FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Letten (No 6)

[2010] FCA 1048

THE COURT ORDERS THAT:

1.         The Receivers are justified in settling the proceeding known as Yarra Valley Golf Pty Ltd ats Muirfield Golf Maintenance Pty Ltd, Supreme Court of Victoria Proceeding Number 9909 of 2006, on the terms set out in the Settlement Deed exhibited at Confidential Exhibit DJT-49 to the Seventeenth Affidavit of Damian John Templeton dated 17 September 2010 (the Seventeenth Templeton Affidavit).

2.         Until further order, confidential exhibits “DJT-48” and “DJT-49” to the Seventeenth Templeton Affidavit be placed in a sealed envelope and marked “Confidential:  No access without leave of a judge of the Court”.

3.         That the time for service of the interlocutory process be abridged.

4.         Costs of the interlocutory process filed on 17 September 2010 be reserved.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

INTRODUCTION

1                          This is the sixth judgment in a series about unregistered managed investment schemes in which Mr Mark Ronald Letten, the First Defendant, was involved.  The history of the proceedings were summarised in Australian Securities and Investments Commission v Letten (No 3) [2010] FCA 512 at paragraphs [1] – [2].  These reasons for decision adopt the same abbreviations as the earlier reasons for decision.

2                          On 25 February 2010, the Court made orders that the Receivers be appointed as receivers and managers to each of the schemes listed in Annexure A to those orders.  One of the schemes (scheme numbered 15) named “Yarra Valley Golf Joint Venture” involved a number of defendants to this proceeding including:

Yarra Valley Golf Pty Ltd – Twenty-First Defendant [(YVG)]

Adina Rise Pty Ltd – Twenty-Second Defendant

Albright Investments Pty Ltd – Twenty-Third Defendant

Ashfield Rise Pty Ltd – Twenty-Fourth Defendant

Bradfield Corporation Pty Ltd – Twenty-Fifth Defendant

Copeland Enterprises Pty Ltd – Twenty-Sixth Defendant

Devlin Way Pty Ltd – Twenty-Seventh Defendant

First Hazelwood Pty Ltd – Twenty-Eighth Defendant

Glenbelle Pty Ltd – Twenty-Ninth Defendant

Glenvale Way Pty Ltd – Thirtieth Defendant

Greenview Lane Pty Ltd – Thirty-First Defendant

Hallmark Corporation Pty Ltd – Thirty-Second Defendant

Moorleigh Holdings Pty Ltd – Thirty-Third Defendant

Norton Ridge Pty Ltd – Thirty-Fourth Defendant

Raleigh Glen Pty Ltd – Thirty-Fifth Defendant

Redcrest Holdings Pty Ltd – Thirty-Sixth Defendant

Suri Corporation Pty Ltd – Thirty-Seventh Defendant

Sutton Rise Pty Ltd – Thirty-Eighth Defendant

The Virtual Mlmer Pty Ltd – Thirty-Ninth Defendant

Tivendale Pty Ltd – Fortieth Defendant

Tulloch Downes Pty Ltd – Forty-First Defendant

Mainking Pty Ltd – Forty-Second Defendant

Topglen Pty Ltd – Forty-Third Defendant

Allblue Pty Ltd – Forty-Fourth Defendant

Aranbay Pty Ltd – Forty-Fifth Defendant

The orders on 25 February 2010 also provided that the scheme numbered 15 be wound up pursuant to s 601EE(1) of the Act.

3                          A subsequent Disclosure Report prepared by the Receivers identified the property of scheme 15 as the Heritage Golf Club and Country Club, Corner of Hughes and Yarraview Roads, Chirnside Park, Victoria (the YVG Property).  The YVG Property was described by the Receivers as follows:

The … property is situated within the Heritage Golf Club and Country Club Complex.  This includes residential, hotel, day spa, conference and golf facilities (albeit these have different owners)

The … property comprises the two golf courses (St John & Henley), clubhouse, residential development land and 92% of the shares in HGCC Pty Ltd.  HGCC Pty Ltd in turn operates the Heritage Golf Club and Country Club (an unincorporated association).  The St John course is subject to a lease to HGCC Pty Ltd.  It was originally intended that a similar lease be provided to HGCC Pty Ltd once the subdivision of the relevant land occurs

[Yarra Valley Golf Pty Ltd] is responsible for the day to day management of the golf operations and the development, marketing and sale of the residential land.  The hotel operations including conference and day spa facilities are not owned by [Yarra Valley Golf Pty Ltd]

4                          The Disclosure Report set out the “key” steps and processes by which the project was established.  For present purposes, it is sufficient to note that the Receivers stated that:

The investor funding for the development of YVG has been sourced from many different investors and in different forms over a long period of time and as such may constitute separate schemes

There are a number of issues which make it difficult to identify the scheme property for each of the schemes.  These include:

·     The fact that a number of [Joint Venture Agreements] appear to relate to the same physical assets (even though different corporate managers were appointed pursuant to the [Joint Venture Agreements])

·     Any separate schemes are effectively ‘cross collaterised’ as the secured finance in relation to YVG has not been quarantined to particular assets of the schemes

·     The substantial number of investors who invested in various aspects of the YVG development

5                          On 23 October 2000, Muirfield Golf Maintenance Pty Ltd (Muirfield) and YVG entered into a Golf Course Maintenance Contract (the Contract)whereby YVG engaged Muirfield to provide maintenance services on the St John Golf Course at the Heritage Golf and Country Club for a fixed term of five years.  On 16 November 2000, YVG served a notice of default and, on 24 November 2000, a notice of termination, by which YVG purported to terminate the Contract.  The notice of default alleged that Muirfield had failed to perform the maintenance services of it required under the Contract and, further or alternatively, YVG alleged that Muirfield had failed to supply the equipment necessary to perform the services.  

6                          On 22 October 2006, years before the appointment of the Receivers, Muirfield commenced proceedings in the Supreme Court of Victoria against YVG, Proceeding Number 9909 of 2006 (the Proceeding) alleging that YVG wrongfully terminated the Contract and unlawfully took possession of equipment owned by Muirfield.  YVG counterclaimed. 

7                          At the time the Receivers were appointed, the Proceeding was set down for a ten day trial to commence on 9 August 2010.  Directions hearings were held on 23 March, 20 April and 11 May 2010.  At those hearings, the Proceeding was adjourned to allow the Receivers time to investigate the affairs of YVG and to determine their strategy in relation to the Proceeding.

8                          Attempts to stay the Proceeding, by consent, were unsuccessful.  A further directions hearing was held on 18 May 2010.  On 6 July 2010, an application by the Receivers to have the Proceeding stayed was made and denied.  At a further directions hearing on 20 July 2010, the August trial date was vacated and the Proceeding was relisted for trial on 4 October 2010.

9                          On 13 September 2010, the parties attended mediation and, subject to Court approval, the Proceeding was settled.  The terms of the settlement are contained in a confidential Settlement Deed (the Settlement Deed).

INTERLOCUTORY PROCESS

10                        The present interlocutory application by the Receivers is made under ss 1323(5) and 601EE of the Corporations Act 2001 (Cth) (the Act) for the following relief:

1.         Orders or directions determining questions in the receivership of YVG, namely that the Receivers are justified in settling the proceeding known as Yarra Valley Gold Pty Ltd ats Muirfield Gold Maintenance Pty Ltd, Supreme Court of Victoria, Proceeding Number 9909 of 2006, on the terms set out in the Settlement Deed exhibited at Confidential Exhibit DJT-49 to the Seventeenth Templeton Affidavit.

2.         Confidential Exhibits DJT-48 and DJT-49 to the Seventeenth Templeton Affidavit be placed in a sealed envelope and marked “Confidential:  No access without leave of a judge of the Court.

3.         Such further or other orders or directions as the Court thinks appropriate.

4.         That the time for service of this interlocutory process be abridged.

5.         That the costs of this interlocutory application be reserved.

Notice of the application was served on the Plaintiff and the First Defendant. 

ANALYSIS AND CONCLUSION

11                        In support of the application to approve the settlement, the Seventeenth Templeton Affidavit explained the background to the litigation and the reasons Mr Templeton thought that it was in the best interests of the unsecured creditors and investors in YVG to settle the Proceeding on the terms set out in the Settlement Deed. 

12                        Exhibited to the Seventeenth Templeton Affidavit was advice from Mr Troiani and Ms Papealia of Mallesons Stephen Jaques.  That advice deals with the prospects of success.  They are of the view that, in the circumstances, it was appropriate for the proceedings to be settled on the terms set out in the Settlement Deed. 

13                        As noted earlier, scheme 15 was wound up by the Court on 25 February 2010:  see [2] above.  Paragraph 3 of those orders was in the following terms:

Pursuant to s 1323(1)(h)(ii) of the Act, and subject to paragraph 21 of these Orders and any further or other order of the Court, Mr Damian Templeton and Mr Phillip Hennessy of KPMG (the Receivers), be appointed, without giving security, as joint and several receivers and managers of the Property (as defined in Annexure A to these Orders) of each of the second to sixteenth and eighteenth to forty-fifth defendants (the Corporate Defendants) (other than Property that also constitutes Property of a Scheme as defined in Annexure A to this Order) with all of the powers provided in ss 420(1) and (2) of the Act, except the power of sale, for the purposes of identifying and securing all of the assets of the Corporate Defendants.

14                        Having regard to the terms of that Order, the Receivers seek an order under ss 601EE and 1323(5) of the Act that they are justified in settling the Proceeding on the terms set out in the Settlement Deed.  Order 26 r 7 of the Federal Court Rules provides the Court may authorise a receiver to do any act or thing which the parties or any of them might do if of full age and capacity.  That rule permits the Court to invest the receiver with powers, including the power to conduct legal proceedings, to appoint lawyers to act and, subject to the Court’s approval, to settle such proceedings: University of Western Australia v Gray (No 6) [2006] FCA 1825.

15                        Having read the Seventeenth Templeton Affidavit which included the legal advice from Mallesons Stephen Jaques and the terms of the Settlement Deed, I am satisfied that the Receivers are justified in settling the Proceeding on the terms set out in the Settlement Deed.  For completeness, I note that the Plaintiff and the First Defendant did not object to the Orders sought by the Receiver.  For those reasons, there will be Orders in accordance with the minute of proposed orders which I have initialled and directed be placed on the Court file.  Two exhibits to the Seventeenth Templeton Affidavit are confidential and appropriate Orders limiting disclosure of those documents will be made accordingly.

Associate:

Dated:         24 September 2010

SCHEDULE OF PARTIES

LGH HOLDINGS LIMITED (ACN 007 191 943)

Second Defendant

211 WELLINGTON ROAD PTY LTD (ACN 092 663 860)

Third Defendant

BLUEMIST HOLDINGS PTY LTD (ACN 097 306 922)

Fourth Defendant

DELLWOOD HOLDINGS PTY LTD (ACN 098 505 803)

Fifth Defendant

ENMORE ENTERPRISES PTY LTD (ACN 082 158 487)

Sixth Defendant

FIRBANK ARCH PTY LTD (ACN 059 464 381)

Seventh Defendant

GLENLINE PTY LTD (ACN 098 532 364)

Eighth Defendant

GERLING HOLDINGS PTY LTD (ACN 091 726 457)

Ninth Defendant

LGH ADMINISTRATION PTY LTD (ACN 007 165 069)

Tenth Defendant

LGH FINANCE PTY LTD (ACN 078 859 248)

Eleventh Defendant

LOW HEAD VILLAGE PTY LTD (ACN 091 731 958)

Twelfth Defendant

NICHOLSON STREET PTY LTD (ACN 069 104 089)

Thirteenth Defendant

HOLLOWAY CREST PTY LTD (ACN 091 731 967)

Fourteenth Defendant

ROSEBERY ENTERPRISES PTY LTD (ACN 091 826 229)

Fifteenth Defendant

SIMMS INVESTMENTS PTY LTD (ACN 093 504 511)

Sixteenth Defendant

SY21 RETAIL PTY LTD (ACN 107 874 564)

Seventeenth Defendant

THE GLEN CENTRE HAWTHORN PTY LTD (ACN 089 906 543)

Eighteenth Defendant

CASTELLO HOLDINGS PTY LTD (ACN 088 204 175)

Nineteenth Defendant

TWINVIEW NOMINEES PTY LTD (ACN 097 307 278)

Twentieth Defendant

YARRA VALLEY GOLF PTY LTD (ACN 066 632 479)

Twenty-First Defendant

ADINA RISE PTY LTD (ACN 083 181 122)

Twenty-Second Defendant

ALBRIGHT INVESTMENTS PTY LTD (ACN 088 204 166)

Twenty-Third Defendant

ASHFIELD RISE PTY LTD (ACN 093 504 806)

Twenty-Fourth Defendant

BRADFIELD CORPORATION PTY LTD (ACN 088 204 371)

Twenty-Fifth Defendant

COPELAND ENTERPRISES PTY LTD (ACN 093 504 824)

Twenty-Sixth Defendant

DEVLIN WAY PTY LTD (ACN 088 264 813)

Twenty-Seventh Defendant

FIRST HAZELWOOD PTY LTD (ACN 093 505 303)

Twenty-Eighth Defendant

GLENBELLE PTY LTD (ACN 097 306 646)

Twenty-Ninth Defendant

GLENVALE WAY PTY LTD (ACN 088 287 021)

Thirtieth Defendant

GREENVIEW LANE PTY LTD (ACN 093 505 312)

Thirty-First Defendant

HALLMARK CORPORATION PTY LTD (ACN 093 505 312)

Thirty-Second Defendant

MOORLEIGH HOLDINGS PTY LTD (ACN 088 287 058)

Thirty-Third Defendant

NORTON RIDGE PTY LTD (ACN 078 821 066)

Thirty-Fourth Defendant

RALEIGH GLEN PTY LTD (ACN 088 204 380)

Thirty-Fifth Defendant

REDCREST HOLDINGS PTY LTD (ACN 100 836 486)

Thirty-Sixth Defendant

SURI CORPORATION PTY LTD (ACN 093 505 321)

Thirty-Seventh Defendant

SUTTON RISE PTY LTD (ACN 088 204 399)

Thirty-Eighth Defendant

THE VIRTUAL MLMER PTY LTD (ACN 065 374 665)

Thirty-Ninth Defendant

TIVENDALE PTY LTD (ACN 093 505 349)

Fortieth Defendant

TULLOCH DOWNES PTY LTD (ACN 078 895 048)

Forty-First Defendant

MAINKING PTY LTD (ACN 100 790 485)

Forty-Second Defendant

TOPGLEN PTY LTD (ACN 096 857 564)

Forty-Third Defendant

ALLBLUE PTY LTD (ACN 100 836 388)

Forty-Fourth Defendant

ARANBAY PTY LTD (ACN 098 532 319)

Forty-Fifth Defendant

MELVILLE CORPORATION PTY LTD (ACN 091 911 045)

Forty-Sixth Defendant

TILLEY LANE PTY LTD (ACN 086 136 361)

Forty-Seventh Defendant

HPSC PTY LTD (ACN 059 930 139

Forty-Eighth Defendant

JENSDALE PTY LTD (ACN 098 367 974)

Forty-Ninth Defendant

OAKDALE RISE PTY LTD (ACN 091 598 908)

Fiftieth Defendant

MAYWOOD INVESTMENTS PTY LTD (ACN 091 599 218)

Fifty-First Defendant

ACETRAIN PTY LTD (ACN 100 820 282)

Fifty-Second Defendant

SAGE BAY PTY LTD (ACN 097 306 628)

Fifty-Third Defendant

TOBAGO HOLDINGS PTY LTD (ACN 093 504 520)

Fifty-Fourth Defendant