Vero Insurance Ltd v The Gombac Group Pty Ltd
[2007] VSC 17
•16 February 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 2000 of 2007
F6060
| PCM NOMINEES (NO.2) PTY LTD | Plaintiff |
| v | |
| BRIGHTON BAY DEVELOPMENTS PTY LTD & OTHERS | Defendants |
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JUDGE: | HOLLINGWORTH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9 February 2007 | |
DATE OF RULING: | 16 February 2007 | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 17 | |
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Practice and procedure – Cross-vesting – Application by defendant to transfer proceeding to the Federal Court of Australia – Five related proceedings pending in that Court – One of those proceedings itself a cross-vested proceeding – Whether more appropriate or otherwise in the interests of justice that the proceeding be heard and determined by that Court – Transfer ordered – Jurisdiction of Courts (Cross-Vesting) Act (1987) (Cth) s5(1)(b), (6).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N Mukhtar QC and Mr PD Nicholas | Clayton Utz |
| For the First Defendant | Mr MN Connock S.C. | Minter Ellison |
| No appearance for the Second and Third Defendants | ||
| For ASIC | Mr W Day (solicitor) |
HER HONOUR:
The first defendant (“Brighton Bay”) is a member of the Primelife group of companies, which owns and manages retirement villages. In June 1999, Brighton Bay agreed to sell a retirement village at Brighton to the plaintiff (“PCM”), the second defendant (“People First”), the third defendant (“Podesta”) and Ambridge Productions No 2 Pty Ltd (“Ambridge”), for the sum of $40 million. A deposit of $10 million was duly paid under the sale contract (as subsequently amended), but settlement has not occurred. Although PCM, People First and Podesta each delivered an executed transfer of land of the Brighton property, Ambridge was deregistered by the Australian Securities and Investments Commission (“ASIC”) on 2 July 2006, before it had delivered a transfer. This is the latest in a series of proceedings in this court and the Federal Court relating in some way to the sale.
By summons dated 7 February 2007, Brighton Bay seeks to have this proceeding transferred to the Federal Court, pursuant to s5(1)(b) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) (“the Act”), on the grounds:
(a) That it is related to 5 proceedings pending in the Federal Court and it is more appropriate that this proceeding be determined by that court (s5(1)(b)(i)); and/or
(b) That it is otherwise in the interests of justice that it be determined by that court (s5(1)(b)(iii)).
In the course of oral submissions, Brighton Bay also relied upon s5(6), which provides for the transfer of a proceeding which arises out of or is related to another proceeding, which has itself been transferred to the Federal Court under cross-vesting legislation.
PCM opposes the application. A letter from People First’s solicitors, dated 7 February 2007, says that their client will not take an active part in this proceeding and neither consents to nor opposes the cross-vesting application. Podesta has entered an appearance but did not appear at the hearing of this application.
Relevant litigation
The ASIC proceedings
ASIC has commenced four proceedings in the Federal Court (V1174, V1176, V1177 and V1182 of 2004) seeking orders under ss601EE and 1324 of the Corporations Act 2001 (Cth) for the winding up of an alleged unregistered managed investment scheme relating to the Brighton property. ASIC alleges, among other things, that various defendants, including Primelife, Brighton Bay, Podesta, PCM and People First, operated the managed investment scheme and the sale contract was entered into as an integral part of the scheme.
Amongst the extensive relief sought in the ASIC proceedings is the appointment of investigating accountants to the scheme, and orders restraining the defendants to the ASIC proceedings from doing any acts in furtherance of the scheme, or from receiving or disposing of any funds in connection with the scheme.
Various defendants in the Primelife group of companies, including Brighton Bay, have entered into terms of settlement with ASIC, in which they consent to the making of certain orders, including an order that the scheme was and is a managed investment scheme which was required to be registered but was not. The consent orders have not been made yet, because PCM, People First, Podesta and other defendants are still contesting ASIC’s claims.
The ASIC proceedings are pending in the Federal Court. There is no evidence before me as to when they might be heard and determined.
The First PCM proceeding
In January 2006, PCM issued proceeding No. 2000 of 2006 in the Commercial List of this court, seeking declaratory relief as to its position under the sale contract. By May 2006, the other purchasers under the sale contract, namely, People First, Podesta and Ambridge, had joined Brighton Bay as defendants in that proceeding. Only PCM and Brighton Bay took an active role in the proceeding.
The arguments considered by his Honour involved narrow points of construction. On 27 September 2006, Whelan J decided that on a proper construction of the sale contract, Brighton Bay could not be required to settle in the absence of executed transfers from all of the companies comprising “the Purchaser” and payment of the entire residue. The only relief ordered by his Honour were declarations to the effect that PCM was not in default and had performed its obligations under the sale contract by delivering a transfer in registrable form in relation to its share in the property.
The People First Proceeding
In February 2006, People First commenced proceeding No. 2005 of 2006 in this court, against the other parties to the sale contract. As well as raising the same question as to Brighton Bay’s obligation to settle as was raised in the first PCM proceeding, the following issues were raised:
(a) Whether the sale contract is a voidable “terms contract” under the Sale of Land Act 1962 (Vic);
(b) Whether Brighton Bay is required at settlement to deliver the land vacant of commercial tenants; and
(c) Whether People First is entitled to an order pursuant to s48 of the Trustee Act 1958 (Vic) that a new trustee be appointed to the Ambridge Trust in lieu of Ambridge, so as to enable the sale contract to be completed.
Whelan J managed the interlocutory steps in the First PCM and the People First proceedings together. A trial date for both proceedings was set for 5 September 2006, but the trial date in the People First proceeding was vacated about 6 weeks before trial, by consent and at People First’s request.
At the time of publishing his reasons for decision in the First PCM proceeding, Whelan J raised the possibility of transferring the People First proceeding to the Federal Court, to be dealt with in the context of the ASIC proceedings. At the directions hearing in the People First proceeding, held two days later, each of PCM, People First, Brighton Bay and Podesta consented to an order transferring the People First proceeding to the Federal Court.
This proceeding
PCM alleges that the deregistration of Ambridge makes impossible the execution of a transfer or transfers by all four purchasers. It seeks the repayment of approximately $4.7 million, being its share of the deposit, on a number of bases: on a “just and equitable” basis under s49(2) of the Property Law Act 1958, under s3(2) of the Frustrated Contracts Act 1959, or as moneys had and received upon a total failure of consideration.
Reasons for ordering transfer
As discussed above, all of the parties to this proceeding are parties to the People First proceeding and parties to one or more of the four ASIC proceedings. All of the Federal Court proceedings relate in some way to the Brighton property, the sale contract and the parties’ rights and obligations in relation thereto. This proceeding is related particularly closely to the People First proceeding, both of which raise questions as to the construction and enforceability of the same sale contract as between the vendor and purchasers. I conclude, and PCM does not dispute, that this proceeding is “related to” the Federal Court proceedings, within the meaning of s5(1)(b)(i) and (6) of the Act.
Of particular concern to me in considering issues of “appropriateness” and “interests of justice” is the fact that the claims raised in the People First proceeding and this proceeding could well lead to inconsistent findings of fact and inconsistent relief. A few examples will suffice. In the People First proceeding, one of the purchasers, People First, pleads that a new trustee can and should be appointed to the Ambridge Trust in place of the deregistered Ambridge, thereby enabling the sale contract to be completed. But in this proceeding, another purchaser, PCM, claims that the deregistration of Ambridge had the legal consequence of frustrating the sale contract, thereby entitling it to the refund of its deposit. In the alternative, People First alleges that the sale contract is a voidable terms contract, whereas PCM alleges that the sale contract is completely incapable of performance. It is desirable that such opposing contentions, made by purchasers under the single sale contract, be heard and determined by the same court, to avoid inconsistency in findings or relief.
In this proceeding, PCM seeks the return of the deposit on “just and equitable” or restitutionary grounds. The vendor, Brighton Bay, says that it may plead as a defence to those claims that the sale contract forms part of an unregistered managed investment scheme. That would squarely raise the very same issue as is raised in the ASIC proceedings. Brighton Bay has not yet filed a defence, so it is too early to say whether it will in fact plead that matter here. However, the possibility of the same complex issue being raised in different courts cannot be completely ignored, even if it is too soon to assess its likelihood.
A further consideration is that the relief which the Federal Court may grant in the ASIC proceedings is expressed in s601E of the Corporations Act in very broad terms. It might include orders affecting payments between scheme members under the sale contract, or the ownership of the Brighton property.
As far as timing issues are concerned, I understand that no directions have been made by the Federal Court in the People First proceeding since its transfer last year. There is no evidence before me as to when any of the Federal Court proceedings may be heard and determined or what interlocutory steps have been completed in the ASIC proceedings. However, I note that this proceeding has only recently been commenced. There is no reason to think that the Federal Court could not manage the interlocutory steps in this proceeding in such a way as to fit in with its case-management and hearing of the People First and ASIC proceedings.
PCM complains that the deposit to which it claims to be entitled is a very substantial sum, which Brighton Bay is wrongfully retaining. It points to the fact that ASIC does not object to this court hearing this proceeding. Therefore, it argues that this court ought to at least determine whether PCM is entitled to get its deposit back. Whilst having some superficial appeal, that submission ignores several important matters.
First, it ignores the inconsistencies and potential inconsistencies in the allegations in the various proceedings, and wrongly assumes that it is desirable to deal with PCM’s arguments in isolation from and in advance of those of any other purchaser. Secondly, there is no evidence to suggest that the payment of statutory penalty interest would not compensate PCM adequately for the loss of use of the deposit, in the event that it ultimately succeeds at the trial of this proceeding. Thirdly, it does not fully reflect ASIC’s attitude. Whilst it is true that ASIC made no submissions as to whether this proceeding ought to be cross-vested, ASIC would strongly oppose the repayment and distribution of the deposit. ASIC’s concerns are conveniently set out in a letter dated 8 February 2007 to PCM’s solicitors:
ASIC is concerned that should your client be granted that relief by the Supreme Court of Victoria that any act of seeking to distribute any monies that your client receives incidental thereto, may amount to acts in furtherance of the illegal scheme(s) which ASIC is seeking to have wound up and, as such, may contravene section 601ED(5) of the Corporations Act.
In the circumstances, ASIC seeks your confirmation that prior to taking any such action to distribute any proceeds to investors in the scheme … your client will give ASIC at least 7 days written notice and also make application to the Federal Court of Australia for approval of such steps.
Even if this court went ahead and heard and determined this proceeding in PCM’s favour, it is clear that ASIC would seek to restrain the distribution of any funds which might be recovered by PCM, because of the matters raised in the ASIC proceedings. Even on the limited material before me, it seems that if PCM refused to provide the confirmation sought in ASIC’s letter, ASIC would have reasonable prospects of enjoining PCM from distributing the deposit prior to the finalisation of the ASIC proceedings. In those circumstances, a finding that PCM was entitled to have its portion of the deposit repaid would not result in it immediately being able to recover and spend the deposit.
Finally, I note that all parties consented to the People First proceeding being transferred to the Federal Court. Indeed, PCM’s own counsel submitted that the transfer should occur because the People First proceeding was related to the ASIC proceedings and it would be more appropriate and otherwise in the interests of justice for the Federal Court to determine the People First proceeding. Given the issues raised in this and the People First proceedings, that submission does not rest terribly well with PCM’s current submission that this proceeding ought not also be transferred.
For these reasons, I conclude that it is more appropriate and in the interests of justice for this proceeding to be transferred to the Federal Court of Australia (Victorian District Registry), being the court in which related proceedings, including the previously cross-vested proceeding, are pending.
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