FEDERAL COURT OF AUSTRALIA
Pleash (Liquidator) v Tucker [2018] FCAFC 144
Appeal from: Pleash, in the matter of Equititrust Limited (In Liquidation) (Receivers and Managers Appointed) (No 3) [2017] FCA 1074 File number: QUD 2 of 2018 Judges: MCKERRACHER, FARRELL AND BANKS-SMITH JJ Date of judgment: 29 August 2018 Catchwords: CORPORATIONS - appeal from refusal to order production of documents under s 597(9) of the Corporations Act 2001 (Cth) - liquidators' examination - where liquidators sought to assess means of examinee to pay prospective debt - where examinee is beneficiary or object of discretionary trusts and director of corporate trustees - whether control exception applied where beneficiary controls the distribution of trust assets - whether income and capital of trusts and third parties otherwise relevant to examinable affairs - whether liquidators established basis for asserting potential to trace funds into trusts - relevance of Pt VI Div 4A of the Bankruptcy Act 1966 (Cth) to prospect of payment Legislation: Bankruptcy Act 1966 (Cth) Part VI Division 4A
Corporations Act 2001 (Cth) ss 596A, 597(9), 1323
Federal Court of Australia Act 1976 (Cth) s 27
Federal Court Rules 2011 (Cth) r 20.31
Cases cited: Australian Securities and Investments Commission v Carey (No 6) [2006] FCA 814; (2006) 153 FCR 509
Boys v Quigley [2002] WASCA 99; (2002) 26 WAR 454
DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties [1980] 1 NSWLR 510
Dwyer v Ross [1992] FCA 20; (1992) 34 FCR 463
Fordyce v Ryan [2016] QSC 307; (2017) 2 Qd R 240
Freeman v National Australia Bank [2003] FCAFC 200
Gerah Imports Pty Ltd v Duke Group Ltd (in liq) (1993) 61 SASR 557; (1993) 116 FLR 479
Grosvenor Hill (Queensland) Pty Ltd v Barber [1994] FCA 59; (1994) 48 FCR 301
House v The King [1936] HCA 40; 55 CLR 499
Inland Revenue Commissioners v Trustees of Sir John Aird’s Settlement [1982] 2 All ER 929
Kennon v Spry [2008] HCA 56; (2008) 238 CLR 366
Pleash, in the matter of Equititrust Limited (In liquidation) (Receivers and Managers Appointed) [2017] FCA 16
Pleash, in the matter of Equititrust Limited (In liquidation) (Receivers and Managers Appointed) (No 2) [2017] FCA 758; (2017) 122 ACSR 299
Pleash, in the matter of Equititrust Limited (In liquidation) (Receivers and Managers Appointed) (No 3) [2017] FCA 1074
Rafferty v Time 2000 West Pty Ltd (No 9) [2011] FCA 1483
Swishette Pty Ltd v Australian Competition and Consumer Commission [2017] FCAFC 45; (2017) 249 FCR 483
Wainter Pty Ltd, in the matter of New Tel Limited (in liq) [2005] FCAFC 114; (2005) 221 ALR 331; (2005) 145 FCR 176
Date of hearing: 29 May 2018 Registry: Queensland Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 81 Counsel for the Appellant: Mr JW Peden QC with Mr L Sheptooha Solicitor for the Appellant: Russells Counsel for the Respondents: M…
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- AGLC
- Pleash (liquidator) v Tucker [2018] FCAFC 144
- Case
- [2018] FCAFC 144
- Decision Date
CaseChat Overview and Summary
The case of Pleash (liquidator) v Tucker involves a dispute between liquidators and a beneficiary or object of discretionary trusts, as well as a director of corporate trustees. The liquidators sought to assess the means of the examinee to pay prospective debt. The legal issues revolved around whether the control exception applied where the beneficiary controls the distribution of trust assets, and whether the income and capital of the trusts and third parties were relevant to the examinable affairs. Additionally, the liquidators needed to establish a basis for asserting the potential to trace funds into the trusts, and the relevance of Part VI Division 4A of the Bankruptcy Act 1966 (Cth) to the prospect of payment.
The court examined the arguments presented by the liquidators and concluded that they had not established a basis for asserting the potential to trace funds into the trusts. The court noted that the liquidators' focus was on the potential for recovery of any judgment debt from the examinee, and not on tracing profits from the MS Asia debt acquisition. The court found that the liquidators had not raised the issue of tracing before the primary judge and that it was not open to them to raise it on appeal. The court also found that the liquidators' reliance on the transcript excerpts from the examinee's examination was not sufficient to establish the relevance of tracing.
The appeal was dismissed, and the interlocutory application for production of documents filed on 20 April 2018 was also dismissed. The parties were required to file any submissions with respect to costs within seven days, and the question of costs would be dealt with on the papers.
The court examined the arguments presented by the liquidators and concluded that they had not established a basis for asserting the potential to trace funds into the trusts. The court noted that the liquidators' focus was on the potential for recovery of any judgment debt from the examinee, and not on tracing profits from the MS Asia debt acquisition. The court found that the liquidators had not raised the issue of tracing before the primary judge and that it was not open to them to raise it on appeal. The court also found that the liquidators' reliance on the transcript excerpts from the examinee's examination was not sufficient to establish the relevance of tracing.
The appeal was dismissed, and the interlocutory application for production of documents filed on 20 April 2018 was also dismissed. The parties were required to file any submissions with respect to costs within seven days, and the question of costs would be dealt with on the papers.
Orders
Orders of the court
1. The appellant has leave to appeal.
2. The appeal is dismissed.
3. The appellant's interlocutory application for production of documents filed 20 April 2018 is dismissed.
4. The parties are to file any submissions with respect to costs within seven days and, subject to further order, the question of costs will be dealt with on the papers.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
The excluded documents relevant to this appeal are described more specifically in the schedule to these reasons (Schedule). Expressed generally, the orders exclude from production:(a)certain financial statements of any superannuation fund in which Mr Tucker has an interest in any period from 1 July 2013;(b)the financial statements and income tax returns for various companies for the years ended 30 June 2015 and 30 June 2016; and(c)the most recently received bank statements for those same entities.Relevant factual background The background facts are described briefly in Pleash (No 1) at [19]‑[20] and Pleash (No 2) at [18]‑[19]. In summary, in February 2012 administrators were appointed to Equititrust under s 436A of the Corporations Act. At that time, Equititrust owed its secured creditor BOS International (Australia) Ltd (BOSI) some $11.5 million. BOSI appointed receivers and managers over certain of Equititrust's property and subsequently the Liquidators were appointed. In July 2012 MS Asia Debt Acquisition Ltd (MS Asia) acquired the BOSI debt and securities by assignment for some $2 million. MS Asia then appointed receivers and managers to recover the BOSI debt it had acquired, and those receivers and managers were able to recover some $16.5 million over time and apparently have remitted some $13 million to MS Asia. The Liquidators contend that Mr Tucker was involved in MS Asia's acquisition of the BOSI debt and has an interest in the proceeds received by MS Asia. Since the decision in Pleash (No 3) Mr Tucker has been examined in accordance with the court orders. The Liquidators say his examination has shed some light on Mr Tucker's role in the MS Asia debt acquisition and they seek to rely on an affidavit that annexes parts of the transcript of that examination by way of fresh evidence.Reasons of the primary judge It must be emphasised that the primary judge in Pleash (No 3) proceeded on the basis that the Liquidators sought access to the documents because they were said to be relevant to whether any judgment they might obtain against Mr Tucker in an action with respect to the MS Asia transaction might ultimately be recoverable from him: (Pleash (No 3) at [26]). The question of whether it was an improper purpose to pursue Mr Tucker's examination to identify his ability to satisfy any judgment obtained against him was considered and answered in the negative in Pleash (No 2) (at [34]‑[38]). The primary judge accepted that a consideration of whether Mr Tucker might meet a judgment debt if proceedings are issued falls within the examinable affairs of Equititrust under s 597(9), applying long‑standing authorities in support of such a proposition, including Gerah Imports Pty Ltd v Duke Group Ltd(in liq) (1993) 61 SASR 557; (1993) 116 FLR 479 and the Full Court decision in Wainter Pty Ltd, in the matter of New Tel Limited (in liq) [2005] FCAFC 114; (2005) 221 ALR 331; (2005) 145 FCR 176 (Evans v Wainter). In Pleash (No 1) the Court also noted that an examination to determine whether any chose in action will ultimately be recoverable from any party or its insurer is within the contemplation of the examination provisions: Pleash (No 1) at [20].
Evidence
Evidence Before The Court
It follows that we do not accept either of the two bases (paragraph [34] above) upon which the Liquidators contended that Mr Tucker's interests in the various trusts were sufficient to require production of the relevant documents.The tracing investigation and the application to adduce fresh evidence The Liquidators now contend that the excluded documents are relevant not only because they wish to inquire into Mr Tucker's ability to meet any judgment debt, but also because they may show whether profits from the MS Asia transaction were received by any of the trusts, which might in turn allow such profits to be traced. They seek to rely upon the transcript excerpts from Mr Tucker's examination to support the relevance of the tracing exercise. According to the transcript, Mr Tucker said the following during his examination:(a)he receives, equally with a Mr Kennedy and Mr Howard, a one third share of the profits made by MS Asia in its recovery of the BOSI debt;(b)he did not know the identity of the shareholders in MS Asia;(c)he admitted that he has a one-third beneficial interest in MS Asia, but said that neither he nor any of his associated companies owns any share in MS Asia;(d)he said that he has received about $3.8 million by way of profits from the MS Asia transaction, although it did not come into a personal bank account of his, and he doesn't know where it went;(e)he also said that he does not recall benefiting from the $3.8 million but that he 'hasn't paid a lot of attention to it'. The Liquidators say that the issue of tracing was raised before the primary judge but that even if it were not, it is open to them to raise it on appeal and they seek to re‑open the evidence under s 27 of the Federal Court of Australia Act 1976 (Cth) in order to rely upon the transcript excerpts. Mr Tucker objects to any reliance on tracing on the basis it was not raised below, and asserts he is prejudiced if the transcript excerpts are accepted as evidence on the appeal. As already noted, the focus of the written and oral submissions seeking access to the documents before the primary judge was the potential for recovery of any judgment debt from Mr Tucker. The Liquidators rely on a statement in their supplementary submissions filed on the final hearing day below. Relevantly, those submissions state that the Liquidators want to investigate entities 'to whom profits have been channelled'. This was said in the same submissions to be in the context of the MS Asia debt acquisition and the suggestion that the transaction involved the use of inside information 'such as that to which directors and long‑standing solicitors would have access'. It is necessary to set out some detail about how the hearing proceeded after the supplementary submissions were provided. According to the transcript, shortly after the luncheon adjournment counsel for the Liquidators was to commence final submissions. Before he did so, counsel for the respondents raised with the primary judge the fact that he had only just received the supplementary submissions, that they seemed to reflect a shift in the manner in which the Liquidators were articulating their case for the documents and that he would address the issue more fully in reply, rather than pre‑empt what counsel for the Liquidators might say.
Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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