Hillston Grove Vineyards Limited v Custodial Limited
[2008] QSC 38
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- Unreported Judgment
- Hillston Grove Vineyards Limited v Custodial Limited[2008] QSC 38
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Hillston Grove Vineyards Limited v Custodial Limited[2008] QSC 38
Hillston Grove Vineyards Limited v Custodial Limited[2008] QSC 38
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO: | |
Trial Division | |
PROCEEDING: | Claim |
DELIVERED ON: | 5 March 2008 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 4 March 2008 |
JUDGE: | de Jersey CJ |
ORDER: | That the application filed on behalf of the defendant on 26 February 2008 be dismissed, with costs to be assessed on the standard basis |
CATCHWORDS: | Order for winding up unregistered investment scheme –proceeds to be paid to investors – alleged trustee claiming fees and damages – availability of freezing order to suspend payments investors pending determination of alleged trustee’s claims - previous application by alleged trustee to vary winding up order had been dismissed – whether present application competent Corporations Act 2001 (Cth), s 601 Trade Practices Act 1974 (Cth), s 82 Australian Security and Investment Commission v Commercial Nominees of Australia Ltd [2002] NSWC 576 Mier v FN Management Pty Ltd [2006] 1 Qd R 339 |
COUNSEL: | S Doyle SC with C Conway for the first plaintiff L Armstrong for the defendant |
SOLICITORS: | ClarkeKann Lawyers for the first plaintiff Macrossans Lawyers acting as Town Agent for Madgwicks for the respondents |
[1] de Jersey CJ: On 14 December 2007, in a proceeding numbered BS 6437/2005 in which Australian Securities & Investments Commission is applicant and the present plaintiffs are respondents, Byrne J made a declaration that the present plaintiffs operated an unregistered managed investment scheme in contravention of s 601ED(5) of the Corporations Act 2001, in circumstances where the scheme should have been registered under s 601EB. His Honour made orders for the winding up of the scheme, by the first plaintiff (referred to in the order as the respondent) under the supervision of an independent party.
[2] The orders include these paragraphs:
‘3.Subject to paragraph 4 hereof for the purpose of winding up the Scheme the first respondent:
(a)Shall as soon as reasonably practicable having regard to the best interests of the Investors, collect, call in and convert into money Property of the Scheme and thereafter pay the proceeds to those investors entitled and pay it in the same proportions that the amount of the principal and interest money owed to each Investor bears to the total amount of all principal and interest money owing under the Scheme; ...
4.Subject to compliance with the terms of this Order, and without derogating from the generality of the above, the first respondent may exercise all the rights and powers of the first respondent as Trustee for the Scheme.’
[3] The present applicant, which is the defendant is this separate proceeding, was not a party to the proceeding brought by ASIC. In the instant proceeding, the plaintiffs allege that the defendant published a misleading and deceptive circular to investors, causing loss to the plaintiffs because of the loss of prospective investors; and the defendant counter-claims for unpaid fees due to it as trustee of the scheme, and other relief. The defendant was allegedly appointed trustee as from May 2002, and removed by resolution of the investors in August 2003. The defendant alleges that it continued to act as trustee until late last year.
[4] The defendant brings this application to protect assets from which it might satisfy any judgment it may ultimately secure against the plaintiffs on its counter-claim. The amounts pursued are $16,636.95 unpaid trustee’s fees, $39,537.00 damages pursuant to s 82 of the Trade Practices Act 1974, and other fees etc. allegedly owing in respect of the trusteeship amounting to $575,116.47 (see exhibit 7 to the affidavit of Catherine Maisie Pierce filed 27 February 2008). The assets targeted by the defendant are the assets gathered together through the winding up of the scheme pursuant to the order of Byrne J of 14 December 2007.
[5] Accordingly, the principal order sought by the applicant is as follows:
‘That until the final hearing and determination of this proceeding or further order of the Court the plaintiffs be restrained by their directors, officers, servants or agents from taking any step, pursuant to the orders made by his Honour Justice Byrne ... in Supreme Court of Queensland proceeding BS 6437 of 2005 ... or otherwise, to
(a)Distribute to investors as defined in (that order) any property of the Hillston Grove Vineyards Project (‘the Scheme’); or
(b)Other than in the ordinary course of the business of the Scheme, dispose of, deal with or diminish the value of any property of the Scheme and in particular the property being:
(i)The real estate known as ‘The Lea South’ in New South Wales;
(ii)The vines and improvements upon The Lea South.’
The applicant also seeks some ancillary orders.
[6] On 12 February 2008, the applicant applied for leave to intervene in the proceeding brought by ASIC, and for orders varying those which had been made by Byrne J on 14 December 2007. Most significantly for the present, the applicant sought a variation of paragraph 3(a) of the order of Byrne J so that the proceeds of realisation of the scheme property would not be paid to the investors, but paid ‘to the Supervisor to be held by him upon trust until further order’. Another order sought by the applicant was that ‘any further application made in this proceeding be made upon notice to all parties and to Custodial (the applicant)’.
[7] On 23 February 2008, White J dismissed that application, on the basis the Court ‘lacked power under the Rules to vary’ the order made by Byrne J (para 27 affidavit of C.M. Pierce).
[8] Mr Doyle, who appeared for the respondents, characterised the present application as another attempt to change the effect of the order made by Byrne J. He submitted that the applicant is bound by the dismissal by White J on 23 February 2008 of the application brought before her. Mr Armstrong, who appeared for the applicant, countered that the instant application is different. But the substantial relief sought is the same as was sought before White J: the suspension of any distribution of the scheme property to the investors.
[9] The applicant faces an even more fundamental problem. The order of 14 December 2007 was made pursuant to s 601EE of the Corporations Act 2001, which relevantly provides:
‘1.If a person operates a managed investment scheme in contravention of subsection 601ED(5), the following may apply to the Court to have the Scheme wound up:
...
(c)A member of the Scheme.
2.The Court may make any orders it considers appropriate for the winding up of the Scheme.’
[10] As said in Mier v FN Management Pty Ltd [2006] 1 Qd R 339, 347, ss (2) ‘must be read as empowering a Court to make such orders as it considers appropriate in order to apply such a procedure (winding up) to an unregistered managed investment scheme’. In Australian Security and Investment Commission v Commercial Nominees of Australia Ltd [2002] NSWSC 576, Barrett J suggested (para 12), and I agree, that ‘the powers conferred upon the Court are very broad’. I accept the submission made by Mr Doyle that the power is ‘to be exercised principally for the benefit of the investors whose money (ex hypothesis) has been deployed in a scheme which should not have got off the ground’.
[11] The order made by Byrne J contemplates that the proceeds of the sale of the scheme property will be paid to the investors and them alone. His Honour has prescribed the destination of those proceeds, inconsistently with any accommodation for claims such as are made by the present applicant. His Honour’s order is definitive of what is to be done in winding up the scheme.
[12] In response to a submission by Mr Doyle that there would be no point in ‘freezing the proceeds pending further order, because it would always still be necessary for the applicant to secure a variation of the order made on 14 December 2007 to allow for a disbursement to it, Mr Armstrong pointed to para 13 of the order, which reserved liberty to Hillston Grove Vineyards Ltd (the first plaintiff), among others, to apply for a variation of the orders then made. He submitted that the present applicant could in due course seek an order requiring Hillston to apply for a variation. But again, that would contemplate departure from the scheme ordained by Byrne J pursuant to statutory authority.
[13] Mr Armstrong submitted that the orders sought, in suspending any distribution to the investors, would not cut across implementation of the scheme, because the order of 14 December 2007 did not include any ‘timetable’. That submission ignores the opening words of para 3(a) of the order: ‘Shall as soon as reasonably practicable having regard to the best interests of the investors, collect, call in and convert into money ... and pay the proceeds to those investors ...’.
[14] Additionally, Mr Armstrong submitted that the reference to the ‘proceeds’ to be paid to the investors should be read as confined to what he termed the ‘residual assets of the scheme after allowing for priority claims’. He referred to Arkmill Pty Ltd v Tippers & Co Pty Ltd (2006) QSC 248, paras 6 and 7, and Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360, 367. But the language of the order is clear and does not admit of that qualification.
[15] Mr Doyle raised a number of other points in opposition to the application including as to the adequacy of damages as a remedy; doubt whether the applicant was properly appointed as trustee, and as to whether it acted as trustee following removal in August 2003; the recoverability of any fees from the scheme manager (the second plaintiff), which has the capacity to meet them; suggested doubt as to the adequacy of the undertaking as to damages; and as to terms of the orders sought. Because of the views I have taken on the more primary issues, there is no need for me to enter upon discussion of those remaining matters.
[16] I order that the application filed on behalf of the defendant on 26 February 2008 be dismissed, with costs to be assessed on the standard basis.