Australian Securities Commission v Aust-Home Investments Limited

[1993] FCA 185

Re: AUSTRALIAN SECURITIES COMMISSION
And: AUST-HOME INVESTMENTS LIMITED and OTHERS
No. G3004 of 1992
FED No. 185
Number of pages - 14
Corporations Law - Receivers and Managers

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Cooper J(1)

CATCHWORDS

Corporations Law - Receivers and Managers appointed - interim orders freezing property - investigation by ASC - whether reasonable time for an investigation has expired - no proceedings commenced - Receivers and Managers advertised all the real property for sale - urgent application to prevent sale.

Receivers and Managers - purpose of appointment to prevent the companies dealing with property to defeat any legitimate claims of aggrieved persons - not within power to sell property to investigate whether or not offences have been committed - ASC to carry out investigations on behalf of aggrieved persons.

Receivers and Managers - whether purpose of sale of the properties is within the scope of the initial order - state of the titles to the properties - whether in the circumstances could be sold to best advantage - whether property should be released absolutely or on conditions.

Corporations Law Sections 11323(1)(h)(ii), 1323(3), 1323(6), 1323(1)

HEARING

BRISBANE, 18 March 1993

#DATE 19:3:1993

Counsel for the Applicant 4th and 5th
Respondents: Mr P. McHugh

Solicitors for Applicant 4th and 5th
Respondents: Biggs and Fitzgerald

Counsel for the Receivers and Managers: Mr J. Bell

Solicitors for the Receivers
and Managers: Halletts

Counsel for the Third Respondent: Mr P. Favell

Solicitors for Third Respondent: Masinello and Associates

Counsel for the A.S.C.: Mr J.D. McKenna

Instructed by: A.S.C.

ORDER

THE COURT ORDERS:

1. Direct that the receivers and managers not sell the

properties of the applicants at auction on 20 March, 1993 and 26 March, 1993 as they presently propose or at all without the leave of the Court.

2. That the notice of motion be adjourned to 10.15 a.m. on 23

April, 1993 for further consideration and directions.

3. The costs of the motion be reserved.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

COOPER J This is an application by Berona Investments Pty. Ltd. and Berona Holdings Pty. Ltd. for the following relief :-

1. That the receivers and managers by themselves,

their servants and/or agents be restrained from selling or attempting to sell any of the said seven parcels of land referred to herein. That is to say, the four parcels of land registered in the name of BERONA INVESTMENTS PTY. LTD.; the one parcel of land registered in the name of BERONA INVESTMENTS PTY. LTD. and myself as Trustees for the T.J. Bell Family Trust and the two parcels of land registered in the name of BERONA HOLDINGS PTY. LTD..

2. That the injunction made by Northrop J in 3(c)

of his Order of 18th March, 1992 and impliedly extended by the Order of Cooper J on 6th April,1 992 be dissolved in respect of the seventh and eighth respondents.

3. That BERONA INVESTMENTS PTY. LTD. and BERONA

HOLDINGS PTY. LTD. be required to pay into Court the sums of $25,665.46 and $154,882.05 respectively to abide the final determination of these proceedings.

4. That the appointments of John East and Wilson

Joseph Wilde as Receivers and Managers of the seventh and eighth respondents being BERONA INVESTMENTS PTY. LTD. and BERONA HOLDINGS PTY. LTD. respectively be varied such that the seven parcels of real property mentioned in the affidavit of BEATRIX JULIE BELL-BRADBURY filed herein be revoked.

5. That the said receivers and managers be ordered

forthwith and at their own costs to remove the caveats on the said parcels of real property.

6. That directions be given for the further conduct

of these proceedings.

7. That the costs of and incidental to this

application be paid by either the Australian Securities Commission or in the alternative by the said receivers and managers.

1. The receivers and managers were appointed by Northrop J on 18 March, 1992 and their appointment was extended by me on 1 April, 1992. On 6 April, 1992 I ordered by consent that the order of Northrop J be varied to allow the applicants to mortgage real estate to the extent of $50,000.00 to meet the expected legal expenses of the applicants arising out of the proceedings commenced by the Australian Securities Commission ("ASC").

2. The orders were made pursuant to section 1323(1)(h)(ii) of the Corporations Law, which provides :-
   

"1323(1) Where:

(a) an investigation is being carried out under the ASC Law or this Law in relation to an act or omission by a person, being an act or omission that constitutes or may constitute a contravention of this Law;

(b) a prosecution has been begun against a person for a contravention of this Law; or

(c) a civil proceeding has been begun against a person under this Law;

and the Court considers it necessary or desirable to do so for the purpose of protecting the interests of a person (in this section called an "aggrieved person") to whom the person referred to in paragraph (a), (b) or (c), as the case may be, (in this section called the "relevant person"), is liable, or may be or become liable, to pay money, whether in respect of a debt, by way of damages or compensation or otherwise, or to account for securities, futures contracts or other property, the Court may, on application by the Commission or by an aggrieved person, make one or more of the following orders: ....

(h) an order appointing:

....

(ii) if the relevant person is a body corporate - a receiver or receiver and manager, having such powers as the Court orders, of the property or of part of the property of that person;"

1. The orders were interim orders under section 1323(3) and were operative until further order (section 1323(6)).

2. The evident purpose of the section is to freeze property of a person where there is an investigation being carried out by the ASC into an act or omission of a person which constitutes or may constitute a contravention of a relevant law under the section. The freezing of the property is to benefit a person who may have a claim consequent upon the act or omission (an aggrieved person) by providing property against which a judgment may be enforced.

3. The order in the first instance ought in my view only remain in force for such period as is reasonably necessary to conclude the investigation and to enable the aggrieved person to institute suit. Thereafter, whether the order is maintained is a separate question.

4. The applicants submit that a reasonable time for an investigation has expired. No proceedings have been brought by the ASC against the companies or against any officer of them. No aggrieved person has commenced any proceedings to recover a money sum.

5. The receivers and managers since their appointment have been investigating the affairs of the Aust-Home Group of companies and taking control of the property over which they were appointed. That property includes the following real estate of Berona Holdings Pty. Ltd. :-
   

(i) Unit 22 "The Moorings", Cavill Avenue, Surfers Paradise;

(ii) Unit 4, 48 Buckland Road, Nundah; It includes the following real estate of Berona Investments Pty. Ltd. :-

(i) 19 Yaldara Street, Carseldine;

(ii) Unit 49 "The Moorings";

(iii) William Court, Lawnton;

(iv) 35 Colonial Drive, Lawnton.

1. There is also land held by Berona Investments Pty. Ltd. and Beatrix Julie Bell-Bradbury as trustees at 165 Todds Road, Lawnton.

2. The receivers and managers have advertised all the real property for sale. Four of the properties are being offered for sale at auction on Saturday 20 March, 1993. The balance are being offered for sale on 26 March, 1993.

3. There is therefore some urgency in delivering these reasons and time does not permit an extensive examination of all of the facts in issue nor a determination of all of the issues raised.

4. The properties of Berona Investments Pty. Ltd. (including the properties held jointly in trust with Mrs. Bell-Bradbury) are valued at $530,000.00. The properties of Berona Holdings Pty. Ltd. are valued at $240,000.00.

5. As a result of the investigation the receivers and managers claim that the following is owed to other members in the group by :-
   

(a) Mrs Bell-Bradbury: $73,494.27

(b) Berona Holdings Pty. Ltd: $167,052.41

(c) Berona Investments Pty. Ltd: $25,665.46

1. The companies and Mrs. Bell-Bradbury deny that the money is owed as alleged.

2. The properties Unit 22 "The Moorings" and 4/48 Buckland road are mortgaged to Connie Borg and David Allan Fischer in the sum of $300,000.00. The properties at Yaldara Street and Unit 49 "The Moorings" are mortgaged to the same persons for $300,000.00. The receivers and managers submit that the mortgages are a sham and there is some evidence to support this. Nevertheless, Mrs. Borg and Mr. Fischer have caveated the properties and taken proceedings in the Supreme Court of Queensland to enforce their claim as mortgagees. As at today the caveats have not been removed and the receivers and managers are intending to sell the properties subject to the receivers and managers being able to obtain orders to remove the caveats.

3. Mrs Bell-Bradbury, as co-trustee, opposes the sale of the Todds Road property. The receivers and managers intend to offer the property for sale notwithstanding that Mrs. Bell-Bradbury is registered as a co-trustee on the basis of advice given to them that her appointment as trustee was ineffective.

4. There are other securities granted by the companies, the validity of which is disputed by the receivers and managers, which are not immediately relevant to the sale of the properties.

5. Mrs. Bell-Bradbury deposes that the property at Yaldara Street, Carseldine, although registered in the name of Berona Investments Pty. Ltd. was in fact purchased in 1979 with funds provided by her and her family and that the property is held in trust for them. There is in my view sufficient material to raise a serious question to be tried as to who is beneficially entitled to the house property which is the personal residence of Mrs. Bell-Bradbury.

6. In his affidavit Wilson Joseph Wilde, one of the receivers and managers, deposes :-
   

"20. I submit to this Honourable Court that Mrs Bell-Bradbury has breached the Corporations Law to such an extent that Holdings and Investments have no effective management other than the Receivers and Managers. Therefore the assets of Holdings and Investments should be converted into cash by the Receivers and Managers. Upon conversion, it is my intention to pay the Creditors of the companies in accordance with the law and to account to beneficiaries and contributories. In order to disburse funds properly it is essential that I resolve matters of ownership and clarify the relationships between the companies, their shareholders and Mrs Bell-Bradbury.

21. The Receivers and Managers are in the process of selling five of the properties of Holdings, Investments, and Investments and Mrs. Bell-Bradbury as Trustee on 20th March 1993 and the two properties each at "The Moorings" on 27th March, 1993. I submit that further delay will only result in greater expenses to the companies involved. In my opinion all of the properties of Holdings will need to be sold as valuations I have obtained indicate that the net value of those properties will be sufficient to satisfy the claims of the unsecured Creditors and possible liability to the Commissioner for Taxation and the costs of the Receivers and Managers and Australian Securities Commission only if all are sold.

22. In my opinion the Investments properties must be sold in order to meet the claims of unsecured Creditors and possible liability to the Commissioner for Taxation and, the costs of the Receivers and Managers and Australian Securities Commission. The costs and liabilities of the Trustee of the T.J. Bell Family Trust must also be met".

1. In an affidavit of Lawrence Bodin Shaw, an employee of Coopers and Lybrand working under the direction of the receivers and managers, he deposes :-
   

"The Receivers and Managers were appointed on 18th March, 1992. The Receivers and Managers wish to determine their administration. A lengthy period of time has expired since the original Orders. Investigations are continuing and the Receivers and Managers wish to sell assets according to the Order on 18th March,

1992. The Receivers and Managers do not have funds to meet the expenses holding the properties, their costs of the investigation, nor legal costs. The Receivers and Managers estimate their costs to date at $35,000.00. Legal fees are estimated at $24,000.00. The costs of the auction thrown away if the sale does not proceed are estimated at $6,000.00".

1. These affidavits were filed in support of a notice of motion filed on 16 March, 1993 which seeks the following relief :-
   

1. A declaration that Berona Investments is the sole Trustee of the T.J. Bell Family Trust.

2. A declaration that :-

(a) Beatrix Julie Bell-Bradbury;

(b) Trevor John Bell;

(c) Rowena Ruby Roze Bell-Bradbury;

(d) Natasha Vera Joy Bell-Bradbury; are the beneficiaries of the Trust.

3. A declaration that the Receivers and Managers of Berona Investments Pty. Ltd. as sole Trustee of the T.J. Bell Family Trust are empowered to sell the following properties known as :-

(a) 19 Yaldara Street, Carseldine;

(b) Unit 49, "The Moorings", 63 Cavill Avenue, Surfers Paradise;

(c) 5 William Court, Lawnton;

(d) 35 Colonial Drive, Lawnton;

(e) 165 Todds Road, Lawnton.

4. A declaration that upon realisation of the assets of the Trust, the Trust vests.

5. A declaration that the unregistered mortgage dated 1 June, 1989 between Berona Investments Pty. Ltd. as mortgagor and Connie Borg and David Allen Fischer as mortgagees is invalid.

6. A declaration that the charge registered on the 16th January, 1992 between Berona Investments and Rowena Ruby Roze Bell-Bradbury is invalid.

7. That after realisation of the assets of the Trust, the funds be applied as follows :-

(a) the net proceeds of 19 Yaldara Street, after the Trustee has recovered all costs of holding and maintaining the property, be paid to Rowena Ruby Roze Bell-Bradbury and Natasha Vera Joy Bell-Bradbury;

(b) towards the costs and expenses of administering the distribution;

(c) in payment of the trade and other Creditors of the Trust and incurred by the Trustee for the benefit of the Trust;

(d) in payment of the costs and expenses of the Receivers and Managers and the Australian Securities Commission;

(e) in payment of any liability to the Commissioner for Taxation once the Receivers and Managers have finalised the company's taxation affairs;

(f) if a Liquidator is appointed, in payment of the costs and expenses of the Liquidator;

(g) in distribution to the beneficiaries in equal shares.

8. That Berona Investments Pty. Ltd. be wound up.

9. A declaration that the Receivers and Managers of Berona Holdings Pty. Ltd. are empowered to sell the following properties known as :-

(a) Unit 22, "The Moorings"; and

(b) Unit 4, 48 Buckland Road, Nundah.

10. A declaration that the unregistered mortgage dated 1 June, 1989 between Berona Holdings as mortgagor and Connie Borg and David Allen Fischer as mortgagees is invalid.

11. A declaration that the charge registered on 16th January, 1992 between Berona Holdings and Rowena Ruby Roze Bell-Bradbury is invalid.

12. A declaration that after the sale of Unit 22, "The Moorings" and Unit 4, 48 Buckland road, Nundah the funds be applied as follows :-

(a) in payment of the costs and expenses of the Receivers and Managers and the Australian Securities Commission;

(b) in payment of the trade and other Creditors of the company;

(c) in payment of any liability to the Commissioner for Taxation once the Receivers and Managers have finalised the company's taxation affairs;

(d) if a Liquidator is appointed, in payment of the costs and expenses of the Liquidator;

(e) in distribution to the shareholders of the balance.

13. That Berona Holdings Pty. Ltd. be wound up.

1. The approach reflected in the notice of motion and the reason for selling the properties is misconceived. The receivers and managers were not appointed to investigate the affairs of the companies, to settle accounts between the companies, creditors, contributors and others and to wind up those affairs and the companies themselves.

2. The purpose was to prevent the companies dealing with property to defeat any legitimate claims of aggrieved persons. I do not consider that it is within the power of the receivers and managers to sell the property of a person to investigate whether or not offences have been committed and whether or not other companies or persons for whom they are receivers and managers have claims against the person holding the property. I do not agree with the submission of the ASC that all that is happening is that the Receivers and Managers are investigating what property they have been appointed to and taking steps to get in that property. Here the receivers and managers are making claims against the applicants and Mrs. Bell-Bradbury on behalf of other companies. Their appointment as receiver managers of the applicants property was not for the purpose of carrying out an investigation for other aggrieved persons and to use the applicants assets for that purpose. The investigation on behalf of aggrieved persons is comprehended in the investigation specified in section 1323(1) of the Corporations Law. That is to be carried out by the ASC. If aggrieved persons wish to carry out investigations independent of the commission they must use their own funds and if the receivers and managers by virtue of their appointment to the property of others wish to carry out investigations to identify other property which they claim is property to which they are entitled, then they must use the funds of the party in whose interest they seek to recover for that purpose.

3. The purpose for which the receivers and managers wish to sell the properties is not one contemplated by the order of Northrop J of 18 March, 1992. Additionally, the state of the titles to five of the properties is such that they cannot in my view be sold to best advantage.

4. I am conscious that certain costs will be thrown away if the sales do not proceed. It was submitted that the companies are insolvent and will have to be wound up in any event. The question of solvency depends in part on the validity of the securities given and whether any consideration was advanced to support them. No creditor has applied to wind up the companies and the ASC has not applied to have them wound up in the exercise of the powers of the ASC to apply for such an order in certain circumstances. I am far from satisfied that the receivers and managers are entitled to apply to wind up the companies or have any grounds for doing so. Further, no undertaking as to damages has been given by the ASC in the event that no proceedings are brought against the companies by aggrieved persons and the companies can demonstrate loss or damage caused to them by the receivership.

5. I direct the receivers and managers not to sell the properties of the companies as they intended to do.

6. The question remains whether I ought to discharge the receivers and managers and release the property of the applicants from the further operation of the order of Northrop J absolutely or upon conditions.

7. The ASC has completed its investigations into the Aust-Home Group subject to receiving a report from the receivers and managers as to their investigations. The ASC now has to determine what action, if any, it will take against any company or individual. It has by its Counsel advised the Court that it intends to advise persons it considers aggrieved persons of its decision. I have listed the matter again on 23 April, 1993 to give directions as to whether other parties property ought to be released from the operation of the order of Northrop J

8. I am of the opinion that this motion as regards the release of the properties should also stand over to 23 April, 1993. The reason for adopting such a course is that the receivers and managers in the material filed have identified claims by others against the applicants and Mrs. Bell-Bradbury in the sums set out earlier in these reasons. Those persons may wish to seek to maintain the orders in place or obtain substitute orders to the extent of the identified claims. To release the property now could operate to the detriment of those persons if there was any dealing with the properties by the applicants in the interim.

THE COURT ORDERS:

1. Direct that the receivers and managers not sell the properties of the applicants at auction on 20 March, 1993 and 26 March, 1993 as they presently propose or at all without the leave of the Court.

2. That the notice of motion be adjourned to 10.15 a.m. on 23 April, 1993 for further consideration and directions.

3. The costs of the motion be reserved.