Vartelas v Kyriakou

REASONS FOR JUDGMENT 1 The plaintiff, Mr Vartelas, is the liquidator of Ultimate Furniture Design Pty Ltd (in liq), a company which, before its liquidation, was a furniture manufacturer. The company was wound up in insolvency on 29 October 2009. Locating the company's assets has proved to be very difficult. To assist, the liquidator seeks to have issued a warrant under s 530C of the Corporations Act 2001 (Cth) that will permit the search for, and seizure of, any property and books of the company that are in possession of the defendants. 2 The reason the liquidator seeks the issue of a warrant is set out in his affidavit of 20 November 2009. I will not repeat everything that is said in the affidavit, but it is important to mention the following matters. First of all, the last set of financial accounts prepared on behalf of the company, being the financial accounts for the year ended 30 June 2008, disclose that for some time the company had been trading at a loss. It also had a deficiency of assets over liabilities. Nonetheless, as at 30 June 2008 the company had current assets of $423,137. The assets comprised a small amount of cash (a little over $1,000), inventories and work in progress valued at around $200,000, and trade and other receivables of $208,185. The notes to the accounts explain that the only receivable is a loan to a company described as Jordan Way Pty Ltd. 3 Following his appointment, the liquidator tried to obtain possession of the books and records of the company to enable him to carry out the winding up. In particular, the liquidator wanted to get his hands on all the accounts in order to discover what had become of the assets. His efforts have been frustrated. 4 One reason for this frustration is that the former sole director of the company, Mr Kyriakou, has passed away. Accordingly, the liquidator got in touch with Mr Kyriakou's son, Thomas Kyriakou (the first defendant), to see what had become of the company's assets. The son told the liquidator that about four months earlier the son (or his company, the second defendant) had purchased the company's business. That business is now being conducted by the second defendant. 5 The son did not produce any documents that contained the terms upon which the acquisition took place. He said in substance there was a contract of sale, but did not provide a copy. The son acknowledged that after he established the second defendant it had purchased the business, taken over all employees of the company and paid out all its creditors, apart from a debt due to the Taxation Office. 6 On several occasions the liquidator requested the son to deliver up the books and records of the company. The requests were oral and in writing. 7 In my opinion the evidence suggests a very real possibility that the son, through his company, has simply taken over the assets of the company - goodwill, plant and equipment and customers without any proper accounting. He, or the second defendant, is also likely to be in possession of the company's books and records. 8 Having regard to the son's dismissive attitude to the liquidator, there is a risk that the books and records of the company as well as its assets (if they still exist) will be concealed from the liquidator. 9 In these circumstances it is, I think, appropriate for a warrant to be issued under s 530C. Mr Broberg for the liquidator has provided me with a form of warrant which is based on the form granted in Australian Securities Commission v Samson (1997) 24 ACSR 555. With minor modification, I will direct that the warrant in those terms be issued to be executed at the place of business of the second defendant. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.