Queensland Judgments


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  • Unreported Judgment

Virgtel Limited v Zabusky


[2006] QSC 241





Trial Division





1 September 2006




31 August 2006


de Jersey CJ


Application of the respondent filed by leave on 31 August 2006 be dismissed, with costs to be assessed


CORPORATIONS – RAISING OF CAPITAL – UNDERTAKINGS TO COURTS – VARIATIONS – variations of undertakings given to court – whether a basis justifying variations sufficiently established


P H Morrison QC, with D J Williams, for the first and second applicants

D A Savage SC, with C Wilson, for the first to fifth respondents

No appearance for the sixth respondent


Gadens Lawyers for the first and second applicants

Provestlaw for the first to fifth respondents

No appearance for the sixth respondent

[1] On 9 November 2005, the first to fifth respondents gave undertakings to the court that they would not, pending trial, deal with their assets.  They now seek an order releasing the fourth defendant (Commslogic Pty Ltd) from the undertakings, or that they be varied, in order to facilitate a raising of capital in circumstances where the financial position of Commslogic is unpromising.

[2] The applicants oppose any variations, substantially on the ground of the respondents’ incomplete disclosure of what they propose.  Mr Morrison QC, who appeared for the applicants, said that it may be that if given full disclosure, the applicants would not oppose a variation, but at present, they are disinclined to take that course.

[3] The order made on 9 November 2005 was premised on the applicants’ giving the usual undertaking as to damages, backed up by the deposit of $500,000 in the applicants’ solicitor’s trust account.

[4] The undertakings then given by the respondents are as follows:

“Not to do the following acts:

(a)removing, or causing or permitting to be removed or taking any steps to remove, any of their assets out of the jurisdiction of this Court; or

(b)disposing of, transforming, transferring, charging, dissipating or diminishing or in any way dealing with their assets within the jurisdiction unless for the following purposes:

(i)to enable them to pay and to continue to pay the reasonable legal expenses of defending these or any other legal proceedings and any appeal there from;

(ii)to enable them to pay and to continue to pay the reasonable legal expenses incurred to protect their assets or vindicate their other legal rights to protect their assets by commencement and prosecution of any other proceedings or to defend any such proceeding commenced against any of them;

(iii) to meet their taxation liabilities and those of each of them;

(iv) to comply with any statutory requirement to which they or any of them are subject;

(v) to meet the normal accounting fees;

(vi) to pay bona fide ordinary business expenses incurred by any of them;

(vii) to pay their ordinary living expenses and those of their family including the Second Respondent’s mother, the first Respondent’s sister, and the First and Second Respondent’s daughter;

(viii) to pay the ordinary wage paid by the Fourth Respondent to the Third Respondent.

whether in the case of the First to Third Respondents, by the First to Third Respondents personally or by the First to Third Respondents’ respective servants or agents or any of them or otherwise; and whether in the case of the Fourth and Fifth Respondents, by their directors, officers, servants or agents or any of them or otherwise, except with the prior written consent of the Applicants’ Solicitors.”

[5] The undertakings were qualified by these additional orders:

“2.This undertaking shall not prevent the Respondents from dealing with their assets in terms of paragraph 1(b) provided such dealing is reasonably required in the ordinary course of business of the Fourth and Fifth Respondent.

4.In the event that any of the dealings referred to in paragraph 2 above exceed $500,000 to give the Applicant’s solicitors seven (7) days prior notice in writing of such dealing.”

[6] The order was cast in a way intended to assist the applicants to monitor the respondents’ adherence to it:

“3.The Respondents and each of them shall within seven days of the service of this order upon them make and serve on the Applicant’s solicitors an affidavit disclosing with full particularity:

(a)the full value of their assets whether within or without the jurisdiction of the Court;

(b)the nature of all such assets;

(c)the whereabouts of all such assets;

(d)whether those assets are held in their own names or held jointly or held by nominees or otherwise on their behalf or on behalf of any of them;

(e)the identity of all bank and other accounts in their sole names or jointly held by nominees or otherwise on their behalf and the sums standing to their credit in those accounts; and

(f)any real estate or other assets, money or goods owned by them or any of them and the whereabouts of the same and the names and addresses of all persons who have or may have possession, custody or control of any such assets, money or goods at the date of service of this order.”

[7] In mid July this year, the applicants ascertained that on 12 December 2005, about a month after the court order, Commslogic granted a mortgage debenture to the ANZ Bank, over all its assets and undertakings.  That plainly breached the undertaking.  The applicants sought consequent relief.  McMurdo J, hearing the application, described the breach as serious, and the respondents’ explanation as “not entirely persuasive”.  I mention this as part of the background which may explain the applicants’ circumspect approach to the present application.

[8] Mr Morrison pointed to two other features in that regard.  In a document provided to the applicants for the first time on 30 August 2006, the ANZ Bank, on 23 June 2006, offered Commslogic what would appear to be a new finance facility of $1.7 million, subject to granting various securities.  The first respondent Mr Zabusky, a director of Commslogic, refers to it as an established loan agreement (paras 57-62).  Prior notice of that dealing should have been given to the applicants, but was not (para 4 Order).

[9] The other feature is that although Mr Zabusky said (para 70) that Commslogic disclosed to the broker (to which I will subsequently refer) “the facts and circumstances the subject of” the substantial overall proceeding between the parties, the apparent actual disclosure was confined to a sparse acknowledgement of their currency (cl 1(j) “business plan key data inputs” document).

[10] The genesis of the present application was advice to the applicants on 22 August 2006, by Commslogic, that it intended to pursue a capital investment raising to the tune of $40 million, to be in place by 31 October 2006.  The next day the solicitors for the applicants complained of the lack of notice, and of deficiencies in the information provided, and sought answers to some 25 questions – covering objections of the character of those raised before me.

[11] In an affidavit sworn 24 August 2006, Mr Zabusky swore that Commslogic had accrued losses of $2.4 million, and while generating $100,000 income per month, needed double that to cover expenses and service debts.  He referred to negotiations with prospective investors. 

[12] Then on 27 August 2006 the respondents’ solicitors forwarded a proposed “memorandum of understanding”, to be signed by Commslogic before noon on 29 August.  The respondents subsequently undertook not to sign the document before noon on 1 September.  By their current application, the respondents are seen to be acknowledging that were Commslogic to sign the memorandum of understanding without more, it would breach the undertakings contained in the order of 9 November 2005.

[13] I turn now to the major deficiencies in the respondents’ disclosure, as submitted for the applicants.

[14] The first is nondisclosure of the identity of the broker.  Clause 2 would operate to entitle the broker forthwith to 15,000 B class share in Commslogic.  Also, there is nothing to specify the rights which attach to B class, as opposed to ordinary, shares.  Clause 2.5 may suggest the broker could be resident off shore.

[15] Second, Commslogic has not disclosed the names of the intended investors.  The matter has proceeded to a point where, one reasonably infers, they would be known.  Mr Morrison raises the possibility they may be parties associated with the Zabusky interests.

[16] The third concern relates to cl 5, which obliges the Zabusky Family Trust, which presently owns all of the issued shares in Commslogic, to take various steps to facilitate the raising of the capital, and regardless of whether the $40 million is actually injected into the company.  Essentially, those steps centre about the establishment of a holding company, which would hold the shares in Commslogic.  Mr Morrison raised the possibility it might be an off shore company, to which Mr Savage SC, appearing for the respondents, responded with an undertaking it would be a company incorporated in Queensland.

[17] The funding by new investors might be by way of loans (cl 5.4) to the holding company, presumably secured over its undertaking, with, presumably, loans by it to Commslogic secured by mortgage debenture with priority over any entitlement which may be established in this proceeding in favour of the applicants.

[18] The fourth concern relates to cl 6.2, by which Commslogic abandons choses in action arising from its directors’ personal guarantees.

[19] Finally, cl 9.5 provides for a fee to be paid by Commslogic to the broker, yet the amount or rate has been concealed.  It may be a very substantial amount, in light of the amount to be raised.

[20] I consider those to be legitimate concerns, and while unanswered, not outweighed by the desirability, if it can prudently be secured, of bolstering the financial position of Commslogic. 

[21] The reason why the respondents have not made full disclosure is Mr Zabusky’s concern that Mr Van Leeuwin, of the applicants, would seek to sabotage the initiative.  Mr Savage offered to provide the court, on a confidential basis, with a full copy of the memorandum of understanding.  His intention however was that that not be made available to Mr Morrison.  That would not, in this adversarial litigation, be an appropriate way for the court to proceed, in my view.  I am not satisfied that Mr Zabusky’s concern justifies the non-disclosure which has occurred.

[22] In the event I took this view, Mr Savage sought a substantial increase, to $10.6 million, in the amount deposited on trust as security for the applicants’ undertaking as to damages, on the basis Commslogic will likely suffer very substantial consequent financial loss.  I accept Mr Morrison’s counter submission, however, that any such loss would not result from any act or omission on the part of the applicants, but from the respondents’ own inability to persuade the court that the variations sought should now be made.

[23] For these reasons, I order that the application of the respondent filed by leave on 31 August 2006 be dismissed.


Editorial Notes

  • Published Case Name:

    Virgtel Limited & Anor v Zabusky & Ors

  • Shortened Case Name:

    Virgtel Limited v Zabusky

  • MNC:

    [2006] QSC 241

  • Court:


  • Judge(s):

    de Jersey CJ

  • Date:

    01 Sep 2006

Litigation History

No Litigation History

Appeal Status

No Status