A recent decision in the Supreme Court of Queensland, Equititrust Ltd v Members of the Equititrust Income Fund, has indicated that when it is in the best interests of its members, a receiver may be appointed in winding up a registered scheme and distributing remaining funds to the interested parties.
Counsel for the respondents submitted that a receiver should not be appointed, because such an order would cut across the legislative framework governing the winding up of a registered scheme. Judge Applegarth rejected this submission stating that the legislative framework of Part 5C.9 Corporations Act 2001 (Cth) does not preclude the appointment of a receiver pursuant to section 601NF(2) where it is necessary to do so. In this instance, the Court was convinced that that appointment of a receiver was necessary for the well-being of the property that was held on trust by the company.
Among factors leading to the determination was the company's history of non-compliance with its statutory obligations, breaches of the conditions of its licence and the evidence pointed to by ASIC (Australian Securities and Investments Commission) in relation to the allegations of misconduct by the current director. This, collectively, presented a strong case for the appointment of a receiver for each fund's property. Moreover, in a unique set of circumstances, the case was urgently set for determination as insurance policies covering officers of Equititrust Ltd (the company), were due to expire at 3.00pm that day and the recently appointed directors of the company had proposed to resign before then.
On the above facts, the Court could not be persuaded that the company would wind up the funds in a manner that was in the best interests of their members. In accordance with its powers under section 601NF, the Court considered it necessary to appoint a person to take responsibility for ensuring that each fund was wound up in accordance with its constitution and any further orders made under section 601NF(2). Also of note, is that a few days prior to the decision, the company had not opposed the making of the orders. However, the Court did not give much thought to the change in tune and held that, regardless, it was in the best interests of the fund members to be protected by instating a receiver.
See court decision here.