Naidenov (liquidator) v Davey, in the matter of Josa Civil Group Pty Ltd - [2021] FCA 1175 - FCA 2021 case summary — Zoe

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Naidenov (liquidator) v Davey, in the matter of Josa Civil Group Pty Ltd

[2021] FCA 1175

Federal Court of Australia|2021-09-24|Before: Halley J

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At a glance

Source facts

Court

Federal Court of Australia

Decision date

2021-09-24

Before

Halley J

Source

Original judgment source is linked above.

Judgment (16 paragraphs)

[1]

The District Registrar issue, pursuant to s 530C of the Corporations Act 2001 (Cth), warrants substantially in the form of the warrants appearing at Annexure B to these orders.
Any requirement that the originating process be served on the defendants is dispensed with in the first instance and leave is granted to the plaintiffs to make the application ex parte.
Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) (FCA Act) on the grounds that it is necessary to prevent prejudice to the proper administration of justice pursuant to s 37AG(1)(a) of the FCA Act and until further order of the Court or the discharge of this order pursuant to Orders 4 and 5 below, publication or other disclosure of the following is prohibited as follows: (a) the Originating Process is to be kept confidential and, except with the leave of the Court, is not to be disclosed to anyone other than the Court and Court staff; (b) the affidavit of Steven Naidenov affirmed on 22 September 2021, Exhibit SN-1 thereto and the affidavit of Blake O'Neill affirmed on 24 September 2021 are to be kept confidential and, except with leave of the Court, are not to be open to inspection to any person other than the Court and Court staff; and (c) these orders are to be kept confidential and, except with the leave of the Court, are not to be disclosed to anyone other than the Court and Court staff.
Within 14 days of the last date on which the warrants have been executed, the plaintiffs file an affidavit reporting on the execution of the warrants and annexing a list of the property and books and records seized.
On the filing of the affidavit referred to in Order 4, Order 3 shall be discharged.
Within 7 days of the filing of the affidavit referred to in Order 4, the plaintiffs serve on the defendants the originating process, the affidavits referred to in Order 3(b), a copy of any orders made in these proceedings, any reasons for judgment and the affidavit referred to in Order 4.
Pursuant to s 597A of the Corporations Act 2001 (Cth), within 14 days of service of the documents referred to in Order 6, each of the defendants file an affidavit specifying: (a) the current whereabouts of those motor vehicles so defined and listed in Annexure A to these orders (Company Vehicles) that have not been seized by the plaintiffs (the Outstanding Company Vehicles), including the specific address where the Outstanding Company Vehicles are located; (b) if the current whereabouts of the Outstanding Company Vehicles are unknown to them, and cannot be ascertained after making reasonable enquiry, then the address of the last location of the Outstanding Company Vehicles; (c) the facts, matters and circumstances, together with any supporting documents, concerning any sale by Josa Civil Group Pty Ltd (in liquidation) ACN 607 760 556 (the Company) of the Company Vehicles, including details of any consideration paid to the Company for the Company Vehicles; and (d) to the extent that they are aware of the circumstances in which the Company Vehicles have been used since 5 May 2020 (being the date of the appointment of the first plaintiff as liquidator of the second plaintiff), the details of the person(s) or entity(ies) (whether a company, partnership or otherwise) that have been using the Company Vehicles and the facts, matters and circumstances concerning their use of the Company Vehicles.

[2]

ANNEXURE B SEARCH WARRANT TO: Simon Gallant, Consultant, ERA Legal, Level 15, 45 Clarence Street, Sydney NSW WHEREAS the Court, on the application of Steven Naidenov ("the liquidator"), the liquidator of Josa Civil Group Pty Ltd (in liquidation) ("the company''), was satisfied that Lynne Davey, Spiros Apokis and George Apokis have concealed or removed books and property of the company and that there is on or in the premises being: - (a) Lot 13 Jervis Bay Road, Huskisson NSW 2540 (herein after called "the premises'') the following: - (a) books and records of the company; and (b) motor vehicles registered in the name of and or owned by the company. AND WHEREAS the Court was satisfied that there was reasonable grounds for the issue of this warrant under the provisions of section 530C of the Corporations Act 2001 (Cth). YOU ARE HEREBY AUTHORISED between the hours of 8.00 am and 6.00 pm with such help as is reasonably necessary to: - (a) enter on or into the premises, using such force is as necessary for the purpose and is reasonable in the circumstances; (b) search the premises for the property as set out in the schedule; (c) break open, and search for the property, building, room or receptacle whether a fixture or not, on or in the premises; (d) take possession of or secure against interference any property of the company found on or in the premises; and (e) deliver to the liquidator or person authorised in writing by the liquidator for the purpose any property of the company of which possession is taken under the warrant. SCHEDULE (a) the following motor vehicles registered in the name of the company: No. Make Model Colour VIN/Chassis # 1 KTM 4T-EXC Orange VBKEXA402DM315901 Racing 2 Torino WY125T-21 Blue LFFWJT215C1000061 Wangye Series 3 Ferrari 308 Red F106AL13994 4 Ford Mustang 1 White 5R09C134573 5 Harley Davidson FLH Series Black 5HD1KRMG5FB601743 6 Harley Davidson Softtail White 1HD1BJL44MY010040 Deuce FXFTD 7 Mazda B32 White MMOUPOYF100400360 8 Mercedes GLA250 4M White WDC1569462J173266 9 Hamelex HXDT 4 Silver 6D9HXW1TTWMW66178 Trailers 10 Freight FL80 CBU Yellow 1FVXJLBB9RL439841 Liner 11 Holden Rodeo White MPATFS26H3T100775 12 Mitsubishi Triton Silver MMAJRKB809D013464 13 Ford Commercial White 6FPAAAJGCM5M41737 14 Toyota Prado Silver JTEBU29J900035846 15 Prestige Unknown Blue 6C9T20000R2LF3042 Trailers 16 Home 00TRLR Black 6A9T20000W1SS4001 Made

[3]

(b) the books and records of the company. YOU ARE TO REPORT to the Court within (14) fourteen days of the execution of this Warrant the result of its execution and all other circumstances you consider relevant. DATED: SEARCH WARRANT TO: Simon Gallant, Consultant, ERA Legal, Level 15, 45 Clarence Street, Sydney NSW WHEREAS the Court, on the application of Steven Naidenov ("the liquidator"), the liquidator of Josa Civil Group Pty Ltd (in liquidation) ("the company''), was satisfied that Lynne Davey, Spiros Apokis and George Apokis have concealed or removed books and property of the company and that there is on or in the premises being: - (a) 52 Quay Road, Callala Beach NSW 2540 (herein after called "the premises''), the following: - (a) books and records of the company; and (b) motor vehicles registered in the name of and or owned by the company. AND WHEREAS the Court was satisfied that there was reasonable grounds for the issue of this warrant under the provisions of section 530C of the Corporations Act 2001 (Cth). YOU ARE HEREBY AUTHORISED between the hours of 8.00 am and 6.00 pm with such help as is reasonably necessary to: - (a) enter on or into the premises, using such force is as necessary for the purpose and is reasonable in the circumstances; (b) search the premises for the property as set out in the schedule; (c) break open, and search for the property, any building, room or receptacle whether a fixture or not, on or in the premises; (d) take possession of or secure against interference any property of the company found on or in the premises; and (e) deliver to the liquidator or person authorised in writing by the liquidator for the purpose any property of the company of which possession is taken under the warrant. SCHEDULE (a) the following motor vehicles registered in the name of the company: No. Make Model Colour VIN/Chassis # 1 KTM 4T-EXC Orange VBKEXA402DM315901 Racing 2 Torino WY125T-21 Blue LFFWJT215C1000061 Wangye Series 3 Ferrari 308 Red F106AL13994 4 Ford Mustang 1 White 5R09C134573 5 Harley FLH Series Black 5HD1KRMG5FB601743 Davidson 6 Harley Softtail Deuce White 1HD1BJL44MY010040 Davidson FXFTD 7 Mazda B32 White MMOUPOYF100400360 8 Mercedes GLA250 4M White WDC1569462J173266 9 Hamelex Trailers HXDT 4 Silver 6D9HXW1TTWMW66178 10 Freight Liner FL80 CBU Yellow 1FVXJLBB9RL439841 11 Holden Rodeo White MPATFS26H3T100775 12 Mitsubishi Triton Silver MMAJRKB809D013464 13 Ford Commercial White 6FPAAAJGCM5M41737 14 Toyota Prado Silver JTEBU29J900035846 15 Prestige Trailers Unknown Blue 6C9T20000R2LF3042 16 Home Made 00TRLR Black 6A9T20000W1SS4001

[4]

(b) the books and records of the company. YOU ARE TO REPORT to the Court within (14) fourteen days of the execution of this Warrant the result of its execution and all other circumstances you consider relevant. DATED: SEARCH WARRANT TO: Blake O'Neill, Director, ERA Legal, Level 15, 45 Clarence Street, Sydney NSW WHEREAS the Court, on the application of Steven Naidenov ("the liquidator"), the liquidator of Josa Civil Group Pty Ltd (in liquidation) ("the company''), was satisfied that Lynne Davey, Spiros Apokis and George Apokis have concealed or removed books and property of the company and that there is on or in the premises being: - (a) 199A Homestead Road, Orchard Hills NSW 2748 (herein after called "the premises''), the following: - (a) books and records of the company; (b) motor vehicles registered in the name of and or owned by the company. AND WHEREAS the Court was satisfied that there was reasonable grounds for the issue of this warrant under the provisions of section 530C of the Corporations Act 2001 (Cth). YOU ARE HEREBY AUTHORISED between the hours of 8.00 am and 6.00 pm with such help as is reasonably necessary to: - (a) enter on or into the premises, using such force is as necessary for the purpose and is reasonable in the circumstances; (b) search the premises for the property as set out in the schedule; (c) break open, and search for the property, any building, room or receptacle whether a fixture or not, on or in the premises; (d) take possession of or secure against interference any property of the company found on or in the premises; and (e) deliver to the liquidator or person authorised in writing by the liquidator for the purpose any property of the company of which possession is taken under the warrant. SCHEDULE (a) the following motor vehicles registered in the name of the company: No. Make Model Colour VIN/Chassis # 1 KTM 4T-EXC Racing Orange VBKEXA402DM315901 2 Torino WY125T-21 Blue LFFWJT215C1000061 Wangye Series 3 Ferrari 308 Red F106AL13994 4 Ford Mustang 1 White 5R09C134573 5 Harley Davidson FLH Series Black 5HD1KRMG5FB601743 6 Harley Softtail Deuce White 1HD1BJL44MY010040 Davidson FXFTD 7 Mazda B32 White MMOUPOYF100400360 8 Mercedes GLA250 4M White WDC1569462J173266 9 Hamelex Trailers HXDT 4 Silver 6D9HXW1TTWMW66178 10 Freight Liner FL80 CBU Yellow 1FVXJLBB9RL439841 11 Holden Rodeo White MPATFS26H3T100775 12 Mitsubishi Triton Silver MMAJRKB809D013464 13 Ford Commercial White 6FPAAAJGCM5M41737 14 Toyota Prado Silver JTEBU29J900035846 15 Prestige Unknown Blue 6C9T20000R2LF3042 Trailers 16 Home Made 00TRLR Black 6A9T20000W1SS4001

[5]

(b) the books and records of the company. YOU ARE TO REPORT to the Court within (14) fourteen days of the execution of this Warrant the result of its execution and all other circumstances you consider relevant. DATED: SEARCH WARRANT TO: Nicholas Chase Berry, Associate Director, ERA Legal, Level 15, 45 Clarence Street, Sydney NSW WHEREAS the Court, on the application of Steven Naidenov ("the liquidator"), the liquidator of Josa Civil Group Pty Ltd (in liquidation) ("the company''), was satisfied that Lynne Davey, Spiros Apokis and George Apokis have concealed or removed books and property of the company and that there is on or in the premises being: - (a) Suite 201, 35 Doody Street, Alexandria NSW 2015 (herein after called "the premises''), the following: - (a) books and records of the company; and (b) motor vehicles registered in the name of and or owned by the company. AND WHEREAS the Court was satisfied that there was reasonable grounds for the issue of this warrant under the provisions of section 530C of the Corporations Act 2001 (Cth). YOU ARE HEREBY AUTHORISED between the hours of 8.00 am and 6.00 pm with such help as is reasonably necessary to: - (a) enter on or into the premises, using such force is as necessary for the purpose and is reasonable in the circumstances; (b) search the premises for the property as set out in the schedule; (c) break open, and search for the property, any building, room or receptacle whether a fixture or not, on or in the premises; (d) take possession of or secure against interference any property of the company found on or in the premises; and (e) deliver to the liquidator or person authorised in writing by the liquidator for the purpose any property of the company of which possession is taken under the warrant. SCHEDULE (a) the following motor vehicles registered in the name of the company: No. Make Model Colour VIN/Chassis # 1 KTM 4T-EXC Racing Orange VBKEXA402DM315901 2 Torino Wangye WY125T-21 Blue LFFWJT215C1000061 Series 3 Ferrari 308 Red F106AL13994 4 Ford Mustang 1 White 5R09C134573 5 Harley FLH Series Black 5HD1KRMG5FB601743 Davidson 6 Harley Davidson Softtail Deuce FXFTD White 1HD1BJL44MY010040 7 Mazda B32 White MMOUPOYF100400360 8 Mercedes GLA250 4M White WDC1569462J173266 9 Hamelex HXDT 4 Silver 6D9HXW1TTWMW66178 Trailers 10 Freight Liner FL80 CBU Yellow 1FVXJLBB9RL439841 11 Holden Rodeo White MPATFS26H3T100775 12 Mitsubishi Triton Silver MMAJRKB809D013464 13 Ford Commercial White 6FPAAAJGCM5M41737 14 Toyota Prado Silver JTEBU29J900035846 15 Prestige Trailers Unknown Blue 6C9T20000R2LF3042 16 Home Made 00TRLR Black 6A9T20000W1SS4001

[8]

background 9 The Liquidator is also the liquidator of Josa Constructions Pty Ltd (in liquidation) (Josa Constructions) and Equipment Hire Pty Ltd (in liquidation) (Equipment Hire). He was previously the administrator of both companies. 10 Members of the Apokis family have, at various times, been directors and shareholders of Josa Constructions and Equipment Hire. In particular: (a) Thelma Apokis (Ms Apokis) is the sole director and secretary of Josa Constructions and Equipment Hire; (b) Ms Apokis is the sole shareholder of Equipment Hire; and (c) the third defendant was previously the sole director and secretary of Josa Constructions and Equipment Hire and is a shareholder of Josa Constructions. 11 The Company, Josa Constructions and Equipment Hire appear to be a part of a larger group of companies that operate under the name "JG Corp". On the website for "JG Corp" it describes itself as a "locally based sewer, water and stormwater civil construction and sub-divisional contractor". Further: (a) the second defendant is described as the "Managing Director"; and (b) the third defendant is described as the "CEO of J Group". 12 The Company has known creditors totalling $162,861.55 according to the proofs of debt received so far by the Liquidator. However, the plaintiffs contend that the advised creditor amount is $5,473,739.83. Neither of those amounts include any claim by the Australian Taxation Office (ATO). 13 On 29 May 2020, the ATO advised that there is presently no claim in the administration of the Company, but noted that there may be a claim by the ATO when the: (a) income tax returns for the years ending 30 June 2016 to 30 June 2020 are lodged and issued; (b) annual payment summaries for the years ending 30 June 2017 to 30 June 2020 are lodged and issued; and (c) activity statements for the quarters January to March 2018, April to June 2018, July to September 2018, October to December 2018, January to March 2019, April to June 2019, July to September 2019, October to December 2019, January to March 2020 and April to June 2020 are lodged and issued. 14 According to the proofs of debt received to date, Josa Constructions has known creditors of $3,552,916.23 and Equipment Hire has known creditors of $2,334,752.70. 15 As a result of his investigations into the affairs of the Company to date, the Liquidator has identified several possible causes of action, including with respect to: (a) the existence of a scheme designed to defraud the ATO by the non-reporting and non-payment of its taxation liabilities; (b) whether the business of the Company, Josa Constructions and Equipment Hire may have been illegally phoenixed to one or more companies within the broader corporate group; and (c) claims against related parties.

[9]

relevant legal principles 16 As Davies J recently stated in Brooks (Liquidator) v Bull, in the matter of DV Bull Pty Ltd (in liq) [2021] FCA 967 at [7], there are three requirements for an order to be made under s 530C of the Act: (1) the company is being wound up; (2) the application is made by a liquidator; and (3) the Court must be satisfied that the person has: (a) concealed or removed property of the company with the result that the taking of the property into the custody or control of the liquidator will be prevented or delayed; or (b) concealed, destroyed or removed books of the company or is about to do so. 17 There can be no issue that the first and second requirements are satisfied in the current circumstances. 18 I turn now to consider whether the third requirement is satisfied. 19 The factors that the Court should consider in determining whether to make an order pursuant to s 530C of the Act were usefully summarised by Banks-Smith J in Carello (Liquidator), in the matter of Drilling Australia Pty Ltd (in liq) (2019) 139 ASCR 187; [2019] FCA 1563 at [6]-[9], which I gratefully adopt: 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 Ltd (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]. 20 In Tang (liquidator) v Wright, in the matter of Wright's Transport Pty Limited (in liq) [2020] FCA 709 Stewart J stated at [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 119, 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]. (Emphasis omitted.)

[11]

Books and records 22 The Liquidator has received no books and records of the Company from the first defendant, despite issuing letters and notices pursuant to s 530A of the Act requesting their production on 8 May 2020 and 30 October 2020. The Liquidator issued a further letter to the first defendant on 4 December 2020 requesting provision of all the Company's books and records as well as a request for information. 23 On 8 May 2020 the Liquidator issued a letter to the second defendant enclosing a notice pursuant to s 530A of the Act requesting the books and records. The plaintiffs submit that on 8 July 2020, the Liquidator received from the second defendant a record box containing approximately 1,000 pages of various tax invoices and payment confirmations issued by the Company dating back to 2016, but no other books and records of the Company. This was despite issuing a request for information on 21 August 2020 and issuing a further request and a notice pursuant to s 530A of the Act on 30 October 2020, requesting that the second defendant deliver to the Liquidator all books and records of the Company in his possession or subject to his control. A further letter was issued on 1 December 2020 requesting information and documentation. 24 The Liquidator has also requested that the third defendant produce to the Liquidator any books and records of the Company in his possession. The request was first made on 6 July 2021, after the Liquidator's attempts to recover the books and records of the Company from the first defendant and the second defendant were, apart from the tax invoices and payment confirmations produced by the second defendant, unsuccessful. 25 On 12 July 2021, the third defendant's solicitor initially requested a 30-day extension of time to respond to the request and then on 17 August 2021 requested a further extension of indeterminate length, although the response requested that the third defendant provide the requested information prior to 17 September 2021. On 22 September 2021 some information was provided by the third defendant's solicitor to the Liquidator but it was stated that the third defendant was "continuing to collate information". The information provided comprised a one page summary email, a one page schedule of vehicles no longer owned by the Company and some 38 pages of detailed spreadsheets purporting to explain transactions on the Company's accounts but including somewhat formulaic explanations for transactions such as: "Funds transferred from another/separate account to pay invoice"; "Transfer from separate unrelated account to pay JCG wages & supplier/contractor invoice" and "Transfer from separate unrelated account to pay JCG financial repayment". What would appear tolerably clear, however, is that the author or authors of the spreadsheets must have had access to a considerable quantity of books and records of the Company in order to prepare the spreadsheets. These are books and records which the Liquidator submits the defendants have failed to provide to him. 26 The Liquidator has received some books and records of the Company from third parties, however there are books and records that the Liquidator expected the Company would have maintained and which, so far, have not been produced to the Liquidator.

[12]

Company Vehicles 27 According to the records maintained by New South Wales Roads and Maritime Services (RMS), there are seventeen motor vehicles last registered in the name of the Company (Company Vehicles). The RMS records reveal that the ownership of none of the Company Vehicles have been transferred to any other person or entity and each would thus appear to remain property of the Company, although none are currently registered. The Company Vehicles include a Ferrari, a Mercedes, Harley Davidson motorcycles and four wheel drive utility vehicles. 28 The Liquidator has not been able to identify any monies having been paid to the Company as consideration for the Company Vehicles. 29 Further, the Liquidator does not believe that, at the date of his appointment or shortly prior to that time, any of the Company Vehicles were subject to finance. That is, the Liquidator does not believe that the persons or entities presently in possession of the Company Vehicles paid out any finance secured by the vehicles which might be said to amount to consideration. 30 As previously discussed, the Liquidator has made requests of the first defendant for her to provide details of all of the assets of the Company and to deliver up any assets of the Company in her possession, which she has not responded to. Further, despite the fact that the Company Vehicles were last registered in the name of the Company and the RMS records do not reveal any change of ownership, the first defendant stated that the Company had no assets in her "Report on Company Activities and Property" dated 5 May 2020 and provided to the Liquidator on his appointment. 31 The Liquidator has also made requests of the second defendant requesting, inter alia, that he provide details of any vehicles owned by the Company. Those requests were made on 21 August 2020, 6 November 2020 and 1 December 2020. The Liquidator received no responses to those requests other than the email from the third defendant's solicitor on 22 September 2021. The email does not disclose the existence or location of any of the Company Vehicles. Rather, according to the email, the third defendant is not aware of any vehicles that are "currently in the Company's name".