1 It is useful to recite some background. By an amended originating process filed on 17 July 2002, ASIC sought orders under s.601EE of the Corporations Act 2001 (Cth) for the winding up of a solicitors' mortgage scheme as an unregistered managed investment scheme. An issue arose as to whether the defendants, loosely described as the administrators of the scheme, were "operating" it in contravention of Part 5C.1 by continuing to pursue rights of action they considered themselves to have against certain other parties, being valuers who had given allegedly faulty valuations in reliance on which mortgage loans had been made and a guarantor of a mortgage loan. I answered that question in the affirmative: Australian Securities and Investments Commission v Takaran Pty Ltd (2002) 43 ACSR 46 (12 September 2002). Shortly afterwards, I was asked by ASIC to make orders for the winding up of the schemes and for the conduct of that winding up. There was no opposition to the making of the orders sought. Mr Love and Ms Duggan were appointed receivers without security to wind up each of the managed investment schemes. These orders were made on 16 September 2002.
2 Exercising leave reserved by the orders, ASIC now seeks a supplementing of them by way of explicit declaration that the receivers are authorised to conduct, and have power to conduct, the legal proceedings to which I have referred (that is, the proceedings against the valuers and the guarantor), as well as any other proceedings concerning any chose in action which is the property of any of the defendants arising out of the making or conduct of the scheme or any scheme loan. ASIC seeks this supplementing as a precaution only, being of the view that the existing orders already confer the particular authority and power.
3 I shall turn in a moment to the terms of the orders. First, it is necessary to say something about the position and attitude of the defendants. I have described them loosely as the administrators of the scheme. To be more precise, Takaran Pty Ltd held as a trustee the mortgages and other rights related to loans made by the aggregation of funds supplied by various investors or contributors. Takaran Pty Ltd is the party with standing to prosecute the proceedings in question. To the extent that the proceedings entail assertion of contractual rights, it is Takaran that is able to sue on the relevant contracts. To the extent that the proceedings are based on representations, it is Takaran that received and relied on them. ASIC acknowledges these realities and says that the orders are so framed as to leave Takaran's position vis a vis the rights of action undisturbed, but in such a way that Takaran no longer has any capacity actively to pursue the proceedings, the effect of the orders being that the receivers will do so in Takaran's name.
4 Takaran maintains that, notwithstanding the orders, it is (or should be) entitled to continue the active pursuit of the proceedings. Furthermore, it contends that there will be advantages in its doing so since the principals of Elliott Tuthill, the firm of solicitors through which the mortgage loans were arranged, have undertaken to fund the litigation against the valuers and the guarantors until 24 December 2002 if Takaran is the decision maker in relation to that litigation (albeit with appropriate reporting to and consultation with the receivers) but not if the receivers become the active decision makers in relation to the proceedings. To the extent that there is evidence of the attitude of investors or contributors of funds, it suggests that they prefer the course which sees them obtain the benefit of the Elliott Tuthill funding until 24 December and avoids the need for the receivers to fund the litigation out of resources which will no doubt eventually impact on any returns to the investors.
5 I proceed now to consider the terms and effect of the orders made on 16 September 2002. It was first declared that "the Scheme as a whole" and "each Scheme Loan" is a managed investment scheme subsisting beyond 28 February 2002 and is unregistered. The expressions "Scheme" and "Scheme Loan" take their meaning from the amended originating process filed on 17 July 2002:
" 'Scheme' means the scheme conducted by:
(i) the First Defendant,
(ii) the Second Defendant,
(iii) the Third Defendant,
(iv) the Fourth Defendants or alternatively
(v) the First, Second, Third and Fourth Defendants,
whereby money was obtained to be invested by the Defendants or any of them upon security of a mortgage over property, which mortgage is herein described as a Scheme Loan;
'Scheme Loan' means a mortgage loan described in Schedule A together with any other mortgage loan comprising the Scheme;"
6 It was next ordered that the scheme be wound up pursuant to s.601EE(1) of the Act and that Mr Love and Ms Duggan be appointed receivers of "all the property in the Scheme pertaining to the Scheme Loans" and "to wind up the Scheme in accordance with this order". By a further order, the defendants were removed as trustees of each and every trust created for the purposes of or subsisting in the scheme, "other than any trust of the rights the subject of the declaration in 3". The receivers were appointed the new trustees of every such trust "other than any trust of the rights in the subject of the declaration in 3" and it was ordered that the property in every such trust, "other than any trust of the rights the subject of the declaration in 3" be vested in the receivers. Order 3 was as follows:
"A declaration that:
(a) the rights asserted by the First Defendant as Applicant in proceedings in the Federal Court of Australia Nos 1474 of 2001, 1482 of 2001, 1483 of 2001 and 1484 of 2001 ('the Federal Court Proceedings');
(b) the right asserted by the First Defendant as Plaintiff in the proceedings in the Equity Division of this Court, No 50114/01 (the 'Supreme Court Proceedings'), and
(c) any other thing in action which is property of any of the Defendants arising out of the making or conduct of any Scheme or any Scheme Loan,
are property in the Scheme."
7 The effect of these orders is that the receivers have become receivers of a body of property described as "all the property in the Scheme". That property includes, by virtue of order 3, the rights asserted in and choses in action founding the proceedings against the valuers and the guarantor. Those rights and choses in action, unlike the remainder of the trust property (in respect of which the receivers have been appointed new trustees), continue nevertheless to be vested in Takaran, subject to the trusts declared by it in respect of the various receivables, mortgages and associated interests. The situation, so far as the rights and choses in action against the valuers and the guarantor are concerned, is thus the familiar one where property is vested in one person but another has, by court order, become the receiver of that property and been given certain powers in relation to it.
8 In the present case, many of the powers conferred upon the receivers arise from order 11 and schedule B. Order 11 directs that the winding up be conducted in accordance with the further and other provisions in schedule B. That schedule in turn directs that, subject to any further order made in the proceedings, the winding up shall be conducted as if the scheme were, for the purposes of certain provisions of the Corporations Act, a "company" and the receivers were, for those purposes, a "liquidator", but with specified modifications. Certain provisions of the Act are thus made to apply, subject to those modifications, to and in relation to the scheme and the receivers as if they were respectively a company and a liquidator of that company. Among those provisions is s.477(1)(a) which empowers a liquidator to carry on the business of the company so far as is necessary for the beneficial disposal or winding up of that business. I am satisfied that s.477(1)(a) is made to apply in this case in a modified way which empowers the receivers to carry on the activities of the scheme so far as is necessary for the beneficial winding up of those activities. Powers that are effectively powers of management are thus conferred.
9 It must be borne in mind that the liquidator of a company, unlike a trustee in bankruptcy, does not acquire title to the company's property. Rather, the liquidator becomes an officer of the company with power to conduct its affairs for the purposes of winding up. In the same way, a receiver appointed by the court does not acquire title to property (Bolton v Darling Downs Building Society [1935] St R Qd 237), although, in the present case, some property has become vested in the receivers in consequence of their having been appointed new trustees. Nor is a receiver appointed by the court the agent of anyone. It follows that, in the general course of events, a person appointed by the court to be receiver of the property of a company, partnership or trust cannot in his own name sue upon causes of action vested in the company, the partners or the trustee. A company liquidator, by contrast, is empowered by statute to sue in the company's name: s.477(2)(a) (a provision expressly excluded by schedule B in the present case).
10 If a receiver appointed by the court wishes to sue in respect of the property of which he or she is receiver, the proper course appears to be to apply to the court for leave to sue in the name of the party in whom the right to sue is vested. This proposition is stated at paragraph 2836 of the third edition (1992) of Meagher, Gummow and Lehane, "Equity Doctrines and Remedies" by reference to observations of Hutley JA (with whom Street CJ and Glass JA agreed) in Wilton v Commonwealth Trading Bank [1974] 2 NSWLR 96.
11 The process of winding up under s.601EE of the Corporations Act is not prescribed or in any way elaborated by the provisions of the Act. It may be that, in some cases, the court will see fit to make orders which entail winding up under the control of the existing operator of the scheme with appropriate supervision by a person appointed by the court for the purpose: see, for example, Lawloan Mortgages Pty Ltd v Lawloan Mortgages Pty Ltd [2002] QSC 302. It may be that a person designated "liquidator" will be appointed: see, for example, Australian Securities and Investments Commission v Landy DFK Securities Ltd [2002] FCA 1056. Or, as here, it may be that, recognising that the situation is one in which trust property may be regarded as in a form of jeopardy because being administered otherwise than in accordance with the statutory requirements (thus activating the head of equitable jurisdiction discussed in Yunghanns v Candoora No 19 Pty Ltd (No 2) (2000) 35 ACSR 34 and Martyniuk v King[2000] VSC 319), the court will appoint a receiver to effect the winding up and thereby to ensure that the trust property is preserved and eventually placed in the hands of those entitled to it.
12 Whichever course is taken at inception, the court's power to supervise the winding up continues. It was held in Australian Securities and Investments Commission v Landy DFK Securities Ltd (above) that a liquidator appointed under s.601EE is an officer of the court. A receiver so appointed is undoubtedly an officer of the court. And in all cases, s.601EE continues to apply after the making of the initial order. Section 601EE(2) empowers the court to "make any orders it considers appropriate for the winding up of the scheme". That power arises when one of the persons mentioned in s.601EE(1) applies to the court "to have the scheme wound up". The power extends, in my judgment, not only to the imposition of an appropriate winding up regime at inception but also to the making, as and when needed after inception, of such further orders as are needed in connection with the due conduct and completion of the winding up: Australian Securities and Investments Commission v Commercial Nominees Ltd (2002) 42 ACSR 240.
13 In the present case, the body of property to which the receivers' functions and responsibilities extend includes the rights of action against the valuers and the guarantor. Much of that body of property is vested in the receivers in consequence of their appointment as new trustees, but the particular rights of action are not. For reasons outlined, the receivers cannot sue in their own names on those causes of action. If they are to do so, they require leave to sue in the name of Takaran in the way discussed by Hutley JA in Wilton v Commonwealth Trading Bank (above). In the exercise of its inherent jurisdiction, backed by s.601EE, the court may make an order granting such leave.
14 This leads to the question whether, as a matter of discretion, leave should be granted.
15 The orders made on 16 September 2002 state that the winding up is to be conducted by the receivers, not by Takaran, the principals of Elliott Tuthill or anyone else. I have already noted that a winding up regime imposed by the court under s.601EE might possibly entail some continuing control by the existing operator of the scheme, as in the Lawloan Mortgages case (above). It seems to me, however, that such an approach would not be favoured except in exceptional circumstances. The fact that a scheme is being operated by its existing operators in contravention of statute activates a public interest in favour of not only its being wound up under s.601EE (Australian Securities and Investments Commission v McNamara [2002] FCA 1005) but also "ensuring the transparency of the winding up process and the safeguarding of the rights of the contributories" by committing the winding up to an independent party (Bells Securities Pty Ltd v LPG Mourant [2002] QSC 156 per Wilson J; see also Australian Securities and Investments Commission v Product Management Group Pty Ltd [2002] VSC 255).
16 There is no reason why the particular aspect of this winding up that involves prosecution of the proceedings against the valuers and the guarantor should held back from the receivers to whom the court has entrusted the task of conducting and completing the winding up as a whole. It is said that, if the receivers conduct the litigation in the name of Takaran, the investors will be denied the benefit of the funding that the principals of Elliott Tuthill are willing to provide if Takaran itself is left to conduct the litigation. The position does not seem to me to be as clear-cut as that. The attitude of the principals of Elliott Tuthill in being willing to provide financial support is, if I may say so, to be commended. But it is apparent that they do not expect Takaran to have an entirely free hand. They accept that the receivers will play a part.
17 To the extent that the receivers require leave to continue proceedings in the name of Takaran, such leave should be granted. In exercising that leave, the receivers will no doubt give close consideration to the question whether the conduct by them of the several proceedings in the name of Takaran may be undertaken in a way and on a basis which, while ensuring that they remain properly attentive to the interests they are bound to serve, includes consultation or co-operation with the principals of Elliott Tuthill such that those principals may see fit to make available the financial support they are, in principle, willing to give. It is, of course, open to the receivers to engage in such consultation or co-operation.
18 It is appropriate that the court should order that Andrew Love and Robyn Louise Duggan, the receivers appointed by order made in these proceedings on 16 September 2002, have leave to prosecute and conduct in the name of the first defendant the following proceedings commenced by the first defendant, namely, proceedings 1474 of 2001, 1482 of 2001, 1483 of 2001 and 1484 of 2001 in the Federal Court of Australia and proceedings 50114/01 in the Equity Division of this court and, as such receivers but in the name of the first defendant, the said Andrew Love and Robyn Louise Duggan are empowered to prosecute and conduct those proceedings. Before such an order is made, however, it is desirable that ASIC, the receivers and Takaran have an opportunity to make such submissions as they may wish as to the terms, if any, that the court should impose when granting leave, including any protecting Takaran in respect of the future costs of the litigation.
19 I direct that the present application by ASIC be stood over to Monday, 28 October 2002 at 9.30am before me for the making of any such submissions. It is to be hoped that the position in relation to the financial assistance that the principals of Elliott Tuthill are willing to provide may be clarified and consolidated in the meantime.