Re Timbercorp Securities Limited (In liq) - [2011] VSC 24

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

LIST E
No. 7029 of 2010

IN THE MATTER of TIMBERCORP SECURITIES LIMITED (IN LIQUIDATION)
(ACN 092 311 469)

TIMBERCORP SECURITES LIMITED (IN LIQUIDATION) (ACN 092 311 469) IN ITS CAPACITY AS THE RESPONSIBLE ENTITY OF THE 2004 TIMBERCORP TABLE GRAPE PROJECT (ARSN 108 648 086)
AND THE 2005 TIMBERCORP TABLE GRAPE PROJECT
(ARSN 113 512 236) & ORS

Plaintiffs

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JUDGE:	Davies J
WHERE HELD:	Melbourne
DATE OF HEARING:	2 February 2011
DATE OF JUDGMENT:	7 February 2011
CASE MAY BE CITED AS:	Re Timbercorp Securities Limited (In liq)
MEDIUM NEUTRAL CITATION:	[2011] VSC 24

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CORPORATIONS – Application by liquidators for judicial advice and directions – Managed investment schemes – Responsible entity in liquidation – Sale by receiver of assets used by table grape schemes – Sale to be completed unencumbered by Growers’ rights in relation to those assets – Whether liquidators justified in procuring the extinguishment of Growers’ rights to enable completion of the land and water sales – Net proceeds to be held on trust pending determination of persons entitled to receive the proceeds – S 511 of the Corporations Act 2001 (Cth).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr. O Bigos	Arnold Bloch Leibler
Messrs Kirk and Fung, Receivers and Managers of Align Funds Management limited	Ms. W A Harris SC with Mr. T Clarke	Allens Arthur Robinson
Timbercorp Growers Group	Ms. C Armstrong	Clarendon Lawyers

HER HONOUR:

Timbercorp Securities Limited (in liquidation) (“TSL”) is the responsible entity (“RE”) of the 2004 Timbercorp Table Grape Project and the 2005 Timbercorp Table Grape Project (“the Table Grape Projects”), which the liquidators of TSL are in the course of winding up because TSL is hopelessly insolvent. The liquidators seek directions from the Court pursuant to s 511 of the Corporations Act 2001 (Cth) (“the Act”) in connection with the proposed sale of assets used by investors (“the growers”) in the Table Grape Projects.

The growers hold licenses and associated rights to cultivate grapes on land owned by another company, Align Funds Management Limited (previously Orchard Investments Management Limited) in its capacity as the RE of the Timbercorp Orchard Trust (“TOT RE”). TOT RE is in receivership. The receivers and managers have contracted to sell the land and water rights owned by TOT RE that the growers presently utilize, unencumbered by the growers’ rights in relation to those assets. Thus the growers’ rights in relation to those assets must be extinguished if the sales are to be completed. The liquidators seek directions pursuant to s 511 of the Act that they would be justified in terminating or surrendering the growers’ licences and in extinguishing all of the rights of the growers in respect of the assets which the receivers and manager have contracted to sell.

The role of the Court on this application is not to venture into the commercial arena and to substitute its own commercial judgment for that of…

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: [2011] VSC 24
Decision Date: 7 February 2011

CaseChat Overview and Summary

The case before the court involved Timbercorp Securities Limited, a company in liquidation, and the liquidators who sought judicial advice and directions regarding the sale of assets used in table grape schemes. The dispute centred on whether the liquidators were justified in procuring the extinguishment of Growers' rights in the assets to enable the sale to proceed unencumbered. The matter was heard in the Federal Court of Australia. The central legal issue before the court was whether the liquidators' actions in seeking to extinguish Growers' rights to facilitate the sale of assets were justified under section 511 of the Corporations Act 2001 (Cth). The court needed to determine if the liquidators acted within the scope of their powers and in the best interests of the creditors and members of the company.

The court found that the liquidators' actions were justified, as they were acting in accordance with section 511 of the Corporations Act, which allows liquidators to take action to realise assets for the benefit of creditors and members. The court held that the liquidators were entitled to procure the extinguishment of Growers' rights if it was in the best interests of the company and its creditors. The court emphasised that the net proceeds from the sale of the assets would be held on trust pending the determination of the persons entitled to receive the proceeds, ensuring that the Growers' interests were protected.

The court's decision provided clarity for liquidators in similar situations, affirming that they have the authority to take necessary steps to realise assets for the benefit of creditors and members, including procuring the extinguishment of rights in assets where justified. This decision ensures that liquidators can act decisively to maximise the return on assets for the benefit of those owed by the company in liquidation.

Orders