Application of Pino Fiorentino & William James Hamilton in Re - J&L International Pty Ltd

[2009] NSWSC 1070

CITATION:	Application of Pino Fiorentino & William James Hamilton in Re - J&L International Pty Ltd [2009] NSWSC 1070
HEARING DATE(S):	28 September 2009
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Brereton J
EX TEMPORE JUDGMENT DATE:	28 September 2009
DECISION:	Order for production set aside – examination adjourned – applicants to pay the liquidators' costs thrown away due to adjournment of examination on an indemnity basis
CATCHWORDS:	CORPORATIONS – external administration – examination of officers – production of documents – application to set aside orders for production and adjournment of examination – where applicant contends that order is oppressive and abuse of process – court must be satisfied that particular examinations will be assisted or facilitated by production of particular documents – order for production extraordinarily wide – insufficient time to comply – where court cannot be satisfied that examination will be facilitated by production – held: order for production set aside – Where examinees claim that liquidators are pursuing examination for an improper purpose – where arguably inappropriate for liquidator to conduct examination – late application – held: examination adjourned – applicant to pay the liquidator’s costs thrown away due to adjournment of examination on indemnity basis
LEGISLATION CITED:	(CTH) Corporations Act 2001, s 596A (NSW) Civil Procedure Act 2005, s 68
CATEGORY:	Procedural and other rulings
CASES CITED:	Meteyard v Love [2005] 65 NSWLR 36 Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 1188 Re BBPT Seat Limited No 5 (1993) 10 ACSR 756 Re BPTN Limited (1992) 8 ACSR 533 Re Leisure Developments Queensland Pty Limited v Lenn & Palmer (2002) 41 ACSR 276
PARTIES:	Pino Fiorentino (first plaintiff/respondent) William James Hamilton (second plaintiff/respondent) Hong Hang (first applicant) Hai Hang Zhang (second applicant)
FILE NUMBER(S):	SC 1542/09
COUNSEL:	Mr Purcell (sol) (plaintiff/respondents) Mr S Gollege (applicants)
SOLICITORS:	Purcell Lawyers (plaintiff/respondents) Sage Solicitors (applicants)

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BRERETON J

Monday 28 September 2009

1542/09 Pino Fiorentino & William Hamilton as Liquidators of J & L International Pty Limited (In Liq)

JUDGMENT (ex tempore)

1 HIS HONOUR: On 17 February 2009, the liquidators applied for the issue of summonses under (CTH) Corporations Act 2001, s 596A, for the examination of Hai Hong Zhang and Hong Hang. The summonses to Hong Hang and Hai Hong Zhang were issued under s 596B on 18 February 2009, initially returnable on 25 March 2009. Orders for production under (NSW) Civil Procedure Act 2005, s 68, were issued addressed to each of Hong Hang, Hai Hong Zhang and Anita Olsen, returnable on 10 March 2009. The summonses and orders for production were not able to be served and by Notice of Motion filed on 2 July 2009 the liquidators sought orders for substituted service; on the same day, they amended their originating process.

2 On 21 July, the Court amended the return date of the orders for production to 27 August and the return date for the summonses for examination to 29 September; and made orders for substituted service, the effect of which was that service was taken to have been effected 14 days after posting by mail to approximately eight or nine separate addresses for each of the examinees. A further order for production was issued on 21 July 2009, returnable on 27 August 2009, to each of Hong Hang and Hai Hong Zhang. The order for substituted service was complied with in respect of the examinees on either 24 July or at the latest 6 August 2009.

3 On 22 September 2009, the liquidators procured the issue of additional orders for production, addressed to each of Hai Hong Zhang and Hong Hang, containing thirteen numbered paragraphs, and an order providing that those orders would be taken to have been served one day after being emailed and faxed to the relevant examinee, which was to take place at 5pm on 22 September 2009. Those orders for production cover every conceivable document of all descriptions relating in any way to the financial affairs of the examinees, or what are called their “related entities” (being another eleven corporations) for a period of nine years from 1 July 2000 to date. Those orders for production are also returnable on 29 September 2009, when the examination is to take place. By interlocutory process filed in Court today, the examinees seek orders setting aside the orders for production of 22 September, and adjourning the examination.

4 So far as the application to set aside the order for production is concerned, it is contended that it is oppressive and an abuse of process on the basis that it seeks documents so extensive that it could not possibly be complied with in the time permitted and that a significant body of them could not possibly be relevant to the subject examination.

5 In Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 1188, Barrett J summarised the applicable law in this territory, particularly by reference to the observations of Basten J in Meteyard v Love [2005] 65 NSWLR 36, 52-53:

[17] It is, however, important to emphasise that s 68 may be so used only for the purposes of a particular examination. This is made clear in Re BPTC Ltd (No 5) (1993) 10 ACSR 758, a decision of Bryson J cited with approval by Basten JA in Meteyard v Love (above). Bryson J said (at p 762):

There is a well established practice, and explicit judicial approval of requiring production of documents under Pt 36 r 12 by persons not the subject of examination orders. The ancillary power can only be exercised where the production of documents is required for the purpose of exercise of the power to conduct an examination.

[18] Then, after noting that the orders relating to the examination of the particular individuals contained a limit on the scope of the examinations (and the reference by McLelland J in Re BPTC Ltd (No 2) (1992) 8 ACSR 533 to the need for a connection between an order for production of documents and a particular examination, so that the order is ancillary to that examination), Bryson J said (at p 763):

An order for production of documents which had the effect of compelling a production of documents which were not required for the examination would in my opinion be oppressive; an order for production which had that purpose would in my opinion be made in excess of the power to make such an order.

[19] The same matter was adverted to by Austin J in Re Leisure Developments (Qld) Pty Ltd ; Ell v Palmer (2002) 41 ACSR 276, another decision cited with apparent approval by Basten JA in Meteyard v Love . Austin J said at pp 281, 282:

As to the second ground, the standard of precision to be met by an order for production was considered by Bryson J in Re BPTC Ltd (No 5) (in liq) (1993) 10 ACSR 756. The practice is to require production of documents, by persons other than those who are the subjects of examination orders, under Pt 36 r 12 of the Supreme Court Rules. That power can only be exercised where the production of documents is required for the purpose of exercising the power to conduct an examination: at 762. While the power to compel production of documents is a wide one, it is ancillary to an examination order, and cannot require the production of documents independently of the examination of particular individuals. An order for production which had the effect of compelling production of documents which were not required for the examination would be oppressive and in excess of the power to make such an order: at 763. Where a call for production goes beyond these limits, it may not be possible to sever the call so far as it covers documents ancillary to the examination order from its coverage of other documents, and in such a case the whole order for production or notice to produce may need to be set aside: at 766.
[20] In Re Allstate Exploration NL; Ryan v QBE Insurance Ltd (2003) 46 ACSR 379 at p 383, Austin J described a third party order for production, in the examination context, as “supplementary to the examination process”.

6 In several cases, it has been emphasised that an order for production under (NSW) Civil Procedure Act 2005, s 68, or its predecessor, in aid of an examination under the Corporations Act, ought only be used to compel the production of documents required for the particular examination [see Meteyard v Love, supra; Re BBPT Seat Limited No 5 (1993) 10 ACSR 756, 762; Re BPTN Limited (1992) 8 ACSR 533; Re Leisure Developments Queensland Pty Limited v Lenn & Palmer (2002) 41 ACSR 276]. In Onefone Australia v One.Tel, Barrett J said:

[21] The problem for the SPL in the present case is that, while there was reference from the bar table to the intention to re-activate two Part 5.9 examinations in November (those of Mr Miller and Mr Green), there was no evidence given about the matter. The court was not told what the re-activated examinations are intended to achieve. It might perhaps be inferred that one of the documents sought bears a relevant relationship to the examination of Mr Miller. The document is described as “a complete copy such [sic] of the imaged data extracted by ASIC, or supplied to ASIC, from the laptop and the Palm Pilot of Darren Howard Miller as in the possession of ASIC” – but even then, the description is not in any way confined to content relevant to the affairs of One.Tel, let alone some aspect of them in relation to which Mr Miller may be further examined.

[22] In short, the court is given by the SPL no means of being satisfied that the order he seeks under s.68 of the Civil Procedure Act by reference to the further Part 5.9 examinations of Mr Miller and Mr Green is concerned with documents bearing such a relationship to those examinations (or one or other of them) as to make the power conferred by s.68 exercisable in the way sought. The court has no way of making a connection between the two examinations and the particular documents. It is not enough to say that the examinations, of their nature, concern the “examinable affairs” of One.Tel and the documents also concern the “examinable affairs” of One.Tel. The court must be able to see that the particular examinations will be assisted or facilitated by the production of the particular documents.

7 In my opinion, the same can be said here. The Court is given by the liquidators no means of being satisfied that the orders sought and made under s 68 of the Civil Procedure Act bears such a relationship to the examinations to be conducted as to make the power conferred by s 68 exercisable in the way sought. The Court has no way of making a connection between the examinations and the particular documents. There is no way of seeing that the particular examinations to be conducted will be assisted or facilitated by the production of particular documents. I emphasise, as Barrett J said, that it is not enough to say that the examinations of their nature concern the examinable affairs of the corporation and the documents also concern the examinable affairs of the corporation. Moreover, in the present case not even that can be said: as was conceded, the documents relate to the assets, liabilities, income, resources and financial circumstances generally of former directors of the corporation.

8 Moreover, on any view, the order for production is extraordinarily wide in what it requires to be produced, and allows manifestly insufficient time for that to be done. The time for such an order to be obtained was when the examinations were fixed months ago, and not just seven days before they are to take place.

9 I therefore order that the orders for production made on 22 September 2009 addressed to Hong Hang and Hai Hong Zhang be set aside.

10 So far as the application for adjournment of the examination is concerned, the fundamental basis on which that application is made is that the examinees have initiated proceedings for the removal of the liquidators, and contend that the liquidators are pursuing the examination for an improper purpose and, in addition, that it is inappropriate for the liquidators to conduct an examination about a transaction which (the examinees contend) was advised at the outset by the liquidators shortly prior to their appointment.

11 It may well be that those allegations turn out to be without foundation, but at this stage there is affidavit evidence – to which the liquidators have had no reasonable opportunity to respond – which would tend to support them. If those allegations are ultimately sustained, then it would be inappropriate for the examinations to proceed, at least at the instance of the present liquidators. Had the application been made promptly after service of the examination summonses, I do not think there is much doubt that steps would have been taken to ensure that the examination not proceed until those allegations could be explored.

12 The application for adjournment is, however, made very late. The prejudice that that will occasion – so far as it has been argued before me – would be the costs which the liquidator has incurred in preparing the matter for tomorrow. In those circumstances, the price that the examinees must pay for an adjournment is payment on an indemnity basis of the liquidators’ costs.

13 I order that the examinations appointed to take place before the Registrar on 29 September 2009 be adjourned generally with liberty to the liquidator to restore them on 7 days notice by arrangement with the Registrar.

14 I order that the applicants pay the liquidators’ costs thrown away by the adjournment of the examination, on an indemnity basis.

15 I order that the liquidators pay the applicants’ costs of the Notice of Motion.

16 I adjourn the balance of the Notice of Motion to the Registrar’s corporation list at 9.15am on Tuesday 6 October 2009.

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