Australian Securities and Investments Commission v Caddick (No 2) [2023] FCA 1196

FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Caddick (No 2) [2023] FCA 1196 File number: NSD 1220 of 2020

Judgment of: MARKOVIC J

Date of judgment: 5 June 2023

Date of publication of reasons: 9 October 2023

Catchwords: CORPORATIONS – application made by receivers appointed pursuant to s 1101B(1) of the Corporations Act 2001 (Cth) – application for directions pursuant to the Court's inherent jurisdiction; whether the receivers would be justified in making certain distributions – directions as to the method of distribution – whether the receivers would be justified in distributing to out-of-pocket investors on a pari passu basis – directions in relation to the proposed treatment of a loan secured by mortgage over receivership property –consideration of the position of interested persons – application granted CORPORATIONS – application made by liquidators seeking directions pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations), being Sch 2 to the Corporations Act – directions that the liquidators are justified in providing certain releases – directions that the liquidators are justified in not further investigating, assigning or commencing claims that the company may have in relation to distribution of assets realised in the liquidation – application granted PRACTICE AND PROCEDURE – application to extend suppression order – whether order necessary to prevent prejudice to proper administration of justice – application granted

Legislation: Corporations Act 2001 (Cth) ss 9, 424(1), 601EE subs (1) and (2), 1101B subs (1) and subs (8) Insolvency Practice Schedule (Corporations), being Sch 2 to the Corporations Act 2001 (Cth) s 90-15 Trustee Act 1925 (NSW) s 63 Trustee Act 1963 (NSW) s 63

Cases cited: Australian Securities and Investments Commission v Caddick (2021) 395 ALR 481; [2021] FCA 1443 Australian Securities and Investments Commission v Commercial Nominees of Australia Ltd (2002) 42 ACSR 240; [2002] NSWSC Australian Securities and Investments Commission v Letten (No 7) (2010) 190 FCR 59 Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209 Glazier Holdings Pty Ltd v Australian Men's Health (unreported, Supreme Court of New South Wales, Young J, 30 April 1998) Kelly (Liquidator), Halifax Investment Services Pty Ltd (In Liq) v Loo (2021) 390 ALR 669; [2021] FCA 531 Mariconte v Batiste (2000) 48 NSWLR 724 Re Anglican Development Fund Diocese of Bathurst (Recs and Mgrs Apptd) [2015] NSWSC 440 Re BBY Ltd (recs and mgrs apptd) (in liq) (No 2) (2008) 363 ALR; [2018] NSWSC 346 Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 Re Tayeh and Another (as joint liqs of The Black Stump Enterprises Pty Ltd and Others) (2005) 53 ACSR 684; [2005] NSWSC 475

Division: General Division

Registry: New South Wales

National Practice Area: Commercial and Corporations

Sub-area: Regulator and Consumer Protection

Number of paragraphs: 100

Date of hearing: 31 May 2023; 5 June 2023

Counsel for Bruce Gleeson and Daniel Robert Soire in their capacity as joint and several receivers of the property of Melissa Louise Caddick: Ms V Whittaker SC and Mr A Oakes

Solicitor for Bruce Gleeson and Daniel Robert Soire in their capacity as joint and several receivers of the property of Melissa Louise Caddick: Swaab

Counsel for Interested Persons (Bruce Gleeson and Daniel Robert Soire in their capacity as joint and several liquidators of Maliver Pty Ltd (in liq)): Ms V Whittaker SC and Mr A Oakes

Solicitor for Interested Persons (Bruce Gleeson and Daniel Robert Soire in their capacity as joint and several liquidators of Maliver Pty Ltd (in liq)): Swaab

Counsel for Interested Persons (Edward Grimley and Barbara Grimley): Mr JR Anderson

Solicitor for Interested Persons (Edward Grimley and Barbara Grimley): Baker McKenzie

Counsel for Interested Person (Investor A): Mr B Hancock

Solicitor for Interested Person (Investor A): Mackay Chapman

ORDERS NSD 1220 of 2020

BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Plaintiff

AND: MELISSA LOUISE CADDICK First Defendant

MALIVER PTY LTD Second Defendant

order made by: MARKOVIC J DATE OF ORDER: 5 june 2023

In these orders: Edgecliff Property means the real property as described in the orders made by Justice Markovic on 25 July 2022. Liquidators means Bruce Gleeson and Daniel Robert Soire of Jones Partners of Level 13, 189 Kent St, Sydney NSW 2000 as joint and several liquidators of Maliver Pty Ltd (in liq). Out-of-Pocket Investors has the same meaning as defined in the Orders made by Justice Markovic in these proceedings on 22 November 2021. Receivers means Bruce Gleeson and Daniel Robert Soire of Jones Partners of Level 13, 189 Kent St, Sydney NSW 2000 as joint and several receivers of the Receivership Property. Receivership Property has the same meaning as defined in the Orders made by Justice Markovic in these proceedings on 22 November 2021. Receivers' Trust Account has the same definition being the account maintained by the Receivers pursuant to Order 4(d) in the Proceeding on 22 November 2021. THE COURT ORDERS THAT: 1. Pursuant to s 37AF(1)(a) and s 37AG(1) and (c) of the Federal Court of Australia Act 1976 (Cth), the publication and disclosure of the names of the investors and account details included in Annexure MDV-2 to the affidavit of Martin Duc Vu sworn 2 June 2023 is prohibited other than to the parties to this proceeding, each of their legal representatives, and the Court until the later of the discharge of the Receivers or the deregistration of Maliver Pty Ltd (in liquidation) (Company). 2. Evidence filed and relied on in this proceeding by Messrs Gleeson and Soire in their capacity as Receivers of the property of Melissa Louise Caddick in support of their amended interlocutory application lodged with the Court on 12 May 2023 shall be evidence in the interlocutory application filed by Messrs Gleeson and Soire as liquidators of the Company on 2 June 2023. Receivership Edgecliff Loan 3. The direction to the Receivers given in Order 6(e) of the Orders made on 25 July 2022 is vacated insofar as it relates to the Edgecliff Property. 4. The Receivers would be justified in placing monies into an offset account held with the National Australia Bank (NAB) and linked to debts payable to NAB by the first defendant secured over the Edgecliff Property, on the terms proposed by NAB in its letter to the Receivers dated 16 March 2023. Interim distribution to Out-of-Pocket Investors 5. The Receivers would be justified in making an interim distribution of up to $3,000,000 of the Receivership Property to the Out-of-Pocket Investors, on a pari passu basis. Payment to Mr and Mrs Grimlev 6. The Receivers would be justified in making a payment from the Receivers' Trust Account to Edward and Barbara Grimley (Grimleys) in the amount of $950,000 (Settlement Sum) upon the Grimleys providing vacant possession of the Edgecliff Property on the basis that: (a) the Grimleys will provide vacant possession of the Edgecliff Property to the Receivers within six weeks of the date of these Orders; (b) upon payment of the Settlement Sum: (i) the Grimleys will cause to be removed from the title of the Edgecliff Property caveats AQ 623920, AQ664219, AQ786558; (ii) the Receivers, the Liquidators and the Company release the Grimleys in respect of all matters relating to the Receivership Property, the Company, their dealings with Melissa Caddick and the proceeding; (iii) the Grimleys release the Receivers, the Liquidators and the Company in respect of all matters relating to the Receivership Property, the Company, their dealings with Melissa Caddick and the proceeding. 7. The Receivers would be justified in providing the release to the Grimleys referred to in Order 6(b)(ii) above. Sale of the Edgecliff Property 8. Subject to completion of those matters specified in Order 6 above, the Receivers would be justified in taking possession of the Edgecliff Property, and: (a) preparing the Edgecliff Property for sale including, but not limited to, removing items from the Edgecliff Property, undertaking maintenance and repairs that they consider appropriate and arranging for the styling of the Edgecliff Property; (b) undertaking a selection process with a view to appointing a real estate agent or agents to commence marketing the Edgecliff Property for sale; (c) appointing a real estate agent or agents to market the sale of the Edgecliff Property; (d) obtaining updated valuation(s) of the Edgecliff Property; (e) insuring the Edgecliff Property; (f) preparing a contract for sale; (g) marketing the sale of the Edgecliff Property; and (h) incurring expenses in the process of implementing (a) to (g) above, which expenses may be paid from the Receivers' Trust Account. 9. The Receivers would be justified in realising the Edgecliff Property by conducting a sales and marketing campaign of the Edgecliff Property as recommended by the real estate agent appointed by the Receivers. 10. The Receivers would be justified in applying the proceeds of such sale as follows: (a) first, any necessary property adjustments in order to sell the property including applicable council, water, strata and utility rates; (b) second, the sales and marketing expenses of any real estate agent appointed by the Receivers; (c) third, costs in relation to conveyancing costs of the solicitor for the Receivers; (d) fourth, any taxes including but not limited to capital gains tax, land tax and goods and services tax; (e) fifth, the debts secured over the Edgecliff Property including mortgage debts pursuant to the registered mortgages to the NAB; (f) sixth, costs of attending to remove, securing, dealing with and storing any Receivership Property located at the Edgecliff Property; and (g) thereafter by deposit into the Receivers' Trust Account established in accordance with Order 4(d) of the Orders made on 22 November 2021. Further distributions 11. The Receivers shall seek directions from the Court prior to any further or final distribution. 12. Any further interim or final distribution to Out-of-Pocket Investors will be made on a pari passu basis. Other matters 13. The Receivers' legal costs and expenses of the Amended Interlocutory Application filed by the Receivers on 15 May 2023 are to be paid out of the Receivership Property. 14. Without limiting Order 5 made on 8 March 2023, pursuant to s 43 of the Federal Court Act and r 2.13(5) of the Federal Court (Corporations) Rules 2000 (Cth), the legal costs and expenses reasonably incurred by Investor A in this proceeding be paid out of the Receivership Property and on an indemnity basis. Liquidation 15. Pursuant to s 90-15 of the Insolvency Practice Schedule (IPS) being Schedule 2 to the Corporations Act 2001 (Cth) the Liquidators would be justified in providing the release to the Grimleys referred to in Order 6(b)(ii) above. 16. Pursuant to s 90-15 of the IPS the Liquidators would be justified in not further investigating, assigning, commencing or seeking to enforce or compromise any claim that the Company may have against the first defendant (or her deceased estate or trustee in bankruptcy) including: (a) in respect of Receivership Property; or (b) which, if made out, would be payable from the Receivership Property. 17. Pursuant to s 90-15 of the IPS so long as the total admitted amounts for admitted creditors of the Company (other than any Out-of-Pocket Investors) is not more than $11,000, the Liquidators would be justified in making any distribution of assets realised in the liquidation in accordance with s 556 of the Corporations Act but, in respect of any amounts payable to any Out-of-Pocket Investors or any admitted creditors of the Company: (a) first, pari passu amongst any admitted creditors of the Company other than any Out-of-Pocket Investors; and (b) then, pari passu amongst all Out-of-Pocket Investors. Suppression orders 18. Except as provided in Order 19 below, the following orders made pursuant to ss 37AF(1)(a) and (b), 37AG(1)(a) and (c) and 37AI of the Federal Court Act be extended until the later of the discharge of the Receivers or the deregistration of the Company: (a) Order 7 made on 10 November 2020; (b) Order 1 made on 10 December 2020; (c) Order 18 made on 15 December 2020; (d) Order 8 made on 17 December 2020; (e) Orders 2 and 3 made on 22 February 2021; (f) Order 1 made on 9 March 2021; (g) Order 2 made on 24 May 2021; (h) Order 2 made on 15 June 2021; (i) Orders 5 and 6 made on 29 June 2021; (j) Order 3 made on 23 August 2021; (k) Order 2 made on 26 November 2021; (l) Orders 5, 6 and 7 made on 4 March 2022 at 11.00 am; (m) Order 1 made on 4 March 2022 at 2.00 pm; (n) Order 1 made on 22 March 2022; (o) Order 2 made on 25 July 2022; (p) Order 1 made on 31 October 2022; (q) Order 10 made on 8 March 2023; and (r) Order 3 made on 31 May 2023. 19. Pursuant to s 37AF(1)(a) and (b) and s 37AG(1)(a) and (c) of the Federal Court Act, the publication or disclosure of: (a) the Grimleys' bank account details be prohibited until the passing of Barbara Anne Grimley or Edward Grimley, whichever occurs later; and (b) the name of the son of the first defendant be prohibited until 30 June 2024, other than to the parties to this proceeding and each of their legal representatives and the Court. 20. Pursuant to s 37AF(1)(a) and (b) and s 37AG(1)(a) and (c) of the Federal Court Act, Order 1 made on 8 March 2023 and extended on 28 April 2023, 5 May 2023 and 31 May 2023, be extended until the date that is six months after the later of the discharge of the Receivers or the deregistration of the Company. 21. To the extent necessary, the hearing of this matter listed on 4 and 7 August 2023 is vacated. 22. Mr and Mrs Grimley and Investor A, each of whom are named as interested persons in this proceeding, are excused from further attendance. 23. Liberty to apply on two days' notice. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MARKOVIC J: 1 On 31 May 2023 and 5 June 2023 I heard an amended interlocutory application filed by Bruce Gleeson and Robert Soire in their capacity as receivers of the property of Melissa Louise Caddick (Receivers) seeking directions relating to, broadly, the distribution of receivership property and the proposed treatment of a loan secured by mortgage over property situated at Edgecliff, New South Wales (Edgecliff Property) and an interlocutory application filed by Messrs Gleeson and Soire in their capacity as liquidators of Maliver Pty Ltd (in liquidation) (Liquidators) seeking directions pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS), being Sch 2 to the Corporations Act 2001 (Cth) that the Liquidators are justified in, among other things, providing certain releases and in not further investigating, assigning or commencing claims that Maliver may have against Ms Caddick and directions in relation to the distribution of assets realised in the liquidation. 2 On 5 June 2023, after hearing submissions on both interlocutory applications, I made a number of directions and orders including: (1) a direction that the Receivers would be justified in making distributions of the Receivership Property (as defined in the Orders made by the Court on 22 November 2021 described below) on the basis of an open offer made by Ms Caddick's parents, Edward and Barbara Grimley, and otherwise on a pari passu basis to the Out-of-Pocket Investors; (2) a direction that the Receivers would be justified in placing moneys in an offset account with the National Australia Bank (NAB) linked to the mortgage loan over the Edgecliff Property rather than using the proceeds of sale of a property situated at Dover Heights, New South Wales (Dover Heights Property) to discharge that mortgage; and (3) orders pursuant to s 90-15 of the IPS that the Liquidators would be justified in: (a) providing a release to Mr and Mrs Grimley in respect of all matters relating to the Receivership Property, Maliver, their dealings with Ms Caddick and the proceeding; and (b) not further investigating, assigning, commencing or seeking to enforce or compromise any claim that the Company may have against Ms Caddick or her deceased estate or trustee in bankruptcy. 3 The applications which led to the making of these orders principally had their genesis in an offer made by Mr and Mrs Grimley to the Receivers, the terms of which are set out below, to resolve the competing claims in relation to the dispute that had arisen over the Edgecliff Property in which Mr and Mrs Grimley reside. 4 These are my reasons for making the orders. Background Orders made on 22 November 2021 5 The Receivers were appointed pursuant to s 1101B(1) of the Corporations Act by Orders made on 22 November 2021 (22 November 2021 Orders) over the Receivership Property which was defined as all property, as defined in s 9 of the Corporations Act, of Ms Caddick. By those Orders Messrs Gleeson and Soire were also appointed as liquidators of Maliver: see Australian Securities and Investments Commission v Caddick (2021) 395 ALR 481; [2021] FCA 1443 (ASIC v Caddick). 6 It is convenient to set out some of the findings made in ASIC v Caddick. 7 Mr Gleeson gave evidence in the proceeding, both in his capacity, at the time, as joint receiver and provisional liquidator. Relevantly: (1) I noted that Mr Gleeson was of the opinion that subject to the claim by Mr and Mrs Grimley in relation to the Edgecliff Property, assets held by Maliver or Ms Caddick that were purchased after October 2012 were purchased using investor funds or from proceeds from property acquired with investor funds: see ASIC v Caddick at [177]; (2) I referred to Mr Gleeson's investigations which demonstrated the extent of the intermingling of funds and thus supported his view that it was difficult to determine for what particular amounts advanced by investors were ultimately used. The intermingling of funds supported the conclusions in the interim receivers' and provisional liquidators' reports dated 15 February 2021 that Ms Caddick treated the financial affairs of Maliver and her personal affairs as one: see ASIC v Caddick at [178]; (3) the investigations revealed that: (a) when investor funds were paid either into a Citibank account in the name of Ms Caddick's brother, Adam Grimley, or the bank accounts of Maliver or Ms Caddick, they were used to pay for living expenses, meet mortgage payments for the Edgecliff Property and Ms Caddick's residence or to purchase property in the name of Maliver or Ms Caddick; and (b) investor funds were also transferred to other bank accounts controlled by Ms Caddick and that frequent transfers between accounts meant that investor funds had been intermingled with a number of accounts making it difficult to determine for what particular amounts advanced by investors were ultimately used, see ASIC v Caddick at [178]; (4) I noted that Mr Gleeson's investigations confirmed that investor funds which were advanced to Ms Caddick and, following its incorporation, Maliver were used to meet Ms Caddick's personal expenses and to purchase assets in her name: see ASIC v Caddick at [179]; (5) I referred to a document prepared by the receivers and provisional liquidators, titled "Updated Annexure I", which set out the investors who contributed funds for investment with Ms Caddick or Maliver, whether they invested as individuals, companies or through a self-managed superannuation fund, for each investor details of amounts paid, the date and purpose of payment and bank accounts into which the payments were made and any amounts returned to investors by Ms Caddick or Maliver. Mr Gleeson's evidence about Updated Annexure I included: (a) the total funds advanced, including of management fees, and received by investors including the amount of profit received by investors who were repaid; (b) the total amount owed to the remaining investors after taking account of those investors who had been repaid, referred to as Out-Of-Pocket Investors, being $23,554,921; and (c) that he had undertaken a tracing exercise. He explained his analysis of the sources of funds received by Maliver and the uses to which those funds were put which underpin his conclusion that the assets held by Ms Caddick and Maliver were acquired with investor funds, see ASIC v Caddick at [180]-[184]; (6) I set out Mr Gleeson's evidence in relation to the tracing exercise he undertook insofar as it dealt with the Edgecliff Property and the dispute that had arisen with Mr and Mrs Grimley who had made a claim in relation to that property: see ASIC v Caddick at [185]-[196]; and (7) I referred to a "secondary claim" made by Mr and Mrs Grimley and an alternate claim in relation to the Edgecliff Property: see ASIC v Caddick at [197]-[200]. 8 At [350]-[353] of ASIC v Caddick I referred to the competing claims of various parties on the funds and the particular complexities that arose: [350] As I have already observed the facts of this matter raise numerous complex issues. They include, but are by no means limited to the following: that Ms Caddick has been missing since mid-November 2020 and her status uncertain; the pending coronial inquiry; the identification of all claimants on Ms Caddick's estate in the event that she is found to be deceased and/or she, or her estate, is declared bankrupt and thus the potential to prematurely administer her estate via the receivership process; the extent to which investor funds can be traced into assets held by Ms Caddick and, if so the nature of the investors' claims to those assets and whether their claims to any of the assets should rank ahead of other claimants, for example Ms Caddick's parents; the question of whether, because tracing the interests of individual investors is not reasonably or economically practical such that the funds are irreversibly deficient and mixed, a pooling order should be made (see for example Re Courtenay House at [33]); and the question of, if funds are distributed to investors, what method should be adopted for that purpose. [351] That being so, in my opinion, at this stage the Receivers, if appointed, must act with caution. Section 1101B(8) of the Corporations Act confers certain powers on a receiver appointed under the section which, when viewed in context, are limited to dealing with the property received by the financial services licensee in that capacity and in the manner in which the financial services licensee is entitled deal with it. However, s 1101B(8) also provides that the Court may specify other powers for a receiver appointed under the section in respect of the property of a financial services licensee. But, to the extent the Court does so, regard must be had to the purpose of s 1101B as a whole, the purpose of the appointment of receivers under the section and the particular facts of the case. [352] I have addressed the purpose of s 1101B above (see [321]-[322] above). Here, in contrast to the position in ASIC v Marco (No 6), there is no liquidator or other relevant controller to whom the Receivers can deliver up the property once identified and secured. That is one of the unique issues that arises in this case. Nor can the Receivers simply return the funds to the Identified Investors on some rateable basis because there are other issues that arise in relation to entitlement and other claimants on the fund. Finally Ms Caddick's status, once known, may also affect the way in which the assets identified by the Receivers are to be administered. [353] ASIC understandably seeks to bring some finality to the process and certainty to the Identified Investors in order to enable them to make recovery at an early stage and in an efficient manner. But that objective needs to be balanced with a consideration of the complex issues that the specific facts of this case raise, the proper applicant for some of the relief sought by ASIC and the need to ensure an orderly administration of the assets and ultimately, if it arises, Ms Caddick's estate. 9 Since the 22 November 2021 Orders, the Receivers have, from time to time, provided reports to the Court and issued circulars to the Out-of-Pocket Investors to update them about the progress of the receivership. In summary in those reports the Receivers have reported to the Court and/or the Out-of-Pocket Investors, among other things, on the progress of sale of Ms Caddick's assets, the balance held by the Receivers in the Receivers' Trust Account, an account established pursuant to the 22 November 2021 Orders, and proposals for distribution of available funds to Out-of-Pocket Investors and other creditors. The Edgecliff Property 10 As at 19 May 2023 the Edgecliff Property was the only significant item of Receivership Property that had not been realised. Mr and Mrs Grimley claimed an equitable estate as to 37.37% of the Edgecliff Property and a subsisting life interest, both of which they contended had priority over the interests of the Out-of-Pocket Investors. The other piece of real property owned by Ms Caddick, the Dover Heights Property, had been realised by that time. 11 Both the Edgecliff Property and the Dover Heights Property were subject to mortgages held by the NAB. On 25 July 2022, on the Receivers' application, I directed that the Receivers would be justified in applying some of the proceeds of sale of the Dover Heights Property in discharge of the mortgage held by the NAB over the Edgecliff Property (25 July 2022 Direction). 12 The 25 July 2022 Direction was sought on the basis that discharge of the mortgage over the Edgecliff Property would stop the accrual of interest on the loan secured by the mortgage and minimise legal and professional costs incurred in liaising with stakeholders. At the time the 25 July 2022 Direction was sought and obtained, it was the Receivers' intention to act in accordance with it upon completion of the sale of the Dover Heights Property. 13 After the 25 July 2022 Direction was made and before settlement of the sale of the Dover Heights Property Mr Soire came to understand that there was a possibility of disputes in relation to the proceeds of sale of the Dover Heights Property as between different classes of Out-of-Pocket Investors and in relation to the Edgecliff Property. Mr Soire became concerned that discharging the mortgage over the Edgecliff Property from the proceeds of sale of the Dover Heights Property may involve subordinating the interests of one group of creditors to a different group of creditors. 14 The sale of the Dover Heights Property settled on 27 January 2023. 15 In their report dated 31 January 2023 (January 2023 Report) the Receivers noted, among other things, that: they had identified all assets available for realisation and distribution; all but the Edgecliff Property and some minor household items had been sold and converted to cash; and they held $3,333,761.24 in the Receivers' Trust Account, exclusive of the net proceeds from sale of the Dover Heights Property of $5,474,605.41, which amount was being held in a separate account. They noted among other things that: There is some complexity around the distribution of those funds. Speaking generally, that complexity includes the following: a. There is a serious issue about whether any Out-of-Pocket Investors have a proprietary interest in either or both the Dover Heights Property and the Edgecliff Property, and the ranking of those interests. Those claims may arise if it could be shown that particular Out-of-Pocket Investors' funds were used to pay the purchase price for those properties. b. There is also a serious issue about whether the likely time and expense anticipated to be required to analyse any such entitlement (via a full or partial tracing exercise) justifies the potential advantage to some creditors. c. The claims of [Mr and Mrs Grimley] to equitable interests in the Edgecliff Property ought to be ventilated and determined. 16 The Receivers went on to inform the Out-of-Pocket Investors that it would be necessary for those with different interests to have their interests represented before the Court and proposed that be achieved by the engagement of two barristers as contradictors to make submissions in relation to the utility of full or asset specific tracing from the perspective of: i. Out-of-Pocket Investors who had advanced funds as at the date of purchase of the Dover Heights Property. ii. Out-of-Pocket Investors who had advanced funds as at the date of purchase of the Edgecliff Property. 17 As at January 2023 the Receivers had not yet undertaken an exercise to trace the interests of each individual investor. They informed the Out-of-Pocket Investors that such an exercise would need to be undertaken by specialist forensic accountants. They also noted that: It may be that certain Out-of-Pocket Investors will wish to raise additional claims in equity that are said to arise other than by way of contribution to the purchase price (for example, by contributing to a mortgage repayment). No such claims have been advised to the Receivers, but it is important that Out-of-Pocket Investors have the opportunity to raise them before the Court if they consider there to be grounds to do so. The Receivers' application for directions is intended to facilitate this. The Receivers had obtained a costs and time estimate from McGrathNicol for undertaking the tracing exercise. They summarised the difficulties identified by McGrathNicol in undertaking such an exercise. 18 Annexed to the January 2023 Report were two lists of Out-of-Pocket Investors: a list of those who had invested prior to the acquisition of the Dover Heights Property; and a list of those who had invested prior to the acquisition of the Edgecliff Property. In each case the Receivers noted their views that it was likely that each of the Out-of-Pocket Investors had a beneficial interest in the Dover Heights Property or the Edgecliff Property, as applicable, to the extent that their funds were used to contribute to the purchase price but also noted that they had not specifically traced the funds used by Ms Caddick for individual mortgage payments over the period of ownership of each of the properties. 19 On 3 February 2023 the Receivers sent a circular to the Out-of-Pocket Investors (3 February Circular) informing them that the sale proceeds of the Dover Heights Property would not be applied to discharge the mortgage held by the NAB over the Edgecliff Property before putting the Court on notice of potential priority claims and seeking specific directions about how the Receivers should proceed. As is apparent, this approach by the Receivers was not in conformity with the 25 July 2022 Direction. 20 The 3 February Circular also annexed an interlocutory application filed by the Receivers in which, among other things, the Receivers sought directions to establish a procedure to address competing interests of the Out-of-Pocket Investors, orders for a mediation with Mr and Mrs Grimley and directions for the final distribution of funds. 21 In the meantime, the Receivers engaged in negotiations with the NAB about alternative options to minimise the interest associated with the mortgage over the Edgecliff Property. On 16 March 2023 the NAB issued a written offer to the Receivers proposing an offset arrangement (NAB Offer). At the Receivers' request the NAB extended the time in which its offer was open for acceptance. 22 On 10 February 2023 the Receivers sent a further circular (10 February Circular) to the Out-of-Pocket Investors notifying them of a meeting to be held on 24 February 2023. The Receivers informed the Out-of-Pocket Investors that this proceeding had been before the Court for case management on 8 February 2023 and that a direction was made at that time that the Receivers would be justified in organising a mediation with the Out-of-Pocket Investors and Mr and Mrs Grimley by 30 April 2023. 23 The proposed agenda for the 24 February 2023 meeting included: … (b) To discuss and explain what we consider to be the two distribution options that are available for the distribution of funds held in the Receivers' Trust Account to Out-of-Pocket Investors. As part of this discussion, we will explain the advantages and disadvantages of each option and the estimated returns that may be received from such distributions. (c) To discuss and explain the upcoming proposed mediation between us, as Receivers, Out-of-Pocket Investors and Mr and Mrs Grimley. (d) To discuss and consider the appointment of a Representative Defendant/Investor to act on behalf of other Out-of-Pocket Investors who may have equitable tracing claims to certain Receivership Property (if applicable). (e) To deal with any questions regarding the Receivership generally. 24 In the 10 February Circular the Receivers noted that they would issue a detailed report one week prior to the meeting which, among other things, would set out two distribution options available to distribute funds to the Out-of-Pocket Investors: the first involving a tracing exercise to establish the proportion of each Out-of-Pocket Investor's share held by Ms Caddick on constructive trust at the time of the acquisition of specific Receivership Property; and the second involving a pari passu distribution. 25 As foreshadowed, on 17 February 2023 the Receivers provided a circular explaining, in further detail, the two options for the distribution of realised funds to the Out-of-Pocket Investors which were to be discussed at the meeting scheduled for 24 February 2023. That circular set out the amounts that would be available under each option, i.e. tracing or pari passu, and the advantages and disadvantages of each option. By the pari passu method of distribution the Receivers estimated that the Out-of-Pocket Investors would likely receive between 29 to 30 cents for every dollar owing to them from the Receivership. 26 On 1 March 2023 the Receivers sent another circular to the Out-of-Pocket Investors (1 March Circular) reporting on the meeting which took place on 24 February 2023 and noting that 51 Out-of-Pocket Investors, representing 96.3% of total Out-of-Pocket Investor claims, attended the meeting. The 1 March Circular also reported that all Out-of-Pocket Investors who attended or were represented at the meeting unanimously supported distribution of moneys held in the Receivers' Trust Account on a pari passu basis and reported on the appointment of a representative defendant to represent the Out-of-Pocket Investors in relation to the competing claims for the Edgecliff Property. 27 A voting form was provided to Out-of-Pocket Investors for each of them to indicate their preferences about: the appointment of the person who nominated to act as the representative defendant (i.e. Investor A); whether recoveries made from the Edgecliff Property could be distributed to all Out-of-Pocket Investors on a pari passu basis; and whether any reasonable legal costs associated with making a claim against the Edgecliff Property could be paid out of funds held in the Receivers' Trust Account. 28 On 8 March 2023 I made orders permitting Investor A to intervene in the proceeding. Investor A was to represent all Out-of-Pocket Investors, including in relation to the dispute that had arisen between the Receivers and Mr and Mrs Grimley about discharge of the mortgage held by the NAB over the Edgecliff Property and the Receivers' failure to comply with the 25 July 2022 Direction. 29 On 26 April 2023 the Receivers sent a circular informing Out-of-Pocket Investors that they had filed an application for directions that they were justified in making an interim dividend distribution of $3 million to Out-of-Pocket Investors on a pari passu basis. That circular noted that as at its date the Receivers were holding funds totalling $8,090,523.43 and that they proposed to distribute that amount less: (a) An amount of $162,113.05, being our Receivers' remuneration, costs and expenses for the period 23 November 2021 to 30 June 2022, which has been approved by the Court which has not yet been paid; (b) An amount of $679,771.32 for current Receivers' remuneration, costs and expenses (including legal and Counsel fees) for the period 1 July 2022 to 31 March 2023; (c) $30,800 being the proposed costs of the mediation to be held on 3 May 2023; (d) An amount of $495,000 for estimated future Receivers' remuneration, costs and expenses (including legal and Counsel fees) for the period 31 March 2023 onwards; (e) Payment (if required) of the outstanding balance owed to [the NAB] in respect of the Edgecliff Property, being $1,921,247.05; (f) Allowances for Investor A's reasonable legal costs, including potential adverse costs orders, of $486,850.76; and (g) A contingency of $750,000 for unforeseen legal fees and professional fees associated with the legal proceedings relating to the Edgecliff Property and Other Assets of the Receivership, and a contingency for Mr and Mrs Grimley if they make a claim to be a creditor in the Receivership. The Receivers also noted that if ultimately the contingency amount and estimated future costs were not incurred then the remaining amount would be distributed to Out-of-Pocket Investors as part of future dividends. 30 On 3 May 2023 the Receivers, Mr and Mrs Grimley and Investor A attended a mediation. 31 After the conclusion of the mediation, by letter dated 3 May 2023 Mr and Mrs Grimley, through their solicitors, made an open offer to settle all claims they had in respect of the Receivership Property, "their dealings with [Ms Caddick] and the Proceedings, together with any claims they have against Bruce Gleeson and Daniel Soire as Receivers of the Property of [Ms Caddick] in their own right and on behalf of [Ms Caddick] and [Maliver]" on the following basis (as written): 1. The Receivers pay to the Grimleys $950,000 (the Settlement Sum) to be paid upon the Grimleys providing vacant possession of [REDACTED] (the Edgecliff Property). 2. The Grimleys will provide vacant possession of the Edgecliff Property within 6 weeks of the Court making directions to the effect that the Receivers are justified in distributing the Settlement Sum to the Grimleys. in accordance with paragraph 1. 3. Upon payment of the Settlement Sum: (a) The Grimleys will cause to be removed from the title of the Edgecliff Property caveats AQ 623920, AQ664219, AQ786558. (b) The Receivers release the Grimleys in respect of all matters relating to the Receivership Property, their dealings with Melissa Caddick and the Proceedings. (c) The Grimleys release the Receivers in respect of all matters relating to the Receivership Property, their dealings with Melissa Caddick and the Proceedings. 32 On 5 May 2023 the proceeding was again before the Court. I made orders (5 May 2023 Orders) including an order that: Any person who is not yet named as an interested person in the proceeding and who wishes to be heard in relation to the Distribution Direction in the Receivers' Amended IA is to file and serve a notice of objection, together with any submissions, not exceeding 10 pages in length, on or before 24 May 2023. 33 On 16 May 2023 the Receivers issued a further circular to Out-of-Pocket Investors (May Circular). The principal purpose of the May Circular was to set out the Receivers' position in relation to whether the Court should make a direction concerning payment of $950,000 (Settlement Sum) to Mr and Mrs Grimley (also referred to as the Parents) and to explain the Receivers' reasoning. The Receivers noted that they had a convened a meeting of Out-of-Pocket Investors to be held on 18 May 2023 to discuss the May Circular and informed the Out-of-Pocket Investors of the Court's Order made on 5 May 2023 set out in the preceding paragraph. 34 The May Circular included the following (as written): 13. There are three important matters that it is necessary to make clear from the outset. a. First, our overall position concerning the distribution of the Property over which we were appointed (the Receivership Property) is unchanged. We must act in the best interests of all the people who have claims to the proceeds of sale of such Property. Relevantly, the best interests of the OOP Investors include achieving the highest rateable return to them. We are focused on that objective. b. Secondly, our responsibilities include putting to the Court our view about what directions for distribution would best advance the interests of the creditors. That is what we consider we are doing. It is not within our power to accept any offer from the Parents, and we have not done so. We have not negotiated any settlement with the Parents. We are not able to make the Parents make an offer or agree to take less money in exchange for vacating the Edgecliff Property. The fact that we are putting forward the Parents' settlement offer as a basis for distribution is not a reflection of any view held by us that $950,000 is a fair or correct amount to be paid to the Parents in respect of their claims. It does not reflect our assessment of their legal entitlements. The fact, which we cannot change, is that the Parents have the advantage of being in possession of the Edgecliff Property, claiming a life interest over the Edgecliff Property and having lodged a caveat on that basis, with the consequence that proceedings must be taken to dispossess them (absent a settlement). c. Thirdly, the Court may disagree with our view or decline to make make a direction that the available funds should be distributed on the basis of the Parents' settlement offer. It is open to any OOP Investor to persuade the Court that the funds should be distributed on a different basis, including after a hearing of the contest with the Parents. At the moment, it seems that any such contest could potentially be heard in August 2023. As such, no OOP Investor's rights are being prejudiced by our positon. 14. Our position in respect of the Parents' offer can be put simply: the amount of money in contest between the OOP Investors and the Parents means that continuing to litigate the dispute is likely to be uncommercial for the OOP Investors. 15. We detail our modelling below, attached as Annexure "B". Although our analysis must be considered as a whole, we highlight the following aspects of our view. a. Our calculations attached to this Circular all assume that the Parents will lose. Based on our calculations, even if the OOP Investors win completely and all possible contingencies about the cost of that litigation favour the OOP Investors, our calculations indicate that distributions to the OOP Investors' at best may only be marginally higher than if they accept the Parents' offer (and could still be lower). Obviously, with litigation, there is always a risk that the Parents might win. Without expressing any view as to the merits, the OOP Investors should take this fact into account. b. If the Parents' claim were to be litigated and the Parents lose, our estimate of the maximum amount of their alternative claim is approximately $958,000. Assuming a 35.3% return to all investors, that means that the amount in dispute is the difference between $958,000 and approximately $338,500, being $619,500. That amount is spread over 55 OPP Investors. For the purpose of discussion, if distributions to OOP Investors were equal, that amounts to the sum of approximately $11,250 per OOP Investor. c. This type of litigation is unique because, in our experience, not only will our remuneration and legal costs be paid from the fund, but there is also a reasonable likelihood that the costs of any true contradictor will be as well. That means that the fund is at risk of bearing each of: i. our legal costs, ii. the legal costs of Investor A; and iii. those of the Parents. Although objections could be raised to the Parents receiving any costs, both on the basis of the authorities and that the Court has been previously advised that the Parents are being represented pro-bono, our experience is that this risk is not warranted in relation to an amount in dispute of $619,500 d. Everything we have seen in this matter to date points to the contest between the OOP Investors and the Parents being complicated (and therefore expensive in terms of legal costs) and protracted. To put the matter in perspective, MacKay Chapman, for Investor A, have billed approximately $185,000 (plus GST) to May 2023. Baker McKenzie, for the Parents, have indicated that the likely legal costs the Parents would seek to recover if successful will be approximately $575,000 (plus GST) (and leaving aside any appeal). e. The value to the OOP Investors in the Parents vacating the Edgecliff Property should not be overlooked. The valuation we have obtained estimates the difference in value between selling the Edgecliff Property subject to a life estate and not so encumbered to be $550,000. Although not relevant to our analysis, the Parents' offer does involve a compromise of their claim. When taken along with the Parents' legal costs that will not be sought from the fund, the settlement sum the Parents have proposed is considerably less than what they seek. Of course, Investor A will have legal advice about the strength of the Parents' legal position, about which we express no view. To the extent that some form of compromise is relevant to the view of the OOP Investors, we simply observe that the Parents' offer does involve some compromise. f. In our experience, there is real value to OPP Investors in receiving an earlier distribution. This may be especially so in the context of the inherently uncertain property market. If a distribution occurs on the basis of the Settlement Sum, we hope to finally distribute this year and in line with the valuation of the Edgecliff Property we have received (which is valid to 22 June 2023). If the proceedings are contested, it is difficult to predict when they will be judicially determined (including any final appeals) and what the Edgecliff Property might sell for after that date. Of course, it is also possible that the Eastern Suburbs property market may improve over the next 12-18 months. g. We place no weight on the releases being offered to us by the Parents. They are irrelevant to our view. We have always acted appropriately and in the best interests of creditors as a whole. We have been neutral as between the Parents and the OOP Investors. In particular, the direction made in July 2022 that we were justified in using the proceeds of sale of the Dover Heights Property to pay out the mortgage on the Edgecliff Property was sought before Investor A articulated a claim against the Parents. Once that dispute was crystallised, it was obvious that we could not pay the mortgage on the Edgecliff Property to the advantage of the Parents (by preserving any life estate against the possibilty of NAB forcing a sale under its mortgage). h. The orders which the Parents foreshadow, for an inquiry into our conduct about the payment of the mortgage on the Edgecliff Property and that we pay the interest on that mortgage from February 2023 are misconceived. i. Although an amended application seeking those orders has not been filed, the Court has previously indicated it would be heard on 31 May 2023. The fact that those baseless claims may now cause some OOP Investors to think that we are in some way advantaged by the Parents' proposal is regrettable. We assure the OOP Investors that these releases have no bearing on our opinion whatsoever because we regard any application for an inquiry as hopeless; this should be readily apparent from the attached calculations. (Emphasis in original.) 35 The Receivers undertook modelling in which they estimated the dividends payable on two bases: first, if the offer made by Mr and Mrs Grimley was accepted; and secondly, if that offer was rejected and the Out-of-Pocket Investors were wholly successful in the litigation concerning entitlement to the Edgecliff Property. The latter basis was considered on both a "high" and "low" estimate scenario, with the difference between the two being the treatment of variables such as costs. A summary of the results of the modelling provided to the Out-of-Pocket Investors is set out below: Scenario Estimated distribution Estimated timeframe Offer accepted 36.55 cents in the dollar 6-8 months Offer rejected, litigation successful 37.69 cents in the dollar 1-3 years (high estimate) Offer rejected, litigation successful 32.99 cents in the dollar 1-3 years (low estimate)

36 The May Circular also set out the terms of the NAB Offer and the Receivers' views in relation to it as follows: 33. With this in mind, since the settlement of the Dover Heights Property, we have secured a written offer from the NAB which provides that: a. The NAB will waive any default interest charged on the offset account linked to the Edgecliff Property mortgage (NAB Offset Account) totalling approximately $13,000. This has already been credited to the NAB Offset Account. b. The NAB will permit the Receivers to deposit monies equivalent to the balance of the Edgecliff Property mortgage account balance into the NAB Offset Account. Such deposit would result in no interest being charged on the Edgecliff Property mortgage account. c. The NAB Offset Account is currently in arrears and the NAB requires payment of the arrears to be made to be made before the arrangement is agreed to (currently approximately $76,000). d. Monthly principal repayments will be deducted from the NAB Offset Account on an ongoing basis. e. The NAB agrees, for a period of 6 months, not to exercise their rights of offset or combination. This period may be extended upon written request. … 35. We have formed the view that the NAB's offer is commercially acceptable and placing monies into the NAB Offset Account would appropriately balance preservation of parties' rights to the monies in the Receivers' Trust Account and the Edgecliff Property, while minimising the effect of ongoing interest being charged on the Edgecliff Property mortgage account. 36. We intend to accept the NAB's offer. Although we do not consider it strictly necessary, for the avoidance of doubt, our Proposed Distribution Direction seeks a direction in relation to this payment. 37 On 18 May 2023 the Receivers held a meeting of the Out-of-Pocket Investors at which they explained the May Circular. Mr Soire gave evidence that: (1) 36 out of 55 Out-of-Pocket Investors attended or were represented at the meeting; and (2) no Out-of-Pocket Investor who attended the meeting indicated that they intended to oppose the direction sought by the Receivers that they would be justified in making a distribution on the basis of Mr and Mrs Grimley's offer.

Maliver 38 Based on the Liquidators' investigations into the affairs of Maliver, as at 30 May 2023 they had identified the following creditors of Maliver (other than the Out-of-Pocket Investors and Mr and Mrs Grimley): Creditor Name Amount Owing Australian Taxation Office $2,195 Australia and New Zealand Banking Group Limited $6 Linkt, Interlink Roads Pty Ltd and TollAust (WestConnex) $374 LSI Taxation Advisors Pty Ltd $6,930 NSW Revenue $377 Shred-X $209 Total $10,091

39 Mr Soire explained that Maliver is in the process of filing amended and outstanding income tax returns, fringe benefit tax returns and business activity statements and that once they are filed he anticipates the claim by the Australian Taxation Office (ATO) as creditor of Maliver will reduce to nil. 40 Based on the Liquidators' investigations into Maliver's affairs, as at 30 May 2023 Maliver's only remaining asset and recovery is a tax refund estimated to be approximately $1,050,000. Mr Soire explained that Maliver's entitlement to this tax refund arises from taxes improperly paid by Maliver to the ATO for fictitious income which Maliver never derived. 41 Mr Soire is considering whether Maliver has a claim against any investors that it repaid in full (plus any gain) prior to the commencement of this proceeding and is also considering whether Maliver has a claim against Ms Caddick's estate for moneys paid by the Out-of-Pocket Investors to Maliver for investment purposes that were withdrawn and spent by Ms Caddick for her personal benefit.

STATUTORY FRAMEWORK AND LEGAL PRINCIPLES

The Court's powers 42 As set out above, by Order 4 of the 22 November 2021 Orders the Receivers were appointed pursuant to s 1101B(1) of the Corporations Act. 43 Section 1101B of the Corporations Act is titled "Power of Court to make certain orders" and relevantly provides that: Court's power to make orders in relation to certain contraventions (1) The Court may make such order, or orders, as it thinks fit if: (a) on the application of ASIC, it appears to the Court that a person: (i) has contravened a provision of this Chapter, or any other law relating to dealing in financial products or providing financial services; or (ii) has contravened a condition of an Australian market licence, Australian CS facility licence, Australian derivative trade repository licence or Australian financial services licence; or (iii) has contravened a provision of the operating rules, or the compensation rules (if any), of a licensed market or of the operating rules of a licensed CS facility; or (v) has contravened a condition on an exemption from the requirement to hold an Australian market licence or an Australian CS facility licence; or (vi) is about to do an act with respect to dealing in financial products or providing a financial service that, if done, would be such a contravention; or … However, the Court can only make such an order if the Court is satisfied that the order would not unfairly prejudice any person. Note: For examples of orders the Court could make, see subsection (4). ... Powers of receivers appointed under Court orders (8) A person appointed by order of the Court under subsection (1) as a receiver of the property (see subsection (12)) of a financial services licensee: (a) may require the financial services licensee to: (i) deliver to the person any property of which the person has been appointed receiver; or (ii) give to the person all information concerning that property that may reasonably be required; and (b) may acquire and take possession of any property of which the person has been appointed receiver; and (c) may deal with any property that the person has acquired, or of which the person has taken possession, in any way in which the financial services licensee might lawfully have dealt with the property; and (d) has such other powers in respect of the property as the Court specifies in the order. 44 The Court's power to make directions in relation to a court-appointed receiver arises from its inherent jurisdiction. It is an incident of the statutory power to appoint a receiver, in this case s 1101B(8) of the Corporations Act. 45 In Glazier Holdings Pty Ltd v Australian Men's Health (unreported, Supreme Court of New South Wales, Young J, 30 April 1998) at 6-8 Young J (as his Honour then was) considered the position of court-appointed receivers observing, among other things, that: … The sequestrator is an officer of the court and so it tended to be thought that a receiver was an officer of the court also. However, up until the early part of the 19th century no-one had actually gone as far as to say so. The history of the appointment of receivers is set out in Spence's Equitable Jurisdiction of the Court of Chancery, vol 1, 1846 p673 and that is reproduced in Picarda "The Law Relating to Receivers Managers and Administrators" 2nd ed Butterworths, London 1990 p2-p3. The basic authority that a receiver is an officer of the court appears to be an Irish equity case of Hutchinson v Massareene (1809) 2 Ball & Beatty 55 (a report which is not available in Sydney). That decision was followed by Lord Eldon in Angel v Smith (1804) 9 Ves 335; 32 ER 632 and also in Davis v Marlborough (1819) 2 Swans 108, 118; 36 ER 555, 559. However, the furthest Lord Eldon seems to go is to say that receivers were like an officer of the court. In one sense they were like trustees, in that they owed fiduciary duties, but they were unlike trustees in that they had no property vested in them. They were, however, considered to be officers of the court in the United States. In Davis v Gray (1872) 83 US 203 at 217-218, Swayne J, giving the decision of the court, said that: "A receiver is appointed upon a principle of justice for the benefit of all concerned ... [The receiver] is virtually a representative of the court, and of all the parties in interest in the litigation wherein he is appointed. He is required to take possession of property as directed, because it is deemed more for the interest of justice that he should do so than that the property should be in the possession of either of the parties in the litigation. He is not appointed for the benefit of either of the parties, but of all concerned. Money or property in his hands is in custodia legis. He has only such power and authority as are given him by the court, and must not exceed the prescribed limits. The court will not allow him to be sued touching the property in his charge, nor for any malfeasance as to the parties, or others, without its consent; nor will it permit his possession to be disturbed by force, nor violence to be offered to his person while in the discharge of his official duties." I do not think that the status of the receiver is stated with any greater clarity than in that passage. The receiver seeks directions of the court as an officer of the court. However, his status as an officer of the court is not quite the same as other officers. I said in Moclair v Moclair, 18 December 1986, unreported, following Re St George (1887) 19 LR Ir 566, that receivers are officers of the court and they should resort to the court for guidance when they think it is desirable to do so. I stand by what I there said, but I think it should be appreciated that there is a difference between a liquidator, who is doing the work that last century the court did itself in the Master's Office, or even with a trustee, in that those people have unlimited functions, whereas a receiver has a very limited and usually relatively mechanical function. Instead of making a broad statement that receivers may always seek the opinion of the court, it would be better to put the proposition more narrowly, that if a receiver within his own limitations requires the guidance of the court, then normally he should have it. Accordingly, I do not consider that many of the cases dealing with the sort of advice that is given to trustees, on the one hand, or liquidators, on the other hand, necessarily apply in the case of applications by receivers to get advice. (Emphasis added.) 46 His Honour then observed (at 12-13) that unlike a trustee, who seeks judicial advice because he or she is surrendering all of his or her discretion to the Court, and a liquidator, who seeks judicial advice as a delegate of the Court and is asking the Court as his or her appointer to make the decision, a receiver "is really only carrying out machinery tasks committed to him by the court". Thus in carrying out the task of giving directions to a receiver, the Court should have regard to the "aim of the suit". See also Mariconte v Batiste (2000) 48 NSWLR 724 at [75] and Re Anglican Development Fund Diocese of Bathurst (Recs and Mgrs Apptd) [2015] NSWSC 440 at [11]-[13]. 47 In Re Anglican Development Fund (at [11]) Brereton J also expressed the view that it is doubtful that court-appointed receivers may rely upon s 424(1) of the Corporations Act as "that section is available only to a receiver who is appointed under a power contained in an instrument, which seems to exclude a receiver appointed by the court pursuant to its inherent or statutory power". 48 The Receivers drew my attention to the decision in Australian Securities and Investments Commission v Commercial Nominees of Australia Ltd (2002) 42 ACSR 240; [2002] NSWSC 576 by way of analogy to the present case. In that case Barrett J (as his Honour then was) considered an application by a receiver appointed under s 601EE(2) of the Corporations Act seeking the court's assistance in determining the appropriate method of distributing, among beneficiaries of a trust that was an unregistered managed investment scheme, the net cash proceeds resulting from the applicant's exercise of his powers as receiver. An order had been made pursuant to s 601EE(1) of the Corporations Act for the scheme to be wound up. Here an order was made under s 1101B of the Corporations Act appointing the Receivers with the powers and for the purposes set out in the 22 November 2021 Orders. 49 In considering the nature of and basis for the jurisdiction to be exercised by the court, Barrett J referred to three statutory provisions identified by the applicant: s 601EE(2) and s 424(1) of the Corporations Act and s 63 of the Trustee Act 1925 (NSW) pursuant to which a trustee may apply to the court for its opinion, advice or direction on any question about the management or administration of trust property. Referring to Glazier Holdings, at [10]-[11] his Honour relevantly said: [10] I also entertain a doubt as to the applicability of s 63 of the Trustee Act in this case. A court appointed receiver is not a trustee in the strict sense (Vine v Raleigh (1883) 24 Ch D 238), although, of course, fiduciary duties are owed by such a receiver (Nugent v Nugent [1908] 1 Ch 54). … I therefore prefer to look beyond s 63 of the Trustee Act for a source of relevant jurisdiction in this case. [11] The court's general equitable jurisdiction is, I think, a much clearer source of power for the court to give its opinion, advice or direction to a receiver it has appointed. Such a receiver is an officer of the court and, as such, may resort to the court for necessary guidance. … 50 His Honour accepted that the powers conferred upon the court by s 601EE(2) of the Corporations Act are "very broad" and observed that while the expression "winding up" as applied by s 601EE to an unregistered management investment scheme is not the subject of any explanation in the statute, "as a matter of general principle", what is contemplated is the realisation of a scheme's assets, discharge of liabilities and distribution of any surplus among beneficiaries in an appropriate way: at [12]-[13]. At [15] Barrett J said: In the present context, it seems to me that the best way to proceed, in a jurisdictional sense, is to regard s 601EE(2) as the source of jurisdiction to prescribe, by order, the appropriate basis of distribution of surplus and for the completion of the winding up; and to entertain, by reference to the court's general equitable jurisdiction, an application by the receiver for a direction to proceed to complete the winding up in accordance with the s 601EE(2) order, with both s 424 of the Corporations Act and s 63 of the Trustee Act left to one side as not immediately useful.

The effect of the direction sought by the Receivers 51 The Receivers submitted that, having made full and fair disclosure of all relevant facts and circumstances, a direction would permit them to act in accordance with it without incurring personal liability to any interested parties. 52 In Kelly (Liquidator), Halifax Investment Services Pty Ltd (In Liq) v Loo (2021) 390 ALR 669; [2021] FCA 531 I considered the liquidators' application for directions pursuant to s 90-15 of the IPS and judicial advice pursuant to s 63 of the Trustee Act 1963 (NSW). At [15]-[20] I set out the principles applicable to an application for directions pursuant to s 90-15 of the IPS and to an application for judicial advice pursuant to the Trustee Act. 53 At [247] of Halifax I concluded as follows in relation to the nature of the liquidators' application for directions: … Such an application does not determine equitable proprietary rights; the effect of directions made by the Court is to immunise a liquidator from personal liability provided he or she acts in accordance with those directions: Courtenay House at [151]. As was recognised by Brereton J in Re BBY (No 2) (at [40]) in "a liquidator's application for directions courts often have to do 'rough justice' because of the limitations of the available evidence" and in light of what is reasonably and practically economical. 54 To like effect in Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 McLelland J considered an application by the liquidator of GB Nathan and Co Pty Ltd (GBN) for directions under s 479(3) of the Corporations Law (now repealed). In so doing his Honour explored the nature and scope of a liquidator's application for directions stating (at 677) that: The protection of the official administrator, acting under a direction of the court, from personal liability would not however affect the rights of creditors and beneficiaries as between themselves … 55 His Honour concluded in relation to the application before him (at 680-681) that: The primary matters of significance in the present application arising from the above considerations are that any directions which may be given to the liquidator (a) will not give rise to any conclusive determination as between GBN and its clients as to (i) whether particular assets held by GBN are held in trust for those clients or (ii) whether any such trust assets may properly be applied by the liquidator in payment of his remuneration and expenses; and (b) will not protect the liquidator against the claims of clients asserting that assets held by GBN are held in trust for those clients. …

The method of distribution 56 The question of method or basis of distribution is ultimately a matter for the Court. 57 In cases concerning distributions of mixed deficient funds, the general rule is that assets should be distributed in accordance with legal entitlements. However, in exceptional circumstances, where it is not reasonably and economically practical to ascertain strict legal entitlements, the Court may take a pragmatic approach even where to do so would amount to "a wise and commercial breach of trust": see Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209 at 213. 58 In Re BBY Ltd (recs and mgrs apptd) (in liq) (No 2) (2008) 363 ALR; [2018] NSWSC 346 the liquidators of BBY Ltd sought judicial advice on how to distribute client money to various classes of BBY's clients. Despite a statutory requirement to do so, moneys deposited by clients were not held on their behalves in segregated accounts. There was a deficiency in total funds recovered by the liquidators when compared to the total claims by investors and it was not economically practical for the liquidators to reconstitute the accounts in order to identify where funds contributed by individual clients were located from time to time. The question for the Court was whether the liquidators could group or pool all or some client segregated accounts. Commencing at [38] Brereton J undertook an analysis of the relevant authorities and principles. At [54]-[59] his Honour observed that: [54] In MF Global, Black J observed that, at least in the case of a court-ordered winding-up, the pooling of CSAs could be effected by a direction under s 479 of the Corporations Act, permitting the liquidators to make a distribution in a manner which did not comply strictly with reg 7.8.03(6), on the basis that to do so would be 'a wise and commercial breach of trust': [55] I note that the same result could be reached, as Underdog points out, by the court making a direction under s 479 of the Corporations Act permitting the Liquidators to make a distribution in a manner which did not strictly comply with reg 7.8.03(6), so far as accounts were pooled on an appropriate basis and that course amounted to "a wise and commercial breach of trust": Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd (1997) 42 NSWLR 209 at 213; 24 ACSR 79 at 82. It is not necessary for present purposes to express a view as to whether such a direction could be made under s 511 of the Corporations Act. While Young J held to the contrary in Dean-Willcocks v Soluble Solution Hydroponics above, that view was not followed by Warren CJ in Handberg (in his capacity as liquidator of S&D International Pty Ltd (in liq)) v MIG Property Services Pty Ltd above at [9]–[15]. [55] This illustrates the pragmatic basis for the pooling remedy, which also appears from the judgment of Gordon J in ASIC v Letten (No 7), albeit in the context of an unregistered managed investment scheme. While acknowledging that generally, the Court's power (under s 601EE(2) of the Corporations Act) "to make any orders it considers appropriate for the winding up of the scheme" does not authorise a distribution of surplus assets of an unregistered managed investment scheme other than to those entitled to the assets in proportion to their entitlements, namely, the members, this general principle yields in cases where it is not pragmatic to ascertain their proprietary rights: … [56] Section 601EE is analogous to s 479(3), and her Honour's approach is applicable under ss 479(3) and 511 in the present context. [57] This is important because it means that while there are references to the "impossibility" of tracing, the notion is not one of absolute impossibility, but whether tracing is not reasonably and economically practical, so that they should be regarded as irretrievably commingled; thus her Honour's references to "property of the Schemes [being] irretrievably commingled owing to the central treasury role played by LGHA and the manner in which the Schemes were operated", and to "the tracing of funds is further complicated and, in some cases, rendered impossible by the lack of reliable financial and accounting data". On the other hand, pooling may be inappropriate where the trust ledger records provide a reliable factual foundation on which to mould relief, and mere difficulty in ascertaining entitlements to permit distribution by single account may not suffice to justify "pooling", though that would be influenced by the size of the estate, the number of claimants, and the degree of difficulty. [58] In MF Global, Black J founded the Court's jurisdiction on s 479(3), which was available in a voluntary liquidation by reason of ss 506(1)(b) and 511. In Dean-Willcocks v Soluble Solution Hydroponics Pty Ltd, Young J (as he then was) suggested that whereas under s 479(3) the Court could authorise its officer to perform what would otherwise be a breach of trust, that was not available under s 511: Under s 511, the court does not give directions to the liquidator as to what he should do. It cannot advise the liquidator to do something which would be, for instance, a wise and commercial breach of trust. Although it is said that the section must be construed liberally (see per Gibbs J in Re Evers Motor Co Ltd [1962] QWN 6 (at 13) and Re Union Bank of Kingston-Upon-Hull (1880) 13 Ch D 808), the court's role is to decide disputes according to law. Thus the court decides a question of fact or law in a summary way, but the decision is the same as would have been reached by a court sitting with a jury or after full-blown pleadings. The jurisdiction is not to decide matters according to the opinion of the presiding judge as to what would be commercially appropriate. [59] I would depart from any dicta of Young J with great reservation. However, in Handberg (in his capacity as liquidator of S & D International Pty Ltd) v MIG Property Services Pty Ltd, Warren CJ explained, to my mind compellingly, that s 511 is not limited in that way, but was intended to give the Court the same powers in respect of a voluntary liquidator as it has in respect of a Court-appointed liquidator … (Footnotes omitted.) 59 At [83] Brereton J summarised the principles including relevantly: (1) While a liquidator must distribute funds under his or her control through the company being trustee of trusts in accordance with the legal entitlements to those funds, findings about what legal entitlements exist depend upon the evidence, and where a liquidator knows no more than that the fund is held on trust and that there are a number of potential claimants, it may be appropriate for the Court to direct distribution of the fund amongst the claimants proportionately to their claims. That is because it is the best that can reasonably be done on the available evidence. … (3) While the Court's powers to give directions under ss 479(3) and 511 do not generally permit orders that depart from proprietary rights, this principle yields in cases where it is not pragmatic to ascertain the proprietary rights with precision; … (5) The pragmatic nature of the jurisdiction means that neither strict proof of mixing such as would entitle a beneficiary to an equitable proprietary remedy, nor absolute impossibility of tracing, is required; pooling may be directed where the identification and tracing of the interests of individual clients is not in the circumstances of the particular case reasonably and economically practical, on the basis that it is reasonable in the circumstances that the funds be regarded as irreversibly deficient and mixed. (6) However, relatively clear property interests are not to be altered by reference to some notion of common misfortune, nor should one fund unduly benefit at the expense of another. Because the effect of pooling two or more accounts is to treat each client's entitlement to one as identical to its entitlement to the other(s), and so to treat each client as having a rateably equal interest in each fund, it will be warranted when the funds have become so intertwined that each client's entitlement to one account may reasonably be regarded as identical to its entitlement to the other(s), and this will be so when it is reasonable to regard each as having a rateably equal interest in the mixed fund. (7) The combination of mixing and impracticability of tracing does not of itself mean that it will necessarily be reasonable to treat each client's entitlement to one account as identical to its entitlement to the other(s), and to regard each as having a rateably equal interest in the mixed fund. Whether that will be so is influenced by the scale of the mixing, and the relative sizes of the funds and the deficiencies, and above all the extent of the interest of the contributing fund (which I have called fund B) in the mixed fund (which I have called fund A). That requires the Court to form a view, if it can — albeit an imprecise and impressionistic one — as to what is likely to be the extent of the interest of the beneficiaries of each fund in the other(s). In doing so, the Court is informed, but not controlled, by equitable tracing principles. See also Halifax at [232]. 60 In Australian Securities and Investments Commission v Letten (No 7) (2010) 190 FCR 59 Gordon J dealt with an application by receivers for directions that they were justified in pooling the assets of an unregistered managed investment scheme. The question that arose was whether the Court could or should direct a distribution other than in accordance with proved legal entitlements. In addressing that question her Honour considered whether any further tracing of investor contributions should be attempted, in circumstances where there were complexities associated with an attempted reconstruction of the financial and accounting data and "prohibitive" costs associated with the tracing exercise. Her Honour found (at [259]) that "in the circumstances of [the] case it [was] not justifiable to reduce the available funds" through attempting a further tracing exercise and set out the facts in support of that conclusion. 61 Justice Gordon then undertook an analysis of the source of the Court's power to consider a direction of the kind sought by the receivers, including in particular s 601EE(2) of the Corporations Act, and concluded (at [268]) that: … generally s 601EE(2) does not authorise a distribution of surplus assets of an unregistered managed investment scheme other than to those entitled to the assets in proportion to their entitlements, namely, the members. The next question is when is it possible for there to be a distribution of surplus assets of an unregistered managed investment scheme other than to those entitled to the assets in proportion to their entitlements, namely, the members and if so, by what method? I address both these issues in further detail below. However, before considering them, it is necessary to examine the Court's powers in relation to the Concluded Schemes and the Corporate Defendants. (Emphasis in original.) 62 At [275]-[286] her Honour summarised the relevant authorities setting out the principles which enable a court to make distributions as between beneficial claimants and ultimately concluded that the general rule for distribution according to entitlements "must yield to pragmatism". At [332]-[333] her Honour said: 332 The facts of the present case disclose circumstances which may be classified as exceptional. Circumstances in which the general principle (that there should be no distribution of surplus assets other than to those entitled to the assets in proportion to their relevant entitlements) must yield to pragmatism. Why? Because in the present case, in addition to the matters raised in [250] and [259] above, it is to no-one's advantage that a very long time and very large costs be spent in working out the entitlements and liabilities on a Scheme by Scheme basis (see [249]-[260] above and Re TVSN Ltd [2005] NSWSC 692 at [17]ff) where: … 333 Such a conclusion is consistent with authority: see [275]-[286] above. In each of Nelson, Enterprise Solutions 2000 and Tasman, the fund available for distribution to beneficiaries of the trust or members of the scheme (as applicable) was not substantial and the liquidators in each were concerned about the impact that the costs of making further investigations would have on the prospects of making a distribution. On that basis, the liquidators sought, and were granted, orders or directions for rateable distribution of the fund rather than to incur further costs in carrying out further investigations. … 63 For completeness, her Honour noted (at [336]) that the effect of the directions sought did "not affect the rights of any person to claim that they have, or any other person has, an entitlement to distribution from an asset of a scheme or a corporate defendant … which differs from the distribution which they would receive if the pooling process identified" was adopted.

The position of interested parties 64 The position of interested parties will be significant in the Court's assessment of the appropriateness of a direction. 65 In Dean-Willcocks in considering a liquidator's application for directions in relation to the consolidation of creditors and assets of associated companies Young J stated (at 216-217) that: It would be possible for the court to advise a liquidator in a court winding up that he should consolidate debts, but it would be unlikely that the court would do so unless every creditor agreed or a regime was put in place for creditors to object. 66 In Re Tayeh and Another (as joint liqs of The Black Stump Enterprises Pty Ltd and Others) (2005) 53 ACSR 684; [2005] NSWSC 475 Barrett J explored the circumstances in which creditors may be deemed to have provided their assent in relation to the liquidators' proposed scheme for the assets of associated companies to be pooled and for dividends to creditors to be paid from a single pool of assets. His Honour noted (at [24]) that "[t]here may be circumstances in which silence, coupled with surrounding circumstances is tantamount to assent", citing Re Bailey Hay & Co Ltd [1971] 3 All ER 693 as an example. Justice Barrett declined to make the directions sought by the liquidators in that case. In doing so at [25] his Honour noted that: … In the present case, creditors were told that the liquidators proposed to ask the court to make "a pooling order". They were not informed of the basis on which the court might make "a pooling order" or the considerations that might influence its decision, apart from the intermingling of the companies' financial affairs. In particular, they were not told that any evaluation of the existence or non-existence of creditors' unanimous approval of what was proposed might play a part in the court's decision making. Having received the messages they received, the creditors would have had the impression that the court would, in some undefined way, look after matters on its own and without regard for their wishes or attitudes.

CONSIDERATION

The Edgecliff Property and the offer made by Mr and Mrs Grimley 67 The Receivers submitted that they were cognisant of their obligations to act in the best interests of creditors as a whole and act impartially between them. They noted that they do not themselves have the power to accept Mr and Mrs Grimley's offer or to compromise claims that other creditors may have against the Receivership Property. In those circumstances they sought the directions in their amended interlocutory application. 68 It was apparent from the evidence before me that a distribution to Mr and Mrs Grimley on the basis of their offer was likely to result in an earlier and more certain outcome for the Out-of-Pocket Investors than the alternative, namely a hearing of the dispute between Mr and Mrs Grimley and the Out-of-Pocket Investors as to whether Mr and Mrs Grimley have the interest they assert in the Edgecliff Property. That that was so was evident from: (1) the nature of the dispute between Mr and Mrs Grimley and the Out-of-Pocket Investors and the issues it raises; and (2) the modelling undertaken by the Receivers in relation to the likely cost of the litigation and the time it would take. As to the modelling I note that, on close examination, it was relatively conservative in that it did not take into account both the cost and time for any appeals that might lie from a decision at first instance. 69 Further, as submitted by the Receivers the modelling carried out by them indicated that, even if the Out-of-Pocket Investors were wholly successful in the proceeding with Mr and Mrs Grimley and all contingencies as to the costs of the proceeding were to favour them, at best distributions may only be marginally higher than if they accepted Mr and Mrs Grimley's offer. Of course in the event that any of the variables in the modelling proved to be inaccurate and, in particular too conservative, the distributions could be lower. Critically, Mr and Mrs Grimley's offer provided the Out-of-Pocket Investors with certainty about an outcome which seemed to be similar to the best outcome that could in any event be expected following a complex and possibly protracted proceeding. 70 The Out-of-Pocket Investors were notified of Mr and Mrs Grimley's offer and were provided with the modelling undertaken by the Receivers and copies of the amended interlocutory application, affidavits in support and the Receivers' submissions. They were also provided with regular updates about this proceeding and informed that if any of them wished to appear at the hearing of the amended interlocutory application they should file and serve any notice of objection together with any submissions by 24 May 2023. No Out-of-Pocket Investor did so and, other than Investor A, there was no appearance by or on behalf of any Out-of-Pocket Investor at the hearing of the amended interlocutory application. 71 Investor A, who as set out above was granted leave to appear as an interested party to represent the position of the Out-of-Pocket Investors in respect of, among other things, Mr and Mrs Grimley's claim to the Edgecliff Property, made submissions by which she sought to raise potential issues with the Receivers' modelling. She contended that: (1) it assumed that Mr and Mrs Grimley would rank as unsecured creditors for their "current total maximum estimated claim" while not explaining the basis of the calculation of that estimated claim or making any allowance for the fact that Mr and Mrs Grimley had occupied the Edgecliff Property since 2017 without paying rent nor contributing to loan payments or strata fees; (2) it assumed that Mr and Mrs Grimley would share pari passu in the available assets; and (3) on the "high estimate" the Receivers made no allowance for recovery of their costs in dealing with Mr and Mrs Grimley's claim. Investor A submitted that it was not implausible that if Mr and Mrs Grimley were liable to pay Investor A's costs, they would also be liable to pay the Receivers' costs thereby further increasing the pool of funds available to the Out-of-Pocket Investors. 72 In contrast, Mr and Mrs Grimley submitted that the Receivers' assumptions underlying their modelling were, when analysed, extremely optimistic and failed to factor in a number of contingencies which would erode the amount in dispute. It is not necessary to set out those contingencies identified by Mr and Mrs Grimley. 73 In undertaking the modelling the Receivers attempted to assist the Out-of-Pocket Investors to determine whether they should take any steps to oppose the direction they sought in relation to the proposed distribution to Mr and Mrs Grimley. There are no doubt numerous different assumptions that could have been made or approaches adopted in undertaking that task which may have led to different outcomes, including by increasing or decreasing the pool of funds available to the Out-of-Pocket Investors. Those matters raised by Investor A are examples of some of those different assumptions that might lead to an increase in the estimated available pool. 74 Critically, the Receivers' modelling assumed that the Out-of-Pocket Investors would be wholly successful in proceedings with Mr and Mrs Grimley. Investor A's issues in relation to the modelling are also raised in that context. Whether ultimately that would be the case is not known. The question of merit of Mr and Mrs Grimley's claim and its prospects of success were not explored by any party for the purposes of the amended interlocutory application. 75 In other words, the Receivers' modelling does not account for the risk to the Out-of-Pocket Investors that Mr and Mrs Grimley may be successful in part or all of their claims over the Edgecliff Property. If that occured, the Out-of-Pocket Investors may be worse off. However, as the Receivers submitted it was not necessary for the Court to assess the likelihood that such risk might materialise; it was sufficient to note that it exists. 76 Investor A also submitted that the Court could not be satisfied that Mr and Mrs Grimley's offer reflected any considered view of the respective likelihoods of success by either party to the dispute. So much may be accepted. It was put forward as an offer to settle the dispute. Based on Investor A's calculation it represents a slight discount on the amount Mr and Mrs Grimley would recover if they were wholly successful in their claim. 77 Despite these submissions Investor A did not oppose the Court making the directions sought by the Receivers in relation to the Edgecliff Property. Investor A took that position recognising the reality that it will cost the Out-of-Pocket Investors a significant amount and take substantially longer than the process proposed by the Receivers to vindicate their position with respect to that property. Investor A accepted that the benefits accruing from certainty and the timely vacation of the Edgecliff Property were sufficient to warrant the Court making the directions sought. 78 The Out-of-Pocket Investors did not provide express approval of the direction sought by the Receivers in relation to payment of the Settlement Sum. However, I accepted the Receivers' submission that for the following reasons their non-objection is tantamount to assent: (1) each Out-of-Pocket Investor was given an opportunity to make a positive expression of their views by way of the mechanism established in the 5 May 2023 Orders permitting them to file a notice of objection. None was filed; and (2) each Out-of-Pocket Investor was given adequate notice of the amended interlocutory application, the basis for it and their ability to object. 79 In the circumstances I was satisfied that I had the power to make and should make the direction sought by the Receivers in relation to the payment of the Settlement Sum to Mr and Mrs Grimley as well as the ancillary orders in relation to the sale of the Edgecliff Property. The making of that direction brought the dispute with Mr and Mrs Grimley to an end, permitted the sale of the Edgecliff Property, as the Settlement Sum is only to be paid upon Mr and Mrs Grimley vacating the property and ultimately will enable a dividend to be paid to the Out-of-Pocket Investors at a much earlier time than if the dispute had proceeded to hearing. 80 As set out above, on the application of the Liquidators, I also made orders pursuant to s 90-15 of the IPS that the Liquidators would be justified in providing a release to Mr and Mrs Grimley in relation to claims relating to the Edgecliff Property and that they would be justified in not further investigating, assigning, commencing or seeking to enforce or compromise claims that Maliver may have against Ms Caddick, her deceased estate or her trustee in bankruptcy. 81 These orders were sought because: (1) the Receivers' application involved the distribution of funds which could potentially be available to the Liquidators. This was because Ms Caddick removed funds from Maliver; and (2) of the terms of Mr and Mrs Grimley's offer. Mr and Mrs Grimley sought releases from both the Receivers and the Liquidators. 82 Given that I was satisfied that I should make the direction sought by the Receivers in relation to payment of the Settlement Sum and the ancillary relief concerning the Edgecliff Property, it followed that it was appropriate for the Liquidators to be protected from criticism for providing the release sought and for not seeking to claw back money transferred by Ms Caddick from Maliver.

The NAB mortgage over the Edgecliff Property 83 As set out above the Receivers sought and obtained the 25 July 2022 Direction to the effect that they would be justified in using proceeds of sale of the Dover Heights Property to discharge the mortgage over the Edgecliff Property (see [11] above). By their amended interlocutory application they sought to have that order vacated and replaced. 84 The Receivers explained that as at July 2022 no Out-of-Pocket Investor opposed their proposal to use proceeds of sale from the Dover Heights Property to discharge the mortgage over the Edgecliff Property. However, subsequent to the 25 July 2022 Direction and prior to the settlement of the sale of the Dover Heights Property in January 2023 it became apparent to the Receivers that there were possible disputes about claims over the proceeds of sale and priorities as to claims in respect of the Edgecliff Property. Those Out-of-Pocket Investors who had previously informed the Receivers that they did not oppose funds being used from the settlement of the sale of the Dover Heights Property to discharge the mortgage over the Edgecliff Property changed their position. They informed the Receivers that they opposed that course. Investor A took the same position. 85 Understandably, the Receivers were no longer in a position to act in accordance with the 25 July 2022 Direction. 86 The Receivers submitted, and I accepted, that the NAB Offer (see [21] and [36] above) presented a middle ground. That offer has three elements: repayment of unpaid principal on the loan secured by way of mortgage over the Edgecliff Property; payment of outstanding interest on that principal; and a waiver by the NAB of accrued default interest and the placing of moneys in an offset account such that no further interest payments are incurred, although principal will continue to be credited. The Receivers will be entitled to withdraw funds from the offset account at any time. Because of this the Receivers considered that there was an appropriate balance between the desire to reduce interest repayments on the loan secured by way of mortgage over the Edgecliff Property and the desire to avoid prejudicing claims that the Out-of-Pocket Investors may have in relation to the proceeds of sale of the Dover Heights Property and in relation to the Edgecliff Property. 87 I accepted the Receivers' submissions about the effect of the NAB Offer. As the Receivers submitted it presents a middle ground and its intended effect is to reduce costs accruing. Accordingly, I made the orders sought by the Receivers in relation to the NAB Offer.

Pari passu distribution to the Out-of-Pocket Investors and admitted creditors in the liquidation 88 On the application of the Liquidators, I also made an order pursuant to s 90-15 of the IPS that the Liquidators would be justified in making any distribution of assets realised in the liquidation payable to any Out-of-Pocket Investors on a pari passu basis. This order was sought by the Liquidators in contemplation of potential recoveries including an ATO refund and the disgorgement of payments made to investors (see [40]-[41] above). 89 The Liquidators submitted that at the heart of the Receivers' amended interlocutory application is the proposition that all Out-of-Pocket Investors, irrespective of whether they have been identified as having invested through Maliver or through Ms Caddick, will participate in the Receivership Property on a pari passu basis. It would be similarly impractical and uneconomical to take the necessary steps to identify individual rights and entitlements of the Out-of-Pocket Investors in the liquidation and the pragmatic solution is to treat there as being one fund of available assets for the Out-of-Pocket Investors. 90 Thus the Liquidators submitted that it is appropriate that complementary directions be made in the liquidation for any distributions to be made to the Out-of-Pocket Investors on a pari passu basis, irrespective of whether they invested through Maliver or Ms Caddick. 91 Given that I was satisfied that I should make the directions sought by the Receivers in relation to distribution of the Settlement Sum, it followed that it was appropriate for complementary directions to be made for the Liquidators in relation to distributions being made on a pari passu basis. 92 Finally I note that, on the application of the Liquidators, I made a direction that the Liquidators would be justified in making any distribution of realised assets to admitted creditors in priority to the Out-of-Pocket Investors on a pari passu basis. 93 The Liquidators sought this direction having regard to an issue arising in relation to the priority between the Out-of-Pocket Investors and other unsecured creditors of Maliver, as identified in [38] above. The Liquidators submitted that: if they are successful in recovering from the potential claims against the ATO and the other investors who were repaid in full (see [40]-[41] above), such moneys are susceptible to an argument that the Out-of-Pocket Investors do not have a proprietary interest in them; and, in the light of the quantum of the known creditors, i.e. $10,091, the most economical and practical approach to distribution would be to pay those creditors in priority to the Out-of-Pocket Investors. 94 The Liquidators submitted, and I accepted, that the direction sought in relation to the admitted creditors would remove the need for those creditors to be given an opportunity to object to: the Liquidators not pursuing claims Maliver may have had against Ms Caddick, the Out-of-Pocket Investors ranking before them, or the participation of Out-of-Pocket Investors who did not invest through Maliver in the liquidation. Accordingly, I made the order sought by the Liquidators in relation to distributions to the admitted creditors.

Suppression orders 95 The final matter to address is the order made on Investor A's application extending the Order made pursuant to ss 37AF(1)(a) and (b) and s 37AG(1)(a) and (c) of the Federal Court Act suppressing Investor A's identity until the date that is six months after the later of the discharge of the Receivers or the deregistration of Maliver (Order 20). 96 In summary, Investor A gave evidence that she volunteered to represent the Out-of-Pocket Investors based on her understanding that: the Receivers considered it desirable for an Out-of-Pocket Investor to participate in the proceeding to advance the interests of the Out-of-Pocket Investors with respect to the Edgecliff Property; her identity would not be made public; and she would have her identity suppressed in accordance with the Court's Order made on 22 February 2021 which prohibited publication or disclosure of the identity and personal information of the Out-of-Pocket Investors. Investor A was concerned that disclosure of her identity and role in the proceeding would attract media attention and attention generally such that her professional interests, personal security and safety would be negatively affected. 97 In support of her application for extension of the suppression order Investor A submitted that in matters of this kind it is often necessary for the Court to have the benefit of people willing to volunteer to take the position of a representative defendant, as is the case here, and if the Court is not willing, in circumstances such as these, to give them the protection that other people in their class have, there is a real risk that they would not be willing to do so. 98 In the circumstances of this case I was satisfied that the order sought was necessary to prevent prejudice to the administration of justice and that I should make the order sought by Investor A. 99 In particular it was both necessary and of assistance to the Court and the resolution of the proceeding for the Out-of-Pocket Investors to be represented in the proceeding, given its nature; Investor A came forward and was prepared to take on that representative role; and in doing so Investor A made submissions in the interests of the larger group of Out-of-Pocket Investors. As a member of the group of Out-of-Pocket Investors referred to in the evidence in this proceeding, Investor A has had the benefit of an order suppressing her name. It would be curious if, because she stepped forward to take on a more active role as a representative defendant on behalf of that class, she would lose that benefit. This is particularly so in a case such as this where competing claims to a finite pool of assets are to be considered, making the participation of each claimant group critical to a resolution of the proceeding. As Investor A submitted, if the Court is not willing, in circumstances such as these, to extend the Order, there is a real risk that people would not be willing to step forward and take on those critical roles.

CONCLUSION 100 For those reasons I made the orders sought by the Receivers, the Liquidators and Investor A in their respective applications. I certify that the preceding one hundred (100) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Markovic.

Associate: Dated: 9 October 2023