Search and Seizure of Company’s Property, Books and Records by a Liquidator

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January 2019

Search and Seizure of Company’s Property, Books and Records by a Liquidator

Key Takeaways

  • A persistent pattern of non-cooperation and evasion of a person who is in possession of the company’s property or books is sufficient to satisfy the requirements in s 530C of the Corporation Act 2001 (Cth) (Act) and for the Court to issue warrant to search and seize company’s property or books.
  • The meaning of ‘possession’ within the s 9 of the Act is wide enough to include the company’s property and books held in a storage locker by the defendant’s mother. In other words, direct possession is not necessary and possession is a wider concept.

Overview of the Beattie v Gray’s Case

In the recent decision in the Federal Court of Australia on Beattie v Gray, in the matter of Control Rail Pty Limited (in liq) [2018] FCA 1524 , Justice Farrell granted an application for a warrant to search and seize property, books and records of Control Rail Pty Limited (in liq) (Company) located in storage lockers held in the defendant’s mother’s name.

The defendant had previously advised the applicant’s solicitor that he had received but not opened the letters and emails relating to the proceedings and that the books and assets of the Company were at storage lockers in his mother’s name.  Extensive attempts by both the Liquidator and his solicitor to obtain the books and records of the Company had been unsuccessful. The Liquidator, in the end, made the application to the Court to issue a warrant under s 530C of the Act.

The Court’s Decision

Justice Farrell granted the issue of the warrant to search and seize company books and records pursuant to s 530C of the Act.  Section 530C of the Act gives the Court the power to issue a warrant to search and seize company’s property or books if it is satisfied that a person has concealed, destroyed or removed such property or books that a Liquidator will be prevented or delayed from taking them into his/her control.

His Honour referred to Whitemore Holdings Ltd (in liquidation) [2004] FCA 806, which had significant similarities with the facts of this case, and was satisfied that a persistent pattern of non-cooperation and evasion is sufficient to meet the requirements of s 530C(1).  Accordingly, His Honour authorised the issue of a warrant substantially in the same form as in the case of Vartelas v Kyriakou [2009] FCA 1489, where assistance from ASIC and the Federal Police may be provided if necessary.   In his judgement, His Honour took into account the fact the defendant was convicted of contraventions of ss 475 and 530A of the Act and fined of $11,000 for failing to provide a report as to the affairs in relation to the Company and failing to provide the Company’s books and records to the Liquidator.

His Honour also took note of the requirements of s 530C(2) of the Act, that the warrant must relate to materials in the possession of the defendant having regards to the definition of ‘possession’ in s 9 of the Act.  Despite the fact that the Company’s property and books were contained in a storage locker in the name of the defendant’s mother, the Court was satisfied that such property and books are relevantly in the defendant’s possession within the meaning of s 9 of the Act.

Implication of the Decision

The decision reinforces the broad powers conferred by s 530C to the Court to issue a warrant in favour of a Liquidator who is faced with uncooperative or obstructive directors and officers of a company in liquidation.  Nevertheless, sufficient steps must be taken by a Liquidator to justify the issue of a warrant, which is a remedy of last resort.

Historically, Liquidators struggled to satisfy the criteria in s 530C to justify the issue of a warrant mainly because the Courts are divided on what conditions should attach to the warrant and whether a more liberal approach should be adopted.

Contact Us

If you need further information or assistance, contact Craig Higginbotham or Catherine Fox on 1300 88 33 92.

Craig Higginbotham and Richen Mojica

29 January 2019

By | 2019-02-01T16:25:21+11:00 January 29th, 2019|Business, Insolvency|Comments Off on Search and Seizure of Company’s Property, Books and Records by a Liquidator