Australian Securities and Investments Commission v GDK Financial Solutions... [2011] FCA 1496 | Case summary

Advertisement, gazettal and notification

As soon as practicable after the date of these orders, the Mews Receivers are to place an advertisement substantially in the form of Annexure A to these orders, in: (a) the Commonwealth of Australia Business Gazette; and (b) The Australian newspaper.
Within 3 days after the date on which the advertisement is published in accordance with paragraph 1(a) of these orders (Commencement Date), the Mews Receivers are to issue to all known or potential claimants in the Mews Scheme in any capacity, whose contact details are known to the Mews Receivers at that time, a circular substantially in the form of Annexure B to these orders, along with the following in a form to be determined by the Mews Receivers: (a) a listing of all claims received by the Mews Receivers as at the date of the circular; and (b) the Mews Receivers' provisional assessment, as at the date of the circular, of those claims. Submission of new claims
If any person who has not previously submitted a claim with respect to the winding up of the Mews Scheme (New Claimant) wishes to make a claim that he is a creditor, investor, or otherwise entitled to a share in the assets, of the Mews Scheme, then: (a) by 28 days after the Commencement Date the New Claimant must file: (i) a notice stating the nature and particulars of the claim; and (ii) an affidavit verifying the claim, (b) as soon as practicable thereafter the New Claimant must serve the Mews Receivers (C/- Blake Dawson, Level 32 Exchange Plaza, 2 The Esplanade, Perth WA 6000, reference: Lucas Wilk/Bree Ludlow) and the 7th defendant (C/- Arnold Bloch Leibler, Level 21, 333 Collins Street, Melbourne VIC 3000, reference Sam Dollard) with copies of all documents filed in accordance with paragraph 3(a) of these orders.
If any person other than the Mews Receivers who has not previously submitted a claim with respect to the winding up of the Mews Scheme (New Priority Claimant) wishes to claim, in whole or part, a priority claim against the assets of the Mews Scheme as against the investors in, or other creditors of, the Mews Scheme (not including the Mews Receivers), then: (a) by 28 days after the Commencement Date the New Priority Claimant must file: (i) a notice stating the nature and particulars of the claim; and (ii) an affidavit verifying the claim; (b) as soon as practicable thereafter the New Priority Claimant must serve the Mews Receivers (C/- Blake Dawson, Level 32 Exchange Plaza, 2 The Esplanade, Perth WA 6000, reference: Lucas Wilk/Bree Ludlow) and the 7th defendant (C/- Arnold Bloch Leibler, Level 21, 333 Collins Street, Melbourne VIC 3000, reference Sam Dollard) with copies of all documents filed in accordance with paragraph 4(a) of these orders. Assessment of new claims and objections
By 42 days after the Commencement Date the Mews Receivers file a report (Supplementary Assessment Report) which states whether, as a result of information in their possession, any New Claimant's claim or a New Priority Claimant's claim, or any other claim of any sort they have received to that date against the assets of the Mews Scheme subsequent to the Mews Receivers' report dated 16 January 2009 (as attached to the affidavit of Brian Keith McMaster sworn 16 January 2009), should, on their recommendation, be accepted or rejected.
As soon as practicable after compliance with paragraph 5 of these orders above, the Mews Receivers shall circulate to all persons who have made a claim against the assets of the Mews Scheme as at that date, by pre-paid post addressed to the persons' last known addresses: (a) a schedule (Claim Schedule) which states: (i) the name of each person who has made a claim; (ii) the nature of each claimant's claim; (iii) the amount (if any) for which the Mews Receivers propose to seek the approval of the Court to admit each claim, (iv) the extent to which the Mews Receivers propose to seek the approval of the Court to reject any claims (whether in whole or part), and (b) a copy of these orders.
If any person (Objector) wishes to challenge the matters referred to in paragraph 6(a)(iii) or 6(a)(iv) of these orders, as contained in the Claim Schedule, then: (a) by 63 days after the Commencement Date, the Objector must file: (i) an interlocutory process in these proceedings seeking an order that the claim be approved or rejected, as the case may be (and, if the Objector is not a party to the proceedings, an order that the Objector be joined as a party); and (ii) an affidavit in support thereof. The affidavit is to set out the name and address of the Objector, the nature and amount of the claim, the basis on which it is sought that the claim be approved or rejected, and any evidence relied on; (b) as soon as possible thereafter the Objector must serve the Mews Receivers (C/- Blake Dawson, Level 32 Exchange Plaza, 2 The Esplanade, Perth WA 6000, reference: Lucas Wilk/Bree Ludlow) and the 7th defendant (C/- Arnold Bloch Leibler, Level 21, 333 Collins Street, Melbourne VIC 3000, reference Sam Dollard) with copies of all documents filed in accordance with paragraph 7(a) above, and, in the event that the Objector seeks an order that the Court reject a claim that the Mews Receivers propose to be admitted, the Objector do within the same time serve copies of the documents filed in accordance with paragraph 7(a) on the person whose claim the Mews Receivers recommended be accepted. Adjudication of claims and determination of procedure for distribution
The proceedings be listed for mention at 10.00am EDST on 23 March 2012 and all interlocutory processes filed in accordance with paragraph 7(a) above be made returnable for directions at that time, for the purposes of determining the appropriate procedural and other steps to be taken for the purposes of dealing with: (a) any challenges to approval or rejection of claims against the assets of the Mews Scheme as contained in the Supplementary Assessment Report; (b) the Court's adjudication of all claims the subject of the Supplementary Assessment Report; and (c) the mechanism and timetable to be followed by the Mews Receivers in making a distribution to eligible claimants following the Court's final adjudication of all claims. Other orders
The Mews Receivers' costs of this application are costs properly incurred in the exercise of their duties and powers as Receivers of the Mews Scheme.
There be liberty to apply. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. ANNEXURE A The Mews Scheme: Notice to Claimants & Priority Claimants On 28 November 2006 in action VID 590/2006 the Federal Court of Australia ordered that the Mews Scheme (as defined in orders of the Court made 28 November 2006) be wound up. The Mews Scheme concerns the arrangements as to investments in the "Mews Retirement Village" (also known as the "Mews Village"). Among other things the assets of the Mews Scheme included that land known as Lot 4 Railway Parade, Upper Swan, Western Australia of which Western Retirement Village Management Pty Ltd (In Liq) was the registered proprietor. TAKE NOTICE THAT on [insert date of orders] in action VID 590/2006 the Federal Court of Australia ordered, among other things, that:
If any person who has not previously submitted a claim with respect to the winding up of the Mews Scheme (New Claimant) wishes to make a claim that he is an creditor, investor, or otherwise entitled to a share in the assets, of the Mews Scheme, then: a. by [insert date] the New Claimant must file: (i) a notice stating the nature and particulars of his claim; and (ii) an affidavit verifying his claim, b. as soon as practicable thereafter the New Claimant must serve the Mews Receivers (C/- Blake Dawson, Level 32 Exchange Plaza, 2 The Esplanade, Perth WA 6000, reference: Lucas Wilk/Bree Ludlow) and the 7th defendant (C/- Arnold Bloch Leibler, Level 21, 333 Collins Street, Melbourne VIC 3000, reference Sam Dollard) with copies of all documents filed in accordance with paragraph 3(a) of these orders.
If any person other than the Mews Receivers who has not previously submitted a claim with respect to the winding up of the Mews Scheme (New Priority Claimant) wishes to claim, in whole or part, a priority claim against the assets of the Mews Scheme as against the investors in, or other creditors of, the Mews Scheme (not including the Mews Receivers), then: a. by [insert date] the New Priority Claimant must file: (i) a notice stating the nature and particulars of his claim; and (ii) an affidavit verifying his claim; b. as soon as practicable thereafter the New Priority Claimant must serve the Mews Receivers and the 7th defendant with copies of all documents filed in accordance with paragraph 3(b) of these orders.
The proceedings be listed for mention at [insert date and time]. Any queries should be directed to the Mews Receivers (C/- KordaMentha, Level 11, 37 St Georges Terrace, Perth WA 6000. T. (08) 9221 6999. Ref. Simon Harris.) ANNEXURE B CIRCULAR TO CREDITORS [insert date] TO PERSONS WHO MAY HAVE A CLAIM AGAINST THE ASSETS OF THE MEWS SCHEME Dear Sir / Madam The Mews Scheme (Receivers Appointed) We refer to previous correspondence. Interim distribution In accordance with Orders of the Federal Court of Australia made on [insert date of Orders], we intend to make an interim distribution to investors and any other admitted claimants in the Mews Scheme. The timing and rate of this distribution will depend upon, amongst other things: • The timing of future Court hearings and Orders • The quantum of claims admitted. Subject to our comments below, any person with a claim against the Mews Scheme is to submit an affidavit including details of the claim, and providing supporting documentation, by no later than [insert date 4 weeks from Gazette advertisement]. Please note, however, that if you have a claim which has been provisionally assessed as accepted, you do not need to submit any further information at this stage. Claims received Please find attached a schedule of claims received, together with our provisional assessment of those claims. Our provisional assessment has been made based upon information sourced from the following: • Our review of the books and records of the Mews Scheme that have been made available to us. • Information provided by parties who have made a claim against assets of the Scheme. • Information from other parties obtained as a result of our investigations. At this stage our assessments are provisional in nature only. The final adjudication of claims will be conducted by the Court. We have provisionally assessed each claim as either: • Accepted; • Not accepted; or • Further information required. To the extent that you have a claim which has been provisionally assessed as accepted, you do not need to submit any further information at this stage. In respect of each of these categories, we set out the following information:
Accepted We consider that these claims have been substantiated, and it is our intention to propose to the Court that the persons making these claims be accepted as investors or other admitted claimants of the Mews Scheme, subject to any comments / objections from other parties.
Not accepted Based upon our review to date, we do not consider that these are claims against the assets of the Mews Scheme, and we intend to report this to the Court in accordance with the above timetable. Included in this category are duplicate claims. For example, where a claim has been received from a partnership manager as well as the members of that partnership. It is our intention to propose to the Court that only the claim of the partnership manager be admitted.
Further information required Based upon our review to date, we require further information in order to make a provisional assessment in respect of these claims. We have requested this information previously, however the information has not been received. Adjudication of Claims Please note that the ultimate adjudication of claims will be made by the Court. Our role is to submit details of all claims and provide our opinion as to the adjudication of the claims. Further Claims / Responses / Objections and Further Information Should any party wish to make a further claim, or submit further information in respect of a claim, or have any comment regarding our provisional assessment of a claim (including the claim of another person), such comment must be provided to our office, in writing, by [insert date]. In the absence of any responses/objections, our recommendations will be provided to the Court, and the intended distribution will proceed subject to the Court's Orders, in accordance with the information available to us at that time. If you have any queries in relation to this matter, please contact Simon Harris of this office. Yours faithfully Brian McMaster Receiver Enc. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 590 of 2006

REASONS FOR JUDGMENT 1 On 21 December 2011, I made the orders set out above for the following reasons. 2 The applicants are receivers of the Mews Scheme, a scheme defined in the order of Finkelstein J made on 28 November 2006. The Mews Scheme is an unregistered managed investment scheme which involved the establishment of a retirement village on land known as the Mews land. The applicants were appointed receivers of the Mews Scheme by the order of Finkelstein J made 28 November 2006. In that capacity, they now hold some $3,568,838. That money constitutes a fund which is being administered by the court: ASIC v GDK Financial Solutions Pty Ltd (No 6) [2010] FCA 1092 at [19]. 3 The applicants applied for orders providing for certain procedural steps preliminary to an eventual hearing to authorise a proposed interim distribution of an estimated $1.5 million. 4 The seventh defendant, Mr Peter Warne, was, by order of Finkelstein J made on 21 March 2007, appointed representative of the cash investors in the Mews Scheme. Neither the seventh defendant nor any other party was represented at the hearing or opposed the orders sought. 5 The applicants relied on the affidavit of Brian Keith McMaster sworn on 21 November 2011. Mr McMaster deposed that the orders were sought in order to permit the interim distribution to creditors of the Mews Scheme, foreshadowed to the Court on 29 July 2011. He exhibited a supplementary report to the Court on the Mews Scheme dated 15 November 2011 which set out a proposed timeframe and methodology. The provisional amount for distribution was about $1,500,000. As the applicants proposed to afford all known and potential claimants a final opportunity to submit claims, no provisional assessment of claims was as yet included. The distribution process proposed was to be substantially in line with the timeframe applicable to dividend distribution in a liquidation under the Corporations Act 2001 (Cth) ("the Act") and Corporations Regulations 2001 (Cth) ("the Regulations"). 6 The Act includes provisions governing the procedure a liquidator is to follow on the winding up of a corporation and empowering the liquidator to make a distribution of the available property (see, e.g., s 478 & Division 6 of Part 5.6 of the Act and reg 5.6.37 - 5.6.72 of the Regulations). There are no equivalent statutory provisions applicable on the winding-up of an unregistered managed investment scheme by the court. 7 Accordingly, the applicants required an order of the court to authorise them to make a distribution of the Mews Scheme property, which is under the court's control. 8 Section 601EE(2) of the Act provides: The Court may make any orders it considers appropriate for the winding up of the scheme. 9 Section 601EE(2) empowers the court to make such distribution orders. In ASIC v Commercial Nominees of Australia Ltd (2002) 42 ACSR 240 at [13], Barrett J stated: ... it must be accepted that the court has jurisdiction to settle or prescribe any aspect or element of the basis for winding up or the winding up process which it is necessary to supply because that element cannot be obtained from any other source. 10 The authorities establish, however, that s 601EE(2) cannot be employed to sanction the release of funds to persons who have no legal entitlement to them: ASIC v Edwards [2009] QSC 360 at [7]-[8]; ASIC v Idylic Solutions Ltd (2009) 76 ACSR 129 at [6]. Nor can it be used to create substantive obligations: ASIC v Piggott Wood & Baker (No 3) (2008) 172 FCR 257 at [13]. 11 Therefore, in the present case, as a precondition of authorising a distribution, the court must be satisfied as to the respective legal entitlements of the claimants against the fund. To facilitate such a determination, the applicants proposed a process of: (1) calling for claims; (2) submission of claims; (3) provisional assessment of claims; (4) identification of objections to the provisional assessment of claims; and (5) final adjudication of claims, including any objections to the provisional assessments. 12 Section 601EE(2) confers the power to make orders as to the proposed procedural steps, which are incidental to, or in aid of, the eventual distribution order. (Section 23 of the Federal Court of Australia Act 1976 (Cth) provides another source of power for the making of such ancillary orders.) 13 Although the applicants had made a number of reports to the court containing provisional assessments as to certain claims received, including reports dated 14 November 2008 and 16 January 2009, considerable time had since elapsed. The recent supplementary report did not include a provisional assessment of claims. 14 The applicants proposed the following regime for submission and determination of claims, to ensure that all possible claimants received adequate notice before the final determination of claims leading to a distribution. 1. Immediate advertisement & gazettal, together with a circular to all known or potential claimants, calling for any new claims. 2. Details of any new claim to be provided within 28 days. 3. By 14 days thereafter the applicants make a provisional assessment as to any new claim, report on that assessment, and circulate a "claim schedule" with all provisional assessments to all known claimants. 4. Any objector to any part of the provisional assessment would then file and serve a process within a further 21 days. The proceedings would then come back before the court to determine the appropriate procedural steps for dealing with a final adjudication and the interim distribution. 15 The proposed orders and advertisement would thus invite new claims from both claimants generally and "priority" claimants. An advertisement had already been published pursuant to orders made 18 November 2008, calling for priority claims. 16 The applicants informed the court that the solicitors for the seventh defendant did not support re-advertisement in relation to priority claims, on the ground that it would be unnecessary, and could invite baseless claims with attendant wasted costs and time. A copy of an email dated 8 November 2011 from the seventh defendant's solicitors setting out the seventh defendant's concern was exhibited. 17 While the applicants conceded that the concerns of the seventh defendant should be taken into account by the court, they submitted, and I accepted, that it was reasonable to re-advertise as proposed, given the effluxion of time since the last substantive report, the necessity to advertise as to claimants generally in any event, and to consider and determine any new priority claims received, which would be more efficiently achieved under a regime contemplating new priority claims. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dodds-Streeton.

Australian Securities and Investments Commission v GDK Financial Solutions Pty Ltd

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (23 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (3)

Cited By (1)