Corporate Advisory Update – 10 July 2015

July, 2015

In the media

Industry boss warns of widespread real estate rorts

Geoff Baldwin, Managing Director of RE/MAX Western Australia has received ‘numerous requests’ from overseas buyers for help to flout foreign investment rules and said there is now a recognised practice of foreign buyers trying to purchase established properties in the names of Australian residents.

Foreign investors are generally limited to buying off-the-plan properties – but Mr Baldwin said the evidence suggests these rules are often being sidestepped.

Mr Baldwin’s statement followed a similar warning earlier this year from Malcolm Gunning, the president of the Real Estate Institute of NSW.

ASIC takes civil action against Padbury Mining and two directors

ASIC has started civil penalty proceedings against Padbury Mining Limited and two of its directors regarding Padbury’s announcement last year of a multi-billion dollar funding deal for the Oakajee port and rail project, in Western Australia.

ASIC is seeking financial penalties against the directors as well as orders banning them from managing companies. ASIC is also seeking declarations that Padbury breached its continuous disclosure obligations and engaged in misleading or deceptive conduct.

For more information, please click here.

In practice and Courts

PPSR fees are changing from 01 July 2015

The Attorney-General recently approved changes to the Personal Property Securities Register fees. The new fees apply from 1 July 2015. The changes affect activities which are available online and from the National Service Centre.

For more information, please click here.

ACLA: Implications of the Uniform Law for the In-house Profession

The new uniform regulatory regime applying to all lawyers in Victoria and New South Wales (NSW) commenced on 1 July 2015. Relevant changes for the In-house profession include:

For more information, please click here.

Cases

Lantern Hotel Group and Australian Securities and Investments Commission [2015] AATA 428

The Administrative Appeals Tribunal has made a decision in substitution of ASIC’s refusal to grant Lantern Real Estate Trust (Lantern) an exemption from compliance with provisions of the Corporations Act 2001 (Act) that would otherwise preclude a proposed selective buy back.

Facts
Under the proposed selective buy back, Lantern had conditionally agreed to a $16.1 million buy back of securities from one of its major security holders, Millinium. After gaining approval from the ASX, shareholders and unit holders, Lantern applied to ASIC to modify the application of s 601GA(4) of the Act and dispense with compliance with ss 601FC(1)(d) and 601 KB – KE to permit the buy back

Initially, ASIC made an ‘in principle’ albeit conditional, decision to grant the application. However, ASIC later refused to grant Lantern an exemption on the basis that a favourable decision would be ‘similar to law reform’, and that its usual approach was not to give relief to reverse the usual and intended effect of relevant provisions of the Act.

The Court’s Decision in substitution
In setting aside ASIC’s decision, Senior Member Taylor SC noted that the circumstances of the matter involved ‘an exemption or modification related to a particular transaction that has a relatively clear content, purpose and background. It is not one that involves a broad exemption (otherwise contemplated by s 601QA(2)) that would apply generally or to widely described securities or persons.’

In such circumstances he considered it ‘both unhelpful and potentially misleading’ to describe ASIC’s discretionary power ‘as a power to effect “law reform”’.

For more information, please click here.

Thorn Australia Pty Ltd v Peel Hotel Pty Ltd & Anor [2015] VCC 818

Facts
Thorn Australia Pty Ltd (Thorn) supplied the Peel Hotel in Collingwood (Peel Hotel) with finance for the lease of commercial kitchen equipment. Tom McFeely (McFeely) was the sole director of the Peel Hotel and the guarantor of the Peel Hotel’s obligations to Thorn under the finance contract (together, the Defendants)

Although Thorn approved the finance and paid the Suppliers upon the receipt of the executed delivery documents, no kitchen equipment was ever delivered to the Peel Hotel. It appears that business associates of the Defendants were dishonest, and the Peel Hotel and McFeely were victims of a fraud.

Thorn sued the Defendants for moneys owed under the finance contract. The Defendants joined four third parties including Auswise Finance Pty Ltd (Auswise), which acted as broker for the Peel Hotel in obtaining finance from Thorn.

The Defendants alleged that, as finance broker for the Peel Hotel, Auswise owed a duty to act with due skill and care in obtaining the finance and breached this duty by negligently or carelessly allowing the Peel Hotel to become the victim of fraud by assuming an obligation to pay for goods which were never delivered.

It was said that Auswise had breached its duty of care by failing to advise the Peel Hotel not to sign an Acknowledgment of delivery form until the goods had been delivered to it.

The Court’s Decision
His Honour Judge Cosgrave was satisfied that Auswise owed the Defendants a duty of care to act with the skill and care of a reasonably competent commercial finance broker to prevent the hotel from suffering economic loss due to the negligent performance of its finance broker.

However His Honour found no evidence to suggest that it was a term of the agreement between Auswise and the Peel Hotel, or part of the duty owed by Auswise, to warn the Peel Hotel that if the goods were not delivered the defendants might remain liable to Thorn under the rental agreement and guarantee.

On this basis His Honour found that Auswise was not legally responsible for the loss incurred by the Defendants, whether through any breach of statutory guarantee, breach of agreement, or breach of duty.

For more information, please click here.

Contact Mills Oakley

To find out more about any of the information in this update, please contact:

warren-scott

Warren Scott | Partner
T: +61 3 9605 0984
E: wscott@millsoakley.com.au

daniel-livingston

Daniel Livingston | Partner 
T: +61 3 9605 0965
E: dlivingston@millsoakley.com.au

stuart-gibson

Stuart Gibson | Partner
T: +61 3 9605 0092
E: sgibson@millsoakley.com.au

warwick-painter

Warwick Painter | Partner
T: +61 2 8289 5808
E: wpainter@millsoakley.com.au

gavin-douglas

Gavin Douglas | Partner
T: +61 2 8289 5855
E: gdouglas@millsoakley.com.au

simon-champion

Simon Champion | Partner
T: +61 2 8289 7926
E: schampion@millsoakley.com.au

tim-cox

Tim Cox | Partner
T: +61 2 3228 0442
E: tcox@millsoakley.com.au

 

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