Australian Securities Commission v Skase, C.C

Re: AUSTRALIAN SECURITIES COMMISSION
And: CHRISTOPHER CHARLES SKASE
No. Q G3008 of 1991
FED No. 555
Corporations - Costs

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Pincus J.(1)

CATCHWORDS

Corporations - delivery up of passports and prohibition from leaving Australia - whether necessary or desirable to exercise power to protect creditors or potential creditors.

Costs - Court's discretion - effect of making difficulties about service and failing to provide address on order for costs.

Companies Code, s.573

HEARING

BRISBANE

#DATE 30:5:1991

Counsel for the applicant: Mr J.S. Douglas QC with

Ms R.G. Atkinson and Mr A.M. Daubney

Solicitors for the applicant: Australian Securities Commission

Counsel for the respondent: Mr P.L. O'Shea

Solicitors for the respondent: Henderson Trout

ORDER

On the undertakings given by Mr O'Shea on behalf of the respondent, Christopher Charles Skase, being:-

1. To attend pursuant to the order of the Supreme Court of New South Wales made on the 23rd day of May, 1991 in action No. 50672 of 1990, or any order made in substitution therefor, before Deputy Registrar Sourdin at the Supreme Court of New South Wales, Queens Square, Sydney in the State of New South Wales on the 31st day of May, 1991 at 9.00 am and at any adjourned date thereof.

2. Upon eight weeks notice to Messrs Henderson Trout, to return to Australia and attend to give evidence before the investigation being conducted by the Australian Securities Commission in relation to the affairs of Qintex Limited, Qintex Australia Limited (Receivers and Managers appointed), their subsidiaries, associated corporations and persons or corporations having dealings with any of the foregoing.

3. To attend in compliance with any Order, and in accordance with any bail conditions imposed, by any Stipendiary Magistrate with respect to the hearing of any charges brought by the Australian Securities Commission against the respondent.

4. To instruct Messrs Henderson Trout to accept service on behalf of the respondent of any Court process (initiating or otherwise) and not to withdraw those instructions unless the same instruction is given to another firm of solicitors in Australia in substitution for Messrs Henderson Trout and to instruct Messrs Henderson Trout to inform the Australian Securities Commission of the identity of that other firm of solicitors.

5. Whilst outside Australia to remain in such contact with Messrs Henderson Trout by facsimile and by telephone that he can give them such instructions as they seek from him without any delay in excess of three days.

6. Not to transfer or remove from the Commonwealth of Australia any interest in any property within the Commonwealth of Australia owned or controlled by him.

7. To provide to the Australian Securities Commission, through his solicitors, notification in writing of any change of address within seven days of any such change and at the request in writing of the Australian Securities Commission made to his solicitors to inform the Australian Securities Commission within three days of any address at which he is then temporarily residing:-

i) the application be dismissed;

ii) the respondent's passport be restored to him forthwith;

THE COURT FURTHER ORDERS THAT:

iii) the respondent be released from the undertaking to the Court which he gave during his evidence;

iv) there be no order as to costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

This is an application by the Australian Securities Commission, under the provisions of s.573 of the Companies Code. The application is brought against one Christopher Charles Skase, who is presently resident in Spain, and its purpose is to continue an order which has been made for the delivery up of Mr Skase's passports and further, to continue an order prohibiting him from leaving Australia without the consent of this Court.

The section, which I do not propose to read out in full, is capable of application in the present circumstances; that is, there has been an investigation carried out as the section requires, and a prosecution has been instituted, a second condition mentioned in the section. The question is whether or not the Court considers it "necessary or desirable" to exercise either of the powers I have mentioned, for the purpose of protecting the interests of any persons to whom Mr Skase is liable or may become liable.
In short, the purpose of the provision is so far as relevant to protect creditors and potential creditors. It is not, as was pointed out by counsel for the respondent, to punish the debtor. The basis upon which the matter is put is that the respondent has, in the past, made difficulties about the service of process; that he has on occasions failed to appear when he should have done and has given reasons for doing so which were not entirely convincing; that he has given addresses which were not quite bona fide; that he is substantially indebted; that he is being prosecuted and may seek to stay out of the country to evade these difficulties.
The respondent came before a Court on a similar application last year, and it has been suggested by his counsel that the situation is much the same as it then was. That does not appear to me to be so; it is desirable to set out a brief chronology of some of the principal features of the respondent's recent history, both before and after that application was made.
Towards the end of 1989, the Qintex group, which was to a considerable extent, it appears, under the control of the respondent, collapsed, and shortly before that there were some transactions which would tend to give rise to a suspicion that an attempt was being made by the respondent to get rid of assets. It has been proved that at the end of September 1989, shortly before the receivership of the Qintex group, there was a substantial amount of money paid to discharge a liability on a Rolls Royce motor car given to a stepdaughter of the respondent. Apparently two such cars were given, and they were, shortly after the making of the gifts, shipped overseas.
In May 1990, a London property was transferred to Alexandra, a stepdaughter of the respondent. That is said to be worth over 200,000, pounds and (without going into considerable detail) there is some reason to suspect that precautions were taken by the respondent against the possibility of his bankruptcy. In September 1990, a suit was instituted, as appears from the affidavit of Mr Lockhart, in a sum in excess of a third of a million dollars, against the respondent. In the same month, the respondent failed to appear before Wylie D.C.J. in respect of a certain investigation. About the same time, the respondent's solicitor gave evidence which explained his difficulties in contacting the respondent. The solicitor did not, apparently, then have any contact telephone number and relied upon communications through the respondent's secretary and upon the respondent's telephoning the solicitor; it was then admitted that the respondent was at times hard to contact.
In November 1990, there was service of process on the respondent at a Magistrates Court hearing and some attempt, it appears, at evasion of that service. In December 1990, judgment was obtained by a bank in a sum of about $1.5 M. against the respondent. The solicitor who acted for the bank in that matter has made an affidavit explaining that the solicitors for the respondent did not respond to facsimiles inquiring after the respondent's address. As it seems to me, it is the respondent's having made difficulties and (on the face of it) attempting to conceal his address, which has been, partly at least, the cause of this application's having been brought.
Towards the end of 1990, the applicant wrote to the respondent's solicitors and obtained no reply, but it has to be said that subsequently those solicitors were more forthcoming. In January 1991, a judgment was entered against the respondent in a sum of over $20,000,000. A bankruptcy notice was issued, and it was served by substituted service - again, a reflection of the difficulty of ordinary service and the difficulty of ascertaining the whereabouts of the respondent.
In February 1991, in respect of a charge the details of which do not need to be mentioned, the respondent failed to answer bail in this State; it is said, in mitigation of that, that the reason was that the respondent had a medical condition, viz., a sore back. There is some evidence that he did, but it is not overwhelmingly convincing. It is not notoriously difficult to obtain a medical certificate to say that a person has a sore back, but it is notoriously difficult for a medical practitioner to ascertain how sore someone's back is. It is said that his back condition discouraged or prevented the respondent from travelling, but he seems to have a job which involves a great deal of plane travel.
Now, more recently, there has been an order for oral examination in the Supreme Court of New South Wales, and that is said to be due to take place tomorrow, 31 May. Again quite recently, tax appeals involving a sum of nearly $1,000,000, in which the respondent was the appellant, were dismissed.
I therefore do not accept the suggestion, made on behalf of the respondent, that the situation is much the same as it was in September last year and the implicit submission that the applicant has no justification for concern. It seems to me that the situation so far as the respondent's finances are concerned has worsened, and events have occurred which would increase the apprehension of anyone who wished to contact him. The question nevertheless remains whether, in these circumstances, the applicant has discharged the onus of showing that the condition as to protection of creditors' interests laid down in s.573 of the Companies Code is satisfied.
That provision, as I have mentioned, requires so far as relevant that the Court be satisfied that it is either necessary or desirable to exercise the powers which the applicant desires to have exercised for the purpose of protecting the interests of persons to whom the respondent is liable or may become liable. The argument which is advanced on behalf of the respondent includes the contention that, whether or not the respondent is in Australia, the creditors will have similar difficulties; he says he has no money of any consequence.
His income, although substantial, is trivial compared with the amount of the judgments against him; one would think that, as a practical matter, if the creditors are going to gain any satisfaction, it would only be by undoing transactions which the respondent entered into in anticipation of financial trouble (if there are any such transactions, and it seems possible that there are) or by unearthing some hidden funds or property. It may be said in favour of the applicant that the second aspect of it (that is, unearthing hidden funds or property) might make some progress if the oral examination, set down to take place tomorrow, occurs.
It appears that the respondent intends to apply to the Supreme Court to have that examination adjourned on the ground that there is an application to set aside the judgment; if that application succeeds, it may be that the oral examination will not take place for some time. But the applicant goes further and says that, whether the oral examination proceeds soon or not, it is desirable that the respondent stay in Australia continuously until the completion of proceedings recently instituted against him under s.229 of the Companies Code for alleged serious breaches of company law. It is said that, in about two months, the committal proceedings in relation to those matters will be mentioned again and a date for hearing will be obtained. It seems to be put for the applicant that the creditors are likely to obtain some advantage because, if there is a conviction under the relevant provision, then the matter can be pursued further civilly. The theory is that if Mr Skase does not return to Australia to answer these charges, then the committal proceedings will not take place, the compensation which might have been ordered under s.229 could not then be ordered and persons who might have been harmed by the respondent's activities will lose the prospect of obtaining money.
An answer to that which was made by counsel for the respondent was that, of course, if the respondent has done something unlawful as a director of a company in the Qintex group, he can be sued, and that seems to me correct. I can see that the Commission may pursue the s.229 matter with more enthusiasm than others might, but I would not have thought that that difference is, in itself, sufficient to take the matter into the category of one in which it is necessary or desirable to require the respondent to stay in Australia indefinitely.
After having made what I am satisfied were deliberate difficulties about service and having been, as I am also satisfied, inclined to conceal his whereabouts, the respondent seems to have abandoned those tactics and has given instructions for a series of undertakings to be proffered. I propose to read the undertakings out and to comment upon them briefly.
The first one is an undertaking:

"To attend before Deputy Registrar Sourdin at the Supreme Court of New South Wales, Queens Square, Sydney in the State of New South Wales on 31 May 1991 at 9.00 am and at any adjourned date thereof".

It does not appear to me that that undertaking takes the matter very far, because the Court was told that attempts will be made to have the hearing adjourned, on the ground that the judgment should be set aside. I am therefore not significantly influenced by that undertaking.

The second undertaking is:

"Upon eight weeks notice to Messrs Henderson Trout, to return to Australia and attend to give evidence before the hearing" which should be: "the investigation being conducted by the Australian Securities Commission in relation to the affairs of Qintex Limited, Qintex Australia Limited (Receivers and Managers appointed), their subsidiaries, associated corporations and persons or corporations having dealings with any of the foregoing".

It appears to me that that undertaking is of some consequence, and it is not suggested that the eight weeks' notice is excessive. Mr Douglas QC for the applicant candidly admitted that there is no immediate intention, on the part of the Commission, to examine the respondent further.

The third undertaking which is proposed is:

"To attend in compliance with any Order by any Stipendiary Magistrate with respect to the hearing of the charge brought by the ASC under Section 229(4)".

I am dubious about the wording of this undertaking because, as I understand it, there is an obligation to appear unless the Stipendiary Magistrate positively orders or gives leave otherwise, so it appears to me that undertaking number 3 would require some attention.

Undertaking number 4, which seems to me of particular importance, is as follows:

"To instruct Messrs Henderson Trout to accept service on behalf of the Respondent of any Court process (initiating or otherwise) and not to withdraw those instructions unless the same instruction is given to another firm of Solicitors in Australia in substitution for Messrs Henderson Trout".

The applicant does not suggest that there is any particular difficulty in the wording of that. It is reasonably watertight and should, I think, alleviate the concerns of those interested in the respondent's affairs who are suspicious of his intentions.

Number 5 is:

"Whilst outside Australia to remain in such contact with Henderson Trout by facsimile and by phone that he can give them such instructions as they seek from him without any delay in excess of three days".

Again, that seems a reasonable undertaking and one which, if in effect last year when Mr Harley gave evidence, would have made the situation rather different.

Undertaking 6 is:

"Not to transfer or remove from the Commonwealth of Australia any interest in any property within the Commonwealth of Australia owned or controlled by him".

On the respondent's own evidence, that will have no effect; he claims to have no property.

Undertaking 7 is:
"To provide to the Australian Securities Commission, through his solicitors, notification of any change of address".
It is my opinion, particularly in view of the evidence that the respondent appears sometimes in doubt as to what his true address is, that undertaking number 7 needs to be made more specific. That is, I think that there should be some time limit - for example, that the notification of change must take place within seven days of the address being adopted; I would like counsel to discuss that matter.
To return to the broader questions, on the evidence of the respondent, he is hopelessly insolvent. That does not mean that the creditors are not entitled to attempt to demonstrate otherwise, or, as I have suggested, to attempt to show that there are transactions which may be undone to produce funds, or that there is money hidden away. I do not say that any of these things have occurred, but creditors may think they may be able to prove that they have. These are considerations in favour of requiring that Mr Skase remain in Australia. Secondly, there is some evidence of evasion of service and difficulty about the respondent's address. Thirdly, there is the very disturbing evidence, as it seems to me, concerning the sum of $32.5 million, which the respondent referred to.
On the other side, there is the - as I think - important circumstance that the respondent has been extensively examined over some considerable time. He has given a great deal of information. He has, consistently with that, appeared before me today and answered responsively to whatever was asked of him; he has given instructions to give the pertinent undertakings which I have mentioned.
Subject to the difficulties with respect to the form of undertakings being resolved, I therefore have in mind to discharge the order with respect to the passport. I propose to order that the passport be returned, and that the order inhibiting Mr Skase's movements also be discharged. I will adjourn the matter until tomorrow to enable the undertakings to be agreed upon - unless counsel think they can do this now.
(Discussion ensued, following which undertakings in the following agreed form were given on behalf of the respondent Skase.)

"Firstly, to attend pursuant to the order of the Supreme Court of New South Wales made 23 May 1991 in action number 50672 of 1990 or any order made in substitution therefor before Deputy Registrar Sourdin at the Supreme Court of New South Wales, Queens Square, Sydney, in the State of New South Wales, on 31 May 1991, at 9 am and at any adjourned date thereof. Secondly, upon eight weeks notice to Messrs Henderson Trout to return to Australia and attend to give evidence before the investigation being conducted by the Australian Securities Commission in relation to the affairs of Qintex Limited, Qintex Australia Limited (Receivers and Managers appointed), their subsidiaries, associated corporations and persons or corporations having dealings with any of the foregoing. Thirdly, to attend in compliance with any order and in accordance with any bail condition imposed by any stipendiary magistrate with respect to the hearing of any charges brought by the ASC against the respondent. Fourthly, to instruct Messrs Henderson Trout to accept service on behalf of the respondent of any court process initiating or otherwise and not to withdraw those instructions unless the same instruction is given to another firm of solicitors in Australia in substitution for Messrs Henderson Trout and to instruct Messrs Henderson Trout to inform the ASC of the identity of that other firm of solicitors. Fifthly, whilst outside Australia to remain in such contact with Henderson Trout by facsimile and by phone that he can give them such instructions as they seek from him without any delay in excess of three days.

Sixthly, not to transfer or remove from the Commonwealth of Australia any interest in any property within the Commonwealth of Australia owned or controlled by him.

Seventhly, to provide to the Australian Securities Commission through his solicitors notification in writing of any change of address within seven days of any such change, and at the request in writing of the ASC made to his solicitors to inform the ASC within three days of any address at which he is then temporarily residing".

The other matter which I have given consideration to is the question of costs. The application was reasonably brought, and it has had some success in the sense that significant undertakings have been obtained. I think that the application was provoked by the conduct of the respondent which I have mentioned and I have in mind making no order as to costs - but I will hear counsel on that also, if they wish me to do so.
It seems to me the orders that I should make, since the first interim order, as to leaving Australia, has now expired, are that the respondent's passport be restored to him forthwith, on the undertakings given by Mr O'Shea on behalf of the respondent. The application is dismissed. I will release the respondent from the undertaking to the Court which he gave during his evidence.
(Argument as to costs ensued.)
In this matter, I have suggested that the order be that each party bear their own costs. There is some substance in Mr O'Shea's submission on that subject, but I think on the whole that the order I have foreshadowed would be fair. It is not unlawful to make difficulties about service and to decline to disclose to one's solicitor, in circumstances of this kind, where one lives. Nevertheless, there may be consequences attaching to that conduct; one is that you may provoke this sort of application. The Commission is acting in the public interest, in attempting to do something about what has turned out to be a great commercial disaster. I think it would not have been too much to ask of the respondent that he be more co-operative and less difficult than he has been in the past. His having apparently abandoned that policy is commendable, but I think that the Court should in the circumstances not give him any costs, and I do not propose to.

[1991] FCA 555

30 MAY 1991