In the matter of ACN 067 436 024 Pty Limited (in liquidation)

[2013] NSWSC 422

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of ACN 067 436 024 Pty Limited (in liquidation) [2013] NSWSC 422
Hearing dates:	10 April 2013
Decision date:	10 April 2013
Jurisdiction:	Equity Division - Corporations List
Before:	Black J
Decision:	Application for amendment to orders refused. Matter relisted in Corporations List. Costs reserved.
Catchwords:	CORPORATIONS - examinations relating to insolvency - public or private examination - orders sought to vary access and use transcripts and other records of private examinations - circumstances of pending criminal proceedings PROCEDURE - joinder application - order sought for two persons to be joined as applicants - where proposed applicants have not brought an application before the Court.
Legislation Cited:	- Civil Procedure Act 2005 (NSW) s 90 - Corporations Act 2001 (Cth) ss 596(1)(e), 596(1)(f), 596B, 596F, 597 - Court Suppression and Non-Publication Orders Act 2010 (NSW)
Cases Cited:	- Global Finance Group Pty Ltd (in liq) v Margaria [2001] WASC 50 - Hamilton v Oades [1989] HCA 21; (1989) 166 CLR 486 - McMahon v Gould (1982) 7 ACLR 202 - Re Kassem (as liquidators of Clarecastle Pty Ltd) [2011] NSWSC 490 - Re Southern Equity Corporation Ltd (in liq); Bond and Cobache v England (1997) 25 ACSR 394
Category:	Interlocutory applications
Parties:	Nicholas Crouch as liquidator of ACN 067 436 024 Pty Limited (in liquidation) (Applicant)
Representation:	Counsel: M. Stevens (sol) (Applicant) P. Bruckner (Examinee - Mr McCarthy) Solicitors: O'Neill Partners (Applicant) Solari Lawyers (Examinee - Mr McCarthy)
File Number(s):	2011/263929

Judgment

1. By interlocutory application filed on 7 March 2013, the applicant, Mr Nicholas Crouch ("Liquidator") as liquidator of ACN 067 436 024 Pty Limited (in liq) ("Company") seeks orders under, inter alia, ss 596F and 597 of the Corporations Act 2001 (Cth) that orders 1, 2, 4 and 5 dated 21 October 2011 ("21 October orders") be vacated; the Liquidator be relieved from any expressed or implied terms of confidentiality pursuant to those orders and, to the extent necessary, he be released from any implied undertaking concerning the use of two records of examination of Messrs McCarthy and Seller and/or documents produced in respect of orders for production in the proceedings for the purpose of considering and, if he sees fit, causing the company to commence proceedings in respect of its investment in what is described as the "whisky scheme". The Liquidator did not press for orders in that form today, but has indicated that he will do so if unsuccessful in obtaining alternative orders in the form put before the Court in two versions today.

1. By way of background to the 21 October orders, the application made on 7 March 2013, and the alternative form of orders now put before the Court, Messrs McCarthy and Seller are each subject to criminal proceedings in respect of the whisky scheme. The Court issued summonses for examination of Messrs McCarthy and Seller in September 2011. The examinations ultimately proceeded after a regime was established, with the Liquidator's consent, of confidentiality and non-publication directions. In particular, paragraphs 1-2 and 4-5 of the 21 October orders, which are now sought to be replaced, relevantly provided that the examinations of Messrs McCarthy and Seller conducted under ss 596B and 597 of the Corporations Act be held in private; paragraph 4 restricted access to the transcripts or written records of the examinations to specified persons; and paragraph 5 restricted publication or communication of the information about the examinations, including the questions asked and answers given.

1. Those orders broadly corresponded to the orders made by Ward J in Re Kassem (as liquidators of Clarecastle Pty Ltd) [2011] NSWSC 490 which also related to the "whisky scheme". In that case her Honour had pointed to the public purpose served by the examination regime on the one hand, and had also considered the interaction between pending criminal proceedings and a liquidator's examination, referring to the decision of the High Court in Hamilton v Oades [1989] HCA 21; (1989) 166 CLR 486, and to the recognition of the need to balance justice between the parties in McMahon v Gould (1982) 7 ACLR 202 at 206 - 207, and the further consideration of those issues in Global Finance Group Pty Ltd (in liq) v Margaria [2001] WASC 50 (at [15]). Her Honour had concluded in Re Kassem (as liquidators of Clarecastle Pty Ltd) above at [63]:

"Provided that safeguards can be put in place to protect the position of the examinees in the subsequent criminal proceedings (by directing that the examinations be held in private and imposing restrictions on access to the transcript), I am of the view there is not sufficient prejudice likely to be suffered by the examinees being required to prepare for and attend public examinations to outweigh the public interest in the liquidators being able to perform their obligations in the winding up and to ascertain for the benefit of creditors what occurred in relation to the Scotch Whisky Scheme without further delay."

Her Honour there made orders for the examinations to be made in private and "to put in place a regime that would maintain the ability of the Court to preclude access of the transcripts of the examinations until after the conclusion of the hearing in the criminal proceedings and then subject to any further order of the Court" (at [87]). The parties consented to similar, but not identical, orders before the Registrar in these proceedings, which permitted access to the transcripts of examination (no authenticated written record of the examinations having been required) to say specified class of persons subject to a confidentiality regime.

1. The evidence indicates that the Liquidator is now considering issuing proceedings against Mr Seller, Australian Spirit Management Pty Limited and a legal firm of which Mr Seller was at one time a partner for recovery of moneys invested in the whisky scheme. The Liquidator indicates that he seeks to rely on the information obtained in the examinations to commence those proceedings and would, in all likelihood, serve the examination transcripts in support of the claim upon the proposed defendant.

1. A difficulty arises, however, because Messrs McCarthy and Seller are still subject to the criminal proceedings, to which I referred above, which were recognised by the imposition of the orders to which I have also referred. Those proceedings were permanently stayed by a judge of this Court on 17 August 2012; the Court of Appeal subsequently allowed an appeal against that decision on 1 March 2013, permitting the criminal proceedings to proceed; and, although Messrs McCarthy and Seller have filed an application for special leave to appeal to the High Court against that decision, the matter should presently be approached on the basis that the criminal proceedings are pending.

1. I have set out the background to these matters at some length, because they remain relevant notwithstanding the proposed further orders that were put before the Court following the original interlocutory application. It appears the parties, or at least the Liquidator and Mr McCarthy, have reached a degree of agreement as to one form of orders and seek to have those orders made subject to certain issues as to their efficacy being resolved. It appears from submissions that Mr Seller adopts Mr McCarthy's position in that regard although Mr Seller did not appear in this application. There remains however, a wider issue as to whether the issues sought, whether in the form of the "consent" orders or in the alternative form proffered by the Liquidator, may properly be made by the Court.

1. I should say something further, at this point, as to the Liquidator's position in this application. In written submissions, the Liquidator indicated that he had agreed to the orders proposed by Messrs McCarthy and Seller, subject to the restrictions the orders sought to impose on persons not parties to the application. That is true in one sense, in that it appears that Mr McCarthy has proposed a form of order in response to the Liquidator's original application; nonetheless, it should be recognised that the Liquidator is the party who seeks the amendment to the previous orders and need to establish to the Court's satisfaction that that amendment should be made. The Liquidator is not a respondent to an application made by Mr McCarthy to have his own examination transcript released to third parties. The Liquidator has, as I have noted, in turn advanced an alternate set of orders if the Court is not prepared to make the order agreed with Mr McCarthy and has, as I have noted before, also reserved the right to pursue the interlocutory application if neither the consent orders nor the alternative orders were made.

1. The first order sought in the consent orders is the two persons, Mr Peter Brent and Ms Mary Ann Brent ("the Brents") be joined as applicants. It appears that the Brents were directors of the Company before it was placed in liquidation by a creditors' voluntary resolution in March 2011; the Liquidators submit that they personally invested money in the whisky scheme in 1999 of a substantial amount in addition to the Company making an investment in the scheme; the shareholder of the Company was another entity controlled by the Brents; and, the Liquidator contends, the Brents intend to be joined as co-plaintiffs in the proposed proceedings, presumably on the basis that the Liquidator sees no difficulty with himself and creditors or contributories of the Company being represented by the same solicitors in those proceedings. The amendments now sought to the 21 October orders would permit the Brents access to the examination transcripts and documents produced by Messrs Seller and McCarthy.

1. There it seems to me a difficulty with the first order sought. That difficulty is that Mr and Mrs Brent do not, in fact, bring any application before me, although Mr Stevens, who appears for the Liquidator, points out that, on his instructions, they consent to the Liquidator's application. I would be reluctant to grant leave for persons to be joined as applicants, where they do not, in fact, bring an application. I would also be reluctant to make that order, in the absence of those sought to be joined as applicants, where it is unclear whether they recognise that the consequence of being joined as an applicant in the proceedings is that they would be exposed to liability for costs of the application if it is unsuccessful. So far as the Brents seek to be joined as applicants, then it is preferable that they first identify the application that they make, and that it be clear that they accept the potential liability for costs from being joined in the application. I will not make an order in the form of the first order, in the Brents' absence and without clarity as to those matters.

1. The second order sought is amendments to paragraphs 4 and 5 of the 21 October orders. The proposed amendments to orders 4 and 5 are complex, but, in broader terms, seem to have the consequence, first, that any future leave of the Court for access to records of the examinations under s 596(1)(e) of the Corporations Act may be given in these proceedings or in future civil proceedings which may be commenced by the company against specified persons ("proposed proceedings"). It is plain enough that an application for such leave may be made in these proceedings and no further order is required to achieve that result. It does not seem to me that I should determine whether such an application should be made in the proposed proceedings which is a matter better left for determination, if the proposed proceedings are commenced, by the judicial officer dealing with them.

1. The second amendment sought in respect of order 4 is that the range of persons who may have access to the transcripts of examinations of Messrs McCarthy and Seller would be extended to the Brents and "named defendants in the proposed proceedings" who have been notified of the directions and their respective legal advisers. (I note there is no definition of the term "named defendants in the proposed proceedings", but that is a matter which could be addressed by a minor amendment). The amendment sought to paragraph 5 of the 21 October orders seeks an order under s 596(1)(f) of the Corporations Act that the Brents, and each of the named defendants to the proposed proceedings who have been notified of the directions, must not publish or communicate to any person other than their respective legal advisers (or after giving notice of the terms of the directions) the named defendants in the proposed proceedings. There is a degree of complexity in this provision, not least because the named defendants appear in it twice, both as persons subject to the restraint and as persons to whom communication may be made on condition.

1. The combined effect of the amendment to orders 4 and 5 seem to be to extend access to the transcripts of the examinations to the Brents and the named defendants in the proposed proceedings and to impose restrictions on publication and communication on those persons although they are not party to the present proceedings. The Liquidator identifies, but does not make substantive submissions about, an issue whether the Court has power to, or should, make orders restricting publication and communication binding on third parties who are not before the Court. Mr Bruckner, who appears for Mr McCarthy, makes substantive submissions as to that issue, and submits that the Court has power under s 596F of the Corporations Act, its inherent jurisdiction and s 90 of the Civil Procedure Act 2005 (NSW), in granting access to documents of non-parties to make orders that those non-parties, not to disclose the relevant material. Mr Bruckner also refers to the Court's power to make confidentiality and non-publication orders under the Court Suppression and Non-publication Orders Act 2010 (NSW). Mr Bruckner submits that the Court would exercise its discretion to impose such conditions and makes clear that Mr McCarthy does not consent to disclosure that is not conditioned on such confidentiality and such non-publication orders. He points to the recognition of the rights of persons facing prosecution in this regard in matters addressed in Hamilton v Oades and in Clarecastle, to which I have referred above.

1. I do not find it necessary to address the Court's power to make non-publication orders binding on third parties because it seems to me this application can and should be decided on a significantly narrower basis. It would be open to the Brents, Australian Spirit Management or the law firm that is a proposed defendant to the proposed proceedings to apply, by interlocutory process, whether individually or in conjunction with the Liquidator, for access to the relevant transcripts, and offer confidentiality undertakings to the Court in order to address any concerns as to maintaining the confidentiality and use of the documents. Here, it is implicit in the Liquidator's application that the Brents seek such access, although they have made no such offer of such an undertaking. There is evidence that Australian Spirit Management neither consents to nor opposes the application, so it appears that it does not itself seek such a transcript, and it offers no such undertaking. There is no evidence as to the attitude of the law firm as to whether access is sought and it, not having made its position clear, it also offers no such undertaking.

1. So far as the Brents are concerned, I can see no reason why the Court should exercise a discretion to grant such access, or make orders for confidentiality seeking to bind them as third parties, where they have not themselves applied for such access or offered an undertaking as to confidentiality so as to assist in addressing the issue that would otherwise arise from unrestricted publication of the transcript. In particular, I see no reason why the Court should engage with complex issues as to its ability to make orders binding upon third parties, where an identified person seeking such access could readily offer an undertaking to bring certainty to the position. So far as Australian Spirit Management and the law firm are concerned, I could see no reason to grant access to transcripts to persons who do not seek it. If these persons seek access to the transcripts, they too can make an appropriate application to the Court, and consider whether to offer a confidentiality undertaking to the Court in a form which would avoid the potential difficulties in respect of orders made against third parties in their absence.

1. The third order sought seeks leave for the Liquidator, the Brents, and each of the named defendants in the proposed proceedings who have been notified of orders 4 and 5 of the 21 October orders, the orders made today and any further leave granted under orders 4 and 5 to use the transcripts or other written record of the examination to decide whether to commence the proposed proceedings, to prepare any final pleadings or "otherwise negotiate a settlement of the proceeding". I do not consider the first part of this order is necessary since the orders previously made by the Court do not prevent the Liquidators using the transcripts to prepare the proposed proceedings: compare Re Southern Equity Corporation Limited (in liq); Bond and Cobache v England (1997) 25 ACSR 394 at 397. I do not consider I should make the second part of the order, because it is unclear what is intended to be comprised by use of the transcript to negotiate a settlement. In particular, it is unclear whether an order in that form would permit a disclosure of the content of the transcript, if that were made for the purposes of negotiating a settlement, to persons who are otherwise not parties to any subject confidentiality regime in a manner which to date has not been permitted. Order 4 appears as a derivative of order 3 and does not arise where I have not made order 3.

1. Order 5 deals with the implied undertaking and seeks to vary it to reflect the amended orders 4 and 5 of the 21 October orders. It is not necessary to make it since I have not amended orders 4 and 5 of the 21 October orders. Order 6 is a release from the implied undertaking to use the documents to decide whether to commence the proposed proceedings and "otherwise to negotiate a settlement". The first part of the order is not necessary and the second part is not, in my view, appropriate for the reasons noted above.

1. I have, therefore, not made the orders proposed by the Liquidator (subject to the reservation as to the position of third parties) and assented to by Mr McCarthy and Mr Seller so far as he adopted Mr McCarthy's submissions. I would also not make the Liquidator's alternative orders, which involved the same difficulties as the suggested consent orders, with an additional difficulty so far as it seeks to permit wider use of the information to be released. I should make clear that in taking this approach, I have not made any decision that it would not, in fact, be appropriate to grant access to transcripts to the Brents or proposed defendants to the proposed proceedings, if an appropriate application for such access was made and appropriate undertakings as to confidentiality and use were offered. I have instead decided the matter on the narrower basis that the Court should not join parties to an application as applicants where they do not bring one; should not order the release of transcripts, in the context of subsisting criminal proceedings, to persons who do not apply for it; and should not make confidentiality orders binding third parties in their absence in respect of the documents to which they do not seek access, where it would be straightforward for those persons to seek such access and offer appropriate confidentiality undertakings, if they wished to do so.

1. It would, of course, be open to the Liquidator to pursue his original application, which will squarely raise the issues addressed by the High Court in Hamilton v Oades, and I will relist the matter in the Corporations List in case he seeks to do so. Alternatively, any party who seeks access to the transcripts, for the purpose of settlement negotiations or otherwise, may prefer to take the course of simply applying for such access on the basis of an appropriate undertaking as to confidentiality and restrictions on the use of the documents, if so advised.

1. I therefore order that:

1. The matter be relisted in the Corporations List on 29 April 2013.

2. Costs be reserved.

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Decision last updated: 28 May 2013