FEDERAL COURT OF AUSTRALIA

Bird v McComb (No. 2) [2011] FCA 507

THE COURT ORDERS THAT:

1.    Pursuant to Order 5 of the Orders of the Court made on 18 February 2011, the Orders made that day are varied in terms of the following Orders.

2.    Leave is given to the second respondent Brimin Gem Pty Ltd either alone or together with Austral Pacific Queensland Operations Pty Ltd to borrow sufficient monies in order to discharge the following obligations of Brimin Gem Pty Ltd. First, arrears of interest payments for the months of January, February, March and April 2011 in respect of the six properties recited at para 2(b)(i) of the amended notice of motion filed 5 April 2011, namely properties located at 1 MacKeith Court, Mt Eliza; 235 Canadian Bay Road, Mt Eliza; 85 Elizabeth Avenue, Rosebud West; 3 MacKeith Court, Mt Eliza; 2 MacKeith Court, Mt Eliza; and 18 Taroona Close, Mt Eliza, being the amounts recited at para 8(c)(i) to (vi) of the affidavit of John Edmund McComb filed 29 March 2011 and bearing the date 24 February 2011. Second, the amount represented by arrears of rates as described at paras 8(f)(i) to (vi) of the said affidavit of John Edmund McComb. Third, the amount of $60,000 in respect of the property at 26 Seafarer Court, Surfers Paradise referred to at para 8(r) of the said affidavit of John Edmund McComb. Fourth, amounts in respect of legal fees described at paras 8(l) and 8(m) of the said affidavit of John Edmund McComb.

3.    The first defendant and the second defendant are to file an affidavit exhibiting copies of the financial statements for the BM Family Trust for each financial year from the settlement of the trust on 25 June 1992 to the financial year ending 30 June 2005.

4.    The first defendant and the second defendant are to file an affidavit exhibiting copies of the financial statements for the BM Family Trust for each financial year commencing with the financial year ending 30 June 2006 and ending with the financial year ending 30 June 2010 being financial statements adopted by Mr McComb.

5.    The first defendant and the second defendant are to file an affidavit exhibiting copies of taxation returns for the BM Family Trust for each financial year from the settlement of the trust on 25 June 1992 to the financial year ending 30 June 2010 and such affidavit shall identify an estimate of the tax liability (if any) of either the BM Family Trust and Brimin Gem Pty Ltd.

6.    The affidavits referred to in Orders 3, 4 and 5 are to be filed within 14 days.

7.    Austral Pacific Queensland Pty Ltd as trustee of the BM Family Trust is joined in the proceedings as the sixth defendant.

8.    Upon the usual undertaking as to damages proffered by the plaintiff, Suzanne Christine Bird, Austral Pacific Queensland Pty Ltd is restrained, whether by itself, its servants or agents or otherwise howsoever from dealing in or creating any interest in any person in any of the properties recited at para 8(c)(i) to (viii) and para 8(c)(ix) to (xi) of the said affidavit of Mr McComb, pending the trial of the action.

9.    The parties have liberty to apply.

10.    The Court notes the usual undertaking as to damages given to the Court by the plaintiff for the purposes of Order 8 of these Orders.

11.    The costs of and incidental to the amended notice of motion filed 5 April 2011 are reserved.

THE COURT FURTHER ORDERS THAT:

1.    Pursuant to order 5 of the Orders of the Court made on 18 February 2011, the Orders made that day are varied in terms of the following Orders.

2.    Leave is given to the Third Defendant, SCB Holdings Pty Limited, to borrow sufficient moneys in order to discharge the following obligations of SCB Holdings Pty Limited:-

(a)    first, arrears of interest payments for the months of January, February, March and April 2011 in respect of the two properties recited at paragraph 2(d)(i) of the Amended Notice of Motion filed 5 April 2011, namely properties located at 18-20 Walter Street, Safety Beach; 12-16 Walter Street, Safety Beach, being the amounts recited at paragraphs 9(c)(i) to (iii) of the Affidavit of John Edward McComb sworn and filed 31 March 2011;

(b)    second, the amount represented by arrears of rates as described in paragraphs 9(h) of the said Affidavit of John Edward McComb.

3.    The parties have liberty to apply.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

Background

1    By their Amended Notice of Motion filed 5 April 2011 the defendants sought orders for the variation of orders made by the Court on 18 February 2011. By that order the Court restrained, until the determination of the principal proceeding, the first defendant, Mr McComb, from making any arrangements that had the effect of changing the officebearers of the second, third, fourth and fifth defendants or entering into any arrangements that give rise to a transfer of shares in those entities, without the leave of the Court.

2    Further, the Court by the orders of 18 February 2011 restrained, until the determination of the principal proceeding, Mr McComb from causing any of the second, third, fourth or fifth defendants to enter into any arrangements for the sale of properties owned by those companies or entering into arrangements with financiers for the refinancing of existing securities granted either by any one of the companies in respect of the assets or undertaking of any of those companies or alternatively in respect of any individual assets owned by any one of those companies, without the leave of the Court subject to two qualifications.

3    First, Mr McComb was, in effect, given leave to conduct discussions in the ordinary course of business for the purpose of securing a refinancing of existing securities granted by any one of the four companies, subject to no refinancing agreement being concluded without the leave of the Court.

4    Second, Mr McComb was, in effect, given leave to conduct discussions in the ordinary course of business with a view to seeking to reach arrangements, in principle, by which any one of the four defendant companies might sell any one of its real property assets subject to no agreement being reached without the leave of the Court.

The Amended Notice of Motion

5    The defendants were also given liberty to apply on reasonable notice in relation to any application for leave in the relevant respects as contemplated by the orders. By Order 5, the parties were given liberty to apply generally on three days notice. By their Amended Notice of Motion, the defendants sought a variation to the earlier orders in these terms:

(a)    The Second Defendant (or Austral Pacific Queensland Pty Ltd …) shall be permitted to borrow the sum of $400,000 from Peter F Sangster Financial Services (or lenders nominated by Peter F Sangster Financial Services) on the terms appearing at page 6 of exhibit ‘JEM-1’ to the Affidavit of John Edmund McComb filed 29 March 2011 and dated 24 February 2011 (“Brimin Gem Borrowed Money”)

(b)    That the Brimin Gem Borrowed Money shall be deposited into the trust account of Tucker & Cowen Solicitors of Level 15, 15 Adelaide Street, upon the undertaking of Tucker & Cowen Solicitors, to only disburse the Brimin Gem Borrowed Money in payment of:

    (i)    Interest due (either now or in the future) pursuant to mortgages secured over properties the registered proprietor of which is the Second Defendant, and which properties are situated at:

(A)    1 MacKeith Court Mt Eliza;

(B)    235 Canadian Bay Road Mount Eliza;

(C)    85 Elizabeth Avenue Rosebud West;

(D)    3 MacKeith Court Mt Eliza;

(E)    2 MacKeith Court Mt Eliza; and

(F)    18 Taroona Close Mt Eliza (“Brimin Gem Properties”);

(ii)    Council rates owing to the Mornington Peninsula Shire Council in respect to the Brimin Gem Properties;

(iii)    Legal Fees owing by the Second Defendant, as identified in paragraphs 8(j) to (m) inclusive of the Affidavit of John Edmund McComb filed 29 March 2011 and dated 24 February 2011 (provided such fees are only paid once);

(iv)    Such reasonable legal fees as may be incurred in the defence of this action;

(v)    Land Tax owing on the Brimin Gem Properties;

(vi)    The sum of $60,000 due pursuant to a contract to purchase 26 Seafarer Court, Surfers Paradise dated 27 August 2009;

(vii)    All sums owing pursuant to a General Tenancy Agreement with the owner of 26 Seafarer Court, Surfers Paradise dated 25 August 2009; and

(viii)    The sum of $2,000 per week to the First Defendant as living expenses.

(c)    The Third Defendant shall be permitted to borrow the sum of $250,000 from Mortgage Connexions Financial Services (or lenders nominated by Mortgage Connexions Financial Services) on the terms appearing at page 6 of exhibit JEM4 to the affidavit of John Edmund McComb filed 31 March 2011 and sworn 31 March 2011 (“SCB Borrowed Money”).

(d)    That the SCB Borrowed Money shall be deposited into the trust account of Tucker & Cowen Solicitors of Level 15, 15 Adelaide Street, upon the undertaking of Tucker & Cowen Solicitors, to only disburse the SCB Borrowed Money in payment of:

    (i)    Interest due (either now or in the future) pursuant to mortgages secured over properties, the registered proprietor of which is the Third Defendant, and which properties are situated at:

        (A)    18-20 Walter Street Safety Beach; and

        (B)    12-16 Walter Street Safety Beach (“SCB Properties”);

    (ii)    Council rates owing to the Mornington Peninsula Shire Council in respect to the SCB Properties;

    (iii)    Legal Fees owing by the Third Defendant, as identified in paragraphs 9(k) to (n) inclusive of the Affidavit of John Edmund McComb filed 31 March 2011 and sworn 31 March 2011 (provided such fees are only paid once);

    (iv)    Such reasonable legal fees as may be incurred in the defence of this action; and

    (v)    Land Tax owing on the SCB Properties.

The orders made on 18 April 2011

6    The Amended Notice of Motion was heard on 11 April 2011 at 2.30pm. However, the application for leave was initially heard before Reeves J on 5 April 2011 and stood over for further hearing. On 5 April 2011, the defendants filed the Amended Notice of Motion. Aspects of the Amended Notice of Motion were heard on 8 April 2011 and the matter was listed for hearing on 11 April 2011. On 18 April 2011, the Court made the following orders:

1.    Pursuant to Order 5 of the Orders of the Court made on 18 February 2011, the Orders made that day are varied in terms of the following Orders.

2.    Leave is given to the second respondent Brimin Gem Pty Ltd either alone or together with Austral Pacific Queensland Operations Pty Ltd to borrow sufficient monies in order to discharge the following obligations of Brimin Gem Pty Ltd. First, arrears of interest payments for the months of January, February, March and April 2011 in respect of the six properties recited at para 2(b)(i) of the amended notice of motion filed 5 April 2011, namely properties located at 1 MacKeith Court, Mt Eliza; 235 Canadian Bay Road, Mt Eliza; 85 Elizabeth Avenue, Rosebud West; 3 MacKeith Court, Mt Eliza; 2 MacKeith Court, Mt Eliza; and 18 Taroona Close, Mt Eliza, being the amounts recited at para 8(c)(i) to (vi) of the affidavit of John Edmund McComb filed 29 March 2011 and bearing the date 24 February 2011. Second, the amount represented by arrears of rates as described at paras 8(f)(i) to (vi) of the said affidavit of John Edmund McComb. Third, the amount of $60,000 in respect of the property at 26 Seafarer Court, Surfers Paradise referred to at para 8(r) of the said affidavit of John Edmund McComb. Fourth, amounts in respect of legal fees described at paras 8(l) and 8(m) of the said affidavit of John Edmund McComb.

3.    The first defendant and the second defendant are to file an affidavit exhibiting copies of the financial statements for the BM Family Trust for each financial year from the settlement of the trust on 25 June 1992 to the financial year ending 30 June 2005.

4.    The first defendant and the second defendant are to file an affidavit exhibiting copies of the financial statements for the BM Family Trust for each financial year commencing with the financial year ending 30 June 2006 and ending with the financial year ending 30 June 2010 being financial statements adopted by Mr McComb.

5.    The first defendant and the second defendant are to file an affidavit exhibiting copies of taxation returns for the BM Family Trust for each financial year from the settlement of the trust on 25 June 1992 to the financial year ending 30 June 2010 and such affidavit shall identify an estimate of the tax liability (if any) of either the BM Family Trust and Brimin Gem Pty Ltd.

6.    The affidavits referred to in Orders 3, 4 and 5 are to be filed within 14 days.

7.    Austral Pacific Queensland Pty Ltd as trustee of the BM Family Trust is joined in the proceedings as the sixth defendant.

8.    Upon the usual undertaking as to damages proffered by the plaintiff, Suzanne Christine Bird, Austral Pacific Queensland Pty Ltd is restrained, whether by itself, its servants or agents or otherwise howsoever from dealing in or creating any interest in any person in any of the properties recited at para 8(c)(i) to (viii) and para 8(c)(ix) to (xi) of the said affidavit of Mr McComb, pending the trial of the action.

9.    The parties have liberty to apply.

10.    The Court notes the usual undertaking as to damages given to the Court by the plaintiff for the purposes of Order 8 of these Orders.

11.    The costs of and incidental to the amended notice of motion filed 5 April 2011 are reserved.

7    On 18 April 2011, the Court indicated that reasons in support of those orders would be published in due course. These are the reasons in support of those orders.

Ms Bird’s principal claims

8    The parties will recall that the orders of 18 February 2011 were made pending the trial of proceedings in which the plaintiff, Ms Bird, contends that she had been a de facto of Mr McComb for 31 years; all real property in which Ms Bird and Mr McComb were said to hold an interest arising out of that relationship was property owned by each of the four defendant companies and in particular the second defendant; Ms Bird’s six shares in the second defendant (“Brimin Gem”) were transferred by Mr McComb to Mr McComb without Ms Bird’s consent; Mr McComb notified the Australian Securities and Investments Commission (“ASIC”) that Ms Bird had ceased to be a director and secretary of Brimin Gem which was not the fact; Mr McComb had caused Ms Bird’s one share in the third defendant (“SCB”) to be transferred to Brimin Gem and then to Mr McComb without her consent or authority; Mr McComb advised ASIC that Ms Bird had ceased to be a director and secretary of SCB which was not the fact; Ms Bird’s shareholding in the fourth defendant (“Carriages”) had been transferred to Brimin Gem without Ms Bird’s authority; Mr McComb had caused ASIC to be told that Ms Bird had ceased to be a director and secretary of Carriages which was not the fact; and Mr McComb had caused ASIC to be told that Ms Bird had ceased to be a director of the fifth defendant (“Newtoun”) which was not the fact. All of those contentions as to the transfer of shares and the appointment and removal of officers of the companies is denied by Mr McComb.

9    Having regard to those factual contentions made on oath by Ms Bird in her affidavit in support of her interlocutory application, orders were made restraining any further dealings in the shares and any further notifications of changes of officers of the entities without the leave of the Court with a further order restraining any disposition of the relevant properties so as preserve Ms Bird’s position in connection with those entities and those assets in the event that, at trial, she persuades the Court of the merits of her claims and persuades the Court that she is entitled to relief in respect of the relevant matters in controversy. Those orders were made having regard to the organising principles discussed by Gummow and Hayne JJ in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at [65] to [72] and Gleeson CJ and Crennan J at [19].

The response by Mr McComb and the defendant companies

10    In resisting the application by Ms Bird, the defendants relied upon an affidavit of Ms Entink filed 10 March 2011 in which Ms Entink who is a mortgage broker and sole director of an entity called Mortgage Connexions (Vic) Pty Ltd said that she has acted as a mortgage broker for Mr McComb, Brimin Gem and SCB for over 10 years; has arranged finance for Mr McComb, Brimin Gem and SCB; has dealt solely with Mr McComb in relation to those two companies since 14 August 2002; and, Ms Entink has understood that Mr McComb’s references in discussions with her to “his” properties includes the properties owned by Brimin Gem and SCB.

11    As a mortgage broker who has dealt with Mr McComb, Brimin Gem and SCB for 10 years in connection with securing finance for Brimin Gem and SCB (and other entities controlled by Mr McComb), Ms Entink did not suggest in her affidavit when addressing the topic of ownership of properties, that any of those properties which she understood to be owned by Brimin Gem and SCB (and rendered subject to security facilities supporting mortgage lending arrangements put in place by her), to be properties held upon any relevant trusts by those entities borrowing in a trustee capacity.

12    The question of whether Brimin Gem held properties in its name as trustee on behalf of the BM Family Trust became a relevant matter having regard to later affidavits also relied upon in support of the application for leave to enter into particular financing arrangements.

13    Ms Entink deposed that she had been able to source a loan of $200,000 supported by a second mortgage over relevant assets so as to provide bridging finance to Brimin Gem and SCB in respect of 50% of the mortgages granted by those companies which had then expired. The proposition that Brimin Gem and SCB were in the process of trying to secure bridging finance led to the qualifications in the orders as described at [3] and [4] of these reasons, facilitating the continuation of those negotiations in the ordinary course of business of the defendant companies.

14    Mr McComb swore an affidavit dated 24 February 2011 in support of an application for leave to enable Brimin Gem and/or SCB to enter into a particular financing facility. That application was then made the subject of the further Amended Notice of Motion. The initial application for leave was made under the orders of 18 February 2011 before Reeves J. As a result of argument in the course of that application, the defendants elected to file the Amended Notice of Motion.

15    The affidavit of Mr McComb which recites a swearing date of 24 February 2011 seems, in fact, to have been sworn on 7 March 2011 (and is thus simply misdescribed). The affidavit was filed on 29 March 2011. I will describe it as the 29 March 2011 affidavit of Mr McComb.

Mr McComb’s affidavit reciting a date of 24 February 2011 but sworn, in fact, on 7 March 2011

16    In that affidavit Mr McComb says that he needs to obtain further finance for Brimin Gem and SCB; he has obtained an offer for finance for Brimin Gem of $400,000 from “Peter F Sangster Financial Services”; and he wishes to accept the offer. The offer is dated 23 February 2011 and consists of an offer of $400,000 for a term of six months at an interest rate of 19% per annum payable monthly in advance subject to the satisfaction of certain conditions. Mr McComb says that the offer is the best offer he can arrange as Brimin Gem and SCB have fallen into default under their existing loan arrangements which Mr McComb attributes to earlier actions taken by Ms Bird to lodge caveats over the properties of Brimin Gem, SCB and Newtoun which, inferentially, disrupted the securing of other possible refinancing arrangements.

17    Mr McComb says that the financing is required now as neither Brimin Gem nor SCB has the necessary funds available to discharge particular obligations.

18    The first of those obligations concerns interest payments on existing mortgage facilities. Mr McComb says that Brimin Gem and SCB need to borrow money to pay interest for the 2011 calendar year which is either due and not paid or will fall due during the course of 2011. At para 8(c)(i) to (viii) Mr McComb sets out, for Brimin Gem, a schedule of interest payments consisting of those payments which had then fallen into arrears (by 7 March 2011) and those interest payments which would fall due monthly over the course of calendar year 2011. The schedule shows that each of the mortgage facilities secured over each of those properties is in arrears for the months of January and February thus attracting the default interest rate. The schedule sets out the monthly interest payments under each mortgage for the remainder of the year. The properties are (i) 1 MacKeith Court, Mt Eliza; (ii) 235 Canadian Bay Road, Mt Eliza (a first mortgage debt); (iii) 85 Elizabeth Avenue, Rosebud West; (iv) 3 MacKeith Court, Mt Eliza; (v) 2 MacKeith Court, Mt Eliza; (vi) 18 Taroona Close, Mt Eliza; (vii) 85 Elizabeth Avenue, Rosebud (which presumably is the same property as the property described at (iii)); (viii) 235 Canadian Bay Road, Mt Eliza (a second mortgage debt).

19    Although the total of those mortgage interest obligations is said to be $374,087.94, the total of the interest obligations at 8(c)(i) – (viii) is $420,556.84.

20    At para 8(c)(ix), (x) and (xi), Mr McComb sets out the position in relation to the mortgages granted by SCB over three properties namely, (ix) 1820 Walter Street, Safety Beach; (x) 1216 Walter Street, Safety Beach; and (xi) 12 -16 Walter Street, Safety Beach. The interest payments concerning the first and third of those properties had fallen into arrears by two months and the payments concerning the second property were in arrears by three months. The total mortgage interest debt payable by SCB under these facilities is said by Mr McComb to be $265,303.13. The total mortgage interest debt on behalf of Brimin Gem and SCB therefore constitutes $639,391.04 well over the $400,000.00 Sangster facility, if that facility is to be applied to the interest obligations of both companies.

21    Accordingly, Mr McComb’s proposal at that time was that leave be given to Brimin Gem (and SCB) to take up the Sangster facility at $400,000.00 (although that facility seems to have been directed only to Brimin Gem in terms of the Sangster facility letter) in order to meet obligations in the ordinary course of business of those companies.

22    Mr McComb exhibits to his affidavit of 29 March 2011 (sworn 7 March 2011) redacted copies of summaries of the mortgage facilities. The redaction of some data from the summaries arose because of concerns that inquiries would be made directly of the mortgagees which might have the effect of disrupting the business or commercial relationship between Mr McComb and those mortgagees. For present purposes, those matters do not need to be further pursued in these reasons.

23    The second set of obligations that need to be discharged concern Council rates in connection with particular properties which are unpaid. Mr McComb says that Brimin Gem owes the Mornington Peninsula Shire Council rates for the period 1 July 2010 to 30 June 2011 of $16,660.18, 85 Elizabeth Avenue, Rosebud West; $10,128.05, 18 Taroona Close, Mt Eliza; $8,899.48, 3 MacKeith Court, Mt Eliza; $3,893.41, 2 MacKeith Court, Mt Eliza; $791.45, 235 Canadian Bay Road, Mt Eliza; and $759.35, 1 MacKeith Court, Mt Eliza constituting $41,131.92 in all. Outstanding rates for SCB are said to be $6,132.06, 18 Walter Street, Safety Beach; and $6,263.60, 12 Walter Street, Safety Beach constituting $12,395.66 in all. Outstanding rates for Brimin Gem and SCB amount to, in total, $53,527.58.

24    The third group of obligations to be discharged consists of legal fees incurred by Brimin Gem, SCB and Newtoun in resisting Supreme Court proceedings in Victoria commenced by Ms Bird. Those legal fees are set out at para 8(l)(i) to (vii) and constitute a total amount of $71,061.66. Mr McComb says that Brimin Gem and SCB (and also Carriages and Newtoun) have incurred further legal fees identified at 8(m)(i) to (iii) constituting $21,952.32.

25    The fourth set of obligations Brimin Gem and SCB will incur consist of further legal fees in relation to the defence of the present proceeding by those defendant entities. The future legal costs are described by Mr McComb as “my reasonable legal expenses” by which I assume Mr McComb means the reasonable legal expenses of the defendant entities (apart from the legal expenses he might incur in his own right (if any)).

26    The fifth group of obligations relate to a property at 26 Seafarer Court, Surfers Paradise. On 27 August 2009, Brimin Gem entered into a contract to purchase a property at that address at a purchase price of $2.6 million with a deposit paid of $260,000.00. There is no reference in the contract document to Brimin Gem acquiring the property in any capacity other than in its own right. Settlement of the contract was due on or before 5 March 2011 with a provision that if settlement has not occurred by 5 September 2010 the buyer is required to pay a further $50,000.00 by 6 September 2010 to extend the settlement date. Brimin Gem paid the extension sum. On 16 September 2010, the vendor agreed to further extend the settlement on condition that the purchase price be increased by a further $60,000.00. It seems from the exhibited correspondence that settlement has been extended to 6 September 2011 on the footing that Brimin Gem pay the vendor a further $60,000.00 which is presently in arrears although the vendor remains willing to accept that sum.

27    The sixth obligation consists of land tax payable by both Brimin Gem and SCB to the State Revenue Office of Victoria in an amount of $89,590.28. At para 15 Mr McComb says that the payment of land tax is not a priority in the disbursement of the proposed borrowing as he (by which I assume Mr McComb means Brimin Gem and SCB) are in the process of objecting to the assessment.

28    The seventh obligation consists of rent payable by Brimin Gem to the vendor in respect of 26 Seafarer Court, Surfers Paradise. On 25 August 2009, Brimin Gem entered into a general tenancy agreement with the owner of 26 Seafarer Court by which Brimin Gem is to pay rent of $1,200.00 per week. The tenancy commenced on 8 September 2009. Mr McComb does not say in his affidavit how many of the weekly rental payments are in arrears (if any) or whether Mr McComb simply seeks leave for Brimin Gem to borrow further monies to pay future rental of the property.

29    At para 9 Mr McComb says that all funds advanced are to be used solely for the normal business practices of the company. The nature of the business practices concerning the rental of 26 Seafarer Court is not set out in Mr McComb’s affidavit.

30    At para 14 Mr McComb says that of the $400,000.00 to be drawn down from the facility arranged by Mr Sangster (the facility described at para 5 of Mr McComb’s affidavit arranged for Brimin Gem), funds are to be disbursed in paying all interest payments which are in arrears (namely the January and February default interest payments); all “rates” amounts which are in arrears; the $60,000.00 contract extension on Seafarer Court; future interest payments for the months of March, April and May 2011; the outstanding legal fees relating to the Victorian Supreme Court proceedings; other legal fees owing with respect to the defence of the present proceeding; and land tax obligations. However, Mr McComb observed at para 15, as already noted, that the land tax assessment was the subject of an objection and would therefore not form part of the disbursement of the Brimin Gem facility funds.

The quantification of the amounts referred to Mr McComb’s affidavit dated 24 February 2011 but sworn 7 March 2011

31    So far as Brimin Gem is concerned, the obligations described at [30] of these reasons amounts to this. First, the interest payments in arrears for the months of January and February amount to $96,546.74. The rates payable by Brimin Gem amount to $26,137.92. The Seafarer Court obligation is $60,000.00. The interest payments for the months of March, April and May amount to $99,078.03. The outstanding legal fees which are owed by both Brimin Gem and SCB (and also Newtoun) but which are therefore payable (jointly and severally) by Brimin Gem amount to $71,061.66. The “other” legal fees amount to $21,952.32. The amount of the future legal fees to be incurred by Brimin Gem in the defence of these proceedings is not quantified in the 29 March 2011 (7 March 2011) affidavit. The land tax obligation is $89,590.28. The total of the identified obligations is $374,776.67, leaving aside the land tax amount. If that amount is included the total identified obligation is $464,366.95.

32    So far as SCB is concerned, the interest payments in arrears for January and February amount to $56,110.42. The rates amount payable by that company is $12,395.66. The interest payments for the months of March, April and May amount to $81,533.21. The total amount of those obligations is $150,039.29.

33    Leaving aside the land tax obligation, the total identified obligations of Brimin Gem and SCB the subject of the application, according to the affidavit of 29 March 2011, amounted to $374,776.67 plus $150,039.29 constituting $524,815.96 in all. The Sangster facility however seemed to be limited to $400,000.00 for six months.

Mr McComb’s further affidavit sworn 24 March 2011

34    Mr McComb filed a further affidavit sworn 24 March 2011 and filed 29 March 2011. I will describe this affidavit as Mr McComb’s affidavit of 24 March 2011. In this affidavit Mr McComb says, at para 21, that each of the principal sums for each of the Brimin Gem and SCB mortgages (at para 8(c)(i) to (xi)) are considered to be outstanding under the personal covenants, although the mortgagee’s agents have said that if the interest payments are brought up to date, the principal sum will no longer be treated as outstanding. At paras 26 to 28 of his affidavit, Mr McComb attaches a copy of the land tax assessment issued by the Office of State Revenue for Victoria for the 2010 year of $89,590.28 and a copy of the assessment for 2011 of $97,155.00. The documents do not show the date of issue of the assessment or the party to whom the assessment has been issued. Mr McComb at para 28 of his affidavit says that he has instructed the solicitors for the “defendant companies” to file an objection notice with respect to the further land tax assessment which means firstly, that one or other or all of the defendant companies are the relevant taxpayer(s) and, secondly, that both assessments are now under objection or to be the subject of objection proceedings.

35    The aggregate land tax assessment is $186,745.28.

36    At paras 10 to 15 of his affidavit Mr McComb deals with the rental income derived from renting any of the properties the subject of each mortgage debt. These matters were not dealt with in Mr McComb’s earlier affidavit. Mr McComb says that the only properties owned by the defendant companies which generate rental income payments are the properties at 2 MacKeith Court, Mt Eliza (which generates monthly rental income to Brimin Gem of $2,145.00) and 3 MacKeith Court, Mt Eliza (which generates monthly rental income to Brimin Gem of $3,120.00) representing $5,265.00 per month. Mr McComb at para 15 says that the monthly rental amounts are paid to him directly by the real estate agent for the properties and Mr McComb uses that money for living expenses. The payments made by Brimin Gem to Mr McComb in this way will be accounted for, it is said, in the loan account between Mr McComb and Brimin Gem. Mr McComb says, by way of example, that in November 2010 he made a loan to Brimin Gem of $150,000.00 and that sum is to be taken up in the loan accounts which Brimin Gem’s accountants are currently in the process of finalising.

37    In Mr McComb’s affidavit of 29 March 2011 (7 March 2011), the facility he describes is one provided by Mr Sangster of $400,000.00 made available to Brimin Gem although the description of the various categories of expenses include obligations to be discharged by Brimin Gem and SCB. At paras 33 to 38 of Mr McComb’s affidavit of 24 March 2011, he says that since swearing the affidavit of (7 March 2011), he has been advised to use the funds to be advanced (under the Sangster $400,000.00 facility) only for the payment of obligations of Brimin Gem and that independent financial facilities for the discharge of interest payments and other liabilities of SCB are to be taken up by SCB. At para 34 Mr McComb says that he is in the process of negotiating finance facilities for the discharge of those obligations of SCB.

38    At para 35 of the affidavit of 24 March 2011, Mr McComb says that the monies are to be drawn down and placed in the trust account of his solicitor in Victoria and the monies so drawn down by Brimin Gem are to be applied in the following way: (a) payment of the outstanding interest in relation to the loans identified at para 8(c)(i) to 8(c)(viii) of the affidavit filed on 29 March 2011 (sworn 7 March 2011); (b) any future interest payments for the 2011 year in respect of the eight Brimin Gem facilities; (c) the $60,000.00 contract extension on Seafarer Court, Surfers Paradise; (d) outstanding rates for properties owned by Brimin Gem; (e) outstanding legal fees with respect to the Supreme Court proceedings; (f) other legal fees with respect to the defence of this proceeding; (g) other legal fees reasonably incurred in respect of this proceeding; and (h) $2,000.00 per week in wages to Mr McComb to enable the defendant companies to continue to undertake the various things described at para 37(h)(i) to (iii), including the payment of the legal costs of providing instructions to object to the land tax assessments.

The quantification of the amounts referred to in Mr McComb’s affidavit sworn 24 March 2011

39    The quantification of the monies to be drawn down (on the basis as set out at [38] of these reasons) and for which leave is sought seems to be this. The interest payments on Brimin Gem’s facilities which are in arrears together with the future interest payments for the calendar year 2011 (items (a) and (b)) amount to $420,556.84. The Seafarer Court amount is $60,000.00. The outstanding rates are $26,137.92. The outstanding legal fees are $71,061.66 and $21,952.32. There are other reasonable legal fees referable to the defence of these proceedings which need to be quantified. The final amount is the living allowance amount of $2,000.00 each week or approximately $26,000.00 for approximately 13 weeks until mid or end June when the proceeding might be determined. The total amount of those identified obligations constitutes $625,708.74 (leaving aside the land tax assessments of $186,745.28 and the unquantified future legal costs of these proceedings).

Mr McComb’s affidavit of 28 March 2011

40    Mr McComb relied upon an extensive further affidavit sworn 28 March 2011 which addresses aspects of his background generally; the history of his financial circumstances (including his bankruptcy) and the relationship between those matters and arrangements put in place for the continuing management of the affairs of Brimin Gem, Carriages and Esterglade Pty Ltd; the changes made to the appointment of officers of the relevant companies both in anticipation of Mr McComb’s bankruptcy and after his discharge from bankruptcy; and some documents said to evidence Ms Bird’s consent to particular arrangements.

41    The effect of these paragraphs of Mr McComb’s affidavit is to not only assert and affirm his earlier contentions that Ms Bird’s claims, on the facts, are denied, but also to provide some direct evidence and copies of documents said to support Mr McComb’s contentions, and contextual content to the matters he asserts. These matters which address the principal claims of Ms Bird are relevant in the context of the amended application as they go to the strength of the plaintiff’s prima facie case and the exercise of the discretion to vary the interlocutory restraints.

42    As to those matters, Mr McComb says that some time in 1996 he discussed his financial problems arising out of personal guarantees he had given, and debts owed to creditors, with accountants and professional advisers. Mr McComb says that it was “becoming increasingly difficult for me to avoid bankruptcy and that I would need to take steps to protect the assets of Brimin Gem and Carriages from any bankruptcy trustee”: para 14. Mr McComb says that he understood that “if [he] disposed of any assets in the 12 months prior to [his] bankruptcy, the bankruptcy trustee could claw those assets back”: para 15. At para 16, Mr McComb says that he took accountancy advice that was “all about [his] bankruptcy” and examined the affairs of Brimin Gem, Carriages, Esterglade and the BM Family Trust and reviewed “how everything should be structured”.

43    The arrangements to be put in place were that Ms Bird should become the sole director and secretary of Brimin Gem, Carriages and Esterglade during Mr McComb’s bankruptcy. After discharge, Mr McComb was to be restored to those positions and Ms Bird would retire as Secretary of Brimin Gem, Carriages and Esterglade. Share transfers were to occur so that Brimin Gem as trustee of the BM Family Trust would beneficially control all relevant assets and Ms Bird would be a director of Carriages as she was approved to hold the relevant motor dealer’s licence.

44    Mr McComb says that Ms Bird agreed to the arrangements to be put in place: paras 18, 20 and 21. Mr McComb says Ms Bird agreed to sign all the necessary documents: para 19. Ms Bird, it is said, accepted that these changes were made for the “duration of my bankruptcy”: para 22. Mr McComb says that he saw Ms Bird sign the documents effecting the share transfers in Brimin Gem, Carriages and Esterglade and the appointment and resignation documents. Mr McComb says that Ms Bird agreed to the arrangements that Mr McComb had decided to put in place “because the BM Family Trust (of which Brimin Gem was the trustee) would hold all the shares in the relevant companies so that they were part of the discretionary trust and, accordingly, the property would be outside of my bankruptcy”: para 25.

45    Having put those arrangements in place, Mr McComb filed a s 188 Authority under the Bankruptcy Act 1966 (Cth) on 29 August 1997. That Authority ended on 20 October 1997. A Sequestration Order was made on 20 October 1997 and Mr McComb was discharged from bankruptcy on 3 February 2001.

46    As to the BM Family Trust, Mr McComb says that he incorporated Brimin Gem to be the trustee of the BM Family Trust on 25 June 1992 with two directors, Mr McComb and Ms Bird. There were originally 12 issued shares. Six shares were held by Mr McComb on trust, he says, for his daughter and six shares were held by Ms Bird. On 1 July 1995, the six shares held by Mr McComb, he says, were transferred by him to his daughter although they were held by her on trust for him, according to Mr McComb. However, Mr McComb says that he “always acted as if they were my shares”.

47    Mr McComb says that he resigned as a director and secretary of Brimin Gem due to his impending bankruptcy and Ms Bird “became the sole director and secretary” in accordance with the arrangement (described earlier). Mr McComb says that the transfer of shares in Carriages to Brimin Gem “was to ensure that the BM Family Trust owned any property held at any time in Carriages”. Mr McComb says that he caused ASIC to be notified of his appointment as director and secretary of Brimin Gem on 14 August 2002 and of Carriages on 8 January 2003 having signed consents to act on 24 July 2002 and resolutions of appointment having been passed by the directors on 24 July 2002.

48    Mr McComb says that during the period of his codirectorship with Ms Bird from 24 July 2002, it became difficult for Ms Bird to engage in the affairs of Brimin Gem and sign documents as she lived on the Gold Coast and he lived in Melbourne. Mr McComb says that in mid2004 Ms Bird “orally agreed (by telephone) [with Mr McComb] … that she would resign her directorship [of] Brimin Gem” (para 50) and did so because Mr McComb was “running Brimin Gem” (para 51(a)); Ms Bird “[knew] that she was a beneficiary under the trust” (para 51(b)) and Ms Bird “never questioned me when it came to the Defendant Companies” (para 51(c)).

49    These reasons for Ms Bird’s conduct are not simply the speculation of Mr McComb, he contends, because he deposes at para 52 that Ms Bird told him and he believed that Ms Bird agreed to these arrangements for those reasons and thus Ms Bird was aware at all times (para 53) of Mr McComb’s reappointment as a director and secretary of Brimin Gem; the transfer of Ms Bird’s six shares in Brimin Gem to Mr McComb and her resignation as a director and secretary of Brimin Gem.

The BM Family Trust

50    Mr McComb says that Ms Bird agreed to these arrangements in mid2004, in part, because she knew that she was a beneficiary under the BM Family Trust in which all assets were said to be consolidated. The BM Family Trust was established by a Deed of Settlement dated 25 June 1992. The primary beneficiaries of the trust are described under the instrument as Mr McComb, Ms Bird and their children and any parent of Mr McComb and Ms Bird. On 18 March 2011, Mr McComb, Brimin Gem and Austral Pacific Queensland Operations Pty Ltd (“Austral”) entered into a Deed of Change of Trustee which records that Mr McComb under clause 21 of the settlement, as appointor, removes Brimin Gem as trustee and replaces it with Austral. On 21 March 2011, Mr McComb and Austral then entered into a deed by which the incoming trustee, Austral, in the exercise of powers conferred upon the trustee under clause 21 of the settlement to vary the trust, varied the trust (with the consent of Mr McComb under clause 2 of the Deed of Variation) by removing any reference to Ms Bird as a primary beneficiary and substituting as the primary beneficiaries: “John Edmund McComb and any child or children of John Edmund McComb whether born or unborn at the date of execution hereof and any parent of John Edmund McComb”.

The references by Mr McComb to advances by Brimin Gem to Ms Bird and Mr McComb’s steps to provide financial support for Ms Bird

51    Mr McComb says at para 56 of his affidavit of 28 March 2011 that his de facto relationship with Ms Bird either ended or was coming to an end in 2000 or 2001 (rather than 2005 as Ms Bird contends). However, Mr McComb’s estate was under administration in bankruptcy from 1997 until 3 February 2001 and so Ms Bird signed documents on behalf of Brimin Gem and “occasionally provide[d] guarantees with respect to mortgages Brimin Gem entered into”: para 57. Mr McComb says at para 58 that the “substance” of Ms Bird’s guarantees of these mortgages was “little if any as she did not own any property as all the property was owned by the BM Trust”. It follows, it seems, that in Mr McComb’s view, the giving of the guarantees was just a matter of inconsequential form as there were no assets in Ms Bird’s name in any event to meet the promises in the covenants made to the lenders.

52    Mr McComb says that from the time of his separation from Ms Bird until about 16 March 2009 (or perhaps August 2009) he caused Brimin Gem to make advances to Ms Bird as a result of an agreement he reached with her to that effect as “I felt that I had a responsibility to take care of [her] as she had always been loyal to me, and I knew that she cared about me as I had always cared about her” and “I felt it proper to provide for her care given the duration of our relationship”: para 62. The payments made by Brimin Gem were $300.00 per week and the payment of Ms Bird’s rental of particular properties over the period. Carriages also provided Ms Bird with a motor vehicle.

53    Since these payments were made in discharge of Mr McComb’s personal responsibility to Ms Bird (as explained by him at para 62 of his affidavit), Brimin Gem must simply have been the agent or an administrative vehicle for the payment to Ms Bird of obligations Mr McComb felt he owed to her for the reasons he described. It follows that the loan accounts between Mr McComb and Brimin Gem ought to reflect advances by Brimin Gem to Mr McComb in discharge of his identified responsibilities to Ms Bird, although the payments were made by Brimin Gem to Ms Bird for and on behalf of Mr McComb. Otherwise, of course, Brimin Gem is simply either making gifts to Ms Bird or making loans itself to Ms Bird which is not consistent with the propositions advanced by Mr McComb in his affidavit.

54    As to SCB, Mr McComb says he caused it to be incorporated on 19 January 1999 with Ms Bird as its sole director and shareholder so as to acquire a property during Mr McComb’s bankruptcy. The property was already under contract to Mr McComb: paras 75 to 77. Mr McComb transferred the shares in SCB to Brimin Gem to be held as a trust asset of the BM Family Trust with Ms Bird remaining a director and secretary of SCB until Mr McComb’s discharge from bankruptcy: para 80. Mr McComb says Ms Bird agreed to these arrangements: paras 82, 83, 84, 85 and 89. Mr McComb says that apart from his bankruptcy he has always been in effective control of SCB. Mr McComb says he notified ASIC on 14 August 2002 of his appointment as director and secretary of SCB in accordance with the earlier agreement (para 94) with consents to act having been signed on 24 July 2002: paras 94 and 96. A period of codirectorship of SCB occurred until, it is said, an agreement was reached between Ms Bird and Mc McComb in January 2003 that Ms Bird would resign her directorship of SCB.

55    Mr McComb says that on 22 January 2003 a meeting of directors of SCB was held at which it was resolved to accept the resignation of Ms Bird as a director and secretary of SCB. Mr McComb says that on 17 December 2010 he caused the share in SCB held by Brimin Gem (as a trust asset, he says, of the BM Family Trust) to be transferred to him because the Victorian State Revenue Authorities had assessed Brimin Gem to land tax aggregating the value of the land of Brimin Gem and SCB for assessment as a group. Mr McComb sought to remove the basis for a group assessment.

56    As to Carriages, Mr McComb says that he has been in effective control of that company.

57    As to Newtoun, Ms Bird and Mr McComb were both appointed directors upon acquisition of the company on 9 September 2002. Mr McComb says that Ms Bird agreed in late 2002 to resign as a director. Mr McComb says he has always been in effective control of Newtoun.

The affidavit of Mr Tucker sworn 5 April 2011

58    Mr Tucker, the solicitor for Mr McComb and the defendant companies, deposes to his conversations with Mr McComb and Mr Christopherson (the accountant for Brimin Gem, SCB and Mr McComb). Draft financial statements to the year ending 30 June 2006 have been prepared for Brimin Gem although interest expenses have yet to be reconciled. The financial statements for the years ending 30 June 2007, 2008, 2009 and 2010 had not been prepared at the date of Mr Tucker’s affidavit because a number of ANZ bank statements were missing. Once received, the financial statements to 30 June 2009 could be finalised by Mr Christopherson. The financial statements for SCB to 30 June 2009 have been prepared by Mr Christopherson.

59    Mr Christopherson says that Brimin Gem has always been the trustee of the BM Family Trust; Brimin Gem’s financial statements have been prepared on that basis; and the properties registered in the name of Brimin Gem are assets of the BM Family Trust and have been accounted for by Mr Christopherson on that footing.

60    Mr Christopherson says that at 30 June 2006 Mr McComb’s loan account reflected contributed loan funds by Mr McComb to Brimin Gem of approximately $3.3m which Mr Christopherson believes has not been repaid. On 5 April 2011, Mr McComb attended the ANZ Bank and obtained a search inquiry result for Brimin Gem’s account with the bank opened on 7 June 2000 and SCB’s cheque account with the bank opened on 1 March 2005. Both accounts are closed accounts. Mr McComb tells Mr Tucker that “he tends to operate [Brimin Gem and SCB] from the bank account of Carriages Pty Limited maintained with the ANZ Bank” and that the Carriages account is currently “overdrawn as to $8,275.67” the overdraft limit being $10,000.00: para 12. Presumably obligations of Brimin Gem and SCB are discharged out of the Carriages account, and revenues attributable to those companies are paid into the Carriages account.

61    The bank statement for the Brimin Gem account for 11 August 2010 shows that the account was closed on that date. Mr McComb says that from that date to 6 April 2011 no bank accounts were opened with any financial institution “in the name of the BM Family Trust”: para 15, affidavit of Dugald Hamilton sworn 8 April 2011. The Brimin Gem account with the ANZ Bank was styled both on the search inquiry report and in the bank statements as “The Secretary Brimin Gem Pty Ltd” with no reference to Brimin Gem in any capacity as trustee of the BM Family Trust.

Mr Hamilton’s affidavit sworn 8 April 2011

62    Mr Hamilton is a solicitor employed by Mr McComb’s solicitors, Tucker & Cowen. Mr Hamilton deposes to the provision to him by Mr Christopherson of the financial statements for Brimin Gem as trustee of the BM Family Trust for the financial years ending 30 June 2006, 2007, 2008, 2009 and 2010 which contain the profit and loss statements for the trust; the balance sheets for the trust; a statement of the directors’ loan accounts with the trust and disbursements from the trust. The general ledgers for the trust have also been provided by Mr Christopherson.

63    Taxation returns for the BM Family Trust for the years ending 30 June 2006, 2007, 2008, 2009 and 2010 had not been lodged with the Australian Taxation Office (“ATO”) as at 8 April 2011 although Mr Christopherson says he has now been instructed by Mr McComb to prepare taxation returns for those years and lodge them with the ATO as a matter of priority.

64    As to the ownership of the properties registered in the name of Brimin Gem, Ms Bird contends that the properties acquired by Brimin Gem are owned by that company absolutely with no interest subject to any trust. Mr Mylne, the solicitor for Ms Bird, says in his affidavit sworn 5 April 2011 that throughout the course of proceedings in the Supreme Court of Queensland and in the Supreme Court of Victoria between the interests represented in these proceedings in relation to the properties owned Brimin Gem, it was never contended by Brimin Gem or Mr McComb that those properties were held by Brimin Gem subject to the terms of the BM Family Trust or any other trust.

65    As to Ms Entink and the question of whether she might hold any documents or applications for finance by Brimin Gem as trustee of the BM Family Trust rather than simply by Brimin Gem in its own right, Mr McComb says that all applications made to Ms Entink for finance by the trust were made “orally” and “[Mr McComb] does not make written applications for finance [for the trust]” or perhaps otherwise: para 22, affidavit of Dugald Hamilton sworn 8 April 2011. This question of documentation, applications or notes consistent with a trust seeking finance over trust assets from entities associated with Ms Entink as broker rather than simply by Brimin Gem seeking finance supported by charges over its assets (absolutely) arose in the context of a notice to produce relevant documents held by Ms Entink.

66    As to SCB, financial statements have been provided by Mr Christopherson for the financial years ending 30 June 2006 to 30 June 2010. Taxation returns have not been prepared and lodged by SCB for those years although Mr McComb has instructed Mr Christopherson to prepare and lodge taxation returns as a matter of priority.

67    No financial statements have been prepared for Carriages for the financial years ending 30 June 2006 to 30 June 2010 and nor have taxation returns been prepared and lodged by Carriages for those years. Those taxation returns are to be prepared and lodged, on Mr McComb’s instructions, as a matter of priority.

68    As to Newtoun, no financial statements or taxation returns have been prepared for the financial years ending 30 June 2006 to 30 June 2010 although, once again, Mr McComb has instructed Mr Christopherson to prepare the statements and to prepare and lodge taxation returns for that company, as a matter of priority. Mr Christopherson has the bank statements for Newtoun and the bank statements for Carriages.

Mr McComb’s affidavit sworn 11 April 2011

69    In Mr McComb’s affidavit of 11 April 2011 he says that he has now been able to obtain internet access to some of Carriages ANZ cheque account bank statements. He exhibits (“JEM5”) bank statements for the period 24 November 2009 to 24 January 2011. There are many transactions through the account which begin on 25 November 2009 with a credit balance of $690,693.97 and end on 24 January 2011 showing a draw down of the overdraft in an amount of $9,083.20. The overdraft at the date of Mr McComb’s affidavit was drawn to $8,275.67. Mr McComb says that these funds were used to pay Brimin Gem’s interest payments on the mortgages earlier described [para 8(c)(i) to (viii), affidavit dated 24 February 2011 and sworn 7 March 2011]; architect’s fees; fees for professional services; marketing expenses; rental payments on 26 Seafarer Court; general operating expenses of the defendant companies and Mr McComb’s living expenses.

70    Mr McComb says that as a result of these expenditures “neither [he] nor the four defendant companies have any cash resources to meet the current interest bills [accruing on the mortgages entered into by Brimin Gem and SCB]”; nor does Mr McComb have the capacity to borrow any monies on properties in his own name, although no detail of those properties, the mortgage debts related to them or revenues derived from those properties, are disclosed.

71    By the Amended Notice of Motion, Brimin Gem (or Austral) seeks leave to borrow $400,000.00 under the Sangster facility so as to apply those funds to pay all interest payments on the mortgages described at para 8(c)(i) to (viii) of Mr McComb’s affidavit dated 24 February 2011 (sworn 7 March 2011) constituting interest payments of $420,556.84; Council rates of $26,137.92; legal fees of $71,061.66 and $21,952.32 constituting $93,013.98; such further reasonable legal fees as may be incurred in defending these proceedings; all Land Tax owing by Brimin Gem (which, on the evidence, amounts to $186,745.28, although these amounts are said to be subject to objection proceedings); $60,000.00 in respect of 26 Seafarer Court; all sums owing under the General Tenancy Agreement for 26 Seafarer Court; and $2,000.00 per week living expenses which, on the assumption set out at [39] of these reasons, amounts to approximately $26,000.00.

72    Leave therefore is sought by Brimin Gem (and/or Austral) to borrow $625,708.74 (leaving aside the land tax amount, the quantification of the further legal fees connected with the defence of the proceeding and the unidentified amount of the rents unpaid (if any) under the General Tenancy Agreement).

73    The Sangster facility available to Brimin Gem is an amount of $400,000.00 for six months only: Exhibit “JEM1”, page 6.

The further affidavit of Mr McComb sworn and filed 31 March 2011

74    A further amount of $250,000.00 is sought to be borrowed by SCB from Mortgage Connexions Financial Services or lenders nominated by that firm on the terms of Exhibit “JEM4” to Mr McComb’s affidavit filed 31 March 2011 and sworn 31 March 2011. In his affidavit sworn 31 March 2011 Mr McComb gives evidence of the independent financial facility to be made available to SCB previously foreshadowed in his affidavit of 24 March 2011. The SCB facility is set out in a letter from Mortgage Connexions (Vic) Pty Ltd to Mr McComb (SCB) dated 28 March 2011 which says that Mortgage Connexions has clients willing to loan funds on second mortgage security to SCB in an amount of $250,000.00 for one year with a right of early discharge on one month’s notice at an interest rate of 14% with a default interest rate of 18%. In his affidavit of 31 March 2011 Mr McComb says that the offer is the best offer he can obtain; SCB wishes to accept the offer; SCB does not have funds available to meet its present obligations from its own resources; and the mortgage interest obligations previously set out at para 8(c)(ix) (x) and (xi) of Mr McComb’s affidavit dated 24 March 2011 (sworn 7 March 2011) have been revised so that the total amount payable from January to December 2011 in respect of the three mortgages is $266,069.80 rather than $265,303.13. SCB’s obligations in relation to rates remains as $12,395.66 and its joint obligation with Brimin Gem and Newtoun in relation to legal fees remains as $71,061.66 and $21,952.32. The land tax obligation is said to be $89,590.28 which does not take account of the 2011 assessment. Mr McComb in his affidavit of 31 March 2011 says that he proposes to disburse the loan funds to pay the interest obligations for the 2011 year ($266,069.80); outstanding rates ($12,395.66); outstanding legal fees with respect to the Victorian proceedings ($71,061.66) which, by reference to the description, seems to include the legal fees at para 9(n) of the affidavit of 31 March 2011 amounting to $21,952.32; and other legal fees incurred in connection with these proceedings and future legal fees to be reasonably incurred in respect to these proceedings.

75    On that footing, the quantified amount owed by SCB in respect of interest and rates is $278,465.46. The outstanding legal fees amount to $93,013.98. However, those fees are a joint obligation of SCB, Brimin Gem and Newtoun and are taken up in the Brimin Gem proposal.

76    For the purposes of the application for orders in terms of the Amended Notice of Motion, I accept that on the face of the financial accounts prepared for Brimin Gem by Mr Christopherson that Mr McComb has advanced significant funds to that company and therefore has a substantial investment or interest in that company. I also accept that on the face of the financial accounts prepared by Mr Christopherson, on instructions from Mr McComb, Brimin Gem’s accounts have been prepared on the footing that it has acted at all relevant times as a trustee of the BM Family Trust and that the properties acquired by Brimin Gem are treated, by reference to a schedule, as trust assets. For present purposes, the question of whether the properties registered in the name of Brimin Gem are owned by that company absolutely or are trust assets, is in controversy and will be resolved in the principal proceedings. I also accept that Brimin Gem and SCB have entered into a series of mortgages secured over the properties recited in Mr McComb’s affidavit dated 24 February 2011 (sworn 7 March 2011) and his affidavit sworn 31 March 2011. I accept that the interim position ought to be preserved in the sense that these entities ought to be entitled to borrow funds in the ordinary course of their business in order to meet obligations to be discharged which fall to be discharged prior to the determination of the principal proceeding.

77    I also accept that Mr McComb has exhibited to his affidavit some documents which suggest that Ms Bird may have consented to particular matters.

78    Nevertheless, the central contention of Ms Bird is that she did not agree to the transfer of her shares as already described and nor did she consent to arrangements which altered her position as an officer of the companies. In the context of the exercise of the discretion to vary the orders relating to the interim injunctions, it should be noted that Mr McComb has made a disarmingly frank admission that when his bankruptcy seemed inevitable he elected to take steps to reorganise his affairs so as to remove assets from the reach of a trustee of his estate who would be appointed in that inevitable continuum; Mr McComb regarded the granting of guarantees by Ms Bird as a matter of little substance; the financial statements for Brimin Gem and SCB appear not to have been prepared for the period 2006 to 2010 until these proceedings seemed to make that step necessary; the financial statements for Carriages and Newtoun have not been prepared; taxation returns for none of the defendant companies have been prepared and lodged; the financial affairs of Brimin Gem and SCB seem to be conducted out of the bank account of Carriages at the ANZ Bank; and although Mr McComb says that Ms Bird agreed to transfer her shares in the relevant entities and resign her positions because she knew she was a beneficiary under the BM Family Trust, Mr McComb as appointor has removed Brimin Gem as trustee and the trustee, with the consent of Mr McComb, has varied the trust to remove Ms Bird as a beneficiary under the trust.

79    Although no findings are to be made and nor it is appropriate to do so, the impression gained from the position adopted by Mr McComb as reflected in his own affidavits, is that compliance with the proper discharge of legal obligations by the defendant companies under his control is treated as largely a matter of election or discretion.

80    However, the proper course is to preserve the capacity of Brimin Gem and SCB to continue to function in the ordinary course of business by discharging obligations arising in the ordinary course of business of those companies, pending the determination of the proceeding. The BM Family Trust was established on 25 June 1992. The financial statements for the BM Family Trust for the financial years ending 30 June 1992 to 30 June 2005 ought to be produced. The financial statements for the period 2006 to 2010 as adopted by Mr McComb (rather than simply the draft financial statements) ought to be produced. The taxation returns for the BM Family Trust for the financial years ending 30 June 1992 to 30 June 2005 ought to be produced. The taxation returns for the BM Family Trust for the years ending 30 June 2006 to 30 June 2010 are being prepared by Mr Christopherson and they ought to be produced.

The further order made on 18 April 2011

81    On 18 April 2011, the following further orders were made in relation to SCB:

1.    Pursuant to order 5 of the Orders of the Court made on 18 February 2011, the Orders made that day are varied in terms of the following Orders.

2.    Leave is given to the Third Defendant, SCB Holdings Pty Limited, to borrow sufficient moneys in order to discharge the following obligations of SCB Holdings Pty Limited:-

(a)    first, arrears of interest payments for the months of January, February, March and April 2011 in respect of the two properties recited at paragraph 2(d)(i) of the Amended Notice of Motion filed 5 April 2011, namely properties located at 18-20 Walter Street, Safety Beach; 12-16 Walter Street, Safety Beach, being the amounts recited at paragraphs 9(c)(i) to (iii) of the Affidavit of John Edward McComb sworn and filed 31 March 2011;

(b)    second, the amount represented by arrears of rates as described in paragraphs 9(h) of the said Affidavit of John Edward McComb.

3.    The parties have liberty to apply.

82    Since the question of whether the properties are trust assets or not is in issue, Austral will be joined in its trustee capacity as a party to the proceedings and will be restrained from dealing in or creating any interest in any person in any of the relevant properties. Accordingly, orders will be made giving leave to Brimin Gem and/or Austral to borrow sufficient monies to discharge interest payments for the months of January, February, March and April 2011 in respect of the six properties recited at para 2(b)(i) of the Amended Notice of Motion; the amount represented by arrears of rates payable by Brimin Gem as described at paras 8(f)(i) to (vi) of the affidavit of Mr McComb filed 29 March 2011 but bearing the date 24 February 2011; the amount of $60,000.00 in respect of the property at 26 Seafarer Court, Surfers Paradise referred to at para 8(r) of the said affidavit of Mr McComb; and the legal fees described at paras 8(l) and 8(m) of that affidavit.

83    Leave will be given to SCB to borrow sufficient monies to discharge interest payments for the months of January, February, March and April 2011 in respect of the properties recited at para 2(d)(i) of the Amended Notice of Motion; and the amount represented by arrears of rates as described at para 9(h)(i) and (ii) of the affidavit of Mr McComb sworn and filed 31 March 2011.

84    In addition, orders will be made requiring the first and second defendants to file an affidavit exhibiting copies of the financial statements for the BM Family Trust for each financial year from the settlement of the trust on 25 June 1992 to the financial year ending 30 June 2005 together with exhibited copies of financial statements for the BM Family Trust for each financial year from 30 June 2006 to 30 June 2010 containing the financial statements adopted by Mr McComb. In addition, the first and second defendants are to file an affidavit exhibiting copies of taxation returns for the BM Family Trust for each financial year ending 30 June 1992 to 30 June 2005 (as already prepared, it seems) and the taxation returns for the trust for the years ending 30 June 2006 to 30 June 2010 which are now being prepared by Mr Christopherson.

85    The affidavits so described ought to be filed within 14 days. Austral will be joined and an injunction granted pending trial in the terms described subject to the usual undertaking as to damages being given. The costs of the Amended Notice of Motion are to be reserved and the parties will be given liberty to apply generally. As to the formal matters, leave is given to read and file the affidavit of Dugald Hamilton sworn 8 April 2011 and the affidavit of John Edmund McComb sworn 11 April 2011.

Associate:

Dated:    17 May 2011