NSW mortgage scheme to get a receiver

A New South Wales mortgage scheme has had a receiver appointed to it despite fears of investors involved that a receiver would increase the potential capital losses they would suffer.

The ruling was made in the Supreme Court of New South Wales with theAustralian Securities and Investments Commissionappearing as amicus curiae (‘friend of the Court’) in support of the application by Interstate Mortgage and Investment to have a receiver appointed to the managed investment scheme operated by the company on behalf of law firm Halliday & Stainlay.

Justice Austin made orders to wind up the scheme on Monday of this week after an application by Interstate.

The Court ruled that the appointment of a receiver to wind up the loans will not expose the investors to any appreciable additional losses. It argued in support of this that the realisation of securities in these matters is akin to a mortgage in possession sale.

A point of contention raised in an earlier judgment centred around whether Interstate satisfied the criteria as being the ‘person operating the scheme’ as defined in the Corporations Act, which if correct, would authorise Interstate to wind down the scheme. Interstate argued that its role was of realising the security rather than conducting an ongoing business, since the mortgage loans of the scheme were in default.

Justice Austin accepted that the natural meaning of the words ‘operating the scheme’ is wide enough to encompass the act of winding down and realisation of security because that is a natural part of operating such a scheme. His Honour therefore found that Interstate had standing to make the application to have a receiver appointed.