IN THE COURT OF APPEAL IN THE SUPREME COURT OF VICTORIA AT MELBOURNE S APCI 2012 0069 S APCI 2012 0068 IN THE MATTER OF WILLMOTT FORESTS LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 063 263 650) BETWEEN WILLMOTTACTIONGROUP INC and Appellant (Intervener) WILLMOTT FORESTS LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 063 263 650) IN ITS PERSONAL CAPACITY AND 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 I First Respondent (First Plaintiff) RESPONDENTS OUTLINE OF SUBMISSIONS ON SECURITY FOR COSTS Date of document: Filed on behalf of: Prepared by: ARNOLD BLOCH LEIBLER Lawyers and Advisers Level 21 333 Collins Street MELBOURNE 3000 17 August 2012 the Respondents Solicitor s Code: 54 DX 38455 Melbourne Tel: 9229 9999 Fax: 9229 9900 Ref: 01-1722259 (Jane Sheridan - jsheridan@abl.com.au ) By summonses dated 7 August 2012, the Respondents seek security for costs: (a) in the sum of $87,174.19 in respect of appeal S APCI 2012 0068 (HVP Appeal); and (b) in the sum of $71,324.33 in respect of appeal S APCI 2012 0069 (Main Sale Appeal). (together the WAG Appeal Proceedings). ABLI2322796v1
2 The Respondents rely upon the following affidavits: (a) (b) (c) (d) affidavit of Justin Taede Vaatstra sworn 7 August 2012 in the Main Sale Appeal (First Vaatstra Affidavit); affidavit of Justin Taede Vaatstra sworn 7 August 2012 in the HVP Appeal (Second Vaatstra Affidavit); affidavit of Jane Chalmers Sheridan sworn 17 August 2012 in the Main Sale Appeal (First Sheridan Affidavit); and affidavit of Jane Chalmers Sheridan sworn 17 August 2012 in the HVP Appeal. 3 In the Main Sale Appeal and HVP Appeal, the appellant, the Willmott Action Group Inc (WAG), appeals from the decision of Justice Davies in proceedings SCI 2011 6762 and SCI 2011 6816 (Advice Applications), in which her Honour provided the Second and Third Respondents (the Liquidators) with directions pursuant to s 511 of the Corporations Act 2001 (Cth) (Act) that they were justified in procuring the First Respondent (WFL) to perform the HVP Final Implementation Deed and Amended Main Sale Contracts. 3 4 WAG is an association incorporated for the purpose of "representing the interests of shareholders, creditors, investors and Growers to ensure their concerns were heard by the external administrators of WFL". 4 The WAG intervened at the hearing of the Advice Applications 5 and opposed the giving of the judicial advice sought by the Respondents. WFL consented to the payment of WAG s costs of the Advice Applications out of the proceeds of sale of the Amended Main Sale Contracts and HVP Final Implementation Deed, on a solicitor and own client basis 6 on the basis that it was a proper intervener in the Advice Applications and those applications led to the creation of a fund from the sale of the subject assets.7 In the Matter of Willmott Forests Limited (Receivers and Managers Appointed) (in Liquidation) [2012] VSC 125. 2 As defined in the First Vaatstra Affidavit [4(a)]. As defined in the First Vaatstra Affidavit [13(b)]. Affidavit of Mark James Hoddinott affirmed 9 January 2012 at [23], being exhibit JTV-10 to the First Vaatstra Affidavit. See also First Vaatstra Affidavit [39]. First Vaatstra Affidavit at [5]. 6 Plaintiffs Outline of Submissions on Costs, dated 9 May 2012 at [3], being exhibit JCS-1 to the First Sheridan Affidavit. Transcript of hearing, dated 15 May 2012 at p4, being exhibit JCS-2 to the First Sheridan Affidavit ABL/23227960
5 Pursuant to rule 64.24(2) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic), the Court of Appeal may, in special circumstances, make an order that security be given for the costs of an appeal. The probable inability of an appellant to pay the respondent s costs of appeal is a special circumstance for the purposes of r.64.24(2). 8 By reason of the following, it is apparent that the WAG does not have the means to pay the Respondents costs of the appeal: (a) (b) First, despite numerous requests to do so, the WAG has failed to provide evidence as to its ability to meet an adverse costs order; 9 and Second, the available evidence suggests that WAG is impecunious and reliant on donations of Growers to fund the WAG Appeal Proceedings and has not yet made a specific call for donations. 1 6 An intervener has all of the burdens and rights of a party in litigation, including the burden of paying costs. 11 In these proceedings, the WAG is appealing the Advice Applications decision. It can therefore no longer claim to be a mere intervener, but is an active party in the WAG Appeal Proceedings. The creditors of WFL should not bear the expense of the WAG obtaining a "second opinion". 7 The Advice Applications concerned advice in relation to ownership of assets and the distribution of funds resulting from their sale. In cases involving a dispute concerning the allocation, distribution or ownership of a fund, the courts have repeatedly noted the distinction between an initial test of the merits and a second attempt by way of an appeal. 12 As Thomas J stated in Re McIntyre: It is...essential that a distinction should be maintained in the approach to costs at first instance and on appeal. Applicants and their advisers should not think that they can bring appeals confident in the knowledge that the estate will in all probability be obliged to pay for the exercise. What I have called the indulgent attitude of judges of first instance to unsuccessful applicants has no See, eg, Scerri v Northam Holdings Pty Ltd (1967) VR 674, 674; Mobilia v Voudiotis (2002) 4 VR 327,328 per Batt JA (with whom Eames JA agreed); Maher v Commonwealth Bank of Australia [2008] VSCA 122 [81] per Dodds-Streeton JA (with whom Redlich JA agreed); Challenge Charter Pty Ltd v Curtain Bros (QId) Pty Ltd [2004] 9 VR 382, 384 per Callaway JA (with whom Chernov JA agreed) See, First Vaatstra Affidavit [ 26] [32]. 10 First Vaatstra Affidavit [38][47]. G E Dal Pont, Law of Costs (LexisNexis Butterworths Australia, 2 nd ed, 2009) [11.40]. See also Corporate Affairs Commission v Bradley (1974) 1 NSWLR 391, 396; Hocking v Southern Greyhound Racing Club Unreported Supreme Court of South Australia, King CJ, Milihouse and Debelle JJ, 10 December 1993). 2 See, eg, Re McIntyre (1993) 2 Qd R 383, 388 (Full Court); Lippe v Hedderwick (1922) 31 CLR 148, 154-155 per Knox CJ; Murdocca v Murdocca (No 2) [2002] NSWSC 505 [78]; Dal Pont, Law of Costs (LexisNexis Butterworths Australia, 2 ed, 2009) [20.14]. ABLI23227960
place in the appeal process. A litigant has a right under the rules of court to test a judgment by bringing an appeal, but he has no similar right to do so at the expense of the other party or estate. 13 8 The Respondents position is strengthened by the fact that the parties entitled to the proceeds of the Amended Main Sale Contracts and HVP Final Implementation Deed - namely, the Growers, unsecured creditors and secured creditors - have already had their entitlement diminished by reason of the fact the WAG s costs are to be paid out of the sale proceeds. 14 The WAG has made a claim in relation to those costs in the sum of $892,444.18.15 Although this amount is disputed by WFL, the final amount of the claim will reduce the amount available to other Growers, unsecured creditors and secured creditors. In Manly v The Public Trustee of Queensland, 16 the Queensland Court of Appeal (in dismissing the appeal with costs) stated that in circumstances where the value of the estate had "already been significantly diminished by reason of the costs properly incurred in the challenge at first instance", it would be: quite unjust for this appellant to be relieved from the usual circumstances of paying the successful respondents costs of this appeal, particularly if that were to be accompanied by an order which had the effect of even further diminishing the value of the estate. 17 9 Finally, the WAG Appeal Proceedings are unlikely to advance the interests of the Growers, including those Growers that are members of the WAG. Justice Davies provided clear and comprehensive reasons as to why the Court was empowered to make directions pursuant to s 511 of the Act and why the land and head leases the subject of the Main Sale Contracts and HVP Final Implementation Deed respectively were not scheme property. The WAG did not enjoin the Respondents from completing the Main Sale Contracts and HVP Final Implementation Deed. Those agreements have now been completed and the proceeds received by the Liquidators and Receivers. 18 Therefore, at their highest, the WAG Appeal Proceedings can only effect a re-distribution of the sale proceeds as between the Growers, unsecured creditors and secured creditors. By their notices of appeal, the WAG has not 13 Re McIntyre (1993) 2 Qd R 383, 388. 14 First Vaatstra Affidavit [18(b)]. 15 First Sheridan Affidavit [16]. 16 [2008] QCA 198. 17 Ibid [42] per Daubney J (with whom McMurdo P and Mackenzie AJA agreed). 18 First Sheridan Affidavit [7][1 1]. ABLI23227960
elucidated any substantive basis for altering conclusions reached by Her Honour that the land and head leases were not scheme property and that the allocation of the sale proceeds as between land and trees was reasonable. 10 For the foregoing reasons, the Respondents ought to be awarded security for their costs of the WAG Appeal Proceedings. As the Appellants seek to ventilate all of the issues the subject of the Reasons for Decision, it is likely that the appeal will take 3 days 19 and will require the Court to traverse a six volume Appeal Book. 20 The Respondents estimate that their total party-party costs of the WAG Appeal Proceedings will be $158,498.52 and have allocated that amount between the Main Sale Appeal and HVP Appeal by reference to whether the grounds of appeal are common or relate only to one of the WAG Appeal Proceedings. 21 As exhibit JTV-15 to the First Vaatstra Affidavit demonstrates, the assumptions which underlie the estimate are conservative given the size of the WAG Appeal Proceedings. P ANASTASSIOU R CRAIG............................ ARNOLD BLOCH LEIBLER 19 First Vaatstra Affidavit at [50]. 20 First Vaatstra Affidavit at [53]. 21 First Vaatstra Affidavit at [60] [61 ]. ABL/23227960
Schedule I - Parties WILLMOTTACTIONGROUP INC Appellant (Intervener) and WILLMOTT FORESTS LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 063 263 650) IN ITS PERSONAL CAPACITY AND 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 First Respondent (First Plaintiff) and CRAIG DAVID CROSBIE IN HIS CAPACITY AS LIQUIDATOR OF WILLMOTT FORESTS LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 063 263 650) Second Respondent (Second Plaintiff) and IAN MENZIES CARSON IN HIS CAPACITY AS LIQUIDATOR OF WILLMOTT FORESTS LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 063 263 650) Third Respondent (Third Plaintiff) ABU23227960
SCHEDULE 2- REGISTERED MANAGED INVESTMENT SCHEMES I Willmott Forests 1989-1991 Project (ARSN 092 516 651) 2 Willmott Forests Project (ARSN 089 379 975) 3 BioForest Dual Income Project 2006 (ARSN 119 153 623) 4 BioForest Sustainable Timber and Biofuel Project 2007 (ARSN 124 135 535) 5 Willmott Forests Premium Forestry Blend Project (ARSN 131 549 589) 6 Willmott Forests Premium Forestry Blend Project - 2010 Project (ARSN 142 722 585) 7 Willmott Forests Premium Timberland Fund No. 1 (ARSN 136 768 520) ABU2322796v1
SCHEDULE 3- UNREGISTERED MANAGED INVESTMENT SCHEMES: PROFESSIONAL INVESTOR SCHEMES I Willmott Forests - Professional Investor - 2001 Project - 2001 Information Memorandum 2 Willmott Forests - Professional Investor - 2002 Project - 2002 Information Memorandum 3 Willmott Forests - Professional Investor - 2003 Project - 2003 Information Memorandum (2003) and 2003 Information Memorandum (2004) 4 Willmott Forests - Professional Investor - 2004 Project - 2004 Information Memorandum and 2004 Information Memorandum (2005) 5 2005 BioForest Wholesale Project No. 2-2005 Wholesale Forestry Memorandum (Bioforest) 6 Willmott Forests - Professional Investor - 2006 Project - 2006 Information Memorandum ABLI23227960
SCHEDULE 4- UNREGISTERED MANAGED INVESTMENT SCHEMES: CONTRACTUAL SCHEMES AND PARTNERSHIP SCHEMES Contractual Schemes 7 1983 (No Project) 8 1984 (No Project) 9 1985 (No Project) 10 1986 (No Project) 11 1987 (No Project) 12 1989 (No Project) 13 1990 (No Project) Interest Only Offer 14 1991 (No Project) 15 Sharp/Reed Plantation Project -1998 Information Memorandum 16 2001 (No Project) Partnership Schemes 17 McKenzie & Partners - Forestry Partnership No.1 (1993) 18 Grimsey & Associates Pty Ltd - Forestry Partnership No. 1 (1994) 19 Grimsey & Associates Pty Ltd - Forestry Partnership No. 2 (1994) 20 Grimsey & Associates Pty Ltd - Forestry Partnership No. 3 (1994) 21 McKenzie & Partners - Forestry Partnership No. 2 (1994) ABU2322796v1