reports.[40] The bordereaux were required under the terms of the policy with respect to “all outstanding loans in respect of which [SMML seeks] cover “.[41]
  2. On 13 February 2013, the first claim for indemnity under the policy was made. It was in the amount of $347,139.96 and was made in respect of the Strathpine loan. On 20 June 2013, this claim was revised upwards to the sum of $449,437. On 8 April 2014, the liquidators accepted the underwriters’ offer to pay $432,661 in satisfaction of this claim and that sum was received on 12 June 2014. The costs and disbursements incurred by the liquidators in conducting this claim amounted to $97,901.90.
  3. The decision to advance the Strathpine claim ahead of the other claims was a considered one. As Mr Fletcher explained:[42]

“I chose to conduct the Strathpine Claim prior to the Remaining Claims for strategic reasons, as I considered it to be a straightforward claim with good prospects. I did not make the Strathpine Claim first to prefer the interests of capital insured investors in the Strathpine loan to the interests of other capital insured investors.”

  1. After advancing the Strathpine claim, the liquidators continued to provide monthly reports regarding the other insured loans. In the report dated 30 June 2013,[43] significant shortfalls in relation to these loans were identified. Indeed, in the covering email, the solicitor for the liquidators stated that “we have made only one claim i.e. the Strathpine Lodge loan” and “no other claims in respect of defaults noted on the bordereau have yet been made or declined”. He added, “I gather from your letter that you have instructions from London Underwriters in respect of all defaulting loans/prospective claims”.[44] After the underwriters’ offer to settle the Strathpine claim was accepted, their solicitors asked for a release with respect to policy but, when the solicitor for the liquidators indicated that “other claims (further to the Strathpine claim) were imminent” and that he would “prefer to leave any release until after all claims were disposed of”, the underwriters accepted that position.[45]
  2. On 6 August 2014, the liquidators made claims on the policy with respect to the remaining eight loans that had incurred a capital loss.[46] The letters outlining each claim referred to the previous claim on the policy and noted that “much information has, of course, already been provided in the monthly bordereau and with the Strathpine Lodge claim.”[47] The further claims were in these amounts:
  1. $3,000,000 in respect of the Mayaman loan;
  2. $2,422,656.11 in respect of the Dunes loan;
  3. $871,136.23 in respect of the Maryborough loan;
  4. $157,837.77 in respect of the Tilgonda loan;
  5. $43,707.77 in respect of the Platinum loan;
  6. $24,245.19 in respect of the Milanese loan;
  7. $8,344.42 in respect of the Bamboo loan; and
  8. $3,788.90 in respect of the Mangoes loan.
  1. Although each of the further claims was lodged at the same time, by letter dated 28 August 2014, the solicitors for the underwriters advised the solicitors for the liquidators that the underwriters would first investigate the claims made with respect to the Mayaman and Dunes loans because the claims in relation to those loans exceeded the remaining aggregate limit of indemnity under the policy. In particular, they wrote:[48]

“Given that the loans to Mayaman Developments Pty Limited and Dunes 33 Pty Limited constitute around 80% of the total monetary claim and exceed by a wide margin the remaining limit of indemnity available under the Policy, Underwriters propose to revert to you with their position in relation to those two loans first. Please confirm your agreement to this proposal.”

  1. In consequence, the claims made with respect to the Mayaman and Dunes loans were progressed ahead of the remaining claims with the investigation and progression of those other claims being “relatively limited”.[49] However, Mr Fletcher deposed that:[50]

“The order of the progression of the Remaining Claims is not necessarily a reflection of the strength or weakness of those claims, but rather it was done in that manner for commercial expediency.”

  1. On 6 August 2015, the liquidators amended the Dunes claim to the sum of $3 million. A dispute then developed as to the extent to which SMML were entitled to be indemnified by the underwriters under the policy in respect of the remaining claims. Ultimately, on 7 December 2016, the liquidators accepted the sum of $3 million in full and final satisfaction of all remaining claims made under the policy, which sum was agreed to be inclusive of interest and costs. That sum was paid on or about 10 January 2017 and a deed of release was entered into with respect to the settlement.[51] The costs and disbursements incurred by the liquidators in conducting the remaining claims came to $472,739.63.
  2. The settlement sum was agreed to be paid in addition to the sum already paid with respect to the Strathpine loan ($432,661), and that was made clear in the deed of release. However, the deed did not otherwise distinguish between any of the loans in relation to which the settlement sum was paid, or apportion that sum amongst the claims.
  3. Mr Fletcher has deposed that, by conducting the claim with respect to the Strathpine loan before the remaining claims, member investors in the Strathpine loan benefited at the expense of the member investors in the other loans because the amount recoverable under the claim made with respect to the Strathpine loan was not subject to the reduction necessarily applicable to the later lodged claims by virtue of the aggregate limit of indemnity under the policy.[52] Furthermore, Mr Fletcher pointed out that the settlement sum agreed in respect of the remaining claims may have been adversely impacted by virtue of the amount paid in respect of the Strathpine claim in that “the insurer may have taken that payment into account, rather than simply the merits of each of the Remaining Claims”.[53] On the other hand, investors in the loans which became the subject of the remaining claims received a benefit as a consequence of the Strathpine claim being conducted first because the costs of the investigations about the general nature and conduct of SMML’s capital insurance arrangement were incurred in the course of conducting that claim and not the remaining claims.[54] In addition, the “costs of responding to the insurer’s non claim-specific contentions about indemnity were borne primarily during the conduct of the Strathpine Claim”.[55]
  4. As to other creditors in the winding up of the Scheme, Mr Fletcher also saw benefit for them in the conduct of the capital insurance claims because:[56]

“(a) in order for a loan to be an insured loan the Policy required SMML, by clause 4.13, to comply in all respects with its own criteria, policies and procedures in respect of entering into, monitoring and enforcing insured loans and mortgages, which criteria, policies and procedures were required to be those a prudent lender would apply;

  1. I caused extensive investigations to be undertaken with respect to SMML’s conduct of the loans the subject of the Strathpine Claim and Remaining Claims as a consequence of this Policy requirement; and
  1. the information ascertained from those investigations has been utilised in the conduct of other proceedings in the winding up of SMF, including:
  1. Supreme Court of Queensland Proceeding BS4349 of 2012, which concerns an allegedly negligent valuation undertaken in respect of the security property for the Mayaman loan;
  1. Supreme Court of Queensland Proceeding BS2405 of 2014, which concerns an allegedly negligent valuation undertaken in respect of the security property for the Bamboo loan;
  1. Supreme Court of Queensland Proceeding BS2333 of 2013, which concerns an allegedly negligent valuation undertaken in respect of the security property for the Mangoes loan.”
  1. In addition, the information obtained in the course of conducting the capital insurance claims was utilised by the liquidators from time to time to contribute to their “staff and lawyers’ understanding” of the factual circumstances relevant to the three claims prosecuted in this court for allegedly negligent valuations and in “apprehending or responding to particular aspects of contributory negligence allegations”[57] made by the defendants in those proceedings.[58]

Directions

  1. There is now a fund in the hands of the liquidators representing the proceeds of the capital insurance claims and the member investors who contributed to the insured part of those loans can be identified. The liquidators therefore seek a direction as to the “appropriate manner in which to distribute the proceeds of the insurance claim”.[59]
  2. It was submitted that the investors who had paid an insurance premium in relation to the loans invested in by them “constitute a separate class of beneficiaries from other investors, and that the proceeds received under the capital insurance policy should be paid to those investors only”.[60] I agree. Only those investors who sought to protect their investment through payment of premiums under the policy should stand to benefit from the proceeds realised from the claims.
  3. However, as between those insured investors, different outcomes will be achieved depending on whether the proceeds received are distributed to the investors in the loans in the order in which the claims were made and assessed, that is to say, the Strathpine claim followed by the Mayaman and Dunes claims and then the remaining claims. Furthermore, the overall outcome will be affected by the manner in which the costs and disbursements related to the insurance claims are allocated as between the capital insured investors. Another consideration that arises in the case of each of the Mayaman and Dunes claims is that those claims exceeded the “any one claim” limit of $3 million and, as such, different returns are achieved depending on whether those claims are treated as being capped at that limit.
  4. The liquidators have considered the different ways in which the proceeds may be distributed and the expenses allocated.[61] Detailed submissions have also been made about the different permutations.[62] These analyses demonstrate that, if the proceeds received with respect to the Strathpine loan are distributed (net of expenses) to the capital insured investors in that loan in priority to the capital insured investors in the other loans, the Strathpine investors will recover nearly all of their losses but at the expense of those other investors. If, on the other hand, the proceeds received with respect to all of the insured loans are pooled and the Mayaman and Dunes claims are uncapped, that would provide the best return (net of expenses) to the investors in the Mayaman and Dunes loans but, again, that will be at the expense of the investors in each of the other loans. However, the best outcome for the investors in six of the nine insured loans will be achieved if the Mayaman and Dunes loans are capped, the proceeds pooled and then, after deduction of expenses, distributed rateably.
  5. As earlier discussed (at [21] – [26]), in determining how the proceeds on a winding up should be distributed, what might appear to the court to be the best, or fairest,  outcome for the most number of members is irrelevant. Instead, the focus must be on the nature and extent of the members’ claims to the proceeds under consideration. If all beneficial classes have equal claims, there should be a rateable distribution. If otherwise, the distribution should reflect, in proportion, the different claims. Here, for the reasons I have already expressed above (at [48]), the members who elected to take up the offer of capital insurance constitute a separate class of beneficiaries from the other members. Only the insured members should share in the capital insurance proceeds. The more difficult question is whether, within the class of members who were insured, there existed a subclass who, for one reason or another, are entitled to a greater share of the proceeds than the other members.
  6. What is pointed to in order to support the possible existence of such a subclass is the feature that the Strathpine claim was made in advance of all other claims and a discrete sum recovered in satisfaction of that particular claim. It was submitted that, had the liquidators pursued all capital insurance claims at the same time and received a single “lump sum” payment in satisfaction of all claims, it would be uncontroversial that the proceeds should be distributed rateably between all insured investors in proportion to their respective claims. But that did not occur and, for this reason, the court was asked to consider whether what did occur gave the members who invested in the Strathpine loan an entitlement to share in the capital insurance proceeds received with respect to that claim to the exclusion of the other members. In my opinion, it does not.
  7. In the first place, the underwriters were apprised at all times about the existence of claims other than the claim made with respect to the Strathpine loan. That would have been apparent to them from the date of the first notice of default on 30 June 2008 as well as the subsequent reports over the ensuing five years. In addition, communications with the solicitors for the liquidators over that same period would only have served to reinforce their awareness in this regard. As such, it cannot really be said that the Strathpine claim was advanced before the others. Whilst it may be said that the Strathpine claim was the first claim to be formally made, that occurred in the context – well understood by all parties – that other loans covered by the policy had fallen into default and that claims would most assuredly be made with respect to those defaults.
  8. Secondly, the decision to make the Strathpine claim first was a strategic choice on the part of the liquidators. The liquidators did not arrive at that decision in order to prefer the interests of the members who had invested in the Strathpine loan over the interests of the other capital insured members or because, in their view, the other claims lacked merit. Rather, the Strathpine claim was made first because it was a “straightforward claim with good prospects”.[63] In a real sense, it paved the way for the remaining claims and should be seen for what it was; step one in a recovery process intended to benefit all capital insured members.
  9. For these reasons, I am not persuaded that there was, within the class of members who made capital insured investments, a subclass of members who had invested in the Strathpine loan who are entitled to share in the capital insurance proceeds received with respect to that loan to the exclusion of the other members. To the extent that it is necessary to say, I am of the same view with respect to the members who invested in the Mayaman and Dunes loans; the decision of the underwriters to assess the claims made with respect to those loans ahead of the remaining claims did not give rise to a subclass of members entitled to priority over the others.
  10. In the result, the insurance proceeds received with respect to all of the claims on the policy should be pooled, the costs and disbursements incurred with respect to those claims deducted and the net proceeds distributed rateably between the capital insured members in proportion to their respective claims, with the claims made in relation to the Mayaman and Dunes loans capped at $3 million.

National Australia Bank

Facts

  1. On 11 April 2014, SMML commenced a proceeding in this court against National Australia Bank Ltd.[64] By that proceeding SMML claimed equitable compensation in respect of the alleged knowing receipt by the bank of property held on trust by SMML for investors in the Scheme. Two heads of compensation were sought: (1) $400,000 in respect of the assignment to the bank of the first registered mortgage securing the Dunes loan;[65] and (2) $144,185.13, being the balance of an investment account conducted by SMML with the bank.[66]
  2. On 15 May 2015, the liquidators accepted $520,000 to settle the proceeding.[67] There was no apportionment of the settlement sum between the mortgage claim and the investment account claim.
  3. As to the balance held in the investment account, save for the two exceptions discussed immediately below, it is not practical to determine which members contributed to this balance. All member funds were deposited to that account, and advances to borrowers and payments of interest to members were paid from it. Mr Fletcher deposed that “[an] extensive tracing exercise would be required to determine which members’ funds were contained in” the investment account at the time when they were knowingly received by the bank.[68] In his opinion, the cost of such a tracing exercise would “far exceed the amount of the Investment Account Claim such that it would not be commercial or in the interests of members” for that exercise to be undertaken.[69]
  4. The two exceptions come about because, as at 23 June 2008, the following deposits in the investment account had not been allocated to any loan. They were:
  1. $20,000 invested by Lowden High Park Superannuation Fund, which money had been invested in other SMML loans and then repaid but was awaiting reinvestment at the time of the liquidators’ appointment; and
  2. $15,000 invested by the Heather & James Derwin Superannuation Fund just three days before the winding orders were made, which money was a new investment that had not previously been allocated to any SMML loan.
  1. It following that, apart from these two amounts, it is not possible to determine which members contributed the balance held in the investment account without conducting the extensive tracing exercise referred to by Mr Fletcher.
  2. The costs and disbursements incurred by the liquidators in conducting the proceeding against the Bank totalled $146,143.[70] It is not possible to apportion those costs and expenses between the two different heads of compensation.

Directions

  1. On behalf of the liquidators, it was submitted that:[71]

“(a) The $520,000 recovered from the NAB ought to be allocated rateably to the beneficiaries of each of the claims for knowing receipt of the Dunes mortgage and knowing receipt of the funds in SMML’s investment account such that:

a. $144,985.13 / $544,985.13 or 26.6% of the $520,000 is allocated to the beneficiaries of the SMML investment account claim; and

b. $400,000 / $544,985.13 or 73.4% of the $520,000 is allocated to the beneficiaries of the Dunes mortgage claim;

  1. With respect to the recovered funds allocated to the SMML investment account claim:

a.  The identifiable unallocated investments, totalling $35,000, on behalf of Lowden High Park Superannuation Fund and James and Heather Derwin, should be distributed rateably to those individuals in the proportion their unallocated investments bear to the total of the investment account claim (for example in the case of Lowden, $20,000 / $144,985.13 or 13.79% of the sum attributed to the investment account claim, should be distributed to Lowden). Those contributions are traceable, and it is appropriate to distribute them rateably in the amounts identified;

b.  The balance of the recovered funds allocated to the investment account claim should be distributed rateably among all investors;

  1. The proportion of the recovered funds allocated to the Dunes mortgage claim should be distributed rateably among all investors in the Dunes loan. Note that the $400,000 payment by the liquidators forming the basis of the Dunes mortgage claim was drawn from the funds recovered from the sale of assets securing SMML’s loan to Dunes (Fletcher, WJF-14 p255). Accordingly, the liquidators submit that it is appropriate to distribute the recovered funds allocated to the Dunes mortgage claim on a pro-rata basis amongst investors in the Dunes loan.”
  1. I accept these submissions subject only to the observation that, in determining how the proceeds should be distributed, it is not a question of what is “appropriate”; what should occur is to be decided by reference to principle. However, what is proposed in the submissions does accord with the principles I earlier identified. The proceeds should therefore be distributed in the ways submitted.

Oxford Crest/Maryborough Developments

Facts

  1. The final issue for consideration involves the borrower in the case of the Maryborough loan – Maryborough Developments Pty Ltd – as well as a related entity, Oxford Crest Pty Ltd. SMML made loans to both companies, as follows:
  1. $355,000 to Oxford Crest secured by, inter alia, a mortgage over a property owned by it at Gympie;
  2. another loan of $1.15 million to Oxford Crest secured by, inter alia, mortgages over properties owned by it at Toowoomba, Beachmere and Bundamba; and
  3. a loan of $3.03 million to Maryborough Developments secured by, inter alia, a fixed and floating charges over all of the assets and undertaking of Oxford Crest along with mortgages over properties at Raceview and Eagleby, each of which was owned by Oxford Crest.
  1. After the loans went into default, on 29 July 2011, the liquidators appointed receivers and managers to Oxford Crest.[72] The receivers subsequently sold the mortgaged properties and, after deduction of costs and expenses, the total proceeds realised from the sales amounted to $448,337.56. All properties save for the Eagleby property achieved a net surplus after deduction of costs and expenses. The Eagleby property incurred a net loss of $116,759.40.
  2. If the proceeds of sale are allocated to the loans to which each mortgage related, the recovered funds for each loan will be as follows:

Borrower

Oxford Crest

Oxford Crest

Maryborough

Developments

Loan Amount

$355,000

$1,150,000

$3,030,000

Net Received

$182,102

$365,801

-$99,566

Directions

  1. The liquidators seek a direction as to whether the proceeds from sale should be characterised according to the amount received from the sale of each property before deduction of costs, or after deduction of costs. By reference to paragraph 7(b)(ii) of winding up order as varied by Douglas J on 19 November 2009, the focus is on which sum represents the “gross realisation of any individual loan/investment” within the meaning of that part of the order.
  2. The two alternatives yield significantly different results and consequently different returns to investors in each of the three loans. A spread sheet prepared by the liquidators was in evidence on the hearing of the application,[73] and provides particulars of the sale proceeds of the mortgaged properties and the receivers’ costs and expenses allocated between each property. By extension, the costs and expenses of realising those properties are able to be allocated to the loans secured by each property and consequently to the investors in relation to each loan.
  3. It is therefore possible to identify the costs and expenses “directly referable to a particular loan/investment” within the meaning of paragraph 7(b)(ii) of winding up order as varied, and the net return to each loan.
  4. Accordingly, the proceeds should be characterised according to the amount received from the sale of each property after deduction of the costs and expenses of realising that property.

Orders and directions

  1. For the above reasons, the court will make directions accordingly.
  2. In that regard, counsel for the liquidators helpfully supplied a draft order for the consideration of the court following the hearing of the application. However, that draft will require some adjustment to align with these reasons.
  3. The liquidators will therefore be directed to bring in minutes of orders to reflect the reasons. In addition to the directions I have indicated, an order granting leave to read the affidavit of the solicitor for the liquidators filed on 29 September 2017, an order providing for the sealing up of the first affidavit of Mr Fletcher and an order that the costs of the application be the liquidators’ costs in the winding up of the company and the Scheme should be included.

Footnotes

[1]  A copy of the Constitution is exhibited to the first affidavit of William Fletcher filed on 2 August 2017 (Exhibit WJF-4).

[2]  Clause 1.1 of the Constitution defines “Manager” to mean SMML and “Member’s Fund” to mean: “[Each] individual member’s interest in the Scheme established in accordance with this Constitution, and is equal to the total of that Member’s Application Money paid into the Scheme Accounts.”

[3]   Fletcher 1, ex WJF-4.

[4]   Paragraph 7.

[5]  Fletcher 1, par 74.

[6]   Affidavit of William Fletcher filed on 30 August 2017, ex WJF-1.

[7]   Ibid, par 2(a).

[8]   Ibid, par 2(b).

[9]   Ibid, par 4.

[10]   Ibid, ex WJF-2.

[11]  See Re Stacks Managed Investments Ltd (2005) 219 ALR 532, 539 per White J; Rubicon Asset Management Ltd (Administrators appointed) (2009) 77 NSWLR 96, 105-106 per McDougall J.

[12] Rubicon Asset Management Ltd (Administrators appointed), (Supra) 106-107.

[13] Mier v FN Management Pty Ltd [2006] 1 Qd R 339, 349 per Keane JA.

[14]   [1992] 2 Qd R 76.

[15]  Ibid, 98, which observations were approved by the Full Court of the Federal Court in Joye v Beach Petroleum NL (1996) 67 FCR 275, 287, 290 and by Keane JA (with whom McMurdo P and Douglas J agreed) in Mier v FN Management Pty Ltd (Supra), 347.

[16]  These provisions have recently been repealed with effect on 1 September 2017. However, by operation of s 1617(3) of the Insolvency Law Reform Act 2016 (Cth), they continue to apply to proceedings brought under the Act prior to that date. Section 479(3) permitted a liquidator to apply to the court for guidance as to the manner in which the liquidator should act in carrying out his or her functions and s 511 allowed a liquidator to apply to the court to determine a question arising in the winding up of a company. The operation of s 479(3) was considered in Re G B Nathan and Co Pty ltd (in liq) (1991) 24 NSWLR 674, 676-680 per McClelland J.

[17]  Section 96 provides for a trustee to seek directions from the court concerning any property subject to a trust, the management or administration of that property, or the exercise of any power or discretion vested in the trustee. See Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, 89-95; Corbiere & Anor v Dulley & Ors [2016] QSC 134, [2]-[4] and [23]-[29].

[18] Mier v FN Management Pty Ltd (Supra), 348.

[19] ASIC v Tasman Investment Management (2006) 59 ACSR 113, [18] per Austin J.

[20] Re Stacks Managed Investments Ltd (2005) 219 ALR 532, [42]-[44]; Mier v FN Management Pty Ltd (Supra), [20].

[21] Re Hazelton Air Charter Pty Ltd v Mentha (2002) 41 ACSR 472, [30] per Goldberg J.

[22]   (2009) 74 ACSR 626.

[23] Re Hazelton Air Charter Pty Ltd v Mentha (Supra), [47] per Goldberg J.

[24] Re Timbercorp Securities Ltd (in liq) (No 3) (Supra), [80].

[25] Devaynes v Noble (1816) 1 Mer 572; 35 ER 781.

[26]  See Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361, [169], [176], [187]-[190]; ASIC v Enterprise Solutions 2000 Pty Ltd [2001] QSC 82, [14], [21]; ASIC v Edwards [2009] QSC 360, [14]; ASIC v Letten (No 7) [2010] FCA 1231, [277].

[27]   (2003) 59 NSWLR 361.

[28] Re Sutherland; French Caledonia Travel Service Pty Ltd (in liq) (Supra), [169].

[29] ASIC v Enterprise Solutions 2000 Pty Ltd & Ors (Supra), [14] per Chesterman J; ASIC v Edwards (Supra), [14] per McMurdo J. See also the discussion in Jacob’s Law of Trusts in Australia, 7th edition, pars 2708 and 2709.

[30]   (2003) 59 NSWLR 361.

[31]  Ibid, [176].

[32] ASIC v Letten (No 7) (Supra), [332] per Gordon J.

[33]   Ibid.

[34]   And see ASIC v Enterprise Solutions 2000 Pty Ltd & Ors (Supra), [14]; ASIC v Edwards (Supra), [14].

[35]   (2010) 79 ACSR 425.

[36]  Ibid, [33]-[34].

[37]  Fletcher 1, par 21.

[38]   Fletcher 1, par 22.

[39]  Affidavit of Mylton Burns filed on 29 September 2017, par 2 and ex MB-1. All save for the Bamboo loan were the subject of this initial notification. That was probably an oversight because the Bamboo loan featured in subsequent monthly bordereaux. See, eg, ex MB-2.

[40]   Burns, exs MB-2, MB-4 and MB-5.

[41]   Fletcher 1, ex WJF-5, cl 4.16.

[42]  Fletcher 1, par 32.

[43]   Burns, ex MB-5.

[44]   Burns, ex MB-6.

[45]   Burns, par 12 and ex MB-7.

[46]   Fletcher 1, ex WJF-8. Each claim was made by separate letter dated 6 August 2014.

[47]  Ibid.

[48]  Fletcher 1, Ex WJF-11

[49]  Fletcher 1, par 34.

[50]  Fletcher 1, par 35.

[51]  Fletcher 1, Ex WJF-10.

[52]   Fletcher 1, par 39(a)(i).

[53]  Fletcher 1, par 39(a)(ii)

[54]   Fletcher 1, par 39(b)(i).

[55]  Fletcher 1, par 39(b)(ii).

[56]  Fletcher 1, par 40.

[57]  Fletcher 1, par 41(b).

[58]   Fletcher 1, par 41.

[59]  Submissions for the applicant, par 29

[60]  Submissions for the applicants, par 50

[61]  Fletcher 1, par 43 and ex WJF-12 (being the summaries of projected net distributions to insured investors in capital insured loans).

[62]  Submissions for the applicant, par 51. 

[63]   Fletcher 1, par 32.

[64]  Proceeding BS3521 of 2014.

[65]  This sum, it was alleged, had been paid by SMML when in liquidation to the Bank in exchange for a release of the Dunes mortgage at the time that the mortgage property was sold by the liquidators. See Fletcher 1, Ex WJF-14.

[66]  The funds in the investment account represented investor funds as at the date of the winding up of SMML and the Scheme. Some of those funds were unallocated in the sense that they had not been committed to a particular loan but, it was alleged, the Bank applied all of the funds in that account against SMML’s debt to it, knowing that they were trust funds.

[67]  Fletcher 1, Ex WJF-15, being a copy of the settlement deed.

[68]  Fletcher 1, par 54.

[69]  Fletcher 1, par 55.

[70]  None of the costs and disbursements referred to in this judgment were incurred in respect of the winding up of SMML. Rather, they were incurred in respect of the winding up of the Scheme and approved by the Committee of Inspection appointed with respect to the winding up of the Scheme: Fletcher 1, par 65.

[71]  Submissions for the applicant, par 53.

[72]   Fletcher 1, par 71 and ex WJF-24.

[73]  Fletcher 1, Ex WJF-25.

Close

Editorial Notes

  • Published Case Name:

    In the matter of Secured Mortgage Management Ltd (in liq); Fletcher & Barnet in their capacity as liquidators of Secured Mortgage Management Ltd (in liq) & Anor

  • Shortened Case Name:

    Re Secured Mortgage Management Ltd (in liq)

  • MNC:

    [2017] QSC 254

  • Court:

    QSC

  • Judge(s):

    Burns J

  • Date:

    03 Nov 2017

Litigation History

Event Citation or File Date Notes
Primary Judgment [2017] QSC 254 03 Nov 2017 -

Appeal Status

No Status