Raymond Edward Bruce & Anor v LM Investment Management Limited
[2021] QSC 356
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- Raymond Edward Bruce & Anor v LM Investment Management Limited[2021] QSC 356
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Raymond Edward Bruce & Anor v LM Investment Management Limited[2021] QSC 356
Raymond Edward Bruce & Anor v LM Investment Management Limited[2021] QSC 356
SUPREME COURT OF QUEENSLAND
CITATION: | Raymond Edward Bruce & Anor v LM Investment Management Limited & Ors [2021] QSC 356 |
PARTIES: | RAYMOND EDWARD BRUCE & ANOR (applicants) v LM INVESTMENT MANAGEMENT LIMITED & ORS (respondents) |
FILE NO/S: | BS 3383/13 |
DIVISION: | Trial Division |
PROCEEDING: | Application |
ORIGINATING COURT: | Supreme Court of Queensland at Brisbane |
DELIVERED ON: | 16 December 2021 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 16 December 2021 |
JUDGE: | Callaghan J |
ORDER: |
|
CATCHWORDS: | CORPORATIONS – WINDING UP – GENERALLY – OTHER MATTERS – where application brought by court appointed receiver of investment fund for remuneration Corporations Act 2001 (Cth) s 425, s 601NF Bruce and Another v LM Investment Management Limited and Others [2020] QSC 317, cited Bruce & another v LM Investment Management Limited & others [2021] QSC 203, cited |
COUNSEL: | D de Jersey QC for the applicant |
SOLICITORS: | Tucker & Cowan for the applicant |
- [1]This is an application by Mr David Whyte who was appointed pursuant to s 601NF(1) to ensure that the fund known as the LM First Mortgage Income Fund was wound up in accordance with its constitution and as a Court-appointed receiver pursuant to s 601NF(2) of Corporations Act 2001. Mr Whyte applies for an order approving his remuneration for work done in the period of the receivership from 1 May 2021 to 31 October 2021; he seeks remuneration in the sum of $924,169.40 (inclusive of GST).
- [2]The application, therefore, falls to be considered in context with all that I have written in the decisions bearing the same title as this case and which may be found under the references [2020] QSC 317 and [2021] QSC 203, along with the unreported extemporaneous decision of 26 March 2021.
- [3]For the purposes of this decision, it can be taken that many aspects of the application mirror the situation as it existed on 13 August 2021 – that is [2021] QSC 203 – and, specifically, that which is recorded in paragraphs 3 to 11 inclusive and 19 to 20 within the judgment of that date. I have, of course, in each instance, had regard to the actual evidence that was adduced in this application and, on that basis, reached the conclusions that underpin the orders I am going to make.
- [4]Once again, as was reflected in paragraph 18 of that judgment, a large sum of money ($144,550) is claimed under the heading “Creditors”. As foreshadowed, Mr Whyte’s reports to creditors have, along with his own affidavit, been subjected to particular scrutiny on this application. Some of the contents of those reports informed a debate about the amount claimed under the heading “Assets” – and I shall return to that – but when regard is had to the reports themselves and the other activity identified in the affidavit material, it can be accepted that payment of this sum is warranted under that heading.
- [5]The same can be said about the amounts claimed under the other “categories”: “Trade on” – $39,860; “Dividend” – $2,251; and “Administration” – $61,415. The justification for payment is, in each case, addressed specifically by reference to affidavit material.
- [6]The real focus of attention in this application and, it can be anticipated, in any future application of this kind, is very much on the amount claimed under the heading “Assets”. It is under this heading that by far the largest separate sum – $592,077 – is claimed and by far the largest part of this sum is attributable to pursuit of the claim being made against the former auditors of the FMIF (see Brisbane Supreme Court claim 3166 of 2015).
- [7]The quantum of this claim is now said to be up to $249.6 million, but that, of course, at this stage, remains an aspiration. The expenditure incurred for the purposes of this litigation has always been scrutinised but it is allowed by Mr Whyte that both the litigation itself and, consequently, his claims to be reimbursed for the expense of it are at a “crossroads”.
- [8]There have been some material changes in the situation since I last considered the matter. Question marks now attend the prospect of a trial date in 2022, although, as my most recent exchange with Mr de Jersey on behalf of Mr Whyte might indicate, I should not be taken as accepting that the possibility of a trial date next year should yet be surrendered.
- [9]Nevertheless, the prospect of a delay far greater than any thus far anticipated gives some intensity to the “general objection” identified in paragraph 6 of my last judgment. This objection has, in correspondence similar to that which was considered on the last occasion, been reagitated. The reasonable concern has been expressed that the balance of the funds available in the FMIF will be eroded substantially by claims such as this and the legal fees incurred in the course of the proposed proceeding.
- [10]In their own (usually very blunt) terms, a number of investors have, in effect, expressed the same concern. As time passes, and the prospect of resolution remains abstract, the validity of these concerns increases. They are, however, not yet at the point that would compromise the claim currently being made by Mr Whyte.
- [11]Understanding the basis for that conclusion requires, first, an examination of the justification for the magnitude of the sum claimed. These are examples only, but it can be noted that preparation of the case has involved the review and analysis of valuations of 29 different properties; this has had to be done retrospectively covering up to nine different valuation dates. The nature of the properties themselves was diverse.
- [12]Preparation has also required analysis of 23 different loans in respect of which the retrospective valuations had to be taken into account. Further, there was a need for an expert report that explained how a receiver of the fund might have disposed of its assets had the winding up occurred earlier. I emphasise that those are just examples, but they illustrate the fact that the concepts involved are far from straightforward and involve many variables.
- [13]The scope of work done is also illustrated usefully by reference to that which was involved in the process of disclosure. For the purposes of the litigation, approximately 450,000 documents have been disclosed in six tranches and 330,000 of those were disclosed during the period for which Mr Whyte’s claim is now being made. Disclosure is, of course, an essential aspect of any litigation and was clearly a labour-intensive exercise in this one.
- [14]It is because of the fact that exercises such as those I have used for the purposes of illustration have now been completed that Mr de Jersey, on behalf of Mr Whyte, was able to submit that much of the “heavy lifting” had been done and that the case is at the point where attention will shift to the defendants. They will now be required to grapple with the question as to whether they go to the effort and expense of matching that which has been done or whether settlement might be explored. That is a possibility that Mr Whyte has identified in correspondence with disaffected investors.
- [15]It could not be taken as any sort of concession about the nature of the case he has assembled, but rather, amounts to no more than a recognition of the fact that, whether through mediation or not, settlement is an option that is necessarily considered in litigation of this kind. Of course, if an acceptable settlement was reached, the need for further applications of this nature would reduce and a benefit would accrue to investors. If it was not, then the matter would proceed to trial and further applications of this nature involving sums that include legal expenses would be necessary.
- [16]I have indicated that such applications would need to be accompanied by confidential information, the nature of which has been discussed at length with Mr de Jersey in closed court. In that way, it should be understood that the aforementioned “general objection” of the liquidator, as well as the concerns expressed by investors, have been considered in the application, are reflected in these reasons and may need to be addressed differently in future applications of this kind. I do not apprehend the need to elaborate at this point. As foreshadowed in [17] of [2021] QSC 203, expectations of what might be involved will develop as the litigation progresses.
- [17]On the understanding that this is, indeed, a “crossroads” application and that the way forward may be signposted in a different fashion, I am prepared to order that the remuneration of David Whyte, as the person responsible for ensuring that the FMIF is wound up in accordance with its constitution, for the period 1 May 2021 to 31 October 2021, be fixed in the amount of $924,169.40 inclusive of GST.
- [18]Pursuant to the orders of Dalton J made on 21 August 2013, Mr Whyte’s costs of, and incidental to, this application should be costs in the winding up of the FMIF to be paid out of the assets of the FMIF.