Evans v Wainter Pty Ltd

THE FACTUAL CONTEXT 3 A brief history of the Company and the background to Mr Thomas' application was recorded by Greenwood J as follows (see Thomas at [2]-[4]): 2 Mr Thomas is a creditor and shareholder of the Company which was the operator of a bar and nightclub known as La La Land located at Level 1, 6 Lawson Street in Byron Bay, NSW. Those premises were leased from Sosiku Pty Ltd under a 20 year lease executed in July 2013. 3 Mr Thomas held 50% of the issued shares in the Company, was licensee and manager from December 2014 (mis-described in the submissions of Mr Thomas as "December 2015") to September 2015 and was a creditor of the Company due to "significant loans" he made in 2013 and 2014 to refurbish the premises of the nightclub. 4 On 25 September 2015, Mr Keri Taiaroa, the former director of the Company, signed a resolution to appoint Mr Andrew Poulter as an Administrator of La La Land. On 27 November 2015 the Company was placed into voluntary liquidation and Mr Poulter was appointed liquidator. Mr Thomas alleges that upon Mr Poulter being appointed as Administrator, Mr Poulter made a number of determinations which included "disposing of the remaining Company's asserts [sic - assets] to LLL Nominees Pty Ltd, a company jointly owned by Taiaroa and Peter Raftopoulos." Mr Thomas also makes various other allegations that impugn the conduct of various people associated with the external administration of La La Land.

THE RELEVANT LEGISLATIVE PROVISIONS AND PRINCIPLES 4 Section 596A is described in the Act as a "mandatory" examination provision. Under it, the Court is required to issue a summons if the prescribed conditions are met, namely that the person who applied to have the summons issued is an eligible applicant and that the person to whom it is to be issued is, or was, an officer or liquidator of the corporation concerned during the period prescribed by s 596A(b) (see Kimberley Diamonds Ltd v Arnautovic (2017) 252 FCR 244; [2017] FCAFC 91). 5 Greenwood J was satisfied that Mr Thomas was an eligible applicant (see Thomas at [28]) and that Mr Taiaroa and Mr Poulter (see Thomas at [31]), together with Mr Raftopoulos (see Thomas at [32]), was each an "officer" of the Company as that expression is defined in the Act. 6 Section 596A is to be contrasted with s 596B. The latter gives the Court a discretion to issue a summons to persons other than an officer, or liquidator, of a corporation in the circumstances prescribed in s 596B(b). Greenwood J adverted to this distinction in his reasons for judgment (see Thomas at [22]-[24]). His Honour went on to observe (at [25]) that: … a summons issued in compliance with s 596A can be discharged if it is found that the applicant had an improper purpose in securing the summons, or if the summons and resulting examination is otherwise found to amount to an abuse of process. 7 While Greenwood J concluded that there was no evidence that Mr Thomas' purpose was improper, he noted that "[i]f there was such evidence, it would be a matter for the examinees to seek consequential orders on the basis of proper evidence" (see Thomas at [26]).

THE PRESENT APPLICATION 8 Mr Taiaroa was quick to adopt the abovementioned approach. About two weeks after the summons was issued to him requiring him to attend an examination on 7 June 2019, he filed the present application seeking to set aside the summons on the ground that it constituted an improper purpose and was an abuse of process. 9 While he acknowledges that he must establish that the improper purpose mentioned above was Mr Thomas' predominant purpose in applying for the issue of the summons (see Evans v Wainter at [252(7)]), Mr Taiaroa claims that such can be inferred from the timing of the pending proceeding; from the statements Mr Thomas made to Greenwood J about the purpose for which the examination was sought; and from the statements Mr Thomas made in the affidavit he filed in opposition to the present application.

THE PENDING PROCEEDING 10 The pending proceeding to which Mr Taiaroa has referred was filed by Mr Thomas in this Court on 5 January 2019 (the FC proceeding). It follows that it was on foot at the time that Greenwood J made the order for the issue of the summons to Mr Taiaroa on 18 April 2019. Indeed its existence, together with that of two other proceedings that Mr Thomas had issued, one in the New South Wales Supreme Court and the other in the Queensland Supreme Court, is recorded in some detail in his Honour's reasons for judgment (see Thomas at [8]-[16]). 11 The FC proceeding named three defendants: Mr Taiaroa (first defendant), Mr Raftopoulos (second defendant) and LLL Nominees Pty Ltd (third defendant). It sought final relief under s 598(4) of the Act in the following terms: 1. An order pursuant to Section 598(4) of the Corporations Act 2001 (Cth) that the First Respondents transfer to the Company: a. $120,000 being the sum the First Respondent directed to be removed from the Company's cash earnings in January 2015 b. $12,000 being the sum the First Respondent removed from the Company's cash earnings in July 2015. c. All of the Company's cash earnings in the last 10 weeks of trade being the amount of $280,000 or an amount determined by the Court. d. All of the Company's cash floats held as at 25th September 2015 being the sum of $30,000 or an amount determined by the Court. … 8. An order pursuant to Section 598(4) of the Corporations Act 2001 (Cth) that the Respondents and each of them pay the Company compensation for loss and damage being: a. $250,000, the amount of loss of income insurance cover held by the Company as at 25th September 2015 that the Company was entitled to claim. b. The total costs paid by the Company for the administration and liquidation of the Company. c. The amount outstanding to all Creditors of the Company as deemed to be determined by the Court. d. Any and all outstanding liabilities for Income Tax, PAYG, BAS, Employee Superannuation, determined in the proceedings to be to be owing by the Company. e. The value of the Company as at the 24th September 2015. … 10. An order pursuant to Section 598(4) of the Corporations Act 2001 (Cth) that the First and Second Respondents pay the Company aggravated and /or exemplary damages. (Errors in original) 12 It also sought a range of other final relief apparently intended to facilitate the obtaining of the above orders, as follows: 2. An order that the Respondents and each of them, provide an account of: a. All of the profits of the Third Respondent. b. All disbursements and/or payments made by the Third Respondent to the First and Second Respondent. c. All of the proceeds from the sale of the Third Respondents business and/or leasehold interest and other assets associated with the Third Respondents business premises at level 1, 6 Lawson St Byron Bay NSW Pty Ltd. d. Further and alternatively, an amount that the Court assesses as being a fair and reasonable assessment of the likely profits and/or disbursements in sub-paragraphs "a" & "b" above and the likely proceeds and/or fair market value, from the sale of the Third Respondents business and or business assets. 3. An order pursuant to Section 598(4) of the Corporations Act 2001 (Cth) for payment by the Respondents and each of them of all sums found to be due from the Respondents and each of them to the Company on the taking of the account t in "2" above. 4. Declarations that the respondents and each of them hold on constructive trust for the Company or are liable to account for all assets now or previously in their possession acquired directly or indirectly with the Company's assets. 5. Court orders for all necessary accounts and inquiries to enable the Applicant to trace and recover the assets referred to in "4" above. 6. Orders for the delivery up or transfer to the Company of the assets referred to in "6" above. 7. An injunction restraining the defendants and each of them by themselves their servants or agents or otherwise from disposing of the assets referred to in "6" above otherwise than by delivery up or transfer to the Company. … 9. Alternatively an order for equitable compensation or equitable damages to be paid by the Respondents and each of them to the Company. … 11. Interests in equity and/or pursuant to the said Act and/or Regulations. 12. Any other orders the Court deems appropriate. (Errors in original)

THE DOCUMENTS SOUGHT 13 Since he is a defendant in that proceeding, Mr Taiaroa claimed that he will most likely have to give evidence in his defence of it. That being so, he claimed Mr Thomas will be able to use the examination as a rehearsal for his cross-examination. He also claimed that, through the examination, Mr Thomas will be able to obtain access to a range of documents that he would not otherwise have been able to obtain through the usual discovery process in that proceeding. 14 In this respect, it should be noted that, in addition to attending for examination, Mr Taiaroa was required by the summons to produce the following books: 1. Records showing evidence of payment(s) to Sosiku Pty Ltd and/or Mr Peter Roger and/or Rogers Lawyer Mr Philip Vickers and/or Vickers company Vickers Lawyers for the rent owing by the Company for the months of August, September October 2015 whether the payment was made by the Company or by you personally under an obligation as guarantor on the lease, the evidence being original bank statements showing the payments. 2. An account of the Company's Cash Earnings in the last 10 week of trade 3. An account of the Cash floats held by the Company. 4. All books and records of the Company, including but not limited to: a. daily "Z" reads and managers daily takings sheets b. weekly earnings summaries, c. management reports, d. invoices, receipts, statements e. staff time cards f. the Company's MYOB File, g. daily/weekly wage summaries. h. "whatsapp" nightly management messages i. bank statements from the Company's Bank of Queensland account j. bank statements from the bank account used to deposit monies from the Company's earnings in August and September 2015 5. Correspondence to and from the NSW Independent Liquor and Gaming Authority. 6. Correspondence to and from the NSW Office of Liquor Gaming and Racing. 7. Correspondence to and from Mr Gavin Coleman. 8. Correspondence to and from Mr Tim Hartman. 9. Correspondence to and from staff employed by the Company for the period 1st February 2015 to 10. Correspondence to and from Mr Samuel Owens. 11. Correspondence to and from Joseph Alesci, where such correspondence relates to the Company or the license of the premise 12. Correspondence to and from Mr Brian McMahon where such correspondence relates to the Company. 13. Correspondence to and from Mr Andrew Poulter and/or other persons employed by Poulter. 14. Correspondence to and from Poulter's Lawyer, Mr Joseph Di Mauro 15. Correspondence to and from Mr Nicholas Nicolaou and/or other persons employed by Nicolaou at NAMS Taxation Pty Ltd and/or Nicholas Accounting Management Services Pty Ltd where such correspondence relates to the Company 16. Correspondence to and from Mr Peter Raftopoulos 17. Evidence in support of the alleged $629,000 that the Company owes you. 18. Evidence in support of the alleged $1,300,000 of debt you alleged was owed by the Company. 19. Emails to any staff person of the Company from the period where such person submitted a pod and/or proxy 20. staff roster for the week ending Sunday 27th September 2015 21. reports records LLL Byron trust (Errors in original)

MR THOMAS' OTHER STATEMENTS 15 As is already noted above, Mr Taiaroa also sought to rely on the statements Mr Thomas made to Greenwood J about his purpose in pursuing examinations of Mr Taiaroa, Mr Poulter and Mr Raftopoulos. In particular, he pointed to the following parts of Thomas (at [7]): 7 Mr Thomas deposes in his affidavit of 4 December 2018 that the purpose of the examination of Mr Taiaroa, Mr Poulter, Mr Raftopoulos and Mr Roger is to: a. Obtain information that may support an application against Taiaroa and/or Raftopoulos for: i. Breach(s) of Statutory duties owed to the Company pursuant to Sections 180-183 of the Act ii. Breach(s) of fiduciary duties owed to the Company. iii. Breach(s) of the Competition and Consumer Act 2010 pursuant to Section 18 for misleading and deceptive conduct in relation to the financial statements/status of the Company. iv. An Act(s) of fraud. v. Receipt of unreasonable director related transaction(s). vi. Compensation. b. Obtain information that may support an application against Poulter for: i. Breach of Statutory duty owed to the Company pursuant to Sections 180- 183 of the Act. ii. Breach of fiduciary duties owed to the Company. iii. Breach of the Competition and Consumer Act 2010, pursuant to Section 18, for misleading and deceptive conduct, in relation to the disposition of Company assets for nil/nominal consideration. iv. Involvement, pursuant to section 79 of the Act, and/or knowing assistance at common law, with respect to the alleged Taiaroa breach(s) of Statutory and fiduciary duties specified in sub-paragraph "a" above. v. Compensation. c. Obtain information that may support an application against LLL and other persons specified below, for involvement, pursuant to section 79 of the Act, and/or knowing assistance, knowing receipt at common law, with respect to the alleged Taiaroa and Raftopoulos breach(s) of Statutory and fiduciary duties specified in sub-paragraph "a" above. d. Obtain information that may support an application against the owner of the premises formerly leased by the Company, Sosiku Pty Ltd (the Landlord) for: i. Breach(s) of the Competition and Consumer Act 2010 for misleading and deceptive conduct, in relation to purported rental arrears owed by the Company and the validity of the Notice to Quit for failing or purportedly failing to remedy a Breach of Lease for non-payment . ii. Further and alternatively to sub-paragraph "i" above, receipt of an unfair preference payment, pursuant to Section 588F A of the Act. e. Make the application for compensation for the Company's loss and damage: i. Pursuant to Section 598 of the Act. ii. Pursuant to Division 90-20 of Schedule 2 of the Insolvency Practice Schedule (Corporations) (the Schedule), subject to leave of the Court to make the application on behalf of the Company. f. Compensate the Company's creditors. (Errors in original) 16 Finally, as is also already noted above, Mr Taiaroa also relied upon the following statements that Mr Thomas made in his affidavit filed in opposition to the present application: 4. The primary purpose of the Amended Summons of Taiaroa dated 12th June 2019 is to gather information and make inquiries into the examinable affairs of the Company, which will assist establishing whether there is sufficient evidence and grounds for the Company to pursue potential causes of action against Taiaroa, the former Voluntary Administrator (Administrator) now Liquidator Andrew Poulter, Peter Raftopoulos (Raftopoulos), the lessor of the Company's former business premises Sosiku Pty Ltd (Landlord), the Company's former accountant and bookkeeper Nicholas Nicolaou (Nicolaou) and Nicoalou's companies Names-Taxation (NAMS) and Nicholas Accounting Management Services Pty Ltd (NAMS) (hereinafter referred to as "Matters Of Inquiry"). (Errors in original) (Bolded terms in original)

MR THOMAS' POSITION 17 In his submissions on the present application, Mr Thomas denied that his dominant purpose in seeking the examination of Mr Taiaroa was to gain any forensic advantage in the pending FC proceeding. He claimed that the pending FC proceeding is limited to relief under s 598 of the Act and the possible proceedings outlined at [7] of Thomas go "well beyond that". This was demonstrated, so he claimed, by the fact that the possible defendants in those proceedings included not only Mr Taiaroa, but also Mr Poulter, the company's former administrator and Mr Nicholas Nicolaou, the company's accountant. He contended that there were numerous matters associated with the closure of the La La Land nightclub in September 2015 which he wished to pursue in the examination of Mr Taiaroa, as outlined in his affidavit. One example of this contention concerned his claim that the largest trade creditor of the business was paid in full some days before Mr Poulter was appointed as the Company's administrator in September 2015. He also pointed to his unsuccessful attempts to obtain the books of the Company from Mr Taiaroa, or his associates, and claimed that the examination would assist in that pursuit. He denied that obtaining access to the Company's books in this way provided him with any forensic advantage in the FC proceeding.

CONSIDERATION 18 I do not consider the positon with respect to Mr Thomas' purpose in pursuing the examination has changed since Greenwood J concluded that there was no evidence that purpose was improper (see Thomas at [26]). The FC proceeding was already on foot at the time Greenwood J made the order for the issue of the summons, so its timing obviously had no effect on that conclusion. 19 The pending FC proceeding is in its infancy. No pleadings have been exchanged. It is not remotely ready to be set down for trial, even on a tentative basis. When, or whether, Mr Taiaroa will give evidence in that proceeding and, if so, on what issues, is, at this stage, entirely speculative. In those circumstances, I do not consider there is any merit in Mr Taiaroa's contention that the examination is being used as a dress rehearsal for Mr Taiaroa's cross-examination in that proceeding. 20 Similarly, while Mr Thomas may, through the examination, obtain access to documents that he would not be able to obtain through the discovery process in the pending FC proceeding, I do not consider that could be characterised as a "forensic advantage", much less the predominant purpose of the examination of Mr Taiaroa. The examination process is commonly, and quite properly, used to obtain access to a corporation's books in these circumstances. 21 Finally, it is worth noting that Mr Thomas has pointed to numerous legitimate purposes of Mr Taiaroa's examination. Thus, even if the advancement of the pending FC proceeding is a purpose being pursued by Mr Thomas in that examination, I do not consider, in the circumstances outlined above, that it could be characterised as his predominant purpose. 22 For these reasons, Mr Taiaroa's application must be dismissed. Accordingly, the orders will be:

1. Mr Taiaroa's interlocutory application filed 17 May 2019 is dismissed. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.