FEDERAL COURT OF AUSTRALIA Hamilton v Piggott Wood & Baker [2003] FCA 1055 WINDING UP – unregistered managed investment scheme – application by liquidator for directions – whether liquidator appropriate plaintiff in proceedings against legal firm which managed scheme Corporations Act 2001 (Cth) ss 477(2)(a), 479(3), 601EE Perpetual Trustee Company Limited v Attorney General (1937) 54 W N (NSW) 95 cited Woods v Dodge [2003] FCA 1066 at [5] to [8] followed Australian Securities and Investment Commission v Takaran (No 2) (2003) 21 ACLC 12 cited BARRY KENNETH HAMILTON AS LIQUIDATOR OF THE PIGGOTT WOOD & BAKER RUN-OUT MORTGAGE BUSINESS (IN LIQUIDATION) v PIGGOTT WOOD & BAKER (A FIRM) T3018 of 2003 HEEREY J 30 SEPTEMBER 2003 HOBART IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY T3018 OF 2003 BETWEEN: BARRY KENNETH HAMILTON AS LIQUIDATOR OF THE PIGGOTT WOOD & BAKER RUN-OUT MORTGAGE BUSINESS (IN LIQUIDATION) APPLICANT AND: PIGGOTT WOOD & BAKER (A FIRM) RESPONDENT JUDGE: HEEREY J DATE OF ORDER: 30 SEPTEMBER 2003 WHERE MADE: HOBART THE COURT ORDERS THAT: 1. The applicant is entitled to bring proceeding No 404 of 2003 in the Hobart Registry of the Supreme Court of Tasmania in the name Barry Kenneth Hamilton as Liquidator of the Piggott Wood & Baker Run-Out Mortgage Business (in liquidation). Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY T3018 OF 2003 BETWEEN: BARRY KENNETH HAMILTON AS LIQUIDATOR OF THE PIGGOTT WOOD & BAKER RUN-OUT MORTGAGE BUSINESS (IN LIQUIDATION) APPLICANT AND: PIGGOTT WOOD & BAKER (A FIRM) RESPONDENT JUDGE: HEEREY J DATE: 30 SEPTEMBER 2003 PLACE: HOBART REASONS FOR JUDGMENT 1 On 13 December 2001 Sundberg J ordered under s 601EE of the Corporations Act 2001 (Cth) (the Act) that an unregistered managed investment scheme known as the Piggott Wood & Baker Run-out Mortgage Business (the Scheme) be wound up and that Mr Barry Kenneth Hamilton (the Liquidator) be appointed liquidator jointly and severally with Mr John William Woods. 2 The Liquidator has applied under s 479(3) of the Act for the following directions: "Whether or not the applicant is entitled to institute proceedings in the name of Barry Kenneth Hamilton as Liquidator of the Piggott Wood & Baker Run-out Mortgage Business (in liquidation), and if not in what name the applicant is entitled to should he institute proceedings." 3 Section 479(3) provides that a liquidator may apply to the Court "for directions in relation to any particular matter arising under the winding up". 4 Piggott Wood & Baker (the Firm) is a firm of solicitors. It conducted a business in which clients deposited moneys with it and the Firm arranged for those moneys to be advanced as loans secured by mortgages over real estate in Tasmania. The mortgagees named in the mortgages were two partners in the Firm, Grant Edward Kench and Michael Graham Foster, who were nominees of the Firm and trustees for investors. 5 The terms of Sundberg J's order included an order under par 2(b) that the liquidators have all the powers that a liquidator would have pursuant to s 477 of the Act as if the Scheme were a company. The order also contained certain specified powers including, under par 2(b)(ix), the power "to…bring or defend any proceeding…relating to the operation of (the Scheme) in the name of or on behalf of the respondents [ie the Firm]." 6 On 5 August 2003 the Liquidator filed in the Hobart Registry of the Supreme Court of Tasmania a generally endorsed writ No 404 of 2003 naming the Firm as defendant. The named plaintiff is "Barry Kenneth Hamilton as Liquidator of the Piggott Wood & Baker Run-out Mortgage Business (in Liquidation)". The plaintiff's claim against the Firm is stated to be: "…for damages or other relief for: (a) breach of contract; (b) negligence; (c) negligent misstatement; (d) breach of trust; (e) misleading or deceptive conduct; (f) breach of fiduciary duty; (g) fiduciary default under the Legal Profession Act 1993; (h) unconscionable conduct; (i) unjust enrichment; (j) money had and received in relation to moneys paid to the Defendant by investors in a contributory mortgage scheme conducted by the defendant between on or about 26 July 1991 to on or about 13 December 2001 and costs to be taxed." 7 For the reasons discussed in Woods v Dodge [2003] FCA 1066 at [5] to [8] the title to this proceeding will be amended so that the Liquidator is the applicant and the Firm is the respondent. The Firm has not been served and, appropriately in my view, the present application proceeded ex parte. 8 As this application shows, the provision for the winding up of an investment scheme cannot always be neatly fitted into the analogy of the winding up of a company. Where a company is wound up the property of the company does not vest in the liquidator. In proceedings brought by a company in liquidation the company itself is the plaintiff. The Act confers power on a liquidator to bring or defend any legal proceeding in the name and on behalf of the company: s 477(2)(a). 9 However a managed investment scheme, unlike a company, is not a legal entity. A scheme may be wound up, whether it is unregistered (under s 601EE) or registered (under Pt 5C.9). In respect of some kinds of claim it might be possible to say that Messrs Kench and Foster would be in a position truly analogous to that of a company in liquidation, for example where a trespasser has wrongfully taken possession of the mortgaged property. In such a case the Liquidator could bring an action in the name of Messrs Kench and Foster because they are on the register as mortgagees. (I was informed that a transfer of the mortgages from Messrs Kench and Foster to the Liquidator was executed on or about 4 January 2002 and lodged at the Office of the Recorder of Titles but was withdrawn from registration after the Recorder raised certain requisitions and objections.) 10 The complication in the present case is that Messrs Kench and Foster are partners in the Firm, or at any rate were when the allegedly wrongful conduct occurred. Those allegedly liable for the loss and damage are the partners in the Firm at the relevant time including Messrs Kench and Foster themselves. That loss and damage has been suffered by the investors in the scheme. Claims against the Firm are choses in action which need to be enforced so that the proceeds, along with other recoveries such as the proceeds of sale of mortgaged properties and debts of mortgagors, can be pooled and distributed rateably amongst investors. 11 In Australian Securities and Investment Commission v Takaran (No 2) (2003) 21 ACLC 12 receivers had been appointed to an unregistered managed investment scheme. Under the scheme Takaran Pty Ltd held mortgages as trustee. It was desired to bring claims allegedly negligent valuers and a guarantor. Barrett J granted the receivers leave to sue in the name of Takaran. Thus the case differed from the present one in that the claims were not against the trustee, or defendants who included the trustee. 12 It is clear enough that neither the Firm or Messrs Kench and Foster, the nominee mortgagees, could be plaintiffs since they will be on the other side of the record: see Perpetual Trustee Co Limited v Attorney General (1937) 54 W N (NSW) 95. As already mentioned, the Scheme itself is not a legal entity and cannot be a plaintiff. Therefore the appropriate course is that which the liquidator has adopted. He can bring proceedings as plaintiff in the style Barry Kenneth Hamilton as Liquidator of the Piggott Wood & Baker Run-Out Mortgage Business (in liquidation). I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey. Associate: Dated: 3 October 2003 Counsel for the Applicant: M O'Farrell Solicitors for the Applicant: Toomey, Maning & Co Date of Hearing: 30 September 2003 Date of Judgment: 30 September 2003