Bassoak Pty Ltd (recs and mgrs apptd) v Rellgrove Pty Ltd

Judgment - ex tempore 1By Amended Originating Process filed on 27 November 2014, the Plaintiff, Mr Roderick Sutherland, as liquidator of Steel Tigers Pty Ltd (in liq) ("Steel Tigers") and Steel Tigers seek interlocutory and final orders, including an order that a warrant be issued under s 530C of the Corporations Act 2001 (Cth) authorising the liquidator to search for and seize two motor vehicles in the possession of several defendants and, further or in the alternative, an interlocutory mandatory order under, inter alia, r 25.3 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), that the several defendants deliver up eight motor vehicles (including the two motor vehicles within the scope of the first order) to the Plaintiffs, and authorising the Plaintiffs to have access to the locality of these vehicles for the purpose of taking and maintaining custody of them. The Plaintiffs also seek orders prohibiting the further transfer of the motor vehicles and for disclosure of information by the Defendants. The Plaintiffs also seek final relief, to which the interlocutory relief sought is ancillary, seeking to establish that they hold valid registered security interests under the Personal Property Securities Act 2009 (Cth) in relation to six of the vehicles and that they hold legal and beneficial ownership of the seventh and eighth vehicles. 2By Amended Interlocutory Process filed 25 November 2014, the First Defendant, OSM Transport Pty Ltd ("OSM") and its liquidators, Messrs Solomons and Tayeh, also apply for interim relief, including the issue of a warrant under s 530C of the Corporations Act in respect of nine further vehicles. 3The application is brought ex parte. The case law recognises that applications of this character can be brought on an ex parte basis. There are many examples of such applications, and a recent one is the decision of Crisp, in the matter of Buchanan Group Holdings Pty Ltd v Iliopoulos [2011] FCA 1526. I am satisfied by the evidence in the applications, to some of which I refer below, that there would be a real risk of further disposal or concealment of the vehicles in issue if orders were made on notice to the Defendants. It seems to me that this is a proper application to proceed on an ex parte basis so that orders may be made to secure the vehicles that are in issue, noting that the orders contemplate that the matter will be back before the Corporations List within a short period, at which time the Defendants would have an opportunity to be heard, and that undertakings as to damages are to be provided which would protect the Defendants if it emerged that the orders sought were ultimately held to be wrongly made. 4The applicants have advanced detailed submissions as to the relevant legal principles. Without disrespect to the detail of those submissions, I propose to refer to those principles relatively briefly, although I will return to some cases of specific relevance below. Section 530C of the Corporations Act provides that, where a company is being wound up (as are Steel Tigers and OSM) and an application is brought (as these applications are) by a liquidator, and the Court is satisfied that a person has, relevantly, concealed or removed property of the company, with the result that the taking of the property into the custody or control of the liquidator will be prevented or delayed, the Court may issue a warrant under that section. That warrant may authorise a specified person, with such help as is reasonably necessary, to search for and seize property of the company in possession of the relevant persons and to deliver, as specified in the warrant, the property seized under it. The Court will not issue a warrant under this section unless it is necessary to take that extreme step in order to administer the company in circumstances that the liquidator has taken all reasonable steps to acquire the relevant property by other means: Bassoak Pty Ltd (Recs & Mgrs Apptd) v Rellgrove Pty Ltd [2006] NSWSC 262; (2006) 57 ACSR 86 at [99]ff. There has been a difference of view in the authorities over many years as to the conditions to be included in such warrants and, in particular, there has been a difference in approach between the Supreme Court of New South Wales and the Federal Court of Australia in that regard. There is some indication in the cases, including the decision of the Supreme Court of Victoria in Re Global SDR Technologies Pty Ltd (Prov Liq Apptd) [2005] VSC 454; (2005) 224 ALR 464, and in Re Ezyclad Pty Ltd (in liq) [2014] VSC 66; (2014) 98 ACSR 38, that the real question is what conditions are appropriate in a particular issue. I will return to that question below. 5Mr Sutherland and Steel Tigers also rely, inter alia, on UCPR r 25.3 which provides that, in proceedings concerning property, or in which a question may arise as to property, the Court may make orders for the custody or preservation of the property, and that order may authorise any person to enter any land or do anything to give effect to that order. I have been taken to authority as to the scope of that rule which indicates, amongst other things, that such an order is directed to the preservation of the very subject matter of the proceedings which might otherwise be dissipated before a hearing: GB Gazzana v Nadalan Enterprises Pty Ltd [2012] NSWSC 676 at [193]. That rule applies, in particular, where there is a need to secure or protect property and the case law indicates that the Court is not required to engage in a detailed investigation of the merits of the particular competing claims in order to make such an order, but will do no more than what is necessary to preserve the property. That rule and the Court's inherent jurisdiction may well be wider than the power under s 530C of the Corporations Act since they may well be available to the Plaintiffs, and OSM in this case, without necessarily establishing their ownership or that they were recently owners of the relevant property so far as they have claims to that property, even if there is a dispute as to these claims. 6Mr Sutherland and Steel Tigers rely on his affidavit dated 21 October 2014, the affidavit of a licensed commercial agent dated 17 November 2014 and the affidavit of his solicitor, Mr Hegarty, dated 26 November 2014, as well as Mr Solomons' affidavit dated 25 November 2014 filed in OSM's application. 7Mr Sutherland's affidavit sets out the history of the liquidation of Steel Tigers and refers to evidence of occasions which Steel Tigers, prior to the winding up, had asserted ownership of the relevant vehicles and to an agreement reached on 14 September 2012 for the sale of the vehicles to OSM, which was then an entity under the control of persons associated with the Kreidie family. That agreement included retention of title provisions such that the title to the relevant vehicles, which were the subject of that agreement, would not pass to OSM until full payment of the purchase price to Steel Tigers, which did not occur. Mr Di Francesco, who appears for Mr Sutherland and Steel Tigers, fairly notes that further issues as to the construction of the Personal Property Securities Act and the remedies available under that Act may arise in this respect but it is not necessary to address them in this application. The interest of Steel Tigers in respect of six of the vehicles subject to that agreement was registered in the Personal Property Securities Register on 20 September 2012, shortly after the date of the agreement. Mr Sutherland notes that at one point Arab Bank Australia was a secured creditor of Steel Tigers but it appears it no longer holds securities registered in the Personal Property Securities Register and its proof of debt has been rejected. 8Mr Sutherland also gives evidence of OSM's failure to pay the balance payable by it under the sale agreement, and Messrs Solomons and Tayeh were then appointed as liquidators of OSM in a court ordered winding up. An affidavit sworn by a member of the Kreidie family in the course of that winding up application, asserted ownership by OSM of ten heavy and combination semi-trailers, which is a matter of relevance to OSM's claim. However, shortly before the winding up order, OSM purported to transfer the registration of those vehicles (with one exception) to another entity, AAA Transport Pty Limited ("AAA Transport"), the Seventh Defendant. Mr Sutherland's evidence is that he is not aware of any consideration payable for that transaction and Steel Tigers did not consent to it. 9Mr Sutherland also gives evidence of a number of requests for information made to directors of the relevant companies which have not been complied with or have been complied with only by the provision of confusing information and of claims by Mr Salaheddine Kreidie, a person associated with the companies, that Steel Tigers never owned the relevant vehicles and of an assertion of misconduct in respect of a payment to the liquidator's firm. There is evidence as to the character of that payment which appears, on the evidence before me, to have been for a proper purpose in respect of the winding up and I need say nothing further in that regard. Mr Sutherland also identifies risks if the order is not made to allow the vehicles to be taken into the liquidator's custody, including the risk of further transfers of their registration or that they may be moved outside New South Wales, and indicates his view that damages are unlikely to be an adequate remedy, given the assets of the relevant defendant entities. 10The evidence of the commercial agent, to which I have referred above, indicates that at least some of the vehicles may well be stored on property occupied by members of the Kreidie family or entities associated with them. Mr Hegarty's affidavit in turn sets out detailed information as to the registration history of the relevant vehicles, to which I have been taken in detail by Mr Di Francesco in respect of Steel Tigers' case and by Mr Karam in respect of OSM's case, and Mr Hegarty's affidavit also outlined the arrangements proposed to take control of the vehicles if relevant orders are made. 11There is also evidence (Ex P3) of PPS registration of security interests of the first six vehicles and of the claim to ownership in respect of the seventh and eighth vehicles. The evidence as to the vehicles' registration history is very detailed but, in broad summary, there is evidence in respect of several vehicles indicating that they were registered to Steel Tigers; there is, for several vehicles, evidence of their purchase by Steel Tigers or statutory declarations by a member of the Kreidie family indicating Steel Tigers' ownership of the vehicles or both; there is evidence of later registration of relevant vehicles to OSM after the sale agreement, and evidence of a subsequent transfer of several vehicles to KMG Group (Aust) Pty Ltd, one of the defendants. The sixth vehicle, a Range Rover station wagon, was in turn transferred to another member of the Kreidie family. 12OSM and Messrs Solomons and Tayeh rely on Mr Solomons' affidavit dated 25 November 2014 and on the evidence filed by Steel Tigers and its liquidators. Mr Solomons in turn outlines the circumstances in which the sole director of OSM disputed the terms of the sale agreement in respect of the vehicles and the debt claimed by Steel Tigers in respect of that agreement and refers to the evidence in the winding up application that OSM owned about ten heavy vehicles and also refers to the difficulties in obtaining the documents and to a later claim by the Kreidie family that Steel Tigers did not own the vehicles that it sold to OSM and that the money paid by OSM in respect of that transaction was paid in error. 13Mr Solomons accepts that OSM does not have an interest in the vehicles to which Steel Tigers has a claim, but refers to evidence of OSM's ownership of nine other vehicles purchased from third parties and to the transfer (to which I referred above) of those vehicles to AAA Transport, two weeks before the winding up of OSM, which was apparently signed by a person who was neither a director of OSM or of the purchasing entity. Mr Solomons notes that there is no evidence of the sale agreement or a payment of consideration to OSM and that the sale prices recorded in the transfer documents lodged with Roads and Maritime Services, if they were paid, were substantially lower than the purchase price of the vehicles in transactions 12 to 18 month before in arm's length transactions. Mr Solomons also refers to the inconsistencies to the information provided to the liquidators from time to time and also expresses concerns as to the further transfers or dealings with the vehicles, which would prevent recovery of them, unless they can be taken into the liquidators' custody. 14I have set out only a broad summary of the evidence and I have, as I have noted, been taken to substantial documentation in the course of submissions and provided a detailed chronology and a summary of evidence as to ownership of the vehicles by both parties, together with supporting documents. I have had regard to that chronology, the summaries and the underlining documents in satisfying myself that the orders sought can properly be made, but I need not set out further detail of those matters in an interlocutory judgment of this kind. 15So far as the first six vehicles claimed by Steel Tigers are concerned, the claim is made by reason of the reservation of title clause in the sale agreement with OSM and the registration of the securities under the Personal Property Securities Act and orders for delivery of the vehicles are sought under UCPR r 25.3. I am satisfied that the proceedings concern those vehicles and that Steel Tigers and the liquidators have established a serious question to be tried as to their rights, including a possible right of sale, of those vehicles and that the balance of convenience favours authorising the liquidator to take possession of those vehicles so as to preserve them pending the hearing. I note the defendants' rights in that regard will be protected by an undertaking as to damages which Mr Sutherland and Steel Tigers offer. 16So far as the evidence goes, the seventh and eighth vehicles claimed by Mr Sutherland and Steel Tigers are still owned by Steel Tigers but have been removed from it, in a manner which satisfies me that the liquidators' control of the property will be prevented or delayed. I am satisfied that a warrant under s 530C of the Corporations Act should be issued and, further and in the alternative, an order should be made authorising the liquidator to take custody of the vehicles to preserve them under UCPR 25.3 and the Court's inherent jurisdiction. 17In respect of the claim by OSM and its liquidators, I have been taken to documents which record the transfer of the vehicles to AAA Transport, shortly before the winding up, although the information contained in those transfers is not corroborated by a sale agreement or evidence of the payment of the consideration. The authorities to which I have been taken to in the course of the hearing make clear a purported transfer of property, such that it is no longer under the control of a company, does not prevent orders being made under s 530C of the Corporations Act. Such orders have frequently been made in circumstances where there is a transfer, or purported transfer, of the property out of company prior to the point at which the orders are sought. That approach may simply be a recognition that a purported transfer of the property may simply be a means by which the property is removed from the company for the purposes of s 530C of the Corporations Act. Alternatively, it may reflect a view that the existence of a purported transfer should not be treated as conclusive when determining whether property is the company's property for the purposes of s 530C of the Act. That approach would be consistent with the purpose of the section in promoting the liquidator's ability to take control of the company's property, since otherwise that ability could readily be frustrated by purported transactions which dispose of it. Orders under s 530C of the Corporations Act have been made, notwithstanding purported disposals of company property, or at least transfers of that property to third parties, in Re Whitemore Holdings (In Liq) [2004] FCA 806; Vartelas (As Liquidator of Ultimate Furniture Design Pty Ltd (In Liq)) v Kyriakou [2009] FCA 1489; Crisp, In the Matter of Buchanan Group Holdings Pty Ltd above, and in Cammaroto Poultry Pty Ltd v Southern Food Management Pty Ltd (No 2) [2009] VSC 415, where particular reference was made to the transfer of five motor vehicles to another entity. 18I am satisfied on the basis of the evidence presently before me, that the purported transfer of the nine further vehicles to AAA Transport, shortly before the winding up, amounted to removal of property of OSM with the result that the liquidators taking control of that property would be prevented or destroyed and that there is a proper basis for the issue of a warrant under s 530C of the Corporations Act. It may be, of course, that a contrary view is ultimately reached, once the Defendants have had the opportunity to lead evidence establishing the legitimacy of purported transfers, for example, by indicating evidence as to their basis and the fact that payment for them was made. If I were wrong in the view that s 530C of the Corporations Act is sufficiently wide to apply to such a transaction, I am in any event satisfied that this is a proper case for orders being made to secure the property under UCPR r 25.3 and in the Court's inherent jurisdiction, given the evidence to which I have referred above. That evidence and the transactions which I have noted above, seems to me to indicate that there is a real risk that property would be further transferred out of the companies' or liquidators' reach, in the absence of such relief. 19I noted above that detailed submissions have been made as to the terms of the warrant under s 530C of the Corporations Act. I do not consider it necessary to include detailed provisions within the warrant of the kind specified in Cvitanovic v Kenna and Brown Pty Ltd (1995) 18 ACSR 387, in the particular circumstances, without expressing a broader view as to the desirability of such conditions generally. It seems to me that such conditions would not be appropriate in this particular case, given the nature of the property to be recovered and the circumstances in which such warrants may be executed. In particular, it seems to me that, where a warrant is to be executed as to large and moveable items, it would be undesirable to prescribe, for example, a specific requirement for a period of notice before the warrant was executed or the hours during which the warrant is executed. As has been pointed out in the submissions, liquidators exercising warrants issued by the Federal Court of Australia under s 530C of the Corporations Act have done so for many years without any evidence of particular difficulty arising from the absence of such conditions. 20I have, however, required personal undertakings to be given by the liquidators to the Court to be responsible for any damage or loss occasioned by or as a result of the execution of the warrants to any person, as contemplated by the orders made by Young CJ in Eq in Cvitanovic above, and such undertakings have been given. I also note that undertakings as to damages have been given in respect of the interlocutory relief sought under UCPR r 25.3 and in the Court's inherent jurisdiction. 21I should also note that the Plaintiffs also sought relief by way of an order for disclosure by directors of the relevant corporate defendants. I am not satisfied that such an order should be made on an ex parte basis, since the question whether such an order should be made can be determined after the Defendants have had an opportunity to be heard, without any risk of further dispositions of the relevant property once the steps contemplated by the orders have been taken. I also note that the question of the privilege of self-incrimination would need to be addressed in any orders requiring disclosure and the present form of draft orders does not do so. 22The Plaintiffs also sought orders requiring the Defendants to file evidence in respect of any application by them in respect of the relief granted by this application. I do not consider that I should make such orders, where this application has proceeded on an ex parte basis, and the Defendants have not had the opportunity to be heard as to those orders. It will, of course, be a matter for the Defendants to serve such evidence they may rely on in respect of any application to set aside or vary the orders in a reasonable time so that the parties may address it when the matter is next listed.