This week's TGIF considers an application for a warrant authorising a liquidator to search for and seize property, books and records of a company in liquidation.
The liquidator's application was brought after extensive – and ultimately unsuccessful – attempts had been made by both him and his solicitor to obtain access to the company's records.
The defendant had earlier advised the liquidator's solicitor that the company's records and assets were located in storage lockers held in the defendant's mother's name at premises occupied by Blacktown Storage King. Following a verbal assurance that he would locate the keys and grant the liquidator access to the site, the defendant refused to respond to further communications.
Broadly speaking, s 530C of the Corporations Act 2001 (Cth) (the Act) gives the court the power to issue a warrant for search and seizure if it is satisfied that a person has concealed, removed or may destroy property of a company such that a liquidator will be prevented and/or delayed from taking it into their control.
As the property was said to be in a storage locker held in the defendant's mother's name, the Court gave particular consideration to whether the materials were "in the possession" of the defendant. Having regard to the definition of "possession" in s 9, as explained in s 86, that "a thing that is in a person's custody or under a person's control is in the person's possession", the court was satisfied that the books and records were relevantly in the defendant's possession.
Further, the Court was satisfied, on the basis of significant similarities with the facts in Whitemore Holdings Ltd (in liquidation)  FCA 806, that there had been a persistent pattern of non-cooperation and evasion sufficient to satisfy the requirements of s 530C. It ordered that a warrant be issued in substantially the form authorised in the case of Vartelas v Kyriakou  FCA 1489; that is, subject to a term that assistance be provided by ASIC and the Federal Police, as necessary.
The decision serves to reinforce the advantages of the broad powers conferred by s 530C to liquidators in circumstances where they are faced with uncooperative or unhelpful directors and officers of a company in liquidation.
That said, liquidators need to be mindful of the need to prove that all other avenues have been exhausted before making an application under s 530C, given the frequent emphasis placed by the Courts on the fact that orders under s 530C will ordinarily be "a remedy of last resort". Indeed, in this case, the fact that the defendant had already been convicted of an offence under s 530A for a failure to provide books and records to the liquidator appeared to be one of many factors in deciding whether a s 530C warrant was justified.
Although liquidators have not routinely struggled to establish the criteria in s 530C to justify the issue of a warrant, one area of significant judicial disagreement has been whether and what conditions should attach to the warrant. Courts have historically been divided between two differing schools of thought; namely, whether a number of conditions should routinely attach to such warrants or whether a more liberal approach should be adopted.
In this case, the Court was prepared to order a common form of warrant issued by the Federal Court, that is, the warrant included a direction that such assistance as is reasonably necessary from ASIC and the Australian Federal Police be provided.
Despite the historical division, Courts appear to be moving towards a more flexible approach where the imposition of conditions to s 530C warrants are assessed on a case-by-case basis. Liquidators seeking to have unfettered search and seize powers should make sure that this is specifically addressed in any application to the Court in order to ensure that the Court does not impose conditions that may in some way hinder their access to the books and records in the particular circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
|Chambers Asia Pacific Awards 2016 Winner
Client Service Award
|Employer of Choice for Gender Equality