Re Addstone Pty Ltd (In Liq); ex parte Macks

[1998] FCA 1682

IN THE MATTER OF ADDSTONE PTY LTD (IN LIQUIDATION) ACN 010 764 997 and PETER IVAN MACKS
No. SG 3080 OF 1995
FED No. 1682/98
Number of pages - 13
Corporations

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY

GENERAL DIVISION

MANSFIELD J

CORPORATIONS - application by liquidator under s 531 to prevent certain creditors from viewing liquidator's books - creditors also defendants in proceeding by liquidator - discretion to refuse inspection of liquidator's books - purpose of creditors in seeking access to liquidator's books - creditors wishing to participate in liquidator's application to have remuneration determined by Court under s 473 - balancing of interests of liquidator and creditors - factors to be weighed in exercising discretion.

Corporations Law ss 173, 246F, 246G, 247A, 247D, 251B, 314, 473, 486, 531, 542, 1274(2), 1300, regs 5.6.01, 5.6.02

Uniform Companies Code 1981 ss 416, 425, reg 67

Companies Acts 1961 s 277

Companies Act 1934 (UK) s 247

Nut Trading Co (Aust) Pty Ltd v KKL (Kangaroo Line) Pty Ltd (1997) 25 ACSR 580, applied

Re Interchase Corporation Ltd (In Provisional Liquidation) (1993) 44 FCR 501, considered

Re Sanitary Burial Association [1900] 2 Ch 289, considered

Re Silver Valley Mines [1882] 21 Ch D 381, considered

Re BPTC (1992) 10 ACLC 271, considered

Re Excel Finance Corp Ltd; Worthley v England (1994) 52 FCR 69, applied

WA Pines Pty Ltd v Bannerman (1980) 30 ALR 559, applied

Suburban Pty Ltd v Smith (as liquidator of Conpac (Aust) Pty Ltd (in liquidation) (1998)

28 ACSR 328, considered

Harman v Secretary of State for the Home Department [1983] 1 AC 280, applied

ADELAIDE, 27 October 1998 (hearing), 23 December 1998 (decision)

#DATE 23:12:1998

Appearances

Counsel for the Applicant:

Mr R J Whitington QC

with him

Mr P Slattery

Solicitor for the Applicant:

Ward & Partners

Counsel for the Creditors:

Mr J Sheehan SC

with him

Ms S Maharaj

Solicitor for the Creditors:

Kelly & Co

as agents for Clayton Utz

MANSFIELD J

This is an application by a liquidator under s 531 of the Corporations Law ("the Law") for an order that a creditor not be permitted to inspect books kept under that section. The context in which the application arises is the creditor's desire to see those books to enable that creditor to be fully informed in relation to an application for a liquidator's remuneration to be determined by the Court under s 473 of the Law. The creditor is also a current defendant in proceedings brought by the liquidator for damages on behalf of the company in liquidation, so the liquidator is reluctant to provide access to those records.

The applicant, Peter Ivan Macks, ("the liquidator") is the liquidator of Emanuel Management Pty Ltd (In Liquidation) and sixty-three other companies, together known as the Emanuel Group ("the Emanuel Group"). He was appointed as liquidator of each of the Emanuel Group on various dates between 13 June 1995 and 24 January 1996, save for Emanuel Investments Pty Ltd (In Liquidation). In that case he was appointed on 9 January 1995 by resolution of its creditors, to succeed an earlier appointment of another person by resolution of its members. One of the Emanuel Group is Emanuel (No.14) Pty Ltd (In Liquidation) ("Emanuel 14"). He was appointed provisional liquidator of Emanuel 14 on 30 August 1995, and liquidator of Emanuel 14 on 23 January 1996.

The liquidator caused extensive investigations to be carried out, including public examinations of those involved in the conduct of the affairs of the Emanuel Group, following his appointment. A number of possible causes of action were identified, and proceedings issued as a result. Included in those proceedings are actions in the Supreme Court of South Australia Action No 2420 of 1996 in which two of the Emanuel Group, Emanuel Management Pty Ltd (In Liquidation) and Elizabeth House Pty Ltd (In Liquidation) and the liquidator are plaintiffs, and in which the defendants are EFG Finance Ltd, Coopers & Lybrand and Murray Goldie Anderson, a partner of Coopers & Lybrand. EFG Finance Ltd is now called Glenmore Park Estate Ltd ("Glenmore"). It is represented in those proceedings by the same solicitors now acting for it in relation to the issues to which these reasons are addressed. In addition, the liquidator caused a further action to be instituted in the Supreme Court of South Australia, being Action 411 of 1998, in which the Emanuel Group generally are plaintiffs and there are a number of defendants including Glenmore and Elfic Ltd ("Elfic"). There is a substantial overlap of issues in those two actions and steps have been taken to consolidate them, together with a third action in Supreme Court of South Australia, being Action 167 of 1997. The actions are together called "Supreme Court Actions".

Glenmore and Elfic claim to be the major creditors of Emanuel 14. Their claimed debt is $137,980,723. The amount of the debt claimed is the balance outstanding under a judgment in the Supreme Court of Queensland, from which there has been no appeal nor any application to set it aside. There is a dispute as to whether the debt should be admitted for that amount, having regard to the support of Glenmore and Elfic for resolutions passed in favour of a scheme of arrangement in March 1995. The liquidator has indicated a preparedness only to admit their debt for the sum of $1. He contends that the Deed of Forbearance and Release then entered into, if it is enforceable, includes covenants by Glenmore and Elfic, and others, to forbear from recovering that judgment sum. Their response is that those covenants do not apply to prevent them from claiming a dividend in the winding up of the Emanuel Group, and alternatively that the covenants are not enforceable by him due to his conduct. The largest other debtor of Emanuel 14 is in respect of the sum of $274,048, so that if Glenmore and Elfic's debt is provable to the amount for which they assert, they are interested as creditors for almost all the indebtedness of Emanuel 14. Neither party asked for that issue to be determined. I shall proceed on the basis that Glenmore and Elfic are creditors of Emanuel 14, as the liquidator accepts, and that potentially at least they are major creditors of Emanuel 14.

By notice of motion dated 13 August 1998, the liquidator applied pursuant to s 531 of the Law for orders that Glenmore and Elfic or their agents, as creditors of Emanuel 14, not be permitted to inspect the books kept by the liquidator. Section 531 provides:

"A liquidator or provisional liquidator shall keep proper books in which he or she shall cause to be made entries or minutes of proceedings at meetings and of such other matters as are prescribed, and any creditor or contributory may, unless the Court otherwise orders, personally or by an agent inspect them."

A provision in almost the same terms was contained in s 416 of the Uniform Companies Code 1981, and before that in the various State Companies Acts 1961 (s 277) and in their legislative predecessors including the UK Companies Act 1934 s 247. The provision therefore has considerable antiquity. Researches of counsel, or my own researches, do not disclose that the particular matter presently in issue has been the subject of prior decision, save for the recent decision of Nut Trading Co (Aust) Pty Ltd v KKL (Kangaroo Line) Pty Ltd (1997) 25 ACSR 580. The only amendment to s 531 in the Law was effected by the Corporate Law Reform Act 1992, when it was extended to apply also to provisional liquidators.

Regulations 5.6.01 and 5.6.02 of the Corporations Regulations prescribe the matters in respect of which a liquidator is obliged to keep books, as referred to in s 531. Those regulations provide:

"5.6.01 For the purposes of section 531 of the Corporations Law, the prescribed matters are those that are required to give a complete and correct record of the liquidator's or provisional liquidator's administration of the company's affairs.

5.6.02 The liquidator or provisional liquidator must ensure that the books kept under section 531 of the Corporations Law are available at his or her office for inspection in accordance with that section."

Glenmore and Elfic contend that a liquidator is obliged thereby to keep books and records which give a complete and correct record of the administration, sufficient to evidence the work undertaken by that liquidator or officers, including detailed client notes, time sheets, and documents defining the tasks to be undertaken. The present motion does not require the Court to determine precisely what is required of a liquidator to comply with s 531 and regs 5.6.01 and 5.6.02, or whether the liquidator has complied with that obligation.

THE CLAIM FOR REMUNERATION

The entitlement of the liquidator to remuneration, and the means of it being quantified, is contained within s 473 of the Law. It relevantly provides:

"473(2) A provisional liquidator is entitled to receive such remuneration by way of percentage or otherwise as is determined by the Court.

473(3) A liquidator is entitled to receive such remuneration by way of percentage or otherwise as is determined:

(a) if there is a committee of inspection - by agreement between the liquidator and the committee of inspection; or

(b)if there is no committee of inspection or the liquidator and the committee of inspection fail to agree:

(i) by resolution of the creditors; or

(ii) if no such resolution is passed - by the Court."

There is no committee of inspection of Emanuel 14. The liquidator sought to procure a resolution of the creditors that he should receive his claimed remuneration. He convened a meeting of the six creditors of Emanuel 14 on 16 April 1998, partly to report on the liquidation generally and partly for the purposes of the creditors considering his remuneration. The minutes indicate that he reported at some length on the progress of the liquidation, including the various actions which had been commenced. He then invited a motion for the consideration of the creditors concerning his remuneration. There were four creditors present, Glenmore and Elfic, a legal firm who are also defendants in a separate Supreme Court proceeding brought by the liquidator for damages, and the Australian Taxation Office. Those creditors each indicated that they would abstain on any motion before the meeting on the topic of the liquidator's remuneration. Accordingly no motion was proposed or passed.

The liquidator therefore decided to ask the Court to determine his remuneration as liquidator of Emanuel 14, under s 473(3)(b)(ii) of the Law. The formal notice of that meeting is not in evidence. The evidence does not indicate whether the liquidator complied with s 473(4), in relation to that meeting: cp ReInterchase Corporation Ltd (In Provisional Liquidation) (1993) 44 FCR 501 at 506. No point has been taken in that regard. He also sought that his remuneration as provisional liquidator of Emanuel 14 be determined by the Court, under s 473(2). It seems clear enough that there is no real prospect of the creditors determining the liquidator's remuneration at a level satisfactory to all concerned without resolution of the present issue. The liquidator's application to have his remuneration determined by the Court is but the occasion for the present issue concerning s 531 to arise. It is not a legal

pre-condition for a Court to entertain the present motion.

On 25 May 1998, the liquidator moved the Court for orders that his remuneration as provisional liquidator and as liquidator of Emanuel 14 be determined by the Court. He confined his claim to work done exclusively for Emanuel 14, so he expressly excluded work undertaken in respect of matters concerning Emanuel 14 but also being pursued jointly with other companies in the Emanuel Group. For the period of provisional liquidation he sought his remuneration to be fixed at $9,514.21. As liquidator of Emanuel 14 thereafter and up to 30 April 1998, he sought that his remuneration be fixed at $122,781.60. On 26 May 1998, the Registrar directed that notice of that motion be given to the six creditors of Emanuel 14. The motion was supported by an affidavit of the liquidator describing in narrative form the work carried out by him and his staff in respect of which the claim for remuneration was made, the time spent in total by him and each of his officers on that work, and deposing to the fact that the work was charged according to the scale of charges equal to or less than the guide to hourly rates recommended by the Insolvency Practitioners Association of Australia for professional work of that nature. Subsequently, on 24 June 1998, the liquidator provided an itemised summary of his claims for remuneration in a form which approximates that in which a bill of costs of a solicitor is prepared for taxation.

Glenmore and Elfic appeared on that motion. Each asserts that they wish to be in a position to ascertain the reasonableness or otherwise of the liquidator's claim for remuneration. For that purpose, they assert an entitlement to inspect all of the files, documents and materials maintained by the liquidator in relation to the liquidation of Emanuel 14 which support his claims for remuneration for the tasks undertaken by him and his staff, other than the original time sheets. Certain limited information has been provided to them. The liquidator, and Glenmore and Elfic, are unable to agree as to the extent of the books and documents which the liquidator should make available to them. Glenmore & Elfic contend they are entitled to, and need, all the information sought to assess the reasonableness of the tasks undertaken by the liquidator, and the time undertaken in relation to them, and thus to be in a position to express an attitude to the claim for remuneration. No particular matter or matters of concern to Glenmore and Elfic have yet been expressed. They claim that they will not be in a position to do so until they have had inspection of the liquidator's primary records. In the course of submissions they have identified by reference to the material before the Court, some matters of concern which they wish to explore.

The process of the Registrar determining the liquidator's remuneration has been adjourned to a date to be fixed while the present motion is resolved.

THE CONTENTIONS ON THE APPLICATION

The principal reason for the liquidator's application under s 531 is his concern that, because Glenmore and Elfic are defendants in the Supreme Court actions, it is "inappropriate"for them to have inspection of his original files and records maintained in the administration. He seeks a blanket order precluding them from doing so. He suspects that Glenmore and Elfic wish to trawl through his records for the purposes of finding matters about which they can make a submission complaining of extravagance or unreasonableness in carrying out work on his part. His suspicion is enhanced by the failure of Glenmore and Elfic to specify any particular objection to the claim for remuneration despite requests to do so, and by their acknowledgment in submissions made on their behalf that they should be given an opportunity to review the liquidator's primary records in order to ascertain if they do have any objections to the remuneration claimed by the liquidator so that any objections (if they exist) can be addressed by the Court prior to the fixing of his remuneration.

They have, through their solicitor deposed to the fact that unless they and their solicitors are given access to all the primary records of the liquidator, they will not be in a position to assess the reasonableness of the remuneration claimed by his liquidator. They have received at the meeting on 16 April 1998, a work in progress computer printout and the schedule in narrative form. An updated copy of that computer printout is available. A revised schedule in narrative form is part of the material served on them, together with the itemised bill of costs referred to above.

Apart from the general objection in principle to Glenmore and Elfic having access to his further material, there are three specific objections which the liquidator has raised. The first is that to provide inspection of all the available records would be extremely onerous. Those records include daily time sheets, extending over a period of three years. It would take a considerable time and effort to retrieve the relevant time sheets, and to check them so as to isolate matters relevant only to the particular claim for remuneration now being pursued. The difficulty is not confined to the time sheets. The liquidator's records are apparently prepared and maintained in relation to his administration in the Emanuel Group generally. It would be necessary to isolate those books and records or those parts of those books and records which relate to Emanuel 14 only, and which relate only to the present claim for remuneration. That is because, to a large extent there has been overlap of his work for the Emanuel Group of Companies. The liquidator is concerned at the cost and inconvenience of accommodating the request of Glenmore and Elfic, and of them then having an unbridled role in debating the reasonableness of his fees. He points out that there are other creditors of Emanuel 14 who are not defendants in the Supreme Court actions, and whose interests are better served by him being able fully to direct his efforts towards pursuing those claims. He claims Glenmore and Elfic, if permitted to adopt the role they propose, would result in a significant distraction from him pursuing his principal function of maintaining the causes of action on behalf of and for the benefit of the creditors of Emanuel 14 and the Emanuel Group.

The second specific concern arises from the fact that much of his work has been directed to ascertaining what causes of action the liquidator might have available to him on behalf of any company in the Emanuel Group, and then assessing the strengths and weaknesses and the strategic and other considerations relevant to how those claims might be progressed in the interests of the creditors of Emanuel 14 and of the creditors of the Emanuel Group generally. The liquidator is concerned not to disclose to Glenmore and Elfic material which is or may be the subject of client legal privilege.

Thirdly, he is anxious to preserve from examination confidential or sensitive material, that is, material the disclosure of which might be of potential detriment to the liquidator in being able to pursue those causes of action which the liquidator regards as in the best interests of the creditors of the Emanuel Group. Although disclosure to Glenmore and Elfic would be subject to the obligation to keep such material confidential, such disclosure makes the material more vulnerable to becoming available indirectly to those against whom causes of action are asserted to exist.

Glenmore and Elfic dispute those contentions. They contend that the liquidator's submission that the inspection sought is "inappropriate" because of the Supreme Court actions, is fallacious. The records upon which the claim for costs are based would not be relevant to that litigation because of the refined category of work for which remuneration is sought. It is limited to the work carried out exclusively for Emanuel 14, and does not include work done for Emanuel 14 which overlaps with work done also for the benefit of other Emanuel Group companies. The analysis of the material presently available to them has exposed a not insignificant number of apparently minor irregularities or discrepancies between the costs claimed and the records made available which may call for explanation. Their analysis is not exhaustive. They assert that the material made available does not enable any real assessment to be made of the nature of the overall tasks undertaken from time to time, or the efficiency with which they have been undertaken, or the reasonableness of them having been undertaken. I do not accept their further submission that such records will have to be discovered in the Supreme Court proceedings in any event. That is not necessarily the case. That will depend upon the orders for discovery made in those proceedings, and the relationship of the various documents to the matters in issue in those proceedings.

In response to the three particular concerns of the liquidator, they submit first that the complaint of the liquidator about the cost and effort involved in producing the material sought is somewhat unrealistic. They contend that there is no real evidence as to the cost which would be involved in isolating the documents sought and producing them for inspection. They also point out that they do not require access to the time sheets themselves. It appears that they are prepared to accept that the particular officer of the liquidator, or the liquidator himself, spent the time which has been ascribed on the time sheet on the affairs of Emanuel 14 on the occasion to which reference is made on the time sheet. They wish to explore the reasonableness of having expended that time on the tasks undertaken, and perhaps the reasonableness of the rates charged. If, as the liquidator asserts in part, there are no other documents than the time sheets, there can be no hardship. If there are other documents, the liquidator has not explained why the production of those documents would be too expensive to warrant an order for their production.

Glenmore and Elfic accept that privilege documents ought not to be made available to them and they do not ask for that to be done. Those privileged documents will have to be identified and enumerated in any event if the inspection sought is permitted.

Thirdly, they point out that the claim for remuneration is limited to work undertaken as liquidator of Emanuel 14 and exclusively for Emanuel 14. It excludes work done for Emanuel 14 in conjunction for work done for others in the Emanuel Group. Thus, they submit, there is no apparent reason why privileged matters or matters of significance to ongoing proceedings would be disclosed. There has been one action pursued by Emanuel 14 alone, to recover a preferential payment under Part 5.7B of the Law, and that matter has been resolved. They submit that no special reason is shown to opine that privileged material or material of a sensitive commercial nature might be disclosed by reason of any access to the documents to which s 531 entitles them in the absence of any order to the contrary.

Glenmore and Elfic urge that there are substantial reasons why the order for access should be made. They contend that they have genuine grounds for concern as to whether all of the remuneration claimed should be approved. There is affidavit evidence, as I have noted, to indicate some apparent discrepancies in the detailed claim for costs, or at least some matters which call for explanation before it is possible to be satisfied that the amounts claimed are properly attributable to Emanuel 14 alone. They also contend that there is a serious question as to whether the remuneration claimed should be partly disallowed, or allowed on a percentage basis only, on the ground that the liquidator's claimed remuneration for his fees and expenses may exceed his receipts. I do not wish to be seen as accepting the breadth of that proposition. The source referred to on that point is McPherson on Company Liquidation, 3^rd ed, at 220-221. It supports the proposition that the liquidator's remuneration may be lost or diminished where the assets are insufficient to meet it, but that is "insufficient" having regard to the other costs, charges and expenses of the winding up: see Re Sanitary Burial Association [1900] 2 Ch 289 at 295. It is not clear that that is the case. Nor, if that were the point of the objection, is there any reason to suspect that the liquidator has not made proper provision for the other costs of the winding up, including costs incurred in the retention of solicitors. Reference was also made to McPherson (above at 278) for the proposition that:

"A liquidator who is unnecessarily litigious and who, without good reason, engages in fruitless legal proceedings may be deprived of the right which he otherwise has of receiving his costs out of the assets."

As that text indicates, it would be necessary to establish that the liquidator acted with manifest impudence, or failed to exercise a reasonable degree of professional skill and care: Re Silver Valley Mines [1882] 21 ChD 381 at 392. It is said that there is some material to indicate that the costs of the one completed action in which Emanuel 14 was the sole applicant exceeded the recoveries, even though there was a substantial recovery in respect of that claim.

CONSIDERATION OF THE APPLICATION

Section 531 first obliges a liquidator to keep proper books. Regulation 5.6.01, in particular, requires that those books be capable of presenting a complete and correct record of the administration of the company's affairs. Subject to the Court ordering to the contrary, the section then entitles any creditor or contributory of the company to inspect those books.

The availability of that material to any creditor or contributory is in contrast to the general availability of such material to a creditor or contributory of a company. The Law provides for certain documents lodged with the Australian Securities and Investment Commission to be available for inspection, and for some information to be provided to or available to members generally. Without being exhaustive, that material includes the registers required to be maintained by Chapter 2C of the Law: s 173, certain documents concerning share divisions or conversion of shares into classes of shares: ss 246F and 246G, the minute book concerning meetings of members and resolutions of its members: s 251B, financial reports including the directors' report and the auditor's report: s 314, and all but certain limited documents which have been lodged with the Commission: s 1274(2). Section 1300 deals with the way in which inspection, where it is permitted by the Law, is to be provided.

Section 247A entitles a member of a company to apply to the Court for an order authorising that person to inspect books of the company. The Court is empowered to make such order only if it is satisfied that the applicant is acting in good faith, and that the inspection is to be made for a proper purpose. At the time of that order, the Court is also empowered to make such orders as it considers appropriate limiting the use which may be made of the information obtained during inspection, or the copying of the material inspected. Otherwise, members do not have a right to inspect books of the company except by resolution of the directors or of the company: s 247D. Section 486 of the Law in Pt 54B concerning external administration provides:

"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."

Then, there is s 531.

There is no provision entitling a creditor to inspect the books of a company equivalent to s 247A in relation to members.

It is apparent that, prior to any winding up, members are given certain statutory rights to information described in broad terms above, but no other right to access to the books of the company except by application under s 247A. It is necessary to show that the member is acting in good faith in seeking access to those books, and that there is a proper purpose for the request to see those books. The Court may impose conditions as to the use of that information. After the winding up, the Court's power to authorise access to the books of the company under s 486 is extended, firstly because creditors are eligible to apply for such access, and secondly because the conditions upon which such access may be given either to creditors or contributories is only limited by the Court being satisfied that the access sought is "just". The Court may permit access only to the extent that it is just to do so. Any such order could, no doubt, contain express conditions as to the use to which that material may be put: Re BPTC Ltd (1992) 10 ACLC 271. There are obvious reasons why, following the liquidation of a company, a creditor may have a legitimate interest in the operation of the affairs of the company prior to its winding up but which did not exist prior to the winding up. Section 486 relates to an application made after the winding up of a company, but in relation to the books of the company concerning its affairs, created and maintained up to the time of the liquidation, rather than in relation to the liquidator's books. Section 531 then takes the further step, in the case of the liquidator's books, of providing that they should be generally available, unless the Court otherwise orders.

It is necessary to give each of ss 247A, 486 and 531 those exclusive areas of operation to give full and proper effect to their respective terms. I respectfully agree with Einstein J in Nut Trading Co (above, at 604) on that matter. (As the liquidation was being conducted under the Code, his Honour was addressing earlier provisions but effectively in the same terms).

That legislative regime may assist in determining the proper operation of s 531 in the present circumstances. The criteria for the making of an order on the application of a member under s 247A are explicit. Following liquidation, the expressed criterion for eligibility for an order for access to a company's books under s 486 is not expressly so limited. As Einstein J noted in Nut Trading Co (above, at 604) in relation to s 486 (s 386 of the Code), a number of decisions suggest that the discretion to permit access to those documents will be exercised only for the purposes of the winding up and for the benefit of those interested in the winding up so as to increase the assets available to creditors and contributories, although some recent decisions have doubted that stringent restriction on the scope of operation: eg Re BPTC Ltd (above).

The circumstances in which permission to inspect books will be granted under s 486 should not be too liberally applied: Re Excel Finance Corp Ltd; Worthley v England (1994) 52 FCR 69: see at 91-92 per Gummow, Hill and Cooper JJ.

There is one other matter I should refer to briefly. In Nut Trading (above, at 606) Einstein J observed that the books required to be kept by a liquidator under s 531 and reg 5.6.01 (in that case, s 416 of the Code and reg 67) do not apply to every document which a liquidator creates or which comes into the possession of a liquidator in the course of the administration, as those provisions contain "inbuilt limitations" on the types of books required to be kept. His Honour compared s 425 of the Code (s 542 of the Law), and noted that s 531 is expressed in terms of books in which the liquidator makes entries, as distinct from documents received in the course of the administration, and that as they must be books necessary to record his administration of the company's affairs they are really records of an accounting nature. The parties on their motion have not sought to urge any such distinction upon me. It has been assumed by both parties that s 531 applies to all the records held by the liquidator, whether created by him or received by him in the course of his administration. In those circumstances, I have not addressed the distinction which was drawn in that case.

In my view, having regard to the legislative structure noted above defining the circumstances in which a member or creditor of a company is entitled to inspect documents, the power to deprive a member or creditor from inspecting books kept by a liquidator must be exercised in the interests of justice in all the circumstances. The starting point for such consideration will be the liquidator's reasons for seeking the order, as the initiative for invoking the power must come from the liquidator. Beyond that, I do not think that s 531 imposes any particular onus upon the liquidator. It is a discretion to be exercised without any particular legal or evidentiary onus. Once the application is made, and there is a sound reason for it, it will be appropriate to consider the purpose for which the inspection is sought. If there is sound reason for the liquidator's concern, and the creditor or contributory does not explain cogently the purpose for which inspection is sought, the application for an order not to permit access to the documents is likely to succeed. Most commonly, I suspect, those two considerations will lead to the need to balance the respective interests of the liquidator in pursuing the prompt realisation of the assets of the company for the benefit of creditors and members and of the creditor or member in procuring access to the documents. There is likely then to be a number of factors to be weighed in the balance in making that judgment. It is neither appropriate nor possible to endeavour to list all potentially relevant factors. They will differ in each case.

In Nut Trading (above), the liquidation was about to be completed, and the inspection sought was to frustrate that occurring so as to investigate alleged misconduct by the liquidator which had already been adjudicated upon adversely to the creditor. An order was made refusing access to the documents. Einstein J said at 606:

"Whatever be the touchstone for refusing to allow a creditor to inspect the books maintained by the liquidator, it would not be permissible if the creditor or contributory seeks simply to go on a fishing expedition in an endeavour to turn up some material which might support a claim to have the liquidation reviewed: cf IACS. Were it otherwise, any disgruntled creditor or contributory would be permitted to trawl through a liquidator's documents in the hope that he might discover some damning material.

Whether or not the court ought exercise its discretion to allow [inspection] ... depends upon assessing the purpose ... in seeking inspection and the utility or detriment of allowing it."

His Honour had regard to the fact that the creditor's allegations against the liquidator had already been determined adversely to the creditor, that the creditor had no real basis for believing that the liquidator had been guilty of a default, that the inspection sought would therefore be a waste of money and resources. He also had regard to the timing of the application as by then the assets had been distributed in accordance with directions of the Court and the liquidator had no funds.

In WA Pines Pty Ltd v Bannerman (1980) 30 ALR 559, the expression "unless the Court otherwise orders" in O 15 r 1 of the Federal Court Rules was discussed. Proceedings had been instituted for a declaration that a notice issued by the Chairman of the Trade Practices Commission pursuant to s 155 of the Trade Practices Act 1974 (Cth) did not oblige the applicant to produce certain documents. Having instituted those proceedings, an order for discovery was sought. The Rules empower discovery "unless the Court otherwise orders". Brennan J, with whom Bowen CJ agreed, said at 567 that whether an order should be made depended upon the nature of the case and the stage of the proceedings at which discovery is sought. He categorised the applicant in that case as having made a bare allegation that the Chairman had no proper purpose for seeking the documents the subject of the notice, and then in the face of the Chairman's denial of that allegation, seeking to interrogate the Chairman of the Commission and to ransack his documents in the hope of making a case. His Honour described that as "mere fishing". Discovery had been refused. The appeal against the decision of the trial Judge that discovery in those circumstances should be refused was upheld by the Full Court. Although in a different context, that decision also reflects that, once the issue arises under s 531, the Court should look to the genuineness of the reason for which the creditor or member seeks inspection and to whether there is material upon which the reason is said to be based.

Glenmore and Elfic have indicated the purpose for which they seek access to the documents, namely to participate in the process of the Court determining the liquidator's remuneration. The taxing officer has directed that they be served with the material relating to that application by the liquidator so that they can so participate. I also note that ss 473(5) and (6) contemplate that, where the Court is asked to determine the remuneration of the liquidator, either because the Committee has fixed that remuneration and a significant number of members or creditors are unhappy with it, or where the remuneration has been fixed by the

creditors and the liquidator is unhappy with it, the Court may then review that remuneration. The creditors clearly are contemplated to have a role in any such hearing. In City and Suburban Pty Ltd v Smith (as Liquidator of Conpac (Aust) Pty Ltd (In Liquidation) (1998) 28 ACSR 328, one issue concerned the liquidator's remuneration. Principally that matter involved an application to remove the liquidator, but in part it concerned his remuneration up to the time of the application. Merkel J permitted the creditor to be heard on that application, and concluded that there were "serious and significant failures" on the part of the liquidator in respect of certain payments which were made, and that those failures meant that he ought not to be remunerated in relation to them. The parties had agreed upon a percentage reduction of his overall remuneration claim if such a finding had been made. The liquidator here has not argued that the interest of Glenmore and Elfic is not a bona fide one, or that they are not entitled to participate in the taxation process to the extent to which they wish to do so.

In my view, the purpose of Glenmore an Elfic in seeking the documents is a proper one.

In addition, as the evidence referred to above indicates, there are reasons advanced by Glenmore and Elfic as to why the material presently advanced by the liquidator does not satisfy them that the costs claimed should be allowed. I shall not re-traverse that material. I am satisfied that Glenmore and Elfic will be assisted in their participation in the hearing determining the liquidator's remuneration by having access to the liquidator's books concerning his administration of Emanuel 14. That access may enable them to reconcile the apparent discrepancies and inconsistencies to which they refer. It may also enable them to form judgments, and to make submissions about, the propriety of the liquidator having undertaken certain of the work which he has undertaken. Of course, ultimately, those matters are for judgment of the Court in determining the appropriate remuneration.

I am not persuaded that the liquidator's general concern, or the particular matters he raises, weigh sufficiently heavily in the scales to decline the order sought or to make some more limited order. There is nothing to indicate that the fact that Glenmore and Elfic are also

defendants in the Supreme Court action, of itself, will impede in any way the conduct of the Supreme Court action or will lead to the disclosure of information about that action or other actions brought by the liquidator which might be to the detriment of the creditors of Emanuel 14 or of the Emanuel Group. By reason of their particular status, I propose to make an order restricting the purpose for which those documents may be inspected, so that they may not be used at large. That order will reflect the form of implied undertaking which was recognised, for example, in Harman v Secretary of State for the Home Department [1983] 1 AC 280 that the documents so inspected not be used, or be permitted to be used, for any purpose other than the proper conduct of the liquidator's application to have his remuneration determined.

If it be the case that, as a result of that inspection, matters are raised which disclose that costs have been unreasonably incurred, then the creditors of Emanuel 14, including Glenmore and Elfic, will have been protected from being liable to have those costs paid ahead of their own claims in the liquidation. The liquidator has accepted to this point that Glenmore and Elfic are acting bona fide in seeking access to the liquidator's books for that purpose. Of course, in the event of any subsequent application in relation to Emanuel 14 or to the Emanuel Group generally, the liquidator will not necessarily have to adhere to his present attitude in that respect. The conduct of the hearing to determine his present application to have his costs determined by the Court, or other material, may lead to him adopting a different view in the future.

The liquidator has also submitted that in the circumstances Glenmore and Elfic should be obliged to identify particular matters of concern about the claim for costs, and that they should be entitled to inspect only those documents which pertain to those particular issues. I am not disposed to accede to the liquidator's application, put in this alternative way. Glenmore and Elfic have shown several matters of concern in relation to the material presently available to them. In that circumstance, to oblige them to identify all matters of concern before having the opportunity to inspect the documents might substantially inhibit their participation in the Court's determination of the liquidator's remuneration. There is no particular consideration put forward by the liquidator which warrants that sort of order in this particular instance. I accept that there must be a balancing of the interests of the member or creditor seeking to inspect the liquidator's books, on the one hand, with the interests of the liquidator and the creditors and members of Emanuel 14 generally on the other. But the liquidator has not, to my satisfaction, identified any factors which require that the balancing process produce that form of order.

I do not think that the cost and expense of the liquidator complying with the conditional right which s 531 establishes is shown to be of great moment. The difficult task of isolating, masking, and producing the time sheets is not required. Glenmore and Elfic do not require those documents. As noted, they appear to have accepted that the liquidator and his officers have done the things which the schedules indicate and have taken the time claimed in respect of doing those things. The evidence does not demonstrate that the production of the others of the liquidator's books relating to his remuneration as claimed would be unduly burdensome, or time consuming. Nor does the evidence show that the costs of meeting any such production obligation would interfere with the conduct of the administration of Emanuel 14 or the Emanuel Group. Indeed, the material sought might well be required by the Court for the purposes of determining the remuneration claimed in any event. In so far as the books may contain documents the subject of client legal privilege, Glenmore and Elfic accept that material need not be produced. There is no evidence to indicate that isolating such privileged material would itself be unduly expensive or time consuming. Given the refined nature of the claim for remuneration, I am not satisfied that any books sought would or might involve the disclosure of material of ongoing sensitivity in the winding up of Emanuel 14 or of the Emanuel Group. I propose however to permit the liquidator to exclude from production such documents as contain material of that nature, provided a list of them is prepared and provided to Glenmore and Elfic. I will then give the parties liberty to apply in relation to such documents.

There will be an order refusing the liquidator's application except in the limited respects referred to in these reasons but provided the undertaking referred to is proffered by Glenmore and Elfic. I will stand the matter over for a short time to enable the liquidator to draw short minutes to reflect these reasons.