Re Pindan Group Pty Ltd (Administrators Appointed) & Ors [No 5]
[2022] WASC 469
•6 FEBRUARY 2023
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RE PINDAN GROUP PTY LTD (ADMINISTRATORS APPOINTED) & ORS [No 5] [2022] WASC 469
CORAM: STRK J
HEARD: 18 MAY 2022 & 31 MAY 2022
DELIVERED : 6 JULY 2022
PUBLISHED : 6 FEBRUARY 2023
FILE NO/S: COR 102 of 2021
EX PARTE
VINCENT ANTHONY SMITH, COLBY RHYS O'BRIEN and SAMUEL JOHN FREEMAN, as joint and several deed administrators of PINDAN GROUP PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT), PINDAN CONTRACTING PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT), and as joint and several liquidators of PINDAN CAPITAL PTY LTD (IN LIQUIDATION), PINDAN CAPITAL INVESTMENTS PTY LTD (IN LIQUIDATION), PINDAN DEVELOPMENTS PTY LTD (IN LIQUIDATION), PINDAN CONSTRUCTIONS PTY LTD (IN LIQUIDATION), PINDAN PROJECTS (WA) PTY LTD (IN LIQUIDATION), PINDAN REALTY PTY LTD (IN LIQUIDATION), PINDAN HOMES PTY LTD (IN LIQUIDATION), PINDAN CONSTRUCTIONS (NSW) PTY LTD (IN LIQUIDATION) AND MOSELLE HOLDINGS PTY LTD (IN LIQUIDATION)
Plaintiff
Catchwords:
Corporations - External administration - Application by joint and several deed administrators and liquidators for orders pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) - Whether external administrators would be acting properly in destroying books and records of the companies in circumstances where the external administrations were ongoing
Legislation:
Corporations Act 2001 (Cth) s 1307
Corporations Act 2001 (Cth) Sch 2 (Insolvency Practice Schedule (Corporations))
Result:
Application refused
Category: B
Representation:
Counsel:
| Plaintiff | : | T Langdon |
Solicitors:
| Plaintiff | : | HWL Ebsworth Lawyers |
Cases referred to in decision:
Allen (as liquidator of Divine Homes Pty Ltd) v Harb [2011] NSWSC 8
ASIC v GDK Financial Solutions Pty Ltd (in liq) (No 4) [2008] FCA 1071
Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 268 CLR 524
Commonwealth Bank of Australia (CBA) v Marwan Tabet [2008] VSC 161
Earth Loop Pty Ltd v AIAN Investments Pty Ltd [2008] NSWSC 1042
Ex parte Frigger [2020] WASC 365
GDK Projects Pty Ltd, Re Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq) [2018] FCA 541
Nipps (Admin) v Remagen Lend ADA Pty Ltd, Re Adaman Resources Pty Ltd (Admin Apptd) (No 4) [2021] FCA 644
Oswal v Burrup Fertilisers Pty Ltd (ACN 095 441 151) (recs and mgrs. apptd) (2013) 295 ALR 708; [2013] FCAFC 9
Re Ansett Australia Ltd (No 3) (2002) 115 FCR 409; (2002) FCA 90
Re Autocare Services [2021] FCA 167
Re Broens Pty Ltd (in liq) [2018] NSWSC 1747
Re Community Work Pty Ltd (in liq) [2018] FCA 425
Re Fund Options (Australia) Pty Ltd (in liq) [2020] FCA 1256
Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674
Re GGA Lifestyle Pty Ltd (Administrators Appointed); Ex Parte Woodhouse [2019] WASC 167
Re Halifax Investment Services Pty Ltd (No 8) [2020] FCA 533; (2020) 144 ACSR 292
Re Hawden Property Group Pty Ltd (in liq) (2018) 125 ACSR 355; [2018] NSWSC 481
Re HIH Insurance and related matters [2004] NSWSC 5
Re JML Holdings Ltd (rec and mgr apptd) (in liq) (1996) 19 ACSR 437
Re Nexus Energy Ltd [2014] NSWSC 1041
Re ONE.TEL Ltd [2014] NSWSC 457
Re Pindan Group Pty Ltd (Administrators Appointed) [2021] WASC 347
Re Pindan Group Pty Ltd (Administrators Appointed) [No 2] [2021] WASC 358
Re Pindan Group Pty Ltd (Administrators Appointed) [No 3] [2021] WASC 480
Re Pindan Group Pty Ltd (Administrators Appointed) [No 4] [2022] WASC 143
Re Poles & Underground Pty Ltd (Admin Apptd) [2017] FCA 486
Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83
Re Union Standard International Group Pty Ltd (No 2) [2020] FCA 1111
Roach v R [2019] NSWCCA 160
Rubix Investments Group Pty Ltd [2018] NSWSC 1184
Table of Contents
Introduction
Evidence
Submissions
The context in which the application was made
Negotiations with Oxley Holdings and the purchaser of the Belmont property
The remaining records
Removal of documents considered necessary
Boxes returned to Pindan Asset Management
Mr Freeman's view as to potential need for the archived documents
Storage and destruction costs
Risks associated with abandoning the remaining records
Notice to ASIC
The plaintiffs' position
Applicable principles - directions pursuant to s 90-15(1) of the IPS
Legislative framework
Obligation to keep books
Section 1307 - falsification of books
Section 70-10 of the IPS - administration books
Section 70-35 of the IPS - retention and destruction of books
Disposition
Confidentiality
Directions pursuant to s 90-15(1) of the IPS
Conclusion and orders
Sch A – Liquidation entities
Sch B – Estimated time to completion of external administration
STRK J:
Introduction
Samuel John Freeman, Colby Rhys O'Brien and Vincent Anthony Smith (together, the plaintiffs) are the joint and several deed administrators of Pindan Group Pty Ltd (subject to deed of company arrangement), and Pindan Contracting Pty Ltd (subject to deed of company arrangement). The plaintiffs are also the joint and several liquidators of the nine entities listed in sch A to these reasons (together, the liquidation entities). Pindan Group, Pindan Contracting and the liquidation entities are together described in these reasons as the Pindan entities.
The plaintiffs were formerly administrators and deed administrators of Pindan Asset Management Pty Ltd. Since their appointment, Pindan Asset Management has progressed through a change of control transaction by way of a deed of company arrangement, which has now been fully effectuated.
The Pindan group of companies is primarily a Western Australian property and construction group. Oxley Sparkle Pty Ltd is the holding entity of various Pindan entities. Oxley Holdings Ltd holds all of the shares in Oxley Sparkle and is the ultimate parent company of each entity comprising the Pindan corporate group.
Since their appointment, the plaintiffs have sought various forms of relief and directions from the court.[1] These reasons concern some of the books and records of the Pindan entities.
[1] Including orders made for the reasons published in Re Pindan Group Pty Ltd (Administrators Appointed) [2021] WASC 347; Re Pindan Group Pty Ltd (Administrators Appointed)[No 2] [2021] WASC 358; Re Pindan Group Pty Ltd (Administrators Appointed)[No 3] [2021] WASC 480; and Re Pindan Group Pty Ltd (Administrators Appointed) [No 4] [2022] WASC 143.
Prior to the plaintiffs' appointment, the property at 191 Great Eastern Highway, Belmont (the Belmont property), was the head office for the Pindan entities, and the vast majority of the physical records of the Pindan entities were stored in a shed at the Belmont property. Mr Freeman observed that 'archived documents' were kept in the storage shed at the rear of the Belmont property, whereas 'live documents' were held at the relevant company or divisional office at the Belmont property or at other offices across Australia.[2]
[2] First affidavit of SJ Freeman pars 17 - 18.
On or about 30 March 2022, a contract for the sale of the Belmont property was executed by Mr Freeman on behalf of Pindan Group in his capacity as deed administrator. While first contracted to take place on 30 May 2022, settlement of the Belmont property was brought forward to 20 May 2022.
On 17 May 2022, the plaintiffs made an urgent application which concerned the 'archived documents' located in the storage shed on the Belmont property (the remaining records). The plaintiffs moved for directions pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS), as to how they may deal with the remaining records which may include books and records, or copies of books and records, of one or more of the Pindan entities in circumstances where the external administrations of the Pindan entities were ongoing. The plaintiffs sought a direction pursuant to s 90-15 of the IPS that each of the plaintiffs in their capacity as joint and several external administrators of the Pindan entities would be acting properly and that they would be justified in destroying, or causing to be destroyed, documents stored in about 2,310 boxes (that is, the remaining records). In the alternative, the plaintiffs sought a direction that they would be justified in abandoning the same at the Belmont property. Relief was ultimately pressed in relation to 2,308 boxes, as two were returned to Pindan Asset Management.
Further, the plaintiffs sought an order that any act or omission of the plaintiffs in destroying the remaining records or, alternatively, abandoning them did not constitute conduct that results in the concealment, destruction, mutilation or falsification of any books and records affecting or relating to the affairs of any of the Pindan entities. Further and alternatively, they sought an order that the plaintiffs were acting honestly in all of the circumstances in engaging in any act or omission in destroying or abandoning the remaining records.
The plaintiffs also sought a confidentiality order in relation to some of the evidence read on the basis that it concerned information that was confidential and commercially sensitive.
The hearing and determination of the application became less urgent as the purchaser and Pindan Group entered into an access agreement, by which the remaining records could remain in situ at the Belmont property after settlement until 18 July 2022.[3]
[3] Second affidavit of SJ Freeman pars 12 - 13, SJF22.
As to confidentiality, on 31 May 2022 I made an order that the attachment marked 'SJF-16' to the first affidavit of Mr Freeman sworn on 16 May 2022 be treated as confidential and not be published or disclosed except pursuant to an order of the court. These reasons have been prepared so as to not disclose the substance of the confidential information in attachment SJF16 which was before the court and which was weighed in the balance in the determination of this application.
On 6 July 2022, I refused to give the directions promoted on behalf of the plaintiffs which contemplated destruction, alternatively the abandonment of the remaining records. Set out below are my reasons.
Evidence
Counsel for the plaintiffs read and relied upon six affidavits in support of the application.
The first was the affidavit of Mr Freeman sworn on 16 May 2022, to which Mr Freeman attached documents marked SJF1 to SJF21. In his first affidavit Mr Freeman described the plaintiffs' appointment to the Pindan entities and Pindan Asset Management on 18 May 2021; deposed to the progression of Pindan Asset Management through a change of control transaction by way of a deed of company arrangement; and deposed to the current status of the external administrations of Pindan Group and Pindan Contracting, and to the role of Oxley Holdings as the proponent of deeds of company arrangement.
In this regard, Mr Freeman deposed that all material claims in respect of the pre-appointment actions of the directors of the Pindan entities and ultimate parent entity (Oxley Holdings) had been settled, save for the claims in relation to Pindan Group and Pindan Contracting, which had been negotiated and were soon to be resolved by way of deeds of company arrangement.
Mr Freeman also described in his first affidavit the historic use of the Belmont property; described the records kept at the Belmont property; described the position of Pindan Group and Oxley Holdings in relation to the retention of physical records; estimated storage and destruction costs in dealing with the remaining records; and described what the plaintiffs perceived to be the risks of abandoning the remaining records.
The attachments to Mr Freeman's first affidavit included Australian Securities and Investments Commission (ASIC) notices in relation to the appointment of the plaintiffs to the Pindan entities; ASIC company searches for each of the Pindan entities and Pindan Asset Management; a title search for the Belmont property; the contract for the sale of the Belmont property (marked SJF16 and the subject of the confidentiality order); and various communications and cost estimates in relation to the removal, retention and destruction of the remaining records.
Mr Freeman also attached to his first affidavit a spreadsheet prepared by him setting out the status of the external administration of each of the Pindan entities; the material transactions, sales, settlement of claims and restructures that have taken place within each of the Pindan entities; the likely next steps or outcome of each external administration and the associated timing; and the likely timeframe to completion for each external administration. In the spreadsheet, Mr Freeman also described the status of all litigation and claims in relation to each Pindan entity.
The second affidavit relied upon was deposed to by Marie Puti Morris, a solicitor employed by HWL Ebsworth Lawyers. Ms Morris acts for the plaintiffs in relation to this application. Ms Morris' first affidavit was affirmed on 18 May 2022, and attached documents marked MPM1 to MPM4.
By her first affidavit, Ms Morris deposed that ASIC had been put on notice of this application and provided with copies of the court documents then intended to comprise the application for the purposes of conferral. She also deposed to service of the filed interlocutory process, written outline of submissions and other documents on ASIC on 17 May 2022; and to communications as between the solicitors for the plaintiffs and ASIC on 16 and 17 May 2022. Ms Morris attached to her affidavit a copy of various email communications as between the solicitors for the plaintiffs and ASIC.
The third affidavit relied upon was the second affidavit deposed to by Ms Morris, also affirmed on 18 May 2022. In her second affidavit Ms Morris deposed to the reason for the delay in bringing the application. Ms Morris also described the plaintiffs' negotiations with Oxley Holdings; the terms of a proposed access agreement with the purchaser of the Belmont property to permit access to the remaining records for a period following settlement; and instructions that had been given to HWL Ebsworth Lawyers in relation to the application.
Ms Morris also deposed to having been informed that until about 13 April 2022, the plaintiffs in their capacity as deed administrators of Pindan Group had been in negotiations with Oxley Holdings, as proponent of the Pindan Group deed of company arrangement, as to the remaining records. She deposed to her belief that the plaintiffs had held the view that the remaining records were the responsibility of Oxley Holdings as the proponent of the Pindan Group deed of company arrangement in circumstances where Pindan Group was in possession of the remaining records. She also deposed that after agreement was reached with Oxley Holdings (which I understood was on the terms set out at [26] below), the plaintiffs took steps to instruct HWL Ebsworth Lawyers to bring this application.
The fourth affidavit relied upon was the second affidavit of Mr Freeman sworn on 26 May 2022, to which Mr Freeman attached documents marked SJF22 to SJF23.
Among other things, Mr Freeman deposed to directing two employees of Ernst Young Australia to conduct a physical review of the 2,310 storage boxes located at the Belmont property. Mr Freeman deposed to his belief that an individual review of each document within each box had not been undertaken, rather the employees had examined the markings on the outside of the boxes. He also deposed to his belief that from that review, two of the 2,310 storage boxes were identified as containing records of Pindan Asset Management. The two boxes were subsequently delivered to Pindan Asset Management and therefore did not fall within the scope of this application.
Mr Freeman also deposed to the execution of an access agreement with the purchaser of the Belmont property; settlement of the Belmont property; and further correspondence with Mr Benjamin Rollo on behalf of Oxley Holdings regarding the remaining records. The attachments to Mr Freeman's second affidavit included a copy of the access agreement and email communications from Ankura, advisor to Oxley Holdings.
In relation to the position of Oxley Holdings, attached to Mr Freeman's second affidavit and marked SJF23 was a copy of email communications as between Mr Rollo on behalf of Oxley Holdings and Alex Harper of Ernst and Young. In an email sent on 19 May 2022, Mr Rollo represented as follows:
I have had approval from Oxley overnight for the following as requested:
1. They do not intend to collect the books and records of Pindan post effectuation of the DOCA;
2. They approve the court submission to destroy any documents they may be deemed to own under the DOCA;
3. They approve the destruction of the books and records; and
4. They approve the destruction funds (circa $35,000) being withheld from the Belmont settlement to fund the destruction of the documents (final approval subject to Iron Mountain quote coming);
5. They approve SPB fee for negotiating the access agreement of $1200.
The fifth affidavit relied upon was the third affidavit of Ms Morris affirmed on 27 May 2022, to which Ms Morris attached documents marked MPM5 to MPM7. In her third affidavit, Ms Morris deposed to the service of documents on ASIC, and summarised communications that had been had with ASIC in relation to this application. Ms Morris attached to her affidavit copies of email communications between HWL Ebsworth Lawyers and ASIC.
The sixth affidavit relied upon was the fourth affidavit made by Ms Morris, affirmed on 31 May 2022. In her fourth affidavit Ms Morris deposed to the receipt of a second quotation for the removal and destruction of the remaining records received from Iron Mountain Australia Group Pty Ltd on 30 May 2022. The second quotation was attached to Ms Morris' affidavit and marked MPM8.
Submissions
At the hearing of the application, counsel for the plaintiffs relied upon a written outline of submissions filed on 17 May 2022.
The context in which the application was made
Negotiations with Oxley Holdings and the purchaser of the Belmont property
On or about 30 March 2022, a contract for the sale of the Belmont property was executed by Mr Freeman on behalf of Pindan Group in his capacity as deed administrator. Settlement was initially fixed to take place on 30 May 2022.[4]
[4] First affidavit of SJ Freeman pars 20 ‑ 22.
I understand that the plaintiffs then spent some time engaged with Oxley Holdings in relation to the remaining records. Attached to Mr Freeman's first affidavit and marked SJF21 was a copy of a chain of email communications as between Mr Rollo on behalf of Oxley Holdings and Mr Freeman. I also understand that Oxley Holdings initially expressed the view that the plaintiffs were responsible for the costs and management of any storage or disposal of the remaining records, whereas the plaintiffs maintained that responsibility was jointly held as the remaining records were on premises owned by Pindan Group and the boxes likely contained records of Pindan Group and Pindan Contracting, which would become the responsibility of Oxley Holdings following successful completion of the deeds of company arrangement.[5]
[5] First affidavit of SJ Freeman, SJF21, page 180 - 181.
In an email sent on 13 April 2022, Mr Rollo suggested as follows:[6]
Considering the records exact owners and split are uneconomical to ascertain we would suggest a split of costs in the following portions:
·Liquidators are responsible legal costs of any court applications, court fees and liquidators fees in gaining approval of the destruction of the documents;
·Oxley are responsible for the actual destruction of the documents when and if the court approval for destruction has been granted.
[6] First affidavit of SJ Freeman, SJF21, page 180.
The plaintiffs instructed the selling agent to make inquiries of the purchaser of the Belmont property as to their preparedness to agree to an access agreement that would allow settlement to proceed but permit the plaintiffs to leave in situ the remaining records until the application was determined; and to access the Belmont property for the purposes of undertaking any action that may be sanctioned by the court in this application.[7] The purchaser indicated that it was amenable to entering into such an agreement.[8]
[7] Second affidavit of MP Morris par 9(h). See also the first affidavit of SJ Freeman par 23.
[8] Second affidavit of MP Morris par 9(i).
I also understand that the plaintiffs sought agreement from Oxley Holdings to meet the cost of preparing of the access agreement. In this regard, Ms Morris deposed that without funding from Oxley Holdings, the plaintiffs were not prepared to incur the cost of negotiating and preparing an access agreement with the purchaser.[9]
[9] Second affidavit of MP Morris par 9(j).
On about 27 April 2022, the settlement of the Belmont property was brought forward to 20 May 2022.[10]
[10] Second affidavit of MP Morris par 9(f).
On or about 16 or 17 May 2022, Oxley Holdings confirmed to the plaintiffs that it would fund the preparation of an access agreement.[11]
[11] Second affidavit of MP Morris par 9(k).
On 17 May 2022, the plaintiffs made this urgent application to the court. On the first return of the application on 18 May 2022, while the access agreement had not yet been executed, the terms of the agreement were broadly agreed in principle.[12] It was executed on 23 May 2022.[13]
The remaining records
[12] Second affidavit of MP Morris par 9(m).
[13] Second affidavit of SJ Freeman pars 12 - 13, SJF22.
In his first affidavit, Mr Freeman described the records of the Pindan entities by reference to two categories. The first he described as 'live documents', being documents that related to active projects or matters for one or more of the Pindan entities, or documents that might have to be retained by the Pindan entities, which were not stored in the storage shed on the Belmont property. The second he described as 'archived documents', being documents that were not 'live documents' and which had been moved by the Pindan entities to the storage shed on the Belmont property prior to the appointment of the plaintiffs. Mr Freeman noted that this application concerned the boxes of archived documents that remained in the storage shed at the Belmont property (described in these reasons as the remaining records).
Mr Freeman deposed that the remaining records had not been catalogued in a detailed or prescriptive way prior to the plaintiffs' appointment. He also deposed to the enquiries made by the plaintiffs of the directors of the Pindan entities in relation to the remaining records, and of at least two head office employees of the Pindan entities, being Kristy Beresford, a human resources manager, and Matt Pasini, an IT coordinator and systems administrator.[14]
[14] First affidavit of SJ Freeman pars 26 ‑ 27.
On the basis of, among other things, those enquiries, Mr Freeman deposed to his belief that:[15]
[15] First affidavit of SJ Freeman par 28. In Mr Freeman's first affidavit, references to 'the Corporate Group' are references to the Pindan entities and Pindan Asset Management, and references to 'the Companies' are references to the Pindan entities.
(a)the practice employed by the Corporate Group with respect to all documents at the Belmont Property prior to the Appointees being appointed to the Companies was that:
(i)documents relating to "live" issues were held in the office at the Belmont Property;
(ii)documents were moved to the Storage Shed when the project or matter to which they related was completed or resolved; and
(iii)the Corporate Group generally held key records electronically and any documents held in physical files located at the Belmont Property would likely also be held electronically on the server;
(b)as archive boxes were re-located to the Storage Shed, Pindan employees would mark the year of their archive on the side of the box, based on their understanding of the practice referred to at (a) above;
(c)the Remaining Belmont Records are largely comprised of:
(i) tender offers and requests;
(ii) forecasted costs and subcontractor timelines;
(iii) quotes and quote requests;
(iv) instruction manuals for machinery;
(v) internal process and control instructions;
(vi) marketing materials;
(vii) drawings and floor plans for historic projects;
(viii) copies of statutory guidelines and requirements;
(ix) accounts payable;
(x) resolved legal disputes and cases;
(xi) completed projects;
(xii) special purpose vehicles; and
(xiii) employee records,
that are not in the nature of live documents;
(d) once boxes of documents were placed in the Storage Shed, they were rarely accessed by the Corporate Group or any directors or employees after that time;
(e) the majority of the books and records of the Companies that were, prior to the Appointees' appointments, required to deal with or otherwise address active matters or extant disputes or claims are separately stored in electronic format;
(f) between 16 June 2021 and 16 July 2021 Ms Bleddyn and Mr Hobson attended the Belmont Property and, by reference to the year of archive that had been notated on the outside of the box by Pindan employees (as referred to in (b) above), identified those boxes that contained documents older than 7 years by affixing a red sticker to each of those boxes, and by affixing a green sticker to those boxes that contained documents younger than 7 years;
(g) of the 2,310 boxes, Ms Bleddyn and Mr Hobson identified that 850 contain documents that are older than 7 years (based on the year of archive noted on the respective boxes);
(h) the remaining 1,460 boxes relate to historic matters and projects that are no longer active or have been completed as they would otherwise have been held by the Corporate Group in the office at the Belmont Property;
(i)the 2,310 boxes comprising the Remaining Belmont Records are unlikely to contain records that would be required to resolve disputes/claims of the Companies with third parties; and
(j) aside from the statutory prohibition on destruction of books and records, there is unlikely to be any other reason to retain the 2,310 boxes comprising the Remaining Belmont Records.
Removal of documents considered necessary
Mr Freeman deposed that during the course of the external administrations of the Pindan entities, the plaintiffs had caused 369 boxes of documents to be removed from the office of the Belmont property and stored as they considered that the boxes may contain documents necessary for the discharge of their statutory record keeping obligation in accordance with s 70‑10 of the IPS.[16]
Boxes returned to Pindan Asset Management
[16] First affidavit of SJ Freeman par 32.
As noted at [24] above, on 19 May 2022, Mr Freeman directed employees of Ernst and Young to conduct a physical review of the 2,310 boxes in the storage shed. A review of the documents within the boxes was not undertaken. In the course of that review, two boxes containing records of Pindan Asset Management were identified.
The two boxes were delivered to Pindan Asset Management, which is now under the control of Programmed Facility Management Pty Ltd, leaving 2,308 boxes the subject of this application.[17]
Mr Freeman's view as to potential need for the archived documents
[17] Second affidavit of SJ Freeman pars 8 - 11.
On the evidence filed, I understood that the need to resort to the archived documents had not arisen during the course of external administrations of the Pindan entities and Pindan Asset Management.[18]
[18] First affidavit of SJ Freeman par 29(a).
As noted at [18] above, I had before me evidence of the status of the external administrations.[19] Further, at par 13 of his first affidavit, Mr Freeman made the following observation:[20]
Relevantly, all material claims in respect of the pre-appointment actions of the Companies' directors and ultimate parent entity (which may have warranted the retention of books and records) have been settled, save for claims in relation to [Pindan Group] and [Pindan Contracting], which have been negotiated and are soon to be resolved by way of the [Pindan Group deed of company arrangement] and the [Pindan Contracting deed of company arrangement].
[19] First affidavit of SJ Freeman par 11, SJF14.
[20] First affidavit of SJ Freeman par 13.
The plaintiffs through Mr Freeman noted that they did not believe that the remaining records contained information that might assist with a resolution of the disputes that remained outstanding with clients of various Pindan entities. Mr Freeman noted that those outstanding disputes concerned projects that were active at the time of (or shortly before) the plaintiffs' appointment, and therefore the plaintiffs believed that the books and records that might be relevant to the outstanding disputes had already been retrieved by the plaintiffs and stored.[21]
Storage and destruction costs
[21] First affidavit of SJ Freeman pars 56 - 57.
The plaintiffs obtained estimates as to the cost of removing and destroying the remaining records. Two estimates were obtained. The first estimated the cost of removal and destruction to be $35,280 (exclusive of GST);[22] and the second estimated the cost of removal and destruction to be $17,735.40 (exclusive of GST).[23]
[22] First affidavit of SJ Freeman pars 63 - 64, SJF20.
[23] Fourth affidavit of MP Morris pars 9 - 10, MPM8.
The plaintiffs also obtained estimates of the cost for the removal, storage for the statutory period and destruction of the remaining records after the statutory period. The estimates came to a total amount of $116,795.85 (exclusive of GST). In this regard, Mr Freeman at pars 58 and 59 of his first affidavit deposed as follows:[24]
[24] See also the first affidavit of SJ Freeman, SJF19.
If destruction is not permitted of the Remaining Belmont Records, the Appointees will be required to uplift the Remaining Belmont Records and store them at a storage facility.
I estimate storage costs associated with the uplifting and storage of the Remaining Belmont Records for a period of 7 years, and their destruction at the end of that 7 year period, will be approximately $116,795.85 comprising the following amounts:
Description
Amount ($)
Uplift costs
$56,941.02
Storage costs
$53,225.13
Destruction costs (at the end of 7 yr storage period)
$6,629.70
Total costs
$116,795.85
Mr Freeman deposed that if uplift, storage and destruction costs were incurred, then he considered it appropriate that they be treated as a cost of the deed administration of Pindan Group as Pindan Group was the parent company of the corporate group; the entity within the corporate group responsible for administrative matters; and the seller of the Belmont property, and therefore the entity required to give possession of the Belmont property to the purchaser at settlement.[25]
[25] First affidavit of SJ Freeman par 61.
At par 62 of his first affidavit, Mr Freeman deposed as follows:
By destroying the Remaining Belmont Records the [Pindan Group] external administration would not incur the cost of uplifting, storing and destroying the records … This saving of $116,796 may increase the amount available for unsecured creditors of [Pindan Group] from approximately $277,000, to approximately $393,000, being an increase of approximately 42.2%.
Mr Freeman deposed to his belief that in the circumstances, it was in the interests of the creditors of the Pindan entities that the remaining records be destroyed.[26]
Risks associated with abandoning the remaining records
[26] First affidavit of SJ Freeman par 67.
Mr Freeman described in his first affidavit what he then perceived to be the risks associated with abandoning the remaining records, which risks are summarised below.[27]
[27] First affidavit of SJ Freeman pars 68 - 69.
First, despite the contract of sale providing that the Belmont property was sold on an 'as is where is basis', that the purchaser might refuse to attend settlement unless the remaining records were removed.[28]
[28] Mr Freeman's first affidavit was deposed on 16 May 2022, before the access agreement was executed.
Secondly, if settlement was to proceed, the purchaser might seek to recover from the plaintiffs the costs of dealing with the remaining records.
Thirdly, if settlement was to proceed, to the extent that the remaining records contain confidential information or personal information (including, for example, personal details of former employees and other individuals who had dealings with the Pindan entities, confidential business records, and suppliers' and customers' bank account details), the information may be used in a manner that is inconsistent with the maintenance of confidentiality in that information and the protection of those individuals' privacy.
Notice to ASIC
ASIC was first put on notice of the application on 16 May 2022 at 6.51pm.[29] ASIC indicated that it had not been given sufficient time to consider the application and requested that the court be made aware of the same at the first return on 18 May 2022.[30] In circumstances where an access deed had been broadly agreed in principle and ASIC's views were not known,[31] the hearing of the application was adjourned to 31 May 2022.
[29] First affidavit of MP Morris par 5, MPM1.
[30] First affidavit of MP Morris par 10, MPM3.
[31] Second affidavit of MP Morris par 9(m); ts 186, 190 (18 May 2022).
On 27 May 2022, an officer of ASIC confirmed that ASIC had by then had sufficient time to consider the application; had formed the view that it was a matter for the administrators and the court; and would not be commenting on the application or appearing at the return of the hearing on 31 May 2022.[32]
[32] Third affidavit of MP Morris par 12, MPM6.
The plaintiffs' position
Counsel for the plaintiffs suggested that the issues to be considered by the court might be framed as follows:[33]
(a)whether the Court has power to make orders in the form proposed;
(b)whether the benefits to creditors of destroying (or abandoning) the Remaining Belmont Records now outweighs the potential loss of information contained in the Remaining Belmont Records;
(c)whether, in the above circumstances, the plaintiffs would be justified in destroying, or abandoning, the records, and should be excused from any potential liability under s 1307(1) for doing so; and
(d)whether the appropriate course is to destroy the records, or abandon them at the Belmont Property.
[33] Plaintiffs’ submissions par 7.
While counsel acknowledged that he had been unable to identify any published reasons where a court had granted to an external administrator the relief pressed in this application,[34] in summary, it was submitted that the court had the power to make orders in the form proposed; the benefits of destroying (or abandoning) the remaining records outweighed the potential loss of information contained in the records; the plaintiffs would be justified in their actions and should be excused from any potential liability under s 1307(1) of the Corporations Act; and the remaining records should be destroyed and not abandoned.[35]
[34] ts 199 (31 May 2022).
[35] Plaintiffs' submissions par 8.
Counsel for the plaintiffs submitted there was nothing dishonest or fraudulent about the proposed destruction of the physical records, and noted that the sole purpose of destruction was to avoid incurring significant storage costs in relation to records that no longer have forensic value and which had not been used by the plaintiffs in their roles as deed administrators and liquidators, in circumstances where it was anticipated there would be no need.[36]
[36] Plaintiffs' submissions par 23.
While counsel for the plaintiffs acknowledged that the proposed destruction would, prima facie, constitute an offence by the plaintiffs under s 1307(1),[37] counsel submitted that a defence would 'almost certainly' be available to the plaintiffs pursuant to s 1307(3) of Corporations Act if the remaining records were destroyed or abandoned without the approval of the court.[38] In this regard, counsel submitted that an offence under s 1307 required some improper or dishonest purpose. Further, counsel submitted that the direction power of s 90-15 of the IPS was available to the plaintiffs to advise them as to whether they would be justified in acting in the manner proposed.[39]
[37] Plaintiffs' submissions par 19.
[38] The plaintiffs' submissions reference the likelihood of protection being afforded to the plaintiffs' pursuant to s 1307(3) at par 5, pars 21 - 23 and par 40.
[39] ts 201 (31 May 2022).
Counsel further submitted that the justifications for destroying or abandoning the remaining records were, in summary, the costs associated with moving and storing the remaining records until the end of the statutory retention period; and the likelihood that the remaining records would be of no utility in the external administration of the Pindan entities.[40]
[40] Plaintiffs' submissions par 3.
Applicable principles - directions pursuant to s 90-15(1) of the IPS
Division 90 of the IPS concerns the review of an external administration of a company, which may be undertaken by the court (div 90 subdiv B), or by another registered liquidator (div 90 subdiv C). The court is afforded wide powers to inquire into the external administration of a company and s 90-15(1) of the IPS provides a source of power for the court to make orders. An administrator of a deed of company arrangement executed by the corporation and a liquidator both have, among others, standing to apply for orders pursuant to s 90-15.[41]
[41] Section 90-20(1)(d) of the IPS, read with s 9 of the Corporations Act (pars (e) and (f) of the definition of 'officer').
While the court's power under s 90-15(1) of the IPS is 'very broad',[42] the ambit of s 90-15 has not yet been fully considered by the authorities.[43]
[42] Re Halifax Investment Services Pty Ltd (No 8) [2020] FCA 533; (2020) 144 ACSR 292 [51] (Gleeson J), cited by Stewart J in Re Union Standard International Group Pty Ltd (No 2) [2020] FCA 1111 [7].
[43] Re Broens Pty Ltd (in liq) [2018] NSWSC 1747 [39] (Gleeson J); see also Re Hawden Property Group Pty Ltd (in liq) (2018) 125 ACSR 355; [2018] NSWSC 481 [7] ‑ [8] (Gleeson JA), cited in Ex parte Frigger [2020] WASC 365 [12] (Allanson J).
The court may make such orders as it thinks fit in relation to the external administration of a company,[44] and s 90-15(3) gives examples of the types of orders that the court may make under s 90-15(1). This includes an order determining any question arising in the external administration of the company.[45] Further, s 90-15(3)(a) accommodates the determination of substantive rights, provided appropriate notice has been afforded to potentially affected parties.[46]
[44] Section 90-15(1) of the IPS.
[45] Section 90-15(3)(a) of the IPS, see Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; (2019) 268 CLR 524 [166] (Gordon J).
[46] Re Autocare Services [2021] FCA 167 [44] (Farrell J), cited by Banks-Smith J in Nipps (Admin) v Remagen Lend ADA Pty Ltd, Re Adaman Resources Pty Ltd (Admin Apptd) (No 4) [2021] FCA 644 [37].
In GDK Projects Pty Ltd, Re Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq) [2018] FCA 541 at [33], Farrell J recognised the power in s 90‑15(1) to be 'in its terms, unconstrained', but held that 'despite the breadth of the power … it is difficult to envisage circumstances where the power could be exercised if the court could not be satisfied that it would be just and unless the applicant had demonstrated sufficient utility to the external administration'.
When orders under s 90-15 are sought, regard should also be had to the objects of the IPS, reproduced below:[47]
[47] Nipps (Admin) v Remagen Lend ADA Pty Ltd, Adaman Resources Pty Ltd (Admin Apptd) (No 4) [24] (Banks-Smith J).
1-1 Objects of this Schedule
(1)The object of this Schedule is to ensure that any person registered as a liquidator:
(a) has an appropriate level of expertise; and
(b) behaves ethically; and
(c) maintains sufficient insurance to cover his or her liabilities in practising as a registered liquidator.
(2) The object of this Schedule is also:
(a)to regulate the external administration of companies consistently, unless there is a clear reason to treat a matter that arises in relation to a particular kind of external administration differently; and
(b) to regulate the external administration of companies to give greater control to creditors.
Section 90-15(4) contains a non-exhaustive list of matters that the court may take into account in exercising the discretion under s 90-15.
Section 90-15 confers power on the court to give directions to administrators that was previously conferred by the now repealed s 477D(1) of the Corporations Act, and to liquidators that was previously conferred by the now repealed s 479(3) of the Corporations Act. As observed by Stewart J in Re Union Standard International Group Pty Ltd (Administrators Appointed) (No 2) at [8]:[48]
The court's power under s 90-15(1) includes a power to give directions about a matter arising in connection with the performance or exercise of an administrator's functions or powers: Reidy, in the matter of eChoice Ltd (Administrators Appointed) [2017] FCA 1582 at [26] - [27] (Yates J). In this respect, s 90-15(1) confers a power to give directions that was previously conferred by ss 447D(1) and 479(3) of the Act concerning administrators and liquidators, respectively: see Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth [2019] HCA 20; 93 ALJR 807 at [166] (Gordon J); Reidy at [27] (Yates J); and Kelly (liquidator), in the matter of Australian Institute of Professional Education Pty Ltd (in liq) [2018] FCA 780 at [30] (Gleeson J). The principles governing directions to administrators and those governing directions to liquidators are relevantly analogous: Re Ansett Australia Ltd (No 3) [2002] FCA 90; 115 FCR 409 at [43] (Goldberg J).
[48] See also Rubix Investments Group Pty Ltd [2018] NSWSC 1184 [31] ‑ [32] (Gleeson JA), citing Re HIH Insurance and related matters [2004] NSWSC 5 (Barrett J) and Re Spedley Securities Ltd (in liq) (1992) 9 ACSR 83 (Giles J).
As to the function of and scope of s 90-15 of the IPS, I adopt the observation made by Stewart J in Re Union Standard International Group Pty Ltd (Administrators Appointed) (No 2) at [9], which follows the decision of Goldberg J in Re Ansett Australia Ltd (No 3):[49]
The function of a judicial direction of this kind is not to determine rights and liabilities arising out of a particular transaction, but to confer a level of protection on the administrator. An administrator who acts in accordance with a judicial direction, having made full and fair disclosure to the court of the material facts, has 'protection against claims that they have acted unreasonably or inappropriately or in breach of their duty in making the decision or undertaking the conduct' proposed.
[49] Re Ansett Australia Ltd (No 3) (2002) 115 FCR 409; (2002) FCA 90 [44] (Goldberg J). See also Re ONE.TEL Ltd [2014] NSWSC 457 [32] (Brereton J); followed in Re Fund Options (Australia) Pty Ltd (in liq) [2020] FCA 1256 [42] (Farrell J).
Whether to exercise the power under s 90-15 will often be informed by the principles that applied on such an application to the court for directions.[50] The approach of the court on an application for directions by an external administrator are well-established. The court will not give a direction if the direction relates to the making of a business or commercial decision. There must be something more before the court will give a direction. The 'something more' may be a legal issue of substance or procedure or an issue of power, propriety or reasonableness. Put differently, there must exist some issue calling for the exercise of legal judgment.[51]
[50] Re GGA Lifestyle Pty Ltd (Administrators Appointed); Ex Parte Woodhouse [2019] WASC 167 [18] (Vaughan J), citing Re Broens Pty Ltd (in liq) [39] (Gleeson J). See also Re Poles & Underground Pty Ltd (Admin Apptd) [2017] FCA 486 [41] (Gleeson J); and Re Community Work Pty Ltd (in liq) [2018] FCA 425 [45] ‑ [47] (Gleeson J).
[51] Re Ansett Australia Ltd (No 3) [65] (Goldberg J); adopted in Re Nexus Energy Ltd [2014] NSWSC 1041 [12] ‑ [13] (Black J); Nipps (Admin) v Remagen Lend ADA Pty Ltd, Adaman Resources Pty Ltd (Admin Apptd) (No 4) [38] (Banks-Smith J); and in Re GGA Lifestyle Pty Ltd (Administrators Appointed); Ex parte Woodhouse [19] ‑ [20] (Vaughan J). See also Re ONE.TEL Ltd [33] (Brereton J).
In Re Union Standard International Group Pty Ltd (Administrators Appointed) (No 2), Stewart J at [10] ‑ [11] further noted:
[10]A court may give a direction on an issue of 'substance or procedure' or 'of power, propriety or reasonableness': Ansett at [65]. Although a court will not give a direction on a decision that is purely commercial, a direction may be provided where there is a 'particular legal issue raised for consideration or attack on the propriety or reasonableness of the decision in respect of which the directions are sought': Ansett at [65]. As Black J observed in In the matter of RCR Tomlinson Ltd (administrators appointed) [2018] NSWSC 1859, a decision may have a 'commercial character' but nonetheless be amenable to judicial direction. His Honour said (at [14]) of the application before him (which sought a direction as to whether a company should borrow loan funds):
The Court has been prepared to give directions of this kind, where the decision is a complex one, and where it has to be made, as here, under circumstances of time pressure, in respect of a very large corporate group, and by balancing different interests. The Court's preparedness to grant such a direction in those circumstances reflects the intrinsic unfairness of leaving a voluntary administrator to be at risk of liability, in respect of a complex decision of that kind, where any decision that is made, including making no decision, will have inevitable risks for some or all of the affected constituencies.
[11]Because the effect of a direction under s 90-15 is to exonerate the liquidator or administrator if full disclosure is made, it will usually necessitate consideration by the court of the liquidator's or administrator's reasons and decision making process: see Re ONE.TEL Ltd [2014] NSWSC 457; 99 ACSR 247 at [36] per Brereton J (referring to former s 511 of the Act).
The value of a direction is to protect the applicant from liability for breach of duty or unreasonable behaviour provided full disclosure has been made to the court.[52]
[52] Re Ansett Australia Ltd (No 3) [44] (Goldberg J); Re Nexus Energy Ltd [12] ‑ [13] (Black J); Nipps (Administrator) v Remagen Lend ADA Pty Ltd, in the matter of Adaman Resources Pty Ltd (Administrators Appointed) (No 4) [38] (Banks‑Smith J); and Re GGA Lifestyle Pty Ltd (Administrators Appointed); Ex parte Woodhouse [21] (Vaughan J), citing Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674, 679 ‑ 680 (McLelland J).
Legislative framework
There are various provisions of the Corporations Act and the IPS that concern the keeping of company books and inspection. The following are relevant to the disposition of this application.
Obligation to keep books
Chapter 9 of the Corporations Act concerns miscellaneous matters, and pt 9.3 concerns books. The term 'books' is a term defined in s 9 as including:
(a) a register; and
(b) any other record of information; and
(c) financial reports or financial records, however compiled, recorded or stored; and
(d) a document;
but does not include an index or recording made under Subdivision D of Division 5 of Part 6.5.
Section 1300 of the Corporations Act concerns the inspection of books and by operation of s 1300(2B), if a person asks a proprietary company in writing to inspect a particular book of the company that the person has a right to inspect, the company must make it available within seven days for inspection by the person at the place it is obliged to be kept. A person who refuses or fails to allow a person permitted to inspect and take extracts is guilty of an offence, which is an offence of strict liability.[53]
[53] Corporations Act s 1300(2B) and (3).
Chapter 2M of the Corporations Act concerns financial reports and audit, and pt 2M.2 concerns financial records. Under s 286(1) of the Corporations Act, which falls within pt 2M.2, companies are positively obliged to keep written financial records that:
(a)correctly record and explain its transactions and financial position and performance; and
(b)would enable true and fair financial statements to be prepared and audited.
As noted in s 286, 'financial records' is defined in s 9 of the Corporations Act, as including:
(a)invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes and vouchers; and
(b)documents of prime entry; and
(c)working papers and other documents needed to explain:
(i) the methods by which financial statements are made up; and
(ii) adjustments to be made in preparing financial statements.
The definition is a broad one, and has been held to include a loan contract, invoices, projections, sales reports, journal entries in ledgers and business plans.[54] What may constitute 'financial records' will vary depending on the circumstances and activities of the company.[55]
[54] Commonwealth Bank of Australia (CBA) v Marwan Tabet[2008] VSC 161 (Robson J); ASIC v GDK Financial Solutions Pty Ltd (in liq) (No 4) [2008] FCA 1071 [68] ‑ [69] (Gordon J); Oswal v Burrup Fertilisers Pty Ltd (ACN 095 441 151) (recs and mgrs. apptd)(2013) 295 ALR 708; [2013] FCAFC 9; Allen (as liquidator of Divine Homes Pty Ltd) v Harb[2011] NSWSC 8 (Barrett J).
[55] Earth Loop Pty Ltd v AIAN Investments Pty Ltd [2008] NSWSC 1042 [27] (Barrett J).
Financial records may be kept in an electronic format, subject to s 288 and s 1306 of the Corporations Act.
By operation of s 286(2), financial records must be retained for seven years after the transactions covered by the records are completed. Further, a person commits an offence of strict liability if a person contravenes s 286(1) or s 286(2).[56]
Section 1307 - falsification of books
[56] Corporations Act s 286(3), s 286(4).
Section 1307 falls within pt 9.3 of the Corporations Act, which concerns books.
The other sections within the part concern the inspection of books (s 1300); the location of books on computers (s 1301); the court's power to compel compliance if any person refuses to permit inspection of any book (s 1303); the need to translate documents if not in English (s 1304); the admissibility of books in evidence (s 1305); and the form and evidentiary value of books (s 1306). As was observed by the New South Wales Court of Appeal in Roach v R [2019] NSWCCA 160 at [121], the purpose of the division is to ensure that books that are required by the Corporations Act to be kept by the company are readily available and available for inspection (s 1300 ‑ s 1304), to provide that the books kept by the company are admissible in evidence (s 1305), to preserve the safety and physical integrity of books required to be kept by the company (s 1306(3)) and to prohibit falsification of books affecting or relating to affairs of the company (s 1307).
Relevantly, s 1307(1) and s 1307(3) provide as follows:
1307 Falsification of books
(1) An officer, former officer, employee, former employee, member or former member of a company who engages in conduct that results in the concealment, destruction, mutilation or falsification of any securities of or belonging to the company or any books affecting or relating to affairs of the company is guilty of an offence.
…
(3) It is a defence to a charge arising under subsection (1) or (2) if the defendant proves that he, she or it acted honestly and that in all the circumstances the act or omission constituting the offence should be excused.
An administrator of a deed of company arrangement executed by the corporation and a liquidator of a company, among others, are officers of a company, and therefore the plaintiffs are officers for the purposes of s 1307 of the Corporations Act.[57] The penalty for a contravention of s 1307(1) is up to five years' imprisonment.[58]
[57] Corporations Act, s 9, definition of 'officer'.
[58] Corporations Act, s 1311, read with sch 3.
As to the defence afforded by s 1307(3) of the Corporations Act, the officer bears the legal burden to prove, on the balance of probabilities, that they acted honestly and ought be excused.[59]
[59] Criminal Code (Cth), s 13.4(b).
As noted in Roach v R at [112], s 1307 of the Corporations Act originates from s 83 of the Larceny Act 1861 (UK) which provided:
Whosoever, being a Director, Manager, Public Officer, or Member of any Body Corporate or Public Company, shall, with Intent to defraud, destroy, alter, mutilate, or falsify any Book, Paper, Writing, or valuable Security belonging to the Body Corporate or Public Company, or make or concur in the making of any false Entry, or omit or concur in omitting any material Particular, in any Book of Account or other Document, shall be guilty of a Misdemeanour, and being convicted thereof shall be liable, at the Discretion of the Court, to any of the Punishments which the Court may award as herein-before last mentioned.
As was noted by counsel for the plaintiffs, the requirement of an 'Intent to defraud' in s 83 of the Larceny Act was removed from the language of s 1307 of the Corporations Act.[60]
Section 70-10 of the IPS - administration books
[60] Plaintiffs' submissions par 21.
The plaintiffs are obliged by operation of s 70‑10(1) of the IPS to keep proper books in which they must cause to be made:
(a)entries or minutes of proceedings at meetings relating to the external administration of the company; and
(b)such other entries as are necessary to give a complete and correct record of the external administrators' administration of the company's affairs.
This provision is noted for completeness, as the plaintiffs' application did not concern the proposed destruction or abandonment of administration books.
Section 70-35 of the IPS - retention and destruction of books
The last external administrator of a company must retain all books of the company, and of the external administration of the company, that:
(a)are relevant to the affairs of the company; and
(b)are in the external administrator's possession or control at the end of the external administration,
for a period (the retention period) of five years from the end of the external administration: s 70‑35(1) of the IPS. The external administrator may destroy the books at the end of the retention period: s 70‑35(4) of the IPS.[61]
[61] Section 70-35(3) and (4) are subject to subsection (6), that is, an obligation to retain the books, or part of the books, under another provision of the Corporations Act or under any other law.
The obligation to retain all books of the company in the retention period does not apply if the external administrator has a reasonable excuse: s 70‑35(2) of the IPS.
An offence will be committed if a person is subject to a requirement under s 70‑35(1), and the person intentionally or recklessly fails to comply with the requirement: s 70‑35(5) of the IPS.
There are exceptions to the obligation to retain the books of the company for the retention period under s 75‑35(3) of the IPS (all which require the consent of ASIC). However, in this case, the external administrations of the Pindan entities have not come to an end and thus, the retention period under s 70‑35(1) of the IPS has not yet commenced.
Disposition
Confidentiality
I was satisfied that the attachment to Mr Freeman's affidavit marked SJF16 (the contract for the sale of the Belmont property), contained confidential and commercially sensitive information, and the application for a confidentiality order was appropriately made.
I was satisfied that it was appropriate to restrict access to the document marked SJF16, which shall be treated as confidential and not be published or disclosed except pursuant to an order of the court pursuant to O 67B r 5(b) of the Rules of the Supreme Court.
Directions pursuant to s 90-15(1) of the IPS
As noted above, the plaintiffs sought a direction pursuant to s 90-15 of the IPS that each of the plaintiffs in their capacity as joint and several external administrators of the Pindan entities would be acting properly and that they would be justified in destroying, or causing to be destroyed the remaining records. In the alternative, the plaintiffs sought a direction that they would be justified in abandoning the same at the Belmont property.
Further, the plaintiffs sought an order that any act or omission of the plaintiffs in destroying the remaining records or, alternatively, abandoning them would not constitute conduct that resulted in the concealment, destruction, mutilation or falsification of any books and records affecting or relating to the affairs of any of the Pindan entities. Further and alternatively, they sought an order that the plaintiffs were acting honestly in all of the circumstances in engaging in any act or omission in destroying or abandoning the remaining records.
I was satisfied the plaintiffs, acting as joint and several deed administrators and joint and several liquidators of the Pindan entities, had standing to apply for orders pursuant to s 90-15 of the IPS.
In considering the plaintiffs' application, I had regard to the wide power afforded to the court under s 90-15 to make such orders as seen fit in relation to the external administration of a company. I also had regard to s 90-15(3), which includes as an example of an order that might be made under s 90-15(1), an order determining any question arising in the external administration of the company. I was satisfied that the application gave rise to an issue of propriety and reasonableness. That is, the direction sought related to more than the making of a business or commercial decision.
On balance, I was not prepared to make the directions sought having weighed the following matters.
First, the Corporations Act requires the books of the Pindan entities to be kept. Upon the successful change of control of Pindan Group and Pindan Contracting by way of deed of company arrangement, it would appear appropriate that the books of Pindan Group and Pindan Contracting be returned by the plaintiffs to those entities. Assuming that the plaintiffs are the last external administrators of the liquidation entities, they are required to keep the records of the liquidation entities until the end of the external administrations and for the retention period. Section 70‑35(3) allows in certain circumstances for the destruction of books after the end of an external administration and within the retention period, but the exception afforded by subsection (3) is not presently available to the plaintiffs.
The early destruction of books is not contemplated by the Corporations Act. Indeed, the destruction of the remaining records, alternatively their abandonment, are acts prohibited under the Corporations Act. While the power in s 90‑15(1) of the IPS in its terms unconstrained, I was troubled by the call to exercise the power in a manner inconsistent with express statutory obligations where breach may constitute an offence.
Secondly, I was cognisant that while the evidence disclosed a basis to assume that the remaining records would not be needed going forward, only a superficial review of the 2,308 boxes had been undertaken and no reliable inventory of the documents stored in the boxes had been kept.
Thirdly, I understood that the practice that had been employed by the Pindan entities prior to the plaintiffs' appointment was to characterise certain documents as being 'key' and appropriate to be stored electronically or kept after the project or matter to which they related was completed or resolved.[62] However, the criteria that had been applied to identify 'key' documents was not clear from the evidence, nor was it clear that the criteria had been consistently applied.
[62] See [40] above.
Fourthly, while Mr Freeman deposed to the basis for his belief that the remaining records were not necessary to deal with known claims of the Pindan entities,[63] the remaining records may be relevant to 'claims' which are presently unknown, for example where there is not yet a completed cause of action, or where an insurer may later be called upon to respond. I weighed in balance the prejudice that may be suffered by third parties as a consequence of the plaintiffs prematurely destroying or abandoning the remaining records, particularly those in the 1,460 boxes marked as containing documents created within the last seven years.
[63] First affidavit of SJ Freeman par 29(a).
Fifthly, I was cognisant of the costs involved in removing, transporting and storing the remaining records and the impact on Pindan Group creditors, as deposed to by Mr Freeman. This was a matter that I considered weighed in favour of the grant of relief. However, as to such costs, I was also cognisant of the following.
If the remaining documents included financial records of Pindan Group and Pindan Contracting, it was not suggested that the obligation of those entities to keep financial records for seven years after the transactions covered by the records were completed would come to an end by reason of successful completion or termination of the deeds of company arrangement. Despite this, the plaintiffs' application was premised on an assumption that the retention obligation (with associated costs of removal, transportation and long term storage of all remaining records) would appropriately fall to Pindan Group for the reasons described at [49] above. It was also premised on an assumption that all of the associated costs would be borne by the unsecured creditors of Pindan Group. The basis for this assumption was not developed by counsel for the plaintiffs.
Before this application was made, there was some debate as between the plaintiffs and Oxley Holdings as to where the obligation to meet the costs of removal, transportation and long term storage of the remaining records would properly fall. By this application I was not called upon to determine this controversy as between the plaintiffs and Oxley Holdings, which this court may be required to determine on another occasion and, I made no finding in this regard.
Sixthly, when orders under s 90-15 are sought, regard should also be had to the objects of the IPS, which includes the regulation of the external administration of companies consistently, unless there is a clear reason to treat a matter that arises in relation to a particular kind of external administration differently. The importance of proper record keeping and of retaining the books of a company is emphasised throughout the Corporations Act. The obligations are imposed on all companies and the circumstances in which they may be destroyed during a retention period are prescribed. The grant of the orders sought on behalf of the plaintiffs would not have accorded with the object of consistent regulation. The circumstances deposed to did not give rise to a clear reason to treat the books of the Pindan entities differently than all other external administrations.
In weighing the application I noted that the unreported decision of Mackenzie J in Re JML Holdings Ltd (rec and mgr apptd) (in liq) (1996) 19 ACSR 437, concerned an application by the receiver and manager of JML Holdings Ltd to compel the liquidators to take possession of the books and records of the company, to be responsible for any ongoing costs of possession of the books and records, and to permit the liquidators to destroy the books and records at the liquidators' costs. The application was brought pursuant to s 1321 of the Corporations Act 1989 (Cth) (Corporations Law), which has since been repealed. Section 1321 was titled 'Appeals from decision of receivers, liquidators etc.' (a section of no particular significance to this application).
As to the proposed destruction of the books and records of the company, Mackenzie J reasoned that having regard to the terms of s 542 of the Corporations Law, it was premature for the documents to be destroyed. However, his Honour noted that an application for destruction may be made once liquidation was complete. Section 542 of the Corporations Law was comparable to s 542 of the Corporations Act, a provision which was repealed and replaced by s 70‑35 of the IPS.
In this case, I too considered that early destruction of company books to be premature.
While the plaintiffs had sought an alternative direction that they would be justified in abandoning the remaining records at the Belmont property, abandonment was not promoted as the preferred option. Indeed, Mr Freeman identified a number of risks of abandonment, which are summarised at [52] to [55] above.
In circumstances where the alternative application was not formally abandoned, I record that the plaintiffs' application for a direction pursuant to s 90-15 of the IPS that each of the plaintiffs in their capacity as joint and several external administrators of the Pindan entities would be acting properly and that they would be justified in abandoning the remaining records at the Belmont property also failed. In addition to the six matters discussed from [102] above, I was concerned that the remaining records may contain confidential information or personal information (including, for example, personal details of former employees and other individuals who had dealings with the Pindan entities, confidential business records, and suppliers' and customers' bank account details), and if abandoned, the information may be used in a manner that is inconsistent with the maintenance of confidentiality in that information and the protection of those individuals' privacy.
Having so concluded, it followed that the plaintiffs' application for additional orders was also refused. While I accepted that the plaintiffs prosecuted the application in good faith and their honesty had in no way been impugned, in light of the above I did not consider it appropriate to make an order or declaration that:
(a)any act or omission of the plaintiffs in destroying the remaining records or, alternatively, abandoning them would not constitute conduct that results in the concealment, destruction, mutilation or falsification of any books and records affecting or relating to the affairs of any of the Pindan entities; or
(b)that the plaintiffs would be acting honestly in all of the circumstances in engaging in any act or omission in destroying or abandoning the remaining records.
Conclusion and orders
For these reasons, I was not prepared to make the orders sought on behalf of the plaintiffs and the application was refused. The plaintiffs have liberty to apply should an order be sought in relation to the costs of the application.
Sch A – Liquidation entities
Pindan Capital Pty Ltd (In Liquidation) (ACN 139 599 652)
Pindan Capital Investments Pty Ltd (In Liquidation) (ACN 615 672 225)
Pindan Constructions Pty Ltd (In Liquidation) (ACN 159 837 500)
Pindan Projects WA Pty Ltd (In Liquidation) (ACN 611 922 475)
Pindan Homes Pty Ltd (In Liquidation) (ACN 612 210 643)
Pindan Constructions (NSW) Pty Ltd (In Liquidation) (ACN 612 479 115)
Pindan Developments Pty Ltd (In Liquidation) (ACN 611 922 555)
Pindan Realty Pty Ltd (In Liquidation) (ACN 009 372 847)
Moselle Holdings Pty Ltd (In Liquidation) (ACN 009 338 318)
Sch B – Estimated time to completion of external administration
| Entity | Estimated time to completion for appointment |
| Pindan Group Pty Ltd (Subject to Deed of Company Arrangement) (ACN 611 922 386) | 9 - 12 mths |
| Pindan Contracting Pty Ltd (Subject to Deed of Company Arrangement) (ACN 120 076 360) | 9 - 12 mths |
| Pindan Capital Pty Ltd (In Liquidation) (ACN 139 599 652) | 9 - 12 mths |
| Pindan Capital Investments Pty Ltd (In Liquidation) (ACN 615 672 225) | 9 - 12 mths |
| Pindan Constructions Pty Ltd (In Liquidation) (ACN 159 837 500) | 9 - 12 mths |
| Pindan Projects WA Pty Ltd (In Liquidation) (ACN 611 922 475) | 9 - 12 mths |
| Pindan Homes Pty Ltd (In Liquidation) (ACN 612 210 643) | 6 - 12 mths |
| Pindan Constructions (NSW) Pty Ltd (In Liquidation) (ACN 612 479 115) | 6 mths |
| Pindan Developments Pty Ltd (In Liquidation) (ACN 611 922 555) | 6 - 12 mths |
| Pindan Realty Pty Ltd (In Liquidation) (ACN 009 372 847) | 6 - 12 mths |
| Moselle Holdings Pty Ltd (In Liquidation) (ACN 009 338 318) | 6 mths |
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
LP
Associate to the Honourable Justice Strk
6 FEBRUARY 2023
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