FEDERAL COURT OF AUSTRALIA Australian Securities and Investments Commission v Letten (No 2) [2010] FCA 307 Citation: Australian Securities and Investments Commission v Letten (No 2) [2010] FCA 307 Parties: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v MARK RONALD LETTEN, LGH HOLDINGS LIMITED (ACN 007 191 943), 211 WELLINGTON ROAD PTY LTD (ACN 092 663 860), BLUEMIST HOLDINGS PTY LTD (ACN 097 306 922), DELLWOOD HOLDINGS PTY LTD (ACN 098 505 803), ENMORE ENTERPRISES PTY LTD (ACN 082 158 487), FIRBANK ARCH PTY LTD (ACN 059 464 381), GLENLINE PTY LTD (ACN 098 532 364), GERLING HOLDINGS PTY LTD (ACN 091 726 457), LGH ADMINISTRATION PTY LTD (ACN 007 165 069), LGH FINANCE PTY LTD (ACN 078 859 248), LOW HEAD VILLAGE PTY LTD (ACN 091 731 958), NICHOLSON STREET PTY LTD (ACN 069 104 089), HOLLOWAY CREST PTY LTD (ACN 091 731 967), ROSEBERY ENTERPRISES PTY LTD (ACN 091 826 229), SIMMS INVESTMENTS PTY LTD (ACN 093 504 511), SY21 RETAIL PTY LTD (ACN 107 874 564), THE GLEN CENTRE HAWTHORN PTY LTD (ACN 089 906 543), CASTELLO HOLDINGS PTY LTD (ACN 088 204 175), TWINVIEW NOMINEES PTY LTD (ACN 097 307 278), YARRA VALLEY GOLF PTY LTD (ACN 066 632 479), ADINA RISE PTY LTD (ACN 083 181 122), ALBRIGHT INVESTMENTS PTY LTD (ACN 088 204 166), ASHFIELD RISE PTY LTD (ACN 093 504 806), BRADFIELD CORPORATION PTY LTD (ACN 088 204 371), COPELAND ENTERPRISES PTY LTD (ACN 093 504 824), DEVLIN WAY PTY LTD (ACN 088 264 813), FIRST HAZELWOOD PTY LTD (ACN 093 505 303), GLENBELLE PTY LTD (ACN 097 306 646), GLENVALE WAY PTY LTD (ACN 088 287 021), GREENVIEW LANE PTY LTD (ACN 093 505 312), HALLMARK CORPORATION PTY LTD (ACN 093 505 312), MOORLEIGH HOLDINGS PTY LTD (ACN 088 287 058), NORTON RIDGE PTY LTD (ACN 078 821 066), RALEIGH GLEN PTY LTD (ACN 088 204 380), REDCREST HOLDINGS PTY LTD (ACN 100 836 486), SURI CORPORATION PTY LTD (ACN 093 505 321), SUTTON RISE PTY LTD (ACN 088 204 399), THE VIRTUAL MLMER PTY LTD (ACN 065 374 665), TIVENDALE PTY LTD (ACN 093 505 349), TULLOCH DOWNES PTY LTD (ACN 078 895 048), MAINKING PTY LTD (ACN 100 790 485), TOPGLEN PTY LTD (ACN 096 857 564), ALLBLUE PTY LTD (ACN 100 836 388) and ARANBAY PTY LTD (ACN 098 532 319) File number: VID 95 of 2010 Judge: GORDON J Date of judgment: 31 March 2010 Corrigendum: 24 May 2010 Date of hearing: 25 and 30 March 2010 Place: Melbourne Division: GENERAL DIVISION Number of paragraphs: 73 Counsel for the Plaintiff: Mr P Murdoch QC and Mr AP Trichardt Solicitor for the Plaintiff: Australian Securities and Investments Commission Counsel for the First, Second and Tenth Defendants: Mr SJ Hibble Solicitor for the First, Second and Tenth Defendants: Baker & McKenzie Counsel for the Receivers: Mr R Strong Solicitors for the Receivers: Mallesons Stephen Jaques IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 95 of 2010 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Plaintiff AND: MARK RONALD LETTEN First Defendant LGH HOLDINGS LIMITED (ACN 007 191 943) Second Defendant 211 WELLINGTON ROAD PTY LTD (ACN 092 663 860) Third Defendant BLUEMIST HOLDINGS PTY LTD (ACN 097 306 922) Fourth Defendant DELLWOOD HOLDINGS PTY LTD (ACN 098 505 803) Fifth Defendant ENMORE ENTERPRISES PTY LTD (ACN 082 158 487) Sixth Defendant FIRBANK ARCH PTY LTD (ACN 059 464 381) Seventh Defendant GLENLINE PTY LTD (ACN 098 532 364) Eighth Defendant GERLING HOLDINGS PTY LTD (ACN 091 726 457) Ninth Defendant LGH ADMINISTRATION PTY LTD (ACN 007 165 069) Tenth Defendant LGH FINANCE PTY LTD (ACN 078 859 248) Eleventh Defendant LOW HEAD VILLAGE PTY LTD (ACN 091 731 958) Twelfth Defendant NICHOLSON STREET PTY LTD (ACN 069 104 089) Thirteenth Defendant HOLLOWAY CREST PTY LTD (ACN 091 731 967) Fourteenth Defendant ROSEBERY ENTERPRISES PTY LTD (ACN 091 826 229) Fifteenth Defendant SIMMS INVESTMENTS PTY LTD (ACN 093 504 511) Sixteenth Defendant SY21 RETAIL PTY LTD (ACN 107 874 564) Seventeenth Defendant THE GLEN CENTRE HAWTHORN PTY LTD (ACN 089 906 543) Eighteenth Defendant CASTELLO HOLDINGS PTY LTD (ACN 088 204 175) Nineteenth Defendant TWINVIEW NOMINEES PTY LTD (ACN 097 307 278) Twentieth Defendant YARRA VALLEY GOLF PTY LTD (ACN 066 632 479) Twenty-First Defendant ADINA RISE PTY LTD (ACN 083 181 122) Twenty-Second Defendant ALBRIGHT INVESTMENTS PTY LTD (ACN 088 204 166) Twenty-Third Defendant ASHFIELD RISE PTY LTD (ACN 093 504 806) Twenty-Fourth Defendant BRADFIELD CORPORATION PTY LTD (ACN 088 204 371) Twenty-Fifth Defendant COPELAND ENTERPRISES PTY LTD (ACN 093 504 824) Twenty-Sixth Defendant DEVLIN WAY PTY LTD (ACN 088 264 813) Twenty-Seventh Defendant FIRST HAZELWOOD PTY LTD (ACN 093 505 303) Twenty-Eighth Defendant GLENBELLE PTY LTD (ACN 097 306 646) Twenty-Ninth Defendant GLENVALE WAY PTY LTD (ACN 088 287 021) Thirtieth Defendant GREENVIEW LANE PTY LTD (ACN 093 505 312) Thirty-First Defendant HALLMARK CORPORATION PTY LTD (ACN 093 505 312) Thirty-Second Defendant MOORLEIGH HOLDINGS PTY LTD (ACN 088 287 058) Thirty-Third Defendant NORTON RIDGE PTY LTD (ACN 078 821 066) Thirty-Fourth Defendant RALEIGH GLEN PTY LTD (ACN 088 204 380) Thirty-Fifth Defendant REDCREST HOLDINGS PTY LTD (ACN 100 836 486) Thirty-Sixth Defendant SURI CORPORATION PTY LTD (ACN 093 505 321) Thirty-Seventh Defendant SUTTON RISE PTY LTD (ACN 088 204 399) Thirty-Eighth Defendant THE VIRTUAL MLMER PTY LTD (ACN 065 374 665) Thirty-Ninth Defendant TIVENDALE PTY LTD (ACN 093 505 349) Fortieth Defendant TULLOCH DOWNES PTY LTD (ACN 078 895 048) Forty-First Defendant MAINKING PTY LTD (ACN 100 790 485) Forty-Second Defendant TOPGLEN PTY LTD (ACN 096 857 564) Forty-Third Defendant ALLBLUE PTY LTD (ACN 100 836 388) Forty-Fourth Defendant ARANBAY PTY LTD (ACN 098 532 319) Forty-Fifth Defendant JUDGE: GORDON J DATE OF ORDER: 24 May 2010 WHERE MADE: MELBOURNE CORRIGENDUM 1 Paragraph 1, line 1 of the Reasons for Judgment made on 31 March 2010 should read "Orders were made that 11 schemes listed in Annexure A" not "Orders were made that 15 schemes listed in Annexure A". I certify that the preceding one (1) numbered paragraph is a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Gordon. Associate: Dated: 24 May 2010 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 95 of 2010 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Plaintiff AND: MARK RONALD LETTEN First Defendant LGH HOLDINGS LIMITED (ACN 007 191 943) Second Defendant 211 WELLINGTON ROAD PTY LTD (ACN 092 663 860) Third Defendant BLUEMIST HOLDINGS PTY LTD (ACN 097 306 922) Fourth Defendant DELLWOOD HOLDINGS PTY LTD (ACN 098 505 803) Fifth Defendant ENMORE ENTERPRISES PTY LTD (ACN 082 158 487) Sixth Defendant FIRBANK ARCH PTY LTD (ACN 059 464 381) Seventh Defendant GLENLINE PTY LTD (ACN 098 532 364) Eighth Defendant GERLING HOLDINGS PTY LTD (ACN 091 726 457) Ninth Defendant LGH ADMINISTRATION PTY LTD (ACN 007 165 069) Tenth Defendant LGH FINANCE PTY LTD (ACN 078 859 248) Eleventh Defendant LOW HEAD VILLAGE PTY LTD (ACN 091 731 958) Twelfth Defendant NICHOLSON STREET PTY LTD (ACN 069 104 089) Thirteenth Defendant HOLLOWAY CREST PTY LTD (ACN 091 731 967) Fourteenth Defendant ROSEBERY ENTERPRISES PTY LTD (ACN 091 826 229) Fifteenth Defendant SIMMS INVESTMENTS PTY LTD (ACN 093 504 511) Sixteenth Defendant SY21 RETAIL PTY LTD (ACN 107 874 564) Seventeenth Defendant THE GLEN CENTRE HAWTHORN PTY LTD (ACN 089 906 543) Eighteenth Defendant CASTELLO HOLDINGS PTY LTD (ACN 088 204 175) Nineteenth Defendant TWINVIEW NOMINEES PTY LTD (ACN 097 307 278) Twentieth Defendant YARRA VALLEY GOLF PTY LTD (ACN 066 632 479) Twenty-First Defendant ADINA RISE PTY LTD (ACN 083 181 122) Twenty-Second Defendant ALBRIGHT INVESTMENTS PTY LTD (ACN 088 204 166) Twenty-Third Defendant ASHFIELD RISE PTY LTD (ACN 093 504 806) Twenty-Fourth Defendant BRADFIELD CORPORATION PTY LTD (ACN 088 204 371) Twenty-Fifth Defendant COPELAND ENTERPRISES PTY LTD (ACN 093 504 824) Twenty-Sixth Defendant DEVLIN WAY PTY LTD (ACN 088 264 813) Twenty-Seventh Defendant FIRST HAZELWOOD PTY LTD (ACN 093 505 303) Twenty-Eighth Defendant GLENBELLE PTY LTD (ACN 097 306 646) Twenty-Ninth Defendant GLENVALE WAY PTY LTD (ACN 088 287 021) Thirtieth Defendant GREENVIEW LANE PTY LTD (ACN 093 505 312) Thirty-First Defendant HALLMARK CORPORATION PTY LTD (ACN 093 505 312) Thirty-Second Defendant MOORLEIGH HOLDINGS PTY LTD (ACN 088 287 058) Thirty-Third Defendant NORTON RIDGE PTY LTD (ACN 078 821 066) Thirty-Fourth Defendant RALEIGH GLEN PTY LTD (ACN 088 204 380) Thirty-Fifth Defendant REDCREST HOLDINGS PTY LTD (ACN 100 836 486) Thirty-Sixth Defendant SURI CORPORATION PTY LTD (ACN 093 505 321) Thirty-Seventh Defendant SUTTON RISE PTY LTD (ACN 088 204 399) Thirty-Eighth Defendant THE VIRTUAL MLMER PTY LTD (ACN 065 374 665) Thirty-Ninth Defendant TIVENDALE PTY LTD (ACN 093 505 349) Fortieth Defendant TULLOCH DOWNES PTY LTD (ACN 078 895 048) Forty-First Defendant MAINKING PTY LTD (ACN 100 790 485) Forty-Second Defendant TOPGLEN PTY LTD (ACN 096 857 564) Forty-Third Defendant ALLBLUE PTY LTD (ACN 100 836 388) Forty-Fourth Defendant ARANBAY PTY LTD (ACN 098 532 319) Forty-Fifth Defendant JUDGE: GORDON J DATE OF ORDER: 31 MARCH 2010 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. Damian Templeton and Phillip Hennessy (the Receivers) are justified in causing Glenbelle Pty Ltd (receivers and managers appointed) (Glenbelle) to borrow funds from Westpac Banking Corporation Limited (Westpac) in the maximum amounts specified in, and upon the terms set out in, the term sheet for Glenbelle (the Glenbelle Facility)included in Exhibit "DJT-8" to the affidavit of Damian John Templeton sworn on 26 March 2010 (the Third Templeton Affidavit) provided that, at the time of any draw down of funds under the Glenbelle Facility, the Receivers issue a Certificate substantially in the form contained in Annexure A to these Orders. 2. Without limiting Westpac's rights under the Glenbelle Facility and the security specified therein, amounts owing under or in connection with the Glenbelle Facility be paid out of the assets of Glenbelle (including any Scheme assets held by Glenbelle) in priority to all other debts and claims. 3. The Receivers are justified in causing Firbank Arch Pty Ltd (receivers and managers appointed) (Firbank) to borrow funds from Westpac in the maximum amounts specified in, and upon terms set out in, the term sheet for Firbank (the Firbank Facility)included in Exhibit "DJT-8" to the Third Templeton Affidavit provided that, at the time of any draw down of funds under the Firbank Facility, the Receivers issue a Certificate substantially in the form contained in Annexure A to these Orders. 4. Without limiting Westpac's rights under the Firbank Facility and the security specified therein, amounts owing under or in connection with the Firbank Facility be paid out of the assets of Firbank (including any Scheme assets held by Firbank) in priority to all other debts and claims. 5. The Receivers are justified in causing Yarra Valley Golf Pty Ltd (receivers and managers appointed) (YVG) to borrow funds from Westpac in the maximum amounts specified in, and upon the terms set out in, the term sheet for YVG (the YVG Facility) included in Exhibit "DJT-8" to the Third Templeton Affidavit provided that, at the time of any draw down of funds under the YVG Facility, the Receivers issue a Certificate substantially in the form contained in Annexure A to these Orders. 6. The Receivers are justified in causing YVG to borrow further funds from Westpac in the maximum amounts specified in, and substantially upon the terms set out in, the proposed Stage 1 Botanica Facility (the Stage 1 Botanica Facility)which is attached to these Orders as Annexure B provided that, at the time of any draw down of funds under the Stage 1 Botanica Facility, the Receivers issue a Certificate substantially in the form contained in Annexure A to these Orders. 7. Without limiting Westpac's rights under: (a) the YVG Facility and the security specified therein; (b) the Stage 1 Botanica Facility and the security specified therein, amounts owing under or in connection with the YVG Facility and/or the Stage 1 Botanica Facility be paid out of the assets of YVG (including any Scheme assets held by YVG) in priority to all other debts and claims. 8. The Receivers are justified in causing Twinview Nominees Pty Ltd (receivers and managers appointed) (Twinview) to borrow funds from Westpac in the maximum amounts specified in, and upon the terms set out in, the term sheet for Twinview (the Twinview Facility) included in Exhibit "DJT 8" to the Third Templeton Affidavit provided that, at the time of any draw down of funds under the Twinview Facility, the Receivers issue a Certificate substantially in the form contained in Annexure A to these Orders. 9. Without limiting Westpac's rights under the Twinview Facility and the security specified therein, amounts owing under or in connection with the Twinview Facility be paid out of the assets of Twinview (including any Scheme assets held by Twinview) in priority to all other debts and claims. 10. The Receivers are justified in causing The Glen Centre Hawthorn Pty Ltd (receivers and managers appointed) (The Glen Centre) to borrow funds from Westpac in the maximum amounts specified in, and upon the terms set out in, the term sheet for The Glen Centre (The Glen Facility) included in Exhibit "DJT-8" to the Third Templeton Affidavit provided that, at the time of any draw down of funds under The Glen Facility, the Receivers issue a Certificate substantially in the form contained in Annexure A to these Orders. 11. Without limiting Westpac's rights under The Glen Facility and the security specified therein, amounts owing under or in connection with The Glen Facility be paid out of the assets of The Glen Centre (including any Scheme assets held by The Glen Centre) in priority to all other debts and claims. 12. The Receivers are justified in causing Nicholson Street Pty Ltd (receivers and managers appointed) (Nicholson Street) to borrow funds from Westpac in the maximum amounts specified in, and upon the terms set out in, the term sheet for Nicholson Street (the Nicholson Street Facility)included in Exhibit "DJT-8" to the Third Templeton Affidavit provided that, at the time of any draw down of funds under the Nicholson Street Facility, the Receivers issue a Certificate substantially in the form contained in Annexure A to these Orders. 13. Without limiting Westpac's rights under the Nicholson Street Facility and the security specified therein, amounts owing under or in connection with the Nicholson Street Facility be paid out of the assets of Nicholson Street (including any Scheme assets held by Nicholson Street) in priority to all other debts and claims. 14. The Receivers are justified in causing Enmore Enterprises Pty Ltd (receivers and managers appointed) (Enmore) to borrow funds from Westpac in the maximum amounts specified in, and upon the terms set out in, the term sheet for Enmore (the Enmore Facility)included in Exhibit "DJT-8" to the Third Templeton Affidavit provided that, at the time of any draw down of funds under the Enmore Facility, the Receivers issue a Certificate substantially in the form contained in Annexure A to these Orders. 15. Without limiting Westpac's rights under the Enmore Facility and the security specified therein, amounts owing under or in connection with the Enmore Facility be paid out of the assets of Enmore (including any Scheme assets held by Enmore) in priority to all other debts and claims. 16. Notwithstanding paragraphs 3 and 5 of the Orders made on 25 February 2010 (the 25 February Orders) and subject to paragraphs 20 and 21 of the 25 February Orders, the powers of the Receivers include the power: (a) to complete the contracts of sale entered into by YVG in respect of lots 601 to 610 on plan of subdivision number 415064K located at the Heritage Golf and Country Club, Wonga Park, Victoria and known as the "Botanica" development; and (b) to pay the entire net proceeds of the settlement of the Botanica properties to Westpac, in reduction of the secured liabilities of YVG to Westpac, after deduction of the reasonable selling expenses of YVG and the reasonable fees and expenses of the Receivers in respect of getting in, preserving and realising the Botanica properties (as agreed with Westpac or, failing agreement, as fixed by the Court). 17. Notwithstanding paragraphs 3 and 5 of the 25 February Orders and subject to paragraphs 20 and 21 of the 25 February Orders, the Receivers are justified in: (a) completing the contracts of sale entered into by YVG in respect of lots 601 to 610 on plan of subdivision number 415064K located at the Heritage Golf and Country Club, Wonga Park, Victoria and known as the "Botanica" development; and (b) paying the entire net proceeds of the settlement of the each of the said contracts to Westpac, in reduction of the secured liabilities of YVG to Westpac, after deduction of the reasonable selling expenses of YVG and the reasonable fees and expenses of the Receivers in respect of getting in, preserving and realising the Botanica properties (as agreed with Westpac or, failing agreement, as fixed by the Court). 18. The Receivers shall file any Certificates issued or made pursuant to these Orders. 19. Until further order, confidential exhibit "DJT-7" to the Third Templeton Affidavit be placed in a sealed envelope and marked "Confidential: No access without leave of a judge of the Court". 20. Costs of the interlocutory process filed on 23 March 2010 are reserved. ANNEXURE A DRAW DOWN CERTIFICATE BORROWER NAME: FACILITY: AMOUNT OF DRAW DOWN: I hereby certify that the above drawdown is made solely to pay debts of the Borrower which have been incurred by the Receivers, on and from 25 February 2010 to the earlier of 12 April 2010 and the date Westpac Banking Corporation enforces its security over the Borrower's business: (a) in the performance or exercise of their functions and powers as Receivers; (b) for services rendered, goods bought or property hired, leased or occupied in connection with the conduct of the business of the borrower; and (c) for the preservation of the following asset or assets, namely ……………………….., being in each case an asset to which the Receivers have been appointed as Receivers and Managers. ……………………………….. Receiver and Manager Date: ANNEXURE B Loan Agreement Yarra Valley Golf Pty Ltd (Receivers and Managers appointed) Westpac Banking Corporation as successor in law to St. George Bank Limited Stage 1 Botanica Facility Allens Arthur Robinson Level 27 530 Collins Street Melbourne VIC 3000 Australia Tel +61 3 9614 1011 Fax +61 3 9614 4661 www.aar.com.au © Copyright Allens Arthur Robinson, Australia 2010 Table of Contents 1. Definitions and Interpretation 3 1.1 Definitions 3 1.2 Interpretation 6 1.3 Document or agreement 7 1.4 General Standard Terms and Inconsistency 7 1.5 Determination, statement and certificate 7 1.6 Consents and Opinions 7 2. Purpose 7 3. Facility 7 4. Drawdown Notices 8 5. Number of Loans 8 6. Interest 8 6.1 Rate 8 6.2 Payment 8 7. Fees 8 7.1 Establishment fee 8 7.2 Line fee 8 7.3 Service charge 8 8. Cancellation of Commitment 9 8.1 During Availability Period 9 8.2 At end of Availability Period 9 8.3 Reduction on repayment or prepayment 9 9. Repayment 9 10. Prepayments 9 10.1 Voluntary prepayments 9 10.2 Interest 9 10.3 Limitation on prepayments 9 11. Payments 10 11.1 Manner 10 11.2 Payment to be made on Business Day 10 11.3 Appropriation where insufficient moneys available 10 12. Conditions Precedent 10 13. Declarations 10 13.1 Declarations 10 13.2 Reliance on declarations 10 14. Undertakings 11 15. Events of Default 11 15.1 Tranche G Default 11 15.2 Consequences 11 16. Interest on Overdue Amounts 11 17. Control Accounts 11 18. Expenses 12 19. No personal liability of Receivers 12 20. Set Off 12 21. Waivers, Remedies Cumulative 12 22. Severability of Provisions 12 23. Survival of Obligations 12 24. Moratorium Legislation 13 25. Assignments 13 25.1 Assignment by Borrower 13 25.2 Assignment by Lender 13 25.3 Disclosure 13 26. Notices 13 27. Authorised Officers 14 28. Governing Law and Jurisdiction 14 29. Counterparts 14 30. Acknowledgement by Borrower 14 31. Security 14 Schedule 1 15 Schedule 2 16 Annexure A 18 Drawdown Notice 18 Annexure B 19 Botanica Properties 19 Annexure C 20 General Standard Terms 20 Date 2010 Parties 1. Yarra Valley Golf Pty Ltd(ACN 066 632 479) (Receivers and Managers appointed)of c/o- KPMG, 147 Collins Street, Melbourne, Victoria 3000 (the Borrower). 2. Westpac Banking Corporation as successor in law to St. George Bank Limited (ABN 92 055 513 070)of Level 8, 530 Collins Street, Melbourne, Victoria 3000 (the Lender). Recital The Borrower has requested the Lender to provide the Borrower with a facility under which loans of up to A$819,598 may be made available to the Borrower for the purposes set out in clause 2. IT IS AGREED as follows. 1. Definitions and Interpretation 1.1 Definitions The following definitions apply unless the context requires otherwise. Authorised Officer means: (a) in respect of the Borrower, any Controller appointed in relation to all the assets and undertaking of the Borrower, any administrator or liquidator of the Borrower or any person from time to time nominated as an Authorised Officer by it by a notice to the Lender accompanied by certified copies of signatures of all new persons so appointed; and (b) in respect of the Lender, any person whose title or acting title includes the word Chief, Counsel, Executive, Head, Director, Manager or President or cognate expressions, or any secretary or director. Availability Period in respect of Tranche G means the period from the date that the condition precedent in clause 12 is either satisfied or waived by the Lender to the relevant date set out in column 3 of Schedule 2. Botanica means the development of that name at the Heritage Golf and Country Club Wonga Park Vic 3115 in relation to Lots 522 and 523 on plan of subdivision PS 415064K. Botanica Property means each property set out in Annexure B. Business Day means a weekday on which banks are open in Melbourne. Collateral Security means any Security Interest, Guarantee or other document or agreement at any time created or entered into as security for any Secured Money. Controller has the meaning given to it in the Corporations Act 2001 (Cth). Commitment in respect of Tranche G means the relevant amount specified in column 2 of Schedule 2, as reduced or cancelled under this Agreement. Drawdown Date means the date on which a Loan under this Agreement is or is to be drawn. Drawdown Notice means a notice under clause 4. Finance Debt means indebtedness (whether actual or contingent) in respect of money borrowed or raised or other financial accommodation. It includes indebtedness under or in respect of: (a) a Guarantee of Finance Debt or a Guarantee given to a financier; (b) a finance Lease; (c) a swap, option, hedge, forward, futures or similar transaction; (d) an acceptance, endorsement or discounting arrangement; (e) a redeemable share or redeemable stock; or (f) the deferred purchase price (for more than 90 days) of an asset or service, or an obligation to deliver assets or services paid for in advance by a financier or otherwise relating to a financing transaction. Finance Document means this Agreement, any Security, any Collateral Security or a document or agreement entered into or provided under or in connection with, or for the purpose of amending or novating, any of the above. It includes a written undertaking by or to a party or its lawyers under or in relation to any of the above. Funding Period means a period for the fixing of interest rates for, and the funding of, a Loan. That period commences on a Drawdown Date or the last day of the previous Funding Period and has a duration of 30 days unless otherwise agreed with the Lender. No Funding Period in respect of Tranche G may extend beyond the Repayment Date of that Tranche. General Standard Terms means the document titled General Standard Terms – (09/2008 version) previously provided to the Borrower by the Lender, a copy of which is set out in Annexure C. Government Agency means any government or any governmental, semi-governmental or judicial entity or authority. It also includes any self-regulatory organisation established under statute or any stock exchange. GST means any goods and services or similar tax, together with any related interest, penalties, fines or other charge. Guarantee means any guarantee, indemnity, letter of comfort or other assurance against loss. It includes any obligation to be responsible for the solvency or financial condition of another party, or for payment of Finance Debt of another party, either directly or indirectly (for example, by buying the Finance Debt). Lease means an agreement under which an asset may be used, exploited, operated or managed by a person other than the owner. It includes a lease, licence, charter, hire purchase or hiring arrangement. Liquidation includes receivership or other appointment of a controller, deregistration, compromise, deed of arrangement, amalgamation, administration, reconstruction, winding up, dissolution, assignment for the benefit of creditors, arrangement or compromise with creditors or bankruptcy. Loan means each loan, in respect of Tranche G, lent or to be lent under this Agreement that has the same Funding Period. Margin means 2% pa. Principal Outstanding in respect of Tranche G means the total principal amount of all outstanding Loans provided under Tranche G under this Agreement. Receiver means the receivers and managers of the Borrower. Related Entity means, in relation to an entity (the first entity): (a) a Subsidiary of the first entity; (b) an entity of which the first entity is a Subsidiary; or (c) a Subsidiary of another entity of which the first entity is also a Subsidiary. Repayment Date in respect of Tranche G means the relevant Repayment Date set out in column 4 of Schedule 2 or any other date agreed in writing by the Borrower and the Lender. Secured Money means all money which the Borrower (whether alone or not) is or at any time may become actually or contingently liable to pay to or for the account of the Lender (whether alone or not) for any reason whatever under or in connection with this Agreement, whether or not currently contemplated. It includes money by way of principal, interest, fees, costs, indemnity, charges, duties or expenses or payment of liquidated or unliquidated damages under or in connection with this Agreement, or as a result of a breach of or default under or in connection with this Agreement. It also includes money that the Borrower would have been liable to pay but for its Liquidation, or some other reason. Security means: (a) the Real Property Mortgage dated 17 March 1999 between the Borrower and St George Bank Limited (number V953318B); (b) the Fixed and Floating Charge dated 17 March 1999 between the Borrower and St George Bank Limited (ASIC charge number 688480); (c) the Real Property Mortgage dated 29 April 2003 between the Borrower and St George Bank Limited (number AC562155T); or (d) any Collateral Security granted by the Borrower to the Lender. Security Interest includes any mortgage, pledge, lien or charge or any security or preferential interest or arrangement of any kind. It includes: (a) anything which gives a creditor priority to other creditors with respect to any asset; and (b) retention of title other than in the ordinary course of day-to-day trading and a deposit of money by way of security. STFR means, on any day, the cost of funds of the Lender on that day as determined by the Lender. Subsidiary has the meaning given in the Corporations Act 2001, but as if body corporate includes any entity. Tax includes any tax, levy, impost, deduction, charge, rate, duty, compulsory loan or withholding which is levied or imposed by a Government Agency, and any related interest, penalty, charge, fee or other amount. Tranche G means Tranche G as set out in Schedule 2. Undrawn Commitment in respect of Tranche G means the Commitment of Tranche G less the Principal Outstanding of Tranche G. 1.2 Interpretation Headings are for convenience only and do not affect interpretation. The following rules apply unless the context requires otherwise. (a) The singular includes the plural and the converse. (b) A gender includes all genders. (c) Where a word or phrase is defined, its other grammatical forms have a corresponding meaning. (d) A reference to a person, corporation, trust, partnership, unincorporated body or other entity includes any of them. (e) A reference to a clause, annexure or schedule is a reference to a clause of, or annexure or schedule to, this Agreement. (f) A reference to a party to this Agreement or another agreement or document includes the party's successors and permitted substitutes or assigns. (g) A reference to legislation or to a provision of legislation includes a modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it. (h) A reference to writing includes a facsimile transmission and any means of reproducing words in a tangible and permanently visible form. (i) A reference to conduct includes an omission, statement or undertaking, whether or not in writing. (j) The meaning of terms is not limited by specific examples introduced by including, or for example, or similar expressions. (k) A reference to an asset includes any real or personal, present or future, tangible or intangible property or asset (including intellectual property) and any right, interest, revenue or benefit in, under or derived from the property or asset. (l) An event or circumstance referred to in clause 15.1(d), (e) or (f) subsists until it has been waived in writing by the Lender. (m) A reference to an amount for which a person is contingently liableincludes an amount which that person may become actually or contingently liable to pay if a contingency occurs, whether or not that liability will actually arise. (n) All references to time are to Melbourne time. (o) Nothing in this Agreement is to be interpreted against a party on the ground that the party put it forward. 1.3 Document or agreement A reference to: (a) an agreement includes a Security Interest, Guarantee, undertaking, deed, agreement or legally enforceable arrangement whether or not in writing; and (b) a document includes an agreement (as so defined) in writing or a certificate, notice, instrument or document. A reference to a specific agreement or document includes it as amended, novated, supplemented or replaced from time to time, except to the extent prohibited by this Agreement. 1.4 General Standard Terms and Inconsistency (a) Subject to the exclusions contained in clauses 13.1(b) of this Agreement, the General Standard Terms are incorporated in this Agreement by reference and form part of this Agreement. A reference to the Facility Offer in the General Standard Terms is a reference to this Agreement. (b) This Agreement prevails over the General Standard Terms to the extent that the General Standard Terms are inconsistent with the terms of this Agreement. 1.5 Determination, statement and certificate Except where otherwise provided in this Agreement any determination, statement or certificate by the Lender or an Authorised Officer of the Lender provided for in this Agreement is conclusive. It binds the parties in the absence of manifest error. 1.6 Consents and Opinions Except where expressly stated the Lender may give or withhold, or give conditionally, approvals and consents, may be satisfied or unsatisfied, may form opinions, and may exercise its rights, powers and remedies, at its absolute discretion. 2. Purpose The Borrower shall use the proceeds of Tranche G to fund payments required to be made by the Borrower under rental guarantees given by the Borrower to the purchasers of Botanica Properties and to pay the establishment fee set out in clause 7.1. 3. Facility (a) Subject to this Agreement, whenever the Borrower requests a Loan in a Drawdown Notice, the Lender will make available that Loan to the Borrower on the relevant Drawdown Date to the account specified in the Drawdown Notice. (b) The Lender need not make a Loan available under Tranche G if as a result the Principal Outstanding in respect of Tranche G would exceed its Commitment in respect of Tranche G. 4. Drawdown Notices Whenever the Borrower wishes to make a drawing using any of the Undrawn Commitment of Tranche G, it shall give to the Lender an irrevocable Drawdown Notice substantially in the form of Annexure A. That Drawdown Notice must be received by the Lender by 11am (Melbourne time) 3 Business Days before the proposed Drawdown Date (which must be a Business Day within the relevant Availability Period). 5. Number of Loans Not applicable. 6. Interest 6.1 Rate Interest accrues from day to day on the outstanding principal amount of each Loan at the rate determined by the Lender to be the sum of the Margin and the STFR on the first day of the relevant Funding Period. 6.2 Payment The Borrower shall pay accrued interest in arrears on the last day of each Funding Period and on repayment or prepayment of all or the relevant part of the Loan. 7. Fees 7.1 Establishment fee On the date of this Agreement the Borrower shall pay to the Lender an establishment fee of $4078. 7.2 Line fee (a) A line fee accrues at 0.50% pa on the daily amount of the Commitment. (b) The Borrower shall pay to the Lender any accrued line fee in arrears on the last Business Day of each month. 7.3 Service charge (a) A service charge based on the average Principal Outstanding accrues from the date of this Agreement. (b) The Borrower shall pay to the Lender any accrued service charge on the last Business Day of each month in accordance with the following. (i) If the average of the Principal Outstanding of Tranche G is below $99,999.99, the service charge will be $30; (ii) If the average of the Principal Outstanding of Tranche G is between $100,000 and $499,999.99, the service charge will be $40; and (iii) If the average of the Principal Outstanding of Tranche G is over $500,000, the service charge will be $60. 8. Cancellation of Commitment 8.1 During Availability Period On giving not less than 3 Business Days irrevocable notice to the Lender the Borrower may cancel all or part of the Undrawn Commitment during the Availability Period. 8.2 At end of Availability Period At the close of business (Melbourne time) on the last day of the Availability Period of Tranche G the Undrawn Commitment of Tranche G will be cancelled. 8.3 Reduction on repayment or prepayment On any repayment under clause 9 (Repayment) or any prepayment of all or part of the Principal Outstanding of Tranche G, the Commitment of Tranche G shall be reduced by an amount equal to the principal amount repaid or prepaid. 9. Repayment The Borrower shall repay each Loan made under Tranche G on the Repayment Date of Tranche G. 10. Prepayments 10.1 Voluntary prepayments Subject to this clause, if it first gives at least 3 Business Days' notice to the Lender the Borrower may prepay all or part of a Loan. That notice is irrevocable. The Borrower will prepay in accordance with it. 10.2 Interest When the Borrower prepays any amount it shall pay any interest accrued on that amount in accordance with clause 6.1. 10.3 Limitation on prepayments The Borrower may not prepay all or any part of a Loan except in accordance with this Agreement. 11. Payments 11.1 Manner The Borrower shall make all payments under this Agreement: (a) by transfer of immediately available funds to the account specified by the Lender by 11am (local time) on the due date; and (b) without set‑off, counterclaim or other deduction, except any compulsory deduction for Tax. 11.2 Payment to be made on Business Day If any payment is due on a day which is not a Business Day, the due date will be the next Business Day. 11.3 Appropriation where insufficient moneys available The Lender may appropriate amounts it receives among amounts due as it sees fit. This will override any appropriation made by the Borrower. 12. Conditions Precedent The right of the Borrower to give the initial Drawdown Notice and the obligations of the Lender under this Agreement are subject to the making of court orders to the effect that: (a) the Receivers are justified in causing the Borrower to borrow funds from the Lender in an amount up to the aggregate of the Commitments; and (b) without limiting the Lender's rights under this Agreement and the Security, the Secured Money be paid out of the assets of the Borrower (including any scheme assets held by the Borrower) in priority to all other debts and claims. [AAR Note: form of court order may vary] 13. Declarations 13.1 Declarations (a) The Borrower makes the declarations set out in clause 2.1(a), (b), (c), (f), (g) and (j) and 2.2 of the General Standard Terms, but amended so that references to any arrangement with us is a reference to this Agreement and the transactions contemplated by this Agreement. (b) For the avoidance of doubt, clauses 2.1(d), (e), (h), (i) and (k) of the General Standard Terms do not apply and are not incorporated into this Agreement by reference. 13.2 Reliance on declarations The Borrower acknowledges that the Lender has entered this Agreement in reliance on the declarations referred to in this clause. 14. Undertakings The Borrower will use all reasonable endeavours to secure tenants for each Botanica Property to minimise the amount required to be drawn under Tranche G. 15. Events of Default 15.1 Tranche G Default Notwithstanding anything else in this Agreement, the Lender shall not; (a) declare due and payable the Secured Money; (b) demand any payment; or (c) cancel the Commitments, to the extent it directly relates to the Tranche G Commitment or Principal Outstanding under Tranche G, unless: (d) the Borrower is deregistered; (e) clause 55 of the General Standard Terms applies; or (f) the Borrower fails to comply with any of its obligations under: (i) clause 2 of this Agreement; or (ii) clause 14 of this Agreement except where that failure is remedied within 7 days of receipt of a notice from the Lender specifying the failure to comply. 15.2 Consequences In addition to any other rights provided by law or any Finance Document, at any time after an event or circumstance referred to in clause 15.1(d), (e) or (f) occurs (whether or not it is continuing) the Lender may do all or any of the following: (a) by notice to the Borrower declare immediately due and payable, and the Borrower shall immediately pay the Secured Money; (b) by notice to the Borrower cancel the Commitments. 16. Interest on Overdue Amounts Interest accrues on each unpaid amount which is due and payable by the Borrower under or in respect of this Agreement (including interest under this clause) in accordance with clause 47 of the General Standard Terms. 17. Control Accounts The accounts kept by the Lender constitute sufficient evidence, unless proven wrong, of the amount at any time due from the Borrower under this Agreement. 18. Expenses The Borrower shall reimburse the Lender for all costs and expenses in relation to the preparation, execution and completion of this Agreement or the actual or contemplated enforcement of, or actual or contemplated exercise, preservation or consideration of any rights, powers or remedies under, this Agreement, including in each case legal costs and expenses (including in‑house lawyers charged at their usual rates) on a full indemnity basis. 19. No personal liability of Receivers The parties agree that Damian Templeton and Phillip Hennessy as Receivers and Managers of the Borrower have no personal liability with respect to any Secured Money owing to the Lender. 20. Set‑Off (a) The Lender may apply any credit balance in any currency (whether or not matured) in any account of the Borrower with the Lender towards satisfaction of any sum then due and payable by the Borrower to the Lender under or in relation to any Finance Document. The Lender need not make the application. (b) The Lender may exchange currencies to make that application. (c) The Lender shall not exercise its rights under paragraph (a) before the final Repayment Date. 21. Waivers, Remedies Cumulative (a) No failure to exercise and no delay in exercising any right, power or remedy under any Finance Document operates as a waiver. Nor does any single or partial exercise of any right, power or remedy preclude any other or further exercise of that or any other right, power or remedy. (b) The rights, powers and remedies provided to the Lender in the Finance Documents are in addition to, and do not exclude or limit, any right, power or remedy provided by law. 22. Severability of Provisions Any provision of any Finance Document which is prohibited or unenforceable in any jurisdiction is ineffective as to that jurisdiction to the extent of the prohibition or unenforceability. That does not invalidate the remaining provisions of that Finance Document nor affect the validity or enforceability of that provision in any other jurisdiction. 23. Survival of Obligations (a) (Representations and warranties) Each representation, warranty or declaration in a Finance Document survives the execution and delivery of the Finance Documents and the provision of financial accommodation. (b) (Indemnity) Each indemnity, reimbursement or similar obligation in a Finance Document: (i) is a continuing, separate and independent obligation; (ii) is payable on demand; and (iii) survives termination or discharge of the relevant Finance Document and repayment of financial accommodation. Where a party is obliged to indemnify another party against a loss, cost, charge, liability, expense, deficiency or other amount, it shall pay on demand from time to time the amount stated by the other party to be the amount indemnified against. 24. Moratorium Legislation To the full extent permitted by law all legislation which at any time directly or indirectly: (a) lessens, varies or affects in favour of the Borrower any obligation under a Finance Document; or (b) delays, prevents or prejudicially affects the exercise by the Lender of any right, power or remedy conferred by a Finance Document, is excluded from the Finance Documents. 25. Assignments 25.1 Assignment by Borrower The Borrower may only assign or transfer any of its rights or obligations under this Agreement with the prior consent of the Lender. 25.2 Assignment by Lender The Lender may assign or transfer all or any of its rights or obligations under the Finance Documents at any time. 25.3 Disclosure The Lender may: (a) without the consent of the Borrower, disclose to any ratings agency or Government Agency; or (b) with the prior consent of the Borrower (who shall not unreasonably withhold that consent) disclose to a proposed assignee, transferee or sub‑participant, any information which relates to the Borrower or Finance Document or was furnished in connection with the Finance Documents. 26. Notices All notices, requests, demands, consents, approvals, agreements or other communications to or by a party to this Agreement: (a) must be in writing signed by an Authorised Officer of the sender; and (b) will be taken to be given or made when delivered, received or left at the address or fax number of the recipient shown in schedule 1 or to any other address or fax number which it may have notified the sender but, if delivery or receipt is on a day on which business is not generally carried on in the place to which the communication is sent or is later than 4pm (local time), it will be taken to have been given or made at the commencement of business on the next day on which business is generally carried on in that place. 27. Authorised Officers The Borrower irrevocably authorises the Lender to rely on a certificate by a person purporting to be its director or secretary as to the identity and signatures of its Authorised Officers. The Borrower warrants that those persons have been authorised to give notices and communications under or relating to the Finance Documents. 28. Governing Law and Jurisdiction This Agreement is governed by the laws of New South Wales. The Borrower submits to the non‑exclusive jurisdiction of courts exercising jurisdiction there. 29. Counterparts This Agreement may be executed in any number of counterparts. All counterparts together will be taken to constitute one instrument. 30. Acknowledgement by Borrower The Borrower confirms that: (a) it has not entered into any Finance Document in reliance on, or as a result of, any statement or conduct of any kind of or on behalf of the Lender or any Related Entity of the Lender (including any advice, warranty, representation or undertaking); and (b) neither the Lender nor any Related Entity of the Lender is obliged to do anything (including disclose anything or give advice), except as expressly set out in the Finance Documents. 31. Security The Borrower acknowledges and agree that each Security remains in full force and effect, and secures the Secured Money. Schedule 1 Part A - Borrower Yarra Valley Golf Pty Ltd (Receivers and Managers appointed) Address: c/o- KPMG, 147 Collins Street, Melbourne, Victoria 3000 Fax number: (03) 9288 6666 Attention: Damian Templeton Part B - Lender Westpac Banking Corporation as successor in law to St. George Bank Limited Address: Level 8, 530 Collins Street, Melbourne, Victoria 3000. Fax number: (03) 9274 4860 Attention: Graham Robinson Schedule 2 Tranche G Details Tranche Commitment Last day of Availability Period Repayment Date A$ Tranche G 819,598 One day before the date that is 2 years from the date of the settlement of the last Botanica Property, and in any event no later than 31 May 2012. 2 years from the date of the settlement of the last Botanica Property, and in any event no later than 31 May 2012. EXECUTED in Melbourne. Each attorney executing this Agreement states that he or she has no notice of revocation or suspension of his or her power of attorney. Executed by Damian Templeton in his capacity as Receiver and Manager of Yarra Valley Golf Pty Ltd (Receivers and Managers appointed): Signature of Witness Damian Templeton, Receiver and Manager Print Name Print Name Signed for Westpac Banking Corporation as successor in law to St George Bank Limited by its attorney in the presence of: Witness Signature Attorney Signature Print Name Print Name Annexure A Drawdown Notice Yarra Valley Golf Pty Ltd - DRAWDOWN NOTICE NO. [*] This is an irrevocable notice under clause 4 of the Loan Agreement dated [*](the Loan Agreement). (1) We wish to draw on [*] (the Drawdown Date). Note: Date is to be a business day. (2) The total principal amount to be drawn from under Tranche G is [*]. Note: Amount to comply with the limits. (3) The proceeds will be used to [*]. (4) Please remit the proceeds to account number [*] at [*]. Definitions in the Loan Agreement apply in this Drawdown Notice. On behalf of Yarra Valley Golf Pty Ltd By: [Authorised Officer] DATED [*] Annexure B Botanica Properties Each property set out below. Lot and address Purchaser Lot 601, 1 Henley Bridge Road Sandra Casey &/or nominees Lot 602, 3 Henley Bridge Road Andrew Kwan &/or nominees Lot 603, 5 Henley Bridge Road Grant Jordan &/or nominees Lot 604, 7 Henley Bridge Road DA Qing Li & Yuan Huang Lot 605, 9 Henley Bridge Road Vittorio E DI Luzio Lot 606, 11 Henley Bridge Road Shawn Wolfe &/or nominees Lot 607, 13 Henley Bridge Road Jin Guang Liu & Gui Ying Ye &/or nominees Lot 608, 15 Henley Bridge Road Fengwie Guo Lot 609, 17 Henley Bridge Road Chris Richardson & Josephine Pang Lot 610, 19 Henley Bridge Road Cavill Pty Ltd ATF Lawrence FT No. 2 Annexure C General Standard Terms Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 95 of 2010 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Plaintiff AND: MARK RONALD LETTEN First Defendant LGH HOLDINGS LIMITED (ACN 007 191 943) Second Defendant 211 WELLINGTON ROAD PTY LTD (ACN 092 663 860) Third Defendant BLUEMIST HOLDINGS PTY LTD (ACN 097 306 922) Fourth Defendant DELLWOOD HOLDINGS PTY LTD (ACN 098 505 803) Fifth Defendant ENMORE ENTERPRISES PTY LTD (ACN 082 158 487) Sixth Defendant FIRBANK ARCH PTY LTD (ACN 059 464 381) Seventh Defendant GLENLINE PTY LTD (ACN 098 532 364) Eighth Defendant GERLING HOLDINGS PTY LTD (ACN 091 726 457) Ninth Defendant LGH ADMINISTRATION PTY LTD (ACN 007 165 069) Tenth Defendant LGH FINANCE PTY LTD (ACN 078 859 248) Eleventh Defendant LOW HEAD VILLAGE PTY LTD (ACN 091 731 958) Twelfth Defendant NICHOLSON STREET PTY LTD (ACN 069 104 089) Thirteenth Defendant HOLLOWAY CREST PTY LTD (ACN 091 731 967) Fourteenth Defendant ROSEBERY ENTERPRISES PTY LTD (ACN 091 826 229) Fifteenth Defendant SIMMS INVESTMENTS PTY LTD (ACN 093 504 511) Sixteenth Defendant SY21 RETAIL PTY LTD (ACN 107 874 564) Seventeenth Defendant THE GLEN CENTRE HAWTHORN PTY LTD (ACN 089 906 543) Eighteenth Defendant CASTELLO HOLDINGS PTY LTD (ACN 088 204 175) Nineteenth Defendant TWINVIEW NOMINEES PTY LTD (ACN 097 307 278) Twentieth Defendant YARRA VALLEY GOLF PTY LTD (ACN 066 632 479) Twenty-First Defendant ADINA RISE PTY LTD (ACN 083 181 122) Twenty-Second Defendant ALBRIGHT INVESTMENTS PTY LTD (ACN 088 204 166) Twenty-Third Defendant ASHFIELD RISE PTY LTD (ACN 093 504 806) Twenty-Fourth Defendant BRADFIELD CORPORATION PTY LTD (ACN 088 204 371) Twenty-Fifth Defendant COPELAND ENTERPRISES PTY LTD (ACN 093 504 824) Twenty-Sixth Defendant DEVLIN WAY PTY LTD (ACN 088 264 813) Twenty-Seventh Defendant FIRST HAZELWOOD PTY LTD (ACN 093 505 303) Twenty-Eighth Defendant GLENBELLE PTY LTD (ACN 097 306 646) Twenty-Ninth Defendant GLENVALE WAY PTY LTD (ACN 088 287 021) Thirtieth Defendant GREENVIEW LANE PTY LTD (ACN 093 505 312) Thirty-First Defendant HALLMARK CORPORATION PTY LTD (ACN 093 505 312) Thirty-Second Defendant MOORLEIGH HOLDINGS PTY LTD (ACN 088 287 058) Thirty-Third Defendant NORTON RIDGE PTY LTD (ACN 078 821 066) Thirty-Fourth Defendant RALEIGH GLEN PTY LTD (ACN 088 204 380) Thirty-Fifth Defendant REDCREST HOLDINGS PTY LTD (ACN 100 836 486) Thirty-Sixth Defendant SURI CORPORATION PTY LTD (ACN 093 505 321) Thirty-Seventh Defendant SUTTON RISE PTY LTD (ACN 088 204 399) Thirty-Eighth Defendant THE VIRTUAL MLMER PTY LTD (ACN 065 374 665) Thirty-Ninth Defendant TIVENDALE PTY LTD (ACN 093 505 349) Fortieth Defendant TULLOCH DOWNES PTY LTD (ACN 078 895 048) Forty-First Defendant MAINKING PTY LTD (ACN 100 790 485) Forty-Second Defendant TOPGLEN PTY LTD (ACN 096 857 564) Forty-Third Defendant ALLBLUE PTY LTD (ACN 100 836 388) Forty-Fourth Defendant ARANBAY PTY LTD (ACN 098 532 319) Forty-Fifth Defendant JUDGE: GORDON J DATE: 31 MARCH 2010 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 On 25 February 2010, Orders were made that 15 schemes listed in Annexure A to the orders made on that day (the Schemes) be wound up pursuant to s 601EE(1) of the Corporations Act 2001 (Cth) (the Act). In addition, the Orders provided that Mr Damian Templeton and Mr Phillip Hennessy of KPMG (the Receivers) be appointed as joint and several receivers and managers of certain property of each of the second to sixteenth and eighteenth to forty-fifth defendants (defined as the Corporate Defendants) and as joint and several receivers and managers of identified property of the Schemes (the Appointment Order): see Australian Securities and Investments Commission v Letten [2010] FCA 140. 2 On 4 March 2010, the Receivers were also appointed as joint and several receivers and managers of the property of a scheme defined in those orders (the SY21 Orders) to mean "the funds invested, contributed or deposited by investors for the purpose of acquiring an interest in the project known as SY21 Retail Complex Project" (the SY21 Scheme). 3 In general terms, the effect of the Appointment Order and the SY21 Orders was to preserve the status quo to enable the Receivers to conduct investigations into each Scheme and the SY21 Scheme and, on or before 12 April 2010, to file a report (the Disclosure Report) in respect of each about the following matters: (a) the nature and identity of the Property of the Scheme; (b) the claims (actual, contingent and other) of third parties in relation to the Property of the Scheme including, but not limited to, whether the Property of the Scheme has been given as security for any debt or liability and if so, the nature of the security and the debt or liability so secured; (c) in relation to the Investors: (i) the identities of the Investors and the nature and extent of their interests; (ii) any payments made to or by Investors in relation to the Scheme; (iii) any money owing to the Investors; (d) the nature and identity of the liabilities of the Scheme including, but not limited to, liabilities to the Investors; (e) the solvency of the Scheme; (f) the most appropriate manner and timing of managing and realising any assets or Property of the Scheme so as to most benefit the Investors; and (g) a recommendation as to the process for recovering all money owing to the Scheme, whether by way of loan or otherwise. 4 On 23 March 2010, the Receivers filed an Interlocutory Process under ss 1323(5) and 601EE of the Act and paragraph 29 of the Appointment Order seeking orders or directions determining certain questions in the receiverships, namely: (a) that the Receivers are justified in causing the following corporate defendants (each a "Borrower") to borrow funds from Westpac Banking Corporation Limited ("Westpac") in the amounts identified at paragraph 34 of the Second Templeton Affidavit: (i) Yarra Valley Golf Pty Ltd (receivers and managers appointed) ("YVG"); (ii) Firbank Arch Pty Ltd (receivers and managers appointed); (iii) Twinview Nominees Pty Ltd (receivers and managers appointed); (iv) Nicholson Street Pty Ltd (receivers and managers appointed); (v) The Glen Centre Hawthorn Pty Ltd (receivers and managers appointed); (vi) Glenbelle Pty Ltd (receivers and managers appointed); and (vii) Enmore Enterprises Pty Ltd (receivers and managers appointed), (collectively, the "Facilities".) (b) that, without limiting Westpac's rights under the Facilities and any security it holds in connection with the Facilities, amounts owing under or in connection with the Facilities be paid out of the assets of the relevant Borrower (including any Scheme assets held by that Borrower) in priority to all other debts and claims (for the purposes of this Order (b), Scheme has the meaning ascribed to it in the Appointment Order). (c) that the powers of the Receivers as set out in paragraphs 3 and 5 of the Orders of the Court made on 25 February 2010 be amended so as to provide the Receivers with the following powers: (i) to complete the contracts of sale entered into by YVG in respect of lots 601 to 618 on plan subdivision number 415064K located at the Heritage Golf and Country Club, Wonga Park, Victoria and known as the "Botanica" development; and (ii) to pay the entire net proceeds of the settlement of the Botanica properties to Westpac, in reduction of the secured liabilities of YVG to Westpac, after deduction of the reasonable selling expenses of YVG and the reasonable fees and expenses of the Receivers in respect of getting in, preserving and realising the Botanica properties (as agreed with Westpac or, failing agreement, as fixed by the Court). (d) that the Receivers are justified in: (i) completing the contracts of sale entered into by YVG in respect of 601 to 618 on plan subdivision number 415064K located at the Heritage Golf and Country Club, Wonga Park, Victoria and known as the "Botanica" development; (ii) paying the entire net proceeds of the settlement of the Botanica properties to Westpac, in reduction of the secured liabilities of YVG to Westpac, after deduction of the reasonable selling expenses of YVG and the reasonable fees and expenses of the Receivers in respect of getting in, preserving and realising the Botanica properties (as agreed with Westpac or, failing agreement, as fixed by the Court). (e) that the Receivers are justified in suspending operation of any of the businesses conducted by the following corporate defendants in the event that the relevant corporate defendant does not have and cannot obtain sufficient loan funds, or generate sufficient cash flow from trading operations of the relevant business, to pay all debts which would otherwise be incurred during the receivership as a result of those trading operations: (i) YVG; (ii) Firbank Arch Pty Ltd (receivers and managers appointed); (iii) Twinview Nominees Pty Ltd (receivers and managers appointed); (iv) Nicholson Street Pty Ltd (receivers and managers appointed); (v) The Glen Centre Hawthorn Pty Ltd (receivers and managers appointed); (vi) Glenbelle Pty Ltd (receivers and managers appointed); (vii) Enmore Enterprises Pty Ltd (receivers and managers appointed); and (viii) Low Head Village Pty Ltd (receivers and managers appointed). 5 An affidavit sworn by Mr Damian Templeton on 23 March 2010 (the Second Templeton Affidavit)was filed in support of the interlocutory process. The process was listed for hearing on 25 March 2010. When the interlocutory process was called on for hearing, I informed Counsel for the Receivers that I had a number of concerns with the proposed orders sought and the material filed in support of the application. Those concerns included that the material appeared to be incomplete, the material inappropriately dealt with the schemes on a global basis, in some respects the application appeared to be premature and further or alternatively, the cash flow forecasts appeared to involve some double counting. Counsel for the Plaintiff, the Australian Securities and Investments Commission (ASIC), informed the Court that ASIC was not in a position to express a view on the majority of the Orders sought because it had not been provided with the necessary material. In fact, some of the material (for example the terms of the proposed funding) was not then in existence. Counsel for Mr Letten informed the Court that he supported the making of the Orders. Notwithstanding the submissions of Counsel for the Receivers and Counsel for Mr Letten, I refused to make the Orders on the material that had then been filed. I informed the Receivers that if they wished to seek a variation to the Appointment Order or the SY21 Orders, they could do so on a scheme by scheme basis supported by appropriate affidavit evidence. 6 On 29 March 2010, a further affidavit sworn by Mr Damian Templeton on 26 March 2010 (the Third Templeton Affidavit)was filed in support of the interlocutory process. The application was accompanied by an outline of submissions and draft orders. The orders sought by the Receivers were in an amended form (the Proposed Orders) as follows: 1. Damian Templeton and Phillip Hennessy ("Receivers") are justified in causing Glenbelle Pty Ltd (receivers and managers appointed) ("Glenbelle") to borrow funds from Westpac Banking Corporation Limited ("Westpac") in the maximum amounts specified in, and upon the terms set out in the term sheet for Glenbelle ("Glenbelle Facility")included in Exhibit "DJT-8" to the affidavit of Damian John Templeton sworn on 26 March 2010 ("Third Templeton Affidavit"). 2. Without limiting Westpac's rights under the Glenbelle Facility and the security specified therein, amounts owing under or in connection with the Glenbelle Facility be paid out of the assets of Glenbelle (including any Scheme assets held by Glenbelle) in priority to all other debts and claims. 3. The Receivers are justified in causing Firbank Arch Pty Ltd (receivers and managers appointed) ("Firbank") to borrow funds from Westpac in the maximum amounts specified in, and upon terms set out in the term sheet for Firbank ("Firbank Facility")included in Exhibit "DJT-8" to the Third Templeton Affidavit. 4. Without limiting Westpac's rights under the Firbank Facility and the security specified therein, amounts owing under or in connection with the Firbank Facility be paid out of the assets of Firbank (including any Scheme assets held by Firbank) in priority to all other debts and claims. 5. The Receivers are justified in causing to (sic) Yarra Valley Golf Pty Ltd (receivers and managers appointed) ("YVG") to borrow funds from Westpac in the maximum amounts specified in, and upon the terms set out in, the terms sheet (sic) for YVG ("YVG Facility") included in Exhibit "DJT-8" to the Third Templeton Affidavit. 6. The Receivers are justified in causing YVG to borrow further funds from Westpac in the maximum amounts specified in, and upon the terms set out in, the Proposed Botanica Facility ("Botanica Facility")which is Exhibit "DJT-11" to the Third Templeton Affidavit. 7. Without limiting Westpac's rights under: (a) the YVG Facility and the security specified therein; (b) the Botanica Facility and the security specified therein, amounts owing under or in connection with the YVG Facility and/or the Botanica Facility be paid out of the assets of YVG (including any Scheme assets held by YVG) in priority to all other debts and claims. 8. The Receivers are justified in causing Twinview Nominees Pty Ltd (receivers and managers appointed) ("Twinview") to borrow funds from Westpac in the maximum amounts specified in, and upon the terms set out in the term sheet for Twinview ("Twinview Facility") included in Exhibit "DJT 8" to the Third Templeton Affidavit. 9. Without limiting Westpac's rights under the Twinview Facility and the security specified therein, amounts owing under or in connection with the Twinview Facility be paid out of the assets of Twinview (including any Scheme assets held by Twinview) in priority to all other debts and claims. 10. The Receivers are justified in causing The Glen Centre Hawthorn Pty Ltd (receivers and managers appointed) ("The Glen Centre") to borrow funds from Westpac in the maximum amounts specified in, and upon the terms set out in the term sheet for The Glen Centre ("The Glen Facility") included in Exhibit "DJT-8" to the Third Templeton Affidavit. 11. Without limiting Westpac's rights under The Glen Facility and the security specified therein, amounts owing under or in connection with The Glen Facility be paid out of the assets of The Glen Centre (including any Scheme assets held by The Glen Centre) in priority to all other debts and claims. 12. The Receivers are justified in causing Nicholson Street Pty Ltd (receivers and managers appointed) ("Nicholson Street") to borrow funds from Westpac in the maximum amounts specified in, and upon the terms set out in the terms sheet (sic) for Nicholson Street ("Nicholson Street Facility")included in Exhibit "DJT-8" to the Third Templeton Affidavit. 13. Without limiting Westpac's rights under the Nicholson Street Facility and the security specified therein, amounts owing under or in connection with the Nicholson Street Facility be paid out of the assets of Nicholson Street (including any Scheme assets held by Nicholson Street) in priority to all other debts and claims. 14. The Receivers are justified in causing Enmore Enterprises Pty Ltd (receivers and managers appointed) ("Enmore") to borrow funds from Westpac in the maximum amounts specified in, and upon the terms set out in the term sheet for Enmore ("Enmore Facility")included in Exhibit "DJT-8" to the Third Templeton Affidavit. 15. Without limiting Westpac's rights under the Enmore Facility and the security specified therein, amounts owing under or in connection with the Enmore Facility be paid out of the assets of Enmore (including any Scheme assets held by Enmore) in priority to all other debts and claims. 16. Notwithstanding paragraphs 3 and 5 of the 25 February Orders, the powers of the Receivers include the power: (a) to complete the contracts of sale entered into by YVG in respect of lots 601 to 618 on plan of subdivision number 415064K located at the Heritage Golf and Country Club, Wonga Park, Victoria and known as the "Botanica" development; and (b) to pay the entire net proceeds of the settlement of the Botanica properties to Westpac, in reduction of the secured liabilities of YVG to Westpac, after deduction of the reasonable selling expenses of YVG and the reasonable fees and expenses of the Receivers in respect of getting in, preserving and realising the Botanica properties (as agreed with Westpac or, failing agreement, as fixed by the Court). 17. The Receivers are justified in: (a) completing the contracts of sale entered into by YVG in respect of 601 to 618 on plan of subdivision number 415064K located at the Heritage Golf and Country Club, Wonga Park, Victoria and known as the "Botanica" development; (b) paying the entire net proceeds of the settlement of the each of the said contracts to Westpac, in reduction of the secured liabilities of YVG to Westpac, after deduction of the reasonable selling expenses of YVG and the reasonable fees and expenses of the Receivers in respect of getting in, preserving and realising the Botanica properties (as agreed with Westpac or, failing agreement, as fixed by the Court). 7 The Receivers submitted that the orders and directions in [6] above were necessary: 1. to enable them to obtain working capital facilities from Westpac to allow the businesses to continue to operate as going concerns and to maintain the operational status quo until the Receivers completed their investigations; 2. to vary the existing orders to allow the Receivers to settle the pre-existing contracts for sale of the "Botanica" townhouses within the Yarra Valley Golf Development; and 3. to enable the Receivers to obtain construction funding for completion of works on some of the "Botanica" apartments and to cover the contingent cost of rental guarantees and other post-settlement obligations specified in the contracts of sale of the apartments. 8 Before turning to consider the interlocutory process, it is necessary to restate some principles. First, scheme property is trust property: Re GDK Financial Solutions Pty Ltd; Australian Securities and Investments Commission v GDK Financial Solutions Pty Ltd (2006) 236 ALR 699 at [2], [22] and [47]. Secondly, the principle that trust property should not be mixed applies equally to managed investment schemes: see Australian Securities and Investments Commission v Enterprise Solutions 2000 Pty Ltd [2001] QSC 82 and generally Charles Pearson Pty Ltd v Attorney-General for the State of Victoria[2006] VSC 260 at [7]; Conlan v Registrar of Titles (2001) 24 WAR 299 at [272]; Lupton v White [1808] 15 Ves 432; R P Meagher, Jacobs' Law of Trusts in Australia (6th ed, 1997) at 435. Thirdly, it is only where trust property is so intermixed that it is nearly impossible to trace individual investor's monies and that any attempt to do so would be unlikely to produce a reliable result, that a rateable distribution may be more appropriate: see Enterprise Solutions 2000 Pty Ltd [2001] QSC 82 at [12] and [13]. We are not currently in that position and may never be so. The Receivers have not yet prepared the Disclosure Reports which would identify the assets of each scheme and identify whether scheme assets have been intermixed and, if so, the extent to which that has occurred. 9 In order to understand the orders now sought by the Receivers (see [6] above), it is necessary to set out in some detail the evidence filed in support of the application. 10 First, notwithstanding that the Receivers have not yet completed preparation of the Disclosure Reports which would identify the assets of each scheme and, if relevant, the extent to which scheme assets have been intermixed, the Receivers' contend that "the Corporate Defendants and the Schemes (excluding the SY21 Retail Complex Project) individually or collectively (the emphasis added is mine) own four trading businesses and five commercial property investments" listed in the table below. The Receivers define the trading businesses and the commercial property investments as "the Businesses". (A) Trading Businesses Name of Business Name & Address of Business Nature of Business Operating Entity/Property Owner Scheme(s) in Annexure A Reef House Resort The Sebel Reef House Resort, 99 Williams Esplanade Palm Cove, Qld (Reef House) 69 Room Hotel Firbank Arch Pty Ltd (Receivers and Managers Appointed) No 6 – Reef House Resort Low Head Joint Venture Low Head Caravan Park, 136 Low Head Road George Town, Tasmania, 142 Low Head Road, George Town, Tasmania & 40 Gunn Parade, George Town, Tasmania (Low Head) Caravan Park and Development Land Low Head Village Pty Ltd (Receivers and Managers Appointed) No 8- Low Head Joint Venture Yarra Valley Golf Joint Venture Yarra Valley Golf Course, St John Of God's Seminary and Henley Farm Golf Courses, Chirnside Park, Victoria (Yarra Valley Golf) Golf Courses (2) (St John and Henley 18 Hole Championship Courses) Club House, Golf Maintenance Sheds and The Operation Of The Waste Water Treatment Plant For The Entire Facility Yarra Valley Golf Pty Ltd (Receivers and Managers Appointed) No. 15 - Yarra Valley Golf Joint Venture Operation of The Golf Club For 1,200 Members Glenbelle Project Sebel Heritage Lodge Management Lot, Yarra Valley Golf Course, Chirnside Park, Victoria (Glenbelle) Food and Beverage Operations and Conference Facilities Associated With Sebel Heritage Hotel and The Retreat Spa Complex which is available for use by Local Residents, Hotel Guests and Members of The Heritage Golf and Country Club Glenbelle Pty Ltd (Receivers and Managers Appointed) No 16 – Glenbelle Project (B) Commercial Property Investments Name of Investment Name and Address Of Business Nature Of Business Operating Entity/Property Owner Scheme(s) in Annexure A Twinview Joint Venture 167 Flinders Lane, Melbourne, Victoria (Flinders Lane) 4 Storey Office Building Twinview Nominees Pty Ltd (Receivers and Managers Appointed) No 14 – Twinview Joint Venture The Glen Centre Joint Venture 673–681 Glenferrie Road, Hawthorn, Victoria (The Glen Centre) 15 Shop Retail Property and Arcade The Glen Centre Hawthorn Pty Ltd (Receivers and Managers Appointed) No 13 – The Glen Centre Joint Venture Nicholson Street Joint Venture 127-137 Nicholson Street, East Brunswick, Victoria (Nicholson Street) 1.4ha Warehouse and Office Complex Nicholson Street Pty Ltd (Receivers and Managers Appointed) No 9 – Nicholson Street Joint Venture George Street Joint Venture 34 George Street, Launceston, Tasmania (George Street) Single Storey Office Property Enmore Enterprises Pty Ltd (Receivers and Managers Appointed) No 4 – George Street Joint Venture Cimitiere House Joint Venture 113 Cimitiere Street, Launceston, Tasmania (Cimitiere House) 4 Storey Office Building and Cafe Enmore Enterprises Pty Ltd (Receivers and Managers Appointed) No 5 - Cimitiere House Joint Venture 11 The last column in each table was not included by the Receivers. I have added it for two purposes. First, while the Receivers describe the projects in this application by "Name of Investment", Annexure A to the Appointment Order identified the scheme and, in relation to each scheme, the property connected with that scheme and the manager or managers of the joint venture. I have listed the name of the relevant scheme as at the time of the Appointment Order. Whether Annexure A to the Appointment Order correctly allocated the property to each scheme is one of the issues to be addressed in the Disclosure Reports to be filed by the Receivers on or before 12 April 2010. Secondly, by identifying the schemes in Annexure A which were said to be "connected" to the property listed in the table, two additional facts become apparent – that the corporate managers of the schemes numbered 1, 2, 3, 7, 10 and 11 in Annexure A to the Appointment Order and the SY21 Retail Complex Project (including the property listed in relation those schemes) and the schemes connected to those corporate managers are not the subject of this application and, further, there are other joint venture managers connected with the schemes numbered 9, 15 and 16 which are not the subject of the Proposed Orders. 12 Further, notwithstanding the principles earlier stated about the nature of scheme property (see [8] above), the affidavit material filed in support of the interlocutory process has not been prepared consistent with those principles. In fact, the Third Templeton Affidavit stated that the assumptions and methodology adopted were as follows: (a) The cash flow forecasts have been prepared on a business by business basis rather than a scheme by scheme or entity by entity basis: (i) as it reflects the manner in which the Businesses operate; and (ii) due to the historical intermingling of funds between the Letten Entities and Schemes, it is not yet clear to the Receivers: (A) whether the Businesses constitute scheme property; or (B) if so, how many schemes may have an interest in the Businesses. (b) The cash flow forecasts were prepared based on information available as at 12 March 2010. (c) For the trading businesses other than Reef House, the forecast cash flow was estimated on a daily basis to 28 March 2010 and on a weekly basis to from 29 March 2010 to 12 April 2010. For Reef House, the forecasts are on a daily basis throughout. For the commercial properties, the cash flows were estimated on a weekly basis. (d) The cash flow forecasts were sought to be prepared on a conservative basis in order to minimise the prospect of further applications for funding in the short term. (e) The forecast cash flows for each Business have been prepared based on information and discussions with key operational and management staff, including obtaining and reviewing historical monthly management accounts for the 7 months to January 2010. (f) Due to the limited time available, the forecast information has been prepared based on information available at the time and is being tested, developed and reforecast on a daily basis. Based on information now available, we do not expect the funding requirement to 12 April 2010 to exceed the previous forecast amounts but still believe the requested amounts are appropriate. (g) The forecast cash flows include a contingency for the timing of working capital fluctuations and potential unexpected cash flow items in the amounts of: (i) $100,000 for each of Reef House, Glenbelle and Yarra Valley Golf, being the trading businesses with greater working capital requirements and, therefore, a greater risk of working capital fluctuations; and (ii) $20,000 for each of the remaining Businesses. These contingencies were based on estimates which, in [the] opinion [of the Receivers], are reasonable given the nature of each of the Businesses and the need to ensure adequate funding at all times to meet unexpected trading or asset preservation liabilities that may arise. (h) The forecast information has been prepared based on the operational and asset preservation aspects of the Businesses, and does not include Receivers' fees and costs, legal costs, realisation expenses etc, which are being quantified. (i) The cash flow forecast has been presented on the basis that the Businesses would have access to opening working capital balances, being cash, debtors and stock in order to minimise the funding requirements. (j) As well as forecasting the cash requirements to determine the Cash flow Shortfall, we have forecast the level of liabilities to be incurred on a daily/weekly basis in order to estimate the amount of the Standby Shortfall. (Emphasis added). 13 The Court is in a difficult position. It does not know what facts or matters support preparation of the affidavit material on these assumptions and methodology including, in particular, paragraph 12(a). Any Court is concerned to ensure that the orders it makes do not result in a position where trust property is intermixed at all or, by reason of additional orders, becomes so intermixed that it becomes impossible to trace individual investor's monies. That concern is heightened when the Proposed Orders deal with property identified in Annexure A to the Appointment Order not on a scheme by scheme basis but on a business by business basis. 14 Notwithstanding these concerns, the Receivers sought to justify the Proposed Orders on the following bases: 1. upon their appointment, they began an assessment of the nature of the Businesses, the operating and financial controls within each of the Businesses and the forecast cash flows for each of the Businesses to assess whether any funding would be required in the short term to enable the objectives of the receivership to be met; 2. as a result of their investigations, they ascertained the nature of the Businesses and, where relevant, implemented stringent controls around incurring of liabilities and handling of cash to ensure appropriate controls are in place to minimise the incurring of liabilities and ensure there is no intermingling of funds between Businesses during the receivership period; 3. as a result of their investigations, they determined that for the period up to 12 April 2010, all Businesses (except the Glen Centre Joint Venture) required a level of funding and were likely to be unable to meet their respective interest obligations; 4. in the interim, the Receivers sought to continue to operate the Businesses on a 'business as usual' basis because they formed the view that continuing to trade the Businesses in the short term maintained the value of the Businesses while: (a) an independent assessment of the Businesses and their potential value was undertaken; (b) the full extent of the other assets of the Schemes is determined; (c) long term strategies are developed for consideration by the Court, investors in the Schemes and lenders; and (d) the funding and other requirements to implement long term strategies are identified and investigations undertaken to determine if these requirements are likely to be met. 5. the Receivers believe it is beneficial for all stakeholders for funding to be provided to enable the Businesses to continue to trade (at least in the short term) to enable the operational status quo to be maintained while the Receivers make recommendations to the Court, investors and lenders on whether the Businesses should, inter alia: (a) continue to trade to maximise the realisations from the sale of the Scheme property; or (b) cease to trade as continued operation would not enhance the value of the Scheme property. 6. the status quo of the operational aspects of the Businesses is unable to be maintained in the absence of funding being provided; 7. in the Receivers' opinion, closure of the Businesses is likely to have a detrimental impact on the value of the Scheme assets, and further, crystallise a number of liabilities against the respective companies (which may rank in priority to investors following the ultimate realisation of scheme assets) including (but would not be limited to) redundancy liabilities associated with the termination of employees and damages claims arising under existing contracts. 15 The Second and Third Templeton Affidavits state that Westpac has been the historical lender to each Business as follows: Business Historical Borrower Reef House Firbank Arch Pty Ltd Glenbelle Glenbelle Pty Ltd Yarra Valley Golf Yarra Valley Golf Pty Ltd The Glen Centre The Glen Centre Hawthorn Pty Ltd George Street Enmore Enterprises Pty Ltd Cimitiere House Enmore Enterprises Pty Ltd Flinders Lane Twinview Nominees Pty Ltd Nicholson Street Nicholson Street Pty Ltd 16 By the Proposed Orders, new facilities would be provided to the same companies (defined by the Receivers as the Proposed Borrowers)to enable Westpac to secure the new monies advanced under existing security arrangements. The existing security arrangements include mortgages over each property and a fixed and floating charge over the borrower. Westpac has reserved all of its rights under its existing facilities and securities including its right to enforce those securities. The proposed orders (see [6]) together with the terms of the proposed facilities (see [19] – [21] below) would afford priority to Westpac over another secured lender to any of the Businesses. Counsel for the Receivers informed the Court that there are no other secured lenders to each of the Businesses. 17 The Third Templeton Affidavit addressed the funding requirements for each Business separately by reference to the following categories: 1. asset preservation – operation and trading funding. This was described as the maximum funding requirement (after allowing for appropriate contingencies) in the period to 12 April 2010 in order to pay suppliers of goods and services to the Businesses as and when they fall due in the normal course of business for goods or services ordered after the appointment of the Receivers. The Receivers acknowledged that the amount required changes on a daily basis given the timing of receipts and payments and includes a contingency for the timing of working capital fluctuations and a potential unexpected cash flow items; 2. asset preservation – insurance and valuation costs. This was described as the funding needed to pay insurance premiums in order to protect the assets of the Businesses and undertake valuations to ascertain the financial position of the Businesses in each case where the obligation to pay is incurred prior to 12 April 2010; 3. Standby Shortfall. This was described as the funding needed to cover the amount of the trading liabilities outstanding that have not been paid, but would have to be met if the Receivers ceased to trade the Business on a particular date. The Receivers acknowledged that this amount also changes on a daily basis and that the funding sought is based on the forecast maximum level of liabilities over the period to 12 April 2010. The Receivers submitted that the amount of the Cash Flow Shortfall (items 1 and 2) and the Standby Shortfall are connected in that once a liability is paid, the Cash Flow Shortfall will increase but the Standby Shortfall will decrease. 18 As I have stated earlier, the funding requirements were prepared by reference to the assumptions and methodologies set out in paragraph [12] above. Having determined the funding requirements, the Receivers made a submission to Westpac for the provision of sufficient facilities to meet the requirements summarised in paragraph [17]. The amount sought for each Proposed Borrower was the Cash Flow Shortfall and the peak amount of the Standby Shortfall. Westpac advised the Receivers that it was currently unable to provide the funding requested on a long term basis but agreed to fund the Cash Flow Shortfall and the peak amount of the Standby Shortfall for each Proposed Borrower on certain terms and conditions which include a stipulated interest rate and, except in the case of the Nicholson Street Facility and the Stage 1 Botanica Facility, no line fees or establishment costs. 19 The key terms of each of the Proposed Operating Facilities (except for the Nicholson Street Facility and the Stage 1 Botanica Facility) share common features. First, the facilities comprise three tranches – A, B and C. The purpose of tranche A is to meet "approved costs" incurred by the relevant borrower prior to the earlier of 12 April 2010 and the date Westpac enforces any of its securities over the relevant Business. "Approved costs" means interest payable under any facility made available to the borrower by Westpac and debts incurred by the Receivers, on and from 25 February 2010, in the performance or exercise of their functions and powers as Receivers, for services rendered, goods bought or property hired, leased, used or occupied in connection with the conduct of the relevant Business but excluding debts incurred in relation to capital works (other than as agreed with Westpac), legal fees and, in some cases, certain management fees. "Approved costs" does not include the Receivers' remuneration or that of their partners and staff. As will become apparent, the Orders I propose to make will impose a certification requirement on the Receivers to ensure that the purpose of the drawdowns is to preserve one or more identified assets (being an asset or assets to which they have been appointed Receivers). The purpose of tranche B is to meet the costs of obtaining valuations and to meet the costs of insurance premiums. The purpose of tranche C is, upon the borrower ceasing to carry on its business or Westpac enforcing any of its securities over the relevant Business, to meet "approved costs" incurred by the borrower in the period from 25 February 2010 to the date of cessation or Westpac enforcing any of its securities. 20 The Nicholson Street Facility also provides for three tranches although the purpose of tranche A is said to be to pay "project management costs incurred by the borrower in the rezoning of Nicholson Street". During the course of the hearing, I enquired what was intended to be covered by the phrase "project management costs" and, in particular, whether the steps proposed were inconsistent with preservation of the status quo. Counsel for the Receivers informed me that the steps were necessary to enable the Receivers to obtain advice about whether an application to rezone should be pursued and for that advice to then be included in the Disclosure Report. As will become evident later, these concerns will be satisfied by the form of the orders I propose to make. 21 The Receivers have also informed the Court that: 1. the facilities will not be drawn unless necessary; 2. if the expected cash flows materialise and they have access to those cash flows until 12 April 2010, it will not be necessary to draw the facilities at all or, if it is necessary to do so, for amounts which are substantially less than the maximum amounts of the facilities; 3. if the Receivers do not have access to the cash amounts then the maximum amounts or a substantial amount of them will be required; 4. the terms of each Proposed Operating Facility are reasonable and that the interest proposed to be charged by Westpac under the relevant Proposed Operating Facility is commercial in a receivership context; and 5. it is in the best interests of each of the Proposed Borrowers to enter into the relevant Proposed Operating Facility to preserve the status quo of the business pending consideration by the Court of the Receivers' report due on 12 April 2010. 22 The reason why the Receivers have made this application may be simply stated – the Receivers submit that Court appointed receivers should not be required to self fund a business to which they have been appointed and that if the appointment is to a business which from time to time experiences cash flow shortages, the receivers should not be personally exposed to the shortages. In the case of each of the Businesses, the Receivers submit that based on the assumptions and methodologies identified in paragraph [12] above, the cash flow forecasts establish that there will be a cash shortage from time to time prior to 12 April 2010. The Receivers properly acknowledge that there are other options to seeking funding from a secured lender including making express agreements with suppliers and ceasing trading operations but submit that those options are not appropriate. 23 ASIC does not oppose the making of the orders sought by the Receivers. Mr Letten consents to their making. The Court is therefore left in the position that no party represented in the present proceedings opposes the orders that are sought. It can be inferred, however, from the lack of opposition by ASIC that it is the opinion of the regulator that what is proposed could be carried into effect without substantial risk of contravention of the Act. There is no dispute that the Court has power to make the Proposed Orders whether as an incident of the power to appoint receivers or in exercise of powers conferred on the Court by s 601EE or s 1323 of the Act. 24 In considering whether to make orders of the kind sought, it is necessary to bear a number of other facts and matters at the forefront of that consideration. First, the orders are sought without the Receivers having completed their assessment of the businesses, properties and schemes that was a principal reason for their appointment. Those assessments are due to be finished within two weeks and it has not been suggested that the assessments cannot be completed within that time. 25 Secondly, and no less importantly, it is not yet clear whether any of the Corporate Defendants, or any of the Schemes, the subject of this application is or may be unable to meet its debts as and when they fall due. The request by the Receivers for the power to borrow further money demonstrates that the companies or the schemes, or both, may not be able to meet their debts as they fall due from cashflow. It must be emphasised that this is not to say that the companies or the schemes are insolvent. The willingness of Westpac to make further loans may suggest to the contrary. What is presently important is that solvency has not been demonstrated. 26 The third consideration is that the principal function of the Receivers is to maintain the status quo. If it is demonstrated that further borrowings are necessary in order to preserve the property of which the Receivers have been appointed receiver, the borrowing of that money can be, and should be, understood as no more than a means of preserving the status quo by preserving the value of the assets to which the Receivers were appointed. But the need to make further borrowings must be capable of demonstration case by case. For that reason, if it is appropriate to give the Receivers the power to agree with a lender that the lender will provide a further facility, that facility should not be drawn upon unless the Receivers are of opinion, and certify in writing, before drawing on the facility that, for stated reasons, the drawing is necessary to preserve one or more identified assets (being an asset or assets to which they have been appointed receivers) (the Receivers' Certification). Certification was not opposed by the Receivers. However, the form of Certification subsequently proposed by the Receivers I have amended. 27 As noted earlier, each Proposed Operating Facility affects or the very least directly concerns a Scheme or Schemes listed in Annexure A to the Appointment Order. I will deal with each of them in turn. Yarra Valley Golf Pty Ltd (receivers and managers appointed) (YVG) 28 The Third Templeton Affidavit proposes that YVG establish a loan facility with Westpac in an amount of $602,000 secured on the Yarra Valley Golf properties and Business on specified terms. The amount of $602,000 was said to be comprised of the adjusted cash funding requirement for 12 March 2010 of $175,000, valuation and insurance cost estimates of $75,000 and the expected creditor balance as at 12 April 2010 of $352,000. 29 However, the Third Templeton Affidavit goes on to state (at [48]) that the projected position for the period from 25 March 2010 to 12 April 2010 "shows a minimal cash/funding requirement even assuming that the $100,000 cash buffer is required" and that "having regard to the fact that there is no cost associated with the establishment of the facility unless it is used, and establishing it in conjunction with the other facilities referred to in this affidavit will avoid the necessity to do so later should an unexpected need arise, … it is appropriate to accept the proposed facility as negotiated even if the amount exceeds the presently anticipated need". 30 Finally, the Third Templeton Affidavit states that: If the actual cash flows of [YVG] up to 12 April 2010 are precisely as forecast, it is expected that the drawn balance of the facility will be $272,084, on the assumption that the valuation and insurance expense and all creditors are paid. This assumes, however, that receipts of $115,000 from accrued Heritage Golf and Country Club members' subscription fees will have been paid by 12 April 2010, so the actual amount drawn down will be probably be substantially greater, but should reduce to the predicted figure as that revenue is received. It also assumes that the cash balance on 12 April ($48,367) and the proceeds of the members' subscription fees are actually available to the Receivers. 31 In the circumstances, I would grant the Receivers the Orders they seek in relation to this proposed facility but subject to the Receivers' Certification. Glenbelle Pty Ltd (receivers and managers appointed) (Glenbelle) 32 Glenbelle is an entity connected to Scheme No 16 in Annexure A to the Appointment Order. The business is the Sebel Heritage Lodge Management Lot, Yarra Valley Golf Course which is managed by Mirvac under a management agreement. 33 The Third Templeton Affidavit proposes that Glenbelle establish a loan facility with Westpac in an amount of $625,000 secured on the Glenbelle properties and Business on specified terms. The amount of $625,000 was said to be comprised of the adjusted cash funding requirement for 26 March 2010 of $142,355, valuation and insurance cost estimates of $40,000 and the expected creditor balance as at 25 March 2010 of $440,000. 34 In calculating the amount of the facility, the Receivers have not taken into account deposits paid in advance by customers, during the receivership, for future bookings. Instead the Receivers have decided to retain those funds in the event they need to be refunded. 35 The Third Templeton Affidavit states that if the actual cash flows of Glenbelle up to 12 April 2010 are precisely as forecast, it is expected that the drawn balance of the facility will be $112,642, on the assumption that the insurance and valuation expenses and all creditors are paid. However, that statement assumes that: 1. debtors of $220,144 expected to be received in the following weeks will have been paid by 12 April 2010, so the actual amount drawn down will be probably substantially greater but should reduce to the predicted figure as the debtors are collected over time; and 2. the cash balance on 12 April 2010 ($116,612) and the proceeds of those debtors are actually available to the Receivers. 36 In the circumstances, I would grant the Receivers the Orders they seek in relation to this proposed facility but subject to the Receivers' Certification. Firbank Arch Pty Ltd (Receivers and Managers Appointed) (Firbank) -Reef House Resort 37 Firbank is an entity connected to Scheme No 6 in Annexure A to the Appointment Order. The business is the Reef House Resort which is managed by Mirvac under a management agreement. 38 The Third Templeton Affidavit proposes that Firbank establish a loan facility with Westpac in an amount of $335,000 secured on the Reef House properties and Business on specified terms. The amount of the proposed facility is the sum of the following amounts shown in the cash flow spreadsheet for Reef House: 1. the adjusted cash funding requirement for 5 April 2010 of $71,153, rounded down to $70,000; 2. the valuation and insurance cost estimate of $60,000; and 3. the expected creditor balance as at 12 April 2010 of $205,084, rounded down to $205,000. 39 The Third Templeton Affidavit discloses that if the actual cash flows of Reef House up to 12 April 2010 are precisely as forecast, it is expected that the drawn balance of the facility will be $80,918, on the assumption that the valuation and insurance expenses and all creditors are paid. However, that statement assumes that receipts of $101,698 from debtors will have been paid by 12 April 2010, so the actual amount drawn down will be probably be substantially greater, but should reduce to the predicted figure as those debtors are collected and that the proceeds of those debtors are actually available to the Receivers. 40 In the circumstances, I would grant the Receivers the Orders they seek in relation to this proposed facility but subject to the Receivers' Certification. Twinview Nominees Pty Ltd (receivers and managers appointed) (Twinview) 41 Twinview is an entity connected to Scheme No 14 in Annexure A to the Appointment Order. The property connected to the scheme is 167 Flinders Lane, Melbourne. 42 The Third Templeton Affidavit proposes that Twinview establish a loan facility with Westpac in an amount of $26,000 secured on the Flinders Lane property on specified terms. The amount of the proposed facility is the sum of the valuation and insurance cost estimate of $15,000 and the expected creditor balance as at 12 April 2010 of $10,900, rounded up to $11,000. 43 The Third Templeton Affidavit further states that if the actual cash flows of Twinview up to 12 April 2010 are precisely as forecast, it will not be necessary to draw on this facility up to that time and there will be a cash balance sufficient to pay for the insurance and valuation expenses and the creditors on the basis that the cash balance on 12 April 2010 ($26,400) is actually available to the Receivers. There is no reason to suggest otherwise. 44 In the circumstances, I would grant the Receivers the Orders they seek in relation to this proposed facility but subject to the Receivers' Certification. GlenCentre Hawthorn Pty Ltd (receivers and managers appointed) (Glen Centre) 45 Glen Centre is an entity connected to Scheme No 13 in Annexure A to the Appointment Order. The property connected to the scheme is 673-681 Glenferrie Road, Hawthorn. 46 The Third Templeton Affidavit proposes that Glen Centre establish a loan facility with Westpac in an amount of $33,000 secured on the Glenferrie Road property on specified terms. The Second Templeton Affidavit stated that the required funding was $43,000 but this figure included a sum of $10,000 for operating / trading which is no longer required. The amount of the proposed facility is the sum of the valuation and insurance cost estimate of $15,000 and the expected creditor balance as at 12 April 2010 of $18,400, rounded down to $18,000. 47 The Third Templeton Affidavit further states that if the actual cash flows of The Glen Centre Hawthorn up to 12 April 2010 are precisely as forecast, it will not be necessary to draw on this facility up to that time and there will be a cash balance sufficient to pay for the insurance and valuation expenses and the creditors on the basis that the cash balance on 12 April ($47,300) is actually available to the Receivers. 48 In the circumstances, I would grant the Receivers the Orders they seek in relation to this proposed facility but subject to the Receivers' Certification. Nicholson Street Pty Ltd (receivers and managers appointed)(Nicholson Street) 49 Nicholson Street is an entity connected to Scheme No 9 in Annexure A to the Appointment Order. The property connected to the scheme is 127-137 Nicholson Street, East Brunswick. 50 The Third Templeton Affidavit proposes that Nicholson Street establish a loan facility with Westpac in an amount of $48,000 secured on the Nicholson Street property on specified terms. The amount of the proposed facility is the sum of the valuation and insurance cost estimate of $25,000, the expected creditor balance as at 12 April 2010 of $12,400 rounded up to $13,000 and project management and other costs associated with assessing the financial benefits for stakeholders of completing the rezoning of Nicholson Street of $10,000. 51 The Third Templeton Affidavit further states that if the actual cash flows of Nicholson Street up to 12 April 2010 are precisely as forecast, it will not be necessary to draw on this facility up to that time and there will be a cash balance sufficient to pay for the insurance and valuation expenses but not to pay the outstanding creditors. The Third Templeton Affidavit goes on to state that there will be a shortfall of $10,700 on the assumption that the cash balance on 12 April ($27,000) is actually available to the Receivers. 52 In the circumstances, I would grant the Receivers the Orders they seek in relation to this proposed facility but subject to the Receivers' Certification. The George Street and Cimitiere House Joint Ventures 53 Enmore Pty Ltd (receivers and managers appointed) (Enmore) is an entity connected to Scheme Nos 4 and 5 in Annexure A to the Appointment Order. The property connected to scheme No 4 is 34 George Street, Launceston and the property connected to scheme No 5 is 113 Cimitiere Street, Launceston. 54 The Third Templeton Affidavit proposes that Enmore Pty Ltd (receivers and managers appointed) establish a loan facility with Westpac in an amount of $57,000 secured on the George Street and the George Street properties on specified terms. 55 The Third Templeton Affidavit further stated that the cash flow forecasts had been prepared and funding had been sought on a combined basis for the following reasons; 1. the properties have historically received shared financing and utilised shared bank accounts; 2. the existing facilities provided by Westpac are secured by "all monies" mortgages over both properties and a fixed and floating charge over Enmore, so that any monies drawn on those securities for the purposes of one of the Businesses is automatically also secured on the property of the other; 3. if, and to the extent that the facilities need to be drawn, it will be more readily apparent for which property the relevant expenditure is made, and this accounting process can more conveniently be carried out at a later date; 4. the allocation of expected outgoings between the two would in some instances at this stage require a somewhat arbitrary division; 5. the properties are adjacent to one another with a shared car park; and 6. the properties have a common property manager (namely, Andrew Heap & Associates). 56 The amount of the proposed facility is the sum of the adjusted cash funding requirement for the week commencing 5 April 2010 of $3,900, rounded up to $5,000, valuation and insurance cost estimate of $30,000 and the expected creditor balance as at 12 April 2010 of $22,300, rounded down to $22,000. 57 The Third Templeton Affidavit further states that if the actual cash flows of Enmore up to 12 April 2010 are precisely as forecast, it will not be necessary to draw on the facility to meet the projected cash/funding requirement. However, on the assumption that the cash balance on 12 April ($16,200) is actually available to the Receivers it will be necessary to draw a total of $36,500 to meet the cost of insurance and valuations and to pay the anticipated creditors as at 12 April 2010. 58 In the circumstances, I would grant the Receivers the Orders they seek in relation to this proposed facility but subject to the Receivers' Certification. Botanica Properties 59 The "Botanica" townhouses are part of the Yarra Valley Golf Course development of scheme No 15 in Annexure A to the Appointment Order. 60 There are 18 lodge townhouses (lots 601 to 618 on plan of subdivision number 415064K) located at the Heritage Golf and Country Club, Wonga Park. YVG sold each townhouse "off the plan" to various purchasers in 2006 and 2007 for prices ranging from $655,000 to $739,000. 61 In respect of lots 601 to 610, Mr Peter Bate (the "superintendent" of Botanica) and the Receivers' legal advisors have informed the Receivers that: 1. the building works are complete albeit some landscaping is still to be undertaking to complete that stage of the development as required; 2. plans of subdivision have been registered and notice of registration has been sent to purchasers; 3. occupancy permits have been issued; 4. the "particulars of sale" for the contracts of sale indicate that settlement is due to take place under the contracts of sale within seven days of the vendor giving notice to the purchaser that an occupancy permit has been issued; 5. the vendor has not provided the purchasers with notice that the occupancy permits have been issued; and 6. the contracts of sale impose post settlement obligations on the vendor. 62 In respect of lots 611 to 618 of the Botanica properties, Peter Bate, the "superintendent" for the Botanica properties, informed the Receivers that: 1. the building works are not complete and the cost to complete is $968,000. (A breakdown of that figure was provided in the Third Templeton Affidavit although many elements of it were not the subject of independent review); 2. plans of subdivision have been registered and notice of registration has been sent to the purchasers; 3. occupancy permits have not been issued; 4. the "particulars of sale" for the contracts of sale indicate that settlement is due to take place under the contracts of sale within seven days of the vendor giving notice to the purchaser that an occupancy permit has been issued; 5. settlement cannot take place until the outstanding building works are complete and the occupancy permits have been issued; and 6. the contracts of sale impose post-settlement obligations on the vendor. 63 The maximum value of the post settlement obligations (on a worst case basis) were summarised by the Receivers as follows: Incentive Total estimated value (lots 601-618) Rent guarantee $1,476,120 Golf membership $336,564 Accommodation $108,500 Golf lessons $7,150 Other $15,600 Total $1,943,934 The estimate included the full value of the two year rental guarantees for each of the properties. 64 In the Third Templeton Affidavit, the Receivers expressed the view that the purchasers of lots 601 to 618 of the Botanica properties are unlikely to settle the contracts of sale unless the Receivers can provide some assurance that YVG's post-settlement obligations under the contracts of sale would be satisfied. The Third Templeton Affidavit goes on to state that the Receivers consider that it is beneficial for the pre-existing sale contracts to settle and have therefore sought: 1. funding on behalf of YVG from Westpac for the rental guarantee component of the post settlement obligations of YVG; and 2. Westpac's agreement in principle to allow a portion of the settlement proceeds of individual Botanica properties (to be quantified and agreed on a case by case basis) to be retained to satisfy the other post settlement obligations of YVG where necessary. 65 In the Third Templeton Affidavit the Receivers expressed the view that it would be detrimental to YVG and its stakeholders for the existing sale contracts for each of lots 601 to 618 to be abandoned or delayed having regard to: 1. the value of the sale contracts and post-settlement obligations are acceptable; 2. the potential for additional construction costs in the event that the existing builder abandons completion of the remaining construction work and a new builder needs to be engaged (noting he has already walked off the site but will recommence if funding is available and confirmed); 3. the time it would take to re-sell 18 townhouses; 4. the need to complete the construction works even if the contracts were to be abandoned and the properties re-sold; 5. the uncertainty that would be created from abandoning the existing contracts; 6. the additional interest incurred through not paying down existing loans from the sale proceeds; 7. the additional Receivers' and legal costs that would be incurred from terminating the existing contracts and re-marketing the properties; 8. the additional selling costs that would be incurred from engaging agents and re-marketing the properties; and 9. the potential for damages claims against YVG that may arise from current purchasers if the existing contracts did not settle. 66 Next, the Third Templeton Affidavit expressed the view that it was in the interests of all stakeholders for the existing builder to complete the Botanica properties on the following grounds: 1. the builder has indicated that it is ready, willing and able to come back on site immediately to undertake the outstanding works in relation to the Botanica properties; 2. there would be a significant cost in terms of time, delay and financing costs if another builder were to be retained to complete the outstanding works. (The additional cost was unable to be quantified at this stage); 3. the builder has indicated that it will not come back on site to complete the outstanding works in relation to the Botanica properties unless its outstanding claims in respect of the Botanica properties are paid; and 4. the existing residents are very supportive of the completion of the development. 67 Finally, the Third Templeton Affidavit expressed the view that it was in the interests of all relevant stakeholders for the outstanding works to be completed in relation to the Botanica properties and the contracts of sale for lots 601 to 618 to be settled as soon as possible on the following grounds: 1. the Receivers believe that the builder may be less willing to complete the works if there is a delay. The basis for this view was not explained; 2. the settlement in the short term of the contracts of sale for lots 601 to 610 would result in the receipt of approximately $6.2 million in respect of the net proceeds of sale which could be used to pay down bank debt and reduce ongoing interest obligations; 3. upon completion of lots 611 to 618, further receipts of $5 million would be received from the settlement of those lots which could be used to further reduce bank debt; and 4. the Receivers believe that any delay of the settlement of the contracts of sale (in a receivership context) would create uncertainty and may increase the risk that purchasers would attempt to rescind the contracts of sale. 68 The Receivers stated that they did not consider that YVG could complete the outstanding works and settle the contracts of sale for lots 611 to 618 of the Botanica properties until funding is obtained and that YVG cannot settle the contracts of sale for lots 601 to 610 without obtaining funding for the performance of the rental guarantee obligations. 69 The Third Templeton Affidavit proposed that YVG enter into a facility with Westpac to fund the completion and settlement of the Botanica properties ($980,000) and to fund the post-settlement obligations ($1,934,934) on specified terms and conditions. For present purposes, it is sufficient to record that the proposed facility comprised seven tranches: 1. the purpose of tranche A is to meet the costs of work already completed relating to lots 601 to 618; 2. the purpose of tranche B is to meet the future costs of completion of lots 611 to 618. An existing facility exists for these amounts but is to be replaced by the proposed facility; 3. the purpose of tranche C is to meet the GST obligations associated with all completion costs which will be repaid once the GST refunds are received; 4. the purpose of tranche D is to meet project management costs for completion of lots 611 to 618 and a contingency for unexpected costs; 5. the purpose of tranche E is to meet interest, costs and charges associated with the Botanica facilities; 6. the purpose of tranche F is to meet the obligations to the builder in relation to post completion retention amounts. An existing facility exists for these amounts but is to be replaced by the proposed facility; and 7. the purpose of tranche G is to meet the post settlement rental guarantee obligations to purchasers of lots 601 to 618. 70 During the course of the hearing, I expressed concern that much of the information on which the Receivers appeared to rely was provided by Mr Peter Bate, who was described as the "superintendent", and who was also involved with another scheme, the SY21 Retail Complex Project Scheme. The evidence did not disclose the terms of his engagement, his qualifications or his association (if any) with the builder. In fact, the builder was not named. During the course of the hearing, Counsel for the Receivers informed the Court that they did not pursue their application in relation to lots 611 to 618 but did pursue the balance of the application. 71 Subsequent to the hearing, the Receivers' position changed. They filed what is described as the Fourth Templeton Affidavit which informed the Court: 1. of the name of the builder and that, so far as the ASIC records disclosed, the builder had no connection with Mr Letten or Mr Bate. However, the Fourth Templeton Affidavit did not address the position of Mr Bate as the "superintendent"; 2. amounts have been or will be certified by a quantity surveyor approved by Westpac prior to amounts being paid to the builder; 3. the interest cost of not discharging the amount of secured debt by realisation of lots 611 to 618 is in the order of $30,000 per month; 4. should Westpac appoint receivers to the Botanica properties or otherwise take possession of the properties, there will be additional costs incurred as a result of the interaction of two sets of receivers thereby adversely affecting the return to investors; and 5. there was no reason they could think of why the existing contracts should not be settled as soon as possible and that if the townhouses were not attended to they would quickly "become forlorn". 72 In my view, the Receivers are justified in causing YVG to borrow further funds from Westpac in the maximum amounts specified in, and substantially upon the terms set out in the proposed Stage 1 Botanica Facility (the Stage 1 Botanica Facility)which was provided to the Court and which will be attached to these Orders provided that, at the time of any draw down of funds under the Stage 1 Botanica Facility, the Receivers issue a Certificate substantially in the form contained in Annexure A to these Orders. 73 However, I do not consider that the Receivers are justified in causing YVG to borrow further funds for the development of lots 611 to 618. As noted earlier (see [26]), the principal function of the Receivers is to maintain the status quo. The investors have been told that is the Receivers' function: see para 16 of the 25 February Orders. That function may involve the management of businesses. In my view, it does not involve incurring new debt to complete development of the townhouses which will take a significant period of time well beyond 12 April 2010. The Disclosure Report relevant to this scheme is due on 12 April 2010. When that report has been received, the investors can read the report and assist in deciding on the future of the scheme. Of course, if events change, the Receivers are at liberty to apply to the Court for a variation of the Orders. I certify that the preceding seventy-three (73) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon. Associate: Dated: 31 March 2010