Re: Southern Equities Corporation Ltd (in Liq) No. Scgrg-93-92516 Judgment No. S6650

[1998] SASC 6650

RE:  SOUTHERN EQUITIES CORPORATION LTD
(IN LIQUIDATION)

Civil

Debelle J

These are applications to remove orders for confidentiality made in respect of examinations conducted by a liquidator pursuant to s596 of the Corporations Law.  The liquidator challenged the standing of each of the applicants to make the application.

The applications concern the affairs of Southern Equities Corporation Ltd (in liquidation) (“SECL”).  SECL is the present name of the company formerly known as Bond Corporation Holdings Ltd, one of a group of companies controlled by Mr Alan Bond.  On 23 December 1993 an order was made in this court winding up SECL and appointing Mr R A F England as liquidator.

The liquidator has conducted examinations of a number of persons pursuant to s596A and s596B of the Corporations Law. Orders have been made that the examinations be confidential. The affidavit of the liquidator applying for the orders is confidential and not available for inspection: s596C. In addition, orders have been made that other documents including orders of the court be confidential. Almost all of these orders have been made by Judge Bowen Pain, the Master in this court who has supervised the administration of the winding up. A few orders as to confidentiality have been made by courts in other countries in proceedings which have been ancillary to the liquidator’s examinations. Because of the confidential nature of the orders, I do not know how many orders as to confidentiality have been made or to what the orders relate.

It is, however, common ground that the liquidator has obtained orders for examination of a number of witnesses on different issues relating to the winding up of SECL. It is also common ground that, by an application dated 7 December 1995, the liquidator sought, among other things, orders for the examination of a number of people and for the production by them of documents. That application was supported by an affidavit of the liquidator. Although the affidavit is confidential by dint of s596C, its contents have been described in general terms in decisions made by Judge Bowen Pain. The liquidator has not objected to those general descriptions. In the affidavit, the liquidator describes steps he has taken with respect to the recovery of certain works of art, mainly paintings, which he alleges were at one time assets of SECL but are no longer. He alleges that, on 2 January 1990, SECL sold thirteen paintings and one sculpture for $922,500 at a time when the value for insurance purposes of those works of art was in excess of $6 million. The present whereabouts of the works of art are unknown. One of the purposes of the auditor’s examination was to make enquiries of different individuals for the purpose of seeking to trace them. The affidavit outlines the enquiries which the liquidator thinks should be made. It also set out the basis of an apprehension on the part of the liquidator that, if the strictest confidentiality is not maintained, the assets which he seeks to obtain might be placed further out of his reach. The affidavit explains that the application for orders as to examination seeks a package of orders designed to provide evidence as to the whereabouts of the works of art.

Judge Bowen Pain acceded to the application. He made orders that a number of persons be examined and ordered, pursuant to s597(4) of the Corporations Law, that the examinations be confidential.  The details of all of the persons ordered to be examined have not been disclosed to me.  However, in the course of hearing appeals concerning other orders made in the course of the examinations, and in the course of hearing this application, I am aware and it is common ground that three of the persons who have been examined pursuant to the orders were Mr Alan Bond, his son Mr Craig Bond, and Ms D J Caboche, who was employed at one time by companies in the Bond Group.  They are also three of the present applicants. 

Action No 113 of 1996

SECL, Bond Corporation Pty Ltd and the liquidator of SECL are plaintiffs in an action in this court seeking to recover the works of art alleged to have been assets of SECL. It is action No 113 of 1996.  It is common ground that the works of art the subject of that action are the same as those which are the subject of the examinations by the liquidator as outlined in his affidavit sworn on 7 December 1995. The action was instituted on 2 January 1996.  At that time, the examinations which had been ordered by Judge Bowen Pain had scarcely begun.  The liquidator did not wish to serve the proceedings lest he prejudice the intended examinations.  For the same reason, he wished to keep confidential the fact that the action had been commenced.  On 2 January 1996 I made an order that, until further order, the issue of the proceedings be confidential so that knowledge of that fact would not prejudice the conduct of the examinations.  The order for confidentiality was renewed from time to time.  Similarly, the summons was also renewed from time to time.  In May 1997, the proceedings were served on most of the defendants.  On 6 May 1997 I ordered that a time be appointed for consideration of the question whether the orders for confidentiality should stand.  I ordered that the plaintiff give notice of the application to the defendants.  For one reason or another, the application was not heard until 2 December 1997.

The defendants in action No 113 of 1996 are Mr Alan Bond; Messrs G J Trevor and A J Halse as trustees of the estate of Peter George Beckwith deceased; Tambar Pty Ltd; Mr Craig David Bond; Hulmes Pty Ltd; Ms D J Caboche; Mr John Bryan Bond; and SHC International Inc.  The plaintiffs have discontinued the proceedings against the trustees of the estate of Mr P G Beckwith deceased.  Each of the other defendants save SHC International Inc applied to have the orders for confidentiality set aside. 

Orders for Confidentiality Discharged

On 2 December 1997 I made an order discharging the orders for confidentiality in action No 113 of 1996.  The order expressly excepted any order for confidentiality made by a court in another jurisdiction.  On that occasion the liquidator was represented by senior counsel, who said that the liquidator consented to the release of the affidavits and the transcript of the relevant hearings.  After I had made the orders, I indicated that I would make like orders in action No 92516 of 1993 without any need for attendance of parties.  Senior counsel for the liquidator did not raise any objection to that proposed course of action.  On 3 December 1997 I made two orders, namely,

“1..... Upon the defendant Alan Bond signing the transcript of his s596 examination the orders for confidentiality in this action will cease, save and except that this order does not touch any document the subject of an order for confidentiality by any foreign court.

2...... That the orders binding persons examined pursuant to s596 of the Corporations Law to keep the fact of the examination and the subject matter of the examination confidential be rescinded forthwith.”

The Orders Restored in Part

.................. On 8 December 1997 the liquidator made an urgent application ex parte to discharge the order made on 3 December 1997, the liquidator undertaking to make an application within 14 days in respect of the material on the court file on action No 113 of 1996. The affidavit in support of the application stated, among other things, that the winding up file contained material concerning other examinations by the liquidator in respect of matters unrelated to the issues in action No 113 of 1996 and “numerous confidential affidavits and material to which third parties are not entitled to inspect including pursuant to s596C of the Corporations Law”(sic).

.................. On the hearing of the application, senior counsel for the liquidator explained that he had been in error in allowing the orders made on 2 and 3 December to pass.  He said that he had been subsequently informed that the discharge of the order as to confidentiality opened up a large number of matters, some of which were quite sensitive, including orders as to confidential terms of settlement of actions and examinations in other matters unrelated to the issues in action No 113 of 1996.  I made an order revoking the order made on 3 December 1997 and substituted for those orders the following:

“2.Upon the defendant Alan Bond signing the transcript of his s596 examination the orders for confidentiality in this action will cease, save and except that this order does not touch any document the subject of an order for confidentiality by any foreign court and all affidavits exhibits and transcripts relating to the approval of any confidential settlement or compromise.

3.That the orders binding persons examined pursuant to s596 of the Corporations Law to keep the fact of the examination and the subject matter of the examination confidential be rescinded forthwith.”

Thus, the orders for confidentiality of the documents were restored but the orders rescinding the orders binding the persons examined to keep the fact of the examination and the subject matter of the examination confidential remained in force.  I also made orders that the matter come on for further argument. I directed that a copy of the transcript and my reasons for the orders be sent to the defendants in action No 113 of 1996.  I also ordered the liquidator to file a schedule identifying documents, examinations or transcripts in respect of which the liquidator sought to maintain confidentiality. The liquidator filed such a list.  It is a list which is almost devoid of any real meaning to the reader as it simply lists documents by reference to their file number and does not provide any information identifying the nature of the document. 

Applications to Set Aside Orders as to Confidentiality

All of the defendants in action No 113 of 1996 have applied to set aside the order made on 8 December 1996 in action No 92516 of 1993.  The liquidator has consented to a variation of that order so that the transcripts of the examinations of Craig David Bond, Delores Jean Caboche, Wayne Joseph Zekulich, Robert John Bleakley, John Bryan Bond, Kevin Lee Christensen and Alan Bond will be available to each of the applicants.  An order has been made to that effect.  However, the applicants seek to go further.  They seek to know what orders have been made including orders which are subject to orders as to confidentiality; the names of the persons required to attend for examination; whether those persons attended for examination and, if not, whether they produced a statement or document without the necessity for formal examination.  They contend that the orders for confidentiality which are in place prevent them from knowing what is on the file relating to the administration of the winding up.  They seek, therefore, a list which identifies the documents which are subject to orders as to confidentiality so that they may determine whether they wish to be able to examine any particular document. This, they assert, is a basic necessity for any enquiry as to the extent of the orders as to confidentiality.  However, the applicants expressly state that they do not wish to roam at large over examinations of persons in relation to matters unassociated with the investigations into the works of art or peruse confidential documents on unrelated issues.  For example, the liquidator has examined officers of Arthur Andersen in respect of issues now the subject of another action in this court.  The applicants expressly disavow any desire to inspect the transcripts of examination of those officers or any documents produced in those examinations.  The applicants point to the fact that the effect of the orders as to confidentiality render it virtually impossible for them to ascertain what material exists on the winding up file.

The liquidator challenges the standing of each of the applicants to inspect any document other than the transcript of his or her own application. The parties have, therefore, agreed that the issue of standing should be determined first.  If that issue is decided in favour of the applicants, consideration can then be given to the appropriate manner in which to enable the applicants to be informed of the confidential documents which exist without impairing the confidentiality.

Standing to Apply to Inspect Confidential Documents

Examinations under s596A and 596B of the Corporations Law are, of course, unlike the usual form of judicial proceedings. The differences have been identified on many occasions. It is sufficient to refer to the observations of this court in Emanuele v Emanuele Investments Pty Ltd (1996) 21 ACSR 83 and, on appeal, (1997) 191 LSJS 412. Notwithstanding that an examination is not a determination of rights and liabilities of adversaries but a function incidental to the winding up, the power to conduct examinations is an incident of the judicial power of winding up and has a judicial character: Gould v Brown (1998) 72 ALJR 375 per Brennan CJ and Toohey J at 389 to 390. It must also be noted that each examination is often the subject of a separate order and is a separate matter. It is not unusual, however, for a series of orders to be made on one application with the order for the examination of each individual being made in separate paragraphs of the one order. The fact that a person is ordered to attend for examination does not give the examinee an interest in the winding up beyond the conduct of that examination. Further, the administration of the winding up by the court is not an inter partes matter. Mr Gray QC, who appeared for the liquidator, emphasised these propositions.

But there are other principles which bear upon the question whether the applicant has standing to make these applications.  Those principles might be summarised in these terms:

1. An examination under ss596A or 596B is conducted in public unless the court considers that, by reason of special circumstances, it is desirable to hold the examination in private: s597(4). That principle is consistent with the principle that, generally speaking, courts conduct proceedings in public.

2...... While the procedure under ss596A and 596B confers on the liquidator an advantage not possessed by other litigants: see, for example, Nicholson J in Re Rothwells Ltd [No 2] (1989) 15 ACLR 168 at 182, it also subjects him to the disadvantage, in a tactical sense, that if he exercises that power his opponent in litigation will learn the substance of the evidence which a witness might give concerning matters in dispute: G.P.I. Leisure Corporation Limited v The ANI Corporation Ltd (1981) 6 ACSR 412 at 414. It is simply one of the consequences of a liquidator exercising a power which others do not have.

3...... An examinee is, as a general rule and as a matter of fairness, entitled to a copy of the transcript of his examination.  One example where a copy of the transcript was not made available is Re Spedley Securities Limited (1990) 2 ACSR 266. Further, where the court is satisfied that a party has a legitimate interest in inspecting the transcript of an examination or a particular part of it, that party will be given leave to inspect the transcript: Spedley Securities Ltd v Bond Corporation Holdings Limited (1990) 1 ACSR 726 at 741;  Re Spedley Securities Limited (supra) at 269; G.P.I. Leisure Corporation Ltd v The ANI Corporation Ltd (supra) at 414-415.  In Spedley Securities Ltd (in liq) v Bond Corporation Holdings Ltd Rogers CJ said, at 741:

“As to the application that the defendants receive a copy of the transcript of the examination of other persons, particularly former officers of the plaintiff, I can see advantage in making available, so much of the transcript as deals with evidence bearing on the subject matter of the dispute between the plaintiff and defendant.  After all, what the liquidator, as an officer of the court is attempting to do, is to place before the court relevant material enabling a decision to be made as to the entitlement of the company to property.  I hardly think that it lies in the mouth of the liquidator in those circumstances to deny an opposing party the opportunity of having access to information bearing on that question.  Accordingly, in my view, it should be made available to the defendant so much of the evidence given in the course of the public examinations as bears on the subject matter of these disputes.”

Thus, a person who is a party to litigation with the liquidator or even a person who is engaged in litigation with a person other than a liquidator who can show that the evidence in the examination relates, or could be relevant, to the issues in the action is, generally speaking, entitled to inspect the transcript or the relevant portions of it.  An instance where a person engaged in litigation with a person other than the liquidator has obtained the transcript of the examination is G.P.I. Leisure Corporation Ltd v The ANI Corporation Ltd (supra).  In other words, a person who can satisfy the court that he has a legitimate interest may obtain the transcript of a public examination.  In addition to the cases already cited, see also Re BPTC (in liq) (1992) 7 ACSR 539; Re Botafogo Pty Ltd (1992) 10 ACSR 31.

.................. The above principles apply to examinations conducted in public.  The fact that an examination is being conducted in private and is confidential does not necessarily mean that a person is disqualified from applying for a copy of the transcript of the examination or part of it.  As Shepherdson J noted in Re Country Stores Pty Ltd (1988) 2 Qd R 149 at 155, a liquidation does not remain static and courts must be flexible enough to meet changes which occur. Thus, an examination which has been conducted in private can be converted into a public examination: Re Country Stores Pty Ltd (supra);  Re Lazar International Pty Ltd (1990) VR 799. The fact that the examination was confidential will, of course, be a factor to be weighed with all other relevant issues. One of those issues will be whether the applicant has a legitimate interest in obtaining a copy of the transcript. But questions as to whether the applicant should be permitted to have access to the transcript of a confidential examination are different from the entitlement to make the application. In other words, the question of the entitlement to make the application should not be confused with the determination of the merits of the application. The questions whether confidentiality should be maintained and the persons against whom it ought to be maintained are matters to be worked out at a later stage. For example, a person ordered to attend for examination who seeks access to the affidavit sworn by the liquidator in support of the order for examination will be confronted with a long line of authority to the effect that the examinee is not entitled to access the affidavit: see, for example, Re Gold Co (1879) 12 Ch D 77; Re Hugh J Roberts Pty Ltd (in liq) [1970] 2 NSWR 582; Murphy v FAI General Insurance Co Limited (1997) 24 ACSR 604; cf Re British & Commonwealth Holdings Plc [1992] 1 Ch 342; Re Moage Ltd (in liq) (1997) 25 ACSR 53.

.................. Thus, not only an examinee but also a person who has a legitimate interest has standing to make the application.  The court has power to release documents and permit inspection and, when doing so, to determine what, if any, safeguards or restrictions should be ordered: Murphy v FAI Insurance Co Limited (supra) at 610 where it was said that the decision should be worked out on a case by case basis. 

.................. The applicants are all defendants in an action brought by the liquidator who seeks to recover assets alleged to be assets of the company in liquidation.  It is alleged that they have each been implicated, to the extent alleged in the Statement of Claim, in unlawful dealings with the works of art, the subject of the action.  As parties to an action brought by the liquidator which involves issues the subject of the examinations ordered in consequence of the liquidator’s affidavit sworn on 7 December 1995, the applicants have a legitimate interest in inspecting the transcript of an examination of any person who has been ordered to be examined on the issues in the action.  In addition, they have a legitimate interest in knowing the persons against whom orders have been made, whether those persons have been examined and, if not, whether they have produced documents or statements without attending for formal examination.  As such, they have standing to bring these applications. The liquidator has substantially amended the Statement of Claim.  It is reasonable to infer that the Statement of Claim has in part been drawn on the basis of material disclosed in the course of the examinations.  This is another reason why the applicants have a legitimate interest in inspecting the transcript of the examinations.

.................. I think that the applicants also have standing to apply for access to other confidential information on the winding up file.  At the risk of unnecessary repetition, the issue of standing is, of course, quite separate from the merits of the application.  There may be all kinds of barriers to access to this information and all kinds of reasons why the applicants are not entitled to have access to it.  But those are issues for another day.

.................. For these reasons, the applicants have standing to make their present applications.  I will hear the parties as to how the applications may proceed without impairing the effect of the orders of confidentiality.