Supreme Court New South Wales Medium Neutral Citation: In the matter of Trio Capital Limited (In Liquidation) [2011] NSWSC 1483 Hearing dates: Monday, 14 November 2011 Decision date: 14 November 2011 Jurisdiction: Equity Division - Corporations List Before: White J Decision: Refer to para [35] of judgment. Catchwords: CORPORATIONS - examination summons and orders for production - application to set aside examination summonses and orders for production - whether examination summonses and orders for production obtained for improper purpose - no basis for inferring examination summonses being used to conduct a dress rehearsal for cross-examination or to obtain a forensic advantage in contemplated proceeding that would not be available to it in those proceedings - examinations can be conducted to investigate existence and strength of potential causes of action - whether orders for production oppressive - whether orders for production should be set aside because they call for production of privileged documents - documents which might be subject to claim for privilege only small proportion of documents called for - application to set aside examination summonses and orders for production refused Legislation Cited: Corporations Act 2001 (Cth) Superannuation Industry (Supervision) Act 1993 (Cth) Evidence Act 1995 Civil Procedure Act 2005 Cases Cited: Meteyard v Love [2005] NSWCA 444; (2005) 65 NSWLR 36 In the matter of Southland Coal Pty Ltd [2006] NSWSC 184) Category: Interlocutory applications Parties: Cameron Patrick Anderson (1st Plaintiff) Michael James Anderson (2nd Plaintiff) CPI Complete Property Investments Pty Ltd (3rd Plaintiff) MARQ Asset Management Pty Ltd (4th Plaintiff) MARQ Capital Pty Ltd (5th Plaintiff) Mark Andrew Weller (6th Plaintiff) MARQ Property Investments (7th Plaintiff) ACT Super Management Pty Limited (Defendant) Representation: A J McInerney with G O'Mahoney (Plaintiffs) R Beech-Jones SC with J Kay Hoyle (Defendant) Ellison Tillyard Callanan Solicitors (Plaintiffs) File Number(s): 2011/339067 Judgment 1HIS HONOUR : On 6 October 2011, the Registrar issued summonses addressed to the first and second plaintiffs, Cameron Patrick Anderson and Michael James Anderson requiring them to attend before this court on 21 November 2011 to be examined about the examinable affairs of Trio Capital Limited (In liquidation) ("Trio Capital"). 2On the same day orders were made against those individuals and against four companies and another individual plaintiff requiring the production of documents. The orders required the documents to be produced on 25 October 2011. 3On 24 October 2011 the plaintiffs filed an originating process and interlocutory application seeking amongst other relief orders that the examination summonses served on the first and second plaintiffs be set aside and that the orders for production served on the plaintiffs be set aside. The orders for production of documents was stood over to today. 4The examination summonses and orders for production of documents were obtained by the defendant, ACT Super Management Pty Limited ("ACT Super Management"). Trio Capital was formerly called Astarra Capital Limited. Prior to 16 December 2009 it had a large amount of money under management for investors. It acted as trustee of at least five superannuation funds and was the responsible entity of 28 managed investment schemes. It is now in liquidation. 5On 16 December 2009 the Australian Prudential Regulation Authority suspended Trio Capital as trustee of the superannuation funds and appointed the defendant (ACT Super Management) as acting trustee of the funds. On 30 September 2011 the Australian Securities and Investments Commission authorised ACT Super Management to be an eligible applicant for the examination summonses and orders for production. 6The questions that arise are first, whether the time for the plaintiffs to bring their application should be extended. Secondly, whether the examination summonses or orders for production were obtained for an improper purpose. Thirdly, whether the orders for production should be set aside on the ground that they are oppressive, and fourthly, whether orders for production addressed to the first and second plaintiffs should be set aside on the ground that they call for the production of privileged documents. 7Although an extension of time for the application was not consented to, it was not strenuously opposed. It was necessary to consider the merits of the plaintiffs' claims in any event. Although the applications ought to have been commenced earlier, indeed, the Supreme Court (Corporations) Rules 1999 require the applications to be brought within three days (see r 11.5), there would be no prejudice to the defendant if the time for bringing the application is extended. I will extend the time as sought. 8The grounds upon which it is contended that ACT Super Management has acted for an improper purpose in obtaining the examination summonses and orders for production of documents are that ACT Super Management is seeking to obtain a forensic advantage that would not be available to it in proceedings instituted against the plaintiffs, or at least some of them, and what is sought is either a trial run of cross-examination of the first two individual plaintiffs, and/or the obtaining of documents that may not be available on discovery. 9To understand that submission, some background is necessary. 10On 17 November 2004 Messrs Cameron Anderson and Michael Anderson were appointed directors of Ualan Property Holdings Pty Ltd ("Ualan Property Holdings"). It had a number of subsidiaries. In 2005 it acquired three additional subsidiaries and the Messrs Anderson became directors of those companies. Ualan Property Holdings also acquired units in two unit trusts. Mr Cameron Anderson became director of the trustee of one of those trusts called the Ualan Shortland Unit Trust. The Messrs Anderson became directors of the trustee of the other trust known as Ualan Myoora Unit Trust. There were also other trusts in which those trustees held units. 11There is evidence that between 17 November 2004 and 16 December 2009, Trio Capital, in its capacity as trustee of a superannuation fund, made substantial investments either directly or indirectly in Ualan Property Holdings. This was substantially by way of acquisition of shares. It also made loans to Ualan Property Holdings. Three of the superannuation funds of which Trio Capital was the trustee became either directly or indirectly (through unitholding in another fund) entitled beneficially to approximately 92 per cent of the shares in United Property Holdings. There is evidence that subsidiaries of United Property Holdings undertook various property development projects using funds advanced by United Property Holdings. Some of those projects were undertaken by subsidiaries in their capacity as trustees of unit trusts. There is evidence that prior to 27 March 2009 Trio Capital appointed CMF Australia Limited to conduct a review of what has been called the UPH Portfolio. 12On 27 March 2009 a deed was entered into between Trio Capital (then called Astarra Limited) and 28 other entities, including Mr Cameron Anderson and Mr Michael Anderson and other companies that are plaintiffs in this application. That deed provided for the Messrs Anderson to resign as directors and for directors of CMF Australia Limited to be appointed as directors of various of the companies. Releases were given to the Messrs Anderson and to entities associated with them in respect of various specified matters. 13Trio Capital in various capacities, including in its capacity as trustee of three superannuation funds, agreed to use reasonable endeavours to procure, amongst other things, the release of personal guarantees given by Messrs Anderson to third party financiers and agreed to indemnify them in relation to their liability arising as a result of securities given by them. It also agreed to pay $900,000 by way of management fees. Subsequently, Trio Capital in various capacities caused moneys of superannuation funds or managed investment schemes in excess of $5 million to be advanced to United Property Holdings for the benefit of its subsidiary companies, and the trusts of which its subsidiaries were trustees. 14On 25 September 2009 Trio Capital, which was then still under the control of its directors, together with United Property Holdings and various subsidiaries of United Property Holdings and trustees of trusts associated with it, commenced proceedings in the Federal Court against, amongst others, the Messrs Anderson and companies associated with the Messrs Anderson who were parties to the deed of 27 March 2009. 15The proceedings in the Federal Court did not get beyond the stage of the filing of the applicants' pleadings and amended pleadings. The applicants to the Federal Court proceedings sought amongst other orders a declaration that the deed of 27 March 2009 was void or should be set aside, or varied. They also claimed that warranties given by the present plaintiffs, or some of them, to the effect that the Ualan companies had carried on their business in the ordinary usual course had been breached, and they alleged that the present plaintiffs, or some of them, had failed to disclose material matters that ought to have been disclosed prior to the agreement of 27 March 2009 being entered into. It was also alleged that Messrs Anderson had breached their duties as directors of Ualan Property Holdings and its subsidiaries. It was also alleged that one of the present plaintiffs, Marq Property Investments Pty Limited, had breached its duties as trustee. There were wide-ranging allegations of misrepresentation, breach of trust and breach of directors' duties. 16On 16 December 2009 administrators were appointed to Trio Capital. The Federal Court proceedings were discontinued on or about 6 or 26 May 2011. The Federal Court noted that the respondents to those proceedings (which comprised the present plaintiffs) acknowledged that the discontinuance was without prejudice to any rights which ACT Super Management in its capacity as acting trustee of five superannuation funds might have against them, or against any other party, arising out of any issue or matter the subject of the Federal Court proceedings. 17The present plaintiffs say that although there are no existing proceedings on foot, the fact that proceedings had been instituted, but then discontinued on terms that allow for them to be reactivated, shows that the dominant purpose of the defendant in seeking to examine the Messrs Anderson is to subject them to a cross-examination that is a dress rehearsal for a cross-examination that can be expected when proceedings are reinstituted, or is otherwise for the purpose of obtaining a forensic advantage for ACT Super Management or for the companies that were applicants in the Federal Court proceedings. It was also submitted that it would not be a proper purpose for ACT Super Management to conduct an examination, not for the purpose of investigating what cause of action it might have as the acting trustee of superannuation funds, but for the purpose of determining what causes of action Ualan Property Holdings and its subsidiaries might have. 18Earlier, and over the opposition of ACT Super Management, I made an order pursuant to s 596C(2) of the Corporations Act 2001 (Cth) making available for inspection the affidavit filed under s 596B in support of the application for the issue of summonses for examination and orders for production of documents. That affidavit was read by the plaintiffs. 19In that affidavit a director of ACT Super Management, Mr Michael Hill, deposed that ACT Super Management wished to examine the proposed examinees in relation to aspects of Trio Capital's examinable affairs relating to investments in and loans made to United Property Holdings and the uses to which those funds were put by United Property Holdings. It can also be inferred from Mr Hill's affidavit and from the objective facts, that ACT Super Management wishes to investigate the existence and strength, or apparent strength, of any cause of action that it, as successor of Trio Capital, may have against the plaintiffs or some of them, and against third parties. 20Mr Hill deposes that following the examinations, ACT Super Management may be able to apply for financial assistance to the Commonwealth Government pursuant to Pt 23 of the Superannuation Industry (Supervision) Act 1993 (Cth) in relation to losses suffered by eligible funds arising from their investments in and loans to United Property Holdings. He also deposes that the proposed examinations would supplement information available to ACT Super Management to enable it to make a properly informed decision prior to commencing proceedings against any of the current or former officers of Trio Capital or entities associated with it in relation to the investments in or loans to United Property Holdings, and assist it in determining which causes of action are most appropriate to pursue. He also says that the proposed examinations would assist the liquidators of Trio Capital in gathering information to assist them in the administration of Trio Capital and its affairs. These are proper purposes. 21I do not infer, and I do not think there is a basis for inferring, that ACT Super Management purposes to use the examinations to conduct a dress rehearsal of cross-examination or to obtain a forensic advantage in contemplated proceedings that would not be available to it in those proceedings. At the moment no proceedings are on foot. The fact that the right of ACT Super Management to commence new proceedings is acknowledged does not change the position that ACT Super Management has to assess whether fresh proceedings should be brought, and if so, against whom, and on what causes of action. If the examinations were to extend to investigating the existence or strength of causes of action that United Property Holdings or its subsidiaries might have against any of the plaintiffs, that would not take the examination outside the permitted scope of s 596B, because of the investments that Trio Capital and the superannuation funds of which it was trustee had made in United Property Holdings. That is to say, such an investigation would be an investigation into the nature and value of assets of Trio Capital and of the trusts. 22It was submitted for the plaintiffs that it was not legitimate to use the examination process to determine the strength or weakness of a case that Trio Capital in any of its capacities might have. Counsel referred to Meteyard v Love [2005] NSWCA 444; (2005) 65 NSWLR 36 where Basten JA (with whom Beazley JA agreed) said (at [44]): " [44] There is, in addition, an established line of authority to the effect that an eligible applicant under s 596B may examine a potential defendant, or an existing defendant, in relation to proposed or actual litigation, in order to determine whether the defendant has sufficient assets to meet an adverse judgment, if unsuccessful in the litigation. On the other hand, the authorities draw a line between those possible topics of inquiry and use of the examination process to determine the strength or weakness of the corporation's case, or its opponent's case, in relation to the dispute. In the recent decision of the Full Court of the Supreme Court of South Australia, In the matter of Normans Wines Ltd (Receivers and Managers appointed) (in liq); Harvey v Burfield [2004] SASC 171 Mullighan J quoted without criticism, the following statement of the trial judge at [42]: 'The authorities establish that an improper purpose includes a purpose of using the examination as a dress rehearsal for cross-examination, or for the purpose of destroying the credibility of the examinees or witnesses who might be called for the examinee in substantive proceedings, or for the predominant purpose of obtaining a forensic advantage not available from ordinary pre-trial procedures, or simply to cause undue inconvenience or embarrassment to the examinee or to inflict costs.'" 23Basten JA went on to say that if the examination process were used for the purpose of causing inconvenience, embarrassment or inflicting costs, that would be an abuse of the process of the court and that the other examples may be understood as not seeking to obtain information about a company's examinable affairs (at [45]). His Honour said that such proceedings would be improper because the purpose would be foreign to the statutory purpose for which the power was conferred. Read in the light of para [45] I do not understand his Honour to be saying that an examination under s 596B cannot legitimately involve investigation into the strength or weakness of a corporation's case against an examinee or of the opponent's case in relation to the dispute. It is well established that examinations can be conducted to investigate the existence and strength of potential causes of action, including potential causes of action against the examinees, provided that the examination is not used as a dress-rehearsal for cross-examination or to destroy the credit of potential witnesses or to obtain forensic advantages not obtainable in ordinary court proceedings. 24In my view, it has not been shown that the purpose of ACT Super Management, let alone a dominant purpose of ACT Super Management, is to use the examination for an improper purpose. I refuse the application to set aside the examination summonses. 25The orders for production addressed to the Messrs Anderson are wide ranging. They are not on that account oppressive. The evidence in support of the allegation of oppression was that according to the plaintiffs' solicitor, the copying of the documents required to be produced would need to be outsourced and that it was estimated that the copying would cost up to $15,000 to $20,000, given that there " could be " up to 20,000 pages to be produced. This was on the basis that the solicitor envisaged that five copies of documents would be required. I do not think that this establishes any real ground of oppression. It is not clear to me that copying of documents would be required at all in order to comply with the orders for production, although one can understand that one or more copies would be taken by the plaintiffs for their own purposes. Be that as it may, at the conclusion of the examinations the court in its inherent jurisdiction can make orders to reimburse the plaintiffs for the proper costs that may be incurred in complying with the orders for production. 26Other issues of oppression were raised in correspondence, including a suggested need to redact parts of bank statements which it was said would be irrelevant. That contention was not advanced either in the plaintiffs' evidence or in submissions. I am not persuaded that it would be proper, let alone necessary, for such redaction to take place. Given that proceedings have been on foot, it could be expected that at least a substantial part of the documents would have been collated in any event. There is no evidence that an excessive amount of time will be required in order to comply with the orders. 27The remaining ground of objection to the orders for production concerns a call for what are said to be privileged documents. Orders for production have been issued to all of the plaintiffs. The suggested privileged material is said to be communications in relation to the negotiation of and drawing of the deed of 27 March 2009. Counsel for the plaintiffs submit that the orders are framed such that they are likely to encompass any advice provided to the plaintiffs in respect of the deed, as well as the restructuring for which the deed provided. The relevant paragraphs of the order for production require the production of documents or correspondence between 24 March 2005 and December 2009 referring or relating in any way to the March 2009 settlement documented in the deed of 27 March 2009, or the provision by Trio Capital of an indemnity to each of the individual plaintiffs, or any entity related to them and a release by Trio Capital of either of the individual plaintiffs. 28There can be no question of oppression in complying with such an order, but I accept that it is at least on the cards that documents which would be privileged would be amongst those required to be produced by the order. In Meteyard v Love , Basten JA said (at [132]-[133]) that given that client legal privilege is an objection to production as well as to inspection, an order should not be made under Pt 36 r 12 of the Supreme Court Rules requiring the production of documents for which client legal privilege would be expected to be claimed. His Honour said: " [132] ... Given the importance of the issues raised by client legal privilege, and the absence of a clear procedure by which to raise the issues, in my view the preferable conclusion is that an order for production under Pt 36 r 12 should not be made ex parte where it may be anticipated that such questions will arise or, in the alternative, the order should make express exception for documents subject to privilege. The fact that a claim for privilege was likely to be raised in the present circumstances was known to the Opponents when they sought the orders and should, in accordance with the obligations of a party seeking ex parte relief, have been disclosed to the Deputy Registrar. ... [133] In my view the orders for production should be set aside on the basis that it has been established that they are likely to extend to documents which cannot properly be the subject of an order for production, which documents are likely to form a significant proportion of those subject to the order. " 29With respect, it is not entirely clear why a clear procedure for dealing with the production of privileged documents is or was absent. The usual procedure is that, as on a subpoena when documents called for by a subpoena are the subject of a claim for privilege, objection is made to the production. The documents might be produced to the court in a sealed packet. Usually the person claiming privilege is required to identify the grounds of the claim and to provide an affidavit or oral evidence of the facts giving rise to those grounds. Nor is it clear, with respect, why it should make a difference whether the order for production is made ex parte or after a hearing inter partes . Nor is it clear to me why it should make any difference whether the documents for which privilege is claimed are likely to form a significant proportion or a small proportion of the documents the subject of the order. Nonetheless, what his Honour said is binding on me. 30But what his Honour said has been applied in accordance with its terms so that orders for production have been made after a hearing ( In the matter of Southland Coal Pty Ltd [2006] NSWSC 184), and a fortiori if the documents which may be the subject of a claim for privilege would not form a significant proportion of the documents called for by the order. 31In the present case the documents which might be subject to a claim for privilege appear to be only a small proportion of the documents called for. At least they are a small proportion of the categories called for. If the orders for production were to be set aside because they seek documents for which privilege will be claimed, the question would be how ACT Super Management could seek and obtain the documents if the claim for privilege was resisted. One can well envisage cases in which a liquidator obtaining an order for production of documents might know that privilege will be claimed, but will seek to contend the claim for privilege is not available because, for example, of s 125 of the Evidence Act 1995. If such documents cannot be included in an order for production, it would seem to me that the only way in which the question of privilege could be determined would be by excising from the order for production a requirement to produce privileged documents; but to require the person to whom the order is addressed to provide an affidavit that listed any documents for which privilege was claimed and to set out the grounds of the claim for privilege and the evidence in support of the claim. Counsel for both parties were unable to suggest an alternative form of proceeding. That would achieve an outcome which would be no different from making the order for production which in terms was wide enough to cover documents for which privilege would be claimed, and to allow the claims for privilege to be made in the usual way when documents are produced. 32I have considered whether I ought to take that course in the present case. In my view, to do so would not be consistent with s 56 of the Civil Procedure Act 2005. I have also considered whether having now conducted an inter partes hearing, I should make an order in the same terms as the orders made on 6 October 2011 requiring the immediate production of the documents. Again, nothing would be served by that course. 33In the circumstances, I propose to proceed in the same ways as Austin J in In the matter of Southland Coal Pty Ltd , on the basis that the documents called for do not appear to be a significant proportion of those the subject of the orders. 34For these reasons I refuse the orders to set aside the orders for production. 35Accordingly the orders I make are as follows: 1. Extend the time for the first, second, third, fourth, fifth and seventh plaintiffs to file their originating process and interlocutory applications to 24 October 2011, and extend the time for the sixth plaintiff to file and serve its application up to today. 2. Order that the claims for relief in the originating process and the amended interlocutory application be dismissed. 3. Order that the plaintiffs pay the defendants' costs. 4. Exhibits may be returned forthwith, but are to be retained by the solicitors for the parties producing the exhibits pending the expiry of the time for appeal or for application for leave to appeal. If an appeal or application for leave is made, the exhibits are to be retained pending the determination of that application or the appeal. 5. Stand over to 10am Wednesday, 16 November 2011 the orders for production. 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. Decision last updated: 05 December 2011