Re Orchard Aginvest Ltd - [2008] QSC 2

SUPREME COURT OF QUEENSLAND

[2008] QSC 002

CIVIL JURISDICTION

FRYBERG J

No 11325 of 2007

IN THE MATTER OF SECTION 601ND OF THE CORPORATIONS ACT
ORCHARD AGINVEST LIMITED (ACN 085 398 189) AS RESPONSIBLE ENTITY FOR THE PRIMARY AGRIBUSINESS FUND (ARSN 112 930 800)	Applicant

BRISBANE

..DATE 09/01/2008

ORDER

HIS HONOUR: The applicant, Orchard Aginvest Limited, is the responsible entity, as that term is defined in the Corporations Act, in respect of the Primary Agribusiness Fund. That fund is a registered managed investment scheme within the meaning of that Act.

It was established in 2004 and the applicant was, in fact, the promoter of it. An associated company of the applicant is the responsible entity in respect of another scheme called the Primary Infrastructure Fund which is another fund which the applicant also promoted. The Primary Agribusiness Fund raised money from the public in the later part of 2005 for the purpose of agricultural activities on land owned by it or leased by it from other persons. It was, no doubt, anticipated that it would be profitable. That has not turned out to be the case.

For reasons which need not now be investigated in detail the amount of income earned by the 10 farms which the fund operates has not been sufficient to meet outgoings. There is presently insufficient income to enable the fund to pay rent in respect of the five farms which are being leased. The liabilities of the fund exceed its assets by a small margin.

...

HIS HONOUR: The applicant contends that the fund is presently insolvent and the uncontradicted evidence before me supports that contention. The fund is also committed to a management agreement in respect of a number of farms with a firm which, it seems, is an onerous agreement and which continues to prevent profitable operations.

The applicant has chosen not to proceed to wind up the fund under section 601NC of the Act. It is a matter of some doubt whether that section would be available in circumstances of insolvency given the wording of sub-section (1) of that section. Moreover, the applicant submits that the expense of proceeding under that section would be greater than proceeding under section 601ND. It submits that the Court may make an order under the latter section in the present case because, in the circumstances, it is just and equitable that such an order be made.

There is no direct authority cited to me to establish that a mere insolvency makes the winding up one which would be just and equitable but in the absence of any submission to the contrary I am prepared to proceed on the basis that the terms of the section are satisfied by that condition of insolvency.

The application has been before the Court on two previous occasions. On the first, the Court directed that notice of the application be given to all members of the scheme and all known creditors and potential creditors. That has been done. After it was…

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.

Continue reading Re Orchard Aginvest Ltd

Details

AGLC: Re Orchard Aginvest Ltd [2008] QSC 2
Case: [2008] QSC 2
Decision Date: 9 January 2008

CaseChat Overview and Summary

Orchard Aginvest Limited applied to the Supreme Court of Queensland for an order that it be the liquidator of the Primary Agribusiness Fund, which it had promoted. The fund had raised money from the public and had purchased land for agricultural activities. However, it had failed to generate sufficient income to meet its outgoings, including rent to another fund, the Primary Infrastructure Fund, which Orchard Aginvest also promoted. The fund was insolvent and unable to meet its liabilities.

The court had to decide whether the fund should be wound up and, if so, whether it should appoint Orchard Aginvest as the liquidator, with or without an independent supervisor. The court held that the fund was insolvent and that it was just and equitable to wind it up. However, the court was concerned that Orchard Aginvest might not properly carry out its duties due to a potential conflict of interest with the Primary Infrastructure Fund. The court noted that the bank which held security over the fund's assets was resistant to having an independent person supervise the winding up, which raised suspicions that the bank and Orchard Aginvest might have a secret agreement that would not be acceptable to an independent supervisor. The court also rejected Orchard Aginvest's arguments against the appointment of an independent supervisor, such as the cost, the default under the bank's security documents, and its better position to conduct the winding up.

The court concluded that it could not make an order to deal with the potential conflict of interest, as it would not be necessary or essential for the winding up. The court also held that it was not open to it to make an order under section 601NF(1) of its own volition, and that it could only do so if it thought it was necessary for the winding up. The court therefore decided to make an order for the winding up without any supervision or reporting condition, despite its view that it was undesirable that Orchard Aginvest carry out the winding up unsupervised.

The final order was that Orchard Aginvest Limited be appointed as the liquidator of the Primary Agribusiness Fund.

Orders