FEDERAL COURT OF AUSTRALIA Photosprint Australia Pty Ltd (Receiver & Manager Appointed) (In Liquidation) [2004] FCA 1504 CORPORATIONS – liquidation – receiver and manager – duty to provide information to liquidator Corporations Act 2001 (Cth) ss 530A, 530B E R S Engines Pty Ltd v Wilson (1994) 35 NSWLR 193 cited Gomba Holdings UK Ltd v Homan [1986] 1 WLR 1301 cited Pearse v Green (1819) 1 Jac & W 135 cited Smiths Ltd v Middleton [1979] 3 All ER 842 cited Turner v Burkinshaw (1867) LR 2 Ch App 488 cited IN THE MATTER OF PHOTOSPRINT AUSTRALIA PTY LTD (RECEIVER & MANAGER APPOINTED) (IN LIQUIDATION) GREGORY STUART ANDREWS (AS LIQUIDATOR OF PHOTOSPRINT AUSTRALIA PTY. LTD. (RECEIVER & MANAGER APPOINTED) (IN LIQUIDATION) V MARTIN JOHN GREEN (AS RECEIVER & MANAGER OF PHOTOSPRINT AUSTRALIA PTY LTD. (RECEIVER & MANAGER APPOINTED) (IN LIQUIDATION) V1217 of 2004 FINKELSTEIN J 23 NOVEMBER 2004 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 1217 of 2004 In the matter of Photosprint Australia Pty Ltd (Receiver & Manager Appointed) (In Liquidation) BETWEEN: GREGORY STUART ANDREWS (as Liquidator of Photosprint Australia Pty. Ltd. (Receiver & Manager Appointed) (In Liquidation) Plaintiff AND: MARTIN JOHN GREEN (as Receiver & Manager of Photosprint Australia Pty. Ltd. (Receiver & Manager Appointed) (In Liquidation) Defendant JUDGE: FINKELSTEIN J DATE OF ORDER: 23 NOVEMBER 2004 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The application be dismissed. 1. The defendant pay half the plaintiff's costs of the application, such costs to be taxed on a party and party basis. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 1217 of 2004 In the matter of Photosprint Australia Pty Ltd (Receiver & Manager Appointed) (In Liquidation) BETWEEN: GREGORY STUART ANDREWS (as Liquidator of Photosprint Australia Pty. Ltd. (Receiver & Manager Appointed) (In Liquidation) Plaintiff AND: MARTIN JOHN GREEN (as Receiver & Manager of Photosprint Australia Pty. Ltd. (Receiver & Manager Appointed) (In Liquidation) Defendant JUDGE: FINKELSTEIN J DATE: 23 NOVEMBER 2004 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 This is the last phase of an unseemly dispute between a liquidator and a privately appointed receiver, a dispute, which has now been resolved, apart from the costs. To resolve that issue (which I must do) requires some investigation into the merits of the dispute. 2 The background can be described briefly. The plaintiff is the liquidator of Photosprint Australia Pty Ltd (Receiver & Manager Appointed) (In Liquidation). The company's assets, including its books and records, are under the control of the defendant, the receiver and manager appointed at the suit of a secured creditor. The liquidator requires information about several aspects of the receivership in order, so it is said, to effectively deal with matters raised in the winding up. One aspect concerns the manner in which the receiver has dealt with the company's business; the receiver sold the business for a nominal sum to the secured creditor. The liquidator intends to discover whether the receiver sacrificed the asset. 3 On 8 December last, the liquidator wrote to the receiver. He requested copies of certain documents and answers to a number of questions. In particular, the liquidator asked for a copy of the "profit/loss account" of the receivership, a list of payments made to priority and/or secured creditors, a copy of the agreement pursuant to which the business was sold to the secured creditor and a copy of the information memorandum prepared for distribution to persons interested in purchasing the business. With respect to information, the liquidator inquired whether money paid to the secured creditor represents the proceeds of the sale of fixed assets, sought details of payments to employees, asked to be given the names of all persons who had expressed an interest in purchasing the company's business and sought details of the receipt of $415,651.79 which appears to have been paid by the secured creditor. 4 The receiver responded through his solicitors. In their first letter the solicitors advised that the receiver had already provided the liquidator with certain information "despite having no obligation to do so" and that upon the receiver's retirement "any documents which constitute the books and records of the company will be delivered to [the liquidator]". The letter went on to say that "[t]o the extent that those documents do not answer the request made in any of your letters, we assume that you will seek legal advice with respect to the avenues available to you (if any) to obtain such information". In their second letter the solicitors stated that "[a]s the receivership is all but complete, we suggest that [the liquidator] reconsider (sic) [his] request once [he] has the company's documents, which will be delivered up on the receiver's retirement. If after considering those documents [the liquidator] feels that there is still some need (and basis) for his request, the matter can be discussed further." 5 These responses were both unhelpful and unsatisfactory. The solicitors overlooked the fact that the receiver is an officer of the company (see the definition of an officer in s 9 Corporations Act 2001 (Cth)) who, under s 530A(3), "must do whatever the liquidator reasonably requires [him] to do to help in the winding up". They also ignored s 530B(2)(a), which provides that a liquidator is entitled to inspect and make copies of all the company's books and records that are in the receiver's possession. True it may be that the liquidator's request does not identify s 530A as a source of obligation that requires the receiver to provide information, which would assist in the winding up. Nor did the liquidator seek inspection under s 530B of the company's books and records; he sought copies of documents forming part of those books. Nevertheless, the receiver's refusal to provide any assistance, or make available copies of any documents, was not founded on these points. The solicitors' letters reflect, so it seems to me, a general attitude that the receiver would provide as little information as possible to the liquidator. 6 In adopting this attitude, the receiver also overlooked his duties as agent of the company. In addition to his duties under the statute the receiver has an obligation in equity to account to the company in respect of his dealings with the company's assets and produce the accounts and all documents relating to the company's business when called upon to do so: Pearse v Green (1819) 1 Jac & W 135; Turner v Burkinshaw (1867) LR 2 Ch App 488, 491-492; Smiths Ltd v Middleton [1979] 3 All ER 842, 847. (The obligation does not cover the receiver's other documents, such as those which have come into existence for the purpose of providing advice or information about the receivership). The receiver is also under a duty to provide the liquidator with information, other than that which may be injurious to the secured creditor: Gomba Holdings UK Ltd v Homan [1986] 1 WLR 1301, 1307. 7 Despite this protection, however, the receiver did provide the liquidator with some of the requested information (for example through his published accounts) before the application was filed and by the time of the hearing, had agreed to provide the balance. On one view this involved a degree of generosity. The liquidator's application was grounded upon the statute and not on his rights in equity. For this reason the application may have failed for want of proof. For example, the liquidator did not explain why he needs the requested information for the purposes of the winding up: E R S Engines Pty Ltd v Wilson (1994) 35 NSWLR 193, 198. Moreover, on a proper reading of s 530B the liquidator is only entitled to inspect and make his own copies of documents which are in the possession of the receiver, not obtain copies of them from the receiver. On the other hand, it was inevitable that, in due course, the liquidator would get to see the documents and obtain the information he was after. In all the circumstances I think that the receiver should pay half the liquidator's costs of this unnecessary piece of litigation. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein. Associate: Dated: 23 November 2004 Counsel for the Applicant: Mr M Lapirow Solicitor for the Applicant: Davies Moloney Counsel for the Respondent: Mr A Hanak Solicitor for the Respondent: Dibbs Barker Gosling Date of Hearing: 3 & 10 November 2004 Date of Judgment: 23 November 2004