New South Wales Supreme Court CITATION : Bauhaus Pyrmont Pty Limited (In Liq) [2006] NSWSC 742 HEARING DATE(S) : 06/06/06 Written submissions: 26/06/06, 11/07/06, 13/07/06 JUDGMENT DATE : 25 July 2006 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Order for production of books and records. Interlocutory processes otherwise dismissed. No order as to costs. CATCHWORDS : CORPORATIONS - winding up - liquidators - attempt to invoke court's supervisory jurisdiction over liquidators in what are really questions of case management - exercise of liquidator's powers - whether abuse of process LEGISLATION CITED : Corporations Act 2001 (Cth), ss.530B, 536, CASES CITED : Burns Philp Investments Pty Ltd v Dickens (1993) 10 ACSR 626 Re Bauhaus Pyrmont Pty Ltd [2006] NSWSC 534 Andrew Timothy Roberts, Ross Arnold McDiven, Karen Maree Pederson - Applicants PARTIES : Andrew Hugh Jenner Wily - Respondent Multiplex Limited - Non-party FILE NUMBER(S) : SC 1486/06 COUNSEL : Mr S.A. Kerr/Mr P. Kuleski - Applicants and Multiplex Ltd Mr C.C. Branson QC/Mr G. Lucarelli - Respondent SOLICITORS : Clayton Utz - Applicants and Multiplex Ltd Landerer & Company - Respondent IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J TUESDAY, 25 JULY 2006 1486/06 IN THE MATTER OF BAUHAUS PYRMONT PTY LIMITED (IN LIQUIDATION) JUDGMENT 1 The main issue to be agitated in these proceedings is whether Mr Wily (whom I shall call "the liquidator") should be removed as liquidator of Bauhaus Pyrmont Pty Limited ("BP"). The proposition that he should be removed is advanced by three persons who were directors of BP up to 20 April 2002. Those persons were associated with the Multiplex Group by which all the shares in BP were sold on that date. The three persons in due course became the recipients of examination summons issued upon the liquidator's application. This appears to be the source of their interest in whether he should continue in office. 2 There have been a number of interlocutory applications. Several have already been disposed of (see, for example, Re Bauhaus Pyrmont Pty Ltd [2006] NSWSC 543). This judgment deals with three further interlocutory applications, being (a) an application expressed to be under s.536 of the Corporations Act 2001 (Cth) by the three persons just mentioned (Mr A.T. Roberts, Mr R.A. McDiven and Ms K.M. Pederson) for an order that the liquidator give them access to all of the accounting books and records of BP since 20 April 2002 (or, in the alternative, that the liquidator file and serve an affidavit as to what books and records are in his possession and the action or inquiries he has taken or made to gain access to, or possession of, such books and records) – "the Books and Records Application"; (b) an application also expressed to be made under s.536 by the same applicants for an order that the liquidator produce to them all documents containing records of "time incurred by" parties and staff of the liquidator's firm in relation to the winding up of BP – "the Time Sheets Application"; and (c) an application by a non-party, Multiplex Limited ("Multiplex"), for an order that it be joined as a party for the purpose of pursuing the application for an order that a notice served by the liquidator on Multiplex be set aside – "the Multiplex Application"). 3 I shall deal with these applications in turn. First, however, it is appropriate to say something about the way the Books and Records Application and the Time Sheets Application are advanced. As I shall mention in greater detail presently, Austin J made certain directions of relevance on 27 April 2006. It is clear that those directions were of a case management kind relevant to administration of the pre-trial phase of the proceedings in which removal of the liquidator is sought. In the subsequent interlocutory processes by which the Books and Records Application and the Time Sheets Application were initiated, however, the applicants purported to rely on s.536 of the Corporations Act. It is pertinent to set out that section in full: " Supervision of liquidators (1A) In this section: "liquidator" includes a provisional liquidator. (1) Where: (a) it appears to the Court or to ASIC that a liquidator has not faithfully performed or is not faithfully performing his or her duties or has not observed or is not observing: (i) a requirement of the Court; or (ii) a requirement of this Act, of the regulations or of the rules; or (b) a complaint is made to the Court or to ASIC by any person with respect to the conduct of a liquidator in connection with the performance of his or her duties; the Court or ASIC, as the case may be, may inquire into the matter and, where the Court or ASIC so inquires, the Court may take such action as it thinks fit. (2) ASIC may report to the Court any matter that in its opinion is a misfeasance, neglect or omission on the part of the liquidator and the Court may order the liquidator to make good any loss that the estate of the company has sustained thereby and may make such other order or orders as it thinks fit. (3) The Court may at any time require a liquidator to answer any inquiry in relation to the winding up and may examine the liquidator or any other person on oath concerning the winding up and may direct an investigation to be made of the books of the liquidator." 4 I would say several things about the purported resort to s.536 in this instance. That section is not an appropriate basis for action by a person engaged in litigation with a liquidator to achieve some particular objective in that litigation. The threshold question, when s.536 is invoked, is whether it has been shown that an inquiry by the court into conduct of the liquidator is warranted. Only if it appears to the court that some inquiry is necessary does it embark upon an inquiry. The relevant necessity will be seen to exist if the court sees, on the material presented, that "it would be in the public interest to conduct an inquiry": Burns Philp Investments Pty Ltd v Dickens (1993) 10 ACSR 626. It is true that, under s.536(3), the court may require the liquidator to give to it an account of matters related to the winding up. But that power is an aspect of the broader s.536 supervisory jurisdiction. It is not a power intended to be used to assist a particular person engaged in litigation with the liquidator to achieve any particular position in that litigation. Section 536 does not create a means to be employed by a litigant to advance the litigant's own interests in particular litigation. It has regard, rather, to the broader question of due administration of the winding up in the public interest. 5 I record these matters to emphasise two things: first, that, despite the purported reliance by the applicants on s.536, I have approached the Books and Records Application and the Time Sheets Application as no more than further steps, by way of renewed attempts to obtain discovery of documents, in the pre-trial phase of this particular litigation; and second, to make it clear that, despite the attempted invocation of s.536, the court is not, in reality, embarking upon (or even considering) an inquiry under that section into any matter. 6 I proceed to consider the several applications separately. The Books and Records Application 7 Austin J made on 27 April 2006 a direction or order that the liquidator give access to all the accounting books and records of BP in the possession of the liquidator or his solicitors. The liquidator purported to comply with that by means of delivery of certain documents on 1 May 2006. The applicants contend that the compliance was deficient. 8 That contention relates mainly to the position after 20 April 2002. It is said by the liquidator that BP did not trade after that date, being the date on which all shares in its capital were sold. The proposition that there were accordingly no documents after 20 April 2002 is not, however, borne out by the evidence of Mr Hamilton of the liquidator's firm. Events relevant to taxation occurred after that date. Mr Hamilton said in cross-examination on 6 June 2006 that all BAS statements in the liquidator's possession had already been produced to the applicants' solicitors. Certain BAS statements were, however, forwarded on 21 June 2006 together with an ATO "running balance account" to which he had referred in his evidence. 9 The applicants also point to the fact that BP brought proceedings in this court in July 2002, which proceedings would no doubt have generated costs and expenses, yet nothing relevant to those financial matters had been produced. It is said on the liquidator's behalf, however, that there is no evidence that BP itself (as distinct from the purchasers of the shares in it) paid those costs and expenses. It is to be noted that the judgment of Young CJ in Eq of 31 July 2002 contained a costs order against BP. Regardless of the practicalities of who paid, this must have led to some entry in a relevant book of account of the plaintiff. 10 Furthermore, documents produced to date show tax refunds in May, June and September 2002 of no less than $4,096,428 in total which must have been accounted for in some way. 11 These circumstances – and, in particular, the fact that BAS statements were forwarded on 21 June 2006 despite Mr Hamilton's evidence on 6 June 2006 that all had previously been provided – represent a sound basis for an apprehension that the liquidator may not have been fully diligent in complying with the earlier order made by Austin J. 12 The principal order sought in the Books and Records Application will be made, but not by reference to s.536. The Time Sheets Application 13 Again, directions or orders were made by Austin J on 27 April 2006. These required that the liquidator produce documents relating to records of time incurred by parties and staff of the liquidator's firm in relation to the winding up of BP. Again, the applicants say, there are good grounds for an apprehension that there has not been full compliance by the liquidator. 14 Certain documents were produced on 1 May 2006. They were computer printouts showing, by date, time entries for various persons and a brief narration (such as "reading re examination issues and meeting to discuss" and "dealing with court action"). The applicants initially maintained that this was deficient because paper timesheets should have been produced. Mr Hamilton explained in evidence, however, that paper timesheets are not kept and individuals enter their time directly into the computer from their desks. 15 The applicants also say that the production was deficient because the records produced were only for the period 1 December 2005 to 24 March 2006. That deficiency was, however, remedied on 5 June 2006 by the production of records up to 24 April 2006 (Austin J's order was made on 27 April 2006). The liquidator says that the delay in the production of these further records resulted from misunderstanding. The applicants say that it is of significance that the further records were produced only on the eve of the hearing of the present application. 16 The applicants next point out that no records have been produced for the period before 1 December 2005, despite the fact that the liquidator had assumed office on 23 September 2005. The applicants point to certain key events (including meetings), obviously involving time and effort within the liquidator's firm, that occurred between 23 September 2005 and 1 November 2005. Mr Hamilton's evidence is, surprisingly one might think, that work done before 1 December 2005 was done gratuitously; also that no diary, file or other notes were taken in relation to the events during this period. While, as I have said, that evidence is surprising, I have no real alternative but to accept it. 17 No further order for the production of time sheets will be made. The Multiplex Application 18 The relevant notice was served by the liquidator on Multiplex on 4 May 2006, that is, the day immediately after the filing of the interlocutory process embodying the Books and Records Application. It required production to the liquidator of an array of documents of BP, insofar as they were in Multiplex's possession or control. The documents sought are documents "of" BP. It is reasonably clear, therefore, that the liquidator based the notice on s.530B of the Corporations Act. Even though the document carries a reference to "Section 530A & 530B", its heading refers to "Section 530B(1), 530B(4) and 530B(5) oif the Corporations Act 2001". I therefore take the notice to be one intended to relate to "books" of BP, as defined by s.9, and based on s.530B(4): "The liquidator of a company may give to a person a written notice requiring the person to deliver to the liquidator, as specified in the notice, books so specified that are in the person's possession." 19 Multiplex says that the notice represents an abuse of process. It makes five points in support of that contention: 1. Multiplex established before Young CJ in Eq in 2002 that it held no further relevant records. 2. Multiplex passed all relevant documents in its possession to the new owners of BP when it was sold, or shortly thereafter. 3. Multiplex has, through its solicitors, so informed the liquidator (including by letter dated 5 May 2006). 4. The liquidator did not respond to that correspondence and simply pressed his claim. 5. Mr Widdup, one of the April 2002 purchasers, said in evidence in the 2002 proceedings that "a truckload of documents" had been produced by Multiplex to BP. 20 In those circumstances, Multiplex says, there was no cogent or sound basis for resort to s.530B by the liquidator of BP as against Multiplex. 21 In relation to items 1 and 5 above, it is necessary to say something more about the 2002 litigation. In those proceedings, BP sought an order that Multiplex deliver to it certain documents and records that BP claimed to be its property. The judgment of Young CJ in Eq (31 July 2002) does not describe all the documents sought. It describes only those then "still in dispute", of which there were apparently four categories. His Honour dismissed the application. He was not satisfied, on the balance of probabilities, on a number of matters. Among them was whether Multiplex still held relevant documents. He said in his judgment: "The plaintiff says that its documents, including documents in the categories noted above, were not handed over to the new shareholders and directors. The defendant has sworn that there are now no documents in those categories held by it. I should note that after interlocutory proceedings a large number of documents, I think thirty five lever arch files, were handed over, but just what those documents were I am not told, thought there is some reference to three of the folders in the affidavit of Mr Moylan." 22 The references to particular categories are references to the four categories that were still contentious when Young CJ in Eq had the matter before him. These related to a guarantee fee of $1,578,105.19, particular loans of $550,054, a consultancy fee of $750,000 and journal entries for the period 1 July 2001 to 20 April 2002. His Honour's finding can therefore be of only limited relevance in the present context, where the notice calls for more broadly-stated categories of "books". 23 In relation to items 2, 3 and 4 above, there is in evidence a letter of 5 May 2006 from Multiplex's solicitors to the liquidator's solicitors which was written very soon after service of the s.530B notice of 4 May 2006 and makes four points: (a) that the notice was presumably prompted by the Multiplex examinees' requests for access to the liquidator's books and records from 20 April 2002 (what I have called the Books and Records Application, filed on 3 May 2006); (b) that all documents relating to BP falling within the scope of the notice had been provided by Multiplex to BP on or before 31 July 2002, that being something of which the liquidator was "undoubtedly aware"; (c) this was confirmed by the judgment of Young CJ in Eq; and (d) Multiplex required the notice to be withdrawn forthwith "or we will have no alternative but to file a further interlocutory process". 24 Section 530B puts at liquidators' disposal means that are to be employed responsibly and for proper purposes. It is said by Multiplex that these implied boundaries were overstepped having regard to, first, the timing of the notice (which was given at a time when the Multiplex examinees were engaged in efforts to obtain access to documents held by the liquidator and had just filed the Books and Records Application) and, second, the findings of Young CJ in Eq. I am not satisfied that this is so. 25 As to the timing sequence, it is not without significance that the alternative order sought by the Books and Records Application was an order requiring the liquidator to detail steps taken by him to obtain books and records of BP. That may well have produced in the liquidator a quite legitimate and quite understandable desire to renew efforts in that direction so that, if he was required to depose to the steps taken, he could be seen to have done something that, in the circumstances, was among the fairly obvious precautions to take. 26 The decision of Young CJ in Eq and his findings as to documents already delivered related to particular classes of documents. I have already referred to the limited scope of those proceedings. His Honour did not make findings as to generality of the books of BP sought by the s.530B notice. 27 There is no apparent reason why Multiplex should not make due search and provide a considered response to the liquidator's notice. If it is found that nothing of the kind described in the notice is still held, well and good: Multiplex can give that assurance to the liquidator, having taken proper steps to confirm the position. If, on the other hand, due search results in something being found, then the notice will be seen to have been a means of assisting in the winding up. Either way, the notice stands to achieve something potentially useful. 28 The order sought by the Multiplex application will not be made. Conclusion 29 In the result, therefore, the only substantive order I shall make is Order 1 in the interlocutory process filed on 3 May 2006, that is, the Books and Records Application, as follows: Order that the respondent to the interlocutory process filed on 3 May 2006 give the applicants under that interlocutory process access to all of the accounting books and records of Bauhaus Pyrmont Pty Limited in relation to the period from and after 20 April 2002 in his possession. 30 Otherwise, the three interlocutory processes will be dismissed. 31 As to costs, I am of the opinion that this mixed outcome in circumstances where the three applications were heard together indicates that there should be no order for costs in relation to any of 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. 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