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Shepard v Downey

Shepard v Downey

Case [2009] VSC 33 12 February 2009

Standing

Winding Up & Liquidation

Statutory Interpretation

Corporate Law & Governance

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

CORPORATIONS LIST

No. 9141 of 2008

CRAIG PETER SHEPARD AND MARK FRANCIS XAVIER MENTHA IN THEIR CAPACITY AS RECEIVERS AND MANAGERS OF ENVIRONINVEST LTD (ACN 080 743 791) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)	First and Second Plaintiff
- and -
ENVIRONINVEST LTD (ACN 080 743 791) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)	Third Plaintiff
v
JAMES PATRICK DOWNEY IN HIS CAPACITY AS LIQUIDATOR OF ENVIRONINVEST LTD (ACN 080 743 791) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)	Defendant

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JUDGE:	JUDD J
WHERE HELD:	Melbourne
DATE OF HEARING:	4, 5, 8, 9, 10, 11, 16 December 2008
DATE OF JUDGMENT:	12 February 2009
CASE MAY BE CITED AS:	Re Environinvest Ltd
MEDIUM NEUTRAL CITATION:	[2009] VSC 33

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CORPORATIONS – Managed Investment Scheme – application for order to wind up a scheme under s.601ND(1)(a) Corporations Act 2001 – standing of receivers to make application – appointment of scheme liquidator in lieu of responsible entity under s.601NF(1) – ownership of scheme property – termination of scheme documents – power to deal with non-scheme property – order made winding up registered schemes

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr. J Santamaria QC Mr. H Austin	Minter Ellison
For the Defendant	Mr. J Evans	Deacons
For ABL Nominees Pty Ltd Primary Yield Finance Pty Ltd (Receivers and Managers Appointed) and Ian Carson & Daniel Bryant as Receivers and Managers of Primary Yield Finance Pty Ltd	Mr. M Sifris SC Mr. O Bigos	Gadens Lawyers
For Growers in Schedule A	Mr. T North SC Mr. Galvin	Brian Ward Partners
For Growers in Schedule B	Mr. T North SC Mr. B Snelling	WPS Law and Leonard Legal
For Australian Securities and Investments Commission	Mr. J Moore	ASIC
For Mr. A Stephenson	Appeared in person

HIS HONOUR:

Introduction

The third plaintiff, Environinvest, is an unlisted public company. Its business included inviting members of the public to participate in investment schemes and the management of those schemes. The schemes with which this proceeding is concerned relate to the establishment and management of eucalypt plantations.

On 19 September 2008 the directors of Environinvest appointed James Patrick Downey administrator of the company and associated entities. On 22 September 2008 the Commonwealth Bank of Australia Ltd appointed the first and second plaintiffs, Craig Peter Shepard and Mark Francis Xavier Mentha, receivers and managers of the assets and undertakings of Environinvest. The appointment of the receivers was made pursuant to a registered charge dated 16 May 2001. By 24 October 2008 Environinvest and twelve associated companies were in liquidation and Mr Downey was appointed liquidator.

The plaintiffs have applied to wind up a number of the schemes managed by Environinvest.[1] The receivers made application, pursuant to s 601ND(1)(a) of the Corporations Act 2001, in the name of Environinvest. They applied for the appointment of an independent scheme liquidator to take responsibility for the winding up in the place of Environinvest pursuant to s 601NF(1) of the…

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

AGLC: Shepard v Downey [2009] VSC 33
Case: [2009] VSC 33
Decision Date: 12 February 2009

CaseChat Overview and Summary

Shepard v Downey involved an application for an order to wind up a managed investment scheme under section 601ND(1)(a) of the Corporations Act 2001. The application was made by the receivers of a company involved in the scheme. The dispute centred on the authority of the receivers to apply for the winding up, the appointment of a liquidator in place of the responsible entity, and the ownership and disposition of scheme property. The case was heard in the Federal Court of Australia.

The court had to determine whether the receivers had standing to apply for the winding up of the scheme, whether the court could appoint a liquidator in lieu of the responsible entity, and what orders could be made in relation to the ownership and disposition of scheme and non-scheme property. The court also had to consider the implications of the termination of the scheme documents and the powers of the court under section 601NF(1) of the Corporations Act.

The court held that the receivers did have standing to apply for the winding up of the scheme, as they were appointed to manage the company's assets, which included the scheme. The court found that it could appoint a liquidator in lieu of the responsible entity, as the scheme was effectively insolvent and the responsible entity was unable to fulfil their duties. The court further held that the scheme property should be vested in the liquidator and that the scheme documents should be terminated. The court also made orders in relation to the disposition of non-scheme property, ensuring that the interests of all stakeholders were protected.

The final orders of the court included the winding up of the registered schemes, the vesting of scheme property in the liquidator, the termination of scheme documents, and the disposition of non-scheme property. The court's decision provided clarity on the powers and responsibilities of receivers, liquidators, and the court in the context of managed investment schemes.

Orders