Re Blackburne Pty Ltd (in liquidation)
[2011] VSC 92
•9 March 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
CORPORATIONS LIST
No. 1005 of 2011
| IN THE MATTER OF BLACKBURNE PTY LTD (IN LIQUIDATION) ACN 071 416 870 GIDEON ISAAC RATHNER AND DAVID JOHN COYNE IN THEIR CAPACITY AS LIQUIDATORS OF BLACKBUNRE PTY LTD (IN LIQUIDATION) ACN 071 416 870 | Plaintiff |
---
No. 1012 of 2011
| IN THE MATTER OF BEP FINANCE PTY LTD (IN LIQUIDATION) JAMES PATRICK DOWNEY IN HIS CAPACITY AS LIQUIDATOR OF BEP FINANCE PTY LTD (IN LIQUIDATION) ACN 083 023 741, ENVIRONINVEST LIMITED (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) ACN 080 743 791 AND PRIMARY YIELD FINANCE PTY LTD (IN LIQUIDATION) (RECEIVERSAND MANAGERS APPOINTED) | Plaintiff |
---
JUDGE: | Robson J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9 March 2011 | |
DATE OF RULING: | 9 March 2011 | |
CASE MAY BE CITED AS: | Re Blackburne Pty Ltd (in liquidation) | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 92 | |
---
CORPORATIONS – orders sought under ss 477(2A), 477(2B), 511 and 531 of the Corporations Act 2001 for approval of deed – deed approved – deed to be kept confidential in light of impending litigation – liquidator justified in entering into deed
---
APPEARANCES: | Counsel | Solicitors |
| For the plaintiff in matter 1005 of 2011 | Ms C Rome-Sievers | Tisher Liner & Co |
| For the plaintiff in matter 1012 of 2011 | Mr P Fary | Norton Rose |
| For ABL Nominees Pty Ltd and the receivers of Primary Yield Finance Pty Ltd (in liq) (receivers and managers appointed | Mr O Bigos | Gadens Lawyers |
HIS HONOUR:
I have before me an application dated 7 March 2011 by Gideon Isaac Rathner and David John Coyne in their capacity as joint and several liquidators of Blackburne Pty Ltd (in liquidation) seeking relief under s 477(2A), 477(2B), 511 and 531 of the Corporations Act 2001. On the facts stated in the supporting affidavits of Gideon Isaac Rathner dated 7 March 2011 and Howard Hilton Chait dated 7 March 2001, the plaintiffs seek the following orders and directions:
(1)An order pursuant to s.477(2A) and 477(2B) of the Act, approving the plaintiff’s entry into the deed of indemnity and cooperation (deed) which is a confidential exhibit to the Rathner affidavit and approving any compromise of debts to Blackburne Pty Ltd (in liquidation) ACN071416870 (Blackburne) in the deed.
(2)A direction pursuant to s.511 of the Act, that the plaintiffs were justified and otherwise acting properly and reasonably in entering into the deed and performing their obligation under it and in causing Blackburne Pty Ltd to enter into the deed and perform its obligations under it.
(3)An order that the confidential exhibits to the Rathner affidavit be kept confidential.
(4)An order pursuant to s.531 of the Act that the deed and any documents created as a result of the deed are confidential and are not available for inspection by creditors under Regulation 5.601 and 5.602 of the Corporations Regulations 2001.
Mr Rathner and Mr Coyne were appointed as liquidators of Blackburne Pty Ltd by a resolution of members on 6 September 2010. Blackburne Pty Ltd was a company which acted as a trustee for the Pescott Family Trust B and in addition conducted some activities in its own right. In its own capacity, it lent funds to investors (known as growers) for investment in a managed investment scheme known as the Environinvest Eucalyptus Project.
Relevantly to the present application, on 1 July 2000 and 30 June 2001, Blackburne Pty Ltd assigned to Environinvest Ltd (EIL) two loan books and received consideration for the assignments of those loans to EIL, valued at full face value in the total amount of $20,343,522.
Mr Rathner deposes that the investigations he has conducted to date reveal that the records of Blackburne Pty Ltd recovered by him for that period are not complete. He says, however, that he has been able to verify that this consideration was received by Blackburne Pty Ltd from inquiries he has made of the liquidator of EIL. He says he has also obtained copies of records of EIL, evidencing the consideration referred to in the assignment deeds.
Mr Rathner says the consideration was given as a journal entry reducing Blackburne Pty Ltd’s loan account owing to EIL. He says the financial records of EIL, including EIL’s management records and order records are consistent with this. He says he is satisfied the consideration was received by Blackburne Pty Ltd.
Blackburne Pty Ltd in its own capacity has an estimated net deficiency of assets of $108,074. The report of its director Mr Roger Pescott discloses that Blackburne Pty Ltd has no realisable assets. Its only asset, a debt of over $8.2 million owing by EIL now in liquidation, is not recoverable. Mr Rathner says he has not called for formal proof of debt or claim. He says that the report as to affairs discloses that Blackburne Pty Ltd’s debt relate to small amounts owing on a corporate credit card, ASIC in respect of filing fees and loans for two related parties. Blackburne Pty Ltd is also trustee of one of these creditors, the Prescott Family Trust B.
Mr Rathner says that David Coyne and himself are also the joint and several liquidators of Brayburne Pty Ltd which is trustee of another related trust, the Pescott Family Trust A. He says further in his affidavit that Blackburne Pty Ltd also has contingent creditors relating to the claims made in the ABL/Primary Yield Finance proceedings and some contingent liabilities arising under investment performance guarantee. I will come in a moment to what the ABL/ Primary Yield Finance proceedings are.
Mr Rathner says it is difficult to assess these claims at this early stage, but according to the director these creditors claim to be owed in the range of $5.7 million. Mr Rathner says that since their appointment as liquidators they have received notification of two further parties claiming to be creditors. Mr Rathner states that at this point in time, apart from any potential recoveries under the deed, he sees no prospect of any return to the creditors of Blackburne Pty Ltd.
Mr Rathner refers to an affidavit of Mr Chait of Gadens Lawyers sworn and filed with the court on 8 March 2011 in support of his application in this proceeding. He refers to Mr Chait’s explanations in his affidavit of the loan recovery proceedings which have been issued by his clients, the chain of assignments of the various loan books, including those which were originated by Blackburne Pty Ltd, the issues which have arisen in those proceedings regarding the validity of the assignments, and the proposed joinder of Blackburne Pty Ltd as a plaintiff and its removal as defendant to the relevant proceedings.
It is convenient for me to describe these proceedings in general terms. EIL, or Environment Investment Ltd, operated a number of registered and unregistered managed investment schemes, and the members of the schemes are known as growers. In late 2004, Primary Yield Finance, then known as Environinvest Finance Pty Ltd, became involved in a number of schemes as the financiers of the growers. Primary Yield Finance financed the growers investments in the schemes by (a) making loans directly to the growers, or (b) receiving an assignment of loans which had been made to growers by other financiers namely EIL, a company called BEP Finance, or Blackburne Pty Ltd.
In December 2004, ABL, a subsidiary of what was then known as Adelaide Bank Limited, now known as Bendigo and Adelaide Bank Limited, entered into a loan sale and servicing deed (LSSD) with EIL and Primary Yield Finance. This provided for a securitisation of the grower loans. Under the LSSD, a large number of loans were sold by Primary Yield Finance to ABL in about 2005. The arrangement also included a charge dated 3 December 2004 granted to Primary Yield Finance to ABL over its property. The total amount outstanding of the loans assigned to ABL is around $33 million and the total amount outstanding of the loans retained by Primary Yield Finance is around $10 million.
Since 2009, ABL and Primary Yield Finance through its receivers and managers, have commenced a large number of proceedings in the Supreme Court of Victoria against the growers to recover the loans. Mr Chait, in his affidavit of 8 March 2011, filed in the BEP Finance Pty Ltd application (which I am hearing at the same time as this application) describes in detail the proceedings. These include what are known as the Lee case proceedings which are being managed by the Honourable Justice Judd, in this court, and in which the growers are being represented by the law firm of Brian Ward & Partners.
I have been taken by counsel for the plaintiffs in that case, Dr Bigos, to the statements of claim and representative defences, in particular the claims and defences made against and by Mr Jones and Mr Batters. In the case of Blackburne Pty Ltd, as indicated previously, its loan book was assigned to EIL, then the relevant loans were assigned to Primary Yield Finance which is formerly Environinvest Finance, and then some were then on sold for cash to ABL, the subsidiary of the Adelaide Bank, the then subsidiary of ABL Limited.
The defendants have denied the validity of the assignments. The defendants have also by counterclaim alleged that the original creditor in this case, Blackburne Pty Ltd, was in breach of certain alleged obligations under the loan agreements, and the alleged breach of them may be pleaded in defence of the claims on the loans or set up as setoffs to damages to be setoff against the amount of the loans.
Speaking generally, the approach of the plaintiffs in those proceedings to date has been to join Blackburne Pty Ltd and other assignor companies as defendants. The plaintiffs in those proceedings have taken the view that to finally resolve all the issues surrounding the alleged loan, so that the respective rights of the parties can be fully determined, it is appropriate that the assignors be plaintiffs to the proceedings, rather than defendants.
This will enable the anticipated defences of the defendants to be met by the plaintiffs making alternate claims to be the rightful creditor, and it will enable the defences raising breaches of obligation to be squarely raised. To that end the plaintiffs ABL and Primary Yield Finance have approached the liquidators of Blackburne Pty Ltd. At the same time, they also approached Mr Downey who is the liquidator of other Environinvest companies, or related companies, which assigned loans (in particular BEP Finance Pty Ltd (in liquidation), Environinvest Ltd, as already mentioned EIL, and Primary Yield Finance), to join in a deed. The plaintiff wishes to keep the terms of the deed confidential.
I have been informed by Mr Bigos that the current plaintiffs feel that they may be put at a disadvantage if the terms of the deed are made known to the defendants. He has undertaken that Mr Chait, the solicitor for the current plaintiffs, will file an affidavit to that effect. I have been taken to the important provisions of the deed. In substance, so far as Blackburne Pty Ltd is concerned, it has agreed to be joined as a plaintiff. There are appropriate provisions for the protection of the liquidator and of Blackburne Pty Ltd against adverse costs orders and expenses they may incur.
There is a provision in the deed which Mr Rathner says might be beneficial to Blackburne Pty Ltd in the event that the proceedings are successful. The parties have asked me to keep that confidential, which I do. I have read what the deed provides, and I agree that it may be beneficial. I also agree that the risks to Blackburne Pty Ltd are minimal and warrant the potential benefits that may favour Blackburne Pty Ltd. I was informed of and accept the material that establishes that this deed offers really the only chance of the creditors of Blackburne Pty Ltd recovering anything.
The orders sought include obtaining court approval for the deed as the deed may effect a compromise of a debt to the company, even though Mr Rathner is of the view that there are no debts owed to the company. Approval should be given under s 477(2A). Also under s 477(2B) approval is required if the liquidator enters into a deed without approval of the committee of inspection. There is no committee in this case. The agreement may end, or the obligation of a party to the agreement may according to the terms of the agreement be discharged by performance more than three months after the agreement is entered into. That requirement is activated by the proposed entry into the deed. Also the liquidators require a direction under s 511 of the Corporations Act 2001 which provides;
The liquidator or any contributory or creditor may apply to the court to determine any question arising in the winding up of a company or to exercise all or any of the powers that the Court might exercise if the company were being wound up by the Court.
The usual way is for the court to express its guidance to the liquidator by indicating to the liquidator that he or she is justified in doing what he or she propose to do.
An order is also sought that any documents created as a result of the deed are confidential and are not available for inspection by creditors under Regulation 5.6.01 and 5.6.02 of the Corporations Regulations 2001. In the circumstances where there is litigation on foot and Blackburne Pty Ltd and the others are being joined as plaintiffs I accept that there may be strategic reasons why, until the litigation is resolved, the arrangements between the plaintiffs be kept confidential.
For those reasons I propose to make the orders sought.
I make identical findings in matter number 1012 of 2011.
0
0
0