Hi-Tech Telecom Pty Ltd (in Liquidation) (Receivers and Managers appointed) v Yahaya

EX TEMPORE Judgment (Revised) 1Earlier today I made search and freezing orders. These are my reasons for making those orders. 2The plaintiff, Hi-Tech Telecom Pty Ltd (in Liquidation) (Receivers and Managers appointed) ("HTT") brings these proceedings by its receivers. Those receivers were appointed on 14 June 2013 by a secured creditor of HTT, Allianz Finance Pty Ltd ("Allianz"). 3HTT sought, on an interlocutory basis, freezing and search orders against Mr Amadu Sidick Yahaya, Ivoisys Pty Ltd and PennyTel Pty Ltd. HTT also seeks, on a final basis, orders that Ivoisys and PennyTel pay it sums in the order of $1.3 million and $3.9 million respectively and that Mr Yahaya pay it equitable compensation and other related orders. 4The basis of the proceedings is an assertion by HTT that a fraud has been perpetrated on Allianz and on HTT itself. 5The sole shareholder of HTT is Mr Yahaya. Up until 2 April 2013 Mr Yahaya was the sole director of HTT. The sole director is now Mr Robert Van Leeuwen. There is, however, evidence that Mr Yahaya has continued to act as a director of HTT until as recently as 10 June 2013. He left Australia a short time ago and is now believed to be in Los Angeles, or beyond. 6Until very recently HTT published documents, including invoices, which stated that it conducted its business, which is a telecommunications business, from premises in Talavera Road, North Ryde. 7On 17 September 2010 HTT entered into a factoring facility with Allianz whereby HTT assigned to Allianz the benefit of invoices issued by it to its customers, which Allianz purchased at a discount. In the usual way, HTT agreed to pay to Allianz the proceeds of its invoices once paid. 8The original limit of the factoring facility was $7.1 million. On 22 March 2012 the limit was increased to $15 million; that is, it more than doubled. Earlier this year, HTT sought a further increase in the facility which was declined. 9In March 2013 Allianz gave a notice, as it was entitled to do under the factoring facility, of an independent verification of the balance of moneys owing to HTT by its debtors. Allianz nominated to carry out that process of verification with a firm of accountants, Lawler Partners. The gentleman who actually carried out the exercise was Mr Gwynne. 10One of the steps that Mr Gwynne took to verify HTT's debtors' balance was to cause telephone calls to be made to purported customers of HTT. He was given telephone numbers purporting to be those of genuine customers of HTT by a Ms Myrna. Mr Gwynne received a peculiar response from many of those "customers". Many of the "customers" would simply answer the telephone by saying "hello" and would only state the name of the entity on behalf of whom they were purporting to respond when asked to do so. 11On two occasions Mr Gwynne made telephone calls to numbers that he obtained otherwise than from Ms Myrna only to be told by the person answering the phone that they had had no dealings with HTT of any kind. 12The net result of Mr Gwynne's review was that he was only able to verify $7 million of the $12 million balance of debtors which HTT was then contending for. Nonetheless, Allianz continued to do business with HTT for a short time. 13Voluntary liquidators were appointed on 13 June 2013 and receivers appointed the next day, 14 June 2013. As I have mentioned, those receivers were appointed by Allianz to whom an amount of some $14.4 million is now owing by HTT. 14The receivers have conducted what appears to have been a more rigorous process of investigating the true status of HTT's debtors. The result of that process is contained in a report prepared by Mr Gerald Barnes, an employee of the receivers. His report states that there were 45 debtors of HTT as at 30 April 2013 (as reported by HTT to Allianz) in the order of $23 million. Of those 45 debtors some 21 were contacted and said that they had no knowledge of HTT. Those 21 debtors, according to information given by HTT to Allianz, accounted for some $10.9 million. Mr Barnes was unable to contact a further 24 debtors, whose indebtedness to HTT, according to information given by HTT to Allianz, was in the order of $13 million. Many of the individuals that Mr Barnes contacted stated, as emerges from what I have just said, that they had had no dealings with HTT. Some of those contacted alleged that signatures associated with their organisations had been forged. 15The receivers also discovered that, during 2013, Mr Yahaya (the only person authorised by HTT to operate the relevant bank accounts) transferred some $1.2 million to Ivoisys and the sum of $3.9 million to PennyTel. In effect, the funds paid away were from those advanced by Allianz to HTT. 16Both Ivoisys and PennyTel have, as their registered office, the Talavera Road premises. Mr Yahaya was the sole director of both companies until 28 March 2013. The sole director of each company is now Ms Megan Havyatt. In at least one ASIC return both Ms Havyatt and Mr Yahaya notified ASIC that their residential address was in Lonsdale Place, West Pennant Hills. One of the receivers, Mr Murray Campbell Smith, whose affidavit has been read in support of this application, deposes that he has been informed by a Mr Gross from Allianz that Mr Yahaya and Ms Havyatt have two children. On the face of it, it appears that Mr Yahaya and Ms Havyatt are in a domestic relationship and live, or have lived, at the Lonsdale Place address. 17The receivers have been unable to find any documents which would justify the payments to Ivoisys and PennyTel. 18Indeed, the receivers have been unable to find any regular business records of HTT. The only source of documentary information available to the receivers to date is information that they have been able to obtain from Allianz, from HTT's bankers (NAB and Westpac) and from ASIC. 19On the face of it, at least as the evidence currently stands, the payments that Mr Yahaya evidently caused to be made to Ivoisys and PennyTel are payments which have been made for no consideration. 20The registered office of HTT is an address in Baulkham Hills. The receivers have sought access to that address. There appears to be no business activity, at least relating to HTT, at that address. The receivers have been told by someone at that address that, several days ago, two computers were removed. 21The receivers have also sought access to the Talavera Road premises. On 14 June 2013 representatives of the receiver attended those premises and observed up to 15 people apparently working on the premises. They also observed computer equipment and document files. Mr Henry, an employer of the receivers, spoke to a person who seemed to be a receptionist who said that Mr Van Leeuwen was an irregular attendee at the office. 22Mr Henry was also told that the offices of Ivoisys and PennyTel were managed by a woman named Ms Jocelyn Sinha. Mr Henry spoke to Ms Sinha on the telephone who denied any knowledge of HTT and denied that Mr Van Leeuwen was carrying out any business activities at the Talavera Road premises. 23That denial appears to be inconsistent with what I am told is a finding made by Foster J in the Federal Court of Australia in Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd [2011] FCA 131 to the effect that Ms Sinha is, indeed, an employee of HTT. 24The receivers made inquiries of Ivoisys concerning the books and records of HTT that might be located at Talavera Road. A solicitor wrote on behalf of Ivoisys to the receivers on 19 June 2013 stating that he was instructed that there were no books or records of HTT relating to the undertaking, property or assets over which the receivers had been appointed at Talavera Road. 25Mr Henry and another employee of the receivers also visited the Lonsdale Place property. They were not able to obtain access to the property. The evidence suggests that it is residential premises. 26So far as concerns Talavera Road, on 19 June 2013 Mr Henry and other persons again visited Talavera Road and spoke to a person who said he was Mr Martin Chin, evidently a sales director of Ivoisys. Mr Chin denied that there were any books or records of HTT at the Talavera Road premises and, curiously, refused to confirm or deny whether the businesses of HTT and Ivoisys were intermingled, whether HTT or Ivoisys had ever occupied the premises, or whether any HTT employees had ever worked there. 27Mr Smith, one of the receivers, last spoke to Mr Yahaya on 17 June 2013. Mr Yahaya said that he was ringing from Los Angeles. Mr Yahaya said that he and Mr Van Leeuwen would be in contact the following day. The line disconnected and Mr Smith has heard nothing since. 28Attempts have been made by the receiver to contact Mr Van Leeuwen. Contact has been made by email. The result of that contact suggests that Mr Van Leeuwen is not proposing to give the receivers any assistance in relation to their inquiries. 29The search orders sought relate to the Talavera Road premises and the Lonsdale Place premises. 30As to the Talavera Road premises, as I have said, the evidence shows that HTT stated in invoices and otherwise until very recently, that each conducted its business from that address. 31That address remains the registered office of Ivoisys and PennyTel. The receivers' inquiries have failed to reveal the existence of any regular business records of HTT at its registered office. There appears to be some prospect that such business records as HTT may still have are at the Talavera Road premises. I have mentioned the curious nature of the responses that the receiver has had to his inquiries regarding Talavera Road on 19 June 2013. 32As to the Lonsdale Place premises, they are evidently residential premises and premises nominated by Mr Yahaya and Ms Havyatt as their residential address. 33I am satisfied that the evidence shows that, on the face of things, a fraud appears to have been perpetrated on Allianz and on HTT. 34As the evidence stands there appears to me to be a strong prima facie case that Mr Yahaya has acted in breach of his fiduciary obligations to HTT and that Ivoisys and PennyTel have participated in that breach. 35So far as concerns making a search order, Uniform Civil Procedure Rules r 25.20 requires that I be satisfied that the plaintiff has a strong prima facie case against each of the defendants on an agreed cause of action. I am so satisfied. 36That rule also requires that I be satisfied that the plaintiff will suffer potential or actual loss or damage if a search order is not made. I am so satisfied. 37The receiver has not yet been able to obtain access to any of the regular financial or other records of the plaintiff. There appears to be a distinct possibility that they reside at the Talavera Road premises. I am satisfied that a basis exists to believe that if the defendants were warned of the commencement of these proceedings, one or more of them would take steps to destroy material which might be relevant to the claims that the plaintiff wishes to agitate in these proceedings. 38In that regard I am mindful of the observations made by the Court of Appeal in Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 to the effect that where a prima facie case has been established against a defendant of fraudulent misappropriation of a large sum of money, an inference will readily arise that, absent an order for restraint, that defendant might not preserve evidence relevant to the misappropriation. 39It is for those reasons that I granted the orders earlier today.