Lake Coogee Estate Management Pty Ltd ACN 115 352 504 v Australian Securities and Investments Commission

Effective from the date of this order, the order made on 11 May 2007 amended by orders on 7 May 2009 be further amended as follows: (a) In paragraph 4 the words after "The Scheme be wound up pursuant to s 601EE(1) of the Act and" and the whole of paragraph 5 be deleted and the following be inserted in its place:
…Mr Shaun Robert Fraser of care of McGrathNicol, 60 Margaret Street, Sydney NSW 2000, and James Thackray of care of McGrathNicol, 37 St Georges Terrace, Perth WA 6000, be appointed liquidators of the Scheme (Liquidators).
The appointment of the Liquidators is without prejudice to any claim, right or entitlement the Bank of Western Australia Ltd ACN 050 494 454 (Bank) has against any asset of the Scheme or the first, second or third plaintiff and, in particular, any claim, right or entitlement accruing to the Bank pursuant to registered fixed or floating charges over the assets of the first and second plaintiff numbered 1305595 and 1315307 respectively and Transfer of Land Act mortgages registered numbers J803889, J757616 and J757609 (Mortgages), any claim, right or entitlement at law, or the Bank's possession, sale and transfer of land mortgaged to the Bank pursuant to the Mortgages.
The first , second and third plaintiffs shall: (a) Within 7 days of the date of this order deliver to the Liquidators all Scheme Property in their possession, custody or control. (b) Use their best endeavours to assist the Liquidators in winding up the Scheme pursuant to these orders; and (c) Provide such information as may be reasonably required by the Liquidators to that end.
There be liberty to apply to the parties including the Liquidators on 48 hours notice.

REASONS FOR JUDGMENT 1 The plaintiffs in this proceeding have attempted to wind up an unregistered managed investment scheme (the Scheme) operating in contravention of the Corporations Act 2001 (Cth) (CA). The reasons for that course were outlined in my previous judgment in Lake Coogee Estate Management Pty Ltd ACN 115 352 504 v Australian Securities and Investments Commission [2009] FCA 471 (Lake Coogee No 1) (and see also the earlier decisions of Nicholson J (Lake Coogee Estate Management Pty Ltd v Australian Securities and Investments Commission (2006) 60 ACSR 281 and Lake Coogee Estate Management Pty Ltd v Australian Securities and Investments Commission [2007] FCA 692). 2 As explained in those judgments, the plaintiffs did not seek the usual orders in a winding up application. Rather they sought and obtained orders permitting them as operators to wind up the Scheme and for completion of the Scheme to constitute the winding up. 3 The original orders granting that permission were made by Nicholson J in Lake Coogee (2006) 60 ACSR 281 and in supplementary reasons in Lake Coogee [2007] FCA 692. In orders which I made in Lake Coogee No 1, the supplementary orders in Lake Coogee [2007] FCA 692 were amended to extend the period during which the Scheme was required to be completed but at the same time to improve the reporting of progress in the attempts to complete the Scheme to the investors in it. 4 As it transpires, the Scheme will not be completed within the currently required time and further, the Supervisor together with the Australian Securities and Investments Commission (ASIC) have advised that the Scheme is or is likely to become insolvent. 5 The current motion before the Court is an application by ASIC to end the administration of the winding up by the first plaintiff (Lake Coogee) and to complete the winding up by a newly appointed liquidator. 6 Service has been effected on Lake Coogee, on the controller appointed to the second plaintiff (ALB Developments) and on the investors in order that they be permitted an opportunity to consider and make submissions on the orders proposed. No opposition has been raised. 7 In Lake Coogee No 1, I set out the basis on which the Court is conferred with power to administer the Scheme (at [6]-[9]). In the present application, evidence is found in an affidavit of the appointed Supervisor, Mr Shaun Fraser of McGrathNicol and by Mr Antony Hirsch Cowan. Those affidavits annex a variety of documents. 8 With the affidavit of Mr Fraser are annexed the last two quarterly reports to the Court and to ASIC on the progress of the Scheme. Those reports are dated 19 August 2009 and 22 December 2009. Mr Fraser's last report indicates that the Scheme's current banking facilities are insufficient to pay all its current liabilities. Additionally, despite construction work for stages 1 and 2 being complete, the Scheme continues to incur costs of approximately $100,000 per quarter relating to fees to be paid together with interest of approximately $100,000 per month. Based on the costs incurred to 30 September 2009, indications are that Bank of Western Australia Limited will not recover the full amount of its secured debt, thereby rendering the Scheme either already insolvent or likely to be insolvent. 9 This insolvency or likely insolvency has arisen despite the fact that Stage 3 of the Project, subject to various conditions, has mostly been sold. 10 From all of this it can be seen that the development has not been completed as had been hoped by Lake Coogee and as was contemplated in the reasoning for and the making of orders by Nicholson J which I extended. Stages 1 and 2 are in the possession of Bank of Western Australia Limited and Stage 3 is being sold separately, such that completion of the Scheme as contemplated in the earlier orders is not a possibility. Evidence from Mr Fraser is that investors are unlikely to receive any return on their investment. In those circumstances, it is appropriate to accept the opinions of Mr Fraser and terminate the administration by Lake Coogee and place the administration with the registered liquidator as a person more appropriately qualified to adjudicate the collection of assets and administration of claims and attend to the distribution of surpluses, if any, amongst those entitled. 11 On the return of the motion by ASIC for the appointment of a registered liquidator in place of the administration by Lake Coogee, counsel appeared for the Bank of Western Australia Limited. Although the Bank did not oppose orders as sought by ASIC, it sought to supplement those orders with a paragraph which acknowledged that the Bank was entitled to be exercising its powers under its securities and, in particular, to be in possession of those properties in which such powers had already been exercised. 12 Mr Hargreaves, for the Bank, made it abundantly clear that the Bank was not seeking to fetter the liquidator's discretion in any way and that if there were any doubt about the matter, he would not oppose the liquidator reverting to the Court for further directions. In circumstances where there had been a lengthy and unusual attempt for Lake Coogee to resolve its financial difficulties during which the Bank had exercised its rights under its securities, the Bank sought to have its position acknowledged lest there be any doubt about the steps it had taken. 13 Whilst counsel for ASIC, Mr Slater and I both considered that the addition of the paragraph was unnecessary, Mr Slater acknowledged, I think correctly, that the paragraph was doing no more than acknowledging the status quo and that the liquidator would not be encumbered by the addition of such a paragraph. 14 Accordingly, order 5 below as slightly amended, has been included with the orders sought by ASIC. 15 The orders made are these:

Effective from the date of this order, the order made on 11 May 2007 amended by orders on 7 May 2009 be further amended as follows: (a) In paragraph 4 the words after "The Scheme be wound up pursuant to s 601EE(1) of the Act and" and the whole of paragraph 5 be deleted and the following be inserted in its place:
…Mr Shaun Robert Fraser of care of McGrathNicol, 60 Margaret Street, Sydney NSW 2000, and James Thackray of care of McGrathNicol, 37 St Georges Terrace, Perth WA 6000, be appointed liquidators of the Scheme (Liquidators).
The appointment of the Liquidators is without prejudice to any claim, right or entitlement the Bank of Western Australia Ltd ACN 050 494 454 (Bank) has against any asset of the Scheme or the first, second or third plaintiff and, in particular, any claim, right or entitlement accruing to the Bank pursuant to registered fixed or floating charges over the assets of the first and second plaintiff numbered 1305595 and 1315307 respectively and Transfer of Land Act mortgages registered numbers J803889, J757616 and J757609 (Mortgages), any claim, right or entitlement at law, or the Bank's possession, sale and transfer of land mortgaged to the Bank pursuant to the Mortgages.
The first , second and third plaintiffs shall: (a) Within 7 days of the date of this order deliver to the Liquidators all Scheme Property in their possession, custody or control. (b) Use their best endeavours to assist the Liquidators in winding up the Scheme pursuant to these orders; and (c) Provide such information as may be reasonably required by the Liquidators to that end.
There be liberty to apply to the parties including the Liquidators on 48 hours notice.
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 fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.

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