Ample Source International Limited v Bonython Metals Group Pty Limited; In the Matter of Bonython Metals Group Pty Limited

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1784 of 2010

IN THE MATTER OF BONYTHON METALS GROUP PTY LIMITED (ACN 141 257 294) BETWEEN: AMPLE SOURCE INTERNATIONAL LIMITED (BVICN 1575638)

AND: BONYTHON METALS GROUP PTY LIMITED (ACN 141 257 294)

JUDGE: FOSTER J DATE: 10 JANUARY 2011 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 On 22 December 2010, I heard and determined an application by the plaintiff in respect of two payments made into the Trust Account of Holman Webb Lawyers (Holman Webb's Trust Account). The first payment was made into Holman Webb's Trust Account on 11 November 2010 and the second on 16 December 2010. The first payment was in the amount of $175,000 and the second in an amount of $175,035. The first payment was made directly from the funds of the first defendant. The second payment was funded by the first defendant but paid into Holman Webb's Trust Account via the third defendant's bank account. The relevant facts are set out in the judgment which I gave on 22 December 2010 (Ample Source International Limited v Bonython Metals Group Pty Limited; In the Matter of Bonython Metals Group Pty Limited [2010] FCA 1479). 2 During the course of the hearing which took place on 22 December 2010 I was informed that the first defendant and the third defendant had arranged for the settlement of the purchase of a home unit property in Henderson Road, Alexandria (the Alexandria home unit) to take place at 11.30 am on Thursday, 23 December 2010. It was the existence of that appointment for settlement which was relied upon by the second and third defendants as the critical matter going to the balance of convenience and justice in their favour in respect of the application with which I dealt on 22 December 2010. 3 The settlement which had apparently been fixed for 23 December 2010 has been postponed. The evidence suggests that settlement of the purchase of the Alexandria home unit and the payment of the other moneys required to be paid by the second and third defendants in respect of that transaction will occur on Wednesday next, 12 January 2011. 4 Two of the orders which I made on 22 December 2010 concerned the production to the plaintiff's nominee of the financial records of the first defendant. Two of the other orders which I made on that occasion required the restoration to the first defendant of the two payments of $175,000 and $175,035 to which I have referred. As of this morning, only one of the three orders to which I have just referred has been complied with by the defendants. 5 There has been an exchange of correspondence between the lawyers for the plaintiff, on the one hand, and the lawyers for the defendants, on the other, in which the question of whether or not there has been compliance with the orders which I made on 22 December 2010 has been fully ventilated. I will not refer to that correspondence in any detail. Suffice it to say that the defendants have taken some steps towards accommodating the production of financial records but have only arranged for the restoration to the first defendant of one of the payments of $175,000. 6 In light of these matters, the plaintiff has applied to the Court this morning by way of an Interlocutory Process filed in Court this morning for the following relief: 1. An order that [the] interlocutory process be returnable instanter. 2. An order that Peter William Briggs, Walter Jonathan Casson, Roger John Cornforth, Stephen David Rogers, Wendy Anne Macdonnell and Alexander John Stevens Wakefield trading as "Holman Webb" be added as Fourth Defendants to this proceeding. 3. An order that the Fourth Defendants do all things necessary to transfer the sum of $175,000, held in Holman Webb's trust account and paid into that trust account by the third defendant, to BMG's National Australia Bank, Double Bay branch, bank account number 16-613-1625 by 5.00 pm on Monday 10 January 2011. 4. An Order that service of this Interlocutory Process and any affidavits in support thereof upon the Fourth Defendants be effected by delivery at the office of Holman Webb Lawyers, level 17, Angel Place, 123 Pitt Street Sydney NSW. 5. An order that, until judgment in these proceedings or further order, within 2 days of this order Linda Lau, being a person nominated by the Plaintiff, or her nominee as notified to the First Defendant from time to time in writing by Linda Lau, be appointed a co-signatory to any and all bank accounts maintained in the name of the First Defendant at National Australia Bank's Double Bay branch. 6. An order that, by no later than 4:00pm on 10 January 2011, the First Defendant notifies the manager of the Double Bay branch of the National Australia Bank in writing of the order made pursuant to paragraph 5. 7. An order that, until judgment in these proceedings or further order, the First Defendant be restrained from making or undertaking any transaction on any of its bank accounts until the written notification referred to in paragraph 6 is given, and the plaintiff (by its solicitors, DibbsBarker Lawyers) receives a copy of such notification. 8. Costs. 9. Such further order as the Court thinks fit. 7 The listing this morning was originally made at the request of the lawyers for the defendants. In light of the listing, the plaintiff availed itself of the opportunity to bring forward its Interlocutory Process.

Production of Financial Records 8 The correspondence reveals that there has been at least one reasonably lengthy discussion between the plaintiff's nominee and a representative of Mann Judd, the auditors of the first defendant, in which an arrangement was made for the production of records in the possession of Mann Judd tomorrow, 11 January 2011. There appears to be a difference of opinion as to whether, in addition to the production of records held by Mann Judd, there was also going to be production tomorrow of the remaining records which I ordered on 22 December 2010 to be produced. That difference of opinion may well be the result of a misunderstanding. As I see matters at the moment, it is not necessary for me to resolve whether the non production of the records was deliberate or was simply the result of a misunderstanding between the parties as to what was intended to happen tomorrow. 9 However, in order to ensure that there is produced tomorrow all of the records which I ordered to be produced in the orders which I made on 22 December 2010, I propose to make an additional order dealing with the production of records.

The Remaining Amount of $175,035 in Holman Webb's Trust Account 10 The evidence shows that, by 24 December 2010, an amount of $175,000 was paid by the partners of Holman Webb into the first defendant's bank account conducted by the Double Bay branch of National Australia Bank Limited. As at that date, the view taken by the defendants was that that payment was a restoration of the first of the payments which had been made into Holman Webb's Trust Account, that is to say, the payment made on 11 November 2010. In the most recent correspondence passing between the parties' lawyers, the defendants' position appears to have altered. In that correspondence, they take the view that the payment was a refund of the amount paid on 16 December 2010. This distinction is no doubt seen to be important because, as I recorded in my earlier judgment, the third defendant gave an undertaking to the Supreme Court of New South Wales in the following terms: "5. CFM Media Holdings Pty Ltd undertakes to the Court that until judgment and, if the Court's determination be that [sic] contract is on foot and ought be performed, then until completion of the sale CFM Media Holdings Pty Ltd will not direct Holman Webb to apply that money otherwise than to payment of the purchase money." 11 That undertaking appears to have been given after the trial in the Supreme Court had commenced, ie on or after 12 November 2010 but before 16 December 2010 (see [109] and [110] of the judgment of Slattery J in Hillam v Leduva Pty Limited [2010] NSWSC 1360). 12 There is no evidence as to when that undertaking was given. The only material which provides some indication as to the precise date when the undertaking was given are the remarks of Slattery J at [109] and [110] of his Reasons for Judgment. It seems to me that what may have happened since I made the orders on 22 December 2010 is that the funds which were the subject of the undertaking given to the Supreme Court in mid-November 2010 have, in fact, been returned to the first defendant in breach of the undertaking. Whether this is so or not will be a matter which will have to be resolved as between the third defendant and the Supreme Court of New South Wales. I do not need to resolve finally whether or not that is so because I have been told that the settlement of the Alexandria home unit is fixed for Wednesday next, 12 January 2011. Putting aside for the moment the question of whether the third defendant has breached its undertaking to the Supreme Court, the practicalities are that the second sum (viz the amount of $175,035) presently held by Holman Webb in its Trust Account will likely be returned to the first defendant once the position concerning settlement of the purchase of the Alexandria home unit has been resolved. 13 Having regard to the terms of the undertaking, if the funds which were the subject of the undertaking are still in Holman Webb's Trust Account and the settlement of the purchase of the Alexandria home unit proceeds to finality, the undertaking will be spent. If settlement does not occur, it will clearly be incumbent upon the second and third defendants to restore the Supreme Court matter to the list with a view to explaining to Slattery J what has happened to date and seeking a discharge of the undertaking given by the third defendant to the Supreme Court. If the funds the subject of the undertaking have been paid out in breach of the undertaking, the third defendant will not doubt need to explain its conduct to the Supreme Court. 14 The partners of Holman Webb have informed the Court this morning that they will submit to any order of the Court save an order for costs. 15 In those circumstances, it seems to me that there is no impediment to making an order requiring the second defendant and the third defendant to instruct Holman Webb to arrange for the restoration of the second payment (ie the amount of $175,035 to the first defendant's bank account. Because settlement of the purchase of the Alexandria home unit is fixed for Wednesday next, I propose to express the order in terms which require that the payment be actually made by no later than 10.00 am on Thursday, 13 January 2011.

The Co-Signatory Orders 16 The plaintiff seeks additional protective relief in respect of the conduct of the affairs of the first defendant. In particular, the plaintiff applies for an order that I should require the first defendant to authorise Ms Lau, who is an officer of the plaintiff and a director of the first defendant, to be a co-signatory on the bank accounts of the first defendant, in order to ensure that payments which are made out of the first defendant's bank account in the future are truly payments made in the interests of and for the purposes of the first defendant. 17 Having regard to the terms of the orders which I made on 22 December 2010 and to an additional order which I have in mind making today, I do not think that, as matters presently stand, there is a necessity or a justification for making the co-signatory orders which the plaintiff seeks. I decline to make those orders. However, I will make an order which requires the first defendant to give appropriate notice to the plaintiff of the making of any payments out of the first defendant's funds. 18 I will make orders accordingly. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.