Bells Securities Pty Ltd v LPG Mourant - [2002] QSC 156

[2002] QSC 156

SUPREME COURT OF QUEENSLAND

CIVIL JURISDICTION

WILSON J

No 3477 of 2002

BELLS SECURITIES PTY LTD Plaintiff

and

LPG MOURANT AND OTHERS Defendant

BRISBANE

..DATE 04/06/2002

JUDGMENT

HER HONOUR: The applicant, Bells Securities Pty Ltd, is the
operator of a solicitor's mortgage lending business.

Beginning in 1996, lenders contributed varying amounts which
were pooled to make individual loans, referred to as

"contributory loans", secured by what were referred to as

"contributory mortgages" over real property. The loans were
made and corresponding securities taken by the applicant as

trustee. Through this scheme, Bells Solicitors, now

Steindl Bell Lawyers, lent clients' money to borrowers on

the security of mortgages taken over real property.

The scheme is a "managed investment scheme" which was not

registered under the Corporations Law or the Corporations

Act 2001. A requirement for registration was introduced

after the scheme commenced, but the Australian Securities

and Investment Commission ("ASIC") allowed certain mortgage

schemes entered into before 17 December 1999 to be brought

to an end or "run out" by 31 October 2001. That date was

subsequently extended to 28 February 2002 (subject to

conditions) where the scheme continued to be operated under

the supervision of, relevantly, the Queensland Law Society

Inc. The Queensland Law Society Inc. supervised the

operation of this scheme until 28 February 2002. It has

subsisted since then, unregistered.

The applicant seeks an order for the winding up of the

scheme pursuant to section 601EE of the Corporations Act,

with the applicant to be responsible for the winding up,

under the supervision of two chartered accountants, Messrs

Sweeney and Van der Velde of Hall Chadwick. In the case of

one outstanding loan, the Cofordo loan, it seeks an order

facilitating the transfer of the loan to a registered

scheme.

ASIC has intervened in the application to oppose the

appointment of the applicant to wind up the scheme. In its

submission, independent liquidators ought to be appointed.

Over the life of the scheme, 84 loans were made. Of those,

four remain ‑ the Longhampton loan, the Wickham Developments
loan, the Seydel loan and the Cofordo loan. Each loan is in
default.

The Longhampton loan On 14 May 1999, the sum of $1,040,000

was advanced to Longhampton Pty Ltd against the security of

a mortgage over a backpackers' hostel on Magnetic Island.

The loan was repayable on 14 May 2000. Before the moneys

were advanced, the borrower produced a valuation of $1.875

million. The loan went into default in April 2000 due to

the non payment of interest. There was a longstanding

dispute with the tenant who refused to pay rent because of

the alleged failure of the landlord (the borrower) to carry

out structural repairs. That was not resolved until October
2001.

In the meantime, Hall Chadwick had been appointed receiver

manager in September 2000. Attempts to sell the property

were unsuccessful. Another attempt, a tender campaign,

closed on 31 May 2002. The borrower is in liquidation, one

of the guarantors is bankrupt and the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2002] QSC 156
Decision Date: 04/06/2002

CaseChat Overview and Summary

Bells Securities Pty Ltd, an operator of a mortgage lending scheme, sought to wind up four outstanding loans that had defaulted and were secured by mortgages over various properties. The scheme, which was not registered under the Corporations Law, was supervised by the Queensland Law Society until 28 February 2002. The applicant proposed to wind up the scheme under its own supervision, while the Australian Securities and Investment Commission opposed this, advocating for the appointment of independent liquidators. The court had to decide whether the applicant should be appointed to wind up the scheme or if independent liquidators should be appointed.

The court considered several factors in making its decision. These included the conduct of the mortgage lending business, potential conflicts of interest, the wishes of the contributors, and the comparative costs of the applicant's proposal and those of independent liquidators. The court also considered the public interest in the integrity of the system of investor protection. The applicant had not provided a satisfactory explanation for the state of the four loans, which had been in default for periods ranging from 21 to 44 months. The court was concerned that there might be a conflict between the applicant's duty to the contributors and its own interests. The court also noted that the contributors had expressed concerns about the potential costs of the winding up and had voted in favour of the applicant's proposal. However, the court was concerned that the contributors might not be fully aware of all the circumstances surrounding the loans and the potential for conflicts of interest. The court concluded that independent liquidators should be appointed to ensure transparency and safeguard the rights of the contributors.

The court ordered that the costs of all parties of and incidental to the application for winding up be costs in the winding up, to be assessed on the standard basis. The court also ordered that there be no order as to the costs reserved by Justice Muir on 7 May 2002.

Orders