FEDERAL COURT OF AUSTRALIA Elderslie Finance Corporation Limited v Newpage Pty Ltd (No 3) [2007] FCA 259 ELDERSLIE FINANCE CORPORATION LIMITED AND OTHERS v NEWPAGE PTY LIMITED AND OTHERS NSD 4 of 2007 LINDGREN J 2 MarCH 2007 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 4 OF 2007 BETWEEN: ELDERSLIE FINANCE CORPORATION LIMITED (ACN 008 678 233) First Plaintiff PETER ALEXIS GEORGE Second Plaintiff AND: NEWPAGE PTY LIMITED (ACN 087 645 216) (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION) Defendant/First Applicant BARRY KENNETH HAMILTON IN HIS CAPACITY AS OFFICIAL LIQUIDATOR OF NEWPAGE PTY LIMITED (ACN 087 645 216) (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION) Second Applicant CASINO BUSTERS INTERNATIONAL PTY LTD (ACN 108 453 809) First Respondent ROUMALD CHARLES PARSONS Second Respondent MARTIN YONG HENG YII Third Respondent JUDGE: Lindgren J DATE OF ORDER: 26 FEBRUARY 2007 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The applicant has leave to file in Court an Amended Interlocutory Process. 2. The applicant has leave to file in Court the affidavit of Barry Kenneth Hamilton, sworn 26 February 2007, on the understanding that it will be replaced with the original. 3. The interlocutory application be heard instanter. 4. The interlocutory application be heard ex parte. 5. The applicant is directed to have available on the return date of Thursday 1 March 2007 a draft of a statement of claim against Martin Yong Heng Yii. 6. Upon the applicants and Elderslie Finance Corporation Limited giving to the Court through counsel the undertakings referred to in Schedule A in the form of order annexed, I make the following orders in the form of that order. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 4 OF 2007 BETWEEN: ELDERSLIE FINANCE CORPORATION LIMITED (ACN 008 678 233) First Plaintiff PETER ALEXIS GEORGE Second Plaintiff AND: NEWPAGE PTY LTD (ACN 087 645 216) (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION) Defendant/First Applicant BARRY KENNETH HAMILTON IN HIS CAPACITY AS OFFICIAL LIQUIDATOR OF NEWPAGE PTY LIMITED (ACN 087 645 216) (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION) Second Applicant CASINO BUSTERS INTERNATIONAL PTY LTD (ACN 108 453 809) First Respondent ROUMALD CHARLES PARSONS Second Respondent MARTIN YONG HENG YII Third Respondent JUDGE: LINDGREN J DATE: 2 MARCH 2007 PLACE: SYDNEY REASONS FOR JUDGMENT (No 3) 1 On the application of the first plaintiff, Elderslie Finance Corporation Limited and the second plaintiff, Peter Alexis George, the Court ordered on 25 January 2007 that the defendant, Newpage Pty Limited (Receiver, Manager and Provisional Liquidator Appointed) be wound up, and that Barry Kenneth Hamilton, who was at the time provisional liquidator in respect of Newpage, be appointed as liquidator. 2 The winding up proceeding arose out of a debt for principal sum of $3 million that Newpage owed to Lewis Securities Limited, which that company had assigned to the plaintiffs jointly. The loan was made in September 2006; the debt and an associated charge from Newpage to Lewis Securities Limited were assigned to the plaintiffs on 3 November 2006; notice of the assignment was given to Newpage on 15 December 2006; the plaintiffs appointed Mr Hamilton as receiver and manager of Newpage on 29 December 2006; and the Court appointed Mr Hamilton as provisional liquidator of Newpage on 5 January 2007. Newpage is apparently under the control of Martin Yong Heng Yii. 3 By a subsequent interlocutory process, Newpage and Mr Hamilton sought a declaration that Newpage had paid to the first respondent, Casino Busters International Pty Ltd ('Casino Busters') $610,000 on 1 June 2006, and $1,527,000 on 22 September 2006 (totalling $2,137,000), declarations that the making of each of the two payments was an insolvent transaction of Newpage and a voidable transaction of Newpage, and an order that Casino Busters pay to Newpage $2,137,000. Apparently, Casino Busters is a company under the control of the second respondent, Roumald Charles Parsons. 4 The application for the final relief mentioned has not been heard. However, on 25 January 2007, Stone J made a freezing order against Casino Busters and a disclosure order against both Casino Busters and Mr Parsons ('freezing orders'). 5 In response to the freezing orders against him, Mr Parsons has filed two affidavits sworn 8 February 2007 and 13 February 2007. He states that he is the current and only director of Casino Busters, which operates a tutorial gaming internet site open to the public at large. According to his affidavit, the website invites the public to purchase over the internet individual modules of instructions concerning the card game known as 'blackjack'. 6 According to Mr Parsons, he met Mr Yii in Melbourne in about 2002, and over a period Mr Yii provided him with funds for the purpose of gambling in reliance on Mr Parsons's expertise at blackjack. 7 Mr Parsons's affidavit of 8 February 2007 is imprecise, but is generally to the effect that Mr Yii paid to him various parcels of funds totalling, he estimates, in excess of $10 million, for Mr Parsons to use for blackjack gaming. The last payment was a payment in September 2006 of $1,527,000. Mr Parsons states that he used the funds provided to him by Mr Yii in playing blackjack at casinos. He estimates that the total return to Mr Yii up to mid November 2006 exceeded $12 million. Mr Parsons states that when Mr Yii provided him with the funds, Mr Yii would tell him that the funds came from wealthy friends abroad who were interested in gaining a profit from blackjack gaming. 8 In his earlier affidavit, Mr Parsons deals specifically with the sums of $610,000 deposited into Casino Busters' Westpac trading account on 1 June 2006, and $1,527,000 deposited into that account on 22 September 2006. He states that he has inspected the record of that account in respect of the period following those deposits and identifies withdrawals which were used by him for blackjack gaming at the casinos mentioned. He states: 'To the best of my knowledge and recollection Mr Yii received the return of all of his capital and a percentage of the winnings depending on the amount of the winnings. The returns to Mr Yii were always in the form of cash and casino chips.' 9 In his second affidavit (sworn 13 February 2007), Mr Parsons gives further detail of the return of the sums of $610,000 and $1,527,000 to Mr Yii. In respect of the sum of $610,000, he says that the return to Mr Yii was in the form of cash and casino chips, the casino chips usually being in lots of $25,000 per chip or $5,000 per chip. He states that, as best he can remember, he returned approximately $750,000 to Mr Yii in this way between 1 June 2006 and 1 August 2006. He identifies the locations where he handed over the amounts to Mr Yii, but cannot now remember the specific dates or the amounts handed over at those places. 10 In relation to the sum of $1,527,000, Mr Parsons states that he handed over cash and chips to a nominee of Mr Yii's, named 'Walter'. 11 Mr Parsons estimates that over the period 22 September 2006 to the first week of December 2006, he returned to Mr Yii approximately $1,900,000, and states that these funds were returned to Mr Yii at the locations mentioned earlier in his affidavit, with the exception of the sums paid to 'Walter' in the United States. Again, he cannot now recall the dates or the amounts. 12 I adopt in these reasons the reasons given by Stone J on 6 February 2007 for the granting of freezing orders against Casino Busters and Mr Parsons. The case for the making of freezing orders against Casino Busters and Mr Parsons was that Mr Yii had paid over the money borrowed by Newpage to Casino Busters in breach of an arrangement under which the loan of $3 million was to be used by Newpage to assist it to borrow a much larger sum from overseas. What now emerges, on the basis of the affidavits of Mr Parsons, is that the money was all paid back, not to Newpage but to Mr Yii. 13 Although the Court is not favoured yet with a draft statement of claim, the evidence before the Court now suggests that Mr Yii disposed of the sum of $3 million lent to Newpage, at least to the extent of $2,137,000 of it, for his (Mr Yii's) gambling purposes and then received all those monies back. There is, at least, an arguable case for Mr Hamilton, as liquidator of Newpage, to succeed on an application under s 588FF of the Corporations Act 2001 (Cth) ('the Act') against Mr Yii, on the basis of a voidable transaction or insolvent transaction of Newpage. 14 The risk of dissipation is suggested by the fact that Mr Yii used Newpage's money for his own gambling activity (at least on the affidavit of Mr Parsons). 15 I think that a case for a freezing order is made out. There will, however, be an early return date. 16 By the amended interlocutory process, Newpage and Mr Hamilton also seek orders under s 486A(1)(c) and (d) of the Act. Subsection 486A(1) of the Act provides, relevantly, as follows: '(1) On the application of a liquidator or provisional liquidator of a company, the Court may make one or more of the following: (a) ... (b) ... (c) an order requiring an officer or employee of the company, or a related entity of the company that is a natural person, to surrender to the Court his or her passport and any other specified documents; (d) an order prohibiting an officer or employee of the company, or a related entity of the company that is a natural person, from leaving this jurisdiction, or Australia, without the Court's consent.' Subsection 486A(2), however, provides that the Court may make an order under s 486A(1) only if: '(a) the company is being wound up in insolvency or by the Court, or an application has been made for the company to be so wound up; and (b) the Court is satisfied that there is at least a prima facie case that the officer, employee or related entity is or will become liable: (i) to pay money to the company, whether in respect of a debt, by way of damages or compensation or otherwise; or (ii) to account for property of the company; and (c) the Court is also satisfied that there is substantial evidence that the officer, employee or related entity: (i) has concealed or removed money or other property, has tried to do so, or intends to do so; or (ii) has tried to leave this jurisdiction or Australia, or intends to do so; in order to avoid that liability or its consequences; and (d) the Court thinks it necessary or desirable to make the order in order to protect the company's rights against the officer, employee or related entity.' 17 It is a serious thing to require a person to surrender his or her passport to the Court, and to require a person to obtain the Court's consent before leaving the country. 18 I do not think that the orders sought should be made at this stage. 19 According to Mr Hamilton's affidavit of 2 January 2007, he and Mr Yii had a telephone conversation on 29 December 2006, when Mr Yii was in Singapore and was about to travel to Malaysia on his Malaysian passport. 20 According to Mr Hamilton's affidavit sworn 26 February 2007, Mr Yii has left Australia on at least two occasions since Mr Hamilton's appointment as provisional liquidator of Newpage on 5 January 2007. Mr Hamilton does not give details, even as to dates or periods of absence, let alone anything he knows of the purpose of the overseas trips. Mr Yii has returned to Australia most recently on or shortly before 20 February 2007, when he telephoned Mr Hamilton. 21 Mr Hamilton again spoke to Mr Yii on 26 February 2007, and has arranged to meet him in Melbourne this Friday, 2 March 2007. So far as the evidence shows, Mr Yii has been maintaining contact with Mr Hamilton. 22 I am not satisfied that condition (c) of s 486A(2) is met. The evidence does not establish concealment or removal of money or property from Australia or Mr Yii's departure from Australia, for the purpose of Mr Yii's avoiding any liability on his part to the plaintiffs in respect of the debt of $3 million. The most that the evidence establishes is that Mr Yii seems to travel to and from Australia fairly frequently. That is no evidence at all, let alone 'substantial evidence', that Mr Yii has concealed or removed money or has tried or intends to do so, or has tried to leave Australia or intends to do so, 'in order to avoid' a liability on his part to the plaintiffs. 23 The application under s 486A can be renewed on the return date or subsequently if circumstances change. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate: Dated: 2 March 2007 Counsel for the Plaintiffs: Mr JT Johnson Solicitor for the Plaintiffs: Kemp Strang Date of Hearing: 26 February 2007 Date of Judgment: 2 March 2007 PENAL NOTICE TO: Martin Yong Heng Yii IF YOU: (A) REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR (B) DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU TO ABSTAIN FROM DOING, YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT. ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED. TO: Martin Yong Heng Yii This is a 'freezing order' made against Martin Yong Heng Yii by Justice Lindgren at a hearing without notice to you after the Court was given the undertakings set out in Schedule A to this order and after the Court read the affidavits listed in Schedule B to this order. THE COURT ORDERS: INTRODUCTION 1. (a) The application for this order is made returnable immediately. (b) The time for service of the application, supporting affidavits and Amended Interlocutory Process is abridged and service is to be effected by 4.00pm Tuesday 27 February 2007. (c) Service in the first instance is to be effected by 6.00pm on 26 February 2007, by e-mail transmission to the solicitors for Martin Yong Heng Yii, Warwick Isherwood & Associates Pty Ltd, at warwick@isherwood.id.au. 2. Subject to the next paragraph, this order has effect up to and including 1 March 2007 ('the Return Date'). On the Return Date at 9.30 am there will be a further hearing in respect of this order before Justice Lindgren, Sydney Registry of the Federal Court of Australia. 3. Anyone served with or notified of this order, including you, may apply to the Court at any time to vary or discharge this order or so much of it as affects the person served or notified. 4. In this order: (a) 'applicant', if there is more than one applicant, includes all the applicants; (b) 'you', where there is more than one of you, includes all of you and includes you if you are a corporation; (c) 'third party' means a person other than you and the applicant; (d) 'unencumbered value' means value free of mortgages, charges, liens or other encumbrances. 5. (a) If you are ordered to do something, you must do it by yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions. (b) If you are ordered not to do something, you must not do it yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions or with your encouragement or in any other way. FREEZING OF ACCOUNT 6. (a) You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia ('Australian assets') up to the unencumbered value of AUD$2,137,000.00 ('the Relevant Amount'). (b) If the unencumbered value of your Australian assets exceeds the Relevant Amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of your Australian assts still exceeds the Relevant Amount. (c) If the unencumbered value of your Australian assets is less than the Relevant Amount, and you have assets outside Australia ('ex-Australian assets'): (i) You must not dispose of, deal with or diminish the value of any of your Australian assets and ex-Australian assets up to the unencumbered value of your Australian and ex-Australian assets of the Relevant Amount; and (ii) You may dispose of, deal with or diminish the value of any of your ex-Australian assets, so long as the unencumbered value of your Australian assets and ex-Australian assets still exceeds the Relevant Amount. 7. For the purposes of this order; (1) your assets include: (a) all your assets, whether or not they are in your name and whether they are solely or co-owned; (b) any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions); and (c) the following assets in particular: (i) the property known as 30 Lotus Crescent, Mulgrave, in the State of Victoria, or, if it has been sold, the net proceeds of sale; (ii) all motor vehicles in your possession; (iii) all shareholdings and interests in all companies outside Australia; and (iv) all investments in Malaysia and Singapore. (2) the value of your assets is the value of the interest you have individually in your assets. PROVISION OF INFORMATION 8. Subject to paragraph 9, you must: (a) at or before the further hearing on the Return Date (or within such other time as the Court may allow) to the best of your ability inform the applicants in writing of all your assets in Australia and world wide, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your interest in the assets; (b) within 14 days after being served with this order, swear and serve on the applicants an affidavit setting out the above information. 9. (a) This paragraph 9 applies if you are not a corporation and you wish to object that compliance with paragraph 8 may tend to incriminate you or make you liable to a civil penalty; (b) This paragraph 9 also applies if you are a corporation and all of the persons who are able to comply with paragraph 8 on your behalf and with whom you have been able to communicate, wish to object that compliance may tend to incriminate them respectively or make them respectively liable to a civil penalty; (c) You must, at or before the further hearing on the return date (or within such further time as the Court may allow), notify the applicants in writing that you or all the persons referred to in (b) wish to take such objection and identify the extent of the objection; (d) If you give such notice, you need comply with paragraph 8 only to the extent, if any, that it is possible to do so without disclosure of the material in respect of which the objection is taken; and (e) If you give such notice, the Court may give directions as to the filing and service of affidavits setting out such matters as you or the persons referred to in (b) wish to place before the Court in support of the objection. EXCEPTIONS TO THIS ORDER 10. This order does not prohibit you from: (a) paying your ordinary living expenses; (b) paying your reasonable legal expenses; (c) dealing with or disposing of any of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred; and (d) in relation to matters not falling within (a), (b) or (C) dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the applicants, if possible, at least two working days written notice of the particulars of the obligation. 11. You and the applicants may agree in writing that the exceptions in the preceding paragraph are to be varied. In that case the applicants or you must as soon as practicable file with the Court and serve on the other a minute of a proposed consent order recording the variation signed by or on behalf of the applicants and you, and the Court may order that the exceptions are varied accordingly. 12. (a) This order will cease to have effect if you: (i) pay the sum of $2,137,000.00 into Court; or (ii) pay that sum into a joint bank account in the name of your solicitor and the solicitor for the applicants as agreed in writing between them; or (iii) provide security in that sum by a method agreed in writing with the applicants to be held subject to the order of the Court. (b) Any such payment and any such security will not provide the applicants with any priority over your other creditors in the event of your insolvency. (c) If this order ceases to have effect pursuant (a), you must as soon as practicable file with the Court and serve on the applicants notice of that fact. COSTS 13. The costs of this application are reserved to the judge hearing the application on the Return Date. PERSONS OTHER THAN THE APPLICANTS AND RESPONDENTS 14. Persons outside Australia (a) Except as provided in subparagraph (b) below, the terms of this order do not affect or concern anyone outside Australia. (b) The terms of this order will affect the following person outside Australia: (i) you and your directors, officers, employees and agents (except banks and financial institutions); (ii) any person (including a bank or financial institution) who: (A) is subject to the jurisdiction of this Court; and (B) has been given written notice of this order, or has actual knowledge of the substance of the order and of its requirements; and (C) is able to prevent or impede acts or omissions outside Australia which constitute or assist in a disobedience of the terms of this order; and (iii) any other person (including a bank or financial institution), only to the extent that this order is declared enforceable by or is enforced by a court in a country or state jurisdiction over that person or over any of that person's assets. 15. Assets located outside Australia Nothing in this order shall, in respect of assets located outside Australia, prevent any third party from complying or acting in conformity with what it reasonably believes to be its bona fide and properly incurred legal obligations, whether contractual or pursuant to a court order or otherwise, under the law of the country or state in which those assets are situated or under the proper law of any contract between a third party and you, provided that in the case of any future order of a court of that country or state made on your or the third party's application, reasonable written notice of the making of the application is given to the applicants. SCHEDULE A UNDERTAKINGS GIVEN TO THE COURT BY THE APPLICANTS 1. The applicants and Elderslie Finance Corporation Limited ACN 008 678 233undertake to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order. 2. As soon as practicable, the applicants will file and serve upon the respondents copies of: (a) this order; (b) the application for this order for hearing on the return date; (c) the following material in so far as it was relied on by the applicants at the hearing when the order was made: (i) affidavits; (ii) exhibits capable of being copied; (iii) any written submission; and (iv) any other document that was provided to the Court. (d) a transcript, or, if none is available, a note, of any exclusively oral allegation of fact that was made and of any exclusively oral submission that was put, to the Court; (e) the originating process. 3. As soon as practicable, the applicants will cause anyone notified of this order to be given a copy of it. 4. The applicants will pay the reasonable costs of anyone other than the respondents which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondent's assets. 5. If this order ceases to have effect the applicants will promptly take all reasonable steps to inform in writing anyone to who has been notified of this order, or who he has reasonable grounds for supposing may act upon this order, that it has ceased to have effect. 6. The applicants will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than this proceeding. 7. The applicants will not, without leave of the Court, seek to enforce this order in any country outside Australia or seek in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondents or the respondents' assets. SCHEDULE B AFFIDAVITS RELIED ON Name of Deponent Date affidavit made (1) Barry Kenneth Hamilton 2 January 2007 (2) Barry Kenneth Hamilton 5 January 2007 (3) Barry Kenneth Hamilton 24 January 2007 (4) Barry Kenneth Hamilton 26 February 2007 (5) Peter Alexis George 24 January 2007 (6) Joseph Edward Crogan 24 January 2007 (7) Nigel Benjamin Elias 24 January 2007 (8) James Garrett 2 January 2007 (9) Roumald Charles Parsons 8 February 2007 (10) Roumald Charles Parsons 13 February 2007 NAME AND ADDRESS OF APPLICANTS' LEGAL REPRESENTATIVES The applicants' legal representatives are: John Baird c/- Kemp Strang, Level 16, 55 Hunter Street, Sydney NSW 2000, DX 605 Sydney. Telephone: (02) 9225 2534 or 0404 821 462 Facsimile: (02) 9225 2537 Email: bairdj@kempstrang.com.au