FEDERAL COURT OF AUSTRALIA
LEILA BOUNAFEH-ABOU LAHOUD
DATE OF ORDER:
THE COURT ORDERS THAT:
1. The Applicants have leave to issue a subpoena to MMG Limited for the materials appearing in paragraphs 4, 11 and 14 of the draft subpoena provided to the Court on 5 April 2016 and with an additional paragraph in these terms:
‘Any document of MMG as a stand alone entity tending to show the DRC as a creditor of MMG on a non-group basis between 1 October 2017 to 30 November 2017’.
2. No order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
1 On 25 July 2017 a foreign arbitral award in favour of Mr and Mrs Lahoud against the Democratic Republic of Congo (‘DRC’) became a judgment of the Court: Lahoud v The Democratic Republic of Congo  FCA 982. The amount of the judgment debt is nearly $4 million and the DRC is the judgment debtor. A garnishee order against a mining company, MMG Limited (‘MMG’), was obtained on the basis that it owes mining royalties to the DRC. MMG has applied to set aside the garnishee order submitting that the mining royalties are due by one of its subsidiaries, MMG Kinsevere SARL (‘MMGK’) which has a separate legal personality to MMG and is, in any event, not present within the Commonwealth. That application is to be heard on 2 May 2018. In the meantime, the judgment creditors now seek to issue a subpoena addressed to MMG seeking various categories of documents. I was provided with a draft of the proposed subpoena on the present application to which it is that these reasons, where necessary, refer. Unusually, the question of whether leave should be granted to issue the subpoena was the subject of a contested hearing. The parties approached the matter on the basis that if the subpoena had been issued and would have been liable to be set aside, then it should not now be issued. This is, in the circumstances, a convenient way to proceed.
2 On 1 December 2017 MMG served a garnishee statement on Mr and Mrs Lahoud that no debt was due by MMG to the DRC. The gist of the statement was that the mining royalties due to the DRC related to the operation of a copper mine known as the Kinsevere mine. The statement asserts that the Kinsevere copper mine is conducted by MMGK, which is incorporated in the DRC. It is this entity which holds the mining lease from the DRC (‘Permis d’Exploitation No528’) and under cl 7(a) of which the obligation to pay mining royalties arises. It is said that the effect of cl 7(a) is that ‘MMG Kinsevere SARL pays royalties to DRC on its export of copper cathode from the country’. The statement concludes at para 4 in these terms:
‘4. MMG Kinsevere SARL pays royalties to DRC in DRC from its own funds. MMG does not pay any royalty to DRC on behalf of MMG Kinsevere SARL. MMG has not guaranteed the obligation of MMG Kinsevere SARL to DRC and has not otherwise undertaken any legal obligations to DRC.’
3 It seems likely, therefore, that the issue to be determined on 2 May 2018 when MMG’s application to set aside the garnishee order is to be heard, will be whether there was at the date of the issue of the notice a debt ‘due or accruing’ from MMG to the DRC (the relevant statutory precondition to the issue of the notice).
4 The solicitor for Mr and Mrs Lahoud has given some evidence which suggests that the law of the DRC requires MMGK to maintain an account outside the DRC for the purpose of collecting export receipts. Under DRC law the royalty becomes payable on export. DRC law is said also to require that 40% of the receipts in these accounts must be remitted to a local account in the DRC within 15 days.
5 Correspondence between the parties suggests that no such account is held in Australia.
6 I accept that Mr and Mrs Lahoud should be entitled to test the assertion that MMGK and MMG hold no such export receipt account in Australia. I also accept that they are entitled to test whether MMG owes royalties to the DRC but I do not accept that they are entitled to inquire into MMGK’s liability to the DRC which appears to have no relevance to the garnishee issues. Mr and Mrs Lahoud’s answer to that was to suggest that under DRC law the corporate veil might be pierced and MMGK’s liability be sheeted home to MMG.
7 That would require, however, some default by MMGK of its obligations to DRC and there is no suggestion that this has occurred. Consequently, there is no reason to be inquiring into whether MMGK owes DRC mining royalties.
8 This resolves the central issue between the parties. Dealing then with each paragraph of the proposed subpoena:
1. Financial statements (including balance sheets and profit and loss account statements) of MMG Kinsevere SARL in the period 1 January 2015 to 15 November 2017.
9 For the reasons I have given this has no relevance to any issue.
2. Source documentation forming the basis for or underlying the recording (in page 24 of the 2016 Annual Report of MMG Limited, an extracted copy of which is enclosed) that in the year to 31 December 2016, MMG Limited paid royalties of $16.9 million, as part of total production expenses, relating to the Kinsevere Mine.
10 A p 24 of this report a statement does appear that royalties of $16.9 million were a debit entry in the section of the report dealing with the Kinsevere mine. However, this is part of a discussion by management of the performance of the group as a whole and I do not think it can reasonably be read as saying anything about which entity in the group paid the royalties.
3. Source documentation underlying the representation (in a presentation published on MMG Limited’s website titled ‘MMG Kinsevere February 2016’, an extracted copy of which is enclosed) that MMG Limited acquired exploration and mining rights over eight tenements adjacent to the Kinsevere operation’.
11 Again, it is not reasonable to read this as other than a group statement.
4. Statements of account recording receipts of royalty payments deposited in the Treasury of the DRC from 1 January 2017 to 15 November 2017.
12 My interpretation of this is that what is being sought are receipts issued by DRC for royalty payments. If MMG holds such receipts or statements of account this may tend to show that MMG is the debtor rather than MMGK. I will allow this paragraph.
5. Any document recording any agreement, arrangement or understanding (current as at 15 November 2017) between MMG Limited and MMG Kinsevere SARL:
(a) accounting for export receipts from mining conducted in the Kinsevere mine in the DRC; and
(b) payment of royalties to the government of the DRC or its instrumentalities (including its Treasury).
13 I do not see how this throws light on the issues. Assuming at the highest that the parent company had agreed with the subsidiary to pay the royalties on its behalf, this would have no impact on the identity of DRC’s debtor. At best, it might advance the veil-piercing argument considered above, but that is not enough to make it relevant. I reject the paragraph.
6. Any documents (including entry from a public register) recording the directors of or MMG Kinsevere SARL as at 15 November 2017.
14 This could only be relevant to the veil-piercing argument which is not sufficient for relevance purposes.
7. Any documents (including entry from a public register) recording the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer of or MMG Kinsevere SARL as at 15 November 2017.
15 The same remark as to Category 6 applies.
8. Any documents recording current loans by MMG Limited to MMG Kinsevere SARL as at 15 November 2017.
16 The same remark as to Category 6 applies.
9. Any documents (including Constitution, or Articles of Association) recording the objects for the incorporation of or MMG Kinsevere SARL.
17 The same remark as to Category 6 applies.
10. Any minutes of meetings of MMG Limited in relation to the incorporation of or MMG Kinsevere SARL.
18 The same remark as to Category 6 applies.
11. Financial statements (including without limitation general ledgers) indicating payments paid or to be paid to the DRC in the period 1 October 2017 to 30 November 2017.
19 Such records of MMG would tend to prove that MMG is the debtor. I will allow this paragraph.
12. A list of MMG Limited’s creditors for the period 1 October 2017 to 30 November 2017.
20 I accept that if DRC is listed within the books and records of MMG (as a stand alone entity) this would assist Mr and Mrs Lahoud’s contentions. If it is merely a statement of the group’s position it will be useless. The position of other creditors is relevant. I would therefore allow ‘Any document of MMG as a stand alone entity tending to show the DRC as a creditor of MMG on a non-group basis between 1 October 2017 and 30 November 2017’.
13. Documents (including statements of account) indicating the financial source of payments of royalties to the Democratic Republic of Congo (“DRC”) referred to in paragraph 4 of the Garnishee’s Statement That No Debt Due or Accruing (“Garnishee’s Statement”) which is part of Annexure MB2 to the affidavit of Maxwell Thomas Bennett Bonnell (“Bonnell Affidavit”) affirmed on 14 December 2017, in the period 1 January 2017 to 30 November 2017.
21 I do not see the relevance of the source of the funds.
14. Any document recording the ownership or interest of MMG Kinsevere SARL in a mining lease referred to in paragraph 3 of the Garnishee's Statement which is part of Annexure MB2 to the Bonnell Affidavit.
22 Paragraph 3 reads:
‘3. A corporation related to MMG, MMG Kinsevere SARL (formerly known as AMCK Mining SPRL and later MMG Kinsevere SPRL), which is incorporated in DRC, operates the Kinsevere mine under Permis d’Exploitation No528 (a copy of which is annexed and marked “A”). Under clause 7(a) of its mining lease (or “contrat d’amodiation”), MMG Kinsevere SARL is required “to sustain all taxes, levies and fees due to the State as stated in the Mining Code”. A copy of an English language version of clause 7(a) of the contrat d’amodiation is annexed and marked “B”. An obligation to pay mining royalties is imposed upon MMG Kinsevere SARL by Articles 240 and 241 of the DRC Mining Code, and an English translation of those provisions is annexed and marked “C”. The effect of those documents, taken together, is that MMG Kinsevere SARL pays royalties to DRC on its exports of copper cathode from the country. Typically, these payments are made within a number of days of each shipment being made. MMG Kinsevere SARL is a separate corporation from MMG Limited, has no presence in Australia, and is not amenable to the jurisdiction of the Australian courts.’
23 It is relevant to know who the tenant under the lease is. I will allow this paragraph.
24 I therefore allow 4, 11, 12 as modified and 14. There should be no order as to costs.