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[2010] VSC 301
Supreme Court of Victoria
2010-06-30
JUDD J
Original judgment source is linked above.
COMMERCIAL AND EQUITY - Managed Investment Scheme- Winding up by a person appointed under s 601NF(1) of the Corporations Act 2001 (Cth) - Conflict of duty - Person appointed to wind up the schemes also the liquidator of the responsible entity - Directions in winding up under s 601NF(2) of the Corporations Act.
For the Commonwealth Bank of Australia and the Receivers and Managers of Environinvest Ltd
1 On 12 February 2009, I delivered judgment on the application by the receivers and managers of Environinvest Ltd for orders to wind up the managed investment schemes known as PYEP, PYEP 7 and PYEP 9. Orders were made directing the Prothonotary to nominate a person, from the role of official liquidators, to be appointed to take responsibility for ensuring that the schemes were wound up. For reasons which are not material to this application, it became apparent that there was great difficulty in finding an appropriate liquidator. At that time, James Patrick Downey was the liquidator of Environinvest. Mr Downey ultimately agreed to accept appointment as the person responsible to wind up the schemes under s 601NF(1) of the Corporations Act 2001 (Cth). He agreed to do so on condition that the Commonwealth Bank, which appointed the receivers and managers, grant to him a partial indemnity for his fees. The bank agreed to that condition.
2 Mr Downey's position as liquidator of Environinvest exposed him to the risk that conflicts would arise in connection with his duty to wind up the schemes. Some potential areas of conflict were readily identified. In order to deal with the possible conflict, a committee was established and procedures implemented to ensure that, where necessary, the court would supervise and could approve conduct which might otherwise be inhibited by reason of a real or perceived conflict.
3 On 11 March 2010 I delivered judgment on the application by Mr Downey, as liquidator of Environinvest, for approval to disclaim certain leases.[1] He submitted that while approval would not ordinarily be required, he had been directed by the committee of management to make an application because his decision may impact adversely on the interests of some scheme members. I made orders which, in effect, excused Mr Downey from any conflict, permitting him to do as he seemed rightly compelled to do, as liquidator of Environinvest, to disclaim the leases.
4 The present application is not made by Mr Downey in his capacity as liquidator of Environinvest, but in his capacity as scheme liquidator. Mr Downey commenced the proceeding on 4 May 2010 by Originating Process. He sought leave to amend his application in terms of a draft dated 21 June 2010. I grant him that leave. His application is made under s 511 and 601NF(2) of the Corporations Act for directions and orders in relation to the sale process for assets forming part of the scheme property of the managed investment schemes known as PYEP, PYEP 7 and PYEP 9. In this part of the hearing, Mr Downey sought the following orders:
(a) enter into and perform the asset sale deeds as follows:
(i) the asset sale deed exhibited as "JPD-50" to (his affidavit sworn 3 May 2010) (Asset Sale Deed);
(ii) relating to the property known as "Q2" exhibited as "JPD-52" to the Affidavit (Q2 Sale Deed); and
(iii) relating to the property known as "The Laurels" exhibited as "JPD-54" to the Affidavit (Laurels Sale Deed);
(b) make, do or execute such documents and things to give effect to the Asset Sale Deed, the Q2 Sale Deed and the Laurels Sale Deed; and
(c) extinguish the rights of the Growers in respect of the assets the subject of the Asset Sale Deed and the Laurels Sale Deed including by terminating and or surrendering any:
(i) sub-leases in respect of allotments entered into by Growers as part of their investment in a Scheme (Grower Leases); and
(ii) any other agreements or arrangements entered into by the Grower with respect to the Schemes.
(a) apportion the purchase price payable under the Asset Sale Deed (the Purchase Price) in the manner set out in Schedule 7 to the Asset Sale Deed;
(b) receive, from the Purchase Price, the sum of $1,522,756 representing the Growers rights or interests in or in relation to the forestry assets (Gross Tree Sale Proceeds); and
(c) pay the balance of the Purchase Price to the Commonwealth Bank of Australia pursuant to the terms of the Asset Sale Deed.
Power to terminate Grower Leases
(a) Caveat X629820L from the land in Volume 9505 Folio 438; and
(b) Caveat AB469889X from the land in Volume 1660 Folio 833 and Volume 9833 Folios 47 and 48.
...
Disclaimer powers
(a) PYEP Scheme consisting of the rights and interests of the Growers in the trees located on the properties commonly known as Emu Downs and Whitestone; and
(b) PYEP No. 9 Scheme consisting of the rights and interests of the Growers in the trees located on the properties commonly known Ledcourt and Pomonal
which is property that is unsaleable or is not readily saleable or is property where it is reasonable to expect that the costs and expenses that would be incurred in realising the property would exceed the proceeds of realising the property.
5 At a hearing on 13 May 2010, directions were made to ensure that scheme members, who were not then represented by Evans Ellis Law and Brian Ward & Partners (who were represented at the hearing) were notified of the applications. Directions were also made for the filing of further evidence. The applications were to be heard on 23 June 2010.
6 In support of his application, Mr Downey relied upon three affidavits sworn by him, dated 3 May 2010, 4 June 2010 and 21 June 2010 respectively. He also relied upon an affidavit of Craig Peter Sheppard sworn 4 June 2010, an affidavit of Ann Elizabeth Smith sworn 4 June 2010 and three affidavits of Lee Pascoe, each affirmed on 12 May 2010, 4 June 2010 and 21 June 2010 respectively. No affidavits were filed by any other party or interested person. The Commonwealth Bank and its receivers and managers wholly supported Mr Downey's application and the orders and directions sought by him.
7 The scheme members represented by Brian Ward & Partners appeared by counsel, as did ABL Nominees Pty Ltd and Primary Yield Finance Pty Ltd. I am satisfied that Mr Downey discharged his obligation to notify scheme members of his application and the date of the hearing.
8 The only contentious issue at the hearing was the apportionment of the proceeds of sale in the manner set out in Schedule 7 of an Asset Sale Deed between Environinvest (and associated entities) as sellers, Mr Downey as liquidator of the schemes, the receivers and Demeter Farming Australia Pty Ltd, as buyer.
9 The price payable under the Asset Sale Deed for the land, trees and other assets are $17.7 million, which was apportioned between the land and trees. The amount set aside for the land was $16.177,244 and for the trees, $1,522.756. That sum is capable of greater definition by reference to particular properties and allotments and schemes. For present purposes, it is sufficient to note that the amount set aside for PYEP scheme trees is $1,460,450 and for PYEP 7 scheme trees, $62,306. There was no allowance made for PYEP 9 scheme trees.
10 ABL Nominees submitted that a slightly different apportionment should be made by reference to an evaluation carried out by consultants, URS. More will be said about those valuations below. Suffice to say, ABL Nominees submitted that the allocation should be adjusted by increasing the amount allocated to members in the PYEP scheme to $2,724,000, in conformity with the URS valuation, with a corresponding reduction in the amount allocated to the land. In a "pragmatic" submission, ABL Nominees was willing to accept the amount allocated in Schedule 7 of the Asset Sale Deed for the rights and interests of members of PYEP 7, in the sum of $62,306, notwithstanding the fact that the URS valuation gave a negative value for those interests.
11 The scheme members submitted that the allocation made in the Asset Sale Deed should not be accepted, but did not propose an alternative allocation or valuation of members' interests. They submitted that this proceeding should be converted into a proceeding to members' interests where evidence might be adduced to enable the court to reach its own valuation and make an allocation between land and members' interests. The scheme members submitted that the approach taken by Mr Downey, when negotiating the sale and inviting an allocation between land and members' interests, was flawed because he failed to recognise the interest the members had in their leases. They submitted that he had narrowly defined the valuation of members' interests, by aligning them to the present value of the trees on their respective allotments.
12 The receivers of Environinvest have served default notices under the head leases. A standstill agreement between the receivers and Mr Downey designed to avoid re-entry, has now expired. It is now open to the receivers to terminate the head leases and thereby the growers' sub-leases, subject to any successful application for relief against forfeiture. Each of the schemes is hopelessly insolvent. Mr Downey does not have funds to pay rent or otherwise carry on any of the operations previously undertaken by Environinvest.
13 The constitution of each scheme provides that the winding up shall be conducted in accordance with the provisions of Part 5C.9 of the Corporations Act. Mr Downey is required to convert to money all scheme property, deduct all proper costs and then divide any balance between scheme members according to their interests. He is required to proceed with the winding up efficiently, diligently, and without undue delay. He may, however, postpone any part of the winding up if it is in the interests of scheme members to do so.
14 The Commonwealth Bank provided financial accommodation to Environinvest and related companies. Those facilities were secured by registered charges over assets and mortgages over land owned by Environinvest and related companies. The receivers were appointed by the bank on 22 September 2008 pursuant to a charge dated 16 May 2001.
15 Mr Downey has for some time endeavoured to realise scheme property, although confined in his efforts by limited resources. The central argument advanced by scheme members was that Mr Downey, the receivers and URS had approached the definition of scheme property incorrectly, assuming that its value was represented only by the present value of the trees on each relevant allotment or property, whereas they should have approached their analysis by reference to the value of the leases and a broader bundle of rights. That argument presupposed the leases and the businesses thereon (of growing trees) was a going concern with a value exceeding the present value of the crop.
16 While it is no doubt correct that scheme property is comprised of a bundle of rights enjoyed by scheme members, to be defined in the leases and management agreements, the distinction between that bundle of rights and the present value of the trees is, in the context of this case, a distinction without substance. The trees are all but abandoned. Environinvest is insolvent. The scheme members do not advance any plan or proposal for the future management of their allotments. Subject to any application for relief against forfeiture, the leases will inevitably terminate by reason of the termination of the head leases.
17 The growers have not foreshadowed any application for relief against forfeiture. They have not advanced any evidence of a value the leases may have in addition to the present value of the trees on the land. Upon a proper analysis, the true position may be that the value of the leases, as an item for valuation and proposed sale by Mr Downey, is significantly less than the present value of the trees. That may follow because the leases carry with them obligations, nor is there any guarantee of assignment.
18 Following his appointment, Mr Downey sought expressions of interest in the harvesting of scheme trees. His invitation was confined to the PYEP scheme, as the trees planted under the PYEP 7 and PYEP 9 schemes were immature and of doubtful value. In any event, there was no interest in such a proposal.
19 Mr Downey also sought cooperation from the receivers for a possible conjunctional sale of land and trees. An information memorandum was prepared and issued on 14 September 2009. It sought expressions of interest in 6,798 hectares of scheme trees, freehold and leasehold land and forestry and farming equipment. The conjunctional sale strategy was to sell the properties and other assets as a single lot. While there were some expression of interest for individual properties they were not regarded as beneficial to scheme members or by the bank, as the overall cost of marketing individual properties would outweigh the benefits gained if the assets were to be sold as one lot.
20 In the events that occurred, there were only two bidders who made offers for all assets. The bids were highly conditional and the bank was not satisfied with either of them. While rejecting the bids, Mr Downey and the receivers continued to engage some of the bidders in discussions towards reaching agreement.
21 The negotiations were further complicated because, during the period of negotiation, some of the leases over properties and trees had to be withdrawn from sale because third party landlords terminated head leases. The remaining assets available for sale, in addition to forestry and farming equipment, were the land and trees in Victoria on properties known as Yurunga North, Middle Creek, Glendalough, Baangal South, Pine Park, Roean, Morton Hill, Ross', Cross', Spring Hill, Hunters, Alexander 1, Alexander 2, Lonsdale Downs, Loyola and Ararat.
22 By the end of March 2010 there was only one interested purchaser. Demeter Farming eventually entered into the Asset Sale Deed, which is dated 29 April 2010. The Deed includes a number of conditions precedent. One such condition is that Mr Downey make a successful application to the court for orders authorising him to make and implement the agreement, approve the apportionment of funds, declare that the liquidator had power to terminate or surrender grower leases and for orders in relation to the termination of forest property agreements and for the removal of caveats over land. There was also a condition that the bank approve the apportionment and release its encumbrances.
23 As at 28 April 2010 Environinvest was liable to the bank in the sum of $59,214,513.82. The amount ascribed to the land, and payable to the bank under the Deed is $16,177,244. The balance, in the sum of $1,522,756 is payable to PYEP and PYEP 7 scheme members in respect of the trees on the land. No amount was allocated to PYEP 9 scheme members on the basis that the trees were of no commercial value.
24 There are two additional parcels of land involved in the PYEP scheme which do not fall within the Deed. The property Q2 is owned by Snodgrass Nominees Pty Ltd. The leases over that land have been terminated as a consequence of the termination of the head lease. Mr Downey has negotiated the sale of the trees on both properties to the owner at a price generally consistent with a valuation prepared by URS. Mr Downey also seeks approval to perform those agreements and sell those trees. The second property is known as Laurels. The landlords of that land are Twin Eagles (Vic) Pty Ltd and Peppercorn Tree Developments Pty Ltd. Although the head lease is terminable by reason of defaults in the payment of rent, the landlords of Laurels have not yet served notices of termination.
25 Mr Downey has entered into an agreement with the owners of Laurels under which they have agreed to pay $15,000 for the trees on the property. That amount is significantly lower than the value attributed to the trees by URS. Mr Downey deposed that there are significant reversion costs that justified the reduction in the sale price. He has received no other offers for the trees and has little alternative but to sell them to the owners at the best possible price.
26 In paragraph 1 of the originating process, Mr Downey seeks a declaration that he is justified in procuring Environinvest, as the responsible entity of the PYEP schemes and as agent and attorney of the growers, to enter into and perform the sale agreements and to extinguish grower rights to and interests in the scheme trees on the land the subject of the agreements. Mr Downey's position is complicated by his dual role as liquidator of Environinvest and liquidator of the schemes. Unlike the earlier application, he has not been required by the management committee to make the application, although he is required to do so under the Asset Sale Deed.
27 Were it not for his conflicting duties, Mr Downey would not ordinarily seek such approval. The growers objected to the court granting approval on the basis that it would in effect eliminate any prospect of challenge to the propriety of the decision of Mr Downey. I note that the only complaint by the scheme members was as to the apportionment, in the absence of any case to support a different apportionment. They would have the court embark upon a process of investigation which would probably result in little, if any, variation in the valuation of scheme property. Such a proceeding would probably have the effect of scuttling the only agreements Mr Downey has been able to reach to obtain something for the growers as a return on the trees.
28 Notwithstanding the dissatisfaction expressed by the growers to the apportionment process, and by ABL Nominees, who maintained a schizophrenic position when asserting the partial application of the URS valuation, no one has even approached the bank with a proposal for an adjustment in the allocation. In the circumstances it is difficult to regard the complaints and challenge to the apportionment as little more than a formality at best. I do not regard the challenges as raising any substantive basis upon which the allocation advanced by Mr Downey and as agreed by the bank should be rejected.
29 Notwithstanding the lack of merit in the challenges advanced on behalf of the growers and ABL Nominees, the court is required to satisfy itself that the decisions made by Mr Downey as liquidator of Environinvest and as liquidator of the schemes is one that ought to be approve, if only to resolve his conflict of duty.
30 Section 601NF(2) of the Corporations Act provides,
(2) The Court may, by order, give directions about how a registered scheme is to be wound up if the Court thinks it necessary to do so (including for the reason that the provisions in the scheme's constitution are inadequate or impracticable).
31 In my opinion this provision authorises the approval and declarations of the kind sought by Mr Downey.[2] It was not submitted otherwise. The asset sales agreements are a step in the process of winding up the schemes and converting scheme property into money. The necessity for the approval sought arises from the conditional nature of the agreements. The application is fully justified because of the position of conflict in which Mr Downey has found himself. It is to be noted that his position of conflict was imposed upon him by order of the court.
32 In addition to approval of the asset sale agreements, Mr Downey sought approval to terminate the grower sub-leases and any other agreements or arrangements entered into by any grower in respect to the schemes. Termination of these interests is a condition of the agreements.
33 The scheme constitutions provide that, during the winding up of the scheme, the responsible entity may terminate an arrangement "it has entered into with the Growers which relate to this project". The responsible entity is obliged to give notice of the termination of any such agreement or arrangement and that the required notice has been given by the steps taken to inform scheme members of this application.
34 It was not submitted by any party that Mr Downey did not have the power under the constitutions to terminate the sub-leases and other agreements or arrangements as may be required. Nevertheless, Mr Downey, quite properly, raised a possible issue of construction that might, he submitted, militate against the exercise of that power in respect of some sub-leases. It would appear that not all sub-leases were originally entered into between Environinvest, as responsible entity, and each grower. Some were initially entered into between a related company and the grower and subsequently assigned to Environinvest. The majority of such leases had been surrendered by the grower and re-granted by Environinvest to the grower. Thus, Mr Downey said, it might be argued that these leases not originally entered into between Environinvest and the grower fell outside the scope of the termination provisions in the scheme constitutions because such leases were not "agreements or arrangements it [Environinvest] had entered into".
35 In my opinion the relevant words in each of the constitutions should not be interpreted in such a narrow fashion. It was the obvious intention of the parties preparing the constitution that the power of termination during a winding up should extend to any lease or sub-lease to which Environinvest, as responsible entity, was a party. To limit the scope of the power so as to only authorise termination of sub-leases originally entered into by Environinvest would lead to an absurd outcome, which no reasonable person would have intended. Accordingly, I find that Mr Downey has the power to terminate sub-leases and other agreements or arrangements entered into by each grower with respect to the schemes.
36 In paragraph 2 of the Originating Process Mr Downey seeks a declaration approving the apportionment. He submitted that the apportionment made in the Asset Sale Deed between the amount to be paid to the bank and to the growers, and as between schemes, was fair and reasonable. Mr Downey submitted that the sale process was robust and competitive notwithstanding the fact that in the end he was only able to deal with one bidder. The fact that Mr Downey was ultimately obliged to negotiate the sale of the trees with one potential purchaser was less than desirable, although I am satisfied that he has acted diligently, appropriately and that the transaction represents the best deal he could achieve in the circumstances. That is the case for each of the sale transactions. There was no challenged to the overall value of the sale made under the Asset Sale Deed and no challenge to the value of the sale of the trees under the Q2 sale deed or the Laurels sale deed.
37 In respect of the PYEP scheme trees, the growers and ABL Nominees point out that the allocation of the sale price to trees was less than the amount of their valuation by URS. The URS valuations are no doubt a useful guide, although the growers complained that URS proceeded on a similar misunderstanding to that of Mr Downey by failing to value (or offer for sale) the grower leases, concentrating instead on the trees as the asset for valuation and sale. In the circumstances of this case I reject that criticism as having no substance. The leases, if maintained and offered for sale would probably attract a lesser value than the trees alone. No one has advanced a plan or proposal for maintaining any allotment or tree until maturity of the crop.
38 URS valued the land and trees in the PYEP scheme at $19,142,000. The trees were attributed a value of $2,724,000. That represents 14.23 per cent of the total. A comparison of the amounts allocated for land and trees under the Asset Sale Deed, in aggregate, yields a result which attributes only 9.62 per cent of the total amount to the trees. Various calculations were undertaken in an attempt to analyse the relationship between the allocations on a property by property basis, some of which yield comparisons more favourable to the growers and percentages when compared to the URS valuations. In the end, however, the fact remains that there is a price and an allocation with which Mr Downey is satisfied and to which the bank has agreed. That allocation is not so far from the URS valuations as to make it appear arbitrary or unfair. One by-product of departing from the URS valuation is that the growers in the PYEP 7 scheme get something, whereas URS valued these trees as a negative sum.
39 The agreements for which Mr Downey now seeks approval are the only agreements he has been able to reach in his efforts to recover any value for scheme members. The proposal advanced on behalf of the growers, to defer the matter until such time as the court could undertake its own valuation and apportionment, is impractical. It is not the function of the court to undertake such an enquiry. In any event, to do so would probably result in a termination of the Asset Sale Deed by reason of the failure of a condition precedent.
40 In paragraph 5 of the Originating Process, Mr Downey seeks a declaration that the forest property agreements which are listed in Schedule 2 of the initiating process, will be terminated or surrendered with immediate effect upon the termination of grower leases. Each such agreement is comprised of the lease registered by the grower under the Forestry Rights Act 1996 (Vic). Registration of the lease as a forestry property agreement does not confer an enduring right or interest in land or in the scheme that survives termination of the lease. The only significance of registration is that while the grower leases remain extant the burden of any covenant runs with the land and may be enforced against any persons who derive title from the party granting the interest. Upon termination of the lease, the force and effect of a forestry property agreement comes to an end. There are no surviving rights or interests that run with the land or that may be enforced by growers.
41 Mr Downey submitted that it was the responsibility of the growers to notify the Registrar of Titles of any termination of a forestry property agreement. Once the leases are terminated, whether by reason of termination of head leases or by Mr Downey, it is unlikely that growers will notify the Registrar of Titles. Notification is required if the encumbrance is to be removed from the title. Mr Downey seeks the declaration to enable him to effectively remove the encumbrances from title. He may then, notify the Registrar of Titles who will effect removal of the registration of the agreements from title. The Registrar of Titles has advised Mr Downey, by letter dated 12 May 2010, that if a declaration to the effect sought in paragraph 5 of the Originating Process is made, Mr Downey may make application to have each encumbrance removed.
42 In paragraph 6 of the Originating Process, Mr Downey seeks an order that the Registrar of Titles remove certain caveats. The caveats were lodged by the first and second defendants, Mr Misko and Blue Gum Partnership. They were growers in the PYEP scheme. They asserted an interest, as lessees under grower leases, over the land described in the relevant certificates of title. Their interests will be extinguished upon termination of their grower leases.
43 Mr Downey's application is made pursuant to s 90(3) of the Transfer of Land Act 1958 (Vic). That sub-section provides:
(3) Any person who is adversely affected by any such caveat may bring proceedings in a court against the caveator for the removal of the caveat and the court may make such order as the court thinks fit.
44 Neither Mr Misko nor the Blue Gum Partnership have filed any affidavit material to support their caveats and no submission was made on their behalf that an order removing the caveat should not be made.
45 The caveators unregistered interests do not have priority over the interest of the bank. Such interest as the caveators have must be terminated in order for the Asset Sale Deed to be implemented. Mr Downey has made it plain that upon receiving the approval of the court for the course of action proposed by him, he will terminate the grower leases in order to satisfy conditions precedent under the Asset Sale Deed. On that basis, I propose to make orders that upon termination of a grower lease supporting caveat X6298204 in respect of the land described in certificate of title Volume 9505 Folio 438, the caveat be removed; and upon termination of the grower lease or leases supporting caveat AB469889X in respect of the land described in certificate of title Volume 1660 Folio 833 and Volume 9833 Folios 47 and 48, the caveat be removed. While it is usual that the caveator is ordered to remove the caveat, I propose to order that the Registrar of Titles do so in the event that each caveator has not done so within 7 days of this order.
46 When exercising his power and duty to wind up the schemes, Mr Downey has no power equivalent to that expressly conferred by s 568(1) of the Corporations Act to disclaim property. In his capacity as the person responsible for ensuring that the schemes are wound up, he requires a direction from the court to the effect that he is justified in not attempting to realise or to convert into money property which is unsaleable or which is not readily saleable or property where it might reasonably be expected that the costs and expenses incurred in realising the property would exceed the proceeds of realisation. Mr Downey seeks such a direction in relation to trees forming part of the PYEP scheme on properties known as Emu Downs and Whitestone.
47 Mr Downey contends that the PYEP scheme trees on Emu Downs and Whitestone are unsaleable because there is no reliable process by which he can readily identify the trees held on trust for PYEP scheme members. They are intermingled with trees belonging to other growers, known as Excluded Offer Growers. The EOG grower schemes are not the subject of any order for winding up.
48 Approximately 17.5 hectares of an overall of 197.5 hectares of Emu Downs Plantations is, according to investor allocations described in a map prepared by Environinvest in 2004, PYEP plantation. But a plantation overview, prepared by Environinvest in 2005, bears little resemblance to the investor allocations map. References to EOG leases, which contain plans purporting to show the location of grower allotments, do not assist.
49 For the property Whitestone, approximately 150 hectares of plantation out of a total of 247.5 hectares is allocated under EOG leases. The remaining 97.5 hectares appears to be part of the PYEP scheme. Like discrepancies are apparent in relation to those plantations as for Emu Downs. If Mr Downey is to resolve the discrepancies, in the absence of agreement from all interested parties, there will remain a risk that any sale may result in the inadvertent conversion of trees which fall outside the PYEP scheme plantation.
50 Mr Downey accepts that it might be possible to engage a surveyor to conduct a survey of the properties in order to differentiate between excluded offer grower trees and PYEP scheme trees although the cost of doing so would be significant. He does not have funds to undertake the work. Mr Downey is also of the opinion that the cost of undertaking such a survey would probably outweigh any benefit achieved from a subsequent sale of the trees. The PYEP scheme trees appear to have been planted over a number of years in respect of different offers under the PYEP scheme.
51 The intermingling of trees also means that it would be extremely difficult, if not impossible, to undertake a conjunctional sale of land and trees. As a consequence, Mr Downey has concluded that there is no utility in seeking to realise the PYEP scheme trees on Emu Downs and Whitestone. He seeks to be excused from his obligation under the constitutions to convert that scheme property to money.
52 Mr Downey also seeks to be excused from converting the PYEP 9 scheme property into money. Those trees were planted on properties known as Ledcourt and Pomonal. Environinvest is the registered proprietor of the land which is encumbered by first mortgage to the St George Bank. St George Bank has refused to recognise the grower leases executed between Environinvest and some scheme members on the basis that it did not consent to Environinvest entering into such leases. If the contention of St George Bank is correct scheme members may have no entitlement to any proceeds from the sale of the trees on the leased land.
53 Attempts made by Mr Downey to engage in a conjunctional sale process with St George Bank have not proved successful. St George intends to realise the freehold interest in the Ledcourt and Pomonal properties as mortgagee in possession without reference to the rights of any growers. Mr Downey does not have sufficient funds to prosecute a claim against St George Bank to maintain the validity of the grower leases or assert an entitlement to some or all of the trees. For the same reason he is unable to assert a claim against an incoming purchaser or require such a purchaser to pay an amount for the trees.
54 Mr Downey is also of the opinion, based upon the books and records of Environinvest, that the trees planted on those properties were planted as part of a 2006 project. As such, they are relatively immature. Mr Downey is of the view, based on advice received, that they are unlikely to yield any significant value on realisation.
55 I am satisfied that Mr Downey is entitled to relief substantially in terms of paragraphs 1, 2, 3, 5, 6 and 10 of his amended originating process dated 21 June 2010. I propose to make the following declarations and orders:
(a) enter into and perform the asset sale deeds as follows:
(i) the asset sale deed exhibited as "JPD-50" to the affidavit of James Patrick Downey sworn 3 May 2010 (Asset Sale Deed);
(ii) relating to the property known as "Q2" exhibited as "JPD-52" to the Affidavit (Q2 Sale Deed); and
(iii) relating to the property known as "The Laurels" exhibited as "JPD-54" to the Affidavit (Laurels Sale Deed);
(b) make, do or execute such documents and things to give effect to the Asset Sale Deed, the Q2 Sale Deed and the Laurels Sale Deed; and
(c) extinguish the rights of the Growers in respect of the assets the subject of the Asset Sale Deed and the Laurels Sale Deed including by terminating and or surrendering any:
(i) sub-leases in respect of allotments entered into by Growers as part of their investment in a Scheme (Grower Leases); and
(ii) any other agreements or arrangements entered into by the Grower with respect to the Schemes.
(a) apportion the purchase price payable under the Asset Sale Deed (the Purchase Price) in the manner set out in Schedule 7 to the Asset Sale Deed;
(b) receive, from the Purchase Price, the sum of $1,522,756 representing the Growers rights or interests in or in relation to the forestry assets (Gross Tree Sale Proceeds); and
(c) pay the balance of the Purchase Price to the Commonwealth Bank of Australia pursuant to the terms of the Asset Sale Deed.
(a) Caveat X629820L from the land in Volume 9505 Folio 438; and
(b) Caveat AB469889X from the land in Volume 1660 Folio 833 and Volume 9833 Folios 47 and 48;
- and in default the Registrar of Titles shall remove each such caveat.
(a) PYEP Scheme consisting of the rights and interests of the Growers in the trees located on the properties commonly known as Emu Downs and Whitestone; and
(b) PYEP No. 9 Scheme consisting of the rights and interests of the Growers in the trees located on the properties commonly known Ledcourt and Pomonal.
[1] Environinvest Ltd v Great Southern Property Managers Ltd (No. 2) [2010] VSC 323.
[2] Re Stacks Managed Investments Ltd [2005] NSWSC 753; (2005) 219 ALR 532, [52]; Re Rubicon Asset Management Ltd [2009] NSWSC 1068; (2009) 74 ACSR 346, [51].
(2005) 219 ALR 532