FEDERAL COURT OF AUSTRALIA

BCI Finances Pty Limited (in liq) v Binetter (No 3) [2015] FCA 1336

THE COURT ORDERS THAT:

1.    Within 14 days of the date of this judgment, the parties file and serve either:

(a)    a joint proposed minute of order giving effect to these reasons; or

(b)    in the event of disagreement, proposed minutes of order with short written submissions in support.

2.    Further to the freezing orders dated 30 January 2015 as varied by orders dated 11 February 2015, 13 February 2015, 21 May 2015, 23 June 2015 and 29 June 2015, the amount of $7,122,377.00 deposited in a controlled monies or trust account operated by the Australian Government solicitor (‘Account’) on 8 September 2015 remain in the Account until further order;

3.    The proceedings be adjourned for argument on the final form of the orders on a date to be fixed.

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

REASONS FOR JUDGMENT

1    By interlocutory application filed on 21 October 2015, the applicants sought urgent interlocutory relief to freeze monies deposited into a bank account operated by the Australian Government Solicitor (“AGS”) by or at the direction of the fourth respondent (“Andrew Binetter”). On 16 November 2015, the applicants were granted leave to file a further amended interlocutory application in the form foreshadowed by counsel for the applicants, Mr Mostafa, at the hearing on 29 October 2015.

2    The order now sought is addressed to Andrew Binetter, Rawbin Finances Pty Ltd (“Rawbin Finances”), BINQLDL Pty Ltd (“BINQLDL”), and AB Kambala Holdings Pty Ltd (“Kambala”). The key paragraph of the order is in the following terms:

5. Further to the freezing orders dated 30 January 2015 as varied by orders dated 11 February 2015, 13 February 2015, 21 May 2015 and 23 June 2015 and 29 June 2015…:

5.1 any amount deposited in a controlled monies or trust account operated by the Australian Government Solicitor (‘Account’) pursuant to any agreement between Andrew Binetter and the Commissioner of Taxation permitting the issue of a Departure Authorisation Certificate pursuant to the provisions of the Taxation Administration Act 1953 (Cth) remain in the Account until further order;

5.2 any amount held by the Commissioner of Taxation pursuant to any agreement between Andrew Binetter and the Commissioner of Taxation permitting the issue of a Departure Authorisation Certificate pursuant to the provisions of the Taxation Administration Act 1953 (Cth) not be dealt with or diminished until further order.

3    The interlocutory application was opposed.

Funds sought to be frozen

4    Approximately $8.081 million is presently held in a trust account operated by AGS (“AGS trust account”). This amount comprises:

(1)    $7,122,377.00 received by AGS from Rawbin Finances on 8 September 2015;

(2)    $900,000.00 received by AGS from BINQLDL on 8 September 2015; and

(3)    interest on those amounts.

5    Part of the funds sought to be frozen are the funds in the AGS trust account (“trust account funds”).

6    The other funds sought to be frozen comprise a refund due to Kambala, in an amount of approximately $820,000.

7    During the 22 October 2015 hearing, it emerged that the $7.122 million had been received by Rawbin Finances from funds that are the subject of the existing freezing order. The facts are set out more fully below.

8    There is no dispute that the amounts deposited into the AGS trust account and the refund due to Kambala were deposited and held respectively pursuant to an agreement between Andrew Binetter and the Commissioner of Taxation (“Commissioner”) permitting the issue of a Departure Authorisation Certificate pursuant to which Mr Binetter left Australia, and has since returned.

9    At the hearing on 22 October 2015, the applicants’ case was that the funds sought to be frozen are either owned by Andrew Binetter or are owned by entities (Rawbin Finances, BINQLDL and Kambala) over which Andrew Binetter has control.

10    Mr Mostafa on behalf of the applicants said that the applicants did not know the true owner of the funds. He recognised that Rawbin Finances may be the true owner of the majority of the funds, and that the funds were presently in the control of the Commissioner.

11    As I understood the applicants’ case, it was that the funds should be restrained on the basis that:

(1)    As to the funds deposited by Rawbin Finances, they are owned by:

(a)    Andrew Binetter, and have been dealt with contrary to the existing freezing order; or

(b)    Rawbin Finances, in which case they should be frozen pursuant to r 7.35(5)(b) of the Rules;

(2)    As to the funds deposited by BINQLDL, they should be frozen pursuant to r 7.35(5)(b);

(3)    As to the refund due to Kambala, it should be frozen pursuant to r 7.35(5)(b).

12    This is an application to vary existing freezing orders. It was not disputed that the applicants have a substantial cause of action against Andrew Binetter.

13    A freezing order operates in personam and not as an attachment to property: Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 (“Cardile”) at [50]. The existing freezing order made against Andrew Binetter operates in relation to the funds to the extent that they are, as a matter of fact, funds of which he is the owner. A freezing order may identify assets as assets of the person to whom the order is directed (as in paragraph 7 of the existing freezing order in this case). However, to the extent that the proposed order is directed against Andrew Binetter, it does not add anything of substance to the existing order.

14    Accordingly, the real issue for determination is whether, in this case, the freezing order should be varied to apply to Rawbin Finances, BINQLDL and Kambala to the extent of the funds identified above. On that issue, as to Rawbin Finances, Mr Mostafa submitted that, in the event of a judgment against Mr Binetter and his subsequent bankruptcy, Mr Binetter’s trustee in bankruptcy could wind up Rawbin Finances and obtain access to its assets because Mr Binetter is the sole shareholder of Rawbin Finances.

15    As to BINQLDL, the case was that Andrew Binetter appeared to have a power to cause that company to dispose of its funds for his benefit. Although it was not completely clear, I understood the case concerning Kambala’s funds to be put on the same basis.

Disclosure orders

16    Although disclosure orders were sought in earlier iterations of the interlocutory application, none were included in the further amended interlocutory application.

Statutory Power to make orders sought

17    Rule 7.32 of the Federal Court Rules 2011 (Cth) provides, relevantly:

(1)    The Court may make an order (a freezing order), with or without notice to a respondent, for the purpose of preventing the frustration or inhibition of the Court’s process by seeking to meet a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied.

18    Rule 7.34 provides:

The Court may make a freezing order … against a person even if the person is not a party in a proceeding in which substantive relief is sought against the respondent.

19    Rule 7.35 provides, relevantly:

(1)    This rule applies if:

…

(b)    an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in:

(i)    the Court;

…

(5)    The Court may make a freezing order … against a person other than a judgment debtor or prospective judgment debtor (a third party) if the Court is satisfied, having regard to all the circumstances, that:

…

(b)    a process in the Court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment.

(6)    Nothing in this rule affects the power of the Court to make a freezing order or ancillary order if the Court considers it is in the interests of justice to do so.

Current freezing order

20    The following provisions of the current freezing order are relevant:

(1)    Clause 5 which provides:

5. In respect of the third, fourth, eighth and tenth respondents (inclusive), the Court orders that:

(a)    You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia (‘Australian assets’) up to the unencumbered value of AUD$15,000,000 (fifteen million Australian dollars) (‘the Relevant Amount’).

(b)    If the unencumbered value of your Australian assets exceeds the Relevant Amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of your Australian assets still exceeds the Relevant Amount.

(c)    If the unencumbered value of your Australian assets is less than the Relevant Amount, and you have assets outside Australia (‘ex-Australian assets’):

(i)    You must not dispose of, deal with or diminish the value of any of your Australian assets and ex-Australian assets up to the unencumbered value of your Australian and ex-Australian assets of the Relevant Amount; and

(ii)    You may dispose of, deal with or diminish the value of any of your ex-Australian assets, so long as the unencumbered value of your Australian assets and ex-Australian assets still exceeds the Relevant Amount.

(2)    Clause 6(1)(b) which provides:

6. For the purposes of this order:

(1)    your assets include:

…

(b)    any assets which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if any person holds or controls the asset in accordance with your direct or indirect instructions); …

(3)    Clause 9 which provides:

This order does not prohibit you from:

(a)    paying $5,000 per week on ordinary living expenses;

(b)    paying the respondents’ reasonable legal expenses;

(c)    dealing with or disposing of any of your or its assets in the ordinary and proper course of your or its business, including paying business expenses bona fide and properly incurred;

(d)     in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of your or its assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the applicant, if possible, at least two working days written notice of the particulars of the obligation; and

(e)    complying with a court order other than a consent order.

Evidence and application for leave to re-open hearing

21    The interlocutory application was heard on 22 October 2015. The applicants relied upon an affidavit of John Sheahan affirmed 20 October 2015. Mr Sheahan is one of the liquidators of the applicants. In addition, the applicants tendered:

(1)    A letter from AGS dated 22 October 2015

(2)    A company search of Rawbin Finances; and

(3)    A company search of BINQLDL.

22    On 22 October 2015, the respondents tendered the following evidence:

(1)    A bundle of correspondence between AGS and Mr Binetter’s representatives; and

(2)    A letter from the applicants’ solicitors dated 7 May 2015.

23    At the conclusion of the hearing on 22 October 2015, I made orders freezing the funds the subject of the interlocutory application pending my decision on the application.

24    On 29 October 2015, the applicants sought leave to re-open the hearing of the interlocutory application. On such an application, the principal considerations are the likely prejudice to the parties resisting the application, the reason why the evidence was not led in the first place, and whether the interests of justice would be better served by the rejection of the application: Patrick v Capital Finance Pty Ltd (No 2) [2003] FCA 263 at [5]. See also Australian Securities and Investments Commission v Rich [2006] NSWSC 826; (2006) 235 ALR 857 at [18], where Austin J set out some of the factors which may be relevant to a consideration of whether to permit the re-opening of a case.

25    The application for leave to re-open was made on the following bases:

(a)    The liquidators did not learn either of the payment of $7.122 million by Rawbin Finances to AGS, or that the $7.122 million had come from funds that were covered by the existing freezing order, until 22 October 2015. As a result:

(i)    There was no evidence about when the payment was made to Rawbin Finances;

(ii)    There was an issue about whether the payment of $7.122 million contravened the existing freezing order, which the applicants sought to address by obtaining further evidence;

(b)    It had been submitted on behalf of Andrew Binetter that the liquidators knew or should have known that there would be a payment to Rawbin Finances (from Mr Binetter’s 29 April 2015 affidavit) and the applicants had not had an opportunity to adduce evidence about their state of knowledge;

(c)    The liquidators did not learn of the refund due to Kambala and wished to adduce evidence about the shareholding and directorship of Kambala, in support of a contention that the Court has power to freeze that money;

(d)    Having learned of the involvement of Rawbin Finances and BINQLDL, the liquidators:

(i)    sought to amend their application to include those entities;

(ii)    sought to make further submissions on the basis of the shareholding and directorships of those companies;

(e)    The applicants sought to rely on paragraph 6(1)(b) of the existing orders, to submit that all of the funds of entities having Andrew Binetter as their sole director are assets within the meaning of paragraph 6(1)(b).

26    That leave was granted to permit the applicants to adduce further evidence that was identified on the application for leave to re-open being, in particular, evidence about when the $7.122 million was paid to Rawbin Finances ((a)(i) above), the state of knowledge of the liquidators ((b) above) and the shareholding and directorship of Kambala ((c) above) .

27    Leave was refused in relation to (a)(ii), (d)(ii) and (e) for the following reasons:

(1)    The question of whether the existing order had been contravened was a serious issue, but was not a matter of substantial relevance to the current application, and was not of sufficient importance to justify the grant of leave having regard to the substantial amount of the funds that have been frozen pending the determination of this application. If the applicants wish to bring contempt proceedings, that will be a separate application;

(2)    The applicants had been given a sufficient opportunity to make submissions on this issue and had supplied a list of relevant authorities to the Court;

(3)    The proposed argument did not have prospects in the absence of evidence that the funds were assets of the kind mentioned in clause 6(1)(b).

28    Thereafter, the applicants relied upon a further bundle of correspondence, and an affidavit of James Cudmore, a lawyer acting for the applicants, sworn 26 October 2015. Annexed to that affidavit was a company search of Kambala.

29    On 22 October 2015, the respondents tendered the transcript of a directions hearing in this matter before Foster J on 8 May 2015.

Legal principles

30    The principles concerning an application for a freezing order against a third party to a proceeding are set out in Cardile. Relevantly, they are:

(1)    A freezing order is a drastic remedy which should not be granted lightly. It imposes a severe restriction upon a party’s right to deal with his or her assets (at [51]);

(2)    The purpose of a freezing order is to preserve the status quo, not to change it in favour of the plaintiff (at [51]);

(3)    A reason for care in exercising the power to grant a freezing order is that there may be difficulties associated with the quantification and recovery of damages pursuant to the undertaking if it should turn out that the order should not have been granted (at [52]);

(4)    A freezing order may be appropriate, assuming the existence of other relevant criteria and discretionary factors, in circumstances in which some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor (at [57]). This principle is reflected in rule 7.35(5)(b).

31    Several cases have accepted the proposition that a freezing order may be made against a third party company where there was a judgment debtor or prospective judgment debtor who might be bankrupted with the consequence that his or her trustee in bankruptcy would be likely to obtain access to the assets of the third party company: Caboche v Southern Equities Corporation Ltd [2001] SASC 55 at [23] (prospective judgment debtor), Davis v Turning Properties Pt Ltd [2005] NSWSC 742; (2005) 222 ALR 656 at [42] (prospective judgment debtor), Apostolidis v Kalenik [2011] VSCA 307; (2011) 35 VR 563 at [99] (judgment debtor), footnote 80, and Rafferty v Time 2000 West Pt Ltd (No 7) [2011] FCA 405 at [58] and [72] (judgment debtor).

32    In Audio Products Group Pty Ltd v Mamone [2005] NSWSC 982 (“Audio Products”), Palmer J declined to discharge a freezing order against a company of which the prospective judgment debtor was a director and 50% shareholder (the other director and 50% shareholder being his wife). A bankruptcy petition had been filed against the prospective judgment debtor and there were existing consent judgments against him in relation to frauds which he had perpetrated. The proceeding before Palmer J involved additional claims.

33    Palmer J reasoned that, upon sequestration, the prospective judgment debtor’s trustee in bankruptcy would have become entitled to his 50% shareholding in the company. If the proposed proceeding resulted in a substantial judgment against the prospective judgment debtor, the trustee in bankruptcy could seek a winding up of the second defendant on just and equitable grounds, in addition to any other grounds that may be available. If the trustee in bankruptcy was successful on that application, the company would be obliged in the administration of its liquidation to distribute to the bankruptcy trustee as a 50% shareholder in the company, such of the surplus of the company’s assets after paying its debts and liabilities as the trustee as shareholder was entitled to receive.

34    Thus, Palmer J concluded that the possibility that a trustee in bankruptcy of the first defendant might ultimately obtain contribution from a surplus of assets of the second defendant brought the case within the principle set out at paragraph 30(4) above. At [15], his Honour concluded:

It is unrealistic to suppose that [the first defendant], as a 50% shareholder of [the second defendant] and as a co-director of [the second defendant] with his wife, cannot have any influence in the fraudulent disposition of [the second defendant]’s assets if he were minded to engage in such a course of action to prevent the Plaintiff from recovering any fruits of a judgment against him.

Facts

35    The application follows the completion of the trial in the proceeding. The trial commenced on 31 August 2015 and continued until 9 September 2015. Further submissions were made on 28 and 29 September 2015. Judgment is now reserved.

Rawbin Finances, BINQLD and Kambala

36    Andrew Binetter is the sole director and company secretary of each of Rawbin Finances, BINQLDL and Kambala.

37    The sole shareholder of Rawbin Finances is Andrew Binetter.

38    The sole shareholder of each of BINQLDL and Kambala is Michael Binetter, the sixth respondent.

Commissioner of Taxation

39    The Commissioner is the sole creditor of the applicants with the possible exception of one or more related entities which the liquidators do not appear to accept are creditors.

Original freezing orders

40    On 30 January 2015, Mr Binetter gave an undertaking to the Court until 4pm on 11 February 2015 to refrain from removing from Australia or in any way disposing of, dealing with or diminishing the value of his assets in Australia to the extent that those assets did not exceed an unencumbered value of AUD 15 million.

41    Besanko J also made an order against, relevantly, Nudie Franchising Systems Pty Ltd, Nudie Foods Pty Ltd, Nudie Pty Ltd, Real Juice Pty Ltd and Nudie Foods Australia Pty Ltd (collectively the “third parties”) restraining the third parties from removing from Australia or in any way disposing of, dealing with or diminishing the value of their assets in Australia to the extent that those assets did not exceed an unencumbered value of AUD 15 million (“the freezing order”).

42    On 11 February 2015, the freezing order was varied, relevantly by including Tamarama Fresh Juices Australia Pty Ltd (“Tamarama”) as a third party.]

43    On 13 February 2015, the freezing order was further varied by Besanko J, relevantly, to make Mr Binetter subject to the freezing order: BCI Finances Pty Limited (in liq) v GR Binetter as the Representative of the Estate of E Binetter [2015] FCA 86. At [11], Besanko J noted that the freezing order was supported by an undertaking as to damages to the extent of $500,000. There was no evidence on this application that the undertaking was sufficient, although Mr Williams SC questioned its adequacy.

Andrew Binetter’s 11 March 2015 affidavit

44    On 11 March 2015, Andrew Binetter swore an affidavit setting out, relevantly, his assets, their value to the extent known to him and their location and encumbrances.

45    At paragraph 4 of his affidavit, Mr Binetter stated that all of the assets of Ligon 158 Pty Ltd (“Ligon 158”), the tenth respondent, are the subject of a charge in favour of Rawbin Finances.

46    Mr Binetter disclosed his shareholding in Rawbin Finances and stated that, to the extent of his knowledge, none of his shareholdings had any material value.

47    Mr Binetter annexed to his affidavit a table of receivables recorded in the accounts of Ligon 158 as at 30 June 2014. He swore that these were the best estimates of Ligon 158’s receivables that he was able to give. The table shows a receivable from Tamarama of $3,719,767.85.

Andrew Binetter’s 29 April 2015 affidavit

48    On 29 April 2015, Andrew Binetter swore another affidavit concerning, among other things, an asset sale agreement between Monde Nissin (Australia) Pty Limited and its parent company and five of the six third parties. Settlement of the sale took place on 30 January 2015. According to Mr Sheahan’s 20 October 2015 affidavit (to which Mr Binetter’s 29 April 2015 affidavit was annexed)in very broad terms, Mr Binetter’s 29 April 2015 affidavit disclosed that as at 29 April 2015, the proceeds of the sale were held in three bank accounts which, in aggregate, totalled approximately $57 million. How Mr Sheahan arrived at the figure of $57 million was not explained.

49    At paragraph 15, Mr Binetter referred to a payment from the proceeds of sale by Tamarama to Rawbin Finances of $3,288,509.71. Paragraph 16 of Mr Binetter’s affidavit states:

Tamarama owed funds to Ligon 158 Pty Ltd in respect of money Tamarama borrowed to acquire equipment sold to the purchaser under the Asset Sale Agreement. As part of group consolidation the loan was consolidated up to Rawbin Finances Pty Limited. The amount owed was $10,410,887.59 of which $3,288,509.71 has now been paid. Rawbin Finances’ bank account, into which the money was paid, is held with Bank of Queensland…and the money has not been disbursed. This amount was payable by Tamarama to Rawbin Finances out of the proceeds of sale at the time of settlement (ie 30 January 2015), but as a result of the freezing orders, payment was delayed.

50    Under the heading “Interests and entitlements in sale proceeds”, at paragraph 29, Mr Binetter stated:

The Third Parties may pay the following expenses from the remaining proceeds of sale:

…

(g) the remaining balance to Rawbin Finances Pty Ltd (see above);…

Correspondence concerning Mr Binetter’s affidavits

51    By letter dated 7 May 2015, the applicants’ solicitors, Cosoff Cudmore Knox (“CCK”) wrote to Speed & Stracey Lawyers (“Speed & Stracey”), acting for the third parties, saying relevantly:

Paragraph 16 of the affidavit of Mr Binetter, when read with paragraph 29(g) suggests that Tamarama considers that it is permitted to pay funds to Rawbin Finances Pty Ltd.… It is not clear, from the matters set out in paragraph 16 of Mr Binetter’s affidavit, how that is so.…

…an amount of $3,288,509.71 appears to have been paid on 13 February 2015. Mr Binetter states that he considers that a further payment may be made up to the amount of $10,410,887.59.

We note that no written notice of the particulars of any obligation has at any time been provided to BCI Finances as contemplated by paragraph 11(d) of the freezing order. We note that Mr Binetter states that the monies which have been paid to Rawbin Finances to date ‘have not been disbursed’.

We propose to raise this matter at the hearing tomorrow, and to seek a direction that Mr Binetter file a further and better affidavit setting out:

1.    whether or not Tamarama (the sixth third party) considers that it has an obligation properly and bona fide incurred to Rawbin Finances Pty Limited in the ordinary course of its business;

2.    if so, that Tamarama identify the basis of that obligation, whether under contract or otherwise by reference to all facts, matters and circumstances (including all relevant documents) which give rise to that obligation; and

3.    how the amount said to be owed of $10,410,887.59 arises under that obligation, and the purposes and, or, basis of the payment of $3,288,509.71.

Pending the filing of that affidavit, we will be seeking an order from Tamarama that it make no further disposal of any assets to Rawbin Finances as contemplated by paragraph 29(g) of the affidavit of Mr Binetter.

52    At the 8 May 2015 directions hearing before Foster J, Mr Rosser of CCK appeared for the applicants. He told the Court that the liquidators sought an explanation of paragraph 16 of Mr Binetter’s 29 April 2015 affidavit. Foster J told Mr Rosser that he needed to get a response to CCK’s 7 May 2015 letter and “if there’s a real problem then you can raise it”. Mr Rosser then referred to paragraph 29 and said that “there’s a further payment that’s intended to be made out…And we would ask that it not be made.” Foster J told Mr Rosser “you have to work out what you want – what application you want to make, what relief you want – then bring it forward.”

53    It is plain from the 7 May 2015 letter and the transcript of the 8 May 2015 directions hearing that the liquidators were aware that Tamarama had already paid Rawbin Finances $3,288,509.71 and might make a further payment to Rawbin Finances up to the amount of $10,410,887.59.

54    By email dated 12 May 2015, Malcolm Stewart of Speed & Stracey wrote to Mr Rosser, saying:

I refer to our telephone conversation on Friday it (sic) May 2015, following the directions hearing before his Honour Justice Foster earlier that day. Although I was not present at the directions hearing I understand that a concern was raised by you on behalf of your clients with respect to the payment referred to in paragraph 15(b) of the affidavit of A Binetter sworn on 29 April 2015. I mentioned during our telephone conversation that I hope to put to you early this week, a proposal to resolve the issue without the matter having to be further agitated.

Our clients maintain that the payment was made in accordance with the freezing orders. Nevertheless to resolve the issue at this juncture Rawbin Finances Pty Ltd has agreed to transfer the $3,288,509.71 to Ligon 158 Pty Ltd. We understand Ligon 158 Pty Ltd as the 10th respondent to these proceedings is subject to a freezing order and the funds would likewise be subject to that order. Would you please let me have your response to this proposal.

55    The applicants did not respond to the 12 May 2015 proposal.

Further variations to freezing order

56    On 21 May 2015, the freezing order was varied in respects not material to this application.

57    On 23 June 2015, Edmonds J made the following order:

THE COURT NOTES:

1.    The undertaking of Mr Binetter to the Court and the Commissioner that he will return to Australia by 25 July 2015 (Australian Eastern Standard Time) or any later date that is substituted under section 14U(2) of the Taxation Administration Act 1953 (Cth) (TAA) (the Undertaking).

2.     That 12 Years Juice Foods Australia Pty Ltd has agreed to provide security for the return of Mr Binetter to Australia.

3. The agreement between Mr Binetter and the Commissioner made on 23 June 2015 in relation to the provision of security for the return of Mr Binetter to Australia (the Agreement), a copy of which is annexed hereto and marked Annexure “A”.

THE COURT ORDERS THAT:

1.    The Court varies the orders made on 30 January 2015 (as varied) to allow the payment, in accordance with the Agreement, of the sum of $8,178,909.64 by 12 Years Juice Foods Australia Pty Ltd to the Australian Government Solicitor to be placed into a controlled moneys account or trust account to secure the return of Mr Binetter in accordance with the Undertaking.

58    12 Years Juice Foods Australia Pty Ltd was formerly Nudie Foods Pty Ltd.

59    On 29 June 2015, the freezing order was further varied in respects not material to this application.

60    Mr Binetter returned to Australia on 21 July 2015.

August 2015 request for security for Andrew Binetter’s overseas travel

61    By letter dated 27 August 2015 from the Australian Taxation Office (“ATO”), the ATO sought the liquidators’ consent to similar orders as were made on 23 June 2015, to allow security to be provided in the amount of $10,501,584.49 for the return of Mr Binetter to Australia following a departure planned for about 5 September 2015. A similar request was made by Brown Wright Stein lawyers (“BWS”), acting for Andrew Binetter in connection with his tax affairs, by letter dated 31 August 2015.

62    The liquidators declined to give that consent.

Provision of security

63    On 1 September 2015, Tamarama paid Rawbin Finances approximately $7.122 million.

64    Also on 1 September 2015, in response to the BWS letter dated 31 August 2015, CCK sought information that included the amount of the proceeds remaining from the sale of the Nudie business. By letter dated 2 September 2015, BWS declined to provide the information sought by the liquidators. By letter dated 4 September 2015, CCK reiterated the liquidators’ request for the information sought on 1 September 2015.

65    On 2 September 2015, BWS wrote to AGS concerning, relevantly, Kambala, and referred to an amount of $874,644.84 received by the Commissioner under garnishee notices from the sale of property in Bellevue Hill, Sydney. The letter also sought confirmation that the amount of security required for the issue of a departure authorisation certificate to Mr Binetter should be reduced.

66    By email dated 7 September 2015, an AGS solicitor told Chris Ardagna of BWS that the amount of security now required by the Commissioner was $8,842,428.73.

67    The same day, BWS wrote to AGS stating, relevantly:

…in order to secure his return to Australia Mr Binetter is able to provide security from other sources, namely:

(a)    AB Kambala Holdings Pty Ltd as trustee for the AB Kambala Holdings Trust. We understand the Commissioner will shortly issue a refund in the amount of approximately $820,000 to that entity. It is proposed to cause that entity to provide those funds by way of partial satisfaction of Mr Binetter’s security;

(b)    Rawbin Finances Pty Ltd (Rawbin). Rawbin is not a respondent in either proceedings, nor is it a third party bound by freezing orders in either proceedings. We attach an affidavit of Mr Binetter affirmed 29 April 2015 and draw your attention to the matters in paragraphs 15(b), 16 and 29(g). Since the date of that affidavit, further funds totalling $7,122,377 have been paid by Tamarama Fresh Juice Australia Pty Ltd as foreshadowed in paragraph 29(g). The applicant (sic) in SAD5 raised an issue in relation to payments to Rawbin as described in that affidavit. For your information, we attach pages 12-15 of the transcript of the hearing in SAD5 on 8 May 2015 where this issue was raised. No other order has been sought or obtained in relation to such further payments. As such, it is proposed to cause those funds totalling $7,122,377 to be provided as security.

(c)    BINQLDL Pty Ltd, a company of which Mr Binetter is a director. BINQLDL Pty Ltd is not a respondent in either proceedings, nor is it a third party bound by freezing orders in either proceedings. It is proposed that BINQLDL will provide the balance of Mr Binetter’s security in the amount of approximately $900,000.

68    On 8 September 2015, AGS received two telegraphic transfers, one in the amount of $900,000 from BINQLDL and the other in the amount of $7,122,377 from Rawbin Finances. Those monies were paid into a trust account in the name of AGS.

Further correspondence concerning freezing order and security

69    By letter dated 10 September 2015 to BWS, CCK requested confirmation “that there be no endeavour by Mr Andrew Binetter to have recourse to any of the monies which are the subject of the freezing orders in connection with any proposed travel overseas”.

70    By letter dated 10 September 2015 to Speed & Stracey, CCK wrote as follows:

We have recently been in correspondence with parties instructed by Mr Andrew Binetter in relation to the freezing orders, and have had cause to seek unqualified confirmation from those parties that there is strict adherence to the terms of the freezing orders.

In an affidavit of Mr Andrew Binetter dated 29 April 205 filed by your firm, Mr Andrew Binetter set out, at paragraph 16, the circumstances concerning a ‘group consolidation’ whereby a

‘loan was consolidated up to Rawbin Finances Pty Limited. The amount owed was $10,410,887.59 of which $3,288,509.71 has now been paid.’

We wrote to you about the issue by our letter of 7 May 2015. We subsequently received the email from Mr Malcolm Stewart of 12 May 2015 in which Mr Stewart wrote:

‘Nevertheless, to resolve the issue at this juncture, Rawbin Finances Pty Limited has agreed to transfer the $3,288,509.71 to Ligon 158 Pty Limited. We understand Ligon 1587 (sic) Pty Limited as the 10th respondent to these proceedings is subject to a freezing order and the funds would likewise be subject to that order.’

Would you please confirm, therefore, that Ligon 158 continues to hold that amount of $3,288,509.71 subject to the terms of the freezing order, and that none of the ‘amount owed’ pursuant to the ‘group consolidation’ has been paid to Rawbin Finances Pty Limited.

71    Despite the terms of the request for confirmation, it is not now suggested that anyone had ever said that Ligon 158 held the amount of $3,288,509.71. That was Mr Stewart’s proposal on 12 May 2015, but the liquidators did not respond to the proposal.

72    By letter dated 11 September 2015, BWS wrote to CCK saying, relevantly:

In the absence of the liquidators’ reasonable consent to access the frozen funds (despite them doing so on the previous occasion), Mr Andrew Binetter proposed, and the Commissioner has accepted, that entities other than the Third Parties in the SAD5 proceedings provide funds to secure Mr Binetter’s return to Australia.

Mr Binetter maintains that the request for consent to access the frozen funds of the Third Parties in the SAD5 proceedings does not prejudice the liquidator’s interests.

In that regard, we understand that more than $55 million remains frozen. …

73    Thus, BWS did not respond directly to CCK’s request for confirmation in the 10 September 2015 letter. On behalf of the liquidators, Mr Mostafa submitted that the letter was liable to mislead them, although he did not say precisely how they would be misled. The letter was not responsive to CCK’s request for information, but I do not agree that it was misleading. In particular, on my reading of the letter, it did not imply that Andrew Binetter had not had recourse to the monies which are the subject of the freezing orders in connection with his overseas travel.

74    At the hearing of the interlocutory application, Mr Williams SC on behalf of Mr Binetter, informed the Court that the $55 million figure is the amount frozen after the transfer of the $7.122 million from Tamarama to Rawbin Finances.

75    Thus, on 11 September 2015, the liquidators were aware that third parties had provided funds to the ATO to enable Mr Binetter’s departure overseas, and that BWS had not answered its 10 September 2015 request for confirmation.

76    By letter dated 17 September 2015 responding to CCK’s 10 September 2015 letter, Speed & Stracey noted that it did not act for Rawbin Finances. The letter referred to the 8 May 2015 directions hearing and set out a lengthy extract from the transcript of the hearing. The letter noted that there had been no response to the 12 May 2015 proposal. The letter then said:

Other than in respect to the transfer of the $3.2m we do not know of the past, or current funds held by Rawbin Finances.

As you know Mr Binetter is currently overseas and the departure authorisation requires him to return to Australia on or before 23 October 2015.

We have copied in Brown Wright Stein Lawyers on this letter and forwarded a copy to Mr Binetter.

77    Mr Mostafa submitted, in effect, that this letter was misleading in that it tended to suggest that the $7.122 million had not been transferred to Rawbin Finances. I do not accept this submission. The letter states that Speed & Stracey did not know the position, in circumstances where they were not acting for Rawbin Finances and Mr Binetter was overseas. There is no evidence that Speed & Stracey’s letter did not set out their knowledge accurately and complete.

78    Mr Mostafa sought to rely upon the fact that the Speed & Stracey letter was copied to BWS to support the complaint that the letter would cause the reader to believe that the $7.122 million had not been transferred to Rawbin Finances. I do not accept this submission either. Clearly enough, BWS (no doubt on instructions from Mr Binetter) was not cooperating with the liquidators. However, I do not accept that they should have concluded that the liquidators would or could have inferred from the Speed & Stracey letter that the $7.122 million had not been transferred to Rawbin Finances.

79    On 15 October 2015, the liquidators learned that Mr Binetter was scheduled to return to Australia on 16 October 2015.

80    By letter dated 22 October 2015, that is, the day after the interlocutory application was filed, AGS wrote to CCK stating that:

(a)    An amount of $8,081,380.71 was held in a trust account in the name of AGS (“$8.081 million”). This amount comprised the two telegraphic transfers on 8 September 2015, and interest on those amounts;

(b)    There was an agreement made between Andrew Binetter and the Commissioner of Taxation pursuant to which the Commissioner was required to return the funds to the entities which provided the security within seven days of Mr Binetter’s return to Australia;

(c)    On 20 October 2015, BWS requested that the funds be paid on 22 October 2015, that is the day of the first hearing of the interlocutory application.

81    The letter also stated that the ATO was holding an additional amount in respect of a refund due to another entity. This was a reference to the refund due to Kambala.

22 October 2015 hearing

82    Relevantly, Mr Williams SC on behalf of Mr Binetter, informed the Court that, since Mr Binetter’s 29 April 2015 affidavit, further funds totalling $7,122,377 were paid by Tamarama as foreshadowed in paragraph 29(g) of that affidavit.

Correspondence following the 22 October 2015 hearing

83    By letter dated 23 October 2015, that is after the first hearing of the interlocutory application, CCK wrote to Speed & Stracey. After a lengthy recitation of facts, the letter asserted:

22.    These matters clearly establish that:

22.1    despite the wording of paragraph 16 of the affidavit of Mr Binetter affirmed on 29 April 2015 the liquidators have always considered that any payment of funds by Tamarama Fresh Juices as suggested by paragraph 16 was not permitted under the freezing order, and specifically did not come within the exception in paragraph 11(d);

22.2    Further, and in any event, the liquidators considered that if such payment were proposed then proper notice ought be given in compliance with paragraph 11(d);

22.3    the letter to your firm of 7 May 2015 made these matters abundantly clear;

22.4    the proposal set out in your email of 12 May 2015 addressed only that ‘Rawbin Finance Pty Limited has agreed to transfer the $3,288,509.71 to Ligon 158 Pty Limited’;

22.5    the letter from Brown Wright Stein of 11 September 2015 made no mention of any payment by Tamarama Fresh Juices to Rawbin Finances, and stated that their understanding was that ‘more than $55M remains frozen’; and

22.6    The statement in your letter of 17 September 2015 that ‘other than in respect of the transfer of $3.2 million, we do not know if the past, or current funds held by Rawbin Finances’ clearly conveyed a set of circumstances which was incorrect. By that date, apparently, Rawbin Finances Pty Limited had been paid by your client, Tamarama Fresh Juices, an additional $7,122 million, (being an amount in addition to the $3.2 million which was the subject of our letter of 7 May 2015, the matters addressed before his Honour Justice Foster on 8 May 2015 and your email of 12 May 2015).

84    The letter went on to notify Speed & Stracey of the liquidators’ intention to apply to re-open the hearing of the interlocutory application and sought additional information.

85    As to the propositions set out above from CCK’s 23 October 2015 letter, I accept that each of 22.1 to 22.5 is correct. For the reasons given earlier, I do not accept proposition 22.6. There is no evidence that Speed & Stracey had any different knowledge from that set out in the 17 September 2015 letter.

86    By letter dated 27 October 2015, Speed & Stracey told CCK that the $7.122 million payment from Tamarama to Rawbin Finances had been made on 1 September 2015.

Submissions on behalf of Andrew Binetter

87    Mr Williams SC, who appeared with Mr Cook for Mr Binetter, contended that there was no principled basis upon which an order of the kind sought could be made, or would be made as a matter of discretion.

88    Concerning matters of fact and discretion, Mr Williams SC made the following points:

(1)    The proceeding is brought for the benefit of the Commissioner who is the sole creditor with the possible exception of a claim from a related entity which the liquidators do not appear to accept;

(2)    In August 2015, the ATO agreed to accept a portion of the funds frozen in this proceeding as security for Mr Binetter’s overseas travel. The liquidators consented to the arrangement;

(3)    In about September 2015, the ATO and Mr Binetter agreed to a similar arrangement to permit Mr Binetter to travel overseas again. On this occasion, the liquidators did not consent to the arrangement;

(4)    The Commissioner was aware of the sources of the funds provided as security in September 2015;

(5)    The only interest that the liquidators have in the funds over and above the Commissioner is for their fees, which are amply protected by the existing freezing order;

(6)    The liquidators were seeking to use Mr Binetter’s overseas travel as a “bargaining chip” to extract information to which they are not entitled;

(7)    There is no claim against any of the prospective respondents in the proceeding;

(8)    The proposal that Tamarama would pay Rawbin Finances was identified in Mr Binetter’s 29 April 2015 affidavit;

(9)    The issue of payments by Tamarama to Rawbin Finances was raised before Foster J on 8 May 2015, and Foster J said, in substance, that he would deal with an application in relation to the payments if and when one was made after the applicants had endeavoured to resolve the issue through correspondence;

(10)    The Court should infer from the available evidence that the payments to Rawbin Finances were affected by a corresponding liability, because of Mr Binetter’s evidence in his 11 March 2015 affidavit that none of his shareholdings had any material value;

(11)    No further undertaking as to damages has been proffered;

(12)    There is no evidence of dissipation. To the contrary, there is evidence of openness and dealings with the Commissioner with precision as to the source of funds provided as security;

(13)    A very substantial freezing order is already in place, albeit it does not cover the whole amount of any judgment if the applicants are totally successful.

89    I accept propositions (1) to (5) above, which I do not understand to be contentious. As to (3), counsel for the Commissioner highlighted that the Commissioner’s consent was given prior to a claim being asserted by the liquidator in respect of the funds.

90    I do not make a finding about proposition (6). The applicants are entitled to seek ancillary orders for the purpose of eliciting information relating to assets relevant to a freezing order (rule 7.33). In this case, the information was not sought pursuant to an order and it is not obvious that a Court would have ordered the provision of the information sought.

91    I accept propositions (7), (8) and (9) above, which are supported by the evidence.

92    I am not prepared to draw the inference in (10) above. Mr Binetter’s 11 March 2015 affidavit evidence was given in qualified terms, and there is no evidence to explain the disparity between his estimate of Ligon 158’s loan to Tamarama in that affidavit and the amount identified in the 29 April 2015 affidavit. Mr Binetter was available to give evidence of a corresponding liability and did not do so.

93    I accept propositions (11) and (13), which I do not understand to be contentious. As to (12), I accept that there is no evidence of dissipation and that the Commissioner knew, in September 2015 of the sources of the funds now sought to be frozen. However, the evidence of openness does not extend to an identification of those facts to the liquidators when they asked for information.

94    Mr Williams SC submitted that the Court would not find (or could not find) that the funds belong to any of the defendants. Nor could the Court find, and nor is it asserted, that the applicants in the proceeding have any claim to the funds.

95    Further, Mr Williams SC submitted that the applicants do not bring themselves within rule 7.35(5)(b). The evidence is to the contrary, namely that the payment was not a gift.

Consideration

96    The applicants did not ultimately identify a process under which either BINQLDL or Kambala may be obliged to disgorge assets or contribute toward satisfying a judgment against Andrew Binetter. They did not put a case that such a process might apply in relation to any judgment against Michael Binetter. Accordingly, I am not satisfied that the proposed order should be made against either BINQLDL or Kambala.

97    As to Rawbin Finances, I accept that there must be a prospect that, in the event of a judgment against Andrew Binetter in this proceeding, he will have insufficient funds to pay the judgment debt, leading to his bankruptcy and the appointment of a trustee in bankruptcy in the manner described by Palmer J in Audio Products. As judgment has been reserved, this is not a remote prospect. There was no evidence of the precise prejudice to Rawbin Finances if it continues to be deprived of the use of the funds currently frozen.

98    I accept that the applicants have delayed in seeking to freeze Rawbin Finances’ funds. On the other hand, the funds were not transferred to Rawbin Finances until 1 September 2015. Thereafter, they were not used for Rawbin Finances’ business activities. In the circumstances, I do not conclude that the applicants’ delay disentitles them from the relief sought against Rawbin Finances.

99    There is no evidence that would lead me to conclude that the present undertaking as to damages may be insufficient.

Conclusion

100    I will direct the parties to prepare orders reflecting my reasons above.

101    I will hear the parties on costs and on any exceptions which ought to apply to the freezing orders.

Associate:

Dated:    1 December 2015