Athens v Randwick City Council

Counsel for the Plaintiff in NSD74/2017: The Plaintiff did not appear

Counsel for the First Defendant in NSD74/2017: Mr R Glasson

Solicitor for the First Defendant in NSD74/2017: Quinn Emanuel Urquhart & Sullivan

Counsel for the Second Defendant in NSD74/2017: Mr RD Marshall SC

Solicitor for the Second Defendant in NSD74/2017: Hammond Nguyen Turnbull

Counsel for the examinees: Mr S Golledge

ORDERS NSD 1737 of 2017 IN THE MATTER OF RAHUL GOYAL AND JENNIFER ANNE NETTLETON AS JOINT AND SEVERAL (SPECIAL PURPOSE) LIQUIDATORS OF ACN 154 520 199 PTY LTD (IN LIQUIDATION) (ACN 154 520 199) RAHUL GOYAL AND JENNIFER ANNE NETTLETON AS JOINT AND SEVERAL (SPECIAL PURPOSE) LIQUIDATORS OF ACN 154 520 199 PTY LTD (IN LIQUIDATION) (ACN 154 520 199) Plaintiffs

JUDGE: GLEESON J DATE OF ORDER: 9 February 2018, AS VARIED ON 15 fEBRUARY 2018

1. The legal representative of Schon Gregory Condon in his capacity as liquidator of ACN 154 520 199 Pty Ltd (in liq) has leave to file electronically a notice of appearance by 5 pm on 9 February 2018.
2. The plaintiffs be granted access to the documents produced by Andrew Cochineas, Adam Shepard and ABC Refinery (Australia) Pty Ltd in answer to the orders for production made on 30 January 2018.
3. Costs be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS NSD 74 of 2017 IN THE MATTER OF ACN 154 520 199 PTY LTD (IN LIQUIDATION) ACN 154 520 199 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Plaintiff

AND: ACN 154 520 199 PTY LTD (IN LIQUIDATION) First Defendant SCHON GREGORY CONDON IN HIS CAPACITY AS LIQUIDATOR OF ACN 154 520 199 PTY LTD (IN LIQUIDATION)

JUDGE: GLEESON J DATE OF ORDER: 9 February 2018, as varied on 15 february 2018

1. The special purpose liquidators be granted leave to file electronically the interlocutory process dated 9 February 2018 by 5 pm on 9 February 2018.
2. The special purpose liquidators be granted leave to file electronically the affidavit of Rahul Goyal dated 9 February 2018 by 5 pm on 9 February 2018.
3. The functions of the special purpose liquidators as specified in annexure A to the orders dated 6 April 2017 be amended by inserting before the words "(together, the Examinable Matters)": "(c) any restructure or sale or transfer of the business or any of the assets of ABCRA to any third party or parties". Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS NSD 1737 of 2017 IN THE MATTER OF RAHUL GOYAL AND JENNIFER ANNE NETTLETON AS JOINT AND SEVERAL (SPECIAL PURPOSE) LIQUIDATORS OF ACN 154 520 199 PTY LTD (IN LIQUIDATION) (ACN 154 520 199) RAHUL GOYAL AND JENNIFER ANNE NETTLETON AS JOINT AND SEVERAL (SPECIAL PURPOSE) LIQUIDATORS OF ACN 154 520 199 PTY LTD (IN LIQUIDATION) (ACN 154 520 199) Plaintiffs

JUDGE: GLEESON j DATE OF ORDER: 23 February 2018

1. Each of Andrew Cochineas, Philip Cochineas, Francis Gregg and Jane Simpson pay the costs of the special purpose liquidators' application for access to documents produced in answer to orders for production dated 30 January 2018.
2. The application by Schon Gregory Condon in his capacity as liquidator of ACN 154 520 199 Pty Ltd (in liq) for an order restricting the use of information obtained in the public examinations conducted or to be conducted by the special purpose liquidators be refused. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

GLEESON J: 1 The plaintiffs ("special purpose liquidators" or "SPLs") of ACN 154 520 199 Pty Ltd (in liquidation) ("company") sought access to documents produced in accordance with orders for production pursuant to s 597 of the Corporations Act 2001 (Cth) ("Act"), in connection with public examinations arranged for 7, 8 and 12 February 2018. Four present and former directors of the company ("directors") disputed the SPLs' entitlement to access without an expansion of the functions conferred on the SPLs. 2 The SPLs argued that they were entitled to access without any amendment to their functions. However, for the avoidance of doubt, the SPLs applied for such an amendment. 3 The directors did not seek to be heard on the proposed amendment. The general purpose liquidator, Mr Condon, opposed the proposed amendment in part only. In addition, Mr Condon sought an order restricting the use of evidence obtained in the examinations. 4 After hearing argument, I amended the orders specifying the functions of the SPLs substantially in accordance with their proposed amendment and granted them access to the documents. 5 I reserved my decisions on the question of costs and on Mr Condon's application. These are my reasons for my orders made on 9 February 2018 (as amended on 15 February 2018 to correct clerical errors under the slip rule) and my judgment on the two reserved matters.

Background facts 6 By orders made on 6 April 2017, the SPLs were appointed as liquidators of the company, as additional liquidators to carry out specified functions: Deputy Commissioner of Taxation, in the matter of ACN 154 520 199 Pty Ltd (in liq) v ACN 154 520 199 Pty Ltd (in liq) [2017] FCA 444 ("April 2017 judgment"). By order 2 of those orders, the SPLs were granted leave to apply to the Court in proceedings NSD74/2017, including for the purpose of extending the scope of their functions pursuant to s 473(8) of the Act. By the Insolvency Law Reform Act 2016 (Cth), s 473(8) was repealed and s 472(6) (which is in the same terms) was inserted into the Act. Section 472(6) commenced on 1 September 2017. 7 The primary function of the SPLs is to conduct investigations into the restructure of the company and the sale of its business to ACN 607 537 548 Pty Ltd (formerly ABC Refinery (Australia) Pty Ltd) ("ABCRA1") by transactions occurring in around 2014 and 2015 ("2014/2015 restructure"). To be precise, the functions, identified in an annexure to the 6 April 2017 orders ("annexure"), include to: 1. Conduct investigations into: (a) The restructure of [the company] and related entities including but not limited to: (i) the incorporation of Pallion Group Pty Ltd (Pallion Group) on 4 November 2014; (ii) the incorporation of Pallion Equipment Pty Ltd (Pallion Equipment) on 29 July 2015; (iii) the write down of the value of the Company's assets pursuant to the resolution of the board of the Company on or about 29 July 2015; (iv) the sale of the assets of the Company on or about 31 July 2015 to Pallion Equipment; (v) the incorporation of Pallion HR Pty Ltd (Pallion HR) on 4 August 2015; (vi) the incorporation of ABC Refinery (Australia) Pty Ltd (ABCRA) on 7 August 2015; (vii) the sale of the business of the Company to ABCRA (and Pallion HR as employer) on or about 1 September 2015; and … (b) … (together, the Examinable Matters). 2. Conduct investigations into whether the Company entered into any voidable transactions pursuant to Division 2 of Part 5.7B of the Act, section 37A of the Conveyancing Act 1919 (NSW), at common law or in equity in connection with the Examinable Matters. 3. Take steps, including the commencement of legal proceedings, to ensure preservation and protection of assets of the Company, whether or not in the possession of the Company arising out of, or directly or indirectly connected with, the Examinable Matters. 4. Conduct investigations into the conduct and knowledge of current and former directors, shadow or de facto directors and any other person in connection with the Examinable Matters. 5. Conduct investigations into any breaches of duty owed to the Company, whether under the Act, at common law or in equity, by: (a) the directors or officers of the Company; (b) de facto or shadow directors of the Company; or (c) any other person, including persons otherwise involved in the management and control of the Company; in connection with the Examinable Matters. 6. Prepare, make an application for and conduct…for the purposes of the investigations in connection with the Examinable Matters. … 8. Commence and prosecute any legal proceedings in the name of the Company or as liquidator of the Company arising from the investigations in connection with the Examinable Matters. … 10. Undertake such other or further matters in relation to the liquidation and affairs of the Company as the Court considers appropriate. 8 The SPLs noted, and it was not disputed, that any proceedings commenced in accordance with their functions as defined by the 6 April 2017 orders would potentially involve setting aside the sale of the business to ABCRA1 and its recovery by the company on the basis that it had been held on trust by ABCRA1 for the benefit of the company. 9 The SPLs have become aware of the following matters: (1) on 16 August 2017, ABCRA Pty Ltd ("ABCRA2") was registered as a company; (2) on 1 September 2017, ABCRA1 changed its name to ACN 607 537 548 Pty Ltd and four of its five directors resigned with Andrew Cochineas remaining as sole director; of those five directors, four had been directors of the company; (3) also on 1 September 2017, ABCRA2 changed its name to ABC Refinery (Australia) Pty Ltd; (4) shares in ABCRA1 were transferred from Pallion Group Pty Ltd to another company owned and controlled by Andrew Cochineas; (5) on 11 November 2017, Deloittes prepared a valuation of the business of ABCRA1; (6) on 16 November 2017, ABCRA1 was placed into liquidation and Adam Shepard was appointed as its liquidator; and (7) the registered office and principal place of business of both ABCRA1 and ABCRA2 are the same. 10 By originating process filed 29 September 2017, the SPLs applied for orders for examination of seven individuals, including the directors, and ancillary orders. 11 On 30 January 2018, the SPLs obtained orders for production of documents pursuant to s 597 of the Act. The orders were directed to, among others, the present and former directors of the company, Mr Shepard as liquidator of ABCRA1, and ABCRA2. 12 The documents sought included documents which relate to what is described, in the body of the orders for production, as the "2017 Restructuring Transactions" which was defined to mean "the sale and/or transfer of the business or any assets of ABCRA1 to ABCRA2 in or about the period from September to November 2017" ("disputed documents"). 13 Documents which are disputed documents have been produced to the Court by Andrew Cochineas, ABCRA1 and Mr Shepard.

Grant of access to documents and extension of functions of special purpose liquidators 14 The directors (Andrew Cochineas, Philip Cochineas, Francis Gregg and Jane Simpson) opposed access to the disputed documents on the basis that the orders pursuant to which the examinations are being conducted (being the 6 April 2017 orders) do not authorise any investigation into the "2017 Restructuring Transactions". 15 By their written submissions, the directors argued that it followed that: (1) the s 597 orders ought not to have extended to material relating to those events; (2) the SPLs ought not to be granted access to documents which relate only to those transactions; and (3) the Registrar ought be directed not to allow questions that relate to those transactions. 16 However, the directors acknowledged that their objections could be overcome by an expansion of the powers granted to the SPLs. 17 At the hearing of the application, most attention was directed to the scope of the SPLs' powers under the 6 April 2017 orders. After hearing argument on that question, the SPLs sought leave to file an interlocutory process dated 9 February 2018 in proceeding NSD74/2017 to amend the scope of their powers of investigation to include, in effect, the "2017 Restructuring Transactions". As Mr Condon was represented at the hearing, I granted leave to file that interlocutory process and heard the application. 18 The amendment proposed by the SPLs was an addition to the "Examinable Matters" to include: (c) any restructure or sale or transfer of the business or any of the assets of [ABCRA1] to any third party or parties and the subsequent liquidation of [ABCRA1]. 19 In support of the interlocutory process, the SPLs relied on an affidavit of Rahul Goyal affirmed 9 February 2018. In his affidavit, Mr Goyal expressed the view that the restructuring transactions which occurred in 2015 and the 2017 transactions appear to involve the transfer of assets and value from the company to ABCRA1 and then subsequently from ABCRA1 to ABCRA2. 20 On behalf of Mr Condon, Mr Marshall SC submitted that the proposed amendment was too broad to the extent that it referred to the subsequent liquidation of ABCRA1, noting that the SPLs were concerned with the transaction rather than the liquidation that followed the transaction. Mr Marshall SC also submitted that the liquidator of ABCRA1, Mr Shepard, might want to be heard regarding the proposal that the SPLs investigate the liquidation of ABCRA1. 21 In response, Mr Glasson submitted that the SPLs sought to examine about the liquidation of ABCRA1 only to the extent that it was a step in the transactions that were the "2017 Restructuring Transactions". 22 The currently known facts provide reason to believe that steps may have been taken to transfer the business, formerly owned by the company, away from ABCRA1 to the potential detriment of the company's creditors. For this reason, I was satisfied that the proposed amendment to the SPLs' functions fell within the scope of the grant of leave in order 2 of the 6 April 2017 orders. Moreover, these facts caused me to be satisfied that the "2017 Restructuring Transactions" warrant investigation by the SPLs so as to ensure that an important purpose of their appointment is not defeated - namely, the pursuit of claims and the recovery of property for the benefit of the company's creditors. 23 I accepted Mr Marshall SC's submission that the form of the order amending the SPLs' functions should not extend to the events of the liquidation of ABCRA1. I also accepted Mr Glasson's submission that the "2017 Restructuring Transactions" appear to have included, as a final step, the placing of ABCRA1 into liquidation. In my view, an order in the form proposed by the SPLs, but without the concluding words "and the subsequent liquidation of ABCRA", would make it clear that the SPLs may investigate all aspects of the "2017 Restructuring Transactions". 24 Having made that order for the avoidance of doubt and to resolve the question of access without further delay, I then granted access to the disputed documents. Mr Golledge accepted that, having made the order amending the terms of the SPLs' functions, it was within power for the Court to grant access to the disputed documents.

Costs 25 The liquidator did not seek any order as to costs in connection with the interlocutory process. 26 Mr Golledge agreed that the question of the costs of the directors' opposition to access to the disputed documents would depend upon whether s 597 can require the production of documents concerning the "2017 Restructuring Transactions" and whether the SPLs' functions as defined by the 6 April 2017 order permitted examination on the subject of those transactions. 27 Section 597(9) of the Act allows a court to direct that a person produce, at a public examination, books that "are relevant to the matters to which the examination relates or will relate". An order under s 597 which seeks production of documents which are not required for the examination will be beyond power: Re Leisure Developments [2002] NSWSC 248; (2002) 41 ACSR 276 at 281, cited in Palmer, in the matter of Queensland Nickel Pty Ltd (in liq) v Park (Liquidator) [2017] FCA 618 at [11]. 28 The investigations authorised by the 6 April 2017 orders are set out in paras 1, 2, 4 and 5 of the annexure. The proper approach to the construction of Court orders is discussed in Repatriation Commission v Nation (1995) 57 FCR 25 at 33-34, where Beaumont J, Black CJ and Jenkinson J agreeing, said: The rule in England is that when a judgment is clear as to its terms, not even the pleadings nor the history of the action may be utilised to construe the judgment contrary to its clear meaning (see Halsbury's Laws of England, 4th ed., Vol. 26 at 273). Where, however, the judgment or order is ambiguous, it may be permissible to resort to extrinsic material, including the reasons for judgment, to resolve the ambiguity (see Gordon v Gonda (1955) 1 All ER 762 at 765, 768). A similar approach has been taken in this country. If, as in the case of a "speaking" order (see, e.g., I.C.I. Australia Operations Pty. Ltd. v Trade Practices Commission [1992] FCA 474; (1992) 38 FCR 248 at 262) its true meaning is "immediately plain", the terms of the order will speak for themselves. If this is not the case, the true meaning may be ascertained according to ordinary rules of construction (see Australian Consolidated Press Ltd. v Morgan [1965] HCA 21; (1965) 112 CLR 483 per Windeyer J at 503; McNair Anderson Associates Pty. Ltd. v Hinch [1985] VicRp 30; (1985) VR 309 at 311-2; cf. Kwikspan Purlin System Pty. Ltd. v Federal Commissioner of Taxation (1986 2 ATC 4602 at 4605; Australian Energy Limited v Lennard Oil N.L. (No. 2) (1988) 2 Qd R 230 at 232; Sharpe v Goodhew, Drummond J, 11 December 1992, unreported, at 10-12; Australian Securities Commission v Skase, Drummond J, 13 January 1993, unreported, at 16-17). Under the ordinary rules of construction, evidence of surrounding circumstances is admissible to assist in the interpretation of an instrument if the language is ambiguous or susceptible of more than one meaning, but not admissible to contradict the language of the instrument when it has "a plain meaning" (see Codelfa Construction Pty. Ltd. v State Rail Authority of N.S.W. [1982] HCA 24; (1982) 149 CLR 337 per Mason J at 352). 29 In Athens v Randwick City Council [2005] NSWCA 317; (2005) 64 NSWLR 58 at [130] and [140], Santow JA (Tobias JA agreeing) emphasised that the judgment that gave rise to the reasons is the primary reference point for construing orders in cases of ambiguity. 30 On behalf of the SPLs, Mr Glasson accepted that the "2017 Restructuring Transactions" did not fall within the scope of the "Examinable Matters" in para 1(a) of the annexure. He argued that the "2017 Restructuring Transactions" were a matter "in connection with" the "Examinable Matters", saying that there is good reason to believe that the 2015 and 2017 transactions are of the very same nature or effect. Mr Glasson submitted that the SPLs should be entitled to investigate the "2017 Restructuring Transactions" because: (1) they have frustrated or potentially frustrated any claim that might be made by the SPLs for the recovery of the business for the benefit of creditors of the company; and (2) without investigation of the transactions, the SPLs cannot give proper and full consideration to the claims available to the company and whether proceedings should be commenced in respect of those claims in accordance with, at least, paras 3, 6 and 10 of the annexure. 31 Mr Golledge submitted, and I accept, that the SPLs should be properly confined in their public examinations to the matters in respect of which they have been authorised. I also accept Mr Golledge's submission that para 10 of the annexure does not enlarge the functions of the liquidator in the absence of an application of the kind made by the interlocutory application. 32 Mr Golledge next argued that the annexure must be construed as at the time that the 6 April 2017 orders were made, and particularly in the light of the reasons given for the orders. He noted that the "Examinable Matters" are defined in a way which captures events that all occurred before the April 2017 judgment. He contended that any similarity between the 2014/2015 restructure and the "2017 Restructuring Transactions" does not satisfy the requirement of connection in the phrase "in connection with the Examinable Matters" and that the word "connection" connotes some relationship of cause and effect, not merely that a party to the first set of transactions was a party to the second. 33 The phrase "in connection with the Examinable Matters" appears in paras 4, 5, 6 and 8 of the annexure. 34 In the context of statutory interpretation, the words "in connection with" have been described as "capable of describing a spectrum of relationships ranging from the direct and immediate to the tenuous and remote: Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 280 ("Pozzolanic"). In Pozzolanic, the Full Court referred with approval to the observation of Sheppard and Burchett JJ in Australian National Railways Commission v Collector of Customs (SA) (1985) 8 FCR 264 at 378 that the meaning of the word "connection" is wide and imprecise, one of its common meanings being "relation between things one of which is bound up with, or involved in, another." 35 In Our Town FM Pty Ltd v Australian Broadcasting Tribunal (1987) 16 FCR 465 at 479, Wilcox J stated that the words "in connection with" have a wide connotation, requiring merely a relation between one thing and another, and not necessarily a causal relationship. In support of this proposition, his Honour cited Macfarlane J's statement in Nanaimo Community Hotel Ltd v British Columbia [1944] 4 DLR 638 at [5] (upheld on appeal by the British Columbia Court of Appeal in [1945] 3 DLR 225) that: One of the very generally accepted meanings of "connection" is "relation between things one of which is bound up with or involved in another"; or, again "having to do with". The words include matters occurring prior to as well as subsequent to or consequent upon so long as they are related to the principal thing. The phrase "having to do with" perhaps gives as good a suggestion of the meaning as could be had. 36 This passage was cited with approval by Somervell LJ in Johnson v Johnson [1952] P 47 at 50-51. 37 Based on these authorities, I do not accept that the phrase "in connection with the Examinable Matters" is necessarily limited to matters that occurred before the April 2016 judgment, or that it requires a relationship of cause and effect. 38 By para 4 of the annexure, the SPLs' functions extend to: … investigations into the conduct and knowledge of current and former directors, shadow or de facto directors and any other person in connection with the Examinable Matters. 39 In my view, this aspect of the SPLs' functions extends beyond investigations of conduct giving effect to the elements of the 2014/2015 restructure to include investigations of subsequent conduct or knowledge having a connection with the 2014/2015 restructure. The relevant connection is found in apparent similarity in the subject matter of the earlier restructure and the "2017 Restructuring Transactions", and the possibility that both sets of transactions may have had a common purpose or effect of defeating the rights of creditors of the company. Investigations into conduct concerning or giving effect to the "2017 Restructuring Transactions", as defined, are therefore investigations into conduct in connection with the 2014/2015 restructure and therefore "in connection with the Examinable Matters". 40 Thus, in my view, documents concerning the "2017 Restructuring Transactions" are relevant at least to a matter to which the examinations may relate as part of the investigations that may be conducted pursuant to para 4 of the annexure, being investigations into the conduct of the directors and any other person in connection with the 2014/2015 restructure. 41 It follows that the SPLs were entitled to access to the disputed documents even without the amendment to their functions. Accordingly, the directors should pay the costs of the SPLs' application for access to the documents.

Use of evidence obtained in public examinations 42 Mr Condon, the general purpose liquidator, sought an order that: The testimony given by the examinees in the Examinations held by the Court and conducted by the special purpose liquidators and the documents produced by the respondents to orders for production issued by the Court at the request of the special purpose liquidators must not be used, either directly or indirectly, for or in connection with proceedings numbered 6242 of 2016 in the Administrative Appeals Tribunal without the leave of a judge of the Court. 43 The AAT proceedings referred to in the proposed order are tax appeal proceedings brought by Mr Condon on behalf of the company and funded by, or at least previously funded by, ABCRA1: April 2017 judgment at [45]-[49]. The SPLs are funded by the Australian Taxation Office. 44 Mr Marshall SC contended that an order in similar terms was made in McCann (in his capacity as liquidator of Australvic Property Management Pty Ltd (in liq)) v Mason [2009] FCA 44. In that case, Finkelstein J (refusing to set aside an examination summons) ordered that evidence given at a public examination must not be used in Supreme Court proceedings without leave of the Federal Court, "to safeguard against any improper use of the examination procedure" (at [8]). The conduct of the Supreme Court proceeding had been taken over by the liquidator, and his Honour accepted (at [7]) that, during the course of the examination, the liquidator might uncover information that would be of assistance in the Supreme Court proceeding. 45 Finkelstein J stated (at [5]) that an examination summons will not be oppressive, unfair, an abuse of process or improper merely because there is litigation on foot between a liquidator (or the company in liquidation) and the proposed examinee. On the other hand, the examination power must be exercised for the purpose for which it is conferred. Thus, at [6], Finkelstein J referred to limits on the power, citing, among other authorities, Sent & Ors v Andrews [2002] VSCA 209 and Hamilton v Oades [1989] HCA 21; (1989) 166 CLR 486 at 498. His Honour referred to the observation in Re Southland Coal [2005] NSWSC 789; (2005) 189 FLR 297 at 303 that a chance that defences will be disclosed or de facto discovery obtained is not sufficient to restrain a public examination. 46 Here, there is no suggestion of oppression, unfairness, abuse of process or impropriety on the part of the SPLs (or the ATO). It was not submitted that Mr Condon had a basis for believing that the SPLs might seek to use the examination procedure improperly beyond the fact that the SPLs are funded by the ATO. Rather, the application was put on the basis that the examination of Andrew Cochineas was asked a line of questions said to be directly related to the subject matter of the tax appeal. After some argument, it seems, the questions ceased. 47 On that limited information, I am not satisfied that the circumstances warrant the making of the proposed order. There is presently no suggestion that the SPLs may seek to exceed the limits of their powers by making improper use of the examination procedure. There is no suggestion that the examinations will be used as a "dress rehearsal" for the directors' evidence in the tax appeal: cf. Lamb (in his capacity as Liquidator of Redcastle Estate Pty Ltd) v Mentha [2010] FCA 695 at [32]. Although there may some overlap (about which I make no findings), the issues for investigation by the SPLs are different from the issues that can be expected to arise in the tax appeal. 48 The proposed order is directed against the ATO but there is no reason to suspect that any of its officers have any intention to use improperly any testimony obtained in the course of the public examinations. 49 Accordingly, I will not make the order sought by Mr Condon. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.