Re Gunns Plantations Limited (No 4)
[2013] VSC 595
•9 September 2013
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE | Not Restricted | |
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2012 5485
IN THE MATTER OF GUNNS PLANTATIONS LIMITED (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) (ACN 091 232 209)
| DANIEL MATHEW BRYANT, IAN MENZIES CARSON and CRAIG DAVID CROSBIE (in their capacities as joint and several Liquidators of GUNNS PLANTATIONS LIMITED (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) (ACN 091 232 209)) and others and | First Plaintiffs |
| GUNNS PLANTATIONS LIMITED (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) (ACN 091 232 209) | Second Plaintiffs |
| v | |
| THE TRUST COMPANY (AUSTRALIA) LIMITED (ACN 000 000 993) as Trustee of the Forestry Investment Trust and others | Defendants |
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JUDGE: | FERGUSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9 September 2013 | |
DATE OF ORDERS: | 9 September 2013 | |
DATE OF REASONS: | 31 October 2013 | |
CASE MAY BE CITED AS: | Re Gunns Plantations Limited (No 4) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 595 | |
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CORPORATIONS — Forestry managed investment scheme — Application by liquidators for directions in relation to costs, expenses and remuneration — Directions also sought in relation to proceeds of settlement with receivers in relation to funds derived from bank guarantees — Corporations Act 2001 (Cth) s 511 — Supreme Court (General Civil Procedure Rules) 2005 (Vic), r 54.02.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Dr O Bigos | Arnold Bloch Liebler |
| For Great Southern Plantation Holdings Pty Ltd (in liquidation) | K & L Gates |
HER HONOUR:
Introduction
The First Plaintiffs (‘Plaintiffs’) are the liquidators of the Gunns group of companies. They became liquidators on 5 March 2013 following the transition of the companies from voluntary administration to liquidation. The Plaintiffs control Gunns Plantations Limited (‘GPL’) in its capacity as responsible entity of a number of Gunns’ managed investment schemes. GPL is otherwise controlled by receivers and managers. The Plaintiffs applied for directions in relation to costs, expenses and remuneration, which they incurred in relation to the schemes during the time that they were voluntary administrators of GPL. They also sought directions in relation to funds which they received as a result of a settlement entered into with the receivers. Those funds emanated from bank guarantees which were called upon following the collapse of the Gunns Group. At the conclusion of the hearing, I gave the directions sought by the Plaintiffs and said that I would publish my reasons at a later date. These are those reasons.
The Plaintiffs relied on two sources of power for the making of the directions which they sought. First, they relied on s 511 of the Corporations Act 2001 (Cth). Secondly, they relied on r 54.02 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) which confers on the Court power to give directions to trustees.
The reasons why insolvency practitioners seek directions and the circumstances in which such directions will be made were summarised by Goldberg J in Re Ansett Australia Limited (No 3)[1] as follows:
When liquidators and administrators seek directions from the Court in relation to any decision they have made, or propose to make, or in relation to any conduct they have undertaken, or propose to undertake, they are not seeking to determine rights and liabilities arising out of particular transactions, but are rather seeking protection against claims that they have acted unreasonably or inappropriately or in breach of their duty in making the decision or undertaking the conduct. …
There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, the decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised.[2]
[1](2002) 115 FCR 409.
[2]Ibid [44], [65].
The matters that were raised on the Plaintiffs’ application are of the type that Goldberg J described and it is appropriate to give directions to the Plaintiffs.
GPL is the responsible entity of 21 registered managed investment schemes. Eighteen of the schemes are forestry schemes, nine of which were formerly operated by Great Southern Managers Australia Limited (‘Great Southern’). The remaining three schemes are wine grape schemes. The members of the schemes are described as growers, and there are approximately 35,000 growers who hold approximately 49,000 investments in the schemes in excess of $1.6 billion. The plantations which are the subject of the forestry schemes are spread across multiple states. The forestry schemes are large scale and complex commercial operations.
On 19 December 2012, Robson J made orders in the proceeding prospectively endorsing the Plaintiffs’ performance of functions as administrators in caring for, protecting, preserving and where necessary realising the scheme property of the schemes, on the basis that, if their expenditure and remuneration are reasonable, they will be entitled to an indemnity and lien.[3] Essentially the Plaintiffs seek an extension of his Honour’s orders to cover the period of liquidation which has followed from the voluntary administration. The basis for the directions that his Honour made was the principle in Re Universal Distributing Company Limited (In Liquidation)[4] (‘Universal Distributing’) and/or the salvage principle. The directions that his Honour made were similar to those that had previously been given by this Court to the receivers and managers of Great Southern.[5] After their functions were performed, the receivers and managers of Great Southern applied for a declaration about their entitlement to the indemnity and lien, and sought to satisfy the Court that their expenditure and remuneration were reasonable.[6] The Plaintiffs seek to follow a similar course for the period of administration, and propose following a similar course for the period of liquidation.
[3]Re Gunns Plantations Limited (No 1) [2012] VSC 655.
[4](1933) 48 CLR 171.
[5]Re Great Southern Managers (Australia) Limited (No 1) (2009) 77 ACSR 9.
[6]Thackray v Gunns Plantations Limited (2011) 85 ACSR 144 and Thackray v Gunns Plantations Limited (No 2) [2011] VSC 417.
The Plaintiffs’ costs, expenses and remuneration
The principle that liquidators are entitled to be paid their costs, charges and expenses incidental to the realisation of assets out of the fund produced by that realisation in priority to others interested in the fund was set out in Re Universal Distributing).[7] In that decision, Dixon J (as his Honour then was) stated:
If a creditor whose debt is secured over the assets of the company come in and have his rights decided in the winding up, he is entitled to be paid principal and interest out of the fund produced by the assets encumbered by his debt after the deduction of the costs, charges and expenses incidental to the realization of such assets (In re Marine Mansions Co.). The security is paramount to the general costs and expenses of the liquidation, but the expenses attendant upon the realization of the fund affected by the security must be borne by it (In re Oriental Hotels Co.; Perry v. Oriental Hotels Co.). The debenture-holders are creditors who have a specific right to the property for the purpose of paying their debts. But if it is realized in the winding up, a proceeding to which they are thus parties, the proceeds must bear the cost of the realization just as if they had begun a suit for its realization or had themselves realized it without suit (cf. In re Regent's Canal Ironworks Co.; Ex parte Grissell; and see Batten v. Wedgwood Coal and Iron Co.).
In applying this principle, only those expenses appear to have been thrown against the fund belonging to the debenture-holders which have been reasonably incurred in the care, preservation and realization of the property. In the present case the liquidator has employed a material part of his time and energies in recovering moneys, both uncalled capital and debts, which enure for the debenture-holder, and in so far as these services increase the remuneration which he receives, I see no reason why the burden should not be thrown upon the proceeds. The question is not whether moneys available for unsecured creditors should be relieved at the expense of the security. In such a case it may be said that the service of collecting enough to discharge the debenture must in any event be performed in order that a surplus may then arise in which the unsecured creditors may participate. The question in the present case is whether the liquidator can charge against the fund passing through his hands as between himself and the person to whom it is payable, so much of the remuneration fixed for work done in the winding up as is referable to the calling in and conversion of the assets producing the fund. I see no reason why remuneration for work done for the exclusive purpose of raising the fund should not be charged upon it.[8]
[7](1933) 48 CLR 171.
[8]Ibid 174–175 (citations omitted).
Since that decision, a number of authorities have considered the principle. In Re S & D International Pty Ltd (in liq) (rec & mgr apptd),[9] Robson J summarised the principles to be gleaned from the authorities as follows:
a.At equity, an equitable lien arises in favour of a liquidator over the funds realised from the sale of company property for the costs he incurs for the care, preservation and realisation of the property in priority to those otherwise interested in the fund....
b.The costs include those that the liquidator fairly incurs in the discharge of his duty to care, preserve and realise the property....
c.The lien may arise whether or not the ultimate sale is [effected] by the liquidator and entitles the liquidator to be paid in priority out of the fund whether or not he is in possession of the fund....
d.The costs and expenses secured by the lien must be incurred exclusively for the care, preservation or realisation of the property and not otherwise expended in the general administration of the mortgagor....
e.The costs and expenses include the liquidator’s reasonable remuneration.[10]
[9][2009] VSC 225.
[10]Ibid [273] (citations omitted).
As I have noted, the liquidators in this case are taking a similar course to that taken by the receivers and managers of Great Southern. In the Great Southern case, Davies J considered an application by the receivers to establish their entitlement to be indemnified out of the scheme property of ten managed investment schemes. Having considered the authorities, her Honour stated:
It is clear on the authorities that the equitable lien will extend only to the receivers’ costs, expenses and remuneration incurred “exclusively” in the care, preservation and realization of the property and assets of the ten [managed investment schemes] in question. Furthermore, that those costs, expenses and that remuneration must be referrable to the particular scheme against which the claim is made. The lien will not extend to the general receivership costs or costs, expenses and remuneration referable to the care, preservation and realization of the property and assets of any other scheme or schemes.[11]
Her Honour determined that the receivers must satisfy the Court that there was a sufficient nexus between the expenditure and remuneration in the schemes[12] and that the amount claimed was on its face reasonable.[13]
[11]Thackray v Gunns Plantations Limited (2011) 85 ACSR 144 [42].
[12]Ibid [48].
[13]Ibid [60]–[64].
The administration in the present case was complex. The period of administration lasted about five and a half months. There were, as I have already noted, 21 schemes in respect of which GPL acted as the responsible entity, and it was just one company in a group of 36 in the Gunns group. In summary, throughout the administration period, the Plaintiffs (as administrators):
· obtained court orders extending the time within which to call the first creditors meeting;
· obtained court orders extending the rent‑free period provided for under the Corporations Act;[14]
[14]Section 443B(3).
· considered restructure proposals from four parties in respect of the forestry schemes;
· spent considerable time and resources in exploring a restructure, including negotiations with Macquarie Bank and WA Blue Gum;
· entered into service agreements for the maintenance and protection of the plantations in relation to the forestry schemes;
· obtained further court ordered extensions of the rent‑free period — the application was opposed and a contested hearing took place over several days;
· obtained a further extension of the convening period for the holding of the second creditors meeting. This application was also opposed.
Of the 18 forestry schemes, 11 are described by the Plaintiffs as ‘schemes of interest’ because it is those schemes where expressions of interest were submitted for restructure. Most of the work undertaken by the Plaintiffs during the voluntary administration after 21 November 2012 related to attempts to restructure those schemes.
The total scheme‑related costs for which the Plaintiffs claim a lien for the period of the administration is $6.02 million plus GST. As might be expected, the supporting documentation (for example, receipts and timesheets et cetera) are voluminous. In those circumstances, the Plaintiffs made application under s 50 of the Evidence Act 2008 (Vic) for directions that they may adduce the evidence in respect of the expenditure and remuneration in the form of summary spreadsheets. Such orders may be made where it would not otherwise be possible conveniently to examine the evidence because of the volume or complexity of the documents and where a reasonable opportunity has been given to any other party to the litigation to examine or copy the documents in question.
Although the Plaintiffs and Gunns companies are the only parties to this proceeding, the Plaintiffs nevertheless served the application and supporting material on:
(a)ASIC;[15]
(b)the receivers;
(c)the committee of growers;
(d)the committee of inspection; and
(e)the liquidators of Great Southern Plantations Holdings Pty Ltd (in liquidation) (which is a member of six of the schemes).
In addition, the Plaintiffs gave them a copy of the summary upon which they wish to rely and gave them a reasonable opportunity to inspect the documents.
[15]Australian Securities and Investments Commission.
In my opinion, the requirements of s 50 of the Evidence Act have been satisfied and it was appropriate for orders to be made that the summary spreadsheets be adduced in evidence in respect of the expenditure and remuneration. Indeed, I am persuaded that it is the only practical way to deal with such evidence and it greatly aided the efficient conduct and disposition of the Plaintiffs’ application in respect of their remuneration and costs.
The expenses and remuneration incurred by the Plaintiffs (when they were administrators) in relation to the schemes fall into five broad categories:
(a)court applications (extensions of the period of the first creditors’ meeting and the convening period, extensions of the rent‑free period, and defending applications for possession — in part, these applications preserved the potential for a restructure of the schemes);
(b)maintenance of the plantations used in the schemes (entering into agreements related to fire management services, fire maintenance and suppression services, regulatory compliance services and additional general forestry maintenance and management services);
(c)conducting the expressions of interest campaign and dealing with interested parties in relation to a proposed restructure;
(d)communicating with the grower committee; and
(e)general infrastructure for dealing with the schemes (offices, employees et cetera).
Those categories are of a type that fall within the Universal Distributing principle. They all relate to the care, preservation and realization of the relevant assets and relate to the schemes. The Plaintiffs contended that, in addition, the expenditure and remuneration are reasonable.
The Plaintiffs have proposed multiple methods for allocation of the administration period scheme related costs as follows:
Method 1: if the costs can be identified with a particular forestry scheme, then they will be allocated to that scheme otherwise among all forestry schemes pro-rata on a per hectare basis. It is proposed that this method be applied in respect of the costs associated with entering into service agreements and with general maintenance of the plantations. The Plaintiffs also propose to allocate some of the legal costs that they have incurred by this method.
Method 2: allocation among all forestry schemes pro rata on a per hectare basis. It is proposed that this method be applied in respect of the costs associated with maintenance of the grower registers, staff wages and information technology. The Plaintiffs also propose to allocate most of the legal costs that they have incurred by this method. In addition, the Plaintiffs propose to allocate most of their remuneration, out‑of‑pocket expenses (for example advertising and travel) and overheads (for example, photocopying, printing and postage) by this method. Their remuneration to be allocated by this method relates to landlord tasks, grower tasks, management scheme tasks, legal liaison, scheme investigations and class action tasks, scheme administrative tasks.
Method 3(a): allocation of costs and remuneration associated with the expressions of interest campaign among all forestry schemes pro rata on a per hectare basis for the period before 21 November 2012 (that being the date from which the parties partaking in the expression of interest campaign were only interested in the schemes of interest).
Method 3(b): allocation of costs, expenses and remuneration associated with the expressions of interest campaign among the 11 schemes of interest pro rata on a per hectare basis for the period after 21 November 2012.
On the face of it, the evidence establishes that:
(a)the expenses incurred or work performed for which remuneration is claimed during the period of the administration related only to the care, preservation or realisation of the assets of the schemes or the administration of those schemes;
(b)the work was necessary and the Plaintiffs were acting reasonably in incurring the expenses and in performing the work;
(c)sufficient explanation has been provided to the Court to enable the Court to assess that the amount claimed is reasonable;
(d)the Plaintiffs exercised commercial judgment in relation to the work that was done and the cost attaching to that work;
(e)the amounts claimed were proportionate to the value of the services provided by the Plaintiffs, given the size, importance and complexity of the tasks performed; and
(f)the principles by which the Plaintiffs have allocated the expenses and remuneration amongst the schemes are fair and reasonable.
Going forward, the Plaintiffs are also justified in carrying out their duties as liquidators of GPL on the basis that, if they incur reasonable expenditure in the care, protection, preservation and/or realisation of scheme property, they will be entitled to both an indemnity for that expenditure and reasonable remuneration out of the scheme property and a lien to secure that indemnity.
Treatment of proceeds of settlement relating to bank guarantee amounts
GPL held six ANZ bank guarantees in its favour at the time that it was placed into administration and receivership. At a time when they were the administrators, the Plaintiffs sought to call on the guarantees. There was a dispute between the receivers and the Plaintiffs as to whether the proceeds of the guarantees were captured as part of the security over which the receivers were appointed. That dispute was resolved and orders were made that the Plaintiffs were justified in entering into the deed of compromise which encapsulated the settlement.[16] As a result of the settlement, the Plaintiffs received a total of $2.5 million comprising $500,000 in respect of one guarantee (‘the RE Guarantee’), and $2 million in respect of the five other guarantees (‘Maintenance Reserve Guarantees’). The Plaintiffs seek a direction that they are justified in proceeding on the basis that the funds which they received in respect of the RE Guarantee belong to GPL in its personal capacity. They also seek a direction that they are justified in proceeding on the basis that the funds received in respect of the Maintenance Reserve Guarantees which relates to a scheme:
(a)will be used to pay for maintenance costs incurred in relation to that scheme until the time of any sale of the relevant scheme assets;
(b)will not be applied to pay for maintenance costs incurred in relation to any other scheme;
(c)to the extent that the funds exceed the maintenance costs incurred in relation to that scheme until the time of any sale of the relevant scheme assets, that excess will be applied to GPL in its personal capacity.
[16]Re Gunns Plantations Limited (No 1) [2012] VSC 655 [153]–[167].
As I have noted above, Great Southern Plantation Holdings Pty Ltd (in liquidation) (‘GSPH’), is a member of some of the Great Southern Plantation schemes. GSPH filed written submissions in opposition to this part of the Plaintiffs’ application. GSPH did not appear on the hearing of the application.
RE Guarantee
The responsible entity of a registered scheme must hold an Australian financial services licence (‘AFSL’) authorising it to operate a managed investment scheme.[17] One of the stipulations in GPL’s AFSL is that it must be able to pay all its debts as and when they become due and payable. Following an enquiry from ASIC, GPL responded by letter on 26 March 2010 and stated:
[17]Corporations Act s 601FA.
To support future operational costs a bank guarantee in favour of GPL to a value of $4m is held as a reserve fund. The bank guarantee is available to be drawn down by GPL (in its personal capacity) at any time to support its cash requirements as responsible entity.
This was the genesis of the RE Guarantee.
In a letter to ASIC dated 9 July 2010 GPL said:
As a key part of GPL's strategy to avoid a situation where GPL is unable to meet its obligations, is the maintenance of the $4 million bank guarantee. The guarantee is designed to fund GPL and its obligations in a transitional period to enable GPL to find replacement service providers if [Gunns Ltd] was unable to provide the services or to find a replacement responsible entity.
In a letter to ASIC dated 28 March 2012 GPL said:
We note that the $4 mil bank guarantee referred to in our previous response dated 9 July 2010 (a copy of which is on your files) is provided by [Gunns Ltd] as part of the financial support to GPL. We note that an original of the guarantee documentation was not identified following a recent review and the original is in the process of being replaced in consultation with [Gunns Ltd]. The terms and conditions of the guarantee have not been altered, apart from the deletion of a reference to 'maintenance reserve' in the section entitled 'Favouree'. This requested change is to remove any implication of a restriction of use of the guarantee for maintenance purposes.
Subsequently GPL sent a copy of the replacement $4 million bank guarantee to ASIC. That is the RE Guarantee.
In its written submissions, GSPH submitted that the settlement proceeds that related to the compromise in respect of the RE Guarantee constitute scheme property because the settlement proceeds became:
(a)contributions of money or money’s worth;[18] and/or
(b)money raised by GPL for the purposes of the schemes.[19]
[18]See paragraph (a) of the definition of ‘scheme property’ Corporations Act, s 9.
[19]See paragraph (c) of the definition of ‘scheme property’ Corporations Act, s 9.
GSPH submitted that, in any event, the Court should not give a direction of the kind sought by the liquidators unless satisfied that there is sufficiently clear evidence before the Court that the proceeds of the RE Guarantee were not contributed to the schemes or raised for the schemes.
In Re Gunns Finance Ltd (in liq)(res & mgrs apptd) and Re Gunns Plantations Limited (in liq)(res & mgrs apptd) (No 2),[20] Robson J considered whether the head leases that GPL entered into were scheme property. His Honour said:
[t]he definition of scheme property includes “contributions of money or money’s worth to the scheme.” The note to paragraph (a) of the definition states that if what a member contributes to a scheme is rights over property, the rights in the property that the member retains do not form part of the scheme property. It is implicit, therefore, that “money’s worth” may include rights over property. In my view, under the Gunns schemes, GPL contributes rights over leasehold land to the scheme.…
As explained, this contribution is an essential element of the scheme and without it the scheme would not exist. The contribution of the forest rights that GPL has obtained from the head lessors, which are then made available to the growers, lies at the heart of the scheme. The compensation to GPL for the contribution was to be a share of the wood sale proceeds. This is the very nature of a scheme, where participants contribute money or money’s worth and share the proceeds.
Although the responsible entity may not be characterised as a member of a managed investment scheme for all purposes under the Act unless it takes an interest as a grower, GPL was a participant in the scheme and was to share in its proceeds.[21]
[20][2013] VSC 365.
[21]Ibid [135]–[137].
Robson J found that GPL held an interest in the scheme (being entitled to share the proceeds of the trees to the extent of 12 per cent), was a member of the scheme and that the head leases were scheme property.[22]
[22]Ibid [145]–[148].
In my opinion, the proceeds of the RE Guarantee are quite different to the head leases that Robson J was considering. The RE Guarantee made no reference to the schemes, nor was it a requirement under any of the scheme constitutions or other scheme documents for GPL to obtain the RE guarantee. The RE Guarantee was not an essential element of the schemes. Rather, it was a mechanism by which GPL could satisfy the regulatory requirement placed upon it by its AFSL to remain solvent. That of itself cannot be categorised as a contribution to the schemes. Nor is it money raised by GPL for the schemes. Accordingly, the RE Guarantee (and the settlement proceeds in respect of it) do not fall within the definition of ‘scheme property’ in s 9 of the Corporations Act. In those circumstances, the Plaintiffs are justified in proceeding on the basis that the funds which they received in respect of the RE Guarantee belong to GPL in its personal capacity rather than in its capacity as responsible entity.
Five maintenance reserve guarantees
The Maintenance Reserve Guarantees in favour of GPL were obtained specifically for the purpose of maintenance of the 1999 to 2003 Great Southern schemes (‘Great Southern Schemes’). Under the terms of the constitutions for the Great Southern Schemes, the responsible entity was required to pay the plantation expenses. To ensure that this would occur, an independent forester determined amounts which the responsible entity was to pay into a Maintenance Reserve Fund using its own funds to do so. The constitutions required that the Maintenance Reserve Fund be held by the responsible entity as a separate and distinct fund which was only to be used in accordance with the relevant constitution. The constitutions specifically provided that the Maintenance Reserve Fund did not constitute scheme property.
In early 2010, GPL became the responsible entity of the Great Southern Schemes. As a result of amendments made to the constitutions, GPL was required to establish a replacement Maintenance Reserve Fund. Alternatively, GPL was permitted to secure an amount equal to the amount in the Maintenance Reserve Fund. The Maintenance Reserve Fund was to be used for the payment of the costs and expenses for the care and maintenance of the forest produce. After harvest of all the forest produce, the responsible entity was entitled to receive any balance left in the Maintenance Reserve Fund.
In order to comply with the requirements in the constitutions, GPL arranged the five Maintenance Reserve Guarantees — one for each of the Great Southern Schemes.
In Re Great Southern Managers Australia Limited,[23] McKerracher J had to consider whether money in a trust maintenance fund belonged to the original responsible entity or whether the responsible entity who replaced it was entitled to those funds. The schemes were originally prescribed interest schemes which transitioned to managed investment schemes in 2000. The amendments made to the constitution at that time provided that on the retirement or removal of the RE, it was entitled to receive the balance of the trust maintenance funds, and the new responsible entity was required to pay into a new trust maintenance fund an appropriate amount as determined by an independent professional forester. His Honour held that the funds had never been held on trust for the investors or the growers. His Honour noted that the effect of the amendments made to the constitution of the schemes as part of the transition to a managed investment scheme under the Corporations Act led to the replacement of the trustee and manager with an RE to perform all of their functions. His Honour said:
The money which had been held by the Trustee for the benefit of the Manager would now be held by the RE for the benefit of itself. There was no trust because there cannot be a merger of the two interests of trustee and beneficiary. The effect of the statutory amendment, in any event, was that the RE held the money for itself. That is reflected by clause 38 of the Constitution where reference to the money being held on trust for the Manager has been replaced by terms which provide that the monies are to be held by the RE but only to be dispersed in accordance with the provisions set out in subclauses. There is no suggestion in the documentation that the funds were held on trust for anybody.[24]
[23](2010) 190 FCR 501.
[24]Ibid [84].
His Honour concluded that the new RE was not entitled to the funds and that instead, they should be used by the liquidators of the outgoing RE and applied in accordance with his statutory obligations.[25]
[25]Ibid [85].
Here, GSPH contends that the settlement funds received by GPL attributable to the Maintenance Reserve Guarantees are scheme property and that the Court, in any event, should not make any orders unless it is positively satisfied that the proceeds were not contributed to the schemes or raised for the schemes.
GSPH also submitted that in relation to the schemes in which it was a member, the original clauses of those scheme constitutions concerning Maintenance Reserve Funds ceased to apply when GPL became the responsible entity of each scheme. Whilst that is true, as I have said above, the amendments to the constitutions required GPL to set up a replacement fund or provide security for the same amount as had been held in the original fund with any balance left after payment of the maintenance costs and expenses to be returned to the responsible entity. It seems to me that it makes no difference that the old provisions no longer applied.
I do not accept that the settlement proceeds in relation to the Maintenance Reserve Guarantees are scheme property. They are not a contribution to the relevant schemes. Rather, the Maintenance Reserve Guarantees were there for the purpose of ensuring that maintenance expenses were paid by the responsible entity from its own funds. It is for this purpose that the Plaintiffs intend to use the settlement funds. As was always intended, once that purpose has been fulfilled, any balance (which the Plaintiffs expect will be no more than $800,000) is intended to go back to GPL. The Plaintiffs are justified in proceeding on the basis that they propose in regarding the settlement proceeds in relation to the Maintenance Reserved Guarantees.[26]
[26]See [20] above.
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