Australian Securities & Investments Commission; In the Matter of Richstar Enterprises Pty Ltd ACN 099 071 968 v Carey

Notwithstanding anything contained in the Orders made on 20 April 2006, as amended on 30 June 2006 and extended on 22 December 2006, the Corporate Receivers (as defined in paragraph 2 of those orders) shall be empowered and entitled in their discretion to effect, as agent of the Sixth Defendant, such short-term insurances, including property damage and business interruption insurances, as the Corporate Receivers consider are reasonably necessary, having regard to pre-existing arrangements, on behalf of the owners and operators of commercial properties which the Sixth Defendant manages.
The Corporate Receivers shall be entitled to immediately reimburse themselves, without the authorisation of the signatories required for the operation of the Sixth Defendant's bank accounts, from the Sixth Defendant's bank account for so much of the cost of such insurance as is incurred by the Corporate Receivers and the Sixth Defendant's bankers shall be permitted to allow such reimbursement.
The Corporate Receivers shall immediately provide to any person for whom they have effected short-term insurances notice of the time when the short-term insurances shall expire.
Liberty to apply for further orders at short notice.

REASONS FOR JUDGMENT ON VARIATION OF RECEIVER ORDERS 1 It appears from the materials before me and from what I am told by the corporate receivers appointed to the sixth defendant on 20 April 2006, that there may have been arrangements in place with companies in and associated with the Westpoint Group whereby Westpoint Realty Pty Ltd (Westpoint Realty), the sixth defendant, arranged insurance of properties held by those companies and that it did so as one of the insured parties. It appears from the evidence of the receiver, Mr McMaster, that certain of the relevant insurances are about to expire at close of business today, if they haven't already expired, and that there may be an expectation on the part of the various commercial property owners, to whom I have referred, that the insurance will have been renewed by the sixth defendant. 2 The renewal of the insurance in its full sense by the sixth defendant would involve it entering into a loan agreement with Pacific Premium Funding (PPF), which provides the finance for the premiums necessary to be paid for the relevant insurance. Mr McMaster has indicated not only that he is not satisfied that Westpoint Realty is solvent but that, in the light of recent advices of which he has been informed, it is insolvent. This plainly raises a difficulty in relation to any step under which Westpoint Realty would incur any further liability. The motion before me today proceeded on the basis that what was necessary was a variation of the orders which I made on 20 April 2006, as subsequently amended and extended, to enable the corporate receivers to enter into the relevant commercial loan facility, notwithstanding their want of satisfaction of the solvency of Westpoint Realty. 3 However, as I pointed out in the course of argument, variations of this kind previously made have not involved the incurring of liabilities but the payment out of funds, for example, to meet legal fees, notwithstanding that the corporate receivers may not be satisfied of the relevant company's solvency. The incurring of an additional liability, when the receivers are positively satisfied of insolvency, is another matter entirely. I am concerned, however, that there is a real possibility that the commercial property holders, a number of which are related to each other, may be prejudiced if the sixth defendant were to allow the insurance to lapse without prior notice to them, or to their administrators, so that appropriate action could be taken. 4 It appears that the matter has acquired this degree of urgency because of the very short notice upon which Mr McMaster was informed through Mr Carey, the director of WestpointRealty, of this expiry of the insurance. In the circumstances, what I am prepared to do is to authorise a payment, rather than the incurring of a liability, and a payment sufficient to provide for short-term insurance so that the relevant property owners, or their administrators, can assess their positions and look to their own interests and arrangements. I understand that short-term insurance, to the extent of 30 days, can be covered. If WestpointRealty were to enter into a commercial loan facility of the kind proposed I understand that the liability it would be incurring would be in the order of $150,000 or more. I am therefore prepared to make the orders proposed following exchanges with counsel for the Corporate Receivers, in the following terms:

Notwithstanding anything contained in the Orders made on 20 April 2006, as amended on 30 June 2006 and extended on 22 December 2006, the Corporate Receivers (as defined in paragraph 2 of those orders) shall be empowered and entitled in their discretion to effect, as agent of the Sixth Defendant, such short-term insurances, including property damage and business interruption insurances, as the Corporate Receivers consider are reasonably necessary, having regard to pre-existing arrangements, on behalf of the owners and operators of commercial properties which the Sixth Defendant manages.
The Corporate Receivers shall be entitled to immediately reimburse themselves, without the authorisation of the signatories required for the operation of the Sixth Defendant's bank accounts, from the Sixth Defendant's bank account for so much of the cost of such insurance as is incurred by the Corporate Receivers and the Sixth Defendant's bankers shall be permitted to allow such reimbursement.
The Corporate Receivers shall immediately provide to any person for whom they have effected short-term insurances notice of the time when the short-term insurances shall expire.
Liberty to apply for further orders at short notice. I certify that the preceding four (4) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable French.

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Judgment (10 paragraphs)

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