Justice Judd in the Victorian Supreme Court is currently reserved on an application by Primary RE Ltd seeking either to preserve leases that were granted to the responsible entity in some of the Great Southern managed investment schemes or for relief against forfeiture of those leases.
Primary RE Ltd is a responsible entity that was appointed by members (known as Growers) to replace the insolvent responsible entity of some of Great Southern managed investment schemes. A managed investment scheme is a form of trust regulated by the Corporations Act. As well as being the trustee, the responsible entity was also the head tenant of the land on which the plantations were established. The Growers are beneficiaries of the trust and sub-tenants of the responsible entity.
After the collapse of the Great Southern group, the receivers and managers in control of the land owning companies attempted to terminate the head leases granted to the responsible entity. The Growers appointed Primary RE Ltd as their replacement responsible entity. It lodged a caveat and argued that the leases were not properly terminated.
In the alternative, it sought relief from forfeiture of the head leases. Primary RE Ltd relied on s 601FS, which states that the rights, obligations and liabilities of the former responsible entity in relation to the scheme become the rights, obligations and liabilities of the new responsible entity, and s 601FT, which makes the new responsible entity a party to certain scheme documents.
The case raises a number of interesting issues for leasing lawyers and managed investment scheme lawyers, including:
- whether a right to seek relief against forfeiture transfers to a replacement responsible entity under ss 601FS and 601FT of the Corporations Act. One of the arguments in the case is that the right to seek relief from forfeiture is a bare right to sue that cannot ordinarily be assigned. I am not aware of any cases considering the operation of ss 601FS and 601FT in that context;
- the requirements of a notice of default under s 146 of the Property Law Act 1958 (Vic), including the description of the breaches in the notice, service of notices on sub-tenants, any requirement to request compensation, the requirement to provide a reasonable time for rectification; and
- the impact of delay, the viability of the schemes and other discretionary considerations in seeking relief from forfeiture in the context of an insolvent responsible entity.