Coral Reef Pty Ltd, Woodgrip Pty Ltd & Bilborough, Re [1995] QSC 46

~L ~~-r otb State Reporting Bureau TRANSCRIPT OF PROCEEDINGS (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director. State Reporting Bureau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION HELMAN J Application 840 of 1994 IN THE MATTER OF APPLICATION NO 840 OF 1994 and i REVISED COPIES iSSUED l State Reportmg Bureau IDate r/ :3 i q > I IN THE MATTER OF UNDERTAKINGS GIVEN BY CORAL REEF PTY LTD, WOODGRIP PTY LTD, CHRISTOPHER RUSSELL BILBOROUGH IN APPLICATION NO 840 OF 1994 AND BREACHES THEREOF and IN THE MATTER OF RULES OF THE SUPREME COURT OF QUEENSLAND and IN THE MATTER OF AN APPLICATION BY HEATHER MAY GILSENAN BRISBANE .. DATE 23/02/95 JUDGMENT ..Jth Floor, The Law Courts. George Street, Brisbane. Q. 4000 Telephone: (07) 227 4360. Facsimile: (07) 227 5532 -- 1 of 15 -- 230295 (Helman DCJ) HIS HONOUR: The applicant applies by way of notice of motion for an order that the respondent Bilborough be committed to prison or otherwise punished for contempt of this Court for breach of undertakings given to the Court on 14 December 1994 in interlocutory proceedings before Dowsett J. in relation to application no. 840 of 1994. She also applies for other relief, including leave to issue a writ of attachment against the respondent. An issue arose at the hearing before me as to whether there had been personal service of the notice of motion and supporting affidavits in this case. Personal service is necessary in a case of this sort, and it was contended for the respondent that there had not been personal service of those documents upon him. On that subject I accept the evidence of Messrs Lynch and Morgan that late on the afternoon of 2 February 1995 they were present in a car park in the basement under the Corporate Centre in Slatyer Avenue, Bundall and that in the car park Mr Lynch approached the respondent, saying ''Mr Bilborough, I have a notice of motion and supporting affidavits to serve on you". I find that Mr Morgan then approached Mr Bilborough and attempted to hand the documents to him but Mr Bilborough ignored Mr Morgan, failed to take the documents, and departed. It was not possible for Mr Morgan to hand the documents to Mr Bilborough but they were left on the bonnet of Mr Bilborough's car in his view. 2 JUDGMENT 10 20 30 40 50 -- 2 of 15 -- 230295 (Helman DCJ) In those circumstances I concl~de that there was personal service to satisfy the rule that applies to this case. It is not necessary that the person upon whom service is attempted actually have corporal possession of the documents in a case like this. Where the person upon whom it is attempted to serve the documents refuses to take corporal possession of the 10 documents, but is informed of the nature of the process and the documents are left in front of or near him so that he has access to them, that, in my view, is sufficient. On that subject I refer to Re Ditford; ex parte Deputy Commissioner of Taxation, 19 FCT 347 at p. 360. On 14 December 1994 the respondent and one Gerald Brian O'Neill and two companies of which the respondent was the managing director - Coral Reef Pty Ltd and Woodgrip Pty Ltd, through their counsel Mr Heyworth-Smith - gave the several undertakings which were set out in a document in the form of a draft order:- "UPON THE SEVERAL UNDERTAKINGS of CHRISTOPHER RUSSELL BILBOROUGH, GERALD BRIAN O'NEILL, CORAL REEF PTY LTD and WOODGRIP PTY LTD 1. That immediately upon receipt of any of the commissions referred to in Exhibit 1 those monies and all other monies to which WOODGRIP PTY LTD may be entitled will be paid into Court or, at the option of the respondents, an account in the name of WOODGRIP PTY LTD at the National Australia Bank Limited, Elizabeth & Albert Streets branch with the 20 30 40 signatories (both to sign) being the solicitor for 50 2 . the applicant and the solicitor for the respondent. That CHRISTOPHER RUSSELL BILBOROUGH without any admission of his liability so to do, will pay to WOODGRIP PTY LTD commission of $20,000 upon completion of each of the existing sale contracts in relation to his houses situated at Lots 73 and 74 Yarraglen Place, Arundel and WOODGRIP PTY LTD will 3 JUDGMENT 60 -- 3 of 15 -- 230295 (Helman DCJ) thereupon deal with :he said commissions in accordance with paragraph 1 hereof. 3. That 4 . (a) the said monies or any part thereof so banked into the accoun: referred to in paragraph 1 hereof will noL be disbursed from the said account for any purpose; (b) the assets, undertaking business or goodwill of WOODGRIP PTY L~~ will not be disposed of or otherwise dealt with and no payment will be made by or on i~s behalf without the written authority of the applicant, or failing such the order of the Cc~rt, provided that should WOODGRIP PTY LTD request of the applicant such authority, the applicant will give written notice of her consent to or rejection of such request within two working days of service of such request upon her solicitor, provided further that s~ch service may be effected by facsimile trans~ission. That upon two clear working days' notice given to it in writing by the applicant or her solicitors, WOODGRIP PTY LTD wil~ make available for inspection by the applicant or her solicitors or agents at the offices of CORAL REE? PTY LTD situated at Level 9, Corporate Centre One, Ferry Road, Bundall, all books and records relating to the business of WOODGRIP PTY LTD including but net limited to the following: (a) bank statements, deposits books, cheque butts, marketing agree~ents, current files and irrevocable auL~orities; (b) each client fi~e evidencing marketing 10 20 30 transactions undertaken by WOODGRIP PTY LTD or 40 marketing transactions with purchasers secured from seminars, the costs of which have been paid for or charged to WOODGRIP PTY LTD; (c) documents relating to the operating expenses and overheads of WOODGRIP PTY LTD IT IS ORDERED BY CONSENT: (a) That the application be adjourned to a date to be fixed to be brought on by any party including the parties giving the above undertakings, upon giving two working days notice in writi~g to the other parties; 4 JUDGMENT 50 60 -- 4 of 15 -- 230295 (Helman DCJ) (b) That the costs of and incidental to the application on :3th and 14th December be reserved." The exhibit 1 referred to in the document was as follows: "I.YOODGRIP CURRENT SALES DATE SIGNED SURNM1E GOLD CO,'\S' C0r'1i'1 SYDNTCY COfv1N DEVELOP~·lEN IRREVOCABLE 10 At10UNT 16/10/94 Hunter $1 1 000 $ 0 Cranbrook $ 23,600 04/10/94 Kelly $ 0 $ 2,500 Cranbrook $ 23,600 09/10/94 Chanthanpanya m :;, 0 $ 2,500 Cranbrook $ 22,600 26/09/94 Palermo $ 0 $ 0 Cranbrook $ 22,600 12/10/94 Harris $ 0 $ 0 Cranbrook $ 24,900 20 22/10/94 Deed $ 0 $ 0 Cranbrook $ 20,500 22/10/94 Si mons $1 1 000 <t 0 Cranbrook $ 22,600 "+-' 23/10/94 Walker $1 1 oco $ 0 Cranbrook $ 23,600 27/09/94 Slapp $ 0 $ 0 Cranbrook $ 22,600 25/09/94 Langlois $ 0 $ 2,500 Cranbrook $ 20,600 31/10/94 }\Oh $1 1 200 $ 2,500 Cranbrook $ 24,600 01/11/94 Chand $ 0 $ 2,500 Cranbrook $ 24,600 06/11/94 Glazier $1 1 200 $ 2,500 Robina $ 32,000 12/11/94 Faulkner $ 0 $ 2,500 Cranbrook $ 23,600 19/11/94 O'Donnell $ 0 $ 2,500 Cranbrook $ 20,900 30 26/12/94 Culotta $1 1 200 $ 2,500 Bushmead $ 20,000 27/11/94 Plambeck $1 1 200 $ 2,500 Bushmead $ 20,000 30/11/94 Vickery $1 1 200 $ 2,500 Village $ 20,900 Gard 59,000 $27,500 $413,800 NB All of the above shall have Coral Reef's usual fee deducted 40 from them before being transferred. 11 I should mention that although there was an exhibit 1 admitted in the hearing before me, the exhibit 1 I shall refer to 50 henceforth will be the exhibit 1 referred to in the draft order. Although the respondent was not present in court when the undertakings were given, I find that they were given on his 60 5 JUDGMENT -- 5 of 15 -- 230295 (Helman DCJ) instructions; Mr Heyworth-Smith had conceded in open Court on 13 December 1994 that all of the moneys referred to in exhibit 1 were the property of Woodgrip Pty Ltd. On 14 December 1994, Dowsett J. made an order in the following terms - IN THE MATTER of THE CORPORATIONS LAW and IN THE MATTER of WOODGRIP PTY LTD A.C.N. 065 306 710 ORDER JUDGE: DATE OF ORDER: 14 DECEMBER 1994 Document i~itiating this hearing: Application for Appointment of Provisional Liquidator filed 6 December 1994 upo~ the several undertakings of Christopher Russell Bilborough, Gerald Brian O'Neill, Coral Reef Pty Ltd and Woodgrip Pty Ltd IT IS ORDERED THAT: 1 • 2. That immediately upon receipt of any of the commissions referred to in Exhibit 1 those monies and all other monies to which WOODGRIP PTY LTD may be entitled will be paid into Court or, at the option of the Respondents, an account in the name of WOODGRIP PTY LTD at the National Australia Bank Limited, Elizabeth and Albert Streets branch with the signatories (both to sign) being the Solicitor for the Applicant and the Solicitor for the Respondent. That CHRISTOPHER RUSSELL BILBOROUGH without any admission of his liability so to do, will pay to WOODGRIP PTY LTD commission of $20,000.00 upon completion of each of the existing sale contracts in relation to his houses situated at Lots 73 and 74 Yarraglen Place, Arundel and WOODGRIP PTY LTD will thereupon deal with the said commissions in accordance with paragraph 1 hereof. 3. That:- 6 JUDGMENT 10 20 30 40 50 60 -- 6 of 15 -- 230295 (Helman DCJ) (a) the said monies or any part thereof so banked into the account referred to in paragraph 1 hereof will not be disbursed from the said account for any purpose; (b) the assets, undertaking business or goodwill of WOODGRIP PTY LTD will not be disposed of or otherwise dealt with and no payment will be made by or on its behalf without the written authority of the Applicant, or failing such the Order of the Court, provided that should WOODGRIP PTY LTD request 10 of an the Applicant such authority, the Applicant 4. will give written notice of her consent to or rejection of such request within two working days of service of such request upon her Solicitor, provided further that such se~vice may be effected by facsimile transmission. That upon two clear ~orking days notice given to it in writing by the applicant or her solicitors, WOODGRIP PTY LTD will make available for inspection by the applicant or her solicitors or agents at the offices of CORAL RE~? PTY LTD situated at Level 9, Corporate Centre One, Ferry Road, Bundall, all books and records relating to the business of WOODGRIP PTY LTD including but no~ limited to the following: (a) bank statements, deposit books, cheque butts, marketing agreements, current files and irrevocable authorities; (b) each client file evidencing marketing transactions undertaken by WOODGRIP PTY LTD or marketing transactions with purchasers secured from seminars, the costs of which have been paid for or charged to WOODGRIP ?TY LTD; (c) documents relating to the operating expenses and overheads of WOODGRIP PTY LTD. IT IS ORDERED BY CONSENT: 1. That the application be adjourned to a date to be fixed to be brought on by any party including the parties giving the above undertakings, upon giving two working days notice in writing to the other parties; 2. That the costs of and incidental to the application on 13th and 14th December be reserved." The undertakings referred to in the final order were clearly those referred to in the draft order. 7 JUDGHENT 20 30 40 50 60 -- 7 of 15 -- 230295 (Helman DCJ) This application is concerned ~ith the undertakings set out in paragraphs 1 and 2 of the draf~ order, and in particular eleven sales referred to in pa~agraph (those of Hunter, Kelly, Palermo, Harris, Deed, Simons, Walker, Langlois, Koh, Chand and Glazier) and the sale of the house property on lot 74 referred to in paragraph 2. The only reasonable construction that can be put upon the undertaking in paragraph 1 is, in my view, that the commissions referred to should immediately upon receipt be paid, without deduction, either into Court or into the proposed account at the Natio~al Australia Bank Limited. The only way in which drawings on ~hose funds were permitted was in accordance with the procedu~e provided for in paragraph 3. The National Australia Bank account was not opened until 22 December 1994, so the only way in which any funds the subject of the undertakings could be dealt with before that day to comply with the undertakings was to pay them into Court. There were, however, no payments into Court. Each of the eleven sums was deposited first in an account of Coral Reef Pty Ltd at the Commonwealth Bank at Broadbeach in accordance with a practice that had been adopted by the companies before 14 December 1994. The sums relating to the sales of Palermo and Glazier were in the Coral Reef Pty Ltd account on the morning of 14 December 1994 and, it seems, just before the order was made by Dowsett J., $52,900 was transferred tc an account, also at the 8 JUDGMENT 10 20 30 40 50 60 -- 8 of 15 -- 230295 (Helman DCJ) Commonwealth Bank at Broadbeach, in the name of Woodgrip Pty Ltd. The $52,900 was calculated by deducting a fee of $850 paid by Woodgrip Pty Ltd to Coral rteef Pty Ltd (in relation to each sale) from the sum of $22,600 referred to in exhibit 1 in relation to Palermo and the $32,000 referred to in exhibit in relation to Glazier: $54,600 less $1,700. From and including 15 December 1994 to and including 23 December 1994, the funds in that Woodgrip Pty Ltd account were depleted by $14,680.31 when cheques drawn on the account before 14 December 1994 were presented, and a direct debit of $561.74 in favour of Zurich Australia was recorded. (That direct debit is shown in the notice of motion as $562.74 but a perusal of the relevant bank statement shows the sum to have been $1 less than that.) In the result only $38,000 of the $54,600 in respect of Palermo and Glazier was deposited at the National Australia Bank account on 22 December 1994, although a further $1,700, reversing the effect of the deduction of the two sums of $850, was deposited on 11 January 1995. $19,700 in respect of the Langlois sale (the $20,600 in exhibit 1 less $850) was deposited first in the Coral Reef Pty Ltd account at the Commonwealth Bank at Broadbeach. It was then transferred on 21 December 1994 to the Woodgrip Pty Ltd account at that bank and on the following day to the National Australia Bank account. 9 JUDGMENT 10 20 30 40 50 60 -- 9 of 15 -- 230295 (Helman DCJ) Each of the remaining nine surs r red to in exhibit 1 was deposited first in the Coral ~eef Pty Ltd account at the Commonwealth Bank at Broadbeac~. In the case of each of the sales of Hunter, Simons, Walker, and Koh, an $850 fee was deducted. Clearly such a deduction was not provided for in the undertakings and when the error was discovered in January 10 1995, it was rectified by the deposit of $5,950 on 11 January 1995, which sum included of ccJrse the $1,700 I have referred to in relation to Palermo and Glazier. I shall now set out the particJlars of the facts relating to the eleven sums to which I have referred in the order in which they appear in exhibit 1. For completeness I shall repeat the details in relation to Palermo, Glazier, and Langlois. For Hunter, a sum of $23,600 ~as to be deposited in Court or in the National Australia Bank account. On 23 December 1994 $22,750 was deposited in the 'atter and on 11 January 1995 $850 was deposited in that account. By 11 January 1995, then, there was no deficiency. In respect of Kelly, the full sum of $23,600 was deposited in the National Australia Bank account on 17 January 1995. It is convenient next to deal ~ith Palermo and Glazier together. The sum referred to in exhibit was $22,600 for Palermo, and $32,000 for Glazier, making a total of $54,600. Of that, $38,000 was deposited in the National Australia Bank account on 22 December 1994 and a further $1,700 on 11 January 1 0 JUDGMENT 20 30 40 50 60 -- 10 of 15 -- 230295 (Helman DCJ) 1995 in the same account, making a total of $39,700 thus leaving a deficiency of $14,900. In respect of Harris, the full sum of $24,900 was deposited in the National Australia Bank account on 12 January 1995. In respect of Deed, the full sum of $20,500 was deposited in the National Australia Bank account on 12 January 1995. In respect of Simons, $22,600 was to be deposited, and $21,700 was deposited in the National Australia Bank account on 23 December 1994 and $850 on 11 January 1995 in the same account, leaving no deficiency after the latter date. In respect of Walker, $23,600 was to be deposited, and $22,700 was deposited in the National Australia Bank on 23 December 1994 and $850 on 11 January 1995 in the same account, leaving no deficiency after the latter date. In respect of Langlois, $20,600 was to be deposited and $19,700 was deposited in the National Australia Bank on 22 December 1994 and $850 on 11 January 1994, leaving no deficiency after the latter date. In respect of Koh, $24,600 was to be deposited and $23,700 was deposited in the National Australia Bank account on 6 January 1995 and $850 on 11 January 1995, leaving no deficiency after the latter date. 1 1 JUDGMENT 10 20 30 40 50 60 -- 11 of 15 -- 230295 (Helman DCJ) In respect of Chand, $24,600 ~as to be deposited, and the full sum was deposited in the Natic~al Australia Bank on 19 January 1995. In summary, then, there were breaches if the undertaking given in paragraph 1 of the draft order in that first, the sums referred to were diverted to t~e Coral Reef Pty Ltd account and were not deposited immediately as provided for in the undertaking, and secondly, the full amounts were not deposited. Although the deficiency caused by the deduction of the seven sums of $850 has been rectified, a deficiency of $14,900 remains. The latter deficiency is the most serious aspect of this case. Mr Cooke, QC, for the respondent Bilborough, sought to justify the remaining deficiency on the ground that the fund from which that sum was deducted was a bank account upon which cheques had been drawn and a direct debit recorded in the ordinary course of business, -~e cheques having been written and the debit authorized before the undertaking had been given. I cannot accept that proposition because it appears to me that the respondent's undertaking clearly contemplates the deposit of the sums in question without deduction, to be drawn on only as provided for in paragraph 3 of the undertaking. It was clearly not intended that if a transaction were completed just before the undertaking was given, the proceeds would be available for disbursement contrary to the provisions of paragraph 3. Had such a course been proposed, the respondent through his counsel would no doubt have brought it to the 1 2 JUDGMENT 10 20 30 40 50 60 -- 12 of 15 -- 230295 (Helman DCJ) attention of the Judge and, if appropriate, the undertaking could have been ~odified accordingly. The evidence before me reveals that the respondent failed to pay the $20,000 commission in respect of the sale of the lot 74 referred to ~n paragraph 2 of the draft order on completion 10 on 20 January 1995. That sum was initially deposited to the credit of a personal account of the respondent with the Australia and New Zealand 3anking Group Limited and was not deposited in the National Australia Bank account until 3 February 1995. In failing to pay that sum either into Court or into the National Australia 3ank account immediately upon receipt the respondent was in breach of his undertaking in paragraph 2 of the draft order. They In the result, I am satisfied that the breaches of the respondent's undertakings to the Court have been proved. were not casual, accidental, or unintentional. The most serious aspect of this case has been the failure to make up the deficiency of the $14,900. In the circumstances I conclude that provided that deficiency is rectified in the near future the case does not warrant either imprisonment or a fine. That is because although there were breaches of the undertakings, the moneys in question have, without excessively lengthy delays, eventually been dealt with as provided fer in the undertaking. In addition, the rectification of the erroneous deduction of the seven sums of $850 is, I conclude, some evidence of good faith. I shall invite further submissions on the form of the final order. 1 3 JUDGMENT 20 30 40 50 60 -- 13 of 15 -- 230295 (Helman DCJ) HIS HONOUR: The respondent having been guilty of contempt of Court in committing the breaches of the undertakings given to the Court on 14 December 1994 to which I referred in my reasons published this morning, I conclude that the applicant should not be out of pocket as a result of bringing this application and that the appropriate order as to costs to reflect that conclusion and as a punishment to the respondent Bilborough, is that the respondent Bilborough pay to the applicant her costs of and incidental to the application, including reserved costs if any, on a solicitor and own client basis. The respondent Bilborough was ~he only respondent named in the notice of motion against whom the application proceeded and so I conclude that the other respondents named in the notice of motion are not entitled to any order for costs. No order for costs in favour 0~ any other applicant for costs. Leave to appeal against the order for costs. HIS HONOUR: In relation to the application which is document 144 on the file, by consent I order that the application be adjourned to 10 a.m. on the f~rst day of the trial with liberty to apply. Costs reserved. 1 4 JUDGMENT 10 20 30 40 50 60 -- 14 of 15 -- 230295 (Helman DCJ) HIS HONOUR: By consent, I order that the injunction ordered by Moynihan J. on 6 February 1995 restraining the appointment of an administrator of the co~pany be extended to 4.30 p.m. on the first day of the trial on the basis that the undertaking be enlarged. Costs reserved. HIS HONOUR: In my view the evidence before me does not demonstrate a sufficient basis for granting the relief sought. It appears to me that the application for an injunction in the circumstances is premature and I dismiss the application. HIS HONOUR: I order that the applicant pay to the respondents their costs of and incidental :o the application to be taxed. 1 5 JUDGMENT 10 20 30 40 50 60 -- 15 of 15 --