National Australia Bank Limited v Human Group Pty Limited (No 3)

[2023] NSWSC 360

Supreme Court

New South Wales

Medium Neutral Citation:

National Australia Bank Limited v Human Group Pty Limited (No 3) [2023] NSWSC 360

Hearing dates:

30 March 2023

Date of orders:

30 March 2023

Decision date:

30 March 2023

Jurisdiction:

Equity - Commercial List

Before:

Ball J

Decision:

(1) Pursuant to section 471B of the Corporations Act 2001 (Cth), leave be granted to the Plaintiff to proceed with this proceeding against the First Defendant and Third Defendant, on the condition that the Plaintiff will not, without leave of the Court, seek to enforce against the First Defendant or Third Defendant any judgment it may obtain in this proceeding;

(2)   The operation of order 1 made on 16 October 2019 be discharged;

(3)   The Plaintiff be granted access to the affidavits contained in the sealed envelopes provided to the Court in accordance with paragraphs 7A and 7B of the asset preservation orders made on 21 August 2019 and 13 January 2021;

(4)   Orders 1 - 3 be entered forthwith;

(5)   The matter be listed for directions on 12 May 2023; and

(6)   Liberty to apply on 3 days' notice.

Catchwords:

CORPORATIONS — Winding up — Proceedings against company — Stay of proceedings — Where plaintiff claims proprietary relief — Leave to proceed granted under s 471B of Corporations Act

CIVIL PROCEDURE — Stay of proceedings — Where stay ordered pending final determination of criminal proceedings — Where defendant is convicted but not sentenced — Stay lifted
CIVIL PROCEDURE — Access to sealed affidavits — Where assets affidavits provided in connection with freezing order — Where affidavits sealed due to privilege against self-incrimination

Legislation Cited:

Corporations Act 2001 (Cth)

Crimes Act 1900 (NSW)

Cases Cited:

Ong v Lottwo Pty Ltd (in liq) [2013] SASCFC 57; (2013) 116 SASAR 280

Category:

Procedural rulings

Parties:

National Australia Bank Limited ACN 004 044 937 (Plaintiff)
Human Group Pty Ltd (First Defendant)
Helen Mary Rosamond (Second Defendant)
A.C.N. 137 384 662 Pty Ltd (Third Defendant)

Representation:

Counsel:
DFC Thomas SC with E Bathurst (Plaintiff)

Solicitors:
King & Wood Mallesons (Plaintiff)

File Number(s):

2019/257864

Publication restriction:

None

EX TEMPORE JUDGMENT

1. By notice of motion filed on 6 February 2023, the plaintiff seeks:

1. Leave pursuant to s 471B of the Corporations Act 2001 (Cth) to proceed against the first defendant and third defendant, both of which are in liquidation on the condition that the plaintiff will not, without leave of the Court, seek to enforce any judgment it obtains in these proceedings;

2. An order, the effect of which would be to lift a stay of the proceedings so far as they concern the second defendant; and

3. Access to certain affidavits provided by the defendants which were sworn in connection with freezing orders the plaintiff obtained on 21 August 2019 and 13 January 2021 against the defendants.

2. There was no appearance by any of the defendants. However, Mr Thomas SC, who appeared for the plaintiff, indicated that he mentioned the matter on behalf of the first and third defendants. I am satisfied that the second defendant was on notice of the hearing today.

3. In the proceedings, the plaintiff alleges that between 2013 and 2017, the first defendant issued a series of invoices for consulting services purportedly provided to the plaintiff totalling at least $43.6 million. The third defendant is another company controlled by the second defendant. The second defendant was the controller of the first defendant. The plaintiff claims that the invoices were issued as part of a fraudulent scheme devised by the first and second defendants in connection with Ms Rosemary Rogers, who at the time was the chief of staff to the plaintiff’s chief executive officer and the person primarily responsible for approving payment of the invoices.

4. It is alleged that the first defendant issued the invoices for an inflated amount or in respect of which no services were provided. It is also alleged that Ms Rogers, who approved the invoices, was paid secret commissions. The evidence indicates that in all, amounts totalling approximately $5.9 million paid by the plaintiff to the first defendant were transferred to the third defendant.

5. The orders under s 471B of the Corporations Act are not opposed by the liquidators of the first and third defendants. They are sought because the relief claimed by the plaintiff includes proprietary claims against the first and third defendants on the basis that trust property or property held by a fiduciary (that is, Ms Rogers) or property held by a knowing participant in Ms Rogers’ breaches of fiduciary duty include amounts currently held by either the first or third defendants. That provides a proper basis on which to grant leave. As the Full Court of the Supreme Court of South Australia said in Ong v Lottwo Pty Ltd (in liq) [2013] SASCFC 57; (2013) 116 SASAR 280 at [61]:

Where, as in the present case, the claim alleges a proprietary interest in the company’s assets, such a claim (if successful) falls outside the province of the proof of debt system. Leave is likely to be given in such cases. However, it is important to bear in mind that such a court action, even if the company were to be successful in resisting it, will expose the company to potentially substantial expenditures on costs which it may not recover. For this reason, even where a proprietary claim is concerned an applicant for leave ordinarily will be required to demonstrate that the claim gives rise to a serious dispute and has a solid foundation… [footnotes omitted]

6. In the present case, I am satisfied that the plaintiff has at least an arguable proprietary claim against the first and third defendants. The evidence is that of the amount paid by the first defendant to the third defendant, the third defendant transferred at least $4,153,421.19 to Shaw and Partners and that that amount was subsequently invested on behalf of the third defendant.

7. It appears that the plaintiff has a strong case that it can trace money that it paid (as a consequence of Ms Rogers’ breaches of duty) to the first defendant and then to the third defendant and then to the amount held by Shaw and Partners.

8. So far as the first defendant is concerned, the plaintiff does not know on the material that it has what money, if any, the first defendant retains. However, it seems clear that if the first defendant does retain any money, or if that money has been invested, the plaintiff would have a strong proprietary claim in respect of that money as well.

9. I accept, for the reasons given by the plaintiff, that there are no other discretionary reasons for refusing leave to proceed. As the plaintiff points out, the proceedings are unlikely to have an impact on other creditors, given that the plaintiff was the only customer of the first defendant during the relevant period.

10. It is also noteworthy that the proceedings are in an advanced stage of preparation and were on foot for almost three and a half years before the companies were placed into liquidation and that they were placed into liquidation on the application of the plaintiff.

11. So far as the second order sought by the plaintiff is concerned, on 16 October 2019, Henry J ordered that the proceedings against the second defendant be stayed “pending final determination of all criminal matters brought against her”. On 23 November and 25 November 2022, the second defendant was convicted of a total of 90 offences of dishonestly obtaining, or attempting to dishonestly obtain a financial advantage, contrary to s 192E of the Crimes Act 1900 (NSW) and corruptly giving a benefit to an agent, contrary to s 249B of the Crimes Act.

12. In circumstances where the second defendant is yet to be sentenced, and has not exhausted any right of appeal, there is a question whether there has been a final determination of the criminal charges against her. However, whether or not there has been, I am satisfied that the stay should be lifted.

13. The purpose of the stay and the purpose for that matter of restricting access to affidavits filed by the defendants in compliance with freezing orders made against them, was to protect the integrity of the criminal trial and the second defendant’s privilege against self-incrimination.

14. However, the trial is now complete and has resulted in guilty verdicts. It is difficult in those circumstances to see what further purpose the stay serves. It is, of course, a theoretic possibility that the second defendant will appeal successfully against her conviction and that the Court of Criminal Appeal will order a retrial. However, I do not think that that theoretic possibility justifies an extension of the stay. The primary purpose of a stay is to serve the interests of justice. The interests of justice require that the plaintiff be permitted to pursue its action. It was open to the second defendant to make submissions to the Court in relation to the question of an appeal and the likelihood that it might be successful. She chose not to do so and in those circumstances, the question of an appeal and a retrial is purely a theoretical one.

15. For similar reasons, it seems to me the plaintiff should have access to the affidavits to which it seeks access.

16. Accordingly, the orders of the Court are:

1. Pursuant to section 471B of the Corporations Act 2001 (Cth), leave be granted to the Plaintiff to proceed with this proceeding against the First Defendant and Third Defendant, on the condition that the Plaintiff will not, without leave of the Court, seek to enforce against the First Defendant or Third Defendant any judgment it may obtain in this proceeding;

2. The operation of order 1 made on 16 October 2019 be discharged;

3. The Plaintiff be granted access to the affidavits contained in the sealed envelopes provided to the Court in accordance with paragraphs 7A and 7B of the asset preservation orders made on 21 August 2019 and 13 January 2021;

4. Orders 1 - 3 be entered forthwith;

5. The matter be listed for directions on 12 May 2023; and

6. Liberty to apply on 3 days' notice.

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Decision last updated: 12 April 2023