Australian Securities and Investments Commission v Letten

introduction 1 On 25 February 2010, the schemes numbered 1, 4 to 9 and 13 to 16 in Annexure A to these reasons for decision were wound up pursuant to s 601EE(1) of the Corporations Act 2001 (Cth) (the Corporations Act). Also on 25 February 2010, Mr Damian Templeton and Mr Phillip Hennessy of KPMG (the Receivers) were appointed as joint and several receivers and managers of certain property of each of the second to sixteenth and eighteenth to forty-fifth defendants (the Corporate Defendants) and as joint and several receivers and managers of identified property of each of the schemes listed in Annexure A (the Schemes), except for the scheme numbered 12: Australian Securities and Investments Commission v Letten [2010] FCA 140 (the 25 February Orders). 2 The 25 February Orders required the Receivers to file and serve a report in respect of, inter alia, the nature and identity of the property of each Scheme, any claims by third parties in relation to the property of the Scheme, the identities of investors and the nature of their investment (the Disclosure Reports). 3 On 13 April 2010, the Receivers filed Disclosure Reports in relation to each Scheme listed in Annexure A except for schemes numbered 6, 15 and 16. The Disclosure Reports for schemes numbered 6, 15 and 16 were filed on 28 April 2010. 4 This judgment concerns Scheme No 8 - the Low Head Joint Venture (the Low Head Scheme) - which also involves one of the entities included in the 25 February Orders, Low Head Pty Ltd, the twelfth defendant (Low Head). On that day, pursuant to s 1323(1)(h)(ii) of the Corporations Act the Receivers were appointed to the property of Low Head other than property which constitutes property of a Scheme as defined in Annexure A to the 25 February Orders, the Low Head Scheme was wound up pursuant to s 601EE(1) of the Corporations Act and the Receivers were appointed as receivers and managers of the Property of the Low Head Scheme. 5 In his disclosure report in relation to the Low Head Scheme and Low Head, Mr Templeton (one of the Receivers) provided a diagrammatic and descriptive overview of the scheme structure and the relationships between key stakeholders (the Overview). A copy of the Overview is attached as Annexure B to these reasons for decision. As that overview records, as at 25 February 2010, Low Head had a loan payable to Tasmanian Perpetual Trustees Limited (TPTL) of $1.6 million, secured by registered mortgages over three properties constituting the Low Head Properties. As at 31 March 2011, the balance owing by Low Head to TPTL was $1.85 million, with interest accruing at a penalty rate of 11.70%. 6 On 25 May 2010, the Receivers were authorised to sell: (1) the land, buildings and fixtures located at: (a) 128-136 Low Head Road, George Town, Tasmania; (b) 142 Low Head Road, George Town, Tasmania; and (c) 40 Gunn Parade, Low Head, Tasmania; and (2) the Low Head Tourist Park business located at 136 Low Head Road, George Town, Tasmania; (collectively the Low Head Properties) subject to the directions set out in paragraphs 10 to 12 of those Orders (the Low Head Orders). 7 Since the Court made the Low Head Orders, the Receivers' enquiries revealed that: 1. prior to the appointment of the Receivers, the twelfth defendant sold a portion of the property referred to in paragraph 6(1)(b) above (of approximately 0.550 ha); 2. that portion of land sold retained the street address of 142 Low Head Road, George Town, Tasmania; and 3. the remainder of the land at 142 Low Head Road, George Town, Tasmania (approximately 0.6994 ha) was added to the street address at 128-136 Low Head Road, George Town, Tasmania. 8 On 8 April 2011, the Receivers entered into a contract of sale of the Low Head Tourist Park (the Low Head Agreement). A copy of the Low Head Agreement was provided to the Court. The property the subject of the sale is 128-136 Low Head Road, George Town, Tasmania, in its amended form. 9 The sale price obtained under the Low Head Agreement is not sufficient to pay the realisation costs and discharge the debt owed to TPTL in full. The Receivers obtained the consent of TPTL to the Low Head Agreement on the condition that the Receivers allow TPTL to take possession of the third of the Low Head Properties, 40 Gunn Parade, Low Head (40 Gunn Parade), pursuant to securities held over this property, that the receivership in respect of this property cease, and that the Receivers allow TPTL to hold the property for an indefinite period to assist in minimising any further losses. 10 On 12 April 2011, the Receivers filed an interlocutory process which, pursuant to ss 1323(5) and 601EE of the Corporations Act and paragraph 29 of the 25 February Orders, sought approval of the Receivers: 1. entering into the Low Head Agreement; and 2. permitting the secured lender, Tasmanian Perpetual Trustees Limited, to enter into possession of the property at 40 Gunn Parade, Low Head, Tasmania. The interlocutory process was supported by an affidavit sworn by Damian John Templeton on 11 April 2011 (the Twenty-Fourth Templeton Affidavit). 11 On 13 May, the interlocutory process came on for hearing. In addition to Counsel for the Receivers, a number of other parties appeared including Counsel for the Australian Securities and Investment Commission (ASIC) and the first defendant, Mr Letten. ASIC and Mr Letten did not oppose the orders sought by the Receivers.