Court of Appeal

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LM Investment Management Limited (in liq) v Bruce & Ors [2014] QCA 136 (13/8895) Fraser and Gotterson JJA and Daubney J 06/06/2014

Full-text: QCA14-136.pdf

Catchwords

CORPORATIONS – MANAGED INVESTMENTS – WINDING UP – where the appellant is the responsible entity of the LM First Mortgage Income Fund (“the Fund”) – where the primary judge concluded it was necessary to appoint a person independent of the appellant to take responsibility for ensuring the Fund is wound up in accordance with its Constitution pursuant to s 601NF(1) of the Corporations Act 2001 (Cth) (“the Act”) – where the primary judge made that appointment upon finding that given the complexity of the winding up, the administrators of the appellant (“the administrators”) would not act properly in the interests of members in identifying and dealing with potential issues of conflict – where the primary judge found the appellants had conducted the litigation in a partisan and combative manner, and the administrators had preferred their own interests to those of the Fund – whether those findings and other supporting findings were reasonably open on the evidence – whether setting aside any of those findings vitiates the primary judge’s ultimate conclusions

CORPORATIONS – MANAGED INVESTMENTS – RESPONSIBLE ENTITY – where the primary judge found the administrators had acted in a way inconsistent with those owing duties as responsible entity and trustee under the Act, conducted the litigation in a partisan and combative manner, and had preferred their own interests to the interests of the Fund – where the appellant argues those conclusions and supporting findings were not open because they were not put to appropriate witnesses in cross-examination or the appellant was not otherwise given adequate notice to meet those imputations – whether the administrators were cross-examined about those imputations or were otherwise given sufficient notice – whether there was a breach of the rule in Browne v Dunn so as to require those findings be set aside – whether setting aside any of those findings vitiates the primary judge’s ultimate conclusions

CORPORATIONS – MANAGED INVESTMENTS – WINDING UP – where the primary judge found that if the administrators were permitted to wind up the Fund, there would be a real potential for conflicts of interest to arise – where the second respondent argued there would arise actual and not merely potential conflicts of interest – whether the primary judge erred on that basis – where the primary judge concluded that the real potential for conflicts of interest to arise did not of itself make it “necessary” to appoint an independent person to wind up the Fund under s 601NF(1) of the Act – where the second respondent argued the primary judge misconstrued s 601NF(1) and that those potential conflicts did make it “necessary” to appoint an independent person – whether the primary judge erred on those bases

Summary Notes

General Civil Appeal – Corporations – where the appellant is the responsible entity of the LM First Mortgage Income Fund (“the Fund”) – where the present voluntary administrators of the appellant, Ms Muller and Mr Park, were appointed to the appellant as responsible entity of the Fund on 19 March 2013 – where the primary judge concluded it was necessary to appoint a person independent of the appellant to take responsibility for ensuring the Fund is wound up in accordance with its Constitution pursuant to s 601NF(1) of the Corporations Act 2001 (Cth) (“the Act”) – where the primary judge made that appointment upon finding that given the complexity of the winding up, the administrators of the appellant (“the administrators”) would not act properly in the interests of members in identifying and dealing with potential issues of conflict – where the primary judge found the appellants had conducted the litigation in a partisan and combative manner, and the administrators had preferred their own interests to those of the Fund – whether those findings and other supporting findings were reasonably open on the evidence – whether setting aside any of those findings vitiates the primary judge’s ultimate conclusions – where the primary judge found the administrators had acted in a way inconsistent with those owing duties as responsible entity and trustee under the Act, conducted the litigation in a partisan and combative manner, and had preferred their own interests to the interests of the Fund – where the appellant argues those conclusions and supporting findings were not open because they were not put to appropriate witnesses in cross-examination or the appellant was not otherwise given adequate notice to meet those imputations – whether the administrators were cross-examined about those imputations or were otherwise given sufficient notice – whether there was a breach of the rule in Browne v Dunn so as to require those findings be set aside – where in the result, with one arguable exception the primary judge’s findings adverse to the administrators were made only after the administrators had been given such clearly expressed notice of the imputations as allowed them the opportunity of responding to them by their own evidence (as Ms Muller did) and any other evidence they might obtain – where the arguable exception concerns the primary judge’s conclusion that the administrators preferred their own interests to the interests of scheme members – where contrary to what may have been implicit in aspects of the argument for the administrators, the primary judge did not hold that the administrators had breached their duties as officers of the appellant as responsible entity under s 601FD(1)(c) of the Corporations Act 2001 to give priority to the members’ interests in a conflict between those interests and the interests of the responsible entity (the primary judge did not refer to that provision or express any conclusion in relation to it), or that they had in fact breached an applicable statutory duty, or that they had intentionally preferred their own interests to the interests of the members in a situation in which the administrators were conscious that there was a conflict between those different interests – where one ground of appeal raises an issue about the use of a finding in relation to the primary judge’s conclusion that the appellant conducted the litigation in a combative and partisan way which was reflective of the administrators acting in their own interests to keep control of the winding up rather than acting in the interests of members – where it was not put to Ms Muller (or any other witness) that an error in the statement in Ms Muller’s affidavit was indicative of the administrators preferring their own interests to the members’ interests – where it follows that the rule in Browne v Dunn was contravened in that respect – where the appropriate remedy is to treat the finding challenged under this ground as supplying no support for the primary judge’s conclusion – where this finding does not justify setting aside those ultimate conclusions or the orders challenged in this appeal – where the primary judge derived the findings set out in these reasons from matters which were unrelated to the administrators’ conduct in the litigation – where the appellant has not established any error in those findings – where in the context of the primary judge’s conclusions about the potential conflicts which the appellant would face in winding up the Fund, those findings themselves justified the primary judge’s ultimate conclusions and the challenged orders. Appeal dismissed with costs.