FEDERAL COURT OF AUSTRALIA

Norman, in the matter of The Executors and Trustees of the Deceased Estate of McFarlane v McFarlane (No 2) [2009] FCA 607

IN THE MATTER OF THE UNREGISTERED MANAGED INVESTMENT SCHEME OF ALLAN MCFARLANE (DEC’D)

TREVOR GILBERT NORMAN v THE EXECUTORS & TRUSTEES OF THE DECEASED ESTATE OF ALLAN MCFARLANE

SAD 135 of 2008

MANSFIELD J

2 JUNE 2009

ADELAIDE

IN THE MATTER OF THE UNREGISTERED MANAGED INVESTMENT SCHEME OF ALLAN MCFARLANE (DEC’D)

THE COURT ORDERS THAT:

1.         The orders made on 28 November 2008 be varied by deleting paragraph 7.3 therefrom and by making consequential enumeration changes so that the Orders are in terms of the amended Order annexed hereto.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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IN THE MATTER OF THE UNREGISTERED MANAGED INVESTMENT SCHEME OF ALLAN MCFARLANE (DEC’D)

REASONS FOR JUDGMENT

1                          The Orders made in this matter on 28 November 2008 were made with some urgency and with a limited opportunity to fully consider the issues.  Reasons for those Orders were subsequently published: Norman, in the matter of The Executors and Trustees of the Deceased Estate of McFarlane v McFarlane [2009] FCA 14. At the time of making those Orders there was some discussion between counsel and the Court as to how to properly define the “Scheme property” and certain alterations to the proposed orders were made as a result of that discussion. In addition the parties and the liquidators were given liberty to apply on short notice, including specifically in relation to the definition of “Scheme property”.

2                          An application has now been made to vary the definition of the “Scheme property” by deleting what was previously clause 7.3 of that definition, and for consequential enumeration changes.

3                          Matters have moved on. It was understood at the time those Orders were made that one, if not the principal, investigation which the liquidators would pursue on behalf of the Scheme investors would be to determine whether the National Australia Bank Limited (the Bank) in its conduct of an account entitled “McFarlanes Chartered Accountants Trust Account” had in some way acted improperly. Following the making of those Orders, the liquidators secured from the Court Orders for the examination of two officers of the Bank and for the production of certain of its records. The Bank unsuccessfully applied for a stay of those Orders because in the meantime it had sought leave to appeal from the making of the Orders made on 28 November 2008. Its application for a stay was unsuccessful both at first instance and on appeal: National Australia Bank Limited v Norman [2009] FCAFC 13. The practical situation is that it has produced the papers which it was required to produce for inspection pursuant to the examination/production Orders, but the examination of its officers has not taken place. I understand that the examination of its officers is not intended to proceed pending the hearing of its application for leave to appeal and, if leave is granted, the appeal, from the making of those Orders.

4                          Counsel for the Bank today has appeared and been heard on the application without opposition.  He has opposed the amendment of the Orders made on 28 November 2008, because he contends in effect that it is too late to do so.  He submits that the production of documents required in conjunction with the examination Orders was very extensive, and was founded upon clause 7.3 of the Orders as made on 28 November 2008. If that clause of the Orders made on 28 November 2008 was not in place, he submitted that, whilst examination orders could nevertheless have been made, and production of documents directed to facilitate or support those examinations, they would not have been so broad in relation to the production of documents. I have not seen the affidavit in support of the examination Orders. I am aware that the Bank has applied to set aside those examination Orders, and that its application has been stood over pending the hearing and determination of its application for leave to appeal from the Orders made on 28 November 2008 and, if leave is granted, that appeal.

5                          Whether or not the production of documents ordered in conjunction with the examination Orders was broader than it might otherwise have been, I do not consider that I should for that reason decline to amend the Orders of 28 November 2008 in the terms sought. That application was foreshadowed at the last directions hearing on 8 May 2009 and has been notified to the other parties, and to the Bank.  There is no evidence specifically directed to the Bank’s opposition, although I accept in theory the proposition put by counsel for the Bank (although, as I said, I have not seen the material submitted to the Court for the purpose of the examination Orders). In any event, as counsel for the Bank acknowledged, to amend the Orders of 28 November 2008 as sought does not prevent the Bank from asserting that it should be granted leave to appeal from those Orders or from endeavouring to establish what I understand is a contentious proposition – contentious in the sense that the parties wish to argue about it – as to its standing to seek that leave to appeal and to maintain any appeal.

6                          I am mindful also that for slightly different reasons, the Full Court upheld the decision to refuse to stay the examination Orders, including the production of documents, albeit that the Bank then complained that if it were right in its application for leave to appeal and on appeal that the Orders of 28 November 2008 should not have been made, it would have been prejudiced by having to produce its records in the meantime. It is still the case that if the Bank succeeds in its application for leave to appeal and on its appeal, the consequence will be that its records will be returned because there should have been no Orders made on 28 November 2008, at least in the terms that they were made. That is largely by way of an additional observation, further to the reasons for ruling which I have made.

Associate:

Dated:         3 June 2009

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY                                                           

                                                                                                          No:  SAD 135/2008

TREVOR GILBERT NORMAN

Plaintiff

EXECUTORS AND TRUSTEES OF THE DECEASED ESTATE OF ALAN

MCFARLANE

Defendant

ORDER

For the purposes of this Order “the Scheme” means the managed investment scheme operated by Allan McFarlane (deceased) (“McFarlane”) whereby:

(a)        members of the public (the “scheme investors”), at the request of McFarlane, invested moneys with McFarlane to be held on trust for them, by way of payments into a National Australia Bank Account, BSB 085005 account number 049097085 in the name of “McFarlanes Chartered Accountants Trust Account” (“the Account”);

(b)        the investors’ moneys were pooled in the Account;

(c)        the purpose of the investment and of the pooling was for McFarlane to invest the pooled moneys in other investments to achieve further financial benefits for scheme investors;

(d)        McFarlane had day to day control over the moneys obtained from investors;

(e)        McFarlane misappropriated the moneys of scheme investors.

THE COURT DECLARES THAT:

1.         The Scheme was a managed investment scheme as defined in s 9 of the Corporations Act 2001 (Cth) (“the Act”) which was required to be registered pursuant to s 601ED(1) of the Act.

2.         The Scheme was not registered as required by s 601ED(1) of the Act.

3.         McFarlane was operating the Scheme in contravention of s 601ED(5) of the Act.

THE COURT ORDERS THAT:

4.         The Scheme be wound up forthwith pursuant to s 601EE of the Corporations Act.

5.         Nicholas David Cooper and Andrew Janis Strazdins, Official Liquidators, of BRI Partners, Level 4, 12 Pirie Street, Adelaide SA 5000 be appointed to act as the joint and several liquidators of the Scheme (“the Liquidators”).

6.         Pursuant to s 601EE(2) of the Act, the winding up of the Scheme shall be conducted as if the Scheme were for the purposes of the Act a “company” and in acting as liquidators and administering the affairs of the Scheme the Liquidators shall have all the powers and responsibilities that a liquidator would have pursuant to the Corporations Act as if the Scheme were a company, with such modifications as are necessary.

7.         Subject to the proviso expressed at the end of this Order, the scheme property of the Scheme (“the Scheme property”) shall consist of:

            7.1       the property and rights of each of the scheme investors in the Scheme;

            7.2       any and all moneys in the Account;

7.3       any and all causes of action (or other rights) in relation to:

            7.3.1    the Account,

            7.3.2    the Scheme,

            7.3.3    any payment made to or from the Account, or

            7.3.4    scheme investors’ participation in the Scheme;

which are held by any one or more of the scheme investors as at the date of this order, whether jointly or severally;

7.4       any and all traceable proceeds or assets from:

7.4.1    the Account, or

7.4.2    contributions made to the Scheme or the Account by the scheme investors.

            For the avoidance of doubt this paragraph of the Order shall be construed widely, and shall include but not be limited to any causes of action held by one or more of the scheme investors, arising partly or wholly because of the Scheme, against third parties provided that nothing in this Order shall apply to any divisible property of McFarlane within the meaning of the Bankruptcy Act 1966 (Cth).

8.         The liquidators shall not commence any proceeding relying on a cause of action of the kind referred to in Order 7.3 hereof without the leave of the Court.

9.         The Liquidators shall be paid remuneration on a time basis at a reasonable fee according to the hours for which the Liquidators, or any partner in or employee of the firm to which the liquidators are attached, are engaged in work necessary for and relevant to the purpose of the winding up, such remuneration to be calculated at the standard rates of that firm from time to time for work of that nature, together with all reasonable out of pocket expenses.

10.       The remuneration and expenses of the Liquidators incurred in relation to their winding up of the Scheme be paid from the Scheme property.

11.       The parties and the Liquidators have liberty to apply on short notice, including but not limited in relation to the powers of the Liquidators and the definition of Scheme property.

12.       The Plaintiff be paid his costs of this application as a first priority from the Scheme property.

Date that entry is stamped: 

               DISTRICT REGISTRAR