HP Mercantile v Australian Rural Group [2005] NSWSC 895

New South Wales Supreme Court

CITATION : HP Mercantile v Australian Rural Group [2005] NSWSC 895

HEARING DATE(S) : 31 August 2005

JUDGMENT DATE : 31 August 2005

JURISDICTION : Equity

JUDGMENT OF : Campbell J

DECISION : Leave refused

CATCHWORDS : CORPORATIONS - winding up - leave to proceed against company in liquidation - leave to proceed against company subject to a deed of arrangement - standing to sue concerning alleged breach of requirements of deed establishing prescribed interest scheme - otherwise turns on its own facts

Corporations Act 2001 (Cth) LEGISLATION CITED : Managed Investments Act 1998 (Cth)

Brash Holdings Ltd (admr apptd) v Katile Pty Ltd (1994) 13 ACSR 504 Hirlian v Rodgers [2005] NSWSC 295 CASES CITED : Re National Express Group Australia (Swanston Trams) Pty Ltd; Thiess Infraco (Swanston) Pty Ltd v Smith (2004) 50 ACSR 434 Vagrand Pty Ltd (in liquidation) v Fielding (1993) 41 FCR 550

HP Mercantile Pty Limited - Plaintiff PARTIES : Australian Rural Group Limited (in liq) - First Defendant JA & BM Bowden & Sons Pty Ltd (under administration) - Second Defendant

FILE NUMBER(S) : SC 3681/05

P Stitz - Plaintiff COUNSEL : A P Coleman - First Defendant S Golledge - Second Defendant

Versace McKenzie Lawyers - Plaintiff SOLICITORS : Clayton Utz - First Defendant Gadens Lawyers - Second Defendant

LOWER COURT JURISDICTION :

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

CAMPBELL J

WEDNESDAY 31 AUGUST 2005

3681/05 HP MERCANTILE PTY LIMITED v AUSTRALIAN RURAL GROUP LIMITED (IN LIQUIDATION) & ANOR JUDGMENT – Ex Tempore 1 HIS HONOUR: This is the hearing of an interlocutory process which seeks leave to continue proceedings, firstly, against a company in liquidation, and, secondly, against a company which is subject to a deed of company arrangement. 2 The plaintiff in these proceedings is the assignee of certain entitlements relating to seven different prescribed interest schemes. Each of those prescribed interest schemes was one under which members of the public could invest in an agricultural venture. It appears that the schemes were at least to some extent tax driven. The Deeds Establishing the Schemes 3 The schemes all came into existence under deeds which were executed over a period from December 1990 to February 1998. Thus, they were all entered before the Managed Investments Act 1998 (Cth) came into force on 1 July 1998, and they had the general type of structure which is associated with prescribed interest schemes. 4 The first defendant has come to fulfil the role of what is called, in the deeds, "the Representative". This is the entity which, in broad terms, fills the role which a trustee for members ordinarily fills in a prescribed interest scheme. 5 There was, under each of the deeds, also an appointment of a Manager to each scheme. Tree Top Projects Pty Ltd (in Liquidation) came to be the Manager of each of the projects. 6 The schemes had deeds which bear a fairly strong family resemblance one with the other, and it is possible to take the deed relating to one of the schemes, the Tumut River Orchard Project, as being typical in the respects which are relevant here. The deed is one which was expressed to be between the initial Manager of the scheme, the initial Representative of the scheme, and various members of the public who might come to be parties to the scheme at a later date. Such members of the public are referred to in the deed as "Growers". The application before me has proceeded as though the first defendant is in all respects in the same position as the original Representative was, under the deed. 7 The deed recites that the Manager wishes to appoint the Representative to be the representative in respect of the interests of the Growers in certain Project Agreements which are to be entered into. Those Project Agreements are ones proposed to be entered by a Grower who makes application to the Manager to become a member of the scheme. The deed spoke as though each Grower would be conducting, on an individual allotment of land, a business of growing certain agricultural products. However, there was provision for the Manager to carry out the actual agricultural activities, and to have a power to delegate the conduct of those activities. The deed goes into some detail about the administrative arrangements under which the prescribed interest scheme will be operated, but does not say in so many words whether the relationships which arise pursuant to it are contractual ones, or ones of trust. 8 Clause 11 of the deed contains provisions that: "11.1 The Manager shall be entitled to be paid all moneys payable to it under the Project Agreements. 11.2 In addition to the amounts specified in clause 11.1 the Manager shall be entitled to be reimbursed for all costs and expenses incurred or payable by the Manager in accordance with clause 16.4."