In the matter of ACN 168 479 614 Pty Ltd (Receivers and Managers Appointed) (Administrators Appointed)
[2020] VSC 333
•5 June 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2020 01029
| SIMON MAURICE PITARD | First Applicant |
| SKYE ELIZABETH PITARD | Second Applicant |
| v | |
| KEITH CRAWFORD, MATTHEW CADDY AND JASON PRESTON AS RECEIVERS AND MANAGERS OF ACN 168 479 614 PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 168 479 614) | First Respondent |
| KEITH CRAWFORD, MATTHEW CADDY AND JASON PRESTON AS RECEIVERS AND MANAGERS OF DEVELOPMENT STELLER PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 629 168 289) | Second Respondent |
| KEITH CRAWFORD, MATTHEW CADDY AND JASON PRESTON AS RECEIVERS AND MANAGERS OF STELLER ESTATE ROSEBUD PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)(ACN 616 045 679) | Third Respondent |
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JUDICIAL REGISTRAR: | Irving JR |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 18 May 2020 |
DATE OF JUDGMENT: | 5 June 2020 |
CASE MAY BE CITED AS: | In the matter of ACN 168 479 614 Pty Ltd (Receivers and Managers Appointed) (Administrators Appointed) |
MEDIUM NEUTRAL CITATION: | [2020] VSC 333 |
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CORPORATIONS – Corporations Act 2001 (Cth) – Summonses for public examination issued under ss 596A and 596B – Application for access to affidavit in support of application to issue summonses – Application to set aside summonses – Whether ‘arguable case’ of abuse of process – Whether application for summonses made for private purpose – Whether proper disclosure made by receivers at time of application for summonses – Whether summonses oppressive in their terms.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicants | M R Craig SC | Allens |
| For the Respondents | Mr D McAloon | Strongman & Crouch |
JUDICIAL REGISTRAR:
Simon Pitard and Skye Pitard (the Pitards) have been summoned to produce documents and for public examination pursuant to s 596A and s 596B of the Corporations Act 2001 (Cth) (the Act) respectively. The Pitards seek to have their summonses set aside on the basis that they are an abuse of process. As a preliminary issue in their application to set the summonses aside, the Pitards seek to inspect the affidavit filed in support of the application to issue the summonses.[1] These reasons address my decision to grant Mr Pitard access to limited parts of the affidavit.
[1]At the request of the parties, oral submissions on the issue of access to the affidavit were heard separately. The parties will make further oral submissions in relation to the substantive application to have the summonses set aside as abuses of process at a future date. As a result, any views expressed about the merits of the substantive arguments raised must be understood as preliminary only.
The summonses were obtained on the application of Keith Crawford, Matthew Caddy and Jason Preston (the Receivers). The Receivers are the receivers and managers of ACN 168 479 614 Pty Ltd (Receivers and Managers Appointed) (In Liquidation) – formerly known as Steller Developments Pty Ltd, Development Steller Pty Ltd (Receivers and Managers Appointed) (In Liquidation) and Steller Estate Rosebud Pty Ltd (Receivers and Managers Appointed) (In Liquidation) (collectively, the Named Companies). The Named Companies form part of a broader group of related companies that operated as the ‘Steller Group’, a Melbourne based property development and construction group founded by Mr Pitard and a colleague. In addition to being the Receivers of the Named Companies, the Receivers have been appointed to a number of other Steller Group companies.
Mr Pitard is a former director of each of the Named Companies. Ms Pitard is the sole director of Pitard Construction Group Pty Ltd.
The Pitards assert that the summonses are an abuse of process because they were issued for a private purpose. They allege that the private purpose is to assist the Receivers’ appointor in the conduct of litigation, via other entities it controls, against the interests of Atlas Advisors Australia Pty Ltd (Atlas), another creditor of companies within the Steller Group. The Pitards also argue that the Receivers have breached their obligation to fully and frankly disclose all relevant facts and materials to the Court at the time they applied for the summonses. Finally, the Pitards contend that the summonses are oppressive particularly having regard to documents already in the Receivers’ possession.
Principles and provisions relevant to the application
Section 596A of the Act provides for directors and officers of a corporation in liquidation to be summoned about a corporation’s examinable affairs if an eligible applicant applies for the summons. A receiver does not come within the statutory definition of an eligible applicant. However, an eligible applicant includes a person authorised by ASIC to make the application.[2] It is common ground that the Receivers in this case obtained ASIC approval.
[2]Corporations Act 2001 (Cth) (‘the Act’), s 9.
The Court has a discretion to issue a summons about a corporation’s examinable affairs to other persons under s 596B of the Act. Applications for a summons under s 596B must be made by an eligible applicant and the court must be satisfied that the person may be able to give information about the examinable affairs of the company.
An application for a summons under s 596B must be accompanied by an affidavit supporting the application. That affidavit is not available for inspection except by an order of the Court.[3]
[3]Ibid s 596C.
The principles relevant to an application to set aside a summons as an abuse of process and for access to the supporting affidavit are well traversed.
In Re New Tel Ltd (in liq); Evans v Wainter (‘Evans’),[4] after reviewing the legislation and authorities, Lander J distilled the following propositions about the purpose of an examination under Pt 5.9 of the Act and the principles relevant to an application to set aside an examination summons on an abuse of process ground:
[4][2005] FCAFC 114; (2005) 145 FCR 176, [252].
(1)The power given to the Court to summon a person for examination is a coercive power.
(2) The purpose of the power is to be gleaned from the legislation.
(3) The following legitimate purposes emerge:
(3.1)First, an examination is designed to serve the purpose of enabling an eligible applicant to gather information to assist the eligible applicant in the administration of the corporation.
(3.2)Secondly, it assists the corporation’s administrators to identify the corporation’s assets, both tangible and intangible. It also allows the corporation’s liabilities to be identified.
(3.3)Thirdly, the purpose is to protect the interests of the corporation’s creditors.
(3.4)Fourthly, it serves the purpose of enabling evidence and information to be obtained to support the bringing of proceedings against examinable officers and other persons in connection with the examinable affairs of the corporation.
(3.5)Fifthly, it assists in the regulation of corporations by providing a public forum for the examination of examinable officers of corporations.
(4)If an eligible applicant applies for an order for the examination of a person for a purpose unconnected with the purposes authorised by the legislation that will be an abuse of process and the order, if obtained, will be set aside.
(5)The procedure may not be used to allow a party to obtain a forensic advantage and, if it is, any order obtained will be set aside.
(6)The procedure may not be used as a dress rehearsal for the cross-examination of a person in a pending or subsequent action. However, it is not improper to seek an order of the Court to summon a person for examination whilst litigation is pending against that person or entities connected with that person.
(7)The question whether in any particular case the applicant has used the procedure abusively will depend upon the applicant’s purpose in seeking the order and all of the surrounding circumstances. It will not be an abuse unless an offensive purpose is at least the predominant purpose.
(8)It will be an offensive purpose if the application cannot be characterised as being for the benefit of the corporation, its contributories or creditors.
(9)A creditor may, if first authorised by ASIC, apply to the Court for an order to summon for examination a person for the purpose of obtaining information in relation to a debt owed to the creditor if such an examination would be in the interests of the corporation or its creditors as a whole.
(10)A creditor may not use the procedure for the purpose of obtaining a forensic advantage which would not have been available to the creditor if the corporation had not gone into administration.
To be legitimate, the purpose for which the examination summons is sought must be referrable to the legislative purpose. The fact that a forensic advantage in other litigation may be one purpose for seeking an examination summons will not, of itself, constitute an abuse of process. In Re Global Medical Imaging Management Ltd (in liq),[5] Santow J observed that:
The position is well established in Australia that a liquidator may, without abuse of process have the purpose which this liquidator says was his purpose, provided that purpose is a genuine one not subordinated to the purpose of seeking forensic advantage. That is, to seek information to prosecute causes of action for potential recovery, to determine if any of these causes of action should be abandoned and to determine whether any other causes of action should be added. That such a purpose may be associated with the purpose of obtaining forensic advantage in the litigation, does not vitiate the first purpose, so long as that associated purpose of forensic advantage is not the dominant purpose…
Moreover the onus is on the applicant who seeks to set aside the examination summons to prove that the liquidator is engaged in an abuse of process; Powell JA with whom Mahoney and Meagher JJA agreed in Sherlock v Permanent Trustee Australia Ltd (1996) 22 ACSR 16 at 20. That the onus is a heavy one is born out by the fact that the applicants must show that the pursuit of forensic advantage was the dominant purpose of the liquidator…
[5][2001] NSWSC 481; (2001) 38 ACSR 214, [12]–[13].
The principles relevant to the exercise of the Court’s discretion to grant access to the affidavit were recently explained by Judicial Registrar Hetyey (as he then was) in In the matter of Dalstonville Pty Ltd (in Liq) and Don Leunig Pty Ltd (in Liq):[6]
The discretion to grant access to the affidavit may be exercised in favour of an examinee once a ground of challenge to the public examination process is identified as an arguable one, where the affidavit appears relevant to making out that ground and “where the justice of the case so requires”.[7]In other words, inspection may be allowed under s 596C(2) if the Court is of the opinion that access to the affidavit is likely to assist in determining the correctness of the challenge[8] such that the Court would not be able to fairly and properly determine the examinee’s application in its absence.[9] At the same time, it is important that the examination process not be frustrated by the release of confidential information which may disclose the matters upon which the examinee is sought to be examined[10] and that the person seeking access is not doing so without good cause or engaging in a fishing exercise to make out his or her ground of challenge.[11]
In the event access is ultimately granted, it may be appropriate for the Court to limit inspection, for example by only making available certain parts of the affidavit.[12]
[6][2018] VSC 774, [15] (Hetyey JR) (‘Dalstonville’) .
[7]Re Excel Finance Corporation (Receiver and Manager Appointed); Worthy v England [1994] FCA 1251; (1994) 52 FCR 69, 93-4 (‘Re Excel’).
[8]Meteyard v Love [2005] NSWCA 444; (2005) 65 NSWLR 36; Sutherland v Pascoe [2012] FCA 453 (18 April 2012), [8].
[9]Accord Pacific Holdings Pty Ltd v Accord Pacific Land Pty Ltd (in liquidation) [2011] NSWSC 707 (8 July 2011) [43] (Ward J) (‘Accord Pacific’) citing Austin and Black, Annotations to the Corporations Act [5.596] and the cases cited therein.
[10]Re Gold Co (1879) 12 Ch D 77; In the matter of Moage Pty ltd (in liq); John Sheahan v Robert Pitterino & Ors [1997] FCA 719; (1997) 77 FCR 81 (‘Re Moage’); Re Excel (n 7) 93–4.
[11]Re Moage (n 10) 95.
[12]Trevor, in the matter of Bell Group NV (in liq) (2016) 116 ACSR 294, [145]–[147] (Yates J) (‘Bell Group’); Accord Pacific [103] (Ward J), more generally.
In Re Moage Ltd (in liq), Mansfield J described the nature of “an arguable case” as follows:
…it is both inappropriate and sterile for the purposes of the present applications to seek to attribute some scientific exactitude to the degree of satisfaction of ”an arguable case” which needs to be made out by the applicant. In my view it involves no more than that the Court requires to be satisfied to an appropriate level of satisfaction that the applicant is not pursuing the application without good cause or without good reason, and in particular is not doing so purely in the hope that, by procuring the release of the affidavit, some evidentiary foundation for the allegation will be made out. In other words, if the applicant is merely ”fishing” for a case, then no reason for exercising the discretion in its favour will exist; if it presents material from which it is shown that it has passed the threshold beyond fishing, and has an arguable case based on that material, then the discretion may be exercised in its favour. Refinements of degrees of arguability is, in my view, unnecessary.
It must also be borne in mind that, at this stage of the proceedings, the Court is not adjudicating in point of fact upon whether the purpose is, or is likely to be, made out in any sense. It is asked only to review the material presented to it, absent the affidavit, to determine whether the application is brought making such allegation without any foundation or with a foundation which is not frivolous or without some rational basis. What will satisfy the necessary degree of arguability will vary from case to case, and will need to be assessed in all the particular circumstances.[13]
[13]Re Moage (n 10) 95.
A failure to make full and frank disclosure by the applicant for a summons may form the basis for setting the summons aside.[14] As Lander J explained in Re Southern Equities:
An application for an examination summons is made ex parte. Consequently, there is a heavy obligation upon the person applying for the examination summons to make full and frank disclosure of all matters which may impact upon the decision to summon a person for examination about a corporations examinable affairs.
There can be no doubt, in my opinion, that a person who makes an application of this kind is under an obligation to bring all facts and material to the court’s attention which might bear upon the order to be made. The applicant has no lesser obligation than that imposed upon a party seeking an injunction ex parte. Indeed, in my opinion, the obligation for frankness and candour is even greater in an application of this kind. That is because, unlike on the return of an interlocutory injunction obtained ex parte, on the return of an examination summons the material supporting the application is not ordinarily made available to the proposed examinee.
Because the proposed examinee, ordinarily, is not privy to the information or material which was used to support the application for the examination summons, the person applying for the examination summons has the very highest obligation relating to frankness and candour and any breach of that obligation, in my opinion, ought to be viewed very seriously by the court.
The obligation is to provide to the court all material which might impact upon the order sought, including all material which might lead the court to refuse the application. The applicant must act in the place of the proposed examinee and therefore draw to the attention of the court anything which might lead the court to refuse the application.
If an applicant fails to provide all of the information bearing upon the order sought, in my opinion, that might be sufficient ground to set aside the order, because the order will have been obtained in circumstances where the court has not been apprised of a reason or reasons for the refusal of the order.[15]
[14]Re Southern Equities Corporation Ltd (in liq); Bond v England (1997) 25 ACSR 394, 422-423 (‘Re Southern Equities’).
[15]Ibid.
Material before the Court - The Atlas Proceeding
On 29 April 2016 various entities in the Steller Group entered into a Loan Note Subscription Agreement pursuant to which OL Master (Singapore) Pte Ltd (OLM) and Orchard Landmark II Master Limited (Orchard) provided finance to Steller Projects Pty Ltd. Under the Loan Note Subscription Agreement, as amended from time to time, OLM, Orchard and OCP Asia Fund III (SF 1) Pte Limited provided Steller Group entities with finance in excess of AUD$100 million.
On or about 2 February 2017, Steller Developments Pty Ltd (Steller Developments), now named ACN 168 479 614 Pty Ltd (Receivers and Managers appointed) (in Liq) (ACN 168 479 614), executed a commercial loan note master facility deed (the Atlas Deed) for the benefit of Atlas in its capacity as trustee for QCAX Australian Property Income Fund II (the QCAX Fund). The beneficiaries of the QCAX Fund were predominantly nationals of the People’s Republic of China who had invested in the QCAX Fund for the purpose of making a “complying investment” within the meaning of the Migration (IMMI 15/100: Complying Investments) Instrument 2015 (Cth). Investment in the acquisition or development of commercial property in Australia was a complying investment under the Instrument. Investment in residential property in Australia was not a complying investment.
Steller Developments did not obtain the prior written consent of its secured financiers before entering into the Atlas Deed.
Pursuant to the Atlas Deed, Steller Developments issued notes to Atlas and on-lent the proceeds of those notes (the Atlas Funds) to fund a number of projects, including residential property development projects.
On 1 March 2019, under a General Security Deed, entities in the Steller Group granted a general security interest over their present and after-acquired property to One Managed Investment Funds Limited (OMIFL), the security trustee appointed pursuant to a Loan Note Subscription Agreement between companies in the Steller Group and their financiers, OLM and Orchard.
On 1 July 2019, following default events under the Loan Note Subscription Agreement, OMIFL appointed the Receivers as receivers and managers to certain Steller Group entities, including the Named Companies.
On 15 November 2019, four Steller Group companies[16], each of which is a wholly owned subsidiary of a Steller Group company to which the Receivers have been appointed, commenced separate litigation against Atlas in the Supreme Court of Victoria (the Atlas Proceeding). In the Atlas Proceeding the plaintiffs seek declarations of entitlement to the proceeds of sale of a number of properties the plaintiffs previously owned. By counter-claim Atlas alleges breaches of trust such that it is entitled to the proceeds of sale. The breaches of trust asserted by Atlas include the use of Atlas Funds by Steller Developments for residential property development projects.
[16]Steller 207 Pty Ltd (ACN 619 530 193), Steller Estate Hastings Pty Ltd (ACN 616 051 293), Steller Care Hastings Pty Ltd (ACN 618 871 640) and Steller 204 Pty Ltd (ACN 619 507 470).
Material before the Court – Documents already in the Receivers’ possession
Since August 2019 the Receivers have been in possession of a back-up of a Steller Group ‘Google Drive’ file storage service. Since October 2019, the Receivers have been in possession of the cloud-based mailbox and the Google Drive associated with the email address of Mr Pitard, [email protected].
Material before the Court – previous requests of Mr and Ms Pitard for documents
On 8 April 2020 the Pitards’ solicitors wrote to the Receivers’ solicitors stating that, prior to service of the summons, the Receivers had not requested any documents of the Pitards. The Pitards’ solicitors stated that the documents requested of Mr Pitard were limited to “relevant documents on a copy of the Steller server which was made on or around July 2019” and that the Receivers were “in possession of the server itself, which includes all documents held by Mr Pitard”. The Pitards’ solicitors requested that the Receivers confirm that at the time of applying for the summonses the Receivers informed the Court that the Receivers were in possession of the server and had made no previous requests for documents of the Pitards.
On 9 April 2020 the Receivers’ solicitors responded that:
(a)
on 16 August 2019 Ms Pitard was informed in writing by the Receivers that they believed that Pitard Construction Group Ltd was a debtor of
ACN 168 479 614 due to a $2,500,000 loan. Ms Pitard was asked that, in the event the debt was disputed, she provide the Receivers with any documents she relied on to maintain the amount was not owing;
(b) over the course of the receivership, the Receivers had made “numerous requests of Mr Pitard for documents relating to the affairs of the Companies, including documents relating to the arrangements with Atlas”;
(c) Mr Pitard had only ever provided limited books and records in response to those requests; and
(d) while the Receivers had obtained access to documents from other officers of the companies (including records made available on the ‘server’), the Receivers believe that those documents do not comprise all of the books and records of the companies.
On 16 April 2020 the Receivers responded to a request for details of the ‘numerous requests’ made of Mr Pitard in the following terms:
(a) in early July 2019, the Receivers requested that Mr Pitard deliver up all books and records of the Steller Group entities to which they had been appointed;
(b) in response, Mr Pitard informed a representative of the Receivers that;
(i) the books and records of the companies that are stored electronically are intermingled with books and records of entities within the Steller Group to which the Receivers were not appointed; and
(ii) he would not permit the Receivers to take an ‘image’ of the electronic data comprising the intermingled books and records described above.
(c) in mid-July 2019, a representative of the Receivers requested from Mr Pitard a back-up copy of the material stored on the Steller Group’s ‘Google Drive’ file storage service;
(d) in response, Mr Pitard provided a listing of the names of the folders stored on the ‘Google Drive’ and invited the Receivers to highlight the folders relevant to their appointment for consideration by Mr Pitard as to whether the identified folders would be provided;
(e) the Receivers were not able to identify properly from the folder and file names whether (and what) information was relevant to the companies over which they were appointed, or to other entities in the Steller Group;
(f) in August 2019, another director of the companies provided the Receivers with log-in access to a historical point in time back-up of a Steller Group ‘Google Drive’ file storage service (backed up approximately three months earlier), but on review by the Receivers, it was apparent that the Google Drive data did not constitute all of the books and records of the companies to which the Receivers had been appointed; and
(g) in October 2019, the other director provided the Receivers with access to the cloud-based mailbox and the Google Drive associated with the email address ‘[email protected]’ but it was evident to the Receivers that what was provided did not constitute all of the books and records of the companies to which the Receivers had been appointed;
The Pitards put before the Court email correspondence from between 1 July 2019 and 31 July 2019 relating to requests for access to and the provision of, or consent to the access to or provision of, certain documents and information relating to the Named Companies. It is not necessary to set out the detail of this correspondence save to note that Mr Pitard contests the Receivers’ assertion that the various requests were made of him.
Simon Pitard
The summons issued to Mr Pitard calls for production of documents relevant to nine categories, including a number related to Atlas and the Atlas Funds. Mr Pitard contends that the Receivers have issued the summonses to secure a ‘forensic advantage in private or personal litigation’ brought by a creditor ‘outside of the liquidation’[17] and that this is not a permissible use of the public examination process.
[17]In the matter of Affinity Capital Pty Ltd; Indrasith v Ku [2011] NSWSC 1158, [48].
Mr Pitard contends that the Court should draw an inference that the summonses have been issued to assist the Receivers’ appointor in its contest with Atlas over assets of the three companies in whose names the summonses are sought as well as the Plaintiffs in the Atlas Proceeding. He relies on the following to support that inference:
(a) that the Atlas Proceeding is designed to ultimately benefit the Receivers’ appointor;
(b) that the summonses were obtained by privately appointed receivers and not a liquidator acting in the interests of all creditors;
(c) that the summonses were obtained in respect of the examinable affairs of the Named Companies and not related companies or other Steller Group member companies;
(d) that the Receivers have failed to explain how the Named Companies in the examination proceedings or their creditors more generally will benefit from the litigation against Atlas;
(e) that the Receivers’ explanation that if the Plaintiffs in the Atlas Proceeding are successful in establishing an entitlement to the proceeds of sale of those properties, the proceeds of sale will become available for distribution to entities in the Steller Group to which the Receivers have been appointed, fails the test because it does not explain the benefit to the Named Companies; and
(f) that Mr Pitard is likely to be a witness in the Atlas Proceeding and so any examination of Mr Pitard will serve as a ‘dress rehearsal’ for Mr Pitard’s subsequent cross-examination in the Atlas Proceeding.
In response the Receivers say:
(a) the fact that examinations may involve gathering evidence relevant to an existing proceeding is not itself an abuse of process;
(b) the prospect of an examination constituting an abuse may only arise where the other litigation is for the advantage of a third party rather than the company itself;
(c) Mr Pitard was a director of ACN 168 479 614 – formerly Steller Developments – and some but not all of the categories of documents sought in the summons addressed to Mr Pitard directly concern the relationship between Steller Developments and Atlas and the use of funds which were advanced by Atlas to Steller Developments;
(d) each of the Named Companies stand to benefit from a careful and detailed examination of the arrangements between Atlas and the Steller Group as:
(iii) the questions of what happened to the money advanced by Atlas to Steller Developments and whether Steller Developments acted in breach of trust in distributing that money are within the examinable affairs of the Named Companies and relevant to the receivership;
(iv) there are very serious allegations of breach of trust and dishonesty made in the Atlas Proceedings against ACN 168 479 614 which will obviously be relevant to its receivership, including possible actions by the Named Companies against their directors;
(v) one of the Plaintiffs in the Atlas Proceeding is wholly owned by Development Steller Pty Ltd (Receivers and Managers Appointed) (In liquidation) and the other Plaintiffs are wholly owned by other entities to which the Receivers have been appointed receivers and managers; and
(vi) Atlas has lodged a caveat over a property owned by Steller Estate Rosebud Pty Ltd (Receivers and Managers Appointed) (In Liquidation), one of the Named Companies;
(vii) if Steller Estate Rosebud Ltd (Receivers and Managers Appointed) (In Liquidation) is successful in establishing an entitlement to the proceeds of sale of a property that is the subject of the Atlas litigation, those proceeds will become available to the Receivers for the purpose of their receivership;
(viii) if the other Plaintiffs in the Atlas Proceeding are successful in establishing an entitlement to the proceeds of sale of relevant properties in the Atlas Proceeding, those proceeds, or some portion of them, will become available for distribution to entities in the Steller Group to which the Receivers have been appointed receivers and managers; and
(ix)there are a number of other properties owned by companies in the Steller Group which remain subject to caveats lodged by Atlas and it will be necessary to resolve Atlas’ claims underlying the caveats in order for those properties to be sold and the net proceeds distributed.
The Receivers submit that the Pitards have not demonstrated an arguable case that the predominant purpose of issuing Mr Pitard’s summons is for a purpose unconnected with the purposes authorised by the legislation.
In Hong Kong Bank of Australia Limited v Murphy,[18] Gleeson CJ said that:
…the fact that current proceedings are pending makes it necessary for the court to be alert to the possibility that a proposed application might be used for an improper purpose.
[18]Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512, 518–519.
It is common ground that there will be some overlap of the factual matters relevant to the Atlas Proceeding and the examination of Mr Pitard. It is also common ground that the Receivers’ appointor would ultimately benefit if successful in the Atlas Proceeding. The Receivers will obtain a forensic advantage in the Atlas Proceeding from Mr Pitard’s examination. These aspects of Mr Pitard’s case cannot be said to be frivolous or without some rational basis.
I am satisfied that Mr Pitard has demonstrated an arguable case, within the meaning of that term outlined in Moage, that the dominant purpose of the Receivers in issuing Mr Pitard’s summons is to obtain a forensic advantage in the Atlas Proceeding.
Having formed the view that Mr Pitard has demonstrated an arguable case and having examined the affidavit filed in support of the application for the summons, it is my view that the Court is unable to fairly and properly determine the substantive application to set aside the summonses without recourse to parts of that affidavit. In particular the affidavit will be relevant to Mr Pitard’s application on the question of what was disclosed to the Court about the Atlas Proceeding. I will seek submissions from the Receivers about the parts of the affidavit and any conditions on which those parts should be provided to Mr Pitard or his legal representatives.
Non-disclosure
When the Pitards asked the receivers what disclosure they had made to the Court about the contest between its appointor and Atlas in the private litigation the receivers indicated that they had ‘disclosed to the court that they are engaged in the Atlas Proceeding’. The Pitards contend that if this was the extent of the receivers’ disclosure to the court then the receivers have not discharged their disclosure obligations. However, the Pitards concede that they do not know if the Receivers did or did not discharge their disclosure obligations.
The Receivers argue that the Pitards’ concession that they do not know what, if anything, the Receivers told the Court about the Atlas Proceeding, means that the Pitards have failed to demonstrate an arguable case of non-disclosure by the Receivers.
An applicant for access to the affidavit cannot be in a position to know what was disclosed to the Court in the affidavit. There would be no purpose in the application if the position were otherwise. The question is whether, based on all of the materials made available to the Court, which includes the pleadings in the Atlas Proceeding and an account of the relationship of the Receivers’ appointors to the Atlas Proceeding, Mr Pitard has raised an arguable case, with a rational underpining that there has been relevant non–disclosure by the Receivers.
In my view Mr Pitard has raised an arguable case that the Receivers have not discharged the stringent disclosure obligations on applicants for summonses.
Having examined the contents of the affidavit filed in support of the application for Mr Pitard’s summons, I have formed the view that some of its contents are directly relevant to the non-disclosure arguments raised by Mr Pitard and that it will be necessary to refer to parts of the affidavit to properly and fairly determine the substantive application to set aside Mr Pitard’s summons on the basis of non-disclosure by the Receivers. As referred to above, I propose to seek submissions from the Receivers about the parts of the affidavit and any conditions on which those parts should be provided to Mr Pitard or his legal representatives.
Mr Pitard also raises the issue of the Receivers’ possible non-disclosure in relation to previous requests for documents. In my view it is appropriate that the Receivers make available those parts of the affidavit relevant to previous requests made of Mr Pitard. Again, I will seek submissions from the Receivers about the identification of those parts and any conditions on which they should be provided to Mr Pitard or his legal representatives.
Oppression
The Pitards submit that they require access to the affidavit in order to agitate the issue of what the court was told about Mr Pitard’s previous cooperation with requests for documents. The Pitards argue that a summons may be oppressive where it seeks documents already in the possession of the party that procured the summons. The Pitards say this does not constitute a prohibited ‘fishing’ exercise. Rather, the Pitards submit that having raised an ‘arguable question that warrants further investigation’, the court should be satisfied that access to the affidavit is likely to assist in answering that question.[19]
[19]Secatore, in the matter of Last Lap Pty Ltd (in liq) [2020] FCA 627, [99].
The Receivers contend that:
(a) the burden of establishing oppression lies with Mr Pitard;
(b) Mr Pitard has adduced no evidence of the time, labour or expense likely to be involved in producing the documents sought;
(c) Mr Pitard has adduced no detailed evidence of the cross-over between the documents previously provided and the documents sought;
(d) there is no obligation on the Receivers to have requested documents from an examinee prior to obtaining a summons and that there was no obligation on the Receivers to accept voluntary production of documents; and
(e) there is forensic utility, particularly on the question of knowledge, in having clear production by Mr Pitard.
In my view Mr Pitard has not demonstrated an arguable case that his summons is oppressive. While it is clear that a summons may be oppressive if it seeks documents already in the possession of the party that procured the summons, on the material before me it is not clear that this is the case or, if it is, the extent to which it is the case. I also accept the Receivers’ contention that Mr Pitard’s clear production of the documents under summons may be relevant to questions central to the examination, including Mr Pitard’s knowledge.
In reaching my views I have taken into account that Mr Pitard has not sought to adduce any evidence of the extent of the overlap of documents already provided to the Receivers and those now sought by them. Similarly, I have taken into account that Mr Pitard has not sought to adduce any evidence of the burden of production on him in terms of time, labour and expense.
Having decided that Mr Pitard has not met the threshold of demonstrating an arguable case that his summons is oppressive, it is unnecessary for me to examine the contents of the affidavit.
At the risk of repetition, my views on whether an arguable oppression case has been demonstrated are made in the context of the application for access to the affidavit and on the basis of the materials filed and arguments made in that application. They will necessarily be revisited in light of any further argument on the substantive application.
Skye Pitard
Ms Pitard is the sole director of Pitard Construction Group Pty Ltd. The Receivers allege that the books and records of ACN 168 479 614 indicate that it loaned Pitard Construction Group Pty Ltd the amount of $2,500,000.
The summons issued to Ms Pitard calls for production of documents recording transactions between Steller Developments and Pitard Constructions Pty Ltd including whether by loan, gift or otherwise.
The application to set aside the summons addressed to Ms Pitard is made on the same three bases as those relied upon in relation to Mr Pitard’s summons. These bases are that the summonses were issued for a private purpose, that the Receivers may not have brought all relevant facts and material to the Court’s attention in their application for the summonses and, finally, that the summonses are oppressive.[20]
[20]See, eg, Dalstonville (n 6) [117], [121] (Hetyey JR).
For the reasons outlined below I am not satisfied that Ms Pitard has demonstrated an arguable case such as would justify her being provided with a copy of the affidavit that supported the Receivers’ application for her summons.
Forensic advantage
As discussed above, the Pitards rely on the Atlas Proceeding to support their argument that the Receivers have sought the summonses to advance their own private interests. The forensic advantage to the Receivers in the Atlas Proceeding from examining Ms Pitard was not identified. In addition, the part of the Pitards’ written submissions that describe the Atlas Proceeding makes no reference to Ms Pitard or to how the documents sought from her would assist the Receiver in that proceeding.[21]
[21]“Atlas has alleged in the Atlas Proceeding that Mr Pitard (along with another director of Steller Developments) made a “knowingly false misrepresentation”. It follows that Mr Pitard is likely to be a witness at any trial of the Atlas Proceeding and, further, that there is a prospect that any public examination of Mr Pitard pursuant to the Summons issued in this proceeding will serve as a “dress rehearsal” for Mr Pitard’s cross-examination in the Atlas Proceeding… The categories of documents in the Schedule to the Summons addressed to Mr Pitard are concerned with Atlas and what is defined in the Schedule as the “Atlas Funds”.
Oppression
Similarly, Ms Pitard has not clearly explained how the previous provision of documents to the Receivers by Mr Pitard supports an argument that the summons addressed to Ms Pitard is oppressive. Indeed the Pitards’ written submissions on the issue of the oppressive nature of the summonses appear under the heading, Summons to Mr Pitard is oppressive. No mention is made of Ms Pitard nor any explanation given as to why it is said that the summons addressed to Ms Pitard is oppressive. No evidence has been provided as to the volume of documents sought, the time it would take to identify the documents or the difficulty of doing so.
Non-disclosure
The Pitards’ non-disclosure argument was put on two bases. First, that the Receivers may not have discharged their obligation of frankness and candour in relation to the Atlas Proceeding. Second, that the Receivers may not have discharged their obligation of frankness and candour in relation to both their previous requests to the examinees for documents and documents the Receivers have secured following their appointment.
As discussed above, the Pitards have not demonstrated any link between
Ms Pitard or Pitard Construction Group Pty Ltd and the Atlas Proceeding.
In these circumstances the Pitards have not demonstrated an arguable case for setting aside Ms Pitard’s summons on the basis of any non-disclosure of the Atlas Proceeding by the Receivers.
From the evidence filed on the application it appears that, other than the letter of 16 August 2019 addressed to Ms Pitard in her capacity as director of Pitard Construction Group Pty Ltd, the Receivers had not requested documents of Ms Pitard prior to the issuing the summons. As pointed out by the Receivers, there is no obligation when issuing a summons for production of documents to first request those documents from the examinee. The Pitards have not identified a duty to do so. Nor have the Pitards identified how the Receivers’ possible non-disclosure of the fact that they had not previously requested the documents from Ms Pitard could constitute a breach of the Receivers’ obligation of frankness and candour that would arguably lead to the summons being set aside as an abuse of process.
Conclusion
For the reasons given above I have decided that Mr Pitard should be provided with those parts of the affidavit that are relevant to his forensic advantage and non-disclosure arguments and that the application by Mr and Ms Pitard for access to the affidavit should be otherwise dismissed.
I will hear from the Receivers about which parts of the affidavit should be disclosed to give effect to these reasons. I will also provide the parties with the opportunity to provide further written or oral submissions on the substantive application once the relevant parts of the affidavit have been provided to Mr Pitard.
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