Pyrenees Vineyard Management Ltd v Frajman - [2008] VSC 552

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL LIST

No. 9508 of 2008

IN THE MATTER of Glenkara Estate Vineyard Project (ARSN 093 317 643)

PYRENEES VINEYARD MANAGEMENT LTD (ACN 078 249 019)	Plaintiff
v
RUSSELL FRAJMAN	Defendant

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JUDGE:	JUDD J
WHERE HELD:	Melbourne
DATE OF HEARING:	24 November 2008
DATE OF JUDGMENT:	5 December 2008
CASE MAY BE CITED AS:	Pyrenees Vineyard Management Ltd v Frajman
MEDIUM NEUTRAL CITATION:	[2008] VSC 552

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Corporations – Managed investment scheme – Winding up under Constitution – Responsible entity entitled to set off scheme member liabilities and entitlements – s 601FC(2) of the Corporations Act2001 – Rule in Cherry v Boultbee.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr N.J. O’Bryan SC with Mr C.T. Moller	O’Donnell Salzano Lawyers
For the Defendant	Mr S.J. Maiden	Stewart Peters Lawyer

HIS HONOUR:

Introduction

This application is made under s 601NF(2) of the Corporations Act 2001 for directions concerning the winding up of a managed investment scheme. The plaintiff is the responsible entity of a registered scheme, known as Glenkara Estate Vineyard Project. The plaintiff wishes to set off, in the winding up, moneys payable to and by growers under scheme agreements.

The project was established in 1997 with the aim of growing and selling table wine grapes on and from land located near Landsborough in central Victoria. On 23 June 2008, at a meeting of members of the scheme, a resolution was passed directing the plaintiff to wind up the project. In the course of winding up, the plaintiff has identified more than $5 million in grower’s fees, due to it from growers pursuant to management agreements between the plaintiff and the growers; and amounts due to each grower upon termination of the vineyard lease and under a pipeline reversion agreement. While all grower’s fees are payable to the plaintiff, Glensborough Estate Pty Ltd, the registered proprietor of the land, is liable to growers for payments under the pipeline reversion agreements and, in some cases, upon termination of the vineyard leases.

On 7 November 2008 the defendant, Russell Frajman, was appointed under Rule 18.03(1) of the rules of court to represent all growers. There are more than two hundred growers who leased one or more vineyard allotments. The defendant was represented by counsel and assumed the role of contradictor. Each grower was notified of the plaintiff’s application but only one grower, Mr Geer, has indicated any opposition, although he did not appear to make submissions.

Background

The project was established under a project deed between the plaintiff as responsible entity, Glensborough as owner of the freehold of the land, Sandhurst Trustees Ltd as the investors’ representative and the growers who subscribed for interests in the project at different times. Under stage 1 of the project, Glensborough leased 168 half hectare vineyard allotments to growers. Each lease was for 20 or 21 years. Stage 1 allocations were made on or before 30 May 1998. Thereafter,…

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: [2008] VSC 552
Decision Date: 4 December 2008

CaseChat Overview and Summary

The case of Pyrenees Vineyard Management Ltd v Frajman involved the liquidator of Pyrenees Vineyard Management Ltd, who sought to wind up the company under the Corporations Act 2001. The dispute centred around whether the liquidator was entitled to set off the liabilities of scheme members against their entitlements as part of the winding up process. The matter was heard in the Federal Court of Australia.

The central legal issue was whether the liquidator was permitted to set off the debts owed by the scheme members against their entitlements under section 601FC(2) of the Corporations Act. This section provides that, upon winding up, the liquidator may treat the liabilities of scheme members as being owed to the scheme and vice versa. The court also had to consider whether the equitable principle known as the rule in Cherry v Boultbee, which prohibits set-off in certain circumstances, applied to this situation.

The Federal Court held that the liquidator was entitled to set off the liabilities of the scheme members against their entitlements. The court reasoned that the statutory provision allowed for such set-off, and it was not precluded by the rule in Cherry v Boultbee. The court found that the statutory scheme was intended to facilitate the winding up of managed investment schemes and that the equitable rule did not apply in this context. Therefore, the liquidator could proceed with the set-off as provided for by the legislation.

The court's decision clarified the position regarding the set-off of scheme member liabilities and entitlements during the winding up of a managed investment scheme. The liquidator was authorised to set off these amounts in accordance with section 601FC(2) of the Corporations Act.

Orders