Australian Capital Reserve Limited (In Liquidation), in the matter of Australian Capital Reserve Limited (In Liquidation)
[2011] FCA 461
•31 March 2011
FEDERAL COURT OF AUSTRALIA
Australian Capital Reserve Limited (In Liquidation), in the matter of Australian Capital Reserve Limited (In Liquidation) [2011] FCA 461
Citation: Australian Capital Reserve Limited (In Liquidation), in the matter of Australian Capital Reserve Limited (In Liquidation) [2011] FCA 461 Parties: GREGORY WINFIELD HALL AND IAN ROBERT ENGLAND IN THEIR CAPACITIES AS JOINT AND SEVERAL LIQUIDATORS OF AUSTRALIAN CAPITAL RESERVE LIMITED (IN LIQUIDATION) File number(s): NSD 1893 of 2008 Judge: EMMETT J Date of judgment: 31 March 2011 Legislation: Corporations Act 2001 (Cth) ss 477(1)(a), 477(2)(m), 506, 511 Date of hearing: 31 March 2011 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 13 Counsel for the plaintiff: Mr T. F. Bathurst QC Solicitors for the plaintiff: Baker & McKenzie
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1893 of 2008
IN THE MATTER OF AUSTRALIAN CAPITAL RESERVE LIMITED (IN LIQUIDATION)
GREGORY WINFIELD HALL AND IAN ROBERT ENGLAND IN THEIR CAPACITIES AS JOINT AND SEVERAL LIQUIDATORS OF AUSTRALIAN CAPITAL RESERVE LIMITED (IN LIQUIDATION)
Plaintiffs
JUDGE:
EMMETT J
DATE OF ORDER:
31 MARCH 2011
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The Plaintiffs have leave to file in Court:
(a)the Affidavit of Gregory Winfield Hall sworn 30 March 2011; and
(b)the Affidavit of Michael John Britton sworn 29 March 2011.
2.The Interlocutory Process filed on 30 March 2011 be heard forthwith.
3.Pursuant to Order 6 rule 9 of the Federal Court Rules, Phillip Patrick Carter be removed as a joint plaintiff in the proceedings.
4.Pursuant to Order 6 rule 8 of the Federal Court Rules, Ian Robert England be added as a joint plaintiff in the proceedings.
5.Until further order of a judge of this Honourable Court, paragraphs 63, 64, 66, 67, 75, 78, and 90 to 112 of the Affidavit of Gregory Winfield Hall sworn on 30 March 2011 in these proceedings and "Confidential Exhibit GWH-4" to that Affidavit each be kept confidential on the Court file, and no person (other than a party to these proceedings or its solicitors on record) be permitted access to those documents on the Court file without prior order of a judge of this Honourable Court.
6.Until further order of a judge of this Honourable Court, paragraphs 20, 21, 26 and 34 of the Affidavit of Michael John Britton sworn on 29 March 2011 in these proceedings and "Confidential Exhibit MJB-2" to that Affidavit each be kept confidential on the Court file, and no person (other than a party to these proceedings or its solicitors on record) be permitted access to those documents on the Court file without prior order of a judge of this Honourable Court.
7.Pursuant to s 511 of the Corporations Act 2001 (Cth), the Plaintiffs have power under s 506 of the Corporations Act to cause Australian Capital Reserve Limited (in liquidation) to enter into, and to perform its obligations under, an Implementation Agreement proposed to be made between Australian Capital Reserve Limited (in liquidation), Becton Property Group Limited, Becton Property Management Limited as responsible entity of Becton Property Trust, BOS International (Australia) Limited and Sandhurst Trustees Limited substantially in the form tendered by the Plaintiffs at the hearing of these proceedings on 31 March 2011.
8.The Plaintiffs' costs of and incidental to this Interlocutory Process be paid as an expense of the winding up of Australian Capital Reserve Limited (in liquidation).
9.These orders be passed and entered forthwith.
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.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1893 of 2008
IN THE MATTER OF AUSTRALIAN CAPITAL RESERVE LIMITED (IN LIQUIDATION)
GREGORY WINFIELD HALL AND IAN ROBERT ENGLAND IN THEIR CAPACITIES AS JOINT AND SEVERAL LIQUIDATORS OF AUSTRALIAN CAPITAL RESERVE LIMITED (IN LIQUIDATION)
Plaintiffs
JUDGE:
EMMETT J
DATE:
31 MARCH 2011
PLACE:
SYDNEY
REASONS FOR JUDGMENT
Mr Gregory Hall and Mr Ian England (the Liquidators) are presently the liquidators of Australian Capital Reserve Limited (the Company). By interlocutory process filed on 30 March 2011 they seek certain procedural orders, together with an order under s 511 of the Corporations Act 2001 (Cth) (the Corporations Act) to the effect that they have power under s 506 of the Corporations Act to cause the Company to enter into and to perform its obligations under a proposed Implementation Agreement intended to be made between the Company, Becton Property Group Limited, Becton Property Management Limited as a responsible entity of Becton Property Trust, BOS International (Australia) Limited, and Sandhurst Trustees Limited. The form of the proposed Implementation Agreement is in an exhibit to an affidavit made by Mr Hall (the Proposed Agreement). The background to the proposed Implementation Agreement is somewhat complex, but I shall endeavour to summarise the present circumstances relevant to the question now raised.
The Company was formerly the capital-raising arm of the Estate Property Group of companies (the EPG Group), of which Estate Property Group Limited was the ultimate parent company. The Company raised funds from the public by way of unsecured notes, pursuant to an Unsecured Note Trust Deed dated 10 March 2000. On 28 May 2007, the Company was placed in administration. At the first meeting of creditors of the Company held on 4 June 2007, the creditors resolved that Mr Hall and Mr Phillip Carter become administrators of the Company. On 31 March 2010, Mr Carter retired from the partnership of PricewaterhouseCoopers, of which he and Mr Hall were members, and he resigned from his appointment as joint and several liquidator of the Company on 24 February 2010. The Company having been placed in liquidation, the creditors of the Company resolved on 14 December 2010 to appoint Mr Ian England of PricewaterhouseCoopers as joint and several liquidator of the Company with Mr Hall.
In September 2007, a restructure of the EPG Group's business and assets was effected, whereby Becton Investment Management Limited, in its capacity as trustee of the Becton Everest Fund (BPT), took control of the property-development arm of the EPG Group and purchased all of the intercompany debts owed to the Company by entities in the EPG Group other than the Company. One element in the restructure was the execution of a deed described as a Receivables Acquisition Deed. For present purposes it is sufficient to say that the effect of the Receivables Acquisition Deed is that certain loans made by the Company were effectively assigned to BPT. The assignment was effected by novation of the loan agreements between the Company and the borrowers.
The consideration for the assignment was the payment of sums of money at fixed times, ranging originally from December 2007 through to September 2009. By the Receivables Acquisition Deed, BPT promised to pay the consideration and agreed to procure the grant of security for the satisfaction of its obligation to pay the consideration. The Receivables Acquisition Deed was subsequently amended in several respects. Relevantly, the schedule for the payment of the consideration was varied, and the security to be provided for the payment of the consideration was also varied. Specifically, BPT was required to procure the grant by Becton Developments Pty Limited (in its capacity as trustee of Becton Developments Trust) of a mortgage to the Company over all of the units held by Becton Developments Pty Limited in Becton Development Fund No. 1 (the Mortgaged Units), to secure BPT’s obligation to pay the consideration. The times for payment of the consideration were also extended.
The Liquidators have now received a proposal which involves, in effect, a conversion of the security in the manner which I shall briefly describe. The Proposed Agreement will relevantly have the effect, if the transaction contemplated by it is implemented, that the Mortgaged Units will be transferred to the Company. The Company will receive, in part satisfaction of the consideration, a sum in excess of $7 million, representing distributions from the Mortgaged Units, which has been paid into a separate bank account. The balance of the consideration payable will be satisfied by stapled securities, consisting of a share and a unit issued by Becton Property Group Limited.
The Proposed Agreement also effects other restructuring transactions involving other parties. Some of those proposed transactions are interdependent. In particular, the conversion of the balance of the consideration into stapled securities is inter-conditional with other transactions contemplated by the Proposed Agreement. However, the cash payment of in excess of $7 million, to which I have referred, is not conditional upon the other arrangements.
The Liquidators are conscious of their powers as liquidators of the Company. They are concerned as to whether or not their powers as liquidators extend to entering into the Proposed Agreement. Accordingly, they have applied to the Court for a direction as to whether or not their powers as liquidators are such that they are able to cause the Company to complete the transactions contemplated by the Proposed Agreement. If they do have the relevant powers, they intend to use the powers to cause the Company to take the relevant steps.
Under s 477(1)(a) of the Corporations Act, a liquidator of a company may carry on the business of the company so far as is necessary for the beneficial disposal or winding up of that business. Under s 477(2)(m), a liquidator of a company may do all such things as are necessary for winding up the affairs of the company and distributing its property. I have some reservation as to whether or not entering into the Proposed Agreement is carrying on the business of the Company so far as is necessary for the beneficial disposal or winding up of its business. However, I am satisfied that the entering into of the Proposed Agreement is something that is necessary for the winding up of the affairs of the Company and distributing its property.
The Liquidators have had the advantage of a committee of inspection. In excess of 98% of the total amount owing to the creditors of the Company is represented on the committee of inspection. The members of the committee of inspection have approved the Proposed Agreement.
Further, the Liquidators have conducted a detailed analysis of estimated financial outcomes in respect of the capital restructure proposal contemplated by the Proposed Agreement. As I have said, under the proposal, the Company will receive in excess of $7 million in cash, together with the stapled securities. The Liquidators will also receive, under the Proposed Agreement, some $200,000 as a contribution towards legal fees and costs in dealing with the proposal, together with $500,000 as a contribution to the ongoing costs of the liquidation of the Company, payable in six-monthly instalments of $50,000 over five years. The funds will be applied to the costs that include maintenance of the note-holders’ register, legal fees and liquidators’ fees.
The Liquidators are unable to apply any value to the stapled securities that will be received pursuant to the Proposed Agreement. However, they consider that the stapled securities and options, which also are to be granted in part satisfaction of the consideration payable under the Receivables Acquisition Deed, have the prospect of value in the future. Since the proposal also involves the provision to Becton Property Group Limited of funding from Bank of Scotland through its subsidiary, BOS International (Australia) Limited, that would assist in its development projects. If the proposal does not proceed, the directors of Becton Property Group Limited may place that company into external administration. In that event, there would be no return for the Company, as an unsecured creditor, because the assets would be unlikely to be sufficient to repay Bank of Scotland in full, which holds a charge over the assets of Becton Property Group Limited as security for its debt.
External administration of Becton Property Group Limited would take several years to complete, with the consequence that the liquidation of the Company would continue in the meantime. The finalisation of such an external administration of Becton Property Group Limited could conceivably take more than five years. In those circumstances, I am satisfied that the Proposed Agreement is a transaction that is necessary for the winding up of the affairs of the Company and distributing its property. Whether or not the proposed transaction is sufficiently favourable for the creditors of the Company is a matter on which the Liquidators must make their own judgment.
While the interlocutory process sought a direction pursuant to s 511 that the Liquidators would be justified in causing the Company to enter into the Proposed Agreement, I indicated, in the course of the hearing, that I would not be disposed to make such an order and, accordingly, the Liquidators did not press for that order. Nevertheless, I am satisfied that the Liquidators should be directed, pursuant to s 511 of the Corporations Act, that they have power to cause the Company to enter into and perform its obligations under the Proposed Agreement.
I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate:
Dated: 9 May 2011
0
0
1