Re APCH Ltd (in liq) (recs &mgrs apptd) (No 1)

[2012] VSC 653

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL & EQUITY DIVISION

COMMERCIAL COURT
CORPORATIONS LIST

No. S CI 1199 of 2012

RE AUSTRALIAN PROPERTY HOLDINGS LIMITED (IN LIQUIDATION)(RECEIVERS AND MANAGERS APPOINTED)
AUSTRALIAN PROPERTY HOLDINGS LIMITED (IN LIQUIDATION)(RECEIVERS AND MANAGERS APPOINTED)	Plaintiff
v
MICHAEL RICHARD LEWIS WOOLRIDGE & ORS	Defendants

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JUDGE:	ROBSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	17 September 2012
DATE OF RULING:	17 September 2012
CASE MAY BE CITED AS:	Re APCH Ltd (in liq) (recs &mgrs apptd) (No 1)
MEDIUM NEUTRAL CITATION:	[2012] VSC 653

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J.G. Santamaria QC with Mr J.P. Moore	Clayton Utz
For the ASIC	Mr P.D. Crutchfield SC with Ms M. Hogan (solicitor)	Australian Securities and Investments Commission
For the First Defendant	Mr P.E. Anastassiou SC with Mr R.G. Craig	Norton Gledhill
For the Second and Fourth Defendants	Mr D.J. Williams SC	Maddocks
For the Third Defendant	Mr P.J. Bick QC with Mr J.P. Tomlinson	SBA Law
For the Fifth Defendant	Mr D. Leggatt (solicitor)	DLA Piper Australia
For the Sixth, Twelfth and Fourteenth Defendants	Mr D.J. Crennan	Wotton + Kearney
For the Seventh and Eighth Defendants	Mr P. Cash (solicitor)	Norton Rose
For the Ninth, Tenth, Eleventh and Thirteenth Defendants	Mr A. Joseph (solicitor) with Ms F.J. Bentley	Strongman & Crouch
For the Fifteenth Defendant	Mr D.R. Luxton	Colin Biggers & Paisley

HIS HONOUR:

1. I propose to adjourn the applications before me until early October.  I propose to give my reasons, in part to record the history of these proceedings.

1. From 22 to 24 August 2001, APCH (through its receivers and managers) commenced public examinations in the Supreme Court of Victoria before Efthim AsJ.  APCH says that there were a number of potential claims which were able to be identified during those examinations.  Many of these relate to an alleged conflict of interest on the board of APCH, the alleged lack of governance on the board of APCH, and the alleged conduct of and benefits given to Mr Lewski, the managing director of APCH from 2001 to 2008.

1. APCH says that in its capacity as the responsible entity for the Prime Retirement and Aged Care Property Trust (the Trust) it paid itself a fee in 2007-2008 of approximately $33 million for the listing of the Trust.  APCH says that payment came out of property of the Trust and was paid to APCH in its personal capacity.  APCH says that Mr Lewski and related entities own all of the shares in APCH.

1. On 5 March 2012, APCH (by its liquidator) commenced these proceedings in the Supreme Court of Victoria. Separate proceedings were then heard and determined in this court by which Ferguson J determined that the chose in action asserted by APCH in this proceeding constituted property of APCH charged in favour of the appointers of the Receivers. Accordingly, following the delivery of judgment in that proceeding (which was [2012] VSC 124), on 4 April 2012 the Receivers assumed control of this proceeding.

1. On 25 May 2012, Ferguson J made directions for the APCH to file a statement of claim. On 3 August 2012, APCH filed and served a statement of claim in this proceeding seeking as against all 15 defendants an order for compensation pursuant to ss 1317H and 1317HA(1), (2), (3), (4) and/or 1325 of the Corporations Act 2001. In addition APCH also seeks against the:

(a)    first to ninth defendants, damages, or alternatively payment of the sum of  $32,939,947 (plus 10% on account of GST) (Listing Fee), or in the further alternative equitable compensation.

(b) ninth to eleventh defendants, an order setting aside the Supplemental Deed of Variation (No. 7) of the Constitution dated 22 August 2006 ab initio, an account of its respective dealings and transactions with regard to the Listing Fee, further or alternatively, an account of all profits made by the tenth and eleventh defendants from the receipt of any part the Listing Fee and further or alternatively, equitable constitutions.

(c)    eleventh defendant, alternatively, restitution of the Listing Fee;

(d)    twelfth to fifteenth defendants, further or alternatively, damages and or equitable compensation.

1. On 9 August 2012, Ferguson J made directions for the hearing of applications by the defendants to be relieved of their obligation to file a defence to the statement of claim.  Those applications were fixed for hearing on 14 September 2012. 

1. On 21 August 2012, ASIC commenced proceedings in the Federal Court of Australia against APCH (the plaintiff in the Supreme Court proceeding) and five of its directors: Messrs Lewski, Butler, Jaques, Clarke and Dr Wooldridge (the first five defendants in the Supreme Court proceeding).

1. As a result of that proceeding being instituted in the Federal Court of Australia several applications have been made in the Supreme Court proceeding.  By a summons dated 11 September 2012 the plaintiff, APCH, sought an order that the Supreme Court proceeding be transferred to the Federal Court of Australia pursuant to s 5(1)of the Jurisdictions of Courts (Cross–vesting) Act 1987, or s 1337H of the Corporations Act 2001.

1. APCH contends that there is a substantial degree of overlap between the facts and contentions in the Supreme Court proceedings and the Federal Court proceedings.  APCH says that the same core allegation are made in both proceedings – namely, breach of directors duties in purporting to change the constitution of a managed investment scheme to permit payment of a fee of approximately $30 million to the responsible entity of the scheme itself and for the personal benefit of the beneficial owners of the shares and the responsible entity, being directors controlled by one of the directors of the responsible entity, Mr Lewski.

1. For his part, Mr Lewski says that the allegations in both proceedings are substantially the same and concern substantially the same events and transactions and the same alleged breaches of statutory duties.  He says that they are in fact almost identical.[1]

   [1]Submissions of Lewski (30 August 2012), [34].

1. Mr David Paul Cowling (the solicitor for APCH) states in his affidavit of 11 September (sworn in support of the transfer of this proceeding to the Federal Court and in opposition to the application by some of the defendants to the proceedings be stayed), that, if the Supreme Court proceedings are transferred to the Federal Court of Australia, he has been instructed to apply for directions that the present civil proceeding be case managed concurrently with the existing Federal Court penalty proceeding and that they be set down to be heard together with evidence in one proceeding being evidence in the other.

1. As to Mr Lewski (the 3^rd defendant), by a summons of 23 August 2012 he seeks an order that the Supreme Court proceedings be stayed as against him until the determination of the Federal Court penalty proceedings.  Alternatively, he seeks an order that he be relieved from the obligation to file a responsive defence to the statement of claim in the Supreme Court civil proceeding.  He contends that the transfer application by APCH should not be heard until the stay application has been heard and determined.

1. Mr Wooldridge (the 1^st defendant) by a summons dated 11 September 2012 seeks a stay of the Supreme Court civil proceeding and opposes APCH’s application to transfer the proceeding to the Federal Court.  He says that the resolution to the stay application is of central relevance to the transfer application.

1. Messrs Clarke and Butler (the 2^nd and 4^th defendants) both seek a stay of the Supreme Court civil proceeding.

1. Mr Jacques (the 5^th defendant) by a summons dated 24 August 2012 seeks a stay of the Supreme Court civil proceeding.

1. Mr Power, Mr David Williams and Kidder Williams Ltd (the 6^th, 12^th and 14^th defendants) are not party to the ASIC proceeding.  They have advised that a stay of the Supreme Court civil proceeding against the directors will prompt a submission by them for the Supreme Court civil proceeding also to be stayed against them.

1. Messrs Hansen and Rodaway (the 7^th and 8^th defendants) are former directors of APCH but are not parties to the ASIC penalty proceedings.  They have advised that if the court is minded to order the civil proceeding be stayed against the other former directors of APCH then they intend to submit that the Supreme Court civil proceedings ought to be stayed against them as well.

1. Madgwicks Lawyers (the 15^th defendant) are not a party to the ASIC penalty proceeding.  They have advised that they propose to follow the course adopted by Mr Hansen and Mr Rodaway.

1. Madgwicks oppose APCH’s application to transfer the Supreme Court civil proceedings to the Federal Court.

1. In essence the following issues are before me:

(1)Should this proceeding in the Supreme Court be transferred to the Federal Court of Australia?

(2)Should this proceeding by stayed?

(3)Should I hear and determine the transfer application before, at the same time or after I hear the determination of the stay application?

(4)Should limited non responsive defences be filed?

1. Counsel for Mr Lewski has submitted that the Federal Court penalty proceedings have created quite considerable difficulties for him and for other defendants.  Counsel said that if the proceedings in the Supreme Court are not stayed then Mr Lewski would have a strong preference for this court to deal with both proceedings (in other words, the Federal Court penalty proceedings should come this Court).

1. Today, ASIC has appeared through Mr Crutchfield SC and informed the Court that ASIC is not in a position to explain the reasons for issuing penalty proceedings in the Federal Court.  Mr Crutchfield was unable to say whether or not ASIC has recognised the problems and difficulties they have caused for some of the existing defendants by issuing penalty proceedings in the Federal Court while these civil proceedings are pending in the Supreme Court.

1. Whether or not an application is or should be made to transfer the Federal Court penalty proceedings to the Supreme Court is a matter entirely for the parties, about which I should say no more. 

1. In those circumstances, I propose to adjourn the hearing of all applications before me to 8 October, and I am proceeding on the basis that we will complete those applications in a day.