Hamer v Parity Partners Pty Ltd

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SUPREME COURT OF QUEENSLAND

CITATION:

Hamer & Anor v Parity Partners Pty Ltd [2022] QSC 232

PARTIES:

ADAM GLEN HAMER

(first applicant)

AND

KATHRYN LISE HAMER

(second applicant)

AND

KNIGHTSHALL PTY LTD (ACN 646 226 020)
(third applicant)

v

PARITY PARTNERS PTY LTD

(respondent)
FILE NO/S:

5399 of 2022

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court

DELIVERED ON:

25 October 2022

DELIVERED AT:

Brisbane

HEARING DATES:

13 May, 20 June, and 31 August 2022, with further written submissions supplied on 2 and 12 September 2022

JUDGE:

Freeburn J

ORDER:

1.   The application for the appointment of a receiver is dismissed.

2.   The parties be heard on the form of the orders and costs.

CATCHWORDS:

PRACTICE AND PROCEDURE – REMOVAL OF RECEIVER – APPOINTMENT OF RECEIVER OF TRUST ASSETS AND UNDERTAKINGS - POWERS OF RECEIVER – where there is ongoing litigation whether trust assets in disarray or at risk – where the applicants alleges that the trustee is incompetent - where the applicants seek for a receiver to be appointed, without security, of all assets held or purportedly held by the present trustee – whether the trustee is unfit to manage the trust – whether an independent and experienced receiver ought to be appointed to preserve the trust’s assets pending the determination of the investors’ rights and entitlements

Civil Proceedings Act 2011 (Cth), s 12

Australian Securities and Investment Commission v Cassimatis (No 8) [2016] FCA 1023, considered

Fordyce v Ryan [2017] 2 Qd R 240, considered
Martyniuk v King [2000] VSC 319, considered
Singh v Brisbane Sikh Temple (Gurdwara) Inc [2022] QSC 151, considered

COUNSEL:

Mr G Handran KC and Mr MJ Downes (applicant)
Mr JW Peden KC and Mr DC Clarry (respondent)

SOLICITORS:

Davey Associates (applicant)
RH Law (respondent)

REASONS

  1. The three applicants, Mr and Mrs Hamer and Knightshall Pty Ltd, are sophisticated or wholesale investors.  In March 2021, they decided to invest in an unregistered managed investment scheme (the Fund).  The object of the scheme was to acquire land at Beresfield in New South Wales and to fund the construction on that land of a cold store distribution facility.  The objective was to lease the completed cold store to BDD Australia Pty Ltd, a company related to the Bega group (producers of Bega cheeses, Vegemite and Vitasoy products).

  2. Mr and Mrs Hamer invested $500,000 as trustees for their family trust.  Knightshall Pty Ltd, as trustee of the Ian E Yeo Family Investment Trust, also invested $500,000.  Various other investors contributed funds totalling approximately $3m.

  3. To say the least, the applicants are disappointed in their investment.  They describe the project as a “monumental failure”. They seek to remove the trustee of the Fund, Parity Partners Pty Ltd.  On an interlocutory basis they seek to install a court appointed receiver in place of the trustee.

  4. It is common ground that the project has failed.  Whilst land was acquired, and some construction was commenced, for various reasons the project cannot continue.  What remains to…

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Details
Case
[2022] QSC 232
Decision Date

CaseChat Overview and Summary

In the case of Hamer v Parity Partners Pty Ltd, the applicants, presumably unitholders, sought the appointment of a receiver over the trust assets managed by Parity Partners, the trustee. The applicants alleged that the trustee was incompetent and that the trust assets were at risk due to mismanagement and breaches of duty. They argued that an independent and experienced receiver should be appointed to preserve the trust’s assets pending the determination of the investors' rights and entitlements. The legal issues before the court were whether the trustee was unfit to manage the trust and whether it was just and convenient to appoint a receiver without security over all assets held or purportedly held by the trustee.

The court found that the applicants had levelled numerous complaints against Parity Partners, but only one, related to the failure to provide unitholder tax statements, demonstrated substance. While some other complaints revealed a lack of attention and errors, the more serious allegations were not substantiated. The court was not satisfied that the case in favour of appointing a receiver was strong, that the drastic remedy of appointing a receiver was inappropriate, or that there was a convincing case that a receiver was necessary. The court considered that other remedies were likely to be perfectly adequate and effective. The court also noted that Parity Partners had offered to consent to orders involving additional directors being appointed and for the parties to give cross-undertakings, which the court did not interpret as a tacit concession that a receiver was appropriate.

The court dismissed the application for the appointment of a receiver and ordered that the parties be heard on the form of the orders and costs. This decision highlights the importance of substantiating allegations of mismanagement and the need for a strong case to be made for the appointment of a receiver.

Orders

Orders of the court

1. The application for the appointment of a receiver is dismissed.

2. The parties be heard on the form of the orders and costs.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The complaint numbered (e) complains that the material sent to unitholders was sent too late. It was sent at 4.44pm the previous day. This complaint assumes that Parity Partners was obliged to send the material. Nothing in the Constitution required that disclosure. Even if it was sent late, as counsel for Parity Partners points out, there is not suggestion that any unitholder asked for more time to consider the material. Conclusions: Appointment of a Receiver? As explained at the outset, it will be just and convenient to appoint a receiver where, absent such an appointment, the trust property is imperilled. A receiver may also be appropriate where the trust is in a state of disarray, or where the trust property has been improperly managed, or where the misconduct or breaches of duty of the trustee places the trust assets in danger.[79][79]This is intended only as a broad summary of the principles stated earlier. As can be seen, the applicants have levelled every possible criticism they can at Parity Partners. The applicants have trawled through all of the email, the documents they have obtained, and all transcripts of this proceeding and related proceedings in order to demonstrate the misconduct of Parity Partners. The allegations made have spanned a range from very serious allegations to a quite trifling claim.[80] That trawling exercise has yielded very little. Only one of the 43 complaints has demonstrated substance. That is complaint 11 comprising a failure to provide unitholder tax statements. Some other complaints reveal some lack of attention and errors.[81] More importantly, there is no substance to the large number of serious complaints.[82][80]See complaint 33.[81]For example, complaints 1, 2, 3 and 21.[82]For example, complaints 5, 18 to 22, 24, 18A to 23A, 23B and 23C. That limited yield illustrates the overall impression which is of an unregistered managed investment scheme which is likely to have failed because of problems with the builder. Attempts to sell the property and to wind-up the trust have also met with problems, one of which is that the trustee has been under siege from the applicants. The applicants prosecuted all 43 complaints. They also submitted that, looking at the totality of the complaints, there was a serious case that the misconduct and breaches of Parity Partners was of such a character as to place the trust assets in danger. That submission is not accepted. None of the more significant complaints has been shown to have any substance. To the limited extent that a serious case was shown, it was limited to errors and poor bookkeeping. In the circumstances I am not satisfied that:(a)the case in favour of appointment is strong;(b)applying appropriate care and caution, the drastic remedy of appointing a receiver is inappropriate; (c)there is no convincing case that a receiver is necessary.[83] [83]See the discussion above in paragraph [15]. Other remedies are likely to be perfectly adequate and effective. Only one parcel of land needs to be sold in order to liquidate the assets of the trust. The accounts will need to be attended to. Parity Partners has offered to consent to orders which would involve two additional directors being appointed in place of Mr Garden and for the parties to give cross-undertakings.[84] [84]This offer was treated by the applicants as a tacit concession that a receiver was appropriate: see the applicants’ reply to the respondent’s supplementary outline. I do not interpret the offer in that way. It is a recognition that further steps are required to wind up the trust and a genuine attempt to progress that process.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.