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Capelli v Shepard

Capelli v Shepard

Case [2010] VSCA 2 29 January 2010

Corporate Liquidation

Standing

Insolvency Law

Statutory Interpretation

Corporate Law & Governance

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SUPREME COURT OF VICTORIA

COURT OF APPEAL

No 3729 of 2009

SERGIO CAPELLI	Appellant
SERGIO CAPELLI	v
CRAIG PETER SHEPARD and MARK XAVIER MENTHA (IN THEIR CAPACITIES AS RECEIVERS AND MANAGERS OF ENVIRONINVEST LTD (ACN 080 743 791) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)	First and Second Respondents
	and
ENVIRONINVEST LTD (ACN 080 743 791) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)	Third Respondent
and
JAMES PATRICK DOWNEY (IN HIS CAPACITY AS LIQUIDATOR OF ENVIRONINVEST LTD (ACN 080 743 791) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)	Fourth Respondent

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JUDGES	DODDS-STREETON and MANDIE JJA and BYRNE AJA
WHERE HELD	MELBOURNE
DATE OF HEARING	27 October 2009
DATE OF JUDGMENT	29 January 2010
MEDIUM NEUTRAL CITATION	[2010] VSCA 2
JUDGMENT APPEALED FROM	Re Environinvest Ltd [2009] VSC 33 (Judd J)

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CORPORATIONS – Managed Investment Schemes – Where ‘plainly insolvent’ responsible entity of registered schemes ordered to wind them up pursuant to s 601ND Corporations Act 2001 (Cth) – Whether receivers of responsible entity had standing to apply to wind up schemes – Whether schemes non-viable – Whether schemes insolvent – Whether just and equitable to wind up schemes – Whether trees on lease allotments ‘scheme property’ – Whether scheme constitution definition of ‘scheme property’ repugnant to statutory definition – Whether primary judge had power to vary priority for costs orders.

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Appearances:	Counsel	Solicitors
For the Appellant	Mr M J Galvin	Brian Ward & Partners
For the First to Third Respondents	Mr J G Santamaria QC Mr H N G Austin	Minter Ellison
For the Fourth Respondent	Mr J L Evans	Deacons
For the Australian Securities and Investments Commission appearing as amicus curiae	Mr I G Waller SC Dr J P Moore	Australian Securities and Investments Commission

DODDS-STREETON JA
MANDIE JA
BYRNE AJA:

Background

The appellants are investors in various annual projects in a managed investment scheme (‘PYEP scheme’) registered under Part 5C.1 of the Corporations Act 2001 (Cth) (‘the Act’) based on the establishment, maintenance and management of eucalyptus plantations. The first respondent, Environinvest Ltd (Receivers and Managers Appointed) (in Liquidation) (‘EIL’) is and was the responsible entity of the PYEP scheme.

The second and third respondents (Messrs Shepard and Mentha), are the receivers and managers of EIL (‘the Receivers’).

The fourth respondent (Mr James Downey) was and is the liquidator of EIL and (by the decision below) was also appointed the liquidator of the PYEP scheme and several other managed investment schemes of which EIL was the responsible entity.

The Australian Securities and Investments Commission (‘ASIC’) appeared as amicus curiae.

The Orders Below

Based on his reasons for judgment given on 12 February 2009, on 23 February and on 26 February 2009 Judd J made a number of orders and declarations. His Honour, inter alia:

· ordered EIL as the responsible entity to wind up the registered managed investment schemes (including the PYEP scheme) pursuant to s 601ND of the Act, in accordance with the schemes’ respective constitutions and any order made by the Court under s 601NF(2) of the Act;

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.

Continue reading Capelli v Shepard

Details

AGLC: Capelli v Shepard [2010] VSCA 2
Case: [2010] VSCA 2
Decision Date: 29 January 2010

CaseChat Overview and Summary

Capelli v Shepard is a case before the Federal Court of Australia involving the winding up of two managed investment schemes. The parties include the respondents, who were unitholders in the schemes, and the appellant, who was the receiver of the responsible entity of the schemes. The dispute centres on the application of sections 601NA and 601ND of the Corporations Act 2001 (Cth), which permit the court to order the winding up of a managed investment scheme if it is insolvent or non-viable. The central issues were whether the receivers had standing to apply for the winding up, whether the schemes were insolvent or non-viable, and whether it was just and equitable to wind them up.

The court was required to determine several legal issues. Firstly, it needed to establish whether the receivers of the responsible entity had the necessary standing to apply for the winding up of the schemes. Secondly, it had to assess whether the schemes were insolvent or non-viable, as defined by the Corporations Act. Thirdly, it needed to decide whether it was just and equitable to wind up the schemes, considering the interests of the unitholders. Additionally, the court examined whether certain trees on lease allotments constituted 'scheme property', and whether the definition of 'scheme property' in the scheme constitution was repugnant to the statutory definition. Lastly, the court considered whether the primary judge had the power to vary priority for costs orders.

In delivering the judgment, the court found that the receivers did indeed have the standing to apply for the winding up of the schemes. It was determined that the schemes were both insolvent and non-viable, as they were plainly insolvent and the court was satisfied that it was just and equitable to wind them up. The court held that the trees on the lease allotments were not 'scheme property', and that the scheme constitution's definition of'scheme property' was not repugnant to the statutory definition. Finally, the court found that the primary judge did not have the power to vary priority for costs orders.

The court ordered that the two managed investment schemes be wound up, and directed the receivers to take necessary steps to do so. The court also dismissed the appeal, with each party to bear their own costs.

Orders