New South Wales Supreme Court CITATION : Nicou v Ngan [2005] NSWSC 570 HEARING DATE(S) : 15 June 2005 JUDGMENT DATE : 15 June 2005 JURISDICTION : Equity JUDGMENT OF : Campbell J DECISION : Notice to Produce not set aside. Order limiting use made of documents. CATCHWORDS : CORPORATIONS - winding up - liquidator who is party to proceedings ordered to pay costs - application for liquidator to be denied indemnity from the company's assets for his own costs and the costs he has been ordered to pay - notice to produce documents relating to costs incurred - whether appropriate to set aside notice to produce - whether appropriate to order limit on use made of documents produced LEGISLATION CITED : Corporations Act 2001 (Cth) National Employers' Mutual General Association Ltd v Waind & Hill [1978] 1 NSWLR 372 CASES CITED : Nicou v Ngan [2005] NSWSC 446 Maria Nicou - First Plaintiff Arun Sunil Robert Lobo - Second Plaintiff PARTIES : Peter Ngan - First Defendant Heritage Fine Wines Pty Ltd (in liquidation) - Second Defendant FILE NUMBER(S) : SC 2343/05 M R Aldridge SC - Plaintiffs COUNSEL : M R Gracie; L Chan - Defendants MBP Legal - Plaintiffs SOLICITORS : NRG Legal - Defendants LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST CAMPBELL J WEDNESDAY 15 JUNE 2005 2343/05 MARIA NICOU & ANOR v PETER NGAN & ANOR JUDGMENT – Ex Tempore 1 HIS HONOUR: I gave a judgment in this matter on 4 May 2005: Nicou v Ngan [2005] NSWSC 446. The proceedings are ones which were begun on 8 April 2005, seeking the removal of Mr Ngan as liquidator. As explained in my earlier judgment, in the course of submissions Mr Ngan decided, for reasons which I have there recorded, that it would be appropriate for him to resign. Ultimately, Mr Crouch was appointed as liquidator of the company. 2 On 4 May 2005 the plaintiffs, who are two creditors of the company, sought and obtained a costs order. They also submitted that the proceedings should be stood over to enable the question of the liquidator's entitlement to indemnity from the assets of the company for his own costs, and for any costs he might be ordered to pay to the plaintiff to be investigated. I indicated that there was some complexity about that question, which made it an inappropriate one to deal with in a summary fashion on 4 May. I therefore stood over any question of whether the defendant should be entitled to indemnity from the company, either for his own costs, or for the costs which he has been ordered to pay to the plaintiffs. 3 The company is one to which Mr Ngan was appointed first as administrator, then as liquidator. The type of liquidation which has resulted from the administration ending in liquidation is a creditors' voluntarily winding up. 4 The Notice of Motion before me today is one which seeks to set aside two Notices to Produce. One of the Notices to Produce is directed to the solicitors for Mr Ngan, requiring them to produce, broadly, all documents and any tax invoices issued to the company or Mr Ngan in relation to the provision of legal services for the period 8 April 2005 to 4 May 2005 concerning these proceedings. The other Notice to Produce is one directed to Mr Ngan himself. It requires him to produce all documents in relation to work undertaken, rendered or remuneration paid to his firm by the company in these proceedings, and also in some other related proceedings, 2539 of 2005, whether as voluntary administrator, or as liquidator. The period for which those documents are sought is a period from 8 March 2005 to 4 May 2005. 8 March 2005 was the date of the first meeting of the creditors. While there are some other paragraphs of the Notice to Produce, the theme is broadly the same, in relation to each of them. 5 The application which is made concerning Mr Ngan being disentitled to indemnity for his own costs and for the costs he has been ordered to pay is an application which differs from the usual type of application for costs which arises in litigation. It is, in substance, an application which relates to the internal administration of the liquidation, although the subject matter of it is this litigation. 6 I have discussed with counsel today some questions which arise in my mind about whether it is appropriate for such orders to be made, in circumstances where the usual way in which these applications would be made, by there being first an application for remuneration and approval of expenditure to the creditors, and then an application to this Court if there were to be anyone dissatisfied with what had been decided by the creditors, has not been gone through. I refer here to McPherson Law of Company Liquidation 4th Edition page 297 to 305. An alternative way in which the conduct of a liquidator concerning litigation is sometimes challenged is by there being proceedings which enquire into the conduct of a liquidator, under section 536 Corporations Act 2001 (Cth). Usually, the Court will not engage in such proceedings under section 536, without there being shown some at least prima facie ground for the Court doing so. The present case might possibly be different to the usual application under section 536, because of the intimate connection of this application with the litigation which the Court has already heard. 7 Both counsel appearing today agreed that an expeditious way of dealing with the matter was to assume that the Court had power to deal with the application which has been brought, and to deal with the Notice to Produce on that assumption, leaving to the final hearing the question of whether the Court has the power, and if it has, whether it should exercise the power, to make this sort of an order relating to costs at this stage of the proceedings and of the liquidation. 8 One of the submissions which the plaintiff wishes to make is that the conduct of the litigation has been extravagant, and that, for that reason, the liquidator should be denied his indemnity. When that is the basis upon which the application is intended to be put, the material which is sought is in my view relevant. When I say it is relevant, I mean that it is relevant in the attenuated sense which has been laid down in National Employers' Mutual General Association Ltd v Waind & Hill [1978] 1 NSWLR 372 as being the appropriate test for the validity of a claim to have documents produced under subpoena or other compulsory process. 9 One of the arguments which Mr Aldridge SC wishes to put is that the conduct of proceedings 2539 of 2005 is relevant to the present orders sought. Those proceedings were, it seems, an application by the liquidator to the Court for directions. They will result in there being some costs chargeable. The total of the costs chargeable is something which the plaintiff wishes to rely upon in support of a submission that extravagance is something which needs to be measured, not by reference just to the quantum of money spent or type of work which has been carried out in these present proceedings, but also by reference to the available resources in the liquidation. The quantum of costs chargeable in proceedings 2539 of 2005 will, he submits, be relevant to that. When that is the argument which is sought to be put, it seems to me that there is sufficient relevance in the documents for present purposes. It is not suggested that production of the documents relating to 2539 of 2005 would be unreasonably onerous. 10 Mr Gracie, counsel for Mr Ngan, submitted that no challenge had been made, in the proceedings themselves, to the bona fides of Mr Ngan in taking the appointment, or indeed in any other way, and that in consequence it was too late to raise any such claim now. If this were an ordinary costs application in litigation, there would be much to be said for Mr Gracie's submission. However, as the application is in substance an application relating to the internal administration of the liquidation, which has the litigation as its subject matter, it seems to me that the situation is different. Evidence would be needed to found the allegation of extravagance, appropriate notification would need to be given of any basis upon which it was to be contended that Mr Ngan should be denied the indemnity that a liquidator ordinarily has and at that stage he would have the opportunity of putting any material which he wished. 11 In my view it is not an appropriate case in which to set aside the Notices to Produce. 12 As a fall back position Mr Gracie submits that if the documents are produced, they should be produced subject to an order whereby the plaintiffs and their legal advisors will not otherwise than for the purposes of these proceedings, divulge any of the information contained in the documents to any other person. Ordinarily in litigation there is an implied undertaking to much the same effect as this. However, Mr Gracie says that there is doubt about whether that implied undertaking continues to apply once the documents have been tendered in evidence. He is concerned that as a consequence of the issue of these Notices to Produce, and the tender at the trial of documents produced, documents which might otherwise remain private to Mr Ngan will be given a wide currency. 13 Ordinarily, that sort of concern is one which is adequately dealt with by the making of confidentiality orders concerning evidence which is tendered at the trial, if there is a basis for such an order being made. I think that the present case is one which is out of the ordinary, however. The way in which it is out of the ordinary is because of the way that there is at present an undecided question about the appropriateness of the relief which has been sought, and the question of whether the Notices to Produce should be set aside is being considered on the assumption that that question is answered in one particular way. 14 In my view it would not be an appropriate exercise of the Court's compulsive powers to allow a situation to arise where documents produced pursuant to the Notice to Produce are tendered at a hearing, and for the Court to then decide that the orders sought were ones which were inappropriate to make, but for the documents to have got into the public domain as a result of the hearing having occurred. In my view, it is appropriate to impose the condition which Mr Gracie seeks, on the basis that if, at the hearing, it is decided that the orders are ones which are appropriate to apply for, the question of revoking the condition can then be addressed afresh. In that way, no one will gain any advantage from the expedient way in which the question of the validity of the Notice to Produce has been dealt with. 15 I dismiss the Notice of Motion seeking to set aside the Notices to Produce. I order that, until further order, except with the leave of the Court, the plaintiffs and their legal advisors will not, otherwise than for the purpose of the matters presently before the Court in proceedings number 2343 of 2005, divulge, communicate or refer to any person any information obtained from inspection of any document or thing produced to them pursuant to either of the Notices to Produce referred to in the Notice of Motion filed 20 May 2005 or a copy of any document or thing so produced to, or inspected by, them. ********** 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.