W M Scollay & Co Ltd (In Liquidation) v South Pacific Energy Trading Pty Ltd (In Liquidation)
[1996] FCA 585
•26 JUNE 1996
CATCHWORDS
CORPORATIONS - winding-up - application for inspection of books by creditor - whether inspection should be subject to conditions - condition (i) as to non-disclosure of documents to applicant's officers and as to (ii) applicant's consent to respondent's access to its documents - costs of inspection
Corporations Law: ss 486 and 511
W M Scollay & Co Limited (in liquidation) v South Pacific Energy Trading Pty Ltd
(No. VG 3279 of 1996)
Judge: Heerey J
Date: 26 June 1996
Place: Melbourne
IN THE FEDERAL COURT OF AUSTRALIA )
)
VICTORIA DISTRICT REGISTRY ) No. VG 3279 of 1996
)
GENERAL DIVISION )
B E T W E N:
W M SCOLLAY & CO LIMITED (IN LIQUIDATION)
Applicant
- and -
SOUTH PACIFIC ENERGY TRADING PTY LTD
(IN LIQUIDATION)
(ACN 002 527 095)
First Respondent
BRETT JANNAR
Second Respondent
JUDGE: Heerey J
DATE: 26 June 1996
PLACE: Melbourne
MINUTES OF ORDER
The Court orders that:
Application is allowed.
Applicant's solicitors to bring into court minutes of proposed draft orders which will include a schedule of the categories of documents sought to be inspected.
Applicant should pay the liquidator's out-of-pocket expenses for photocopying and the like, for time spent by the liquidator and his staff in connection with the inspection and for the liquidator's legal costs, provided such costs are reasonable.
Liberty to apply generally.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
IN THE FEDERAL COURT OF AUSTRALIA )
)
VICTORIA DISTRICT REGISTRY ) No. VG 3279 of 1996
)
GENERAL DIVISION )
B E T W E E N:
W M SCOLLAY & CO LIMITED (IN LIQUIDATION)
Applicant
- and -
SOUTH PACIFIC ENERGY TRADING PTY LTD
(IN LIQUIDATION)
(ACN 002 527 095)
First Respondent
BRETT JANNAR
Second Respondent
JUDGE: Heerey J
DATE: 26 June 1996
PLACE: Melbourne
REASONS FOR JUDGMENT
This is an application for inspection of the books of a company under section 486 of the Corporations Law, which provides as follows:
The Court may make such order for inspection of the books of a company by creditors and contributories as the Court thinks just, and any books in the possession of the company may be inspected by creditors or contributories accordingly, but not further or otherwise.
That provision is contained in Division 3 of Part 5.4B dealing with winding up by the Court. The present respondent is being wound up under Part 5.5 Division 4 and consequently reliance is placed on s 511 which provides:
The liquidator, or any contributory or creditor, may apply to the Court:
...
(b)to exercise all or any of the powers that the Court might exercise if the Court were being wound up by the Court.
The Court, if satisfied that the determination of the question or the exercise of power will be just and beneficial, may wholly or partially to any such application on such terms and conditions as it thinks fit or may make such other order on the application as it thinks just.
It is not disputed that there should be an inspection. The only issue in contention is whether that inspection should be subject to certain conditions stipulated by the respondents. The applicant is a New Zealand company which is being wound up under the laws of that country. The respondent is an Australian company which is being wound up under the Corporations Law.
On 13 November 1995 the applicant and respondent entered into an agreement described as an Oil Bunkering Agreement, the effect of which was that the respondent was authorised to act as agent for the applicant in arranging oil bunkering at ports around the world.
The applicant complains that it is owed some $9 million for liabilities which the respondent incurred on its behalf to third parties without proper authorisation and contrary to the terms of the Oil Bunkering Agreement. Some partial inspection has taken place, but has ceased because of conditions sought to be imposed by the respondent. These are the conditions which it is now said the Court should impose on any order made. The conditions are contained in a letter from the respondent's solicitors, Messrs Baker and McKenzie, to the applicant's solicitors dated 24 April 1996. The first condition is that the applicant provide a written undertaking that:
... access to the documents inspected or to be inspected and the information contained in them shall be restricted to the liquidators and their staff and their legal advisers until the earlier of:
(a)public examinations our client intends to conduct (and which will involve New Zealanders formerly associated with your client) are concluded; or
(b)written consent to extended access is received from our client.
I should explain that hearing dates have been obtained in September for the examinations under s 597A and 597B of the Corporations Law in the course of the respondent's winding up in the Supreme Court of New South Wales.
In support in that proposed condition Mr Chapple, a partner of Baker and McKenzie who appeared for the respondent, argued that it would be unjust to allow documents made available to be passed on to those officers or former officers of the applicant who might be subject to the examination because, as he said, "any forensic advantage would be blown away".
I do not accept this as an appropriate limitation. The respondent did not rely on any affidavit material and there is no evidence whatsoever as to the identity of the persons to be examined or the significance of any documents which the applicant might inspect in the course of any such examination. Still less is there any evidence that any persons connected with the applicant have engaged in some kind of nefarious conduct which could only be uncovered by trapping them in the witness box with some unexpected document.
On the contrary, as far as I can see from the evidence as to the earlier inspections, it appears that there is a great deal of documentation likely to be in existence as to the dealings which the respondent had with the third parties to whom the applicant has become liable pursuant to what the applicant claims is the wrongful pledging of its credit by the respondent. It seems highly desirable that officers and former officers of the applicant should have the opportunity of examining those documents and giving the explanations which will probably be necessary to the applicant's liquidator and his legal and other expert advisers. I should add that in this regard reliance was placed by Mr Chapple on the decision of McClelland J in Re BPTC Limited (1992) 10 ACLC 271 at 275. But I think that the case turns entirely on its own facts.
The next condition sought to be imposed was in these terms:
Our client reserves the right to discontinue future access to documents beyond those which would be discoverable in proceedings between our respective clients if the liquidators of your client do not, within a reasonable period, agree to our client and his advisers having reasonable access to your client's documents.
In other words, as Mr Chapple put it, there should be a "mutual show and tell". It appears that in the absence of any such undertaking the respondent would not have a comparable right of inspection in the New Zealand liquidation of the applicant. This is, as I was told, not because the New Zealand law is in substance different but because the respondent is not, or at any event probably not, a creditor of the applicant and therefore would lack standing.
I do not think this is an appropriate condition to be imposed. If the applicant otherwise can make out a right of inspection under the Corporations Law I do not think it should be a price for the exercise of that right that the applicant give to the respondent a right which apparently it does not have under the law of New Zealand.
As to the costs of the inspection, apparently the costs up until now have been dealt with by arrangement. As to the future costs, it is accepted that the applicant should pay the liquidator's out-of-pocket expenses for photocopying and the like, and also reimbursement for time spent by the liquidator and his staff in connection with the inspection, and also the liquidator's legal costs. In respect of these items I am satisfied that it is appropriate to impose some limitation, that is to say, they should only be costs which are reasonable.
In saying this I do not intend that the liquidator of the respondents should be out of pocket in connection with the inspection or that he should not receive his reasonable professional remuneration for work done. However, understandably, the liquidator of the applicant was somewhat apprehensive about a totally open ended commitment and I think therefore I should impose the requirement that I have mentioned. There will be liberty to apply but hopefully the parties being sensible professional people should be able to resolve such matters.
As to the costs of the present application, it is true that an application to the Court was necessary but substantial argument has been caused by the unsuccessful attempt by the respondent to impose conditions. Counsel for the applicant submitted that there should be no order as to costs and that seems to me a fair result.
Finally it was accepted that the documents to be the subject of inspection should be defined in some way, and I will direct simply that the applicant's solicitors bring into Court minutes of proposed draft orders which will include a schedule of the categories of documents sought to be inspected. There will be liberty to apply generally.
I certify that this and the preceding five (5) pages are a true copy of the reasons for judgment of his Honour Justice Heerey.
Dated:
Associate
Appearances
Counsel for the applicant: Mr S P Gardiner
Solicitor for the applicant: Coadys
Counsel for the respondent: Mr M Chappel with Mrs C Wheelahan
Solicitor for the respondent: Baker & McKenzie
Date of hearing: 26 June 1996
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