Tang (liquidator) v Wright, in the matter of Wright's Transport Pty Limited (in liq)
[2020] FCA 709
•21 May 2020
FEDERAL COURT OF AUSTRALIA
Tang (liquidator) v Wright, in the matter Wright’s Transport Pty Limited (in liq) [2020] FCA 709
File numbers: NSD 548 of 2020 Judges: STEWART J Date of judgment: 21 May 2020 Catchwords: CORPORATIONS – application for issue of warrant under s 530C of the Corporations Act 2001 (Cth) – ex parte application – leave to have warrant issued – evidence that defendant concealed or removed property of plaintiff company in liquidation
PRACTICE AND PROCEDURE – suppression orders – whether necessary to prevent prejudice to the proper administration of justiceLegislation: Corporations Act 2001 (Cth) s 530C
Federal Court of Australia Act 1976 (Cth) s 37AG
Cases cited: Australian Securities Commission v Samson [1997] FCA 739; 24 ACSR 555
Beattie v Gray, in the matter of Control Rail Pty Limited (in liq) [2018] FCA 1524
Carrafa v Reinhold Investments Pty Ltd, in the matter of Greenfield Mowers Pty Ltd (in liquidation) [2018] FCA 1252
Carrello (Liquidator), in the matter of Drilling Australia Proprietary Limited (In Liquidation) [2019] FCA 1563; 139 ACSR 187
Crisp, in the matter of Buchanan Group Holdings Pty Ltd v Iliopoulos [2011] FCA 1521
Morton v Robins [1996] FCA 472; 14 ACLC 119
Re Ezyclad Pty Ltd (in liq) [2014] VSC 66; 98 ACSR 38
Vartelas v Kyriakou [2009] FCA 1489
Date of hearing: 21 May 2020 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 30 Counsel for the Plaintiffs: D Krochmalik Solicitor for the Plaintiffs: Hilton Bradley Lawyers ORDERS
NSD 548 of 2020 IN THE MATTER OF WRIGHT’S TRANSPORT PTY LIMITED (IN LIQUIDATION)
BETWEEN: JASON BING-FAI TANG AND OZEM AZZAM KASSEM IN THEIR CAPACITY AS LIQUIDATORS OF WRIGHT’S TRANSPORT PTY LIMITED (IN LIQUIDATION) ACN 110 737 838
First Plaintiff
WRIGHT’S TRANSPORT PTY LIMITED (IN LIQUIDATION)
Second Plaintiff
AND: ROBERT WRIGHT
Defendant
JUDGE:
STEWART J
DATE OF ORDER:
21 MAY 2020
THE COURT ORDERS THAT:
1.The District Registrar issue, pursuant to s 530C of the Corporations Act 2001 (Cth), a warrant in the form of the warrant in the Schedule to these orders (the Warrant).
2.Any requirement that the Originating Process in this proceeding be served on the defendant is dispensed with in the first instance, and leave is granted to the plaintiffs to make the application ex parte.
3.Until further order or the discharge of this order pursuant to order 6 below, the affidavit of Jason Bing-Fai Tang affirmed 7 May 2020 and the exhibit thereto, the affidavit of John Thompson affirmed 4 May 2020, the affidavit of Luke Whiffen sworn 21 May 2020 and the annexure thereto, and the affidavit of Quoc Nguyen affirmed 21 May 2020 and the annexure thereto remain confidential and, except with leave of the Court, are not to be open to inspection by any person other than the Court and Court staff.
4.Until further order or the discharge of this order pursuant to order 6 below, the file in the proceeding is to be kept confidential and, except with leave of the Court, is not to be disclosed to anyone other than the Court and Court staff, and the reasons for this judgment are not to be published.
5.Within 7 days of the recovery of the vehicle referred to in the Warrant, the plaintiffs shall file an affidavit reporting on the execution of the Warrant and the recovery of the vehicle.
6.On the filing of the affidavit referred to in order 5, orders 3 and 4 above shall be discharged.
7.Within 14 days of the filing of the affidavit referred to in order 5, the plaintiffs shall serve the originating process and supporting affidavits, these orders and the reasons for judgment on the defendant.
8.The matter be listed for case management at 9:30am on 25 June 2020.
9.The parties and any other party claiming an interest in the vehicle have liberty to apply on at least two days’ notice.
10.The costs of the application are reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(Revised from the transcript)STEWART J:
The plaintiffs are Wright’s Transport Pty Ltd (in liquidation), which I will refer to as the company, and Jason Bing-Fai Tang and Ozem Azzam Kassem, in their capacity as liquidators of the company. The originating process seeks relief with respect to two issues: first, the issuing of a warrant for the delivery up of a prime mover vehicle that belongs to the company and, second, orders appointing the liquidators as receivers and managers of the assets, property and undertaking of two trusts of which the company is trustee.
The plaintiffs rely on the affidavits of Mr Tang affirmed on 7 May 2020, John Thompson affirmed on 4 May 2020, Luke Whiffen sworn on 21 May 2020 and Quoc Nguyen affirmed on 21 May 2020. At the hearing today the plaintiffs only move on the first issue and seek the issuing of a warrant on an ex parte basis. The balance of the relief is to stand over for later determination on an inter partes basis. It is envisaged that service will be effected on Mr Wright, the defendant, only after the warrant is executed and the vehicle is returned to the liquidators, at which point the balance of the relief sought in the originating process can be dealt with.
It is common to proceed with applications of this type on an ex parte basis: Crisp, in the matter of Buchanan Group Holdings Pty Ltd v Iliopoulos [2011] FCA 1521, Carrafa v Reinhold Investments Pty Ltd, in the matter of Greenfield Mowers Pty Ltd (in liquidation) [2018] FCA 1252 and Beattie v Gray, in the matter of Control Rail Pty Ltd (in liq) [2018] FCA 1524. The plaintiffs are justified in proceeding on an ex parte basis in this case for reasons that will shortly become apparent.
Prior to its external administration the company operated a long-range freight transport business as a subcontractor for two large customers, Toll and Incitec Pivot, and it utilised between seven and 12 heavy motor vehicles at any given time.
The company was and remains the trustee of two trusts, the RJ & D Wright Asset Holding Trust and the Wright’s Transport Family Trust, and appears to have carried on business in its capacity as trustee of those trusts and does not own any assets in its own right, that is, as opposed to as trustee.
On 29 November 2019, the company was placed into voluntary administration by resolution of the director of the company and Messrs Kassem and Tang were appointed as administrators. On 15 January 2020, the creditors of the company resolved that the company be wound up and Messrs Kassem and Tang were appointed as the liquidators.
At all relevant times Mr Wright has been a director of the company. Further, his wife, Dawn Wright, was a director of the company up to 16 March 2018. Mr and Mrs Wright are the members of the company in equal share.
On 18 May 2018, the company purchased from Alfridge Pty Ltd, trading as Pengelly Trucks & Trailer Sales, the following two used Kenworth prime mover vehicles:
(1)Kenworth prime mover with registration number 338XUD and VIN 6F5000000DA449412 (Kenworth 338XUD); and
(2)Kenworth prime mover with registration number 302XUD and VIN 6F5000000DA450072 (Kenworth 302XUD).
The Kenworth 338XUD and Kenworth 302XUD were purchased using finance provided by Flexirent Capital Pty Ltd and on 22 May 2018 asset finance agreements were entered into with Flexirent. Flexirent has been given notice of the ex parte application today and, other than requesting to have its claimed interest in the vehicles brought to the attention of the Court, has not appeared on the application.
Flexirent registered its security interest in the vehicles following the asset finance agreements. However, the liquidators contend that the registration of the security interests is invalid and as a result each of the security interests vests in the company such that Flexirent no longer has any security over the vehicles. That issue does not fall for consideration in this proceeding.
As set out further below, Mr Wright was permitted to remain in control of the Kenworth 338XUD and the Kenworth 302XUD following the commencement of the external administration with a view to the purchase of the vehicles from the liquidators by Mr Wright and/or his wife or, I infer, their nominee. Ultimately, however, that purchase did not proceed and Mr Wright has since refused to return the vehicles to the liquidators.
On 4 April 2020, the liquidators made a report to the New South Wales Police that both vehicles had been stolen. On 11 April 2020, the New South Wales Police recovered the Kenworth 302XUD at Moree and it has been returned to the possession of the liquidators through an agent.
However, the Kenworth 338XUD has not been delivered up to the liquidators. Mr Tang believes that Mr Wright, or possibly Mrs Wright, have possession of the vehicle. It is on that basis that the liquidators bring the application for a warrant to be issued to assist in its recovery. The liquidators rely on s 530C of the Corporations Act 2001 (Cth) which provides as follows:
(1)The Court may issue a warrant under subsection (2) if:
(a)a company is being wound up or a provisional liquidator of a company is acting; and
(b)on application by the liquidator or provisional liquidator, as the case may be, or by ASIC, the Court is satisfied that a person:
(i) has concealed or removed property of the company with the result that the taking of the property into the custody or control of the liquidator or provisional liquidator will be prevented or delayed; or
(ii) has concealed, destroyed or removed books of the company or is about to do so.
(2)The warrant may authorise a specified person, with such help as is reasonably necessary:
(a)to search for and seize property or books of the company in the possession of the person referred to in subsection (1); and
(b)to deliver, as specified in the warrant, property or books seized under it.
(3)In order to seize property or books under the warrant, the specified person may break open a building, room or receptacle where the property is or the books are, or where the person reasonably believes the property or books to be.
(4)A person who has custody of property or a book because of the execution of the warrant must retain it until the Court makes an order for its disposal.
A court’s power to issue a warrant is discretionary, but the discretion is only enlivened if the court is satisfied that the elements of s 530C(1) of the Act have been established: Re Ezyclad Pty Ltd (in liq) [2014] VSC 66; 98 ACSR 38 at [59]. The authorities in this Court have made orders issuing a warrant generally without any conditions attached: see Morton v Robins [1996] FCA 472; 14 ACLC 119, Australian Securities Commission v Samson [1997] FCA 739; 24 ACSR 555 and Vartelas v Kyriakou [2009] FCA 1489. Ultimately, however, the question of whether conditions should be imposed is a matter for the court’s discretion: see Re Ezyclad at [67].
The legal principles on which a warrant may be sought under s 530C of the Act were recently stated by Banks-Smith J in Carrello (Liquidator), in the matter of Drilling Australia Pty Ltd (In Liq) [2019] FCA 1563; 139 ACSR 187 where her Honour made the following observations at paras [6]-[9] which I gratefully adopt:
[6] Section 530C is ordinarily ‘a remedy of last resort’: see Cvitanovic v Kenna & Brown Pty Ltd (1995) 18 ACSR 387.
[7] A warrant should be granted if the Court finds that there has been a ‘persistent pattern of non-cooperation and evasion’: Re Whitemore Holdings Ltd (in liq) [2004] FCA 806 at [9]–[10], affirmed in Beattie (in his capacity as liquidator of Control Rail Pty Ltd (in liq)) v Gray [2018] FCA 1524 (Beattie v Gray). This does not appear to be a requirement of granting a warrant, but provides useful guidance.
[8] Factors that have been relied upon in deciding that a person has concealed or removed the property of the company include:
(a) refusals to comply with liquidators’ requests to deliver up the books and records of the company: Vartelas v Kyriakou [2009] FCA 1489 (Vartelas v Kyriakou) at [6];
(b) transfer of assets to, and continued use of the assets by, related companies or entities without proper accounting: Re Crisp (in his capacity as liquidator of Buchanan Group Holdings Pty Ltd) v Iliopoulos [2011] FCA 1521 (Crisp) at [11]; and
(c) moving of assets, books or records from one place to another: Crisp at [13].
[9] It is clear from the s 86 definition that property does not need to be registered to a person’s name or in their custody for them to be in possession of it. Control over the property will suffice. In Beattie v Gray, the property was held in storage lockers in the defendant’s mother’s name. The property was considered to be in the defendant’s possession: at [7].
On the evidence before me I am satisfied that the Kenworth 338XUD is owned by the company for the purposes of s 530C(1)(b)(i) of the Act. The company acquired the vehicle and granted a security interest over it in favour of Flexirent, noting that the registration of that security interest is now in dispute. The purchase and security that is claimed is recorded in the sales invoices and in the security documentation which is before me. Following the appointment of administrators, Mr Wright was permitted to retain de facto control of both the vehicles because the business of the company was still being traded during the administration period.
There was then a proposal that a new entity controlled by the Wrights purchase the vehicles from the liquidators, but that did not ultimately proceed. The draft sale contracts, however, explicitly recorded that the company was the owner of the vehicles. It is also clear on the evidence before me that Mr Wright has concealed or removed the Kenworth 338XUD within the meaning of s 530C(1)(b)(i) of the Act.
First, during the external administration Mr Wright was previously in possession of the Kenworth 338XUD and there is no evidence that he has since disposed of it or that it is in the possession of anyone other than him or possibly Mrs Wright on his behalf.
Secondly, on 21 March 2020 the Wrights admitted that they had control of the vehicles and were continuing to use them.
Thirdly, Hall Chadwick, insolvency advisers retained by the Wrights, also confirmed that the Wrights had custody of the vehicles and that they had been advised to return them to the liquidators. That is particularly telling. It is not apparent why Hall Chadwick should have chosen to advise the liquidators that they, Hall Chadwick, had advised the Wrights to return the vehicles to the liquidators, but they nevertheless did so and that is evidence of the Wrights’ knowledge that they should return the vehicles.
Fourthly, there have been multiple demands, both orally and in writing, from the liquidators’ staff and solicitors demanding the return of the vehicles.
Fifthly, the Kenworth 302XUD had its registration plate changed prior to it having been found and recovered by the New South Wales Police which gives rise to the inference that the same might have occurred with respect to the Kenworth 338XUD. In any event, this is demonstrative of deliberate concealment of the vehicle on behalf of Mr Wright. It also goes without saying that the ongoing concealment or removal of the Kenworth 338XUD is preventing or delaying the liquidators from taking custody or control of the vehicle.
Accordingly, each of the matters in s 530C(1) of the Act is satisfied and there is no other reason why the Court should not issue a warrant.
There is nothing premature about the application. The liquidators have unsuccessfully sought to recover the vehicle for several months. They reported the vehicle stolen more than six weeks ago and one of the liquidators has deposed that he believes that Mr Wright and Mrs Wright, together or separately, are in possession of the vehicle.
Finally, the form of warrant that I intend authorising be issued is consistent with the form of warrants authorised in Vartelas and also Beattie v Gray at [10] and Carrello at [33].
The plaintiffs also seek orders that:
(3) Until further order the affidavit of Jason Bing-Fai Tang affirmed 7 May 2020 and the exhibits thereto, the affidavit of John Thompson affirmed 4 May 2020, the affidavit of Luke Whiffen sworn 21 May 2020 and the annexure thereto, and the affidavit of Quoc Nguyen affirmed 21 May 2020 and the annexure thereto, remain confidential and, except with the leave of the Court, are not to be open to inspection to any person other than the Court and Court stuff; and
(4) Until further order the file in this proceeding is to be kept confidential and, except with the leave of the Court, is not to be disclosed to anyone other than the Court and Court staff.
I shall refer to these proposed orders as the suppression orders. Such orders would have to be justified as “necessary to prevent prejudice to the proper administration of justice”: see s 37AG(1)(a) of the Federal Court of Australia Act 1976 (Cth).
The plaintiffs seek the suppression orders on the basis that if the Wrights discover the existence of the warrant before it is executed and the Kenworth 338XUD is recovered, they may take extra measures to conceal it and avoid it being recovered. Although it might be thought to be a remote possibility that the Wrights would be tracking the lists of filed cases in this Court and seek access to the files of the Court, if they did so and they then learnt of the warrant on the information before me I consider it is likely that they would take further steps to hinder the recovery of the vehicle. It is relevant on the evidence that the Wrights have said that they are using the vehicle.
If the Wrights learn of the warrant they may take further steps to hinder recovery of the vehicle and conceal it, including by, for example, not using it and removing it from the roads where it might otherwise be found. Any steps to hinder the recovery of the vehicle would constitute prejudice to the proper administration of justice.
In the circumstances I am satisfied that the suppression orders should be made. However, once the warrant has been executed and the vehicle recovered there will be no further justification for the suppression orders. I will accordingly make orders that cause the Court to be notified of the successful execution of the warrant so that the suppression orders may then be discharged and for service of the application papers.
I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stewart. Associate:
Dated: 25 May 2020
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