Brennan v DCA Capital Pty Ltd (No 2)
[2024] FCA 507
•1 May 2024
FEDERAL COURT OF AUSTRALIA
Brennan v DCA Capital Pty Ltd (No 2) [2024] FCA 507
File number: NSD 368 of 2024 Judgment of: CHEESEMAN J Date of judgment: 1 May 2024 Catchwords: CORPORATIONS —application for the issue of an arrest warrant in aid of examination summons — whether the evidence demonstrated failure to attend for examination without reasonable cause — whether an order for the issue of an arrest a warrant should be made — whether orders should be stayed — Held: relief granted, not stayed Legislation: Federal Court (Corporations) Rules 2000 (Cth) r 11.10(2) Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 18 Date of hearing: 1 May 2024 Counsel for Applicants: Mr M L Rose Solicitor for Applicants: ERA Legal Counsel for the Third Defendant: Mr R J Boadle Solicitor for the Third Defendant: Kerrs Law
ORDERS
NSD 368 of 2024 BETWEEN: PETER BRENNAN
First Plaintiff
MELODY-ANN HASSE
Second Plaintiff
MARCELLE BERNARD (and others named in the Schedule)
Third Plaintiff
AND: DCA CAPITAL PTY LTD (ACN 629 833 129)
First Defendant
DIGITAL COMMODITY ASSETS PTY LTD (ACN 619 068 781)
Second Defendant
ASHOD OHAN BALANIAN
Third Defendant
ORDER MADE BY:
CHEESEMAN J
DATE OF ORDER:
1 MAY 2024
THE COURT ORDERS THAT:
1.The interlocutory application dated 1 May 2024 made by the Applicants seeking an order for the issue for the arrest of the Third Defendant be returnable instanter.
2.Pursuant rule 11.10 of the Federal Court (Corporations) Rules 2000 (Cth) for a warrant to be issued and addressed to the Sheriff to arrest the Third Defendant, Ashod Ohan Balanian, and to bring that person before the Court to be examined under section 596A of the Corporations Act 2001 (Cth) about the examinable affairs of the First and Second Defendants, detaining such person in custody in the meantime.
3.Notice of the issue of the warrant referred to in Order 2 be communicated by the Applicants to the Commissioner of the Australia Federal Police for the purpose of the warrant’s enforcement.
4.The Applicants are to serve a copy of these orders on the Third Defendant by sending an email to [email protected] within 1 hour of receipt a copy of these sealed orders.
5.The Third Defendant pay the Applicants’ costs of this application, such costs to be taxed on the ordinary basis.
6.The Third Defendant pay the Applicants’ costs of hearing before Registrar O’Connor on 1 May 2024 in respect of the summons for examination of the Third Defendant lodged on 15 April 2024, such costs to be taxed on the ordinary basis.
7.These orders be entered forthwith.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
Ex tempore (revised from transcript)CHEESEMAN J:
This is an application made pursuant to r 11.10(2) of the Federal Court (Corporations) Rules 2000 (Cth) (Corporations Rules). The Applicants, Scott David Harry Langdon, Jennifer Anne Nettleton and John Mouawad, in their capacity as the joint and several provisional liquidators of the first and second defendants, seek a series of orders, the first of which was an order that the interlocutory application be returnable instanter. While I may have forgotten to pronounce that expressly, I proceeded on that basis given the urgency of the application.
The Applicants seek an order pursuant to r 11.10 of the Corporations Rules for a warrant to be issued and addressed to the Sheriff to arrest the third defendant, Ashod Ohan Balanian, and to bring him before the Court to be examined under section 596A of the Corporations Act 2001 (Cth) about the examinable affairs of the first and second defendants, detaining him in custody in the meantime.
The next order sought is that notice of the issue of the warrant be communicated by the Applicants to the Commissioner of the Australian Federal Police for the purpose of the warrant’s enforcement.
The remaining relief sought goes to matters of service and costs, to which I will return.
Rule 11.10 of the Corporations Rules provides:
11.10 Default in relation to examination
(1)This rule applies if a person is summoned or ordered by the Court to attend for examination, and:
(a) without reasonable cause, the person:
(i)fails to attend at the time and place appointed; or
(ii)fails to attend from day to day until the conclusion of the examination; or
(iii)refuses or fails to take an oath or make an affirmation; or
(iv)refuses or fails to answer a question that the Court directs the person to answer; or
(v)refuses or fails to produce books that the summons requires the person to produce; or
(vi) fails to comply with a requirement by the Court to sign a written record of the examination; or
(b)before the day fixed for the examination, the person who applied for the summons or order satisfies the Court that there is reason to believe that the person summoned or ordered to attend for examination has absconded or is about to abscond.
(2) The Court may:
(a)issue a warrant for the arrest of the person summoned or ordered to attend for examination; and
(b)make any other orders that the Court thinks just or necessary.
The application is supported by an affidavit of one of the Applicants, Ms Jennifer Anne Nettleton, sworn on 1 May 2024, and exhibit JAN-3 to that affidavit which was tendered on the application.
The third defendant was represented by counsel at the hearing, and an affidavit of the third defendant’s solicitor, Mr Tean Kerr sworn on 1 May 2024 was read, first, in support of an adjournment application, which application I refused, and secondly on the substantive application for the issue of an arrest warrant.
On the substantive application, Mr Kerr’s evidence was relied on to oppose the making of the order in two bases: first, as to whether the condition in r 11.10(1)(a) as to failure to attend without reasonable cause was satisfied such that the discretion to order that an arrest warrant be issued was enlivened, and secondly, if so, whether the Court’s discretion should be exercised in favour of making the order.
Having carefully considered the evidence in support of the application and the evidence against the application, I am satisfied that Mr Balanian has been required by the Court to attend for examination and, without reasonable cause, has failed to attend at the time and place appointed. An argument was raised as to a debate in the authorities as to where the onus lies on the element of establishing “without reasonable cause”.
Mr Rose, appearing for the provisional liquidators, submits that, in the context of the present application, the issue of onus is not determinative. Mr Rose submits, and I accept, that the evidence establishes that if that onus sits with Mr Balanian, then he has failed to establish that his failure to attend was with reasonable cause. As to the corollary I am also satisfied that if the onus sits with the Applicants for the warrant, they have successfully met the low threshold of establishing that the third defendant’s failure to attend was without reasonable cause.
When it comes to exercising the discretion in favour of issuing the warrant, I have had regard to the detailed affidavit of Ms Nettleton which exposes that, in the relatively short period that these proceedings have been on foot, there has been repeated attempts by the provisional liquidators against an impending deadline for a report to the Court to garner information from Mr Balanian with only limited success.
I will not recite the detail of Ms Nettleton’s affidavit, save to say, on the basis of Ms Nettleton’s affidavit, I am satisfied that there are compelling reasons to exercise the discretion in favour of the grant of the warrant. The paucity of the evidence led by Mr Balanian, and the quality of that evidence, is such that the Court can have no confidence that Mr Balanian will attend for examination promptly in the absence of a warrant being issued for his arrest. That is so despite his counsel’s and instructing solicitor’s best efforts to put some evidence before the Court.
There was no issue between the parties as to service of the examination summons. That issue is perhaps more properly described, having regard to the authorities, as being that Mr Balanian was on notice and knew he was required to attend. Indeed, his solicitor and counsel appeared when the matter was before the Registrar at 10.15 am this morning. Mr Balanian has provided, through his solicitor, a single page medical report dated 1 May 2024 which has a box ticked to demonstrate that Mr Balanian will not be able to attend work. No reason is stated. The certificate is limited to a date range from 1 May 2024 to 1 May 2024.
When the matter came before me, I stood the matter down to enable, amongst other things, further evidence to be put forward by Mr Balanian. That resulted in Mr Kerr’s affidavit being prepared and read. The substantive part of the affidavit is limited to a statement that Mr Kerr received four documents electronically from his client, the first being the medical certificate to which I have referred, the second being medical results also dated 1 May 2024, the third being an electrocardiogram result for his client dated 1 May 2024, the fourth being a patient information summary for his client dated 1 May 2024. Each of those documents is annexed to Mr Kerr’s affidavit.
No expert medical evidence has been led to explain the documents that are attached. Doing my best, I note that it appears that Mr Balanian presented to a hospital emergency department earlier today, giving a history of chest pain. He was discharged after five hours, with the one line medical certificate to which I have made reference. In face of the present application, of which Mr Balanian’s representatives were aware at some point during the first half of the day, and certainly, by around 11.30 am, no further evidence has been forthcoming, notwithstanding that the Registrar adjourned the examination summons to come before me at 2.15 pm. Mr Balanian did not appear when the matter was called at 2:15 pm. He was again represented by counsel and his solicitor. No evidence was led from Mr Balanian or from his solicitor on information or belief to supplement the scant medical documentation attached to Mr Kerr’s affidavit.
By the time the matter came before me the present application for an arrest warrant had been formalised and Mr Balanian was on notice that an application would be made for an arrest warrant to be issued. Being satisfied that the Court has power to issue a warrant for Mr Balanian’s arrest, and on the evidence before me, I am satisfied that the orders should be made.
I have not overlooked the submission made by Mr Balanian’s counsel that it would be appropriate to stay any orders made for the issue of a warrant to provide a further period for Mr Balanian to provide additional evidence or bring such other application as he may choose. The examination is scheduled for today and tomorrow and is attended by some urgency. In the circumstances and considering the whole of the evidence, I am satisfied that it is not appropriate to stay the orders.
Having heard from the parties on costs I am satisfied that it is appropriate to order that Mr Balanian pay the Applicants’ costs of this interlocutory application, with costs to be taxed on the ordinary basis. Further that Mr Balanian pay the Applicants’ costs of the examination hearing before the Registrar today with costs to be taxed on the ordinary basis.
I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman. Associate:
Dated: 1 May 2024
SCHEDULE OF PARTIES
NSD 368 of 2024 Plaintiffs
Fourth Plaintiff:
PBG PTY LTD (ACN 631 764 997)
Fifth Plaintiff:
BROADVIEW INVESTMENTS PTY LTD (ACN 007 533 806)
Applicant:
SCOTT DAVID HARRY LANGDON, IN HIS CAPACITY AS JOINT AND SEVERAL PROVISIONAL LIQUIDATOR OF DCA CAPITAL PTY LTD (IN PROVISIONAL LIQUIDATION) (ACN 629 833 129) AND DIGITAL COMMODITY ASSETS PTY LTD (IN PROVISIONAL LIQUIDATION) (ACN 619 068 781)
Applicant:
JENNIFER ANNE NETTLETON, IN HER CAPACITY AS JOINT AND SEVERAL PROVISIONAL LIQUIDATOR OF DCA CAPITAL PTY LTD (IN PROVISIONAL LIQUIDATION) (ACN 629 833 129) AND DIGITAL COMMODITY ASSETS PTY LTD (IN PROVISIONAL LIQUIDATION) (ACN 619 068 781)
Applicant:
JOHN MOUAWAD, IN HIS CAPACITY AS JOINT AND SEVERAL PROVISIONAL LIQUIDATOR OF DCA CAPITAL PTY LTD (IN PROVISIONAL LIQUIDATION) (ACN 629 833 129) AND DIGITAL COMMODITY ASSETS PTY LTD (IN PROVISIONAL LIQUIDATION) (ACN 619 068 781)
0
0
1