Richard Albarran in his capacity as liquidator of Krisnic Nominees Pty Ltd (in Liquidation) (ACN 634 372 437) v Kristofer Wczesniak

A brief overview and chronology

1. It would appear that the Company traded as a business known as Gecco Gifts and/or Gecco Gifts International (ABN 97 594 558 388) (Gecco Gifts), through which it sold retail and wholesale gifts.
2. It would also appear the Company maintained a bank account with the National Australia Bank with the account number ending in 5718, which recorded credits and debits with "Gecco" in the particulars.
3. As set out above, the Company was wound up by order of the Supreme Court of New South Wales on 20 March 2024 and the Liquidators were appointed.
4. By letter dated 21 March 2024, the Liquidators wrote to Mr Wczesniak advising of their appointment and, inter alia, attached a notice for the Production of Books and Records in accordance with the provisions of ss 530A and 530B of the Corporations Act 2001 (Cth) (Corporations Act). The letters stated "we require copies of any records in your possession".
5. The letter also requested that Mr Wczesniak provide, by no later than 12pm on Friday 22 March 2024: 1. A copy of each Trust Deed for each Trust in respect of which the Company was, or has been at any time, the Corporate Trustee; 2. The names of each Trust in respect of which the Company was, or has been at any time, a Corporate Trustee; and 3. A list of each Trust's assets.
6. By letter dated 11 April 2024, the solicitors for the plaintiffs sent a letter to the second defendant, being the company (TREG Nominees), of which the third defendant (Ms Hilder) is the sole director and secretary, requesting that TREG Nominees deliver up to the Liquidators the books and records of the Company. I explain the inter-relationship between the Company, TREG Nominees and Ms Hilder below.
7. On 30 March 2024, it appears that a circular was issued to customers of the Company in the following terms: Subject: Important Update: Change in Company Bank Account Details - THIS IS NOT A SCAM: Gecco Gifts Dear Treasures Cards & Gifts, I hope this message finds you well. We wanted to inform you of an important update regarding our company's bank account details. Due to unforeseen circumstances, we have had to chnge [sic] our financial institution. Effective Immediately,.please note the OLD bank account details for Gecco Gifts - Bank Name: NAB I National Australia Bank - Account Name: Krisnic nominees P/L T/A Gecco Gifts - BSB Number: 082 356 - Account Number: 95 843 7518 - Effective lmmediately,.please note the NEW bank account details tor Gecco Gifts - Bank Name: Westpac - Account Name: TREG Nominees P/L ATF GNN Wholesale Group Trust T/A Gecco Gifts - BSB Number: 032 111 - Account Number: 447186 We understand the importance of maintaining clear and accurate financial records, and we kindly request you to update your records with the new information at your earliest convenience. Should you have any questions or require assistance with updating the payment information, please do not hesitate to reach out to our customer service team at Gecco Gifts Head Office 61+ (02) 9651 5176. We sincerely apologize for any inconvenience this change may cause and appreciate your prompt attention to this matter. Angela McGill
8. On its face, the circular advises of a change in the Company's bank account details, from a bank account formerly in the name of the Company trading as Gecco Gifts, to a bank account in the name of TREG Nominees Pty Ltd as trustee for GNN Wholesale Group Trust trading as Gecco Gifts. The "OLD bank account" referred to in the circular is the bank account which the Liquidators have identified as the Company's bank account with National Australia Bank.
9. Ms Hilder is an equal shareholder of the Company with Mr Wczesniak and resides at the same address.
10. These proceedings were commenced by summons on 5 April 2024. The summons seeks certain interlocutory relief including an order restraining Mr Wczesniak, TREG Nominees, and Ms Hilder (the Defendants) from trading as Gecco Gifts and/or Gecco Gifts International, and from transferring, disposing or otherwise alienating any stock, equipment or plant held in the control of any of the Defendants for the purposes of carrying on business as Gecco Gifts and/or Gecco Gifts International. Interlocutory relief is also sought seeking to reverse the effect of the circular referred to above in [12]. The summons seeks final relief in relation to the property of the business trading as Gecco Gifts and/or Gecco Gifts International and, inter alia, a declaration that any monies received by TREG Nominees are held on trust for the Company.
11. Short service was granted on the summons and it was made returnable on 9 April 2024. On that day, there was no appearance for the Defendants and the Court made the following orders: 1. UPON the first and second plaintiffs in their capacity as liquidators of the third plaintiff, and the third plaintiff itself, its servants and agents, giving to the Court (by Mr RD Turnbull of counsel) the usual undertaking as to damages, ORDER that the defendants be restrained from: a. trading as Gecco Gifts or Gecco Gifts International (ABN 97 594 558 388) or both; b. causing or encouraging any other person to trade as Gecco Gifts or Gecco Gifts International (ABN 97 594 558 388) or both; c. accessing, transferring funds from, or otherwise disposing of funds from the following bank accounts: i. the following account: Name: TREG Nominees Pty Ltd atf GNN Wholesale Group Trust t/as Gecco Gifts Bank: Westpac Banking Corporation Branch: Shop GR51, Rouse Hill Town Centre, Rouse Hill NSW 2155 Number: 447 186; BSB: 032 111; and ii. any other bank accounts held wholly or partly by any one or more of the defendants for the purposes of carrying on business as Gecco Gifts or Gecco Gifts International (ABN 97 594 558 388) or both; d. transferring, disposing, dealing with, encumbering or otherwise alienating any stock, equipment or plant held or under the control of any of the defendants for the purposes of carrying on the business Gecco Gifts or Gecco Gifts International (ABN 97 594 558 388) or both. 2. UPON the undertakings to the Court noted in order 1, ORDER that on or before 4 pm on 10 April 2024, the defendants cause each of the recipients of the email titled "Subject: Important Update: Change in Company Bank Account Details - THIS IS NOT A SCAM: Gecco Gifts" dated 30 March 2024 be notified in writing that: a. Gecco Gifts and / or Gecco Gifts International are businesses carried on by Krisnic Nominees Pty Ltd (In Liquidation); b. The notification about the change in bank account details and the purported transfer of the business trading as Gecco Gifts and / or Gecco Gifts International from Krisnic Nominees Pty Ltd (In Liquidation) to TREG Nominees Pty Ltd was not authorised by the liquidators of Krisnic Nominees Pty Ltd (In Liquidation); c. The recipients are to pay any moneys owed to Gecco Gifts or Gecco Gifts International or both to the original bank account being: Bank: National Australia Bank Limited Branch: Marrickville Metro, Marrickville NSW 2204 Name: Krisnic Nominees P/L T/A Gecco Gifts BSB Number: 082 356 Number: 95 843 7518. 3. ORDER that the defendants provide to the plaintiffs a copy of the communication, including the recipients of the communication, sent in accordance with Order 2, within 12 hours of the communication being sent.
12. On or about 11 April 2024, the Liquidators attended the warehouse where it was understood that the business used to store its stock. It was observed that all the stock had been removed from the warehouse.
13. The matter was next before the Court on 17 April 2024. There was no appearance by the Defendants. The Court made the following orders on 17 April 2024: 1. UPON the undertaking of the plaintiffs recorded in order 1 of the orders made on 9 April 2024, ORDER that the defendants, no later than 5pm on 19 April 2024, deliver up to the plaintiffs at Lloyds Auctions, 60 Marple Avenue, Villawood NSW 2163 such of the property as in their possession, custody and control belonging to: a. the business trading as Gecco Gifts or Gecco Gift International (ABN 97 594 558 388); and b. the Third Plaintiff, Krisnic Nominees Pty Ltd (in Liquidation) (Company), 2. UPON the undertaking recorded in order 1, ORDER that the Defendants no later than 5pm on 19 April 2024 provide to the plaintiffs an itemised account of: a. the items removed from the warehouse from which the business of the Company traded prior to it being placed into liquidation, being the real property at Unit 21, 252 New Line Road, Dural NSW (Property) setting out: i. the items removed; ii. the quantity of items removed; iii. the purchaser(s) of the items removed; and iv. the value or price or both of the items removed; and b. all assets of the Company, whether in the Property or removed from the Property. 3. ORDER that the Defendants no later than 5pm on 19 April 2024 provide to the plaintiffs an itemised account of the assets of the GNN Wholesale Group Trust.
14. By order 6 made on 17 April 2024, the Court also granted leave to the plaintiffs to issue subpoenas to Mr Wczesniak and Ms Hilder for the production of documents, such subpoenas to be returnable on 22 April 2024. The subpoenas sought, in substance, production of the books and records of the Company, together with any trust documents in relation to the Company and in relation to TREG Nominees.
15. By email dated 22 March 2024, Mr Wczesniak indicated to the Liquidators that Mr Jason Hammond, who appears to be an accountant associated with Mr Wczesniak, was representing Mr Wczesniak and had full authority to act on his behalf. Pursuant to this email and acting on Mr Wczesniak's behalf, on 17 April 2024, Mr Hammond sent an email to the plaintiffs' solicitors stating: Alec In regards to the subpoena, there is nothing to produce. The business have [sic] ceased to trade, there is no stock or assets and you have closed the bank accounts. There is no money going into the accounts and the liquidator once he starts to do his job will find there are no debtors. So again, I don't know what all the fuss is about. I gather you all though there was a pot of gold they were hiding and you thought it was prudent run a [sic] some fees. I am in the process of bankrupting the directors. Regards, Jason
16. The matter was next before the Court on 22 April 2024. There was no appearance by the Defendants and there was no production in response to either subpoena.
17. The subpoenas were stood over to 24 April 2024 before me as the Duty Judge and the matter was otherwise returnable before myself on that date. There was no appearance by the Defendants and no documents produced in response to the subpoenas.
18. To complete the evidentiary picture, on 17 April 2024, Mr Hammond asserted that: The items removed from the warehouse were items owned wholly by Lisnic Pty Ltd and not the assets of Krisnic Pty Ltd. The lease on the warehouse had been terminated and they had to remove there [sic] items last week.
19. According to a company search for Lisnic Pty Ltd, it does not appear to have any relationship with any of the Defendants.
20. Further, on 11 April 2024, Westpac Banking Corporation produced documents in answer to a subpoena issued by the Court on the application of the plaintiffs.
21. One of the copy documents produced under that subpoena was a "Deed of Establishment - Discretionary Trust" in relation to the GNN Wholesale Group Trust dated 13 January 2022. The Company was the trustee of the trust. Mr Wczesniak and Ms Hilder were the designated beneficiaries of the trust.
22. A further document was produced by Westpac entitled "Deed of Amendment - GNN Wholesale Group Trust" dated 7 February 2024. By that document, Mr Wczesniak resigned as appointor under the trust, and appointed Anthony Francis Hackett under the trust. A further document produced by Westpac is a "Deed of Amendment - GNN Wholesale Group Trust" dated 8 February 2024 by which TREG Nominees appears to have been appointed a trustee of the trust.

Relevant Legal Principles

1. The orders sought by the plaintiffs are based on ss 68 and 108 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act).
2. In Hexiva Pty Ltd v Lederer [2006] NSWSC 561, Brereton J stated at [13]-[16]: [13] Civil Procedure Act, s 68, provides that subject to rules of the court, the court may, by subpoena or otherwise, order any person to, inter alia, attend court to be examined as a witness. [14] The law relating to the procedure to be followed when a party who has issued and served a subpoena for production wishes to test the sufficiency of compliance with that subpoena was discussed by Beaumont J in Trade Practices Commission v Arnotts Limited (No 2) (1989) 21 FCR 306. His Honour referred to what had been written by Moffitt J in H H Glass, Seminars on Evidence (1970) (at 10-11). Moffitt J, in that extrajudicial writing, observed that there seemed no reason why the court should not have a discretion to ask of a person, who was required to produce documents on subpoena, questions to ascertain the sufficiency of compliance, either informally or on oath. He continued: In exercising such a discretion, the court would not infringe the privilege of a person not to incriminate himself, having regard to the fact that deliberate non compliance with a subpoena is a contempt of court with penal consequences ... Any such discretion could not extend as far as conducting a discovery process ... The precise limits of questions of a person subpoenaed to produce documents are debatable, but it seems that a judge could ask and possibly permit to be asked, questions informally or on oath to ensure that the party understood the terms of the subpoena and the documents referred to and his obligation thereunder, including his obligation regarding documents in his possession or power and relating to search ... It would seem, however, that questions could not extend to establishing proof that the person was in contempt of court, nor could they be of the search and inquiry type such as to the person's knowledge as to the location of documents not in his present possession or control, or as to the nature of other documents in his possession not within the scope of the subpoena, or as to his system of books or the like, so that this material could be used to search for other evidence or to enable a different subpoena to be framed. [15] In Arnotts, Beaumont J concluded that, an issue having arisen as to whether or not documents of the type called for by the subpoena in question existed, the appropriate method to be adopted for the determination of that adjectival issue was a matter of judicial discretion. His Honour concluded that the appropriate course in that case was that the witness who had been subpoenaed to produce documents should be sworn, not in the substantive proceedings but in the ancillary application for production of documents pursuant to the subpoena; that that witness should then be examined by counsel for the party calling on the subpoena (implicitly in chief, by non-leading questions, albeit that the witness was the proper officer of Mattingly, the opposing party in the litigation); that counsel for the party with whom the witness was aligned might then also examine the witness; and that those directions were without prejudice to any claim for privilege against self-incrimination which might be made in the course of the examination and also without prejudice to any claim of confidentiality, and on the basis that none of the evidence so given was to be evidence in the principal proceedings or in proceedings in which it might be alleged that there had been a failure to comply with the subpoena. In that way, his Honour sought to preserve a fair balance between permitting Arnotts, who had issued the subpoena, to pursue their inquiries as to the existence of the documents sought, without depriving Mattingly, on the other hand, of its rights to claim privilege in a proper case. His Honour observed that Arnotts may not be able to pursue their inquiries exhaustively, but, on the other hand, Mattingly would have to make out a proper foundation for any claim for privilege. [16] It is worth observing at this stage that Arnotts was a case in which, when a paragraph of a subpoena for production served on Mattingly was called on, Mattingly's officer proper answered that there were no documents to produce in answer to that paragraph of the subpoena. It was not a case in which there had been some production.
3. Orders 1(c) and (d) concern compliance with earlier orders of the Court. Section 108 of the Civil Procedure Act relevantly provides: (1) The court may, subject to and in accordance with the uniform rules, make an order requiring a person bound by a judgment or order - (a) to attend the court to be orally examined as to any material question, or (b) to produce any document or thing that is in his or her possession and that relates to a material question. … (5) For the purposes of this section, the material questions in relation to a judgment or order are - (a) to the extent to which it requires the person bound by it to pay money - (i) questions as to whether any and, if so, what debts are owing to that person, and (ii) questions as to whether that person has any and, if so, what other property or other means of satisfying the judgment or order, and (b) to the extent to which it does not require the person bound by it to pay money, such questions concerning or in aid of the enforcement or satisfaction of the judgment or order as may be specified in the order under this section.
4. In Austress Freyssinet Pty Ltd v Kowalski [2007] NSWSC 1105, where orders were sought by a plaintiff for the oral examination of the defendant under s 108 of the Civil Procedure Act in relation to and connection with compliance with earlier orders made by the Court, Austin J stated at [31]: [31] It seems to me that s 108 provides a useful function in circumstances such as the present. The very limited information available to the plaintiffs, summarised above, is arguably not sufficient for them to conclude that the defendant is in contempt of Windeyer J's orders. It would be an unsatisfactory situation if, in such a case, the person with the benefit of the orders had no other remedy than to commit to an immediate application for punishment for contempt. It is in my view reasonable for a party in the position of the plaintiffs to employ the examination and production procedure with a view to clarifying whether the transfer has led to a resulting trust or the presumption of resulting trust has been rebutted by further facts.

Consideration

1. Having regard to the facts set out above, I was satisfied that this was an appropriate case in which to exercise the Court's discretion to require the Mr Wczesniak and Ms Hilder to attend Court to be examined in relation to their compliance with the subpoenas issued to each of them and the earlier orders of the Court.
2. There is, in my view, an appropriate basis to test the sufficiency of the response to each subpoena - namely, according to Mr Hammond, there are no documents to produce. Given the lack of meaningful response from the Defendants there is little alternative than to order an examination.
3. It is also appropriate, in my view, to order Mr Wczesniak and Ms Hilder to attend Court and be orally examined in relation to compliance with the orders made on 9 and 17 April 2024.
4. The starting point is that the Company operated a business selling physical items, namely gifts. It had a bank account into which its customers paid money. The fact that the Company was a trustee does not relevantly alter the position in terms of the possession of documents. It may be that shortly prior to the liquidation of the Company, it ceased to be the trustee of the GNN Wholesale Group Trust and was replaced by TREG Nominees. The circular issued on 30 November 2024 would appear to suggest that as at the date of the winding up, the Company's bank account continued to be used and by the circular it sought to change the bank account to one that is operated by TREG Nominees.
5. Any transfer of the business and its assets is obviously a relevant matter in the present proceedings.
6. It is difficult to understand there could be no books and records of the Company in the possession of the Defendants. The Company obviously has an obligation to keep financial records (see Corporations Act s 286). Even if the business was transferred so that it was no longer being carried on by the Company but rather was being carried on by TREG Nominees, documents should exist to evidence the transfer. If all of the documents have been transferred to TREG Nominees, then ordinarily they would be produced by Ms Hilder in answer to the subpoena addressed to her.
7. The response given by Mr Hammond, on behalf of Mr Wczesniak that there are no documents to produce is, on its face, open to be questioned.
8. Likewise in the circumstances set out above, it is appropriate in my view that Mr Wczesniak and Ms Hilder be examined in relation to the orders made on 9 and 17 April 2024 and why there appears to have been no compliance with them.
9. There is nothing telling against the making of the orders. Whilst it would be open to the Liquidators to seek to exercise their compulsory examination powers under the Corporations Act in relation to Mr Wczesniak and Ms Hilder requiring them to be examined, and for TREG Nominees to produce documents, pursuing that course would be no less intrusive to the Defendants and would simply add to costs and delay. More importantly, the Liquidators and the Company have properly instituted these proceedings seeking the relief as outlined above. The subpoenas were issued, and the orders properly made in these proceedings. Further, the Liquidators have sought to exercise the powers open to them under the Corporations Act to call for the books and records to be delivered up to the Liquidators. This has not occurred.
10. There will obviously be limits on the nature of the examination in accordance with well understood principles: see, for example, Quach v Vu [2009] NSWSC 131 at [9]ff and GEMI 169 Pty Ltd v Suria Global (L) Pty Ltd (No 2) [2023] NSWSC 427. If necessary, orders can be made formalising the process prior to the commencement of the examinations.

Amendments 30 April 2024 - Correct jurisdiction from "Equity" to "Equity - Duty List" DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 April 2024