JACKSON J:
1 The applicants, Andrew Scott and Scott Pascoe, are the liquidators of All City Recyclers Pty Limited (in liq) (ACR), and ACN 106 976 354 Pty Ltd (in liq), which was formerly named Anderson Waste Services Pty Ltd (AWS). The liquidators seek an order for the issue of a warrant to search for and seize plant and equipment which they say is property of the two companies. The respondent, Southern Highland Waste & Recycling Pty Ltd, has, the liquidators allege, concealed or removed such property.
2 The liquidators bring the application ex parte. I am satisfied that it is appropriate to deal with it on that basis, in view of the nature of the application and the potential that notice of the possibility of the issue of a warrant may frustrate the purpose of any warrant that is issued: see Morton; Incentive Dynamics Pty Ltd (in liq) v Robins & Meissner (1996) 14 ACLC 1197 (Northrop J).
3 Section 530C of the Corporations Act 2001 (Cth) provides:
530C Warrant to search for, and seize, company's property or books
(1) The Court may issue a warrant under subsection (2) if:
(a) a company is being wound up or a provisional liquidator of a company is acting; and
(b) on application by the liquidator or provisional liquidator, as the case may be, or by ASIC, the Court is satisfied that a person:
(i) has concealed or removed property of the company with the result that the taking of the property into the custody or control of the liquidator or provisional liquidator will be prevented or delayed; or
(ii) has concealed, destroyed or removed books of the company or is about to do so.
(2) The warrant may authorise a specified person, with such help as is reasonably necessary:
(a) to search for and seize property or books of the company in the possession of the person referred to in subsection (1); and
(b) to deliver, as specified in the warrant, property or books seized under it.
(3) In order to seize property or books under the warrant, the specified person may break open a building, room or receptacle where the property is or the books are, or where the person reasonably believes the property or books to be.
(4) A person who has custody of property or a book because of the execution of the warrant must retain it until the Court makes an order for its disposal.
4 In the present case affidavit evidence on which the liquidators rely establishes the following matters.
5 ACR and AWS were incorporated in November 2003. As at the date of liquidation the sole director of each company was Jarrett Nottage. The two shareholders of each company (as to 50% each) were Paul Nottage Investments Pty Ltd and Mark Nottage Investments Pty Ltd. Searches of those companies at the Australian Securities and Investments Commission (ASIC) reveal them to be under the control of Paul and Mark Nottage respectively. Jarrett Nottage is Paul Nottage's son. Mark Nottage is Paul Nottage's brother. There is evidence that before Jarrett Nottage became a director, other members of the Nottage family acted as sole director of the companies. One of those former directors, Michael Buratovic-Nottage, is another son of Paul Nottage's, and Jarrett Nottage's half-brother.
6 Mr Scott deposes that ACR and AWS and a third company, PLN Transport Pty Ltd, ran a waste management and metal recycling business from about 2003 until about March 2016. Paul Nottage was the sole director and shareholder of PLN when it entered a creditors' voluntary winding up on 14 June 2019. Trent Devine (who is from a different firm to Mr Scott and Mr Pascoe) is the liquidator of PLN.
7 Mr Scott's evidence is that ACR, AWS and PLN were all members of a group of companies. I accept that to be the case, in view of the overlapping shareholdings and the fact that the present and past directors and direct and indirect shareholders are all members of the Nottage Family.
8 In the course of the business, ACR, AWS and PLN used plant and equipment including trucks, trailers, forklifts, skip bins and cranes. At the time they ceased to operate the business, the companies were running it from a yard at Moss Vale, New South Wales, approximately 120 km south west of Sydney, as well as certain other premises.
9 When the business, as operated by those three companies, ceased to trade in March 2016, Mark Nottage took some of the plant and equipment. He has made admissions to the liquidators to that effect and has given them undertakings with which they are presently satisfied.
10 The respondent, Southern Highlands, was incorporated on 6 April 2016. Michael Buratovic-Nottage is the sole director and has been since incorporation. Paul Nottage Investments Pty Ltd is its sole shareholder.
11 From its incorporation, Southern Highlands has listed the Moss Vale yard in ASIC records as its principal place of business. The company carries on a waste management and metal recycling business, that is, the same type of business that ACR and AWS ran from premises which included the Moss Vale yard until about 31 March 2016, about a week before Southern Highlands was incorporated. Southern Highlands trades as 'Anderson Waste Services'. It uses equipment which has that name on its livery, and it appears to operate the web site andersonwasteservices.com.au, even though there is evidence that ACR is the owner of that domain name.
12 The applicants were appointed as provisional liquidators of ACR on 18 December 2018, as liquidators of AWS on 18 December 2018, and as liquidators of ACR on 13 February 2019 (in the case of ACR, at least, on the petition of Mark Nottage Investments Pty Ltd).
13 There is evidence that during the course of the liquidations, Mr Buratovic-Nottage and the solicitor for Southern Highlands have repeatedly failed to comply with requests from the liquidators for assistance and information. Mr Scott deposes that the only time they have received substantive cooperation from Southern Highlands and Mr Buratovic-Nottage has been under compulsion by order of the court.
14 The liquidators found on their appointment as provisional liquidators that the books and records of ACR to which they had access were limited, and this hindered a full investigation of the company's affairs. The director of ACR, Jarrett Nottage, and professional advisors associated with ACR did not comply with repeated demands for the production of the company's books.
15 The liquidators did not receive a substantial quantity of ACR's books until this court, on their application, made orders for the production of a wide variety of documents by persons including Southern Highlands. Production was required by 28 August 2019. At the same time the court made orders for liquidators' examinations which were to commence on 24 October 2019. Southern Highlands, through Mr Buratovic-Nottage, produced some 31 boxes of documents, which he said in an email was 'all the paperwork pertaining to all city recyclers [sic] That [sic] was requested'. However he did not proffer the documents until 8 October 2019 and they were not delivered until 15 October 2019, nine days before the liquidators' examinations commenced. The return of the order for production had been repeatedly stood over in the meantime.
16 There is evidence that Mr Buratovic-Nottage, as well as being the director of Southern Highlands, purported to act on behalf of ACR and AWS in dealings with the liquidators. Those dealings included repeated attempts to arrange a meeting with Mr Buratovic-Nottage to discuss ACR's affairs. While Mr Buratovic-Nottage has held himself out as able to communicate with the liquidators' solicitors on behalf of ACR, and invited the liquidators to arrange a meeting through his solicitors, repeated attempts to do so proved fruitless and the meeting never occurred. The evidence about those attempts displays a pattern of Mr Buratovic-Nottage or his solicitors appearing amenable to making the necessary arrangements, but then not returning emails or telephone calls, so that true cooperation did not emerge.
17 That pattern was followed after, on 19 March 2019, the solicitors for the liquidators wrote to Southern Highlands on behalf of ACR, claiming that ACR had a 'beneficial interest in assets which are, or have been, in the name, possession or control' of Southern Highlands. The letter sought details of all of Southern Highlands' assets, whether in its name or not and whether solely or co-owned, certain other information, and an undertaking not to dispose of the assets other than in the ordinary course of business. It sought these things by 22 March 2019.
18 On 2 April 2019 solicitors for Southern Highlands responded saying that their client had reviewed the plant and equipment on its site and it was:
apparent following that review that there are some items that appear likely to be the property of All City Recyclers Pty Limited (in liquidation).
Our client is currently preparing a list of those items and are [sic] prepared to grant your clients access to the premises to inspect them. Of course, our client undertakes not to remove or dispose of any items identified.
Our client may be prepared to offer to purchase some of the items that may be identified, subject to our further instructions.
We will be in further contact shortly. Please contact me if you wish to discuss.
19 While the tone of the email is not uncooperative, in substance it provided little by way of assurance to the liquidators. The access proposed, the informal undertaking given, and the suggestion of purchase of assets, all relate to the items to be identified in the promised list. Without the list, those matters could not avail the liquidators.
20 The list has not been provided. On 10 April 2019 the solicitors for ACR wrote back asking when they could expect to receive it. They have received no response and no undertaking in the form requested in their letter of 19 March 2019. Mr Scott deposes that after that, the liquidators decided to seek funding to pursue compulsory examinations, which they did by way of application made on 12 August 2019.
21 It is also relevant to note than between January and May 2019, the liquidators demanded repayment of a debt said to be owing by Southern Highlands to ACR. This culminated in the service on about 24 May 2019 of a statutory demand for approximately $25,000. Southern Highlands has neither applied to set the statutory demand aside nor paid the amount of the demand.
22 As well as the acknowledgment in the email of 2 April 2019 which is mentioned above, there is evidence arising from the liquidators' examination to the effect that Southern Highlands has specific items of equipment in its possession. I do not propose to go into that evidence in any detail. But it indicates that when ACR and AWS ceased trading at the Moss Vale yard, Southern Highlands began to use much of the equipment that ACR or AWS had been using at that location. There is no evidence of any sale contracts for the transfer of assets from ACR (or AWS) to Southern Highlands. There is evidence of a payment having been made to ACR attributable to one of the items of equipment, but that item remains registered in ACR's name. In any event a purported transfer of property, such that it is no longer under the control of a company, does not prevent orders being made under s 530C: Re Steel Tigers Pty Ltd [2014] NSWSC 1748 at [17].
23 The liquidators formed the view after the examination summons that writing to Southern Highlands to demand the return of property of ACR or AWS held by it would give rise to a significant risk that Southern Highlands would adversely deal with the assets.
24 There is also evidence that certain items of equipment at the Moss Vale yard are either registered in the name of ACR, or appear on a draft depreciation schedule for that company. I am therefore satisfied that Southern Highlands has plant and equipment belonging to ACR in its possession at the Moss Vale yard.
25 The liquidators relied on another list in the records of ACR as evidence that a larger number of items belonging to ACR and AWS were also at the yard, and seek that these assets be specifically itemised in the warrant. However that list is not recent, as it dates from 2014, and why it was prepared, what it covers, and exactly whose property it contains is uncertain. I am not satisfied that the assets on it are assets of ACR unless they are also listed in one of the other two documents I have mentioned. And there is no substantial basis in the evidence to conclude that Southern Highlands has possession of any property of AWS.
26 The court's power to authorise the issue of a warrant under s 530C is discretionary but the discretion is only enlivened if the court is satisfied that the elements of s 530C(1) have been established: Re Ezyclad Pty Ltd (in liq) [2014] VSC 66; (2014) 98 ACSR 38 (Robson J). Clearly the first element, that ACR and AWS are being wound up, is satisfied. The warrant is sought by application of the liquidators. For reasons I have given, I am also satisfied that property of ACR is in the possession of Southern Highlands. The authorities show that the requirement that the property be concealed or removed has been given an interpretation which encompasses, among other things, 'a very real possibility the assets of the company have been taken over without any proper accounting' (Vartelas v Kyriakou [2009] FCA 1489 at [7] (Finkelstein J)) or that property has been transferred to another company without proper accounting and is being used in another company's business (Crisp, in the matter of Buchanan Group Holdings Pty Ltd v Iliopoulos [2011] FCA 1521 at [11] (Kenny J)). On the evidence that I have described above, I am satisfied that assets of ACR have been and continue to be used in the business of Southern Highlands without proper accounting. The fact that Southern Highlands has assets of ACR and has not cooperated with the liquidators to identify them has already delayed the taking of the assets into the custody or control of the liquidators, and if the warrant is not issued will continue to cause delay. The elements necessary to give rise to the discretion to issue the warrant in respect of ACR have been established.
27 However I am not satisfied that the evidence establishes those matters in relation to any property of AWS. It is simply not possible on the evidence presented to be satisfied to the standard of the balance of probabilities that any assets of AWS are in the possession of Southern Highlands. For that reason no warrant will be issued in respect of AWS.
28 Counsel for the liquidators submitted that the court was empowered nevertheless to make an order at least authorising the liquidators to search for, if not seize, property of AWS at the Moss Vale yard, at the same time as they execute the warrant in respect of ACR. It was submitted the court has an inherent power to make an order of this kind, or that the power could be found in s 23 of the Federal Court of Australia Act 1976 (Cth). However, even if that power exists, I would not exercise it in this case. The issue of a warrant is a serious incursion into the rights that Southern Highlands and those controlling it would otherwise have to withhold access to the yard and to equipment held there. I do not consider that it would be appropriate to authorise a search which s530C contemplates will be authorised by the issue of a warrant, where here the necessary elements to enliven the power to issue a warrant have not been established.
29 Returning to ACR, should the discretion which does arise there be exercised to issue a warrant? In applications under s 530C, Cvitanovic v Kenna & Brown Pty Ltd (1995) 18 ACSR 387 is often cited for the statement that the section provides a remedy of last resort. The full passage from Young J's reasons in that decision (at 388) is:
It seems to me that s 530C must be a remedy of last resort. It is ordinarily only if the liquidator has taken all reasonable precautions to acquire the books and records by more conventional means that the court will be tempted to authorise the issue of a warrant. I say "ordinarily" because there is always the special case where the conduct of the directors has been such as to show that it is a mere beating of the air to do anything but go for the ultimate remedy in the first instance. However, ordinarily one would expect the liquidator to make a polite request and a statutory request under s 530B(4) of the Corporations Law before applying for a warrant under s 530C.
30 Later on in the decision his Honour said (at 389):
I repeat that the court will not encourage liquidators to apply for warrants under s 530C. There have been other areas in our history where job satisfaction is given to officers of government departments by allowing them to conduct raids on citizens and that is not to be encouraged in liquidators. The warrant procedure is only there for the most extreme case where it is necessary to take an extreme step in order to administer the company. Liquidators often have to put up with irritations in not having the whole of the records, and sometimes it must be appropriate for them to put up with those irritations rather than put the citizen in fear of a raid on his or her home.
31 Young J was dealing with what he understood to be the first case seeking the issue of a warrant under s 530C and, with respect, his caution in that situation was understandable. It is also notable that his observations concerned the 'irritations' of not having books and records, where s 530B provides its own compulsory statutory procedure for obtaining them. In the present case, there is no equivalent to s 530B for property of ACR other than books or records, and the liquidators have provided evidence that their ability to provide a return to creditors is largely contingent upon their ability to recover the assets of the companies from Southern Highlands. That goes beyond irritation.
32 To the extent that any general principle can be expressed on the subject of the discretion under s 530C, in my view it should be limited to saying that it is to be exercised judicially having regard to all relevant circumstances, while bearing in mind that to execution of a warrant to enter premises, 'break open a building, room or receptacle' and seize assets or records, is a serious incursion on the rights of the persons affected by it, and should not be authorised lightly.
33 The evidence I have outlined gives rise to an inference that Southern Highlands has been the vehicle for phoenix activity in respect of the former business of ACR. That is because of the involvement of members of the Nottage family including Paul Nottage and Michael Buratovic-Nottage in both companies, and the fact that Southern Highlands took over the equipment that ACR was using and commenced trading from the same premises using the same business name. It would not be appropriate to make a firm finding of phoenix activity on an ex parte application of this sort. But the fact that there is a real possibility that it has occurred is relevant to the risks that the administration of ACR will face if its assets are permitted to remain in Southern Highlands' possession, and is in favour of the issue of a warrant.
34 The lack of cooperation I have outlined also supports the issue of the warrant, including Southern Highlands' omission to give any meaningful undertaking to preserve the assets while at the same time conceding that it does have assets of ACR. The evidence the liquidators have adduced that ACR has substantial creditors, and that the recovery of plant and equipment belonging to the company is the only chance they have of obtaining a return, is also in favour of exercising the discretion.
35 The main reservation I have about ordering the issue of the warrant is that Southern Highlands is using the assets in its business, and if some of the property seized turns out not to belong to ACR, the loss of the use of them may prejudice that business.
36 The liquidators have provided evidence as to the procedure they will adopt if a warrant issues. They will be accompanied by a police sergeant as well as their solicitor and representatives of a professional auction house, who will take any property seized into secure storage. The liquidators do not presently seek any order for the disposal of the property under s 530C(4), so the equipment will remain in storage until a further order of the court. In order to minimise the prejudice to Southern Highlands from any potential seizure of assets which turn out not to belong to ACR, is appropriate to provide for that company, or any other affected person, to file a notice of appearance in these proceedings within seven days so that any dispute as to ownership of an asset can be resolved as quickly as possible, and also to provide for liberty to apply on shorter notice.
37 In all these circumstances I am satisfied that this is an appropriate case for the issue of a warrant, albeit in a form modified to reflect my findings as to what specific assets are property of ACR, and the lack of any finding that property held by Southern Highlands is an asset of AWS.
I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jackson.