THE MERITS
10 The substantive evidence relied upon by ASIC, is set out in an affidavit of the appointed supervisor, Mr Sean Fraser, as well as an additional affidavit of Ms Yates. Mr Fraser has provided the last quarterly report (dated 6 March 2009) to the Court and to ASIC on the progress of the scheme. The plaintiffs' report to the investors has also been produced.
11 Mr Fraser expresses the view that investors are likely to be better off if the development proceeds to completion rather than terminates immediately. The plaintiffs agree with that view.
12 Mr Fraser refers to the progress of the development in his report to the Court and to ASIC, but he does note that there are challenges to completion of the scheme even in the extended timeframe.
13 In his opinion the development will require a further 12 months to complete construction and site works in a manner contemplated by the orders initially made by Nicholson J. ASIC has contended, and I accept, that it is appropriate to accept the opinions of Mr Fraser, and to extend the period for completion by 12 months.
14 There is a further issue. The plaintiffs, in seeking to continue the scheme, sought to ameliorate the unregistered and unprotected position of investors, with the reporting and supervising functions which had been ordered. Nicholson J, in his second judgment, referred to the plaintiffs' submissions that the additional reporting obligations enhanced investment protection and later concluded that the strength of the protections in the proposed orders, which included the further reporting obligations, made this case exceptional and justified the alternative means of winding up the scheme by the plaintiffs themselves being the operators. In the course of completing the scheme the plaintiffs have reported approximately every quarter, as to the progress.
15 As indicated, the supervisor is of the opinion that the information the investors are required to have to properly consider the progress of the scheme and the risks faced, is insufficiently provided in the reports to date. He sets out the information which he considers should be provided. ASIC submits and it is unopposed, that it is appropriate to accept the opinions of Mr Fraser as to the need to improve the content and quality of information provided to investors, particularly in the economic circumstances which prevail. The manner of adjustment suggested by Mr Fraser is also acceptable to the plaintiffs.
16 Accordingly, the initial orders which were made on 11 May 2007 by Nicholson J will be varied so as to both extend the scheme and to provide for additional reporting.
17 The orders that I make will be in accordance with the minute which has been provided by ASIC and that includes liberty to apply and provision for the costs of ASIC in relation to this motion (including any reserved costs) to be costs in the winding up.
18 I order as follows:
For the purposes of these orders the terms defined in the orders made on 11 May 2007 have the same meaning where those terms are used here:
1. Effective from the date of this order, the orders made 11 May 2007 be amended as follows:
a. In paragraphs 4.2 the number 24 be deleted and the number 36 be inserted in its place.
b. In paragraph 4.6 at the end, the following sentence be added: "The quarterly reports from the first plaintiff to Investors on the progress of the Scheme shall address each of the following subjects:
i. The progress achieved in the period since the last report including:
1. Development work;
2. Environment issues;
3. Approvals; and
4. Pre-sales and terminations.
ii. The completion of key milestones by reference to a project timeline chart which includes:
1. Constructions works;
2. Pre-sales;
3. Settlement of lot sales;
4. Repayment of debt; and
5. Payment of distributions to investors.
iii. The financial forecast for the Scheme to completion in current circumstances and by comparison to the Information Memorandum.
iv. Key elements of the financial forecast including:
1. Costs and revenue changes (both actual and forecast); and
2. Key risks to costs and revenues and their potential impact.
v. The progress of lot sales.
vi. Sensitivity analysis tables.
vii. Scheme finances including:
1. The status of each finance facility relevant to the Scheme, including the progress of and anticipated out comes expected for: approvals, reviews, variations, changes to limits, levels of funds drawn down; and
2. Identification of all covenant breaches.
viii. Management changes and changes to agreements with related parties."
2. There be liberty to the parties including the Supervisor to apply on 48 hours notice.
3. The Defendant's costs of this motion including any reserved costs be costs in the winding up of the Scheme.
I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.