Australian Securities Commission v Fuller, Ross Matthew [1998] FCA 145

EX TEMPORE REASONS FOR JUDGMENT This is an application by the Australian Securities Commission for a warrant under section 530C, of the Corporations law, directed to a Mr Fuller. Mr Fuller on 3 February became the sole director and the secretary of Australian Slip Control Pty Limited, 3 February 1997. The company went into liquidation on 17 June of that year. The company traded for a relatively short time, being registered only in April 1995. Mr Pascoe, an accountant employed in the office of the liquidator, Mr Anthony Milton Sims, says that his investigations show that in carrying on its franchise business, the company received about half a million dollars from various franchisees before trading closed, a number of whom have complained to the liquidator about their treatment by the company. There is material before me now which, if I could place reliance upon it, would justify the issue of the warrant sought. However, given the gravity of the intrusion that a warrant makes lawful, I am not prepared to issue the warrant on the material presently before me, because I do not have the confidence in its reliability which a court, in my opinion, should have before taking the draconic step sought. By way of example, Mr Pascoe has sworn an affidavit in paragraph 7 and 8 of which he says that: The only records I have received to date from Mr Ross Fuller in relation to the company are [certain limited specified bank records]. It is apparent that that is inaccurate and quite misleading, because Mr Pascoe in his oral evidence, said that he had received other documents in relation to the company from Mr Fuller, namely a bundle of paid and unpaid creditor invoices and that although he has not taken the trouble to confirm this, he may well have received from Mr Fuller a list of the company's creditors, albeit later than he originally anticipated when he discussed delivery by Mr Fuller to the liquidator of the company's records, in a telephone conversation he had on the day of the liquidation. What Mr Pascoe says in paragraphs 7 and 8 of his affidavit, is inaccurate in a further respect, he did not in truth receive the bank records listed in paragraph 8 of his affidavit from Mr Ross Fuller as he there swears was the case. He received them from a Mr Pearce, the liquidator's Brisbane agent. Mr Pascoe says he believes Mr Pearce received the documents from a Mr Hannon, who Mr Pascoe further says he believes is or was a franchisee of the company. And Mr Pascoe says he believes that Mr Hannon was asked by Mr Fuller, in circumstances not disclosed by anything put before me, to hand those documents over to the liquidator. Further, the evidence that Mr Pascoe relies upon to lay a foundation for a conclusion that Mr Fuller has deliberately failed to comply with his duty to deliver up material, including company records, to the liquidator comes largely from information provided by Mr Pearce, to whom I have already referred. This material is put before the Court as hearsay by Mr Pascoe for the reason: I do not have funds in the administration and, in particular, I do not have funds to pay my agent, Mr Pearce, for any additional work such as the swearing of an affidavit detailing the tasks he has conducted on behalf of the liquidator and at my direction. Given the possible gravity of the intrusion which will be authorised by a warrant, in my view, a Court is entitled to have information before it which it can rely on with confidence before it takes the step of making an order for the issue of a warrant. I do not accept, in the circumstances of this case, the proposition put forward by Mr Pascoe as justifying failure to obtain from Mr Pearce verification on oath of the truth of what Mr Pascoe says he has been told by Mr Pearce about the latter's dealings with Mr Fuller. It seems to me that the shortest possible affidavit, which would not put the liquidator to anything other than, I would hope, minimal cost, could be obtained which would provide the Court with the confidence, which I think it should have, in the reliability of the information concerning Mr Pearce's dealings with Mr Fuller. If the matters that I have referred to as causing me to have concerns about the reliability of the information put before me are met by appropriate evidence, I would be in a position where I would be satisfied that the requirements for the issue of the warrant sought are also met. I will therefore adjourn the matter for a short period to enable to ASC to decide whether it wants to pursue the application for the warrant. I should also comment on certain propositions of law which were advanced on behalf of counsel for the ASC. His submission is that, since the ASC is acting in aid of an impecunious liquidator it would be appropriate not to require compliance with section 530C(4). Counsel has pointed me to a warrant issued under this section in September 1995 by a Judge of the Court which not only authorised the search and seizure envisaged by section 530C(2) paragraph (a) but which also authorised, in terms, the person to whom the warrant was directed, apparently an officer of the Australian Securities Commission, to deliver the property and books seized under the warrant to the provisional liquidator of the company. Section 530C(2) paragraph (b) would appear to authorise a warrant in those terms. In the only reasoned decision drawn to my attention in which the Commissioner, rather than a liquidator or provisional liquidator, has applied for the issue of a warrant under s 530C, Australian Securities Commission v Samson (1997) 24 ACSR 555, Goldburg J ordered the issue of a warrant directing an officer of the Commission to seize material of a company in circumstances in which the Commission was acting in aid of a liquidator; the warrant the subject of his Honour's order only authorised seizure of material and contained a direction that the executing officer hold possession of that material under the warrant until otherwise directed by order of the Court. It does not appear from the reasons whether a warrant was sought in these terms by the Commission and there is no discussion about the propriety of issuing a warrant on application by the Commission authorising not only seizure of material but delivery of the material to the liquidator. I initially thought that there may be an inconsistency between s 530C(2)(b) and s 530C(4). However, but not without some hesitation, I think effect can be given to both provisions. A warrant under s 530C authorises the seizure of material which can only be used in furtherance of the objects of the section, ie to assist a liquidator or provisional liquidator in his administration. I assume, since the matter was not dealt with in argument before me, that where the Commission seeks a warrant under the section, it too can only follow that course for the purpose of assisting a liquidator or provisional liquidator and not eg for the purpose of enabling it to perform its own statutory functions. The object of the section can be met by reading s 530C(2)(b) as empowering the Court to authorise the issue of a warrant to an executing officer (who will often not be the liquidator or provisional liquidator personally) that authorises not only seizure of material but also delivery of the material to the liquidator. However, the section as I read it at present only permits the use of material seized under such a warrant for the limited purpose of aiding a liquidator or provisional liquidator in his or her administration. Where a warrant issues authorising delivery by the executing officer of material seized to the liquidator, s 530C(4) can be read as designed to ensure that material compulsorily taken under such a warrant and delivered into the custody of a liquidator will be kept by the liquidator and used only for the purpose of assisting him in his administration unless and until he obtains an order under the subsection from the Court permitting him to deal with the seized material in some other way. Where a warrant issues but does not go beyond authorising seizure of material (such as in Samson), the executing officer, whether or not the liquidator, will be unable to make any use of the material until the Court gives a direction under s 530C(4). Subject to proper evidence put before me, I would therefore be prepared to issue a warrant in the form sought by the Commission, ie a warrant authorising not only search for and seizure of company material, but also delivery by the executing officers of that material over to the liquidator of the company. I will adjourn the matter to 9.15 am on 26 February 1998 but I will give the Commission liberty to apply to bring the matter back before me at any prior time. I should also say that I propose to follow the decision of Northrop J in Morton v Robbins & Ors (1996) 14 ACLC 1197. It does not seem to me to be necessary or appropriate to include any conditions in the warrant of the kind referred to in the decision by Young J, although the warrant should specify such matters as hours of the day when it is to be executed.