Beattie v Gray, in the matter of Control Rail Pty Limited

BANKS-SMITH J: 1 By an interlocutory process filed on 30 August 2018, Giovanni Carrello in his capacity as official liquidator of Drilling Australia Pty Ltd (Company) seeks an order pursuant to s 530C of the Corporations Act 2001 (Cth), that the Court issue a warrant authorising Mr Carrello to search and seize property, books and records of the Company located in storage containers occupied by Royal Wolf Storage in Bassendean in Western Australia, and stored on identified premises in Humpty Doo in the Northern Territory. 2 In support of his application, Mr Carrello relies on two affidavits that he has sworn. 3 The Company was placed in liquidation by order of the Supreme Court of Western Australia made on 7 June 2018 and on the basis, in summary, of a deadlock as to its control. The directors of the Company as at the date of liquidation were Troy Higgins and Cameron Frederickson, who also each held 50% of the shares in the Company. 4 Section 530C of the Corporations Act provides as follows: Warrant to search for, and seize, company's property or books (1) The Court may issue a warrant under subsection (2) if: (a) a company is being wound up or a provisional liquidator of a company is acting; and (b) on application by the liquidator or provisional liquidator, as the case may be, or by ASIC, the Court is satisfied that a person: (i) has concealed or removed property of the company with the result that the taking of the property into the custody or control of the liquidator or provisional liquidator will be prevented or delayed; or (ii) has concealed, destroyed or removed books of the company or is about to do so. (2) The warrant may authorise a specified person, with such help as is reasonably necessary: (a) to search for and seize property or books of the company in the possession of the person referred to in subsection (1); and (b) to deliver, as specified in the warrant, property or books seized under it. (3) In order to seize property or books under the warrant, the specified person may break open a building, room or receptacle where the property is or the books are, or where the person reasonably believes the property or books to be. (4) A person who has custody of property or a book because of the execution of the warrant must retain it until the Court makes an order for its disposal. 5 I note the requirement of s 530C(2) that the warrant relates to materials in the possession of the relevant person. Section 9 of the Corporations Act defines 'possession' by reference to s 86, which explains: A thing that is in a person's custody or under a person's control is in the person's possession. 6 Section 530C is ordinarily 'a remedy of last resort': see Cvitanovic v Kenna & Brown Pty Ltd (1995) 18 ACSR 387. 7 A warrant should be granted if the Court finds that there has been a 'persistent pattern of non-cooperation and evasion': Whitemore Holdings Ltd (in liquidation) [2004] FCA 806 at [9]-[10], affirmed in Beattie v Gray, in the matter of Control Rail Pty Limited (in liq) [2018] FCA 1524. This does not appear to be a requirement of granting a warrant, but provides useful guidance. 8 Factors that have been relied upon in deciding that a person has concealed or removed the property of the company include: (a) refusals to comply with liquidators' requests to deliver up the books and records of the company: Vartelas v Kyriakou [2009] FCA 1489 at [6]; (b) transfer of assets to, and continued use of the assets by, related companies or entities without proper accounting: Crisp, in the matter of Buchanan Group Holdings Pty Ltd v Iliopoulos [2011] FCA 1521 at [11]; and (c) moving of assets, books or records from one place to another: Crisp at [13]. 9 It is clear from the s 86 definition that property does not need to be registered to a person's name or in their custody for them to be in possession of it. Control over the property will suffice. In Beattie v Gray, the property was held in storage lockers in the defendant's mother's name. The property was considered to be in the defendant's possession: at [7]. 10 Turning to the facts of this application, on 6 June 2018 information was provided to Mr Carrello to the effect that books of the Company were being burnt at the Company's premises. 11 On 7 June 2018 colleagues of Mr Carrello attended the Company's office. Photos taken at the time show that Mr Frederickson's office was devoid of records: all drawers and shelves were empty and the Company's computer server was not to be found. They found no business-related files on the book keeper's computer. Mr Carrello formed the view that based on the information received and the inspection on site, the office had been cleaned out and the computer had been wiped. Mr Carrello obtained assistance from a computer specialist who also confirmed that the computer had been wiped of information. 12 On 22 June 2018 the plaintiff wrote to Mr Frederickson advising of his obligations under s 530A of the Corporations Act and requesting that he deliver up assets, books and information pertaining to the Company. Other than providing a report as to affairs and answering a questionnaire, Mr Carrello says that Mr Frederickson has failed to assist or to deliver up books and records, and there are assets of the Company including plant and equipment that are unaccounted for. 13 On 1 November 2018 Mr Frederickson was sentenced in the District Court of Western Australia to imprisonment on unrelated charges. He remains in custody. 14 As a result of information received from third parties by way of requests for production of documents or the proof of debt process, Mr Carrello has since received various books and records and other information about the whereabouts of assets of the Company, including the key to a shipping container and certain electronic devices. It is not necessary to disclose all of the information received for the purpose of these reasons. Mr Carrello has ascertained that the key relates to a storage container at Royal Wolf Storage in Bassendean. 15 Of particular note, an email was found on an electronic device dated 1 November 2018 that was sent by Mr Frederickson to a named person, outlining instructions to that person as to how to deal with a detailed collection of property in the event that Mr Frederickson was sentenced to jail. The 1 November 2018 email referred to property contained in shipping containers at Humpty Doo in the Northern Territory or otherwise on site and also property contained in a shipping container in Perth. Some of the property referred to by Mr Frederickson is consistent with descriptions of Company property that Mr Carrello has identified but has been unable to locate to date. 16 Having regard to certain names of persons set out in the 1 November 2018 email, searches conducted by Mr Carrello have ascertained the addresses where three shipping containers or plant and equipment may be held in Humpty Doo. The liquidator's inquiries have revealed that one site is controlled by WDA Drilling Services Pty Ltd near the Humpty Doo Tavern. The 1 November 2018 email also refers to a container located at 'NT-Total hydraulic connections'. That site has been identified and is occupied by Total Hydraulics Connections NT Pty Ltd. The site appears to have two potential addresses. Mr Carrello submits that containers or property on those sites as referred to by Mr Frederickson in the 1 November 2018 email are in his possession, on the basis that he left detailed instructions regarding them directed at the named person mentioned above and so is able to exercise control. 17 The shipping container in Bassendean is in Mr Frederickson's name. Mr Frederickson and his partner (Ms V) have contended by statutory declaration that the shipping container in Bassendean contains personal, and not Company, property. However, Mr Carrello is concerned that it is not appropriate to accept this evidence at face value in light of Mr Frederickson's conduct and wishes to search the container to ascertain if it contains Company property. He considers it may contain Company property based on the fact that the storage key was initially provided to him in response to a request to deliver up Company property, although the person who provided the key (Ms V) now asserts it was not Company property. Ms V was apparently invited by Mr Carrello's staff to attend on site to inspect the contents but has not done so. Mr Carrello's concern is also based on the 1 November 2018 email from which it is apparent that Mr Frederickson has moved Company assets from place to place, even taking into account the fact that the email suggests the Bassendean container holds furniture. 18 Mr Carrello states that the shipping container is tightly packed and cannot be inspected without unpacking it. Unpacking it is not permitted at its current location and so it must be moved first. Mr Carrello intends to seize the container and move it to an auction yard where its contents will be unpacked, inspected and catalogued by a third party. Such a course will in any event protect the contents of the shipping container. 19 Based on the above matters, Mr Carrello is of the view that Mr Frederickson has concealed property of the Company at the identified properties in Humpty Doo and Bassendean. The warrant is sought in respect of those locations. 20 I am satisfied on the basis of the materials before me and particularly the email of 1 November 2018 that Mr Frederickson has concealed or removed property of the Company with the result that the taking of the property into the custody of Mr Carrello has been prevented or delayed. I am satisfied that such position continues. 21 I am satisfied that books and records and assets of the Company are, relevantly, in Mr Frederickson's possession on the basis that the email evidence before me discloses that Mr Frederickson retains control through third parties of access to the relevant shipping containers. 22 In the circumstances I am satisfied that it is appropriate that a warrant issue. 23 The warrant is substantially in the form utilised in Vartelas v Kyriakou and referred to in subsequent cases, including Beattie v Gray (at [10]). I am satisfied that it would be appropriate to authorise the issue of a warrant substantially in the form requested. 24 Accordingly, I will make an order directing the District Registrar to issue a warrant to Mr Carrello in a form which will be settled in chambers but will be substantially in the form attached to the originating application. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Banks-Smith.