New South Wales Supreme Court CITATION : Williamson & Ors v Chamberlain [2006] NSWSC 178 HEARING DATE(S) : 13 March 2006 JUDGMENT DATE : 13 March 2006 JURISDICTION : Equity Division JUDGMENT OF : Windeyer J at 1 EX TEMPORE JUDGMENT DATE : 03/13/2006 DECISION : Books and records of company in liquidation may be inspected by the three named persons. CATCHWORDS : CORPORATIONS - companies in liquidation - application under s486 of Corporations Act 2001 - evidence in support extraordinarily weak - no high hurdle - application granted LEGISLATION CITED : Corporations Act 2001, s486 Paul Edward Williamson & C L Williamson (First Plaintiffs) Estate of EH, SJ & DE Bruest (Second Plaintiff) M H Bullock (Third Plaintiff) CR & RL Eulenstein (Fourth Plaintiff) R J Henwood (Fifth Plaintiff) PARTIES : L J & B M Klemke Pty Limited (Sixth Plaintiff) E C & C E Turner (Seventh Plaintiff) B & M Liston (Eighth Plaintiff) Lynwool Pty Limited (First Defendant) Anthony Peter Lyons (Second Defendant) Michael Peter Lyons (Third Defendant) FILE NUMBER(S) : SC 6548 of 2005 Ms N Obrart (Plaintiffs) COUNSEL : Mr N Carter (First Defendant - submitting appearance) Mr M G McHugh (Second and Third Defendants) Foleys (Plaintiffs) SOLICITORS : K P Farmer & Associaties (First Defendant) Walsh & Blair (Second and Third Defendants) - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WINDEYER J MONDAY 13 MARCH 2006 6548/05 PAUL EDWARD WILLIAMSON & ORS v CHRISTOPHER M CHAMBERLAIN JUDGMENT 1 HIS HONOUR: By amended summons filed on 23 December 2005, on behalf of eight listed plaintiffs, an order is sought that the liquidator of the company Lynwool Pty Limited permit the plaintiffs to inspect the books and records of the defendant company. There is sought in the alternative a declaration that the liquidator is empowered to permit the inspection by the plaintiffs of the books and records of the company, but that is not pursued, and nothing further needs to be said about it. 2 The claim is pursuant to s486 of the Corporations Act 2001. Under that section the court may make an order for inspection of the books by creditors and contributors as the court thinks just. There is a remarkable lack of appropriate and perhaps necessary evidence in this matter. For instance, while there are listed eight plaintiffs, most of those plaintiffs appear to be members of partnerships, but there is no evidence to suggest that they are. There is evidence on behalf of Mr Williamson, Mr Breust and Mr Turner, that they are creditors rather than being members of partnerships which are creditors. There is no real evidence about the conduct of the liquidation, nor of the liquidator's last report to creditors. 3 The three persons who have put on affidavits make their claim on the basis that the company may have been insolvent while trading for some period prior to the commencement of its winding up. The liquidators were appointed on 15 May 2003. Whether this was following an administration or whether they were appointed by a court winding up order is not shown by the evidence. 4 So far as Mr Williamson is concerned, he claims as a creditor the sum of $13,977.48, as the purchase price of wool sold by him to the now defunct company about one week prior to its going into liquidation, which he calls "receivership" in his affidavit. 5 So far as Mr Breust is concerned, he claims that he sold wool to the defendant company for a sum of $42,462.00 on 1 and 2 May, namely, within two weeks of the winding up. Mr Turner claimed that he sold wool on 14 April 2003. The cheques in payment for these three sales were all dishonoured on presentation, because the bank, so far as the evidence goes, had been told that an administrator was to be appointed, and that, therefore, the arrangements which it had agreed to enter into for continued overdraft facilities, were not to go ahead. 6 It is fair to say that the evidence in support of this application is extraordinarily weak, but I have come to the conclusion that it is not just a fishing expedition. Two of the deponents said that at a meeting of creditors Mr Chamberlain, who is one of the liquidators, said that he thought the company might have been trading while insolvent for a short time, but he didn't know for how long. That is the only basis which could ground the application. 7 The order obviously cannot be made in favour of the plaintiffs because there is no evidence that all of them are creditors. The evidence on behalf of the three named persons in itself shows that they may be creditors as members of various partnerships, presumably farming partnerships, either with their wives or with other persons. 8 I do not think that there is any high hurdle over which creditors must jump before an order under s486 of the Corporations Act can be made. I consider that a basis has been made out for the making of an order, but for obvious reasons, the books of the company, which ought to be made available for inspection, must be limited to the last twelve months of the period up to the date of the winding up. I propose to make that order. I also propose to make an order that the expenses of the liquidator in making the documents available for inspection pursuant to that order, be paid by the plaintiffs. 9 The only thing then is to consider whether or not some order should be made for the costs of the present proceedings, other than there should be no order as to costs. (Mr McHugh sought costs up to 17 February on the basis that before that time there was no evidence whatsoever. Objected to.) 10 So far as the costs between the plaintiffs and the defendants other than the company are concerned, the position is somewhat strange. There is no evidence as to the identity of those defendants, namely, whether or not they are directors or some other officers of the defendant company. There is no particular basis, as I understand it, on which it was necessary to name them as defendants, but having said that, the fact is they appeared by counsel today to oppose the making of an order. 11 In ordinary circumstances, when persons who perhaps need not have been joined as defendants come to court to oppose the orders sought, then they must be taking some risks as to costs in doing so. However, it does seem to me that having regard to the extraordinary manner in which this matter has been brought before the Court, including the identification of the second and third defendants, and the identification of the plaintiffs, and the fact that most of the plaintiffs, on the evidence, could not obtain the order which was sought, the second and third defendants had a basis to be here, and I think the appropriate order is that the plaintiffs pay 25 percent of the costs of those defendants, and I propose to make that order. 12 I give leave to the plaintiffs to bring this action against the company in liquidation. Order that the first defendant through its liquidator produce for inspection by Messrs P E Williamson, Peter Breust and Eric Clive Turner, the accounting books and records of the first defendant for the twelve months prior to the date of the winding up. The claim of the plaintiffs, other than the three persons named, be dismissed. 13 Order the three named persons pay the proper expenses of the liquidator incurred as a result of the order for inspection. Order the plaintiffs pay 25 percent of the costs of the second and third defendants of the proceedings. ********** 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.