Australian Securities Commission v Zarro, P

[1992] FCA 606

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JUDGMENT NO. ~ Q . ~ . . I J q%L... !

IN THE FEDERAL COURT OF AUSTRALIA )	NO. QG 3018 of 1991	, I
QUEENSLAND DISTRICT REGISTRY	)	i

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GENERAL DIVISION 1

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BETWEEN: AUSTRALIAN SECURITIES COMMISSION

Applicant

AND :  PASOUAL ZARRO

First Respondent

AND:  MICHELLE GAY ZARRO

Second Respondent

AND :  DOUGLAS CHALMERS BURGESS

Third Respondent

AND:  HAROLD WALLACE WOODS

Fourth Respondent

AND :  SPRING COIL PTY. LTD.

Fifth Respondent

AND :  TRENGATE PTY. LTD.

Sixth Respondent

AND :  POINTBLANK PTY. LTD.

Seventh Respondent

AND :  WESTPAC BANKING CORPORATION

Eighth Respondent I

MINUTES ORDERS

Drummond

4 August

Brisbane

THE COURT ORDERS THAT:

1.   The fifth respondent is authorised to transfer from its trust account with Messrs. McLaughlin Gordon & Lennon,

Lennon, solicitors, to its trust account with Messrs. McLaughlin Gordon & Lennon, solicitors, on its file with Messrs. McLaughlin Gordon & Lennon, solicitors, with regard to its defence of this matter an amount of $208,200.00 on account of costs and outlays incurred and to be incurred in the respondents' defence of this application.

2.        The solicitors for the respondents are authorised to apply the said sum in payment of costs and outlays incurred and to be incurred in the respondents' defence of this application.

3.        The costs of the respondents' notice of motion filed 31 July, 1992 be reserved.

4.        The costs of today be costs in the proceedings.

THE COURT DIRECTS THAT:

1.        The applicant deliver to the respondents by no later than 4.00 p.m. on Monday, 10 August, 1992 the proofs of Mr. Duus and any other witness upon whom they intend to rely on the issue of whether the books of those of the Witan companies which the applicant says are entitled to various moneys reveal any explanation for the disbursement or diversion of those moneys to any of the corporate respondents.

If the respondents wish to apply for an order that the applicant not be allowed to go into further evidence on the issue referred to in direction 1 herein, because of the inadequacy of the proofs delivered, then they can do so on two days' notice to the applicant.

The hearing of the respondents' application, if any,

will take place on Monday, 17 August, 1992 at 10.15
a.m..

Any answering material by the fourth respondent, Mr. Woods, on the issue referred to in direction 1 herein, is to be delivered to the applicant by no later than 4.00 p.m. on Wednesday, 19 August, 1992.

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

IN THE FEDERAL COURT OF AUSTRALIA )	NO. QG 3018 of 1991
QUEENSLAND DISTRICT REGISTRY	1
GENERAL DIVISION	1

i BETWEEN: AUSTRALIAN SECURITIES COMMISSION

Applicant

AND :  PASOUAL ZARRO

First Respondent

AND :  MICHELLE GAY ZARRO

Second Respondent

AND :  DOUGLAS CHALMERS BURGESS

Third Respondent

AND:  HAROLD NALLACE WOODS

Fourth Respondent

AND :  SPRING COIL PTY. LTD.

Fifth Respondent

AND :  TRENGATE PTY. LTD.

Sixth Respondent

AND :  POINTBLANK PTY. LTD.

Seventh Respondent

AND:  WESTPAC BANKING CORPORATION

Eighth Respondent

Coram:	Drummond J
Date:	3 August, 1992

Place: Brisbane

EX TE3lPORE REASONS FOR JUDGMENT

When this action came before me on 27 July last on

the Australian Securities Commission's ("Commission")
application for leave to adduce additional evidence, there was
also before me an application on behalf of the respondents'
for access to further funds of Spring Coil Pty. Ltd. ("Spring
Coil") which funds have been frozen pursuant to an order of
Heerey J on 15 November, 1991. The respondents' application
was for access to funds to cover the further preparation and
the conduct of the further hearing of this action on behalf of
all seven respondents.

It was not possible in the time available to deal with that application on 27 July and, in any event, from my perusal of the material relied on by the respondents in that regard, I had formed some views which gave me concern as to the appropriateness of continuing the regime which has applied so far in giving the respondents access to the frozen funds for the purpose of funding the defence of the proceedings.

The position that had obtained up until 27 July
was that from time to time the respondents had by affidavit

made application for access to funds necessary to cover work

done up to the date of the application and their estimate on	some occasions of work to be incurred in the future. On each
occasion the Commission was invited by me to indicate its attitude and, generally speaking, their attitude was to offer no objection to the particular applications.
Notwithstanding that, my perusal of the material before me on 27 July caused me to have concerns, firstly, as to the appropriateness of Spring Coil's funds being used to

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fund the defences not only of that company but of the other	!
two corporate respondents and the four natural respondents, two of whom only were directors of Spring Coil and, secondly, as to the reasonableness of the amounts claimed in respect of a range of matters including counsels fees and solicitors fees in the application then before me.
My concerns were triggered by information conveyed to me that if I were to grant the current application, that would mean that the entire residue of the frozen funds would be dissipated in moneys released to the respondents for the purpose of the further conduct of the defence.
I accordingly drew my concerns to the attention of all parties on the evening of 27 July and indicated that when	I .
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the application for further funds did come before me for	I
argument, which the respondents indicated they would arrange	r
to do at an early date because of the keenness of their	'.
solicitors to be in funds, I expected that both parties would
be in a position to make their views on my concerns clear.
The respondents have filed a considerable volume of material, and I am satisfied as a result of the proceedings	. . :
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today, that it is appropriate to make orders generally in

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terms of paragraphs 1, 2 and 3 of the notice of motion filed	l
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31 July, but to the intent that for the moment the respondents	. ,
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will only have access to funds necessary for the preparation and the first two weeks of the further hearing, which resumes on 17 August, with liberty to apply for access to further funds at the rates proposed by the respondents in their material at some time in the second week of the further hearing, when a better idea can be gathered as to how long the hearing will continue.
In relation to my concerns as to the propriety of a further order being made fixing Spring Coil's frozen funds with the cost of defending all the other respondents as well as Spring Coil, I am satisfied, and this is accepted by the Commission, that all the issues that the Commission is running against the six respondents other than Spring Coil are also being run against Spring Coil so that, effectively, the defence of Spring Coil is the defence of all the respondents.
So far as the reasonableness of the amounts claimed by the respondents for past and future legal fees are concerned, material has been filed from a cost assessor, Mr. Hallam, as well as from two solicitors not connected with the
respondents' solicitor, Mr. King, and his senior partner, Hr.	respondents' solicitor's firm, as well as from the
Holt, all deposing to the reasonableness of those fees. The Commission, whilst from the bar table I was told it had not engaged any consultant to form an opinion on the reasonableness of the fees, would, from its own inhouse knowledge, be in a position to express a view if it thought that the rates claimed were in any way unreasonable. It has raised no such objection to the rates claimed by the respondents.
Although at one stage there was a suggestion from the Commission that the matter might be adjourned so that further consideration might be given by the Commission to the application, in view of the specific attention I sought to require the parties to give the matter when I flagged my concerns on 27 July, I am not prepared to allow further costs to be incurred by further adjourning beyond today this question of what access the respondents should have to costs.
I-ly concern was sparked, as I have said, by the awareness that there will be nothing left in the fund at the end of the day if I grant the respondents' application. The short answer to that concern is that it appears that that is going to be the inevitable result of the litigation, come what may. If the Commission is successful then, while it has not made a final decision as to whether it would look to anything that may be left in the fund for its costs of the proceedings,
general policy of the Commission, as reflected in the	that does appear to be a procedure which accords with the
Commission's letter which is exhibited to Mr. King's affidavit filed by leave today.
I have taken into account the attitude of the Commission in making the orders giving further access to the frozen funds. As I said in argument, I regard the Commission,

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which in pursuance of statutory power froze Spring Coil's	I
funds, as having an obligation of a custodial nature, in
relation to the frozen funds, to ensure that, once it is	l'
decided as it was long ago, it is proper for the respondents	I:
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to have access to the frozen fund for the purpose of funding a	I I
defence, that reasonable demands only are made by the	I
respondents on that fund.	r
I have already indicated that, although the Commission has mentioned it did not retain consultants to assess the reasonableness of the fees, its own inhouse expertise would enable it to discharge that obligation and I assume that attention has been given by the Commission to those sort of matters in deciding to adopt the attitude it took before me today.
I certify that this and the five
preceding pages is a true copy of

the reasons for judgment herein of

the Honourable Mr. Justice Drummond.

Associate:

Date :  3 August, 1992