Reported Decision : [2000] 34 ACSR 685 New South Wales Supreme Court CITATION : Re Clutha Limited [2000] NSWSC 647 CURRENT JURISDICTION: Equity Division Corporations List FILE NUMBER(S) : SC 1187/2000 HEARING DATE(S) : 22/06/2000 JUDGMENT DATE : 22 June 2000 PARTIES : John Knox Doherty, Frederick W Millar, John M Armstrong, Charles R Longworth, Ernest N Scott, Donald G Thomas and Denis J Frew (Applicants) Timothy James Cuming (Respondent Liquidator) JUDGMENT OF : Young J COUNSEL : G Lucarelli (Applicants) C R C Newlinds (Respondent Liquidator) SOLICITORS : Minter Ellison (Applicants) Piper Alderman (Respondent Liquidator) CATCHWORDS : CORPORATIONS [319]- Winding up- Production of documents- Extent to which officer might be ordered to produce. LEGISLATION CITED : Corporations Law, s 597(9) Re BPTC Ltd (in liq) (1994) 14 ACSR 460 CASES CITED : Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301 Re Laurie Cottier Productions Pty Ltd (1992) 9 ACSR 513 Morton v Joynson (1999) 31 ACSR 76 DECISION : Notice of motion dismissed with costs. THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST YOUNG J THURSDAY 22 JUNE 2000 1187/2000 - RE CLUTHA LIMITED (NOTICE OF MOTION BY DOHERTY & ORS) JUDGMENT 1 HIS HONOUR: The notice of motion, as filed on 20 June 2000, sought declarations as to the true construction of s 597(9) of the Corporations Law. As debate continued, the application shifted to reviewing the decision of a Registrar to order that documents be produced at an examination of former company directors to take place before a Deputy Registrar next week. 2 The basal submissions of the directors are, as I understand them, that because of the great prejudice that could be caused to people who are completely innocent and the amount of time and expense that would have to be put in to comply with orders of this nature, when balancing the public interest of enabling liquidators to effectively conduct examinations, the Court should not order production of documents relating to directors' private affairs without first being satisfied that there is, in fact, some cause of action. 3 The way in which this Court has gone about the administration of Pt 5.9 of the Corporations Law has changed over the years. Initially, what happened was that the liquidator of a company approached a Master or Registrar in chambers with an affidavit indicating that there were some facts which would show that the examinee was able to give information about the company. The Master or Registrar then made an appropriate order which the Court, constituted by a judge, might review. Orders were then made for production of books, et cetera, at the examination. The examination was then conducted before a Master or Registrar or their deputy, and the person in charge of the examination made as sure as he or she could (I say that because of the constraints put on the person conducting the examination by the Corporations Law itself) that fairness was done to the examinee as well as fulfilling the public purpose of the examination. It is clear that in order to conduct an appropriate examination, the examinee ordinarily will need to be questioned about books and records. Where the books and records are the property of the company, nothing more need be said. 4 However, s 597(9) and its predecessors go wider than the books and records of the company, and extends to books in a person's possession which are relevant to matters about which the examination relates or will relate. 5 Now, we know that the examination is to concern the examinable affairs of the company (s 596A and s 596B) and that expression is defined in s 9 and s 53 of the Corporations Law. That expression includes the property of the company. The property of the company includes choses in action which the company has. 6 Mr Lucarelli, counsel for the applicants, puts that unless there is prima facie evidence before the Registrar ordering the examination that there is a cause of action, then the Court has no power to order an examination or to require production of documents. However, the authorities show that this is too limited a view. 7 In the authorities referred to by Mr Newlinds, for the respondent liquidator, one constantly gets expressions such as in Re BPTC Ltd (in liq) (1994) 14 ACSR 460, 461 that an examination involves the nature and value of the claims that there is property of the company about which the examinee may have information to aid the liquidator in doing his job. 8 The material before me suggests that the liquidator claims that the trading position of the company in its dying days was such that there may be a claim against the then directors for personal liability for trading whilst the company was insolvent. It is not suggested for a moment that that is a watertight case. It is a matter which the liquidator says that he wishes to investigate. Prima facie that would seem proper. 9 There was some material put before me that if the liquidator had to pay for the examination out of his own pocket or from the pockets of the unsecured creditors, he might not proceed with the examination. However, because he has been funded, he intends to do so. That is said, somehow or other, to be improper or unwise. That is really a tangential issue in the case before me. In any event the point was decided adversely to the plaintiff in Re Laurie Cottier Productions Pty Ltd (1992) 9 ACSR 513. 10 Once one understands that property within s 53 and allied sections extends to claims to property at least bona fide made, it follows from cases such as Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301, 307 where the Full Federal Court discusses the authorities, and the subsequent Federal Court decision in Morton v Joynson (1999) 31 ACSR 76, particularly at 87, that the examination may relate not only as to material which will indicate to the liquidator whether or not he should pursue the claim as to its merits but also as to whether, if the claim succeeds, it is likely to produce any cash. 11 However, essentially the question as to whether documents should be produced is a decision to be made by the person conducting the examination. The Court constituted by a judge retains its supervisory jurisdiction. Furthermore, there is always an opportunity for people who are aggrieved by a liquidator's decision to ask the Court to give directions to the liquidator, or for the liquidator himself to seek directions. 12 However, subject to that, it is for the person conducting the examination to see whether, in fairness, the books that are the subject of a demand should be produced or not. The question is whether those books are relevant to matters to which the examination relates or will relate. 13 This is analogous to the case of a subpoena. When one is issuing a subpoena one is not limited to matters that go to the merits of the case. One may also issue subpoenas to deal with credit, for instance a witness' previous criminal record, or matters which forensically counsel may wish to investigate before concluding the cross-examination. All these matters are set out in Moffatt J's paper in Glass' Seminars on Evidence (LBC, Sydney, 1970) at page 10. 14 If prima facie or on the voir dire the Deputy Registrar considers that forensically such documents are proper to be produced to the Court the notice must be answered. Cross-examining counsel is entitled to documents relevant to the examination even though they deal with matters that do not directly affect the property of the company, the books of the company, or even matters dealing with the value to the company in hard cold cash at the end of the day of all the claims which might be pursued. 15 Obviously there are areas where this can act oppressively. Although this type of question was flagged early in the hearing of this motion, the flavour I got from the discussions between counsel is that matters of this nature can, to a great degree, be worked out between the parties. The liquidator is very well aware of the problems which might occur for professional directors of a large number of companies if every possible piece of paper that the liquidator could seek was compelled to be produced. Accordingly, I do not think that I need take that matter any further. 16 Mr Lucarelli asked me to adjourn this notice of motion so that if problems did arise they could be dealt with. However, I think it is better to finally determine the motion so that anyone aggrieved can appeal, so that the liquidator and the Deputy Registrar have some guidance and, if there is a problem that arises during the examination, that can be dealt with by the Corporations List Judge, the Duty Judge or myself, whoever happens to be best placed to entertain the matter. 17 I note that the notice of motion is to be amended and the formal notice of motion is to be filed by noon tomorrow. 18 Subject to that, the motion should be dismissed with costs. The exhibits should be retained. ******************* Last Modified: 09/26/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.