FEDERAL COURT OF AUSTRALIA Australian Securities and Investments Commission v Letten (No 28) [2020] FCA 892 File number: VID 95 of 2010 Judge: DAVIES J Date of judgment: 24 June 2020 Catchwords: CORPORATIONS – application for discharge of receiver – application for orders dispensing with compliance with sub-rules 7.5(5) and (6) of the Federal Court (Corporations) Rules 2000 (Cth) – procedural orders requiring service of discharge application on affected persons made – discharge application set down for hearing at a later date – order dispensing with requirements of sub-rules 7.5(5) and (6) of the Federal Court (Corporations) Rules 2000 (Cth) Legislation: Corporations Act 2001 (Cth), ss 480, 601EE, 1323 Federal Court (Corporations) Rules 2000 (Cth), rr 7.5(5) and (6) Cases cited: Australian Securities and Investments Commission v Letten (No 7) [2010] FCA 1231; 190 FCR 59 Australian Securities and Investments Commission v Letten (No 20) [2012] FCA 1283 Re Idylic Solutions Pty Ltd [2018] NSWSC 700 Date of hearing: Determined on the papers Date of last submissions: 8 May 2020 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 9 Counsel for the Receiver: Mr R D Strong Solicitor for the Receiver: King & Wood Mallesons ORDERS VID 95 of 2010 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Applicant AND: MARK RONALD LETTEN First Respondent LGH HOLDINGS LIMITED (ACN 007 191 943) Second Respondent 211 WELLINGTON ROAD PTY LTD (ACN 092 663 860) (and others named in the Schedule) Third Respondent JUDGE: DAVIES J DATE OF ORDER: 24 JUNE 2020 NOTE: For the purpose of this order: (a) "Corporate Defendants", "Scheme" and "Secured Lender" have the meanings ascribed to those terms in the Orders of Justice Gordon made in this proceeding on 25 February 2010 (Appointment Order), 4 March 2010 (SY21 Appointment Order) and 30 July 2010 (Additional Schemes Appointment Order); (b) "Receiver" has the meanings ascribed to "Receivers" in the Orders of Justice Gordon made in this proceeding in the Appointment Order, the SY21 Appointment Order and in the Additional Schemes Appointment Order as amended following the order of Justice Gordon made in this proceeding on 29 April 2015 allowing the discharge of Mr Philip Arthur Hennessy as receiver and manager of the property of the Schemes; (c) "Discharge Application" means the application of the Receiver by interlocutory process dated 8 May 2020 for orders that: (i) he be discharged and released as Receiver of the property of the 4th, 5th, 8th, 9th, 14th, 15th, 16th, 19th, 22nd to 28th and 30th to 54th Defendants (Relevant Entities) and the managed investment schemes operated by the Relevant Entities as set out in Annexure A of the Appointment Orders and Annexure A of the Additional Schemes Appointment Order (Relevant Schemes); (ii) he be released as liquidator of each of the Relevant Entities and that each of the Relevant Entities be deregistered by ASIC (d) "Sixtieth Affidavit" means the Sixtieth Affidavit of Damian John Templeton sworn and filed in this proceeding. THE COURT ORDERS AND DIRECTS THAT: 1. The Receiver is not required to comply with Rule 7.5(5) and Rule 7.5(6) of the Federal Court (Corporations) Rules 2000 (Cth) with respect to each of the Relevant Entities. 2. By no later than 4.00 pm on the seventh day after the date of this order, the Receiver is to serve upon all investors identified by the Receiver to be investors in any of the Schemes (Investors): (a) a copy of these orders; (b) a circular: (i) advising the Investors of the Discharge Application; (ii) informing them that by no later than 21 days after service under this order (Objection Period) any Investor may file and serve a notice in writing objecting to any of the orders sought in the Discharge Application, together with a short but specific statement outlining the nature and grounds of the objection; (c) a copy of the Discharge Application; (d) a copy of each affidavit and submissions filed in support of the Discharge Application, together with the exhibits thereto. 2. Service for the purposes of paragraph 6 may be effected: (a) by email in respect of Investors who have notified the Receiver that email is their preferred method of communication; and (b) otherwise by ordinary post. 3. The Secured Lender, any other party and any Investor, who wishes to do so, shall file and serve on the Receiver within 21 days after service under paragraph 2 a notice in writing identifying any of the orders sought in the Discharge Application, together with a short but specific statement outlining the nature and grounds of the objection. 4. The further hearing of the Discharge Application be adjourned to a date to be advised. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT DAVIES J: Introduction 1 Application has been made by Mr Damian Templeton for orders that: (a) he be discharged and released as a receiver and manager of the property of the fourth, fifth, eighth, ninth, fourteenth, fifteenth, sixteenth, nineteenth, twenty-second to twenty-eighth and thirtieth to fifty-fourth defendants (relevant entities) and the managed investment schemes operated by the relevant entities as set out in Annexure A of the orders of the Court made on 25 February 2010, Annexure A of the orders of the Court made on 4 March 2010 and Annexure A of the orders of the Court made on 30 July 2010 (relevant schemes); and (b) he be released as liquidator of each of the relevant entities and that each of the relevant entities be deregistered by the Australian Securities and Investment Commission (ASIC). The application is supported by Mr Templeton's 60th affidavit in these proceedings, sworn on 29 May 2020. This is the 28th judgment delivered in these proceedings. 2 The relevant entities comprise 40 of the 52 corporate entities which were the managers and trustees of the relevant schemes in which Mark Letten, the first defendant, was involved. In 2010 and 2011, Mr Templeton and Philip Hennessy were appointed as receivers and managers of the property of the relevant schemes and as liquidators of the relevant entities. In 2015, the Court ordered that Mr Hennessy be discharged as receiver and manager and that Mr Templeton continue as sole receiver and manager. Mr Hennessy also subsequently resigned as liquidator of the relevant entities. 3 In Australian Securities and Investments Commission v Letten (No 7) [2010] FCA 1231; 190 FCR 59 (Letten (No 7)), Gordon J held that the receivers and managers were justified in distributing the surplus property of schemes on a pooled basis: Letten (No 7) at [336]. The pooling orders provide the priority order in which payments are to be made out of the assets of each of the schemes as follows: (a) priority receivership costs (as fixed by the Court) to the receivers; (b) any liabilities secured by the scheme asset to the relevant secured lender; (c) trust creditor claims in respect of the relevant entities; and (d) the balance into the common fund. 4 The method by which the distributions out of the common fund were to be calculated and made was determined by Gordon J in Australian Securities and Investments Commission v Letten (No 20) [2012] FCA 1283. 5 The pooling orders did not combine the claims of creditors other than the investors. These claims were to be dealt with in the winding up of the corporate entities and schemes out of any available scheme property before payment of the balance to the common fund, and were to be paid out of such property if the trustee of the scheme was entitled to indemnity. Mr Templeton deposed that there were, in fact, no realisations of scheme property, as by the time receivers were appointed in 2010, the property had been disposed of and no identifiable assets were held by any of the relevant entities nor was there any identifiable scheme property. As Mr Templeton has also sworn, none of the relevant entities had any liabilities secured by a scheme asset or any trust creditor claims. The persons interested in and potentially affected by the application which is now made are the investors. Procedural orders in respect of the application, which are designed to inform the investors in an efficient and cost-effective way about the application and to give them an opportunity to be heard in objection to the orders sought, are sought in the first instance. The procedure is modelled on the procedure used in previous applications concerning the conduct of the receivership and liquidations. 6 The proposed orders also seek dispensation with the requirements of rr 7.5(5) and (6) of the Federal Court (Corporations) Rules 2000 (Cth) with respect to the application for an order that Mr Templeton be released as the liquidator of the relevant entities and that ASIC deregister the companies. Those sub-rules provide as follows: (5) The liquidator must file with, or annex to, the supporting affidavit: (a) a statement of the financial position of the company at the date when the interlocutory process seeking release was filed; and (b) a summary of the liquidator's receipts and payments in winding up the company. (6) Unless the Court otherwise orders, the liquidator must serve by prepaid post, on each creditor who has proved a debt in the course of the winding up, and on each contributory, a copy of the interlocutory process accompanied by: (a) a copy of the summary of the liquidator's receipts and payments in winding up the company; and (b) a copy of the statement of the financial position of the company at the date when the interlocutory process seeking release was filed. 7 Mr Templeton deposed to the following matters in relation to each of the relevant entities and relevant schemes: (a) in so far as I have been able to ascertain, the [relevant entities] and the [relevant schemes] did not have any property at the time of my appointment and no monies have been received or paid in the course of the winding up; (b) no calls have been made on contributories in the course of the winding up; (c) no dividends have been paid in the course of the winding up; (d) no committee of inspection has been appointed; (e) ASIC has not caused books in relation to the [relevant entities] to be audited under section 70-15 of the Insolvency Practice Schedule (Corporations); (f) the Court has not ordered a report on accounts of the liquidator or receiver to be prepared; (g) no objection to my release has been received by me from any creditor, contributory or other interested person; (h) I have not submitted a report to ASIC under section 533 of the Corporations Act 2001 (Cth) (Act); (i) I do not consider it necessary to report on the affairs of the [relevant entities] or the [relevant schemes] or any of [their] officers; (j) no property was disclaimed in the course of the winding up; (k) no remuneration was paid or payable to me directly relating to the work performed by me, my Partners and staff relating to each of the individual Relevant Entities and the Relevant Schemes. Rather, such remuneration was claimed from the Common Fund by the Receiver in relation to the "Miscellaneous Work" work performed for each of the Relevant Entities, as first described in paragraph 22(c) of the Twentieth Affidavit of Damian John Templeton dated 30 November 2010; (l) there are no costs, charges or expenses payable by me if the Court grants my release other than a claim for my costs and expenses in relation to this application; (m) to the best of my belief, there has been no act done or default made by me in the administration of the affairs of the [relevant entities] or the [relevant schemes] or otherwise in relation to my conduct as liquidator or receiver which is likely to give rise to any liability to the Company or any creditor or contributory; and (n) I am not aware of any claim made by any person that there has been any such act or default. 8 Mr Templeton further deposed that as a consequence of those matters: (a) there is no current statement of the financial position for any of the Relevant Entities or Relevant Schemes; and (b) I have not prepared a summary of my receipts and payments in the winding up of each of the Relevant Entities or Relevant Schemes for the purposes of this application because I have not had any such receipts or payments directly to the Relevant Entities or Relevant Schemes. Such a summary would show 'nil' receipts and 'nil' payments. 9 I am satisfied the procedural orders should be made. Persons interested in and potentially affected by this application are the investors and the procedural orders sought are designed to inform them in an efficient and cost effective way about the application and to give any of them who wished to do so an opportunity to be heard in objection to the orders sought. The affidavit material in support of the application otherwise complies with the relevant requirements of r 7.5 of the Federal Court (Corporations) Rules 2000 (Cth) in relation to both the application under s 480 of the Corporations Act 2001 (Cth) (Corporations Act) for release as liquidator and, by analogy, the application for release as receiver under ss 601EE and 1323 of the Corporations Act: see Re Idylic Solutions Pty Ltd [2018] NSWSC 700 at [3]. Given the matters deposed to by Mr Templeton, there would be no purpose in compliance with r 7.5(5) or r 7.5(6) and to do so would cause unnecessary additional expense. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies. Associate: Dated: 24 June 2020 SCHEDULE OF PARTIES VID 95 of 2010 Respondents Fourth Respondent: BLUEMIST HOLDINGS PTY LTD (ACN 097 306 922) Fifth Respondent: DELLWOOD HOLDINGS PTY LTD (ACN 098 505 803) Sixth Respondent: ENMORE ENTERPRISES PTY LTD (ACN 082 158 487) Seventh Respondent: FIRBANK ARCH PTY LTD (ACN 059 464 381) Eighth Respondent: GLENLINE PTY LTD (ACN 098 532 364) Ninth Respondent: GERLING HOLDINGS PTY LTD (ACN 091 726 457) Tenth Respondent: LGH ADMINISTRATION PTY LTD (ACN 007 165 069) Eleventh Respondent: LGH FINANCE PTY LTD (ACN 078 859 248) Twelfth Respondent: LOW HEAD VILLAGE PTY LTD (ACN 091 731 958) Thirteenth Respondent: NICHOLSON STREET PTY LTD (ACN 069 104 089) Fourteenth Respondent: HOLLOWAY CREST PTY LTD (ACN 091 731 967) Fifteenth Respondent: ROSEBERY ENTERPRISES PTY LTD (ACN 091 826 229) Sixteenth Respondent: SIMMS INVESTMENTS PTY LTD (ACN 093 504 511) Seventeenth Respondent: SY21 RETAIL PTY LTD (ACN 107 874 564) Eighteenth Respondent: THE GLEN CENTRE HAWTHORN PTY LTD (ACN 089 906 543) Nineteenth Respondent: CASTELLO HOLDINGS PTY LTD (ACN 088 204 175) Twentieth Respondent: TWINVIEW NOMINEES PTY LTD (ACN 097 307 278) Twenty-First Respondent YARRA VALLEY GOLF PTY LTD (ACN 066 632 479) Twenty-Second Respondent ADINA RISE PTY LTD (ACN 083 181 122) Twenty-Third Respondent ALBRIGHT INVESTMENTS PTY LTD (ACN 088 204 166) Twenty-Fourth Respondent ASHFIELD RISE PTY LTD (ACN 093 504 806) Twenty-Fifth Respondent BRADFIELD CORPORATION PTY LTD (ACN 088 204 371) Twenty-Sixth Respondent COPELAND ENTERPRISES PTY LTD (ACN 093 504 824) Twenty-Seventh Respondent DEVLIN WAY PTY LTD (ACN 088 264 813) Twenty-Eighth Respondent FIRST HAZELWOOD PTY LTD (ACN 093 505 303) Twenty-Ninth Respondent GLENBELLE PTY LTD (ACN 097 306 646) Thirtieth Respondent GLENVALE WAY PTY LTD (ACN 088 287 021) Thirty-First Respondent GREENVIEW LANE PTY LTD (ACN 093 505 312) Thirty-Second Respondent HALLMARK CORPORATION PTY LTD (ACN 093 505 312) Thirty-Third Respondent MOORLEIGH HOLDINGS PTY LTD (ACN 088 287 058) Thirty-Fourth Respondent NORTON RIDGE PTY LTD (ACN 078 821 066) Thirty-Fifth Respondent RALEIGH GLEN PTY LTD (ACN 088 204 380) Thirty-Sixth Respondent REDCREST HOLDINGS PTY LTD (ACN 100 836 486) Thirty-Seventh Respondent SURI CORPORATION PTY LTD (ACN 093 505 321) Thirty-Eighth Respondent SUTTON RISE PTY LTD (ACN 088 204 399) Thirty-Ninth Respondent THE VIRTUAL MLMER PTY LTD (ACN 065 374 665) Fortieth Respondent TIVENDALE PTY LTD (ACN 093 505 349) Forty-First Respondent TULLOCH DOWNES PTY LTD (ACN 078 895 048) Forty-Second Respondent MAINKING PTY LTD (ACN 100 790 485) Forty-Third Respondent TOPGLEN PTY LTD (ACN 096 857 564) Forty-Fourth Respondent ALLBLUE PTY LTD (ACN 100 836 388) Forty-Fifth Respondent ARANBAY PTY LTD (ACN 098 532 319) Forty-Sixth Respondent MELVILLE CORPORATION PTY LTD (ACN 091 911 045) Forty-Seventh Respondent TILLEY LANE PTY LTD (ACN 086 136 361) Forty-Eighth Respondent HPSC PTY LTD (ACN 059 930 139) Forty-Ninth Respondent JENSDALE PTY LTD (ACN 098 367 974) Fiftieth Respondent OAKDALE RISE PTY LTD (ACN 091 598 908) Fifty-First Respondent MAYWOOD INVESTMENTS PTY LTD (ACN 091 599 218) Fifty-Second Respondent ACETRAIN PTY LTD (ACN 100 820 282) Fifty-Third Respondent SAGE BAY PTY LTD (ACN 097 306 628) Fifty-Forth Respondent TOBAGO HOLDINGS PTY LTD (ACN 093 504 520) Fifty-Fifth Respondent WILHELMUS ANTONIUS JOANNES BOERKAMP Fifty-Sixth Respondent AUSTPAC FUNDS MANAGEMENT LIMITED Fifty-Seventh Respondent GOLDEN HERITAGE GOLF PTY LTD