This week’s TGIF considers In the matter of Banksia Securities Limited (in liquidation) (receivers and managers appointed) NSWSC 357 in which the Court uses its broad remedial powers to appoint special purpose receivers.
In a previous decision, special purpose receivers were appointed by the Court to have the conduct of two sets of proceedings brought in relation to a company in liquidation (Company). The special purpose receivers were also appointed over the property of the Company which was constituted by the proceedings.
The special purpose receivers also held the role of liquidators in respect of a third set of proceedings.
By this application, the special purpose receivers sought orders for their appointment as special purpose receivers in respect of the rights and entitlements of the Company that were the subject of the third set of proceedings, as well as in respect of their remuneration.
Evidence was put that the three sets of proceedings were closely interrelated and in many respects, overlapped with each other. The proceedings were to be case managed and heard together, with evidence in one proceeding being evidence in the others. Further, substantially all of the expenses of the proceedings would be incurred by the special purpose receivers, even if the third set of proceedings were not prosecuted.
The receivers of the Company (which were appointed over other assets of the Company) broadly supported the special purpose receivers’ application. ASIC appeared as a friend of the Court, and also made submissions in support of the special purpose receivers’ application.
Black J considered the Court’s powers under section 283HB of theCorporations Act. Section 283HB(1)(d) permits the Court to make an order appointing a receiver of any property constituting security for the debentures. His Honour accepted that this power is supplemented by section 283HB(1)(g) which provides a broad remedial power allowing the court to make any order it considers appropriate to protect the interests of debenture holders, having regard to the matters set out in section 283HB(2).
His Honour noted that in a previous decision, Barrett J observed that once relevant issues were identified under section 283HB(2), it was open to the Court to make any order that appeared to be calculated to safeguard those interests. Those interests included, importantly, the interests of the debenture holders in receiving payment due to them under the debentures, although the Court may also have regard to factors other than those specified in section 283HB(2).
Black J held that:
- Since it was in the best interests of the debenture holders that the three interrelated matters proceeded, it must also be in their interests that each of those matters be properly funded. Accordingly, the special purpose receivers ought be appointed to the third set of proceedings.
- The special purpose receivers should be provided with sufficiency of funds, immediate access to those funds and independence from the receivers in respect of such access.
- Section 283HB(1)(g) permits the Court to make provision for the special purpose receivers to have access to funds held by the receivers to cover their reasonable remuneration and expenses. Accordingly, funds from the assets of the Company presently under the receivers’ control should be transferred to the special purpose receivers for the purpose of conducting the proceedings.
- In relation to the suggestion that a court-appointed receiver may only draw remuneration and expenses from the assets over which they are appointed, section 283HB(1) allows the court to make a wider order once it is satisfied that it is in the interests of debenture holders to do so.
- Section 283HB is capable of overriding the terms of the debenture trust deed, where that deed makes no provision for any payment to the special purpose receivers. There is no need to find any power for payment of special purpose receivers in the debenture trust deed where it would be allowed under section 283HB(1).
His Honour also made orders setting out a mechanism for approval of the special purpose receivers’ remuneration.
The decision reminds us of the Court’s broad remedial powers under section 283HB(1) which may be used, as required, to protect and uphold the interests of debenture holders. This includes the ability to override the relevant trust deed, so long as doing so is in the best interests of debenture holders.