Queensland Trustees Ltd [v White & Gardiner Pty Ltd & Anor 1987] FCA 141

Re: QUEENSLAND TRUSTEES LIMITED
And: WHITE & GARDINER PTY. LTD. and GLEN J. WHITE
No. QLD G2 of 1987
Practice - Companies

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Pincus J.

CATCHWORDS

Practice - subpoena duces tecum - addressed to stranger - not for hearing - whether allowed before discovery - relevance of Companies Code prohibition.

Companies - inspection of books of companies wound up by Court - subpoenaed in Trade Practices Act proceedings - whether Companies Code applies to make Supreme Court leave necessary.

Companies (Qld.) Code s. 387

HEARING

BRISBANE

#DATE 31:3:1987

Counsel for the Applicant: Mr. A.J.H. Morris

Solicitors for the Applicant: Morris Fletcher & Cross

Counsel for the Respondents: Mr. P.R. Dutney

Solicitors for the Respondents: Lippiatt & Co.

ORDER

The subpoena duces tecum dated 6 March 1987 issued to Wilson Joseph Wilde and Anthony Gardiner Sherlock be complied with when served.

The subpoena will be sufficiently complied with by production of the trading accounts, the profit and loss statements and the balance sheets of the four companies mentioned in the subpoena for the five (5) financial years there mentioned.

The applicant may promptly take copies of the documents produced pursuant to (2) above on its undertaking only to use them for the purpose of this litigation.

That forthwith after such copies are taken, the same be returned to the custody of Wilson Joseph Wilde and Anthony Gardiner Sherlock.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

This application is for leave nunc pro tunc to issue a subpoena duces tecum addressed to the respondents, Messrs. Wilde and Sherlock, requiring them to produce certain documents, for leave to inspect and take copies, and alternatively for a declaration that the said respondents may, without an order pursuant to s.387 of the Companies (Queensland) Code make the documents available for inspection. The applicant, if successful, should in my view have its relief in a form different from that claimed. The respondents are the receivers and managers of four companies discussed below and have possession of the documents in question. All the four are in liquidation, pursuant to winding-up orders made in the Supreme Court of Queensland.

On 12 January 1987, the applicant, which is a trustee company incorporated by statute, instituted proceedings in this Court against White & Gardiner Pty. Ltd. and one Glen J. White; it did so as trustee of the "Bartlett Property Trust", a listed trust. The applicant alleged that the trust was formed to acquire a tavern at Townsville, a tavern at Rockhampton, a hotel/motel at Nerang, the "Crown of the Hill Cellars" at Sydney, and a caravan park at Nerang. The statement of claim said that, prior to the formation of the trust, Mr. White, on behalf of White & Gardiner Pty. Ltd., prepared valuations of each of the properties, totalling $16 million, and that the prospectus for the issue of units in the trust to the public contained a valuer's report by Mr. White. The applicant alleged that it bought each of the properties at Mr. White's valuations, relying on those valuations.
The applicant alleged that the valuations and the report were prepared to be made available to the applicant, were untrue and were prepared negligently. The applicant sought damages for contraventions of s.52(1) and/or s.53(aa) of the Trade Practices Act 1974 and other relief. It is not as clear as it should be which conduct alleged in the Statement of Claim is said to be contrary to the statute, but the general thrust of the claim is plain enough.
Mr. Dutney, who appeared for the respondents to the application, made three points: firstly, that there is no power to grant the application; secondly, that the application is premature; thirdly, that it would be oppressive to force the respondents to produce the documents in question.
Mr. Dutney relied upon s.387 of the Companies (Queensland) Code which is as follows:

"The Court may make such order for inspection of the books of the company by creditors and

contributories as the Court thinks just, and any books in the possession of the company may be

inspected by creditors or contributories

accordingly, but not further or otherwise."

The provision is contained in Sub-division C of Part XII Division 2 headed "General Powers of Court" and relates to companies being wound up by the Supreme Court, as those in question are. Mr. Dutney argued that the effect of the provision is that this Court may not permit any books in the possession of the company to be inspected, because of the prohibition imported by "but not further or otherwise".
Mr. Morris argued the matter for the applicant on the assumption that s.387 would, if it forbad this Court to subpoena and permit inspection of documents of the sort mentioned, be valid; he did so, presumably, because he did not wish to raise any question under s.109 of the Constitution. He argued that s.387 does not, on its proper construction, prevent inspection of the books there mentioned in the course of proceedings in this Court. In Miller v. Miller (1978) 141 CLR 269 at p 277, a provision in a statute which prohibited divulging or communication of certain matters to "another person" was considered and it was doubted by Gibbs J. that a Court is "another person" in that context. That view was applied by the High Court in Hilton v. Wells (1985) 157 CLR 57 in a similar context (pp.76, 87) and in Duff v. McCulloch (1985) 65 ALR 677 at p 681 Wilcox J. applied those authorities to a question of the same kind.
In s.387 of the Companies Code, the word "person" does not appear, but for reasons similar to those which operated in the cases just mentioned, it seems obvious enough that the Queensland legislature could not have intended, by such general language, to inhibit this Court's power to issue subpoenas and permit inspection in the ordinary course of litigation.
The subpoena, which was filed on 6 March, 1987, relates to the trading figures, profit and loss statements and balance sheets of each of the four companies, being the vendors of the properties mentioned above, from 1 July 1978 to 30 June 1983. The latter date is explicable in that the valuations in question (which are in evidence) were done in January 1984. Mr. Dutney objected in a particular way, which it is unnecessary to discuss, to production of "trading figures" and Mr. Morris for the applicants responded by saying he would be content with trading accounts, so that the application will be considered on that basis.
An elaborate affidavit has been filed on behalf of the respondents asserting that serious disadvantages would follow from production of these documents, but it is important to note that those assertions were a little late in coming. The solicitors for the applicant wrote to the solicitors for the respondents on 30 January 1987 saying that all the four companies were in receivership and liquidation and that Mr. Wilde, the first respondent, had been contacted to produce accounts. The letter went on:

"Mr. Wilde replied that he would be happy to assist Queensland Trustees Limited by making them

available, but he said he was concerned that

because the companies were in liquidation, a court order ... would be required ..."

The request then discussed asked for accounts beginning in 1976, two years earlier than this subpoena. The response attributed to Mr. Wilde has not been disputed.
A formal reply was sent and the solicitor for the applicant raised the matter again on 11, 24 and 25 February; on the last date the solicitors for the respondents wrote on behalf of their client, in effect refusing to comply with the request.
This application was made on 6 March and came on for hearing on 9 March, when it was adjourned to 16 March to enable the respondents to have more time to resist the application. They filed no material for the hearing on that day, but after discussion it was, at Mr. Dutney's request, adjourned to 25 March on which day the affidavit material mentioned above was finally produced.
It said that on 13 March (some six weeks after the first request was made) the solicitor acting for the respondents was unable to comprehend what the application was "all about". The solicitor deposed to the fact that he had been instructed that various other proceedings are contemplated by the liquidators of the companies concerned, and there are various unresolved claims and numerous possible claims. The liquidators, so the affidavit said, "would view with considerable concern any premature disclosure of information in the accounting records" of the companies, the basis of the concern being undisclosed. The affidavit said that the disclosure sought "may seriously affect their ability to discharge the onerous duties cast upon them", but neither from the affidavit nor from counsel's explanation of it may one gather in what way discharge of those duties would be prejudiced by the applicant's proposal. The affidavit also said that the respondents were "concerned at permitting the Applicant in these proceedings to have any access to the accounts ... without an order of the Supreme Court of Queensland and the consent of the Liquidators ..." The reason for the respondents' concern, it appears, was that "it is likely that the secured creditor, whom they represent, will be an unsecured creditor in the various windings up of each of such companies, and the Receivers are concerned that any premature disclosure of the financial records of each of the aforesaid companies and the possible consequences that may have in the effect of outworking of the Liquidators (sic) administration in each of such companies in the interests of the creditors as a whole as aforesaid".
I do not find this credible. It is hard to believe that the respondents are in truth concerned that showing to the applicant the recent financial statements of these companies could prejudice the exercise of the liquidators' functions. There is no reason from the history of the matter, or in the affidavit, to think that any unfairness or practical difficulty would ensue from disclosure by the respondents of the documents sought. If the barrage of litigation foreshadowed in the respondents' material descends, there will no doubt be public disclosure of a great deal more information about these companies than is presently sought to be made available.
As to the contention that disclosure of the material is premature, it is certainly sought very early; the principal proceedings have not even been served. The applicant trustee's purpose is to determine whether it should pursue the proceedings and, no doubt, to enable an informed review of the statement of claim. Mr. Morris argued on behalf of the applicant that as a trustee, especially one on behalf of a considerable number of members of the public, it has a duty not to venture far into this litigation without thorough enquiry. It appears that although, if the application is pursued, the applicant will certainly obtain discovery against the valuers, its present central interest is not so much in what the valuers may say they had available to them, but what would have been made available had they performed their duties. It may turn out, of course, that the former category of information is identical with the latter.
Mr. Dutney raised what appeared rather a strange objection: that the subpoena should not be allowed because the respondents could not carry on their functions if they have not the documents subpoenaed continuously in their possession. There would be no difficulty in arranging that the documents subpoenaed be returned to the respondents promptly after copying.
Mr. Dutney also argued that it can be seen from the circumstances that the applicants have no idea whether they have a case or not and are merely fishing for one, a process which should not be encouraged. In reply to that, Mr. Morris directed my attention to the valuations, which are in evidence, taking as an example that relating to the Kirwan Tavern at Townsville. All the properties were valued on a basis of capitalization of demonstrated profits.
Mr. Morris argued that it is odd that the Kirwan Tavern (one of those bought by the trust) had been operating since 1978, but was valued on the basis of "an actual net profit" figure for one year only, that ended 30th June 1983. He pointed out that although the valuation purports to contain a summary of profit and loss statements for four years, it in fact does not; the profit for the years ended 30 June 1980, 1981 and 1982, are undisclosed in this lengthy and elaborate valuation. A similar pattern is discernible in the other valuations, an exception being that relating to the Bartlett's Barn Hotel. There the last full year, that ended 30 June 1983 was (the valuer asserted) an abnormal trading year - i.e. very poor - and in that case, "actual net annual profits" were set out for the previous eight years, justifying a much higher valuation than would have been possible on the basis of the last year only. These matters may be capable of rational explanation. At this stage it is undesirable to say more than that the suggestion that the principal application appears to be of a merely fishing character must be rejected.
In general, subpoenas at such an early stage should be discouraged, as it undesirable to use the process of subpoena as a means of investigation. I am, however, satisfied that in this case the applicant trustee proposes what is a just and convenient course.
I discussed the power to issue subpoenas of this sort in Greyhound Australia Pty. Ltd. v. Deluxe Coachlines Pty. Ltd. (1986) 67 ALR 93 at p 98 and said that the -

"... process should ordinarily be allowed only when it is clearly seen to be necessary. As a general rule, the court should not, in my view, trouble

strangers to the proceedings with subpoenas duces tecum except in respect of a hearing at which the subpoenaed documents may be used."

In The Commissioner of Taxation of the Commonwealth of Australia; Ex parte Swiss Aluminium Australia Limited (unreported, 20 September 1986), Beaumont J. said in effect that before exercising its discretion to order a stranger to produce documents before trial -

"... the Court will need to be satisfied that a

legitimate forensic interest is being advanced by the adoption of this special procedure."

Here, properly to analyse and plead its case, the applicant needs to see the documents in question and for that and the other reasons set out above should, in the special circumstances, be allowed to do so. Subject to anything counsel may say as to form, there will be a direction that the subpoena duces tecum dated 6 March 1987 issued to the respondents Wilson Joseph Wilde and Anthony Gardiner Sherlock be complied with when served; that it will be sufficiently complied with by production of the trading accounts, the profit and loss statements and the balance sheets of the companies mentioned in the subpoena for the five financial years there mentioned; that the applicant may promptly take copies of the said documents on its undertaking to use them only for the purpose of this litigation; that forthwith after such copies are taken, the same be returned to the custody of the said Wilson Joseph Wilde and Anthony Gardiner Sherlock.

It appears to me unnecessary to obtain an undertaking from the respondents that the documents be preserved and produced again when required. The Court has power to order their production under O.33 r.13(1)(b), if such an order becomes necessary.
Ordinarily, in a matter of this sort, it might not be appropriate to make an order for costs against the resisting stranger to the litigation, but in the special circumstances of this case, I think I should hear counsel on costs.

[1987] FCA 141

31 MARCH 1987