Pattison v May (No 2)
[2005] VSC 465
•21 November 2005
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
No. 9416 of 2004
IN THE MATTER of an Application under the Corporations Act 2001 (Cth) s 530C
IN THE MATTER of GLOBAL SDR TECHNOLOGIES PTY LTD
(ACN 101 234 860) (Provisional Liquidator Appointed)
| PAUL ANTHONY PATTISON | Applicant |
| V | |
| ROGER THOMAS MAY and JASON ROGER MAY | Respondents |
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JUDGE: | WHELAN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11, 18 and 21 November 2005 | |
DATE OF JUDGMENT: | 21 November 2005 | |
CASE MAY BE CITED AS: | Pattison v May (No 2) | |
MEDIUM NEUTRAL CITATION: | [2005] VSC 465 | |
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CORPORATIONS – Liquidators – Warrant issued pursuant to Corporations Act 2001 (Cth) s 530C – Application to dispose of property and books seized under warrant – Directions and orders pursuant to Corporations Act 2001 (Cth) ss 479(3) and 530C.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr C Charles (solicitor) | Charles Fice Lawyers |
| For the Respondents | Mr R May appeared in person |
HIS HONOUR:
On 31 October 2005 I heard an ex parte application pursuant to s 530C of the Corporations Act 2001 (Cth) (“the Act”) by the liquidator of Global SDR Technologies Pty Ltd (“Global SDR”) for a warrant to search for and seize property and books of Global SDR in the possession or control of the respondents, Mr Roger May and Mr Jason May.
On that application the liquidator, Mr Paul Pattison, relied upon an affidavit sworn by himself on 28 October 2005, and an affidavit of one Simon Peter Cleary, also sworn 28 October 2005. On the basis of that material, I reached the conclusion that Global SDR had acquired all of the intellectual property associated with computer software known as SpectruCell and defined associated hardware pursuant to a deed dated 13 August 2003 entered into with a related company named Advanced Communications Technologies (Australia) Pty Ltd (“ACTA”).
I also reached the conclusion that Mr Roger May and Mr Jason May, who I will refer to together as “the Mays”, had concealed or removed some of this property, and that there were grounds for concern that they might hide or destroy the property as a result of their opposition to a prospective sale of SpectruCell and related assets which Mr Pattison, in cooperation with the receivers and managers of ACTA, Mr Lindholm and Mr Georges, had arranged.
On that hearing I was given a copy of a letter which it was intended would be handed to the Mays upon execution of the warrant, advising them of their ability to apply urgently to the Court in relation to any seized property if they wished to do so. No such application was made.
By an interlocutory process filed 8 November 2005, Mr Pattison now applies under ss 530C(4) and 479(3) of the Act for directions and orders authorising and permitting him to dispose of property and books seized under the warrant on 31 October 2005.
The application was initially returnable on 11 November 2005. It was supported by a further affidavit of Mr Pattison sworn 8 November 2005 detailing the books and property seized pursuant to the warrant on 31 October 2005, an affidavit of service on the Mays, and a further affidavit of Mr Pattison sworn 10 November 2005 dealing with an issue of notification.
On 11 November 2005 Mr Roger May appeared in person and requested an opportunity to file an affidavit. Notwithstanding that he is an undischarged bankrupt and is not presently an officer of any potentially relevant company, I gave him that opportunity. The matter was adjourned to 18 November 2005.
Mr Pattison swore a further affidavit on 17 November 2005 addressing the prospective sale and addressing various assertions that had been made from time to time by Mr Roger May as to ownership of SpectruCell.
At the hearing on 11 November 2005, Mr Roger May had suggested to me that a company named Global Investments Fund Pty Ltd (“GIF”) owned at least some of the seized items. Mr Pattison’s affidavit of 17 November 2005 also addressed this issue. He produced an Australian Securities & Investments Commission (“ASIC”) historical search of GIF and a copy of a letter posted to the registered office of GIF advising it of this proceeding. According to the ASIC extract that was produced, GIF has no current officers. The last director was one Nicholas Christopher Dawe, who resigned on 25 October 2005, and the last secretary was Mr Roger May, who ceased to be secretary on 11 March 2005.
A further short affidavit of Mr Cleary confirmed the accuracy of certain aspects of Mr Pattison’s further affidavit of 17 November 2005.
On the morning of 18 November 2005, Mr Roger May swore an affidavit which I permitted him to file and rely on in the adjourned hearing.
In summary, the matters put to me by Mr Roger May were as follows.
In his affidavit and at times in the hearing, Mr Roger May disputed the proposition that all of the relevant SpectruCell intellectual property had been transferred from ACTA to Global SDR under the deed of 13 August 2003. However, in the course of the hearing, Mr Roger May made it clear that he did not wish to contest ownership of that intellectual property. He eventually told me he was only concerned with the hardware and other equipment seized by Mr Pattison under the warrant.
In relation to that hardware and other equipment, Mr Roger May’s affidavit of 18 November 2005 maintained that it was the property of GIF. In the hearing, Mr Roger May also asserted that some of it was, or might be, the property of his son, Mr Jason May, or of a South Australian company otherwise not mentioned in any material before me.
Mr Roger May’s 18 November 2005 affidavit asserted a claim only on behalf of GIF. At my prompting he relied upon paragraphs 15 to 19 of that affidavit as being the means by which he contended that GIF had acquired its interest in the hardware and other equipment. In further explaining his position he said that the managing controller of ACTA at the time had passed title to GIF in exchange for investments by GIF to “keep SpectruCell alive”. Mr May also maintained that GIF is a secured creditor of Global SDR.
Mr Roger May has complaints as to the conduct of both Mr Cleary, the person who has sworn affidavits in support of Mr Pattison’s applications, and Mr Dawe, the last director of GIF. Mr Roger May has complaints as to the sale process undertaken by Mr Pattison.
Mr Roger May also handed to me during the hearing on 18 November 2005 copies of emails that had passed between his son, Mr Lindholm, and Mr Pattison since the execution of the warrant. Those emails are not consistent with the position that Mr Roger May put to me on the hearing, in that they suggest that the only property with which the Mays are concerned are five specified items which are said to be the property not of GIF, but of the Roger T May family trust.
I must confess to being unable to gain from Mr Roger May any coherent or consistent understanding of how it is said to have come about that GIF acquired the relevant equipment, or of what Mr Roger May maintains ought now to be done with it. It appeared to me that initially he was under the impression that the equipment could be returned to him and his son. When I indicated that that course could not be taken and that neither could the property be returned to GIF, given that it had no officers, he suggested that it should be returned to Mr Lindholm or to the ASIC. Eventually the concern he expressed was that if the sale went ahead, a “revived GIF” would have lost its equipment.
I asked him what prejudice might be suffered if the property was sold and the proceeds of sale were retained. The prejudice to which he referred was the fact that one item was the property of Mr Jason May and it was part of his “tools of trade”, and that there might be, or there was, information on one item, an NT file server, which could be prejudicial to him and his son should it become known to other parties. Mr Roger May also maintained during the hearing that generally there was nothing special about the equipment and that it was all over five years old.
At the conclusion of the hearing on 18 November 2005, I requested the solicitor for Mr Pattison to arrange for a further affidavit to be sworn by Mr Pattison, in which he directly addressed the issue of what seized property he needed to be able to sell in order to complete the proposed sale of SpectruCell. The matter was stood over to 21 November 2005 to enable that to be done.
A further affidavit was sworn by Mr Pattison on 20 November 2005. In that affidavit Mr Pattison deposed that he needs to be able to sell all the items in exhibit “PAP-2” to his affidavit sworn 17 November 2005. In the course of the hearing on 18 November 2005, Mr Roger May had complained that he had not seen that exhibit, and so I stood the matter down to enable him to consider it and I arranged for the Court staff to make a copy of it for him.
The affairs of the companies formerly associated with Mr Roger May and Mr Jason May are complex. There are a number of proceedings pending in this Court concerning them. Further, over recent years there have been a number of other proceedings heard and determined in this Court concerning those companies and this technology.
There are a variety of parties potentially having an interest in a sale of SpectruCell. The company Mr Roger May contends is the owner of the equipment, GIF, has been served with the material in support of this application at its registered office, but has not appeared; unsurprisingly, given that it now has no officers. The Mays have been served and Mr Roger May has appeared. The Mays are bankrupts and their trustee has been notified but has not sought to make any submissions.
Mr Pattison has also notified other interested, or potentially interested, parties, including the Commonwealth of Australia, whose potential interest is via AusIndustry, and the liquidators of two other related companies, SDR Technologies Pty Ltd and SDR Communications Technologies Pty Ltd. ACTA’s receivers and managers, Mr Lindholm and Mr Georges, are cooperating with Mr Pattison in the sale, and the solicitor for the administrator of ACTA’s deed of company arrangement was present during the various hearings and made a brief submission on one matter.
Apart from Mr Roger May, no party has sought to impede Mr Pattison in pursuing the sale or sought to submit that the sale should not go ahead. In so far as Mr Pattison has received responses to his notifications of this application, it can fairly be said, in my view, that there is general support for a realisation of SpectruCell and the related property, although the possibility of claims in relation to the proceeds of sale have been foreshadowed.
At one point I apprehended Mr Pattison’s solicitor might be seeking an order having the effect of finally determining proprietary interests in the relevant property. I indicated that I did not think that was appropriate on this application.
My principal conclusion on the material before me is that it is of the utmost importance that Mr Pattison is given every opportunity to complete a sale of SpectruCell.
I have considered the matters deposed to by Mr Roger May and the matters which he put to me orally. He was not concerned to oppose the orders in relation to the intellectual property. On the account of events he has given me, the hardware and equipment in itself is not of significant value. I could not follow his account of how it is said to have come about that GIF is now the owner of this hardware and equipment, but, in any event, there was nothing which he put that indicates to me that there would be any relevant prejudice suffered by GIF if the hardware and equipment were sold, provided the proceeds of sale were retained pending further direction or order.
Mr Pattison’s affidavits make it clear that the sale of the hardware and equipment he has identified is, in his view, critical to the SpectruCell sale.
Mr Roger May’s concern about confidential information was vague and was unsupported by his affidavit.
Late on 18 November 2005, Mr Roger May expressed a further concern, namely, that the hardware and equipment might be sold separately from a sale of the SpectruCell intellectual property. Shortly prior to delivering these reasons, Mr Roger May and Mr Jason May each filed and served further affidavits sworn by them today, addressing this issue. The burden of those affidavits is that they are concerned that Mr Dawe and Mr Cleary are involved in some kind of activity which, it seems to me, would be correctly characterised as a conspiracy of some sort, in order to acquire the equipment independently of any SpectruCell sale and use it in the course of establishing a business, which the Mays contend is some sort of economic tort committed against them or other parties. The burden of both of those affidavits is a concern about the prospect of a sale of the equipment separate from a sale of the SpectruCell technology. The solicitor for Mr Pattison indicated on 18 November 2005, and has repeated today, that the liquidator has no such intention and that Mr Pattison would be content if the directions and orders made it clear that the hardware and equipment in issue could not be sold separately from a sale of the SpectruCell technology.
I consider that a direction under s 479(3) should be given and an order under s 530C(4) should be made so as to enable Mr Pattison to proceed. Given the history of the matter and the manner in which Mr Roger May has approached these applications, it seems to me that Mr Pattison is clearly entitled to the protection which a direction would give him.
In this connection I make it clear that I am not authorising any particular sale on any particular commercial terms. Those are matters for Mr Pattison’s commercial judgment. Nor am I determining finally that Global SDR owns all of the relevant property. I will direct Mr Pattison to retain the proceeds of sale.
Mr Pattison is naturally concerned to recover his remuneration and expenses in realising this property. Given that it appears to me that insufficient notice of an application for remuneration and expenses has been given, I propose to defer a consideration of that issue until Mr Pattison does in fact have a fund in his hands. I have indicated that if that point is reached, I will endeavour to accommodate an urgent application by him to deal with his remuneration and expenses in realising that fund.
In all the circumstances, the orders that ought to be made are as follows:
(1)Under s 479(3) of the Corporations Act 2001 (Cth) (“the Act”), the applicant is directed that:
(a)He may properly sell the test kit and documents relating to the SpectruCell patents referred to in paragraph 4 of the applicant’s affidavit sworn 17 November 2005 and filed herein and set out in the list which is exhibit “PAP-2” to that affidavit, as part of the sale of the technology known as SpectruCell and its related hardware and software.
(b)He is to retain the proceeds of any such sale until further order.
(2)Under s 530C of the Act, the applicant is authorised to dispose of such of the property and books seized by the applicant under the warrant issued pursuant to the order of 31 October 2005 as fall within the direction in paragraph 1.
(3)The proceeding is otherwise adjourned to a date to be fixed.
Mr Charles, on behalf of Mr Pattison, has sought an order for indemnity costs against the Mays in relation to both the ex parte application for a search warrant and the application in relation to disposal. The only order I am prepared to make in that regard at the moment is an order that the Mays pay the costs incurred on this interlocutory application after 11 November 2005. This is not to preclude Mr Charles from renewing his application at some later time when there is additional material available and when each of the Mays has been given express notice of precisely what order as to costs is being sought against them.
The reason I am making an order against Mr Roger May and Mr Jason May of the limited nature to which I have referred is that it does seem to me that Mr Roger May has pursued an argument unsuccessfully and that costs ought to follow the event in the ordinary way. I am limiting the costs to those incurred after 11 November 2005 because, on any view, Mr Pattison would have had to make an application on that day, even if it had been unopposed.
[Discussion as to the application for indemnity costs ensued].
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