(9) A person attending before the Court for examination pursuant
to an order made under sub-section (3), if directed by the
Court
to produce any books in his possession or under his control
relevant to the matters on which he is to be, or is being,
examined, shall not refuse or fail to comply with the direction."
4. Here, the liquidator contends that he does not know which
partner or
employee of the applicant in which city has the documents which are sought or
the information to be given at the proposed
examinations except that Mr. Lutz
has some information and perhaps some documents. Nevertheless the provisions
of s.541 are clear.
The order that a person attend for examination may only
be made where the requirements of s.541(2) exist, in this case where it
appears to the liquidator that a person may be capable of giving relevant
information. That person may be directed to produce documents:
ss.(9). There
is no basis for an order under the section directing a person merely to
produce documents.
5. I do not think there
can be any doubt that only natural persons can be the
subject of orders and directions under s.541. Stephen J took that view in
Smorgon
v. Australia and New Zealand Banking Group Ltd. and Ors. [1976] HCA 53; (1976) 134
CLR 475 in relation to the powers of the Commissioner of Taxation pursuant to
s.264(1) of the Income Tax Assessment Act 1936 (Cth.) to compel a person to
furnish him with information, a provision not dissimilar in operation from
s.541: see pp 481-483. In
Re Rothwells Ltd. (No.2) (1989) 7 ACLC 576
Nicholson J, in the context of s.541, rejected the notion that the "proper
officer" of a company could be the subject of an order
under the section, and
applied the decision and reasoning of Stephen J in Smorgon (supra): see p 593,
as did McLelland J in Re BPTC
Ltd. (In Liq.) (No.2) (1992) 10 ACLC 1,431 at p
1435. McLelland J did acknowledge that where an order may be, and is, made
against a corporation requiring it to produce
documents, it is "permissible
and common practice to require the corporation 'by its proper officer' to
produce the documents ...":
p.1,435. However, s.541 does not empower the
court to make an order against a corporation. A contrary view was taken by
Cohen J
in M and H Plumbing v. DHD Constructions (1989) 7 ACLC 1266. There,
orders were made pursuant to s.541 apparently directed to the Proper Officer
of various corporations. Cohen J accepted that
there is an established
practice of directing a sub-poena duces tecum to the Proper Officer of a
company and referred to Southern
Pacific Hotel Services Inc. v. Southern
Pacific Hotel Corporation Ltd. (1984) 1 NSWLR 710 per Clarke J and Penn-Texas
Corporation v. Murat Asphalt (1964) 2 QB 643 per Denning LJ at p 663 and
Rochfort v. Trades Practices Commission [1982] HCA 66; (1982) 153 CLR 134. He went on to
say, at p 1,270:- "It seems to me to make any sense of the section, it is
necessary that the Proper Officer produce
the documents and therefore that he
is the person who should be required to be examined for that purpose."
6. I agree with McLelland
J in Re BPTC Ltd. (In Liq.) (No.2) supra, at pp
1435-1436, that the view of Cohen J is not correct. S.541 provides for the
examination
of a natural person who, in the present context, it appears to the
liquidator of the defendant, may be capable of giving relevant
information.
That person must be identified. The identification may be by name or by some
description, e.g. secretary, chairman,
general manager, which is capable of
identifying a particular natural person. Proper Officer is not so capable.
The analogy of the
so-called practice with respect to sub-poena duces tecum
directed to "a corporation" is not appropriate to s.541.
7. Furthermore,
there is no basis for concluding that there is a Proper
Officer of a firm of accountants who practice in partnership and not as
members
of a corporation.
8. The two orders referring to the Proper Officer in Perth and Sydney of the
applicant must be set aside as they
should not have been made. A consequence
of this decision may be that the liquidator will have to obtain orders for the
examination
of all of the partners of the applicant and the staff of the firm
and proceed to examine them one by one until the devised information
is
obtained. He can hardly be criticized if he takes that course and the
principals of the applicant cannot be heard to complain
as it is a simple task
for them to disclose voluntarily to the liquidator, the identity of the
persons who possess the required information
and documents.
9. The applicant also contended that the order relating to Mr. Lutz should be
set aside for various reasons. The
first of them is that it has not been
established that it has appeared to the liquidator that Mr. Lutz is a person
capable of giving
relevant information. The liquidator, who is the prescribed
person pursuant to s.541(2), did not place any evidence before the Master
as
to his belief. An affirmation of his solicitor was filed in which the
solicitor deposed to his belief. This is a technical objection
but one which
the applicant is entitled to take. This issue was resolved by giving the
liquidator leave to file an affidavit setting
out his own belief and the basis
for it.
10. The next ground contended by the applicant for setting aside the order is
that it is
not proposed to examine Mr. Lutz but only to obtain production of
documents and consequently there was no basis for making an order
that the
various documents be produced. I accept the submission that under s.541(9) an
order for the production of documents can
only be directed to a person who has
been ordered, pursuant to s.541(3), to attend court for examination.
However, there is no reason
to suppose that Mr. Lutz is not required to be
examined. The order provides that he be examined and that he be summoned for
that
purpose. Whilst the affirmation of the solicitor which was before the
Master gives the impression that the liquidator was only seeking
documents, a
subsequent affirmation, and the recent affidavit of the liquidator, make it
plain that the liquidator does seek information
from Mr. Lutz as well as the
documents to assist him in the discharge of his duties in the winding up of
the defendant. There is
no substance in this ground of objection.
11. Next, the applicant contended that the documents specified in the order
are not limited
in any way to those relevant to matters upon which Mr. Lutz
might be examined and further that the order is oppressive because it
requires
him to bring to court any documents in his possession, custody or power which
relate to the affairs of the defendant, without
the affairs being specified.
There are various other grounds of objection along similar lines. It is, for
instance, suggested that
certain specified documents are not capable of
relating to the affairs of the defendant because they relate to companies
which were not
part of the defendant at relevant times or they are documents
generated by the applicant during the course of the professional work
which it
undertook. There is no reason to suppose that the documents ordered to be
produced are not relevant to the matters upon
which Mr. Lutz is to be
examined. The liquidator is concerned to ascertain and understand the
circumstances of the valuation of
Western United Limited by a member of
members of the applicant prior to the takeover of that company by Kio Ora Gold
corporation
NL. The subsequent entity was the defendant. Whilst the
liquidator concedes that he wants to use these documents in the Nelson
Wheeler
action but, as I have said, that is not his only purpose. There is no reason
to suppose that any of the docments sought
may not be relevant to the subject
matter of the examination of Mr. Lutz. Those documents relating to companies
before the takeover
may provide a better understanding of matters relevant to
the determination of all of the assets and liabilities and the defendant
relevant in the winding up process. The documents generated by members and
staff of the applicant may also be necessary for those
purposes. Both of
these categories of documents do relate to the officers of the defendant in
the relevant sense and there is no
reason to exclude them from the reach of
the order. Furthermore, the desxcription of the documents in the order does
not suggest
that any of them cannot relate to the affairs of the defendant
when seen in the context of the takeover. There is no reason to conclude
that
the only purpose for seeking the documents is for use in the Nelson Wheeler
action and not for a s.541 examination as the applicant
contends.
12. The liquidator frankly concedes that the documents are required for the
Nelson Wheeler action to prove features of
the defendant's case on damages,
but that is only one purpose for requiring the documents. The liquidator is
involved in a very complex
winding up of the defendant and there is no reason
to reject his assurance that he also requires the documents for the wider
purpose
of the winding up which I have mentioned. The applicant contends
that the defendant should have sought third party discovery from
its
principals pursuant to the rules of court whereupon the applicant could have
exercized a judgment as to what documents should
be discovered and that by
pursuing the procedure under s.541, the liquidator was attempting to
circumvent the rights of the applicant
in the discovery process. It is not
necessary to consider the reach of the discovery process under the rules of
court and as to
whether the applicant would be obliged to discover all of the
documents referred to in the orders. The liquidator is entitled to
seek
appropriate orders pursuant to s.541 even if it has instituted civil
proceedings against the person he seeks to examine: Re
Hugh J Roberts Pty.
Ltd. (In Liq.) (1969) 91 WN 537 per Street J at p 541, Hong Kong Bank of
Australia v. Murphy (1992) 8 ACSR 736 per Gleeson CJ at p 743 and Re
Equiticorp Finance
Ltd.; ex parte Black (1992) 10 ACLC 382. It follows that
he may apply for an order where civil proceedings have been institued against
someone else. As Street J pointed
out in Re Hugh J Roberts Pty. Ltd. (In
Liq.) (supra), at pp 541-542, vexation or oppression will not be tolerated and
a liquidator
must not abuse the process (under s.541).
13. Now that the position of the liquidator has been fully explained by the
affidavits
filed subsequent to the orders, there can be no suggestion of abuse
of process even though he will obtain the benefit of the documents
for use in
the Nelson Wheeler action.
14. I think the issue of vexation or oppression may be readily rejected. In
addition to the
alleged oppression which I have mentioned, it is claimed that
it is oppressive for a person such as Mr. Lutz to be placed in the
position of
having to determine what documents and other writings are "in any way relating
to the affairs" of the defendant. I expect
there may be cases where it would
be oppressive to require a person to make such a judgment just as there are,
no doubt, many cases
where it would be a simple matter to determine which
documents had to be produced. Each case must be determined upon its own
circumstances.
It would appear from the evidence that there is no difficulty
here. There has been correspondence between the respective solicitors
for the
applicant and the liquidator. During the course of that correspondence, the
solicitor for the applicant made it clear that
there was no objection to the
liquidator inspecting the documents provided that he undertook not to commence
proceedings against
the applicant in respect of, or in any way connected with,
or arising out of the takeover of Western United Limited by the defendant
or
arising out of the 1988 and 1987 audits of any relevant company. The
liquidator has refused to give such undertakings. Whatever
else may be said
about this correspondence it may be accepted that the applicant was willing to
produce the documents provided that
the apparent concern that the partners may
be sued was alleviated. No suggestion of oppression was raised and there is
no evidence
to suggest that it would be vexatious or oppressive to require the
documents to be produced. The possibility that production of
the documents
may result in legal proceedings being instituted against the members or staff
of the applicant is no reason to deny
the liquidator the order for the
examination of appropriate persons or the production of documents.
15. Mr. Meagher also argued
that those documents which related to the audits
of Western United Limited in 1986 and 1987 could not be the subject of the
order
because they were conducted at a time when that company was not a
subsidiary of the defendant and therefore its officers could not
be the
subject of an examination under s.541(3) and those documents could not be the
subject of an order under s.541(9). Western
United Limited, after the
takeover, did become part of the defendant and therefore its affairs became
those of the defendant. The
winding up of the defendant necessarily involves
an investigation of all of the assets of the defendant which includes those
assets
which come within the defendant after the takeover. S.541(3) provides
for the examination of a person or any matters relating (inter
alia) to the
winding up of or otherwise relating to the affairs of a corporation. In the
present context it is not difficult to
see how the subject audits are matters
falling within either category.
16. I have not considered it necessary to consider the true
point taken by
the liquidator as it was not pressed during argument.
17. The orders made by the Master on 20th January 1993 relating
to the Proper
Officer of the applicant must be set aside. The application to set aside the
order relating to Mr. Lutz is refused.
At this stage I see no reason to vary
that order so as to give directions as to how the examination is to be
conducted or as to
the production of the documents. If directions are
required they may be given by the Master.