FEDERAL COURT OF AUSTRALIA Valuestream Investment Management Ltd v Richmond Management Pty Ltd [2012] FCA 898 Citation: Valuestream Investment Management Ltd v Richmond Management Pty Ltd [2012] FCA 898 Parties: VALUESTREAM INVESTMENT MANAGEMENT LTD (ACN 094 107 034) IN ITS CAPACITY AS RESPONSIBLE ENTITY OF THE ADDWEALTH ACHIEVER FUND (ARSN 097 580 955) v RICHMOND MANAGEMENT PTY LTD (ACN 118 043 191) IN ITS CAPACITY AS TRUSTEE OF THE RICHMOND EQUITY FUND File number: WAD 185 of 2012 Judge: MCKERRACHER J Date of judgment: 22 August 2012 Catchwords: CORPORATIONS – urgent ex parte interlocutory application for the appointment of an interim receiver and manager – managed investment scheme – whether circumstances justified appointment of a receiver and manager – prima facie evidence that the trustee company no longer had director resident in Australia or registered office – prima facie evidence that the trustee company had made improper investments, failed to keep accounting records, appoint an auditor and report to unit holders Legislation: Federal Court of Australia Act 1976 (Cth) s 57(1) Corporations Act 2001 (Cth) s 1323(1)(h) Cases cited: Australian Securities Commission v AS Nominees Limited (1995) 62 FCR 504 Australian Securities and Investments Commission v Letten [2010] FCA 140 Australian Securities and Investments Commission v Marshall Bell Hawkins Ltd (2002) 43 ACSR 340 Beach Petroleum NL v Johnson (1992) 9 ACSR 404 Re Allco Securities Pty Ltd [2011] NSWSC 1113 Date of hearing: 17 August 2012 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 49 Counsel for the Plaintiff: Mr A Young with Dr V Priskich Solicitor for the Plaintiff: Middletons IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 185 of 2012 IN THE MATTER OF RICHMOND EQUITY FUND BETWEEN: VALUESTREAM INVESTMENT MANAGEMENT LTD (ACN 094 107 034) IN ITS CAPACITY AS RESPONSIBLE ENTITY OF THE ADDWEALTH ACHIEVER FUND (ARSN 097 580 955) Plaintiff AND: RICHMOND MANAGEMENT PTY LTD (ACN 118 043 191) IN ITS CAPACITY AS TRUSTEE OF THE RICHMOND EQUITY FUND Defendant JUDGE: MCKERRACHER J DATE OF ORDER: 17 AUGUST 2012 WHERE MADE: PERTH UPON THE PLAINTIFF (VALUESTREAM) GIVING TO THE COURT THE UNDERTAKING SET OUT IN SCHEDULE A HERETO, THE COURT ORDERS THAT: 1. Until the determination of this proceeding, pursuant to s 57(1) of the Federal Court of Australia Act 1976 (Cth) and s 1323(1)(h) and (3) of the Corporations Act 2001 (Cth) (Corporations Act), Andrew Cummins and Peter Krejci be and are appointed joint and several receivers and managers (Receivers) of all of the assets held by Richmond Management Pty Ltd (ACN 118 043 191) (Richmond) as trustee of the 'Richmond Equity Fund' (REF) with the object of ascertaining, protecting and administering the assets of the REF for the benefit of all the unit holders of the REF (the Object). 2. Until the determination of this proceeding the Receivers have the power to do in Australia and elsewhere all things necessary or convenient to be done for or in connection with the attainment of the Object. 3. Without limiting the generality of paragraph 2 of this Order, for the purpose of attaining the Object the Receivers are empowered to: (a) do any or all of the things described in ss 420(1) and (2) of the Corporations Act, except the power of sale; (b) to inspect at any reasonable time any books (as defined in s 9 of the Corporations Act) in relation to the REF that are in the possession or control of Addwealth Pty Ltd (saving all just exceptions); and (c) require: (i) Richmond by its director(s), officer(s), agents and employees (if any); (ii) Wesley Medford; (iii) Jennifer Medford; (iv) David Price; and (v) Addwealth Pty Ltd by its directors, officers, agents and employees; to provide the Receivers with reasonable assistance. 4. Each of: (a) Richmond by its director(s), officer(s), auditor, agents and employees (if any); (b) Wesley Medford, by himself and or his agents; (c) Jennifer Medford, by herself and or her agents; and (d) David Price, by himself and or his agents; deliver up or make available to the Receivers all documents in their possession or control relating to the REF, including but not limited to, all books (as defined in s 9 of the Corporations Act), records and other papers (saving all just exceptions). 5. Until the determination of this proceeding the Receivers shall have all the powers of the trustee of the REF and Richmond be and is restrained from exercising any power as trustee of the REF save with the prior written consent of the Receivers or leave of the Court. 6. The Receivers be entitled to such reasonable remuneration and costs and expenses properly incurred in the performance of their duties and in the exercise of their powers as receivers and managers of the assets of the REF as may be fixed by the Court on the application of the Receivers, such sums to be calculated on the basis of the time reasonably spent by the receivers and managers, their partners and staff, such fees to be paid out of the assets of the REF provided that the Receivers' remuneration and reasonable costs and expenses must not be paid in priority to any debt the payment of which is secured by the assets of the REF (including by any floating charge) without the consent in writing of the relevant secured lender. 7. As soon as practicable Valuestream serve a copy of this order on each of Richmond, Wesley Medford, Jennifer Medford, David Price and Denis Tennenbaum. 8. Each party, the Receivers, Denis Tennenbaum and any other person affected by these orders have liberty to apply. 9. Valuestream's costs of its interlocutory application for interim relief are reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. SCHEDULE A UNDERTAKING GIVEN TO THE COURT BY VALUESTREAM: (1) Valuestream undertakes to: (a) submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of the order; and (b) pay the compensation referred to in (a) above, to the person there referred to. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 185 of 2012 IN THE MATTER OF RICHMOND EQUITY FUND BETWEEN: VALUESTREAM INVESTMENT MANAGEMENT LTD (ACN 094 107 034) IN ITS CAPACITY AS RESPONSIBLE ENTITY OF THE ADDWEALTH ACHIEVER FUND (ARSN 097 580 955) Plaintiff AND: RICHMOND MANAGEMENT PTY LTD (ACN 118 043 191) IN ITS CAPACITY AS TRUSTEE OF THE RICHMOND EQUITY FUND Defendant JUDGE: MCKERRACHER J DATE: 22 AUGUST 2012 PLACE: PERTH REASONS FOR JUDGMENT INTRODUCTION 1 By urgent ex parte application on 17 August 2012 I made orders essentially in the terms sought by the plaintiff (Valuestream) in light of the evidence and for the reasons briefly discussed below. EVIDENCE 2 Valuestream relied upon several affidavits being: (a) the affidavit affirmed by Robert Patrick Marie on 8 August 2012 (Marie (1)); (b) the affidavit sworn by Nicholas Henry Brown on 8 August 2012 (Brown); (c) the affidavit sworn by Fiona Jane McCann on 10 August 2012 (McCann); (d) the affidavit sworn by Christopher Chandran on 13 August 2012 (Chandran); (e) the affidavit affirmed by Rachael Elizabeth King on 15 August 2012 (King); and (f) the affidavit affirmed by Robert Patrick Marie on 15 August 2012 (Marie (2)). 3 I am satisfied that the affidavit material reveals as Valuestream's submissions show, the matters which follow. The factual summary is adopted in large measure from Valuestream's helpful written submissions. Valuestream and AAF 4 Valuestream is, and since about 31 July 2001 has been, the responsible entity of a registered managed investment scheme known as the Addwealth Achiever Fund (ARSN 097 580 955) (AAF). Since 30 June 2011, there have been approximately 85 million units on issue in AAF. Almost exclusively, retail investors hold the issued units in AAF. The defendant and REF 5 The defendant, Richmond Management Pty Ltd (ACN 118 043 191) (Richmond) is, and since about 19 January 2009 has been, the trustee of the trust (or unregistered managed investment scheme) known as the 'Richmond Equity Fund' (REF). 6 REF was: (a) established to provide investment opportunities to and for AAF; (b) promoted to Valuestream (and AAF) by Mr Paul Foster, the Chief Executive Officer of Addwealth Pty Ltd (ACN 091 604 250) (Addwealth), a company in the business of recommending and promoting financial products, including investments in managed investment schemes. AAF's investment in REF 7 Between 13 March 2009 and 15 November 2011, upon Mr Foster's recommendations, Valuestream, as responsible entity of AAF, invested $29,870,000 in REF. 8 By 3 July 2012: (a) AAF held 27,257,404 (i.e. 98.08%) of the 27,791,274 issued units in REF; (b) the 'Tannenbaum Superannuation Fund' held 533,570 (i.e. 1.919%) of the 27,791,274 issued units in REF; and (c) Richmond held 300 (i.e. 0.001%) of the 27,791,274 issued units in REF. Audit of AAF for the year ended 30 June 2011 9 In or about March 2011, AAF's responsible entity and auditors determined that the accounts of REF for the year ended 30 June 2011 should be consolidated into the accounts of AAF. This was to be subject to an independent audit of the same kind and of the same standard as that which was required to be performed in respect of AAF. 10 From 1 July 2011, Richmond engaged and retained Addwealth to act as the investment manager of REF. Between July 2011 and April 2012, Valuestream and AAF's auditors tried but have failed to obtain from Richmond (and its appointed agent Addwealth) information in relation to REF as required by AAF's auditors (Moore Stephens). This information was sought for the purposes of the audit of AAF's financial statements for the year ended 30 June 2011. 11 On 5 April 2012, Valuestream's managing director and company secretary, Mr Marie, signed the directors' report in respect of the financial statements of AAF for the year ended 30 June 2011. Also that day, AAF's auditors disclaimed expressing an opinion about the accuracy of those financial statements. The financial report of AAF for the year ended 30 June 2011. It: (a) contains statements by Valuestream's managing director to the effect that he was unable to form a view as to the value of AAF as at 30 June 2011 by reason of uncertainty as to the value of AAF's investment in REF; (b) contains a disclaimer of opinion expressed by AAF's auditors because the auditors were unable to obtain sufficient appropriate audit evidence of the value as at 30 June 2011 of AAF's investment in REF; and (c) suggests that (subject to those qualifications) as at 30 June 2011 the fair value of AAF's investment in REF may have been $29,977,350 (representing 38% of the suggested value of AAF). November 2011 freeze on dealings in units in AAF 12 As a result of concerns in respect of the value of AAF's investment in REF that had emerged and crystallised in about November 2011 during the audit process, on 30 November 2011, Valuestream caused all transfers, redemptions, sales and allotments of units in AAF to be suspended or frozen. 13 That suspension or freeze remains in effect. Richmond's conduct as trustee of REF 14 AAF contends that REF has not met its obligations as trustee. 15 Pursuant to the REF Constitution, Richmond: (a) must keep complete and accurate accounting records for REF (cl 12.1); (b) must prepare for each financial year a financial report for REF (cl 12.2(a)); (c) must appoint an auditor to audit the accounts of REF (cl 12.3(a)); and (d) may cause an asset of REF to be valued at any time (cl 10.1). 16 Pursuant to the REF Management Agreement, Richmond must provide monthly reports stating the net asset value of REF, the number of units on issue and other information regarding REF as requested by AAF (or its nominee) from time to time (cl 2.7). 17 The REF Investment Document (at p 24) requires Richmond to: (a) report to Valuestream quarterly on money invested, opening and closing balances, a summary of all transactions and provide a free update at any time upon request; (b) each year (in about September) to send to Valuestream the accounts of REF; and (c) notify Valuestream of any significant event. 18 On the face of the evidence as it presently stands, it appears from documents provided to Valuestream that Richmond has failed to keep complete and accurate accounting records. It has failed or refused to respond adequately or at all to requests by Valuestream and AAF's auditors for information in respect of REF. It has failed to prepare and provide to Valuestream any financial report for REF for the year ended 30 June 2011. It has failed to appoint an auditor to audit the financial accounts of REF for the year ended 30 June 2011 or at all. Despite Valuestream's requests, it has failed to have the assets of REF valued (or revalued) since 30 November 2011. Despite request by Valuestream, it has failed and refused to convene a meeting of unit holders in REF. It has failed to manage prudently and secure the assets of REF. Investments apparently made by Richmond as trustee of REF 19 Additionally, on a transactional level, Valuestream complains that investments apparently made by Richmond as trustee of REF appear to have been 'imprudent if not improper'. 20 Richmond apparently lent a significant amount of REF's money (without obtaining any security) to Framers Mill Pty Ltd (a company apparently owned by Mr Foster and of which he is a director and secretary). Richmond has written-off that loan. It appears that Framers Mill Pty Ltd is unable to repay it. 21 In and after March 2009, Richmond apparently lent a significant amount of REF's money (more than $5 million and perhaps as much as $10.5 million) (without obtaining any security) to Pivod Group Ltd (ACN 088 220 937) (Pivod) (a company of which Richmond's former directors, Mr Wesley Medford and Mr David Price, were also directors). Administrators were appointed to Pivod in November 2010. Pivod executed a deed of company arrangement on or about 19 January 2011. The value and recoverability of the loan to Pivod are doubtful. 22 Richmond apparently 'invested' a significant amount of REF's money in Decimal Pty Ltd, a company of which Mr Foster is a director. The value of the investment in Decimal is doubtful. 23 Richmond apparently lent a significant amount of REF's money (without obtaining any security) to Sentiens Pty Ltd (ACN 105 158 183) (Sentiens), a company apparently owned as to 24% by Mr Foster and of which he is a director. The value and recoverability of the loan to Sentiens are doubtful. 24 Richmond apparently 'invested' a significant amount of REF's money in the 'Ardent Growth Fund', a fund controlled by companies with which each of Mr Foster and Mr Wesley Medford is or has been associated. The value of the investment in the Ardent Growth Fund is doubtful. 25 Richmond apparently 'invested' a significant amount of REF's money (more than $630,000) in TGM Equities LLP. Materials produced by Richmond suggest that that investment now has no value. 26 Richmond apparently 'invested' a significant amount of REF's money (approximately $5.5 million) in a hotel. The value of the investment in the hotel is uncertain, although the hotel itself is well known. Recent developments 27 On Thursday, 9 August 2012 Valuestream as responsible entity of AAF commenced this proceeding by Originating Process. The process was originally to be returnable on 30 August 2012. However, additional matters came to light as disclosed in Valuestream's affidavits. 28 On Friday, 10 August 2012, an attempt was made to serve, among other things, the Originating Process in this proceeding on Richmond at its registered office. The documents were not then served because Richmond's registered office appeared to be abandoned. 29 On Monday, 13 August 2012, a further attempt was made to serve, among other things, the Originating Process in this proceeding on Richmond at its registered office, whereupon: (a) Richmond's registered office was found to be unlocked and but apparently abandoned; (b) the paper shredder in the office appeared to have been used and left turned on; (c) the Originating Process and related documents were served on Richmond by leaving them at its registered office. 30 Also on Monday, 13 August 2012, contact was made with Richmond's former solicitor who said he would seek instructions in respect of the copy of the Originating Process and related documents that have been delivered to him. However, no further communication in respect of Richmond has been received from or been had with that solicitor. 31 On Tuesday, 14 August 2012, attempts were made to contact Richmond by telephone whereupon it was discovered that its telephone had been disconnected. 32 Also on Tuesday, 14 August 2012, Mr Marie visited Richmond's registered office in Olive Street, Subiaco, Western Australia where a former director was found alone in the director's office. Mr Marie asked to speak with a representative of Richmond and Mr Price said he had 'nothing to do with Richmond'. 33 On the same day, an up-to-date historical company extract was obtained in respect of Richmond. It shows Mr Wesley Medford having resigned as a director of Richmond on 16 June 2011 (having been banned by the Australian Securities and Investments Commission (ASIC) from acting as a company director) and Mr David Price having resigned as a director of Richmond on 31 May 2012. As a result and contrary to s 201A(1) of the Corporations Act 2001 (Cth) (CA). Richmond does not now have any director ordinarily resident in Australia. 34 The only director of Richmond appears to be Mr Kenneth Medford, whose address is recorded as being in the United States of America. Further, Richmond does not appear to have any company secretary. Further, Richmond's holding company, Richmond Capital Group Pty Ltd, has no current company officers. Relevant principles 35 As summarised by Ford, H.A.J., Austin R.P. and Ramsay, I.M. in Ford's Principles of Corporations Law (2000, Butterworths) at [25.060]: Because of the severity of the consequences and the company's loss of commercial credit when a receiver is appointed the court will not appoint unless convinced of the necessity to do so. When the court appoints a receiver it is giving an equitable remedy. Like all equitable remedies an appointment is not available where the court thinks common law remedies are adequate. 36 Consistent with these principles in Beach Petroleum NL v Johnson (1992) 9 ACSR 404, von Doussa J said (at 406) that the appointment of a receiver and manager under s 1323(1)(h) is 'a drastic step not to be lightly taken'. His Honour went on to say (at 412): I have thought hard about other alternatives that might be available … [but] I am unable to satisfy myself that any alternative short of appointing a receiver and manager would meet the circumstances. 37 In that case, the appointment of the receiver was held to be necessary following the sale of a crushing plant which comprised a substantial portion of the company's business in order to protect the interests of persons to whom the company was possibly liable. On assessment of the evidence, von Doussa J concluded that the applicants had established a prima facie cause of action against the company and there was a real danger that it absence of interim relief, the company would dissipate its assets prior to judgment. 38 In Australian Securities and Investments Commission v Marshall Bell Hawkins Ltd (2002) 43 ACSR 340, Merkel J made urgent interim orders pursuant to s 1323(1) CA appointing a receiver and manager of all of the property of various respondent companies. In that case, his Honour found there was a prima facie case that investors had been persuaded to make inappropriate high risk investments with self-managed superannuation funds and savings and that appointing a receiver and manager was necessary to protect the interests of those investors. In that proceeding, ASIC alleged that the defendants had breached various contractual and legal duties including, inter alia: a duty of care owed in relation to the investments; a duty to disclose commissions and other benefits received as a result of the investments; and engaging in misleading and deceptive conduct in relation to advice about the investments. 39 In his reasons, Merkel J cited with approval Finn J's summary of principles relating to the operation of s 1323 CA in Australian Securities Commission v AS Nominees Limited (1995) 62 FCR 504. At [13]-[14] his Honour said: [13] …The purpose of the remedies provided in s 1323 is to protect the interests of persons who might have claims against the relevant corporations, irrespective of whether those claims are based on a breach of a law relating to corporations or arise under the general law. That purpose is usually achieved by securing the assets of the relevant corporation against which the claims may lie for the purpose of providing security for those claims or for securing assets for which that corporation may be liable to account in respect of such claims. In considering whether it is necessary or desirable to appoint a receiver and manager the Court should recognise the "drastic nature" of such an appointment, which should only be made in exceptional or special circumstances, after careful scrutiny and after less drastic remedies, including a Mareva injunction, have been considered. The circumstances where a receiver and manager may be appointed include where potential or actual claimants are being protected from incompetence, where there have been persistent breaches of trust caused by "an undeveloped sense of trusteeship" or from fraud. Thus, proof of actual or apprehended fraud is not a pre-condition to the appointment of a receiver and manager under s 1323. [14] Of particular relevance in the present case is the observation by Finn J in AS Nominees … that an appointment of a receiver and manager may be appropriate where there have been serious and persistent breaches of trust and conflicts of interest resulting in the trust funds being subject both to depredation and dissipation. His Honour's justification for the appointment in such circumstances was that for as long as the trust funds remain under the control of the relevant corporation or its controllers there can be no assurance that the breaches will not continue. While the defendants are not holding investors' funds on trust it is arguable that, having regard to their interest in the investments they, or some of them, may owe fiduciary duties or analogous duties to investors in respect of their investments: see Daly v The Sydney Stock Exchanges Ltd (1986) 160 CLR 371 at 377, Australian Securities Commission v Melbourne Asset Management Nominees Pty Ltd (1994) 49 FCR 334 at 358 and Australian Breeders Co-operative Society Limited v Jones (1998) 150 ALR 488 at 506, 517 and 518. 40 In AS Nominees Limited Finn J was required to determine two applications by the Australian Securities Commission. The first application was for the appointment of a receiver and manager of property of the corporate respondents following an investigation into the state of affairs of the companies. The second application, brought at a later date, sought an order that the respondent companies be wound up on just and equitable grounds. In its applications, the Australian Securities Commission alleged, inter alia, that: the trustee companies had been run largely at the direction of and for the benefit of a particular director; the directors repeatedly breached their duties as directors and trusteeship obligations; trust funds had been invested recklessly, often in circumstances of blatant conflict of interest or partiality; the corporate respondents had intermixed funds; and the respondent companies had shrouded the above with deficient and defective record keeping for both the companies and the trusts. 41 While his Honour ultimately found (at 526) that winding up was the 'preferable and more efficacious remedy' in the circumstances of the case, he stated that he would not hesitate in making an order for the appointment of a receiver if it was the only application before him due to the 'serious and persistent breaches of trust and conflicts and interests' and the fact that the trust funds were 'subject both to depredation and dissipation'. Crucially, Finn J reasoned (at 526) that: For as long as these remain under the control of the respondents there can be no reassurance that such will not continue… The conclusion I have arrived at is that it is not safe to leave the trust funds under the control of all or any of the respondents. 42 Further, he held that it was not necessary to establish an actual or apprehended fraud to make the orders sought by the Australian Securities Commission. His Honour said (at 525): In any event, I do not regard proof of actual or apprehended fraud as an essential requirement before an order can or should be made under this section. In the case of the First Fawkner Centre transaction there may not have been fraud. But there has been a potentially devastating breach of trust caused by "an undeveloped sense of trusteeship". (citation omitted) 43 In Re Allco Securities Pty Ltd [2011] NSWSC 1113, Barrett J said (at [15]-[21]): 15. The categories of case in which such an appointment is appropriate are not closed but several such categories are well established. One of them is where trust assets are in jeopardy. Mr Condon referred me, in that connection, to the decision of Warren J (as her Honour then was) in Yunghanns v Candoora No. 19 Pty Ltd (No. 2) [2000] VSC 300; (2000) 35 ACSR 34. That was a case where property, undoubtedly subject to trusts, was in jeopardy and proceedings for the determination of entitlements were in train. The court appointed a receiver to safeguard the property pending the determination of the claim for final relief. 16. In the present case, it is not yet established that the Unique World shares are trust property but, as I have said, it is arguable that they are and that Allco Securities holds them on trust for the plaintiffs. That is sufficient, to my mind, to form the foundation for the appointment of a receiver if what I am generally describing as jeopardy is shown. 17. As to that, the absence of governance mechanisms within Allco Securities means that the company is unable to function. Things are in a state where the company said to be a trustee simply cannot act and, in particular, cannot discharge the responsibilities flowing from any trusts to which its property is subject. Circumstances of corporate paralysis or deadlock have in the past been seen to justify appointment of a receiver: see, for example, McMillan v Toledo Enterprises International Pty Ltd (1995) 18 ACSR 603. The court would readily appoint a provisional liquidator in the case of such deadlock but could do so only at the request of someone with standing to petition for winding up who had actually done so. The plaintiffs do not appear to be in that position vis-vis Allco Securities. The distinction between a provisional liquidator and a receiver is, in a functional sense, not great: Re United Medical Protection Ltd [2002] NSWSC 413; (2002) 41 ACSR 623. 18. The overall circumstances are thus such as to require that the property concerned be taken into the control of the court and put into the hands by an appropriate person who, as the court's appointee, will bring into court, in connection with the determination of the substantive proceedings, the property itself or the proceeds of its sale if it is sold. The plaintiffs have a sufficient interest to seek such an appointment. 19. The plaintiffs asked that the receiver be given a power of sale. Because of the nature of the property and the surrounding circumstances, that was an appropriate course. 20. Mr Dean-Willcocks consented to be appointed as receiver. He is a registered liquidator. That being so, there was no need for him to give security. 21. The plaintiffs by their counsel proffered the usual undertaking as to damages. That was most desirable, given the drastic nature of the interim remedy: National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] VicRp 31; [1991] 1 VR 386. The appointment was made upon that undertaking. 44 In Australian Securities and Investments Commission v Letten [2010] FCA 140 Gordon J, in appointing a receiver and manager to the property of a managed investment scheme, noted (at [16]-[17]): 16 I also consider that a receiver and manager should be appointed to the property of each of those schemes and the property of the managers of each of the schemes, the corporate defendants. The appointment of a receiver is a drastic remedy. Any appointment of a receiver must be made cautiously and only when it is absolutely necessary: National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386. In my view, this is one of those situations. Funds have been contributed by investors in "joint venture projects". Serious questions have been raised about the management of those projects and the entities associated with them, including the extent to which the funds of one "joint venture" have been loaned or transferred between various accounts and other ventures and schemes. Some investors in some of the schemes have lodged complaints that their funds have not been returned following the sale of the properties the subject of the investments. 17 However, at present I do not consider it appropriate to empower the receivers and managers to realise any property of those schemes or to move to complete any existing sale contracts in relation to any property of those schemes. ASIC's application was designed to achieve two objectives – preserve the status quo and to provide an independent report into the status of each of the projects. In my view, the orders I propose to make achieve those objectives. If before the time for reporting by the receivers provided for in the orders, the receivers consider additional steps are necessary, then they can make application to the Court in the usual way. By that time, my hope and expectation is that all interested parties will be in a better position to consider any proposal for the future management of the schemes. 45 The proposed receivers have provided statements to the effect that they have no conflicts or relevant prior associations and have signed forms of consent to act. Undertaking as to damages 46 Valuestream has proffered the usual undertaking as to damages. CONCLUSION 47 Applying the authorities to the present case, based on the evidence before me, it appears that Richmond has shown a similarly underdeveloped sense of trusteeship in relation to REF. Although the orders made on 17 August 2012 were drastic, I considered that they were necessary to protect the unit holders and preserve the status quo. On the face of matters not only have there been serious breaches but also there appears to be no active management of Richmond. The lack of any residential director, the apparent vacation of the company office and the lack of response to requests for information are all matters of concern having regard to the very significant investment apparently at risk. 48 There is protection for those affected by the orders by the undertaking as to damages and liberty to apply at short notice for any party affected by the orders. If the picture painted on the urgent ex parte application is inaccurate, there will be an opportunity to promptly rectify the impression created by the evidence. In all the circumstances recorded in the extensive affidavit evidence and outlined briefly in these reasons, I considered that there was a greater risk of injustice by allowing time to march on without limited intervention at short notice. 49 The following orders were made: UPON THE PLAINTIFF (VALUESTREAM) GIVING TO THE COURT THE UNDERTAKING SET OUT IN SCHEDULE A HERETO, THE COURT ORDERS THAT: 1. Until the determination of this proceeding, pursuant to s 57(1) of the Federal Court of Australia Act 1976 (Cth) and s 1323(1)(h) and (3) of the Corporations Act 2001 (Cth) (Corporations Act), Andrew Cummins and Peter Krejci be and are appointed joint and several receivers and managers (Receivers) of all of the assets held by Richmond Management Pty Ltd (ACN 118 043 191) (Richmond) as trustee of the 'Richmond Equity Fund' (REF) with the object of ascertaining, protecting and administering the assets of the REF for the benefit of all the unit holders of the REF (the Object). 2. Until the determination of this proceeding the Receivers have the power to do in Australia and elsewhere all things necessary or convenient to be done for or in connection with the attainment of the Object. 3. Without limiting the generality of paragraph 2 of this Order, for the purpose of attaining the Object the Receivers are empowered to: (a) do any or all of the things described in ss 420(1) and (2) of the Corporations Act, except the power of sale; (b) to inspect at any reasonable time any books (as defined in s 9 of the Corporations Act) in relation to the REF that are in the possession or control of Addwealth Pty Ltd (saving all just exceptions); and (c) require: (i) Richmond by its director(s), officer(s), agents and employees (if any); (ii) Wesley Medford; (iii) Jennifer Medford; (iv) David Price; and (v) Addwealth Pty Ltd by its directors, officers, agents and employees; to provide the Receivers with reasonable assistance. 4. Each of: (a) Richmond by its director(s), officer(s), auditor, agents and employees (if any); (b) Wesley Medford, by himself and or his agents; (c) Jennifer Medford, by herself and or her agents; and (d) David Price, by himself and or his agents; deliver up or make available to the Receivers all documents in their possession or control relating to the REF, including but not limited to, all books (as defined in s 9 of the Corporations Act), records and other papers (saving all just exceptions). 5. Until the determination of this proceeding the Receivers shall have all the powers of the trustee of the REF and Richmond be and is restrained from exercising any power as trustee of the REF save with the prior written consent of the Receivers or leave of the Court. 6. The Receivers be entitled to such reasonable remuneration and costs and expenses properly incurred in the performance of their duties and in the exercise of their powers as receivers and managers of the assets of the REF as may be fixed by the Court on the application of the Receivers, such sums to be calculated on the basis of the time reasonably spent by the receivers and managers, their partners and staff, such fees to be paid out of the assets of the REF provided that the Receivers' remuneration and reasonable costs and expenses must not be paid in priority to any debt the payment of which is secured by the assets of the REF (including by any floating charge) without the consent in writing of the relevant secured lender. 7. As soon as practicable Valuestream serve a copy of this order on each of Richmond, Wesley Medford, Jennifer Medford, David Price and Denis Tennenbaum. 8. Each party, the Receivers, Denis Tennenbaum and any other person affected by these orders have liberty to apply. 9. Valuestream's costs of its interlocutory application for interim relief are reserved. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher. Associate: Dated: 22 August 2012 SCHEDULE A UNDERTAKING GIVEN TO THE COURT BY VALUESTREAM: (1) Valuestream undertakes to: (a) submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of the order; and (b) pay the compensation referred to in (a) above, to the person there referred to.