MATTER : Huntingdale Village Pty Ltd (Receivers and Managers Appointed), Silkchime Pty Ltd (Receivers and Managers Appointed), Vannin Pty Ltd (Receivers and Managers Appointed), Warwick Entertainment Centre Pty Ltd (Receivers and Managers Appointed, Paragon Apartments Ltd (Receivers and Managers Appointed), Westpoint Corporation Pty Ltd (Receivers and Managers Appointed) (in liq), Bayview Port Melbourne Ltd (Receivers and Managers Appointed) (in liq) and Westpoint Management Ltd (Receivers and Managers Appointed) (in liq)

MARK ANTHONY KORDA and DAVID JOHN WINTERBOTTOM In Their Capacity as Receivers and Managers of Huntingdale Village Pty Ltd (Receivers and Managers Appointed), Silkchime Pty Ltd (Receivers and Managers Appointed), Vannin Pty Ltd (Receivers and Managers Appointed), Warwick Entertainment Centre Pty Ltd (Receivers and Managers Appointed), Paragon Apartments Ltd (Receivers and Managers Appointed), Westpoint Corporation Pty Ltd (Receivers and Managers Appointed) (in liq), Bayview Port Melbourne Ltd (Receivers and Managers Appointed) (in liq) Westpoint Management Ltd (Receivers and Managers Appointed) (in liq)

PERPETUAL NOMINEES LTD As Custodian of The ING Mortgage Pool for ING Funds Management Ltd as the Responsible Entity of The ING Mortgage Pool

Corporations - Receivers and managers - Inspection of financial records pursuant to s 290 and/or s 421(2) of the Corporations Act 2001 (Cth) - Standing - Whether records include records kept by the receivers in their personal capacity as receivers and managers - Documents to be produced - Degree of information required to correctly record and explain the transaction - Redaction of information - Legal professional privilege - Discretion - Whether application brought for an improper purpose - Whether an order for security should be made pursuant to s 421(2)

Corporations Act 2001 (Cth), s 9, s 290, s 421, s 471A

Documents are within the scope of s 421

Section 421 does not abrogate legal professional privilege

First Defendants : Mr C L Zelestis QC & Mr M D Cuerden

Areva NC (Aust) Ltd v Summit Resources (Aust) Pty Ltd (No 2) [2009] WASC 67

1 The first defendants are the receivers and managers of each of eight companies (the Companies) that are or were part of the Westpoint Group. Each of the Companies granted a fixed and floating charge (Charge) in favour of the second defendant (Perpetual Nominees). Each of the Companies committed an act of default and Perpetual Nominees appointed the first defendants as receivers and managers of each of the Companies. I will sometimes refer to the first defendants as the Receivers. Three of the Companies, Westpoint Corporation Pty Ltd, Bayview Port Melbourne Pty Ltd and Westpoint Management Ltd are, and have been since 2006, in liquidation. The first plaintiff, Mr Carey, is a director of each of the Companies except for Westpoint Management Ltd. Mr Carey is also a member of Westpoint Corporation. Quarts Nominees Pty Ltd, the second plaintiff, owns all of the shares in, and hence is a member of, Westpoint Management.

2 Mr Carey requested from the Receivers copies of invoices of their fees in respect of the receiverships of the Companies and copies of the invoices for the legal costs charged by Corrs Chambers Westgarth (Corrs) in respect of the receiverships of the Companies. The Receivers have refused to permit Mr Carey to inspect those documents but has offered to allow Mr Carey to inspect the following documents:

(1) the receipts and payments printouts produced by the receivership MYOB Records;

(2) the first page of the tax invoices issued by Corrs, with all narrations redacted; and

(3) the recharge invoices issued by the Receivers but not the recharge schedules.

Examples of each of these documents are annexures RHM8, RHM11 and RHM9 respectively to the affidavit of Russell Morgan sworn 12 October 2010.

3 On 30 August 2010 Mr Carey commenced these proceedings against the Receivers and Perpetual Nominees by causing to be issued an originating process in which he claimed the following relief:

1. there be an inquiry in relation to the refusal of the first defendants to permit the plaintiff to inspect and copy financial records relating to the Corporations as correctly record and explain payments to:

1.1 the first defendants after 24 January 2006 for their fees as receivers and managers of the Corporations; and

1.2 Corrs Chambers Westgarth after 24 January 2006 for their services to the first defendants as receivers and managers of the Corporations;

1. within 24 hours from the date of order the first defendants produce for inspection and copying by the plaintiff the financial records in paragraph 1 above;
2. the first defendants be removed as the receivers and managers of the Corporation;
3. in the alternative to paragraph 3 above and pending the inquiry in paragraph 1 above, the first defendants be restrained from taking an steps as receivers and managers of the Corporations;

4 Also on 30 August 2010 the plaintiff caused to be issued an interlocutory process in which he claimed, amongst other things, the following relief:

1. With 24 hours from the date of order the first defendants do produce for inspection and copying by the plaintiff ... pursuant to s 290 or section 421(2) of the Corporations Act 2001, financial records relating to each [of the Companies] as correctly record and explain payments to:

2.1 the first defendants after 24 January 2006 for their fees as receivers and managers of the Corporations; and

2.2 Corrs Chambers Westgarth after 24 January 2006 for their services to the first defendants as receivers and managers of the Corporations;

1. pending the inquiry sought in the Originating Process the first defendants be restrained from taking an steps as receivers and managers of the Corporations.

5 The Receivers raised a number of issues concerning the entitlement of the plaintiffs to inspect the documents sought and the obligation of the Receivers to make them available for inspection. I ordered that a number of issues arising in the matter be tried separately. It is those issues which are the subject of these reasons. The issues are:

(a) Whether, having regard to section 471A(1) of the Corporations Act 2001 (Cth) (Act):

(i) the Plaintiff has, or is otherwise entitled to exercise, any right of access to the financial records of the companies in liquidation, namely Westpoint Corporation Ltd, Bayview Port Melbourne Ltd and Westpoint Management Ltd, pursuant to section 290 of the Act;

(ii) the Plaintiff may inspect records kept by the First Defendants pursuant to section 421(2) of the Act with respect to the companies in liquidation referred to in sub-paragraph (i) herein; and

(iii) the Plaintiff has standing to bring this application with respect to the companies in liquidation referred to in sub-paragraph (i) herein or to obtain the relief sought with respect to those companies.

(b) Whether the records within section 421(2) of the Act include records kept by the First Defendants in their personal capacity, or whether they are limited to records kept by the First Defendants as correctly record and explain transactions entered into by the First Defendants in their capacity as the receivers and managers of the Companies the subject of this application.

(c) Whether the records within section 421(2) of the Act extend to any documents beyond the receivership MYOB records (as exemplified by annexure RHM8 to the affidavit of Russell Harry Morgan sworn 12 October 2010) and, in particular, whether those records include tax invoices:

(i) issued by the First Defendants for their fees as receivers and managers of the companies the subject of this application; and

(ii) received by the First Defendant from Corrs Chambers Westgarth for their services to the First Defendants as receivers and managers of the companies the subject of this application.

(d) Whether the First Defendants are entitled to redact information contained in the records to which the Plaintiff is not otherwise entitled under section 290 and/or section 421(2) of the Act, either as a matter of the proper construction of sections 290 and 421(2) of the Act, alternatively as a matter of discretion in granting relief.

(e) Whether any rights which the Plaintiff may have to inspect records under section 290 and section 421(2) of the Act are subject to any proper claim for legal professional privilege by the First Defendants, either as a matter of the proper construction of sections 290 and 421(2) of the Act, alternatively as a matter of discretion in granting relief. (The Court is not asked to determine any claims for privilege at this stage).

(f) Whether the Plaintiff should, as a matter of discretion, be granted any relief at all in the light of the First Defendants' previous offer to provide the documents referred to at paragraph 28 of the letter from the First Defendants' solicitors to the Plaintiff's solicitors of 22 October 2010.

(g) Whether any relief to be granted to the Plaintiff should, in the exercise of the Court's discretion, be conditional upon the Plaintiff agreeing to meet, and providing security in respect of, the First Defendants' reasonable fees and costs associated with complying with that order. (If so, the parties should be ordered to confer as to the quantum of those fees and costs and the form of security to be given).

6 Section 471A of the Corporations Act 2001 (Cth) (the Act) provides that while a company is being wound up a person cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer of the company. The Receivers say that Mr Carey has no standing in relation to the three Companies that are in liquidation - Westpoint Corporation, Bayview Port Melbourne and Westpoint Management. The plaintiff sought access to the relevant documents on the basis that he was a director of those companies at the time they were ordered to be wound up. Mr Carey accepts that he has no entitlement to inspect the relevant documents pursuant to s 421(2) of the Act by reason of the provisions of s 471A of the Act and the fact that the three Companies are in liquidation. It is not necessary to say anything further about issue (a).

7 Section 421(1)(a) - (c) of the Act provides that a managing controller of property of a corporation, which includes a receiver and manager, must open and maintain an account with an Australian authorised deposit taking institution, pay into the account money of the corporation that comes under the control of the managing controller and ensure that the account does not contain money other than money of the corporation that comes under the control of the managing controller. Section 421(1)(d) provides that the managing controller must keep such financial records as correctly record and explain all transactions that the managing controller enters into as the managing controller. Section 421(2) provides relevantly that, unless the court otherwise orders, any director or member of a corporation may inspect records kept by a managing controller of the property of the corporation for the purposes of s 421(1)(d).

8 In their outline of submissions the Receivers submitted that on the proper construction of s 421(2) the right of inspection does not extend to documents prepared by the Receivers for their own benefit or protection and documents referable only to the Receivers' relationship with their appointor. The Receivers do not press that submission. Senior counsel for the Receivers, Mr Zelestis QC, submitted that s 421 is concerned with all payments in and all payments out of the statutory account and it requires the managing controller to keep documents of a certain class, which record and explain transactions which necessarily cover all money going in and all monies going out of the statutory account. The Receivers accept that a director may inspect records kept by the Receivers for the purpose of correctly recording and explaining all such transactions the Receivers enter into as receivers. That includes records which record and explain transactions in which the Receivers withdraw funds from the relevant bank account to pay their fees. It also includes records recording and explaining the withdrawal of funds by the Receivers from the relevant bank account to pay legal fees incurred by the Receivers in obtaining advice for the Receivers' own benefit or protection or referable to their relationship with their appointor. There is no carve out of such transactions from the scope of the transactions in respect of which the Receivers must keep records as correctly record and explain transactions that the Receivers enter into as receivers of the Companies.

9 This issue raises for consideration the scope of the documents covered by s 421 and specifically whether the plaintiff is entitled to inspect the tax invoices issued by the Receivers for their fees and the tax invoices received by the Receivers from Corrs for legal services to the Receivers.

10 Section 421(1)(d) requires a managing controller to keep such financial records as correctly record and explain all transactions that the managing controller enters into as the managing controller. Section 421(2) provides that a director, creditor or member of a corporation may, unless the court otherwise orders, inspect records kept by a managing controller for the purposes of s 421(1)(d). Mr Zelestis QC submitted that s 421(2) does not give a right of access to all documents which the receiver happens to have kept which are capable of contributing to an explanation of a financial transaction. The right of access extends only to the documents which the receiver was required to keep for the purposes of s 421(1)(d).

11 The Receivers say that they have offered to allow Mr Carey to inspect the documents described in paragraph 2 above and that is sufficient to comply with their obligation to give Mr Carey the access provided for by s 421(2). The Receivers submit that they are not required to make available for inspection any further documents notwithstanding that they fall within the definition of financial records in s 9, that they relate to a transaction or transactions involving the withdrawal of funds from the statutory bank accounts maintained by the Receivers pursuant to s 421(1) and that they record and explain such transactions. The Receivers submit that the receipts and payments printouts produced by the receivership MYOB records (the R & P printouts) sufficiently record and explain the relevant transactions and s 421(2) does not require access to other documents relating to those transactions. Alternatively, the Receivers submit that if they are wrong in that and a director or member of a corporation may inspect more detailed documents then it is sufficient that the plaintiffs be given access to the recharge invoices issued by the Receivers (Recharge Invoices) but not the recharge schedules, such as annexure RHM9 and to the first page of each of the tax invoices issued by Corrs but with all narrations redacted. To consider the issues raised by that submission it is necessary to refer to Mr Morgan's evidence concerning the financial records maintained by the Receivers.

12 The Receivers maintain records of receipts and payments together with supporting vouchers such as a tax invoice from a law firm for its fees or a contract of sale for the sale of property. The Receivers maintain records of the receipts and payments using a MYOB software package. Annexure RHM8 is a copy of a sample of a R & P printout.

13 In the course of acting as receivers and managers of the Westpoint companies the Receivers rendered invoices in respect of the relevant companies for their remuneration and expenses incurred. The Receivers rendered a single tax invoice to Westpoint Corporation in respect of all charges for the Westpoint companies during a relevant period. The tax invoice was then presented to Perpetual Nominees for approval and after approval was issued to Westpoint Corporation for payment. After Westpoint Corporation had paid an invoice, Westpoint Corporation would then recharge the relevant amount to each of the Westpoint companies which had relevantly incurred charges on a periodic basis, generally every six months, by issuing a one page invoice. Each Westpoint company would then pay Westpoint Corporation for the invoiced amount. From 24 January 2006 to 12 October 2010 the Receivers have issued 68 tax invoices to Westpoint Corporation and Westpoint Corporation has issued eight recharge invoices to each of the Westpoint companies. The invoices are supported by recharge schedules. Annexure RHM9 is a copy of a recharge invoice issued by Westpoint Corporation to Warwick Entertainment Centre with recharge schedules that have been redacted to mask:

1. references to time entries and narratives relevant to other companies in the Westpoint Group;
2. privileged narratives; and
3. narratives which the Receivers say Mr Carey is not entitled to because they relate to advice provided to the Receivers for their benefit or protection.

14 In relation to work done by Corrs, Corrs issued an invoice to Westpoint Corporation in respect of work done on matters relating to Westpoint Corporation as well as receivership issues that crossed over a number of the Westpoint companies. Where Corrs did work in relation to a particular company, then Corrs would issue an invoice to that company. The Corrs invoices comprise a front page in the form of a tax invoice which identifies the amount invoiced for the relevant period, which has annexed to it a summary of the work performed for that period for that company. Corrs have issued 52 tax invoices to Westpoint Corporation and between 16 and 45 tax invoices to each of the other companies.

15 The R & P printouts contain a succinct summary of each payment it records. For example, an R & P printout records the following information concerning the payment of an invoice from Corrs:

16 Each of those entries record a relevant transaction but they provide only a limited explanation of the transaction. The entries explain that the specified amount was paid on the specified date to Corrs for legal fees but do not explain whether the legal fees were for representation, advice or conveyancing, the subject matter of the legal work done or the company in relation to which the work was done.

17 Mr Zelestis QC submitted that s 421(1)(d) does not require a receiver to keep records providing information to enable third parties to scrutinise the performance of the receiver generally. I agree. However, s 421(1)(d) requires a managing controller to keep records that not only correctly record all transactions that the managing controller enters into as the managing controller but also to explain all such transactions. Explain means 'to make plain or clear'; 'to make known in detail'; 'to make clear the cause or reason of'; 'account for': Macquarie Dictionary; 'to unfold (a matter), to give details of, enter into details respecting'; 'to make plain or intelligible, clear of obscurity or difficulty'; 'to make clear the cause, origin, or reason of'; 'to account for': Oxford English Dictionary.

18 The records in relation to each company should at least explain what work or service was provided to that company in consideration of each payment. Where, as here, a fee has been charged to one company for work and services rendered to a number of companies and then the company charged has sought and obtained reimbursement from the other companies, then a proper explanation of the payment made by each company involves at least an explanation of how that company's share of the aggregate fee was determined. The R & P printouts do not provide that explanation. The printouts do not make known in detail the reason for the payment. The Receivers have not complied with the requirements of s 421(2) by providing, or offering to provide, to Mr Carey the R & P printouts.

19 The Receivers say that if they are required to provide Mr Carey with access to something more than the R & P printouts in relation to the payment of the Receivers' fees then it is sufficient that they provide copies of the Recharge Invoices without the recharge schedules. Annexure RHM9 is an example of a Recharge Invoice together with a redacted recharge schedule. The Recharge Invoice in annexure RHM9 is in form an invoice issued by Westpoint Corporation to Warwick Entertainment Centre. Apart from the date of the invoice it provides the following information:

Reimbursement of Receivers and Managers Fees Paid by WCPL for the period 1 July 2009 to 30 June 2010

Reimbursement of Receivers and Managers Disbursements Paid by WCPL for the period 1 July 2009 to 30 June 2010

20 The Recharge Invoice discloses the Receivers' fees paid by Westpoint Corporation in respect of Warwick Entertainment Centre for a 12 month period but it does not provide an itemised account of the Receivers' fees.

21 The Recharge Invoices invoice the Westpoint Company for the reimbursement of Receivers' fees paid by Westpoint Corporation. The schedule to the Recharge Invoice explains the transaction in so far as it sets out the fees charged by the Receivers to Westpoint Corporation for which Westpoint Corporation is requiring reimbursement from the Westpoint Company, such as Warwick Entertainment Centre. Mr Zelestis QC submitted that the purpose of s 421(1)(d) is to require the keeping of records that explain what money has gone out of the account and why but that it is no part of the purpose of that provision to provide a right of access to records for the purpose of enabling third parties to scrutinise the performance of the receiver generally. Mr Zelestis QC submitted that what is required is the keeping of records and giving rights of access to them in order to enable scrutiny of transactions with money. Mr Zelestis QC submitted that what is principally required is to record the amount and the reason why the money has been paid.

22 An issue in this case is what degree of particularity or detail is required to explain a relevant transaction. What is required to explain why an amount of money was paid by Warwick Entertainment Centre on a certain date to Westpoint Corporation? Is it sufficient to disclose that the amount was paid to reimburse Westpoint Corporation for Receivers' fees paid by Westpoint Corporation for the period 1 July 2009 to 30 June 2010? Or are the Receivers required to keep records that explain why that amount was paid for that period by describing the work done by the Receivers and charged to Westpoint Corporation for which Westpoint Corporation seeks reimbursement from Warwick Entertainment Centre?

23 The requirement that a receiver must keep such financial records as explain all transactions that he enters into as a receiver raises questions of degree. Almost any explanation of a transaction is capable of both further particularity and further generalisation. In any given case a judgment must be made as to the degree of particularity or generality which is appropriate to the transaction and as to what constitutes the necessary explanation. In the circumstances of this receivership a proper explanation of the transaction by which Warwick Entertainment Centre paid an invoiced amount to Westpoint Corporation requires more detail than that it was for the reimbursement of receivers' fees paid by Westpoint Corporation for a 12 months period. The Receivers did not render an invoice to Warwick Entertainment Centre or an invoice to Westpoint Corporation on behalf of Warwick Entertainment Centre for work done by the Receivers in the course of the receivership of Warwick Entertainment Centre. In the absence of such records an explanation is required of why Westpoint Corporation is seeking reimbursement of the specified amount and why Warwick Entertainment Centre paid that amount. That explanation is to be found in the schedule to the Recharge Invoice. I find that the schedule to the Recharge Invoice explains the transaction by which Warwick Entertainment Centre paid the specified amount to Westpoint Corporation as reimbursement of the Receivers' fees for the specified period. I find that the Recharge Invoices together with the recharge schedules are financial records kept by the Receivers so as to correctly record and explain the transactions consisting of the payment of the Receivers' fees or the reimbursement of those fees paid by Westpoint Corporation.

24 In relation to records kept by the Receivers of payments to Corrs for legal services, the Receivers have offered to allow Mr Carey to inspect the first page of the tax invoice issued by Corrs with all narrations redacted. Annexure RHM11 is an example of a tax invoice issued by Corrs to Vannin. The invoice contains the following:

Professional time in relation to the above up to and including 23 May 2007

Expenses incurred by us undertaking the above services (Schedule 1)

Total Amount Owing for fees and expenses including GST

25 Mr Morgan says that the invoice relates to work undertaken by Corrs which both relates to work done for the company, which may or may not be privileged, and tasks for the benefit of the Receivers. The invoice has been redacted to mask privileged narratives and narratives which the Receivers say the plaintiffs are not entitled to because they relate to advice provided to the Receivers for their benefit or protection.

26 The Corrs invoice referred to states that the amount invoiced is for professional fees in relation to Vannin for an unspecified period up to and including 21 August 2006. The part of the invoice reproduced does not explain what part of the amount invoiced relates to work done for the company and what amount relates to work for the benefit of the Receivers. Insofar as it relates to work done for the company, the part of the invoice reproduced does not explain whether the work was done in relation to litigation, advice or conveyancing and the subject matter of the work. The 'narratives' or parts of the Corrs invoice not reproduced in annexure RHM11 explain the transaction in that they set out the work done by Corrs for which the Receivers paid. Subject to questions of privilege or disclosing advice provided to the Receivers for their benefit or protection, to which I will refer later, the whole of the Corrs invoice records and explains the transaction by which the Receivers paid Corrs the amount stated in the invoice and, subject to the court ordering otherwise, Mr Carey may inspect them pursuant to s 421(2).

27 This question is whether the Receivers are entitled to redact information contained in the records to which the plaintiffs are not otherwise entitled under s 421(2) of the Act, either as a matter of the proper construction of s 421(2) or alternatively as a matter of discretion in granting relief.

28 In their written submissions the Receivers say that in addition to privileged communications which are dealt with by issue (e), the Receivers are entitled to redact information to which the plaintiffs are not otherwise entitled which relate to:

(a) the three companies in liquidation in respect of which the plaintiffs do not have a right of inspection or standing;

(b) another company in the Westpoint Group, Emu Brewery Developments Pty Ltd (in liq) which is not the subject of the plaintiffs' request for these proceedings; and

(c) advice provided to the Receivers for their own benefit or protection or referable only to the Receivers' relationship with their appointor.

29 The three companies in liquidation are Westpoint Corporation, Bayview Port Melbourne and Westpoint Management. Quarts Nominees, the second plaintiff, is a member of Westpoint Management and brings the application in that capacity. Mr Carey is unable to pursue the application as a director of Bayview Port Melbourne because that company is in liquidation. Accordingly, the plaintiffs in these proceedings are not entitled to any orders in relation to the inspection of financial records relating to Bayview Port Melbourne. There is no application in relation to Emu Brewery Developments Pty Ltd and hence the plaintiffs are not entitled to any orders in relation to inspection of financial records of Emu Brewery Developments Pty Ltd.

30 On the hearing of these issues the Receivers did not press the submission that on the proper construction of s 421(2) the right of inspection does not extend to documents prepared by the Receivers for their own benefit or protection or documents referable only to the Receivers relationship with their appointor.

31 The issue then raised is whether the Receivers are entitled to redact information concerning transactions of Bayview Port Melbourne or Emu Brewery Developments Pty Ltd from financial records that otherwise fall within s 421(2) in relation to the other companies whose financial records the plaintiffs seek to inspect.

32 Section 421(2) provides that, unless the court otherwise orders, a director or member of a corporation may inspect records kept by a managing controller for the purposes of s 421(1)(d). Section 421(1)(d) requires the managing controller to keep such financial records as correctly record and explain all transactions that the managing controller enters into as the managing controller. Section 421(2) does not enable a director or member of a corporation to inspect records kept by a managing controller that record and explain transactions that the managing controller entered into as the managing controller of another corporation. Where a financial record maintained by the managing controller contains material that does not relate to the transaction entered into by the managing controller as managing controller of the relevant corporation then the managing controller may redact, that is, seal up or cover up in some way, the irrelevant parts of the records so that only the relevant material is inspected.

33 The situation is analogous to the discovery of documents pursuant to the rules of the court. Where a discoverable document contains material that is both relevant and irrelevant, the document can be produced for inspection with the irrelevant part or parts of the document redacted so that only the discovered material is disclosed: Areva NC (Aust) Ltd v Summit Resources (Aust) Pty Ltd (No 2) [2009] WASC 67.

34 Issue (e) relates to legal professional privilege. The issue is whether any rights which the plaintiff may have to inspect records under s 421(2) is subject to any proper claim for legal professional privilege by the Receivers.

35 It is common ground that s 421(2) does not abrogate legal professional privilege. The Receivers are entitled to redact any relevant information in the document which is the subject of legal professional privilege. Whether or not any information in the relevant documents is subject to legal professional privilege has not yet been determined. The Receivers have not yet made any claim for legal professional privilege.

36 This issue is whether the plaintiff should, as a matter of discretion, be granted any relief at all in the light of the Receivers previous offer to provide the documents referred to at paragraph 2 above.

37 Section 421(2) provides that a director or member of a corporation may inspect the relevant records unless the court otherwise orders. Mr Zelestis QC submitted, correctly in my opinion, that s 421(2) confers on the court a discretion to refuse inspection rather than conferring on a director, creditor or member only a right to approach the court for the exercise of discretion to grant inspection.

38 In oral submissions Mr Zelestis QC summarised the matter this way:

If [the Receivers] haven't offered enough, then that's the end of that question. If [the Receivers] offered enough, that will have a costs ... consequence.

I have found that the Receivers have not offered enough.

39 Counsel for Perpetual Nominees submitted that the plaintiffs' purpose in seeking to inspect the Receivers' fee invoices and Corrs' invoices is for the purpose of advancing the plaintiffs' case in COR 223 of 2009. Counsel submitted that it is not appropriate in the exercise of the court's discretion to allow access to documents where the applicants' purpose is to advance the discovery process in COR 223 of 2009.

40 I am not satisfied that the plaintiffs seek access to the relevant invoices for an improper purpose. A director or member may inspect documents under s 421(2) for the purpose of seeing whether he or she may have a case against the managing controller, or some other party, or for the purpose of advancing some case they have already commenced. That is not an improper purpose for seeking to inspect the relevant documents. Section 421(2) does not preclude a director or member from inspecting the documents for that purpose.

41 This issue is whether any relief granted to the plaintiffs should, in the exercise of the court's discretion, be conditional upon the plaintiffs agreeing to meet, and providing security in respect of the Receivers reasonable fees and costs associated with complying with that order.

42 It is common ground that the power of the court under s 421(2) to 'otherwise order' includes the power to order that a director or member may not inspect the relevant records unless the director or member provides security in respect of the Receivers reasonable fees and costs associated with providing inspection.

43 The Receivers say that a process of redaction needs to be undertaken to ensure that only information to which the plaintiffs are entitled to be provided is provided to them. Mr Morgan has sworn that he believes it will take a significant amount of time, and significant costs are likely to be incurred, to undertake a redaction process. Mr Morgan has sworn that there are insufficient funds in the Companies' accounts to meet the reasonable costs of the redaction exercise.

44 The redaction exercise referred to by Mr Morgan in his affidavit of 12 October 2010 has two aspects. Mr Morgan says that each invoice issued by the Receivers and Corrs needs to be reviewed to ascertain whether those invoices contain narratives which:

1. relate to advice provided to the Receivers as agents of the Companies and whether those narratives are privileged; or
2. relate to advice provided to the Receivers for their benefit or protection.

45 The Receivers initially, but no longer, considered that the plaintiffs were not entitled to inspect financial records which record and explain transactions which related to advice provided to the Receivers for their benefit or protection. The redaction exercise to be undertaken by the Receivers relates only to the issue of legal professional privilege. No claim for legal professional privilege has yet been made.

46 It is not appropriate to require the plaintiffs to give security for the Receivers' costs of examining the relevant financial records, determining which if any parts are the subject of legal professional privilege and redacting those parts. At this stage it is not known whether or not any claims for legal professional privilege, if made, will be upheld.

47 In the interests of effective case management, it may be possible to determine whether or not claims to legal professional privilege in relation to some sample invoices should be upheld without the Receivers having to examine all of the relevant financial records and make a claim of legal professional privilege in relation to all the invoices. For example, the Receivers may examine some invoices, consider whether any claim for legal professional privilege should be made in relation to any part of those invoices and if so make the claim. That exercise might be able to be undertaken in relation to a range of representative invoices and the court's ruling in relation to the claim for privilege in relation to those invoices may provide a guide to the approach the Receivers may or should take in relation to claiming legal professional privilege in relation to the remaining financial records. If the Receivers wish to pursue such an approach then they should confer with the plaintiffs in relation to that matter and how it might be approached.

48 I will hear from the parties in relation to the further hearing of the plaintiffs' interlocutory application.