IN THE SUPREME COURT OF VICTORIA AT MELBOURNE COMMERCIAL COURT CORPORATIONS LIST

Transcription

1 IN THE SUPREME COURT OF VICTORIA AT MELBOURNE COMMERCIAL COURT CORPORATIONS LIST Not Restricted S CI IN THE MATTER OF GUNNS PLANTATIONS LIMITED (ADMINISTRATORS APPOINTED) (RECEIVERS & MANAGERS APPOINTED) (ACN ) in its capacity as the responsible entity of the managed investment schemes listed in Schedule 1 DANIEL MATHEW BRYANT, IAN MENZIES CARSON and CRAIG DAVID CROSBIE (in their capacities as joint and several Voluntary Administrators of GUNNS PLANTATIONS LIMITED (ADMINISTRATORS APPOINTED) (RECEIVERS & MANAGERS APPOINTED) (ACN )) Liquidators --- JUDGE: WHERE HELD: Gardiner AsJ Melbourne DATE OF HEARING: 23 February 2017 DATE OF JUDGMENT: 19 December 2017 CASE MAY BE CITED AS: MEDIUM NEUTRAL CITATION: [2017] VSC CORPORATIONS Application by liquidators of managed investment schemes for further directions pursuant to s 511 of the Corporations Act 2001 (Cth) for entitlement to remuneration, costs and expenses including those that are expected to be incurred prior to conclusion of liquidation Directions sought under s 50 of the Evidence Act 2008 (Vic) that evidence be given in summary form. APPEARANCES: Counsel Solicitors For the Plaintiffs Dr O Bigos Arnold Bloch Leibler Mr T Burdon and Mr Musgrave appeared in person ---

2 TABLE OF CONTENTS Introduction... 1 Summary of activities carried out by the liquidators in the Relevant Period... 8 Great Southern Schemes sale related activities... 8 Gunns Woodlot Schemes sale related activities... 8 Tasmanian Forestry Estate sale... 8 Tumbarumba Estate sale... 9 Tumbarumba Estate - non-sale related activities Australian Forestry Plantation sale completion Forestry Tasmania settlement Third Party Landowner activities Sale related activities in relation to the Schemes Non-sale related activities in relation to the Schemes Distribution tasks Income Tax and GST advice and class rulings Resolution of Custodian accounts General Scheme activities Management of the Schemes Second Liquidation Costs Application and Third Liquidation Costs Application.. 19 Stakeholder liaison Scheme wind-up Liaising with ASIC Other administrative Scheme related activities Assessment of activities carried out by the liquidators in the Relevant Period Analysis of expenditure and remuneration The Liquidators allocation methodology Summary spreadsheet for the Relevant Period The claim for remuneration, disbursements, legal costs and third party costs Liquidators remuneration Liquidators disbursements Legal costs Third party costs Claim for Future Costs Liquidators remuneration Liquidators disbursements Legal costs Third party costs Allocation i

3 HIS HONOUR: Introduction 1 On 20 March 2015, I delivered reasons 1 for orders that I made in deciding an application made by the first plaintiffs by interlocutory process dated 29 September 2014 (the previous application ). The previous application sought directions and orders in relation to the costs, expenses and remuneration which the first plaintiffs ( the liquidators ) had incurred as liquidators of Gunns Plantations Limited ( GPL ) in its capacity as responsible entity of the managed investment schemes known as the Gunns Woodlot Schemes and the Great Southern Schemes (together the Schemes ) in the period 1 December 2013 to 30 June The liquidators, by an interlocutory process filed 3 November 2016, make a similar application for directions in relation to costs, expenses and remuneration which they have incurred and which they expect will be incurred in relation to the Schemes during the periods of liquidation from 1 July 2014 to 31 May 2016 and from 1 June 2016 until the completion of the liquidation or the ending of the Schemes (together the Relevant Period ). Other ancillary orders are also sought including an order under s 50 of the Evidence Act 2008 (Vic) ( Evidence Act ) that the liquidators adduce their evidence as to the quantum of their claims in the form of a summary as contemplated by those provisions. 3 The total amount for which approval is sought under this application exceeds $10 million. The amounts claimed do not include remuneration and expenses relating to the general costs of the liquidation. 4 As my earlier reasons reveal, there had been two earlier applications of this character in the Gunns insolvency administration. The first was heard by Ferguson J in Re Gunns Plantations Limited (No 4) 2 and the second by Judd J in Re Gunns Plantations Limited (In Liquidation) (Receivers & Managers Appointed). 3 These reasons should be 1 Re Gunns Plantations Ltd (in liq) (recs and mgrs apptd) [2015] VSC 102 ( my earlier reasons ). 2 [2013] VSC 595 ( the administration application ). 3 [2014] VSC 239 ( The first liquidation application ). SC:EB 1 JUDGMENT

4 read in light of the decisions of Judd and Ferguson JJ and together with my earlier reasons. I will adopt the terminology employed in my earlier reasons here. 5 The liquidators, both partners of PPB Advisory ( PPBA ) were appointed as administrators of the Gunns group of companies on 25 September 2012 and then as liquidators of the group on 5 March The liquidators control the second plaintiff, GPL, in its capacity as responsible entity of the Schemes. Receivers and managers were appointed to the Gunns group on 25 September 2012 and have since controlled the other companies in the Gunns group. 6 This application is concerned with the liquidators costs, expenses and remuneration for the Relevant Period. As such, it is something of a repeat of the earlier applications and involves the application of the same principles and approaches then adopted to the evidence relied upon by the liquidators in this application. I have adopted the same methodology that I employed in considering the previous application. 7 In this application, the liquidators rely on the following affidavit material: (a) an affidavit of Craig David Crosbie, sworn 2 November 2016 (the fifth Crosbie affidavit); (b) the affidavit of Craig David Crosbie, sworn 21 May 2013 (the first Crosbie affidavit); (c) the sixth affidavit of Daniel Matthew Bryant, affirmed 1 November 2013 (the sixth Bryant affidavit); and (d) the twelfth affidavit of Daniel Matthew Bryant, affirmed 20 December 2013 (the twelfth Bryant affidavit). 8 Exhibited to the fifth Crosbie affidavit is a spreadsheet setting out the scheme related costs incurred during the Relevant Period for the Schemes. 4 This is accompanied by a supporting spreadsheet providing a further breakdown of the scheme related costs 4 Exhibit CDC-5 to the fifth Crosbie affidavit. SC:EB 2 JUDGMENT

5 and the proposed methods of allocation of those costs. 9 Subsequent to the hearing of this matter, the liquidators filed a further affidavit of Mr Crosbie sworn 6 March 2017 which exhibits several volumes containing the original time sheets and other documentation comprising the primary source documents from which these summary spreadsheets were prepared (the primary source documents ). 5 Using that material, I have conducted the same random selection exercise that I carried out in relation to the previous application which is described in my earlier reasons The liquidators and GPL are the only parties to this proceeding, however, the following parties have been served: (a) ASIC; (b) the receivers and managers of the Gunns group of companies; (c) the Grower 7 Committee; (d) the Committee of Inspection; (e) Trevor Burdon, a Grower in the 2001 and 2002 Gunns Wood Lot Schemes, who filed a Notice of Appearance; (f) Adam Musgrave, a Grower in the 2005 Gunns Wood Lot Schemes, who filed a Notice of Appearance; and (g) Primary Securities Ltd, the replacement responsible entity for the 2000 and 2001 Gunns Wood Lot Schemes, which filed a Notice of Appearance. 11 The Court documents were also publicly accessible via the liquidators website, and the liquidators solicitors website. 5 Exhibit CDC-6 to the affidavit of Craig David Crosbie sworn 6 March See paragraphs of my earlier reasons. 7 As outlined in my earlier reasons [11], the members of the Schemes are referred to as Growers. SC:EB 3 JUDGMENT

6 12 The general background of the Schemes, the ensuing insolvency administrations, and the applications made to Ferguson J and Judd J are described in my earlier reasons. 8 In the first liquidation application, Judd J observed that: The complexity of a liquidation of managed investment schemes, in conjunction with a receivership of assets, cannot be underestimated. There were 18 forestry schemes, spread across all six states. There were approximately 226,000 hectares of land under management. There were thousands of individual growers. Scheme documentation is complex. Management and administration structures were complex. There is ambiguity surrounding the structures, documentation and grower rights During the hearing for this application, Counsel for the liquidators observed that the Gunns administration had by that time necessitated 46 sitting days before several judges of this Court. 14 Mr Burdon and Mr Musgrave appeared and made submissions at the hearing of this application. In addition, one of the liquidators, Mr Crosbie, was cross-examined by Mr Musgrave on the issues of the need for and cost of engaging expert advice on the issue of incidence of GST. I reminded Messrs Burdon and Musgrave, as I did at the hearing of the previous application, that this application was one concerned with the determination of remuneration and not an occasion for airing general grievances in regard to the conduct of the liquidations and the decisions made by the liquidators in the course of their responsibilities. It is obvious that they are both quite disenchanted with the conduct of the Gunns insolvency administration and in particular with the remuneration claimed and costs incurred by the liquidators. They each filed written submissions and addressed those submissions at the hearing of the application. 15 In their interlocutory process, the liquidators seek the following directions: Notice of Application to Growers 1. A direction pursuant to rule of the Rules and/or s 511 of the Act that the Liquidators would be justified in giving sufficient notice of this interlocutory process to all members of the Schemes ( Growers ) by: (a) causing this interlocutory process and the November 2016 Crosbie Affidavit to be published on the websites of the 8 [10] [22]. 9 [76]. SC:EB 4 JUDGMENT

7 Liquidators ( and the Arnold Bloch Leibler ( and (b) (c) notifying the Growers by that this interlocutory process and the November 2016 Crosbie Affidavit have been so published and details of a phone number which any Grower may use to request a paper copy or electronic copy of those documents; and causing an advertisement to be published in a nationally circulated newspaper that this interlocutory process and the November 2016 Crosbie Affidavit have been so published and details of a phone number which any Grower may use to request a paper copy or electronic copy of those documents. Great Southern Scheme Related Costs 2. A direction pursuant to rule of the Rules and/or s 511 of the Act that the Liquidators are justified and otherwise acting properly and reasonably in claiming the costs, expenses and remuneration incurred in relation to the Schemes numbered 10 to 18 in Schedule 1 ( Great Southern Schemes ) during the period between 1 July until 31 May 2016 ( Relevant Period ) ( Great Southern Scheme Related Costs ) as costs, expenses and remuneration reasonably incurred in caring for, protecting and preserving the assets and/or realisation of property of the Great Southern Schemes. 3. A direction that the Liquidators of GPL are entitled to a lien over the scheme property of the Great Southern Schemes in respect of the Great Southern Scheme Related Costs for the Relevant Period. Gunns Woodlot Scheme Related Costs 4. A direction pursuant to rule of the Rules and/or s 511 of the Act that the Liquidators are justified and otherwise acting properly and reasonably in claiming the costs, expenses and remuneration incurred in relation to the Schemes numbered 1 to 9 in Schedule 1 ( Gunns Woodlot Schemes ) during the Relevant Period ( Gunns Woodlot Scheme Related Costs ) as costs, expenses and remuneration reasonably incurred in caring for, protecting and preserving the assets and/or realisation of property of the Gunns Woodlot Schemes. 5. A direction that the Liquidators and GPL are entitled to a lien over the scheme property of the Gunns Woodlot Schemes in respect of the Gunns Woodlot Scheme Related Costs for the Relevant Period. Great Southern Scheme Prospective Future Costs 6. A direction pursuant to rule of the Rules and/or s 511 of the Act that the Liquidators are justified and otherwise acting properly and reasonably in claiming the costs, expenses and remuneration incurred since 1 June 2016 and that, it is anticipated, will continue to be incurred in relation to the Great Southern Schemes ( the Great Southern Scheme Prospective Future Costs ) until the Great Southern Schemes end or the liquidation of GPL ends, whichever is the later ( the Great Southern SC:EB 5 JUDGMENT

8 Future Period ), as costs, expenses and remuneration reasonably incurred in caring for, protecting and preserving the assets and/or realisation of the Great Southern Schemes. 7. A direction that the Liquidators and GPL are entitled to a lien over the scheme property of the Great Southern Schemes in respect of the Great Southern Scheme Prospective Future Costs for the Great Southern Future Period. Gunns Woodlot Scheme Prospective Future Costs 8. A direction pursuant to rule of the Rules and/or s 511 of the Act that the Liquidators are justified and otherwise acting properly and reasonably in claiming the costs, expenses and remuneration incurred since 1 June 2016 and that, it is anticipated, will continue to be incurred in relation to the Gunns Woodlot Schemes ( the Gunns Woodlot Scheme Prospective Future Costs ) until the Gunns Woodlot Schemes end or the liquidation of GPL ends, whichever is the later ( The Gunns Woodlot Future Period ), as costs, expenses and remuneration reasonably incurred in caring for, protecting and preserving the assets and/or realisation of the Gunns Woodlot Schemes. 9. A direction that the Liquidators and GPL are entitled to a lien over the scheme property of the Gunns Woodlot Schemes in respect of the Gunns Woodlot Scheme Prospective Future Costs for the Gunns Woodlot Future Period. Surplus Prospective Future Costs 10. A direction pursuant to rule of the Rules and/or s 511 of the Act that, in the event that: (a) (b) there are surplus funds after the liens have been fully exercised; and those surplus funds are less than the costs of distributing those surplus funds to Growers, ( the Low Surplus Funds ), the Liquidators are justified and otherwise acting properly and reasonably by not distributing the Low Surplus Funds to Growers and treating the Low Surplus Funds as undistributed money under s 601NG of the Act, or as otherwise directed by the Court. Competing Claims 11. A direction pursuant to rule of the Rules and/or s 511 of the Act that the Liquidators are justified and otherwise acting properly and reasonably in claiming an administration fee of $150 from each of those Growers with unresolved competing claims with their financier in relation to the proceeds, in the circumstances referred to in paragraphs 118 to 123 of the November 2016 Crosbie Affidavit, as costs, expenses and remuneration reasonably incurred in caring for, protecting and preserving the assets and/or realisation of property of the Gunns Woodlot Schemes. SC:EB 6 JUDGMENT

9 Other Matters 12. A direction that, pursuant to s 50 of the Evidence Act 2008 (Vic) the Liquidators may adduce the evidence in respect of the Great Southern Scheme Related Costs and the Gunns Woodlot Scheme Related Costs in the form of a summary. 13. An order that the Liquidators be indemnified in respect of their costs of this application out of the scheme property of the Great Southern Schemes and the Gunns Woodlot Schemes and that they be entitled to a lien over the scheme property of the Great Southern Schemes and the Gunns Woodlot Schemes in respect of those costs. 16 In my earlier reasons, I described the source of the Court s power to give directions. 10 In summary, section 511 of the Corporations Act 2001 (Cth) ( the Act ) confers on the Court power to give directions to liquidators in a voluntary winding up and Rule of the Supreme Court (General Civil Procedure) Rules 2015 confers on the Court power to give directions to trustees. The Court has a discretion as to whether giving directions will be of advantage in the relevant liquidation or trust and it will give directions where it can summarily solve a difficulty which has arisen in an economic and efficient manner. 17 In order to claim an indemnity for the expenditure and remuneration incurred for the Relevant Period, the liquidators must satisfy the Court that (a) there is and, in respect of the claim for prospective remuneration, will be, a sufficient nexus between the expenditure and remuneration and the liquidation of the Schemes, and (b) the amounts claimed are prima facie reasonable. 11 The liquidators must establish that the costs, expenses and remuneration were incurred exclusively in the care, preservation and realisation of the property and assets of the Schemes and, where multiple schemes are involved, the claims under consideration are referrable to a particular scheme The liquidators contend that the expenditure and remuneration is related to the Schemes, was reasonable, and accordingly falls within direction 5 of Ferguson J s 10 [6] [9]. 11 Administration application [9], citing Davies J in Thackray v Gunns Plantations Ltd (2011) 85 ACSR 144 [42] ( Thackray ). 12 See the first liquidation application [77] (Judd J), citing Thackray at [38] [42]. SC:EB 7 JUDGMENT

10 orders of 9 September 2013 made in the administration application As to establishing that there is a sufficient nexus between the expenditure and remuneration and the liquidation of the Schemes, the fifth Crosbie affidavit describes the activities that the liquidators were (and will be) involved in during the Relevant Period and for which a claim is made. What follows is in the nature of a summary of such matters. As I have said, these reasons need to be read with my earlier reasons in order to understand their context and the terminology employed. Summary of activities carried out by the liquidators in the Relevant Period Great Southern Schemes sale related activities 20 The trees located on land owned by Trust Company (Australia) Limited in its capacity as trustee of the Forestry Investment Trust ( Trust Company ) were sold by the liquidators by contracts dated 25 October 2013 ( Trust Company Sale ). The liquidators applied to the Court and obtained orders for the allocation and distribution of the proceeds of the Trust Company Sale. The liquidators incurred costs during the Relevant Period in completing the Trust Company Sale following receipt of the Court s orders. Gunns Woodlot Schemes sale related activities 21 The Gunns Woodlot Schemes sale tasks included tasks associated with the sale of the Tasmanian Forestry Estate, the sale of the Tumbarumba Estate, sale of the AFP Scheme land and the Forestry Tasmania settlement. Tasmanian Forestry Estate sale 22 A significant proportion of the land used in the Gunns Woodlot Schemes was owned by Gunns Limited and other Gunns group entities and leased to GPL ( Gunns Scheme Land ). The Gunns Scheme Land and the trees situated upon that land (comprising the Tasmanian Forestry Estate) were sold by the receivers along with other assets of the Gunns group ( TFE Sale ). 23 As described in my earlier reasons, the liquidators applied to the Court and obtained 13 Direction 5 of Ferguson J s orders is extracted [16] of my earlier reasons. SC:EB 8 JUDGMENT

11 directions in August 2014 that they were justified in exercising their powers to terminate Growers rights to allow completion of the business sale contract for the Tasmanian Forestry Estate and to enter into and perform the sale agreement. 14 In October 2014, the liquidators applied to the Court and obtained directions that they were justified and were otherwise acting reasonably in allocating the proceeds of the TFE Sale between the Gunns Woodlot Schemes in accordance with a report previously provided by URS Corporation. 24 During the Relevant Period, the liquidators undertook further work in relation to the Tasmania Forestry Estate. This included drafting and circulating an Explanatory Notice to Growers in relation to the allocation and distribution application made in May 2015, and preparing and executing certain deeds of assignment and deeds of surrender in relation to the Gunns Scheme Land the subject of the TFE Sale. In addition, they corresponded with taxation advisers in relation to GST and income tax implications associated with the TFE Sale, liaised with URS Corporation regarding their report, corresponded with the Growers who intervened in the liquidators application seeking directions in relation to the TFE proceeds (Mr Burdon and Mr Musgrave), considered the timing and steps necessary to effect the distribution of the TFE proceeds in accordance with the orders subsequently made by Judd J on 18 August 2015, 15 and responded to an interlocutory application filed by Mr Burdon. 16 Tumbarumba Estate sale 25 Each of the GPL Schemes offered investors multiple options ( Scheme Options ), 17 with each Scheme Option effectively being treated as a separate scheme in and of itself. 18 In 2006, 2008 and 2009, three Scheme Options were offered within the Gunns Woodlot Schemes ( the Gunns Woodlot (Third Option) Schemes ). Option 3 to the Gunns Woodlot (Third Option) Schemes involved an investment in pine. The Tumbarumba Estate comprises the trees planted on Tumbarumba land and belonging 14 [34(f)]. 15 See Re Bryant and Others (in their capacities as joint and several liquidators of Gunns Plantations Ltd (ACN ) (in liq) (recs and mgrs. apptd)) (No 5) [2015] VSC Fifth Crosbie Affidavit [24]-[30]. 17 No such options were offered in the GSP Schemes. 18 Fifth Crosbie Affidavit [138] [139]. SC:EB 9 JUDGMENT

12 to investors in Option 3 to one or more of these Schemes ( Scheme Pine Trees ), and additional Tumbarumba Land owned by Gunns Limited and planted with pine trees also owned by Gunns Limited. 26 In May 2015, the liquidators applied to the Court and subsequently obtained orders for directions in relation to the sale of the Tumbarumba Estate, the allocation of the Scheme proceeds from the sale of the Tumbarumba Estate between the Gunns Woodlot (Third Option) Schemes, and the distribution of the Scheme proceeds to the third Option investors within those Schemes ( Tumbarumba Application ). 27 The liquidators also undertook additional tasks during the Relevant Period in relation to the sale of the Scheme Pine Trees and the sale of the Tumbarumba Estate as a whole. This included (i) developing a strategy for the sale of the Scheme Pine Trees, (ii) engaging in negotiations with the receivers in relation to the sale process for the joint sale of the Tumbarumba Estate as a single package, (iii) considering the reasonableness of the receivers opinion on the estimated realisable amount for the Tumbarumba Estate (as compared to their internal assessments), and (iv) negotiating with the receivers in relation to the proposed allocation of the purchase price between the various assets on the Tumbarumba Estate, and in relation to the sale process for the Tumbarumba Estate and the allocation for the Scheme Pine Trees. As regards the terms of the sale process agreement with the receivers, they liaised with URS Corporation in relation to their report. This involved reviewing and corresponding with the receivers in relation to bids received for the purchase of the Tumbarumba Estate, commencing and conducting the Tumbarumba Application, and corresponding with taxation advisers in relation to GST and income tax implications associated with the Tumbarumba Estate Sale. 19 Tumbarumba Estate - non-sale related activities 28 The liquidators undertook additional tasks in the Relevant Period in relation to the Tumbarumba Application which were not associated with the sale of the Tumbarumba Estate, including maintaining a PPBA hotline, GPL hotline, PPBA 19 Fifth Crosbie affidavit [40]. SC:EB 10 JUDGMENT

13 Grower address, and GPL Grower address in relation to the GPL allocation and distribution hearing. These facilities were created to address Growers queries in relation to the Tumbarumba Application. The liquidators were also involved in drafting and circulating a Grower Update in relation to the Tumbarumba Application and in obtaining insurance for the Tumbarumba Estate plantations. 20 Australian Forestry Plantation sale completion 29 During the Relevant Period, the liquidators completed the sale of the Australian Forestry Plantation ( AFP ) Scheme Land. This involved the execution of the surrender deeds in respect of the AFP Leases and AFP Sub-Leases (as defined in the Mr Bryant s affidavit of 22 November 2013 ( AFP Affidavit )), liaising with the AFP Receivers, obtaining legal advice in relation to the invoicing and payment of the Liquidators Value Allocation (as defined in the AFP Affidavit), and corresponding with taxation advisers in relation to GST and income tax implications associated with the AFP Sale. 21 Forestry Tasmania settlement 30 The liquidators responded to a breach notice issued by Forestry Tasmania to GPL on 28 August 2013 in respect of eighteen forestry right deeds for non-payment of rent for the period 1 July 2012 to 30 June 2013 ( Breach Notices ). The liquidators subsequently responded to a notice of termination issued by Forestry Tasmania to GPL on 19 December 2013 for failure to remedy the breach the subject of the Breach Notices The liquidators reserved the Growers rights in relation to trees on the land which was owned by Forestry Tasmania and on which the Gunns Woodlot Schemes were partly conducted ( FT Land ), engaged in negotiations with Forestry Tasmania, and issued a letter of demand to Forestry Tasmania. This letter of demand put Forestry Tasmania on notice of a claim in restitution by GPL (in its capacity as responsible entity of the Gunns Woodlot Schemes) in respect of the trees on the FT Land ( Restitution Claim ). During the Relevant Period, the liquidators attended a mediation, and subsequently 20 Fifth Crosbie affidavit [41]. 21 Fifth Crosbie affidavit [42] [43]. 22 Fifth Crosbie affidavit [44] [47]. SC:EB 11 JUDGMENT

14 reached a settlement agreement with Forestry Tasmania in relation to the Restitution Claim. 23 Third Party Landowner activities 32 Other than Trust Company, there are 61 landowners that lease land to GPL ( Third Party Landowners ) pursuant to 68 separate leases in respect of the Great Southern Schemes ( Third Party Leases ). The liquidators incurred further costs in relation to these Third Party Landowners, including costs in relation to both the Schemes sale tasks, and in relation to other non-sale related costs in respect of the Schemes. Sale related activities in relation to the Schemes 33 The liquidators applied for and, on 21 May 2014, obtained directions from the Court that they would be justified in entering into and performing agreements with the Third Party Landowners in accordance with various options Since obtaining those orders, the liquidators sought to reach agreement with as many Third Party Landowners as possible by entering into negotiations and holding landowner meetings, reviewing offers, obtaining counsel s advice in relation to complex legal issues and contracts of sale, preparing deeds and obtaining taxation advice. 25 Non-sale related activities in relation to the Schemes 35 The liquidators undertook tasks relating to the Third Party Leases that were not associated with the sale of trees, including analysing various lease agreements, lease options and forestry inspection reports, processing and reconciling harvest proceeds in relation to harvesting of trees on land of the Third Party Landowners, maintaining the master lease schedule and a register of communications with Third Party Landowners, updating Third Party Landowners and reviewing and responding to general enquiries from Third Party Landowners Fifth Crosbie affidavit [48] [50]. 24 Re Gunns Plantations Limited (in liquidation) (Receivers and Managers Appointed) [2014] VSC 239 (Judd J). 25 Fifth Crosbie affidavit [53] [55]. 26 Fifth Crosbie affidavit [56]. SC:EB 12 JUDGMENT

15 Distribution tasks 36 In the fifth Crosbie affidavit, Mr Crosbie describes the distribution process to Growers as a complex task by reason of, among other things, the number of Schemes and Scheme Options, the number of Growers and the different status of some Growers within Schemes During the Relevant Period, the liquidators prepared for the distribution of sale proceeds by (i) considering the timing and steps necessary to effect the distribution of proceeds from each separate sale, (ii) building and maintaining separate distribution models for the Schemes, (iii) reviewing and auditing the models, (iv) preparing documentation outlining the Scheme proceeds and costs and the allocation of proceeds and costs between the Schemes and Scheme Options, and (v) communicating with Growers. 28 Income Tax and GST advice and class rulings 38 Mr Crosbie deposed that the distribution of the sale proceeds involved complex taxation issues. PPBA does not have in-house taxation advisers and on 17 December 2014, the liquidators engaged PriceWaterhouseCoopers ( PwC ) which has specialist taxation advisers to provide advice on these questions. The advice required had both legal and accounting aspects. In the Relevant Period, the liquidators incurred costs in briefing PwC with the necessary documents, attending numerous meetings and conference calls with PwC and in engaging PwC to obtain a number of tax rulings from the Australian Taxation Office ( ATO ) in December 2015 and September 2016 in relation to various tax issues which affected the Growers Mr Crosbie stated that for each individual sale, the liquidators needed to determine whether the sale proceeds: (a) were taxable in the hands of GPL as the responsible entity; (b) were taxable in the hands of Growers and, if so, in what financial year it is 27 Fifth Crosbie affidavit [59] [69]. 28 Fifth Crosbie affidavit [58]. 29 Fifth Crosbie affidavit [59] [69]. SC:EB 13 JUDGMENT

16 assessable; and (c) attracted GST and, if so, how it would be paid. 40 Mr Crosbie stated that PwC were briefed with the Scheme documents, each of the separate sale agreements and other relevant documents including background information on the Schemes and the liquidators communications with Growers. The liquidators also held numerous meetings and conference calls with PwC to explain and discuss the intricacies of each of the different sale agreements and how the characterisation of proceeds affected the tax treatment. Once the liquidators had obtained PwC s advice, they engaged PwC to obtain tax rulings from the ATO in relation to income tax and GST on the sale proceeds. The ATO required an understanding of the legal nature of the arrangements and potential tax implications PwC had identified before it was willing to issue tax rulings. 41 On 23 December 2015, the ATO issued a guidance letter to the liquidators in relation to the treatment of the sale proceeds for income tax purposes. The ATO agreed to allow an administrative approach in respect of the proceeds. The ATO guidance letter stated: (a) none of the proceeds were taxable in the hands of GPL as the responsible entity; (b) the proceeds were taxable as income in the hands of the Growers however, the Growers could elect to include the proceeds received as assessable income in the year in which the funds were received or in any earlier taxation period (without penalty but subject to interest). 42 Mr Crosbie stated that the ATO guidance letter provided comfort for both the liquidators and Growers as to how the ATO would treat the proceeds for income tax purposes. This was regarded by the liquidators as important given the facts and previous ATO Product Rulings that did not adequately contemplate the income tax treatment of proceeds upon the appointment of liquidators. The guidance also had the added benefit of providing flexibility for Growers as to which year to return the SC:EB 14 JUDGMENT

17 income. If the administrative approach was adopted by Growers, it would align the taxation of the distributions to the income year in which the cash was received and avoid the need for Growers to amend prior year tax returns. 43 On 23 December 2015, the ATO also issued a guidance letter to the liquidators in relation to the GST treatment of the sale of the GSP Scheme and GPL Scheme assets to the respective landlords and any related distributions to the Growers but the guidance was regarded as too general in nature to be of sufficient comfort. Accordingly, on 15 February 2016, PwC, on the liquidators behalf, formally lodged a GST class ruling request to confirm the GST treatment of the various sale proceeds. 44 On 29 February 2016, the ATO issued Class Ruling - Income Tax: Liquidation - Great Southern Plantation and Gunns Plantations Limited Woodlot Schemes ( Class Ruling ) which provided a legally binding guidance to Growers as to how any proceeds received in relation to the Schemes should be declared in their income tax return. Mr Crosbie stated that the Class Ruling would benefit the Growers by resolving any queries they had in relation to declaring proceeds and reduced the cost to the liquidators in having to deal with individual enquiries on this issue. 45 On 12 August 2016 the ATO issued a draft GST class ruling addressing the Growers GST liability upon GPL disposing of GSP Scheme and GPL Scheme assets in its capacity as the responsible entity and making a subsequent distribution to the Grower. The draft ruling concurred with the liquidators submission that the Growers were not making a taxable supply when GPL disposed of the relevant assets or when GPL made a distribution to Growers. The effect of this was that: (a) Growers had no liability to pay GST in respect of these transactions; and (b) GPL would remit any GST in respect of these transactions. 46 The final ATO ruling was published on 15 September Mr Crosbie stated that this ruling provided certainty to all parties and ensured that compliance costs were minimised in order to maximise distributions to Growers. It also significantly reduced SC:EB 15 JUDGMENT

18 distribution costs because the liquidators were not required to calculate and remit payments for individual Grower s GST liability to the ATO. 47 The engagement of PwC to advise on the issue of GST was the subject of strong criticism by Mr Musgrave. In his submissions, Mr Musgrave described himself as an indirect tax practitioner with over 15 years experience in that field. He stated that that he had specialist knowledge in GST and stamp duty, he had worked in various professional services firms and was currently working as a taxation lawyer at a law firm in Sydney. His central criticism of the liquidators was the need for and the cost of obtaining a GST class ruling from the ATO. The GST class ruling ultimately issued by the ATO was that GPL was not the agent of the Growers however Mr Musgrave contended that the issue was not one of any complexity and did not warrant the engagement or the expense of external specialists. 48 Mr Crosbie was asked in cross examination by Mr Musgrave why, if ABL had been engaged as the liquidators lawyers, it was necessary to engage PwC given ABL s expertise in taxation matters and incur the extra cost involved in engaging alternative advice. Mr Crosbie accepted that ABL had a taxation practice but stated that his coliquidator, Mr Bryant, was concerned about ABL s approach to the matter and wished to obtain the advice of PwC, a firm known by them as having specific expertise in GST. 49 The liquidators had remitted $3.850 million GST to the ATO with the December 2013 BAS and the advice of PwC was that this was most likely not the correct course of action. PwC also advised that there were issues around whether the GST should be remitted by the Growers or by GPL as the responsible entity. Mr Crosbie stated that the chief concern of the liquidators was that if a distribution was made and they had not allocated the tax appropriately, the ATO would look to the liquidators to meet the liability. It was considered that the risk was not insignificant and involved the potentially inappropriate dispersal of funds of the order of $8 million. During crossexamination, Mr Crosbie stated that PwC are experts in indirect taxation and the issues involved both legal and taxation considerations and PwC had accountants and lawyers versed in this area. Mr Crosbie stated that the ruling issued by the ATO SC:EB 16 JUDGMENT

19 enabled the liquidators to deal with the funds in a fashion which did not require them to administratively discern in each particular case what the incidence of GST would be and inform the Grower. 50 Mr Musgrave submitted that if ABL had been consulted, because the issue was so clear cut they would have promptly advised that there would be no GST payable in respect of the distribution of the sale proceeds. This is because the majority of the Growers were not registered for GST and had no requirement to be registered by reason of the GST turnover threshold of $75, a year, a figure greater than the potential distributions. In addition, Mr Musgrave contended that Mr Crosbie failed to track PwC s charges against the original fee estimate when he should have done so. 51 I have considered Mr Musgrave s criticisms and come to the conclusion that the engagement of PwC to advise and obtain the necessary rulings and guidance was an appropriate course to take in the circumstances. In my view, the liquidators were entitled to seek the highest level and best quality advice to protect themselves and the Gunns insolvency administration from an exposure to substantial liability to the ATO if they embarked on a distribution of sale proceeds which was not in accordance with the correct position. This involved the obtaining of a number of guidelines and rulings in order that an acceptable level of protection could be obtained by the liquidators. Towards the conclusion of the liquidation a decision had to be made as to the appropriate course to take in regard to the distribution of funds to the Growers. Mr Musgrave, with his expertise in the area of indirect taxation, may consider that the matters that the liquidators consulted PwC about involved no controversy or complexity but I accept the liquidators rationale for engaging PwC. My view in that regard is confirmed by my review of the documentation in regard to the involvement of PwC 30 in the ruling applications and the subsequent ATO rulings. 52 The PwC invoices in respect of the work done by the liquidators together with correspondence regarding fees, memoranda of advice and documentation in relation 30 Exhibit CDC-8 to the affidavit of Craig David Crosbie sworn 6 March This bundle of documents was provided to Mr Musgrove. SC:EB 17 JUDGMENT

20 to the dealings with the ATO including rulings were exhibited to Mr Crosbie s affidavit of 6 March PwC gave a 20% discount rate on the hourly rates normally charged to clients to the liquidators. 53 I have reviewed that material and in particular the narrative in PwC s invoices which describes the nature of the work performed, as well as the applications for the rulings lodged by PwC and the rulings issued by the ATO. The fees charged are for work performed over a year long period from January 2015 to February 2016 and relate to both income tax and GST issues. The ruling application documentation is complex and in my assessment would have involved research, careful drafting and finessing before submission. The PwC tax invoices show that the fees charged are high but I consider that prima facie they are reasonable and were reasonably incurred by the liquidators. The amounts charged by PwC appear to be proportionate to the value provided to the liquidators by PwC when regard is had to the importance and complexity of the work performed and the protection it afforded the liquidators from exposure to potential liabilities of several million dollars. Resolution of Custodian accounts 54 The receivers asserted a claim in relation to the amount held in the custodian accounts for each of the Schemes (being the sum of $3,006, as at 8 April 2016) ( Custodian Funds ). To resolve the receivers claim, the liquidators undertook a reconciliation of the Custodian Funds to understand the source of the funds and thereby determine whether the funds were payable to the Growers or to GPL in its personal capacity (and therefore captured by the lenders charge to which the receivers were appointed). The liquidators reconciliation resulted in a determination that $2,554, of the Custodian Funds were Grower funds and the remaining $450, were captured by the lenders charge. 31 Exhibit CDC-8. SC:EB 18 JUDGMENT

21 General Scheme activities Management of the Schemes 55 During the Relevant Period, the liquidators maintained the Schemes by: (a) preparing and maintaining the purchase order register and maintaining the cash flow model for GPL; (b) reviewing and maintaining the receipts and payments received in relation to the Schemes; (c) liaising with those GPL employees who were retained in order to undertake scheme related work, including assisting in addressing Grower and landowner queries and helping to prepare for distributions to be made; (d) assessing potential realisation opportunities for the trees on the plantations the subject of the Schemes; and (e) liaising and negotiating with the receivers in relation to invoices issued under the management services agreement. Second Liquidation Costs Application and Third Liquidation Costs Application 56 During the Relevant Period, the liquidators: (a) applied to the Court and obtained directions in respect of scheme related costs incurred in relation to the Great Southern Schemes, the sale of assets associated with the Gunns Woodlot Schemes, and other Scheme related costs incurred during the period 1 December 2013 to 30 June 2014 ( the Second Liquidation Costs Application ); and (b) commenced the preparation of documentation in support of this Costs application ( Third Liquidation costs Application ) Mr Crosbie deposed that the calculation of the costs the subject of the Second Liquidation Costs Application and the Third Liquidation Costs Application involved 32 Fifth Crosbie affidavit [77] [79]. SC:EB 19 JUDGMENT

22 (i) an in-depth and careful review by members of the staff of all PPBA timesheets (on a line-by-line basis), (ii) a detailed review of both the invoices issued to the liquidators for out-of-pocket expenses and the internal accounting database for overhead expenses, and (iii) the collation and preparation of the PPBA timesheets and summary spreadsheets of the total costs claimed, and of the remuneration, disbursements, legal costs, and third party costs in particular. 33 It also involved anticipated costs relating to the notification to Growers of the Second Liquidation Costs Application, preparation for hearings in the Second Liquidation Costs Application and the provision of source documents to various individuals and groups. Stakeholder liaison 58 The liquidators kept Growers informed during the Relevant Period by releasing grower updates and explanatory notices and maintaining the various Grower hotlines and enquiry services in order to receive and respond to queries made by Growers (and often their financiers). The liquidators liaised closely with GPL staff in relation to Grower queries and in seeking Grower and Third Party Landowner information required for Grower updates and mail-outs. The liquidators also called a meeting of the GPL Committee of Inspection in order to seek approval to enter into the necessary agreements to effect the Trust Company Sale, the TFE Sale, and the sale of the Tumbarumba Estate. 34 Scheme wind-up 59 During the Relevant Period, the liquidators commenced the winding up of the Schemes pursuant to s 601NC of the Act, on the basis that the Schemes could no longer achieve their purpose, by preparing and lodging notices of intention to wind-up for the Great Southern Schemes and the Gunns Woodlot Schemes with ASIC. 35 Liaising with ASIC 60 The liquidators continued to engage with ASIC by way of fortnightly teleconference 33 Fifth Crosbie affidavit [80] [85]. 34 Fifth Crosbie affidavit [102] [104]. 35 Fifth Crosbie affidavit [105] [107]. SC:EB 20 JUDGMENT

23 updates in relation to various Scheme related matters. 36 Other administrative Scheme related activities 61 The liquidators undertook other general administrative Scheme related tasks, including establishing and maintaining Grower specific bank accounts, reviewing third party invoices, engaging in media relations, and attending internal strategy meetings and maintaining internal files. 37 Assessment of activities carried out by the liquidators in the Relevant Period 62 In relation to the period of administration, and in relation to the first and second phases of the period of liquidation, the types of costs categories as summarised on a task by task basis above were considered to give rise to a Universal Distributing 38 indemnity and lien. In Thackray, similar types of costs categories (under the broader headings of operational costs, legal costs and liquidators remuneration) were regarded as giving rise to a Universal Distributing indemnity and lien I have considered the evidence of Mr Crosbie contained in his fifth affidavit which is summarised above. I am satisfied that each of the tasks described and the expenses incurred, for which an indemnity and lien is claimed, can be characterised as relating exclusively to the care, preservation and realisation of the assets of the Schemes so as to give rise to a Universal Distributing lien. I also consider that the tasks were necessarily performed and that the liquidators acted reasonably in incurring the expenses and performing the work. Analysis of expenditure and remuneration 64 The liquidators must satisfy the Court that there was or is a sufficient nexus between the expenditure and remuneration on the one hand, and the liquidation of each particular Scheme on the other. The Liquidators allocation methodology 65 Where work was done by the liquidators in relation to more than one trust (or 36 Fifth Crosbie affidavit [108] [109]. 37 Fifth Crosbie affidavit [110]. 38 Re Universal Distributing Company Ltd (in Liq) (1933) 48 CLR 171 ( Universal Distributing ). 39 Thackray v Gunns Plantations Ltd (2011) 85 ACSR 144 [72] [74]. SC:EB 21 JUDGMENT

24 scheme), or work was done for one or more trusts as well as in relation to the general liquidation, the liquidators must estimate the costs and expenses incurred insofar as they relate to each trust and only charge those costs to the trust on whose behalf the work was performed Mr Crosbie deposes that the liquidators have allocated the work undertaken by applying the following methodologies with a view to ensuring each Scheme was only charged for the work relating to it: (a) Method 1 - costs which relate to some but not all of the Schemes. It is proposed that these costs are allocated amongst the Schemes to which they related in proportion to the number of hectares in each scheme; 41 (b) Method 2 - general scheme-related costs which were not referrable to any one or group of Schemes. It is proposed that these costs are allocated amongst all Schemes in proportion to the number of hectares in each Scheme; 42 (c) Method 3 was relevant to previous cost applications but has not been used in this application. 43 (d) Method 4 - costs relating to the sale of the various assets. It is proposed that these costs are allocated amongst the Schemes to which each sale related in proportion to the proceeds of sale received for each scheme; 44 (e) Method 5 - costs relating to Third Party Land. It is proposed that these costs be allocated amongst the Schemes which operated on land owned by Third Party Landowners in proportion to the number of hectares of land owned by Third Party Landowners in each Scheme; 45 (f) Method 6 - distribution costs. It is proposed that these costs are allocated Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) (1999) 30 ACSR 377, Fifth Crosbie Affidavit [135]. 42 Fifth Crosbie Affidavit [135]. 43 Fifth Crosbie Affidavit [135]. 44 Fifth Crosbie Affidavit, [136]. 45 Fifth Crosbie Affidavit, [149(b)]. SC:EB 22 JUDGMENT

25 amongst the Schemes in proportion to the number of Growers receiving a distribution in each Scheme As mentioned in paragraph 25 above, each of the Gunns Woodlot Schemes offered investors multiple options, 47 with each Scheme Option effectively being treated as a separate scheme. 48 In light of this, the liquidators propose that for the Gunns Woodlot Schemes, each of the methods identified are broken down again between each Scheme Option as follows: (a) Method 1A - This methodology is a variation of Method 1. Method 1 involves the allocation amongst the Schemes to which the cost relates on a per hectare basis. Method 1A involves the allocation amongst the Scheme Options to which the cost relates on a per hectare basis. (b) Method 2A - This methodology is a variation of Method 2. Method 2 involves the allocation amongst all Schemes on a per hectare basis. Method 2A involves the allocation amongst all Scheme Options on a per hectare basis; and (c) Method 4A - This methodology is a variation of Method 4. The Sale Costs (excluding the Third Party Landowner Costs) incurred during the Relevant Period are allocated between the Scheme Options in proportion to the sale proceeds allocated to each of the Scheme Options of the relevant sale to which those costs relate The liquidators summary 50 breaks down the proposed allocations by reference to the Scheme Options and methods categories described. 69 Mr Crosbie details in his affidavit what specific methodology would be applied to the various categories of costs, being Sale costs, 51 Third Party Landowner Sale Costs, Fifth Crosbie Affidavit, [158]. 47 Fifth Crosbie Affidavit, [138]. No such options were offered in the GSP Schemes. 48 Fifth Crosbie Affidavit, [138] [139]. 49 Fifth Crosbie Affidavit, [141]. 50 Exhibit CD-5 to the fifth Crosbie affidavit. 51 Fifth Crosbie Affidavit [143] [148]. 52 Fifth Crosbie Affidavit [149] [153]. SC:EB 23 JUDGMENT