READ & BIRCH - [2016] WASC 199

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: READ & BIRCH [2016] WASC 199

CORAM: MASTER SANDERSON

HEARD: 11 MAY 2016

DELIVERED : 30 JUNE 2016

FILE NO/S: COR 150 of 2015

BETWEEN: SIMON ANDREW READ & ANDREW JOHN BIRCH in their capacities as joint and several liquidators of WESTPOINT CORPORATION PTY LTD (ACN 009 395 751) (Receivers & Managers Appointed) (in liq)
Plaintiffs

Catchwords:

Corporation law - Directions sought by liquidator - Turns on own facts

Legislation:

Corporations Act 2001 (Cth)

Result:

Directions given

Category: B

Representation:

Counsel:

Plaintiffs:     Mr C D Belyea
First Other Party            :     Mr D J Jackson
Second Other Party       :     Mr A Metaxas
Third Other Party          :     Mr D L Yates

Solicitors:

Plaintiffs:     Clayton Utz
First Other Party            :     Australian Securities & Investments Commission
Second Other Party       :     Metaxas & Hagar for Norman Phillip Carey
Third Other Party          :     Corrs Chambers Westgarth for the 'Eight Companies'

Case(s) referred to in judgment(s):

Dean‑Willcocks v Soluble Solutions Hydroponics Pty Ltd (1997) 42 NSWLR 209
Re Ansett Australia Ltd (Administrators Appointed) and Korda (2002) 40 ACSR 433
Re J M L Holdings Ltd (in liq) (1996) 19 ACSR 437
Re Stansfield DIY Wealth Pty Ltd (in liq) (2014) 291 FLR 17

MASTER SANDERSON: This is an application for directions pursuant to s 479(3) of the Corporations Act 2001 (Cth) (the Act). Before setting out the directions sought by the applicants, it is necessary to give some factual background in order to provide context.
The applicants are the joint and several liquidators of Westpoint Corporation Pty Ltd (Receivers and Managers Appointed) (Westpoint). Westpoint undertook the administrative, operational and financial affairs of 193 companies, trusts and managed investment schemes that formed the Westpoint Group. Receivers were appointed to Westpoint on 24 January 2006. The liquidators were appointed to Westpoint by the Federal Court on 16 February 2006 and 31 October 2007. Further, the liquidators were appointed to 23 other entities within the Westpoint Group. Of the entities to which the liquidators were appointed, 11 have since been deregistered.
By reason of the operation of the Westpoint Group, the books and records of the group are intermingled so it is not practical or possible to identify which books and records relate to which entity. In 2006, Australian Securities and Investments Commission (ASIC) issued notices for the production of documents relating to 193 companies, trusts and persons. As a result, ASIC took possession of 3,464 boxes of records, servers and laptops. Five hundred and seventy five boxes were returned to the receivers in August 2008. ASIC retained 2,889 boxes with electronic images of computers, laptops and other documents at Traralgon. Throughout, these retained records are referred to as 'ASIC current records'. In June 2006 ASIC gave the liquidators electronic copies of documents they held, which amounted to 2.2 million documents. In May 2007 ASIC gave the liquidators electronic copies of documents produced in response to notices. This was the contents of 2,889 boxes but not the contents of 575 boxes. This resulted in a further 1.6 million documents; bringing the total number of documents to 3.8 million.
ASIC no longer needs the records and wants to return the records to the liquidators.
Against that background, the liquidators seek the following directions:
Archive records
1.A direction pursuant to section 479(3) of the Act that Simon Andrew Read and Andrew John Birch in their capacities as joint and several liquidators (liquidators) of Westpoint Corporation Pty Ltd (Receivers and Managers Appointed) (In liquidation) (Westpoint) would be acting properly and are justified in causing to be destroyed the 2,295 boxes of archive books and records referred to at paragraph 11(a) of the Read Affidavit (Archive Records), the costs of destruction to be paid from the assets of Westpoint.
2.Alternatively to order 1, an order pursuant to section 542(3)(a) of the Act that the Archive Records may be destroyed by the Liquidators within a period of one month after deregistration of Westpoint, the costs of storage and destruction pursuant to this order to be paid from the assets of Westpoint.
3.An order that, if the Liquidators are required to store the Archive Records, the costs of storing the Archive Records be paid from the assets of Westpoint.
ASIC Current Records
4.A direction pursuant to section 479(3) of the Act that the Liquidators would be acting properly and are justified in causing to be destroyed the books and records contained in the [2,889] boxes, computer servers, laptops and standalone computers referred to at paragraph 21(b) of the Read Affidavit (ASIC Current Records), the costs of destruction to be paid from the assets of Westpoint.
5.Alternatively to order 4, a direction pursuant to section 479(3) of the Act that the Liquidators would be acting properly and are justified in not taking possession, from the Australian Securities and Investments Commission, of the ASIC Current Records.
6.Alternatively to order 5, an order pursuant to section 542(3)(a) of the Act that the ASIC Current Records may be destroyed by the Liquidators within a period of one month after deregistration of Westpoint, the costs of storage and destruction pursuant to this order to be paid from the assets of Westpoint.
7.An order that, if the Liquidators are required to take possession of the ASIC Current Records, the costs of storing those documents be paid from the assets of Westpoint.
Other Current Records
8.An order, pursuant to section 542(3)(a) of the Act, that the books and records contained in the 575 boxes referred to in paragraph 21 (a) of the Read Affidavit may be destroyed by the Liquidators within one month after deregistration of Westpoint, the costs of storage and destruction pursuant to this order to be paid from the assets of Westpoint.
At the hearing of this application, ASIC appeared by counsel. Also appearing was counsel on behalf of Mr Norman Phillip Carey. Mr Carey is a director of 11 companies which were associated with Westpoint and whose records may be amongst the documents in question. Further, a group of eight companies to which receivers have been appointed and which are still in receivership, appeared by counsel. Submissions, both written and oral, were made by each of these three separate parties.
There was no dispute between the parties as to the circumstances in which a liquidator can seek directions pursuant to s 479(3). The function of the application is to give the liquidator advice as to the proper course of action to take in the liquidation: Re Ansett Australia Ltd (Administrators Appointed) and Korda (2002) 40 ACSR 433 [46]. A liquidator will be protected from liability for any breach of duty if, having made full and fair disclosure of the material facts, he or she acts in accordance with a direction given by the court under s 479(3).
The court will generally not give a direction as to the commercial prudence of a proposed decision or course of action. This is not such a case. Here, the direction sought relates to the manner in which the liquidator should carry out their duties - that is, taking possession of and storing the books and records of Westpoint as required by s 474(1)(a) and s 542(2) of the Act. These sections are in the following terms:
Custody and vesting of company's property
(1)If a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company has been appointed:
(a)in a case in which a liquidator or provisional liquidator has been appointed--the liquidator or provisional liquidator must take into his or her custody, or under his or her control, all the property which is, or which appears to be, property of the company[.]
…
Books of company
(1)Where a company is being wound up, all books of the company and of the liquidator that are relevant to affairs of the company at or subsequent to the commencement of the winding up of the company are, as between the contributories of the company, prima facie evidence of the truth of all matters purporting to be recorded in those books.
(2)If a company has been wound up, the liquidator must retain the books referred to in subsection (1) for a period of 5 years from the date of deregistration of the company and, subject to section 262A of the Income Tax Assessment Act 1936, may, at the end of that period, destroy them.
All parties agreed that the books and records of those companies in the Westpoint Group that have already been deregistered could be destroyed pursuant to s 542(3) of the Act. The section, however, does not permit the destruction of the books and records of Westpoint and other companies to which the liquidators were appointed.
Counsel for the liquidators in his written submissions suggested s 542(3) of the Act 'does not appear to permit the destruction of books and records'. All of the other counsel were more definite. In my view, there is no doubt in relation to this question, and the proper starting point is to acknowledge the liquidators are bound to take possession of the documents presently held by ASIC and are not permitted, pursuant to statute, to destroy those records.
The difficulty with this case is that it is not practical or possible to determine whether particular books relate to one or multiple entities within the Westpoint Group. Further, the books are arguably the property of Westpoint. The winding up of Westpoint and other entities within the group is ongoing. In my view, there is no doubt s 479(3) of the Act does not empower the court to authorise a liquidator to take action which is prohibited by statute. That was the conclusion reached by Brereton J in Re Stansfield DIY Wealth Pty Ltd (in liq) (2014) 291 FLR 17 [40]. It also implicitly was the conclusion reached in Re J M L Holdings Ltd (in liq) (1996) 19 ACSR 437.
The only case which appears to call into doubt this statement of principle is a decision of Young J in Dean‑Willcocks v Soluble Solutions Hydroponics Pty Ltd (1997) 42 NSWLR 209. Young J said, '[T]he court may under s 479 direct its officer to commit a breach of trust or to do something which it is arguable he has no power to do' (212).
If that statement was intended to mean the court can authorise a breach of statute then, with respect, I would disagree. However, what his Honour was concerned with in that case was a possible breach of equitable principle. That is a completely different issue to attempting to authorise a breach of statute. In my view, whatever the status of Dean‑Willcocks, it has no application to a case such as this.
It is clear that in taking possession and storing the records, the liquidators will incur significant costs. That issue was addressed in a number of affidavits and, in particular, Mr Read's affidavit of 10 May 2016. While certain cost pressures will be placed on the liquidators and, by extension, upon the limited assets of the companies, there is no suggestion the applicants do not have sufficient assets to enable them to store the records. This is a completely different case from Re J M L Holdings where the liquidators had no funds to pay for storage costs and had reached the conclusion only a limited number of documents needed to be retained.
Nor do I think it is necessary to make any order permitting the destruction of documents one month after the deregistration of Westpoint. That is provided for in the section and there is no utility in making an order in those circumstances. I would therefore not make directions in the terms of pars 2, 6 and 8 of the amended originating process.
Accordingly, I would decline to make orders in terms of pars 1, 2, 4, 5, 6 and 8 of the amended originating process. For the avoidance of doubt and because some of the records may not be records of Westpoint, I would make orders in terms of pars 3 and 7 of the amended originating process.
I will hear the parties as to costs.