Australian Securities and Investments Commission v Letten

DAVIES J: 1 Damian John Templeton, in his capacity as receiver and manager of 21 unregistered managed investment schemes and the property of each of the 16th and 18th to 54th defendants and in his capacity as liquidator of the 2nd to 54th defendants ("the Letten entities"), has applied to the Court for orders or directions under ss 1323 and 601EE of the Corporations Act 2001 (Cth) and/or s 23 of the Federal Court of Australia Act (Cth) in respect of the receiverships and liquidations, that he is justified in causing the Letten entities to enter into and perform their obligations under a settlement deed. The settlement deed is a confidential exhibit to Mr Templeton's affidavit sworn on 10 May 2018 and relates to a proceeding in the Victorian Supreme Court in which the plaintiffs are three Letten entities, namely Nicholson Street Proprietary Limited, The Glen Centre Hawthorn Proprietary Limited and Twin View Nominees Proprietary Limited and the defendants are Mr Letten, the first defendant in these proceedings, and a Mr Lane ("the Proceeding"). 2 The receiverships have a long history and have been conducted with the extensive involvement and supervision of the Court. For present purposes, it is sufficient to note that on 11 November 2010 the Court ordered that the proceeds of the sale of each of the assets of all of the schemes, after deduction of certain costs and expenses, be paid into a common fund and that the balance of that fund, after payment of costs and expenses of the receivers, be distributed rateably to members of the schemes and any other person who could establish a net proprietary claim on the fund: Australian Securities and Investments Commission v Letten (No 7) [2010] FCA 1231. On 24 June 2014, the Court ordered that the then receivers were justified in deploying funds from the common fund in the institution and prosecution of the Proceeding against Mr Letten and Mr Lane: Australian Securities and Investments Commission v Letten (No 22) [2014] FCA 681. The Proceeding was commenced in July 2014, claiming as against Mr Letten and Mr Lane the sum of $17,838,780 plus interest and costs, and it has a protracted history, involving several revised pleadings and two Court of Appeal decisions. A 7 to 10 day trial is listed for hearing in August 2018. 3 The settlement deed also covers another Supreme Court proceeding in which Mr Templeton, in his capacity as the joint and several liquidator of the 10th defendant, LGHA Administration Pty Ltd, has sued Chapel Properties Pty Ltd claiming $700,150.06 in respect of an unfair preference claim ("the Chapel Properties Proceeding"). No substantive steps have been taken in relation to this action since June 2015 as Mr Templeton's investigations led him to form the view that the company has no assets to satisfy a judgment. 4 The liquidator and receiver, on behalf of the plaintiffs and the Letten entities, has conditionally agreed to settle both Supreme Court proceedings on the terms set out in the settlement deed. Under the proposed settlement, upon the satisfaction of certain conditions precedent, the plaintiffs will seek leave to file a third further amended statement of claim in the Proceeding making the same monetary claim as against the defendants, but confining the cause of action upon which the plaintiffs sue to a breach of trust claim. The plaintiffs will then seek judgment in the Proceeding, and the defendants will consent to that judgment. Relevantly, as against Mr Letten, judgment will be sought for the plaintiffs in the sum of $17,838,780 plus interest and, as against Mr Lane, judgment will be sought for the plaintiffs in the sum of $6,648,713, plus interest. There will be no order as to costs. The Chapel Properties Proceeding will be dismissed with no order as to costs. 5 One of the terms of the settlement deed provides for the assignment of the judgment debt for a sum of money ("the assignment amount"). The assignment amount will be enough to satisfy the plaintiffs' costs and expenses in relation to the conduct of the Proceeding, but there will be no net return to the common fund. If the assignment amount is not paid, the plaintiffs can seek to enforce judgment against the defendants. 6 Mr Templeton believes that the settlement is in the best interests of the claimants on the common fund and he has deposed in an affidavit the reasons why he has reached this conclusion. His reasons are as follows: (a) before he commenced proceedings, both Mr Letten and Mr Lane asserted they did not have substantial assets which would be available to satisfy a judgment debt obtained against them. Mr Templeton was not satisfied that those claims were true; (b) he is now satisfied from the investigations that he has conducted that Mr Letten and Mr Lane are both impecunious and do not have assets in their control from which to satisfy the judgment debts; (c) he does not believe that a judgment obtained in the Proceeding would be satisfied in any significant amount, if at all; (d) claimants on the common fund will be at risk of depletion of the common fund if the Proceeding continues; (e) he has no reason to believe the funds which may be used to pay the assignment amount would be available to satisfy a judgment; (f) having prosecuted the Proceeding to this stage and participated in a "robust" mediation conducted by Associate Justice Efthim he believes that he has received the best possible offer of settlement from the defendants; (g) the effect of the settlement is that the Proceeding has not resulted in any depletion of the common fund. 7 Having regard to those reasons, I am satisfied that Mr Templeton has made a considered decision that entry into the settlement is in the best interests of the claimants on the common fund and I accept that it is appropriate for Mr Templeton to settle both proceedings on the terms that have been agreed upon. Accordingly, I will make the directions sought.

I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies.

Associate: Dated: 15 May 2018 SCHEDULE 1 Schedule of Defendants

LGH Holdings Limited (ACN 007 191 943) Second Defendant 211 Wellington Road Pty Ltd (ACN 092 663 860) Third Defendant Bluemist Holdings Pty Ltd (ACN 097 306 922) Fourth Defendant Dellwood Holdings Pty Ltd (ACN 098 505 803) Fifth Defendant Enmore Enterprises Pty Ltd (ACN 082 158 487) Sixth Defendant Firbank Arch Pty Ltd (ACN 059 464 381) Seventh Defendant Glenline Pty Ltd (ACN 098 532 364) Eighth Defendant Gerling Holdings Pty Ltd (ACN 091 726 457) Ninth Defendant LGH Administration Pty Ltd (ACN 007 165 069) Tenth Defendant LGH Finance Pty Ltd (ACN 078 859 248) Eleventh Defendant Low Head Village Pty Ltd (ACN 091 731 958) Twelfth Defendant Nicholson Street Pty Ltd (ACN 069 104 089) Thirteenth Defendant Holloway Crest Pty Ltd (ACN 091 731 967) Fourteenth Defendant Rosebery Enterprises Pty Ltd (ACN 091 826 229) Fifteenth Defendant Simms Investments Pty Ltd (ACN 093 504 511) Sixteenth Defendant SY21 Retail Pty Ltd (ACN 107 874 564) Seventeenth Defendant The Glen Centre Hawthorn Pty Ltd (ACN 089 906 543) Eighteenth Defendant Castello Holdings Pty Ltd (ACN 088 204 175) Nineteenth Defendant Twinview Nominees Pty Ltd (ACN 097 307 278) Twentieth Defendant Yarra Valley Golf Pty Ltd (ACN 066 632 479) Twenty-First Defendant Adina Rise Pty Ltd (ACN 083 181 122) Twenty-Second Defendant Albright Investments Pty Ltd (ACN 088 204 166) Twenty-Third Defendant Ashfield Rise Pty Ltd (ACN 093 504 806) Twenty-Fourth Defendant Bradfield Corporation Pty Ltd (ACN 088 204 371) Twenty-Fifth Defendant Copeland Enterprises Pty Ltd (ACN 093 504 824) Twenty-Sixth Defendant Devlin Way Pty Ltd (ACN 088 264 813) Twenty-Seventh Defendant First Hazelwood Pty Ltd (ACN 093 505 303) Twenty-Eighth Defendant Glenbelle Pty Ltd (ACN 097 306 646) Twenty-Ninth Defendant Glenvale Way Pty Ltd (ACN 088 287 021) Thirtieth Defendant Greenview Lane Pty Ltd (ACN 093 505 312) Thirty-First Defendant Hallmark Corporation Pty Ltd (ACN 093 505 312) Thirty-Second Defendant Moorleigh Holdings Pty Ltd (ACN 088 287 058) Thirty-Third Defendant Norton Ridge Pty Ltd (ACN 078 821 066) Thirty-Fourth Defendant Raleigh Glen Pty Ltd (ACN 088 204 380) Thirty-Fifth Defendant Redcrest Holdings Pty Ltd (ACN 100 836 486) Thirty-Sixth Defendant Suri Corporation Pty Ltd (ACN 093 505 321) Thirty-Seventh Defendant Sutton Rise Pty Ltd (ACN 088 204 399) Thirty-Eighth Defendant The Virtual Mlmer Pty Ltd (ACN 065 374 665) Thirty-Ninth Defendant Tivendale Pty Ltd (ACN 093 505 349) Fortieth Defendant Tulloch Downes Pty Ltd (ACN 078 895 048) Forty-First Defendant Mainking Pty Ltd (ACN 100 790 485) Forty-Second Defendant Topglen Pty Ltd (ACN 096 857 564) Forty-Third Defendant Allblue Pty Ltd (ACN 100 836 388) Forty-Fourth Defendant Aranbay Pty Ltd (ACN 098 532 319) Forty-Fifth Defendant Melville Corporation Pty Ltd (ACN 091 911 045) Forty-Sixth Defendant Tilley Lane Pty Ltd (ACN 086 136 361) Forty-Seventh Defendant HPSC Pty Ltd (ACN 059 930 139 Forty-Eighth Defendant Jensdale Pty Ltd (ACN 098 367 974) Forty-Ninth Defendant Oakdale Rise Pty Ltd (ACN 091 598 908) Fiftieth Defendant Maywood Investments Pty Ltd (ACN 091 599 218) Fifty-First Defendant Acetrain Pty Ltd (ACN 100 820 282) Fifty-Second Defendant Sage Bay Pty Ltd (ACN 097 306 628) Fifty-Third Defendant Tobago Holdings Pty Ltd (ACN 093 504 520) Fifty-Fourth Defendant Wilhelmus Antonius Joannes Boerkamp Fifty-Fifth Defendant Austpac Funds Management Limited Fifty-Sixth Defendant Golden Heritage Golf Pty Ltd Fifty-Seventh Defendant SCHEDULE 2 Schedule of Entities and Dates of Appointment as Receiver and Manager, or as Receiver and Manager, and Liquidator