Giraud v Albarran

Federal Court of Australia|2021-10-20|Before: Derrington J

The time limited by the Federal Court Rules 2011 (Cth) for the making of the application to review the Queensland District Registrar's exercise of power of the Court in this matter on 31 August 2021 and 2 September 2021 be extended to the day after the filing of the applicants' application.
The order made on 31 August 2021 by the Registrar directing Mr Liam Patrick McMahon to produce certain books, records and documents relating to Digital Infrastructure Pty Ltd (in liquidation) (the Company) be set aside.
The order made on 31 August 2021 by the Registrar directing the proper officer of Enyo Lawyers Pty Ltd ACN 611 979 189 to produce certain books, records and documents relating to the Company be set aside.
The Direction to Produce to the proper officer of Enyo Lawyers Pty Ltd ACN 611 979 189 issued on 2 September 2021 be set aside.
Subject to the operation of orders 6 to 9 hereof, pursuant to r 30.34 of the Federal Court Rules 2011 (Cth), the proper officer of Enyo Lawyers Pty Ltd ACN 611 979 189 (the Proper Officer) is to produce to the Federal Court of Australia at the Harry Gibbs Commonwealth Law Courts Building, 119 North Quay, Brisbane in the State of Queensland by 9:30 am AEST on 27 October 2021, the following books in relation to the examinable affairs of the Company: 5.1 For the period 1 July 2014 to 3 February 2021, books and records of the Company in your power, possession, custody or control, both in hard copy and in electronic format on a portable storage device, including but not limited to: (a) financial records; (b) financial statements and accounts; (c) management accounts; (d) ledgers and journals; (e) lists of creditors (including aged creditors); (f) lists of debtors (including aged debtors); (g) banking records (including cheques, deposit books and slips, payment advices and bank statements); (h) tax returns and business activity statements; (i) working papers; (j) memorandums of advice; (k) lists of assets, fixed assets registers and depreciation schedules; (l) forms lodged with the Australian Securities and Investments Commission and documents which record, evidence or concern those lodgements; (m) minutes of meeting; (n) loan agreements; (o) agreements and/or contracts (generally); (p) correspondence; (q) file notes including telephone and diary notes; (r) any documents concerning the cancellation of the Company's class "A" shares held in Digital Sense Hosting Pty Ltd; and (s) any documents concerning the redemption of the Company's class "M" redeemable preference shares held in Digital Sense Hosting Pty Ltd. 5.2 For the period 1 July 2018 to 30 October 2020, all documents (including invoices, retainers and service agreements) which record or evidence any legal, financial, business, accounting or taxation advice given to the Company either directly or by its directors, and whether solely to the Company or otherwise, regarding: (a) the cancellation, redemption or disposal of the Company's shares held in Digital Sense Hosting Pty Ltd; (b) the financial position, financial circumstances, solvency or insolvency of the Company; (c) Mr Marie Joseph Bernard Giraud's and Mr Barry John De Lacy's duties as director or officers of the Company and/or the conduct or performance of those duties; and (d) the decision of Messrs Giraud and De Lacy to place the Company into liquidation. 5.3 For the period 1 July 2018 to 3 February 2021, all documents (including invoices and service agreements) which record or evidence the sale of the shares in Digital Sense Hosting Pty Ltd to Over The Wire Holdings Limited which completed on or about 30 October 2020 including but not limited to: (a) correspondence; (b) file notes and diary notes; (c) minutes of meetings; (d) memorandums of advice; (e) communications with third parties; (f) reports; (g) contracts or agreements or settlement statements; and (h) payments made by any of the above entities.

Introduction 1 By an interlocutory application filed on 23 September 2021, the applicants, Marie Joseph Bernard Giraud (Mr Giraud) and Barry John De Lacy (Mr De Lacy), sought to set aside orders that their solicitors, Enyo Lawyers Pty Ltd (Enyo Lawyers), and the principal and sole director of Enyo Lawyers, a Mr Liam McMahon, produce documents for the purposes of a public examination. The orders were made by the Queensland District Registrar on the application of Mr Richard Albarran and Mr Marcus Watters of Hall Chadwick (New South Wales) Pty Ltd as liquidators of Digital Infrastructure Pty Ltd (in liquidation) (Digital Infrastructure) and pursuant to s 597(9) of the Corporations Act 2001 (Cth) (Corporations Act) or r 30.34 of the Federal Court Rules 2011 (Cth) (Rules). The present interlocutory application seeks to review the Registrar's orders under s 35A of the Federal Court of Australia Act 1976 (Cth) and/or r 11.5 of the Federal Court (Corporations) Rules 2000 (Cth) (Corporations Rules). 2 As the matter evolved, it became one for the reconsideration of the liquidators' application pursuant to which orders were made that Enyo Lawyers and Mr McMahon produce documents for the purposes of the forthcoming public examination. The material before the Court demonstrates that the liquidator has justifiable concerns as to the manner in which Messrs Giraud and De Lacy caused Digital Infrastructure to dispose of its only valuable assets, what, if any, consideration was paid in relation to that disposition, and, if any was paid, to whom. It is clear that Messrs Giraud and De Lacy are significant examinees for the purposes of the examinations given that, in their positions as directors of that company, they played a pivotal role in the disposal of the company's assets. It is also relevant that the disposition of those assets occurred in the context of a dispute or falling out between the company's shareholders and resulted in the commencement of oppression proceedings against Messrs Giraud and De Lacy. In those proceedings, Enyo Lawyers, and Mr McMahon in particular, acted for Messrs Giraud and De Lacy. 3 The application to review the Registrar's decision was made out of time: Rules, r 3.11; and an application was made for an extension of time in which to bring the application. Quite properly, the liquidators did not oppose the granting of an extension and, indeed, they submitted that it ought to be granted. 4 Although the orders now made on the liquidator's application partly alter those made by the Registrar, the issues agitated on the review differed substantially from those considered when the application was first heard. Importantly, the liquidators acknowledged that the orders which they sought from the Registrar should have made provision for Enyo Lawyers to resist production on the ground of legal professional privilege in accordance with any instructions from their clients. The orders now made put in place a regime whereby any such privilege may be claimed and, if so claimed, the liquidators may challenge it. The liquidators also acknowledged that there was no need for any Direction to Produce to be made to Mr McMahon personally, and they agreed that the Registrar's order in that respect should be set aside.

Background 5 Mr Albarran and Mr Watters were appointed as the joint and several liquidators of Digital Infrastructure Pty Ltd (in liq) on 3 February 2021, pursuant to an order of the Supreme Court of Queensland. 6 For the purposes of seeking the issuing of summonses for a public examination in relation to the examinable affairs of Digital Infrastructure, Mr Watters has deposed to the circumstances of the liquidation and of certain transactions and dealings to the extent to which they are presently known. The following facts are largely taken from his evidence. 7 It appears that for significant periods of time from around about 2007, Messrs Giraud and De Lacy were directors of Digital Infrastructure along with Mr Michael Tran and Mr Daniel Ngo. 8 The company's only real assets comprised "A" class and redeemable preference shares in a company called Digital Sense Hosting Pty Ltd (DSH). As at 30 June 2018, it was the sole holder of all 36,220 "A" class shares in DSH and it held a further $10 million worth of redeemable preference shares. 9 It now appears that, by 1 September 2020, Digital Infrastructure had either disposed or agreed to the cancellation of all of its shares in DSH and that, on or about 30 October 2020, a company called Over The Wire Holdings Limited (OTW) acquired all the shares in DSH. 10 Importantly, on 2 October 2020, OTW announced by a release to the ASX that it would be acquiring all of the shares in DSH on 30 October 2020 for an initial consideration of $27 million plus deferred consideration of up to $12 million. This is referred to in the affidavit of Mr Watters as the "OTW Transaction". The transaction was completed on 30 October 2020. 11 Relevant to the liquidators' present concern is a company called Audad Pty Ltd (Audad), which is apparently related to Messrs Giraud and De Lacy.

Disposal of Digital Infrastructure's preference shares in DSH 12 The liquidators have ascertained that, on 26 May 2020, Mr Giraud, on behalf of DSH, caused a cancellation of 2,540,000 of Digital Infrastructure's preference shares held in it in exchange for a purported payment of $2.54 million. 13 Further, it appears that, on 28 and 31 August 2020, the remaining 7,460,000 preference shares owned by Digital Infrastructure were also cancelled or redeemed, this time for a purported consideration of $7.46 million. On 31 August 2020, DSH issued 5,385,000 preference shares to Audad for $5.385 million. 14 The consequence of those events was that, from 1 September 2020, Digital Infrastructure no longer held any preference shares in DSH. 15 The liquidators are of the view that they cannot be satisfied that any payments were made by DSH to Digital Infrastructure to cancel or redeem the preference shares or, if any were paid, how it was paid and to whom. They also perceive that a discrepancy may exist as to the value attributed to the shares for the purposes of the alleged transactions. 16 The liquidators also expressed concern as to the manner in which Digital Infrastructure's 36,220 "A" class shares in DSH were dissipated. It appears that, on 17 August 2020, Messrs Giraud and De Lacy, as directors of Digital Infrastructure, voted in favour of a resolution to agree to the cancellation of the company's "A" class shares in DSH in exchange for payment of $1,875,000 or $57.77 per share. 17 In 2020, Mr Tran and Mr Ngo commenced oppression proceedings in the Supreme Court of Queensland which ultimately resulted in Digital Infrastructure's winding up. In those proceedings, Mr Giraud swore an affidavit on 12 November 2020 in which he deposed that, were it not for the cancellation of the "A" class shares in DSH, they would have been sold to OTW approximately two months later on 30 October 2020 for $10,415,474 or $287.56 per share.

The liquidators' concerns 18 The liquidators are particularly concerned to know whether any consideration was received by Digital Infrastructure in respect of the cancellation or redemption of its DSH shares and to whom any such consideration was actually paid. 19 They are further concerned as to several amendments made to Digital Infrastructure's taxation returns and the transfer of assets owned by Digital Infrastructure to DSH. They indicate that real questions have been raised as to the veracity of Digital Infrastructure's financial statements and books and records in that it appears that in February 2021 substantial alterations were made to Digital Infrastructure's General Journal for previous financial years whereby its recorded indebtedness to Audad and other entities was significantly increased. This occurred immediately prior to the appointment of the liquidators. Those amendments were made by Digital Infrastructure's then accountants, HMW Group. 20 From the affidavits on which the liquidators rely, a range of facts emerge which raise questions about the company's financial activities and the involvement of Enyo Lawyers. That firm acted for Messrs Giraud and De Lacy in the oppression proceedings, the action which resulted in the order that Digital Infrastructure be wound up. In the course of so doing, it prepared substantial affidavits which annexed copies of numerous pages of Digital Infrastructure's financial books and records. It also liaised with HMW Group, in the latter's capacity as Digital Infrastructure's accountants and tax advisers, and received memoranda of advice from HMW Group regarding the company's affairs and Mr McMahon attended meetings with those accountants concerning the company's financial affairs. It is not irrelevant that the costs of the work undertaken by HMW Group in that respect seems to have been met by Digital Infrastructure. At the very least, HMW Group sent invoices to Digital Infrastructure in relation to that work.

The issuing of the summons and directions 21 On 31 August 2021, the Registrar issued a Direction to Produce (the Direction) under s 597(9) of the Corporations Act to the proper officer of Enyo Lawyers. No summons or notice was issued to Mr McMahon personally or to a Mr Jay Tseng, an employed solicitor of Enyo Lawyers who was involved in the litigation on behalf of Messrs Giraud and De Lacy, even though they were sought. An order was made that Mr McMahon produce certain books and records of Digital Infrastructure to the Court. That order was not served on Mr McMahon and the liquidators do not intend to serve it. They asked that it be vacated and it is appropriate for an order to be made to that effect.

Documents required to be produced 22 In general terms, the Direction required the production of the following three classes of documents: (1) For the period 1 July 2014 to 3 February 2021, books and records of Digital Infrastructure in Enyo Lawyers' power, possession, custody or control whether in hard copy or electronic format. (2) For the period 1 July 2018 to 30 October 2020, all documents recording, evidencing or concerning any legal, financial, business, accounting or taxation advice "given to, or for the benefit of, [Digital Infrastructure] or its directors", regarding: (a) the cancellation, redemption or disposal of the company's shares in DSH; (b) the financial position, financial circumstances, solvency or insolvency of Digital Infrastructure; (c) Messrs Giraud and De Lacy's duties as directors or officers of Digital Infrastructure and/or the conduct or performance of those duties; and (d) the decision of Messrs Giraud and De Lacy to place Digital Infrastructure into liquidation. (3) For the period 1 July 2018 to 3 February 2021, all documents recording, evidencing or concerning the sale of shares in DSH to OTW, which completed on or about 30 October 2020.

Grounds on which the Direction is sought to be set aside 23 No real issue of standing arose on the application given that a major complaint of Messrs Giraud and De Lacy is that the Direction would require Enyo Lawyers to produce documents in respect of which they claim legal professional privilege. The liquidators did not suggest the applicants lacked standing to bring the application. 24 In his affidavit in support of the application, Mr McMahon asserted a number of grounds on which Messrs Giraud and De Lacy seek to set aside the notice. They appear to be: (a) That because Enyo Lawyers acted for Messrs Giraud and De Lacy in the oppression proceedings concerning Digital Infrastructure, their entire file is privileged as every document was prepared by Messrs Giraud or De Lacy or by Enyo Lawyers for the predominant purpose of providing or obtaining legal advice and progressing the litigation. (Sensibly, this ground was not advanced at the hearing of the application and Mr Kipps, Counsel for the applicants, acknowledged that the solicitors' file would necessarily contain numerous documents which could not be the subject of legal professional privilege). (b) That Enyo Lawyers have been instructed to maintain legal professional privilege with respect to certain documents in their possession. (c) That the orders made by the Registrar did not include a mechanism whereby privilege might be claimed. (d) That the notice is an abuse of process because: (i) Enyo Lawyers does not offer financial, accounting or taxation advice and to the extent such documents are sought the notice is nonsensical; (ii) the documents are not Mr McMahon's personally but those of the company Enyo Lawyers and he has no documents of his own to provide; and (iii) it would be oppressive for him to consider all of the documents in his possession. 25 It is relevant to note that, at paragraph 43 of his affidavit Mr McMahon, deposes that: … all of the documents that Enyo Lawyers has that could be considered to be the Company's documents have been provided by the Company's accountants, or the directors themselves. 26 That statement may have some relevance, however a Direction to Produce under s 597(9) (or an order under s 30.34) need not be confined to documents which belong to Digital Infrastructure. No such limitation exists in the sources of the Court's power. Additionally, the liquidators would be entitled to oblige Enyo Lawyers to produce documents belonging to the company without an order of the Court.

Relevant legal framework 27 Although the Direction was purportedly issued under s 597(9) of the Corporations Act, that provision concerns the production of documents "at" an examination. Here, there was some doubt as to whether the documents were required to be produced at the examination such that s 597(9) may not support the making of the Direction. Mr Callanan for the liquidators faintly submitted that the form of the orders made by the Registrar suggested that production was required at a public examination, although he was unable to point to evidence which supported that submission. He also suggested that the Direction could be adjourned to the date of an examination: Blue Ridge WA Pty Ltd (In Liquidation) [2015] FCA 567 [17] - [21]. However, given the evident desire of the liquidators to inspect the documents in advance of the actual examinations, that would entail the somewhat contrived sequence of holding the examinations solely for the purpose of having the proper officer of Enyo Lawyers attend and produce documents, then adjourning the examinations to a later date. That is ultimately unnecessary in the present circumstances where Messrs Giraud and De Lacy accepted that that the Court has the power to make orders for production of documents in advance of examinations pursuant to r 30.34 of the Rules. That rule provides as follows: 30.34 Attendance and production (1) At any hearing of a proceeding, including the trial of the proceeding, a party may apply to the Court for an order for the attendance of any person before the Court, a Registrar, an examiner, a referee, or other person authorised to take evidence: (a) for examination; or (b) for production by that person of any document or thing specified in the order. (2) An order may be made under subrule (1) even if the person whose attendance is required by the order has also been required to attend by subpoena. 28 For the purposes of the application, the liquidators indicated that they were content for an order to be made under that rule for the production of documents, rather than there being a Direction to Produce issued under s 597(9). 29 It can be accepted for present purposes that the power in r 30.34 involves a discretion, the principled exercise of which conforms to the nature of the proceedings in respect of which it is exercised. Here it applies to proceedings under the Corporations Act: Corporations Rules, r 1.3(2); and the desire of the liquidators to obtain documents for the purposes of carrying out a public examination: Cathro, in the matter of Lidcombe Plastering Services Pty Limited (in liq) [2018] FCA 1138 [25] (Cathro v Golman) per Gleeson J. The application of this to the circumstances of this case is discussed in detail below. 30 The process for challenging an order of a Registrar supported by r 30.34 was described by Gleeson J in the last-mentioned decision at follows (at [26] - [27]): 26 There is no express power in the Rules to set aside an order for production made under r 30.34, in contrast to the position in relation to a subpoena (which may be set aside under r 24.15), or an examination summons (which may be discharged under r 11.5 of the Corporations Rules). However, as Jagot J noted in Re Bell Group NV (in liq) (No 2) [2017] FCA 927; (2017) 122 ACSR 418 at [19] ("Bell Group NV"), in connection with an application for an order discharging an examination summons, where an order is made by a Registrar, s 35A(5) of the Federal Court of Australia Act 1976 (Cth) is necessarily applicable. 27 Section 35A relevantly provides: (1) [T]he following powers of the Court may, if the Court or a Judge so directs, be exercised by a Registrar: … (h) a power of the Court prescribed by Rules of Court. … (5) A party to proceedings in which a Registrar has exercised any of the powers of the Court under subsection (1) may, within the time prescribed by the Rules of Court, or within any further time allowed in accordance with the Rules of Court, apply to the Court to review that exercise of power. (6) The Court may, on application under subsection (5) or of its own motion, review an exercise of power by a Registrar pursuant to this section and may make such order or orders as it thinks fit with respect to the matter with respect to which the power was exercised. 31 On any such review, the Court hears the application de novo, albeit taking into account the fact of the Registrar's decision. Where a review is sought, the Registrar's initial decision is only the beginning of the process of determining what orders should be made on the application and the process is completed by the subsequent judicial decision. The proceedings before the judge is merely the continuation of the determination continuum required by the application, albeit that the parties are entitled to adduce further evidence as they see fit. See the recent discussion of the nature of de novo hearings on review from decisions of judicial registrars in Robson as former trustee of the estate of Samsakopoulos v Body Corporate for Sanderling at Kings Beach CTS 2942 [2021] FCAFC 143. Although that matter involved the Court's bankruptcy jurisdiction, the same principles apply to all exercises of delegated federal judicial power. 32 In his written submissions, Counsel for Messrs Giraud and De Lacy submitted that before the Court could undertake an examination of the Registrar's decision it had to be satisfied that there is a reason for such a review. Support for that proposition was said to be found in Sheahan and Lock (liquidators); In the matter of B.C.I. Finances Pty Limited (In Liq) [2015] FCA 1487 [27]. However, the cited passage only supports the application of that proposition in the case of a review by the Court acting of its own motion. Indeed, it correctly identifies that once a party affected by a Registrar's decision seeks a review, the Court must determine afresh whether to make the orders on the liquidators' application. That is a necessary concomitant of the delegation of judicial power to Registrars. It was accepted at the hearing that no requirement existed that any error be shown prior to the Court becoming entitled to hear the matter.

The relevance of Pt 5.9 to the application of r 30.34 33 Although, in substance, the issuing of the Direction was authorised by r 30.34 of the Federal Court Rules and not s 597(9) of the Corporations Act, the principles relating to the issuing of summons under Part 5.9 of that Act remain relevant. That is because the legal limits of the power in r 30.34 are ascertained "by asking whether a person acting judicially could reasonably be of the view that production of the document or thing described in the order was required for the purpose of examining a person within the bounds of s 597 and the internal limitation in the examination orders": Re BPTC Ltd (in liq) (No 5) (1993) 10 ACSR 756 at 763 per Bryson J; Re Southland Coal Pty Ltd (recs and mngrs appt) (in liq) (2006) 58 ACSR 113 (Re Southland Coal). From his Honour's consideration of the interrelationship between the Court's power under the rules to require production of documents and the power to summons persons for examination, Gleeson J in Cathro v Golman identified the following guiding principles which may be applicable on any application for the production of documents in aid of a public examination: (1) the power is to be exercised "where the production of documents is required for the exercise of the power to conduct an examination"; (2) the power to compel production is a wide one and, while there is a need for wide powers, there is also a need to avoid oppressive operation; (3) there must be a connection between the order for production of documents and the purpose of the examination under the relevant section of the Act; and (4) the production of documents is ancillary to the process of examination. 34 Relevant to the exercise of power in this case are the observations of Davies J in Re Bill Express Ltd (in liq) (2010) 238 FLR 329 (Re Bill Express) [26] where her Honour said in relation to the power to make an order under s 596D of the Corporations Act: An examination may be confined by the order of the Court to particular matters and if so, the scope of documents that a court may order for production would similarly be confined. Where, as is the case here, no limitation is placed on the subject matter of the examination, other than that it must be about a corporation's examinable affairs, an order for production in terms that the examinee must produce all books and records relating to the affairs of a corporation is within the power of the Court. They are separate questions as to whether the purpose for which the examination has been sought is a proper and permissible purpose or whether the order may operate oppressively in relation to the person summonsed. (Footnotes omitted). 35 These principles also apply when the court is exercising its power under r 30.34.

The relevant "examinable affairs" of Digital Infrastructure 36 From the foregoing, it is necessary to ascertain those issues in relation to the affairs of Digital Infrastructure which the liquidators have identified as areas of concern and, apparently, in respect of which they intend to undertake a public examination. 37 In his affidavit sworn 24 September 2021, Mr Watters identified a number of matters which have given rise to concerns as to Digital Infrastructure's affairs in respect of which it is possible that Enyo Lawyers has possession of relevant documents. They were: (a) the transfer of funds to the trust account of Enyo Lawyers by Messrs Giraud and De Lacy in an amount of $1,875,000 which related to the sale of shares in DSH formerly held by Digital Infrastructure; (b) the sending of memoranda by HMW Group to Enyo Lawyers concerning purported loans to Digital Infrastructure from its shareholders or entities associated with the shareholders; (c) invoices issued by HMW Group to Digital Infrastructure which record: (i) the drafting of the memos given to Mr McMahon on 23 December 2020 (including earlier versions of the memos); (ii) "various discussions" with Mr McMahon and Mr Tseng of Enyo Lawyers; and (iii) a meeting involving Messrs Giraud, McMahon and Tseng at HMW Group's office on 28 January 2021. (d) the making of amended taxation returns by HMW Group for Digital Infrastructure for the income years ending 30 June 2018 and 2019 on 28 January 2021, being shortly after the meetings which included Messrs Giraud, De Lacy and McMahon; (e) in connection with the matters in the immediately preceding paragraph, the making of amendments to Digital Infrastructure's General Ledgers by HWM Group; (f) the production by Enyo Lawyers of an affidavit of Mr Giraud which was filed in winding up proceedings and which exhibited redacted pages of settlement statements in relation to the transfer of shares in Digital Infrastructure to OTW; and (g) the production by Enyo Lawyers of an affidavit sworn by Mr McMahon in the winding up proceedings which exhibited financial records of Digital Infrastructure. 38 In his subsequent affidavit of 27 September 2021, Mr Watters deposed to evidence which indicated that in around 2018 to 2019, Digital Infrastructure transferred assets worth approximately $3.3 million to DSH. However, as Digital Infrastructure did not operate its own bank account at that time, the liquidators have been unable to ascertain when or how any amount was paid by DSH to Digital Infrastructure as consideration. 39 It is fair to observe that whatever matters were articulated in the material which was before the Registrar as being the liquidators' concerns in respect of which it sought to examine certain individuals and particularly, Messrs Giraud and De Lacy, no such express indication appeared in the material relied upon by the liquidators on this review. Nevertheless, it can be fairly inferred that the matters referred to in Mr Watters' affidavits are those in respect of which the liquidators seek to examine. 40 It can be added that, although the discussion above refers to specific matters, the issues raised also concern Digital Infrastructure's financial affairs over an extended period of time, including payments which it is alleged to have received and its overall level of indebtedness.

The scope of paragraph 1.1 of the Direction 41 At first blush, it can be accepted that the scope of paragraph 1.1 of the Direction, which requires production of the books and records of Digital Infrastructure in Enyo Lawyers' power, possession, custody or control, appears somewhat wide. However, the circumstances of the firm's involvement with Messrs Giraud and De Lacy and HMW Group leading to the alteration to the company's financial records and tax returns, give rise to an important issue as to whether any indebtedness, on which reliance has been placed for apparently denying Digital Infrastructure any consideration for the transfer or cancellation of its shares in DSH, did in fact exist. 42 In the course of the hearing of the application, Mr Callanan for the liquidators explained that they had a general concern about the veracity of the company's books and records and suggested that there may be some variation between versions of similarly titled documents. This seemed to be derived from the discovery of several versions of memoranda from HMW Group to Digital Infrastructure in relation to the restructuring of DSH by redeeming or buying back its shares. The latest version of the document in question assumed that Digital Infrastructure had a greater level of indebtedness than its existing books would have demonstrated. The alteration to the memorandum followed discussions between HMW Group, Messrs Giraud and De Lacy, and solicitors from Enyo Lawyers. Reference was also made to the evidence which the liquidators have accumulated which revealed that, in February 2021, HMW Group made substantial alterations to the historical accounts of Digital Infrastructure for the period from 1 July 2019 to 30 June 2021. In broad terms, those alterations now seem to be relied upon as evidencing the alleged existence of substantial indebtedness by Digital Infrastructure to a number of entities, and it was this which was used to justify the absence of any consideration moving to that company in relation to the transfer or cancellation of its shareholding in DSH. 43 From this it was submitted that an element of the company's examinable affairs requiring investigation is whether there, in fact, existed any actual debt owing by Digital Infrastructure to the identified entities. This sufficiently provides the justification for requiring Enyo Lawyers to produce any books and records of Digital Infrastructure for the period from 1 July 2014 to 3 February 2021. The existence of the alleged indebtedness is an important issue on which Messrs Giraud and De Lacy will be examined and the evidence discloses more than a reasonable probability that Enyo Lawyers, on their behalf, were somehow involved in the reorganisation of the financial accounts identified above. In the course of undertaking their instructions and in the conduct of the oppression proceedings in the Supreme Court, it is likely that they would have received books and records of Digital Infrastructure and have retained possession of them. The documents sought to be produced by the proper officer of Enyo Lawyers in paragraph 1.1 of the Direction relate to the "examinable affairs" of the company including the liquidators' task of identifying the company's assets and liabilities: see Re Bill Express [27]. 44 It did not appear to be in issue that the documents sought by the liquidator in paragraphs 1.2 and 1.3 of the Direction were within the scope of Digital Infrastructure's examinable affairs. They relate to specific transactions of the company which are identified in the liquidators' material before this Court and in respect of which Enyo Lawyers have been involved.

Other grounds on which Enyo Lawyers sought to set aside the summons

Ground 1 - Enyo Lawyers' claim to refuse to produce documents to which privilege attaches 45 The applicants submitted that the Direction was invalid because, on its face, it required the production of documents in respect of which legal professional privilege might be claimed. The submission made was: 35. However broad "examinable affairs" might be, it does not, and has never, extended to piercing legal professional privilege held by directors (to the exclusion of the company) in their lawyers' files for the dominant purpose of obtaining legal advice. 46 In support of that submission, reliance was placed on the decision in Meteyard v Love (2005) 65 NSWLR 36. However, the conclusions reached in that case were founded upon the operation of the Supreme Court Rules 1970 (NSW) and no attempt was made to relate the decision to the legislative scheme which operates in the present matter. The correct approach is carefully explained by Markovic J in Tolric Pty Ltd v Taylor as Liquidator of Bruck Textile Technologies Pty Ltd (in Liq) [2015] FCA 1051. There, her Honour accepted the analysis undertaken by Austin J in Re Southland Coal where his Honour observed (at [80]) that the decision in Meteyard v Love: … does not mean that in every case, the order for production must contain such an express exclusion [being an order framed to exclude documents that a producing party would be entitled to withhold as privileged]. The Uniform Civil Procedure Rules set out a procedure by which claims for privilege are to be made. As I have explained, the person to whom the order is directed may object to producing the document and once the objection is made, cannot be compelled to do so unless and until the objection is overruled. That is the position as a matter of law. If orders were made expressly excluding documents subject to client legal privilege, there would be a risk that the persons to whom the orders were directed would regard themselves as exonerated from taking any co-operative steps with respect to documents that they regarded as privileged, such [sic] preparing lists or even embarking on any process of review. At least in some cases, it may be preferable simply to add a note to the orders drawing the reader's attention to the relevant rules. But in my view it is unnecessary to take any such step in a fully contested inter partes matter where the parties are legally represented, and I do not regard the Court of Appeal as suggesting otherwise. In such a case an acceptable course, in accordance with the rules, is to make unqualified orders for production coupled with liberty to apply, which may be exercised for the purpose of giving directions designed to bring forward contested privileged claims for resolution, once specific documents have been identified and particular claims for privilege have been made in respect of those identified documents. 47 Markovic J accepted that a procedure could be designed to resolve contested privilege claims and identified that there were accepted practices for doing so. In that case, the fact that the summonses, on their face, required production of documents which might be privileged did not render them oppressive. That approach should be followed here. 48 It can be accepted that documents which may be the subject of a legitimate claim for legal professional privilege may well relate to the "examinable affairs" of a company as that expression is defined in s 9 of the Corporations Act and enlarged by s 53. However, save where there is express authority to the contrary, any curial powers to require a person to produce of documents must always be understood as being subject to that person's entitlement to maintain the common law privileges which they may have, including any legal professional privilege. How any such privileges are to be protected will be subject to the circumstances in which the question arises. No doubt, care must be taken when making orders requiring persons who are likely to be without the benefit of legal advice to produce documents, to ensure they are made aware of their entitlements to refuse production in some circumstances. In this respect, the Court may "put in place some mechanism whereby privilege claims may be brought forward and examined before any compulsion is exerted by means of an order of the court": Hypec Electronics Pty Ltd (in liq) [2006] NSWSC 704 [5]. 49 It is also apt to keep in mind that whether the context is the obligation to make discovery or to respond to an order to produce documents, the onus is on the party seeking to preserve their privilege to make such a claim and to support it by admissible evidence. This was cogently articulated by McKerracher J in Carna Group Pty Ltd (in liq) v The Griffin Coal Mining Company (No 2) (2019) 140 ACSR 622 at 627 - 628 [10] - [11]: [10] It is common ground that a person claiming privilege must prove by admissible evidence the grounds of the claim. It would normally be expected that someone would produce evidence on oath or affirmation as to the purpose for which the disputed documents were created. It may, in an appropriate case, be open to the Court to examine the relevant documents to form a view as to whether the claim for privilege is properly made out. (Appropriately I think, no party in this proceeding has suggested such a course.) [11] A mere assertion the documents are privileged can never suffice because it is an inadmissible assertion of law. The claimant must set out the facts from which the Court can see that the assertion is rightly made (Gardner v Irwin (1879) 4 Ex D 49 at 53). But there are a number of ways in which this might be done and regard should be had to all the circumstances in determining the correctness of the assertion. The claimant should expose 'facts from which the [Court] would have been able to make an informed decision as to whether the claim was supportable': National Crime Authority v S (1991) 29 FCR 203; 100 ALR 151 per Lockhart J (at FCR 211; ALR 159). 50 In the case of a Direction to Produce documents issued under s 597(9) or an order to produce documents made under r 30.34, a recipient may raise a claim for privilege at any return date or in advance by application as occurred in the present matter. If the application for the issuing of the summons is made on notice, the issue may be raised at its hearing. 51 Ultimately, the liquidators accepted that Enyo Lawyers must be afforded an opportunity to advance any claim for legal professional privilege which their clients, Messrs Giraud and De Lacy, seek to make and that any orders made under r 30.34 should make that clear. They submitted that the Court should put in place an appropriate mechanism whereby any privilege claim can be ventilated and determined. 52 They further submitted that a first step might be that the existing form of the orders be amended to clarify that any documents in respect of which privilege is claimed will, on production, be kept confidential until a determination of the claim has been made. This, so it was submitted, could be achieved by amending the terms of the Registrar's order 4, which permitted the liquidators to inspect documents produced in accordance with the Direction, by the inclusion of the words "(save for any documents which are or may be subject to a claim of legal professional privilege)". Such an order would, so it was said, afford the liquidator the ability to inspect the documents produced in accordance with the Direction save that any in respect of which privilege is claimed will be kept confidential until the Court otherwise orders. This would require Enyo Lawyers to produce all documents identified by the Direction but, presumably, those in respect of which privilege is claimed will be kept confidential and protected from inspection. It was submitted that this may be achieved by having those documents sealed in an envelope which is marked, "Not to be opened save for on the order of a judge of this Court". 53 Whilst that approach may be appropriate in some cases here, where there are likely to be a substantial number of documents in respect of which privilege is claimed, the preferable course is that Enyo Lawyers not be required in the first instance to produce documents in respect of which their clients wish to make a claim for legal professional privilege. Instead, they should be permitted to identify any such documents and the grounds on which the claim for privilege is made. Production of any such documents need only occur once any privilege claim has been rejected. 54 In the result, in order to facilitate the determination of any privilege claims which Messrs Giraud and De Lacy wish to make, orders should be made permitting them to presently resist the physical production of documents in respect of which they claim privilege. If such claims are to be advanced they must be made by affidavit filed in these proceedings. If the liquidators wish to contest those claims, they are entitled to make the appropriate application. 55 No party suggested that a regime of the above nature would not provide adequate protection of the interests of Messrs Giraud and De Lacy.

Are the documents "required" for the purposes of examining Messrs Giraud and De Lacy? 56 Mr Kipp, on behalf of Messrs Giraud and De Lacy, submitted that the liquidators had not established that the documents sought from Enyo Lawyers were "required" for the purposes of examining them at the forthcoming public examinations. 57 Primarily, he submitted that any relevant documents to which Enyo Lawyers have access are in the power, possession, custody or control of Messrs Giraud and De Lacy as Enyo Lawyers' clients and, as summonses had been issued to them under s 596B and the documents will be produced by them, there is no reason why a summons should also issue to the solicitors. It was further submitted that there is no reason to believe that Messrs Giraud and De Lacy will not produce all documents required to be produced in response to the summons they have received, with the consequence that the Direction to Enyo Lawyers is redundant. Similarly, it was submitted that, as a summons had also been issued to HMW Group for the production of any relevant documents held by it, the documents so produced will include copies of those documents which may have been given to Enyo Lawyers. This also went to the alleged redundancy of the Direction to Enyo Lawyers. 58 That submission should not be accepted. The issue of whether the documents are required for the examination of an examinee is primarily directed to the nature of the documents and their contents; namely whether they relate to the examinable affairs of the company, specifically the topics upon which the liquidator seeks to examine the particular examinees. In this case, the documents sought are so related and, in that sense, they are "required" in order for the liquidator to usefully undertake the investigation into the disposition by Digital Infrastructure of its shareholding in DSH. They are required so that the liquidator can usefully examine Messrs Giraud and De Lacy as to the matters which they have identified. 59 It can be accepted that, where a liquidator already has possession of documents, seeking production of the same documents from a further source may amount to an abuse of process on the basis that, ipso facto, they are not necessary for the purposes of the examination. In this sense, it can be accepted that the ability of the liquidator to acquire documents from a more convenient source is a factor which may influence the conclusion of whether the documents are truly required. However, neither of those considerations arise in this case. Here, there is but one source of the documents in question; the documents held by Enyo Lawyers which, so it is said, were received for the purposes of conducting the oppression litigation. Presently, they are in possession of Enyo Lawyers. It may well be that Messrs Giraud and De Lacy will assume control of them for the purposes of complying with the summons issued to them and produce them to the Court as required (or resist their production on the basis of a privilege claim). However, there is no reason why the liquidators should accept that will occur and it might be expected that solicitors, as officers of the Court, are more likely to take assiduous care to strictly comply with the obligations imposed on them. Conversely, if Messrs Giraud and De Lacy do assume control of those documents, it must necessarily follow that there will be nothing left for Enyo Lawyers to produce pursuant to any relevant order. 60 It is appropriate to recognise here a degree of dissonance in the submissions of Messrs Giraud and De Lacy. For the purposes of this application, they relied upon an affidavit of Mr McMahon sworn 21 September 2021 in which he deposed to, inter alia, the circumstances of his engagement in the oppression proceedings, and evidence which was said to support the contention that the scope of the documents required to be produced amounted to an abuse of process or was oppressive. He deposed that there were 2,748 individual documents relating to the oppression action and that examining them would take an extended period of time which he estimated to be around 137 hours and, at his charge out rates, would equate to a cost of around $95,000.00. He seems unwilling to undertake this task unless paid by the liquidators to do so. 61 That position, however, is inconsistent with the submission made to this Court that there is no need to require Enyo Lawyers to produce the documents because Messrs Giraud and De Lacy would do so pursuant to the summonses issued to them. If it be assumed that they do produce the documents, it must necessarily follow that they, or some other person, will have identified the relevant documents in the Enyo Lawyers' files and extracted them. It is, with respect, not immediately self-evident why Mr McMahon would be required to undertake the task a second time in order to fulfil the obligations imposed upon his firm. On the assumption that Messrs Giraud and De Lacy will be as diligent as Mr Kipps suggested and will retrieve the relevant documents in the Enyo Lawyers' files, Mr McMahon's task must be rendered somewhat simple; there should be no further documents to produce. Alternatively, if copies are made of the relevant documents for production by Messrs Giraud and De Lacy it can be assumed that they will have been isolated from the other documents in the file and are capable of further copying. 62 It should not be accepted that the documents which are the subject of the Direction to Enyo Lawyers are not required for the examination of Messrs Giraud and De Lacy. It can be added that the above submissions were predicated upon the assumption that the scope of the documents sought in the summons issued to Messrs Giraud and De Lacy necessarily included all those documents sought in the Direction. There was, unfortunately, no evidence to that effect before the Court. 63 Mr Kipps for the applicants made the supplementary submission that, in their evidence, the liquidators had produced affidavits prepared by Enyo Lawyers which exhibited a number of documents (or copies of such documents) appearing to be Digital Infrastructure's books and records and that this revealed that they were already in possession of the company records. However, that submission is only valid if it were established that those documents were the totality of such documents in possession of Enyo Lawyers. No attempt was made to do so and the liquidators production in this application of the affidavits prepared by Enyo Lawyers merely established that that firm was in possession of many documents which emanated from Digital Infrastructure. There is nothing from which any inference can be drawn that there are no other documents of that nature in Enyo Lawyer's possession. It is relevant that Mr McMahon did not depose that the documents attached to the affidavits to which the liquidators referred were the only books and records of Digital Infrastructure in Enyo Lawyers' possession. 64 A similar submission was made in relation to various memoranda which the evidence indicated were sent by HMW Group to Enyo Lawyers. These documents fell within the scope of the description of documents in paragraph 1.2 of the Direction. It was submitted that as copies of those documents were annexed to the liquidators' affidavits and presumably received from HMW Group, there was no need to require Enyo Lawyers to produce the same documents. However, it is not clear what documents were received by Enyo Lawyers nor which were retained by HMW Group. In addition, the evidence suggests that there were multiple versions of these memoranda which suggest that there may be some difficulty in isolating those which have been produced and those which have not. It is also quite possible that the copies of the memoranda in the possession of Enyo Lawyers may well contain notations which afford them an additional complexion. More importantly, however, this submission appears to be somewhat insignificant in the circumstances where there is no apparent difficulty in complying with the Direction to produce these particular and specific documents. They are few in number and fall within a broader category of documents which are required to be produced. Their production will not cause any hardship at all. 65 It should also be observed that the fact that a document of a particular type relating to the affairs of a company is in the possession of the recipient of a Direction to Produce or a summons is not irrelevant for the liquidators' investigations. It must be kept steadily in mind that the liquidator comes to the matter unaware of the company's affairs and its transactions and, in relation to specific matters of concern in respect of which the liquidator seeks to examine individuals, the fact that a particular person possesses documents relating to the company's affairs and which are required for the purposes of the examinations may well have significance. 66 For the reasons above, the liquidators have established the documents in each of the three categories are required for the purposes of the examination of Messrs Giraud and De Lacy.

Ground 2 - alleged oppression 67 Messrs Giraud and De Lacy submitted that no order should be made requiring Enyo Lawyers to produce the documents sought on the basis that to do so would be oppressive. It can be accepted that the degree of the burden imposed on a person who is subject to an order under r 30.34 is a matter relevant to the exercise of the Court's discretion to make an order that documents be produced: Re Australasian Liquid Storage Pty Ltd (in liq) (2017) 121 ACSR 119 at 126 [25]: and, in some cases, may underpin a claim that the application for an order is an abuse of process. However, that consideration is tempered by reference to the importance of the documents to the matters in respect of which the liquidator wishes to undertake an examination. Here, the documents in issue related to the manner in which Digital Infrastructure disposed of its only substantial assets, whether any consideration was paid in respect of the disposition and, if so, to whom. On the material, the documents sought are pivotal to a central issue surrounding the insolvency of the company. 68 As indicated above, Mr McMahon has deposed that the extraction of the documents meeting the descriptions in the Direction would be time consuming and costs tens of thousands of dollars. He was not cross examined on that evidence, although it does not follows that his evidence must be accepted uncritically. As has been mentioned, it was submitted that Enyo Lawyers should not be required to produce the documents because Messrs Giraud and De Lacy will be producing the same ones in response to the summonses issued to them. Accepting the correctness of that proposition, it is difficult to understand how it can be said that compliance with the Direction will generate any greater burden than already exists. 69 Moreover, the documents sought in paragraph 1.1 of the Direction would appear to be reasonably capable of identification by Mr McMahon. They are the books and records of Digital Infrastructure and are obviously distinct from other documents created for the purposes of litigation. In a properly organised solicitor's file, it is likely that such documents would be appropriately isolated or easily capable of isolation. Mr McMahon's evidence in relation to this issue was advanced at a high level of generality and, in the circumstances, appeared to substantially over-emphasise the alleged difficulties associated with the task of isolating the relevant documents insofar as it related to the documents in paragraph 1.1 of the Direction. It was not adequately explained just how those difficulties arose. 70 The range of documents required to be produced in paragraph 1.2 of the Direction gives rise to a number of difficulties. The chapeau to that paragraph provides: 1.2. For the period 1 July 2018 to 30 October 2020, all documents (including invoices, retainers and service agreements) which record, evidence or concern any legal, financial, business, accounting or taxation advice given to, or for the benefit of, the Company or its directors, regarding: … 71 Thereafter, a number of topics are identified, being the cancellation, redemption or disposal of Digital Infrastructure's shareholding in DSH, the financial position of Digital Infrastructure, the obligations of Messrs Giraud and De Lacy as directors and the performance of those duties, and their decision to place the company into liquidation. 72 The temporal scope of the documents in this paragraph and the topics they cover are confined which, on the one hand, facilitates compliance. However, the difficulty is that identifying the documents within the class is problematic. The reference to documents which "record" or "evidence" the advice given to Digital Infrastructure on the various topics is not likely to occasion hardship. Such documents should be self-evident, in the sense that they would generally be the primary documents by which any such advice was given. However, the inclusion of the reference to documents which "concern" the advice is uncertain and vague. It would seem that in order for Enyo Lawyers to ascertain which documents are required to be provided in that respect, a solicitor would be required to read through every piece of correspondence and every court document, analyse its content and form a judgment as to whether it meets the description. It can be accepted that this would involve a significant period of time and supports the conclusion that compliance could become unduly onerous. 73 In the course of the hearing, Mr Callanan accepted that the word "concern" should be elided from the form of order so as to remove this complication. That is appropriate and the paragraph should relevantly read "… which record or evidence any legal, financial, business, accounting or taxation advice…". 74 In relation to the scope of documents in paragraph 1.2 (summarised in sub-paragraph 24(b) above), it was submitted that the scope of the paragraph required the production of legal advice given directly to Messrs Giraud and De Lacy by Enyo Lawyers if it was incidentally for the benefit of Digital Infrastructure. There is force in that submission and the words of the paragraph could be so construed. 75 Nevertheless, the difficulty here is that the circumstances of Enyo Lawyers' relationship with Digital Infrastructure is not entirely clear. Although there was no formal engagement of that firm by the company, that conclusion does not foreclose the issue. It is well known that solicitors can act for an entity and owe duties to it in the absence of any formal retainer. It may be that some informal retainer existed and that the advice provided by Enyo Lawyers was to Messrs Giraud and De Lacy as well as to Digital Infrastructure. If so, no privilege in respect of such advice can be claimed as against the liquidators. However, that is not an issue which needs to be answered on this application, but instead on any application disputing a claim for privilege. 76 In order to alleviate any perceived difficulties, Mr Callanan agreed that some alteration to the original form of the Direction was required to make it clear that documents of that nature were not the subject of the order. He maintained that the wording, "advice given to the Company, or for the benefit of the Company via its directors", would overcome that issue. This concession was made as a practical solution to the issues which had arisen between the parties. It being clear on the facts that the applicants would raise a privilege claim in relation to any legal advice provided by Enyo Lawyers to Messrs Giraud and De Lacy alone, there was no point in requiring production or requiring the applicants to make a claim in relation to such obviously privileged documents. Whether any particular advice is to be characterised in that way is a separate issue in respect of which the determination of Messrs Giraud and De Lacy, or Enyo Lawyers as their solicitors, is not necessarily conclusive. 77 However, as Mr Kipps submitted, the use of the phrase "for the benefit of the Company" would give rise to an uncertain, subjective inquiry as to whether the company benefited from particular advice. This potential uncertainty can be overcome if the chapeau to paragraph 1.2 were to instead read, "… advice given to the Company either directly or by its directors, and whether solely to the Company or otherwise, regarding: …". It must be reiterated that this formulation does not prevent Messrs Giraud and De Lacy making any claim for privilege in respect of any advice given to them and Digital Infrastructure jointly and the veracity of that claim being determined in the future.

Conclusion 78 It follows that the liquidators have established an entitlement to the making of orders under r 30.34 that the proper officer of Enyo Lawyers produce certain documents in their power, possession, custody or control concerning the company's examinable affairs. The documents which should be produced are as identified in the orders at the commencement of these reasons. 79 It is necessary for the Court to set aside the orders made by the Registrar in relation to the production of documents by Mr McMahon and to set aside the Direction issued by the Court. This necessarily follows from the de novo re-hearing of the matter and the slightly different conclusion which has been reached.

Costs 80 Messrs Giraud and De Lacy sought to recover their costs of the application. They submitted that they were forced to make the application in order to bring the Direction within its proper bounds and that the liquidators were recalcitrant in dealing with their concerns when raised prior to the application being filed. Conversely, the liquidators submitted that the correspondence demonstrates a preparedness on their behalf to accommodate the concerns raised but that Messrs Giraud and De Lacy required the withdrawal of the Direction in totality. 81 The correspondence shows that both sides had a degree of responsibility leading to the necessity for the application to be made. In addition, on its hearing, each party has had a degree of success. In those circumstances, the appropriate order is that there be no order as to costs. I certify that the preceding eighty-one (81) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Derrington.

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