Price v ASB Bank Limited
[2013] NZHC 3352
•13 December 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-3385 [2013] NZHC 3352
IN THE MATTER OF GGF LIMITED (IN LIQUIDATION)
BETWEEN JOHN ALBERT PRICE Applicant
ANDASB BANK LIMITED Respondent
ANDSTEPHEN MARK LAWRENCE AND CHRISTOPHER CARY McCULLAGH Third Parties
Hearing: 21 October 2013
Counsel: B Gustafson for Applicant
M J Tingey and N F D Moffatt for Respondent
D M Hughes and J M Hanning for Third Parties
Judgment: 13 December 2013
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 13 December 2013 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date......................................
Solicitors: Lowndes Jordan, Auckland Bell Gully, Auckland Kensington Swan, Auckland
PRICE v ASB BANK LTD [2013] NZHC 3352 [13 December 2013]
[1] The applicant, John Robert Price, is the liquidator of GGF Limited. The third parties to this application, Stephen Lawrence and Christopher McCullagh, are the retired liquidators of Olympic Swiss Limited, which was struck off the Companies Register in 2012 upon completion of its liquidation. The respondent ASB Bank Ltd was Olympic Swiss’s bank and it provided banking services to Mr Lawrence and Mr McCullagh for the purpose of Olympic Swiss’s liquidation.
[2] In this application Mr Price seeks orders against ASB pursuant to the Companies Act 1993 to enforce his request that it produce copies of certain documents that it holds. ASB declined to produce the documents, necessitating the application.
[3] The documents Mr Price seeks are said to relate (directly or indirectly) to GGF’s entitlement to payments that various retailers made into Olympic Swiss’s ASB account or its liquidators’ ASB account. Mr Price’s particular concern is with payments for Swiss watches that GGF supplied to Olympic Swiss on terms that the watches and the proceeds of their on-sale were subject to a registered security interest (PMSI) under the Personal Property Securities Act 1999.
[4] In broad terms ASB’s position is that subject to any objection as to jurisdiction raised by the Mr Lawrence and Mr McCullagh, it will not oppose an order under s 266(2)(b) to produce documents in the first of what are essentially two categories of documents. However ASB opposes production of documents in the second category on the grounds that:
(a) it would be oppressive to require it to produce them;
(b)the confidential documents would never have been available to the directors of GGF; and
(c) there is insufficient explanation for requiring them.
[5] Mr Lawrence and Mr McCullagh oppose the application in its entirety on grounds that go to jurisdiction and the court’s discretion (including that the application challenges the propriety of their actions in the liquidation of Olympic Swiss).
[6] The Crown, being the party in whom Olympic Swiss’s property vested on its being struck off, has indicated that it will not take any steps in relation to the application.
[7] Broadly at issue is whether there is jurisdiction to order production and whether Mr Price has demonstrated a legitimate need for the documents for use in the administration of the liquidation of GGF that outweighs the concerns of ASB and the retired liquidators of Olympic Swiss.
Background
[8] I begin with the factual background as it is important to consider Mr Price’s application in the context of the relationship between GGF and Olympic Swiss, their relationship with ASB, and events occurring in and at the conclusion of the liquidation of Olympic Swiss.
[9] Olympic Swiss traded as a wholesaler and supplied Swiss watches to New Zealand retailers. It purchased the watches from an overseas supplier. ASB was Olympic Swiss’s banker and had a perfected security interest over all assets pursuant to a general security agreement.
[10] In early April 2011, Olympic Swiss’s Chief Financial Officer, Grant Marshall, proposed to ASB that a new company (GGF) be established to purchase the Swiss watches from the overseas supplier for on-sale to Olympic Swiss to alleviate Olympic Swiss’s lack of cash flow or credit to purchase the watches. As described in an email from Mr Marshall to ASB, the plan was for GGF to be “just a vehicle to facilitate the purchase of Xmas catalogue stock” for Olympic Swiss. It was intended that GGF would purchase the watches in its name, store them at
Olympic Swiss’s premises, and importantly that it would have a security interest in them pending payment by Olympic Swiss.
[11] GGF was incorporated on 5 April 2011. It was funded by a third party who took a security interest over all of its assets and it shared some common officers with Olympic Swiss. Mr Marshall was a director and shareholder of GGF as well as holding the role of Chief Financial Officer for Olympic Swiss. In accordance with the plan that Mr Marshall had outlined to ASB:
(a) GGF operated from the same premises as Olympic Swiss, and shared its computer system.
(b) Olympic Swiss executed a GGF request for credit agreement on 6
May 2011 pursuant to which it agreed to be bound to the terms and conditions of the agreement. Relevantly, under the terms of the agreement Olympic Swiss granted a security interest to GGF over all inventory supplied by GGF of the agreement until all sums due by Olympic Swiss to GGF had been paid in full.
(c) GGF’s security interest was perfected on 20 May 2011.
(d) Between May 2011 and 30 November 2011, GGF supplied
$182,868.11 worth of Swiss watches to Olympic Swiss on credit.
[12] Olympic Swiss’s business fared badly despite the new arrangement with GGF. By November 2011, its account with ASB was overdrawn. Mr Marshall expressed an interest in purchasing the business, but that did not eventuate.
[13] In early December 2011, GGF refused to supply further stock to Olympic Swiss on credit. By agreement with Olympic Swiss it made further supplies in December on a cash on delivery basis.
[14] On 25 January 2012, Olympic Swiss was placed into liquidation. Mr
McCullagh and Mr Lawrence were appointed as liquidators.
[15] In the period from November 2011 until the date Olympic Swiss was placed into liquidation, Mr Price contends that certain events occurred:
(a) In November 2011, Olympic Swiss directors, in conjunction with
ASB, decided that Olympic Swiss would be liquidated in January
2012 following receipt of payments for Christmas stock.
(b)Mr Marshall was no longer permitted access to Olympic Swiss’s bank account as ASB considered that, as a potential purchaser, he was in a position of conflict.
(c) Olympic Swiss was required to obtain ASB’s approval for any payments out of its ASB bank account. In accordance with that requirement two payments were made in December and January, totalling $24,000 and $11,000 with ASB’s approval.
[16] Mr Lawrence and Mr McCullagh filed their final report in Olympic Swiss’s liquidation on 24 August 2012. The report records that as at the date of liquidation there was $36,445 in Olympic Swiss’s ASB account and that there were two secured creditors of the company, being ASB and Antipodes Holdings Limited. It also set out that the liquidators distributed $69,595 to preferential creditors; $113,133 to a secured creditor; $60,040 for liquidator fees and $21,392 for legal fees. GGF received only $609 into its ASB bank account by the date of liquidation.
[17] After the conclusion of Olympic Swiss’s liquidation the liquidators destroyed its records. They did this after publishing a notice on the Companies Office website on 24 August 2012 to the effect that they intended to remove Olympic Swiss from the Companies Register and that a request would be made to the Registrar for approval for the destruction on the basis that the liquidation had come to an end. They called for objections by 28 September 2012. No objections were received.
Olympic Swiss was subsequently struck off the Companies Register.1
1 Though Olympic Swiss gave notice of the intention to make an application to dispense with the obligation to keep Olympic Swiss’s records for one year after the completion of the liquidation in accordance with s 256 of the Companies Act, there is no evidence that this approval was or was not given.
[18] On 25 January 2013, Mr Price was appointed liquidator of GGF. He learned that Olympic Swiss’s liquidators had destroyed the computer system shared by GGF and Olympic Swiss, the hard copy records of Olympic Swiss’s documents, and all records of the liquidation apart from some documents stored on their own personal computers.
[19] Mr Price makes no suggestion that the destruction was undertaken unlawfully or inappropriately. The concern he raises is that he lacks critical information about Olympic Swiss that would otherwise have been made available to him by GGF or that he could have sought directly from Olympic Swiss’s liquidators had their records not been destroyed, to enable him to perform his duties as liquidator of GGF and that he now needs to look to other sources. It was for this reason that on 11 June
2013 the solicitors for Mr Price wrote to ASB requesting copies of the documents that Mr Price now seeks in his application.
The documents
[20] The documents that Mr Price seeks are documents created from 10 April
2011 to the date of Olympic Swiss’ liquidation, plus documents created during the liquidation up to the date Olympic Swiss was struck off.
[21] The first category of documents that Mr Price seeks from ASB comprises:
(a) Loan and security documentation relating to ASB’s security interest over Olympic Swiss’s assets, including loan agreements, general security agreements and guarantees given in support of and establishing ASB’s loan facility granted to Olympic Swiss;
(b)Bank statements for Olympic Swiss’s accounts from April 2011 until the accounts were closed; and
(c) Copies of bank statements for any accounts operated by the Olympic
Swiss Liquidators in carrying out the liquidation of Olympic Swiss.
[22] The second category of documents comprises internal documents of ASB including minutes and diary notes, plus ASB’s correspondence and emails between staff and agents of ASB and Olympic Swiss’s liquidators, directors, employees and agents, relating to:
(a) the appointment of Mr Lawrence and Mr McCullagh as liquidators of
Olympic Swiss;
(b)the recovery of Olympic Swiss’s ledger of debtors for the period between 11 April 2011 and the date when Olympic Swiss was struck off;
(c) the trading of Olympic Swiss and repayment of debt that Olympic Swiss owed ASB from 11 April 2011 until the date when Olympic Swiss was struck off; and
(d) GGF, including the debt owed by Olympic Swiss to GGF, GGF’s
PMSI over Olympic Swiss’s assets and payments made to GGF.
The case for Mr Price
[23] Mr Price’s case as argued at the hearing is that he has a proper case for:2
(a) An order under s 266(1) of the Companies Act, to enforce the request made of ASB on 11 June 2013 (he says) under s 261(3), or alternatively
(b) An order for the production of the documents under s 266(2)(b).
[24] Mr Price says that as a result of his investigations so far he has identified that:
2 Mr Price’s application does not state what statutory provision he relies on. This is in breach of rule 7.19 but no issue was taken with this omission. In submissions counsel advised reliance is placed on ss 261(3)(b) and 266(2)(b).
(a) GGF only ever had two assets, being the stock purchased but not sold to Olympic Swiss, and the PMSI in the sale proceeds of the stock Olympic Swiss received; and
(b) ASB had notice of GGF’s PMSI and approved payments from 8
December 2011.
[25] Mr Price says the documents will assist him to reconstitute relevant knowledge that GGF’s directors had and to investigate further GGF’s security interest in the sale proceeds of the GGF watches that Olympic Swiss received into its ASB bank account. He wishes to determine whether:
(a) First, any of the sale proceeds were used to pay ASB and whether any such payments were or were not “debtor-initiated” for the purposes of s 95 Personal Property Securities Act 1999. There is, he contends, a “strong possibility” that ASB was applying pressure for payment two months prior to Olympic Swiss’s liquidation.
(b)The security interest has been properly accounted for by Olympic Swiss’s liquidators and GGF has received all it was entitled to in the liquidation.
He states that to do this “I require all of the documents requested of ASB in this application. It is necessary to request this information from ASB as a result of the Olympic Swiss liquidators having destroyed Olympic Swiss’s records”.
Relevant Legal Principles
[26] A liquidator’s responsibility is to take possession of, and realise, all assets of the company in liquidation, and to investigate all means of recovery for the purpose of maximising the return to the company’s creditors. As noted by Associate Judge Abbott in The Official Assignee v Grant Thornton the liquidator is given two
powerful tools to carry out this process.3 The first comprises powers exercised outside of the Court and set out in s 261 which relevantly states:
261 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—
…
(e) A receiver, accountant, auditor, bank officer, or other person having knowledge of the affairs of the company; or
…
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) …
(b) To provide the liquidator with such information about the business, accounts, or affairs of the company as the liquidator requests:
[27] The second comprises the right to seek the aid of the Court and to seek that the Court in its discretion make orders under s 266 for compliance with the liquidator’s requests under s 261, or require that persons attend before the Court for examination or that they produce documents in their possession or control.
[28] Relevantly s 266 states:
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 of this Act to comply with that requirement.
(2) The Court may, on the application of the liquidator, order a person to whom section 261 of this Act applies to—
(a) …
(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.
[29] When exercising its power to order production under s 266, which has been described as an extraordinary power,4 the Court will balance the need to enable the liquidator to obtain information to investigate the affairs of the company with a need to maintain fairness in the proceedings, by taking into account the effect of an order on the party being compelled.5
Issues for determination
[30] The specific issues for determination are:
(a) Did Mr Price make a valid request of the ASB under s 261(3) –failing which the Court will not have jurisdiction to make an order under s 266(1).
(b) Does the Court have jurisdiction to make an order under s 266(2)(b)?
The sub issues arising from this are:
(i)Is ASB a person to whom s 261 applies in accordance with s 261(2)(e)?
(ii)Do the requested documents relate to the “business, accounts, or affairs of the company” GGF?
(iii)Should the Court exercise its discretion to grant the orders sought?
4 British and Commonwealth Holdings Plc v Spicer and Oppenheim [1993] AC 425 (HL) cited in
The Official Assignee v Grant Thornton [2012] NZHC 2145.
5 The Official Assignee v Grant Thornton, above n 3, at [9].
Discussion
Did Mr Price make a valid request of ASB under s 261(3)?
[31] I begin with the order that Mr Price seeks under s 266(1). Mr Price will not be entitled to such an order if he did not make a valid request of ASB for the documents under s 261(3).
[32] I accept counsel for ASB’s submission that there was no such request. The notice that Mr Price relies upon was served by his solicitors ASB on 11 June 2011. It was expressly in reliance on s 261(1) and could not therefore be a notice under s 261(3). Nor could it be a valid request under s 261(1) which authorises a request for records and documents “of” GGF. The notice purported to seek documents of ASB and Olympic Swiss and as such it could not be validly made under s 266(1). Therefore it can only be an invalid notice under s 261(1).
[33] The result is that Mr Price has not established the necessary foundation for an order under s 266(1). I turn then to the order that Mr Price seeks under s 266(2).
Does the Court have jurisdiction to make an order under s 266(2)(b)?
[34] There will be jurisdiction to make an order under s 266(2) only if ASB is a person to whom s 261 applies and the documents are of the kind specified in s 266(2)(b). Once jurisdiction is established, it is a matter of discretion as to whether an order is made.
Is ASB a person to whom s 261 applies?
[35] Section s 261 only applies to “a receiver, accountant, auditor, bank officer, or other person having knowledge of the affairs of the company”.6
[36] I am satisfied that ASB is a person having knowledge of GGF’s business and
affairs. Such knowledge is to be inferred not least because of the notice Mr Marshall
gave ASB about the origin of GGF, its function as a funder for Olympic Swiss, and GGF’s PMSI. Materially, ASB does not take issue with Mr Price’s evidence of his understanding7 that ASB was told that GGF was just a vehicle to buy stock for Olympic Swiss, that its PMSI applied to certain monies coming into Olympic Swiss’s ASB bank account, that ASB intervened to prevent GGF’s chief financial officer from operating the account, and that it required Olympic Swiss to obtain its approval for any payments out of the account. I am satisfied that all of these factors point to knowledge of GGF’s affairs and moreover that such knowledge is related to aspects of the business and affairs of GGF that Mr Price is required or entitled to investigate in the performance of his administration of the liquidation of GGF.
[37] I find that ASB is a person that has relevant “knowledge of the affairs of the company” for the purpose of s 261(2)(e).
Are the requested documents of the kind specified in s 266(2)(b)?
[38] If the documents are in ASB’s possession or control and are “documents relating to the business, accounts, or affairs of” GGF, they will be documents of the kind that attracts the court’s jurisdiction to order production.
[39] There is no dispute that the documents requested exist and are in ASB’s
possession.
[40] Realistically, ASB does not dispute that the documents are of a kind that attracts the court’s jurisdiction, save to abide the outcome of any arguments the liquidators have advanced. Rather, its focus is on the exercise of the Court’s discretion and considerations that it contends outweigh the liquidator’s need for the documentation.
[41] Counsel for Mr Lawrence and Mr McCullogh argues, to the contrary, the documents cannot be documents “relating to the business, accounts, or affairs of the company” unless they are documents “of” GGF. He submits that the documents
belong to ASB, Olympic Swiss or Olympic Swiss’s liquidators (as they are the
7 Mr Price deposes his understanding is based on the examination under oath of Olympic Swiss’s
director, Ms Good.
product of the liquidation “of” Olympic Swiss) and therefore that jurisdiction does not exist under s 266(2)(b) to order ASB to produce the documents (whether in the first or second categories).
[42] The submission adopts an unjustifiably narrow interpretation of s 266(2)(b). ANZ National Bank Ltd v Sheahan is apposite. Heath J refused an application under s 266(1) requiring ANZ to deliver documents to the liquidators of Cedenco NZ, which ANZ had financed prior to Cedenco’s liquidation.8 The documents sought were not documents “of” Cedenco itself but internal documents of the bank relating to Cedenco so the liquidators had no power under s 261 to require their delivery. However Heath J went on to consider the Court’s powers under s 266(2)(b). He points to the distinction between documents referred to in s 266(1), being “of” the company in the sense of belonging to the company, and other documents captured by s 266(2):9
I emphasise that “delivery” of documents “of the company” under s 261(1) is different conceptually from the “production” of documents by a third party, to which s 266(2)(b) refers. Documents of a company are delivered to a liquidator because they belong to the company and should be in his or her custody. Documents that are generated by third parties must be produced because a liquidator has no right to retain them. There is no doubt that once such documents are produced to a liquidator, he or she has the ability to copy them for use in the administration of the liquidation.
[43] I therefore reject counsel’s submission. I consider however that documents referred to in s 266(2)(b) must relate in a material way to the business or accounts or affairs of GGF that the liquidator is bound or entitled to investigate for the purpose of the administration of the liquidation. I am satisfied that the documents Mr Price wants ASB to produce are documents of this kind and invoke the discretion to order production.
[44] It follows I am satisfied that jurisdiction exists under s 266(2)(b) and that as counsel for Mr Price and ASB recognised, the real question is whether there is good reason for the Court to exercise the discretion to order a third party (ASB) to produce
the documents.
8 ANZ National Bank Ltd v Sheahan [2012] NZHC 3037, [2012] NZLR 674 at [37].
Should the Court exercise its discretion under 266(2)(b) to grant the orders sought?
[45] Counsel for Mr Price submits that for the purpose of considering an application under s 266(2)(b) the approaches the Court should take are set out by Heath J in Carrow Holdings Ltd (in liq) v Sadiq.10 Heath J notes that there are two approaches: 11
The traditional approach turns on whether the liquidator is taking a bona fide step in the liquidation to obtain information for genuine purposes. I f the information were sought as a genuine investigative step to enable a liquidator to reach an informed decision on what to do, the examination and production of documents is likely to be approved. On the Cloverbay approach, the Court is directed to consider what is required to put the liquidator into the same position as the directors, so far as knowledge of the company's affairs is concerned. This has been referred to as “re- constitution” of the company's knowledge.
[46] His Honour states that in reality the two approaches work together, observing that:
It is equally important for the liquidator to re-constitute knowledge of the directors or the company as it is for him or her to make informed decisions about what steps to take for the benefit of creditors. In that context, it must be remembered that a liquidator usually has limited funds with which to work and it is in the public interest that he or she ascertains relevant information with a little expense as possible and in the most expeditious manner.12
[47] Counsel for Mr Price submits that no matter which of the two tests is applied the documents should be provided. He contends that it is plain that the documents are needed to enable Mr Price to carry out the reasonable requirements of his task as liquidator of GGF. He submits that under the traditional test, without the information sought, Mr Price is precluded from determining what happened to the proceeds of the watches sold by Olympic Swiss and whether any third party received proceeds that GGF was entitled to.
[48] Counsel makes the further submission that under the Cloverbay approach clearly there is a requirement for reconstitution for all material pre liquidation and
10 Carrow Holdings Ltd (In Liquidation) v Sadiq HC Auckland CIV-2007-404-2855, 5 June 2008.
11 At [30]-[31].
that this could have been sought by the GGF directors from Olympic Swiss pursuant to the PMSI. He also points out that:
... the GGF directors are in the unique position of having been the CFO and Marketing Manager of Olympic Swiss. They had access to all Olympic Swiss documents pre liquidation apart from limited access to Olympic Swiss bank statements from November 2010.
[49] In opposition counsel for ASB’s submissions are essentially threefold. First, counsel submits that the Court should be very cautious before ordering production of confidential internal documents of third parties, and as in this case before intruding on the private and confidential relationship between a bank and its customers. The second submission is that the documents go well beyond those that are genuinely needed to reconstitute the knowledge of GGF’s directors. The third submission is that there is no explanation from Mr Price that demonstrates a sufficient material benefit will be gained from the documents or a genuine need for them in administering GGF’s liquidation. He has not:
(a) Pointed to any evidence that suggests that any payments made out of Olympic Swiss’s ASB account were not debtor-initiated and there is simply no foundation for such suggestion.
(b)Provided any basis for suggesting that Olympic Swiss’s liquidators may have distributed funds from ASB accounts that were subject to GGF’s PMSI and failed to fully account to GGF, and he does not contradict the evidence for Olympic Swiss’s liquidators to the effect that the records show that GGF’s PMSI could only have applied if at all to approximately to $5,000 of monies held and distributed by the liquidators.
[50] Counsel for ASB submits that in these circumstances ASB should not be put to the time and expense of producing such a wide range of third party documents. There are, he submits, no exceptional circumstances justifying the exercise of an extraordinary power against ASB with respect to the second category of documents, particularly ASB’s internal documents. GGF was never entitled to the ASB’s internal information, and has fallen short of proving that the ASB should disclose
confidential information which will put GGF’s liquidators in a better position than the directors of GGF could ever have been.
[51] Counsel further submits that the order sought, at least with respect to the second category of documents (which includes ASB’s own internal documents), is oppressive and simply assists an illegitimate fishing exercise rather than being part of a “genuine investigative step” in the liquidation of the company.13 If GGF’s liquidators consider that GGF has a claim against the ASB, it can bring a claim in the ordinary way and seek documents under discovery rules.
[52] Counsel for the retired liquidators raises as a material concern the effect that orders for production would have on them. He submits that the entire application amounts to an attack on their integrity as Mr Price is delving into decisions taken in a separate liquidation challenging their correctness, and inappropriately accusing liquidators of acting wrongfully when the time for challenge is past. He submits that any challenge should have been made under s 256.
[53] I accept that the concerns ASB and the retired liquidators have raised are to be very carefully weighed against the expressed needs of Mr Price. This is a case where particular caution is needed. The power to order production is to be exercised with caution especially against persons who are not former officers of the company.14
[54] In carefully weighing the competing concerns and interests of Mr Price, ASB and the retired liquidators, I accept that Mr Price is genuine in his claim that he needs the documents to place himself in the same position of knowledge as the directors of GGF and in order to carry the investigation that he is bound to undertake for the benefit of GGF’s creditors. With limited exceptions I am satisfied that he has laid a sufficient foundation to enable an informed judgment on where the proper balance lies. I find helpful and apposite the approach of Associate Judge Abbott in Grant Thornton:15
I take the view that the Assignee’s investigation should not be limited to
specific transactions or circumstances identified in advance. This was not
13 At [30].
14 Barlow Clowes Gilt Managers Ltd, Re [1992] Ch 208 (CHD).
required in British & Commonwealth Holdings Plc. The breadth of the orders will cause … inconvenience but, as was pointed out in British Commonwealth Holdings Plc, that, of itself, does not make the order … unreasonable …The public interest in investigating … must trump … interests to privacy and confidentiality
[55] Of particular relevance in this case is that the fact that Mr Price’s access to the usual sources of documents has gone. This consideration outweighs the inconvenience to ASB. Its actions will come under scrutiny but there is a sufficient basis for that. I am satisfied that the pre liquidation documents that would have been available to GGF should be produced.
[56] In respect of the documents (both pre and post liquidation) that relate to the liquidation, including communications between ASB and the liquidators, I am satisfied that Mr Price needs such documents as part of a genuine step of his investigation and that it is not a fishing expedition. This investigation includes considering whether the retired liquidators made a mistake and whether payments were genuinely debtor initiated. Mr Price has no other way to determine this, except to use the documents. This will involve Mr McCullagh and Mr Lawrence’s actions coming under scrutiny though not because of the attack they perceive on their integrity. There is no suggestion of such an attack. What Mr Price says is that he needs to see what they have done in dealing with payments by Olympic Swiss’s debtors into its ASB account in order to determine whether there have been inadvertent payments of monies to which GGF was entitled. I do not consider that is an attack on their integrity or a sufficient reason to refuse an order.
[57] Overall I am satisfied that the documents that Mr Price seeks should be produced.
[58] I come then to the exceptions. These are ASB’s own internal documents that have not formed part of any communication or exchange with Olympic Swiss or its retired liquidators. ASB is a third party rather than a person directly involved in GGF.16 If the application is granted in its entirety, Mr Price would receive internal
documents that the directors of GGF would never have had – even making due
16I accept of particular relevance is that the s 266 procedure should not be used to get at the confidential relationship between bank and client unless there is very good reason.
allowance for the fact that GGF could have requested copies of Olympic Swiss’s correspondence pursuant to its contractual entitlement to documents. I see no reason presently why Mr Price should have such documents. There is for example no apparent basis for finding internal documents that remained private and confidential to ASB could be causative of a payment by Olympic Swiss that was initiated by ASB. There would have to have been a communication with Olympic Swiss for that to happen. Similarly if Olympic Swiss was required to obtain ASB’s approval for any payments out of its ASB bank account, there would have to have been an external communication to that effect.
Result
[59] For the above reasons, I grant the application save in so far as it relates to the strictly internal documents of ASB. Leave is reserved to seek further directions should there be issues about manner and timing of the production.
[60] Costs are reserved. If the parties cannot resolve the issues of costs between them, any party seeking costs is to file a memorandum within five working days. Any memorandum in opposition is to be filed and served within a further five
working days.
Associate Judge Sargisson