It’s tough to argue that a company isn’t impecunious when it doesn’t have a bank account. Just ask the Sydney barrister who turned up to advocate for this proposition before NSW Supreme Court corporations judge Ashley Black on Monday.
The barrister – Daniel Krochmalik of 3 St James – has had plenty of experience and some success before Black J but even he must have suspected his client’s prospects were dim.
“I set out the subsequent developments at the hearing on 17 January 2024 in two ex tempore judgments delivered on that date. The matters recorded in those judgments extend well beyond the simple proposition, accepted by Mr Krochmalik who now appears for Noda and Mr Huo, that Noda was unsuccessful in the proceedings.” Justice Ashley black.
The matter being heard involved an application by DV Recovery Management’s Daniel O’Brien for the release of $70,000 paid into court as security for costs in respect of litigation between himself as liquidator of H&H Funding Pty Ltd (HHF), Noda Development Ltd which purports to be HHF’s secured lender, Noda’s director and former HHF director Qiang Zheng Huo and Nick Cooper and Dominic Cantone, the receivers Huo appointed to HHF after its alleged default.
iNO says alleged default because the primary disputation between the parties involves the question of whether or not the general security agreement (GSA) relied upon by Noda in respect of its default claim is valid.
Noda had commenced proceedings in a bid to get declarations from the court that a $27 million judgment debt in its favour against HHF was enforceable as a secured debt despite obtaining the debt without basing the claim on the validity or otherwise of the General Security Agreement (GSA) said to exist between Noda and HHF.
As part of the proceedings Noda also wanted orders making O’Brien personally liable for the costs of the proceedings. For his part O’Brien was able to get orders requiring Noda to pay $70,000 into court as security for costs.
At a hearing late last year the court heard that Noda’s application was urgent and straightforward, a submission which prompted the judge to instruct Noda’s legal advisors to go away and streamline its statement of claim, which he saw as anything but straightforward given the myriad orders and declarations being sought.
Then, when the parties returned for hearing in January Noda’s counsel applied orally at the beginning of the hearing for leave to restore a key part of the claim which had been dropped as part of the streamlining exercise.
O’Brien, represented by David Rayment SC unsurprisingly opposed such a course and Justice Black found no reason to let Noda avoid the consequences of its “strategic choice” – made in response to Justice Black’s own direction it must be said – to narrow the issues.
Prior to making the oral application for restoration Noda’s counsel indicated that they would seek leave to discontinue the proceedings if the judge declined to approve the amendment application but the judge told them leave would not be granted, leaving the pair with no choice but to consent to discontinuance, with costs.
Naturally enough O’Brien sought an order to have the $70,000 in security for costs Noda had paid into court payable to him and also sought to have Huo made personally liable for the costs order made against Noda. Cooper advised by email late on Wednesday that he and Cantone are indemnified by their appointor.
And, naturally enough, Noda sought to resist the application, this time engaging Krochmalik whose arguments against the release of the $70,000 to O’Brien and against the making of a non-party costs order encompassed among other things the concept of judicial discretion, claims of set-off and the fact that the costs order was not a debt but a non-quantified liability.
Krochmalik also sought to attack amounts claimed as costs by O’Brien, including two invoices issued by William Buck in respect of an opinion it provided about HHF’s tax liabilities, all to no avail.
A company registered in the Marshall Islands as Noda is and which doesn’t have a bank account as Noda does not will generally operate at a disadvantage.
In her opening King characterised Noda as an entity of “straw”, a descriptor the judge largely accepted by the time each party’s submissions closed, basing his inference on the fact that if Noda had had evidence to refute such a characterisation it would have put it before the court.
In fact it appeared that Justice Black was in no mood to indulge corporate entities that stuff their funds into “pillows”, saying Noda “didn’t lead any evidence of any alternative assets that could displace the court’s inference that it was impecunious”.
O’Brien got his orders, and with a public examination of Huo scheduled for later this month there’s potential for another round of disputation before the GSA issue goes to trial later this year. The real question is which Sydney barrister will next act for the client without a bank account?
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