The High Court to hand down judgment in Willmott Growers Group Inc v Willmott Forests Ltd (Receivers and Managers Appointed) (In Liquidation)

December 2, 2013

The High Court will hand down its decision in Willmott Growers Group Inc v. Willmott Forests Ltd (Receivers and Managers Appointed) (In Liquidation) In its capacity as manager of the unregistered managed investment schemes listed in Schedule 2 and Ors this Wednesday 5 December 2013.

For those, like myself, who practice in the corporations and insolvency area it is a long awaited decision with significant ramifications.

The High Court transcript provides:

MR G.T. BIGMORE, QC: May it please the Court, I appear Read the rest of this entry »

Wolfe v Permanent Custodians [2013] VSCA 331 (22 November 2013): CONSUMER CREDIT, unjust terms, unconscionability & duty to cooperate

November 24, 2013

The Court of Appeal in Wolfe v Permanent Custodians [2013] VSCA 331  considered issues of duty to co operate in the context of a contractual relationship and unconscionability by a creditor in recovery proceedings against a defaulting mortgagor.

FACTS

Permanent Custodians Ltd (“Permanent”) holds a first mortgage over a property in Pascoe Vale which secured a loan to Mr Wolfe and his former partner [1]. In 2008 there was default on the loan. In August 2009 Permanent obtained default judgment against Wolfe, a default judgment for the loan and for possession of the Property against his former partner and issued a warrant of possession. Eviction by the Sheriff was scheduled for the week commencing 4 December 2009 [4]. Wolfe  entered into an arrangement, on terms set out in a letter from Permanent’s solicitors on 1 December 2009 (the “1 December 2009 arrangement”)[5].

Those terms were, at [6],relevantly:

Chan v Four C Realty Pty Ltd (in liq), in the matter of Four C Realty Pty Ltd (in liq) [2013] FCA 928 (13 September 2013) & Chan v Four C Realty Pty Ltd (in liq), in the matter of Four C Realty Pty Ltd (in liq) (No 2) [2013] FCA 959 (23 September 2013): section 477(2B) of the Corporations Act 2001 (Cth) for retrospective approval of contract for sale of business, obligation to indemnify insolvent company in respect of contingent liabilities, factors relevant to exercise of Court’s discretion

September 26, 2013

Gordon J in Chan v Four C Realty Pty Ltd (in liq), in the matter of Four C Realty Pty Ltd (in liq) [2013] FCA 928 and then in Chan v Four C Realty Pty Ltd (in liq), in the matter of Four C Realty Pty Ltd (in liq) (No 2) [2013] FCA 959 made orders regarding the enforcement of a contract and then approval for the Liquidator to enter into that contract.  The facts are common to both hearings

Chan v Four C Realty Pty Ltd (in liq), in the matter of Four C Realty Pty Ltd (in liq) [2013] FCA 928

FACTS

The Applicant, (“Chan”)  applied under sections  471B,  477(2B) and 477(6) of the Corporations Act 2001 (Cth) (the Act) for a series of orders including a declaration that, on 13 August 2013, she and the First Respondent (“Four C Realty”)  entered into a binding and enforceable contract for her to purchase its  business assets of Four C Realty. The Respondents submitted that no binding contract existed on 13 August 2013 and, alternatively, if a binding contract did exist, then Chan was required to provide security for what has been described as “the indemnity” [2].

Four C Realty carries on business as an estate agent, conducting Read the rest of this entry »

First Equilibrium Pty Limited v Bluestone Property Services Pty Limited (in liq) [2013] FCAFC 108 (18 September 2013): winding up, judgment creditor applied to wind up appellant company on the grounds of insolvencystanding as a creditor under section 459P(1)(b) Corporations Act 2001, solvency of appellant, mutual credits or mutual dealings for the purposes of section 553C(1)

September 25, 2013

In  First Equilibrium Pty Limited v Bluestone Property Services Pty Limited (in liq) [2013] FCAFC 108) the Full Federal Court considered an appeal against a winding up order, made by Jacobson J  in Bluestone Property Services Pty Ltd (in liq) v First Equilibrium Pty Ltd [2013] FCA 876, under sections 459A and 459P of the Corporations Act 2001 (Cth) (“the Act”) . The court considered in detail the principles associated with winding up on the grounds of insolvency, including the concept of “commercial realities”, and the argument that there was a genuine offsetting claim (which was included as an asset in the financial returns of the appellant on the question of solvency).

FACTS

 Equilibrium has a sole director and shareholder, Mr Justin Brown (“Brown”).  Bluestone has a sole director and a shareholder, Mr Lance Hodgkinson (“Hodgkinson”) [4].  Brown & Hodgkinson were property developers involved in  a number of substantial property developments [4] - [5].   In late 2005  Brown wanted to sell out of a development [6] and at a meeting convened to discuss this with Hodgkinson he wrote on a single sheet of paper what arrangements would effect this outcome.  Both then signed the document. Brown claimed the document was an enforceable agreement. Some of the payments contemplated by the document (totalling $600,000) Read the rest of this entry »

Wilde & Anor v Morgan & Ors [2013] VSCA 250 (20 September 2013) : Mortgage, Default notice, Service, Effect of provision of a ‘new’ address Transfer of Land Act 1958 (Vic) section 113, doctrine of fair notice.

September 23, 2013

The court of appeal, per Hansen and Tate JJA, considered the operation of default notices, service and the doctrine of fair notice in Wilde & Anor v Morgan & Ors [2013] VSCA 250. It was an appeal from a decision of AsJ Derhham in Re: Art Pacific Pty Ltd; Wilde v Morgan & Ors [2013] VSC 330 (27 June 2013).

FACTS

The applicants sought orders, set out at [1], that:

(1) the appointment of the first and second respondents as agents for the third respondent by Deed of Appointment of Agents for Mortgagee in Possession dated 23 October 2012 (the Deed) under a mortgage of land between the second applicant and the third respondent was invalid;

(2) further or alternatively, the first and second respondents entry into possession or assumption of control of the land of the second applicant pursuant to the Deed was invalid.

The issue at the core of the hearing at first instance and on appeal was Read the rest of this entry »

Banksia Securities Limited (Receivers and Managers Appointed) [2013] VSC 416 (13 August 2013): Examinations being conducted pursuant to Part 5.9 of the Corporations Act 2001, Whether insurance documentation “relates” to examinable the affairs of company within meaning of s 596D(2).

September 2, 2013

Associate Justice Gardiner undertook a detailed examination of a liquidator’s powers under part 5.9 of the Corporations Act, in particular section 596D(2), in Banksia Securities Limited (Receivers and Managers Appointed) [2013] VSC 416 .

FACTS

On 25 June Gardiner AsJ ordered a summons for the examination of Michael Hall (“Hall”) under section 596B of the Corporations Act (The “Act”) by the plaintiff, the joint and several receivers of Banksia Securities Limited (“Banksia”) [1].  Hall applied for orders to set aside the summons in so far as it related to the production of documents [11].

Hall is a member of the the firm MB+M.  The plaintiffs are investigating an unqualified audit report for the 2008 financial year which he signed, on behalf of MB+M and whether the provisioning for some of the loans was materially inadequate.  At the time of the application no proceedings had been issued against MB+M or Hall [10].

Hall’s submissions

Hall objected on the following bases:

  1. while he accepted that an examinable affair of a company includes the property and that the existence of insurance in respect of a chose in action against a third party is capable of being an examinable affair however stated that the Court can not be Read the rest of this entry »

Le Roi Homestyle Cookies Pty Ltd (in liquidation) v Gemmell [2013] VSC 452 (29 August 2013): sections 588G, 588M and 597 of the Corporations Act 2001, Privileges waived in respect of answers – No dispensation from compliance with pleading or discovery Rules

September 1, 2013

The consequences of an examinee not claiming privilege against self incrimination during a public examination by a liquidator are dealt with in Ferguson J’s decision in Le Roi Homestyle Cookies Pty Ltd (in liquidation) v Gemmell [2013] VSC 452.

FACTS

The Liquidators of Le Roi Homestyle Pty Ltd allege that the Defendants have contravened the insolvent trading provisions of the Corporations Act 2001 (“The Act”).  Before issuing proceedings the Liquidators conducted public examinations of each of the Defendants pursuant to section 597. In large part, the insolvent trading claim against the Defendants is based on information elicited in the course of the public examinations.

Neither defendant claimed either privilege during his examination.The Associate Judge before whom the public examination read out the provisions of section 597(1) of the Act and explained its meaning and operation [20] – [21].

The Defendants applied Read the rest of this entry »

Platinum Communications Pty Ltd v Computer Networks Pty Limited [2012] FCA 1260 (14 November 2012): statutory demand, application to set aside, amendment

December 19, 2012

Griffiths J in Platinum Communications Pty Ltd v Computer Networks Pty Limited [2012] FCA 1260 considered an amendment to application to set aside a statutory demand.

FACTS

The plaintiff, a retailer, and the defendant, a software provider, entered into an agreement whereby the plaintiff would use the defendant’s software under licence and receive related services for payment [1].  When the software was switched on the plaintiff suffered difficulties in many of its stores [7].  The plaintiff claimed Read the rest of this entry »

Re Willmott Forests Limited [2012] VSCA 202 (29 August 2012): Liquidation, disclaimer of lease agreement under s 568(1) of Corporations Act 2001 (Cth)

November 2, 2012

Re Willmott Forests Limited [2012] VSCA 202 is a very important decision in insolvency jurisprudence. The Victorian Court of Appeal upheld an appeal from a finding of a trial judge that the disclaimer of a lease agreement by the liquidator did not have the effect of extinguishing the leasehold interests in land [19]. In doing so the court undertook a detailed analysis of section 568 of the Corporations Act.

FACTS

The majority defined the question as, at [1]:

whether a leasehold interest in land is extinguished by the disclaimer of the lease agreement by the liquidator of the lessor, pursuant to s 568(1) of the Corporations Act 2001 (Cth) (‘the Act’)

Willmott Forests Ltd (“WFL”) owned leases from third parties freehold properties. It entered into 25 year leases. The liquidators of WFL sought to sell the interest in the properties unencumbered by the leases and seek to disclaim the lease agreement.  They applied to the court for approval of such disclaimers [2]. Sale contracts for the sale of the land contained conditions precedent to their completion of the liquidators obtaining orders and directions from a court authorising the liquidators, at [9]:

a) to exercise the powers to terminate, relinquish or surrender the project documents of the registered MIS and Professional Investor MIS; and

(b) to disclaim the project documents of the contractual and partnership MIS as onerous pursuant to s 568(1) of the Act.

The liquidators made application under section 511 of the Act and 477 (2B) for approval of their entry into contracts.

 DECISION

Warren CJ and Sifris AJA

Regarding the operation of section 568 their honours stated:

  1. liquidators have the power to disclaim property of a company in liquidation or contracts entered into by the company [15]
  2. it is to enable a liquidator to Read the rest of this entry »

Georges v Seaborn International Pty Ltd (Trustee), in the matter of Sonray Capital Markets Pty Ltd (in liq) [2012] FCAFC 140 (5 October 2012): section 511 Corporations Act, whether shares to included in pooling of assets.

November 1, 2012

The Full Bench of the Federal Court in Georges v Seaborn International Pty Ltd (Trustee), in the matter of Sonray Capital Markets Pty Ltd (in liq) [2012] FCAFC 140 considered the right of the liquidator to recover proceeds of shares the purposes of pooling and distribution to creditors.

FACTS

Sonray was the holder of the Australian financial services licence from 4 May 2005 until it went into administration on 22 June 2010 [87]. It provided access to trading platforms made available by third parties. Clients deposited money with Sonray, which was held in accounts and subject to statutory trust under the Corporations Act [88]. It had 18 segregated accounts which were used to receive deposits in respect of margin calls, proposed trades and the return of funds. In these accounts clients’ funds were co-mingled with funds from other clients [90] to the point where the trial judge found that the funds were so thoroughly mixed as to be almost impossible to ascertain entitlements to each of the segregated accounts [93]. Efax, the trustee of a family trust, entered into a written agreement in 2009 with Sonray regarding its trading activities.  In April 2010 Efax instructed Sonray to purchase 78,000 shares in BHP Billiton Ltd (“BHP”) [5] for $3 million [6], which it did through Saxo Bank (“Saxo”), one of its trading platforms. Efax’s funding for the purchase was deposited into a Sonray accounted which was subject to numerous defalcations.  The purchase price for the shares however was not paid out of a tainted account but rather by Saxo using its own money or by way of credit arrangements.  Sonray debited Efax’s ledger account with the purchase price of the BHP shares.

The Liquidators seek a direction to allow them to pool shares purchased on instructions by Efax with proceeds attributable to all other Sonray clients which would then be distributed amongst all of the clients [8].

 The trial judge held that Efax is entitled to resist the claim for pooling on the ground that it is entitled to the BHP shares in specie [9].

DECISION

The Majority upheld the appeal by a 2-1 majority.

THE MAJORITY

Jacobsen J

His Honour commenced his analysis by Read the rest of this entry »