Australia's Residential Builder Pty Ltd v Wiederstein [2014] VSC 430 (9 September 2014)

AUSTRALIA’S RESIDENTIAL BUILDER PTY LTD (ACN 136 733 732) (in liquidation)	First Plaintiff

and

RICHARD TRYGVE ROHRT in his capacity as joint and several liquidator of AUSTRALIA’S RESIDENTIAL BUILDER PTY LTD (ACN 136 733 732) (in liquidation)	Second Plaintiff

v

ROBERT WIEDERSTEIN	First Defendant

and

RAYMOND FRANCIS DE WEERD	Second Defendant

and

BRONWYN WIEDERSTEIN	Third Defendant

APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr I Upjohn	Thomas Egan Lawyers

For the First and Second Defendants	No appearance

For the Third Defendant	Ms K Knights	Champions Lawyers

1 The first plaintiff is a company in liquidation (‘the company’). The second plaintiff is one of two joint and several liquidators of the company, having been appointed on 11 September 2013 pursuant to a creditors’ voluntary winding up.[1] The originating process filed on 10 July 2014 makes insolvent trading claims against the company’s former directors, the first and second defendants, and voidable transaction claims against the third defendant. The first and third defendants are husband and wife.

2 On 17 July 2014, the plaintiffs sought ex parte freezing orders against the assets of the first and third defendants, search orders and a warrant, pursuant to s 530C of the Corporations Act 2001 (‘the Corporations Act’), against the first and third defendants to search for and seize the company’s books and records at their home at 63 Victoria Street, Williamstown. The applications were supported by an affidavit of the second plaintiff sworn 16 July 2014.

3 On that day, Ginnane J in the Practice Court made freezing orders against the first and third defendant. His Honour adjourned the applications for search orders and a warrant due to an application made by the solicitor for the first defendant. The solicitor relied on a letter dated 15 July 2014 from the first defendant’s medical practitioner to the effect that the first defendant was incapable at that time of giving instructions until the next month because his client had an unspecified medical condition.

4 On the first return date on 22 July 2014, consent orders were made extending the return date to 5 August 2014, then to 14 August 2014. On that day before me in the Practice Court it was clear that the matter would take more than half a day to hear and the parties agreed to a further return date of 27 August 2014. The various consent orders related, amongst other matters, to a timetable for the filing of affidavits by the parties and other interlocutory steps in the proceeding.

5 On 5 August 2014, the first defendant was made bankrupt on his own petition. The effect of the bankruptcy of the first defendant is that his divisible property vests in his trustees in bankruptcy and his non divisible property remains with him. The bankruptcy of the first defendant does not prevent search orders and a warrant being made against the first defendant.

6 On 14 August 2014, the plaintiffs gave notice to the first defendant and his trustees in bankruptcy of the hearing, including that the application for a search order and warrant are continued against him personally. The trustees in bankruptcy informed the plaintiffs they would not attend the hearing on 27 August 2014.

7 Before me on 27 August 2014, the plaintiffs sought the continuation of and an increase of the amount in the freezing orders against the third defendant, as well as search orders and a warrant against the first and third defendant. Since the making of the ex parte orders, detailed and voluminous affidavits have been filed in the proceeding.

8 The third defendant resisted the plaintiffs’ application for the continuation and increase in the amount of the freezing order and the making of a search order and a warrant on the basis that there is no arguable case against her.

9 After hearing the submissions of the parties, I indicated I would reserve my decision and deliver my reasons the following week. For the convenience of the parties, the matter was further adjourned until today for the delivery of judgment.

10 In my view, the evidence supports the making of all the orders sought by the plaintiffs, including that the amount of the freezing order against the third defendant be increased to $1,227,920.65. As the matter is of some urgency, the following written reasons are the reasons for my decision.

11 Before turning to the merits of the evidence in the proceeding, it should be noted that the third defendant submitted that she would suffer prejudice if the orders sought by the plaintiffs were made against her. I consider that any prejudice to her has been adequately addressed by the plaintiffs for the reasons now set out.

12 The third defendant submitted that if the freezing order was continued against her, she will be restrained from selling her property in 63 Victoria Street, Williamstown and buying a modest family home, or alternatively, renting accommodation following a sale of her Williamstown property. In addition, she wished to have sufficient funds to pay for any improvements on her other property at 45 Osborne Street, Ocean Grove so that she could achieve the best price for it. She was also concerned that she may not have sufficient funds to pay legal fees required for representation in the multiple proceedings involving one or other of the plaintiffs.

13 The third defendant also submitted that in the court exercising its discretion as to the continuation of the freezing order, the increase of the freezing orders and the making of the search orders generally, regard should be given to the weakness of the case against her, the prejudice to her of the freezing order continuing and the lack of candour of the plaintiffs in making the ex parte application. In respect of the latter point, the third defendant referred to four matters whereby she said the plaintiffs had made the same claim against other entities or persons. She submitted that, in those circumstances, she ought to be released from the freezing order, the search order ought not to be made against her and her properties at 63 Victoria Street, Williamstown, 45 Osborne Street, Ocean Grove and 43 Osborne Street, Ocean Grove together with her units or interests in the Wiederstein Superannuation Fund should be released from the freezing order.

14 The concerns of the third defendant regarding a sale of 63 Victoria Street and entering into a lease of another residence or purchasing a new family home were adequately addressed by the plaintiffs, who indicated that they did not object to the third defendant realising her properties at 63 Victoria Street, Williamstown and 43 Osborne Street, Ocean Grove and they do not object to the purchase of a substitute family home by the third defendant or the renting of a residence in the meantime, on the condition that the third defendant informs the plaintiffs and the Court in writing, giving two days notice, of any proposed contract of sale and so long as the freezing order applies to the surplus proceeds of sale, subject to appropriate ‘carve-outs’ for living expenses and legal expenses presently contained in the freezing order.

15 The plaintiffs have also addressed any prejudice to the third defendant by agreeing to proper ‘carve outs’ for her benefit in the orders already made. The plaintiffs have also agreed to the third defendant’s request for an increase in the amount of the legal expenses from $40,000 to $65,000. In addition, the plaintiffs have said they will consider the ongoing maintenance of these orders with further appropriate carve outs as need be. This is a reasonable and practical attitude.

16 The third defendant also has the benefit of approaching the court at any time pursuant to liberty to apply. There is a timetable in place for the interlocutory steps to be undertaken by the parties providing for defences and particulars on 8 and 29 September, a reply by 29 September and discovery by the end of October.[2] The anticipated end date of the interlocutory steps is December 2014. It is unlikely that the third defendant would be in a position to sell either property within that time in any case. There is no prejudice in the orders remaining in place for that period, and I am not satisfied there is any real prejudice in the orders remaining in place until the hearing of the proceeding, provided a sensible approach is adopted by both parties.

17 Finally, any prejudice claimed by the third defendant is outweighed by the prejudice to the plaintiffs in the event they face an ‘empty vessel’ after very substantial efforts and expenditure in attempting to recover moneys for the benefit of the company as a whole.

18 The principles in respect of freezing orders were recently set out by Ginnane J in Rail Plus Pty Ltd v Hee-Meng Ng,[3] and need not be repeated. In order to maintain a successful application for a freezing order, the plaintiffs must establish:

(a) a good arguable case for the insolvent trading claims and for the claims that certain transactions are voidable as unreasonable director related transactions; and

(b) a danger that a prospective judgment of the Court will be wholly or partially unsatisfied because of the removal or disposition of assets by the first and third defendants.^[4]

19 In respect of the claims against the third defendant, the plaintiffs elucidated three claims, set out partly in a proposed amended statement of claim dated 19 August 2014, as well as in their submissions.

20 The three claims comprise a total sum of $1,227,920.65 and can be briefly described as follows:

(a) it is alleged that the third defendant received the sum of $434,500 (subject to a dispute about the sum of $2,500) between February and May 2013 (‘the $434,500 claim’). In its statement of claim, the plaintiffs allege that these payments are void against the liquidator because they constitute uncommercial transactions and/or unreasonable director related transactions and are, therefore, voidable under s 588FDA of the Corporations Act. In their proposed amended statement of claim dated 19 August 2014, the plaintiffs allege an alternative claim that the payments are void against the liquidator because they constitute unfair preferences. The alternative claim is raised because of matters contained in the affidavits sworn 1 and 8 August 2014 by the third defendant where she deposed that these were monies repaid to her by ‘my’ company because the company had borrowed monies from her from a home loan account which appears to be a joint account of the first and third defendants, alternatively, her account of which the first defendant was a signatory;

(b) it is alleged that the company paid sums totalling $41,338.96 to building suppliers in relation to renovations or improvements to the third defendant’s home at 63 Victoria Street, Williamstown (‘the $41,338 claim’). The plaintiffs allege a claim for monies had and received or that they are entitled to restitution of those sums;

(c) the sum of $752,081.69 is not pleaded in the proposed amended statement of claim but is a potential claim arising from a guarantee given to the National Australia Bank (‘the NAB’) by a company called Wiederstein Corporation Pty Ltd^[5] (‘the $752,000 claim’). The plaintiffs say the company has paid the sum of $51,628.16 to the NAB under the guarantee and otherwise it owes the balance of approximately $700,000 to the NAB pursuant to the guarantee for the million dollar borrowing by Wiederstein Corporation Pty Ltd. It is alleged that the guarantee was possibly agreed to at a time when the third defendant was a director of that company. The $752,081.69 claim has not been included in the plaintiffs’ proposed amended statement of claim because the plaintiffs need to in investigate in more detail the circumstances surrounding the guarantee.

21 Before Ginnane J, the plaintiffs relied upon the following evidence contained in the affidavit of the second plaintiff sworn 16 July 2014:

(a) the company has been insolvent since at least 31 December 2011 with the principal cause of the insolvency being the increasing of related party debts of between $5.2 and $6.8 million. The related parties are the defendants;

(b) there is ample evidence of ‘phoenix’ transactions, in particular, the demise of Wiederstein Corporation Pty Ltd and the rise of Wiederstein Corporation No 1 Pty Ltd;

(c) the first defendant is an experienced accountant and registered CPA who has established a multi-layered cross-holding and cross-collateralised corporate structure which is incomprehensible without close scrutiny;

(d) the first defendant, who is an authorised sole signatory on the company’s bank accounts, has demonstrated a willingness to omit or disguise related party transactions and indebtedness with the effect that the company was left ‘holding the baby’;

(e) the first defendant has made misrepresentations to the State Revenue Office regarding the value of sales of property upon which the company had built homes for a related company, ARB Developments Pty Ltd, which had the effect of avoiding stamp duty;

(f) the company did not lodge any income tax returns after 1 June 2010 or declare or pay tax on its own trading profits or its building operations;

(g) there are missing cash receipts and other accounting documents, in particular, the land clearing account file, which disappeared from the internal accountant’s desk shortly before the company was placed into voluntary administration;

(h) it is clear there is a second set of company books, kept separate from the company’s main accounting system as operated by the internal accountant and her staff. This second set of accounts is found in spreadsheets produced by the first defendant to external accountants, Morrows, to the company’s bank, being National Australia Bank, and to the company’s domestic building warranty insurer;

(i) In the last three full years of operation, the company turned over approximately $20 million, and booked over $2 million in profits, and yet ran up a debt with creditors of almost $10 million claimed to be due in the winding up. This ‘egregious abnormality’ required an explanation.

22 Further affidavits have been filed on behalf of the plaintiffs to rebut the matters set out in affidavits filed by the first and third defendant dated 1 and 8 August 2014. In his affidavit sworn 12 August 2014, the second plaintiff identifies what he describes as a number of falsehoods by the first defendant, upon which the third defendant relies, and which are contradicted by the objective evidence known thus far by the plaintiffs. He also set out many important matters that he says the first and third defendants have failed to explain and have not been included in their filed affidavits, including a failure to address the ‘gross error check’ referred to above which they say that the first defendant should be able to do considering his expertise and role in the company. He deposed that the affidavits do not answer many of the claims made by the plaintiffs and their concerns that the first and third defendants have been dissipating the company’s assets and are concealing or removing its books and records in an endeavour to frustrate the liquidators’ work in getting in the company’s assets.

23 I now set out the substance of the parties submissions in respect of each of these three claims made by the plaintiffs against the third defendant.

24 Relying on exhibit ‘BW-2’ to the affidavit of the third defendant sworn 1 August 2014 (and also exhibited to an affidavit of the first defendant sworn 1 August 2014), it was submitted that this summary prepared by the first defendant from the relevant bank statements with his handwritten changes on them, established that $488,800 was advanced from the home loan account (being the mortgage account for the Victoria Street, Williamstown property in the name of the first defendant but jointly operated with the second defendant) and paid via a linked account to the Wiederstein Family Trust and then to the company. The summary then shows that the company then in turn paid funds of $434,500 back into the home loan account.

25 The third defendant deposed that the payments were made to the company as it needed urgent short term finance. The third defendant also said that a property owned by her at 45 Osborne Street, Ocean Grove was acquired with external finance from the NAB.

26 In addition, it was said the third defendant had no knowledge of the payments, that the books and records of the company do not mention the third defendant and the third defendant was not a director of the company at any stage and was never on its payroll.

27 It was submitted that this led to the conclusion that the company had benefited from the loans from the third defendant’s home loan account because it enabled it to meet its obligations as well as benefitting from accessing the total sum of $488,800 and repaying only $434,500. Having regard to the benefits and detriments to the company, the loans from the home loan account were said to be plainly beneficial to the company and the detriment in repaying less than the total loans is insufficient to cause the repayments to constitute an uncommercial transaction or an unreasonable director related benefit. In addition, it was submitted that because there was no direct debtor/creditor relationship between the company and the third defendant, there could not be said to be an unfair preference.

28 The second plaintiff contended that by an examination of the bank statements of Wiederstein Corporation Pty Ltd, it is established that between about February and July 2013, a sum of approximately $435,000 was drawn by the third defendant from her home loan account and paid to Wiederstein Corporation Pty Ltd, as trustee of the Wiederstein Family Trust, not the company. Thus, the source of the $488,800 relied upon by the first and third defendants as coming into the company was Wiederstein Corporation Pty Ltd. In addition, the books and records of the company do not disclose any moneys having been received from the third defendant.

29 The plaintiffs also allege that exhibit ‘BW-2’ relied on by the third defendant is misleading and selective in that it does not mention the debit loan account balance of $419,845.63 owing by Wiederstein Corporation Pty Ltd to the company as at 1 February 2013 nor does it mention the debit loan account of the first defendant.

30 Further, the second plaintiff contends that it is not true for the third defendant to assert as she does that her property at 45 Osborne Street, Ocean Grove was acquired with external finance from the NAB because a substantial proportion of the funds were lent by Wiederstein Corporation Pty Ltd to her.

31 In addition, after the acquisition of 63 Victoria Street, Williamstown, mortgage repayments totalling $434,500 were made by the company between February and July 2013. At the same time, Wiederstein Corporation Pty Ltd was indebted to the company in very substantial sums.

32 The plaintiffs also submitted that the third defendant’s knowledge of the company’s insolvency is irrelevant if the $434,500 claim is voidable as an unreasonable director related transaction pursuant to s 588FDA of the Corporations Act, and that alternatively, even if the third defendant succeeds in showing the company owed her $488,000, then the payments totalling $434,500 would be unfair preferences pursuant to s 588FA of the Corporations Act.

33 In my view, the plaintiffs have established an arguable case against the third defendant on the $434,500 claim. The strength of the third defendant’s case relies on re-constructed bank statements by the first defendant and attempts to deal with a period of time in isolation from other activities in the corporate activities of the company and her own financial activities. In the context of the company’s business and its activities with other companies or trusts within the Wiederstein structure, it is simplistic to calculate the amount of funds that were paid in and then out of the company account. It may turn out, on a proper analysis of the evidence led at trial, that the third defendant’s explanation of the relevant transactions is correct. But the plaintiff’s explanation remains equally arguable.

34 The third defendant relied upon an analysis by the first defendant in his affidavit sworn 19 August 2014 to say that only $22,017.15 of the claim is referable to building materials. Insofar as the plaintiffs claim to trace the amount of $41,338 to the third defendant’s property at Victoria Street, Williamstown, the analysis by the first defendant purports to demonstrate that a portion is for legal fees, a portion is for expert reports and, as far as he can tell, only $22,017.15 is for building materials.

35 The first defendant also contended that, although he was a director of the company and its chief financial officer, he delegated the task of doing the accounts to the company’s in-house accountant who, he claims, incorrectly posted these amounts as a loan from the first defendant when it should have been posted to another company called ARB Developments Pty Ltd. He also says that the funds are not described as advances to the third defendant.

36 The first defendant deposed that the sum of $38,000 in the company ledger is also included in the amount of $442,437.01 claimed by the plaintiffs against the first defendant on the basis of moneys had and received in the proposed amended statement of claim.

37 The plaintiffs say there is clearly an arguable case about the $41,338.96 claim as a result of the disputes contained in the affidavit of the first defendant sworn 19 August 2014. They submit that it is arguable on the evidence that the funds were paid by the company for the supply of materials or services concerning renovations to the third defendant’s house that justify the claim for moneys had and received.

38 The plaintiffs also submitted that it is irrelevant whether they were posted by the in-house accountant onto the first defendant’s loan account or that the company may have claimed them as part of its global claim against the first defendant. If the first defendant were not bankrupt, the claim against him would in the usual course be amended but now that he is bankrupt and the claim is stayed against him, the company is unable to take any step in that proceeding.

39 The defendants may wish to dispute, on the evidence, the amount paid for services rendered, or money had and received, and may wish to dispute the amount that is traceable into the Victoria Street, Williamstown property, if that is the remedy ultimately sought. That is a matter for trial. It is apparent to me on what has been produced that the evidence may support a finding that the funds were paid by the company for the supply of materials or services concerning renovations to the third defendant’s house and the plaintiffs have therefore established an arguable case on the $41,338.96 claim.

40 The $752,081.69 claim is for money for which the company became liable to the National Australia Bank (‘the NAB’) as a consequence of it guaranteeing Wiederstein Corporation Pty Ltd’s debt to the NAB. The third defendant says that in 2006 the NAB made a loan, known as the NAB Jackass Flat Debt, of $1 million to Wiederstein Corporation Pty Ltd. The whole of the loan for the NAB Jackass Flat Debt was drawn down by January 2009. The first defendant did not become a director of the company until 1 February 2010. This means the loan for the NAB Jackass Flat Debt was fully drawn down by Wiederstein Corporation Pty Ltd before the first defendant had any involvement with the company.

41 The first defendant deposed as to his belief that as part of the NAB’s internal administration, it transferred the amount owing for the NAB Jackass Flat Debt from one bank account to another and this explains the bank statements relied upon by the second plaintiff in his affidavit sworn 12 August 2014. He says there was no further advance of moneys in respect of the NAB Jackass Flat Debt on that date.

42 The third defendant submitted that the $752,081.69 claim is not a claim for which she could be held liable because she has never been a director of the company, has never received $1 million loan for the NAB Jackass Flat Debt and was not aware the company had guaranteed the payment of the NAB Jackass Flat Debt until after the commencement of these proceedings.

43 The plaintiffs say the third defendant was a director of Wiederstein Corporation Pty Ltd at the time of the draw down of the loan, but resigned six weeks later on 12 July 2011. Some two months later, on 22 September 2011, the company provided a guarantee of such indebtedness. The plaintiffs want to investigate the circumstances of the provision of the guarantee by the company. They say it seems likely that it was required by the NAB and agreed to by the first and third defendants at the time the loan was negotiated as part of the NAB security requirements. If that is the case, the third defendant may be liable to the company for knowing receipt or knowing assistance in breach of director’s duties by the first defendant.

44 At present, the plaintiffs do not have sufficient evidence and do not allege it in their statement of claim however, they contend that the circumstances as outlined justify the increase in the freezing order against the third defendant pending their further investigations of both the NAB and the company’s records once the first and third defendants comply with the search order and warrant.

45 In my view, the result of the investigation by the plaintiffs establishes that further investigations should continue in respect of this claim as the circumstances appear to be that the third defendant was a director of the Wiederstein Corporation Pty Ltd when the loan was drawn down. This means that the freezing order ought be increased to cover the amount of the $752,081.69 claim pending such further investigations. Those investigations should be conducted expeditiously and, provided the reasonable and practicable attitude adopted by the plaintiffs continues, can be conducted without risk of any serious or substantial prejudice to the defendants. Once the further investigations have been completed, the parties are able to reconsider the quantum of the freezing order.

46 The affidavit evidence filed by the first and third defendants does not answer the many claims and concerns of the plaintiffs in respect of the risk of removal or dissipation of assets. The plaintiffs have clearly set out their claims against the third defendant and she has had an opportunity to provide answers to the claims. In my view, the affidavit evidence filed by the first and third defendant does not answer the many claims made by the plaintiffs. In particular, the allegations made concern a systematic or repeated removal of assets from the company by the first and third defendants, in a dishonest fashion, and if true, would give rise to the suspicion that the defendants are engaged in concealing or removing the company’s books and records in an endeavour to frustrate the liquidators’ work in getting in the company’s assets. I am satisfied that the plaintiffs have established there is a danger that a prospective judgment will be wholly or partially unsatisfied because of the removal or dissipation of assets by the first and third defendants.

47 In my view, the evidence establishes that the freezing order against the third defendant ought be continued and increased to the sum of $1,227,920.65.

(b) serious potential or actual loss or damage to the applicants if the search order is not made;

(c) sufficient evidence that the first defendant possesses important evidentiary material and the real possibility that he may destroy such material or cause it to become available for use in the proceeding.^[6]

(a) an Apple Mac laptop and six iPad devices that have not been located despite extensive searches;

50 The plaintiffs propose that the search order is to be executed in the presence of a named independent solicitor who is an accredited commercial law specialist under the Law Institute of Victoria Specialist Accreditation Scheme and has experience acting as an independent solicitor in the execution of Anton Pillar orders.[7]

51 Although the plaintiffs are no longer pursuing the first defendant in the proceeding because of his bankruptcy, they are not precluded from pursuing him so far as the search order is concerned.

52 In support of establishing the requirements for a search order, the plaintiffs say the first defendant was the financial controller of the company, together with the second defendant, and Graeme Varcoe (who has made a personal insolvency agreement under the Bankruptcy Act 1966) and they described themselves as partners.

53 The first defendant looked after the finances of the company from 1 February 201 until 31 May 2013, the second defendant looked after design and Mr Varcoe looked after the building operations. The company employed an in-house accountant who has co-operated with the second plaintiff in his liquidation of the company. She has disclosed that there are missing accounts, in particular, a file called the ‘land clearing account file’, that disappeared from her desk shortly before the company was placed into external administration. According to the in-house accountant, the land clearing account file was an unreconciled hard copy folder of the company’s interests in land and is the only ready record of particular transactions prior to final settlement of about 400,000 land contracts at the time of the appointment of the external administrators. The plaintiffs have not located the land clearing account file in their searches to date.

54 The second plaintiff deposed as to his belief that there is a second set of company books. He sets out in some detail as to the basis of his belief. The company’s external accountant, Morrows, produced or submitted to the NAB and the company’s domestic building warranty insurer documents that show there must have been another set of books because they do not ‘square’ with the books and records located by the plaintiffs. The second defendant says the separate set of books or records have been generated separately on a spread sheet or a series of spread sheets. These accounts were signed off by the first defendant and they bear no resemblance to the financial position represented in the books and records of the company. The digital spread sheets constructed by the first defendant were not on the company’s computer server at the time of the liquidators’ appointment, the conversion of data from trial balance to profit and loss and balance sheets and the form that the first defendant has signed off could only have been constructed on a spread sheet which has not been disclosed to the liquidators.

55 The second plaintiff also deposed that there are computers and devices upon which the company’s records are present. There is an Apple Mac laptop that the plaintiffs believe was operated by the first defendant as his company computer. The packaging for the laptop was found in the company’s computer server room as well as six iPads. The second plaintiff refers to extensive enquiries that have been made concerning these items and they have not been located.

56 The first defendant deposed that he does not have anything that belongs to the companies, either the computer or computer records, but the plaintiffs say that in the circumstances as deposed to by them, they do not believe him.

57 The contents of the rooftop of the third defendant’s residence at 63 Victoria Street Williamstown was the subject of competing affidavit evidence. Mr Brian Wallis, an electrician whose company BMW Electrical Service Pty Ltd is a creditor in the liquidation, observed the rooftop space in 2012. He gained access through a manhole, the only access point. He deposed in his affidavit sworn 4 August 2014 that:

58 Mr Michael Champion, the solicitor for the third defendant, inspected the rooftop on 19 July 2014. He deposed that he did not see any files when he inspected the roof space at the property but he did see an electrical cabinet that he opened and inspected. He did not find a computer back up system or a computer server or anything that could record electronic data but did find two rows of patch panels attached to computer cables, some pages of installation and instructions for patch panels as well as small plastic bags containing screws and the like.

59 Mr Champion deposed to an alternative explanation of the items in the roof top of the house asserting that it was not a computer server but an electrical cabinet left in the roof top and it was left there by the former owner of the property, giving reasons for reaching these conclusion. Mr Champion then deposed that he did an internet search of the previous registered proprietor of the property and of the Clipsal system website that showed the previous registered proprietor to be a Clipsal approved installer. In addition, the third defendant relied on the evidence of the first defendant to the effect that, to the best of his knowledge, there has never been a computer back up system, including a computer server, or any paperwork of the company contained within the roof space of the third defendant’s residence, where he also lives.

60 Mr Wallis was invited by Mr Champion to swear an affidavit to the same effect as Mr Champion’s affidavit, but declined to do so on the basis that it was not accurate and was in some instances incorrect.

61 The first defendant made a general denial of there being a separate set of books and records of the company.

62 The third defendant submitted that having regard to the weakness of the case against her, a search order ought not be made against her.

63 The evidence supports the existence of a second set of books for the company, that there are missing files and accounts as well as a missing laptop and iPads. Insofar as there are competing versions concerning any items in the rooftop of the property at 63 Victoria Street, Williamstown, third defendant, the evidence of Mr Wallis is more persuasive in that he was clear on what he saw in the rooftop and understood what he saw. In particular, as an electrician, he denied that the cabinet he observed was an electrical cabinet, and insisted that it was a computer cabinet. Although it may be items were removed or installed in the rooftop in between when Mr Wallis observed it and when Mr Champion observed it, to the extent that their accounts conflict, I prefer Mr Wallis’ evidence to that of Mr Champion. There was also no evidence from the third defendant as to any attempts to contact the former owner of the property to verify what his researches revealed.

64 In my view, the evidence establishes the requirements for the making of search orders against the first and third defendants in that they are persons who may have concealed or removed the property of the company or have concealed or removed the books and records of the company. There is also sufficient evidence that the first defendant possesses important evidentiary material and there is a real possibility that he may destroy that material or it will become unavailable for use in the proceeding. If the search order is not made, the plaintiffs will suffer serious potential or actual loss and damage.

65 The plaintiffs seek a warrant, pursuant to s 530C of the Corporations Act, to search for and seize the listed items, this being another basis upon which to do so. They contend that the liquidation of the company is being hindered as a result of a first defendant’s concealment or removal of the company’s books and records.

66 Notices pursuant to ss 530A and 530B of the Corporations Act were issued to the first defendant in November and December 2013 and he has ignored them. Section 530A requires the officers, which include directors of the company, to assist a liquidator. Section 530B gives the liquidator a right to the company’s books. If notices pursuant to those sections are served on an officer of the company and are not complied with, the Court is empowered under s 530C to issue a warrant authorising the search and seizure of property where the books and records or company property are believed to be.

67 As with the search order, the bankruptcy of the first defendant does not preclude the plaintiffs from pursuing him so far as a warrant is concerned.

68 The plaintiffs also seek a warrant against the third defendant as the owner and occupier of the property at 63 Victoria Street, Williamstown, as they believe for the same reasons relied upon in respect of the search orders, that there are company records and company computers and devices that contain financial information of the company located at the property and she has concealed or removed them.

69 The plaintiffs have established the non-compliance by the first defendant with the notices under s 530A and s 530B of the Corporations Act. The evidence relied upon by the plaintiffs to support the search orders is relied upon to support the issue of a warrant.

70 In my view, for the reasons given to support the issue of the search orders, there are strong grounds to support the issue of warrant against the first and third defendants.

71 The plaintiffs have produced proposed orders for the freezing orders, the search orders and the warrant and, subject to any further submissions, I will make those orders as well as any further procedural orders that are required to be made.

JUDGE:	McMillan J
WHERE HELD:	Melbourne
DATE OF HEARING:	27 August 2014
DATE OF JUDGMENT:	9 September 2014
CASE MAY BE CITED AS:	Australia’s Residential Builder Pty Ltd v Wiederstein
MEDIUM NEUTRAL CITATION:	[2014] VSC 430

Supreme Court of Victoria

Australia's Residential Builder Pty Ltd v Wiederstein [2014] VSC 430 (9 September 2014)