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Rosedale Action Incorporated v The Honourable Justice Finkelstein & Ors [2007] HCATrans 120 (22 March 2007)

Last Updated: 16 April 2007

[2007] HCATrans 120


IN THE HIGH COURT OF AUSTRALIA


Office of the Registry
Brisbane No B7 of 2007

B e t w e e n -

ROSEDALE ACTION INCORPORATED

Plaintiff

and

THE HONOURABLE JUSTICE FINKELSTEIN

First Defendant

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Second Defendant

ROSEDALE VILLAGE NOMINEES PTY LIMITED (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

Third Defendant

THE MEWS VILLAGE NOMINEES PTY LIMITED (IN LIQUIDATION)

Fourth Defendant

GREAT VICTORIA LONG TERM INVESTMENT HOLDINGS LIMITED

Fifth Defendant

ROSEDALE TALISKER INCORPORATED

Sixth Defendant

WESTERN RETIREMENT VILLAGE MANAGEMENT PTY LTD

Seventh Defendant

WILLIAM BALFOUR RANGOTT

Eighth Defendant

PETER LENNOX SHEILS QC

Ninth Defendant


CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 22 MARCH 2007, AT 9.19 AM

Copyright in the High Court of Australia

__________________


MR K.A.M. PITT, QC: If your Honour please, I appear on behalf of the plaintiff. (instructed by Sourris Solicitors)

MS F.M. McLEOD, SC: If your Honour pleases, I appear on behalf of the second defendant. (instructed by Australian Securities and Investment Commission)

MR B. LEVET: May it please your Honour, I appear on behalf of the fifth defendant. (instructed by Ann Kingham & Associates)

MR P. SHEILS, QC: Your Honour, I am the ninth defendant.

HIS HONOUR: Mr Pitt, it is correct, is it not, that all the orders are stayed?

MR PITT: There has been no formal order staying the orders, your Honour. My instructions are that there was a letter from the High Court Registry advising the parties that it was unnecessary or that, in effect, it was unnecessary to apply for a stay because of the currency of these proceedings, but notwithstanding that, I am instructed that the liquidators who were appointed by the Federal Court in the orders which are the subject of these proceedings have gone into possession of the land and taken possession of the books which form the assets of the two unregistered investment schemes.

HIS HONOUR: Had they done that before the stays were granted?

MR PITT: As I am instructed, there were no formal stays granted, your Honour. It was simply that these proceedings were lodged and I infer that attempts were made to get them on speedily in order to enable stays to be granted, but no stays, as I understand it, were formally granted. May I just check that with my instructing solicitor?

HIS HONOUR: I thought there were stays. What is your understanding, Ms McLeod?

MS McLEOD: My instructions are, your Honour, that no letter was received from the High Court by the second defendant indicating there had been a stay. There was a communication from a solicitor on the record for one of the defendants, the respondents below, indicating that she thought there was a stay. When a question was raised about how that was so there was no effective response. So we are not aware of any stay having been granted.

HIS HONOUR: There has been no stay here and you would need a judge to have granted a stay here.

MS McLEOD: Indeed. His Honour, Justice Finkelstein has not stayed the matter, your Honour, and nor has the Full Court.

HIS HONOUR: I see.

MS McLEOD: In fact, the matter of this application was brought to his Honour’s attention on the last occasion.

HIS HONOUR: Justice Finkelstein?

MS McLEOD: Justice Finkelstein, and he indicated he had no knowledge of any stay or application for a stay either and the matter progressed with further orders in terms of managing the receivership.

HIS HONOUR: So is the receivership continuing?

MS McLEOD: It is, your Honour.

HIS HONOUR: What is the ultimate relief then that is sought in the proceedings in this Court? I know it is for prerogative writs, but what is the end?

MS McLEOD: The plaintiffs seek both prohibition and certiorari, your Honour. The prohibition, we would say, is unnecessary because final orders have been entered in respect of the winding-up of these two managed investment schemes and what his Honour is now doing is, on the application of either the second defendant or each of the receivers, managing the receivership, as it were, in terms of applications by creditors to have their claims considered and dealt with in terms of claims by investors to manage the proceeds or the seizing of assets, things of that nature. I should indicate to your Honour that the third defendant before Justice Finkelstein has appealed but on an unrelated question.

HIS HONOUR: Thank you. What is your ultimate object, Mr Pitt?

MR PITT: Your Honour, to have the matter remitted to the ACT Supreme Court which was the court which originally had the jurisdiction in the matter.

HIS HONOUR: To what end, though? I mean, the Australian Capital Territory court would make the same orders, would supervise the matter in the same way as the Federal Court, or what would the position be?

MR PITT: I am not aware of the differences which that court might make ultimately, your Honour, but the orders which it initially made were orders which directed, because of the use of section 477 powers, the power of sale and distribution. Would your Honour excuse me - I have just received a note which I do not fully understand. Thank you, your Honour. Essentially that the orders in the Federal Court be quashed because the orders that are made in the Australian Capital Territory Supreme Court give different rights to various parties than are given under the Federal Court orders.

HIS HONOUR: Mr Sheils, what is your position?

MR SHEILS: Your Honour, I support the plaintiff. Does your Honour wish to hear from me in any other aspect?

HIS HONOUR: Not at present because I have to say to you that I have not had an opportunity to read all of the voluminous materials. I am really trying to find out at present whether I need to make any interlocutory orders because I am plainly not - - -

MR SHEILS: Your Honour, I was not a party to the Federal Court proceedings. I have been made a party to these proceedings because I am affected by the orders of the Federal Court. One of the orders of which I was not informed until after it was made was that I pay ASIC’s costs in some degree. I was neither a party nor was I forewarned of any application.

HIS HONOUR: No service on you or anything?

MR SHEILS: I was never asked or informed that any application would be made and nor was I put on notice or told to be joined, but that is probably a smaller matter.

HIS HONOUR: I do not know about that.

MR SHEILS: I had absolutely nothing to do with the proceeding and I still do not understand the basis upon which an order was made that I pay ASIC’s costs, but leaving that aside, the basis of the assertion that brings the matter before your Honour is that there having been a decision by a Supreme Court, the Federal Court through his Honour Mr Justice Finkelstein, assumed the jurisdiction to relitigate exactly the same matter and made orders which were different and, having made orders which were different, suggested in a fairly strong manner to the liquidator appointed by the Supreme Court that he resign so another one can be appointed. He then resigned. The Federal Court then appointed another liquidator which was, to some extent at least, an increase in costs of the villagers and then made other consequential orders which seemed to conflict with the orders made by the Supreme Court.

HIS HONOUR: Which had never been set aside?

MR SHEILS: No, there had been no appeal. There was absolutely no reason that I can see, with great respect, why one court should not give full faith and credit to the other.

HIS HONOUR: Who was the moving party before the ACT court?

MR SHEILS: I am not sure.

HIS HONOUR: Yes.

MR LEVET: Your Honour, to the best of my recollection, it was Rosedale Village Nominees Pty Limited, the third defendant.

HIS HONOUR: Who was the moving party in the Federal Court?

MR LEVET: ASIC, your Honour. I can indicate, your Honour, there have been some changes of name through the thing and it is a little bit confusing but I can indicate that I appeared before the Supreme Court of the ACT and winding-up orders were made and a liquidator appointed at that time. Subsequently, matters were commenced in the Federal Court out of Melbourne before his Honour Justice Finkelstein and his Honour was apprised of the orders that had been made. I can indicate to your Honour that I appeared before his Honour, as did my learned friend - - -

HIS HONOUR: What did Justice Finkelstein say? Is it in the material what he said?

MR LEVET: In essence, yes, your Honour. Your Honour, he concluded that there had been a scheme in existence which was in fact slightly larger than the scheme which had been purported to be wound up by - - -

HIS HONOUR: In the ACT?

MR LEVET: Yes.

HIS HONOUR: In fact, his order accepted, did it not, what was covered by the order of the ACT on 12 October? Is that right?

MR LEVET: Your Honour, it was curious. On the one hand he said he did not seek to set it aside, he did not seek to interfere with it. He simply imposed over the top of it a further winding-up order. There was, I think, some 96 or 97 per cent of the scheme he identified as probably being the subject of the Supreme Court of the ACT’s argument and then said that there is this little extra bit, potentially.

Your Honour, it was urged upon him, certainly from my end of the Bar table, that if he was concerned about a little extra bit that he should make an order winding that up or, alternatively, remit it to the Supreme Court of the ACT but what in effect he was saying, “No, I’m winding up the lot by reference to a formula and if within that lot is something that already – so be it”.

HIS HONOUR: “Already covered, I will exclude it.”

MR LEVET: What he did, your Honour, was having heard from my learned friend, Ms McLeod, before he had heard from me he procured the resignation of the liquidator.

HIS HONOUR: The liquidator accepted that.

MR LEVET: There were two letters, your Honour. Basically the liquidator, as I apprehend it, received a message through those who instruct Ms McLeod that “His Honour Justice Finkelstein says could you please resign”. Your Honour, a letter came back from the liquidator that day I believe to his Honour, again it came through the auspices of ASIC, and the indication at that point was “In accordance with the request by his Honour, I tender my resignation”. It was indicated at that stage that that was not satisfactory and he was sent back to redraft his letter.

HIS HONOUR: That liquidator is not represented here?

MR LEVET: No, your Honour. That was Mr Rangott.

HIS HONOUR: I suppose he does not want to incur the cost. I will just ask Ms McLeod something.

MS McLEOD: I should say, your Honour, I do not accept that characterisation of how the resignation came about.

HIS HONOUR: Obviously I am not going to make any findings about that today and I am not going to make any findings about any controversy today. Why would ASIC make the application in the Federal Court instead of going to the ACT court where the matter was well and truly pending and orders had been made? You could have gone back there, could you not?

MS McLEOD: When ASIC issued in the Federal Court it was unaware of the ACT Supreme Court orders.

HIS HONOUR: It became aware of it fairly quickly, did it not?

MS McLEOD: Indeed, your Honour, and what happened was – and Mr Levet agreed with this proposition – the orders in the ACT were ineffective to wind up all of the scheme. There was a scheme within a scheme, if you like, or part of the scheme.

HIS HONOUR: I understand that, but why would you not have gone to the ACT court then?

MS McLEOD: Because his Honour decided it was unnecessary to do so. In the first place, his Honour looked at the material that was filed in support of the ACT Supreme Court orders and decided it was difficult to ascertain what exactly was the scheme that was being wound up there. Those were orders obtained by consent.

HIS HONOUR: Why would you not, as soon as you became aware, which you did certainly by the time that the matter was before Justice Finkelstein, why would you not then have gone to the Australian Capital Territory to get any omissions, as it were, that had been made there filled?

MS McLEOD: Because an inquiry was made as soon as we became aware of those proceedings of the liquidator, Mr Rangott, as to what had happened and what steps he had taken and what he had done. This is before the matter was raised by and in front of Justice Finkelstein. Mr Rangott indicated that he had received no documents, had taken no effective step in the liquidation and as far as he was concerned there was nothing to do. I raised those matters with his Honour on the first occasion of the hearing of this matter and argument then developed when Mr Levet said effectively that you are seeking to wind up something that has already been wound up.

A concession was made by my learned friend that, yes, you have not wound up a 100 per cent of these schemes so something needs to happen, but it was maintained that there was - the argument was run below that effectively what the Federal Court was trying to do was interfere somehow with the ACT Supreme Court orders. His Honour’s reasons reflect that and his orders deliberately carve out any interference with the ACT court orders.

HIS HONOUR: Ms McLeod, what is the controversy now? The liquidator has resigned. The ACT liquidator has resigned.

MS McLEOD: Yes, and what has happened is in his place a liquidator has been appointed over that part of the scheme that is dealt with by the ACT court and that is the same liquidator as is dealing with the scheme overall. So in order to avoid inconsistency or a controversy his Honour put in the same receiver, Mr Rangott, saying there is nothing I can do. So Justice Finkelstein carves out those ACT court orders. That is explicitly stated in the orders. He then puts in the two new receivers in respect of the ACT part of the scheme and in anything left over. If your Honour reads order 9 and 29 it is quite clear he deliberately did so.

Your Honour, can I just address one other thing? There are a number of reasons why we would invite your Honour to strike out this application. The first has already been mentioned, that is, that there are final orders in the Federal Court and save that there are subsequent matters addressing the progress of the winding-up, those orders are final in the Federal Court and there has been no appeal by any party interested.

HIS HONOUR: There may not have to be in order to attract the jurisdiction of this Court under 75(v) of the Constitution.

MS McLEOD: I accept that, your Honour.

HIS HONOUR: I am not saying that that is right, but there may not need to be an appeal.

MS McLEOD: I accept that, your Honour, nevertheless, there may be factual issues that will be raised which are better dealt with by way of an appeal. A non-party, of course, can apply to appeal even though they have not been party to the original application and the plaintiff in this case would be no different to a plaintiff with a commercial interest.

HIS HONOUR: I do not know. You have Mr Sheils’ position if what he says is correct. He has an order made against him without notice.

MS McLEOD: Can I just address that as well, your Honour? Mr Levet, who appeared below for the fourth and sixth respondent, filed on behalf of his clients an affidavit sworn by Mr Sheils’ son, Benjamin Sheils, indicating the offices he held in each of the fourth and sixth defendants. He indicated in his affidavit material that he had been assisting his father, Mr Peter Sheils, with the management of those companies. Can I say it appears that the parties to my left have common interest at least and that those interests were effectively represented and argued by Mr Levet below.

HIS HONOUR: That is not good enough if what Mr Sheils says is correct. You cannot fix Mr Sheils with something his son has said or done.

MS McLEOD: Your Honour, his son said that his father was too ill so he was swearing an affidavit effectively on his behalf. We have a position where there was a costs order made personally against Mr Sheils. If your Honour is going to examine whether that was a correct order or not by way of effectively an appeal on an error of law question, then there should be an appeal below. This is not a matter that is appropriate - - -

HIS HONOUR: No, no, I mean, there may be a jurisdiction question. I am not saying there is, but there may be a jurisdiction question whether an order can be made against a non-party. It may well be a 75(v) question. In any event, Ms McLeod, I am not going to decide anything of that kind today.

MS McLEOD: Yes, your Honour.

HIS HONOUR: I am really trying to find out what the ultimate dispute is.

MS McLEOD: Can I indicate what the criticisms are in short form, your Honour. In terms of the prospects of the application, the first - - -

HIS HONOUR: First of all, what are the differences between the parties? What are the issues? What is each of the parties seeking to achieve? You want the villages wound up, is that right?

MS McLEOD: The villages have been wound up.

HIS HONOUR: They have wound up.

MS McLEOD: There is one village and one block of land, but the scheme has wound up.

HIS HONOUR: All right, and you want that scheme implemented in accordance with Justice Finkelstein’s orders, is that correct?

MS McLEOD: Yes, your Honour.

HIS HONOUR: The other side, what do you understand?

MS McLEOD: They are seeking to quash those orders effectively, your Honour, and stop the receivers progressing with their receivership.

HIS HONOUR: Say they were successful in doing that, what would happen then?

MS McLEOD: What we would be left with would be a portion of each of these schemes that had not been wound up that was conducted contrary to the provisions of the Corporations Law that everybody has recognised were illegal schemes that has to be dealt with by some court at some time in some place.

HIS HONOUR: Would the matter logically then go back to the ACT court?

MS McLEOD: No, your Honour, because the ACT court was not seized of any issue relating the over scheme.

HIS HONOUR: No, but it would be a very simple matter to tack on the additional, would it not?

MS McLEOD: No, they were not the same parties, your Honour, in that court. ASIC was not a party, it was not a necessary party to those proceedings.

HIS HONOUR: No, but you say not the same parties. Was there an identity of parties though, apart from ASIC?

MS McLEOD: No, there is not, your Honour.

HIS HONOUR: Were some of the parties parties to both?

MS McLEOD: The third and fourth defendants in this proceeding, Rosedale Village Nominees as the village manager and Mews Village Nominees as the village manager and - - -

HIS HONOUR: It is sufficient for my purposes if you can tell me whether - - -

MS McLEOD: There were two, perhaps three, parties that were in common.

HIS HONOUR: Were in common, all right. I am not in a position to decide and it would be inappropriate for me to decide any - - -

MS McLEOD: Can I just say something about remitter, your Honour, before your Honour decides how to dispose of the matter this morning.

HIS HONOUR: Yes.

MS McLEOD: We have looked at the question of remitter, your Honour. It is obviously inappropriate to vest the original jurisdiction of this Court in the Federal Court where one of the parties is a judge of that court. There is a question or a doubt about whether it is appropriate also to vest the original jurisdiction of this Court to vest the power to issue prerogative writs in the court of the Territory and it is not clear that section 44(1) enables that to happen.

The long and short of it is that this Court then must deal with the issue. It will inevitably involve issues of disputed facts. For example, the standing of the plaintiff to bring this action is not entirely clear on the basis of matters that have arisen in the material below. So it will be necessary to progress in terms of deciding what the facts are in the standing of the plaintiff. That is one angle.

The criticisms that we see raised by the material filed by the plaintiff that the judge interfered with orders of the Supreme Court, that he entered the fray, as it were, all those matters we say are plainly addressed in his reasons, in his judgment and that they should give no cause to the Court to proceed with the matter at all. But that can be the matter for argument at another day if your Honour is not minded to make a decision on the issue today.

HIS HONOUR: I just feel, Ms McLeod, that I do not know nearly enough about it at this stage and my concern was, of course, whether there are any orders that I should make to preserve any status quo or anything of that kind.

MS McLEOD: We would resist any such orders, your Honour. The matter is proceeding in an orderly fashion at the moment.

HIS HONOUR: In effect, under the supervision of a judge.

MS McLEOD: Indeed, and, in fact, there is nothing to prevent these parties from raising an issue with his Honour below in terms of the progress of the matter if they wish to ventilate their interests in terms of dealing with scheme assets. Mr Sheils, I hear, asks how do I raise my matter? A non-party affected by the outcome of an order, your Honour, may, of course, appeal. Order 52 rule 14(2) of the Federal Court Rules makes that abundantly clear, your Honour.

HIS HONOUR: He is a party now though, is he not, Mr Sheils?

MS McLEOD: He is a party to this proceeding, your Honour.

HIS HONOUR: Yes, so he can raise these things here.

MS McLEOD: He can and ASIC, of course, would need to put into evidence what were the communications received by those responding on behalf of Mr Sheils to the costs application.

HIS HONOUR: I will tell you what I am inclined to do.

MS McLEOD: Yes, your Honour.

MR LEVET: Will your Honour hear me first?

HIS HONOUR: Yes, of course.

MR LEVET: Your Honour, it had been our intention to appeal within the time limited for appeal and we did not do so simply because we became aware of these proceedings, did not think we should be sort of fighting in two places at once, as it were, but, your Honour, we are of the opinion that the orders of his Honour should be stayed. The position taken by my client is that effectively the orders of the Supreme Court of the ACT had been given sufficient effect. There was nothing left to do. In those circumstances, we are of the opinion that the orders made by his Honour, which an event had the result of procuring the resignation of the liquidator prior to him having heard from us, should be stayed.

Your Honour, there is also a further issue, that is that there are various residents whose rights are affected and who were not parties before his Honour and his Honour now seeks, in effect, to cure that by adding them as defendants after he has given his judgment.

HIS HONOUR: I will tell what I am going to do in this matter. I am only going to make one order at this stage and I am going to order that by 1.15 pm today each of the parties prepares a statement of issues, a statement of the orders that each party would want and I want this in the shortest possible form and I want short submissions as to why I should make any interlocutory orders or as to why I should not make any interlocutory orders. I am going to adjourn the matter until 1.15 pm today. I am sorry, I hope that does not inconvenience anybody.

MS McLEOD: Can I indicate this, your Honour, that we would want to put on material in respect of an application for a stay. None has been foreshadowed to us and there is a substantial body of material below that we would seek to bring to your Honour’s attention. If your Honour would hold the matter over beyond today without the grant of a stay, nothing, as we know, significant is happening except the receivers are in. There is no reason for the urgency that your Honour suggests and no
evidence from my learned friends to suggest that it is so urgent it must be dealt with today.

HIS HONOUR: At the moment I am just asking for short submissions on each side as to why a stay might be necessary. I accept your point that you would want to deal with any argumentative matters of fact. This is just to enable me to get a grip on the issues, Ms McLeod, but I understand your position.

MS McLEOD: If your Honour pleases.

HIS HONOUR: Yes.

MR PITT: If your Honour has passed beyond the matter of the stay, my learned friend has been heard effectively in response to the orders that we would be seeking and then heard to some degree as to the substance of them. There are a number of submissions that I would want to make.

HIS HONOUR: What I am saying is I will hear you at 1.15 pm. I have to go into Court. There is another matter listed at 10.00.

MR PITT: Yes, thank you, your Honour.

HIS HONOUR: I will only hear the parties on the basis that they compile that material that I referred to. I know it is short notice to do so, but that is the way I have to proceed.

MR PITT: Your Honour, a statement of the issue, a statement of the orders which are sought by each party and short submissions as to why such interlocutory orders should be made?

HIS HONOUR: Yes, and I would like you, in order to assist the Court, and I do not make any order in this regard, but I would like you to confer. I would like the parties to confer after the short statements have been made, to see what common ground there is, not as to the orders that should be made, but as to precisely what the issues and differences are. It is very hard for me to get a grip on them with parties not having been parties in the Federal Court and, it seems, also in the Australian Capital Territory court. Mr Sheils, the same applies to you and to you, Ms McLeod. I have to tell you that it may be that there will not be time to deal with it today. What is the position of the parties next week?

MR PITT: I have a five-day matter next week, your Honour, in Tasmania, I am sorry. This, of course, must take precedence, but it would cause the gravest inconvenience.

HIS HONOUR: I do not want to inconvenience anybody. I am interested to know why there might be any urgency in it. On what Ms McLeod says the matter seems to be proceeding in an orderly way.

MR PITT: Yes, I will take instructions.

HIS HONOUR: I would like to know why you say there is any urgency. Thank you for your help and I will adjourn the matter until 1.15.

AT 9.50 AM THE MATTER WAS ADJOURNED
UNTIL LATER THE SAME DAY

UPON RESUMING AT 1.17 PM:

HIS HONOUR: Yes. Have you been able to do what I asked?

MR PITT: Your Honour, we have prepared a memorandum of the orders sought by the plaintiff, the fifth defendant and the ninth defendant. We have prepared a statement of the consequences of the orders sought and a statement of the issues which are, I understand, at present to be available to your Honour. Unfortunately, counsel have not been able to agree upon even the statement of the consequences or the statement of the issues.

HIS HONOUR: Very well. Let me read your statement first. Yes. Did you manage to prepare something, Ms McLeod?

MS McLEOD: Yes, I did, your Honour. Could I hand up a copy of our submissions.

HIS HONOUR: Thank you for that.

MS McLEOD: It is a single submission that encompasses, we hope, all of the issues your Honour asked us to identify.

HIS HONOUR: Thank you. I will just read this, thank you.

MS McLEOD: Thank you, your Honour.

HIS HONOUR: You have exchanged these documents, have you not?

MS McLEOD: Yes, we did, your Honour. Unfortunately, there was not a lot of time left before we had to resume to discuss it.

HIS HONOUR: No.

MS McLEOD: Can I indicate that it appears to us that the issues that are probably not in contention are that the ACT Supreme Court orders wound up a part of the schemes in the case of each development.

MR PITT: I should say we differ as to that in respect of The Mews development.

HIS HONOUR: I am hearing – I will hear you, Mr Pitt.

MR PITT: Yes, your Honour.

HIS HONOUR: You continue.

MS McLEOD: If I am wrong about that then I am wrong about that as well, your Honour, so it seems that there are no common issues.

HIS HONOUR: Would you just repeat that, please, Ms McLeod?

MS McLEOD: Yes. I understood that it was not an issue, that the orders of the Supreme Court of the ACT in each case wound up a part of the respective schemes.

HIS HONOUR: That is what I thought, too. I thought that is what is what I was told earlier today that it was common ground that Justice Finkelstein’s order embraced everything except what was the subject of the order - - -

MS McLEOD: Yes. It is plain if you look at paragraphs 9 and 29 of his Honour’s order that he sought to carve out those ACT orders. From the effect of his orders the only way in which those orders are impacted was by the removal of Mr Rangott, the liquidator, and replacement with common liquidators in each case, or receivers, I should say, in each case.

HIS HONOUR: So Justice Finkelstein did, I suppose, amend – and I am using that term loosely – the orders that were made by Justice Crispin, was it not?

MS McLEOD: No, he did not.

HIS HONOUR: No, I mean to the extent only of substituting a different liquidator because the liquidator, under the orders or under the winding-up orders that were made in the Supreme Court, that liquidator retired, did he not?

MS McLEOD: Yes, he did, your Honour.

HIS HONOUR: So it was necessary for him to be replaced.

MS McLEOD: We quibble with the interpretation that there was somehow an interference with Mr Rangott or those orders.

HIS HONOUR: No, well, I have used a neutral term – he retired.

MS McLEOD: Yes.

HIS HONOUR: So once that happened there had to be somebody substituted.

MS McLEOD: Yes.

HIS HONOUR: So to that extent, I suppose, Justice Finkelstein’s order amended, in effect, the order that had been made by Justice Crispin.

MS McLEOD: We say it was not an amendment, your Honour. We say it was a subsequent order and, of course, the courts have a power under the Corporations Law to act in aid of each other, Mr Rangott having indicated to ASIC, and his letter being produced to the court that he had done what he could, there was nothing more to do, there was no effective interference with the scheme.

HIS HONOUR: Yes.

MS McLEOD: We understand there is an issue about that, though.

HIS HONOUR: Yes.

MS McLEOD: Your Honour, might I pose this question which I hope is clear from our submission which we rely upon. The first is that we do not agree with the characterisation of the issues, for our part, in this document which is headed “Statement of issues”. I presume this is filed on behalf of the plaintiff, the fifth and the ninth defendants, but we do not agree that that is a correct characterisation as to how we put the issue. We certainly disagree with the statement of consequences and you will see that all of these things are in issue.

We say there is no basis in any of the material either before you or filed below for the assertion of these issues and there is nothing that has come to our attention to indicate that this is the case. The question for your Honour perhaps is if your Honour does not grant a stay what will happen, if your Honour does grant a stay what will happen? If your Honour does not grant a stay then the receivers who are in place will stay in place. They have appointed managers to operate the Rosedale Village in accordance with the legislative requirements and those managers are in place.

HIS HONOUR: Those receivers are effectively under the supervision of the Federal Court.

MS McLEOD: Yes, they are and if those receivers – the orders appointing those receivers is stayed and the effect of those orders is stayed the question is what will happen to each of these schemes. Is it expected that they will be conducted operating as they were before in an unsatisfactory and arguably illegal state?

HIS HONOUR: And without an administrator.

MS McLEOD: Indeed, Mr Rangott having now resigned, effectively. That would be a most undesirable circumstance, your Honour, and again you would need proper material before you in order to weigh that up one way or another. There is no reason why, if that is your Honour’s concern, that cannot be done properly with consideration of proper material. To do that today without that material could cause a grave injustice and affect the rights of parties who are there, but, as I say, you do not have material before you one way or the other, it is almost impossible to say.

HIS HONOUR: Ms McLeod, it is possible in the course of the administration for any party to apply to Justice Finkelstein any matter arising, is it?

MS McLEOD: Indeed. The plaintiff, if it established it had sufficient standing to do so could do that. Mr Sheils could independently do that, as could, if he could establish an interest, the fifth defendant do that.

HIS HONOUR: I see you have offered an undertaking.

MS McLEOD: Yes, I have, your Honour. I do have instructions to offer the undertaking in respect of the costs order.

HIS HONOUR: It does seem a little unusual that an order for costs was made against a person who was not a party.

MS McLEOD: Your Honour would need to be seized of all the material in relation to the circumstance in which that arose. In a nutshell, Mr Levet, after the winding-up of these companies made an application for a stay and for Justice Finkelstein to recuse himself. That application, on his Honour’s ruling, was without merit and it was refused and what followed then was an order that the costs of that application be paid by Mr Sheils on the basis that Mr Sheils had provided instructions to Mr Levet to bring the application.

HIS HONOUR: I will - - -

MS McLEOD: I hear what is said against me, your Honour, and again your Honour would need to be seized of the evidence in relation to how that came about. Mr Sheils has a complaint about it, it is true. Nevertheless, the undertaking there is intended to provide some comfort to Mr Sheils so that he knows that no step is taken without proper notice. I am instructed to give the undertaking set out in paragraph 5 and I do
so, your Honour, so that nobody is going to be knocking on his door seeking costs. They are the costs of the day, effectively, or the costs of that application.

HIS HONOUR: Thank you, Ms McLeod. Yes, Mr Pitt.

MR PITT: Yes, thank you, your Honour. With respect to the practical consequences might I just be heard with respect to the substance of the matter as well?

HIS HONOUR: Yes, you go ahead.

MR PITT: Your Honour, in our submission the orders of the Federal Court which are sought to be impugned here were founded in three respects, particularly in quite significant severe errors which went beyond jurisdiction.

HIS HONOUR: Let us accept for present purposes that there were such errors. Why did you not appeal?

MR PITT: In the first place, your Honour, my instructions are because the present plaintiff was not a party. It was not named as a party to the Federal Court action nor for that matter was Mr Sheils. In the second place, your Honour, in my submission, the nature of the errors, particularly with respect to natural justice and excess of jurisdiction in terms of a denial of faith and - - -

HIS HONOUR: Mr Pitt, you say that the present plaintiff – that is Rosedale Action Incorporated, is that right?

MR PITT: Yes, your Honour.

HIS HONOUR: Was not a party. It could have applied to become a party if it thought it was going to be affected by the orders or affected in any way at all by the proceedings.

MR PITT: Had it been on prior notice of those matters, yes, your Honour.

HIS HONOUR: But at any stage afterwards?

MR PITT: It could have applied, I accept, your Honour, but the reason why it did not was, in my submission, because so many of the aspects of what was done went beyond jurisdiction, that it was seen as inappropriate to appeal to the Federal Court.

HIS HONOUR: No. If it was beyond jurisdiction you could have applied to be joined and then you could have – assuming that an order was made for joinder – you could then have participated and appealed. If an order for joinder were refused you could have appealed against that.

MR PITT: We could, your Honour, but the initial application - - -

HIS HONOUR: We like the benefit in this Court of intermediate Courts of Appeal, decisions of intermediate Courts of Appeal and it is preferable to have that rather than to have the matter brought to the court if it is an alternative, that is, if an appeal is an alternative and the more regular alternative, I might say, to collateral challenge by prerogative writs. As you know, we do not try facts these days very often, very rarely. Matters are remitted usually to another court for findings of fact when there is a dispute, as from time to time there is in cases under section 75(v). Those factual disputes are usually resolved elsewhere, then the matter comes to the Court. It seems to me that on any view here there are facts in contest.

MR PITT: There are some which may be in contest, your Honour, although we have sought a direction that the parties confer and produce lists of agreed facts and one would have hoped that largely the facts would have subsisted in the record of the proceedings, the formal record, and, of course, the reasons and the transcript.

HIS HONOUR: I understand that, but I think there are still plainly some facts in dispute.

MR PITT: On my instructions, I would not have expected very much to turn on disputed issues of fact, but that, I suppose, cannot confidently be predicted. But, your Honour, the other aspect of why an appeal should not have been lodged with the Federal Court was that this is an unusual case in the sense that it involves the conflict between the Federal Court which was asserting jurisdiction over the schemes which were already the subject of the orders in the ACT Supreme Court.

HIS HONOUR: I thought you agreed this morning that his Honour the Supreme Court judge’s orders did not cover precisely the same ground as the orders covered by Justice Finkelstein’s.

MR PITT: I did, your Honour, but I was going on to, if I might now, develop that argument.

HIS HONOUR: The next step was that his Honour Justice Finkelstein seems to have accepted things that were the subject of orders by Justice Crispin, was it not, I think – he seems to have accepted what was the subject of his orders from Justice Finkelstein’s orders?

MR PITT: With respect to what was done, your Honour, it seems to hang together very logically but, in my respectful submission, there is this which needs to be understood about it to understand why it is that we are bringing the application.

HIS HONOUR: No, no, but if what I have just put to you is right?

MR PITT: It is right.

HIS HONOUR: If that is right, then there is no conflict between the orders because the subject matter of Justice Crispin’s orders are expressly excluded from the subject matter of Justice Finkelstein’s orders. Where is the conflict if that is so?

MR PITT: The conflict is here, your Honour. The two schemes, one involved Western Australian land, one involved New South Wales land. The Western Australian land was the subject of a partnership which Justice Finkelstein agreed that winding-up of that partnership would effectively wind up the scheme and in that respect we would say that the orders of the ACT Supreme Court effectively wound up the totality of that aspect.

HIS HONOUR: Would you please say that again?

MR PITT: The Western Australian aspect, your Honour, involved – it is The Mews scheme, as it is known – essentially, a head partnership which was the same as the principal agreement which constituted The Mews Village scheme, we say. So, the order of the ACT Supreme Court winding that one up effectively wound up the totality - - -

HIS HONOUR: I do not understand that. If an order says expressly that the subject matter of some other order is excluded then that must be given effect and that means that whatever was the subject of the other order is excluded.

MR PITT: Your Honour, our submission is that the totality of what was incorporated within the assets which were wound up by the ACT Supreme Court order was the totality of the assets in The Mews Village scheme. Effectively, it had wound everything up and so that for the Federal Court to go on and then say, “Well, we will make an order that we will except that part out” was effectively to say, “Well, we are making an order about nothing” in respect of that scheme.

HIS HONOUR: If that is in any way unjust to your client then there is nothing to stop you now, is there, making an application to Justice Finkelstein?

MR PITT: Your Honour, we would submit there is.

HIS HONOUR: If there is some problem in the administration – this happens all the time, does it not, in the administration of companies and enterprises like this one?

MR PITT: Without the aspects about which we complained, your Honour, that is the denials of natural justice, the denials of full faith and credit and the like, that would be so except for this, I submit, important fact that not only was there the Western Australia land there was also the New South Wales land. The New South Wales land was, as his Honour found, approximately 95 per cent owned by the Talisker Skye partnership which was wound up by the ACT Supreme Court, even if one took the narrow view that it was only that partnership which was wound up.

So that when the Federal Court said, “We will make an order for the winding-up of the Talisker Skye or the Rosedale Village scheme”, excepting there are such parties as are the subject of the ACT Supreme Court orders, what they were effectively making it an order for was to wind-up the remaining less than 5 per cent of the assets of that scheme or partnership, however one wants it. It added an entirely unnecessary layer on to what had already been achieved by the - - -

HIS HONOUR: You have the same administrator, have you not, acting under both orders now?

MR PITT: It is the same administrator, your Honour, that - - -

HIS HONOUR: If he is having any difficulty in doing this then he can make an application and surely if in any way he is, you think, not acting properly or unjustly to your client then you can make an application, can you not? Can you not seek to have him restrained in some way or an order made in respect of him?

MR PITT: Your Honour, it would be making an application to the very entity – the very person, the first defendant who has, we say, failed to accord natural justice, has dismissed applications before even hearing the reasons for them, has made orders against persons without their being parties, without notice to them.

HIS HONOUR: But you, yourself, as opposed I think to Mr Sheils, have not made an application to have him excuse himself, have you?

MR PITT: Not to the ACT Supreme Court, no, your Honour. I am sorry, not to the Federal Court either.

HIS HONOUR: No. If what you say is right, and I am not saying for a moment that it is or it is not - - -

MR PITT: I am sorry, I misconstrued what your Honour said. My learned friend, Mr Levet, did in fact make application to Justice Finkelstein to excuse himself I think on two occasions. He would be more accurate as to that. Each of those applications was first of all dismissed out of hand and, secondly, after submissions had been allowed to be made was again dismissed. The reading of the transcript would - - -

HIS HONOUR: There is an appeal against that, or there is an argument that there is an appeal against that. I have probably spoken a little quickly.

MR PITT: With respect, I accept that if - - -

HIS HONOUR: There is some debate whether you can appeal against a refusal of a judge to excuse himself or herself. That is a matter that is sometimes relied upon in an appeal about which there is no doubt. That was not the only application that was made, I take it, to Justice Finkelstein?

MR PITT: There were other applications made of different natures, but I think that there were two made that he excuse himself, certainly, unless I am misunderstanding your Honour.

MR LEVET: Your Honour, might I assist you in just an understanding of what we say is the difference.

HIS HONOUR: Just wait a moment, if you do not mind.

MR LEVET: Certainly, your Honour.

HIS HONOUR: The other proposition that I put to you is right, is it not? If there is some problem about the administration or in the administration, then you can apply to the Federal Court, is that not right?

MR PITT: As I understand it, your Honour, yes, but to the judge who - - -

HIS HONOUR: You say you would be committed to Justice Finkelstein. If there is a basis upon which Justice Finkelstein should excuse himself, then you will put that to him and he will either accede to that or not. If he does not accede to that, then he will hear your application and then, depending upon the outcome of that, if you fail you would have an appeal.

MR PITT: Your Honour, such an application has been made and it failed, but because of all of the other aspects that attended - - -

HIS HONOUR: Why did you not appeal?

MR PITT: I assume, and I will check from the instructions that I receive, your Honour, but I would assume that because there were so many other aspects of what was done that - - -

HIS HONOUR: We are not a trial court, Mr Pitt. You have an appeal and it is a discretionary basis for refusing prerogative relief that parties have other remedies and prerogative relief, section 75(v) relief, is often refused on that basis.

MR PITT: There is one aspect, your Honour, which I believe would not have been possible to have appealed and that is the refusal to transfer the proceedings to the ACT Supreme Court upon the application made to Mr Justice Finkelstein to that effect. I understood such an application was made and declined and, as I understand it, the provisions of the Corporations Act preclude that.

HIS HONOUR: That is one aspect that probably could not be - - -

MR PITT: It was, in my submission, a significant aspect because that was entirely what the parties, or at least the plaintiff was seeking to achieve.

HIS HONOUR: It sounds to me like a discretionary order anyway and appeal courts are reluctant to interfere with discretionary orders and, equally, prerogative relief is rarely granted in respect of discretionary orders unless there is shown to be some improper exercise of the discretion.

MR PITT: I accept that falling from your Honour. May I say this, your Honour. The orders that have been made by the Supreme Court of the ACT had the liquidation with respect to all but a tiny fraction of the assets of these schemes, in effect, being wound up. The Federal Court orders on their face excluded such part of the schemes as was the subject of the ACT Supreme Court orders and the result is that in respect of the 95 per cent plus of the Rosedale land in New South Wales and, in my submission, in respect of all of the Western Australian assets, the liquidators are in there - - -

HIS HONOUR: The liquidator or administrator?

MR PITT: Whoever it is. It is an administrator, the administrators.

HIS HONOUR: It is the same administrator now under both schemes, is that not right?

MR PITT: It is, your Honour, but under different orders with different emoluments and the like, different duties. Section 477 powers under the ACT Supreme Court orders, whereas under the Federal Court orders it was a much more limited scope and to which orders the party having the possession of the assets respond. What are the rights and duties of the plaintiff who was the sixth defendant as to the trust assets which it holds? Matters like that. In my respectful submission, one could not with confidence go back to the Federal Court given the events which occurred in the hearing.

I emphasise again, if I may, the failures of natural justice, the failures to accord due faith and credit to the ACT Supreme Court orders and the simple confusion that results from the way in which the orders were made. In my submission, it would not be reasonable to require a person in the position of the plaintiff, or for that matter, Mr Sheils of limited resources to do that, to go back to the Federal Court as opposed to taking a proceeding which would have the effect of bringing about an order by a court which had proper jurisdiction to describe and to delineate the jurisdiction of the Federal Court and the way in which the full faith and credit doctrines should be administered and the like. All of those things, in my submission, militate very strongly to this Court retaining control of the matter.

HIS HONOUR: I come back to it. If Justice Finkelstein’s orders expressly excluded the subject matter of and left Justice Crispin’s orders to operate according to their tenor, then there is no conflict. There cannot be any conflict if, in fact, the
administrator, even though it is the same administrator, is acting in some way improperly in trespassing upon - - -

MR LEVET: Your Honour, that is the point on which I sought to assist your Honour before and I might be able to quickly clarify it for your Honour.

HIS HONOUR: Yes, all right.

MR LEVET: Your Honour, originally what occurred was that a company, of which Mr Sheils was the director, was a trustee company of a trust. That trust contained within it the two managed investment schemes. When Mr Sheils took over the appointment he discovered that they were unlawful managed investment schemes and felt that steps needed to be taken to wind them up. He made application – or his company made application to the Supreme Court of the ACT to effect that and that is what his Honour Justice Crispin did. As the result of that, what was wound up was in fact the two managed investment schemes and that constituted 97 per cent odd of the totality of the activity involved.

Now, off to the side there is a smaller percentage which does not constitute an unlawful managed investment scheme because it has not reached the threshold of the 20 members, so no overt steps needed to be taken to deal with that. What his Honour Justice Finkelstein has done is in leaving in place – he has left in place the orders which wind up the two schemes, but all that Mr Rangott had to do in administering those was simply to effect the transfer of shares in companies. That is all he needed to do.

What his Honour Justice Finkelstein has done is drilled down into the assets of those schemes, in effect, and he has wound up companies, he has wound up Rosedale Village Nominees Pty Limited and Mews Village Nominees Pty Limited, which there was no need to do. They could have continued.

HIS HONOUR: Why did you not appeal against that?

MR LEVET: Your Honour, we were going to appeal. Within the time limited for appeal we were advised by the plaintiff in these proceedings of its intention to bring these proceedings. We made a decision based on a number of factors, firstly, our available resources to be fighting in two places at once, and, secondly, the point raised by my learned friend that one of the matters being appealed was in fact a non-appealable thing which was the exercise of a discretion not to transfer. On that basis the fact that it was coming here and this Court could potentially deal with that issue we elected not to expend resources that were fairly scarce, from our perspective.

HIS HONOUR: I can understand that but you must know that it is an important discretionary ground for refusing collateral relief.

MR LEVET: Yes, your Honour. It is not us that is coming here, your Honour. The fact that it was coming here was, from our perspective, a fait accompli and we had to make an assessment as to where we should spend what resources we had.

HIS HONOUR: You might be able to make an application for an extension of time within which to - - -

MR LEVET: Certainly, your Honour, yes. Your Honour, we say that the question that your Honour posed before, why should this be stayed as a matter of urgency today, we say that there are two practical reasons why your Honour should do that. Firstly, there is the cost of KordaMentha liquidating and continuing to act as liquidator/receiver/manager, et cetera, of Rosedale Village Nominees and The Mews Village.

We say that is a cost that need not be incurred because on our case all that had to happen was that the schemes be dealt with as his Honour Justice Crispin dealt with them, which was simply a transfer of some shares. Firstly, there is the cost that is being incurred. Secondly, your Honour, there is the commercial consideration that if these businesses are to continue they need to be out in the marketplace, firstly dealing with third parties but also getting people in to reside in such vacancies as they have and no company which is referred to as “in liquidation, receivers and managers appointed” no one is going to come and want to stay in that retirement village and put money into a retirement village to stay there if it has that on its shingle.

That, under the orders of his Honour Justice Crispin, need not have occurred because all that had to happen was that the schemes were wound up, there is a transfer of shares effected by Mr Rangott and these companies could have continued to run. That is what we say the urgency is.

HIS HONOUR: Yes, all right, thank you.

MR LEVET: Thank you, your Honour.

HIS HONOUR: Mr Sheils.

MR SHEILS: Your Honour, I have effectively said what I can say.

HIS HONOUR: That undertaking would - - -

MR SHEILS: Well, I suppose it is comfort. If your Honour were not minded to hear this matter, the undertaking is not worth anything to me. If this does not proceed in the Court, then the undertaking expires if I simply get a letter from ASIC saying, “Ha, ha, we are going to seek costs from you now”. I mean, I was not a party, I was not notified, I was not present, I was not aware that any application was to be made. I cannot, with great respect, think of a clearer case of an abuse by ASIC of its position and I cannot think of a clearer case of an extraordinary order by a judge.

Your Honour, I have to correct something that Ms McLeod said. She did say that the order was made upon the basis, if I recollect correctly, that I had been giving instructions to Mr Levet. I gave no instructions to Mr Levet. He was not acting for me, nor was he acting for the company of which I was the director. That was simply an assumption made by his Honour without any evidence and, so far as I am aware, without anybody telling him.

The other aspect, your Honour, is this and I will be very short about this. The Supreme Court of the ACT heard the litigation which was particularly designed to protect the investors from a very, very serious problem with tax. They had advantages I will not worry you with now if the scheme was liquidated and the assets were transferred to a company. That is why his Honour Justice Crispin did that. The scheme was liquidated and the assets were to be transferred. That is what Mr Rangott was doing.

When that was on the basis of being completed, ASIC went to the Federal Court to seek the same relief from the Federal Court. When the Federal Court was advised this matter has been dealt with by Justice Crispin, instead of the Federal Court saying, “Well, look, ASIC, go back to there and have him clean up anything that you are worried about, he has got total jurisdiction in the matter”, Justice Finkelstein simply embarked on a further litigation of the same matter.

HIS HONOUR: What about the orders though which attempted to carve out - - -

MR SHEILS: The orders are not clear. The orders are impossible, absolutely impossible. If your Honour looks at the order of Justice Finkelstein it says, “I do not want to interfere with the court order of the ACT so I exclude that”. There is nothing left once that is excluded. The other 4 or 5 per cent, I have found out since then, had already been litigated and dissolved. I did not know that. It has nothing to do with me, but I found that out. That 5 per cent, or whatever it was, was gone. So there is 100 per cent of both of them gone before he embarked upon the hearing.

The second thing about it is, his order says, “I do not want to touch what Justice Crispin dealt with”, and then he appoints a new administrator to do exactly that. They have taken over the village. Now, I was the director of a trustee company that was running the village, running it for the trust. I was trying to wind up the illegality parts of the schemes and I was then trying to deal with it so it would be to the advantage of the investors and to the village people. But what has happened is it is now put in KordaMentha who are not unknown for their costs and they are administering the village and running it for a fire sale. That is what they do, liquidate and administer.

It is not necessary to liquidate that village. It is not necessary to liquidate the asset. It was only necessary to do what Justice Crispin did. If full faith and credit had been given to his judgment, we would not be here now and nor would anybody be complaining and I would not be facing an order for costs and nor would anybody in the village be looking at a situation in which they have an uncertain future.

Your Honour, this is a matter which can only be, and I can actually quote what Ms McLeod said, “This Court must inevitably deal with the issue”. She was talking about the prohibition. It really does require not a conflict of facts. It is all on the transcripts, it is very simple in the affidavits, but what it does need is an examination of this extraordinarily important concept, I would respectfully submit, that when a court has dealt with something you do not go along and willy-nilly interfere with it without finding out.

Mr Levet informed Justice Finkelstein about what had happened and he was ridden roughshod over and there is no other proper expression for it. The judge simply relitigated the matter without finding out what had been done. In fact, he did not even read the judgment. That is apparent because at one stage he says, “I don’t know if Justice Crispin read the affidavit”, whereas, on the order it says, “Affidavits read” and lists them.

HIS HONOUR: Mr Sheils, the matter that you mentioned about your concern about a fire sale, was that evidence before Justice Finkelstein? Was there any evidence of that before - - -

MR SHEILS: No, your Honour, it is not, because - - -

HIS HONOUR: You see, why I raise that, you might understand that does seem to raise a factual issue.

MR SHEILS: I can only put that this way, your Honour. When you appoint a liquidator and receiver and manager to a company that is what they do, they sell it and there was no need for that and it was not, with great respect, the appropriate thing to be done. Your Honour could very easily just simply throw me out on that and say, “Well, you don’t think it was appropriate, but I do”. May I just say this as to it. His Honour Justice Crispin dealt with the whole of the scheme. It became a legal scheme.

By the time Justice Finkelstein had it before him there was no illegality but he relitigated it and he said, “It is an illegal scheme, KordaMentha go in, liquidate the assets, the companies and receive and manage”. That is really not giving any credit whatsoever to the orders of the Supreme Court of the ACT. The Supreme Court of the ACT turned it, by its orders, from a managed illegal investment scheme to a legal investment scheme which did not need to be interfered with and it was just going to go on and the investors would have had their advantages and their return. Instead of that, it has now gone to KordaMentha to be liquidated.

Your Honour, I know I make a submissive appearance. I intended to do that but when your Honour asked me - - -

HIS HONOUR: No, it has been helpful.

MR SHEILS: As your Honour can see I am quite unhappy about it.

HIS HONOUR: What I take from that side of the Bar table is that, as a practical matter, it is impossible to implement Justice Finkelstein’s orders without in some way trespassing upon the orders that were made by Justice Crispin? Is that the substance of it?

MR SHEILS: Yes, your Honour.

HIS HONOUR: Just as a practical matter it cannot work, or cannot work satisfactorily.

MR SHEILS: No.

HIS HONOUR: Is there more than that?

MR SHEILS: Well, anyone with deep pockets can win this the way it is going. The facts necessary for the prohibition are already on the record. There are no other facts, so far as I can see, and I am open to be in - - -

HIS HONOUR: I will tell you what does trouble me though, Mr Sheils, and you put your finger on it yourself. I cannot make an assumption that an administrator is going to be reckless or improvident in any way.

MR SHEILS: I did not mean to suggest reckless.

HIS HONOUR: No, I know, and I understand the force of what you say. You and the other parties on your side also say that the mere fact that something is in administration becomes known and it has a deflationary effect upon your sale price or your market.

MR SHEILS: It has a big effect on the villagers. The people living in the village, at the risk of going into some sort of evidence, I know those people and they have expressed – I will put it another way. You can perceive the problems they have when they want people to come to the village. They write a letter saying you are welcome, we have got this lovely unit and as you will appreciate an old people’s village of this sort has a turnover. People die every year and new people come in. New people are not going to come in. It is getting smaller. I know that there are less numbers there than there were a year ago.

HIS HONOUR: You say that that would not have been a consequence of Justice Crispin’s orders?

MR SHEILS: No.

HIS HONOUR: All right. Thank you, Mr Sheils.

MS McLEOD: Your Honour, I do object to all of the evidence that has been led from the Bar table.

HIS HONOUR: I understand that, Ms McLeod, but you still really have not explained to me why you chose to go to the Federal Court, or persist in the Federal Court when you well knew that the matter was the subject of orders of the Supreme Court.

MS McLEOD: Because it came clear on any view, your Honour, that the orders of the Supreme Court had not enabled the liquidator to take effective steps to deal with investors’ claims and that he was not purporting to manage the operating village at Rosedale and it became clear that it had not effectively wound up all of the schemes.

HIS HONOUR: All the more reason to go back to the Supreme Court of the ACT and to get complete orders.

MS McLEOD: That was one possible opening, your Honour.

HIS HONOUR: Well, it was a sensible opening, was it not? Why proliferate legal proceedings?

MS McLEOD: Can I come back a step, your Honour. There was nothing live in the Supreme Court of the ACT that required further attention. There were issues in the Federal Court that went beyond the ACT orders that required the court’s attention. His Honour considered and was careful to carve out any trampling upon those orders in the ACT, as apparent from his orders. Now, we have heard a number of things that are in issue today from the Bar table and I do object to that. Your Honour cannot decide whether the consequences or the facts that have been alleged from the Bar table are, in fact, the case without making a determination on the evidence. You do not have that evidence before you, your Honour.

I ask, what is the consequence if your Honour were to stay the operation of these orders today, because that is the question your Honour asked us to consider today. Who would be in control of these villages? Would it be Mr Rangott who is now removed? Of course not. Who would be in control of these companies which on any view under the just and equitable ground needed to be wound up? The former directors? Of course not. Those people were removed from control of the company on the grounds expressed and those grounds have not been challenged in this application. So if your Honour is to stay the operation of those orders, what happens to those entities? What happens to those people sitting in the village?

At the moment, what we do know, because the receivers have filed reports to this effect in the Federal Court, is that they have appointed managers to operate those schemes on a day-to-day basis. Now, Mr Sheils asserts that he was operating it. I do not know under what basis since Mr Rangott had been appointed by the Supreme Court, but he says he will go back in and operate. I understand that to be what he was saying. That is unsatisfactory too, your Honour, because the position that he filed through his son’s affidavits in the Supreme Court who purported to speak on his behalf was that his father was too ill to swear an affidavit. Now, I have to address, your Honour, the issue about Mr Levet’s instructions.

HIS HONOUR: No, before you do that, explain to me why you did not go back to the Australian Capital Territory court and point out to that court what you say you had to bring before Justice Finkelstein?

MS McLEOD: Because there was no live issue remaining.

HIS HONOUR: But you could have made it a live issue. At the very least the Australian Capital Territory Supreme Court was seized in part of the matter. Is there any dispute about that?

MS McLEOD: No, your Honour.

HIS HONOUR: Well, why would you not go back to that court? Why start fresh proceedings in an entirely different jurisdiction when there was a jurisdiction which had some acquaintance with the matter and which could have made the orders which you sought.

MS McLEOD: The reason we issued was because we were unaware of them. The reason we continued - - -

HIS HONOUR: All right, but you became aware of it fairly quickly. Why at that stage, did you not either consent to an order for a transfer or otherwise bring the matter before a court which was already acquainted with the matter.

MS McLEOD: I am not aware, your Honour, and I appeared in the matter. I am not aware of any application to transfer the matter to the Supreme Court of the ACT. My learned friends might point to some passage in the transcript where they asked for that, but I am not aware of any application having been made. That is the first thing. The second thing is, your Honour will see from the discussion set out in the transcript that these possibilities in terms of whether there was inconsistency with the ACT orders were all argued and the subject of his Honour’s reasons and his final orders. Those matters were considered, your Honour. There was no disrespect to the ACT Supreme Court in the framing of these orders or the reasons for reaching them.

HIS HONOUR: You can see, Ms McLeod, obviously I am not saying it occurred here, but if it did occur, it is highly unsatisfactory if courts are – and I am not suggesting this happened – but if courts are intermeddling with each other’s orders and dealing with the same subject matter, that is really not satisfactory. I am not saying that happened, but if it did happen, it is not very satisfactory, is it?

MS McLEOD: Mr Levet raised the question of res judicata and accepted there were not identity of parties. Mr Levet raised the question of identity of issues and agreed that there was not identity of issues because only a part of the scheme had been wound up. These things were all canvassed, your Honour.

HIS HONOUR: I understand all of that, but there is no doubt, is there, that it would have been shorter and less costly if you had gone to the Supreme Court because of its partial acquaintance. In fact, I do not know whether this is right or not, but according to what I have been told today and I know you dispute it, but if it is right that the bulk of the property is covered by the orders of Justice Crispin, is that not right?

MS McLEOD: I do not accept that it is the bulk or anything else, your Honour.

HIS HONOUR: It was a substantial part of the property in question.

MS McLEOD: It was put that it was a substantial part of the property.

HIS HONOUR: You accept that it is a substantial part?

MS McLEOD: I do not accept that, your Honour. I do not know.

HIS HONOUR: You should know if you come here.

MS McLEOD: No, your Honour, because the difficulty has been for ASIC in its initial investigations was that those controlling the schemes did not produce documentation to document the interests of, first of all, the cash investors represented by people such as Mr Montgomerie who supported the winding-up applications, and what I will call the non-cash investors, the promoters who issued themselves interests in these schemes.

Now, it was perceived that the ACT proceedings were brought and consented to by those representing the promoters’ interests, if I can call it that loosely. It was not seen appropriate to go to Canberra and ask them to reopen and relitigate that because there were questions below about notice, propriety and other such issues. I had not intended to raise those issues before your Honour today, but those issues are there and they are canvassed in the transcript.

HIS HONOUR: What do you say I should do, Ms McLeod?

MS McLEOD: Your Honour, it would be untenable, in my submission, for you to order it to stay today. What your Honour should do is if you were thinking of a stay is bring the matter back on when it is convenient to the parties for consideration on the material. In terms of jurisdiction, this Court obviously has jurisdiction by virtue of section 75(iii) and (v) to hear and determine the matter. It is not appropriate to remit the matter.

Our initial submission is that you should strike it out because it involves a subject that there has been a final order pronounced on that has not been appealed but those parties are not excluded from seeking leave to appeal. Order 52 rule 14 makes it clear that any of the parties along this table may make an application to be joined to Federal Court appeals or the ongoing progress of the matter.

At the moment the receivers are in the process of reporting on the matter. Justice Finkelstein’s orders do not permit them to sell property without further application to the Court, particularly orders 18 and 19 in respect of Mews and there is like orders for Rosedale. He was very careful to make sure nothing happened, particularly a fire sale.

HIS HONOUR: Ms McLeod, how long is the administration going to take, do you think?

MS McLEOD: I cannot answer that, your Honour. It may be a matter of months.

HIS HONOUR: It is just not going to finish in the next week or so?

MS McLEOD: No, your Honour, there is nothing to indicate that anything is going to happen today or tomorrow.

HIS HONOUR: And you say there has to be an application to the Court.

MS McLEOD: Yes, it should be a proper application.

HIS HONOUR: No, but before any sales of property can be - - -

MS McLEOD: Yes, indeed, paragraphs 18 and 19, for example, your Honour. Indeed, there has to be a meeting first of investors to ascertain their wishes.

HIS HONOUR: You also say that, in effect, it has just been carried on as a going concern at present, is that right?

MS McLEOD: In respect of Rosedale, yes, your Honour.

HIS HONOUR: Yes.

MS McLEOD: In respect of Mews there are conversations happening with secured creditors, banks, as to the nature of their interests, whether there can be a sale achieved on behalf of investors and so on. So, those conversations and those inquiries
about various claims and interests are already under way but no step has been taken to sell and cannot be taken without the Court’s approval.

HIS HONOUR: All right. Thank you.

MS McLEOD: If your Honour pleases.

HIS HONOUR: Thank you. I am minded to adjourn this matter. I am not going to make any orders for stays but that is on the basis of your undertaking, Ms McLeod.

MS McLEOD: It is so offered, your Honour.

HIS HONOUR: Yes, thank you. On and subject to that undertaking which is to be found in paragraph 5, I am going to adjourn this matter and I am going to adjourn it to a date in May. I will adjourn it – I am not adjourning it to another date, Mr Pitt, because I am trying to meet your convenience about next week. I do not think any other Judge would take this on, now. I am going to keep it with myself. I will not be available in April. I am sorry, did you want to - - -

MR PITT: I am sorry, I was just turning behind to see if the date was difficult for anyone else but it was not, so, thank you.

HIS HONOUR: I am trying to find a date in May. I am minded to adjourn it until 2.30 in the afternoon on May 21. Are the parties available on that date?

MS McLEOD: Could I indicate to your Honour that I am retained in a matter from.....that runs from the 21st for those two weeks. If I could beg the Court’s indulgence in that respect.

HIS HONOUR: Yes.

MR LEVET: Your Honour, the only matter I would have difficulty with is a matter, five working days, commencing on 16 May which would encompass those dates, 16th through to 22nd. I could easily pass anything else, your Honour.

HIS HONOUR: There may be a limit to the extent to which I can meet every – what about 2.30 on 14 May?

MR LEVET: Yes, thank you, your Honour.

MS McLEOD: Thank you, your Honour. That appears to suit all of us.

HIS HONOUR: Let me be clear about this. I am not making any orders other than an order for an adjournment and recording the undertaking, of course. What I will be considering on Monday, 14 May is whether I should grant an order nisi for prohibition or whether I should dismiss the application without granting an order or whether I should refer the application for an order nisi into a Full Court, but I really need proper submissions and I need to be satisfied that there are absolutely no factual questions to be tried. If there are, inevitably, the matter will be remitted for those factual questions to be tried. Your grounds, the grounds upon which you seek an order nisi, Mr Pitt, do I think really need some refinement.

What I need is, and I will make an order to this effect, for the parties to file and serve upon one another detailed written submissions identifying all relevant facts within three weeks from today. If parties want to make any response to another party’s written submissions, that should be done within four weeks from today, that is, within one week of the expiration of the three weeks.

MR PITT: Your Honour, such submission to be limited to facts or to include all of the relevant - - -

HIS HONOUR: No, no, as if you were arguing an appeal in this Court. If you look at the Rules relating to appeals to this Court you will see what is required.

MR PITT: Yes, your Honour.

HIS HONOUR: The orders will be the matter will be adjourned until 2.30 in the afternoon on 14 May 2007. I further order that the parties file and serve written submissions within three weeks from today and I further order that if any party wants to respond to the submissions of the others, they must file and serve those responses within a week after the expiration of those three weeks. I want to make it clear that the submissions should generally accord with the style and form and requirements of submissions as if this were an appeal to the Court.

MS McLEOD: If your Honour pleases. Is your Honour sitting in Canberra on 14 May 2007?

HIS HONOUR: Yes, Ms McLeod.

MS McLEOD: Thank you, your Honour.

HIS HONOUR: I do not think there is anything further then, is there?

MS McLEOD: If it is necessary, would your Honour reserve the costs of today?

HIS HONOUR: Yes, I should reserve the costs. There is no other order that is appropriate I do not think.

MR PITT: Yes, there are not further orders or directions which I seek, thank you, your Honour. May there be liberty to apply just in case something arises?

HIS HONOUR: Yes, liberty to apply to a Judge of this Court. The order will be that the parties have liberty to apply upon three days notice to any other party. Thank you. I will adjourn the matter.

AT 2.25 PM THE MATTER WAS ADJOURNED


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