The Liquidator’s Toolbox: A reminder of the power to search and seize

Articles Written by Ben Renfrey (Partner), Sara Gaertner (Senior Associate), Claudia Boccaccio

In Carrello,[1] the Federal Court granted a warrant under section 530C of the Corporations Act 2001 (Cth) (the Act) allowing the liquidator of Drilling Australia Pty Ltd (the Company) to search and seize property, books and records located in storage containers belonging to the Company.

The decision serves as a reminder to liquidators about the potential availability of warrants to search for and seize property, books and records when dealing with difficult directors.

Background

The Company was placed in liquidation by order of the Supreme Court of Western Australia on the basis of a deadlock as to its control.  Despite requests by the liquidator, the Company’s director failed to deliver up assets, books and information pertaining to the Company, and it became clear that there were assets of the Company unaccounted for.

The liquidator subsequently applied for an order pursuant to section 530C of the Act for the Court to issue a warrant authorising the liquidator to search and seize property, books and records of the Company located in certain identified storage containers and premises.

Decision

The Court firstly acknowledged that the section 530C warrant is ordinarily ‘a remedy of last resort[2] and is typically granted where there has been a persistent pattern of non-cooperation and evasion.[3]

The issue of the requested warrant was authorised on the basis that the Court was satisfied that:

  • the director had concealed or removed property of the Company, with the result that the taking of the property into the custody of the Liquidator had been prevented or delayed.  Relevant factors in deciding whether concealment or removal has occurred include:
    • refusal to comply with liquidators’ requests to deliver up books and records;[4]
    • transfer of assets to, and continued use of the assets by, related companies or entities without proper accounting;[5] and
    • moving of assets, books or records from one place to another;[6]
  • the books, records and assets of the Company were under the director’s control. The director (although in jail on unrelated charges) had given instructions about what to do with the property and was therefore deemed to have ‘possession’ of it, despite lacking physical custody.[7]

Key takeaways

Liquidators should be mindful of their broad powers of search and seizure provided by section 530C of the Act when faced with uncooperative and evasive directors.

Although such warrants should be a last resort, it is common for the criteria to be satisfied if the liquidator is able to show their reasonable efforts to obtain the property, books and records, and the obstruction or evasive action taken by company officers preventing access. It is also useful to bear in mind that property does not need to be registered to a person's name or in their custody for them to be in possession of it; control over the property will suffice. [8]


[1] Carrello (Liquidator), in the matter of Drilling Australia Pty Ltd (in liq) [2019] FCA 1563.

[2] [2019] FCA 1563, [6].

[3] [2019] FCA 1563, [7].

[4] Vartelas v Kyriakou [2009] FCA 1489, [6].

[5] Crisp, in the matter of Buchanan Group Holdings Pty Ltd v Iliopoulos [2011] FCA 1521, [11].

[6] Crisp, in the matter of Buchanan Group Holdings Pty Ltd v Iliopoulos [2011] FCA 1521, [13].

[7] See the definition of ‘possession’ in the Act by reference to s 86, which explains “A thing that is in a person's custody or under a person's control is in the person's possession.”

[8] Carrello (Liquidator), in the matter of Drilling Australia Pty Ltd (in liq) [2019] FCA 1563 at [9].

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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