Nicolai v Indochina Medical Co Pty Ltd, in the matter of Indochina Medical Co Pty Ltd

REASONS FOR JUDGMENT (REVISED FROM TRANSCRIPT) 1 The plaintiff claims that the defendant is indebted to it in the sum of USD1,972,451.89. The defendant failed to comply with a statutory demand served on it for this sum. The plaintiff commenced this proceeding on 22 February 2012 seeking an order that the defendant be wound up in insolvency. The defendant has opposed the making of that order. It claims to be solvent. In this proceeding, it does not dispute that it owes the debt. 2 In its defence, the defendant has filed a number of affidavits including the following: (a) An affidavit of John Walter Klobas sworn 23 March 2012 to which is annexed the defendant's financial statements for the year ended 31 December 2011. At [14] of this affidavit, Mr Klobas states that the debt is recorded as being owed to the plaintiff in the defendant's financial statements. Bank statements annexed to the affidavit disclose that, at the time the affidavit was sworn, the defendant had only $17,697.05 in cash, which was insufficient to repay the debt in full. (b) An affidavit of John Walter Klobas sworn 16 May 2012. Annexed to the affidavit is an acknowledgement by National Australia Bank (NAB) that USD693,349.93 had been paid into an account in the defendant's name. (c) An affidavit of Vo Van Ban affirmed 16 May 2012, to which is annexed a board resolution of Hanoi French Hospital Company Limited trading as L'Hopital Francais de Hanoi (HFH), the wholly owned subsidiary of the defendant, authorising payment of a dividend of USD1.4 million to the defendant. Also annexed to the affidavit are the financial statements of HFH for the year ending 31 December 2011. (d) An affidavit of John Walter Klobas sworn 1 June 2012, to which is annexed two further acknowledgements regarding the deposit of further funds into the defendant's NAB account, and a bank statement from NAB as at 22 May 2012 disclosing that the defendant has USD2,100,834.77 on deposit in its NAB account. 3 This material would indicate that the defendant has sufficient funds in Australia to repay its debt to the plaintiff. However, as at the present time, the debt remains unpaid. 4 By letter dated 18 June 2012 the plaintiff's solicitors requested that the defendant provide an undertaking to the plaintiff to the effect that it would not: (a) remove from Australia any assets that are now in Australia or would be brought into Australia during the course of the winding up proceeding; or (b) dispose of or deal with or diminish the value of any such assets. 5 On 22 June 2012 the defendant's solicitors responded stating that the defendant would not provide the undertaking that had been requested. 6 By email dated 22 June 2012 the plaintiff's solicitors reiterated the plaintiff's request for an undertaking and outlined the plaintiff's concern that the defendant would remove assets from Australia. On 26 June 2012 the defendant's solicitors responded. They confirmed that the defendant would not provide the undertaking that had been sought. 7 On 4 July 2012 the plaintiff's solicitors sent a letter to the defendant's solicitors requesting certain details concerning the funds that had been deposited into the NAB accounts. That letter also served a notice to produce and requested a release from the implied undertaking not to use information obtained during the course of this proceeding for any other purpose, in the event that the plaintiff commenced debt recovery proceedings or applied for a freezing order in respect of the funds. No response has been received to that letter. 8 The plaintiff moves the Court, ex parte, to be released from the implied undertaking not to use the following documents and information in them other than for the purpose of this proceeding: (a) the affidavit of John Walter Klobas sworn 23 March 2012 and its annexures; (b) the affidavit of John Walter Klobas sworn 16 May 2012 and its annexures; (c) the affidavit of John Walter Klobas sworn 1 June 2012 and its annexures; and (d) the affidavit of Vo Van Ban affirmed 16 May 2012 and its annexures. 9 The plaintiff also seeks to have a "notice of appearance" filed by the defendant on 26 March 2012 released from the implied undertaking. 10 The plaintiff intends to commence proceedings in the Supreme Court of New South Wales today seeking orders that the defendant pay the debt to the plaintiff. In this connection, it intends to apply for a freezing order on an ex parte basis in relation to the funds in the NAB accounts. 11 It has been said that the requisite leave will not be granted unless "special circumstances" have been demonstrated. In Crest Homes Plc v Marks [1987] AC 829, Lord Oliver said at 860: Your Lordships have been referred to a number of reported cases in which application has been made for the use of documents obtained under Anton Piller orders or on general discovery for the purpose of proceedings other than those in which the order was made. Examples were Halcon International Inc v Shell Transport and Trading Co [1979] RPC 97 and Sybron Corporation v Barclays Bank Plc [1985] Ch 299. I do not, for my part, think that it would be helpful to review these authorities for they are no more than examples and they illustrate no general principle beyond this, that the court will not release or modify the implied undertaking given on discovery save in special circumstances and where the release or modification will not occasion injustice to the person giving discovery. As Nourse LJ observed in the course of his judgment in the instant case [at 840G], each case must turn on its own individual facts. 12 In Liberty Funding Pty Ltd v Phoenix Capital Ltd (2005) 218 ALR 283, a Full Court of this Court (following the approach in Springfield Nominees Pty Limited v Bridgelands Securities Limited (1992) 38 FCR 217, which approved Holpitt Pty Ltd v Varimu Pty Limited (1991) 29 FCR 576 and Sweetman v Australian Thoroughbred Finance Pty Ltd (unreported, Lockhart J, 23 July 1992)) said at [31]: … It is unnecessary to examine the authorities in this area in any detail. The parties were not in disagreement as to the legal principles. The notion of "special circumstances" does not require that some extraordinary factors must bear on the question before the discretion will be exercised. It is sufficient to say that, in all the circumstances, good reason must be shown why, contrary to the usual position, documents produced or information obtained in one piece of litigation should be used for the advantage of a party in another piece of litigation or for other non-litigious purposes. The discretion is a broad one and all the circumstances of the case must be examined. … 13 In Springfield, Wilcox J said at 225: … For "special circumstances" to exist it is enough that there is a special feature of the case which affords a reason for modifying or releasing the undertaking and is not usually present. The matter then becomes one of the proper exercise of the court's discretion, many factors being relevant. It is neither possible nor desirable to propound an exhaustive list of those factors. But plainly they include the nature of the document, the circumstances under which it came into existence, the attitude of the author of the document and any prejudice the author may sustain, whether the document pre-existed litigation or was created for that purpose and therefore expected to enter the public domain, the nature of the information in the document (in particular whether it contains personal data or commercially sensitive information), the circumstances in which the document came into the hands of the applicant for leave and, perhaps most important of all, the likely contribution of the document to achieving justice in the second proceeding. 14 I am satisfied that good reason has been shown for the favourable exercise in the present case of the Court's discretion to permit the "notice of appearance" and the identified affidavits to be used in the foreshadowed proceeding to be commenced today by the plaintiff in the Supreme Court of New South Wales, seeking, amongst other things, freezing orders against the defendant. I am satisfied that the plaintiff has established an arguable case on good grounds that the defendant is indebted to him for the amount of USD1,972,451.89 for which a judgment would issue. I am also satisfied that there is a real and not insubstantial risk that any such judgment might not be satisfied. 15 In this latter regard, I note that the defendant does not carry on business. It holds all the shares in HFH which operates a private hospital in Hanoi, Vietnam. The defendant's only substantive operating activity is dealing with issues relating to its shareholding in HFH. The evidence before me is that funds debited or credited to the defendant's bank accounts are primarily the result of loans being made and repaid between HFH and the defendant, and between the defendant and the defendant's shareholders, as well as the payment by the defendant of professional and administrative fees. 16 Funds have been brought into Australia by the defendant and deposited into accounts it holds with NAB, in apparent response to the proceeding in this Court in which the defendant's solvency is in issue. On the present evidence, those funds could easily be repatriated to Vietnam or some other place. In this connection I note that HFH proposes to embark on expanding its hospital operations in Vietnam. It is not without significance that the defendant has refused to provide any assurance to the plaintiff and in particular an undertaking that the funds presently in Australia will remain. 17 There is material before me which shows that an Australian court judgment cannot be recognised and enforced in Vietnam. There is also material before me that shows that it would be very difficult to take security over the defendant's shareholding in HFH (called a "participating interest") that would be enforceable in Vietnam. I am satisfied, in the circumstances, that the plaintiff has established that it has an arguable case for the freezing orders it will seek in the Supreme Court of New South Wales. I am also satisfied that the materials which the plaintiff seeks to have released from its implied undertaking to this Court will be necessary to make good its case in the Supreme Court for those freezing orders. 18 In this connection, it will be necessary for the plaintiff to show by evidence the information obtained in the winding up proceeding in this Court. That information would include the financial position of the defendant, the fact that the debt is not apparently disputed and remains owing, and also the relationship between the defendant and HFH as well as the source of funds which are presently in the NAB accounts. I am satisfied that, if such an order is made, there will be no apparent prejudice to the defendant apart from the fact that proceedings will have been commenced in the Supreme Court. 19 I have remarked on the fact that the present application has been made ex parte. I am persuaded that I should proceed on that basis given that the plaintiff wishes to move without notice for freezing orders. If I were to require the plaintiff to give notice to the defendant of the present application, that would not only delay it in seeking those freezing orders but might also increase the risk that the funds presently in Australia may be removed. Given, however, that the plaintiff has moved ex parte, the granting of leave should be limited to use of the materials to seek the freezing orders. The orders I will make will also include an order granting liberty to apply on 24 hours notice. 20 In all the circumstances, I propose to make the orders as sought in the draft minute which I have discussed with counsel this afternoon. That draft minute includes a number of handwritten amendments. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.