MATTER : PWL - ACN 084 252 488 LTD (FORMERLY PALANDRI WINES LIMITED) ACN 084 252 488 (ADMINISTRATORS APPOINTED) AS RESPONSIBLE ENTITY OF MARGARET RIVER WINE BUSINESS ARSN 086 241 198, MARGARET RIVER WINE BUSINESS TRUST ARSN 119 602 505, PALANDRI AMERICA WINE BUSINESS ARSN 098 544 908, PALANDRI WINEGRAPE PROJECT 2005/2006 ARSN 114 193 234, PALANDRI GLOBAL SUPPLY CHALLENGE 2007 - 2008 ARSN 124 150 616 AND PALANDRI AGRICULTURAL PROPERTY TRUST ARSN 114 192 933

PWL LTD (FORMERLY PALANDRI WINES LTD) (ADMINISTRATORS APPOINTED) (ACN 084 252 488)

Originating summons - Corporations - Voluntary administration - Managed investment schemes - Winding­up

Corporations Act 2001 (Cth)

Corporations Regulations 2001 (Cth)

Trustees Act 1962 (WA)

1 EM HEENAN J: By originating process dated 15 August 2008 the plaintiff, presently the responsible entity of the six registered management investment schemes which will be described more fully later, itself a company in voluntary administration, sought orders and declarations for the winding-up of each of those management investment schemes, ancillary orders and, ultimately, the appointment of designated persons other than the plaintiff to conduct the winding-up of each of the schemes. The application is made pursuant to s 601ND(2)(a) and s 601NF(3) of the Corporations Act 2001 (Cth) (the Act) and, further or alternatively, pursuant to s 93 of the Trustees Act 1962 (WA).

2 In relation to one of the managed investments schemes, namely the Margaret River Wine Business ARSN 086 241 198 (MRW scheme), the application is made first on the basis that the responsible entity considered in 2006 that the purpose of the scheme would not be accomplished and that the winding-up should therefore proceed under s 601NC(2) of the Act and be treated as commencing on 15 December 2006. Secondly, and alternatively, the application relies on s 601ND(1)(a) of the Act by seeking to establish that it is just and equitable that the court should make an order to wind-up the MRW scheme.

3 In relation to the five other investment schemes, the application relies solely upon the just and equitable ground under s 601ND(1)(a) of the Act.

4 In relation to each of the six managed investment schemes the application seeks ancillary relief under s 601NF(3) of the Act and, further or alternatively, pursuant to s 89 or s 92 of the Trustees Act for the court to appoint a person other than the responsible entity to ensure that each registered scheme is wound-up in accordance with its constitution and any orders which the court may make, now or later, in relation to the winding-up. In this regard the application seeks that two named persons, Mr Mark Anthony Conlan and Mr Neil Raymond Cribb, each an official liquidator, be jointly and severally appointed as the persons responsible for ensuring that each of the six schemes is wound-up as required by s 601NF(2). Messrs Conlan and Cribb have consented to act in those roles, if so appointed, and there is every reason to accept that they are suitable persons well qualified to discharge such roles if appointed.

5 The nature of a managed investment scheme under this legislation and under earlier legislation has been canvassed and explained in many previous decisions including Australian Softwood Forests Pty Ltd v Attorney-General (NSW); Ex rel CAC [1981] HCA 49; (1981) 148 CLR 121; ASIC v Chase Capital Management Pty Ltd [2001] WASC 27; (2001) 36 ACSR 778; Kay v ASIC [2002] WASCA 299 and ASIC v Knightsbridge Managed Funds Ltd [2001] WASC 339 (affirmed on appeal in Kay v ASIC).

6 Pullin J undertook an historical examination of the law which relates to managed investment schemes in ASIC v Knightsbridge Managed Funds Ltd [39] - [49] and these findings were upheld on appeal: see Kay v ASIC [50] (Wallwork J).

7 The proceedings were initially commenced by the plaintiff on an ex parte basis but the plaintiff sought directions for notice of the proceedings to be given. By order dated 18 August 2008, Martin CJ directed that the voluntary administrators of the plaintiff should give notice, in an approved form, to each of the investors in the various schemes as set out in a list submitted on behalf of the administrators and being exhibit GPD134 to the affidavit of Mr G P Doran sworn 15 August 2008. Such notice was to include a statement prepared by the voluntary administrators explaining that the plaintiff had applied to wind-up each of the six managed investment schemes; the reasons why the plaintiff had brought the application; notifying persons claiming to be members of any one or more of the schemes that they may be heard in the matter providing that they enter an appearance by a given date; and that they might obtain a copy of the originating process and affidavits filed in support of the application upon request together with a copy of the order for directions of 18 August 2008.

8 The learned chief justice also directed that the documents required to be sent by the previous terms of that order, with some exceptions, should be published on a specified page of the administrators' website and that, by a later date, the voluntary administrators should cause a notice to be published giving the details of the application and the terms of the order for directions in a national newspaper and in a daily newspaper circulating generally in each state or territory in which the plaintiff has a registered office or has carried on business. His Honour's directions concluded with an order that any person who wished to appear and be heard should enter an appearance by 1 September 2008.

9 Eventual compliance with the directions contained in the order of Martin CJ of 18 August 2008, subject to unavoidable delays due to the magnitude of the tasks, was proved by a subsequent affidavit of Mr G P Doran sworn 2 September 2008. That affidavit also details responses received by the administrators from certain members of the investments schemes, in particular, from Mr Daryl Henthorn, who claimed to be representing a significant number of members in the schemes (including Mr Stuart Hillier and Mr Ross Tarrant and others) and who claimed to represent approximately 2000 members of various schemes.

10 Not all of the persons who contacted the administrators were members of one or other of the schemes but some purported to be assisting or representing other persons who were.

11 As a result of further communications between the administrators, these persons and a firm of solicitors, two investors in the schemes, Messrs Hillier and Tarrant filed notices of appearance in these proceedings. That led to an order being made by Martin CJ on 3 September 2008 joining Messrs Hillier and Tarrant, respectively, as the first and second defendant to the proceedings and extending time for any other person who wished to appear and be heard until 10 September 2008.

12 However, Messrs Hillier and Tarrant later decided to seek leave to withdraw their appearances and, by consent, I made an order on 19 September 2008 pursuant to Rules of the Supreme Court 1971 (WA) O 43 r 16, that Messrs Hillier and Tarrant have leave to withdraw their appearances; that the appearances were thereupon to be treated as withdrawn; and that they each ceased to be defendants. Further consequential orders, directing that there should be no order as to costs between the plaintiff and either of those defendants and that those defendants be excused from complying with par 3 of the order for directions of 3 September 2008, were also made by consent. It follows, therefore, that from that date on the applications have proceeded unopposed.

13 There is another company associated with the activities of the plaintiff and the six investment schemes which is not a party to these present proceedings but which, nevertheless, needs to be identified; being PFL - ACN 090 580 500 Ltd (Formerly Palandri Finance Ltd) (Administrators Appointed) (hereinafter referred to as Palandri Finance). Messrs Cussen, Doran and Greig are also the voluntary administrators of Palandri Finance having been appointed to that role on 26 February 2008. Their roles, both as administrators of the plaintiff and Palandri Finance, are being conducted in conjunction with their roles as administrators of Palandri Finance. On the evidence to which I am about to refer, both of those companies are presently insolvent.

14 The affidavit evidence in support of the applications for the winding-up of these six schemes is voluminous. It consists of:

(a) an affidavit of Samuel Charles Cooper Burton, sworn 13 August 2008;

(b) an affidavit of Gary Peter Doran, sworn 15 August 2008 (12 volumes);

(c) an affidavit of Dianne Margaret Davidson, sworn 19 August 2008;

(d) an affidavit of Tony Kim Zaffino, sworn 2 September 2008;

(e) an affidavit of Gordon Grant, sworn 2 September 2008;

(f) an affidavit of Gary Peter Doran, sworn 7 September 2008;

(g) an affidavit of Samuel Charles Cooper Burton, sworn 19 September 2008; and

(h) an affidavit of Gary Peter Doran, sworn 19 September 2008.

15 From this evidence the following, but much abbreviated, account of the background and pertinent considerations can be derived.

16 It is the course of the administration of those two companies which had led to these proceedings seeking the winding-up of the six managed investment schemes and the appointment of other persons, in place of the plaintiff, as the existing responsible entity, to be responsible for the winding-up. Nevertheless there is considerable interaction between the administrations of the companies and the proposed winding-up of the schemes and this present application must therefore be seen in that wider context.

17 Adjourned meetings of the creditors of the two companies in administration are due to occur in October 2008. From separate proceedings in this court, which I also heard on 23 September 2008, namely CIV 2062 of 2008 and CIV 2064 of 2008, it is apparent that it is the intention of the administrators at the meetings of creditors of those two companies due to occur later this month, either to propound a proposed deed of company arrangement (DCA) applicable to both companies or to recommend that one or both of the companies be placed in liquidation. Just which course will be followed will depend upon proposals still under negotiation with certain creditors and others. Nevertheless, whichever course may be eventually recommended by the liquidators or decided upon by the creditors, there is no realistic prospect that the plaintiff, PWL, will be able to continue to act as the responsible entity of any of these six investment schemes.

18 The evidence also reveals that there is no practicable prospect of securing another person or entity to take on the obligations of the responsible entity for any of the six investment schemes nor of raising the capital which would be necessary to allow any of them to be carried on with a view to profit, notwithstanding that if sufficient capital could be raised there is a prospect that, in the long term, some of the schemes might become profitable. This is essentially the basis upon which the application for the winding-up of each of the six schemes is now advanced but it is important to record that a significant feature of the DCA which is under consideration by the voluntary administrators for recommendation to the meetings of the creditors of the two companies, is a condition that each of the investment schemes be wound-up if the DCA is to be adopted. Essentially it is that condition, that each of the schemes be wound-up, which is responsible for the urgency of this present application being brought on for hearing and determination before the meetings of creditors of the two companies are held.

19 It is not necessary in these proceedings to describe fully the former role of Palandri Finance, other than to say that it performed an important function in providing finance to various members of the several schemes, and for the activities of those schemes. The two companies collectively, and the six investment schemes, have repeatedly, if somewhat colloquially, been referred to as members of the Palandri Group, a usage which has been continued in the affidavits and in the submissions in support of this application.

20 The six registered managed investment schemes are, respectively:

(a) Margaret River Wine Business ARSN 086 241 198 (MRW scheme);

(b) Margaret River Wine Business Trust ARSN 119 602 505 (MRWBT scheme);

(c) Palandri America Wine Business ARSN 098 544 908 (PAWB scheme);

(d) Palandri Winegrape Project 2005/2006 ARSN 114 193 234 (PWP scheme);

(e) Palandri Global Supply Challenge 2007 - 2008 ARSN 124 150 616 (PGSC scheme); and

(f) Palandri Agricultural Property Trust ARSN 114 192 933 (PAPT scheme).

21 There are three bases for the applicant's contention that it is just and equitable that each of the managed investment schemes should be wound up, namely:

1. Each scheme is insolvent or not viable for members, and is unlikely to recover from this position;

2: None of the schemes can achieve its intended purpose because of:

(a) the financial condition of each of the schemes;

(b) in the case of MRW, MRWBT, PWP and PGSC schemes:

(i) there are likely to be competing entitlements to the same vineyard land by members of those schemes and the resolution of those issues will result in some members losing any entitlement which they might otherwise have to vineyard lots; and

(ii) significant capital expenditure is required in order to keep the vineyards producing grapes in circumstances where there is no one who is likely to provide that capital expenditure.

3: The responsible entity for each scheme is insolvent and it is highly unlikely that any person will replace the plaintiff as the responsible entity of any of the particular schemes.

22 The Palandri companies owned or operated various vineyards and other properties on which the businesses of the various schemes were, or were to be, carried on. There are five such vineyards or properties, namely:

• Frankland River Vineyard 1
• Frankland River Vineyard 2
• Palandri Reserve
• Harvey Vineyard
• Cookernup property

These are together referred to in the evidence as 'the Palandri Vineyards'. Of these, the Cookernup property was intended to be a vineyard but no vines have yet been planted. A fuller description of the individual vineyards is to be found in the affidavit of Mr G P Doran sworn 15 August 2008 at pars 19 - 57.

23 A detailed report of the anticipated costs and revenues (but only upon a 'grape sale' basis) associated with a continuation of attempts to run the Palandri Vineyards for the remaining life of the grape growing schemes is contained in the report of Davidson Viticulture (the DV report) which is exhibit SCCB2 of the affidavit of Mr S C C Burton of 13 August 2008. While this analysis concludes that the Palandri Vineyards (as opposed to the schemes), have positive cash flows, that conclusion does not take into account the extent of the obligation of scheme members to make payments nor their entitlements to receive revenue. That, however, is addressed in the viability analysis in Mr Doran's affidavit and by exhibit GPD133. The significance of that analysis will be examined later.

24 Four of the schemes were, or are, directly concerned with growing grapes on the Palandri vineyards:

• MRW scheme;
• PAWB scheme;
• PWP scheme;
• PGSC scheme.

In addition to this grape growing activity, in past years each of the MRW and PAWB schemes were concerned with the sale of wine for the benefit of its members.

25 In these proceedings the MRW scheme stands in a distinct position. In 2005 and 2006 it was to be restructured and replaced by the MRWBT scheme and all the members of the MRWBT scheme were formerly members of the MRW scheme. At the time of this proposed restructuring, the members of the MRW scheme were offered units in the MRWBT scheme in return for their interests in the MRW scheme. Approximately 85% of the members in the MRW scheme accepted that offer but the remaining 15% did not. The plaintiff then took steps to commence the winding-up of the MRW scheme and it is because of that initiative that the plaintiff is now seeking a declaration that the winding-up of the MRW scheme commenced on 15 December 2006 as an alternative to an order that the winding-up should now commence. It will be necessary to return to the question of whether or not any steps to commence the winding-up of the MRW scheme in December 2006 were effective or whether they were simply abandoned. However, the fact of the matter is that, notwithstanding that 15% of the members of the MRW scheme did not transfer to the MRWBT scheme, no efforts were made to attempt the continuation of the management or the achievement of the objects of the MRW scheme after that point.

26 The sixth and remaining scheme, the PAPT scheme, is concerned with holding the various agricultural properties, such as for example, some of the Palandri vineyards for the benefit of members.

27 Under the terms of the schemes, the various members were required to make an initial financial contribution or investment. In many instances, members obtained a loan for this investment or contribution from Palandri Finance and in return gave Palandri Finance security over their respective interests in the various schemes. Members who financed their contributions or investments to a scheme by these means remain liable to repay those respective loans together with interest to Palandri Finance. Should any member default in his or her obligations to repay Palandri Finance in this regard then that company could, among other courses available, appoint a receiver over that member's interest in the particular scheme. But, as already noted, Palandri Finance is insolvent and because the various schemes are either not functioning or not functioning profitably, the ability of Palandri Finance to recover many of these loans to members is extremely doubtful.

28 Generally speaking the structure of the four main grape growing schemes (MRW, PAWB, PWP and PGSC schemes) can be summarised by noting that:

(a) The members (called growers) invested in the scheme by making an initial payment and then by paying rent and ongoing maintenance fees.

(b) The responsible entity for each scheme (namely the plaintiff) entered into a lease and management agreement in respect of a plot of land (called a vineyard lot) with each member/grower.

(c) Pursuant to the terms of the lease and management agreements:

(i) the plaintiff, or a company related to it, leased the vineyard lot to the grower; and

(ii) the plaintiff agreed to manage (including to maintain and to harvest) the vineyard lot for the grower in order to produce grapes.

(d) The member/grower became entitled to the proceeds of the sale of the relevant scheme product less certain deductions including rent payable under the lease and the management fees.

29 The three schemes involving the sale of wine (MRW, MRWBT and PAWB schemes) provide for the bottling, packaging, marketing, distribution and sale of wine in addition to the growing of grapes. Fees are charged for carrying out these activities by the responsible entity (the plaintiff) and the members/growers become entitled to the net proceeds from the sale of the wine.

30 The sixth scheme, the PAPT scheme, is concerned with holding property for the benefit of members. It is not concerned with the growing of grapes or the sale of wine. Nevertheless, most of the trust property held by the PAPT scheme consists of the Harvey Vineyard and the Cookernup property which were leased to members/growers of some of the grape growing schemes. The objective of the PAPT scheme is to provide a yield to unit holders which would give a return greater than market rates. Primarily this would come in the form of partly tax-advantaged income with some capital growth prospects over the long term.

31 Under this scheme, income should be distributed to unit holders in accordance with the scheme constitution. This income is derived from the lease of the vineyards mentioned to the members/growers of the grape growing schemes. However, because of the parlous condition of the various grape growing schemes there are difficulties in the recovery of the rents due under the various leases. Unit holders of the PAPT scheme are liable to pay fees, including a management fee, to the plaintiff, the responsible entity for its role in managing and operating the PAPT scheme. It was expected that these fees would be payable from the rental income generated under the leases to the members and growers under the wine production schemes but, as already described, this is now very precarious.

32 Steps were taken towards the winding-up of the MRW scheme in 2006. I have already noted that following the incomplete arrangements to transfer members from the MRW scheme to the MRWBT scheme, some steps were taken in November 2006 which might be regarded as commencing a winding-up of the MRW scheme and it is therefore necessary to examine the history of these activities in more detail.

33 The MRW scheme was established as an integrated wine business. Members of the scheme were granted sub-leases of 'vineyard lots' on which they were entitled to grow wine grapes. These grapes were then to be harvested, processed into wine and sold. The return to the members would come in the form of their entitlements to share in the proceeds of the sale of the wine. To achieve this, members of the MRW scheme entered into the MRW scheme Lease and Management Agreements (LMAs). Again, speaking generally, these LMAs provided for:

(a) the payment by members of rent for the lease and a management fee (payable annually);

(b) the detailed obligations of the plaintiff, as responsible entity, with respect to the proceeds derived from the sale of wine; and

(c) details of the services to be provided by the plaintiff in return for the payment of the maintenance fee under the LMAs.

34 Typically, the services of the plaintiff as the responsible entity required it to maintain each member's vineyard lot, to harvest and process all the grapes into wine and to undertake the marketing and sale of the wine produced.

35 The MRW scheme operated several projects. So far as can be ascertained, the projects into which the various members of the MRW scheme were placed seems to have depended upon which particular prospectus members subscribed to for their interests in the scheme. There were three such prospectuses and three such projects, namely:

• Project 1 - prospectus dated 6 April 1999 (Doran affidavit page 571(3));
• Project 2 - prospectus dated 21 June 2000 (Doran affidavit page 660(3));
• Project 2A - prospectus dated 29 January 2001 (Doran affidavit page 720(3)).

The members of the MRW scheme were granted sub-leases of vineyard lots on various parts of Frankland River Vineyard 1.

36 In or about August 2005, the plaintiff formulated a proposed restructure of the MRW scheme. It carried out this proposed restructure throughout 2006, to a degree, by offering MRW scheme members units in the MRWBT scheme in exchange for their interests in the MRW scheme. This was done by way of two offer documents (see Doran affidavit pages 1365(6) and 1403(6)). The offer was open only to members of the MRW scheme. About 1,616 members of the MRW scheme accepted the offer and about 362 members did not. The 362 members who did not accept the offer represent about 14.5% of the total number of interests in the MRW scheme.

37 Next, by notice dated 16 November 2006, apparently sent to members of the MRW scheme by Mr Darryl Jarvis (then chief executive officer of the Palandri Group and a director of the plaintiff), the members were informed that the purpose of the MRW scheme could not be accomplished and that the MRW scheme should be wound up. This notice was said to have been given pursuant to s 601NC(2) of the Act. Under that section, if notice to the effect that the purpose of a scheme cannot be accomplished is given with a view to winding-up the scheme, the responsible entity is obliged to give such notice in writing to the members of the scheme and to the Australian Securities and Investments Commission (ASIC). So far as the present administrators of the plaintiff can ascertain, the only notice given to ASIC was the lodgement of the form prescribed by reg 5C.9.01 which asserted that the winding-up had commenced on 17 November 2006 (see Doran affidavit page 1261(5)). By reg 5C.9.01, the prescribed form should have been lodged with ASIC within 14 days of the commencement of the winding-up. Counsel for the plaintiff submits that by reason of the provision of s 601NC(3) of the Act, such a winding-up does not commence before the expiration of the 28 day notice period referred to in s 601NC(2) and that s 601NC(2)(c) only permits the responsible entity to commence winding-up of the scheme if members have not called a meeting to consider the proposed winding-up within 28 days of notice being given to them.

38 As far as the administrators of the plaintiff are able to ascertain, no such meeting to consider the proposed winding-up of the scheme was ever called by the members. Consequently, counsel for the plaintiff submits, although notice of this proposed winding-up to ASIC was given, the form submitted incorrectly stated the date of the commencement of the proposed winding-up. It is on this basis that the plaintiff submits that a declaration that the commencement of the winding-up of the MRW scheme occurred on 15 December 2006 (that is 28 days after the service of notice on the members) should be made.

39 However, there is nothing in the evidence which the administrators of the plaintiff have been able to locate to show that any steps were taken by the plaintiff to wind-up the affairs of the MRW scheme. Apart from issuing interests in the MRWBT scheme to the 85% in number of the members of the MRW scheme who appear to have elected to accept them in exchange for their former interests, nothing was done to realise the assets of the MRW scheme or to distribute them pro-rata to the members including the 15% in number of the members who did not accept interests in the new MRWBT scheme or to settle the accounts of the MRW scheme. So far as can be ascertained, nothing further was done about the administration of the MRW scheme and perhaps it was simply treated by the plaintiff as having been wound-up. What was not done, however, was to take accounts or to settle or distribute the interests of the members in the MRW scheme.

40 The situation is further complicated by the evidence which suggests that the MRWBT scheme simply took over all the assets and obligations of the MRW scheme. There may well be potential for complexities to arise in this state of uncertainty when it comes to identifying the property or interests, if any, held or retained by the plaintiff on behalf of the MRW scheme and/or in relation to the plaintiff as trustee of the MRWBT scheme, and its various members, or to account for the use made by it or them for the benefit of the MRWBT scheme of assets of the former MRW scheme. Whether these complexities are real or imagined, the degree to which they might present practical problems in conducting the winding-up of either or both of the schemes does not seem to me to detract from the consideration of the fundamental issue namely, should the MRW scheme be treated as the subject of a winding-up commenced on 15 December 2006, or whether the correct view is that steps which could, and perhaps should, have led to the winding-up of the MRW scheme in 2006, were never pursued.

41 Counsel for the voluntary administrators was not able to suggest any major consequences which would turn on a decision as to when the winding-up should be regarded as having commenced and it was certainly not submitted that any questions as to the enforcement, validity or priority of securities or claims would depend upon any such determination. On the limited evidence available, I consider that I should conclude that the giving of notice by the plaintiff as responsible entity pursuant to s 601NC of the Act in November 2006; the elapse of 28 days without members of the scheme calling a meeting to consider the proposed winding-up or to vote on any extraordinary resolution proposed about the winding-up of the scheme, provided a basis upon which the responsible entity could, after 15 December 2006 have taken steps to wind-up the scheme.

42 However, as there is nothing to suggest that the responsible entity then embarked upon the process of winding-up or took any steps to determine the interests of scheme members or the proper distribution or realisation of scheme assets, I can only conclude that no winding-up of the scheme was undertaken and that the initial steps leading to a possible winding-up of the scheme must be regarded as having been abandoned. For that reason, therefore, I have decided that I should decline to make the declaration sought about the commencement of the winding-up of the MRW scheme in December 2006 and, instead, treat that scheme as being, at least partially, still on foot and the subject of the application for winding-up in these present proceedings on the just and equitable ground.

The winding-up of all schemes on the just and equitable ground

43 Counsel for the plaintiff submits and I accept that, generally, it is just and equitable to order the winding-up of a registered management investment scheme pursuant to s 601ND(1)(a) of the Act if it is insolvent: Re Orchard Aginvest Ltd (as responsible entity for the Primary Agribusiness Fund) [2008] QSC 002. Further, it is just and equitable for the court to intervene and to wind-up a registered scheme where the original arrangement as set out in the prospectus of the scheme has broken down: ASIC v Knightsbridge. The phrase 'just and equitable' is broad and designed to accommodate a multiplicity of situations. It is not possible to define the phrase in exhaustive terms. In each case it will be a question of fact for determination upon the evidence relating to the scheme or corporation put before the court: Re Tivoli Freeholds Ltd [1972] VicRp 51; [1972] VR 445, 468; and Ebrahimi v Westbourne Galleries Ltd [1973] AC 360, 374. A determination of whether or not it is just or equitable to wind-up the entity will not depend upon particular factual categories: Re Straw Products Pty Ltd [1942] VicLawRp 52; [1942] VLR 222, 223.

44 Some further guidance can be derived from authorities dealing with applications to wind-up an unregistered scheme pursuant to s 601EE(2) of the Act. In Cumulus Wines Pty Ltd v Huntley Management Ltd [2004] NSWSC 609; (2004) 50 ACSR 58 [21] - [28], the court observed that schemes should be wound-up where; the estimated future income of the scheme was unlikely to achieve a return for investors and there was no realistic basis for expecting that future income and expenses would change to such a degree as to make a return to investors achievable; it was untenable for the schemes to continue in their then current state; and, further, that the schemes were then insolvent. In ASIC v Chase Capital Management an application was made under s 601EE(2) of the Act and it was held that an unregistered scheme may be wound up where the investments of the scheme are in a questionable state. Counsel for the plaintiff also invokes authorities dealing with the winding-up of a corporation on the just and equitable ground where it is apparent that the company has failed to meet its objectives and will be unable to do so: Re Pacific Fisheries Ltd (1909) 26 WN (NSW) 127; Re Co-operative Development Funds of Australia Ltd (No 3) (1978) 3 ACLR 437; and Bernhardt v Beau Rivage Pty Ltd (1989) 15 ACLR 160. I am satisfied that these principles apply to the present consideration of whether any or all of these six registered managed investment schemes should be wound-up upon the grounds relied upon and I shall proceed on this basis.

45 The basic submission by the plaintiff is that the MRW scheme is insolvent and is not viable. The evidence which I accept, discloses that the administrators have assessed the viability of the MRW scheme in two ways. First, they have analysed the viability of the 'grape growing aspect' of the MRW scheme because the members of that scheme might still have an interest in a grape growing business which is a significant part of the scheme. This has been undertaken by the viability analysis already mentioned (exhibit GPD133 of the first Doran affidavit). This involves a calculation of the amounts which an individual member will be liable to pay and receive under the LMAs for the remaining life of the schemes. The amounts payable and receivable are dependent upon the costs and revenues associated with continuing to run the Palandri vineyards and those are in turn based upon the DV report (exhibit SCCB2 to the affidavit of Mr S C C Burton dated 13 August 2008).

46 The conclusion reached from the viability analysis is, in substance, that if the scheme members pay and continue to pay what they are obliged to pay under the LMAs they will each make a loss on their investment for the remaining life of those schemes.

47 The examination of the MRWBT scheme necessarily involves a further examination of the MRW scheme which it purported to take over and replace.

48 Davidson Viticulture, who prepared the DV report, had been engaged by the administrators to assess the condition of the Palandri vineyards; to report on what was required to make those vineyards commercially viable; and, finally, to analyse future income, capital expenditure requirements and operating expenses of the vineyards.

49 The viability analysis, based on the DV report, reached the conclusion that the 'grape growing aspect' of the MRW scheme is not viable because, for the remaining life of the MRW scheme, members would suffer a total loss of in excess of $24 million (in constant 2008 dollars) in respect of the grape growing aspect of that scheme.

50 A second analysis conducted by the administrators addressed the financial statements of the MRW scheme as at 29 February 2008 (a date close to the appointment of the administrators of the plaintiff). These financial statements reveal that the MRW scheme does not presently trade or conduct any business operations. It has been necessary for the administrators to bring up to date the books and records of the MRW scheme and to create a balance sheet of the scheme designed to reveal the true asset and liability position of the scheme.

51 The administrators' reconstructed balance sheet shows that the MRW scheme has a net deficiency of assets of about $500,718. Difficulties in identifying the exact financial position and difficulties which would afflict any attempt to continue operations of the MRW scheme exist because of the events of December 2006 when steps to wind-up the scheme were initiated but, as I have found were not carried into effect. The scheme has not traded since then and profit and loss accounts from that date forward are not available.

52 The authors of the DV report estimated the capital expenditure required to make the Frankland River Vineyard commercially viable. In the viability analysis (exhibit GPD133 to the Doran affidavit) calculations were made on the basis of the MRW scheme's share of the capital expenditure required to make its portions of that vineyard viable. That estimate suggests that a sum of $144,075.80 capital would need to be introduced in the 2008/2009 year for necessary works on the Frankland River Vineyard 1. Also, the analysis conducted showing the component of this expenditure attributable to the MRW scheme in exhibit GPD133 indicates that $87,684.61 would need to be introduced by or on behalf of the MRW scheme.

53 The uncontested evidence is that neither the plaintiff nor the MRW scheme has the financial capacity to introduce or to fund that capital expenditure. Furthermore the conclusion which the administrators have reached after their analysis of the available books and records of the MRW scheme is that it is insolvent.

54 As already described the MRWBT scheme was set up in order to restructure the MRW scheme. As stated in the MRWBT scheme product disclosure statements, the restructure of the MRW scheme involved:

• an assignment by MRW scheme members of all their rights under the MRW scheme LMAs to the plaintiff as responsible entity of the MRWBT scheme.
• the plaintiff as responsible entity of the MRWBT scheme would continue running the business of the MRW scheme. Members of the MRWBT scheme would share in the profits generated by the MRWBT scheme through the units they owned in the MRWBT scheme.

55 These product disclosure statements (see the Doran affidavit pages 1374(6) and 1381(6)) indicated that the purpose of the MRWBT scheme was to:

(b) continue trading the business of the MRW scheme; and

(c) generate returns to unit holders from the business of the MRW scheme.

56 However, the MRWBT scheme did not involve the granting of sub-leases (to members/growers) over any of the Palandri vineyards.

57 The administrators have reconstructed a balance sheet at as 29 February 2008 for the MRWBT scheme. This shows that that scheme has a net asset deficiency in excess of $22.6 million. The administrators have also conducted an assessment of profit and loss based on that scheme's management accounts which has revealed that the scheme made a loss of in excess of $1,788,000 in the period of eight months ending on 29 January 2008. In this situation of combined capital deficiency and operating losses the administrators have concluded that the MRWBT scheme is insolvent and cannot achieve its purpose.

58 The PAWB scheme was established as an integrated wine business. Investors (referred to as 'members') were granted sub-leases of 'vineyard lots' where they were entitled to grow grapes. The grapes were then to be harvested, processed into wine and then wine sold. Members were entitled to a share of the proceeds of the sale of the wine. Members of this scheme became parties to the PAWB scheme LMAs which, generally, provided for:

• the payment of rent and an annual fee by members;
• the obligations of the plaintiff in relation to the proceeds derived from the sale of wine; and
• the services to be provided by the plaintiff in consideration for the payment of the maintenance fees.

59 Under these PAWB scheme LMAs, the plaintiff was obliged to maintain each member's vineyard lot; harvest and process the grapes derived from that lot; and to market and sell the wine derived from that processing. Again, like the MRW scheme, the PAWB scheme was divided into projects and the allocation of members to particular projects seems to have been dependent upon which prospectus the members subscribed to when they acquired their respective interests. There were three such prospectuses namely:

• Project 3 - prospectus dated 8 February 2002;
• Project 4 - prospectus dated 20 January 2003;
• Project 5 - prospectus dated 28 April 2004.

The members of the PAWB scheme were granted sub-leases of vineyard lots on various parts of Frankland River Vineyard 1 and Frankland River Vineyard 2.

60 The application forms for each of the PAWB prospectuses, subscribed by all applicants who became members of the scheme, granted to the plaintiff a power of attorney, among other things, to vary or replace the PAWB scheme LMAs. In his affidavit, at pars 222 - 223, Mr Doran explains how investigations conducted by the administrators have discovered that, during 2007, the plaintiff decided that the PAWB scheme (as then operating) was no longer viable and that the sub-leases granted to the various PAWB scheme members should be terminated. By a deed of termination dated 2 April 2007 (executed by the plaintiff as responsible entity of the PAWB scheme and as lessor of each PAWB scheme member's vineyard lot, and also by the plaintiff as attorney for each member of the PAWB scheme), every lease granted to PAWB members was purportedly terminated. A copy of the deed of termination is to be found at page 2070(9) of Mr Doran's affidavit.

61 The subsequent assessment of the financial position of the PAWB scheme conducted by the administrators was conducted on the same basis as their assessment of the financial position of the MRW scheme as already described. A cash flow analysis of the grape growing aspect of the PAWB scheme was prepared and shows, in the opinion of the administrators, that the grape growing aspect of that scheme is not viable because, for the remaining life of that scheme, members would suffer a total loss in excess of $12.8 million (in constant 2008 dollars).

62 Similarly, the administrators have reconstructed a balance sheet for the PAWB scheme as at 29 February 2008 and this reveals that the scheme has a net asset deficiency in excess of $13.88 million.

63 Nevertheless, the administrators draw attention to profit and loss accounts prepared on the basis of the management accounts of the PAWB scheme for a period of eight months to 29 February 2008 which suggest that the scheme made a profit of about $705,649. However, the administrators do not accept the accuracy of these profit and loss accounts because, in their opinion, the plaintiff did not properly account for the cost of wine sold by the PAWB scheme and that, had this been properly done, an operational loss for the eight month period would have been revealed. For these reasons the administrators consider that the PAWB scheme is insolvent.

64 The PWP and PGSC schemes do not involve the production or sale of wine as they are simply grape growing schemes. Members of these two schemes have entered into LMAs under which they were granted sub-leases by the plaintiff of vineyard lots. Under these agreements, the plaintiff is to manage each member's vineyard lot and to harvest and to sell the grapes produced from each lot. Members are then entitled to share in the proceeds arising from the sale of the grapes produced.

65 Again the administrators have prepared a cash flow analysis of the PWP and PGSC schemes based on the books and records of the plaintiff and the DV report. This has revealed that members of the PWP and PGSC schemes could be expected to suffer a total loss over the remaining lives of the schemes of approximately $24.67 million, in the case of the PWP scheme, and of approximately $16.91 million, in respect of the PGSC scheme.

66 The accounts for the PWP scheme and of the PGSC scheme obtained by the administrators record that each scheme has no assets, no liabilities, no income and no expenses. However, for reasons given by Mr Doran (pars 14 - 16 of his affidavit of 15 August 2008) the administrators are of the opinion that these accounts have not been properly prepared and do not reflect proper accounting for the assets and liabilities, income or expenses of either of these two schemes. On the materials available to them, the administrators have prepared estimated profit and loss statements for the PWP and PGSC schemes for a 12 month period ending 30 June 2008. These reconstructed accounts show, that in the administrators' opinion, for that 12 month period:

• the PWP scheme made a loss of about $159,284;
• the PGSC scheme made a loss of about $212,624.

On this basis the administrators are of the opinion that neither the PWP scheme or the PGSC scheme is presently viable.

67 The business of the PAPT scheme is to hold agricultural property in which members acquire units which, in turn, entitle them to share in the profits of the PAPT scheme. The profits of the scheme are to be derived by the scheme acquiring and leasing agricultural property suitable for viticulture. For these purposes the PAPT scheme has acquired, and is the registered proprietor of, the Harvey Vineyard and the Cookernup property.

68 Members of the PAPT scheme paid application fees for the acquisition of their units in the scheme and then became liable for the payment of certain recurring fees.

69 The administrators have conducted an assessment of the viability of the PAPT scheme by preparing a reconstructed balance sheet as at 29 February 2008 and reconstructed profit and loss accounts for the scheme for the eight month period ending 29 February 2008. From these documents the administrators have reached the conclusion that the PAPT scheme, at 29 February 2008, had a net asset deficiency of approximately $347,464 and for the preceding eight month period had made a loss of about $497,593.

70 On this basis the administrators have concluded that the PAPT scheme is insolvent and no longer viable.

Inability of the schemes to achieve their respective purposes

71 On the basis of the analysis of the financial position of each of the schemes already described, the administrators have reached the conclusion that none of the schemes can achieve the purposes for which they were established. It is necessary, therefore, to turn to the stated purposes of the various schemes.

72 The objectives of the MRW scheme as stated in the several MRW scheme prospectuses already identified are, in substance:

(a) the national and international marketing and distribution of premium bottled wine under the Palandri label; and

(b) the development and management of vineyards which would produce premium wine grapes.

(b) continue trading the business of the MRW scheme;

(c) generate returns to unit holders from the business of the MRW scheme.

74 The evidence indicates that the purpose of the PAWB scheme is to undertake the production or purchase of wine and the sale of that wine in North America and, to the extent that members of this scheme continue to hold 'vineyard lots', the growing of grapes from viticulture on those lots.

75 The evidence of the administrators is that the purpose of these two schemes was to grow and sell grapes with a view to profit.

76 The product disclosure statements for the PAPT scheme reveal that the purpose of this scheme is to provide strong, regular cash yields to unit holders at above industry average rates whilst also simultaneously creating capital growth.

77 The main assets of the PAPT scheme, namely the Harvey Vineyard and the Cookernup property, must now be sold to pay its debts. Consequently, it will not be possible for the members of the PAPT scheme to lease those properties to third parties for a return. Similarly, the need to sell these core assets will mean that it will not be possible to achieve the intended purposes of the scheme. The necessity to sell the properties and the inability of the scheme to trade profitably in the future is due to the combination of the insolvency and lack of viability of this scheme.

Competing entitlements to the vineyard lands

78 As earlier described, four of these investment schemes each involve the growing of grapes for viticulture on the five properties identified as the Palandri Vineyards; namely, Frankland River Vineyard 1, Frankland River Vineyard 2, Palandri Reserve, Harvey Vineyard and the Cookernup property. These schemes are the MRW scheme, the PAWB scheme, the PWP scheme and the PGSC scheme. Two of these schemes, if only in the past, namely the MRW and the PAWB schemes, also involved the sale of wine from grapes produced on these vineyards for the benefit of their members.

79 The establishment of the MRWBT scheme to takeover and restructure the MRW scheme and the incomplete implementation of that restructure has already been described. From this, it is apparent that because no final winding-up of the affairs of the MRW scheme was ever implemented, the members of that scheme continue to have rights in respect of the lands upon which the scheme was operating. Despite this, the evidence establishes that many of the vineyard lots allocated under the MRW scheme were later allocated to other members in the PWP and the PGSC schemes. To complicate the position further, the lots allocated to the members of the newer PWP and PGSC schemes were over the same vineyard lots which had already been allocated to members of the MRW scheme but the lots so allocated did not correspond to the old lots under the MRW scheme. What had happened was that those vineyard lots were resurveyed and new, different sized, lots were created and allocated to the members of the new schemes.

80 The administrators' investigations have revealed that the rights of approximately 85% of the members in the MRW scheme were transferred to the plaintiff as trustee for the MRWBT scheme. Accordingly, the problems associated with the interests in lots over the same properties affects all of the members of those four schemes; namely, the MRW scheme, the MRWBT scheme, and the PWP and PGSC schemes. This is because the issue of new vineyard lots over land already subject to leases in defined lots to members of the MRW scheme leaves a position where there can be expected to be competing proprietary claims to interests in the land between the members of these four schemes.

81 In the view of the administrators, a possible, or even a probable, resolution of these anticipated conflicting proprietary claims will involve some members of some of the schemes losing their respective interests in their vineyard lots or suffering a dilution of those interests. That in turn is expected to prevent those schemes from functioning and therefore constitutes an additional reason why those particular schemes will not be able to achieve their purpose.

Inability to raise capital for necessary expenditure

82 All the vineyards require significant capital expenditure to be able to produce or to continue to produce grapes. The forecast potential income for the vineyards, which are acknowledged to have the potentiality to operate profitably if the capital expenditure is applied, is conditional upon the capital being raised and expended to produce commercial quantities of grapes. The capital expenditure necessary for the five Palandri vineyards is estimated as follows:

• Palandri Reserve - $470,783.11
• Frankland River Vineyard 1 - $144,075.80
• Frankland River Vineyard 2 - $466,427.54
• Harvey Vineyard - $61,111
• Cookernup property - $3,428,927.98,

revealing a total capital expenditure required of $4,571,325.42.

83 This requirement for capital arises in circumstances where the members of the various grape growing schemes have already incurred significant losses from the operation of those schemes to date.

84 Except in relation to the PWP and PGSC schemes, the plaintiff does not have the power to call on members of the various schemes to contribute further funds for capital expenditure. In relation to the PWP and PGSC schemes, cl 15.6 of the constitutions of those schemes permits the plaintiff to retain the gross income from the sale of grapes to meet outgoings of a capital nature. However, because the schemes are not viable, or are insolvent, there is no incentive for members to contribute any funds to the schemes for capital expenditure or otherwise.

85 The plaintiff itself is insolvent and cannot provide capital for the expenditure needed or otherwise. If the capital expenditure is to be undertaken, the capital would need to be raised from other sources and spent on the vineyards for them to become commercially viable. The administrators have not been able to locate any source for the provision of the capital necessary.

86 From the reconstructed balance sheet of the plaintiff prepared by the administrators as at 29 February 2008, the plaintiff has a net asset deficiency in excess of $46 million. The plaintiff is unable to pay its debts as and when they fall due for payment and is, therefore, insolvent.

87 The plaintiff does not have the financial capacity as the responsible entity for any of the schemes and despite efforts to find a replacement responsible entity the administrators have been unsuccessful. According to Mr Doran (Doran affidavit pars 449 and 456) the prospects of finding a replacement responsible entity are remote.

88 As earlier described, independent proceedings are on foot which could lead to the plaintiff being wound-up without a replacement responsible entity being found. If that were to occur it would become necessary for the members, or for ASIC, to wind-up the schemes unless a winding-up order is now made. It is obviously in the interests of the members of the schemes that there should be orderly and independent administration of the schemes detached from the management of the plaintiff.

89 I have no doubt that the plaintiff is insolvent and is unable to carry out its duties as responsible entity of any of the schemes. Further, having regard to the manner in which the schemes operating in respect of the Palandri vineyard lands have been conducted, it is entirely unsuitable for the plaintiff to remain as the responsible entity for any of those four schemes.

90 Furthermore, I am satisfied that it is not possible for any of the schemes to achieve its stated purpose and that each of the schemes is insolvent and without any prospect of being able to trade profitably under present circumstances. The grounds relied upon for seeking orders for the winding-up of each of the schemes have been demonstrated. Indeed there is no evidence to the contrary nor any submissions received from any quarter in opposition to winding-up orders being made notwithstanding that I am satisfied that due notice of these applications has been given to all interested parties in accordance with the order for directions made by the chief justice.

91 It is for these reasons, therefore, that I ordered on 22 September 2008 that each of the six managed investment schemes should be wound-up and that Messrs Conlan and Cribb be appointed on a joint and several basis as the persons responsible for the winding-up of each scheme in accordance with the constitutions of those schemes and of any orders of the court made or to be made under s 601NF(2) of the Act.

92 After I had announced my decisions in this respect I invited submissions from counsel as to the exact terms of the orders to be made and, after some further deliberation and refinement, the orders were settled in the following terms:

1. The following managed investment schemes be wound-up in accordance with their respective constitutions and any orders of the court made under s 601NF(2) of the Corporations Act 2001 (Cth).

(b) Margaret River Wine Business Trust ARSN 119 602 505;

(c) Palandri America Wine Business ARSN 098 544 908;

(d) Palandri Winegrape Project 2005/2006 ARSN 114 193 234;

(e) Palandri Global Supply Challenge 2007 - 2008 ARSN 124 150 616; and

(f) Palandri Agricultural Property Trust ARSN 114 192 933.

1. The court being satisfied that it is impracticable for the responsible entity of the schemes referred to in order 1, namely the plaintiff, to take responsibility for the winding-up of the schemes, Mark Anthony Conlan and Neil Raymond Cribb be appointed on a joint and several basis as the persons responsible for winding-up the managed investment schemes referred to in order 1 in accordance with the constitutions of those schemes and any orders of the court made under s 601NF(2) of the Corporations Act 2001 (Cth).
2. The plaintiff's costs of the application be paid from the assets of the schemes referred to in order 1 or any one or more of them and absent any realisable assets of those schemes, the assets of the plaintiff.
3. The costs of winding-up the managed investment schemes referred to in order 1 and the reasonable remuneration, costs and expenses of Mark Anthony Conlan and Neil Raymond Cribb in winding-up those schemes be paid from the assets of those schemes or any one or more of them and, to the extent that the assets of those schemes are insufficient to pay for those amounts, the assets of the plaintiff.
4. The costs referred to in order 3 be paid in priority to the costs referred to in order 4.
5. There be general liberty to apply granted to any person affected by these orders including liberty to apply for further directions in accordance with s 601NF(2) of the Corporations Act 2001 (Cth).