Re Bill Express Limited (In Liq)

[2015] VSC 225

IN THE SUPREME COURT OF VICTORIA
AT MELBOURNE Not Restricted

COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST

S CI 2011 06842

IN THE MATTER OF BILL EXPRESS LIMITED (In Liquidation) (ACN 090 059 564)

CRAIG DAVID CROSBIE AND IAN MENZIES CARSON (in their capacity as joint and several liquidators of BILL EXPRESS LIMITED (In Liquidation) ACN 090 059 564)) AND ANOTHER AS SET OUT IN THE SCHEDULE OF PARTIES	Plaintiffs
v
PREPAID SERVICES PTY LIMITED (ACN 094 689 219) AND OTHERS AS SET OUT IN THE SCHEDULE OF PARTIES	Defendants

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JUDGE:	ROBSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	16 April 2015
DATE OF RULING:	16 April 2015
CASE MAY BE CITED AS:	Re Bill Express Limited (In Liq)
MEDIUM NEUTRAL CITATION:	[2015] VSC 225

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PRACTICE AND PROCEDURE — Application by the plaintiffs to use documents discovered by the defendants in other proceedings brought by the plaintiffs relating to or arising out of the winding up of the second plaintiff — Whether Court approval is required where the party giving discovery consents to the application — Application granted — s 27(b) of the Civil Procedure Act 2010.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms W A Harris, one of Her Majesty’s Counsel with Dr O Bigos	Herbert Smith Freehills
For the Defendant	Mr D F McAloon	Minter Ellison

HIS HONOUR:

1. In this proceeding, the liquidators of Bill Express Limited (in liquidation) (the liquidators) and Bill Express Limited (in liquidation) (Bill Express) have issued proceedings against Optus and related companies seeking to set aside certain payments to Optus and related companies as preferences. 

1. I shall refer to this proceeding as the preference proceeding, matter no 6842 of 2011.  Bill Express and the liquidators have also instituted proceedings against the directors of Bill Express for trading whilst insolvent and seek damages against them.  I shall refer to this proceeding as the insolvent trading proceeding, matter no 3401 of 2014.

1. In the insolvent trading proceeding, the plaintiffs have engaged separate solicitors, Johnson, Winter and Slattery, to those engaged in the preference proceeding.  In the preference proceeding the plaintiffs have engaged Herbert Smith Freehills. 

1. The liquidators have also instituted proceedings against the auditors of Bill Express.  I understand that the defendants are KPMG and Pitcher Partners.  I shall call this proceeding the auditor proceeding, matter no 5152 of 2011.  The solicitors for the plaintiff in the auditor proceeding are also Johnson, Winter and Slattery. 

1. The application before me is brought by way of an interlocutory process. The application is made by the plaintiffs under s 27(3)(b) of the Civil Procedure Act 2010 and the inherent jurisdiction of the court to be released from their obligation under s 27(1) of the Act and implied under common law in respect of certain documents discovered by the defendants to the plaintiffs in the preference proceeding.

1. On the facts stated in the supporting affidavit of Alan James Mitchell dated 13 April 2015 and the affidavit of Benjamin William Charles Renfry dated 2 April 2015, the plaintiffs apply for an order that the plaintiffs have leave to use in the insolvent trading proceeding and in the auditor proceeding documents discovered by Optus in the preference proceeding.  Mr McAloon of counsel for the defendants in the preference proceeding informed the court that his clients do not oppose the orders sought, subject to one condition:  that Mr Mitchell on behalf of the plaintiffs give the undertakings to the court that he makes in his affidavit.  Mr Mitchell says:  

I am informed by the liquidators and believe that if orders are made giving the liquidators a limited release of the undertaking to enable the liquidators to use the discovered documents and extracts of discovered documents in the insolvent trading proceeding and in the auditor proceeding — those documents

(a)would not be provided to any competitor of Optus;

(b)would be used only in the insolvent trading proceeding and potentially the auditor proceeding;

(c)would be provided by way of discovery by the liquidators only to the defendants in:

(1)the insolvent trading proceeding, being the former non‑executive directors of the company, their legal advisors and any expert they engage; and

(2)the auditor of the proceeding being KPMG and Pitcher Partners, their legal advisors and any expert they engage and would remain, subject to the statutory and implied undertaking as to the use of the documents in those proceedings.

1. Subject to those undertakings being publicly acknowledged, which they have been by Ms Harris on behalf of her clients, the defendants do not oppose to the orders being sought. 

1. The documents, the subject of this application, have been described by Mr Mitchell in his affidavit.  He divides them into four categories of documents.  The first category is documents produced by Optus during public examinations.  The liquidators have carried out public examinations of relevant persons to their liquidation, including two employees of Optus and they produced documents under the summons for examination.

1. Mr Mitchell says that 45 of the Optus documents are duplicates of documents produced by the Optus examinees during their public examination.  He calls these category 1 documents and hence the corresponding copies produced during the public examinations can be used by the liquidators without the limitation of any statutory or implied undertaking.

1. The second category Mr Mitchell calls correspondence with the company’s representatives.  Mr Mitchell says 10 of the combined Optus documents constitute correspondence between Optus and the company’s representatives, and this includes certain letters and emails.

1. The third category he describes as summaries of discussions between Optus representatives and Bill Express representatives.  He calls those category 3 documents. 

1. Mr Mitchell says:

The remaining 34 combined Optus documents are internal Optus emails and two Powerpoint slides which contain information on the debt then currently owed by the company, failure by the company to meet payment deadlines, the status of negotiations with the company and proposed courses of action to reduce any risk faced by Optus.

1. I am informed that the liquidators have retained Mr Meredith to prepare an expert report on the solvency of Bill Express for use in the preference proceeding.  I have also been informed that Optus was a major trading partner with Bill Express Limited.  Optus had a relationship with Bill Express Limited where Bill Express Limited distributed Optus pins.  Optus is owed some $150,000,000 by Bill Express.  It is by far the major creditor of Bill Express. 

1. The documents I have referred to relate to how that debt arose, dealings between Optus and Bill Express about repayment of the debt, how it was to be repaid and such like.

1. Obviously such documents are critical to any analysis of the solvency of Bill Express in the time leading up to it going into liquidation.  Mr Meredith prepared a draft report for the insolvent trading proceeding incorporating many of the Optus documents that had been obtained in the preference proceeding.  I was taken to the draft report where the Optus documents are referred to.  It is obviously significant information for the purposes of preparing the report.

1. The affidavit of material discloses that the plaintiffs in the preference proceeding wish Mr Meredith to give evidence in each of the insolvent trading and auditor proceedings as well.  Without going through the pleadings and the issues in those case, I can infer that solvency will be a major issue in those two cases and Mr Meredith’s evidence will be of major importance in them.

1. Mr Meredith included the Optus documents in the draft report he prepared, which he gave to the liquidators.  The liquidators then gave the draft report to the solicitors Johnson Winter and Slattery, who were acting in the insolvent trading proceeding and the auditor proceeding on behalf of the liquidators.

1. The reports were then provided to counsel for them to take into account in drafting the claims in those cases.  The solicitors for the liquidators in the preference proceeding, Herbert Smith and Freehills, were not aware that the liquidators had provided the draft insolvency report of Mr Meredith to Johnson, Winter and Slattery, the solicitors in the insolvent trading proceeding and the auditor proceeding.

1. They became aware when they were informed that the solicitors in the insolvent trading proceeding had sought the permission of Optus to use the documents in the insolvent trading proceeding and Optus refused. 

1. In any event, when Herbert Smith Freehills became aware of the matter, they sought the permission of Optus to use the Optus documents, in the insolvent trading proceeding and the auditor proceeding and permission was initially refused by Optus.  I have been informed that yesterday afternoon, Optus indicated that it changed its mind and no longer opposed the application that is now being made.

1. Because of the application by the plaintiffs is not opposed, in the normal course I would not have gone into the degree of detail that I have.  I wish, however, to express my view that I consider it in the interest of the administration of justice as well as satisfying the objectives in the Civil Procedure Act — that is, to achieve a just, efficient, timely and cost‑effective resolution of a dispute — that the order sought be granted in this case.  In my view it is desirable that Mr Meredith give evidence in each of the three cases on behalf of the plaintiff.

1. It would be a most unfortunate circumstance if the plaintiffs put different cases on insolvency in these three different proceedings.  It is obviously in the interest of justice that the plaintiffs be able to present the same case on insolvency in each of the three proceedings.  If they did not do so, there is the risk of inconsistent findings which could lead to appeals, could lead to the dissatisfaction of certain parties and it could lead to bringing court into disrepute.

1. I consider that Optus has acted properly now in not opposing the application.  Obviously, when Optus took advice, it saw the wisdom of permitting the Optus documents to be used in all three proceedings, particularly in view of the fact that they are of material relevance to the issue of solvency. 

1. Therefore, I propose to make the orders sought, but subject to one amendment.  I have been informed that the extracts of discovered documents have been taken from other documents, other Optus documents, and they should be included in the order.  So the order will now be:

The plaintiffs have leave nunc pro tunc to use in proceeding S CI 2014 3401 and S CI 2011 5152 in this court the discovered documents, the extracts of discovered documents and the documents from which the extract of discovered documents were obtained, each was defined in the affidavit of Alan James Mitchell sworn 13 April 2015.

1. On the question of costs, Mr McAloon argued that a cost orders should be made in favour of his clients, as they have not opposed the application. Secondly, he submits that the plaintiffs have sought an indulgence. Thirdly, he says that the plaintiffs required the approval of the court anyway, irrespective of the non‑opposition, because the implied undertaking about the use of documents which was reflected in s 27 of the Civil Procedure Act and under the common law required the court to release the plaintiffs from the undertaking.

1. Ms Harris has taken me to two authorities, Dagi v BHP Co Ltd [1996] 2 VR 567 at 572; and Ainsworth v Hanrahan (1991) 25 NSWLR 155 at 168, which Ms Harris submitted confirm that although the undertaking is given to the court, the court accepts that the parties can, between themselves, consent to the discharge or variation of the undertaking without seeking the court’s consent.

1. I think the appropriate order is that the costs of the day be costs in the cause, which means whoever wins will get the costs.  There was merit on both sides of the arguments, on costs so I think that is the appropriate cost order to make.

SCHEDULE OF PARTIES

BETWEEN

CRAIG DAVID CROSBIE and IAN MENZIES CARSON
in their capacity as joint and several liquidators of
BILL EXRESS LIMITED (in liquidation) (ACN 090 059 564)

First Plaintiffs

BILL EXPRESS LIMITED (in liquidation) (ACN 090 059 564)

Second Plaintiff

and

PREPAID SERVICES PTY LIMITED (ACN 094 689 219)

First Defendant

OPTUS MOBILE PTY LIMITED (ACN 054 365 696)

Second Defendant

VIRGIN MOBILE (AUSTRALIA) PTY LIMITED (ACN 092 726 442)

Third Defendant