New South Wales Supreme Court CITATION : Parbery re Trio Capital Limited [2010] NSWSC 775 HEARING DATE(S) : 12/07/10 JUDGMENT DATE : 12 July 2010 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J EX TEMPORE JUDGMENT DATE : 12 July 2010 1. Order pursuant to Section 597(4) of the Corporations Act, any portion of the public examinations of Mr Shaun Richard and Mr Eugene Liu that in senior counsel for the liquidators' opinion will or may involve the disclosure of the documents or involves the witness being asked questions by direct reference to a document the subject of the undertakings given by the liquidators to ASIC dated 7 July 2010 be held in private with no persons present other than court officials and those people referred to in paragraph 3(b)(b) of the said undertaking. DECISION : 2. Direct those parts of the transcript of the examination recording those portions of the examination held in private pursuant to order 1 be kept confidential to those same persons and not be published by any other person. 3. Grant any person liberty to apply in relation to these orders or their implementation on short notice. CATCHWORDS : CORPORATIONS - examinations by liquidators and others - applications for examinations (or part thereof) to be in private - need for special circumstances to be shown - no special circumstances warrant whole being in private - special circumstances warrant part being in private - relevant part is any part involving disclosure content of documents obtained by Australian Securities and Investments Commission from Securities and Futures Commission of Hong Kong under inter-agency confidentiality regime LEGISLATION CITED : Corporations Act 2001 (Cth), s 596B, 597(4) Evidence Act 1995, s 75 CATEGORY : Procedural and other rulings Friedrich v Herald and Weekly Times Ltd (1990) VR 995 CASES CITED : John Fairfax Publications Pty Ltd v District Court of New South Wales [2004] NSWCA 324; (2004) 61 NSWLR 344 Re Trio Capital Ltd [2010] NSWSC 454 PARTIES : Stephen James Parbery, Neil Singleton and Nicholas Martin in their capacity as liquidators of Trio Capital Limited, Astarra Fund Management Pty Limited, and ASI Administration Pty Limited - Plaintiffs FILE NUMBER(S) : SC 2010/11359 Mr C R C Newlinds SC/Mr R M Foreman - Liquidators COUNSEL : Mr S T White SC - Mr Richard Mr W L Keller - Mr Liu Mr A T S Dawson - John Fairfax Publications Pty Ltd - Leave to be heard without becoming a party SOLICITORS : Norton Rose Australia - Liquidators J N Legal Solicitors - Mr Richard IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J MONDAY 12 JULY 2010 2010/011359 STEPHEN JAMES PARBERY & 2 ORS AS LIQUIDATORS OF TRIO CAPITAL LIMITED & 2 ORS JUDGMENT 1 I have before me applications concerning examinations under s 596B of the Corporations Act 2001 (Cth) scheduled to commence tomorrow. The relevant examination summonses were issued on the application of the Part 5.3A administrators of Trio Capital Ltd, Astarra Funds Management Pty Limited and ASI Administration Pty Limited, which I shall call the "Trio companies". Those companies are now in liquidation and the former administrators are now the liquidators. 2 The examinees in question are Mr Richard and Mr Liu. Each appears to be a former officer of one or more of the Trio companies, but ceased to hold office some time ago, yet is judged by the liquidators to be likely to be able to provide information of value concerning the examinable affairs of the companies. The liquidators and Mr Richard and Mr Liu were each separately represented by counsel. Leave was granted to John Fairfax Publications Pty Limited to be heard on the applications without becoming a party. 3 The first application is an application by the liquidators for an order that part of each examination, that is the examinations of Mr Richard and Mr Liu, take place in private. The part in question consists of any part in which questions relating to certain documents are asked and answered. The second application is an application by Mr Richard. He seeks an order that the whole of his examination take place in private. The third application, advanced by his counsel orally, and without any evidence, is an application by Mr Liu that the whole of his examination take place in private. 4 The liquidators' application is not opposed by Mr Richard or Mr Liu; nor is it opposed by Fairfax. The applications of Mr Richard and Mr Liu are opposed by both the liquidators and Fairfax. 5 I deal first with Mr Liu's application because there is no evidence in support of it and no articulation of grounds. The oral application thus has no substance and will be dismissed. 6 In relation to the other two applications the question must be approached by reference to s 597(4) of the Corporations Act: "An examination is to be held in public except to such extent (if any) as the Court considers that, by reason of special circumstances, it is desirable to hold the examination in private." 7 The general nature of the question before me is suggested by observations of the Court of Appeal of Victoria in Friedrich v Herald and Weekly Times Ltd (1990) VR 995, at page 1003: "There can be little doubt, therefore, that an examination in public, in contrast to one in private, is seen as the norm under the present legislation. One may venture some opinions as to why this is so. The legislature must have seen it to be desirable that, whenever an examination is ordered, it should be given as much publicity as the matter deserves. Since no dispute is resolved upon the hearing of an examination, the benefit must be seen in the general publication of the proceedings, whether by press, radio, television or by word of mouth. Not only might that lead to the possibility of further information being provided from other sources to the liquidator or other person in control of the company, but the risk that improper activities of company officers might thereby be spread abroad may have been thought as some form of deterrence to them: cf. McPherson on Company Liquidation, 3rd ed., p. 431. One may doubt that the more thick skinned of the company "sharks" of this world would be especially conscious of the risk of examination, but at least the possibility of public examination may be seen as part of the price paid for the privilege of incorporation and the right to transact business as a company, albeit that the price is usually paid by those who become directors or officers of that company. However, it is not for this court to query the policy of the statute, whatever views one may have as to the need for a public examination for the purposes of para(b) of subs(2)." 8 It follows from the terms of the legislation and the philosophy stated by the Court of Appeal of Victoria that the court cannot order that an examination or any part of it be conducted in private unless it is satisfied that there are "special circumstances" by reason of which it is desirable that the examination be held in private. A positive case of the desirability of examination in private must, therefore, be established by reference to "special circumstances". 9 I deal now with Mr Richard's application for an order that the whole of his examination be held in private. As I said, that application is opposed by both the liquidators and Fairfax. The confidential affidavit of Mr Richard puts forward matters in support of the proposition that relevant special circumstances exist. I do not intend to refer in any explicit way to the content of the affidavit. It is sufficient to say there are two themes, one of fear of personal harm and the other of a medical condition in the form of stress. 10 It was put on with behalf of the liquidators and Fairfax that a very great deal of the content of the affidavit consists of hearsay and in some places hearsay upon hearsay, and should be given little weight, although it is noted that on this interlocutory application s 75 of the Evidence Act 1995 makes hearsay material admissible. I accept the submission concerning weight. 11 In any event, if the evidence of Mr Richard about fears for his safety is taken at its highest, it establishes, in my view, that the matters giving rise to the fears lie very largely in the past, and while the circumstance that the examination is to be held may exacerbate matters, there is really nothing in the affidavit on which one could find an examination in public will produce a greater risk or valid apprehension of risk than an examination in private. 12 Mr Richard, on this application, does not seek to be excused from being put into a position where he must answer questions. Rather, he says, that he should be allowed to answer them in private (and, therefore, in circumstances where they cannot receive publicity) rather than in public where they can be the subject of media report and other comment. 13 The content of his affidavit regarding fears for his safety does not, on my assessment, distinguish between compulsion to answer questions in public and compulsion to answer questions in private. If the fears are well based, the form of the examination which he makes disclosures which he thinks may bring harm to him makes no difference. 14 As I said, on this application it is not a matter of whether Mr Richard should be examined at all, it is a matter of whether the examination should be ordered to be in private rather than take the normal course of being held in public. It is in that context I have said what I have said. 15 As to Mr Richard's health, he says himself that he is suffering from stress which has manifested itself in certain symptoms. He attached to his affidavit a letter from a doctor, now 14 days old. It is apparently a copy of a referral to a neurologist, and apart from referring to a blood pressure reading, does no more than refer to "a lot of work associated stress". One would venture to say that stress for examinees is a familiar and normal by-product of liquidators' examinations undertaken in the ordinary way. 16 I am not satisfied that special circumstances exist in relation to Mr Richard by reason of which it is desirable that his examination be wholly in private. It is for him to prove the existence of special circumstances and to persuade the court that those circumstances warrant a displacement of the north statutory regime of the examination in public. He has not done this. 17 I turn now to the liquidators' application, which is for an order under s 597(4) directing there be conducted in private any portion of the examinations of Mr Richard and Mr Liu that in the opinion of senior counsel for the liquidators will or may involve the disclosure of certain documents or involve the examinee being asked questions by direct reference to any such document. 18 This application is not opposed by the examinees or by Fairfax. It is nevertheless for the liquidators to make a positive case for the exercise of the court's discretion under s 597(4). 19 The documents in question are documents obtained by the liquidators by means of an order for production served on ASIC. An unsuccessful attempt was made by parties, who did not include ASIC, to have the order for production set aside. That matter was dealt with by Ward J, see Re Trio Capital Ltd [2010] NSWSC 454. ASIC, in turn, obtained the documents from the Securities and Futures Commission of Hong Kong. 20 It is necessary to say something about the processes that saw these documents come into the liquidators' possession. As I have said, ASIC produced the documents in response to an order for production. That order, of course, required production to the court. It was then necessary for the liquidators to be granted access by the court. That access was granted to the then administrators, now liquidators, on the basis of certain undertakings given by them both to ASIC and the court. I emphasise the undertakings were given to both. 21 The central substance of the undertakings was that the administrators, now liquidators, would keep the documents confidential and if they sought to make use of them in any Part 5.9 examinations they would do three things: first, give ASIC at least three business days notice of their intention to do so; second, have the documents marked as confidential exhibits in the examination; and third, seek orders and directions of the court that any part of an examination of the documents be held in private. 22 The reason for ASIC's desire to see confidentiality maintained in relation to these documents comes, in large measure, from the circumstance that ASIC was given the documents by the Securities and Futures Commission of Hong Kong. This occurred pursuant to an agreement of May 2002 sponsored by the International Organisation of Securities Commission, known as the IOSCO Multilateral Memorandum of Understanding. The relevant effect of that agreement is summarised at paragraphs 21 and 22 of Ward J's judgment, to which I have already referred: "21 I was provided with a copy (Exhibit 4) of the Multilateral Memorandum of Understanding concerning consultation and co-operation and the exchange of information, signed in May 2002, which sets out the general principles in relation to mutual assistance and the exchange of information between signatories to the Multilateral Memorandum of Understanding. It is pursuant to this Multilateral Memorandum of Understanding that ASIC's request was made to the SFC. 22 Article 10 sets out the permissible uses of non-public information and non-public documents furnished in response to a request for assistance under the Multilateral Memorandum of Understanding. Article 11, headed 'Confidentiality', provides that (in sub-article (a)) each authority will keep confidential requests made under the Multilateral Memorandum of Understanding, the contents of such requests and any matters arising under the Memorandum of Understanding. Article 11(b) provides: The Requesting Authority [here ASIC] will not disclose non-public documents and information received under this Memorandum of Understanding, except as contemplated by paragraph 10(a) (that referring to use for the purposes set forth in the request for assistance including insuring compliance with the laws and regulations related to the request or for a purpose within the general framework of the use stated in their request for assistance) or in response to a legally enforceable demand. In the event of a legally enforceable demand, the Requesting Authority will notify the Requested Authority [here SFC] prior to complying with the demand, and will assert such appropriate legal exemptions or privileges with respect to such information as may be available. The Requesting Authority will use its best efforts to protect the confidentiality of non-public documents and information received under this Memorandum of Understanding. (my emphasis)" 23 Justice Ward also referred to the provisions of Hong Kong law relevant to the giving of assistance by the Securities and Futures Commission of Hong Kong to regulators outside Hong Kong. Again, I gratefully adopt her Honour's summary at paragraphs 23 – 25: "23 Section 186 of the SFO deals with the provision of assistance by the SFC to regulators outside Hong Kong. The Commission's power to provide assistance is subject to satisfaction of the condition provided in s 186(3) (namely, that it is desirable or expedient that assistance be provided in the interests of the investing public or the public interest or that assistance will enable or assist the recipient performing its functions and will not be contrary to the interest of the investing public or public interest that assistance be provided). 24 Mr Lloyd places weight on the fact that the SFC must be satisfied, when receiving a request for assistance from an authority or regulatory organisation outside Hong Kong, among other things, that the authority is subject to adequate secrecy provisions (see s 186(5)). 25 Section 186(6) makes it clear that a claim may be made for privilege against self-incrimination in proceedings brought in Hong Kong in relation to material produced in compliance with notices under the relevant SFC provisions." 24 It can thus be seen that the relevant documents produced by ASIC to this court were obtained by it under an international protocol for mutual assistance among securities commissions directed towards enhancing effective securities regulations across national borders. I am able to infer from the circumstances in which they were obtained, I think, that the documents in question are seen as having relevance or potential relevance to enforcement of securities laws in Hong Kong, or Australia, or both. The documents are of a nature attracting inter agency obligations of confidentiality as between Hong Kong and Australia. They were passed from the Hong Kong Commission to the Australian Commission under the umbrella of confidentiality created in the public interest and to protect investigative and law enforcement functions in both countries. 25 This constitutes, to my mind, special circumstances for the purposes of s 597(4). 26 I do not lose sight of the general importance of the proceedings in courts, including liquidators' examinations, taking place in public. Mr Dawson referred to the decision of the Court of Appeal in John Fairfax Publications Pty Ltd v District Court of New South Wales [2004] NSWCA 324; (2004) 61 NSWLR 344 where the general principles are expounded, particularly in the judgment of Spigelman CJ. Those considerations apply in the context with which I am now dealing subject, however, to the fact that there is a particular statutory regime to be applied here. 27 As I have said, the general rule is that an examination should take place in public, but the statute itself recognises that there may be "special circumstances" which warrant the exercise by the court of a specially conferred statutory power to order that an examination or part of it take place in private. There is a need to balance competing public interests. In this case, the public interest in the protection of investigative and law enforcement functions of the kind dealt with by the IOSCO agreement outweighs the general expectation that proceedings should take place in public. 28 I make orders 1 to 3 in the short minutes of order which I initial and date. ********** 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.