FEDERAL COURT OF AUSTRALIA

BCI Finances Pty Limited (in liq) v G R Binetter as the Representative of the Estate of E Binetter [2015] FCA 86

THE COURT ORDERS THAT:

1.    The fourth respondent’s application to discharge the orders made on 15 January 2015 be dismissed.

2.    Subject to paragraph 3, the third, fourth, eighth and tenth respondents must:

(a)    within 14 working days to the best of your ability inform the applicant, by its lawyers, in writing of all your assets (whether in Australia or otherwise), giving their value (to the extent that such value is known to such respondent, which may be estimated if not known), location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your or its interest in the assets;

(b)    within 14 working days after being served with this order, swear and serve on the applicant an affidavit setting out the above information.

3.    (a)    this paragraph 3 applies if you are not a corporation and you wish to object     that compliance with paragraph 2 may tend to incriminate you or make you

    liable to a civil penalty;

(b)    this paragraph 3 also applies if you are a corporation and all of the persons who are able to comply with paragraph 2 on your behalf and with whom you have been able to communicate, wish to object that compliance may tend to incriminate them respectively or make them respectively liable to a civil penalty;

(c)    you must, within 14 working days, notify the applicant in writing that you or all the persons referred to in (b) wish to take such objection and identify the extent of the objection;

(d)    if you give such notice, you need comply with paragraph 2 of this order only to the extent, if any, that it is possible to do so without disclosure of the material in respect of which the objection is taken; and

(e)    if you give such notice, the Court may give directions as to the filing and service of affidavits setting out such matters as you or the persons referred to in (b) wish to place before the Court in support of the objection.

4.    This proceeding be transferred to the New South Wales District Registry.

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

REASONS FOR JUDGMENT

1    These are reasons for orders I made on 13 February 2015 with respect to three interlocutory applications in this proceeding.

2    The first application was an oral application made by the fourth respondent on 11 February 2015 to discharge two orders I made on 15 January 2015 on the application of the applicant. On 15 January 2015, the applicant’s application was heard ex parte and resulted in orders that the fourth respondent deliver up his passport and not leave Australia without the consent of the Court.

3    The basis of the fourth respondent’s application is that the applicant was aware of information on 15 January 2015 which was material to the application, but which was not disclosed by it to the Court. That information came to the fourth respondent’s attention on 11 February 2015.

4    The information to which I refer is contained in an affidavit of Mr Ian Russell Lock affirmed on 4 February 2015. Mr Lock is one of the joint and several liquidators of the applicant, and he affirmed his affidavit in support of an application for Court approval under ss 477(2B) and 479(3) of the Corporations Act 2001 (Cth) (“the Act”) for the liquidators to enter into a deed of indemnity with the Deputy Commissioner of Taxation. The key points in the affidavit, as far as the present application is concerned, are as follows:

(1)    Mr Lock and Mr John Sheahan were appointed joint and several liquidators of the applicant by a resolution passed by creditors on 23 April 2014;

(2)    the liquidators have received one proof of debt in the liquidation which is a proof of debt lodged by the Deputy Commissioner of Taxation claiming the sum of $14,059,657.01;

(3)    the liquidators have identified various causes of action which the applicant may have against a number of individuals and companies and which may lead to recoveries by it;

(4)    the applicant has instituted proceeding No SAD 5 of 2015 against a number of individuals and companies, including the fourth respondent, wherein it seeks damages and compensation, and costs and expenses against those parties;

(5)    the Deputy Commissioner of Taxation has offered to provide an indemnity to the liquidators in respect of the costs of preparing and filing a statement of claim in No SAD 5 of 2015 and pre-trial interlocutory orders, the costs of filing a freezing order application and actions that may flow from that application, and a capped undertaking as to damages in the amount of $500,000, if required, in support of the application for a freezing order;

(6)    the only substantial assets of the applicant which have been identified by the liquidators are the claims that may be available to it;

(7)    the liquidators seek the approval of the Court to enter into a draft deed of indemnity with the Deputy Commissioner of Taxation which is annexed to Mr Lock’s affidavit.

5    The fourth respondent submits that these matters should have been disclosed to the Court on 15 January 2015 and, to emphasise his point, he pointed to the fact that on that day I asked counsel whether there were any other matters which should be disclosed, bearing in mind the fact that the application was being heard ex parte, and, in response to my question, none of these matters was disclosed. He submitted that I should have been told that the applicant was an “empty shell” and that, as at 15 January 2015, the Deputy Commissioner of Taxation had not been prepared to “stump up” an indemnity. He also referred to an email from the Deputy Commissioner of Taxation to the liquidators’ solicitors which indicates that, as at 14 January 2015, the Deputy Commissioner of Taxation was still considering whether he would provide an indemnity. The applicant’s response to these submissions was to submit that, in the particular circumstances of the application, the matters not disclosed were not material.

6    The application was brought pursuant to s 1323 of the Act, and subsections (3) and (4) of that section provide as follows:

(3)    Where an application is made to the Court for an order under subsection (1), the Court may, if in the opinion of the Court it is desirable to do so, before considering the application, grant an interim order, being an order of the kind applied for that is expressed to have effect pending the determination of the application.

(4)    On an application under subsection (1), the Court must not require the applicant or any other person, as a condition of granting an interim order under subsection (3), to give an undertaking as to damages.

7    The applicant submits that the application it brought was for an interim order and the matters not disclosed were relevant, if at all, to an undertaking as to damages which, by reason of s 1323(4) of the Act, is not to be required. I think the applicant is right.

8    The applicant’s Originating Application included a claim for interim relief, either under s 1323 of the Act, or at general law. The applicant’s written submissions for the application heard on 15 January 2015 made it clear that interim relief under s 1323 of the Act was being sought. The case referred to in the written submissions was a case involving an application under s 1323 of the Act (Re Richstar Enterprises Pty Ltd (ACN 099 071 968) and Others; Australian Securities and Investments Commission v Carey (No 3) and Others [2006] FCA 433; (2006) 232 ALR 577). The fourth respondent suggested that the hearing on 15 January 2015 went beyond a claim for interim relief under s 1323 of the Act, but I do not think that that is the case. I note that one of the orders I made on 15 January 2015 was that the interlocutory application be adjourned for further consideration to 20 January 2015. Insofar as the matters identified in Mr Lock’s affidavit might be relevant to an undertaking as to damages (which was not part of the orders made on 15 January 2015), those matters were not material such that they needed to be disclosed. The fourth respondent also submitted that the matters not disclosed were material because they were relevant to the applicant’s ability to meet an adverse costs order. That issue was not relevant on the application, although the matters may well be relevant to an application for security for costs if brought. I do not think the matters referred to in Mr Lock’s affidavit were relevant on the application because they might bear on the applicant’s ability to meet an adverse costs order.

9    It was for these reasons that I made an order that the fourth respondent’s application to discharge the orders made on 15 January 2015 be dismissed.

10    The second application was an application made by the applicant on 11 February 2015 for orders that the third, fourth, eighth and tenth respondents and the third parties file an affidavit disclosing their assets (“affidavit of assets”). That application was opposed by those respondents and the third parties.

11    In the context of this application, counsel for the fourth, eighth and tenth respondents raised a more general question about whether any orders freezing assets or requiring the provision of information should be made, bearing in mind the inability, so it was said, of the applicant to meet an undertaking as to damages. Counsel for the applicant responded to this submission by stating that the undertaking could be met to the extent of $500,000. That is the capped amount referred to in the draft deed of indemnity. There is no evidence that the deed of indemnity has been executed, and, in fact, it would seem that it has not been. However, counsel for the applicant has stated quite unequivocally that the undertaking as to damages is supported to the extent of $500,000, and I will proceed on that basis. There is no evidence to suggest that, at least at this stage, that amount is not sufficient.

12    There is no doubt the Court has the power to make an order for the provision of an affidavit of assets (Federal Court Rules 2011 (Cth) r 7.33). However, the relevant respondents and third parties submitted that it is a power which should not be exercised in this case.

13    In the context of this application, counsel for the third respondent made a more general submission that the evidence was insufficient to sustain a freezing order against her client because it did not establish a risk or danger that she will dispose of her assets. That is a requirement for a freezing order (r 7.35). She submitted that the third respondent is an elderly woman and it is not surprising she would sell her house. In my opinion, this submission takes insufficient account of the context established by the evidence put before me to this point. That context is established by Mr Sheahan’s affidavit affirmed on 28 January 2015 which sets out details of the disposition of substantial assets in the last six to eight months, and the departure in the last two or three years, apparently on a permanent basis, of some members of the Binetter family. I am satisfied that there is sufficient evidence to sustain a freezing order against the third respondent.

14    Counsel for the third respondent submitted that the orders were not necessary because her client had been recently examined by the liquidators about her assets. The argument was that, in the circumstances, the liquidators did not need the information and that it would be oppressive to require her to provide it. I reject this argument. The issue is not merely what the liquidators need to know. It includes, where appropriate, the Court being provided with information by the respondents in this proceeding for the purposes of the freezing order, and any subsequent variations or additions to it.

15    Counsel for the fourth, eighth and tenth respondents submitted that an order for an affidavit of assets was not axiomatic, and he referred to Pearce v Waterhouse [1986] VR 603 at 608; Bax Global (Australia) Pty Ltd v Evans and Others (1999) 47 NSWLR 538 at 544-545 per Austin J; Universal Music Australia Pty Ltd v Sharman License Holdings Ltd and Others [2005] FCA 1587; (2005) 228 ALR 174 at [20]-[21] per Moore J. In general terms, I accept the observations in these authorities but, of course, much will depend on the particular circumstances of the case.

16    As I understand the submission made by counsel for the fourth, eighth and tenth respondents, it was that there was no need for an affidavit of assets because the applicant was completely protected by the existing order, and the applicant itself had identified assets in the hands of the respondents well in excess of the applicant’s claim. The applicant’s claim is in the order of $14 million – $15 million. The existing orders or undertakings permit a respondent to be released upon payment of the sum of $15 million into Court. The relevant respondents submitted that, as there are ten respondents, if all sought to be released that would give rise to a pool of $150 million. The order is framed in the way it is because ultimately liability may be established against some respondents and not others. Counsel referred to the fact that, in his affidavit, Mr Sheahan refers to assets being sold for a total consideration in excess of $150 million. However, that statement must be considered in context. The entitlements of particular respondents to particular assets, especially in relation to the Nudie business, are quite unclear. In the circumstances, I considered that the relevant respondents should file an affidavit of assets, and that it seemed appropriate to make an order in similar terms to that already made against the sixth respondent (i.e., paragraphs 9 and 10).

17    I was not satisfied that the third parties should be required to file an affidavit of assets at this stage. The relevant information should be obtained from the respondents. If that proves not to be the case, it may well be appropriate to order that they file an affidavit of assets.

18    The third application was an application made by the fourth, eighth and tenth respondents, pursuant to s 48(1) of the Federal Court of Australia Act 1976 (Cth), for the proceeding to be transferred to the New South Wales District Registry of this Court. The application was supported by an affidavit sworn by Dajana Malnersic on 28 January 2015. I will not summarise what is set out in the affidavit. There is a strong case for transfer having regard to the relevant connecting factors, and in light of the principles stated in National Mutual Holdings Pty Ltd and Others v The Sentry Corporation and Another (1988) 19 FCR 155. The application was not opposed by the applicant, or any other party, and I decided that the proceeding should be transferred once all urgent interlocutory applications had been disposed of. That point was reach on 13 February 2015.

Associate:    

Dated:    18 February 2015