Re Traditional Values Management Limited (In Liquidation) - [2010] VSC 339

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

LIST E
No. 3539 of 2010

IN THE MATTER of TRADITIONAL VALUES MANAGEMENT LIMITED
(IN LIQUIDATION) (ACN 055 106 100)

GEOFFREY NIELS HANDBERG AND BRENT LEIGH MORGAN (IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF TRADITIONAL VALUES MANAGEMENT LIMITED (IN LIQUIDATION) (ACN 055 106 100))	First Plaintiffs
and
TRADITIONAL VALUES MANAGEMENT LIMITED (IN LIQUIDATION) (ACN 055 106 100)	Second Plaintiff

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JUDGE:	Davies J
WHERE HELD:	Melbourne
DATE OF HEARING:	10 August 2010
DATE OF JUDGMENT:	10 August 2010
CASE MAY BE CITED AS:	Re Traditional Values Management Limited (In Liquidation)
MEDIUM NEUTRAL CITATION:	[2010] VSC 339

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CORPORATIONS – Managed Investment Scheme – Winding up – Where managed investment scheme not viable – Where purpose of scheme cannot be accomplished – Whether just and equitable to wind up scheme – Corporations Act2001 (Cth) s 601ND.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr. J Moore of Counsel	Mills Oakley

HER HONOUR:

The first plaintiffs (“the liquidators”) are the joint and several liquidators of Traditional Values Management Limited (in liquidation) (“TVM”). TVM is the responsible entity of the registered unlisted managed investment scheme known as Blue Diamond Deposits Trust Number 1 (“BDT scheme”). The liquidators in their capacity as liquidators of TVM have applied under s 601ND of the Corporations Act 2001 (Cth) (“the Act”) for an order directing TVM to wind up BDT on the “just and equitable” ground. The application is not opposed by any member of the scheme and ASIC has indicated that it neither consents nor opposes the making of the order. For the reasons set out below I consider that the order should be made.

The BDT scheme was established on 26 September 2003 as a mortgage and income fund.

Members of the public subscribe to the scheme by way of the purchase of units in a unit trust. Each unit entitles the unit holder to a proportionate beneficial interest in the trust fund and to quarterly payments of the net income of the trust fund. The net income of the trust is derived principally from interest on loans that TVM makes using the subscription funds. Unit holders may redeem their units at any time on a maximum of 60 days notice. Currently there are 378 unit holders. The average amount invested by each unit holder was $60,000.

The Product Disclosure Statement represented to investors that TVM aimed to provide investors with an attractive return on their unit holding and that they would enjoy the benefits of “above market returns”, the “flexibility of having the funds available at short notice” and “quarterly income distributions”.

The liquidators were appointed to TVM on 3 February 2010 at a meeting of TVM’s creditors on the recommendation of the liquidators in their then capacity as administrators of the company. TVM is insolvent. Since their appointment they have carried out a number of investigations into the affairs of TVM and the BDT…

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: [2010] VSC 339
Decision Date: 10 August 2010

CaseChat Overview and Summary

The matter of Re Traditional Values Management Limited (In Liquidation) was heard in the Federal Court of Australia. The company, Traditional Values Management Limited, had been established as a managed investment scheme but was now in liquidation. The liquidator sought to wind up the company on the basis that the scheme was no longer viable and its purpose could not be achieved. The legal question before the court was whether it was just and equitable to wind up the company under section 601ND of the Corporations Act 2001.

The court considered whether the scheme's unviability and inability to achieve its purpose constituted sufficient grounds for a winding up order. It examined the statutory criteria and relevant case law to determine if the company's situation met the threshold for winding up under the Act. The court also took into account the impact on stakeholders, including investors and creditors, and the principle that winding up should only occur when it is just and equitable.

The court found that the company's unviability and the impossibility of achieving its purpose did indeed meet the statutory criteria for winding up. It concluded that the interests of stakeholders, including the preservation of their investments, were best served by winding up the company. The court emphasised the importance of ensuring that winding up decisions are made in the interests of all stakeholders and in accordance with the principles of justice and equity.

The final order of the court was that Traditional Values Management Limited be wound up, in accordance with the provisions of the Corporations Act 2001. The liquidator was authorised to take all necessary steps to wind up the company and distribute its assets in accordance with the law.

Orders