Hodgson (Liquidator) v Bryce, in the matter of Advanced Traffic Management

BANKS-SMITH J: 1 By orders of this Court made 22 August 2023, Advanced Traffic Management (WA) Pty Ltd (in liquidation) (Company) was wound up in insolvency, and David Hodgson and Andrew Hewitt were appointed joint and several liquidators. 2 The Company previously operated a traffic management services business in metropolitan and regional Western Australia. 3 The respondent, Robbe Bryce, has been the sole director of the Company since April 2012. The sole shareholder is a company known as Allfam Holdings Pty Ltd, and Mr Bryce is the sole director and shareholder of Allfam 4 By an originating process filed 27 February 2024, the liquidators sought an order pursuant to s 530C of the Corporations Act 2001 (Cth) that the Court issue a warrant authorising them to search and seize all property of the Company, including its books and certain motor vehicles, and which is in the possession, custody or control of Mr Bryce, including at identified properties in Maida Vale and Ascot, Western Australia. 5 The matter came before me on an urgent ex parte basis on 29 February 2024 and I made orders, including that a warrant issue, on that date. These are my reasons for making those orders.

Section 530C - principles 6 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. 7 Under s 530C(2) the warrant must relate to items 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. 8 In Tang (liquidator) v Wright, in the matter of Wright's Transport Pty Limited (in liq) [2020] FCA 709, Stewart J said: [14] A court's power to issue a warrant is discretionary, but the discretion is only enlivened if the court is satisfied that the elements of s 530C(1) of the Act have been established: Re Ezyclad Pty Ltd (in liq) [2014] VSC 66; 98 ACSR 38 at [59]. The authorities in this Court have made orders issuing a warrant generally without any conditions attached: see Morton v Robins [1996] FCA 472; 14 ACLC 1197, Australian Securities Commission v Samson [1997] FCA 739; 24 ACSR 555 and Vartelas v Kyriakou [2009] FCA 1489. Ultimately, however, the question of whether conditions should be imposed is a matter for the court's discretion: see Re Ezyclad at [67]. 9 For convenience, I repeat the summary of the principles that I included in Carrello (Liquidator), in the matter of Drilling Australia Pty Ltd (in liq) [2019] FCA 1563 relating to the exercise of discretion as follows: [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].

Affidavits relied upon 10 The liquidators relied on three affidavits in support of their application. The first affidavit of Mr Hodgson was the primary affidavit, and it addressed the relevant investigations and communications to date. The second affidavit of Mr Hodgson included particular information about the sale of certain assets of the Company. Mr Hodgson sought a confidentiality order in relation to the second affidavit, not only until the warrant was executed but on an ongoing basis, subject to further order. Because of the commercially sensitive nature of some of the information in the second affidavit, it was appropriate that a suppression order be made, subject to further order. The third affidavit was sworn by Mr Thornton of Grant Thornton and dealt with a number of matters, including attempted service on Mr Bryce. 11 The evidence raised three matters of substance: (a) a number of vehicles registered in the name of the company which have not been made available to the liquidator or financiers; (b) the existence of unproduced books; and (c) a pattern of a lack of cooperation on Mr Bryce's part as to disclosing the whereabouts of property and books.

Vehicles 12 In the course of their investigations, the liquidators identified 25 vehicles that belong to the Company and that cannot be located. Those vehicles are listed in the orders. Extensive information obtained from the Department of Transport was adduced in evidence, together with evidence that traced the acquisition of the vehicles by the Company. 13 The missing vehicles include a 2019 Lamborghini Urus and a 2020 Iveco Motorhome that were purchased by the Company for approximately $487,190 and $212,062 respectively. According to the liquidators, even allowing for depreciation, the potential value of the missing vehicles is significant. 14 The liquidators disclosed in their evidence the nature of the investigations they have undertaken in order to satisfy themselves that the missing vehicles exist and are owned by the Company (free of encumbrances). 15 Subject to disclosed qualifications, the liquidators have not found any evidence, books or records to show that the Company has sold or transferred ownership or possession of any of the missing vehicles to any third parties, or evidence that might otherwise explain their current whereabouts. 16 Those qualifications were, relevantly, that although the Company purchased the Lamborghini in June 2019, its registration was subsequently transferred to Mr Bryce. The liquidators have not found any evidence that shows the basis for that transfer. Further, the Department of Transport records indicate that the registration of two vehicles has been suspended or cancelled (vehicles listed at numbers 2 and 17). Therefore, those vehicles appear to be unregistered, but that would not of itself alter their ownership. 17 The liquidators also disclosed reasons why they believe the missing vehicles are in the possession or control of Mr Bryce. In particular, as to vehicles numbered 1 and 2, there was evidence that Mr Bryce was seen using the vehicles before the Company went into liquidation. Vehicle 18 was apparently seen at Mr Bryce's residence by a process server. Missing vehicle 5 appears to have been acquired for the personal use of Mr Bryce, as it has no relationship to the business of the Company. Missing vehicles 2-4, 6-16 and 18-24 are commercial vehicles that appear to have been used for the Company's traffic management business. According to the liquidators, Mr Bryce has interests in related entities that also operate traffic management and similar businesses, and he had a pattern of allowing those other companies to use the Company's vehicles. Therefore, there is reason to believe those commercial vehicles may be in the possession of Mr Bryce for the purpose of allowing those other companies to continue to use them. 18 The liquidators state that they believe that the missing vehicles may be located at Mr Bryce's residential address in Maida Vale, Western Australia. There is a double lockup garage as well as a large 18m x 9m shed (with three phase power and a toilet) on the premises. Photos of the property were in evidence. Whilst the liquidators cannot put it more highly than a belief, it is far from fanciful to consider that Company vehicles may be stored out of sight in such a shed. The liquidators have also ascertained that there is another property owned by Mr Bryce in Ascot, Western Australia.

Unanswered requests for information 19 After their appointment, the liquidators made the usual inquiries of Mr Bryce, including requiring him to deliver up all books and records of the Company under s 530B of the Corporations Act. Mr Bryce has not responded or complied. Further, the evidence indicates that on two occasions Mr Bryce's wife attempted to remove the liquidators' access to the Company's MYOB file. The liquidators were obliged to approach the National Client Director at MYOB to have access reinstated. There is also evidence to suggest that Mr Bryce has sought to evade service of documents by avoiding a process server who attended his personal address at a time when Mr Bryce was apparently seen there. 20 Relevantly, the evidence also disclosed numerous requests from the liquidators, including by their lawyers, addressed to Mr Bryce or his lawyers between August 2023 and February 2024 seeking books and records of the Company and inquiring as to the whereabouts of certain vehicles. 21 The liquidators have received some information from third parties (in particular, from one of the Company's financial advisors and one of the directors of a related company) that has led to receipt of some financial records and the return of some vehicles. 22 However, the liquidators have not received any answers or information of substance from Mr Bryce or his lawyers (emails in evidence suggest his lawyers had instructions to act in relation to some issues but not others).

Consideration - warrant 23 I took into account the serious nature of an application for the issue of a warrant. However, I was satisfied that the elements of s 530C(1) of the Corporations Act have been established. 24 I was satisfied that there had been a clear and persistent pattern of non-cooperation and evasion with respect to informing the liquidators as to the whereabouts of the Company's vehicles or delivering up or identifying the location of the Company's book and records. I was satisfied that there had been concealment of property in that regard. There was evidence of refusal to comply with the liquidators' requests to deliver up books and records. There was evidence of the transfer of Company assets (at least, for example, in relation to the Lamborghini) and there was evidence that Company assets have been used by other related entities. There had been an attempt to conceal books and records by interference with the liquidators' access to MYOB. All those circumstances are indicative of concealment of property, in accordance with the principles set out at [9] above. 25 It is apparent that Mr Bryce must have possession of some books and records of the Company because, at minimum, as the Company's sole director he would ordinarily have access to a number of books and records of the Company. 26 I inferred that books and records of the Company were likely to be held at either the Maida Vale or Ascot addresses, those being the properties that Mr Bryce appears to utilise. 27 The evidence also supported an inference that the Company vehicles may be stored at either of those addresses.

Consideration - order that Mr Bryce provide affidavit deposing as to whereabouts of vehicles 28 The liquidators also sought an order pursuant to s 597A of the Corporations Act that Mr Bryce, within 14 days of service of the various court documents (and so following the execution of the warrant), file an affidavit revealing information about the whereabouts or last known whereabouts of any outstanding vehicles and their keys. 29 In circumstances where such an application is made by the liquidators, and Mr Bryce is an officer of the Company, the Court has no discretion to refuse an application under s 597A of the Corporations Act: Re Kala Capital Pty Ltd [2013] NSWSC 1982 at [3] (Brereton J); Mohen (Liquidator), in the matter of MAP Exports Pty Ltd (in liq) v Rebelo [2021] FCA 1415 at [30]. However, the Court must be satisfied that the information requested relates to the examinable affairs of the Company and that the time for filing the affidavit is reasonable in the circumstances: s 597A(1) and s 597A(2). I was satisfied that such was the case.

Ex parte hearing and suppression orders 30 It was appropriate that the matter proceed ex parte in view of the nature of the application and the potential that notice of the possibility of the issue of a warrant may frustrate the purpose of any warrant that is issued. 31 I made suppression orders on the basis of s 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth), as in my view they were necessary to prevent prejudice to the proper administration of justice. The application was made in a proceeding in which Mr Bryce is a party. In light of the difficulty the liquidators have encountered in obtaining the books, records and motor vehicles of the Company, I considered there was a risk that Mr Bryce might hinder the liquidators' efforts to recover such property by execution of the warrant if he received prior notice of this application. If that were to occur, it would amount to conduct which would prejudice the proper administration of justice.

Relief 32 For those reasons I considered it appropriate that a warrant issue as requested, and that the other relief, including the s 597A order, also be granted. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Banks-Smith.