OUTLINE OF WGG s SUBMISSIONS ON COSTS

Transcription

1 IN THE SUPREME COURT OF VICTORIA AT MELBOURNE COMMERCIAL AND EQUITY DIVISION COMMERCIAL COURT CORPORATIONS LIST S CI IN THE MATTER OF WILLMOTT FORESTS LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN ) WILLMOTT FORESTS LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN ) IN ITS CAPACITY AS RESPONSIBLE ENTITY OF THE MANAGED INVESTMENT SCHEMES LISTED IN SCHEDULE 2 AND IN ITS CAPACITY AS MANAGER OF THE UNREGISTERED SCHEMES LISTED IN SCHEDULES 3 AND 4 AND ORS ACCORDING TO SCHEDULE 1 Plaintiffs OUTLINE OF WGG s SUBMISSIONS ON COSTS The Application for Directions 1. The Plaintiffs commenced the application ex parte, seeking directions and orders under s 511 of the Corporations Act 2001 ( the Act ). 2. The Willmott Growers Group Inc ( WGG ) was granted leave to intervene as a contradictor in the proceedings by order dated 16 December 2011 to represent the interests of growers in the Willmott Forests Project ( Project ) and certain contractual and partnership schemes. 3. On or about 18 December 2012, the Project was removed from the Liquidators application. From that time, WGG represented the interests of members of five schemes, four of which were partnership schemes and one contractual scheme ( the WGG unregistered schemes ). 4. The interests of the members of the WGG unregistered schemes were affected by paragraph 5 of the Originating Process, which sought the Court s consent to the Liquidators disclaiming the project documents of these schemes, pursuant to s 568(1) of the Act. 5. The intervention of WGG as a contradictor was necessary in order that the interests of the members of the schemes were represented and so that the growers would be bound by the result of the Liquidators application.

2 2 6. WGG had developed a proposal for the continuation of the WGG unregistered schemes it represented, which involved appointing a new trustee and forest manager. The proposal relied upon the growers being entitled to maintain their leases and be excluded from the Liquidators sale process. 7. At the commencement of the hearing on 23 January 2012, the Liquidators identified ten questions for the Court s consideration to determine the application. WGG supported the proposal to hear the second of the ten questions as a separate and preliminary question for determination, being whether the Liquidators were able to disclaim the growers leases with the effect of extinguishing the Growers leasehold estate or interest in the subject land ( the Disclaimer Question ). 8. Once the Disclaimer Question was decided to be heard as a separate preliminary question and it was clear that the Willmott Action Group ( WAG ) had leave to intervene as a contradictor representing growers interests, or at least the balance of growers not represented by WGG, it was not necessary for WGG to duplicate the role of a contradictor in respect of the remaining nine questions for determination in the Plaintiffs application. 9. WGG had submitted before Justice Dodds-Streeton, in the Plaintiffs application for directions in the Federal Court in June 2011, that the Liquidators could not disclaim the growers leases. The Liquidators had submitted that is was unnecessary for Her Honour to determine the issue in order to give the directions being sought in the Federal Court application, and Justice Dodds- Streeton agreed with that submission. The Liquidators now asked that the Disclaimer Question be determined and requested the Court to consent to the Liquidators disclaiming the project documents, including leases. 10. The Liquidators claimed that they were able to disclaim the growers leases pursuant to s 568(1) of the Act and that the effect of the disclaimer was that the leasehold estate ceases to exist. The Receivers agreed that the Liquidators were able to disclaim the growers leases. WGG claimed that the leases included an

3 3 estate and interest in land, which was not able to be disclaimed under s 568 of the Act. 11. The answer to the Disclaimer Question was that the Liquidators were not able to disclaim the growers leases with the effect of extinguishing the growers leasehold estate or interest in the land. 12. Following the decision the Liquidators excised the land upon which the WGG unregistered schemes were operated from the sale contracts. The Plaintiffs filed an amended Originating Process, which amended the reference in paragraph 5 of the Originating Process from Project Documents to Forestry Management Agreements, in order to exclude leases from the request for consent to disclaim under s 568(1). 13. WGG requested that it be excused from the hearing in respect of the remaining nine questions. 14. WGG submits it is entitled to its costs on an indemnity basis out of the winding up, as: (a) WGG was a necessary intervener and contradictor for the purpose of representing interests of growers; (b) the Disclaimer Question was a novel legal issue with some complexity; (c) WGG s submissions and contribution assisted the Court; and (d) costs should otherwise follow the event. WGG a necessary intervener 15. WGG was a necessary party as it was the only entity that could conveniently represent the interests of the growers in the WGG unregistered schemes. Further, WGG had been intervener and contradictor, with the consent of the Liquidators, in the earlier application before Justice Dodds-Streeton, in which the Liquidators sought directions to enable them to conduct the sale process. WGG consequently had an understanding of the issues arising from the Liquidators proposed sale and the present application.

4 4 16. WGG was also best placed to act as contradictor in respect of the Disclaimer Question, as WGG had already put the argument in the Federal Court application that the growers leases could not be disclaimed. 17. Norman, in the matter of Forest Enterprises Australia Limited (Administrators Appointed) (Receivers & Managers Appointed) v FEA Plantations Ltd (Administrators Appointed (Receivers Appointed) (No 3) [2011] FCA 624, concerned an application for directions under s 424(1) of the Act. Finkelstein J pointed out that in respect of such applications, generally no substantive rights are determined. Finkelstein J noted, however, that it often occurs that substantive legal issues are raised in such applications, and His Honour said at [2]: When this occurs the application can easily be adapted to enable the court to deal with the substantive issues. Usually all that is necessary is to join, or give notice to, affected parties. 18. Justice Finkelstein went on that say at [4] [7]: [4] The so-called internal leases application raised several substantive issues. The issues included: (1) which FEA Group company was the landlord of the land on which forestry operations were conducted; (2) was the FEA Group tenant in breach of the lease; (3) had the FEA Group repudiated the lease; (4) did the FEA Group tenant have a right of set-off against the landlord. [5] In order to have those issues resolved, on 9 September 2010 a FEA Group company, FEA Plantations Ltd, was made a defendant to the application. The FEA Growers Group Inc (FEA Growers Group), a body set up to represent the interests of the investors, was also added as a defendant. The defendants were necessary parties in order for the substantive issues to be resolved. In their absence the issues could not have been resolved.

5 5 [6] The receivers were unsuccessful in the arguments they put regarding the internal leases. It follows that they should be required to pay the costs of FEA Plantations Ltd. Those costs should be paid on the usual party and party basis. [7] The position of the FEA Growers Group Inc is different. It was joined to represent all the investors of the managed investment schemes. As my reasons delivered on 21 December 2010([2010] FCA 1444) show, the economic interests of the investors were directly affected by the outcome of the application. And, in any event, I required them to be represented to ensure all investors had a voice in the proceeding and were bound in the result of my determinations. It is usual for a party of this nature to be paid its costs on an indemnity basis. That is what should happen here. 19. Re Lofthouse; Riverside Nursing Care Pty Ltd (subject to deed of arrangement) (2004) 22 ACLC 215; [2004] FCA 93 concerned an application for directions brought by an administrator under s 447D of the Act. In that case, Justice Finkelstein said at [3], : While there are examples of applications for directions being made ex parte, the usual practice for over 150 years has been to join all interested parties so that binding decisions can be made. This practice is, and examples of cases which have applied it are, referred to in Ford & Lee, Principles of the Law of Trusts, 3 rd ed (1996) at para [17030]. 20. The following passage can be found in Ford & Lee at [17030]: If an application is made by the trustee ex parte, without the joinder of other interested persons, it is said that advice given on such application is personal and that in giving it the judge acts conservatively and the advice cannot bind persons claiming against the estate: Re Bowman s Trust (1880) 6 VLR Eq 124; Re J S Mitchell (1913) 30 WN (NSW) 137, per Harvey J at 138; Harrison v Mills [1976] 1 NSWLR 42; Re Union Trustee Co of Australia Ltd [1936] QWN 6; Re SA Perpetual Forests Ltd (unreported, Supreme Court, SA, No 1068 of 1977)..In practice it is usual for the applicant, who is normally but not necessarily the trustee

6 6 (beneficiaries sometimes use the procedure) to join all other interested persons, the advantage of joinder being that finality is ensured so far as those joined are concerned: Re Walker (1901) 1 SR(NSW) Eq 237; Re McGaw (1904) 4 SR(NSW) 591; Will of Moore [1907] VLR 639; Union Trustee Co of Australia Ltd v Eckford (1930) 31 SR(NSW) 92; Thomas v Thomas [1939] St R Qd 301; Guardian, Trust and Executors Co of New Zealand Ltd v Perry [1941] NZLR 269; Re Mitchell [1955] VLR 120; Re Archer [1961] Tas SR 1; Re Bowman [1955] SASR In Farrow Finance Co Ltd (in liq) v ANZ Executors and Trustee Co Ltd (1996) 23 ACSR 521, in which a liquidator had applied to the court for directions, Hansen J, when considering costs of the application, said at : I am also of the view that it was necessary for each of the second, third and fourth defendants to appear and make submissions. Those three parties each had competing interests about which it was necessary for the court to be made aware, and it was helpful for submissions based upon those interests to be advanced. In other words, I am satisfied that each of those defendants was a proper contradictor to the liquidator s stated position: Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 at 448 per Lord Dunedin, quoted with approval by Gibbs J (as he then was) in Forster v Jododex Aust Pty Ltd (1972) 127 CLR 421 at 437-8; [ ] ALR In Forster v Jododex Aust Pty Ltd (1972) 127 CLR 421 at Gibbs J says: It does seem to me that the Scottish rules summarized by Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd should in general be satisfied before the discretion is exercised in favour of making a declaration: The question must be real and not a theoretical question; the person raising it must have a real interest to raise it; he must be able to secure a proper contradictor, that is to say, some one presently existing who has a true interest to oppose the declaration sought.

7 7 Costs in an application for directions by a liquidator 23. As referred to in paragraph 18 above, Justice Finkelstein in Norman, in the matter of Forest Enterprises Australia limited (Administrators Appointed) (Receivers & Managers Appointed) indicated that an entity representing the interests of investors, affected by the outcome of the application for directions, should be paid its costs on an indemnity basis. 24. Further, the costs of a necessary party that has assisted the Court in an application for directions, by a company in liquidation and the liquidator, should be paid out of the winding up. 25. In Farrow Finance Co Ltd (in liq) v ANZ Executors and Trustee Co Ltd (1996) 23 ACSR 521, referred to in paragraph 21 above, Hansen J ordered that the liquidator pay the costs of the parties and that such costs be paid as part of the liquidation. 26. Hansen J noted that there was surprisingly little authority as to the precise principles that apply to the question of costs upon a liquidator s application for directions. 27. Having considered the authorities that were available, Hansen J extracted the following principles: (a) generally, where the application is necessitated only by the stand taken by a creditor acting only in their own interest and the question involved is not complex, and the liquidator s position is ultimately vindicated, costs should follow the event, with reference to Re Masureik & Allan Pty Ltd (1981) ACLR 39; (b) on the other hand, generally, where the issue is a complex one, or one involving a relatively novel proposition in law, the starting point is that the costs of all necessary parties are to be paid by the liquidator and counted as costs in the liquidation, with reference to Re GPI Leisure Corp Ltd (in liq) (1994) 130 ALR 256; 15 ACSR 282.

8 8 28. Justice Hansen also referred to ASC v Melbourne Asset Management Nominees Pty Ltd (rec & mgr apptd) (1994) 49 FCR 334, where a liquidator had applied for directions in respect of interests of creditors in a mortgage investment scheme. Hansen J said it was an example of a case involving multiple defendants and complex questions of fact and law and said at 527: No doubt various competing submissions were made by the parties in that case, and some of those parties lost in the sense that their submissions were rejected. That factor was not, however, mentioned by Northrop J in dealing with costs. Instead, his Honour held that, having regard to the peculiar features of the matters before the court, the costs of all five parties represented should be paid on a solicitor and own client basis as part of the liquidator s costs in the liquidation, and be costs in the winding up. In my opinion, the same order should be made in this case, save for the costs of the third and fourth defendants which should be paid on an indemnity basis as ordered on 4 October Order 29. An appropriate order would be that, the Plaintiffs pay the costs of WGG on an indemnity basis, as an expense in the winding up of Willmott Forests Limited (Receivers and Managers Appointed) (in Liquidation). GARRY BIGMORE QC MATTHEW KENNEDY Counsel for the Willmott Growers Group Inc MILLS OAKLEY LAWYERS Solicitors for the Willmott Growers Group Inc 27 April 2012

9 9 SCHEDULE 1 - SCHEDULE OF PARTIES WILLMOTT FORESTS LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN ) IN ITS PERSONAL CAPACITY AND IN ITS CAPACITY AS RESPONSIBLE ENTITY OF EACH OF THE MANAGED INVESTMENTS SCHEMES LISTED IN SCHEDULE 2 AND IN ITS CAPACITY AS MANAGER OF THE UNREGISTERED MANAGED INVESTMENT SCHEME LISTED IN SCHEDULE 3 First Plaintiff and CRAIG DAVID CROSBIE IN HIS CAPACITY AS LIQUIDATOR OF WILLMOTT FORESTS LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN ) Second Plaintiff and IAN MENZIES CARSON IN HIS CAPACITY AS LIQUIDATOR OF WILLMOTT FORESTS LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN ) Third Plaintiff

10 10 SCHEDULE 2 - REGISTERED MANAGED INVESTMENT SCHEMES 1 Willmott Forests Project (ARSN ) 2 Willmott Forests Project (ARSN ) 3 BioForest Dual Income Project 2006 (ARSN ) 4 BioForest Sustainable Timber and Biofuel Project 2007 (ARSN ) 5 Willmott Forests Premium Forestry Blend Project (ARSN ) 6 Willmott Forests Premium Forestry Blend Project Project (ARSN ) 7 Willmott Forests Premium Timberland Fund No. 1 (ARSN )

11 11 SCHEDULE 3 - UNREGISTERED MANAGED INVESTMENT SCHEMES: PROFESSIONAL INVESTOR SCHEMES 1 Willmott Forests - Professional Investor Project Information Memorandum 2 Willmott Forests - Professional Investor Project Information Memorandum 3 Willmott Forests - Professional Investor Project Information Memorandum (2003) and 2003 Information Memorandum (2004) 4 Willmott Forests - Professional Investor Project Information Memorandum and 2004 Information Memorandum (2005) BioForest Wholesale Project No Wholesale Forestry Memorandum (Bioforest) 6 Willmott Forests - Professional Investor Project Information Memorandum

12 12 SCHEDULE 4 - UNREGISTERED MANAGED INVESTMENT SCHEMES: CONTRACTUAL SCHEMES AND PARTNERSHIP SCHEMES Contractual Schemes (No Project) (No Project) (No Project) (No Project) (No Project) (No Project) (No Project) Interest Only Offer (No Project) 9 Sharp/Reed Plantation Project Information Memorandum (No Project) Partnership Schemes 11 McKenzie & Partners - Forestry Partnership No.1 (1993) 12 Grimsey & Associates Pty Ltd - Forestry Partnership No. 1 (1994) 13 Grimsey & Associates Pty Ltd - Forestry Partnership No. 2 (1994) 14 Grimsey & Associates Pty Ltd - Forestry Partnership No. 3 (1994) 15 McKenzie & Partners - Forestry Partnership No. 2 (1994)