Sheahan, John as Liquidator of Moage Ltd (in liq) v Pitterino, Robert & Ors [1997] FCA 1083

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY SG 3011 of 1997

BETWEEN: JOHN SHEAHAN

as liquidator of moage ltd (in liquidation)

(acn 004 270 848)

Applicant

AND: ROBERT PITTERINO

john stumbles

jamie hutchinson

sidney leslie griff

rodney adler

rodney halstead

john glenn crane

john austin

richard berry

dianne leslie jagelman

joseph grant jagelman

john landerer

Respondents

JUDGE: MANSFIELD J

DATE: 27 AUGUST 1997

PLACE: ADELAIDE

REASONS FOR DECISION

HIS HONOUR: On the motion dated 12 August 1997 of County Natwest Securities Australia Limited ("County"), and further to my orders made on 1 August 1997, application is now made to enable County to have access to those paragraphs of the affidavit of John Sheahan ("Mr Sheahan") sworn in this matter on 6 May 1997 in support of the examination and production orders made on 23 May 1997 which relate to the proposed examinations of Robert Pitterino ("Mr Pitterino"), Rodney Adler ("Mr Adler"), John Glenn Crane ("Mr Crane"), John Austin ("Mr Austin") and Joseph Grant Jagelman ("Mr Jagelman"). Consistent with the reasons for decision, which I published on 1 August 1997 it seems to me that on that application, County is eligible to make the application which it now makes and has got over the threshold requirement of showing an arguable case for the Court to exercise its discretion under s 596C(2) of the Corporations Law ("the Law"). If the appropriate basis for the exercise of the power is otherwise, namely under O 27 r 9 of the Federal Court Rules, for the reasons which appear in my earlier decision, the same considerations would apply. Having taken those two steps, I then turn to consider the particular paragraphs of the affidavit to which access is sought. I do so in the context of deciding whether it is, on balancing the general considerations relating to the liquidator's position on the one hand and relating to the capacity of County to conduct its primary application on the other hand, appropriate to order the release of those paragraphs of the affidavit. In the case of Mr Pitterino, the examination order which was made was upon terms which required service of the order within a certain time. That service was not effected within that time. In practical terms, there is therefore no extant examination order directed to him. Whether the liquidator subsequently seeks to revive the application to examine him in some way is up to him. Whilst there is no order current requiring Mr Pitterino to present himself for examination, I do not think it is necessary, in the interest of justice, to provide to County those paragraphs of Mr Sheahan's affidavit which relate to Mr Pitterino. The production order under s 597(9) of the Law, if valid, must relate to an ongoing examination order otherwise it has no proper purpose. In respect of the other four named persons, there are current examination orders extant against each of those persons. Subject to the hearing of the applications to set aside or discharge those examination orders, those examinations will take place in due course. The material before me to which reference has been made shows that the production order made under s 597(9) of the Law against County identified those persons as persons in respect of whom County is required to produce documents for their examinations. On balance I am satisfied that it is appropriate in the circumstances to order the release of the relevant paragraphs of Mr Sheahan's affidavit to solicitors for County relating to the grounds for him seeking examination orders against those four persons. One important consideration which has been identified in the cases is the need to ensure that the purpose of the proposed examinations is not frustrated by an order for access to such material. Disclosure to a non-examinee will not per se have that effect, provided the disclosure goes no further. Accordingly, it is appropriate that confidentiality orders be imposed as a condition of the release of those paragraphs of Mr Sheahan's affidavit to County to ensure that does not occur. The conditions of such an order will require that the material so made available be confined to certain legal advisers and, if necessary, a named representative or representatives of County for the purpose of giving instructions with respect to the application by County to set aside the production order. Depending upon the outcome of the various applications to set aside the examination orders or production orders, however, there may be a considerable period of time thereafter during which examination orders are extant against Messrs Adler, Crane, Austin and Jagelman. An appropriate undertaking will have to be formulated which precludes County and its legal advisers from disclosing the contents of the paragraphs of the affidavit to be so released to those proposed examinees, or indeed to any other person who might then relay that information further, at least until the examinations of each of those four persons has been completed. Otherwise there is the risk of the purpose of the examinations being frustrated. I note in that regard that in respect of both Mr Austin and Mr Jagelman, I declined to order the release to each of them, on their applications, of the paragraphs of Mr Sheahan's affidavit relating to their proposed examinations for that very reason. I am aware that the consequence may be the imposition of an undertaking required of legal advisers to County and an officer or officers of County which may substantially inhibit the capacity of those legal advisers or of that officer or officers to conduct, for the time being and perhaps for some months, the defence of the principal proceedings in a way which is otherwise appropriate. That is a matter of speculation. It is a matter which those legal advisers and that officer or officers of County will have to bear in mind. Having made those observations, I propose to stand the motion over to Friday, 5 September 1997 for orders, during which time solicitors for County should confer with solicitors for the liquidator with a view to formulating a form of undertaking acceptable to Mr Sheahan. If no agreement is reached, I will entertain further submissions as to the proposed form of the undertaking to reflect the views which I have expressed. It would only be upon a form of undertaking acceptable to the Court having been provided that an order will be made for those paragraphs of the affidavit to be made available to County on the motion. Subject to any other submissions, it is appropriate for the costs of the motion to be the costs in the principal application of County to set aside the production order. I so order. 5 SEPTEMBER 1997: I note that subsequently Mr Sheahan and County by their advisers are agreed upon an appropriate form of undertaking. Accordingly I order: 1. Pursuant to s 596C(2) of the Corporations Law, pars 8-10, 33-36 and 42 of the affidavit sworn by Mr Sheahan on 22 April 1997 and the exhibits referred to in those paragraphs be made available to Victoria Weekes, Robert Thomas and Peter St George of County Natwest Securities Australia Limited and Guy Foster, Ross Drinnan and Bobbi Kovacevic of Allen Allen & Hemsley and Mark Speakman and David Hammerschlag of counsel. 2. Persons having access to the paragraphs and exhibits referred to in Order 1 shall not discuss or otherwise disclose in any way the contents or subject matter of the paragraphs and exhibits referred to in Order 1 to any person other than a person who is also granted access to the same paragraphs and exhibits by Order 1, Mr Sheahan or his legal representatives. 3. Liberty to apply on reasonable notice to vary or discharge the terms of Order 2 is given. I certify that this and the preceding three (3) pages are a true copy of the Reasons for Decision herein of the Honourable Justice Mansfield. Associate: Date: