The plaintiff's entitlement to possession of documents as receiver
45 Prayer 1 in the originating process seeks a declaration that the plaintiff "is presently entitled to possession of all Books which were in the possession of the One.Tel Network Group of 6 June 2001". The word "Books" is defined in the originating process by reference to the definition in s 9 of the Corporations Act. The prayer for relief raises the question whether the plaintiff was, at that time and as against the defendant liquidators, "entitled to possession" of all the documents in the possession of the Network Group.
46 Section 530B (1) (a) of the Corporations Act says that a person is not entitled, as against the liquidator of a company, to retain possession of books of the company. However, s 530B (2) says that subparagraph (1) (a) does not apply in relation to books of which a secured creditor of the company is entitled to possession, but the liquidator is entitled to inspect and make copies of such books at a reasonable time. It is clear that Lucent was a secured creditor for the purposes of this provision.
47 Section 530B creates a "pecking order" in which the receiver's claim to possession of company documents has priority over a liquidator's claim. However, it is particularly important in the present case to pay attention to the precise wording of s 530B. The liquidator's right to obtain or retain possession of books, as against other persons, is confined to "books of the company". As a matter of natural meaning, those words refer to books which belong to the company, and may extend to books to which the company has some lesser but proprietary interest. The liquidator's right is subject to the right of a secured creditor of the company, to the extent that a secured creditor is "entitled to possession" of the relevant books. It is not necessary for the secured creditor to have a proprietary interest in the books - an entitlement to possession will do.
48 Section 530B is generally confirmatory of the previous law. In Re Landmark Corporation Ltd (in liq) (1968) 88 WN (Pt 1) (NSW) 195, speaking of the admittedly more general provisions of s 233 (1) of the Companies Act 1961 (NSW), Street J (as he then was) referred (at 198) to the "well-settled" law that a receiver of the assets of a company appointed by a debenture holder is entitled to the custody and control of the assets covered by that debenture. He said that the receiver's right is superior to the statutory right of a liquidator to take the company's property into his custody and under his control. He held that it was unnecessary for the receiver to make an application to the Court for authorization before taking possession of the company's property.
49 Therefore the question is whether Lucent, and the plaintiff as its appointed receiver, was "entitled to possession" of the documents which the plaintiff claims, as at the date of appointment. The rights of Lucent as secured creditor are defined by the deed of charge. The plaintiff as receiver has two sources of the power to take possession of documents.
50 The first is s 420 of the Corporations Act. Subsection 420 (2) confers statutory powers on the receiver, in addition to any powers conferred by the instrument under which the receiver was appointed, but subject to any limitation in that instrument. The powers include:
"(a) to enter into possession and take control of property of the corporation in accordance with the terms of that … instrument".
51 There is no relevant limitation on this power in the deed of charge dated 1 June 1999. The availability of the power depends upon whether the documents claimed are "property of the corporation". Section 420 does not confer on the receiver the power to take possession of documents that were in the possession of the corporation but were not "property of the corporation".
52 The second source of power is the terms of the instrument itself. As I have mentioned, clauses 5.3(a) and 5.3(j) confer on the receiver the power to enter into possession or assume control of any of the Charged Property, and to have access to any of the Charged Property. The availability of those powers, and the incidental power in clause 5.3(aa), depends upon whether the documents claimed are "Charged Property". As I have said, this raises the question whether any of the companies of the Network Group owned the relevant documents, or had a proprietary interest constituting part of the undertaking, or an asset or right of the company, with respect to the documents.
53 Thus, while the ultimate question is whether the receiver has an entitlement to possession of the documents, the answer to that question does not depend, under the deed of charge, upon whether the company to whose assets the receiver was appointed had an entitlement to possession of the documents. The receiver's right to possession is restricted to documents which, at the relevant date, were the property of a company in the Network Group, and may extend to documents in which one or more of those companies had a proprietary interest.
54 It is unnecessary for me to decide, in the present case, whether a receiver is entitled to possession of books in which the company had a proprietary interest falling short of ownership. Although the receiver's right would have priority over the right of the liquidator, the receiver's entitlement to possession as against other holders of proprietary interests in the documents may depend upon the nature of those other interests.
55 Prayer 1 in the originating process does not recognise the limitations to the receiver's entitlement to possession of documents. It seeks a declaration extending to all Books which were in the possession of the Network Companies at the date of the receiver's appointment. Relief that kind is too broad in two respects.
56 First, to the extent that Books were in the possession of a Network Group company which did not own and had no proprietary interest in them, the plaintiff had no statutory or contractual entitlement to possession of them, having regard to the terms of s 420 and the definition of Charged Property in the deed of charge.
57 Secondly, to the extent that some of the Books may have been property of a Network Group company specifically excluded from the definition of Charged Property, the deed of charge thereby contained a provision that limited the receiver's powers, thus excluding those Books from the power in s 420 (2) (a) to take possession and control of property of the company. As I have said, the definition of Charged Property has the effect of excluding all property, including documents, of a Network Group company situated in any of the Australian States on 1 July 1999, in the absence of a subsequent oral notice specifying further property to be charged. The only such oral notices that are in evidence do not appear to extend to documents at all.
58 It follows that the plaintiff is not entitled to a declaration as wide as the one sought in prayer 1. If it were of practical value or utility, a declaration could be made that the plaintiff is presently entitled to possession of all Books which were owned by any company in the Network Group on 6 June 2001. A declaration extending to documents in which a Network Group company had a proprietary interest falling short of ownership may be difficult, because it would affect the interests of the holders of other proprietary interest in the documents, who are not before the Court. It seems to me, however, that there is no practical value or utility in any such declaration, even if it is confined to cases where the company owns the documents.
59 As I have indicated, the defendants have taken the view that the plaintiff is entitled to the possession of documents belonging to the Network Group (Category 1 documents). The defendants have been prepared to go further. They are prepared to allow the plaintiff access to documents which may or may not belong to the Network Group (Category 3 documents). They refuse the plaintiff possession of, or access to, only those documents that do not belong to the Network Group (Category 2 documents). In my opinion this approach correctly reflects the respective entitlements of the parties to possession of documents.
60 Lying behind the question of principle there is a question of practicality. There is a vast quantity of documents. The defendants say that, to the extent that is necessary for their solicitors to locate and copy documents, the plaintiff should pay the solicitors' costs on doing so. The plaintiff says that the defendants have placed themselves or their solicitors in the position of arbiters of the plaintiff's entitlement to access to specific documents, without any entitlement to do so, and have even claimed that the costs incurred in discharging their illegitimate function be paid by the plaintiff.
61 I shall return to this practical dilemma. I refer to it at the present time in order to make the point that a declaration of the kind which might be made in favour of the plaintiff would make no contribution to resolving the practical problem. In fact, it would make matters worse, because it would reinforce by judicial order the correct approach as a matter of principle without in any way resolving how to adjudicate on particular documents.
62 The defendants submit that in those circumstances, a declaration which does no more than state the plaintiff's right to possession of documents belonging to Network Group companies would not be a "judicial determination" as envisaged by the Full High Called in Bass v Permanent Trustee Company Ltd (1999) 198 CLR 334. I agree. As their Honours said at 355, the notion of a judicial determination "includes a conclusive or final decision based on a concrete and established or agreed situation which aims to quell a controversy". The real controversy between the parties in this case, in my opinion, is not at all about whether the plaintiff is entitled to possession of documents belonging to Network Group companies; it is about the practical problem of how to classify documents, given the mass of documents involved, and who is to pay for the cost of doing so.
63 In my opinion, a declaration in terms of prayer 1 would not make any contribution to resolving this dispute, and it would therefore be futile.