In the matter of Addstone Pty Ltd (in liq) Macks, Peter Ivan [1998] FCA 1682

FEDERAL COURT OF AUSTRALIA CORPORATIONS Ð application by liquidator under s 531 to prevent certain creditors from viewing liquidatorÕs books Ð creditors also defendants in proceeding by liquidator Ð discretion to refuse inspection of liquidatorÕs books Ð purpose of creditors in seeking access to liquidatorÕs books Ð creditors wishing to participate in liquidatorÕs application to have remuneration determined by Court under s 473 Ð balancing of interests of liquidator and creditors Ð factors to be weighed in exercising discretion.

Corporations Law ss 173, 246F, 246G, 247A, 247D, 251B, 314, 473, 486, 531, 542, 1274(2), 1300, regs 5.6.01, 5.6.02 Uniform Companies Code 1981 ss 416, 425, reg 67 Companies Acts 1961 s 277 Companies Act 1934 (UK) s 247

Nut Trading Co (Aust) Pty Ltd v KKL (Kangaroo Line) Pty Ltd (1997) 25 ACSR 580, applied Re Interchase Corporation Ltd (In Provisional Liquidation) (1993) 44 FCR 501, considered Re Sanitary Burial Association [1900] 2 Ch 289, considered Re Silver Valley Mines [1882] 21 Ch D 381, considered Re BPTC (1992) 10 ACLC 271, considered Re Excel Finance Corp Ltd; Worthley v England (1994) 52 FCR 69, applied WA Pines Pty Ltd v Bannerman (1980) 30 ALR 559, applied Suburban Pty Ltd v Smith (as liquidator of Conpac (Aust) Pty Ltd (in liquidation) (1998) 28 ACSR 328, considered Harman v Secretary of State for the Home Department [1983] 1 AC 280, applied IN THE MATTER OF ADDSTONE PTY LTD (IN LIQUIDATION) ACN 010 764 997 PETER IVAN MACKS

SG 3080 of 1995 MANSFIELD J ADELAIDE 23 DECEMBER 1998

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY SG 3080 of 1995

IN THE MATTER OF ADDSTONE PTY LTD

(IN LIQUIDATION) ACN 010 764 997

PETER IVAN MACKS

APPLICANT

JUDGE: MANSFIELD J

DATE: 23 december 1998

PLACE: ADELAIDE

REASONS FOR JUDGMENT

THE APPLICATION This is an application by a liquidator under s 531 of the Corporations Law (Òthe LawÓ) for an order that a creditor not be permitted to inspect books kept under that section. The context in which the application arises is the creditorÕs desire to see those books to enable that creditor to be fully informed in relation to an application for a liquidatorÕs remuneration to be determined by the Court under s 473 of the Law. The creditor is also a current defendant in proceedings brought by the liquidator for damages on behalf of the company in liquidation, so the liquidator is reluctant to provide access to those records. The applicant, Peter Ivan Macks, (Òthe liquidatorÓ) is the liquidator of Emanuel Management Pty Ltd (In Liquidation) and sixty-three other companies, together known as the Emanuel Group (Òthe Emanuel GroupÓ). He was appointed as liquidator of each of the Emanuel Group on various dates between 13 June 1995 and 24 January 1996, save for Emanuel Investments Pty Ltd (In Liquidation). In that case he was appointed on 9 January 1995 by resolution of its creditors, to succeed an earlier appointment of another person by resolution of its members. One of the Emanuel Group is Emanuel (No.14) Pty Ltd (In Liquidation) (ÒEmanuel 14Ó). He was appointed provisional liquidator of Emanuel 14 on 30 August 1995, and liquidator of Emanuel 14 on 23 January 1996. The liquidator caused extensive investigations to be carried out, including public examinations of those involved in the conduct of the affairs of the Emanuel Group, following his appointment. A number of possible causes of action were identified, and proceedings issued as a result. Included in those proceedings are actions in the Supreme Court of South Australia Action No 2420 of 1996 in which two of the Emanuel Group, Emanuel Management Pty Ltd (In Liquidation) and Elizabeth House Pty Ltd (In Liquidation) and the liquidator are plaintiffs, and in which the defendants are EFG Finance Ltd, Coopers & Lybrand and Murray Goldie Anderson, a partner of Coopers & Lybrand. EFG Finance Ltd is now called Glenmore Park Estate Ltd (ÒGlenmoreÓ). It is represented in those proceedings by the same solicitors now acting for it in relation to the issues to which these reasons are addressed. In addition, the liquidator caused a further action to be instituted in the Supreme Court of South Australia, being Action 411 of 1998, in which the Emanuel Group generally are plaintiffs and there are a number of defendants including Glenmore and Elfic Ltd (ÒElficÓ). There is a substantial overlap of issues in those two actions and steps have been taken to consolidate them, together with a third action in Supreme Court of South Australia, being Action 167 of 1997. The actions are together called ÒSupreme Court ActionsÓ. Glenmore and Elfic claim to be the major creditors of Emanuel 14. Their claimed debt is $137,980,723. The amount of the debt claimed is the balance outstanding under a judgment in the Supreme Court of Queensland, from which there has been no appeal nor any application to set it aside. There is a dispute as to whether the debt should be admitted for that amount, having regard to the support of Glenmore and Elfic for resolutions passed in favour of a scheme of arrangement in March 1995. The liquidator has indicated a preparedness only to admit their debt for the sum of $1. He contends that the Deed of Forbearance and Release then entered into, if it is enforceable, includes covenants by Glenmore and Elfic, and others, to forbear from recovering that judgment sum. Their response is that those covenants do not apply to prevent them from claiming a dividend in the winding up of the Emanuel Group, and alternatively that the covenants are not enforceable by him due to his conduct. The largest other debtor of Emanuel 14 is in respect of the sum of $274,048, so that if Glenmore and ElficÕs debt is provable to the amount for which they assert, they are interested as creditors for almost all the indebtedness of Emanuel 14. Neither party asked for that issue to be determined. I shall proceed on the basis that Glenmore and Elfic are creditors of Emanuel 14, as the liquidator accepts, and that potentially at least they are major creditors of Emanuel 14. By notice of motion dated 13 August 1998, the liquidator applied pursuant to s 531 of the Law for orders that Glenmore and Elfic or their agents, as creditors of Emanuel 14, not be permitted to inspect the books kept by the liquidator. Section 531 provides: ÒA liquidator or provisional liquidator shall keep proper books in which he or she shall cause to be made entries or minutes of proceedings at meetings and of such other matters as are prescribed, and any creditor or contributory may, unless the Court otherwise orders, personally or by an agent inspect them.Ó A provision in almost the same terms was contained in s 416 of the Uniform Companies Code 1981, and before that in the various State Companies Acts 1961 (s 277) and in their legislative predecessors including the UK Companies Act 1934 s 247. The provision therefore has considerable antiquity. Researches of counsel, or my own researches, do not disclose that the particular matter presently in issue has been the subject of prior decision, save for the recent decision of Nut Trading Co (Aust) Pty Ltd v KKL (Kangaroo Line) Pty Ltd (1997) 25 ACSR 580. The only amendment to s 531 in the Law was effected by the Corporate Law Reform Act 1992, when it was extended to apply also to provisional liquidators. Regulations 5.6.01 and 5.6.02 of the Corporations Regulations prescribe the matters in respect of which a liquidator is obliged to keep books, as referred to in s 531. Those regulations provide: