REASONS FOR JUDGMENT
1 The plaintiff ('Liquidator') is the liquidator of the second plaintiff ('Strarch'), a corporation registered in Victoria. The Liquidator was appointed on 11 March 2004.
2 Strarch was involved in the structural engineering industry, specialising in the design and construction of large clean span buildings. Much of its work appears to have involved the construction of hangars and other buildings at airports.
3 The Liquidator has instituted proceedings against eight defendants. The statement of claim alleges that Strarch incurred debts totalling $14.2 million during the period 1 January 2003 until 28 November 2003. On the latter date, the Liquidator was appointed as administrator of Strarch. The Liquidator alleges that at the time each of the debts was incurred during this period, there were reasonable grounds for suspecting that Strarch was insolvent.
4 The Liquidator now seeks leave, pursuant to Federal Court Rules ('FCR'), O 8 r 3(2) to serve originating process on the third, fourth, fifth, sixth and seventh defendants in Malaysia. The motion seeks an order that service in each case be by personal service of the originating process, accompanied by a translation in the Bahasa Melalyu language. Service is to be effected by a private agent.
5 The Liquidator alleges that the third, fourth and fifth defendants were directors of Strarch at all material times, while the sixth defendant was a director from 15 February 2001 until 5 September 2003. The seventh defendant is not said to have been formally appointed as a director. However, it is alleged that she acted in the position of a director and is thus within the definition of 'director' in the Corporations Act 2001 (Cth) ('Corporations Act').
6 The statement of claim and the application filed by the Liquidator seek orders under s 588M of the Corporations Act against the third, fourth, fifth and sixth defendants as compensation for insolvent trading in contravention of s 588G(2) of the Corporations Act. Compensation is sought from the seventh defendant under s 588W of the Corporations Act for insolvent trading in contravention of s 588V of the Corporations Act.
7 The claim for compensation against the third, fourth, fifth and sixth defendants is for an amount equal to the loss or damage sustained by the creditors of Strarch during the period 1 January 2003 to 28 November 2003. The claim against the seventh defendant is equal to the loss or damage suffered by the creditors from 1 January 2003 to 5 September 2003. (The temporal limitation of 5 September 2003 in respect of the claim against the seventh defendant may be a mistake. It is possible that the Liquidator intends that limitation to apply to the claim against the sixth defendant, who ceased to be a director on that date. The possible error, however, is of no significance for present purposes.)
8 FCR, O 8 r 2, provides that, subject to r 3, an originating process may be served on a person in a foreign country in a proceeding which consists of, or includes, any one or more of the kinds of proceedings mentioned in a table. The table in r 2 includes the following Items:
'1. Proceeding based on a cause of action arising in Australia
…
11. Proceeding based on a breach of a provision of an Act that is committed in Australia.
…
22. Proceeding affecting the person to be served in relation to:
(a) the person's membership of, or office in, a corporation incorporated, or carrying on business, in Australia; or
(b) …
(c) the person's conduct as a member or officer of such a corporation …'
9 FCR, O 8 r 3, relevantly provides as follows:
'(2) The Court may give leave to a party to serve an originating process on a person in a foreign country in accordance with a convention or the law of the foreign country, on such terms and conditions as it considers appropriate, if the Court is satisfied that:
(a) the Court has jurisdiction in the proceeding; and
(b) the proceeding is of a kind mentioned in rule 2; and
(c) the person seeking leave has a prima facie case for the relief claimed by the person in the proceeding.
(3) The evidence on an application for leave under subrule (2) must include the following:
(a) the name of the foreign country where the person to be served is or is likely to be;
(b) the proposed method of service;
(c) a statement that the proposed method of service is permitted by:
(i) … or
(ii) in any other case - the law of the foreign country'.
10 The Full Federal Court has recently addressed the requirement stated in O 8 r 3(2)(c): Ho v Akai Pty Ltd (in Liq) [2006] FCAFC 159, at [10]:
'As has been observed on many occasions, the prima facie case requirement has to be met at the outset, usually on an ex parte basis, and without the advantage of discovery and other procedural aids to the making out of a case … It "should not call for a substantial inquiry" … For present purposes it is sufficient to say that a prima facie case for relief is made out if, on the material before the Court, inferences are open which, if translated into findings of fact, would support the relief claimed … Or, to put the matter more prosaically as Lee J did in Century Insurance (in provisional liquidation) v New Zealand Guardian Trust [1996] FCA 376:
"What the Court must determine is whether the case made out on the material presented shows that a controversy exists between the parties that warrants the use of the Court's processes to resolve it and whether causing a proposed respondent to be involved in litigation in the Court in Australia is justified"'.
11 The present motion is supported by affidavits from the Liquidator and from a solicitor. The Liquidator's affidavit exhibits voluminous documentation.
12 The solicitor's affidavit establishes that the requirements of FCR, O 8 r 3(3), have been met.
13 I am satisfied for the purposes of the present motion, that the Court has jurisdiction in the proceedings. I am also satisfied that the proceeding is within one or more of Items 1, 11 and 22 of the table incorporated within FCR, O 8 r 2.
14 There is evidence indicating that the third, fourth, fifth and sixth defendants were directors of Strarch during the periods alleged in the pleadings. There may be a question concerning the duration of the sixth defendant's term as a director, but that does not detract from the evidence suggesting that he was a director for the bulk of the period. Accordingly, the plaintiffs have made out a prima facie case that they were directors during the relevant period.
15 The position of the seventh defendant is more problematic. It appears that she was the representative of Pilecon Engineering SDN BHG ('Pilecon'), a Malaysian corporation, in its dealings with Strarch. Pilecon was the majority shareholder in Strarch. The evidence indicates that the seventh defendant attended a number of meetings with the directors of Strarch during the relevant period and held discussions with some of Strarch's creditors.
16 While the evidence in relation to the seventh defendant is somewhat threadbare, I think that, bearing in mind the principles stated in Ho v Akai, there is a prima facie case that the seventh defendant acted as a director of Strarch during the period identified in the pleadings.
17 Strarch suffered something of a calamity in early May 2003, when a hangar under construction at Canberra Airport collapsed. The evidence suggests that the loss may not have been covered by insurance. I am satisfied, on the material before me, that there is a prima facie case of insolvent trading in relation to debts incurred by Strarch during the period from the collapse of the hangar until 28 November 2003.
18 The position in respect of debts incurred before May 2003 is much less clear. However, I do not think that the Liquidator needs to demonstrate that there is a prima facie case that the full amount of compensation claimed will be recovered against each defendant who is to be served in Malaysia. In my view, there is a prima facie case for 'the relief' claimed by the Liquidator against each of the defendants, namely orders for compensation pursuant to ss 588M and 588W of the Corporations Act.
19 It is important to note that this motion has been heard ex parte and that none of the defendants has yet had the opportunity to put on either a defence or any evidence upon which they may seek to rely.
20 For these reasons I propose to make the orders sought in the motion.
I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice SACKVILLE J.