Satz v ACN 069 808 957 Pty Ltd

[2010] NSWSC 365

CITATION:	Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365
HEARING DATE(S):	20/04/10
JUDGMENT DATE :	30 April 2010
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Application for order setting aside orders of 14 December 2009 dismissed.
CATCHWORDS:	PROCEDURE - judgments and orders - amending varying and setting aside - order in favour of member and against company for access to company books - company subject to deed of company arrangement - originating process delivered to deed administrators - whether company served - no appearance by company at hearing - whether company had adequate notice of hearing - duty of plaintiff proceeding in absence of defendant - distinction, for that purpose, between case where defendant notified of hearing and case where defendant not so notified - various alleged misstatements to court - assessment of these - none warrants interference with orders made
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss 9, 109X(1), 247A, 247B, 435C(2)(a). 440D, 444D, 444E(3) Corporations Regulations 2001 (Cth), clause 2(j) of Schedule 8A Uniform Civil Procedure Rules 2005, rules 10.1, 10.2, 10.5(1)(d), 36.15(1), 36.16(2)(b)
CATEGORY:	Principal judgment
CASES CITED:	Areva NC (Australia) Pty Ltd v Summit Resources (Australia) Pty Ltd (No 2) [2008] WASC 10 Cameron v Cole [1944] HCA 5; (1944) 68 CLR 571 Czerwinski v Syrena Royal Pty Ltd (No 1) [2000] VSC 125; (2000) 34 ACSR 245 Elton v Cavil (No 2) (1994) 34 NSWLR 289 Finn v Firefast Pty Ltd [2004] QSC 203 Fitzgerald v Masters (1956) 95 CLR 420 In the Marriage of Black and Kellner (1992) 106 FLR 154 In the Marriage of Briese (1985) 10 Fam LR 642 Italiano v Carbone [2005] NSWCA 177 J Aron Corp v Newmont Yandal Operations Pty Ltd [2004] NSWSC 533: (2004) 183 FLR 90 Kavia Holdings Pty Ltd v Werncog Pty Ltd [1999] NSWSC 839 Metwally v University of Wollongong (No 2) [1985] HCA 28 (1985) 59 ALJR 481 Owners of SS Kalibia v Wilson [1910] HCA 77; (1910) 11 CLR 689 Reed Constructions Australia Ltd v DM Fabrications Pty Ltd [2007] NSWSC 1190; (2007) 25 ACLC 1463 Re Gruzman; Ex parte The Prothonotary (1968) 70 SR (NSW) 316 Roach v B&W Steel Pty Ltd (1991) 23 NSWLR 110 Rowland v Meudon Pty Ltd [2008] NSWSC 381; (2008) 66 ACSR 83 Satz v ACN 069 808 975 [2009] NSWSC 1459 Thomas A Edison Ltd v Bullock [1912] HCA 72; (1912) 15 CLR 679
PARTIES:	Neville Joseph Satz - Plaintiff ACN 069 808 957 Pty Limited - Defendant
FILE NUMBER(S):	SC 2009/291120
COUNSEL:	Mr A P Cheshire - Plaintiff Mr J C Hewitt - Defendant
SOLICITORS:	Morgan Lewis Attorneys - Plaintiff Johnson Winter & Slattery - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

FRIDAY 30 APRIL 2010

2009/291120 NEVILLE JOSEPH SATZ v ACN 069 808 957 PTY LIMITED

JUDGMENT

1 I am dealing with an application by ACN 069 808 957 Pty Limited (“the defendant”) for an order that two orders made by Austin J on 14 December 2009 be set aside. The orders in question (which were entered on 16 December 2009) were made upon an originating process filed by the plaintiff on 2 November 2009 and are as follows:

“(2) The Court directs the defendant by its administrators to permit the plaintiff to inspect and make copies of the books of the defendant including but not limited to:
(a) hard copy records;
(b) electronic records and back up tapes;
(c) books within the possession of Johnson Winter and Slattery.

(3) The defendant pay the plaintiff's costs of the proceedings as agreed or assessed.”

2 The orders were thus orders directed to and binding upon the defendant alone. It was the only defendant named in the originating process.

3 Short reasons for judgment published by Austin J (Satz v ACN 069 808 975 [2009] NSWSC 1459) make it clear that order 2 was made under s 247A of the Corporations Act 2001 (Cth). His Honour expressly said (at [7]):

“In all the circumstances, I shall make an order under s 247A.”

4 The defendant is described in the title to the proceedings as “(administrator appointed)”. It should be described as “(subject to deed of company arrangement)” since it remains subject to a deed of company arrangement which was executed on 21 July 2009. Upon execution of the deed, the antecedent voluntary administration of the company ended: Corporations Act, s 435C(2)(a).

5 Mr Hayes and Mr Sims are the administrators of the deed of company arrangements. They made it clear, through their counsel, that the present application is brought by them in the name of the defendant in exercise of the power they have under clause 2(j) of Schedule 8A to the Corporations Regulations 2001 (Cth). That provision creates a power for a deed administrator

“to bring, prosecute and defend in the name and on behalf of the company or in the name of the administrator any actions, suits or proceedings.”

6 The Schedule 8A provisions are expressly adopted by the deed of company arrangement except to the extent of inconsistency with deed provisions themselves. No inconsistency is suggested.

7 The present application is brought by the defendant under rules 36.15(1) and 36.16(2)(b) of the Uniform Civil Procedure Rules 2005.

8 Rule 36.15(1) provides:

“A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith.”

9 Rule 36.16(2)(b) is in these terms:

“The court may set aside or vary a judgment or order after it has been entered if:
…
(b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order.”

10 The defendant’s complaints centre on two main propositions: first, that the defendant (and perhaps others) were denied an opportunity to be heard before the orders were made; and, second, that the orders were obtained on the basis of incomplete and incorrect information given to the court. I shall deal with these matters separately.

11 As to the alleged denial of an opportunity to be heard, it may be accepted at once that the defendant was not represented when the s 247A application of the plaintiff came before Austin J on 14 December 2009. There is therefore a threshold question whether the defendant was served with the originating process and the supporting affidavit filed with it.

12 An affidavit of service shows that the documents just mentioned were delivered by hand to the office of the firm of accountants of which the deed administrators are members. Mr Cheshire of counsel submitted on behalf of the plaintiff that, in light of s 109X(1)(d) of the Corporations Act, that constituted good service on the defendant.

13 Section 109X(1) sets out ways in which a document “may be served on a company”. Paragraph (d) is in these terms:

“if an administrator of the company has been appointed--leaving it at, or posting it to, the address of the administrator in the most recent notice of that address lodged with ASIC.”

14 Mr Cheshire submitted that “administrator” here includes an administrator of a deed of company arrangement executed by the company. He referred to the definition of “administrator” in s 9:

“’administrator’ :
(a) in relation to a body corporate but not in relation to a deed of company arrangement:
(i) means an administrator of the body or entity appointed under Part 5.3A; and
(iii) if 2 or more persons are appointed under that Part as administrators of the body or entity--has a meaning affected by paragraph 451A(2)(b); or
(b) in relation to a deed of company arrangement:
(i) means an administrator of the deed appointed under Part 5.3A; and
(ii) if 2 or more persons are appointed under that Part as administrators of the deed--has a meaning affected by paragraph 451B(2)(b).”

15 Section 109X(1)(d) refers to “an administrator of the company”. The expression “administrator” is thus used “in relation to” the particular species of “body corporate” that is a “company”, with the result that it is paragraph (a) of the s 9 definition that is relevant, not paragraph (b). Paragraph (b) is relevant only where “administrator” is used “in relation to” a deed of company arrangement – such as in the expression “administrator of a deed of company arrangement” that appears frequently throughout the Act, particularly in Part 5.3A.

16 I am therefore of the opinion that s 109X(1)(d) did not apply and that delivery to the office of the deed administrators did not constitute service on the defendant in accordance with s 109X. In a formal sense, therefore, there was no service consistently with rule 10.5(1)(d) of the Uniform Civil Procedure Rules.

17 The fact remains, however, that the originating process and supporting affidavit actually reached the persons who, in terms of the Schedule 8A provision already noticed, had power “to defend in the name and on behalf of the company” the proceedings instituted by the originating process. Furthermore, the evidence leaves no doubt that the deed administrators were aware of and had been involved in relevant events leading up to the initiation of the proceedings.

18 It is necessary to digress at this point to say more about the power and authority of the deed administrators, bearing in mind that the proceedings concerned with “the books of the defendant” in their entirety, with particular reference to certain kinds of books but without limitation.

19 The deed of company arrangement follows a fairly common pattern, although with peculiar features. Provision is made for creditors to submit claims and for those claims to be assessed. The deed administrators are to establish a deed fund consisting of several items. The main element is the net proceeds of the sale of certain property of the defendant under a contract of 30 June 2009 with a purchaser known as Epicor, after allowing for an amount to be paid by the defendant to the present plaintiff in accordance with a so-called “implementation deed” of 29 June 2009. The deed fund is to be applied according to a stated order of priority towards the costs and expenses of the deed, priority employee entitlements, the so-called Class A Creditors’ claims, the so-called Class B Creditors’ claims and ultimately the so-called Class C Creditors’ claims. The details of the classifications of creditors do not matter for present purposes. All claims are barred by the deed.

20 The deed administrators have the function of carrying the deed into effect and, in particular, of assembling and holding the deed fund, ascertaining creditors’ claims, assigning them to the several classes and applying the fund in the manner provided for in the deed. Clause 12.4 of the deed is in these terms:

“ Deregistration of the Company
Upon the final distribution being made by the Administrators out of the Deed Fund in accordance with clause 7:
(a) the Directors will be bound to deregister the Company at the request of the Administrators and will do all things necessary (including executing any necessary documents and providing all necessary assistance) in order to effect the deregistration of the Company as soon as reasonably practicable;
(b) the Directors authorise the Administrators to cause the Company to be deregistered on their behalf and to file all relevant documents with ASIC to effect the deregistration of the Company, including the notice of termination of this Deed referred to in clause 14.3 of this Deed.”

21 The deed thus envisages that the defendant will be dissolved without winding up once the deed fund has been distributed.

22 I mention the matter of dissolution because it is relevant to the position of the directors and members of the defendant. The structure of the arrangement is such that they will cease to be directors and members following due effectuation of the deed. Furthermore, the deed itself provides in clause 12.2:

“ Directors and Creditors
(a) Creditors and Directors must use their best endeavours to assist the Company and the Administrators to give effect to the purpose, terms and conditions of this Deed.
(b) Where the powers of the Administrators and the Directors overlap, the Administrators’ powers operate to the exclusion of the Directors unless the Administrators grant their prior written consent.”

23 I should also quote clause 3:

“ Moratorium period for Directors and Members
Subject to section 444D of the Corporations Act and the provisions of this Deed, from the Commencement Date until termination of this Deed, neither the Directors nor any member of the Company may:
(a) seek to pass any resolution or make an application for an order for the winding up of the Company;
(b) continue with an application for an order for the winding up of the Company; or
(c) commence or continue with any proceeding against the Company or in relation to the property of the Company; or
(d) commence or continue with an enforcement process in relation to any property of the Company.”

24 The whole tenor of the deed of company arrangement is that the directors of the defendant have no role left to play at least until the deed is fully effectuated; and that their sole remaining function at that point will be to assist in putting an end to the defendant’s existence. Certainly, the deed does not envisage that the company will conduct any business or operate otherwise than as the deed itself provides.

25 The deed administrators, as I have said, have the Schedule 8A powers. The several paragraphs of that schedule are introduced by the words:

“For the purposes only of administering this deed, the administrator has the following powers”

26 I have mentioned these matters concerning the deed of company arrangement in order to assess the significance of the fact that the only steps taken by the plaintiff to effect service of the originating process brought the documents to the actual notice of the deed administrators but did not bring them to the notice of the second director (the plaintiff is himself one of two directors) or to the notice of any member or creditor.

27 Given that the deed administrators have, for the reasons stated, supplanted the directors for all practical purposes, that the only remaining functions of the defendant are those that will culminate in effectuation of the deed of company arrangement (including dissolution of the company) and that the deed administrators, to the exclusion of the directors, have and may exercise the powers of the company necessary to the performance of those functions, I am satisfied that the informal service by hand delivery to the deed administrators must be regarded as sufficient: see generally the discussion by Basten JA in Italiano v Carbone [2005] NSWCA 177 at [58] – [61]. That conclusion is strengthened by contact made by one of the deed administrators with the plaintiff’s solicitor shortly after delivery of the documents (see paragraphs [42] to [45] below). This shows that the documents were not only received but acted upon in the sense that they prompted some relevantly responsive reaction.

28 Having thus reached a point where I am satisfied that the originating process filed on 2 November 2009 should be taken to have been sufficiently served on the defendant, I turn to the circumstances in which there was no appearance by the defendant when the matter came before Austin J on 14 December 2009.

29 The defendant, in the person of the deed administrators, was well aware of the originating process. Johnson Winter & Slattery had been instructed in relation to matters which included the subject matter of the originating process. The solicitors for the plaintiff were Morgan Lewis.

30 The originating process and supporting affidavit came to the actual notice of Mr Hayes, one of the deed administrators, on or about 3 November 2009. The originating process showed a return date of 1 December 2009. Mr Hayes later received a letter from Morgan Lewis stating that the matter would be before the court on 14 December 2009. There is no suggestion at all that Mr Hayes was under any misapprehension in this respect.

31 Because he was due to go on annual leave in early December 2009, Mr Hayes gave certain instructions in relation to the matter to Mr Malafaia, an employee of his firm. By leave, oral evidence was led from Mr Hayes as follows:

“Q. Mr Hayes, can you explain to the Court why it was that neither you nor any of your representatives appeared at the hearing before Justice Austin on 14 December 2009?
A. Yes, I have.

Q. No. Can you please explain that now to the Court?
A. Sorry. Well, I received a folder of documents and I was going on holidays in December and I had asked one of my colleagues to take the folder down to JWS and find out who had replaced Michelle, who was our lawyer acting for us previously, as she was at that point on maternity leave.

Q. Who was the colleague you asked?
A. Diego Malafaia.

Q. What did you ask him to do?
A. Get the documents down to JWS ASAP to get JWS's advice as to what to do.

Q. To your knowledge that instruction carried into effect?
A. No, it wasn't.

Q. Do you know why it wasn't?
A. Well, I just think it was overlooked by Diego.”

32 Mr Hayes made it clear in his evidence that he was in touch with people in his office by telephone during his holiday which he spent in southern New South Wales. At one point he interrupted the holiday and returned briefly to Sydney to attend a creditors’ meeting in an unrelated administration. At no stage during his absence, it appears, did Mr Hayes check with Mr Malafaia that he had, as instructed, contacted Johnson Winter & Slattery. In addition, of course, Mr Hayes was one of two administrators of the deed of company arrangement. There is nothing in the evidence to suggest that the other deed administrator, Mr Sims, was unavailable at any relevant time.

33 Whatever it was precisely that Mr Hayes said to Mr Malafaia before going on holidays, there was no instruction given on the defendant’s behalf to Johnson Winter & Slattery (or other action taken) which resulted in the filing by the defendant of a notice of appearance or any attendance on the defendant’s behalf at the hearing before Austin J.

34 It was suggested upon the present application that it was somehow incumbent upon the plaintiff, when there was no appearance by the defendant, to take steps to find out whether the defendant had overlooked the matter. While considerations of professional courtesy among lawyers may often indicate such a course where discussions before a hearing have indicated that the other party proposes to attend, I do not think that any such rule or general expectation can be said to exist so far as the conduct of the parties is concerned. There were, in any event, particular factual matters to which I should now refer.

35 On 15 October 2009 – more than two weeks before the originating process was filed - Mr Campbell of Morgan Lewis wrote to Mr Hayes asking a number of questions about documents of the defendant. The letter stated that the plaintiff was contemplating legal proceedings against the defendant; also that Mr Hayes had “previously acknowledged” the plaintiff’s entitlement to access to company records. A specific request was made for correspondence between JWS and the defendant. The letter concluded:

“If you have any concerns about providing our client with access to any of the material requested, please let us know by return, and our client will approach the court for appropriate orders. If you do not propose granting immediate access, please let us know if you consent or oppose or neither consent nor oppose such application before the court.
Please also provide an undertaking that you will not release from your possession, custody or control or destroy any of the company records, including the backup tapes. In the event that you fail to provide such an undertaking by 5pm on Friday 16 October 2009, we are instructed to apply to the court for the appropriate orders to present evidence, in which event this letter will be presented on the question of costs.”

36 Mr Campbell wrote again to Mr Hayes on 28 October 2009. He said that there had been no reply to the letter of 15 October 2009. He then asked for an undertaking by 5pm on 30 October 2009 “that you will not dispose of or part with custody of any company documents or backup tapes”. The letter went on to refer to instructions received to approach the court on 2 November 2009 if the undertaking was not received by that deadline.

37 Mr Hayes wrote the following on a copy of the 28 October 2009 letter:

“Bradley
Further to our telephone discussion today I confirm I shall retain the company’s books and records including back up tapes as previously advised to Neville Satz
Allan Hayes
29.20.09”

38 Mr Hayes deposes that Mr Campbell telephoned him on 2 November 2009 and said that the requested confirmation had not been received; to which Mr Hayes replied that he thought he had emailed the confirmation and if it had not been received he would send it again. He says that Mr Campbell then sent the letter again and that he sent back a copy on which he had written, “Agreed. Alan Hayes”.

39 The position as at 2 November 2009 was thus that

(a) Mr Campbell wrote to Mr Hayes on 15 October 2009 asking for company documents, foreshadowing an application to the court for orders giving the plaintiff access to company documents and seeking a statement of attitude to any such application;
(b) by the letter of 15 October 2009, Mr Campbell also sought an undertaking concerning preservation of records, including back up tapes;
(c) by 28 October 2009, Mr Hayes had not replied to the letter of 15 October 2009;
(d) Mr Campbell wrote again on 28 October 2009 saying that there had been no reply and repeating the request for an undertaking as to preservation of documents and back up tapes;
(e) Mr Hayes’ first handwritten endorsement was apparently not transmitted to Mr Campbell or, at least, not received by him; and
(f) Mr Hayes’ second handwritten endorsement (transmitted to Mr Campbell on 2 November 2009) signified unqualified agreement to the content of the 28 October 2009 letter.

40 Mr Hayes’ agreement of 2 November 2009 extended only to Mr Campbell’s request for an undertaking concerning preservation of documents. That (apart from the statement that there had been no reply to the letter of 15 October 2009) was the only thing raised in the letter of 28 October 2009. Left entirely at large and unanswered in Mr Campbell’s mind, therefore, was the request in his 15 October 2009 letter for a statement of Mr Hayes’ attitude to the plaintiff’s foreshadowed application to the court for an order securing access to the documents (see the first of the two paragraphs quoted at [35] above). That, of course, was a possible application quite separate from the application that might be made if the undertaking regarding preservation was not given (see the second of the two paragraphs quoted at [35] above, the message in which was repeated in the 28 October 2009 letter).

41 It was, in the circumstances, perfectly understandable that the plaintiff should have filed the s 247A application on 2 November. The plaintiff, through Mr Campbell, had sought (and been given) an undertaking regarding preservation of documents. That undertaking was given on 2 November 2009. But the separate request of 15 October 2009 for actual access and for a statement of attitude to an application to the court for orders compelling access had elicited no reply whatsoever; and this was in circumstances where the letter of 28 October 2009 had expressly drawn attention to the lack of response on that matter. When, on 2 November 2009, Mr Campbell received a response on the question of a preservation undertaking but nothing on the question of actual access, he was perfectly entitled to regard as appropriate the making, in that respect, of the application for access orders foreshadowed on 15 October 2009.

42 I refer next to events immediately after service of the originating process and supporting affidavit. Mr Campbell deposes that, soon after service, he had a conversation with Mr Hayes as follows:

“Hayes: ‘I received your documents and it doesn’t worry me a lot. I told Neville he can have access to the documents. What’s this all about? Why do you need a court order. We spoke on Monday and I agreed to what you requested.
Campbell: We spoke about you providing an undertaking not to dispose of the backup tapes and documents. You have not answered our letter of 15 October 2009.
Hayes: What is it you need?
Campbell: We need the passwords to access the backup tapes. We can collect the backup tapes and documents now and provide the necessary undertakings to preserve them. Give some thought to that and let me know when you get back to me in relation to the letter.
Hayes: Fair enough.”

43 Mr Hayes says that the first passage here attributed to him is inaccurate and that the words he spoke were to the following effect:

“I don’t know why Neville wants to go to Court. He’s had access to the documents. I’ve said he can have further access. He can inspect any time he likes. It doesn’t worry me that he can have access.”

44 Mr Hayes also says that he does not recall Mr Campbell having spoken the words in the passage beginning “We spoke about” but that if Mr Campbell did say those words, the response by Mr Hayes himself would have been as recorded, that is, “I’ve already responded to your 15 October letter by virtue of the response I sent on 2 November”.

45 It is clear on either version of this conversation that, after service, Mr Hayes showed a quite relaxed attitude to the possibility that the plaintiff might have further access to documents of the defendant.

46 I am satisfied that events before the hearing were not such as to warrant any finding that the orders of 14 December 2009 were obtained “irregularly, illegally or against good faith”. The originating process and supporting affidavit were the subject of informal service on the defendant and came to the actual notice of the deed administrators in the way I have described. The deed administrators, who were the decision-makers for the defendant, were put squarely on notice of the application; and the application was made following absence of any response by those decision-makers to the pre-action request in the first of the two paragraphs of the 15 October 2009 letter quoted at [35] above. Furthermore, the decision-makers were informed in writing when the matter originally returnable on 1 December 2009 was adjourned to 14 December 2009. Those decision-makers were fully aware of all relevant matters and the fact that their apparent attempts to do something towards involving the defendant’s solicitors miscarried is not something that can be laid at the feet of the plaintiff. The defendant was squarely on notice of the proceedings, the relief sought, the evidence filed in support of the application and the date on which the matter was to be before the court. No further duty to alert or warn in advance of the hearing could possibly have been owed by the plaintiff to the defendant. An opportunity to be heard was clearly and unambiguously extended to the defendant.

47 From the defendant’s perspective, therefore, there was no factor at work of the kind with which rule 36.15 is concerned: Roach v B&W Steel Pty Ltd (1991) 23 NSWLR 110 at 114.

48 The defendant maintains, however, that the plaintiff was under a duty to extend to others an opportunity to be heard. Reference was made to the second director of the defendant (by which I mean the director other than the plaintiff) and to Epicor, the purchaser under the sale contract entered into by the defendant on 30 June 2009 as already mentioned. Epicor is said to have an interest in confidential information within the defendant’s documents relevant to the subject matter of the sale to it.

49 I must say at once that I see no basis on which the second director should have been regarded as entitled to an opportunity to be heard. The documents to which access was sought were documents of the defendant company. A director of the company has no proprietorship or similar interest in such documents. The office of director does not give rise to any expectation at all that the individual occupying the office should be heard when a member invokes a statutory right to apply to the court for access to books of the company.

50 The same is true of an outsider such as Epicor. The fact, if it be a fact, that a company is subject to obligations of confidentiality owed to an outsider will properly be raised by the company itself upon any application for an order against it compelling the giving of access to relevant documents.

51 An application under s 247A is an application by a member for an order against and operative upon the company of which the applicant is a member. It is the company against which the “claim or charge is made” (to use the language of Rich J in Cameron v Cole [1944] HCA 5; (1944) 68 CLR 571) and therefore the company that must have an opportunity to be heard.

52 It is significant that neither the second director nor Epicor, about whose interests the defendant expresses concern, has sought to have the orders set aside. Neither has come to court to argue some right or expectation to have been informed about (and to be heard in relation to) an application which, by statute, is maintainable only against a company if brought by a member of that company. This is an important point, given that it is the person denied an opportunity to be heard who will ordinarily have a claim to have an order affecting him or her set aside: see, for example, Owners of SS Kalibia v Wilson [1910] HCA 77; (1910) 11 CLR 689 at 694.

53 The fact that the plaintiff did not take steps to put either the second director or Epicor on notice of the s 247A application did not cause the application to be made “irregularly, illegally or against good faith”.

54 I proceed therefore to a consideration of events at the hearing before Austin J.

55 In submissions made on the defendant’s behalf concerning the hearing on 14 December 2009, there was emphasis on a duty of candour said to have been owed to the court by the plaintiff. The case the defendant sought to make was that there had been a breach of such a duty of candour by the plaintiff in the course of the hearing. Reference was there made to the judgment of Isaacs J in Thomas A Edison Ltd v Bullock [1912] HCA 72; (1912) 15 CLR 679. Isaacs J there said at 681:

“There is a primary precept governing the administration of justice, that no man is to be condemned unheard.”

56 Then followed these words:

“and therefore, as a general rule, no order should be made to the prejudice of a party unless he has the opportunity of being heard in defence.”

57 Isaacs J continued:

“But instances occur where justice could not be done unless the subject matter of the suit were preserved, and, if that is in danger of destruction by one party, or if irremediable or serious damage be imminent, the other may come to the Court, and ask for its interposition even in the absence of his opponent, on the ground that delay would involve greater injustice than instant action. But, when he does so, and the Court is asked to disregard the usual requirement of hearing the other side, the party moving incurs a most serious responsibility.”

58 The “most serious responsibility” requires that the plaintiff “bring under the notice of the Court all facts material to the determination of” the claim pursued without notice to the defendant.

59 Isaacs J thus began with the general rule already noticed that no order should be made to the prejudice of a party unless that party has had an opportunity to be heard. An exception is then recognised where “instant action” is necessary and no such opportunity is in fact given. It is in circumstances where the need for “instant action” causes the general rule to be broken (so that no opportunity to be heard is given) – and in those circumstances only – that the “most serious responsibility” arises according to Isaacs J’s formulation.

60 The contention of the present defendant is that such a duty of disclosure extends beyond the case in which there has been no notice and no opportunity to attend and be heard and is also at work upon the hearing of proceedings in which the defendant does not appear despite clear and unambiguous notice.

61 In Kavia Holdings Pty Ltd v Werncog Pty Ltd [1999] NSWSC 839, Santow J said (at [1]):

“It is well settled that if an applicant for an injunction fails to disclose to the Court all relevant facts which the duty of candour to the Court requires to be disclosed, and in a way which is not misleading, the Court has a discretion to discharge the injunction. The Court may in some cases exercise its discretion by maintaining the injunction, though penalising the applicant by an appropriate order as to costs or by calling upon the Plaintiffs' undertaking as to damages. See for example, Holden v Waterlow (1866) 15 WAR 139 and Thomas A Edison v Bullock (1912) 15 CLR 679 at 682 and the discussion in Spry "The Principles of Equitable Remedies" LBC 1997 at 494-500. While that duty of candour applies with especial stringency to ex parte applications (see for example Frigo v Culhaci (Court of Appeal, 17 July 1998, unreported), its scope extends to any application, contested or not, where evidence is presented to the court in support of an application. Those duties apply to the parties.”

62 It appears however that this position was based to some extent, although it is not clear to what degree, upon the duty to the court owed by legal advisers. His Honour continued at [2]:

“A legal advisor depends on the instructions given. Nonetheless the legal advisor should remain alert to the importance of ensuring he or she can fulfil the personal duty of candour he or she owes to the Court.”

63 And at [11]:

“This is because the duty of candour is firstly a duty of the party involved, though reinforced by the legal advisor’s corresponding duty to the Court.”

64 As I said in J Aron Corp v Newmont Yandal Operations Pty Ltd [2004] NSWSC 533: (2004) 183 FLR 90, I find it difficult to justify the imposition of such a broad duty on parties and their legal advisers in adversarial litigation where the parties are present and represented. Solicitors and counsel, as officers of the court, will always have, in the first place, a duty to the court. That duty includes a clear obligation to be frank and “not to keep back from the court any information that ought to be before it”: Re Gruzman; Ex parte The Prothonotary (1968) 70 SR (NSW) 316 at 323. But where both parties are before the court and represented, I do not think that they have a duty to “supply the place of the absent party”. As long as litigation remains adversarial, a party can be presumed — indeed expected — to put their best case forward. That is not to say that a wilful misleading of the court will pass without remedy, but a mere failure to present a neutral case or to seek to remedy some deficiency in an opponent’s evidence (or, as it was here, entire absence of evidence) cannot lay the foundation for subsequent intervention. In the Marriage of Briese (1985) 10 Fam LR 642 was a case dealing with the specific need for full disclosure of financial affairs in financial proceedings between spouses. Smithers J said (at 662):

“This is quite different from common law litigation between strangers, in which such a general duty does not exist, and obligations would only exist in so far as statute or court rules required.
In my view it is fundamental to the whole operation of the Family Law Act in financial cases is that there is an obligation of the nature to which I have referred.”

65 This view was confirmed by the Full Court of the Family Court of Australia in In the Marriage of Black and Kellner (1992) 106 FLR 154.

66 An approach less comprehensive than that suggested in Kavia Holdings was outlined by Young J in Elton v Cavil (No 2) (1994) 34 NSWLR 289. In that case, the applicant for an interlocutory injunction failed to disclose all the material facts in a hearing at which the respondent was present. His Honour said at 324:

“The court needs to maintain its policy that if a person is to obtain an interlocutory order the proper standard of disclosure must be maintained. I appreciate that the present injunction was not granted on an ex parte basis, but it seems to me that a similar policy consideration arises where injunctions are granted on an interlocutory basis where both parties are present because of the limited inquiry which judges customarily make on such an application.”

67 Kavia Holdings and Elton v Cavill were both cases of applications for interlocutory injunction upon the hearing of which both parties were present. The case now before me is different in two respects. First, the defendant was not present, although it had been served and had been afforded ample opportunity to attend and be heard. Second, the application was an application for final relief and therefore not an occasion for what Young J regarded as the “limited inquiry which judges customarily make” on applications for an interlocutory injunction.

68 It seems to me that the “most serious responsibility” to which Isaacs J referred is attracted only in those cases where a party has not been given proper notice of a hearing and is absent when an application is pressed. In those cases, the applicant is obliged to bring to the court’s attention all relevant facts known to the applicant, including those unhelpful to the applicant’s case. That “most serious responsibility” is not attracted if the defendant has been served and given ample opportunity to attend. Such a defendant’s non-attendance does not give rise to an entitlement to some especially favourable treatment. The plaintiff is, in such a situation, under the generally prevailing obligation to assist the court and not to mislead it. If the case is one of interlocutory hearing of the “limited inquiry” type to which Young J referred, the duty to assist the court is particularly pronounced. But where, as here, the application is an application for final relief and the defendant has not only received the originating process and supporting affidavit but also presented a somewhat relaxed demeanour in the face of the claim (see paragraphs [42] to [45] above), it seems to me that the duty or expectation is confined to honestly, frankness and absence of conduct apt to mislead the court in relation to any material matter.

69 With those principles in mind, I turn to the features of the hearing before Austin J about which the defendant makes several complaints. There are, in fact, six complaints, as follows:

First complaint: The defendant complains that Austin J was informed that its solicitors had been informed of the application when that was not so. Austin J asked whether the solicitors had been notified of the application when it was mentioned that the order sought referred specifically to documents of the defendant company in the possession of the solicitors.
Second complaint: The defendant’s second complaint concerns the answer given to a question by Austin J, “Has evidence been served?” The response by counsel for the plaintiff was:
“We have communicated with them. They said: We don’t have a problem, we refuse to give response in correspondence – to written correspondence.”
Third complaint: The defendant complains that Austin J was erroneously informed that the defendant was “in the hands of the administrators” when the true position was that it was subject to deed of company arrangement.
Fourth complaint: The defendant complains that Austin J was erroneously informed that the deed administrators did not respond to the letter of 15 October 2009 from the plaintiff’s solicitors.

Fifth complaint: The defendant complains that Austin J was not informed that the defendant had entered into the Epicor agreement.
Sixth complaint: The defendant complains that Austin J was not informed that authority in relation to s 247A does not support the making of orders that do not protect valid claims for legal professional privilege.

70 I shall assess these complaints separately.

71 In relation to the first complaint, the plaintiff accepts that it was incorrect to say that the defendant’s solicitors had been informed of the application. But the reality was (and this was conveyed to his Honour immediately after the incorrect message that the solicitors had been notified) that no orders were sought against the solicitors and that the application extended to documents of the defendant company in the possession of its solicitors and in no sense to documents belonging to the solicitors.

72 The submission made by the plaintiff is that, in the light of the explanation counsel gave about the role and relevance of the solicitors, the erroneous statement that the solicitors had been notified of the application was inconsequential. I accept that submission. The solicitors had no role of their own to play and no conceivable interest of their own to defend. They were mentioned in the application only because some of the relevant documents of the defendant company itself were physically in their possession. The defendant company was on notice of the application. Mr Hayes and Mr Campbell had discussed it on the telephone shortly after the originating process and supporting affidavit were served. There is nothing to suggest that Mr Campbell had been told that Johnson Winter & Slattery would be instructed.

73 Turning to the second complaint, the transcript of the hearing before Austin J shows that the plaintiff read four affidavits on the hearing of the application. One was the plaintiff’s affidavit in support of the originating process. That affidavit was sworn on 2 November 2009 and served with the originating process. The others were an affidavit of the plaintiff sworn on 14 November 2009, an affidavit of Mr Campbell of 1 December 2009 and the affidavit of service to which I have already referred.

74 The plaintiff’s second affidavit was very short. It corrected two errors in his affidavit of 2 November 2009. Mr Campbell’s affidavit deposed to the conversation set out at paragraph [42] above, annexed a copy of the 15 October 2009 letter and stated that there had been no reply to that letter, all of which was known to the plaintiff.

75 The statement made by the plaintiff’s counsel after Austin J asked the question about service was, in terms, non-responsive. The position was that the vast bulk of the substantive evidence was in the plaintiffs’ first affidavit that was served. In addition, the plaintiff makes the compelling point that, since the defendant had filed no notice of appearance, there was no formal requirement for the additional affidavits to be served. Under rule 10.2 of the Uniform Civil Procedure Rules, a party may not use an affidavit that has not been filed unless it has been served on “each other interested party”. Under rule 10.1, a document that has been filed by a party must be served on “each other active party”, that is, according to the dictionary at the end of the rules, a party who has an address for service in the proceedings. In the case of a defendant, an address for service will be notified by means of the notice of appearance. It follows that a defendant is not an “active party” unless and until a notice of appearance has been filed. Rule 10.2 refers to an “interested party”, not an “active party” but, as counsel for the plaintiff pointed out, it would be an odd situation if unfiled affidavits must be served on parties who are not “active” but those which are filed need not.

76 The real problem in relation to the subject matter of the second complaint lies at the feet of the defendant. It did not take any action in response to delivery of the originating process and supporting affidavit. No notice of appearance was filed. The defendant thereby showed itself to be uninterested and unconcerned - a message that had been, in any event, substantially communicated by Mr Hayes in the conversation referred to at paragraphs [42] to [45] above.

77 The third complaint comes from this interchange between bench and bar at the hearing on 14 December 2009:

“HIS HONOUR: Is the company now in the hands of the directors?”
CHESHIRE: In the hands of the administrators.”

78 The correct answer was, of course, “In the hands of administrators of a deed of company arrangement”. It is quite clear, however, that Austin J appreciated the true position. While it is true that his Honour referred to s 440D and that that section applies only while a company remains subject to voluntary administration, he said in unmistakeable terms in the short reasons for judgment he delivered:

“… the company is in administration under a deed of company arrangement, and is no longer in voluntary administration.”

79 A company that is “in administration under a deed of company arrangement” and “no longer in voluntary administration” cannot be otherwise than “in the hands of” the administrators of the deed of company arrangement. Any erroneous impression that counsel’s answer may have been capable of conveying was thus not received or acted upon by the judge. The misstatement was therefore of no consequence.

80 There is, however, another aspect of the third complaint, namely, that Austin J was not informed of a particular consequence of the defendant company being subject to a deed of company arrangement. That aspect concerns a provision of the deed that, on its face, affects the plaintiff’s ability to bring legal proceedings against the defendant company. I shall return to that matter after dealing with the other complaints.

81 The fourth complaint is without foundation. As discussed at paragraph [40] above, the defendant did not, in reality, make any response to the request in the first of the two paragraphs of the letter of 15 October 2009 quoted at paragraph [35] above. It was that aspect of the letter, as distinct from the separate request for an undertaking to preserve records, that was relevant to the s 247A application.

82 The fifth complaint concerns non-disclosure to the court of the agreement under which the defendant company sold or agreed to sell assets to Epicor. More specifically, it seems, the complaint centres on the fact that the documents covered by the order made by Austin J included a computer source code related to the subject matter of the sale to Epicor and in respect of which the defendant company is obliged to maintain confidentiality.

83 The plaintiff makes the compelling point that this issue of apparent concern was first raised on 8 April 2010, that is, almost four months after Austin J’s orders were made. It was thus not seen as a matter of sensitivity or concern at the time of the hearing. It follows, the plaintiff says, that there is no reason why the plaintiff should have raised this matter at the hearing – added to which the plaintiff says that he has no interest in the source code and has offered to sign a confidentiality agreement. I accept the plaintiff’s submissions in relation to the fifth complaint.

84 The plaintiff’s response to the sixth complaint is that it is based on an incorrect proposition. The defendant maintains that, according to authority, s 247A does not support the making of an order allowing access to company documents unless the order protects valid claims for legal professional privilege (the implication is that, if the court is asked to make any order, it must be an order that ensures that protection). The plaintiff’s riposte is that the case on which the defendant relies does not assist the proposition it advances. That case is Rowland v Meudon Pty Ltd [2008] NSWSC 381; (2008) 66 ACSR 83, a decision of Bryson AJ.

85 The outcome in Rowland v Meudon Pty Ltd was the making of a general order under s 247A in respect of documents “recording matters taken into account by the directors of the company in the defence, or prosecution of the defence, of” certain legal proceedings. Liberty to apply was reserved with respect to certain matters, including “legal professional privilege”. This is explained by observations made by Bryson AJ at [43]:

“I will limit the ambit of the documents which are to be produced in a manner I regard as reasonable. I have omitted from the order the claim for documents about considering settlement of the proceedings because I regard that as unduly intrusive into the management function. I will reserve liberty to apply with respect to the production of any document for which the company wishes to maintain that production should be withheld on the grounds of legal professional privilege. A question of that kind could only be addressed in the context of an objection to production of an identified document, and of evidence showing the grounds upon which production was resisted.”

86 It is thus clear that the proposition for which the defendant contends is, as the plaintiff submits, not supported by the judgment. Bryson AJ made a general and unconditional order; and it seems clear from the case law that such an order may be made even if legal professional privilege subsists (or may subsist) in particular documents (see Finn v Firefast Pty Ltd [2004] QSC 203 and Czerwinski v Syrena Royal Pty Ltd (No 1) [2000] VSC 125; (2000) 34 ACSR 245) – or perhaps more accurately and as stated by Martin CJ in describing a submission in Areva NC (Australia) Pty Ltd v Summit Resources (Australia) Pty Ltd (No 2) [2008] WASC 10, that legal professional privilege is not an insurmountable barrier to the making of a s 247A order.

87 Bryson AJ recognised in his judgment in Rowland v Meudon Pty Ltd that considerations of legal professional privilege might arise in relation to particular documents caught by the general and unconditional order; and that the appropriate course, in that event, would be for the company to make a new application. That could, of course, be done whether or not liberty to apply was reserved in the s 247A proceeding; and such an application would find a statutory foundation in s 247B of the Corporations Act. That section is obviously intended to deal with situations where some condition or restraint needs to be imposed in relation to the exercise of a right of access obtained by resort to s 247A; and there is nothing in the legislation to suggest that resort may not be had to s 247B after a s 247A order has been made.

88 It is, in my opinion, simply incorrect, in light of the cases mentioned, to say that an order under s 247A must be so framed as to except from its ambit anything in respect of which legal privilege either subsists or is claimed. In any event, mere unilateral claim could never be a reliable determinant of exception and the question whether privilege actually subsists could not be answered without a specific determination by reference to the particular document.

89 In summary, therefore, I accept the plaintiff’s submissions in relation to the sixth complaint. It was not incumbent upon the plaintiff, at the hearing of 14 December 2009, to seek only an order qualified by some form of exception for legal professional privilege.

90 I said at paragraph [80] above that I would return to the provision of the deed of company arrangement which, on its face, affects the plaintiff’s ability to bring legal proceedings against the defendant company. The defendant refers to clause 12.3 of the deed of company arrangement:

“Subject to section 444D [sic] of the Corporations Act and the provisions of this Deed, from the Commencement Date until termination of this Deed, neither the Directors nor any member of the Company may:
. . .
(c) commence or continue with any proceedings against the Company or in relation to the property of the Company;

. . .”

91 This embargo may be accepted as extending to proceedings seeking an order under s 247A of the Corporations Act. Given the terms and structure of the section, such an application represents “proceedings against” the company.

92 The embargo is expressly stated to be “Subject to section 444D of the Corporations Act”. The meaning of this is obscure, given that s 444D has nothing to do with the relevant subject matter. It may be that, as a matter of construction (see Fitzgerald v Masters (1956) 95 CLR 420; Reed Constructions Australia Ltd v DM Fabrications Pty Ltd [2007] NSWSC 1190; (2007) 25 ACLC 1463), the reference to s 444D would be read as a reference to s 444E which is obviously relevant and says, in sub-s (3), that a person bound by a deed of company arrangement cannot “begin or proceed with a proceeding against the company or in relation to any of its property . . . except . . . with the leave of the Court”. On that construction, the relevant part of clause 12.3 did no more than replicate the statutory restriction in s 444E(3); and it was consistent with the operation of both the deed and the section not only for the court to be asked to grant leave to the plaintiff to bring the s 247A application (albeit that the wrong section seems to have been invoked for the purpose) but also for the plaintiff to have in contemplation legal proceedings against the defendant (see paragraph [35] above). Each of those courses was available to the plaintiff with leave under s 444E(3).

93 I am not called upon on this application to address the merits of the decision made by the court on 14 December 2009. My task is to decide whether the proceedings on that day and the order they produced were affected in a material way by some factor of dishonesty, lack of frankness or conduct apt to mislead. In relation to each of the six complaints raised (and also in relation to the six complaints cumulatively), I am satisfied that the proceedings were not tainted in that way.

94 It was observed by Gibbs CJ, Mason J, Wilson J, Brennan J, Deane J and Dawson J in Metwally v University of Wollongong (No 2) [1985] HCA 28 (1985) 59 ALJR 481 at 482 that any power to set aside an order that has been perfected by entry “must be exercised with great caution, after weighing what might otherwise be irremediable injustice against the public interest in maintaining the finality of litigation”. The caution thus enjoined results, in this case, in a decision not to disturb the order already made. The defendant, of course, had a right to appeal. Indeed, it appears that steps in that direction were begun but not pursued. Whether it is now too late for the defendant to seek again to pursue an appeal is a matter for it.

95 The defendant’s application is dismissed with costs.

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