New South Wales Supreme Court CITATION : House of Diamonds (NSW) Pty Ltd (In Liq) v Lemery Pty Ltd [2002] NSWSC 868 revised - 9/10/2002 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 4638/02 HEARING DATE(S) : 16, 17 & 18 September 2002 JUDGMENT DATE : 18 September 2002 PARTIES : House of Diamonds (NSW) Pty Limited (In Liquidation) and John Vouris (P) Lemery Pty Ltd (D) JUDGMENT OF : Hamilton J COUNSEL : J T Johnson (P) No appearance (D) SOLICITORS : Webster O'Halloran & Associates (P) No appearance (D) CATCHWORDS : CORPORATIONS [280] - Winding up - Liquidators - Rights and powers - In winding up by Court - Custody or control of assets of company - Entry and seizure - Appropriate terms and conditions. LEGISLATION CITED : Corporations Act 2001 (Cth) s 530C Australian Securities Commission v Samson (1997) 24 ACSR 555 Cvitanovic v Kenna & Brown Pty Ltd (1995) 18 ACSR 387 CASES CITED : Morton v Robins (1996) 14 ACLC 1197 Re Rainbow Systems of Australia Pty Ltd; Wily v Parker (1996) 21 ACSR 171 Gee on Mareva Injunctions and Anton Piller Relief (4th ed, 1998) DECISION : Warrant issued. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J WEDNESDAY, 18 SEPTEMBER 2002 4038/02 HOUSE OF DIAMONDS (NSW) PTY LTD (In Liquidation) & ANOR v LEMERY HOLDINGS PTY LTD JUDGMENT 1 HIS HONOUR: This is an application under s 530C of the Corporations Act 2001 (Cth) ("the CA") for what is commonly called a search and seizure warrant. The application is made by the liquidator of House of Diamonds (NSW) Pty Ltd ("the company"). Section 530C 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." 2 There has been a difference of opinion of Judges in this Court and Judges in the Federal Court as to the form of warrant which ought be issued. In this Court, the present Chief Judge in Equity has, in formulating warrants, borne in mind the sorts of considerations that are borne in mind when making Anton Piller orders, and has inserted in warrants that he has issued provisions to safeguard the position of persons whose proprietary rights are invaded by the orders: see Cvitanovic v Kenna & Brown Pty Ltd (1995) 18 ACSR 387; Re Rainbow Systems of Australia Pty Ltd; Wily v Parker (1996) 21 ACSR 171. In the Federal Court the warrants have been treated as akin to ordinary search warrants and no such special provisions have been inserted: see the decision of Northrop J in Morton v Robins (1996) 14 ACLC 1197 and the decision of Goldberg J in Australian Securities Commission v Samson (1997) 24 ACSR 555. The Chief Judge in Equity in the second of his decisions announced his adherence to his earlier policy, despite at that time being aware of the course followed in the Federal Court. 3 I should say that I propose to adhere to the practice instituted in this Court by the Chief Judge in Equity by incorporating safeguards in the warrants until I am told that this is inappropriate by the decision of a relevant Court of Appeal or by a consensus of views of Judges in this Division of this Court. My reason for doing this, in addition to the comity of Judges of this Court, is the serious inroads into rights of private property potentially involved, combined with the fact that, although liquidators are in a sense officers of the Court, they do not have the training and discipline possessed by police forces or other law enforcement agencies, which are normally the people who execute search warrants. 4 In the light of the comparatively small body of available authority, this is a slightly unusual case. The cases usually involve an invasion of property of an officer of a company, who appears from the evidence to have concealed or removed property of the company into his or her possession, away from premises of the company. The reason that this is unusual is that the person sought to be characterised in this application as the person falling within s 530C(1)(b) is not an officer or former officer of the company, but a company associated by transactions and some commonality of personnel with the company. The company conducted businesses of retailing diamonds and jewellery at two shops, one in Burwood and one in Liverpool. The Burwood shop was, shortly before the liquidation, sold to the defendant company which is sought to be characterised as the person falling within s 530C(1)(b). The circumstances of the sale are somewhat mysterious and the situation is quite unclear as to payment of the purchase moneys of $800,000 and the destination of such of the purchase moneys as were clearly paid. The defendant had entered into possession of the Burwood shop, but the lease was still in the name of the company, which could, therefore, be regarded as being in legal possession of the premises. On this basis, the liquidator entered those premises, locked the defendant out and seized documents and jewellery in that shop, and this without the aid of any process from this or any other Court. The liquidator now seeks a warrant, in effect, against the defendant, to permit him to enter the Liverpool premises and to seize documents and jewellery in that shop. 5 Part of the case presented by the liquidator depended upon a person, who calls and signs himself Alan Sobbi, being the same person as Ghandi Faisi Sobbi, born on 1 July 1992 in Iran, who ceased to be a director of the defendant at about the time of its purchase of the Burwood business and mysteriously reappeared as the only director of the defendant on 25 July 2002. Mr J T Johnson, of counsel for the plaintiff, has, with his usual care, drawn to my attention that the evidence that Alan Sobbi and G F Sobbi are the same person is not overwhelming. However, I am prepared to draw the inference, for purposes of this application, from the material presented to me that they are the same person. If they are not the same person, then it is at least plain from documents put into evidence that Alan Sobbi was authorised to sign company documents on behalf of G F Sobbi and his wife. 6 All attempts by the liquidator to obtain documents from relevant persons have ended in failure. It is reasonably clear from the evidence that at one stage the company was operating its business from the Liverpool premises. The deed by which the sale of the Burwood business was effected, executed both by the company and the defendant, recites that the defendant conducts a jewellery business at the Liverpool premises. The defendant also is, and has at all material times been, the registered proprietor of those premises. There appears to be a jewellery business being conducted there, and there is nothing in the evidence that suggests the premises have been leased to, or occupied by, anyone else. Solicitors have asserted on behalf of the company and the defendant that the Liverpool business has no connection with the company. But other evidence, created one would infer without the liquidation in mind, indicates that the company was this year conducting a business there. That evidence includes an invoice for jewellery directed to the company at the Liverpool premises in June 2002. Furthermore, documents bearing the company's name and giving its address as the Liverpool premises have continued to be put into circulation after the liquidation. 7 I have squarely borne in mind the warnings contained in the reported authority as to the care that needs to be exercised by reason of the invasive nature of the process And, of course, there is considerable literature concerning that care relating to the equally invasive process of the Anton Piller order (Gee on Mareva Injunctions and Anton Piller Relief (4th ed, 1998) 243), but I am of the view that, on the evidence, the issue of a warrant is justified in the present circumstances. I therefore, last evening, issued a warrant for execution today. The warrant was sought by an originating process and interlocutory application which were not served, as I thought it appropriate to issue the warrant ex parte, because the expressed fears of the liquidator that notice would lead to further removal of documents were reasonable on the evidence before me. 8 However, whilst I was prepared to issue the warrant relating to documents, including computer records, I did not feel, bearing the above considerations in mind, that there was sufficient evidence that there was jewellery or other property of the liquidated company, not being documents or records, on the premises to justify the issue of a warrant for seizure of jewellery or other goods. In the face of my reservations, the plaintiff withdrew its application that the warrant extend so far. I did incorporate in the warrant all the precautions outlined by the Chief Judge in Cvitanovic. In particular, I provided for the attendance of an independent solicitor to give advice if it were sought (making it clear that he should indicate that the occupants of the premises also had the right to obtain advice from other sources). The gentleman nominated for that position has previously accepted instructions in liquidation matters from Mr Vouris, the liquidator, but has never acted for Mr Vouris personally and has had no association with any of the other parties referred to in the evidence. He is an expert in company liquidation and I thought it desirable that a person with that qualification should be the independent solicitor for purposes of giving on the spot advice. I took the view that he was of sufficient independence for me to appoint him to the role. The originating process and interlocutory process are now returnable before me on 20 September 2002 and on that day I have required a report from the liquidator, and from the independent solicitor, as to the execution of the warrant. 9 It is for the reasons that I have now given that I made orders yesterday, including an order for the issue of the warrant, and that I in fact signed the warrant late yesterday afternoon. ********** Last Modified: 10/10/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.