|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
Federal Court of Australia - Full Court Decisions |
Last Updated: 1 June 2007
FEDERAL COURT OF AUSTRALIA
Western Retirement Village Management Pty Ltd v Australian Securities and Investments Commission [2007] FCAFC 75
CORPORATIONS – unregistered
managed investment scheme – order appointing receiver over scheme land
– land sold and purchase
price paid but land not transferred –
whether purchaser entitled to transfer – effect of condition that
purchaser pay
stamp duty – effect of condition that purchaser pay
GST
Held: The payment of stamp duty and GST were not conditions
precedent to the transfer. In any event, the land was part of the scheme and
orders could therefore be made in respect of it.
Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489
cited
Corporations Act 2001 (Cth), ss
601ED 601EE
Stamps Act 1921 (WA), ss 16, 28, 63, 74
WESTERN
RETIREMENT VILLAGE MANAGEMENT PTY LTD (ACN 091 443 239) v AUSTRALIAN SECURITIES
AND INVESTMENTS COMMISSION
VID 1322 OF 2006
SUNDBERG,
GREENWOOD AND JESSUP JJ
1 JUNE
2007
MELBOURNE
|
AND:
|
THE COURT ORDERS THAT:
1. The appeal be dismissed.
2. The appellant pay the respondent’s costs of and incidental to the appeal.
Note: Settlement
and entry of orders is dealt with in Order 36 of the Federal Court
Rules.
|
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF
AUSTRALIA
|
|
BETWEEN:
|
WESTERN RETIREMENT VILLAGE MANAGEMENT PTY LTD (ACN 091 443
239)
Appellant |
|
AND:
|
AUSTRALIAN SECURITIES AND INVESTMENTS
COMMISSION
Respondent |
|
JUDGES:
|
SUNDBERG, GREENWOOD AND JESSUP JJ
|
|
DATE:
|
1 JUNE 2007
|
|
PLACE:
|
MELBOURNE
|
REASONS FOR JUDGMENT
THE COURT
Introduction
1 The respondent (ASIC) brought proceedings in the Court to wind up two allegedly unregistered managed investment schemes. Only one of them is the subject of the appeal. The scheme is referred to in many of the documents as The Mews Village or The Mews Retirement Village (the village). The scheme involved an investment in a prospective retirement village.
2 The proceedings were brought under s 601EE of the Corporations Act 2001 (Cth) (the Act):
"(1) If a person operates a managed investment scheme in contravention of subsection 601ED(5), the following may apply to the Court to have the scheme wound up:
(a) ASIC
(b) the person operating the scheme;
(c) a member of the scheme.
(2) The Court may make any orders it considers appropriate for the winding up of the scheme."
Section 601ED(5) requires a managed investment scheme to which s 601ED(1) applies to be registered.
3 Section 601EE forms part of Chapter 5C of the Act which provides for the regulation of managed investment schemes. The principal objects of the Chapter are to ensure that potential investors are given sufficient information to enable them to determine whether they should invest in the scheme, that following an investment the investors are given periodical reports about the scheme’s financial performance, and that those who control the scheme will act honestly, with due diligence and in accordance with the scheme’s constitution. One aspect of this regulation is the requirement that schemes be registered.
4 The primary judge declared that the scheme was a managed investment scheme which was required to be but was not registered under the Act, and ordered that it be wound up. His Honour appointed receivers of
"the Mews Land (being the land comprised in Certificate of Title Volume 1950 Folio 469), improvements on the Mews Land and all development rights and approvals relating to the Mews Land ... for the purposes of winding up the Mews Scheme."
He ordered that the receivers take into their possession or under their control the Mews Land and all books, documents and records that evidence or record the dealings of the scheme, and that the appellant deliver up possession of the Mews Land to the receivers. They were also empowered
"subject to the claims of prior encumbrancers and with the leave of the Court, to sell the Mews Land."
The primary judge made many other orders, but the foregoing account is sufficient for present purposes.
5 The appellant appeals against the orders appointing receivers over the land and giving them power to enter into possession of the land and sell it. It does not appeal against the winding up order itself.
Background
6 The following description of the scheme is taken from the primary judge’s reasons. It is not controversial. The promoters of the scheme wanted to establish and operate a top-quality resort style retirement village. The village was to be located on land purchased from another company associated with the promoters. Investors would put up the deposit with the balance to be raised by loans from the vendor. A management company controlled by the promoters would operate the village. After payment of a management fee, the profit would go to the investors. The key attraction to the investors was the expectation that they would be entitled to deduct from their assessable income not only the amount of their investment but also their proportionate share of the loan taken out to pay the balance of the purchase price.
7 The village was to be established on a 28 hectare parcel of land at Upper Swan, a semi-rural area on the outskirts of Perth. The land was registered in the appellant’s name. By contract dated 18 April 2000 the appellant agreed to sell the land to The Mews Village Nominees Pty Ltd (the purchaser) for $93,425,000. The purchaser entered into the contract as "bare nominee" for a group of investors. The contract provided for payment of a deposit of $18,048,000, with the balance to be paid by a loan from the appellant secured by a mortgage over the land. The purchase price was not the value of the land, which was stated to be $2,850,000. The disparity was accounted for by the fact that the appellant was required by the contract to construct the village. Most of the deposit was raised from the investors who were grouped into several partnerships. The balance was provided by the appellant under the loan.
8 The village was to be managed by the appellant pursuant to a Marketing Management and Profit Share Agreement between it and the purchaser.
9 The purchaser paid the purchase price using the investors’ capital and loan funds obtained from the appellant. The appellant has not transferred the land to the purchaser, and remains the registered proprietor. Nor did the appellant carry out the building work. There was no accounting to the investors for the money they contributed. The primary judge said there was no hope of the development going ahead while it remains in the hands of its present controllers: "things are in a mess and it will take a good deal of time and great expense to sort them out".
Primary judge’s reasons
10 The primary judge noted that an order for the winding up of an unregistered managed investment scheme does not bring about the same consequences as a winding up order made in respect of a company, because there is no statutory procedure for the winding up that is brought into play by the order. His Honour was of the view that the effect of a winding up order under s 601EE is that each investor is entitled to insist that steps be taken to wind up the scheme. His Honour turned to what those steps should be. He said (omitting citations):
"20 Although the winding up order permits investors to insist that steps be taken for the scheme to be brought to an end, if all the investors are in agreement the winding up need not follow the same steps as the winding up of a company. If the scheme has failed, the company model is likely to be the only appropriate method for the winding up. ...
...
26 The next issue to consider is what procedure should be adopted for the winding up. ... The winding up of [this scheme] must be administered by the court. In a practical sense this can only be achieved by the appointment of an officer of the court to implement the winding up. The appropriate officer is a receiver.
...
29 On his appointment, the receiver is an officer of the court, not of the party at whose instance he is appointed. His authority is to act in the manner directed by the court. Thus, for example, in the absence of an order, the receiver has no right to sell any property in his possession. That is, a power of sale will not be implied from the mere appointment ....
...
31 I will appoint a receiver to take possession of the scheme assets in so far as they are presently known; in the case of the Mews scheme, the land at ... Upper Swan .... If the receiver encounters any difficulty in taking possession of [the property], I will direct that he make any necessary application to the court. ...
32 The receiver will be directed to find a buyer for the properties of which he takes possession. He will not, however, be authorised to sell the properties, save under a contract that is conditional upon court approval. ..."
11 His Honour went on to say that before the property could be sold it would be necessary to determine the rights of prior encumbrancers. The winding up order was not intended to affect their rights. Their claims would have to be adjudicated before any sale.
12 ASIC asked the primary judge to confer on the receiver all the powers that a liquidator has under s 477 of the Act as if the managed investment scheme were a company. It was contended that s 601EE(2) is the source of the power to make such an order. His Honour declined to make such an order, and gave reasons for that refusal. One was that his Honour had given the receivers most of the powers they needed and they did not need many of those in s 477 in order to carry out their tasks. Another was that several of the s 477 powers were not appropriate to be given to the receivers. These included the power of sale and the power to distribute property to the persons entitled thereto. ASIC has filed a notice of contention raising the correctness of his Honour’s views about the ambit of s 601EE(2). As will appear, we do not need to enter upon the correctness of his Honour’s refusal to confer on the receivers all the powers of a liquidator under s 477.
Grounds of appeal
13 The notice of appeal contains twelve grounds. As we understand the position, only three, grounds 7, 8 and 12, were pressed:
"7. His Honour erred in law in appointing receivers (‘Mews Receivers’) over the land (described as the ‘Mews Land’ in the judgment) owned by the Appellant.
8. His Honour erred in law in directing the Appellant as the owner of the land to give up possession of the land to the Mews Receivers with liberty reserved to the Mews Receivers to apply for such orders from the Court as may be necessary for them to obtain possession of the land.
12. His Honour erred in giving the Mews Receivers power to enter into possession and take control of the Appellant’s land and to convert it into money."
14 The point behind each ground is the same. The appellant’s counsel put the matter as follows. The consequential orders complained of are based on the primary judge’s conclusion that the contract of sale had been completed so that it was appropriate to order the receivers to sell the land rather than any interest the purchaser had under the contract. Submissions made it clear that "completed" is used in the sense that the purchaser is entitled to an instrument of transfer of the land executed by the appellant.
15 We have recorded at [9] what the primary judge said about the steps that had been taken under the contract. They were that, pursuant to the purchase price provisions of the contract, the purchaser was to be treated as having paid the whole of the purchase price, but the appellant has not transferred the land to the purchaser, and remains the registered proprietor. It was common ground that a purchaser who has paid the whole of the purchase price has an equitable interest in the land. See Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489 at 521–523. The appellant nevertheless contended that for two reasons the purchaser could not require the appellant to transfer the land to it. The first was that ASIC had not established that the purchaser had paid the stamp duty payable by it "on completion of the contract". The second was that ASIC had not shown that the purchaser had paid the vendor the GST payable on the transaction.
Stamp duty
16 Special condition 17.2 of the contract of sale provides:
"The Vendor and Purchaser will each bear their own legal costs incurred of and incidental to the preparation, negotiation, and the execution of this Contract. The Purchaser will pay all stamp duty levied upon this Contract and any other documents executed in accordance with any of the provisions of this Contract."
17 The Stamp Act 1921 (WA) as in force at the date of the contract imposed stamp duty on various instruments including a "Transfer of land under the Transfer of Land Act 1893 on a sale thereof or conveyance": s 16(1) and second schedule. Section 74(1) provided:
"Every contract or agreement, howsoever executed, for the sale of any estate or interest in any property shall be charged with the same ad valorem duty to be paid by the purchaser as if it were an actual conveyance on sale of the estate, interest or property contracted or agreed to be sold."
The term "conveyance on sale" was defined in s 63 so as to include "every instrument ... whereby any property or any estate or interest in any property on the sale thereof is transferred to or vested in the purchaser ...". Section 74(4) provided:
"When duty has been paid in accordance with subsection (1), the conveyance or transfer concerned made to the purchaser shall not be liable to duty ...."
18 There was no evidence before the primary judge as to whether there was any general practice for stamp duty to be paid on a contract or on the ensuing conveyance or transfer.
19 Special condition 17.2 does not require the purchaser, as a condition of obtaining a registrable transfer, to pay the duty. It does no more than repeat the obligation imposed on the purchaser by the Stamp Act: it is the purchaser’s obligation to pay and not the vendor’s. It is to be contrasted with special condition 12.1, which requires the purchaser to pay the residue of the purchase price on the settlement date. Of course the purchaser will not be able to secure registration without lodging a stamped instrument of transfer. See Stamp Act s 28. Accordingly, it was not a condition of settlement that the purchaser pay the duty, and the purchaser was not disentitled to a transfer by reason of not having paid the duty, if that was indeed the case.
20 If, contrary to our view, the vendor was entitled to insist upon proof that the stamp duty had been paid as a condition of settlement, ASIC has satisfied us that the stamp duty was paid. First, one of the investors, Peter Warne, deposed that at a meeting of investors Geoff Woodham, a director of GDK Financial Solutions Pty Ltd, informed him that of the amount subscribed by investors, $3.2 million had been contributed to the purchase price of the land and the rest had gone on stamp duty and legal fees. Second, Michael Brereton & Co’s trust account for the Mews Partnership shows that stamp duty of $146,353 was "deducted" (presumably from the investors’ balance) on 7 July 2000. That date was about a week after settlement. Michael Brereton & Co is, and was at the time of the transaction, the vendor’s (appellant’s) solicitor. Third, on 30 June 2000 Michael Brereton & Co’s Western Australian agent confirmed by letter that settlement had been completed on that date. Given the evidence that part of the investors’ money was used to pay duty, that the accounts show that an amount of duty was "deducted", and that settlement took place, we infer that the purchaser performed at settlement all its obligations under the contract, including the tender of a stamped instrument of transfer.
21 If, contrary to our view, the vendor was entitled to insist upon proof that the stamp duty had been paid as a condition of settlement, and it was not paid, then in our view, settlement having in fact taken place, the vendor must be taken to have waived the right to insist upon payment as a condition of settlement.
22 For the avoidance of doubt we observe that the General Conditions of Sale applicable to the contract were not in evidence.
GST
23 Special condition 19 of the contract provides:
"19.1 The Purchaser will pay to the Vendor, in addition to any other monies payable by the Purchaser to the Vendor under this Contract, an amount equal to any GST which is levied, collectable on or referable in any way to the sale and purchase of the Property by the Vendor to the Purchaser or any other transaction under this Contract or the value thereof.
19.2 The amounts payable pursuant to special condition 19.1 are to be paid at the times, and from time to time, that the relevant GST is liable to be paid by the Vendor.
19.3 At the time that any payment is made pursuant to special condition 19.1, the Vendor must deliver to the Purchaser a Tax Invoice in relation to such payment, which complies with all relevant statutory and regulatory requirements so as to allow the Purchaser to claim Input Tax Credits."
GST is defined in the contract as
"any Goods and Services Tax ... which is or may be levied or becomes payable in connection with the supply of any goods or services or other things."
24 The verbiage of special condition 19.1 suggests that the purchaser’s obligation to pay GST was not a condition precedent to settlement. Unlike special condition 12.1 which requires the purchaser to pay the residue of the purchase price on the settlement date, special condition 19 deals with payments the purchaser must make at the time or times that the GST is liable to be paid by the vendor. The vendor may become liable to pay GST after the settlement date. Indeed this is what appears to have happened. The Mews trust account referred to at [20] discloses a payment to the Australian Taxation Office of $79,681.07 for GST on 29 October 2001, four months after settlement, which occurred on 30 June 2000. In our view payment of the GST was not a condition precedent to settlement.
25 For the foregoing reasons we accept ASIC’s primary submission that the receivers are entitled to possession of the land and to call for it to be transferred by the appellant.
The submissions below
26 Neither of the matters canvassed before us (stamp duty and GST) is adverted to in the primary judge’s reasons. At a mention some weeks after judgment the appellant’s counsel sought to raise the duty and GST contentions. The following exchange ensued:
"MR HAYES: Well, the point I am wanting to make is that there is both stamp duty and GST payable or potentially payable.
HIS HONOUR: Well, potentially.
MR HAYES: ... There are obligations on the purchaser to pay them.
HIS HONOUR: But is there an assessment for GST yet?
MR HAYES: I don’t know.
...
MR HAYES: But in any event the fact that there might be GST, the fact that there is, or might be, stamp duty payable ... are all reasons why when your Honour lays down the orders and the regime that the luckless receiver who takes this matter over is not bound by any findings of fact. So that the receiver is free and we, on appeal or anyone else on appeal, is free to have those issues determined. Because if it should turn out, for example, that GST is payable; if it should turn out the stamp duty ---
HIS HONOUR: I haven’t said anything about GST.
MR HAYES: No, but your Honour has said to me earlier today that at least implicit in the basis of your Honour’s findings is an assumption that the contract has been fully performed.
HIS HONOUR: I think the only findings I have made, or the only things I have said, is that the purchase price has been paid because the money has been borrowed. Got the contract and the loan agreement, and that tells me that the purchase price was discharged out of borrowed funds. Now, that is the state of the evidence, isn’t it?
And I didn’t say anything about GST or stamp duty because there was no evidence dealing with either GST, or no submission about it."
27 The foregoing extracts explain why the primary judge did not in his reasons refer to GST or stamp duty. They were not raised at trial. In the absence of any factual findings on the issues, we have had to investigate the evidence for ourselves.
Additional reason for dismissing the appeal
28 In resolving this appeal we have followed the approach taken by the parties of focussing on what rights the purchaser had in the Mews Land. It is implicit in the appellant’s submission that whatever interest in the land was retained by the vendor, namely the bare legal title, was not a scheme asset.
29 The primary judge had power under s 601EE of the Act to appoint a receiver over any part of the scheme assets. So long as the Mews Land and both the appellant and the purchaser formed part of the scheme, it is not relevant which party held what interests in the Mews Land.
30 The primary judge described the scheme as follows:
"investors formed partnerships, subscribed money which was pooled and, together with borrowed money, applied on their behalf by managers toward the purchase by a trustee of an asset ... . In a broad sense the scheme comprises the relationships established by the various agreements that gave rise to those transactions."
(emphasis added)
31 The involvement of the appellant and the purchaser in the scheme can be summarised as follows:
• The Mews Land was registered in the name of the appellant.
• By the contract of sale, the appellant agreed to sell the Mews Land to the purchaser.
• The Mews Retirement Village was to be managed by the appellant.
• A Marketing Management and Profit Sharing Agreement was entered into between the appellant and the purchaser.
It is apparent from these matters that both the appellant and the purchaser are integral parts of the scheme. So is the Mews Land.
32 In Schedule A to his orders made on 28 November 2006, the primary judge set out his definition of the scheme:
"The ‘Mews Scheme’ is the venture established by the following agreements and documents, among others:
(a) The partnership agreement dated 18 April 2000 and made:
(i) Between The Mews Retirement Nominees Pty Ltd (now known as The Mews Village Nominees Pty Ltd) [and 15 other named parties];
...
(c) The contract for sale of land dated 18 April 2000 between Western Retirement Village Management Pty Ltd as vendor and Mews Village Nominees Pty Ltd as purchaser;
(d) The marketing, management and profit share agreement dated in or about April 2000 between Western Retirement Village Management Pty Ltd and The Mews Retirement Village Nominees Pty Limited (now known as The Mews Village Nominees Pty Ltd);
(e) The loan agreement dated in or about April 2000 between Western Retirement Village Management Pty Ltd as lender and The Mews Village Nominees Pty Ltd as borrower
..."
33 In the orders, his Honour refers repeatedly to "the Mews Land", without any suggestion that that expression should be read down so as only to refer to certain rights or to rights held by only one of the parties to the contract of sale.
34 Upon a consideration of all these matters, it is clear that the primary judge considered each of the Mews Land, the appellant and the purchaser to be part of the scheme. One of the grounds of appeal was that his Honour erred in finding that the appellant was a part of the scheme. This ground was abandoned. On the appeal no challenge was made to his Honour’s finding that the appellant was part of the scheme.
35 It follows that if, contrary to our view, the purchaser is not entitled to a transfer of the land, the primary judge nonetheless had power to make the orders that he did, namely that the receivers take possession of the Mews Land and sell it.
Conclusion
36 The appeal must be dismissed with costs.
|
|
|
|
Solicitors for the Appellant:
|
|
|
|
|
|
Counsel for the Respondent:
|
|
|
|
|
|
Solicitor for the Respondent:
|
|
|
|
|
|
Date of Hearing:
|
|
|
|
|
|
Date of Judgment:
|
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/cth/FCAFC/2007/75.html