Grosvenor Hill (Qld) Pty Ltd v Barber
[1994] FCA 59
•22 FEBRUARY 1994
GROSVENOR HILL (QUEENSLAND) PTY LIMITED v. RICHARD ANTHONY BARBER AND GREGORY
PAUL KELLY
No. QG213 of 1993
FED No. 59/94
Number of pages - 13
Corporations
(1994) 12 ACLC 176
(1994) 12 ACSR 646, (1994) 120 ALR 262
(1994) 48 FCR 301
COURT
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
BEAUMONT, SPENDER AND COOPER JJ
CATCHWORDS
Corporations - application by liquidator of corporation to examine a person about the corporation under Part 5.9 of the Corporations Law - possible claim by corporation against valuer for professional negligence - whether Court has power to order valuer to produce policies of insurance in respect of the valuations on examination - whether this "relate(s) or will relate to the (corporation's) examinable affairs".
Corporations Law s.9, s.53(a), s.596B, s.596D, s.597(9),s.53.
Re Laurie Cottier Production Pty Ltd (in Liq.) 11 ACLC 178
Re Indopal Pty Ltd (1987) 12 ACLR 54
Re BPTC Limited (in Liq.), (1993) 10 ACSR 756
Kelly v Murphy, (1993) 11 ACLC 1230
Re Spedley Securities Ltd.; Ex parte Potts (1990) 8 ACLC 673
Hamilton v Oades (1989) 166 CLR 486
Re The Financial Insurance Co. Ltd.; Bloxam's Case (1867) 36 LJ Ch (NS) 687
Re Marrickville Timber Co. Ltd. (1921) 21 SR (NSW) 643
Re Land Credit Company of Ireland (1872) 14 LR Eq 8
Massey v Allen (1878) 9 Ch D 164
Re Grey's Brewery Company (1883) 25 Ch D 400
Re Hugh J. Roberts Pty. Ltd. (In Liq.) (1970) 2 NSWR 582
Gerah Imports Pty. Ltd. v The Duke Group Ltd. (In Liq.), unreported, Supreme Court of South Australia (Court of Appeal) 23 December 1993.
HEARING
BRISBANE, 1 February 1994
#DATE 22:2:1994
Counsel and Solicitors Mr. I.D.F. Callinan QC with
for Appellant: Mr. G.H. Brandis instructed by Quinlan
Miller and Treston
Counsel and Solicitors Mr. W. Sofronoff QC with
for Respondent: Mr. J.D. McKenna instructed by Feez
Ruthning
ORDER
THE COURT ORDERS:
Appeal dismissed, with costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
BEAUMONT, SPENDER AND COOPER JJ Grosvenor Hill (Queensland) Pty Ltd ("Grosvenor") appeals, by leave granted, from an order ("the order") made by Drummond J pursuant to s. 597(9) of the Corporations Law ("the Law") requiring Grosvenor to produce certain documents at an examination of Mr. John Richardson and Mr. Brian Moffatt Waghorn. Messrs. Richardson and Waghorn were employed as valuers by Grosvenor. The examinations which, broadly speaking, concerned the affairs of Interchase Corporation Limited (in liquidation) ("Interchase"), are to be conducted pursuant to the provisions of Part 5.9 of the Law.
It is submitted on behalf of Grosvenor that the primary Judge had no power to make the order.
THE BACKGROUND FACTS
3. There is no dispute about the background facts. The respondents, the liquidators of Interchase, are concerned to ascertain if Interchase has a good cause of action for damages against Grosvenor by reason of alleged negligence in providing valuations ("the valuations") of the Myer Centre in Brisbane. If liability is established, substantial damages will be claimed. The liquidators seek the production to the Court, under the provisions of the Law to be mentioned below, of insurance policies held by Grosvenor in respect of the valuations.
THE LEGISLATIVE SCHEME
4. So far as is presently material, Part 5.9 of the Law provides as follows.
The Court may summon a person for examination about a corporation's "examinable affairs" (as defined in s. 9 of the Law) if, inter alia, the Court is satisfied that the person "may be able to give information about examinable affairs of the corporation". (s. 596B(1)(b)(ii)).
A summons under s. 596B requires the person to be examined on oath about the corporation's examinable affairs (s. 596D(1)(b)).
The Court may direct a person to produce, at an examination of that or any other person, "books" (as defined in s.9 to include a "document") that are in the firstmentioned person's possession and "are relevant to matters to which the examination relates or will relate" (emphasis added) (s.597(9)).
"Examinable affairs", as defined in s. 9, means, inter alia:
"(a) the promotion, formation, management, administration or winding up of the corporation; or
(b) any other affairs of the corporation (including anything that is included in the corporation's affairs because of section 53)" ...
For the purposes of the above definitions, by s. 53(a) it is provided that the affairs of a body corporate include, inter alia:
"(a) the promotion, formation, membership, control, business, trading, transactions and dealings (whether alone or jointly with any other person or persons and including transactions and dealings as agent, bailee or trustee), property (whether held alone or jointly with any other person or persons and including property held as agent, bailee or trustee), liabilities (including liabilities owed jointly with any other person or persons and liabilities as trustee), profits and other income, receipts, losses, outgoings and expenditure of the body".
THE HISTORY OF THE PRESENT MATTER
10. In order to understand the circumstances in which the order was made by Drummond J, it is necessary to refer briefly to the history of the matter.
On 10 November 1993, the liquidators applied to Drummond J, ex parte, for the issue of a summons addressed to each of Grosvenor, Mr Richardson and Mr Waghorn under s. 596B requiring their attendance for examination, and further requiring each of them to produce at the examination the following:
"...all books in your possession, custody or under your control relating to Interchase; in particular:
(i) any documents, working papers, notes, drafts, correspondence, supporting calculations, computer disks, or other documents relating to the valuations of the Myer Centre, Queen Street Mall, Brisbane, details of which are as follows:
What are described as four valuations are listed. Paragraph 1(ii) of the summons calls for the production of:
"... any documentation relating to insurance policies held in respect of the valuations referred to in paragraph (i) above."
In each case, a summons to this effect was issued on 15 November 1993.
By notice of motion dated 29 November 1993, Messrs. Waghorn and Richardson, and Grosvenor, applied to the Court for orders, inter alia, that each summons be set aside or, alternatively, varied by deleting para.1(ii). In the course of dealing with this notice of motion, on the application of the liquidators, Drummond J made a direction under s. 597(9). This is the order now under appeal. The order is in the following terms:
"THE COURT ORDERS THAT:
1. Grosvenor Hill (Queensland) Pty. Ltd., by its proper officer, produce at the examination of Mr. Richardson and Mr. Waghorn at 9.15 a.m. on Wednesday, 15 December, 1993 all books that are in Grosvenor Hill's possession and which are relevant to matters to which the examination of Messrs. Richardson and Waghorn will relate, being the books referred to in paragraph 1(i) and (ii) of the summons filed 15 November, 1993 directed to Grosvenor Hill (Queensland) Pty. Ltd."
THE REASONING AT FIRST INSTANCE
14. Drummond J said, and it is now common ground, that -
"...the question is whether in terms of s.597(9) the documents are 'relevant to matters to which the examination (of Messrs. Richardson and Waghorn) relates or will relate'."
His Honour went on to say:
"The documents in question, being documents that deal with the relationship, if any, between Grosvenor Hill, Mr. Richardson and Mr. Waghorn and their insurers, undouitedly relate to and are relevant to the personal affairs of those three persons. But that is not by itself sufficient to show that they cannot also be part of the 'examinable affairs' of Interchase ... The cases show that the expression 'the affairs of a company', both in ordinary parlance and in statutory contexts such as ss.596A and 596B, has a very wide meaning."
His Honour cited the following observations by Waddell CJ in Eq. in Re Laurie Cottier Production Pty Ltd (in liq.) (1993) 11 ACLC 178 at 181-2:
"It is clearly established that it is legitimate for a liquidator to use an examination to enable him to decide whether proceedings already commenced should be continued: re Hugh J. Roberts Pty. Ltd., at 585.
In this case the liquidator needs information as to the availability and likelihood of being able to realise the assets transferred if these are recovered. This is not information which he could gain reliably by discovery or interrogatories."
Drummond J referred also to the following remarks by McClelland J in Re Indopal Pty Ltd (1987) 12 ACLR 54 at 58:
"These considerations serve to emphasise that the identity and value of trust assets, as well as trust liabilities are very much part of the 'affairs' of an insolvent company trustee."
The primary Judge went on to say:
"The question whether a company in liquidation has a good claim in fact and law against a third party, such as a valuer who has prepared a valuation on which the company may have relied to its detriment, is a matter that clearly, in my view, forms part of the affairs of the company. For the liquidator to be able to examine an expert on a s.596B summons for the purpose of gathering information and evidence to see if the company has a good cause of action in damages against the expert is of little practical value if a liquidator cannot also examine the expert as to his ability to satisfy a judgment that the company may be able to recover against him. The dicta in re Laurie Cottier Productions and in re Indopal to which I have referred in my view support the proposition that the ascertainment of the value that a claim the company may have against another is part of the affairs of the company. I would therefore hold that documents throwing light on the extent to which each of Grosvenor Hill, Mr. Richardson, and Mr. Waghorn have professional indemnity insurance against any liability they may be under to Interchase in respect of the negligent performance of the valuations here in question is part of the 'examinable affairs' of Interchase, in that such documents relate to an issue in the winding up of Interchase."
THE GROUNDS OF APPEAL
19. As has been noted, it is now submitted on behalf of Grosvenor that there was no power to order the production of the insurance policies. It is said the policies do not fall within the language of s.597(9) because they are not 'relevant' to matters to which the examination relates or will relate, that is to say, the "examinable affairs" of Interchase. It is contended that the insurance cover, whilst of commercial interest, had absolutely no legal relevance to the potential causes of action. Moreover, the argument runs, neither Cottier nor Indopal was concerned with insurance, and the provisions of the Law should not be construed so as to override the ordinary forensic rule that a litigant is not entitled to inspect his opponent's insurance policies.
CONCLUSIONS ON THE APPEAL
20. In our opinion, the order made was within power.
As has been said, it is accepted, correctly, we think, that his Honour posed the question for determination as follows: For the purposes of s.597(9), was the insurance cover "relevant to matters which the examination of Messrs. Richardson and Waghorn relates or will relate", that is to say, information with respect to the examinable affairs of Interchase? In our view, it was at least open to the primary Judge to conclude that the existence, and the terms, of the insurance cover was "relevant" to those affairs.
According to the Macquarie Dictionary, the meaning of "relevant" is:
"bearing upon or connected with the matter in hand; to the purpose; pertinent".
In our opinion, "relevant" is used in s.597(9) in this sense.
As has been noted, the definition of "examinable affairs" in s.53(a) would include the property of Interchase. A cause of action which vests in Interchase by reason of breach of a professional duty owed to it by a valuer would, if established, be a chose of action possessed by Interchase and, in that sense, would be property of Interchase.
In accordance with the settled course of authority, to which we will refer below, information with respect to the probability or otherwise of success in litigation contemplated by the corporation woul d be information with respect to the "examinable affairs" of the corporation in question. This information would be "relevant", that is to say, it would bear upon or be connected with, the question whether the corporation possessed a cause of action, that is, a chose in action, as its property. It is not, and could not be, seriously disputed that an inquiry as to the existence, and value, of any property that the corporation may possess would be a "relevant" inquiry for the purposes of s.597(9).
A liquidator, when engaged in litigation on behalf of a company which is being wound up, or when contemplating instituting such litigation, is not in the same position as an ordinary litigant. The liquidator comes to the company as an officer of the court under a duty and responsibility to get in and maximise the assets of the company for distribution for the benefit of creditors. In the discharge of his of her duty and function, the liquidator comes to the company with limited or no knowledge of the company's assets, business and affairs. The liquidator is therefore in a position of disadvantage to make informed decisions of both a legal and a commercial nature necessary to carry out the winding up.
The legislature has recognised this position of disadvantage and addressed the problem by the enacting of s.596B of the Law and its predecessors. The effect of the legislation is to place a liquidator in a privileged position to oitain information relevant to and necessary for the proper discharge of his or her statutory function. The seeking of information to make decisions as to whether or not litigation ought to be embarked upon or continued in itself is no more than "an exercise of his duties and the fulfilment of his responsibilities as liquidator" (per Bryson J in Lombard Nash International Pty. Ltd. v. Berentsen (1990) 8 ACLC 1213 at 1217).
The courts have recognised since the introduction of statutory powers similar to that provided for in section 596B of the Law that the exercise of the power can involve tension between two important public interests. The first is the public interest in a liquidator oitaining necessary information to properly discharge the function of liquidator in the winding up of the company for the benefit of the creditors. The second is the right of the individual to privacy in regard to his or her affairs, documents and papers.
In Re Spedley Securities Ltd.; Ex parte Potts ((1990) 8 ACLC 673) (at 675) Young J said :-
"The court must always appreciate when an application is made to it under the sub-section that two important public interests need to be balanced: viz (1) ensuring that the liquidator in the interest of the creditors and the public, is able to collect all necessary information to carry out his public responsibility; and (2) an interest in justice to the witness: see Hamilton v. Oades ((1989) 166 CLR 486 at 496)".
In Hamilton v. Oades Mason CJ, in the passage cited by Young J, identified the two public purposes underlying s.541 of the Companies (New South Wales) Code. His Honour the Chief Justice said (at 496):-
"In exercising this discretion the judge is confronted with a difficult task. He has to take account of the competing public and private interests. There are two important public purposes that the examination is designed to serve. One is to enable the liquidator to gather information which will assist him in the winding up; that involves protecting the interests of the creditors. The other is to enable evidence and information to be obtained to support the bringing of criminal charges in connection with the company's affairs".
The second public interest is not relevant to the present appeal.
The necessity to oitain relevant information in relation to litigation by or against a company being wound up is but one instance of the broad general purposes identified in the decisions cited above and numerous other decisions to like effect. Clearly, one purpose of an examination in relation to pending or contemplated litigation is to determine whether or not there is evidence available to support a clai m brought by the company to recover property or damages, or conversely to defend a claim brought against the company, and the strength of that evidence. That such is a purpose falling within the power contained in s.596B of the Law was not challenged by Grosvenor; the whole weight of authority is against such a challenge in any event.
The question is whether the Court is limited by the section to ordering an examination the purpose of which is to go no wider than to determine whether or not there are reasonable grounds, including evidence, to litigate a case to a successful judgment, or whether, the Court has power to order an examination, the purpose of which is to ascertain the likelihood of any judgment being satisfied; that is, whether it is a permitted purpose to inquire as to the worth of a potential defendant so as to be able to make a practical assessment as to the likelihood of a return to the company of the fruits of any favourable judgment and the necessary legal costs expended in oitaining it. Is the court empowered under the section to order an examination or the production of documents to test the likelihood of the creditors in the winding up receiving a tangible benefit from the satisfaction of any judgment obtained and to enable the liquidator to determine whether it is prudent to commence or maintain litigation with knowledge as to the real likelihood of oitaining any tangible benefit beyond a mere judgment, including a judgment for costs, at the conclusion of the litigation?
In our view, the Court has such a broad power. Additionally, it is a power of long standing.
The courts have always allowed a third party or a banker to be examined as to the financial affairs of a contributory including requiring the production of banker's books relating to any account which the contributory had with the bank. The purpose of such examination was to ascertain the worth of the contributory as a matter incidental to making a decision to pursue the contributory for the amount due by way of contribution (see Re The Financial Insurance Company Limited; Bloxam's Case (1867) 36 LJ Ch (NS) 687 at 688 - 689; Swan's Case (1870) 10 LR Eq 675; Fricker's Case (1871) 13 LR Eq 178; In Re Contract Corporation; Druitt's Case (1872) 14 LR Eq 6 at 7; Re Marrickville Timber Co. Ltd. (1921) 21 SR (NSW) 643 at 650).
The power was not limited to ordering the examination of persons whom it might be considered had particular knowledge of a contributory's financial affairs. It also included a power to order the examination of any person whose relationship with a contributory was such that money or property may pass into the hands of the contributory thereby creating an asset to satisfy any claim by the company in liquidation. A deitor of the contributory was a sufficient relationship. See, for example, Re Land Credit Company of Ireland ((1872) 14 LR Eq 8) where Lord Romilly MR said :-
"Any person who is indeited to a contributory is liable to be summoned under sect. 115 of the Companies Act 1862 and to give information respecting the means of the contributory. The witnesses must, therefore, attend and produce the documents".
In Re Land Credit Company of Ireland, the persons against whom the orders were made were former partners of the contributory. The subject matter of the examination was what was payable to the contributory on the dissolution of the partnership. The documents were the ledger, cash book and cheque book of the partnership.
Likewise, where a contributory claimed a right of indemnity from a third party in respect of a call, made on the contributory by a liquidator, the power to order an examination under s.115 of the Companies Act 1852 (U.K.) extended to order the examination of the person against whom the indemnity was claimed, to ascertain whether or not the indemnity existed. In Massey v. Allen ((1878) 9 ChD 164), the company was the assignee of the contributory's alleged right of indemnity as trustee against Allen, whom the contributory alleged was the person for whom the shares were beneficially held. Allen himself had had no dealings with the company, nor was it suggested that he had any information relating to the affairs and dealings of the company, or that he held any property of the company. Rather, the issue was whethe r or not the contributory had any right of indemnity. That the existence of the indemnity was disputed was the factual question which required investigation. The purpose of the examination was to identify and attempt to realise from a third party a fund enforceable by the contributory which could be used to satisfy the contributory's liability to the company in liquidation. The examination was ancillary to an attempt to realise property of the company (the deit due by the contributory) as part of the winding up.
The relevant test as to the sufficiency of the relationship between the person against whom the examination was sought and the affairs of the company in liquidation was whether, in the opinion of th e court, that person was, or may be, able to give information relevant to increasing or protecting the assets available in the winding up. Hall V.C. in Massey v. Allen was of the view that this followed as a matter of construction of s.115 of the Companies Act 1862 (U.K.). His Lordship said (at 168) :-
"The first question is, whether the Defendant Allen is liable to be summoned before the Court under the provisions of the 115th section of the Companies Act, 1862. It has been contended that he is not a person within the meaning of the language used, i.e., 'any person whom the Court may deem capable of giving information concerning the trade, dealings, estate, or effects of the company,' which words, though a little varied, are substantially the same in the 117th section of the Act. There the word 'trade' is left out and the word 'affairs' inserted in its stead, which makes the meaning rather wider; therefore, any person who can give any information concerning the trade, affairs, dealings, estate, or effects of the company, ie., any person who can give material information in reference to increasing or protecting the assets of the company, is liable to be summoned, and the object of this action is unquestionably that of oitaining money from Massey or Allen, in whose shoes he stands, and by these means the company would be paid the calls on the shares. This case is analogous to Carver's Case. So much as to the construction of the section itself".
Importantly for the present appeal, the language of s.596B of the Law, having regard to the definition of "examinable affairs" in s.9 of the Law, has a broader operation than s.115 of the Companies Act 1862 (U.K.) and the later Australian versions of it.
The fact that the examination of a person under s.596B of the Law is not a proceeding inter partes is a circumstance in favour of a broad and generous construction to the section having regard to its statutory purpose, subject to the power of the Court not to allow the provision to be used oppressively to the private interests of the examinee. This approach was reflected in the judgment of Chitty J. In Re Grey's Brewery Company (1883) 25 ChD 400 where his Honour said (at 403) :-
"The 115th section of the Companies Act, 1862, was undouitedly inserted by the Legislature in that Act on the same principle as a similar clause in the Bankruptcy Act of 1849, and there is in the Bankruptcy Act of 1869 a section which is substantially to the same effect as that which was in the older Act of 1849, and in the Companies Act of 1862. Now the object of all these sections is to enable the Court to oitain information. I do not say that is the sole object, because other matters are mentioned in the 115th section, but the principal object is to oitain information from any persons capable of giving any information concerning the trade and affairs of the company. The nature of the proceedings is essentially this: the person examined is not examined as a witness, and to talk of examination in chief, or
cross-examination, or re-examination in a case of this kind, is to use terms that are really not applicable. What is being done is this: discovery is sought to be obtained which may be useful to the Court in the conduct of the proceedings in the winding-up, and to my mind, looking at the section and the purpose for which the provisions of that section were inserted, an examination of this kind must be considered in the nature of a secret proceeding. It stands, both in bankruptcy and in a winding up, on a footing which, of course, is not the footing on which cases are conducted which are by way of litigation between the parties".
His Honour continued (at 404) :-
"The result of the examination - that which is written down - is not evidence against anybody else. It is the statement on oath of the person under examination, but the examination is not a proceeding in the nature of a litigious proceeding between parties, the object of the examination being, as I have already stated, to get information in order to see what course ought to be followed with reference to some matter or some claim which the official liquidator when he applies to the Court is allowed to state privately".
The reasoning of Chitty J In Re Grey's Brewery Company was cited with approval by Stirling J in Learoyd v. Halifax Joint Building Company (1893) 1 Ch 686 at 692 - 693.
The approach in the older cases is no different from the approach taken by Street J in Re Hugh J. Roberts Pty. Ltd. (In Liq.) (1970) 2 NSWR 582. His Honour's reasoning is generally regarded as the basis for the current Australian view as to the proper interpretation of s.596B of the Law and its predecessors. Street J said (at 584) :-
"The liquidator is given by the statute this special authority to proceed by way of private examination to oitain information which he needs for the due winding up of the company, the affairs of which he has the responsibility of administrating".
In Re Spedley Securities Ltd.; Ex parte Potts, above, Young J recognised that the statutory power was not limited to ordering an examination to oitain evidence to prove a claim. His Honour (at 676) referred to two statements contained in Palmers Company Precedents (17th Edition, (1960) Part II at 471) which are relevant to the present appeal. The first statement, dealing with one of the circumstances when the power under the English equivalent of the then section 541 of the Companies (New South Wales) Code should be exercised, was as follows: "where the proceedings are pending against the company and he (the liquidator) desires to ascertain whether he can prudently proceed with or defend an action". (Emphasis added). The second statement was this: "(t)he object of the examination is to get information to enable the court to determine what course ought to be followed with reference to some matter or some claim in the winding up". In support of this statement the learned editors cited Re Grey's Brewery Company. His Honour continued (at 676):
"The language of this passage which was approved in an earlier form by Maughan AJ (Re Auto Import Co. (Australia) Ltd. (1924) 25 SR (NSW) 52 at 55) directs attention not to the liquidator merely getting information to prove a case, but to the wider matter as to what are the prospects of success. This has at least two aspects to it. First, whether the liquidator should invest the company's money in pursuing an action, either which he commences or is commenced against the company, and secondly, whether he should straight away pay out any demand that is made against the company".
So too, the Full Court of the Supreme Court of South Australia in Gerah Imports Pty. Ltd. v. The Duke Group Ltd. (In Liquidation) (unreported, Adelaide, 23 December, 1993) held that the power of the court to order the examination of certain persons under s.596B of the Law and the requirement that certain documents be produced in relation to that examination, extended to cover information as to the nature and extent of relevant professional indemnity insurance held by a firm of practising accountants who provided a report and valuation to the company in liquidation. The liquidator desired to oitain information as to a possible cause of action against the accountants, and to identify who were the members of the relevant partnership at the time the advice and valuation were given. Additionally, the liquidator wished to ascertain details of the relevant professional indemnity insurance cover with a view to determining the likely possibility of recovering any judgment obtained, having regard to the very considerable costs likely to be generated by the litigation, and, to make a commercial decision as to what potential benefits would flow from the proposed causes of action, having regard to capacities to pay. The principal judgment of the Court was given by Olsson J, with whom King CJ and Millhouse J agreed.
Olsson J restated the contentions of the liquidator in support of the order for examination as follows:
(i) the chose in action comprising the potential claim against the accountants was the largest and most significant potential asset in the winding up;
(ii) the information sought was readily available in the hands of the proposed examinees who had declined requests to supply to information or documents;
(iii) there was an arguable case that the professional indemnity insurers could be joined as a party to the proceedings for the purpose of oitaining a declaration of their liability to indemnify the accountants (see J.N. Taylor Holdings Limited (In Liquidation) v. Alan Bond and Ors. (1993) 59 SASR 432).
(iv) the common sense deduction was that the personal defendants were most unlikely to be of sufficient substance to meet any successful claim of the magnitude being made by the liquidator.
Olsson J said (at p 11):
"This being so it seems to me to be beyond question that the chose in action comprising a potential liability of the relevant defendants to Kia Ora and the ancillary aspect of facilitating the available means of getting in that property by first oitaining a declaration of liability against an insurer of the defendants are clearly matters falling within the phrase 'examinable affairs' of Kia Ora. So also those aspects are relevant to the liquidator's administration in the winding up, because they bear upon the assessment which he needs to make as to what steps are, in commercial terms, proper and desirable to take in discharging his duties. The commercial reality of pursuing long and expensive legal proceedings for a very large sum of money against individuals of
finite resources is clearly a matter as to which he needs to make a judgment, based upon the likelihood, or otherwise, or potential ultimate recovery from a relevant insurer. (As to this, what fell from Mason CJ in Hamilton v Oades (1988-9) 166 CLR 486 at 497 is pertinent.)"
Senior Counsel on behalf of Grosvenor submitted that to adopt a construction which would permit the making of an order for production of the policy of professional indemnity insurance would open the floodgates to permit the examination of all persons against whom the company in liquidation had a personal claim as to their personal financial details, on the basis of ascertaining the proposed examinee's ability to satisfy any judgment obtained against him or her. In our view, the ambit of the power is sufficiently wide to enable information to be sought from a defendant or potential defendant as to the ability of that person to satisfy any reasonable judgment which may be obtained in litigation instituted by the liquidator. In that context it is within power to order production of relevant documents, including insurance policies, to ascertain whether or not the person has an enforceable right to indemnity from an insurer or other person. The oitaining of such information by the liquidator in the course of the winding up is to facilitate the realisation of the chose in action to the best advantage of the company and its creditors. Realisation of the chose in action is an "examinable affair" within the meaning of s.596B(1)(6)(ii) and s.9 of the Law. Any policy of professional indemnity insurance containing the terms of the indemnity, including any exclusions and excesses and the amount of cover is, we think, a document "relevant to matters to which the examination relates or will relate" (s.597(9) of the Law).
We stress that it is important to bear clearly in mind the difference between the ambit of the power and the circumstances in which the power will be exercised. The Court retains a discretion in appropriate cases to refuse to exercise the power or to make its exercise subject to stringent conditions. It is impossible in advance to lay down all of the relevant circumstances which will affect the exercise of a discretion to exercise the power or to subject it to limitations or conditions. Some of the relevant circumstances are set forth in the judgment of Nicholson J in Re Rothwells Ltd. (No. 2) (1989) 7 ACLC 576 at 587 - 589. However, in the final analysis, it must be left to the Court in any particular instance, guided by the evident statutory purpose of the section, to determine whether or not the information is relevant to the liquidator for the purpose of performing his statutory duty and whether and in what manner any proposed examinee needs to be safeguarded beyond the ordinary safeguards of court control of the examination process from any oppressive exercise of the power.
It is true that the question of insurance cover may only become material in the event that the corporation were otherwise unable to satisfy any judgment that might be recovered against it. But, as has been said, in the present case, it has been foreshadowed that, if a cause of action exists, a substantial claim for damages will be made. In other words, it is not suggested that the request for the production of the insurance documents is frivolous or an abuse of the Court's process. It is accepted, properly we think, that the reason for the request is so that the liquidators may be better informed on the question whether it should institute proceedings against Grosvenor. If the order was, in truth, made within power, the conduct of the liquidators in seeking practical information as to the actual worth of any claim that Interchase might have would not, in our view, be an abuse of process and would not be oppressive. Other requests for information might constitute an abuse of process or be oppressive, but we need not attempt to express any view on this. The only question for us is whether the order was beyond statutory power in that the insurance cover was not relevant to information with respect to "examinable affairs" of Interchase.
In our view, the order was not beyond power. It was open to the primary Judge to conclude that the terms of an insurance cover were "relevant" for the purposes of s.597(9) in that they could provide information which was connected with the property of Interchase, that is to say, information which could reasonably be expected to throw light on the question of the actual worth of the alleged cause of action against Grosvenor.
We record that much reliance was placed by Grosvenor upon the decision of Bryson J in Re BPTC Ltd. (In Liq.) (1993) 10 ACSR 756 and the decision of the Court of Appeal on the appeal: Kelly v Murphy (1993) 11 ACLC 1230. The only context in which production of documents, including the professional indemnity insurance policy, was sought in re BPTC was as follows (10 ACSR at 766):
"In relation to a proposed examination of Mr. Short in the context of the allegation of vicarious liability, on the relationship between himself, BPTC and Freehills, and the extent to which Mr. Short's activity as a director of BPTC was carried out as part of the business of solicitors conducted by Freehills."
Production of the insurance policy was ordered, and production of other documents refused, in that limited and specific context. The issue raised in the present appeal was neither open nor argued before Bryson J nor the Court of Appeal. The decisions in Re BPTC are distinguishable and nothing said by their Honours is inconsistent with the reasoning of the South Australian Full Court in Gerah Imports Pty. Ltd. v The Duke Group Ltd. (In Liq.) and these reasons in respect of a discrete and different issue.
In the result, the appeal will be dismissed, with costs.
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