GEM Management Group - Case Update

The liquidators of an unregistered managed investment scheme have secured the Court’s approval to make a distribution to investors, while also ensuring they are relieved from any liability for not pursuing claims against the scheme’s directors.

In 2018, Robert Woods and Salvatore Algeri of Deloitte were appointed liquidators of GEM Management Group. The company owned a development property in the Keysborough suburb of Melbourne and operated an unregistered managed investment scheme.

The liquidators have completed extensive investigations since their appointment, including potential claims against the company’s directors. The property has been sold, resulting in a substantial amount to be returned to investors, the majority of whom are unsophisticated individuals who do not speak English.

The liquidators explained that, throughout the course of the liquidation, they have considered whether they should pursue the directors for breaches of duty for the losses suffered by investors. They set out their reasons for deciding not to do so in a confidential affidavit for the Court.

The Court granted the orders sought, noting that the liquidators had exhibited an opinion from senior counsel supporting their decision not to pursue the possible claims. In the circumstances, the Court accepted that the liquidators’ decision was reasonable, and that they should be protected from any allegations that might be made by investors that they have acted unreasonably in not pursuing the claims. The Court noted that the investors are “largely unsophisticated and vulnerable”, may feel aggrieved by their losses, and may not appreciate the reasoning behind the liquidators’ decision.

Read the decision HERE.

Professionals involved:

• Counsel for the liquidators: Sam D Hay KC of Dever’s List and Nicole Papaleo of List G Barristers

• Solicitor for the liquidators: Lander & Rogers