FEDERAL COURT OF AUSTRALIA Boys v Australian Securities Commission [2001] FCA 1325 PRACTICE AND PROCEDURE – subpoenaed documents – implied undertaking against collateral use – whether leave should be granted to make use of documents in proceedings in another court – whether "special circumstances" Boys v Australian Securities Commission (1997) 24 ACSR 1 cited Boys v Australian Securities Commission (1998) 26 ACSR 464 cited Re Geneva Finance Limited; Quigley (Receiver and Manager appointed) v Cook (1992) 7 WAR 496 cited ESSO Australia Resources Limited & Ors v Plowman & Ors (1995) 183 CLR 10 cited Minister for Education v Bailey (2000) 23 WAR 149 referred to Welfare v Birdon Sands Pty Ltd (1997) 79 FCR 220 referred to Grosvenor Hill (QLD) Pty Ltd v Barber (1994) FCR 301 cited Worthley v England; Re Excel Finance Corporation Ltd (1994) 14 ACSR 407 cited Emanuel Investments Pty Ltd (in liq); Saint v Macks (Burley J, 24 June 1999, unreported) referred to cf Whelan v Australian Securities Commission (1994) 13 ACSR 427 referred to ALAN HAROLD BOYS, RONALD GEORGE HOWARD, DESMOND FRANK CRAWLEY, ANTHONY HAYES DOUGLAS-BROWN & ANTHONY HOWARD LEIBOWITZ v AUSTRALIAN SECURITIES COMMISSION, ERNST & YOUNG, PHILLIPS FOX, PETER REYMOND QUIGLEY and KEVIN LEE CHRISTENSEN WAG 123 of 1994 RD NICHOLSON J 14 SEPTEMBER 2001 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAG 123 of 1994 BETWEEN: ALAN HAROLD BOYS RONALD GEORGE HOWARD DESMOND FRANK CRAWLEY ANTHONY HAYES DOUGLAS-BROWN ANTHONY HOWARD LEIBOWITZ APPLICANTS AND: AUSTRALIAN SECURITIES COMMISSION FIRST RESPONDENT ERNST & YOUNG (a firm) SECOND RESPONDENT PHILLIPS FOX (a firm) THIRD RESPONDENT PETER REYMOND QUIGLEY FOURTH RESPONDENT KEVIN LEE CHRISTENSEN FIFTH RESPONDENT JUDGE: RD NICHOLSON J DATE OF ORDER: 14 SEPTEMBER 2001 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The undertakings in relation to the use of the documents identified in the affidavit of J Garas sworn on 11 September 2001 as the "Perpetual Documents" pages 130 – 161 and 178 – 210 inclusive and the "1991 Affidavit" be modified to permit the applicants to use the documents in support of their application to discharge the examination summonses in Supreme Court proceeding COR 222 of 2001. 2. Applicants' costs be paid by the fourth respondent and Perpetual Trustees (WA) Limited and be paid forthwith. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAG 123 of 1994 BETWEEN: ALAN HAROLD BOYS RONALD GEORGE HOWARD DESMOND FRANK CRAWLEY ANTHONY HAYES DOUGLAS-BROWN ANTHONY HOWARD LEIBOWITZ APPLICANTS AND: AUSTRALIAN SECURITIES COMMISSION FIRST RESPONDENT ERNST & YOUNG (a firm) SECOND RESPONDENT PHILLIPS FOX (a firm) THIRD RESPONDENT PETER REYMOND QUIGLEY FOURTH RESPONDENT KEVIN LEE CHRISTENSEN FIFTH RESPONDENT JUDGE: RD NICHOLSON J DATE: 14 SEPTEMBER 2001 PLACE: PERTH REASONS FOR JUDGMENT 1 A notice of motion is brought on behalf of the applicants seeking the waiver of all undertakings in relation to the use of documents identified in the evidence as the "Perpetual Documents" and the "1991 Affidavit". The motion is pressed in terms that what is sought is a modification of undertakings to permit the applicants to use the documents in the Supreme Court proceeding described below. 2 The documents come to be in the possession of the Federal Court as a consequence of litigation previously conducted: Boys v Australian Securities Commission (1997) 24 ACSR 1 being the primary decision of Carr J, the appeal against which was dismissed by a Full Court (French, Heerey and Merkel JJ) in Boys v Australian Securities Commission (1998) 26 ACSR 464. Those reports show that the applicants were the auditors of a company which collapsed leaving debenture holders owing over $30M. In the proceedings the applicants, who had prepared independent accountant's reports for inclusion in six debenture prospectuses issued by the company, attacked a consultancy agreement made between the receiver and manager of the company appointed by the trustee for the debenture holders, and the first respondent. 3 On the hearing of the present application there was no appearance from the first, second, third or fifth respondents. The fourth respondent is represented, is the above-mentioned receiver and manager. 4 The dispute between the parties and others has also been the subject of proceedings in the Supreme Court of Western Australia. The proceeding is reported as Re Geneva Finance Limited; Quigley (Receiver and Manager appointed) v Cook (1992) 7 WAR 496. 5 What gives rise to the present motion is the issue to each of the applicants of a summons for public examination in relation to the examinable affairs of the company in relation to which the receiver and manager has been appointed. The summons is issued in reliance on s 596B of the Corporations Act 2001 (Cth). It also contains a summons for production at the examination of nine categories of documents including, in the first category, all professional indemnity insurance policies current at the time that the individual applicant notified any insurer or broker of a claim arising in respect of the claim in the Supreme Court of Western Australia. The summonses issued pursuant to an order for examination made by a Master in chambers on 19 July 2001 on the application of the receiver and manager. 6 The response of each of the applicants has been to file interlocutory process directed to discharging the examination summonses. Alternatively, directions are sought to the following effect: "(a) the Proposed Examinees produce only the books referred to in paragraph 2.1 of each of the Summonses and not produce any of the books referred in paragraphs 2.2 to 2.9 of each of the Summonses, or any other books; (b) paragraphs 2.2 to 2.9 of each of the Summonses be discharges; and (c) the Proposed Examinees not be examined on any matters at all except whether, by whom and to what extent the Proposed Examinees are insured pursuant top the books referred to in paragraph 5(a) above with respect to the claim arising in relation to Supreme Court of Western Australia action CIV 1765 of 1993." 7 In the interlocutory process orders were also sought that the applicants, their solicitors and counsel have leave to be released from all undertakings in relation to documents identified in the supporting affidavit and described as "the Perpetual Documents" and "the 1991 Affidavit" and to use the documents for the purposes of supporting the application. 8 That aspect came before Master Sanderson as a preliminary issue. In reasons delivered on 29 August 2001 he put to one side the application in respect of the Perpetual Documents because they were documents produced under a subpoena issued in Federal Court proceedings so that any release was a matter for this Court. 9 In relation to the 1991 Affidavit, he said it had been filed in the Supreme Court for use in proceedings initiated in that court. However, a copy was obtained by the first respondent and discovered in proceedings in the Federal Court and thus it came into the possession of solicitors for the applicants, the proposed examinees. 10 In the course of his reasons Master Sanderson also found that there were no undertakings extant in relation to the 1991 Affidavit because it was part of the public record as a consequence of its inferred use in proceedings described as Quigley v Cook (1992) 7 WAR 496: applying ESSO Australia Resources Limited v Plowman (1995) 183 CLR 10. That proposition was not in dispute here. For the applicants it is accepted that pages 162 –177 of the Perpetual Documents are in the public domain and the application is not pursued with respect to those pages. 11 Master Sanderson also considered what the position would be if the 1991 Affidavit was not correctly found to be in the public domain. He approached the matter on the basis that the document was subject to implied undertakings in both the Supreme Court and the Federal Court. He recounted that the argument put against the relief was that there was a lack of merit in the application to set aside the summonses. He was of the view that it was important that all relevant material was before the Supreme Court on determination of that issue, which was not a question for determination before him. He considered that for the application to be heard without the documents would be to conduct it in something of an air of unreality and that there should be an opportunity for all matters to be put before the court. He therefore released the applicants from any implied undertakings in relation to the 1991 Affidavit but without prejudice to the Federal Court dealing with the issues of waiver of the undertakings to it. A third affidavit which was also dealt with by the master is not relevant here. 12 Master Sanderson proceeded on the basis that the principles to be applied in relation to undertakings are those set out by the Full Court of the Supreme Court of Western Australia in Minister for Education v Bailey (2000) 23 WAR 149. There, the Full Court (Steytler and Parker JJ) considered an application for leave to appeal against the decision of a master given in interlocutory proceedings in respect of the use which might be made of a discovered document. After reviewing the relevant authorities, Steytler J concluded: "It is against this background that the courts have concluded that the implied undertaking or obligation will only be waived or relaxed when special circumstances are present. While I would not, with great respect, have thought that circumstances of that kind would be quite so hard to visualise as Hobhouse J expressed them to be in Prudential Assurance, the fact remains that it will ordinarily be no easy matter to secure that court's indulgence." He further declined to attempt any general definition of what might amount to "special circumstances", saying that each case must depend on its own peculiar facts and circumstances. Before the Full Court no issue had been taken with the Master's expression of opinion that the discovered document in issue was "highly relevant" to the matters in issue between the parties on the leave application. The position was such that the non-production of the document might well have had the consequence that the respondent would have been forever barred from bringing second proceedings. Furthermore, it may have been discoverable in the course of other proceedings. Taking all these circumstances together, Steytler J was of the opinion that the learned Master in that case was correct in finding that special circumstances were present. Parker J agreed with the reasons of Steytler J. 13 In Welfare v Birdon Sands Pty Ltd (1997) 79 FCR 220 at 230, von Doussa J said in this Court: "Where documents have come into the custody of the Court pursuant to a subpoena for production, the power of the Court to control the use of those documents, and to allow inspection is unfettered. The discretion of the Court must be exercised having regard to the nature of the documents and the information contained in them, and to the proper administration of justice." It is in accordance with these principles that the present application requires resolution. 14 The Perpetual Documents (excluding the pages accepted as being in the public domain) comprise minutes, notices, memoranda, correspondence, reports and a record of meeting. The 1991 Affidavit is an affidavit of the receiver and manager in the Supreme Court of Western Australia filed in support of an application for directions. Submissions for the applicants' auditors 15 The case for the applicants is that they wish to use both the Perpetual Documents and the 1991 Affidavit to support the application made on their behalf to discharge the examination summonses. 16 Before the Supreme Court the applicants will seek to contend that the discharge application should be granted because in the case of a receiver and manager the power to order examination is not like that of a liquidator and does not entitle a receiver and manager to an order for production of documents directed to ascertaining whether or not he has an enforceable right to indemnity from an insurer or other person: Grosvenor Hill (QLD) Pty Ltd v Barber (1994) FCR 301 at 306. Further it will be argued that the receiver and manger's principal purpose in applying for the examination summonses constituted an abuse because it is to further his own interests, namely to discharge his duties under the debenture trust deed for which he is remunerated and not to be for the benefit of the company of which he is appointed the receiver and manager, its contributories or creditors other than in the most indirect way: Worthley v England; Re Excel Finance Corporation Ltd (1994) 14 ACSR 407 at 429. The applicants wish to support these contentions by allegations that the receiver and manager had a conflict of interest or duty and maintain that the Perpetual Documents and the 1991 Affidavit are relevant to that issue. 17 For the applicants it is contended that in order to resolve these contentions the Supreme Court will have to exercise a discretion and the evidence to which the application relates "might well influence the outcome of that application": Bailey at 157 per Steytler J with Parker J concurring. In this respect, reliance is placed for the applicants on the way in which Burley J in the Supreme Court of South Australia considered the factors relevant to setting aside examination orders in Emanuel Investments Pty Ltd (in liq); Saint v Macks (Burley J, 24 June 1999, unreported). The contention is that documents in issue establish conflicts and a breach and support the arguments and contentions sought to be made by the applicants. 18 I am of the same mind as Master Sanderson in the application before him when he said that the question as to whether or not the application had merit was not one for determination by him. The question here is whether there are relevantly "special circumstances" to support the waiver of the implied undertakings in respect of the documents to which the application now relates so that the issues intended to be raised for the applicants can be determined elsewhere, namely in the Supreme Court of Western of Australia. Receiver and manager's submissions 19 For the receiver and manager it is said that issues of conflict were dealt with in the primary decision before Carr J which was upheld on appeal: Boys (1997) at 20, ln 23; 25, ln 11; 26, ln 5 and 27. It is said that it is apparent that Carr J had before him evidence and therefore this was not a case where the documents the subject of the present application are necessary to enable the issue of conflict to be considered: cf Whelan v Australian Securities Commission (1994) 13 ACSR 427. 20 The submissions for the receiver and manager are that the findings made by Carr J were to the effect that the receiver and manager was not shielding Perpetual so that there is no arguable conflict. It is said, therefore, that the use of the documents could not advance the applicants' case on that issue. Furthermore, it is contended that it is apparent the Supreme Court would be estopped by the findings of Carr J from finding there was any conflict. 21 A supplementary aspect to this contention for the receiver and manager is that if the undertakings were waived and the Perpetual Documents were produced to the Supreme Court and seen by the presiding judicial officer before the existence of estoppel was argued, that would give rise to a contention that the judicial officer was biased. That, however, is an aspect which could be protected by the proper handling of the documents by the applicants in the timing of production of the documents. 22 In relation to the proposed abuse of power contention founded on the above-mentioned dicta in Worthley at 429, it is submitted for the receiver and manager that the documents in issue are irrelevant to this proposition. It is said the purpose of the examination will prove to be to provide the receiver and manager with information so that the company can sue the auditor. It is said that this is clearly not a case where an improper purpose is predominant. 23 In relation to the 1991 Affidavit, it is said that the documents are not relevant because it is not suggested on behalf of the applicants that the receiver and manager misused the information. Perpetual's submissions 24 Leave was given, without objection, to counsel for Perpetual Trustee (WA) Ltd ("Perpetual") as the respondent to the subpoena for production of the documents in issue to be heard in relation to the Perpetual Documents. 25 In the first place, counsel for Perpetual adopted the submissions on estoppel made on behalf of the receiver and manager. 26 In the second place, counsel contested the relevance of the Perpetual Documents to the issues intended to be argued by the applicants. It is apparent that the documents are not relevant to the legal argument as to whether a receiver and manager, as distinguished from a liquidator, can seek examination in the manner currently pursued by the receiver and manager. It is only on the issue of conflict that the documents become relevant. Here it is said that whereas in Bailey the documents were crucial, that cannot be the case here. 27 Furthermore, it is submitted that the documents cannot be treated as a bundle but need to be addressed one by one so that this Court must form a view on how useful each document will be in the forthcoming proceedings. Reasoning on submissions 28 It is convenient to turn first to the 1991 Affidavit. 29 No contest has been made to the finding by Master Sanderson that the affidavit is already part of the public record in the proceedings in the Supreme Court of Western Australia and so is in the public domain. 30 It is relevant that in any event the undertakings have been waived by the learned Master. 31 Additionally, it was accepted by the Master the affidavit was relevant material to be before the court on the determination of the arguments which the applicants will seek to have made for them. The contrary proposition is not established to my satisfaction. 32 Taking into account all those matters I consider that there are special circumstances present to support the waiver of the implied undertakings in respect of the 1991 Affidavit. 33 Turning to the Perpetual Documents, I consider it is not necessary for a separate finding to be made on each of the documents. That is because the case for the applicants will contend that the documents are relevant as a bundle through which evidence relating to the issue of conflict can be traced. I accept that the pages in issue in the Perpetual Documents contain evident places from which argument could be drawn in relation to that issue. 34 I reject the suggestion in the case for the receiver and manager that this Court should determine on this application whether in fact the Supreme Court of Western Australia is estopped by the findings of Carr J from examining the issue of conflict. The reply of the applicant makes apparent that it will contest the existence of estoppel in at least three respects. The first is that the findings were made by Carr J in the favour of the receiver and manager in a different capacity to that which he will appear before the Supreme Court; secondly, the findings identified in the contentions for the receiver and manager were not findings on ultimate issues; and thirdly, the reasons of Carr J in Boys at 27 show that he put the issue of conflict to one side. 35 The proper place for the argument on estoppel to be made is before the examining court. It is for that court to decide whether or not it is estopped in the manner which will be contended on behalf of the receiver and manager. The consequence is that the Perpetual Documents "might well influence the outcome" of the application if estoppel is not found. If it is found, they will be irrelevant. They can be produced in a way which ensures there is no access to them by the presiding judicial officer until any argument on estoppel is determined. 36 There is another relevant circumstance and that is that a significant portion of the Perpetual Documents namely, pages 162 – 177 inclusive are already in the public domain. It would appear that those documents could be better understood read together with the remainder of the Perpetual Documents. Conclusion 37 For these reasons I consider that both in relation to the Perpetual Documents and the 1991 Affidavit the implied undertakings should be modified as sought. It will be for the applicants in utilising the documents in the Supreme Court proceeding to ensure the documents are not made available to the judicial officer prior to the making of any argument that the officer estopped as a consequence of findings made in Boys. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson. Associate: Dated: 14 September 2001 Counsel for the Applicants: Mr J Garas Solicitor for the Applicants: Mallesons Stephen Jaques Counsel for the First Respondent: No appearance Counsel for the Second Respondent: No appearance Counsel for the Third Respondent: No appearance Counsel for the Fourth Respondent: Mr L Christensen Solicitor for the Fourth Respondent: Tottle Christensen Counsel for the Fifth Respondent: No appearance Counsel for Perpetual (by leave): Mr N Gentilli Solicitor for Perpetual: Jackson McDonald Date of Hearing: 12 & 13 September 2001 Date of Judgment: 14 September 2001