Grosvenor Hill (Qld) Pty Ltd v Barber

Disputed categories of documents 5 The challenged categories in the orders for production issued to CBA, PCL, TCAP and NAB are in the following relevant terms: c. Copies of Income Tax Returns and Notices of Assessment for Vicki Golman (aka Vicky Golman aka Victoria Golman) … for the period 1 July 2008 to 30 June 2017. f. Financial statements of trustee companies, trusts and companies in which Mrs Golman was a shareholder or a director for the period 1 July 2007 to 30 June 2017. h. Copies of all bank statements, loan statements and credit card statements in the name of Mrs Golman or in the name of Mrs Golman jointly with Mr Golman for the period 1 July 2008 to date. 6 The challenged categories in the orders for production issued to Mr Golman and Mr Bruzzano are in the following terms: 3. Copies of Income Tax Returns and Notices of Assessment for Serge Golman jointly with Victoria Golman for the period 1 July 2008 to 30 June 2017. 6. Copies of all bank statements, loan statements and credit card statements in the name of Victoria Golman (aka Vicki Golman) or in the name of Victoria Golman (aka Vicki Golman) jointly with Serge Golman for the period 1 July 2008 to date.

Facts 7 The company was registered on 16 October 2008. Mr Serge Golman has been its sole director and shareholder since registration. Until it ceased trading in about September or October 2013, the company operated a plastering, rendering and drywall business from premises in Bondi Junction, New South Wales. 8 Mrs Golman is not and has never been an officer of the company, and nor has she ever been a shareholder of the company. 9 An administrator was appointed to the company on 29 October 2013. The administrator's report to creditors, dated 22 November 2013, stated that the company was placed into administration in order for Mr Golman to avoid personal liability under taxation legislation following the ATO's issuance of a director's penalty notice on 16 October 2013, for unpaid PAYG taxes of $175,130 incurred in the period 1 January 2013 to 30 June 2013. The administrator's report also noted that no consideration was paid by Lidcombe Plastering Pty Ltd for the transfer of the company's business to it, and that the administrator considered the transaction to be an uncommercial transaction and "effectively Phoenix Activity". 10 On 6 December 2013, the administration ceased. 11 The present liquidation commenced on 8 July 2015. Mr Cathro was appointed as the company's liquidator on 21 March 2017 (having replaced Mr Farnsworth and, before him, Mr Hill). 12 Mr Golman does not own any real property in New South Wales. 13 In an annual report under s 508(3) of the Corporations Act 2001 (Cth) ("Act") dated 30 June 2018, the liquidator stated that he had received a limited quantity of books and records of the company from the company's previous liquidator, but that these records were insufficient to conduct detailed investigations into the company's affairs. Bank statements tendered on behalf of the liquidator showed withdrawals of significant sums, including three cheques totalling $630,000 on 2, 3 and 4 July 2012. Mr Condon SC, senior counsel for the liquidator, submitted from the Bar table that the liquidator has been unable to determine the recipient of these cheques. 14 The liquidator also stated that he suspected "phoenix activity" with respect to other companies owned by Mr Golman, being companies that were wound up in insolvency with a large number also incorporating the words "Lidcombe Plastering" in the company name. The liquidator also stated that ASIC has approved a request for funding from the Assetless Administration Fund. In further support of the liquidator's suspicion of phoenix activity in connection with Mr Golman, the evidence included a letter from Mr Bruzzano to the Australian Taxation Office dated 16 June 2015 which stated that the company "ceased employing around Sep 2013 and Lidcombe Plastering Pty Ltd is the new entity carrying on the business after that". 15 Mrs Golman is the registered proprietor of four properties located variously in Vaucluse, Edgecliff, Bondi Junction and Bondi in NSW. Mr and Mrs Golman live at the Vaucluse property. 16 Mrs Golman was also a director of Glenvale Developments Pty Ltd ("Glenvale") from 1 February 2005 to 29 June 2015. Glenvale, which is now deregistered, was the sole shareholder of Lidcombe Plastering Pty Ltd, which is now also in liquidation. Mrs Golman is identified on an ASIC search for Glenvale as a former sole owner of the issued shares in Glenvale. 17 CBA currently holds a registered mortgage, lodged on 10 February 2009, over the Vaucluse property. Title searches show that the Vaucluse property has been refinanced over the years, and that NAB and PCL were previously registered mortgagees in relation to the property (with PCL being a mortgagee for a period after the registration of the company until 10 February 2009). CBA also holds a registered mortgage dated 14 June 2016 over the Bondi property. 18 In about May 2017, TCAP lodged a caveat on the titles of the Edgecliff property and the Bondi Junction property. The caveator claims an interest as chargee under an instrument dated 26 April 2017. 19 Thus, Mr Condon SC contended, the orders for production addressed to NAB, PCL and TCAP are justified on the basis that they are financial institutions with which Mrs Golman has had a relationship, albeit that there is no evidence of such a relationship during the lifetime of the company in the cases of NAB and TCAP. 20 Mr Condon SC also contended that the order for production to CBA is justified on the basis that CBA has had a relationship with the company both during its lifetime and since the commencement of the liquidation. 21 Mr Cathro's affidavit evidence is that he does not presently know how Mrs Golman "was able to fund or purchase" the properties; "the basis upon which Mrs Golman was able to obtain finance to purchase or further encumber" the properties; or "make the loan repayments to discharge her obligations" under the securities over the properties. Mr Cathro wishes to "inquire whether the company's property has been transferred to Mrs Golman" and, if so, whether the transfers were at an under-value and whether the company's property is traceable into her assets. 22 Mr Cathro also stated that he considers that the documents sought in the orders for production, insofar as they may relate to Mrs Golman, are required to enable him to obtain further documents required for the exercise of the power to conduct the examination, and that the documents may otherwise be relevant to the examinable affairs of the company. 23 Mr Cathro also stated that he considers Mr Golman, Mrs Golman and Mr Bruzzano may be persons against whom the company has a potential claim. 24 Mr Cathro does not identify any specific transactions between the company and Mrs Golman that may be the subject of investigation or challenge (or, for that matter, any transactions between the company and Mrs Golman at all). Mrs Golman contended that the height of Mr Cathro's evidence is that she is a person "against whom the company may have a potential claim".

Legal framework 25 Although the orders for production are expressed to have been issued under s 597(9) of the Act, that provision concerns the production of documents at an examination. In this case, the production was required in advance of examinations of Mr Golman and Mr Bruzzano. The Court has power to issue orders for production in advance of examinations under r 30.34 of the Federal Court Rules 2011 ("Rules"), which applies to a proceeding under the Act by r 1.3(2) of the Federal Court (Corporations) Rules 2000 ("Corporations Rules"). 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. 28 Mr Condon SC, submitted that the Court's power to grant the relief sought by Mrs Golman is conferred by s 35A(6), as a review on the Court's motion of an exercise of power by a Registrar. Counsel for Mrs Golman, Mr Anderson, did not dispute that proposition. 29 Accordingly, I have treated Mrs Golman's interlocutory application as an invitation to review the Registrar's decision to exercise the power under r 30.34 in relation to the orders for production. 30 Concerning the application of s 35A(6), in Bell Group NV, Jagot J said relevantly (at [20]): As explained by Kenny J in Deputy Commissioner of Taxation v Australian Securities and Investments Commission [2013] FCA 623; (2013) 304 ALR 319 the right of review under s 35A(5) is "by way of a hearing de novo in the sense that the parties may adduce fresh evidence as of right", "is a complete rehearing; and the judge is not fettered by the Registrar's decision" (at [36]), so that the "court must determine the facts on the evidence that is adduced at the hearing before it, whether or not that evidence, and the facts to which they relate, were in existence at the time the Registrar made the decision under review" (at [38]). 31 Mrs Golman's submissions acknowledged that the guiding principles that apply to the making of orders for production in aid of public examinations are those identified by Bryson J in Re BPTC Ltd (in liq) (No 5) (1993) 10 ACSR 756 at 762-763: (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. 32 The bounds of the power are marked out 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 set by s 597 and the internal limitation in the examination orders: Re BPTC Ltd (in liq) (No 5) at 763. 33 By reference to Re BPTC, Master Sanderson held in Re Griffin Energy Group Pty Limited (subject to DOCA) [2012] WASC 389 at [64] ("Griffin Energy Group") that: The scope of the power to issue an order for production under the section is more narrow than the power to issue a subpoena. Each examination for which the documents are sought must be assisted or facilitated by the production of each specific category of documents. It is not enough to merely say that the examinations generally relate to the examinable affairs of the company and the documents produced will assist in these examinations. Further this 'implied limit' on the power will be informed by the role of the examinee and the part they have played in the examination affairs, including relevant times at which they were associated with the company. 34 In Re Bill Express Ltd Limited (in liq); Di Donato v Crosbie [2010] VSC 101; (2010) 238 FLR 329 at [26], Davies J said, in relation to the power to make an order under s 596D but of equal relevance to the power under r 30.34, relevantly: 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. 35 The term "examinable affairs" is defined in s 9 of the Act as: (a) the promotional, formation, management, administration or winding up of the corporation; or (b) any other affairs of the corporation (including anything that is included in the corporation's affairs because of section 53); or (c) the business affairs of a connected entity of the corporation, in so far as they are, or appear to be, relevant to the corporation or to anything that is included in the corporation's examinable affairs because of paragraph (a) or (b). 36 The scope of this definition is enlarged by the terms of s 53 of the Act (to which sub para (b) refers), which relevantly provides: For the purposes of the definition of examinable affairs in section 9, section 53AA, 232, 233 or 234, paragraph 461(1)(e), section 487, subsection 1307(1) or section 1309, or of a prescribed provision of this Act, the affairs of a body corporate include: (a) the promotion, formation, membership, control, business, trading, transactions and dealings (whether alone or jointly with any other person or persons and including transactions and dealings as agent, bailee or trustee), property (whether held alone or jointly with any other person or persons and including property held as agent, bailee or trustee), liabilities (including liabilities owed jointly with any other person or persons and liabilities as trustee), profits and other income, receipts, losses, outgoings and expenditure of the body; and … (g) matters concerned with the ascertainment of the persons who are or have been financially interested in the success or failure, or apparent success or failure, of the body or are or have been able to control or materially to influence the policy of the body … 37 "Property" is defined in s 9 as follows: [A]ny legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action … 38 In Meteyard v Love [2005] NSWCA 444; (2005) 65 NSWLR 36, Santow JA cautioned against a narrow interpretation of the "examinable affairs" of a corporation, saying at [9]: Insofar as the scope of the power depends upon whether the enquiry is directed to the "examinable affairs" of the corporation, I would emphasise the need for caution in any a priori observations seeking to limit the scope of that very broadly defined expression. It will often be only when the matter is looked on in closer detail, that the court will be in any position to ascertain whether the scope of the power has been exceeded or the power abused by its use in a vexatious or oppressive manner. That may only emerge when the examination is under way, though it can emerge earlier in a clear-cut case. Many cases however only reveal themselves as having that abusive or oppressive character after the Summons has issued and examination under way. Some may only have that adverse character in a particular aspect of the examination. 39 In Re Bill Express, at [27], Davies J continued: It is uncontroversial that the following are legitimate purposes of an examination under s 597 of the Corporations Act: (a) an examination is designed to serve the purpose of enabling an eligible applicant to gather information to assist the eligible applicant in the administration of the corporation; (b) an examination assists the corporation's administrators to identify the corporation's assets, both tangible and intangible and also allows the corporation's liabilities to be identified; (c) the purpose is to protect the interest of the corporation's creditors; (d) the examination serves the purpose of enabling evidence and information to be obtained to support the bringing of proceedings against examinable officers and other persons in connection with the examinable affairs of the corporation; (e) an examination assists in the regulation of corporations by providing a public forum for the examination of examinable officers of corporations. 40 The purposes of an examination may include inquiring as to the worth of a potential defendant: Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301 at 307 ("Grosvenor Hill"); Re New Tel Ltd (in liq) [2005] FCAFC 114; (2005) 145 FCR 176 at [81] and [82]. In Grosvenor Hill, at 311, the Full Court said: In our view, the ambit of the power is sufficiently wide to enable information to be sought from a defendant or potential defendant as to the ability of that person to satisfy any reasonable judgment which may be obtained in litigation instituted by the liquidator. 41 In Re GEBIE Services Pty Ltd (in liq) [2017] FCA 323 at [29] to [31], White J rejected a submission that in order to establish that documents sought by liquidators were relevant to the examinable affairs of the company, it was necessary for the liquidators to assert that they were actually contemplating litigation against the applicant and to identify the particular proposed cause of action.

Mrs Golman's Submissions 42 Mrs Golman's overarching submission is that the matters which Mr Cathro seeks to investigate through the impugned categories in the orders for production are outside of the "examinable affairs" of the company. In support of that submission, Mrs Golman relied on the absence of any identification by Mr Cathro of any specific transactions between the company and Mrs Golman that may be the subject of investigation or challenge, and the absence of evidence of any such transactions. For that reason alone, Mrs Golman argued, there is no nexus between the documents sought by the challenged categories, the examinable affairs of the company and the proposed examinations of Mr Golman and Mr Bruzzano. 43 Mrs Golman argued that the effect of Mr Cathro's evidence is that he believes that each of the financial institutions may have documents in its possession relating to the company and its examinable affairs and that he does not know what documents were supplied to those institutions to obtain finance and encumber the relevant properties, or from where repayments were made. This, Mrs Golman argued, pre-supposes that any transactions between Mrs Golman and the various financial institutions constitute "examinable affairs" of the company, with Mrs Golman's submission being that they do not, and that the evidence of the relevance of the documents is in the category identified by Master Sanderson in Griffin Energy Group referred to at [33] above.

Consideration 44 The disputed documents concern Mrs Golman's financial affairs during the life of the company, as well as shortly before the registration of the company (in the case of category (f), as extracted at [5] above) and after the commencement of the liquidation. 45 In this case, the purposes of the proposed examinations include the identification of property of the company, including causes of action that may exist against Mr and Mrs Golman. Another purpose of the proposed examinations is the ascertainment of whether Mrs Golman is a person who is or has been financially interested in the success or failure, or apparent success or failure of the company. 46 The facts set out above provide a reasonable basis for the liquidator to suspect that examination of Mrs Golman's financial affairs during the life of the company may reveal the company possesses a cause of action against Mrs Golman. In particular, it is significant that the liquidator has not received complete books and records from the company and that the company's bank statements raise questions about the recipient of substantial cheques drawn on the relevant account. In that context, where the sole shareholder of the company is Mr Golman, it is reasonable to question whether funds of the company may have flowed to his wife, particularly where Mr Golman has had no registered interest in any real property (at least in New South Wales) while Mrs Golman is the registered proprietor of four properties. Where there have been loans secured over the Vaucluse property (in which Mr Golman lives) throughout the life of the company, it is also reasonable to question whether funds of the company may have been used to pay PCL or CBA monies in connection with the registered mortgages over the Vaucluse property. 47 It is also significant that Mrs Golman is a former owner of the shares in Glenvale, which was the former owner of Lidcombe Plastering Pty Ltd, which apparently acquired the business of the company for no consideration. This circumstance gives rise to a question as to whether Mrs Golman was financially interested in the business of the company. 48 In the event that a cause of action against Mrs Golman is identified, a legitimate matter for investigation is Mrs Golman's capacity to meet any judgment that might be obtained against her. 49 The disputed documents are relevant to these subjects for investigation, which are part of the examinable affairs of the company. 50 Further, in the event that a cause of action against Mr Golman is identified, it is relevant for the liquidators to investigate Mr Golman's capacity to meet any judgment that might be obtained against him. Having regard to the facts set out above, documents which shed light on Mrs Golman's financial affairs may be relevant to that question. 51 I do not accept that the order for production issued to NAB should be set aside on the basis that there is no evidence of a relationship between NAB and Mrs Golman during the life of the company. I accept Mr Condon SC's submission that it is reasonable for the liquidator to seek relevant documents from NAB on the basis that its known earlier relationship with Mrs Golman may indicate a continuing relationship by virtue of which NAB might hold relevant documents. 52 Applying the same reasoning, I do not accept that the orders for production issued to PCL and TCAP should be limited by reference to the currently known facts concerning their relationship with Mrs Golman. 53 To the extent that category (f) seeks documents relating to the period 1 July 2007 to the date of registration of the company (16 October 2008), I accept that those documents may be relevant to an understanding of subsequent facts and accordingly, I will not set aside the orders for production on the basis that the documents sought relate to that period. 54 As such, I will not set aside any of the orders for production.

Conclusion 55 The interlocutory application should be dismissed. The liquidator should have access to documents produced in answer to the orders for production. Costs should follow the event. I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.