Re Bill Express Limited (No. 1)
[2010] VSC 651
•5 March 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
No. S CI 2009 10799
In the matter of BILL EXPRESS LIMITED
| SANDRO DI DONATO | First Applicant |
| and | |
| PETER COUPER | Second Applicant |
| v | |
| CRAIG DAVID CROSBIE and IAN MENZIES (as joint and several liquidators of Bill Express Limited (in liquidation)) | Respondents |
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JUDGE: | Gardiner AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 17 February 2010 | |
DATE OF JUDGMENT: | 5 March 2010 | |
CASE MAY BE CITED AS: | Re Bill Express Limited (No. 1) | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 651 | |
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CORPORATIONS ― Examinations of persons associated with company in liquidation ― Summonses issued pursuant to s 596B of the Corporations Act 2001 ― Application pursuant to order 11 r 5 of the Supreme Court (Corporations) Rules 2003 for discharge of summonses by reason of scope of documentation sought being too broad in time and description ― Application to set aside summons for examination on basis of vagueness and uncertainty in description of documents ― Applications to set aside summonses dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr M Clarke | Mills Oakley Lawyers |
| For the Respondents | Mr P Bick, QC with Mr K Tsiakis | Freehills |
HIS HONOUR:
On 18 December 2009 Messrs Crosbie and Menzies who are the joint and several liquidators of Bill Express Limited (in liquidation) (“Bill Express”) filed an originating process seeking orders for the public examination of 15 examinees pursuant to ss 596A and 596B of the Corporations Act 2001 (Cth) (“the Act”) in relation to the affairs of Bill Express.
On 21 December 2009, I made orders for the issue of summonses for the examination of the persons described in the originating process and in the affidavit in support of Craig David Crosbie sworn 18 December 2009. Pursuant to s 596C of the Act that affidavit is a confidential document and not to be inspected except on the order of a Judge or Associate Judge of this Court. However, much of what is contained in that affidavit in relation to Messrs Couper and Di Donato is repeated in the affidavit of Mr Crosbie sworn 4 February 2010 and relied upon by the liquidators in opposition to this application
On 7 January 2010, two of the examinees, Peter Couper and Sandro Di Donato were served with their respective summonses by service upon their solicitors, Mills Oakley Lawyers, who had previously indicated to the liquidators’ solicitors that they had instructions to accept service.
Both summonses were issued pursuant to s 596B of the Act. The summons directed to Mr Di Donato requires him to produce to the Court the books detailed in Schedule 1 to the summons. That schedule provides relevantly:
Schedule 1
All books and records relating to the affairs of Bill Express Limited (in liquidation) ACN 090 059 564 and any of its subsidiaries referred to in Schedule 2 (collectively the Bill Express Group) between the period 1 January 2005 and 8 July 2008, as are in your possession, custody or under your control, including, but not limited to, the following:…
The summons directed to Mr Couper required, him inter alia, to produce the following books detailed in Schedule 1 of the summons:
All books and records relating to the affairs of Bill Express Limited (in liquidation) ACN 090 059 564 and any of its subsidiaries referred to in Schedule 2 (collectively the Bill Express Group) for the period from two years ending on the appointment of the administrators (8 July 2008), as are in your possession custody or under your control, including, but not limited to, the following:
1.…
2.any document relating to any amounts the Bill Express Group is owed or owes, including but not limited to minutes of directors’ meetings, banking records, accounting records, cash payments journal, general journal, general ledger and bank statements of the On Queue Group or the TB Group, agreements, security documentation, file notes, diary notes, letters and emails including in relation to any debts owed between the Bill Express Group, the On Queue Group and/or the TB Group.
Other documents are required to be produced in both summonses but their production is not resisted.
On 12 January 2010 Messrs Di Donato and Couper filed an interlocutory process seeking orders pursuant to Order 11 Rule 5 of the Supreme Court (Corporations) Rules (Corporations Rules) that the summonses issued against them be discharged and/or varied as per the revised wording specified in the interlocutory process. The interlocutory process was supported by an affidavit of Stuart Lewin sworn 12 January 2010. Subsequently, Mills Oakley Lawyers, the solicitors for Messrs Couper and Di Donato, wrote to the solicitors for the liquidators indicating that an amended interlocutory process would be filed seeking a further order pursuant to Rule 10(1) of the Corporations Rules and Order 3 Rule 2 of the Supreme Court (General Civil Procedure) Rules 2005 extending the time for the filing of their application from 11 January 2010 to 12 January 2010.
At the beginning of the hearing of this matter on 17 February 2010, I enquired of Mr Bick, senior counsel for the liquidators, whether the opposition to the application to extend time was pressed and he indicated yes but “only very very faintly”. In my view, it is appropriate to make an order extending the time for the filing and serving of the interlocutory application. It was only one day out of time and the liquidators have put no evidence forward that they would suffer any prejudice by the making of such an order. Further, in my view, the time allowed for the making of the application under Rule 11.5 will in some circumstances, as here, be artificially short, as it allows only three days within which to make the application.
Subsequently, on 3 February 2010, Mills Oakley Lawyers indicated that Mr Couper also resisted the production of the documents described in Category 2 of the summons directed to him. That paragraph of the summons has been extracted above.
Mr Clarke, of counsel who appeared on behalf of Messrs Di Donato and Couper, submitted that the objection taken to the summonses directed to his clients is twofold. The first ground is that in both summonses objection is taken to production of the documents which fall within the “preamble” of Schedule 1, which reads:
All books and records relating to the affairs of Bill Express …
Mr Clarke says that these summonses are not 596A summonses to “insiders” of Bill Express, rather they are section 596B summonses directed to parties who are not directors or officers of Bill Express. He complains that they are extremely wide in their terms and require each of the summonsed parties to interpret his respective summons in order to ascertain whether or not a particular document in his possession relates to “the affairs of Bill Express Limited”. He states that the passages in the summonses are so broad in time and description so as to be oppressive. In oral argument, he did not press the submission that the summonses are too wide as to time.[1] In essence, the basis of the first objection is the use of the expression “relating to the affairs”; Mr Clarke submits that the expression is uncertain, wide and oppressive. Aside from Mr Clarke’s submissions and letters exhibited to Mr Lewin’s affidavit of 8 February 2010 asserting such, there is no evidence that compliance with the summonses would be oppressive.
[1]T 24, line 25-27.
Mr Clarke’s second submission concerned the summons directed to Mr Couper, more particularly the requirement in paragraph 2 of Schedule 1 of the summons directed to him to produce … “Any document relating to any amounts that the Bill Express Group is owed or owes including … the On Queue Group.” Mr Clarke submits that as his client is not an “insider” of the Bill Express Group, he is not in a position to know who its debtors or its creditors are and that compliance with the summons is not possible by reason that it is vague and uncertain.[2] He submits that if the summons was limited to a list of debtors and creditors over a certain amount, the process of compliance with the summonses would be assisted.
[2]T 31, line 27.
Mr Bick, senior counsel for the liquidators, opposed any amendments to the summonses. He made reference to the regime set out in the Corporations Act for examinations and to the wide scope and powers afforded to liquidators and other authorised persons to examine about the “examinable affairs” of a corporation. Section 9 defines “examinable affairs” in relation to a corporation as meaning:
(a)The promotion, formation, management, administration or winding up of the corporation; or
(b)any other affairs of the corporation (including anything that is included in the corporation’s affairs because of s 53); or
(c)the business affairs of a connected entity of the corporation, in so far as they are, or appear to be, relevant to the corporation or to anything that is included in the corporation’s examinable affairs because of paragraph (a) or (b).
Section 53 of the Act expands very considerably the definition of what are “examinable affairs” of a corporation. Coupled with this is the definition of “connected entity” in s 9 as expanded by s 64B of the Act. Mr Bick submits that by reason of the exhaustive definitions and the wide powers afforded to liquidators and other authorised persons to conduct examinations, no examinee could be confounded by the meaning of the expression “affairs of the corporation” in the text of a summons. Mr Bick submitted that the evidence before the Court as to the involvement of Mr Couper and Mr Di Donato with the Bill Express Group of companies was such that they could not be said to be strangers to the workings of the Bill Express Group, even though they are recipients of summonses under s 596B and not s 596A, which latter provision applies to “officers” as defined of the corporation itself. In the latter part of Mr Crosbie’s affidavit of 4 February 2010, he describes the connection that Mr Di Donato and Mr Couper had with the Bill Express Group. The matters set out there indicate quite a close if not intimate involvement in the Bill Express Group’s affairs. Mr Bick notes that these matters were not the subject of contradiction by affidavit evidence by Messrs Di Donato and Couper despite the opportunity to do so.
Mr Bick submitted that Order 11 Rule 5.02 of the Corporations Rules requires that the application to set aside the summons must be supported by an affidavit by the person served with the summons. I do not agree with that interpretation of Rule 11.5, particularly in the context of an application which seeks to mount an attack on a summons as being too wide or oppressive in terms of the documents which are sought. Rule 11.5 provides:
11.5(1)This rule applies if a person is served with an examination summons.
11.5(2)Within three days after the person is served with the examination summons, the person may apply to the Court for an order discharging the summons by filing –
(a)an interlocutory process seeking an order discharging the summons; and
(b)an affidavit stating the facts in support of the interlocutory process.
In my view there is no necessity for the deponent to the affidavit in support of the interlocutory process to be the person summonsed. All that the rule requires is that there be an affidavit in support of the interlocutory process filed. In this case, however, where Mr Crosbie has made specific allegations in his affidavit of 4 February 2010 as to the involvement of Messrs Di Donato and Couper in the affairs of Bill Express and this has not been met by any affidavit contradicting such matters, I am entitled, if not obliged, to assume that they have no facts in favour of the position they contend for available to them to confront the matters put by Mr Crosbie.
I was referred by counsel appearing for the respective parties to various authorities. At the outset I observe that most of them turned on their particular facts and are of limited assistance but nonetheless I will briefly survey the more significant authorities referred to. Mr Clarke referred me to the decision of Hammerschlag J in Lo v Nielsen & Moller Autoglass (NSW) Pty Ltd.[3] That matter involved an application to set aside orders for production of documents on the grounds of oppression. The respondents were special purpose liquidators with very specific powers and functions conferred on them by the order appointing them. A creditor of the subject company had applied for the appointment of the two additional liquidators for a specific purpose in relation to the liquidation. Hammerschlag J held that the categories of documents sought by the special purpose liquidators in their summons for examination was too wide by reason that it went beyond the specific purposes for which they were appointed. That is, they were not at large on the matters that they were entitle to examine upon and the categories of documents sought in the summonses went beyond the subject matters for which they were authorised to investigate by their appointment. As such the case is of no assistance in these circumstances.
[3][2008] NSWSC 1197.
Mr Clarke also made reference to South Pacific Hotel Services Inc v Southern Pacific Hotel Corporation Limited, Kirby v Southern Pacific Hotel Corporation Limited [1984] 1 NSWLR 710. That case concerned a subpoena and I do not regard it of being of immediate assistance. While the authorities indicate that there are close similarities applying the test of relevance with subpoenas as there are for summonses under ss 596B, there are differences. Superimposed over the examinations regime under the Corporations Act are the very wide definitions of “examinable affairs” and “affairs of a body corporate” which impose a very wide scope of relevance which is not present in conventional litigation. Another example is the notion of fishing in respect of subpoenas; liquidators conducting examinations are given a very great degree of latitude in the examination process and their lines of enquiry would often be characterised as fishing if it took place in inter partes litigation.
Mr Clarke then referred me to the decision of Warren J (as she then was) in the Fresh Kept Technology case.[4] That decision involved the challenge to summonses issued under ss 596A, 596B and 596D of the Corporations Law.
[4][2000] VSC 500.
In Fresh Kept Technology, Paragraph (a) of the summons required the production of …..”All books …..journals, ledgers, statements, accounts and books of account contracts and other agreements…….. in the examinee’s possession or under the examinee’s control relevant to the management, administration, or other examinable affairs (as defined in the Corporations Law) of the company”. There then followed in the summons a series of specific categories of documents. The examinees sought an order that the summons be set aside in whole or part. They complained that the documents required for production under the summonses were too wide and oppressive. The judgment of Warren J in respect of this aspect of the matter is at paragraphs 25 and onwards. No reference at all is made to paragraph (a) and the application in respect of the specific categories was dismissed. Mr Clarke submitted that it is to be inferred that the quest to obtain the documents in paragraph (a) was abandoned but I do not consider that there is any basis for this; it was simply not referred to in the judgment and I do not consider it to be any authority for the proposition that a summons seeking documents of the description in sub-paragraph (a) of the Fresh Kept case would be set aside as being too wide or oppressive. There is simply no reference to it in the judgment at all.
The scheme of Part 5.9 Division 1 of the Act giving liquidators and other authorised persons provides for an extraordinarily broad power to examine a person about a corporation’s examinable affairs. Under s 596B, the Court is given jurisdiction to summons a person for examination about a corporation’s “examinable affairs” where the court is satisfied that the person has either taken part or been concerned in examinable affairs of the corporation or may be able to give information about examinable affairs of the corporation. It is not an onerous test to satisfy. Under s 596D(2) of the Act, a summons which is issued under s 596B may require the person to produce to the examination specified books that are in the person’s possession and relate to the corporation or to any of its “examinable affairs”. I have already extracted above the definition of what amounts to “examinable affairs”. Examinees under s 596B are in no different position than those summonsed for examination under s 596A in that they may be required to produce all books relating to the affairs of a company. The summonses, which have been issued, require books and records “relating to the affairs of Bill Express Limited”.
The matters put by Mr Crosbie in his affidavit of 4 February 2010 in my view overwhelm the statements by Mr Lewin in his affidavit of 12 January 2010, which asserts that neither of Mr Lewin’s clients were officers or employees of the Bill Express Group and that they should not be put in a position where they are required to speculate as to what are “the affairs” of the Bill Express Group. Mr Bick emphasised that there was no evidence put forward on behalf of Messrs Di Donato and Couper that compliance with the summonses would be oppressive or that, by reason of their knowledge or lack of knowledge of the “affairs” of Bill Express, they would be unable to comply with the summonses. In particular there was no material which would establish that they would have difficulty identifying the documents which are required to be produced or that they would be obliged to speculate in that regard.
As regards Mr Couper and the submission that he would be unaware of who is owed or who owes money to Bill Express, Mr Bick points to paragraph 27 and onwards of Mr Crosbie’s affidavit of 4 February. Mr Crosbie alleges that Mr Couper was the purported chief financial officer of the On Q Group as he was “significantly involved in the day to day operations, including accounting functions, of the Company, the TB Group and APN.” He goes on to allege that prior to the appointment of the administrators he was informed that Mr Couper maintained the balance sheet of the Bill Express Group, which included the intercompany loan accounts between Bill Express Group, the TB Group, APN and the On Queue Group, and would commonly instruct the finance team, employed by the TB Group, to effect finance transactions on behalf of the Bill Express Group. He then states that Mr Couper also completed the June 2008 quarter BAS on behalf of Bill Express Limited and signed the required statement with the Australian Taxation Office. This was not contradicted by evidence from Mr Couper.
As I remarked to Mr Clarke in the course of argument, it is often the case when a person is summonsed by a subpoena or by a summons under the Corporations Act is confronted with an onerous task of identifying what documents come within the scope of the summons. In this case, unlike a subpoena, the Corporations Act itself prescribes the definitions required to interpret the summons. It has not been demonstrated by evidence that compliance with the summonses in either case would be oppressive. The fact is the Act entitles the liquidator to examine upon matters of a very broad scope; the only constraint is that they must be related to the examinable affairs of the company.
The affidavit material sworn by Mr Crosbie demonstrates a clear connection between Messrs Di Donato and Couper on the one part and the Bill Express Group on the other and the connection which is contended to exist has not been contradicted. What is sought are documents relating to the affairs of Bill Express Group for defined periods, which periods are not of themselves said to be oppressive.
As regards Mr Couper and the summons directed to him in respect of documents in his possession relating to any amounts that the Bill Express Group is owed or owes, the evidence in my view demonstrates that he is a person who is in a unique position to produce documents, if he has any, in regard to such matters and, further, answer questions put to him in that regard and I again refer to the matters alleged by Mr Crosbie in his affidavit of 4 February 2010 at paragraphs 27 and following in that regard.
I am not persuaded by Mr Clarke’s submission that the liquidators should be obliged to describe with particularity the documents sought. If one goes back to the foundation of the liquidators’ examination scheme, it will be seen that a major purpose was to enable a liquidator to reconstruct the affairs of the company in respect of which they had little or no knowledge. As such, in my view liquidators are entitled to cast a wide net in terms of the documents for which they seek production. On occasions, such as here, compliance with a summons can be onerous.
For the above reasons I consider that the application by interlocutory process should be dismissed.
Mr Bick presses for an order for costs on a solicitor client basis but I indicated on the occasion that this matter was heard that I would hear the parties on the question of costs on a date suitable during the course of the hearing of the examinations.
I will extend the time for compliance with the summonses to 4pm on 9 March 2010.
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