Australian Securities & Investments Commission, in the Matter of Richstar Enterprises Pty Ltd ACN 099 071 968 v Carey (No 7)

[2006] FCA 1183

FEDERAL COURT OF AUSTRALIA

Australian Securities & Investments Commission, In the Matter of Richstar Enterprises Pty Ltd ACN 099 071 968 (No 7) v Carey [2006] FCA 1183

CORPORATIONS – court appointed receivers – receivers appointed pursuant to s 1323 of the Corporations Act 2001 (Cth) – public regulatory function – protective of company assets pending Australian Investments and Securities Commission investigation – application by company for approval for expenditure on legal fees relating to possible action against receivers – no potential cause of action or merits disclosed – clear case necessary to justify such an order – risk of inappropriate pressure on receivers in discharge of public function – motion for approval of expenditure dismissed

Corporations Act 2001 (Cth) s 1323

IN THE MATTER OF RICHSTAR ENTERPRISES PTY LTD (ACN 099 071 968)
WESTPOINT REALTY PTY LTD (ACN 050 218 954)
BOWESCO PTY LTD (ACN 008 915 357)
REDCHIME PTY LTD (ACN 117 947 805)
KEYPOINT DEVELOPMENTS PTY LTD (ACN 115 507 232)

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v NORMAN PHILLIP CAREY, GRAEME JOHN RUNDLE, CEDRIC RICHARD PALMER BECK, JOHN NORMAN DIXON, RICHSTAR ENTERPRISES PTY LTD ACN 099 071 968, WESTPOINT REALTY PTY LTD ACN 050 218 954, BOWESCO PTY LTD ACN 008 915 357, REDCHIME PTY LTD ACN 117 947 805, KEYPOINT DEVELOPMENTS PTY LTD ACN 115 507 232, SILKCHIME PTY LTD ACN 066 849 429 AND ROLD CORPORATION PTY LTD ACN 009 358 276
WAD 83 OF 2006

FRENCH  J
30 AUGUST 2006
PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 83 OF 2006

IN THE MATTER OF RICHSTAR ENTERPRISES PTY LTD (ACN 099 071 968)
WESTPOINT REALTY PTY LTD (ACN 050 218 954)
BOWESCO PTY LTD (ACN 008 915 357)
REDCHIME PTY LTD (ACN 117 947 805)
KEYPOINT DEVELOPMENTS PTY LTD (ACN 115 507 232)

BETWEEN:

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Plaintiff

AND:

NORMAN PHILLIP CAREY
First Defendant

GRAEME JOHN RUNDLE
Second Defendant

CEDRIC RICHARD PALMER BECK
Third Defendant

JOHN NORMAN DIXON
Fourth Defendant

RICHSTAR ENTERPRISES PTY LTD ACN 099 071 968
Fifth Defendant

WESTPOINT REALTY PTY LTD ACN 050 218 954
Sixth Defendant

BOWESCO PTY LTD ACN 008 915 357
Seventh Defendant

REDCHIME PTY LTD ACN 117 947 805
Eighth Defendant

KEYPOINT DEVELOPMENTS PTY LTD ACN 115 507 232
Ninth Defendant

SILKCHIME PTY LTD ACN 066 849 429
Tenth Defendant

ROLD CORPORATION PTY LTD ACN 009 358 276
Eleventh Defendant

JUDGE:	FRENCH  J
DATE OF ORDER:	30 AUGUST 2006
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

The fifth defendant’s motion filed 30 August 2006 be dismissed.

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

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 83 OF 2006

IN THE MATTER OF RICHSTAR ENTERPRISES PTY LTD (ACN 099 071 968)
WESTPOINT REALTY PTY LTD (ACN 050 218 954)
BOWESCO PTY LTD (ACN 008 915 357)
REDCHIME PTY LTD (ACN 117 947 805)
KEYPOINT DEVELOPMENTS PTY LTD (ACN 115 507 232)

BETWEEN:

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Plaintiff

AND:

NORMAN PHILLIP CAREY
First Defendant

GRAEME JOHN RUNDLE
Second Defendant

CEDRIC RICHARD PALMER BECK
Third Defendant

JOHN NORMAN DIXON
Fourth Defendant

RICHSTAR ENTERPRISES PTY LTD ACN 099 071 968
Fifth Defendant

WESTPOINT REALTY PTY LTD ACN 050 218 954
Sixth Defendant

BOWESCO PTY LTD ACN 008 915 357
Seventh Defendant

REDCHIME PTY LTD ACN 117 947 805
Eighth Defendant

KEYPOINT DEVELOPMENTS PTY LTD ACN 115 507 232
Ninth Defendant

SILKCHIME PTY LTD ACN 066 849 429
Tenth Defendant

ROLD CORPORATION PTY LTD ACN 009 358 276
Eleventh Defendant

JUDGE:	FRENCH  J
DATE:	30 AUGUST 2006
PLACE:	PERTH

REASONS FOR JUDGMENT ON MOTION FOR APPROVAL FOR PAYMENT OF LEGAL COSTS

1. On 30 August 2006 Richstar Enterprises Pty Ltd (Richstar) filed a motion seeking the following orders:

   ‘1.Approval for payment of legal costs for Mr MH Zilko SC and for Ms ML Coulson the subject of invoices dated 7 August 2006, 8 August 2006 and 25 August 2006 respectively as annexed to the Affidavit of Karen Sandra Carey sworn 25 August 2006 (“the Legal Costs”);

   2.That the Court Receivers pay the costs of and incidental to this Motion and any filing fees associated with this Motion; and

   3.Such further orders as this Honourable Court may deem fit.’

2. The motion was supported by an affidavit of Karen Sandra Carey sworn 28 August 2006.  Ms Carey described herself as ‘the director’ of Richstar and said she was authorised to swear the affidavit on its behalf.  She stated that her affidavit was sworn in support of a motion seeking approval of payment ‘of legal costs relating to potentially litigious issues … pertaining to the Court appointed receivers, Korda Mentha (sic)…’.  The affidavit thereafter exhibited an exchange of correspondence between Ms Carey and the receivers appointed by the Court to Richstar.

3. On 10 August 2006 Ms Carey sent to one of the receivers, Mr McMaster, an invoice from a barrister, Maria-Luisa Coulson, ‘… for work carried out for Richstar in relation to the Richstar funding arrangement with Keypoint Developments Pty Ltd’.  The attached invoice, which was for an amount of $4,180, was said to be:

   ‘For work performed from 13 June 2006 to date inclusive of preparing brief to Senior Counsel, supplementary brief to Senior Counsel and further supplementary brief to Senior Counsel, liaising with Senior Counsel, various meetings and all related and incidental matters.’

4. On 14 August 2006 Ms Carey sent Mr McMaster a further invoice from Mr Zilko SC in an amount of $6,875.  The invoice was addressed to Ms Coulson.  It described the work done in the following terms:

   ‘To my costs since 31 May 2006 including conference with you and Mr Carey 8 June 2006, reading documents in brief, considering legal and factual issues arising therefrom, further conference with you and Mr Carey 20 June 2006, various telephone conferences with you on matters of substance, considering two supplementary briefs and issues therein, further considering legal issues arising from supplementary brief, preparing opinion 6 July 2006, conference with you 1 August 2006, preparing further opinion 7 August 2006, and all matters incidental thereto:’

5. On 15 and 18 August 2006 Mr McMaster wrote to Ms Carey referring to her letters of 10 and 14 August 2006 respectively and the invoices received from Ms Coulson and Mr Zilko.  In each case he required a more detailed account of the services provided in respect of the invoice and confirmation that such services were provided to Richstar. 

6. Ms Carey sent a letter to Mr McMaster on 22 August 2006 enclosing a letter of the same date from Ms Coulson.  In that letter Ms Coulson confirmed that the work which she had performed and which was the subject of her invoice was for services relating to a potential claim by Richstar against its receivers.  She said that Mr Zilko’s invoice also related to the provision of advice with regard to the potential claim and that he was briefed by her in that regard. 

7. On the following day, Mr McMaster wrote to Ms Carey attaching a copy of the orders made by the Court on 7 August 2006.  Those orders included the following:

   ‘The Court receivers shall not be required to approve payment of any expenses which relate to expenses on the part of any defendant for proceedings against the Court receivers.  Any application for a direction for payment of such expenses is to be made to the Court by the ninth defendant.’

   The reference to the ninth defendant in the last sentence of that order appears to have arisen because of the fact that the possibility of such expenses being claimed was raised in materials relating to the ninth defendant, Keypoint Developments Pty Ltd.  However the first limb of the order makes it clear that the Court receivers were not required to approve payment of any expenses relating to expenses on the part of any defendant.  I accept that it is appropriate in those circumstances that Richstar should approach the Court for approval of the payment which it seeks.  The receivers and managers should not be placed in a position of conflict of interest and duty because the expenses sought relate to a potential claim against them.

8. As to the merits of the matter, the affidavit in support of the motion discloses nothing of the nature of the potential claim. The receivers in this case were appointed under s 1323 of the Corporations Act 2001 (Cth) in aid of a public regulatory function. Their primary function is the protection, in the public interest, of the assets of the company pending the completion of investigations by the Australian Securities and Investments Commission. The scope for any cause of action against them by reason of the manner in which they discharge their duties must be limited. No basis for any cause of action is disclosed on the materials before the Court. I will give no encouragement to any conduct by Richstar or its directors which is, or may be, calculated to put pressure on the receivers in the discharge of their public function. Nor will I countenance diminution of the company’s assets in the pursuit of enquiries in that respect without some clear justification. The motion will be dismissed. The receivers took no part in the argument on the motion so there will be no order for the costs of the motion.

I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French .

Associate:
Dated:        30 August 2006

Counsel for the Receivers:

Solicitors for the Receivers:

Mr McLean

Corrs Chambers Westgarth

Counsel for the Fifth Defendant:

Mr T Clavey

Solicitor for the  Fifth Defendant:

Clavey Legal

Date of Hearing:

30 August 2006

Date of Judgment:

30 August 2006