LKM Capital Limited (Receivers and Managers Appointed) v Koops

REASONS FOR JUDGMENT 1 The plaintiffs in this matter seek orders under s 1323 of the Corporations Act 2001 (Cth), requiring that the defendant, Mr Koops, deliver up to the New South Wales Registry of this Court his passport and that he be restrained from leaving Australia without the consent of the Court. Although the application filed on 16 September 2010 does not mention a definite end date for the orders sought, at the hearing the plaintiffs limited their requests to the period ending 28 October 2010. On 25 January 2010, in separate proceedings, initiated by the Australian Securities and Investments Commission (ASIC) against Mr Koops, I made orders similar to those now sought by the plaintiffs. My reasons for those orders are set out in Australian Securities and Investments Commission v Koops [2010] FCA 20. Those orders lapsed today on ASIC's interlocutory application being dismissed with the consent of the parties. 2 The background to the present application is set out in the submissions of the plaintiffs and may be briefly summarised. The first plaintiff (LKM Capital Limited), of which the defendant has been a director since its incorporation on 31 January 2000, has as its principal business the raising of funds for property and other investments through the public issue of debentures. The second plaintiff is a trustee for the debenture holders of LKM, pursuant to a trust deed dated 3 February 2000. It is also a secured creditor of the first plaintiff pursuant to a deed of charge, dated 9 May 2000. In exercise of its rights under the deed of charge, the second plaintiff appointed receivers and managers to the first plaintiff in August 2008. 3 Between 18 and 20 May 2009, the receivers conducted public examinations of Mr Koops in the Supreme Court of New South Wales and on 19 January 2010, they commenced proceedings in that Court. The statement of claim makes a number of allegations, including that Mr Koops engaged in misleading and deceptive conduct and breached his director's duties under ss 180 - 182 of the Act. At the hearing of this application, counsel for the plaintiffs made persuasive submissions in support of the proposition that a prima facie case to be answered had arisen in the Supreme Court proceedings. I do not propose to discuss that issue as I have concluded that even assuming the plaintiffs to be correct on this point, I am not otherwise satisfied that orders, under s 1323, should be made. 4 On 15 September 2010, the receiver filed an examination summons and notice to produce, in respect of Mr Koops, in the Supreme Court of New South Wales. The return date for the examination summons is 21 October 2010. The plaintiffs have made the present application to secure Mr Koops' attendance at the examination. They have allowed a one week period, following the examination, to determine if they wish to apply for an extension of the orders that the Court is requested to make. In relation to s 1323, in addition to the fact that a civil proceeding has been commenced, I must also be satisfied that the orders are necessary or desirable to protect the interests of an aggrieved person or persons. This involves my being satisfied that the orders are required to secure the attendance of Mr Koops at the further examination. 5 In his affidavit affirmed and filed on 20 September 2010, Mr Koops does not deny that he intends to leave the country. In fact, his intention to do so is clear from his comment in paragraph 9 of his affidavit, referring to the difficulty he has had in obtaining employment in Australia and his desire to take up a position which had been offered by a company, Back Row Productions, in the United Kingdom. However, this intention is not inconsistent with Mr Koops intending to return to undergo the scheduled examination. Indeed, in paragraph 12 of his affidavit he is explicit on the point: I am committed to defending the LKM Supreme Court proceedings or settling them, and any other proceedings arising from my directorship of LKM, and otherwise responding appropriately to any process including attendance on any examination. I understand that a failure to attend an examination, pursuant to s 596A of the Corporations Act 2001 is a contempt of court. 6 I have no reason to reject this statement formally made in Mr Koops' affidavit as a true statement of his present intention. The fact that it would be both possible, and perhaps tempting, for him to remain overseas and not attend the examination does not inevitably lead to the conclusion that he would act contrary to his present intention and evade his responsibilities. Nor does it mean that there is any guarantee that Mr Koops will actually return to attend his examination. The Court is not in the position to give such a guarantee nor would it be appropriate to do so. 7 In the circumstances before me, the task of the Court is to decide whether the orders sought by the plaintiffs are necessary or desirable to protect the interests of those who are aggrieved persons within the meaning of s 1323(1) and, if so, whether as a matter of discretion, those orders should be made. Given the assurances Mr Koops gives in his affidavit, and given also his apparent co-operation with ASIC as evidenced by ASIC's consent to its interlocutory application being dismissed (see [1] above), I have no reason to suppose that it is necessary or desirable to deprive him of his passport or restrain him from leaving the country. 8 In considering whether I should, as a matter of discretion, make the orders sought by the plaintiffs, I have taken into account Mr Koops employment prospects. In his affidavit he states that he has not worked for nearly 12 months and during that time has been dependent upon friends and relatives for support. 9 The offer of employment with Back Row Productions was the subject of comment in my reasons in ASIC v Koops. Mr Koops had raised his difficulty in obtaining employment and his consequent desire to accept the position offered by Back Row Productions as a basis for opposing ASIC's application. In my reasons at [20]-[21] I said: [20] Mr Koops claims, however, that he has been offered a position in the United Kingdom, as Chief Executive Officer of Backrow Productions UK Limited. According to Mr Koops, Backrow is partially owned by his sister, Liz Koops, and is a substantial enterprise promoting theatre entertainment worldwide. He says the opportunity is available to him because of his knowledge, experience and understanding of the entertainment industry which he has acquired over 20 years of acting as lawyer and advisor to Backrow. Mr Koops states that the position at Backrow Productions is intended to be for one year initially and will be extended for a further two years if successful. The starting date for this role, according to Mr Koops, is 2 February 2010. [21] Mr Koops has not offered any independent evidence of this offer from Backrow or of the alleged starting date. Conspicuous by its absence is any evidence, or indeed any submissions, as to the inflexibility or otherwise of the starting date. Given the family connection it is not unreasonable to suppose the starting date might be postponed, at least for a short time. If the position was only to be available if Mr Koops starts on 2 February one would expect the point to have been clearly made and supported by evidence from the company. In the absence of such evidence I have no reason to believe that the starting date is critical.