Implied Undertaking with respect to Documents
48 As is mentioned above, the first basis upon which Mr Gartner formally sought an order that the examination summons be set aside, or examination under it stayed, is that the election by the applicants to engage the same firm of solicitors that represents NAB in the Federal Court proceeding will render it impossible for the legal firm Finlaysons not to use documents obtained during, or for the purpose of the examination, for an improper or ulterior purpose (see [36] above). During the course of argument it was conceded on Mr Gartner's behalf that the concerns raised by him with respect to the allegedly improper use of documents could, assuming his arguments to be correct, be adequately met by an order that his examination be stayed until the lawyers retained by the applicants were not the same lawyers as were retained by NAB for the purposes of the Federal Court proceeding. I note that in Harvey v Burfield [2003] SASC 192, a judgment published since the hearing of this application, Besanko J has concluded at [34] that it would be sufficient in such circumstances for an order to be made prohibiting the lawyers from making any improper use of the documents.
49 The argument that, in the circumstances of this receivership, the joint legal representation of the applicants and NAB would inevitably lead to a breach of an implied duty not to use documents to which access was obtained during the course of the examination for an ulterior purpose was addressed to Selway J in D'Arrigo v Carter [2003] FCA 5. His Honour rejected the argument. D'Arrigo v Carter concerned an examination summons issued to an accountant who was an examinable officer of some of the companies in the Gartner Family Group. The respondents in that proceeding were the applicants in this proceeding. Selway J at [20] concluded that, in the absence of any court order to the contrary, the disclosure by a receiver to the creditor by whom he or she was appointed of information or documents obtained in an examination under Part 5.9 of the Act is not a breach of any duty of confidentiality. His Honour concluded that such disclosure is 'clearly envisaged' by s 597(4) and (14A) of the Act. It was accepted by Mr Gartner that it would be appropriate for me to follow the decision of Selway J unless I were satisfied that it was plainly wrong (see K Mart Australia Limited v Commissioner of Taxation, [1995] FCA 760 and the authorities there cited).
50 In D'Arrigo v Carter Selway J referred to the decision of the Full Court of the Supreme Court of South Australia in Re Southern Equities and acknowledged that he should follow it. Re Southern Equities concerned an examination summons obtained by a liquidator of a corporation. Lander J at 437, with whom Cox and Bleby JJ agreed, accepted the accuracy of the following propositions:
'… First, that an undertaking is imposed upon a liquidator with respect to documents produced to the court in response to an examination summons. Second, the undertaking is not to use the documents for a collateral or ulterior purpose. Third, the use of the documents in the liquidation is not a collateral or ulterior purpose.'
51 The argument before me proceeded on the basis that the first and second propositions accepted by Lander J in Re Southern Equities should be understood to apply mutatis mutandis to a receiver who is an 'eligible applicant' within the meaning of the Act. The debate before me concentrated on the third proposition and calls for consideration of the purpose of a receivership.
52 Mr Gartner contended that the position of a receiver when he or she conducts an examination is different from that of a liquidator. It was argued that, unlike a liquidator, a receiver is not obliged to perform a broad statutory function. It was further argued that a receiver is an officer of the company to which he or she has been appointed and therefore must not use the position to obtain an advantage for another person. As I understand the contention, it is that there is no proper 'use of documents' in a receivership comparable to 'the use of documents in the liquidation' to which Lander J referred. As a consequence, it was contended the common legal representation of the applicants and NAB will necessarily result in the implied obligation concerning the use of documents to which the applicants gain access by reason of the examination summons being breached.
53 A receiver and manager, appointed under a power contained in an instrument, of property of a body corporate is an 'officer' of the body corporate (see s 82A of the Act). However, this does not mean that the receiver and manager so appointed owes duties only to the body corporate. The Full Court of this Court in Excel Finance at 86-87 approved, without setting it out, a passage from the judgment of Jenkins LJ in Re B Johnson & Co (Builders) Ltd [1955] Ch 634, 661-663 which had earlier been expressly approved by the Privy Council in Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295 at 313-314. Having regard to Mr Gartner's above contention, it is appropriate to set out part of the passage from the judgment of Jenkins LJ to which the Full Court referred. His Lordship observed:
'… a receiver and manager for debenture holders is a person appointed by the debenture holders to whom the company has given powers of management pursuant to the contract of loan constituted by the debenture, and, as a condition of obtaining the loan, to enable him to preserve and realise the assets comprised in the security for the benefit of the debenture holders. The company gets the loan on terms that the lenders shall be entitled, for the purpose of making their security effective, to appoint a receiver with powers of sale and of management pending sale, and with full discretion as to the exercise and mode of exercising those powers. The primary duty of the receiver is to the debenture holders and not to the company. He is receiver and manager of the property of the company for the debenture holders, not manager of the company. The company is entitled to any surplus of assets remaining after the debenture debt has been discharged, and is entitled to proper accounts. But the whole purpose of the receiver and manager's appointment would obviously be stultified if the company could claim that a receiver and manager owes it any duty comparable to the duty owed to a company by its own directors or managers.
…
In a word, in the absence of fraud or mala fides … the company cannot complain of any act or omission of the receiver and manager, provided that he does nothing that he is not empowered to do, and omits nothing that he is enjoined to do by the terms of his appointment ….'
54 I reject the suggestion that there is no proper use of documents in a receivership comparable to the use of documents in a liquidation. In my view, by parity of reasoning with a liquidator, the use by a receiver and manager of documents produced in response to an examination summons for the purpose of the receivership is not a collateral or ulterior purpose. Not only am I not satisfied that Selway J was plainly wrong to proceed on this basis, I am satisfied that he was right to do so.
55 The above conclusion calls for consideration to be given to the true ambit of the purpose of the receivership. Selway J in D'Arrigo v Carter expressed the view that disclosure by a receiver to the creditor by whom he or she was appointed of documents obtained in an examination fell within the purpose of receivership (see [49] above).
56 Besanko J in Harvey v Burfield has expressed what, at first glance, appears to be a contrary view. His Honour at [28]-[29] observed:
'In Re Southern Equities the Court did not need to address the issue of whether the provision of documents or the information contained in documents by the liquidator to a creditor of the company for use in connection with proceedings instituted by the creditor is a collateral or ulterior purpose. I think that it is. Proceedings by the liquidator under Part 5.9 Division 1 or for the recovery of assets for the benefit of the company are quite distinct from proceedings by a creditor against a third party even though recovery by the creditor might indirectly benefit other creditors or contributories of the company. In my opinion, there is no reason to think that the implied undertaking does not arise in the case of separate actions, one by the liquidator against Deloitte and the other by a creditor (Sandhurst Trustees) against Deloitte. I do not think the rights given to creditors and others as a result of the amendments introduced by the Corporate Law Reform Act 1992 (Cth) (No 210 of 1992) dictate a different conclusion. Counsel for the liquidators referred to the reasons for judgment of Selway J in D'Arrigo v Carter, In the Matter of Gartner Wines Pty Limited (Rec. and Man. App) (Administrators App.) [2003] FCA 5. I note that during the course of his reasons, Selway J said (para 20):
"In particular, in the absence of any Court order to the contrary, the disclosure by the receiver to the creditor of the information or documents obtained in an examination is not a breach of any duty of confidentiality. Such disclosure is clearly envisaged by subs. 597 (4) and (14A) of the Act. Such disclosure involves the 'use of the documents in the liquidation' as envisaged by the statutory scheme."
Subsections 597(4) and (14A) mean that a creditor may attend an examination and he may obtain a record of the examination. He may obtain information contained in documents produced to the Court insofar as that information is revealed in the transcript of an examination. He may by utilising the provisions of s 131 of the Supreme Court Act 1935 inspect or obtain copies of documentary material admitted into evidence in the examinations. However, putting these matters to one side, there is nothing in the relevant sections which gives a creditor the right to inspect and use documents produced to the Court on the application of a liquidator, or gives a liquidator the right to give documents to a creditor for use by that creditor. I think a liquidator is under an implied undertaking in the case of documents obtained under Part 5.9 Division 1 and that facilitating the use of those documents or the information contained in the documents by a creditor in proceedings instituted by that creditor is a collateral or ulterior purpose. I put the proposition in these terms because I recognise that there may be powerful arguments to the effect that there should be nothing to prevent a liquidator from communicating to creditors matters relevant to the liquidator's administration including legal proceedings conducted by the liquidator and that this might involve communicating to creditors information in documents discovered by the other party to the proceedings.'
57 The extent to which the views expressed by Selway J in D'Arrigo v Carter conflict with those expressed by Besanko J in Harvey v Burfield is not entirely clear. Plainly, Selway J held that, in the absence of a court order to the contrary, disclosure by a receiver to the creditor of documents, the content of which were disclosed during a public examination or in a written record of an examination, would be a use of the documents in the receivership. I consider it appropriate to follow his Honour in this regard. It is not clear whether his Honour held that the receiver was entitled to allow the creditor to inspect and use documents merely because the documents were produced at the examination pursuant to a summons which required the production of documents.
58 A summons issued under ss 596A or 596B requires the person summoned to attend the Court to be examined. Where the summons requires the production of documents, the documents are required to be produced 'at the examination' (see s 596D(2) and (3)). The practice of this Court when documents are produced at an examination as required by a summons issued under ss 596A or 596B is for the documents to be taken into the custody of the Court. The party on whose application the summons was issued, and any other party entitled to take part on the examination (see s 597(4)), is required to apply to the Court to gain access to the documents. An application for access is ordinarily dealt with in the same, or a similar, way as a comparable application in respect of documents produced in response to a subpoena duces tecum. At best, the party seeking access to the documents might expect to be given leave, on the usual undertakings as to preservation and return, to uplift the documents from the Court's files for the purpose of copying them. It would not ordinarily be expected that any person who attended the public examination of the person to whom the summons issued, or read the written record of the examination, would gain access to all documents produced pursuant to the summons or even learn of the existence of all such documents.
59 I am, with respect, inclined to agree with Besanko J, and I am not satisfied that Selway J expressed a view to the contrary, that there is nothing in the relevant sections of the Act that gives a creditor, and in particular a creditor who is not an eligible applicant in respect of the corporation, the right to inspect and use documents produced to a court pursuant to an examination summons. It might be thought, although as the precise issue was not argued before me I express no concluded view on it, that to imply an unrestricted right in a liquidator or receiver to pass on such documents to the creditor would be to allow the creditor to achieve indirectly what the Act does not authorise it to do directly.
60 However, if there be any relevant inconsistency between the approaches of Selway J and Besanko J it is not necessary for me to choose between them. I respectfully agree with both Selway J and Besanko J that the fact that the lawyers retained by a creditor will, by reason of their representation of an eligible applicant who has successfully applied for the issue of an examination summons, gain access to documents produced at the examination is not a reason to set aside the summons in its entirety or to stay any examination under it. So far as I am aware, no documents have as yet been produced by Mr Gartner pursuant to the examination summons. When Mr Gartner does produce to the Court the books and records referred to in the examination summons, the applicants will, presumably, apply for access to them. I would expect Mr Gartner, by his legal representative, to be heard on that application. At that time it may become clear, as I would expect, that copies of a significant number of those books and records are already in the possession of NAB. Indeed, it is at least theoretically possible that at that time NAB may be a party entitled to take part in the examination. Even if it is not, in respect of those books and records that are not in the possession of NAB, the applicants and their legal representatives may be willing to give undertaking to the Court that will address all of Mr Gartner's concerns.
61 In my view, to the extent that this application is sought to be supported on the basis that the applicants have engaged the same firm of solicitors that represents NAB in the Federal Court proceeding, the application is, taken at its strongest, premature. I am not satisfied that the engagement by the applicants of the same firm of solicitors that represents NAB in the Federal Court proceeding will render it impossible for that firm not to use documents produced pursuant to the summon for an improper or ulterior purpose.
62 The second basis upon which Mr Gartner seeks an order setting aside the examination summons or staying his examination under the examination summons is that, as he contends, the predominant purpose of the applicants in seeking the summons was an improper purpose.
63 Mr Gartner contended that the decision of the Full Court in Excel Finance is authority for the proposition that it is not permissible for a receiver to conduct an examination in the interest of a creditor. Excel Finance is not authority for that proposition. The relevant passage from the judgment of the Full Court is at 93. It reads as follows:
'… we are of the view that the use of the power to obtain an examination summons for the principal purpose of furthering the cause of the applicant for the summons or, as in this case, appointor of the applicant in litigation against third parties, not for the benefit of the corporation, its contributories or creditors (other than in the most indirect way) is a use of the power for a purpose foreign to that power and thus an abuse of the power.' (emphasis added)
64 In determining whether the examination summons is being used for an improper purpose, Excel Finance discloses that two questions must be asked. First, what is the principal purpose for which the examination summons is being used? Secondly, if the principal purpose is that of furthering the cause of NAB in litigation against third parties, is that litigation for the benefit of the receivership?
65 In seeking the authorisation of ASIC to make application under ss 596A and 596B in respect of the companies in the Gartner Family Group, the applicants, by their solicitors, stated that their purpose in seeking examination summons would be to investigate the circumstances in which, and the transactions pursuant to which, certain assets of the companies in the Gartner Family Group were moved beyond the control of NAB and the applicants as receivers appointed by NAB. It is not suggested by Mr Gartner that this purpose constitutes an improper purpose.
66 By a letter dated 12 May 2003 addressed to the solicitors representing Mr Gartner, the solicitors for the applicants advised:
'We are instructed that our clients, Messrs Carter and Hart, do not intend to examine your client Michael Gartner, or seek the provision of any information from him, in relation to any matter the subject of the claims and allegations raised against the National Australia Bank Limited in Federal Court proceedings S189 of 2002.
Our clients do intend to examine your client on a number of matters, including the merits of the claims made in proceeding S189 of 2002 against both Ernst & Young and Ernst & Young Corporate Finance Pty Ltd (EYCF), as they are required to do on the basis that the chose in action is an asset of Gartner Wines Pty Ltd (Receivers and Managers Appointed) (In Liquidation). It is necessary and incumbent upon our clients to obtain information from your client as to the merit or otherwise of the Federal Court Proceeding against Ernst & Young and EYCF. We note that your client apparently agrees with this given that he has, in his letter of 23 April 2003 requested a meeting with Messrs Carter and Hart to discuss the merits of that claim.'
67 In Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512 at 518, Gleeson CJ, with whom Mahoney and Priestley JJA agreed, cited with approval the following passage from the judgment of Street J in Re Hugh J Roberts Pty Ltd [1970] 2 NSWR 541 at 582; 585:
'A liquidator needs information concerning his company just as much in connection with current or contemplated litigation as in connection with other aspects of its affairs. In using the statutory machinery of private examination he will in many cases be gathering evidence as an ordinary and legitimate use of this procedure. …
In my judgment it is immaterial in basic substance whether the private examination is sought to be used by a liquidator to gather information in connection with proceedings he believes he might be able to bring, proceedings he contemplates bringing, proceedings he has decided to bring, and proceedings he has already brought. There is no presently relevant distinction in substance between gathering information referable to commencing proceedings and gathering information referable to continuing proceedings.'