Altain Khuder LLC v IMC Mining Inc (No. 3)
[2011] VSC 105
•15 March 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST G
No. 03827 of 2010
| ALTAIN KHUDER LLC | Plaintiff |
| v | |
| IMC MINING INC and IMC AVIATION SOLUTIONS PTY LTD (formerly known as IMC MINING SOLUTIONS PTY LTD) (ACN 069 083 094) | Firstnamed Defendant Secondnamed Defendant |
---
JUDGE: | CROFT J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15 March 2011 | |
DATE OF JUDGMENT: | 15 March 2011 | |
CASE MAY BE CITED AS: | Altain Khuder LLC v IMC Mining Inc & Anor (No. 3) | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 105 | |
---
PRACTICE AND PROCEDURE – Ancillary disclosure orders – scope and interpretation – whether substantial compliance – whether evidence supports alleged dissipation of assets – orders stayed pending expedited appeal hearing.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P. Megens, solicitor | Mallesons Stephen Jaques |
| For the Firstnamed Defendant | No appearance | |
| For the Secondnamed Defendant and Third Parties (Mr Stewart Charles Lewis; Mr David Allan Thomas; Mr Garry John Benson; Mrs Carolyn Jane Lewis; Ocean Dynamics Pty Ltd; and Ocean Dynamics Australia Pty Ltd) | Mr N. McAteer | HopgoodGanim Lawyers |
HIS HONOUR:
Background
Pursuant to the ancillary orders I made on 9 February 2011, the primary respondent to this application, formerly known as IMC Solutions Pty Ltd (known now as IMC Aviation Solutions Pty Ltd; I refer to it simply as “IMC Solutions”), the first defendant, IMC Mining Inc (“IMC Mining”), and other associated third parties (collectively, “the respondents”), were required to file and serve affidavits in answer to the categories of information stated in those orders. In summary, these orders required the accounting and disclosure of monies or assets paid or provided to or by the primary respondent, IMC Solutions, or between any other related entities, which were in any way connected with the Operations Management Agreement or the Tayan Nuur Iron Ore project.[1] The orders also compelled a number of associated third parties to depose to whether they were aware of any such assets, or if any such assets had come into their possession or control, since 13 February 2008.[2]
[1]The Operations Management Agreement is the contract, containing an arbitration agreement which was the subject of the primary proceeding, for the proposed preparation and operation of a Mongolian iron ore mine at Tayan Nuur: see Altain Khuder LLC v IMC Mining Inc & Anor [2011]VSC 1 at [10].
[2]See paragraphs 5 to 8 of the ancillary orders, dated 9 February 2011.
Applications
Affidavits were duly sworn and the matter returned before me for further hearing on 7 March 2011. After oral submissions were made at the return hearing, I directed the parties to provide written submissions. I also required the applicant (the plaintiff in the primary proceedings), Altain Khuder (“AK”), to provide a clear statement of the nature of the application and the grounds upon which it relied. Despite the respondents’ submissions to the contrary,[3] I am satisfied that this was done in a manner sufficient for present purposes, as reflected in the AK’s submissions.[4]
[3]See paragraph 3 of “IMC Solutions’ Outline of Submissions in Relation to the Ancillary Disclosure Orders Dated 9 February 2011”.
[4]See, “Plaintiff’s Submissions in Support of Enforcement and Extension of Ancillary Order”, dated 14 March 2011, particularly at [1] (extracted in paragraph three, below).
Compliance with ancillary orders
The applicant, AK, complained that the respondents had not complied with the ancillary orders I made on 9 February 2011, and sought further orders, being:[5]
“(i) an order from the Court requiring proper compliance with the Court’s earlier order by each of the Defendants and Respondents, having regard to His Honour’s reasons, within 7 days;
(ii) wider orders to require the existing Respondents to provide evidence of assets (including money) of any type which the Respondents have received since 13 February 2008 from either the First or Second Defendant and whether by gift or otherwise, including assets which any associated entity of any Respondent has received from the First or Second Respondent since 13 February 2008. For this purpose, an ‘associated entity’ in the case of an individual means a company or trust which employs or employed the individual or engaged them as an officer, employee, agent or (in the case of a trust), of which they are a beneficiary. In the case of a corporate entity, it includes any trust of which it is a trustee and whether it receives the asset in its own absolute right and for its own use or in its capacity as trustee or otherwise and it includes any company in which it has a shareholding other (than a public company) and includes a ‘related entity’ within the meaning of those words as contained in the Corporations Act 2001 (Cth);
(iii) an order that IMC Mining Group Pty Ltd and IMC Consultants Pty Ltd be made Respondents to this application and be required to provide the information requested.”
In brief, those orders were: for the Court to require immediate “proper compliance” with the ancillary orders of 9 February 2011; a further order widening of the scope of the ancillary orders; and an order that two further IMC entities, IMC Mining Group Pty Ltd and IMC Consultants Pty Ltd, be made respondents to the ancillary orders and required to provide the information requested.[6]
[5]See “Plaintiff’s Submissions in Support of Enforcement and Extension of Ancillary Order”, dated 14 March 2011, particularly at [1], repeated at [56].
[6]See above, [1].
At the return date hearing, considerable time was spent addressing why the affidavit of Mrs Carolyn Jane Lewis, [7] the sole director of IMC Solutions, which was directed to the knowledge of IMC Solutions, referred to payments made to third parties being either directly to or for the benefit of Mr Lewis, Mr Thomas and Mr Benson, whereas each of the affidavits from those individuals did not refer to those payments. The respondents submitted that, having regard to the penal nature of the ancillary orders, they, as subjects of such orders, were entitled to adopt a literal interpretation. In general terms, I accept that this is the correct approach. The respondents submitted that the affidavit they had submitted complied with such an interpretation of their terms. Thus, they submitted, the proper operation of the ancillary order has been substantially complied with by the provision of affidavit evidence provided to date in this proceeding.
[7]Filed on behalf of the second defendant, and Mrs Carolyn Jane Lewis, “Affidavit of Carolyn Jane Lewis”, dated 4 March 2011 (“First Mrs Lewis Affidavit”).
In response to these matters raised at the return date hearing, Mrs Lewis, Mr Lewis and Mr Benson provided further affidavits dated 14 March 2011, to assure AK and the Court that no other form of payment or asset transfer under the guise of a gift or other description has occurred. It was submitted by the respondents that this should allay any further concern that AK may seek to raise in relation to this issue. For present purposes, I accept this submission.
The applicant also submitted that it was appropriate to consider the purpose of the ancillary orders and their operation in the context of the current circumstances. The principal point made in that respect was, in my view, that when this summons was first heard on 9 February 2011, IMC Solutions had issued a summons in the Court of Appeal, seeking leave to appeal, and a stay of enforcement had not been heard or determined. It was heard subsequently over a period of time, on 11 February, 24 February and 2 March 2011. The result was that the Court of Appeal granted leave to IMC Solutions to appeal and also granted a stay of enforcement until determination of the appeal. The appeal timetable has been fast‑tracked and the appeal is due to be heard on 29 and 30 March 2011.
The respondents submitted that the timetable has required, and will require, extensive work to be undertaken by the parties' respective legal firms, without any real respite for the legal firms or for those instructing them. Mrs Lewis also deposed as to the substantial work that would be required and the effect on the respondents, IMC Solutions, and perhaps other companies.[8]
[8]See paragraph 14 of the First Mrs Lewis Affidavit.
In any event, at this point it should be noted that there has been no refusal on the part of the respondents to fully comply with the ancillary orders; rather, that in all the circumstances more time is required.
Stay of ancillary orders
By summons filed by IMC Solutions with the leave of the Court, on 7 March 2011, IMC Solutions, Stewart Charles Lewis and Carolyn Jane Lewis have applied to discharge or stay the ancillary orders to the extent that they remain outstanding in whole or in part against them. The reason why full disclosure in accordance with the ancillary orders has not yet occurred is, the respondents submit, because it has not been possible to undertake the work required to achieve disclosure in the time available; amid all the other demands, it says, upon the time of IMC Solutions, Stewart Charles Lewis and Carolyn Jane Lewis, both in relation to the forthcoming appeal and as a result of the demands of the second defendant’s business.[9]
[9]See paragraph 22 of “IMC Solutions’ Outline of Submissions in Relation to the Ancillary Disclosure Orders Dated 9 February 2011”.
The respondents submitted that the reasons why the ancillary order should be stayed are as follows:[10] first, there has to be at the very least considerable doubt as to whether the remaining orders would now be made in the face of the information now available to the Court; secondly, compliance with the orders will require time and resources from essentially two individuals that are out of all proportion to the likely probative value of the material, again measured against the material now available to the Court; thirdly, the Court of Appeal has stayed enforcement of the judgments and orders of this Court, and has set down the appeal for hearing in two weeks’ time. IMC Solutions, it submits, should be permitted to devote its limited resources, that is, the resources of Mr Stewart Lewis and Mrs Carolyn Lewis, to that appeal, rather than be required to undertake a massive and potentially futile disclosure of information; and fourthly, there is and can be no possible prejudice, the respondents submit, to AK in granting a stay for such a short period of time. In this respect AK, it was submitted, has not provided the Court with any evidence or made any submissions as to the prejudice it will suffer if the stay as sought by the respondents were to be granted.
[10]See paragraph 23 of “IMC Solutions’ Outline of Submissions in Relation to the Ancillary Disclosure Orders Dated 9 February 2011”.
The applicant, AK, nonetheless submitted that the respondents’ response to the ancillary order was “evasive and incomplete” and was “not complied with by any of the [respondents] in any meaningful way”. It further submitted that the Court should exercise its inherent jurisdiction in regard to the risk of dissipation to protect AK, the judgment creditor, particularly as an ancillary order is less intrusive than a freezing order, and thus should be more readily granted by the Court in the particular circumstances of this case.[11]
[11]See “Plaintiff’s Submissions in Support of Enforcement and Extension of Ancillary Order”, dated 14 March 2011, [26] and onwards, and the transcript of the oral submissions made at the present hearing, on 15 March 2011.
The applicant, AK, submitted, in summary, that:[12]
a) All Respondents have taken a very narrow, and we say incorrect, interpretation of the order.
b) Mr and Mrs Lewis have purported to try to segment their evidence into that which they personally know, as distinct from that which they are asked on behalf of a company (Mr Lewis calls this difference “a legal matter”).
c) All respondents have taken a very narrow, and incorrect, view of what is an asset and when it is disposed of, so that Mrs Lewis deposes that Messrs Lewis, Benson and Thomas received significant money from IMC Solutions, but those Respondents do not depose to those sums. The Respondents’ view and approach is set out in the exchange between Mr McAteer and Justice Croft at pages 82 to 86 and 122 to 125 of last Friday’s transcript. It cannot be correct.
d) Mr and Mrs Lewis have also told the Court of Appeal that they have not had time to do various things, in part because they are busy doing things in this court, then in this court they claim not to have done the same things, because they are busy in the Court of Appeal.
e) Generally, much has not been done because there is allegedly not enough time. This is not acceptable. There is simply not enough effort.
f) It defies belief that each of the Respondents - and especially Mr Lewis - do not know the current assets and liabilities of the First Defendant, or who its current directors and officers are and where they and it are located.
[12]See “Plaintiff’s Submissions in Support of Enforcement and Extension of Ancillary Order”, dated 14 March 2011, [55].
The respondents submitted that there must be a factual basis to make an ancillary order, and that in the present circumstances, no such factual basis exists which would justify a reasonable belief that IMC Solutions had or was dissipating assets. The applicant submitted, in response, that in the circumstances of the case, the appearance of the dissipation of assets is a sufficient factual basis; particularly as, in its submission, if real evidence was required to obtain ancillary orders, there would be no utility in this process, as an applicant could choose to forgo applying for an ancillary order, and directly apply for a freezing order or Mareva injunction. The respondents submitted that the orders requiring the full accounting could only be justified if, in effect, the Court was satisfied that there was a proper basis to believe that each of the deponents had lied on oath about the current asset position and the complete lack of any previous transfer of assets. The respondents further submitted that the Court has first hand evidence on oath that removes any basis for suspicion that there has been, or, more importantly, could be, a dissipation of assets by IMC Solutions to defeat the judgment; whereas no evidence to the contrary had been presented by the applicant. As a result, it was said, the orders sought by the plaintiff could not be maintained.
The respondents submitted that at the hearing before the Court of Appeal, counsel for AK referred to there being a massive attempt to move assets away from IMC Solutions, which was said to have been supported by each of the matters referred to in paragraphs 29‑34 of the respondents' submissions;[13] and secondly, the Court of Appeal responded to those matters by pointing to two matters which are said to be relevant to this Court. The first is that the Court of Appeal noted that if there had been a dissipation of assets as at today’s date, then that is a disposition to defraud which can be dealt with by different remedies. Secondly, the Court of Appeal noted that any current concerns could be dealt with by requiring an undertaking from counsel that there would be no alteration of assets. Further, it was submitted, relevantly, that the President said:[14] “If we thought there was substance in the concerns we could deal with the position between now and the hearing by requiring an undertaking from counsel that there would be no alteration of the asset position of the appellate company.”
[13]See “Plaintiff’s Submissions in Support of Enforcement and Extension of Ancillary Order”, dated 14 March 2011, [26] onwards.
[14] Court of Appeal Transcript, p 59.
The respondents say that the important point to note, however, is that the Court of Appeal did not require an undertaking. It was submitted that the Court of Appeal did not think there was any substance in the concerns and, the respondents submit, nor should this Court. Of course, since those submissions were made, the reasons for judgment of the Court of Appeal, given on 11 February 2011, were made available. Critical are paragraphs 14 and 15 of the Court of Appeal judgment, in relation to the dissipation of assets issue:
”14. There was one final matter, it concerns a repeated assertion by counsel for Altain that IMC Solutions is or may be considering dissipating its assets. We express no view whatever about that save to note that the assertion that there was a risk of dissipation is properly being litigated before the trial judge on an application for a freezing order. We have been told that orders have been made for the verification on affidavit of the assets of IMC Solutions. One of our purposes in adjourning for 13 days is to ensure that this court will have the benefit of whatever financial information has been filed pursuant to the orders made by the trial judge.
15. But we would take the opportunity to repeat something said before in like circumstances. If a party in the position of IMC Solutions having invoked the appellate jurisdiction of this court should improperly part with any part of its assets from this moment forward, that would be as clear a contempt of court as could be imagined. For the company to act in that way would be to knowingly put itself in the position of being unable to meet a judgment which it has already been ordered to meet.”
It would, of course, follow that any non-party participating in that process would also bring themselves within the species of conduct to which the general warning of the Court of Appeal applies.
Conclusion
In conclusion, as indicated, the parties are clearly at odds with respect to compliance with the ancillary orders and the extent to which evidence before the Court should be regarded as sufficient compliance within the time available, or as indicative of an intention on the part of the respondents not to comply. The inference which the applicant would seek the Court to draw on the basis of the latter view is that assets have or will be dissipated in order to defeat the judgment in this case.
Having regard to proceedings in the Court of Appeal, the fast‑tracking of the appeal, and the Court of Appeal’s response with respect to the protection of assets, the evidence of the burden that would be imposed on the respondents in the face of the appeal being heard in two weeks time is particularly relevant. I am of the view that the ancillary order should be stayed with respect to further compliance, and that the issue of further compliance and other matters with respect to those orders presently before this Court should be adjourned to a date to be fixed after the Court of Appeal has determined the appeal, should that be necessary.
I am strengthened in this view by the fact that the applicant has not, in my view, been able to identify any prejudice to it if this course of action were taken, other than to assert that the delay increases the chance of dissipation of assets; a matter that it has also raised before the Court of Appeal. It was not, however, a matter raised before this Court during the latter part of last year when these proceedings were being brought, now several or so months ago. This issue was explored further at the present hearing, and Mr Megens has explained the reasons for the course of action taken, but in my view that does not go to establishing a basis for prejudice for staying this matter for a relatively short period, as I have indicated.
Orders
For these reasons, I order that:
1. The ancillary orders, dated 9 February 2011, be stayed with respect to further compliance, to a date to be fixed after the determination of the appeal by the Court of Appeal.
2. The plaintiff’s applications to widen the ancillary orders, and to extend these orders to other respondents, be stayed with respect to further compliance, to a date to be fixed after the determination of the appeal by the Court of Appeal.
3. Costs reserved.
0
0
0