Re Bill Express Ltd (in liq)
[2010] VSC 101
•31 March 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST E
No. 10799 of 2009
IN THE MATTER of BILL EXPRESS LIMITED (IN LIQUIDATION) (ACN 090 059 564)
| SANDRO DI DONATO | First Applicant |
| PETER COUPER | Second Applicant |
| v | |
| CRAIG DAVID CROSBIE AND IAN MENZIES CARSON AS JOINT AND SEVERAL LIQUIDATORS OF BILL EXPRESS LIMITED (IN LIQUIDATION) (ACN 090 059 564) | Respondents |
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JUDGE: | DAVIES J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11 March 2010 | |
DATE OF JUDGMENT: | 31 March 2010 | |
CASE MAY BE CITED AS: | BILL EXPRESS LIMITED (IN LIQUIDATION) | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 101 | |
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CORPORATIONS – Appeal against decision of an Associate Justice – Application to discharge or vary summons for production of documents under s 596D of the Corporations Act 2001 (Cth) – Consideration of power to summon a person for examination about a corporations “examinable affairs” and for that purpose require production of books – Consideration of the content of a summons for production of books under s 596D of the Corporations Act 2001 (Cth) – Corporations Act 2001 (Cth) s 596D.
CONSTRUCTION – Meaning of “specified books” in s 596D of the Corporations Act2001 (Cth) – Requirement for clarity and precision in the identification of the books required to be produced under the summons – Requirement that the scope of documents for production under the summons relate to “examinable affairs” – Requirement for production of specified books in the “possession of” the examinee.
EXAMINATIONS – Consideration of powers of the Court under ss 596A and 596B of the Corporations Act 2001 (Cth) – Purpose of examination order –– Corporations Act 2001 (Cth) ss 596A, 596B, 596D, 597.
SUMMONS – Whether summonses too wide, oppressive or uncertain.
WORDS AND PHRASES – “Examinable affairs” – “Specified books” – Corporations Act 2001 (Cth) ss 9, 596D.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr. R A Brett QC with Mr. M Clarke | Mills Oakley Lawyers |
| For the Respondents | Mr. P Bick QC with Mr. K Tsiakis | Freehills |
HER HONOUR:
On 21 December 2009, Gardiner AsJ made orders on the application of the liquidators of Bill Express Limited (in liq) (“Bill Express”) for the issue of summonses under s 596B of the Corporations Act 2001 (Cth) (“Corporations Act”) directed to the applicants and requiring their attendance at Court for examination about the examinable affairs of Bill Express and its subsidiaries and, at the examination, to produce the books and records set out in the schedule to each summons. The applicants applied to Gardiner AsJ for the discharge or variation of the order for production of documents.[1] Gardiner AsJ dismissed the application[2] and the applicants have appealed the dismissal.
[1]Made under Supreme Court (Corporations) Rules 2003 r 11.5.
[2]Re Bill Express Limited (In Liquidation) (ACN 090 059 564) [2010] VSC (Unreported, Gardiner AsJ, 5 March 2010).
The objection to the summonses in their present form is the requirement imposed on the applicants to produce books and records identified:
(a) in the summons issued to the first applicant, as:
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 [specified categories of documents];[3]
[3]Schedule 1 to the summons for public examination issued to the first applicant and dated 22 December 2009.
(b) and in the summons issued to the second applicant, as:
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 2 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 [specified categories of documents] -
relevantly:
(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 Q 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 Q Group and/or the TB Group.[4]
[4]Schedule 1 to the summons for public examination issued to the second applicant and dated 22 December 2009
Before Gardiner AsJ, counsel for the applicants had submitted that the requirement on the applicants to produce “all books and records relating to the affairs of [the] Bill Express [Group]” was oppressive and that the use of the expression “relating to the affairs” was uncertain and too wide. It was submitted that the summonses should specify that the applicants are to produce only those documents “relating to or evidencing” the particular categories of documents identified in the summonses. It was also submitted that the particular category in the summons directed to the second applicant expressed as “any document relating to any amounts that the Bill Express Group is owed or owes” was vague and uncertain. Gardiner AsJ rejected these submissions and refused to discharge or vary the summonses.
The applicants have an appeal as of right from the dismissal of the application and such an appeal is conducted as a full re-hearing of the application below.[5] The task of the Appeal Court is to consider afresh the application and arguments advanced in support and to decide the application for itself, based on the evidence and other material before it. That does not mean that the reasons for decision below will not be of assistance to the Appeal Court in its independent review or that the Appeal Court should not consider them.
[5]Supreme Court (General Civil Procedure) Rules 2005 r 77.06(7).
Gardiner AsJ held that “liquidators are entitled to cast a wide net in terms of the documents for which they seek production”.[6] His Honour concluded that the descriptions of the documents for production under the summonses were not too wide or oppressive and that there was no material before the Court that would establish that the applicants would have difficulty in identifying the documents required to be produced or that the applicants would be obliged to speculate in that regard. Gardiner AsJ reasoned:[7]
[6]Re Bill Express Limited (In Liquidation) (ACN 090 059 564) [2010] VSC (Unreported, Gardiner AsJ, 5 March 2010) [27].
[7]Re Bill Express Limited (In Liquidation) (ACN 090 059 564) [2010] VSC (Unreported, Gardiner AsJ, 5 March 2010).
21.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 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”
…
24.As I remarked to [counsel for the applicants] 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.
25.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.
26.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.
27.I am not persuaded by [the] submission [on behalf of the applicants] 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.[8]
In my view, Gardiner AsJ properly refused to grant the relief sought by the applicants for the reasons that he gave.
[8]Ibid [21], [24]-[27].
On appeal, senior counsel for the applicants relied on the same contentions put before Gardiner AsJ and, additionally and principally, argued that the summonses in their present form were “beyond power” by reason that:
(a) documents required for production pursuant to a summons issued under s 596B of the Corporations Act must be “specified”: it was submitted that documents described simply as documents “relating to” the “examinable affairs” of a corporation did not meet the statutory criterion that they be “specified”;
(b)the documents sought must be documents confined to the “examinable affairs” of the corporation which are to be the subject of the examinations: a summons that requires production of documents relating to examinable affairs beyond the subject matter of the examination is outside the power conferred in s 596B of the Corporations Act;
(c)a summons under s 596B of the Corporations Act cannot be used as a fishing expedition to identify the documents in the possession or power of the examinee or extend to matters beyond the scope of the examination; and
(d)a summons which, on its terms, requires the examinee to exercise a judgement about the documents which may come within the ambit of the summons is too wide.
The grounds relied on raise for consideration the proper construction of s 596D of the Corporations Act and the powers of the Court under ss 596A and 596B of the Corporations Act.
A. Construction of s 596D of the Corporations Act
(i)Power to summon a person for examination about a corporation’s examinable affairs
Section 596D is contained in Division 1 in Part 5.9 of the Corporations Act which makes provision for mandatory and discretionary examination of a person about a corporation or the corporation’s “examinable affairs” on application to the Court by an “eligible applicant”.[9] Section 9 of the Corporations Act defines “examinable affairs” as meaning, amongst other matters, the management or winding up of a corporation, its other affairs including the matters listed in s 53 of the Corporations Act and the business affairs of a connected entity of that corporation. Section 53 of the Corporations Act defines “examinable affairs” “on a very wide basis”[10] and includes matters such as the control, business, trading, transactions and dealings of a corporation and its internal management.
[9]Defined in Corporations Act 2001 (Cth) s 9 as ASIC, a liquidator or provisional liquidator of the corporation, an administrator of the corporation or a person authorised by ASIC to make such an application.
[10]Re Freshkept Technology Pty Ltd (In Liq) [2000] VSC 500 [8].
Division 1 in Part 5.9 of the Corporations Act provides a process for liquidators and other eligible applicants to get information and documents which concern a company’s affairs and to investigate the conduct and dealings of officers of the company. As explained by Lander J in Southern Cross Petroleum Sales (SA) Pty Ltd (In Liq) v Hirsch:[11]
[11](1998) 70 SASR 527.
The legislation is designed to assist an eligible applicant in obtaining information by requiring examinable officers or other persons to attend before the court for their examination in relation to the examinable affairs of a corporation. The eligible applicant also has the power to call upon the court to issue a summons to an examinable officer or other person to produce at the examination documents which relate to the examinable affairs of the corporation. The legislation therefore assists in the gathering of information and for confirming information already in the eligible applicant's hands.
The scheme of the legislation is to give the eligible applicant that information for at least three purposes. The first purpose relates to the winding up generally, and the protection of the interests of creditors. It may be used to protect the interests of creditors by assisting in the recovery of assets of the corporation for distribution to the creditors.
As well as protecting the interests of creditors the information is also gathered to determine whether any person who has taken part or been concerned in the examinable affairs of the corporation may have been guilty of misconduct in relation to the corporation. The power is clearly available to the eligible applicant so that information may be obtained to determine whether any person has been guilty of misconduct in relation to the corporation, and for the purpose of bringing proceedings (whether civil or criminal) against that person: Hamilton v Oades (1989) 166 CLR 486.
The third purpose for which the legislation exists is for the public interest in assisting the regulation of corporations. The legislation acts to remind those who act as examinable officers of the corporation, or who deal with a corporation, that they are at risk that if any of the circumstances giving rise to an application by an eligible applicant arise, they may be called upon to be publicly examined about their conduct in relation to the corporation. It is in the public interest that those who act as examinable officers of corporations and those who take part or are concerned in the examinable affairs of a corporation are obliged to impart their knowledge of the affairs of the corporation in the event that the corporation becomes subject to administration or winding up. In that sense the legislation serves the public interest as well as the private interest of creditors. "The honest conduct of the affairs of companies is a matter of great public concern today": J, Rees v Kratz Mann (1965) 114 CLR 63 at 80 per Windeyer.[12]
There is a clear legislative intent to assist eligible applicants to gather all relevant information about a corporation’s “examinable affairs”.
[12]Ibid 533-534.
The assistance is given in the form of a power conferred on the Court to compel persons, by the issue of a summons,[13] to attend at an examination for questioning about those affairs and, for that purpose, to produce documents.[14] Onerous obligations are placed on persons to whom a summons is issued to comply with the summons, as non compliance can be an offence exposing that person to penalty in the absence of reasonable excuse.[15] It is a measure for protection of a person who receives a summons that the power to compel a person to attend at an examination and produce documents resides with the Court, which may also give directions about the content and conduct of an examination.[16] A recipient of a summons has the right to make application to the Court to seek the discharge or variation of the summons,[17] being a right that was exercised here.
[13]Corporations Act 2001 (Cth) ss 596A and 596B.
[14]Corporations Act 2001 (Cth) s 596D.
[15]Corporations Act 2001 (Cth) s 597(6A); Supreme Court (Corporations) Rules 2003 r 11.10(2).
[16]Corporations Act 2001 (Cth) ss 596F and 597.
[17]Supreme Court (Corporations) Rules 2003 r 11.5.
The legislation under s 596A of the Corporations Act entitles an eligible applicant effectively as of right to an order for the examination of a company’s officers.[18] The only matters of which the Court needs to be satisfied under s 596A are that the person is or was an officer or provisional liquidator of the company during a prescribed period and that the eligible applicant seeks the order for legitimate reasons, not for some improper or collateral purpose.[19] If those matters are demonstrated, the Court has no discretion to refuse to issue the summons. There is a legislative assumption underlying the provision that such persons “should be able to provide an eligible applicant with information which relates to the examinable affairs of a corporation”[20] and, hence, the mandatory requirement obviates the need for an eligible applicant to show the Court that there is warrant in the Court summonsing that person for examination.
[18]Corporations Act 2001 (Cth) s 596A.
[19]Commissioner of Taxation v Futuris (2008) 237 CLR 146; Simionato & Farrugia v Macks & Macks (1996) 19 ACSR 34, 56; Hill v Smithfield Service Centre Pty Ltd (In Liq) (2002) 196 ALR 246, [21], [47]; Carter v Gartner (2003) 46 ACSR 264; Re New Tel Limited (In Liq); Evans v Wainter Pty Ltd [2005] FCAFC 114, [83]–[85].
[20]Southern Cross Petroleum Sales (SA) Pty Ltd v Hirsch (1998) 70 SASR 527.
The position is different if the proposed examinee is not one of the persons designated in s 596A. Section 596B is in the following terms:
[Grounds for discretionary examination]
(1) The Court may summon a person for examination about a corporation’s examinable affairs if:
(a) an eligible applicant applies for the summons; and
(b) the Court is satisfied that the person:
(i)has taken part or been concerned in examinable affairs of the corporation and has been, or may have been, guilty of misconduct in relation to the corporation; or
(ii)may be able to give information about examinable affairs of the corporation.
The provision:
(a) makes it a condition of the Court’s exercise of power that the Court be satisfied about either of the matters contained in s 596B(1)(b); and
(b) makes an order for examination at the discretion of the Court.
To enliven the Court’s exercise of power under s 596B, the eligible applicant must put before the Court sufficient facts which enable the Court to be “satisfied” of either of the criteria for examination.[21] The provision does not require a high threshold. It is sufficient that the eligible applicant can show that the person to be summonsed “may be able” to give information about the corporation or its examinable affairs.[22] In some circumstances it may be enough to show that a person had some involvement in the management or administration of the company. In other circumstances, the connection may require greater explanation. But, relevantly, an eligible applicant does not need to show that the proposed examinee will be able to provide such information.
[21]Ex parte Merrett (1997) 140 FCR 412.
[22]Ibid 415.
In Re New Tel Limited (in liq)(ACN 099 068 955); Evans & Anor v Wainter Pty Ltd (ACN 008 725 586)[23] Lander J (with whom Ryan and Crennan JJ agreed) observed that because the Court is given a discretion under s 596B, the Court needs to be aware of the purpose and subject matter of the examination
[23](2005) 54 ACSR 284.
In that way, the court can ensure that only those persons who qualify under s 596B(b) are summoned for examination.[24]
[24]Ibid [89].
Analytically, that is the view that the Court must reach in order to issue a summons under s 596B since the Court must be “satisfied” of either of the conditions in s 596B(1)(b) for the exercise of power. The discretion itself is facultative, if the Court’s power has been enlivened. In Southern Cross Petroleum Sales (SA) Pty Ltd v Hirsch[25] Lander J stated:
The discretion is unfettered but must be exercised judicially. In exercising that discretion the court might have regard to the expressed purpose of the examination; the importance of the information to the eligible applicant; the seriousness of the matters to be inquired into; the use to which the information obtained on the examination might be put; the possibility of an advantage to the eligible applicant which he or she would not otherwise enjoy and the concomitant disadvantage to the prospective examinee; the availability of the information from other sources; the cost to the prospective examinee in attending for examination; whether the information sought is so peripheral to make the attendance of the prospective examinees oppressive; and the wider public interest in investigating the affairs of the corporation.[26]
The evident purpose for the discretion is to safeguard against abuse of the examination process.[27]
[25](1998) 70 SASR 527.
[26]Ibid 536-7.
[27]Rees v Kratzmann (1965) 114 CLR 63, 66 (Barwick CJ).
In this matter, the applicants do not dispute that they are persons who qualify for examination under s 596B(1). To put it another way, the applicants do not challenge the Court’s exercise of discretion to issue a summons to them and to require them to produce documents at their examinations. Rather, their complaint is that the summonses are too widely drawn.
(ii)Section 596D of the Corporations Act: The content of a summons under s 596A or s 596B of the Corporations Act to produce documents
Section 596D of the Corporations Act specifies the content of a summons to a person under s 596A or s 596B. The section provides as follows:
(1)A summons to a person under section 596A or 596B is to require the person to attend before the Court:
(a)at a specified place and at a specified time on a specified day, being a place, time and day that are reasonable in the circumstances; and
(b)to be examined on oath about the corporation’s examinable affairs.
(2)A summons to a person under section 596A or 596B may require the person to produce at the examination specified books that:
(a) are in the person’s possession; and
(b) relate to the corporation or to any of its examinable affairs.
(3)A summons under section 596A is to require under subsection (2) of this section the production of such of the books requested in the application for the summons as the summons may so require.
The notice, to be valid, must comply with the statutory prescription as to content that is contained in s 596D(2).
(iii)The terms of s 569D of the Corporations Act
The language of s 596D(2) places limitations on the documents that an examinee may be summonsed to produce at that examination.
First, the documents must fall within the class of documents that “relate to the corporation or to any of its examinable affairs”.[28]
[28]Corporations Act 2001 (Cth) s 596D(2)(b).
Secondly, the documents must be ancillary to the purposes of the examination.
Thirdly, the obligation on an examinee is to produce “specified books” in that class, which are in the “person’s possession”.[29] These requirements are central to the applicants’ challenge to the summonses in this proceeding. The applicants’ submission was that the criterion that “specified documents” be identified means that the documents sought must contain a level of detail sufficient to express the limitation imposed by the section in the imperative that the content of the summons identify “specified books”. It was further argued that a summons to a person under s 596D(2) must be with respect only to specified documents that are known to be in the person’s possession.
[29]Corporations Act 2001 (Cth) s 596D(2).
(iv)Scope of the requirement that the documents relate to the examinable affairs
The terms of the provision do not, in language, confine the ambit of production other than by reference to the criterion that the documents sought to be produced relate “to any of [the company’s] examinable affairs”. The language is not proscriptive. There is no requirement to confine the documents which the person must produce at the examination to documents which relate only to the particular matters on which the application for the issue of the summons was based. That is not surprising. The examination provides the means by which the liquidator (or other eligible applicant) gains access to information and books that may assist him or her in their functions. The constraint on the power is the requirement that person, in seeking the production of the documents, does so for a proper purpose.
The relevant consideration is whether the books summonsed to be produced under the examination are books that satisfy the description of books that “relate to the corporation or to any of its examinable affairs”. As the word “relates” is capable of wide meaning, the meaning must be found from the context in which it appears.[30] In this context, the phrase operates to indicate the requirement that there must be a connection between the documents sought to be produced and the examinable affairs of the company. It follows that a document that is unconnected with the company the subject of the examination or of its examinable affairs would not be a document required to be produced.[31]
[30]Project Blue Sky Inc & Ors v Australian Broadcasting Association (1998) 194 CLR 355, [87].
[31]Samuel Charles Davies [2008] SASC 52 (Unreported, Withers J, 29 February 2008) [33]; Re Nielsen & Moller Autoglass (NSW) Pty Ltd (in liq) [2008] NSW 1197 (Unreported, Hammerschlag J, 14 November 2008) [29], [52].
(v)Documents required for the purpose of the examination
The Court’s power under s 596D(2) to order the production of documents by an examinee for the purposes of a s 597 examination was described by McLelland J as an “ample” and “wide” power,[32] but it is a power that is ancillary to an examination and is exercisable only in connection with an order to attend an examination about the examinable affairs of a corporation. That limitation on the exercise of power is prescribed in the legislation itself.
[32]Re BPTC Limited (In Liquidation) (1992) 8 ACSR 533, 538 –539.
It was argued on behalf of the applicants that the scope of the documents that an examinee can be compelled under s 596D(2) to produce at an examination is limited by the scope of the examination: that is to say, to the particular matters concerning the corporation’s examinable affairs that will be the subject of the examination. It was submitted that the s 596D(2) power cannot be used to require the production of documents that relate to the corporation’s “examinable affairs” at large and that an order for production of documents that compelled the production of documents that were not relevant to the subject matter of the examination was oppressive and “beyond power”. It was further argued that the Court could objectively conclude from the form of the summonses in this case seeking “[a]ll books and records relating to the affairs of Bill Express” that the documents sought extended beyond the scope of the matters on which the applicants will be examined and that the Court should find that the summonses are oppressive and beyond power to this extent. Reliance was placed on Re BPTC Ltd (in Liq).[33]
[33](1993) 10 ACSR 756.
In Re BPTC Ltd (in Liq) Bryson J considered the terms of an order made by a Registrar under the Supreme Court Rules (NSW) Pt 36 r 12 under which a person, against whom no order for examination had been made, was required to produce documents for the purposes of an examination of other persons under s 597 of the Corporations Act. The examination orders had limited the examinations of those persons to “any matters relating to the promotion, formation, management or administration of, or otherwise in relation to BPTC”.[34] The power under Supreme Court Rules (NSW) Pt 36 r 12 had been relied on to order production because the Corporations Act makes no provision for the making of orders for production by a person who is not to be examined.Bryson J set aside the order, holding that some of the documents which the applicant had been ordered to produce were outside the power to make an order under Pt 13 r 12 “as ancillary to [the] examination orders”.[35] In the course of his reasoning, Bryson J referred to Re BPTC Ltd (in liq) (No 2)[36] and observed that:
[34]Ibid.
[35]Ibid 767
[36](1992) 8 ACSR 533.
McLelland J at a number of points referred to the width of the power to compel production of documents, and to the need for wide powers but at the same time also referred to the need to avoid oppressive operation. His Honour recognised the need for a relation between the order for production of documents and the purposes of examining persons under s 597; if information is to be obtained, it is obtained from that examination, and the production of documents is ancillary to the process of examination.[37]
[37]Re BPTC Ltd(In Liq) (1993) 10 ACSR 756, 763.
Bryson J went on to hold that an order for production of documents that had the effect of compelling a production of documents that were not required for the examination would be oppressive and, in His Honour’s view:
an order for production which had that purpose would … be made in excess of the power to make such order.[38]
[38]Ibid.
His Honour concluded that:
The legal limits of the power in Pt 36 r 12 can be seen by asking whether … the document or thing described in the order was required for the purpose of examining a person within the bounds set by s 597 and the internal limitation in the examination order.[39]
These passages were cited with approval in Re Nielsen & Moller Autoglass (NSW) Pty Ltd (in liq)[40] which concerned a challenge to orders for production of documents for the purposes of proposed examinations by special purpose liquidators. It was held that the documents sought went beyond the matters over which the special purpose liquidators had specific authority to investigate.
[39]Ibid.
[40][2008] NSW 1197 (Unreported, Hammerschlag J, 14 November 2008) [27].
A consideration of these cases, including Re BPTC Ltd (in liq) (No 2), does not support the proposition for which the applicants in this case contend. These cases were each concerned with the parameters of the examination for which the documents were required. The cases confirm that the scope and exercise of the power to order the production of documents for the purposes of an examination depends on the scope and exercise of the power to order an examination. As Austin J stated in Re Southland Coal Pty Ltd (recs & mngrs appt) (in liq):[41]
Plainly, when used in conjunction with an examination, the production of documents is ancillary to the examination process and the power to order production is subject to the same legal limits as Bryson J identified in the former Pt 36 r 12.[42]
The legal limits of the power to make an order under s 596D are expressly defined in s 596D(2) in the requirement that the exercise of power be for the purposes of the examination.[43] An examination may be confined by the order of the Court to particular matters and if so, the scope of documents that a court may order for production would similarly be confined. Where, as is the case here, no limitation is placed on the subject matter of the examination, other than that it must be about a corporation’s examinable affairs, an order for production in terms that the examinee must produce all books and records relating to the affairs[44] of a corporation is within the power of the Court.[45] They are separate questions as to whether the purpose for which the examination has been sought is a proper and permissible purpose or whether the order may operate oppressively in relation to the person summonsed.
[41][2006] 58 ACSR 113.
[42]Ibid 121.
[43]See Corporations Act 2001 (Cth) ss 596A, 596B and 597; Re BPTC Limited (In Liquidation) (1992) 8 ACSR 533, 539 (McLelland J).
[44]Cf definition of “affairs”,” examinable affairs” in Corporations Act (2001) (Cth) and ss 9 and 53.
[45]Corporations Act 2001 (Cth) ss 569A, 596B, 596D; Re BPTC Ltd(in liq) (No 5) (1993) 10 ACSR 756; 763; Meteyard v Love [2005] 65 NSWLR 36, 39-40 (Santow JA).
It is uncontroversial that the following are legitimate purposes of an examination under s 597 of the Corporations Act:
(a) an examination is designed to serve the purpose of enabling an eligible applicant to gather information to assist the eligible applicant in the administration of the corporation;
(b) an examination assists the corporation’s administrators to identify the corporation’s assets, both tangible and intangible and also allows the corporation’s liabilities to be identified;
(c)the purpose is to protect the interest of the corporation’s creditors;
(d) the examination serves the purpose of enabling evidence and information to be obtained to support the bringing of proceedings against examinable officers and other persons in connection with the examinable affairs of the corporation;
(e) an examination assists in the regulation of corporations by providing a public forum for the examination of examinable officers of corporations.[46]
[46]Re New Tel (In Liq) (2005) 54 ACSR 284, 323 (Lander J).
The procedure in Part 5.9 is to aid liquidators in carrying out their duties. It is an inquisitorial process and inherent in that procedure is the possibility that an examination may involve questions of a fishing nature: an eligible applicant is entitled to discover in an examination matters that are relevant to the functions that he or she has to perform, without allegation of misuse of the power.[47] As Bryson J observed in Re BPTC Ltd (in Liq):
[A] matter can be an affair of the corporation even though nobody knows that it is at the time, or knows of it at all. It can be an affair of the corporation that circumstances exist in which other persons are vicariously liable for breaches of duty of a director, even though no claim has been made, even though no one has adverted to the possibility that a claim might be made, and even though some of the facts which must exist before a claim could be made, or there could be awareness of it, have not yet come into existence.[48]
The very point of s 596B is that an eligible applicant is entitled to an order without showing that an examinee will be able to provide information at the examination. All that is required for an order are facts to support the conclusion that the examinee may be able to provide information. It is a proper use of the examination process for an examiner to explore what information the examinee does have. There is no justification, in my opinion, for reading into s 596D limitations that the language itself, read in the context of Part 5.9,[49] does not convey.
[47]Re Rothwells Ltd (Prov Liq Apptd) (1989) 15 ACLR 168.
[48](1993) 10 ACSR 756, 764.
[49]CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384.
(vi) Meaning of “specified books”
This expression has been the subject of considerable judicial consideration as the requirement to “specify” something often appears in legislation[50] and, relevantly, is commonly found in legislation conferring coercive power to require the production of documents.[51]
[50]D C Pearce & R S Geddes, Statutory Interpretation in Australia, (6th ed, 2006) 368 [12.23].
[51]Australian Crime Commission Act 2002 (Cth) s 29; Bankruptcy Act 1966 Cth) s 77A; Mining Act 1992 (NSW) s 296; Australian Securities and Investments Commission Act (Cth) s 33; National Consumer Credit Protection Act 2009 (Cth) s 265; Water Efficiency Labelling and Standards Act 2006 (NT) s 61.
The courts have consistently construed the requirement to “specify” as signifying a requirement of clarity and precision, which is the ordinary and natural connotation of that word. The Macquarie Dictionary (4th ed, 2005) defines the verb to “specify” (specified, specifying) to mean:
1. to mention or name specifically or definitely; state in detail. 2. to give a specific character to. 3. to name or state as a condition. — verb (i). 4. to make a specific mention or statement.[52]
[52]Macquarie Dictionary (4th ed. 2005) 1355.
In Gantry Acquisition Corporation v Parker & Parsley Petroleum Australia Pty Limited[53] Burchett J said of the ordinary meaning of the word “specify” that it is “a word which signifies precision”.[54] His Honour then stated:
Even such a word must yield to context, since no word has a meaning which remains rigidly fixed, however it is used. A word is not a locked box with static contents; it is more like a living cell, changing as it responds to the environment, which is its context. But no change wrought by the contextual currents enveloping the word ``specify'’ … can so transform it that it fails to signify a requirement of clarity and precision … Judicial attempts to expound the meaning of the word ``specify'’ have repeatedly fixed upon unambiguous clarity as being connoted by it.[55]
Where something must be “specified”, it must be stated clearly and precisely. The need for clarity and precision in the identification of documents that must be produced under compulsion is readily understood where there are consequences for non-compliance with an obligation to produce documents.[56] The requirement provides a safeguard for the protection of the examinee.
[53](1994) 51 FCR 554.
[54]Ibid 569-570.
[55]Ibid 569–570.
[56]Cf Fieldhouse v Commissioner of Taxation (1989) 25 FCR 187. Eg of the Income Tax Assessment Act 1936 (Cth) s 264; Federal Commissioner of Taxation v Australia and New Zealand Banking Group Limited (1979) 143 CLR 499; Trade Practices Act 1974 (Cth) s 155; Pyne Board Pty Ltd v Trade Practices Commission (1982) 57 FLR 368; Australian Crime Commission Act 2002 (Cth) s 29; AB Pty Ltd v Australian Crime Commission [2009] FCA 119.
In AB Pty Ltd v Australian Crime Commission[57] Flick J considered s 29 of the Australian Crime Commission Act 2002 (Cth)[58] which bears strong similarity to s 596D. Flick J said as follows:
[57][2009] FCA 119.
[58]S 29 provides:
(1) An examiner may, by notice in writing served on a person, require the person:
(a)to attend, at a time and place specified in the notice, before the person specified by the notice, being an examiner or a member of the staff of the ACC; and
(b)to produce at that time and place to the person so specified a document or things specified in the notice, being a document or thing that is relevant to a special ACC operation/investigation.
The accepted public importance of the functions entrusted to the Commission can be no reason to construe the power conferred by s 29 in any manner other than that which the words and the context naturally bear. Nor is there any reason to construe the term “specify” in s 29 in the phrase “a document or thing specified in the notice” in any different manner to the manner in which the same term is used elsewhere in that section.
Common to those other statutory provisions which authorise the issue of a notice requiring the production of information or documents, however, has been the concern of the Court to ensure that each of the statutory demands that may be authorised is construed in a practical and common sense manner. Notwithstanding the difference in language as between s 155 of the 1974 Act and s 264 of the 1936 Act, for example, a similar approach has been adopted when considering the degree of certainty required in a notice issued under s 264: McCormack v Commissioner of Taxation[2001] FCA 1700 at [50]; 114 FCR 574 at 590 per Sackville J. Ambiguity may be discerned by those with initiative to find uncertainty where none really exists. But that is not the manner in which any of the notices have been construed in the decided cases.
The more obscure a category of “document or thing” may be, the greater may be the imperative for that “document or thing” to be described with a degree of specificity or definiteness so that the person upon whom a statutory notice is given may be capable of identifying that “document or thing” and thereafter producing it.[59]
His Honour concluded that:
A document may be specified if the description of the document required to be produced is sufficiently certain to identify it to the person upon whom a notice is served — even if that description may mean little (if anything) to a person without such knowledge.[60]
Thus, in that context, the term “specified” was construed as requiring sufficient description to identify to the person upon whom the notice is served the documents that must be produced. The authorities on other statutory provisions conferring coercive power to require production of documents make it clear that the documents required to be produced must be identified with sufficient clarity.[61] This requirement is specifically expressed in s 596D in the prescription that the content of the notice must require production of “specified books” meeting the criteria in the two sub-paragraphs.
[59]AB Pty Ltd v Australian Crime Commission [2009] FCA 119, [36]–[38].
[60]Ibid [50].
[61]Eg Income Tax Assessment Act 1936 (Cth) s 264; Federal Commissioner of Taxation v Australia and New Zealand Banking Group Limited (1979) 143 CLR 499; Trade Practices Act 1974 (Cth) s 155; Pyne Board Pty Ltd v Trade Practices Commission (1982) 57 FLR 368; Australian Crime Commission Act 2002 (Cth) s 29; AB Pty Ltd v Australian Crime Commission [2009] FCA 119.
The context of s 596D(2) requires no other construction than the ordinary meaning ascribed to “specified”. Where an order is made under s 596B, the summons must identify the books and records required to be produced with sufficient clarity to enable the recipient to know what the documents come within the terms of the summons to be able to form a reasonable view about what must be produced in order to comply with the summons.[62] The inquiry, in each particular case, is the degree of specificity required to provide the clarity and precision that the section mandates.
[62]Cf Corporations Act 2001 (Cth) s 597(6A).
(vii)Requirement for production of specified books in “the person’s possession”
In my view, this requirement makes it plain that it is only those documents that are in the possession of the examinee to whom the summons is issued that must be produced.[63] It does not support a construction of knowledge that the books requested, in fact, are in the possession of the examinee. Such a requirement involves reading into the text of the legislation words which are not there.[64] Not only is there no necessity to do so to give meaning and effect to the provision,[65] the requirement is not implicit from the legislative context.
[63]Federal Commissioner of Taxation v Australia and New Zealand Banking Group Limited (1979) 143 CLR 499, 521-522 (Gibbs ACJ).
[64]Cf Federal Commissioner of Taxation v Australia and New Zealand Banking Group Limited (1979) 143 CLR 499.
[65]Thompson v Goold & Co [1910] AC 409, 420 (Lord Mersey).
B. The summonses are not too wide or oppressive
I now turn to consider the terms of the summonses for production of books and records.
In my opinion, the summonses are not too wide or oppressive. The evidence before the Court was to the effect that that each of the applicants, although not an officer of Bill Express, had significant involvement in the affairs of the Bill Express Group and currently have a quantity of the books and records of the company in their possession, custody or control. The evidence substantiated that a purpose for which the liquidators have sought the production of documents as described in the summonses is to assist the liquidators “to be aware of the extent of the books and records” of the Bill Express Group in the possession of each applicant. In my opinion, it was entirely permissible for the summonses to be expressed in the broad terms in which they are cast, namely the production of “all books and records relating to the affairs of [the] Bill Express [Group], including…”. Here the liquidators seek to find out what documents the applicants hold. The liquidators are entitled to require the production of all such documents in the possession of the applicants. The onerous nature is no reason for an examinee to be relieved from the burden of complying with the summons if it conforms to the statutory requirements of s 596D.
Moreover, the requirement for production of “all books and records relating to the affairs of [the] Bill Express [Group], including…” is, in the circumstances of this case, sufficient specification. In this regard, whether the books required to be produced are sufficiently “specified” for the purposes of s 596D(2) is to be considered “against the background of the knowledge and circumstances of the [examinee] and the contextual facts”.[66] It was submitted that there was not sufficient specification because the applicants have to make a judgment about whether documents relate to the “affairs” of the company. The fact that the examinee may have to make a judgment as to whether a document falls within the description does not make the summons oppressive.[67] The question is whether the summons makes “reasonably clear” what documents must be produced.[68]
[66]Hart v Commissioner of Taxation (2005) 148 FCR 198, 226 (Greenwood J) cited with approval in AB Pty Ltd v Australian Crime Commission [2009] FCA 119.
[67]Re Rothwells Ltd (Prov Liq Apptd) (1898) 15 ACLR 168, 189.
[68]Pyneboard Pty Ltd v Trade Practices Commission (1982) 57 FLR 368, 375 (Northrop, Deane and Fisher JJ); Fieldhouse v Commissioner of Taxation (1989) 25 FCR 187, 208 (Hill J)
In this case, I have the benefit of the detailed reasons of Gardiner AsJ and I quote:
22.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. [69]
[69]Re Bill Express Limited (In Liquidation) (ACN 090 059 564) [2010] VSC (Unreported, Gardiner AsJ, 5 March 2010) [22].
In my view, the evidence amply supported the conclusion reached by Gardiner AsJ that the summonses as framed sufficiently describe for both applicants the documents that they must produce and that the applicants would not be required to speculate as to what are the “affairs” of the company. I refer to the evidence of the liquidator:
23.Since our appointment as Liquidators, we have obtained some of the physical books and records and electronic records of the Bill Express Group. Generally, the Bill Express Group stored the majority of its books and records in electronic form. The electronic records reside on computer systems purportedly owned by companies in the TB Group and/or APN.
24.Mr Di Donato was a former director of the TB Group of companies and is a current director of APN. All of these entities had substantial dealings with the Bill Express Group, as described above. To the best of my knowledge, Mr Di Donato also remains the owner of all entities in the TB Group and APN.
Now produced and shown to me and marked “CDC-8” is a true copy of a search of the records of each of the companies in the TB Group dated 15 December 2009 maintained by ASIC.
Now produced and shown to me and marked ”CDC-9” is a true copy of a search of the records of APN dated 15 December 2009 maintained by ASIC.
25. In my view, Mr Di Donato currently has possession, custody or control of relevant books and records of the Bill Express Group. This view is supported by, amongst other things, the following:
(a)On or about 8 July 2008, the date of my appointment as a joint and several voluntary administrator of the Bill Express Group, I caused my staff to attend the business premises of Bill Express to secure the books and records of the Bill Express Group and procure a forensic image of those electronic books and records. I am informed by Mr David Webb, of my office, and verily believe, that he had a conversation with Mr Di Donato during this visit and he was informed that Mr Di Donato was reluctant to provide his consent to the imaging of data of the Bill Express Group as it was intermingled with data from Mr Di Donato’s private companies, including the TB Group and APN, and the servers on which the data was contained were owned by companies in the TB Group;
(b)Since my appointment as a liquidator of the Bill Express Group, Mr Di Donato has located a number of boxes at his premises containing books and records relevant to the affairs of the Bill Express Group, and has informed my staff of the existence of such documents which have been produced to my staff; and
(c)A computer server, purportedly owned by the TB Group is currently located at the premises of APN. On a number of occasions, since my appointment, my staff have attended the premises of APN, with the consent of Mr Di Donato, and have been provided access to the computer system which maintains, amongst other relevant books and records, a copy of the Company’s general ledger system, including debtor and creditor ledgers. My staff have been provided with copies of such relevant books and records of the Bill Express Group during those occasions they have attended the premises of APN to access the computer system.
27.On the basis of my investigations to date as a liquidator, it appears that Mr Peter Couper (the purported Chief Financial Officer of the On Q Group) was significantly involved in the day to day operations, including accounting functions, of the Company, the TB Group and APN.
29.In my view, Mr Couper was significantly involved in the affairs of the Bill Express Group and currently has possession, custody or control of a quantity of the books and records of the Bill Express Group. Notwithstanding that Schedule 1, attached to the summons served on Mr Couper, details six categories of documents required to be produced, the requirement for Mr Couper to produce all books and records relevant to the affairs of the Bill Express Group, for the two years preceding 8 July 2008, arises from the inability of the liquidators to be aware of the extent of the books and records Mr Couper has. [70]
This evidence was not contradicted and was sufficient to show that the applicants are familiar with the operations, activities and books and records of the Bill Express Group and are capable of identifying those documents that fall within the description of “books and records relating to the affairs of [the] Bill Express [Group]”.
[70]Affidavit of Craig David Crosbie sworn 4 February 2010 [23]-[25], [27], [29].
In my opinion, the summonses are not too wide or uncertain. There was no suggestion that the breadth of the documents sought stem from any ulterior purpose and nor could there be on the strength of the material before the Court.
C. “Owed and owes”
This expression needs to be considered as a matter of common sense: [71]
Artificial dissection, in the cause of determined obfuscation, can introduce an argumentative element of uncertainty into words which, when read reasonably in context, are adequate to convey a plain and clear meaning. Provided a notice makes it reasonably clear, in the circumstances in which it is given and on a fair reading of its terms, what information or documents are required, the requirements of s.155(1) as to clarity will be satisfied. In this regard, the mere fact that parsing and analysis in the artificial atmosphere of the courtroom can lead to the identification of a number of latent ambiguities will not invalidate what, as a matter of common sense, is reasonably clear.[72]
The question is whether the class of documents sought is so framed so as to make it clear to the second applicant the documents that fall within this description.
[71] Pyneboard Pty Ltd v Trade Practices Commission (1982) 57 FLR 368.
[72]Ibid 375.
In my view, the words used are capable of sensible and clear meaning.
Gardiner AsJ reasoned:
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.[73]
This accurately summarised the evidence before the Court.
[73]Re Bill Express Limited (In Liquidation) (ACN 090 059 564) [2010] VSC (Unreported, Gardiner AsJ, 5 March 2010)[23].
The second applicant, on the un-contradicted evidence of the liquidator, maintained the books and records of the Bill Express Group prior to the company being placed into external administration and completed BAS statements on behalf of the Bill Express following external administration. It may reasonably be inferred he has detailed knowledge of the company’s books. In my view this category of documents was sufficiently identified for the second applicant to be aware as to what documents he must produce to meet his obligations.
Conclusion
For the above reasons, the appeal is dismissed. I will give the parties the opportunity to make submissions on the appropriate order for costs.
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