Concrete Structures Limited v NMHB Limited (in liquidation)

[2020] NZHC 1218

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-002074

[2020] NZHC 1218

UNDER

the Companies Act 1993

BETWEEN

CONCRETE STRUCTURES LIMITED

Plaintiff

AND

NMHB LIMITED (IN LIQUIDATION)

Defendant/Applicant

Hearing:	7 May 2020
Appearances:	R B Hucker and M W Swan for Applicant Liquidators P F Dalkie and S M Bhanabhai for Respondent, Dyer Whitechurch
Judgment:	4 June 2020

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by Associate Judge Andrew on 4 June 2020 at 3.30 pm

pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar Date………………………

CONCRETE STRUCTURES LTD v NMHB LTD (IN LIQ) [2020] NZHC 1218 [4 June 2020]

Introduction

[1]    The applicants are the liquidators of NMHB Ltd (in liquidation) (the company). They seek orders pursuant to ss 261 and 266 of the Companies Act 1993 (the Act), requiring the respondent, Dyer Whitechurch, solicitors, to provide documents and records relating to the affairs of the company.

[2]Dyer Whitechurch have previously acted as the solicitors for the company.

[3]    The documents sought are trust account documents relating to the deposit of a bank cheque in the sum of $600,000 drawn on the company’s account and paid into the Dyer Whitechurch trust account (the transaction). They include records relating to the dissipation of the funds.

[4]The Xero records of the company obtained by the liquidators record there is

$600,000 held in the trust account of Dyer Whitechurch for the credit of the company. The liquidators wish to investigate the transaction, consistent with their primary responsibility under s 253 of the Act to identify, secure, and realise assets of the company for its creditors. They say that the powers under s 266 extend to information relating to the equitable tracing of funds or assets of the company.

[5]    Dyer Whitechurch oppose the application on the grounds that the documents sought are the property of another of its clients, a third party, and that such documents are not theirs to hand over. Dyer Whitechurch says they are the wrong respondent and claims there is no power under the legislation to require the solicitors of a third party to provide documents when that third party is not a respondent.

[6]    The critical issues I must determine are whether there is jurisdiction to require the production of the documents sought; and, if so, whether as a matter of discretion I should make the orders.

The factual background

[7]    There is an affidavit before the Court from Mr Samuel Tolich, previously employed by the company as a project manager.

[8]    Mr Tolich says that on 7 July 2017 (acting on instructions from the director of the company, Mr Karnie Smith) he obtained a bank cheque for $600,000 in the name of the company and deposited it into Dyer Whitechurch’s trust account. Mr Tolich says that Mr Smith did not explain to him what the money would be utilised for, and he did not ask.

[9]    Mr Tolich further says that he has no knowledge of what happened to the money after it was deposited at the bank and cannot recall giving any instructions to Dyer Whitechurch (written or otherwise) about it.

[10]   The liquidators are Mr Michael Lamacraft and Mr Jeffrey Meltzer (both accredited insolvency practitioners), who were appointed by the Court when the company was placed into liquidation on 2 August 2019.

[11]   Upon their appointment, the liquidators made various requests of Dyer Whitechurch for copies of the company’s documents to enable their investigations to continue. Dyer Whitechurch provided the liquidators all physical files they held for the company on 16 October 2019.

[12]   Those records and ledgers first provided by Dyer Whitechurch had no record of the $600,000 current asset of the company, recorded in the Xero records as “Dyer Whitechurch trust account”.

[13]   The liquidators made requests of Dyer Whitechurch pursuant to s 261 of the Act in relation to the $600,000 which, according to the company records, should have been held in their trust account.

[14]On 1 October 2019, Dyer Whitechurch advised the liquidators that the

$600,000 had been received but:

(a)Had not been received for the credit of the company;

(b)Had not been receipted to the company; and

(c)Had been paid to the Dyer Whitechurch trust account for the credit of a separate client, and that client did not authorise the release of the information requested by the liquidators.

[15]   On 30 October 2019, the liquidators made a further request under s 261 that Dyer Whitechurch provide documentation relating to the $600,000 asset, together with any ledgers or documents relating to the company not previously provided.

[16] Around 4 November 2019, Dyer Whitechurch declined to comply with the liquidators’ request and cited the reasons recorded at [14] above.

[17]   On 30 April 2020 (following the filing of the submissions in opposition), Dyer Whitechurch provided to the liquidators a copy of their trust account receipt for the deposit of $600,000. The receipt records that the payment was made by the company for the credit of SMC Ltd. Mr Karnie Smith (former director of the company) became a director of SMC Ltd in October 2019.

Relevant legal principles

[18]The relevant parts of s 261 of the Act read:

Power to obtain documents and information

(1)A liquidator may, from time to time, by notice in writing, require a director or shareholder of the company or any other person to deliver to the liquidator such books, records, or documents of the company in that person's possession or under that person's control as the liquidator requires.

(2)A liquidator may, from time to time, by notice in writing require –

(a)A director or former director of the company; or

(b)A shareholder of the company; or

(c)A person who was involved in the promotion or formation of the company; or

(d)A person who is, or has been, an employee of the company; or

(e)A receiver, accountant, auditor, bank officer, or other person having knowledge of the affairs of the company; or

(f)A person who is acting or who has at any time acted as a solicitor for the company –

to do any of the things specified in subsection (3) of this section.

(3)A person referred to in subsection (2) of this section may be required –

(a)To attend on the liquidator at such reasonable time or times and at such place as may be specified in the notice:

(b)To provide the liquidator with such information about the business, accounts, or affairs of the company as the liquidator requests:

(c)To be examined on oath or affirmation by the liquidator or by a barrister or solicitor acting on behalf of the liquidator on any matter relating to the business, accounts, or affairs of the company:

(d)Assist in the liquidation to the best of the person's ability.

[19]Section 266 of the Act reads:

266     Powers of court

(1)The court may, on the application of the liquidator, order a person who has failed to comply with a requirement of the liquidator under section 261 to comply with that requirement.

(2)The court may, on the application of the liquidator, order a person to whom section 261 applies to –

(a)attend before the court and be examined on oath or affirmation by the court or the liquidator or a barrister or solicitor acting on behalf of the liquidator on any matter relating to the business, accounts, or affairs of the company:

(b)produce any books, records, or documents relating to the business, accounts, or affairs of the company in that person's possession or under that person’s control.

[20]   Qualifying persons in terms of s 261 include both directors and solicitors (either current or former) of the company in liquidation.

[21]   Section 266 of the Act is the means by which the Court may order that a qualifying person be examined and/or produce documents. Two distinct bases exist to make such an order. First, the Court may order a person who has failed to comply with a requirement of a liquidator under s 261 of the Act to comply with it.1

1      ANZ National Bank v Sheahan [2012] NZHC 3037, [2013] 1 NZLR 674 at [35].

Alternatively, the Court, without proof of the failure to comply with an earlier requirement of a liquidator, may order that a qualifying person “produce any books, records or documents relating to the business, accounts or affairs of the company in that person’s possession or under that person’s control”.2

[22]   In relation to the production of documentation under s 266(2)(b) of the Act, the Court in Norrie v Sutich made the following observations:3

(a)It is necessary to keep in mind that exercising the discretion to make an order involves balancing a number of factors, including the interests of those against whom the order is sought.4

(b)What is required is for the applicant to make a proper case for the making of an order.5 As to what is a proper case, the Court cited, with approval, the following extract from the speech of Lord Slynn in British & Commonwealth Holdings Plc:6

The proper case is one where the administrator reasonably requires to see the documents to carry out his functions and the production does not impose an unnecessary and unreasonable burden on the person required to produce them in the light of the administrator’s requirements. An application is not necessarily unreasonable because it is inconvenient for the addressee of the application or causes him a lot of work or may make him vulnerable to future claims, or is addressed to a person who is not an officer or employee of or a contractor with the company in administration, but all these will be relevant factors, together no doubt with many others.

(c)In addition to enabling the liquidator to assemble replacement documents which are part of the company’s records, the statutory power to obtain documents and examine company officers enables another function of the liquidators, which is to take proceedings where necessary in the interests of the creditors of the company and others.7

2      ANZ National Bank v Sheahan, above n 1, at [36].

3      Norrie v Sutich [2013] NZHC 2495.

4 At [28].

5 At [29].

6      British & Commonwealth Holdings Plc (Joint Administrators) v Spicer and Oppenheim [1992] 3 WLR 853 (HL) at 862–863.

7      Norrie v Sutich, above n 3, at [30].

It is for that reason that the authorities also acknowledge that better equipping a liquidator for litigation is a legitimate objective of exercising the power contained in s 266 of the Act.

(d)The powers which are contained in the Act are necessarily broad. They should be given full effect. They should not go past the point where unfairness results. The power to require directors and others to provide documents is a salutary one.8

(e)Given the circumstances in which liquidators frequently find themselves on taking possession of a company which they have known nothing about previously, they should not have to specify in advance the very documents that they hope to find by exercising their powers under ss 261 and 266 of the Act.9 The onus is on the respondent to comply with the requirements of those sections.10

(f)The powers of liquidators (and those of the Court acting in support of liquidators) are inquisitorial.11

(g)One relevant consideration is the volume of documents overall that the director has possession of.12

Analysis and decision

[23]   The trust account receipt provided to the liquidators by Dyer Whitechurch on 30 April 2020 is obviously no longer at issue. In my view, however, the receipt should have been provided to the liquidators much earlier than it was. Regulation 12(5) of the Lawyers and Conveyancers Act (Trust Account) Regulations 2008 expressly provides that where the payer of the trust money requests a receipt, the solicitor must provide a copy of that receipt to the payer. The liquidators had a clear legal entitlement to the receipt following their request made in September 2019.

8      Norrie v Sutich, above n 3, at [37].

9 At [37].

10 At [61].

11 At [41].

12 At [42].

[24]   When the current applications were made, the liquidators did not have a copy of the receipt, despite having requested Dyer Whitechurch for it. The receipt was not provided until after Dyer Whitechurch had filed its submissions opposing the application, nearly five months later. It was only then that the liquidators became aware that the funds had in fact been deposited into the Dyer Whitechurch trust account for the credit of SMC Ltd.

[25]   At the conclusion of the hearing, Mr Hucker, for the liquidators, confirmed that the application is now confined to an order under s 266(2) requiring Dyer Whitechurch to provide the following documents:13

Any record or document recording or relating to the receipting of funds received from or on behalf of formerly NBHB Ltd (in liquidation) and the transfer or payment of those funds within or from the trust account of Dyer Whitechurch.

[26]   The first issue for determination, and the principal ground advanced by Dyer Whitechurch in opposing the orders sought, is whether the Court has jurisdiction to grant such orders.

[27]   In contending that the Court lacks jurisdiction, the thrust of Dyer Whitechurch’s objection is that because the trust account documents at issue were not created for or by them in their capacity as solicitors for the company, but rather in their capacity as solicitors for a third party, they fall outside the provisions of both paras (f) and (e) of s 261(2). The Court, therefore, does not have the power under s 266(2) (applying to a person to whom s 261 also applies) to require Dyer Whitechurch to produce the documents. Mr Dalkie submitted that it would be fundamentally wrong and beyond the contemplation of Parliament that the Court could require a solicitor to provide documents to a liquidator relating to the solicitor’s third-party client on “the other side of the transaction”. He argued that in none of the jurisprudence to date has the Court gone so far to interpret the statutory provisions as widely as the liquidator contends, as that would give liquidators “unbridled powers” to obtain records from solicitors’ trust accounts. Dyer Whitechurch claims simply that no such power can exist.

13     Paragraph 1(b)(ii) of the application dated 19 November 2019.

[28]   I find, however, that there is no basis for reading down the statute and construing it in the narrow manner for which Mr Dalkie contends. The clear focus of s 261(2) generally is whether the person from whom the documents are sought has “knowledge of the affairs of the company”. The catch-all provision that applies in relation to receivers, accountants, auditors, and bank officers (as listed in subsection 261(2)(e)) – namely, “or other person having knowledge of the affairs of the company”

– does not apply to solicitors who have acted for the company at any time under s 261(2)(f). There appears to be a legislative assumption by Parliament that solicitors, and the information they hold by dint of their role, will often be a likely and fertile source of information about the affairs of the company.

[29]   The difference between an order for production of records under s 266 and an order for the enforcement of the liquidator’s notice issued under s 261 also supports the view that s 266 should not be read down in the manner contended by Mr Dalkie. As noted by Smith AJ in Dalton v Hong, s 261(1) only obliges a person to deliver company records to the liquidator.14 By contrast, s 266(2) refers to any books, records or documents relating to the business, accounts or affairs of the company. Such books, records or documents will not necessarily be owned by the company. The authors of Company and Securities Law consider that the wider wording in s 266(2)(b) clearly encompasses records such as banker’s diary notes, solicitors’ trust account records, and other third-party documents which do not fall within the description of “company records”, but which could still clearly be relevant to a liquidator’s enquiry.15

[30]   There is no dispute that Dyer Whitechurch has previously acted as a solicitor for the company. In my view it falls squarely within s 261(2)(f) of the Act. The capacity of the solicitor at the exact time that the information is gathered or received is immaterial (at least to the issue of jurisdiction) so long as the information requested is or could be relevant to the affairs of the company (s 261(3)), and the solicitor in question had at some time actually acted as solicitor for the company. I can see no legislative basis or purpose for essentially imposing another hurdle for a liquidator to overcome under s 261 by limiting the information that can be ordered to that either

14     Dalton v Hong [2018] NZHC 2266 at [68].

15     Linda Howes and Stephen Revill Company and Securities Law (Thomson Reuters, online ed) at [CA266.01].

gathered or received while the solicitor in question was acting only in his or her capacity as solicitor for the company in liquidation. Having said that, the practical likelihood is that most information relating to the affairs of the company will have been generated at the time that the solicitor was acting for the company.

[31]   It is clear from the jurisprudence that the powers contained in the Act are necessarily broad and are also exceptional. As articulated by McGarry J in Re Rolls Razor Ltd (No 2), the process (under the UK equivalent of s 261) is necessary because of the difficulties in which the liquidator is often placed.16 There are almost certain to be many transactions which are difficult to discover or understand merely from the books and pages of the company. To the extent that there are legitimate concerns about the breadth of the orders sought, they can properly be controlled by the Court in the exercise of its discretion, and I have already noted the qualification in s 261(2) that there must be a sufficient degree of connection between the documents and the affairs of the company.

[32]   In relation to the phrase “any matter relating to the … affairs of the company” (s 261(3)), the Court of Appeal in Finnigan v Ellis held that this is limited to information about the company’s management, accounts, and the handling of its business affairs, including its assets and liabilities.17 That includes information regarding the mismanagement or mishandling of the company’s affairs. There are clear limits within the statutory scheme and it is not necessary to impose more, except for those arising as a matter of discretion, on a case-by-case basis.

[33]   The issue in Finnigan v Ellis, was whether the Court had jurisdiction under the Act to order the respondent, Mr Ellis, to disclose privately-held personal financial information about his means for the purposes of establishing his judgment worthiness.18 In my view, that is a different issue from the matter before me, and my conclusion on jurisdiction is still consistent with the findings of the Court of Appeal as to the scope of the s 266 powers.

16     Re Rolls Razor Ltd (No 2) [1970] Ch 576 at 591; [1971] 2 WLR 100 at 112.

17     Finnigan v Ellis [2017] NZCA 488 at [38].

18 At [3].

[34]   The submission that the Court has no power to require a solicitor to provide documents to a liquidator relating to its third-party client on “the other side of the transaction” is misconceived. The test is not one of ownership of the documents at issue – the legislation expressly includes documents in the solicitor’s possession or under his/her control. I also note that Mr Dalkie accepts the Court’s power (though not the liquidator’s powers under s 261) extend to ordering the production of documents from a third party.19

[35]   As to the claim of a third party “on the other side of the transaction”, the evidence in this case is far from clear and no doubt the liquidators wish to investigate who in fact were the parties to the transaction, and whether the other party had any entitlement to the funds. Furthermore, and as discussed further below, the trust account documents at issue here are not legally privileged.   That is apparent from    s 393(4) of the Act which specifically states that privilege does not attach to (among other things) trust account records.

[36]   In any event, I doubt whether the documents now sought can properly be described as the property of the third-party client (presumably, although not specifically stated, SMC Ltd). There is sound jurisprudence favouring the view that trust account records are in fact the property of the lawyer (as opposed to the client) because they are kept for the benefit of the lawyer to accord with the requirements of s 112 of the Lawyers and Conveyancers Act 2008 (which binds the lawyer and not the client).20 However, I do not need to decide that issue in this case.

[37]   As mentioned, the statutory scheme relevant to the interpretation of ss 261 and 266 includes s 393 of the Act, entitled “[p]rivileged communications”. Section 393(1) provides that nothing in the Act requires a solicitor to disclose legally privileged communications. Subsection (2) codifies the existing common law rule that a company solicitor cannot assert professional legal privilege in relation to company

19     Walker v Angus [2018] NZHC 2354 at [63]; citing Official Assignee v Thornton [2012] NZHC 2145 at [19].

20     BQ v CR NZLCRO LCR 281/2012, 28 August 2014 at [14].

information sought by a liquidator because the liquidator stands in the position of the company and therefore, cannot be denied that information.21

[38]   It is also clear from subs (2) of s 393 that the limitation on privilege only applies to a communication made to or by a solicitor (as referred to in s 261(2)(f)) “while acting or having acted as a solicitor for a company to which that section applies”. If, therefore, s 261(2)(f) was limited to documents generated by or provided to solicitors whilst acting in their capacity as solicitor for the company in liquidation (and not for any other client), then the qualification in bold above would serve no purpose. The fact that s 393(2) expressly limits the application of legal privilege in this way is consistent with the view that s 261(2)(f) can apply (as a matter of jurisdiction) where the information sought was generated by the solicitor in acting for a third-party client (so long as it is also relevant to the affairs of the company). In such circumstances, the solicitor may legitimately resist an application for production of the documents on the grounds of privilege as specifically provided for in s 393(1), but not on the basis of some restrictive and unwarranted interpretation of s 261(2)(f).

[39]   I have already concluded above that because of the nature of the documents at issue, no question of privilege arises. Dyer Whitechurch acknowledges as much, although it contended that privilege could be invoked on application properly made against the third-party owner of the documents.

[40]   I reject that submission. The legislation is very clear – no privilege attaches to the trust account documents at issue here regardless of who the relevant client might be. In terms of the interests of the third party, I address that matter below in relation to the exercise of discretion, being the second issue.

[41]   Although I need not decide the point, I also incline to the view that Dyer Whitechurch fall within s 261(2)(e), under “other person having knowledge of the affairs of the company”. I reject Mr Dalkie’s submission that “other person” strictly takes its meaning from the preceding list, namely, receiver, accountant, auditor or bank officer. In Walker v Angus, Mander J held that the category of “other person having

21     Insolvency Law and Practice (online ed, Thomson Reuters) at [CA261.07]; Dalton v Hong, above n 14, at [75]–[76].

knowledge of the affairs of the company” will include persons who have information about the company’s management, accounts, and its business affairs, including its assets and liabilities.22 Persons with such knowledge need not be limited to those who owe formal duties and obligations to the company.

Exercise of discretion under s 266(2)

[42]   Factors generally relevant to the exercise of the discretion under s 266(2) include:23

(a)Whether the requirement of the liquidator is reasonably necessary for the discharge of his or her functions and duties;

(b)Whether the requirement of the liquidator would impose unnecessary and unreasonable burdens on the person the subject of the liquidator’s notice (mere inconvenience or additional work is not however sufficient reason to validly oppose the liquidator’s application);

(c)The alternative legal procedures which are available to the liquidator (bearing in mind that pre-trial discovery is now firmly part of the litigation process);

(d)The nature of the proposed proceedings (if any are contemplated) and whether the person concerned would be made more vulnerable to future claims as a result;

(e)Whether the person the subject of the notice or the proposed order is a former officer or employee of the company or someone else who has provided services to the company; and

22 Walker v Angus, above n 19, at [38].

23 Insolvency Law & Practice (online ed, Thomson Reuters) at [CA266.02]; citing British and Commonwealth Holdings plc (Joint Administrators) v Spicer & Oppenheim (a firm), above n 6, at 439, at 885; Northrop Instruments & Systems Ltd (in liq) [1992] 2 NZLR 361 at 364, (1991) 5 NZCLC at 67,395; Re GMT Ltd 18/7/94, Master Thomson, HC Napier M20/91; Vagrand Pty Ltd (in liq) v Permanent Trustee Australia Ltd (1995) 17 ACSR 386; ANZ National Bank Ltd v Sheahan, above n 1; and Sargison v McCabe [2012] NZHC 3194.

(f)The nature and significance of the information sought and the public interest in the information.

[43]   In this case, Dyer Whitechurch does not object to producing the documents on the grounds of oppression (namely, that the work required to compile the documents might be extensive or unreasonable). However, it does contend that the failure of the liquidators to take steps to seek the information sought from the previous director, Mr Karnie Smith, and serve the application on the third-party client (thereby depriving it of a right to be heard), are factors fatal to the application. As a matter of discretion, it contends that it would be fundamentally wrong to grant the orders sought.

[44]   I accept that alternative procedures were and are available to the liquidators, including here, the power to summon Mr Karnie Smith and question him about the transaction. Those procedures are relevant to my exercise of discretion. However, I reject Dyer Whitechurch’s submission that the failure by the liquidators to question Mr Smith or to provide any real explanation for such failure is fatal to the liquidators’ present application.

[45]   The liquidators have good reason to investigate and obtain the documents at issue and act efficiently by obtaining them directly from their source – i.e. Dyer Whitechurch. It is also relevant that Dyer Whitechurch failed to provide the trust account receipt (to which the liquidators are legally entitled) in a timely way – and in the circumstances it is understandable that the liquidators would wish to see the relevant documents before proceeding to question Mr Karnie Smith.

[46]   In support of his submission that  the  liquidators  have  failed  to  question Mr Smith about the transaction (and thus obtain the relevant information via that route), Mr Dalkie relied on Walker v Angus, particularly where Mander J held:24

[He] was also provided with no evidence of what efforts had been made by the liquidator to obtain this information from Te Anau and Tay’s [the joint companies in liquidation] own records or, more particularly, from its own offices, professional representatives, agents and former employees. Before such requirements are to be imposed on third parties, it would need to be demonstrated that those efforts had been exhausted, and that it is necessary to widen the inquiry to either obtain that information or complete gaps in the communication records.

24     Walker v Angus, above n 19, at [114].

[47]   However, I do not see how that case can assist Dyer Whitechurch. Here, the party from whom the documents are sought is not a third party in the same position as that in Walker v Angus. Rather, they are previous solicitors of a company in liquidation, expressly named in the statute, who are in possession of what appear to be clearly relevant documents and where they have refused to provide them (s 266(1)).

[48]   I also accept that SMC Ltd and/or Mr Karnie Smith may have some legitimate interest in the documents at issue. However, the claim of a breach of natural justice in failing to give those parties an opportunity to be heard is, in my view, misguided.

[49]   It is undisputed that, in accordance with s 27 of the New Zealand Bill of Rights Act 1990 and the common law, I am bound to adhere to the principles of natural justice. It is, however, necessary to address whether and how those principles are engaged in this case when neither SMC Ltd nor Mr Karnie Smith were served with the proceedings. I find that in substance, they are not.

[50]   To grant the liquidators’ application will not result in any determination by me about the rights or interests that SMC Ltd or Mr Karnie Smith have in the trust account documents. Such an order would simply provide access to those records for the purposes of the liquidators investigating the transaction – and to thereby give them an opportunity (if there is a proper basis) to make a claim over those funds, with the ultimate goal of returning some value to the creditors.

[51]   The mere examination of the documents by the liquidators will not affect any claimed interest in them. In the event that the liquidators subsequently decide to bring proceedings against SMC Ltd and/or Mr Smith based on the information at issue, then at that stage those parties would clearly have a right to be heard. Mr Hucker did not contend otherwise.

[52]   I do not see how mere investigation and provision of the necessary information in any way directly affects the rights and interests of SMC Ltd, or Mr Karnie Smith, such that it is necessary to provide them with an opportunity to be heard.

[53]   In any event, what Dyer Whitechurch seeks to do is claim, without any apparent instructions from either SMC Ltd or Mr Karnie Smith, and in circumstances where no question of privilege arises, that Dyer Whitechurch can rely on the rights and interests of SMC Ltd and/or Mr Karnie Smith to resist production of the documents.

[54]   In all of the circumstances of this case, I find that I should exercise my discretion to grant the application. Access to the trust account documents at issue is in my view reasonably necessary for the liquidators to discharge their duties and to provide direct access to the source of the documents is the most reasonable and efficient way for them to proceed. Dyer Whitechurch is not being asked to provide evidence in court but, rather, to simply provide the trust account documents to the liquidators for their examination. Even if the production of the documents indirectly leads to the liquidators bringing proceedings against either SMC Ltd or Mr Karnie Smith (and I make no finding at all on that point), that result may actually “be exactly in step with the legislative intent”.25 It is not uncommon that liquidators find themselves bringing proceedings against former directors in order to vindicate the rights of creditors and/or shareholders.26

[55]   A further factor relevant to my discretion and favouring the grant of the application is the  discrete  and  narrow  category  of  the  documents  sought.  As  Mr Hucker submitted, the liquidators do not seek details as to the nature of the transaction, nor do they seek the surrounding documents. The documents sought are confined simply to those that show what has happened to the $600,000 in question.

[56]For all these reasons, I conclude that the application should be granted.

Result

[57]   I grant the liquidators’ application pursuant to s 266(2) of the Companies Act 1993, on the terms set out below.

25     Dalton v Hong, above n 14, at [64].

26 At [64].

[58]   I order that the respondent, Dyer Whitechurch, is to produce to the applicant liquidators within 14 days any record or document recording or relating to the receipting of funds received from or on behalf of formerly NMHB Ltd (in liquidation) and the transfer or payment of those funds within or from the trust account of Dyer Whitechurch.

[59]   As to costs, I am of the preliminary view that the respondent, Dyer Whitechurch, should pay costs to the applicant liquidators on a 2B basis, plus disbursements. If costs are not agreed, then brief submissions (no more than three pages) are to be filed and served within 14 days.

Associate Judge P J Andrew