Allen v CGI Holdings Pty Ltd (No. 3) [2022] QDC 133

DISTRICT COURT OF QUEENSLAND CITATION: Allen v CGI Holdings Pty Ltd (No. 3) [2022] QDC 133 PARTIES: REECE JUSTIN ALLEN (Plaintiff) v CGI HOLDINGS PTY LTD ACN 156 152 359 (Defendant) FILE NO: 1465/21 DIVISION: Civil PROCEEDING: Application (ex parte) ORIGINATING COURT: Brisbane District Court DELIVERED ON: 1 June 2022 DELIVERED AT: Brisbane (ex tempore) HEARING DATE: 1 June 2022 JUDGE: Porter QC DCJ ORDERS: 1. The order of the Court dated 20 September 2021, staying the Enforcement Warrant - Seizure and Sale issued on 12 August 2021, in relation to the 155 Ordinary Shares in CGI Kingaroy Pty Ltd (ACN 156 607 555) and the 120 Ordinary Shares in CGI Water Pty Ltd (ACN 166 625 412) (the Enforcement Warrant), be lifted. 2. The Court declares that: a. The conditions stated in Order 2 of the Orders of the Court dated 2 March 2022 have not been complied with; and b. The default judgment of this Court dated 27 July 2021, as amended by Order 1 of the orders made on 2 March 2022, is of full force and effect. 3. The Enforcement Officer is directed to seize 155 Ordinary Shares in CGI Kingaroy Pty Ltd (ACN 156 607 555) owned by the defendant by the Enforcement Officer delivering a notice of seizure in the form provided in Annexure A to: a. BURNETT BUSINESS CENTRE, 67 Fitzroy Street, NANANGO QLD 4615; -- 1 of 9 -- 2 and b. 5 First Avenue, KINGAROY QLD 4610. 4. If there is no person to whom the notice can be delivered at either address, the Enforcement Officer may deliver the notice by leaving it at the address. 5. The Court declares that upon service of a notice in accordance with Order 3, 155 Ordinary Shares in CGI Kingaroy Pty Ltd held by the defendant are taken to have been seized for the purpose of sale under the Enforcement Warrant. 6. An Enforcement Officer is directed to seize 120 Ordinary Shares in CGI Water Pty Ltd (ACN 166 625 412) owned by the defendant by the Enforcement Officer delivering a notice of seizure in the form provided in Annexure A to: a. POOLE & PARTNERS PTY LTD, Level 1, 8 Innovation Parkway, BIRTINYA QLD 4575; and b. 56 Stirling Drive, ROCKYVIEW QLD 4701. 7. If there is no person to whom the notice can be delivered at either address, the Enforcement Officer may deliver the notice by leaving it at the address. 8. The Court declares that upon service of a notice in accordance with Order 6, 120 Ordinary Shares in CGI Water Pty Ltd held by the defendant are taken to have been seized for the purpose of sale under the Enforcement Warrant. 9. The sole director of the defendant, Michael Alexander Eddie, be issued an enforcement hearing summons requiring him to attend an enforcement hearing at Brisbane at a date and time to be fixed and stated in the summons. 10. The defendant, by its sole director, Michael Alexander Eddie, complete and return to the Plaintiff a Form 71A – Statement of Financial Position by 4:00 PM on 20 June 2022. 11. The Plaintiff or the Enforcement Officer have liberty to apply. CATCHWORDS: PROCEDURE – JUDGEMENTS AND ORDERS – WARRANTS OF SEIZURE AND SALE – Where the plaintiff obtained default judgement against the defendant – Where the default judgement was set aside on the condition that security of $250,000 be paid to the Registrar – where the -- 2 of 9 -- 3 defendant failed to comply with the condition of the Court’s orders – where the plaintiff applies to the Court for stays in relation to an enforcement warrant for seizure and sale of certain shares to be lifted – where the Court directs the enforcement officer as to the process for seizing shares in a proprietary limited companies. SOLICITORS: Project Legal for the Plaintiff/Applicant Background [1] I have before me an application by the plaintiff, Mr Allen, to lift the stay of enforcement warrants which I imposed in September of last year, to summon a Mr Michael Eddie (the director of the defendant company) for an enforcement hearing, and to require him to provide a statement of financial position, under rule 807 of the Uniform Civil Procedure Rules (UCPR). The orders he seeks arise against a background of facts set out in the two previous judgments of mine in this matter: Allen v CGI Pty Ltd [2021] QDC 238, and Allen v CGI Holdings Pty Ltd [2022] QDC 68. [2] These reasons need to be considered against the facts set out in those judgments. Briefly, however, the matter first came before me in September of last year because Mr Allen had obtained a default judgment against the defendant, CGI Holdings Pty Ltd (CGI) and was seeking to execute the judgment, inter alia, by the issue of an enforcement warrant for the seizure and sale of shares, amongst other assets of CGI. The enforcement warrant for seizure and sale had been issued, but on reflection the enforcement officer had a concern about whether an enforcement warrant for the seizure and sale of property could apply to shares, given the specific provisions for charging orders for securities. I determined that they could in Allen v CGI Pty Ltd [2021] QDC 238. However, As I mention in my judgment, that did not exhaust the difficulties the plaintiff faced in recovering the judgment debt against shares. The difficulty is how shares in the proprietary limited companies that were identified in the enforcement warrant for seizure and sale would be seized and sold. Because of my concern of how the enforcement officer would do that, I stayed the further steps to give effect to the enforcement warrant to the extent it dealt with shares owned by GCI in CGI Kingaroy Pty Ltd and CGI Water Pty (the companies whose shares were identified in the enforcement warrant) pending Mr Allen’s consideration of how the enforcement officer would proceed. The stay did not apply to any other identified assets of CGI including a Porsche 911 Carrera Coupe. [3] There is some possible confusion about whether I also stayed an enforcement warrant for the redirection of debt issued on 18 August 2021 to the ANZ bank. I did not issue any such stay of that enforcement warrant on 20 September 2021, and so it is unnecessary for me to make an order lifting a stay in respect of that redirection of debt enforcement warrant. -- 3 of 9 -- 4 [4] The steps contemplated that would occur after the September 2021 judgment were interrupted by CGI applying to set aside the default judgment. That matter came before me for hearing on 2 March 2022. For the reasons I set out in Allen v CGI Holdings Pty Ltd [2022] QDC 68, I amended the default judgment that had been entered by a modest amount, and then set aside the default judgment on the condition that CGI pay into Court, security of $250,000 in a form acceptable by the Registrar by 2 April 2022. I also ordered that if that condition was satisfied, the enforcement warrant for seizure and sale and the enforcement warrant for redirection of debt would be set aside. The security was not paid. [5] Mr Allen has now brought the matter back before me with a view to picking up from where it was left which concerned the enforcement in respect of shares in CGI Kingaroy Pty Ltd and CGI Water Pty which are owned by the judgment debtor (at least according to ASIC records). Ex parte? [6] The first question I have to deal with is whether it was permissible for this matter to be brought ex parte. Two matters arise. [7] First, in respect of the enforcement warrant process part of the application, Mr Allen submitted that the application for the enforcement warrants and applications in respect to them were not served and did not have to be served, and since the Court was picking up the matter on his application from as it was left in September 2021 in respect of the seizure and sale warrant, that it was unnecessary to serve the defendant. To that extent, I agree. [8] Second, it was a necessary precondition to this application proceeding that the default judgment was effective because it was conditionally set aside under order 2 made on 2 March 2022. I am in no doubt whatsoever that that condition has not been met. Mr Allen has sworn that to the best of his knowledge and belief, no security of $250,000 was been paid to the registrar by 2 April 2022, or at all. He also swears that he has not heard anything from the judgment debtor or its solicitors since the hearing. Further to that, I have before me the Court file. It is almost impossible to imagine that any such payment could have been made, or any such security could have been given, without it being recorded on the file. For that reason, I am confident beyond reasonable doubt that the amount has not been paid and the condition for the setting aside of the default judgment has not been met. [9] The question is whether, despite that, the application should have been served because it was continuing the proceedings in which CGI had appeared. This issue has to be dealt with because the foundation for the further applications assumes that the default judgment is effective. [10] I accept that there is at least an argument in those circumstances that notice of the application should have been given to CGI. Mr Allen, however, directs my attention to some odd-looking dealings in respect of the identified Porsche. There might be innocent explanations for those dealings however, Mr Allen is concerned that Mr -- 4 of 9 -- 5 Eddie might take steps to frustrate his execution if notice of the application was given. The dealings in the Porsche could certainly provide some reason to harbour that concern. The effect of the warrant is that the assets of CGI are subject to seizure and sale by the enforcement officer, and there really ought not be dealings in those assets without notice. Further, in my 2 March 2022 judgment, I found that there were grounds to believe that Mr Eddie and CGI did not bona fide intend to pursue a defence.1 Since the judgment, there has been no security, no defence, nor any communication from CGI with Mr Allen. That belief now seems justified. [11] In all the circumstances, my conclusion is that there is a sufficient risk of action to frustrate the enforcement process to justify bringing this application ex parte. That is particularly so given the only matter on which, it seems to me, CGI would have any right to be heard is whether there had been compliance with the requirements for the judgment to be set aside. There seems to be no realistic possibility that those conditions have been met. For those reasons, I proceed ex parte. Process for seizure of shares [12] The next issue is how the enforcement officer is to seize and sell the shares in the proprietary limited companies in the circumstance that Mr Allen seeks to execute the warrant. The two companies in question are CGI Kingaroy Pty Ltd and CGI Water Pty. The company searches of those companies show that CGI remains a shareholder in both companies in a substantial way. [13] There was evidence before me in the March 2022 hearing that at least CGI Kingaroy has substantive worth and is managed and controlled by Mr Eddie’s brother. Mr Allen did some helpful research on the question of how to seize shares in a proprietary limited company. The gravamen of his submission was:2 The Plaintiff submits the court should exercise judicial power and aid the Plaintiff in the enforcement of the judgment, a judgment which is now unconditional and final. The very essence of judicial power is that decisions of a court are binding and authoritative, which means that decisions must be enforceable either by execution or contempt. As such, “judicial power includes with the decision and the pronouncement of judgment the power to carry that judgment into effect between the contending parties”: Australian Pipeline Limited v Alinta Limited [2007] FCAFC 55 (20 April 2007) (Full Federal Court)3. In that case Justice Finkelstein stated: 82. Going back to Griffith CJ’s formulation [in Huddart Parker & Co Pty Ltd v Moorehead [1909] HCA 36; (1908) 8 CLR 330, 357 ], an important attribute of a judicial decision is that it must be "binding and authoritative". This raises several considerations. First, decisions that are subject to general judicial review are usually not binding in the sense that judicial determinations are: Precision Data Holdings (1991) 173 CLR at 191; The Attorney-General for the Commonwealth v Breckler [1999] HCA 28; (1998) 197 CLR 83, 108. 1 Allen v CGI Holdings Pty Ltd [2022] QDC 68 at [85] to [89] 2 Plaintiff’s outline of argument at [21] to [23] 3 Per Finkelstein J (dissenting with Gyles and Lander JJ) at [83] – [86], in particular at [85] -- 5 of 9 -- 6 8.3 Secondly, to be "binding and authoritative", a decision must be enforceable. The doctrine of enforcement is of ancient pedigree. It is the formal process by which a party entitled to the benefit of a judgment may obtain that benefit. It is the "practical forcing power of the law" which carries the judgment into effect: Freeman on Executions, 2nd ed, 1888, 2. In Re A Company [1915] 1 Ch 520, 527 Phillimore LJ explained that "it is the old common law process by which the sheriff in obedience to one of the common law writs procures for a judgment creditor the fruits of his judgment." By these submissions the Plaintiff seeks the assistance of the court, in the exercise of its judicial power, to put the judgment of the court (money order4) in this proceeding into effect by the enforcement by the enforcement officers of the Enforcement Warrants. The Plaintiff submits the inherent judicial powers of enforcement, including those exercised by an enforcement officer for a court, are unconstrained, except where any powers are limited by statute5. Simply, the court should not create a right in the Plaintiff (a judgment) without a remedy to put the judgment into effect (enforcement). [14] I agree with his submission that this Court has power (incidental to its power to hear and determine matters) to ensure the efficacy and enforceability of those judgments. That is the underlying basis for the Court’s power to make Anton Piller orders and asset preservation orders. [15] Enforcement of judgments may be carried out by use of enforcement warrants in accordance with the UCPR, however, the Court retains powers to facilitate enforcement, whether through giving directions about the operation of warrants under the UCPR, or one might imagine, in novel ways. Fortunately, we are dealing with the former situation here. The question that most concerns the Court is how to go about seizing shares in a proprietary limited company. [16] Mr Allen has submitted that that can be done by the enforcement officer giving notice of the seizure of the shares at the place where the register of members is taken to be situated under the Corporations Act 2001. He develops his argument in paragraphs 39 to 43, where he states: The order of the Supreme Court of Queensland given by His Honour Justice Harding in Daly & Hellicar v Cooper6 was as follows: “[b]ut in default [of a charging order], let the shares, or a sufficient part thereof, be sold with approbation to the judge, and let the money to arise from such sale to be paid into Court to the credit of this action, and be applied in payment of what shall be certified to be due to the plaintiffs…”. The reported decision of His Honour Justice Harding gave no guidance as to how the shares referred to in that decision were to be sold, but clearly the order was that they be sold with approval of the court (“approbation of the judge”). The Plaintiff provides submissions, and seeks Orders 3 and 4, for seizure for sale as to permit the court to implement a sale under the UCPR r. 832 (1) – (3) (public auction) or (4) (private sale). UCPR 828 (3) and (4) has specific rules about when real property is taken to have been seized. There are no specific rules about the seizure of personal property, such that the 4 Civil Proceedings Act 2011 s 83 5 Civil Proceedings Act 2011 s 101 6 Daly & Hellicar v Cooper (1888) 3 QLJ 104 per Harding J -- 6 of 9 -- 7 common law as to seizure and the inherent jurisdiction of the court in aid of enforcement applies. At common law, seizure is effected by the enforcement officer taking actual possession. Whether seizure has occurred is a question of fact and depends upon the acts and intention of the enforcement officer. The Plaintiff submits possession does not mean physical custody. What seizure means is the assertion of lawful possession for the purpose of sale, usually by making a statement of seizure such as “I seize everything on this holding”7 or providing a notice to that effect8. In effect from the teste the property is charged for sale, from the seizure they are in the “custody of the law” (being exercised by the authority of the court and through the enforcement officer), even though the property may remain in the physical possession of the enforcement debtor9 and under its control. Thus, it is wrong to confuse physical custody and control with seizure (an act asserting possession) for the purpose of sale. Once the Enforcement Officer takes an act of seizure intending to seize, the property is then seized for the purpose of sale. By way of example of how other jurisdictions deal with it in relation to shares, in Ontario, a Canadian state one of which our own Personal Property securities laws are modelled, has specific legislation regulating the process for seizure of uncertificated shares by enforcement creditors, namely ss. 47 – 51 of the Securities Transfer Act, 2006 (Ontario). Section 49 provides: “49. Seizure of interest in uncertificated security “Except as otherwise provided in section 51 [concerning shares held by secured parties], the interest of a judgment debtor in an uncertificated security may be seized only by a sheriff serving a notice of seizure on the issuer at the issuer’s chief executive office.” [17] I note that rule 828(4) UCPR expressly recognises that actual seizure is not necessary to authorise the sale of real property under an enforcement warrant. I cannot see why that idea would not also apply to personal property in the form of a chose in action. [18] To seize and sell property, it is necessary for an enforcement officer to take control of the property and inform those interested (and, if relevant, the public at large) that the property has been seized, is under control of the Court and any interference with the property could amount to a contempt of Court. [19] Mr Allen submitted that the location of the shares is informed by provisions of the Corporations Act 2001. He submits: Section 1070A (1)(a) of the Corporations Act 2001 (Cth) (CA) confirms a share is personal property and laws applicable to ownership of personal property apply to shares as do equitable interests in relation to personal property (s 1070A (3) of the CA). Section 1070A (4) provides a share is taken to be situated in the state or territory where the register of members is kept under s 169 of the CA. As such, it is submitted the physical place where shares are is the place where the register of members is kept. Section 168 (1) of the CA provides a register of members must be kept however ss 1301 and 1306 of the CA provides the register may be kept on a computer. Section 172 (1) of the CA provides that a register may be kept in one of 4 places (which may be on a computer at the 7 C Johnston Edwards (1888) The Law of Execution Upon Judgment and Orders, Stevens and Son, London at 119-121 8 Swann v Earl of Falmouth and Jennings (1828) 108 ER 1112 per Bayley J at 1113 9 Lloyds and Scottish Finance Ltd v. Modern Cars and Caravans (Kingston) Ltd [1964] 2 All ER 732 Edmund Davies J at 737-738 -- 7 of 9 -- 8 place) (a) the registered office; (b) the company’s principal place of business; (c) a place where the work involved in maintaining the register is done; or (d) another place approved by ASIC. Section 172 (2) provides that if the register is kept at another place other than the registered office or principal place of business, the ASIC must receive notice of that other place. Applying the common law and the CA, the Plaintiff submits shares can be seized by a notice to the place where it is register of members is taken to be situated, which by operation of ss. 172 (1), (2) and 1070A (4) of the CA can only be one of two places, either the registered office or principal place of business (because the Plaintiff submits there is no evidence ASIC has been notified of another place10). For this reason the order the Plaintiff seeks, in the court’s inherent jurisdiction in execution (Orders 3 and 4), is for the registrar to provide a notice of seizure to both the registered office and principal place of business of both CGI Kingaroy Pty Ltd and CGI Water Pty Ltd. [20] Those submissions are persuasive. Further, stepping back from the matter, the real issue is, how does the enforcement officer notify legal seizure of the chose in action? It seems to me that that can be done properly by giving notice at the place where the register is, and presumably where anyone seeking to alter interests in the shares ultimately will have to engage with the register to give effect to any transfer at law. For those reasons, it seems to me that the enforcement officer can seize the shares by giving relevant notice at the places where the register may be kept. [21] Mr Allen has identified, by reference to the material, the location of the principal place of business and the registered office of both companies. He has identified the provisions of the Corporations Act 2001 which, applied to the evidence before me, indicate that they are the two places where the register could be, and that it is sufficient to seize the shares to give notice of the seizure at those places. I agree. The question is to determine what steps are required to manifest seizure by the enforcement officer at the place of the register. [22] In my view, that is to be done in two ways. The first is to direct the enforcement officer as to how to seize the shares. In that respect, the enforcement officer is an officer of this Court, taking steps on behalf of the Court to give effect to the Court’s judgment. Like a liquidator, a trustee or, a personal representative, an enforcement officer is entitled to receive the guidance of the Court on how to carry out duties as an officer of the Court. [23] One can imagine that the enforcement officer might wonder how to go about conducting their task of seizing these shares, and for that reason I intend to deal with this, in the first instance, by giving directions to the enforcement officer as to how to seize the shares. Those directions, in substance, will be that they deliver a copy of a notice of seizure of the shares in terms I will define to the registered office and principal place of business of both companies. 10 Affidavit R. Allen sworn 30.05.22 Exhibits “RJA8” (pages 23 -24) and “RJA 9” pp. 42-43 -- 8 of 9 -- 9 The effect of seizure in accordance with this Court’s directions [24] The next step is to deal with the effect of that notice. The way to do that, in my respectful view, uninstructed by authority, is to make a declaration that the shares are taken to have been seized once the enforcement officer seizes them in the way directed by the Court. Those orders can be served on anyone and everyone who has any interest in these shares. It is a matter for the judgment creditor how many parties and in what way they are notified. [25] Ultimately, the judgment creditor seeks these orders for the seizure of the shares with liberty to apply seeking also the issue of an enforcement summons and a requirement to complete a statement of financial position by Mr Eddie, who is the guiding mind and will of CGI, with a view, once more information is available, on how to go about the sale. [26] It does not take much imagination to see there might be difficulties in extracting the value of the shares from a sale. There might be difficulties in how a sale will interact with the undoubted limitations, given that the companies are proprietary limited companies, on transfers and sales of shares and so on. I am conscious that that might create issues for the enforcement officer, and of course the enforcement officer (and the judgement creditor) can always approach the Court for directions or assistance. It seems to me that the enforcement officer is entitled, having completed the steps directed in the orders I have made today, to await further directions as to how to go about the sale. Other orders [27] There are also orders sought for the director, Mr Eddie, to be summonsed to an enforcement hearing, and to complete and return a statement of financial position. I make those orders for convenience as Mr Allen is before me today. I note that the order requiring him to complete and return the statement of financial position is made in his absence and requires it to be done by 20 June 2022. [28] I do not have any hesitation in making an order in his absence for that to be completed. The evidence before the Court, which is summarised relevantly in my March 2022 judgment is that Mr Eddie has had notice of the form 71A for months and, although it is not a contempt, it is a breach of the UCPR not to comply, complete and return an enforcement hearing summons under rule 808. He committed a great deal of resources to cavilling with the default judgment and then did not comply with the requirements to set it aside. The obligation to complete and return the form 71A statement is now an obligation by order of this Court, and if it is not complied with without reasonable excuse, that will be a contempt of this Court under 129 (1)(a) of the District Court Act 1967. For those reasons I intend to make the orders which give effect to these reasons that I have discussed, and which will be finalised presently. -- 9 of 9 --