New South Wales Supreme Court CITATION : Wily v Bettertiles Contracting Pty Ltd [2002] NSWSC 869 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 4712/02 HEARING DATE(S) : 19 & 20 September 2002 JUDGMENT DATE : 20 September 2002 Andrew Hugh Jenner Wily (P1) Bettertiles Projects Pty Limited (In Liquidation) (P2) Bettertiles Contracting Pty Ltd (D1) PARTIES : Bettertiles Pty Ltd (D2) Leonardo Gasparre (D3) Mariliana Gasparre (D4) Patrick Gasparre (D5) Anthony Gasparre (D6) JUDGMENT OF : Hamilton J COUNSEL : J K Chippindall (P) No appearance (D1-6) SOLICITORS : M D Nikolaidis & Co (P) No appearance (D1-6) 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 : House of Diamonds (NSW) Pty Ltd (In Liq) v Lemery Holdings Pty Ltd [2002] NSWSC 868 Morton v Robins (1996) 14 ACLC 1197 Re Rainbow Systems of Australia Pty Ltd; Wily v Parker (1996) 21 ACSR 171 DECISION : Warrants issued. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J FRIDAY, 20 SEPTEMBER 2002 4712/02 WILY v BETTERTILES CONTRACTING PTY LTD & ORS JUDGMENT 1 HIS HONOUR: This is an application under s 530C of the Corporations Act 2001 (Cth) ("the CA") for what are commonly called search and seizure warrants. Section 530C so far as material 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 divergence of practice between the Federal Court of Australia and this Court as to the form and conditions on which warrants are issued under s 530C: see in this Court Cvitanovic v Kenna & Brown Pty Ltd (1995) 18 ACSR 387 and Wily v Parker; Re Rainbow Systems of Australia Pty Ltd (1996) 21 ACSR 171; and in the Federal Court Morton v Robins (1996) 14 ACLC 1197 and Australian Securities Commission v Samson (1997) 24 ACSR 555. 3 I have very recently had occasion to consider that divergence and the course which should now be followed in this Court in House of Diamonds (NSW) Pty Ltd (In Liq) v Lemery Holdings Pty Ltd [2002] NSWSC 868 ("my judgment"). In my judgment I determined that I should follow the course as to the form and conditions of such warrants laid down by the Chief Judge in Equity in his earlier decisions noted above and I acted accordingly in issuing a warrant in that case. I also adverted in my judgment to the substantial intrusion into proprietary rights and, indeed, privacy which may take place in execution of such warrants and the fact that the evidence in support of warrants should be closely examined before warrants are issued. 4 In this case warrants were originally sought against six persons, four of them natural persons and two of them companies. One of the natural persons, Leonardo Gasparre, was a director of the company in liquidation, which is the second plaintiff. The other natural persons, who are related to him, are directors of the two companies. Those two companies, namely, Bettertiles Contracting Pty Ltd and Bettertiles Pty Ltd, conducted a business or businesses similar to that formerly conducted by the second plaintiff. The suggestion is that the second plaintiff was conducting a generally successful business, but was under threat from one large debt arising out of proceedings brought against it in relation to one contract. The threat was that that debt would overwhelm the second plaintiff. The threat in fact materialised. Over a period of time before that occurred, the second plaintiff's business was "transferred" to the two companies mentioned above, which certainly are associated with the Gasparre family, who were also in some form the owners of the second plaintiff. I use "transferred" in the loosest possible sense. It may be that there was some transfer of assets, including the benefit of contracts, which was potentially subject to challenge under the principles relating to transactions with intent to defraud creditors. It may be on the other hand that the operations of the second plaintiff were simply wound down by it ceasing to enter into new contracts and new contracts to do the same sort of work being entered into by the other companies. 5 However that may be, the evidence shows that there has been reluctance to produce to the liquidator the central accounting documents of the second plaintiff. That reluctance has been clearly evinced by Leonardo Gasparre. Furthermore, the present business is being conducted in premises at 25 Fox Street, Holroyd ("the premises"). The evidence shows that both the companies against which a warrant is sought are operating from the premises and that there is a constant or frequent presence of Leonardo Gasparre at the premises. The inference may be drawn from the evidence as a whole that documents of the second plaintiff are at the premises and are being kept from the liquidator and, at the premises, are in the possession of Leonardo Gasparre or of one or other of the two companies. I have formed the conclusion that I am satisfied that each of those three persons has concealed or removed property of the second plaintiff with the result that the taking of the property into the custody or control of the liquidator will be prevented or delayed. I have already issued a warrant against each of the three persons and am now giving these reasons for having done so. 6 I was not satisfied that the evidence showed that Mariliana Gasparre, Patrick Gasparre or Anthony Gasparre was a person who could be characterised in that way. They are directors of one or other of the two relevant companies, but the evidence does not indicate that any documents are in their personal possession as opposed to the possession of those companies. I declined to issue warrants against those persons. 7 The applications I dealt with ex parte on the basis that the evidence that established the relevant persons as falling within s 530C also raised a reasonable fear that, if notified of the application, those persons might take further steps to conceal or remove the documents. 8 The application being ex parte, Mr Chippindall, of counsel for the plaintiffs, properly raised with me the question of whether, so far as the warrants were to be issued against the companies, there could be an argument that the word "person" in s 530C(1) may be limited to natural persons. In discharge of his obligations as counsel moving an ex parte application, he thought he should draw to my attention that possible argument. I must say that I myself can see no reason for limiting persons within the meaning of s 530C(1) to natural persons and excluding from the concept corporate bodies. 9 I did warn that the documents which could be taken under the warrants were documents of the second plaintiff. The evidence showed the liquidator demanding to see documents of the two relevant companies which it was thought might throw light on what had happened to assets of the plaintiff. However useful any documents which are documents of those companies might prove to be to the liquidator, they are not susceptible of seizure under these warrants. 10 Late evidence presented at the time I came to sign the warrants as finally drawn showed that further documents of the second plaintiff had been produced to the liquidator. However, these still did not include many primary accounting documents which were sought. The late production that was made therefore did not dispel, but rather reinforced, the conclusion that the persons against whom the warrants issued retained and were keeping relevant documents from the liquidator. ********** 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.