FEDERAL COURT OF AUSTRALIA

Carrafa v Reinhold Investments Pty Ltd, in the matter of Greenfield Mowers Pty Ltd (In Liq) [2018] FCA 1252

ORDERS

THE COURT ORDERS THAT:

1.    The Registrar issue, pursuant to section 530C of the Corporations Act 2001 (Cth), a warrant in the form which is annexed to this order.

2.    The requirement that the originating process in this proceeding be served on the defendants is dispensed with, and leave is granted to the plaintiffs to make the application ex parte.

3.    The costs of and incidental to the originating process be costs in the winding-up.

4.    Liberty to apply.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

DAVIES J:

1    Application has been made on an ex parte basis that the Court issue a warrant pursuant to s 530C of the Corporations Act 2001 (Cth) (“the Act”). The first plaintiff, Mr Michael Carrafa, is the liquidator of the second plaintiff, Greenfield Mowers Pty Ltd (“the company”). In summary, the plaintiffs seek a warrant to search for, identify and to seize various items that belong to the second plaintiff from Reinhold Investments Pty Ltd (“Reinhold Investments”), Cox Industries Pty Ltd (“Cox Mowers”), and Mr Lewis William Reinhold (collectively, “the defendants”). Mr Reinhold has been the director of the company at all material times. The plaintiffs allege that the defendants have concealed, destroyed or removed these items.

2    I am satisfied that the application is properly brought ex parte by reason of the nature of the application itself, and by reason of evidence that, shortly prior to its winding up, the company moved its full production line, plant and equipment and stock to a third party.

3    Section 530C of the Act provides:

530C     Warrant to search for, and seize, company’s property or books

(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.

4    The plaintiffs rely on both s 530C(1)(b)(i) and (ii). The evidence supporting the application is contained in an affidavit of Mr Carrafa. Mr Carrafa has deposed that, prior to his appointment as liquidator, the company operated a lawn mower manufacturing business in Brisbane and carried on business from property located at 123 Boundary Road, Rocklea, in the State of Queensland (“the premises”), which was rented. The company was evicted from the premises shortly before it was placed into liquidation.

5    Upon his appointment as liquidator, Mr Carrafa sent a letter to Mr Reinhold requiring him to deliver to the liquidator all the books and records of the company which were held by him or under his control. A meeting later occurred between members of Mr Carrafa’s staff, Mr Reinhold, and a Mr Bill Freeman (an associate of Mr Reinhold), during which Mr Carrafa’s staff were told that: a number of items, including the company’s server, remained at the premises when the company was evicted; that minimal stock, which was of minimal value, was provided to Cox Mowers; that in around 2014 an agreement was entered into between the company, Reinhold Investments, and a company called Bartlem Pty Ltd (“Bartlem”), pursuant to which all intellectual property rights associated with the lawn mower manufacturing business would be transferred to Bartlem, and Reinhold Investments would provide goods to the company on consignment; and, in the week prior to the liquidation, an agreement was entered into between Mr Reinhold and Cox Mowers, pursuant to which Mr Reinhold granted a licence to Cox Mowers to manufacture Greenfield mowers. Mr Carrafa deposed that Ms Belinda Reinhold is the sole director, secretary and shareholder of Reinhold Investments, and that, based on his investigations, he believes that she is the wife of Mr Reinhold. When a member of Mr Carrafa’s office visited the premises to collect the remaining assets owned by the company, the company’s server was not located at the premises.

6    Further, Mr Reinhold completed a questionnaire in which he gave information inconsistent to that which he had initially provided to Mr Carrafa’s office concerning the property that had been left at the company’s premises. In particular, according to the questionnaire, 40 unfinished machines were provided to Cox Mowers, together with spare parts, and the company’s server was with Mr Freeman.

7    Mr Carrafa sent a letter to Mr Freeman attaching a notice to deliver up the books and records of the company, pursuant to s 530B of the Act. Mr Carrafa also sent a letter to Cox Mowers, stating that he had been advised that a relocation of the company’s full production line, plant and equipment and stock to Cox Mowers had occurred in May 2018, and requested an accounting of the assets received and the consideration paid to the company or to Reinhold Investments. Mr Carrafa did not receive any response to the letter from Cox Mowers.

8    Mr Freeman, in response to the letter to him, advised Mr Carrafa that the server was not in his possession and never had been in his possession. He also advised that, after the landlord locked the company out of the premises, all of the company’s office equipment and computers were still in the office.

9    Further investigations conducted by Mr Carrafa led him to have reason to believe that the server is in the possession of Cox Mowers and, further, that the removal was authorised by Mr Reinhold and had occurred shortly before the company went into liquidation. Mr Caraffa has further deposed that he believes that the computer, server or similar storage medium from which electronic records are capable of recovery, and equipment and stock belonging to the company, is located at the premises of Cox Mowers and/or Reinhold Investments.

10    I am satisfied on the evidence that Mr Reinhold has concealed or removed books and property of the company, and, as the requirements of s 530C have been established, a warrant should be issued.

Associate:    

Dated:    22 August 2018