Bargo Nominees Pty Limited v Talbots Pty Limited

[2023] NSWSC 1356

Supreme Court

New South Wales

Medium Neutral Citation:

Bargo Nominees Pty Limited v Talbots Pty Limited [2023] NSWSC 1356

Hearing dates:

1 and 2 November 2023

Decision date:

02 November 2023

Jurisdiction:

Equity - Commercial List

Before:

Ball J

Decision:

See [15]

Catchwords:

CORPORATIONS — Receivers and managers — Appointment by court — Whether to appoint receiver to unit trust — Where director not acting in best interests of unit holders — Receiver appointed

Legislation Cited:

Corporations Act 2001 (Cth)

Real Property Act1900 (NSW)

Category:

Procedural rulings

Parties:

Bargo Nominees Pty Limited (Plaintiff)
Talbots Pty Limited (First Defendant)
Peter Gregory Scott (Second Defendant)
FHT Nominees Pty Ltd (Third Defendant)
Pigs Might Fly Pty Limited (Fourth Defendant)

Representation:

Counsel:
M Maconochie (Plaintiff)
RD Marshall SC (Third Defendant)
M Connor (The Grove SF Pty Ltd as trustee for The Grove Super Fund – Interested Party)

Solicitors:
Priest Legal (Plaintiff)
Keypoint Law (Third Defendant)

File Number(s):

2023/143409

Publication restriction:

None

EX TEMPORE JUDGMENT

1. By notice of motion filed on 19 October 2023, the plaintiff, Bargo Nominees Pty Limited (Bargo), seeks by way of interlocutory relief the appointment of receivers to the assets of the third defendant, FHT Nominees Pty Ltd (FHT) and the Nightingale’s Winery Mortgage Trust (the Unit Trust). The plaintiff also seeks various ancillary orders.

2. The plaintiff’s application is supported by The Grove SF Pty Ltd as trustee for The Grove Super Fund (Grove), the plaintiff in proceedings in which relief is also sought against FHT. Both Bargo and Grove were clients of Talbots Pty Ltd, a firm of accountants which, until its recent liquidation, was controlled by Mr Peter Scott. Both Bargo and Grove invested money at the suggestion or instigation of Mr Scott in the Unit Trust, the trustee of which is FHT. The Unit Trust was established, it appears, for the purpose of lending money on security of a mortgage to Fortune Plus Investment Group Pty Ltd, which operates the Nightingale’s Winery. Mr Scott is the sole director of FHT.

3. The money was lent, and the mortgage was executed, on or about 29 May 2017 and was repayable by 29 May 2018. There is some evidence to suggest that Fortune Plus was also a client of Talbots and Mr Scott. In particular, its registered office is at Talbots’ business address.

4. According to Mr Scott, the unit holders in the trust and the number of units held by them are: Bargo, 1,500,000 units; Grove, 150,000 units; Wanran Pty Ltd, 250,000 units; Scott Family Super Nominees Pty Ltd, 950,000 units. Wanran is an investment vehicle of Mr Stubbs. He has sworn an affidavit in support of the appointment of a receiver. It appears that Scott Family Super Nominees Pty Ltd is the trustee of a superannuation fund established by Mr Scott’s parents.

5. Mr Prowse, a director of Bargo, gives evidence that he understood that Bargo was making a loan through Talbots of $1.5 million to FHT, which would then lend money to Fortune Plus. He denies that he was told by Mr Scott that, in fact, the money would be used to acquire units in the Unit Trust, although the evidence before the Court is equivocal on that point.

6. In any event, little seems to turn on the point. The objective evidence is that Bargo holds 1,500,000 units in the Unit Trust, and the only asset of the trust is the loan owed to it by Fortune Plus, which appears to be secured by a mortgage. I say “appears to be”, because the memorandum of mortgage, in an obvious error, refers to a memorandum number Q86000 filed pursuant to s 80A of the Real Property Act1900 (NSW), instead of memorandum number Q860000.

7. Ms Kingston, a director of Grove, the trustee of her and her now deceased husband’s superannuation fund, gives evidence that she decided to transfer $600,000 belonging to Grove and $170,000 held in the superannuation fund to Talbots to invest on term deposits. In fact, it is not entirely clear how much was invested by Talbots. It appears to have included a loan to Talbots, itself, of $300,000, which has been repaid, and an investment of $150,000 in the Unit Trust. Ms Kingston says that she first learned of that investment in about December 2021.

8. Although the loan to Fortune Plus was repayable by 29 May 2018, it remains owing. It appears that, at least until recently, FHT and Mr Scott have taken no steps to recover the amount owing to the trust, despite repeated assurances given both to Mr Prowse and Ms Kingston that the money was about to be repaid or that FHT was about to take steps to enforce its rights, or that the winery would be sold so that the debt could be repaid. Mr Scott gives no explanation for the delay or the apparent misrepresentations he made.

9. Bargo and Grove rely on three other matters, which they say are relevant to the appointment of a receiver. First, Ms Helen Prowse, Mr Prowse’s sister in law, gives evidence that an investment fund of her and her husband’s was also a client of Talbots. The trustee of that fund was FHT. Ms Prowse says that she has recently discovered that a caveat has been placed over a property owned by that fund by Bizcap AU Pty Ltd. The interest claimed in that caveat is said to be “[p]ursuant to a Loan Agreement and Guarantee entered into by FHT Nominees Pty Limited as Guarantor, whereby they charged in favour of the Caveator the interest in their property as security for punctual performance of the Loan Agreement and Guarantee”. In an affidavit provided to the Court during the hearing, Mr Scott’s solicitor says on information and belief that the caveat appears to have been lodged over the property in error, since the loan made by Bizcap was to Talbots (and guaranteed by Mr Scott personally) and did not involve FHT.

10. The second matter relied on by the plaintiff is that a petition to bankrupt Mr Scott is listed for hearing on 9 November 2023. The third matter is the fact that, under the trust deed governing the Unit Trust, the three unit holders who seek the appointment of a receiver have the power to remove FHT as the trustee and appoint a new trustee. That is said to be relevant to the balance of convenience.

11. Mr Scott, at least for the purposes of the current application, does not take issue with what the plaintiffs in both proceedings say. Rather, his position is that steps are now being taken to refinance the loan and that he is willing to give undertakings to the Court which will protect the interests of the unit holders and that the appointment of a receiver will involve an unnecessary expense. He, of course, has a personal interest in a successful sale, since his parents’ superannuation funds own a substantial number of the units in the Unit Trust. Mr Scott accepts that if a refinancing cannot be achieved in a reasonable period, such as a month, then the loans should be collected by the actions of a professional agent, such as a receiver.

12. In support of the contention that steps are now being taken to refinance the loan, Mr Scott relies on an affidavit from Mr Anthony Dale, the solicitor who has recently been appointed to act for Fortune Plus in relation to the refinancing. Mr Dale was only appointed after the application for the appointment of a receiver was made. He gives evidence of the steps that would need to be retaken to refinance the loan. It is not necessary to set out those steps in any detail. Suffice it to say that on the basis of the evidence that he gives, the Court could not be satisfied that the loan could be refinanced within a month.

13. Taking all those matters into account, in my opinion, this is an appropriate matter in which to appoint a receiver. It seems clear that Mr Scott has not acted in the best interests of the unit holders as a result of his failure to take any steps to recover the loan. Although it might be said that he is taking steps now, those steps are, in my opinion, too little and too late. I accept that the plaintiffs now can have no confidence that Mr Scott will act in the bests interests of the unit holders. It is also relevant, in my opinion, that the majority of the unit holders, both by number and by investment, support the appointment of a receiver and, indeed, could achieve much the same result by exercising their rights under the trust deed. The fact that they have not done so now can be explained by the fact that until very recently, they have had difficulties in obtaining sufficient information from Mr Scott to understand the precise nature of their investment and their rights under the trust deed.

14. Bargo has indicated that it is prepared to give an undertaking as to damages if I make orders in terms of those sought in the notice of motion.

15. Accordingly, upon the plaintiff giving the usual undertaking as to damages, I make the following orders:

1. Orders that until further order Benjamin Joshua lsmay and Scott Anthony Newton (Receiver) of Shaw Gidley, Suite 1, Level 1, 65 Lord Street Port Macquarie be appointed jointly and severally without security as receivers and managers of the assets of the third defendant and the Nightingale’s Winery Mortgage (the Trust).

2. An order that within 7 days the second and third defendant deliver up all books and records of the third defendant and the Trust to the Receiver.

3. Orders that the Receiver have the powers in the Schedule of Powers in Annexure A as follows:

1. Schedule of Powers

2. The Power to do all things necessary or convenient to be done for or in connection with or incidental to the attainment of the objective noted below including:

3. All the powers in section 420(2) of the Corporations Act 2001 (Cth);

4. Power to sell or convert into cash any property or asset of the Nightingale's Winery Mortgage Trust;

5. Power to obtain valuations of any asset of the Nightingale's Winery Mortgage Trust;

6. Power to open a bank account in the name of the Nightingale's Winery Mortgage Trust;

7. Power to investigate transactions made using funds derived from the Nightingale's Winery Mortgage Trust; and

8. Power to demand the books and records of the Nightingale's Winery Mortgage Trust from any person, including the first, second and third defendants.

4. Orders that the Receiver be remunerated for his services and those of his partners and employees at the rates set out in the consent to appointment of receiver dated 19 October 2023 and filed with the Court.

5. Orders that the Receiver's remuneration be paid for out of the assets of the Trust.

6. Orders that the amount of the Receiver's remuneration be fixed by the Court upon application in writing being made by the Receiver from time to time, and the Registrar be delegated the task of determining each such application.

7. Orders that the Registrar must not proceed to determine any application referred to in the previous order until 14 days after a copy of the application has been served on each unit holder in the Trust.

8. Orders that each unit holder in the Trust shall be entitled to be heard on the application referred to in the previous order.

9. Orders that as an interim measure, and subject in the end to the passing of his accounts, the Receiver shall be entitled to pay his expenses from property realised in the receivership.

10. Orders that the Receiver shall not distribute any of the proceeds of the receivership without prior direction of a Judge of the Court.

11. Orders that the Receiver is to file with the Court his written report on his progress with the receivership by the end of Wednesday 28 February 2024 and by the same time serve a copy of it upon each unit holder of the Trust.

12. Orders that liberty be granted to the parties and the Receiver to apply on 1 business days' notice, such notice to specify the relief sought.

13. Costs reserved.

14. Orders that the proceedings be listed for directions on Friday, 1 December 2023.

15. Liberty to apply on 3 days’ notice.

**********

Decision last updated: 10 November 2023