REASONS FOR JUDGMENT
1 The joint and several liquidators of two companies, B.J. Jarrad Pty (In Liquidation) ("the company") and Jarrad Equipment Holdings Pty Ltd (In Liquidation) ("Holdings") ("the liquidators") sought orders for the examination of persons and the production of documents under Part 5.9 of the Corporations Act 2001 (Cth) ("the Act"). The application was supported by an affidavit from one of the liquidators. On 19 August 2015, a District Registrar made orders for the examination of persons and on 24 September 2015, another District Registrar made an order pursuant to s 597(9) of the Act for the production of documents by Contura Mining Pty Ltd ("Contura"), Construction Equipment Financial Services Pty Ltd ("Construction Equipment") and CFC Holdings Pty Ltd ("CFC Holdings"). Except where it is necessary to refer to one of them, I will refer to these companies collectively as the CFC Group.
2 One of the proposed examinees and the CFC Group applied to set aside various orders which had been made by the respective District Registrars. When their application came on for argument before me, they only pressed their challenge to the order made against the companies in the CFC Group for the production of documents. With respect to this order, the CFC Group submitted that the order went well beyond what was required for the examination of Mr Christopher Mallios concerning the examinable affairs of the company and, in addition, they submitted that the production of the documents would be a very onerous and expensive exercise for the companies. The CFC Group put forward affidavit evidence of (among other things) the difficulties of the task.
3 I should say something briefly about the facts concerning the matters which the liquidators wish to pursue.
(1) On the date on which the liquidators were appointed as administrators of the company and Holdings (i.e., 31 July 2014), the shares in the companies were owned as to 50.1% by Mr Barry James Jarrad and as to 49.9% by Contura.
(2) On 16 September 2011, the company went into voluntary administration for the first time, and on 11 November 2011 the company entered into a Deed of Company Arrangement with its creditors.
(3) A fund of $1 million was established for creditors under the deed and the company, Holdings and Mr Jarrad of the one part, and Contura of the other, executed a Shareholders Agreement. The effect of the Shareholders Agreement and a later loan agreement was that Contura acquired its 49.9% interest in the company and in Holdings, made the contribution of $1 million to the fund, and Mr Jarrad agreed to repay the sum of $500,000 to Contura.
(4) The Relation Back Period is from 1 February 2014 to 31 July 2014 and during that period:
(a) the company made payments to Contura totalling $5.04 million, some or all of which payments the liquidators believe may constitute preference payments within Part 5.7B of the Act;
(b) Contura lent the company the sum of $4.14 million and a sum of $128,000 accrued on the loan; and
(c) the company paid the sum or $71,013.27 to CFC Holdings.
(5) Mr Mallios was the chief financial officer of Contura from 9 January 2012 to 29 June 2015.
(6) The liquidators have examined a number of documents and have reason to suspect that Contura, Mr Mallios and potentially other persons in the CFC Group were exercising such a degree of control over the company and Holdings that they were "de facto directors" from November 2011 (or in the alternative, at least during 2014). The liquidators have reason to believe that the company was insolvent before their appointment as administrators on 31 July 2014, and the directors may be liable for insolvent trading under Div 3 of Pt 5.7B of the Act.
4 On the application before me, the CFC Group relied on two affidavits of Mr Gerard Whelan sworn on 9 October 2015 and 15 October 2015 respectively, an affidavit of Mr Richard Stanley sworn on 9 October 2015, and an affidavit of Mr Yat Keong (Jack) Mah filed on 9 October 2015.
5 The three deponents of the affidavits are employees of the CFC Employment Trust. In his first affidavit, Mr Whelan, Executive General Manager, Corporate Risk and Asset Management, describes the structure of the CFC Group and deposes to the difficulties of the task of producing the documents and to certain correspondence with the liquidators' solicitors. In his affidavit, Mr Stanley, an Information Technology Support Supervisor, deposes to the information storage system maintained by the CFC Group and the considerable time, effort and expense involved in producing the documents which are the subject of the District Registrar's order. Mr Mah, a Payroll Officer, deposes to matters to similar effect as Mr Stanley in relation to all PayGlobal data and Employee Files. In his second affidavit, Mr Whelan expands on certain matters in his first affidavit, but he also makes the point that the order for production is wide enough to cover ordinary business dealings between CFC Holdings and the company and the nature and volume of documents encompassed by those ordinary business dealings.
6 The application by the CFC companies came on for hearing before me on 15 October 2015. At the beginning of the hearing, counsel for the liquidators put forward for consideration a draft set of orders which were more confined than the orders made by the District Registrar. I was told that the draft orders had been provided to the CFC Group the night before the hearing.
7 Counsel for the CFC Group confined his submissions to particular matters in the draft orders. They were as follows:
(1) The draft orders would capture a large number of documents involving ordinary business dealings between CFC Holdings and the company. Those documents are irrelevant and it would be onerous and oppressive to require their production.
(2) The draft order for the production of annual and interim financial statements of Contura and CFC holdings will require the production of information which is irrelevant, but more importantly is commercially sensitive.
(3) CFC Holdings should not be included in paragraphs 3, 4, 5, 6 and 7.
8 Counsel for the liquidators asked for a short adjournment to take instructions on the matters raised by the CFC Group. When the hearing resumed, he offered to restrict the draft orders to payments involving CFC Holdings. I decided to give counsel for the liquidators an adjournment overnight to redraw the draft orders to deal with the first argument raised by counsel for the CFC Group.
9 On 16 October 2015, counsel for the liquidators produced a further set of draft orders which I was satisfied should be made. Counsel for the CFC Group made a further short submission as to the reasons I should not make an order requiring the production of the annual, any quarterly and six-monthly financial statements of each of Contura and Construction Equipment from 11 November 2011 to 31 July 2014. I rejected that submission and made the following orders:
THE COURT ORDERS:
1. That the order of Registrar Baldwin of 24 September 2015 be set aside and in lieu thereof there be an order that, pursuant to section 597(9) of the Corporations Act 2001 (Cth), the Proper Officers of Contura Mining Pty Ltd (ACN 008 901 915) ("Contura"), Construction Equipment Financial Services Pty Ltd (ACN 116 334 055), ("Construction Equipment") and C.F.C. Holdings Pty Ltd (ACN 008 777 348) ("CFC Holdings") (hereinafter referred to collectively as "the CFC Group") produce to the Federal Court of Australia, South Australia District Registry, 3 Angas Street, Adelaide at the examination of Christopher Mallios at 10.15am on 26 October 2015 copies of the documents set out in Annexure A in the possession, custody or control of Contura, Construction Equipment or CFC Holdings.
2. That the application filed on behalf of Christopher Mallios, Contura, Construction Equipment and CGC Holdings dated 9 October 2015 otherwise be dismissed.
3. That:
3.1 the applicants pay the liquidators' costs of and incidental to that part of the application to dismiss the Summons;
3.2 otherwise there be no order as to the costs of the application, save that the costs of the liquidators be proper costs of the liquidators in the winding-up of BJ Jarrad Pty Ltd (in liq) and Jarrad Equipment Holdings Pty Ltd (in liq).
Annexure A
1. Email communications (including attachments) sent or received by or copied to:
1.1. Christopher Mallios;
1.2. Richard King;
1.3. Filippo Cardaci; and/or
1.4. Brett Cornelius;
from 11 November 2011 to 31 July 2014 (the "Relevant Period") relating to:
1.5. the business or affairs of B.J. Jarrad Pty Ltd (In Liquidation) (ACN 008 026 533) ("the Company"); Jarrad Equipment Holdings Pty Ltd (In Liquidation) (ACN 137 623 191) ("Holdings"); Jarrad Nominees Pty Ltd (ACN 007 887 149) ("Nominees") and/or Jarrad Holdings Pty Ltd (ACN 111 607 400) ("Jarrad Holdings"); and/or
1.6. any loans, payments or transactions between Contura Mining Pty Ltd (ACN 008 901 915) ("Contura"), Construction Equipment Financial Services Pty Ltd (ACN 116 334 055) ("Construction Equipment"), C.F.C. Holdings Pty Ltd (ACN 008 777 348) ("CFC Holdings") and/or CFC Employment Trust (the CFC Trust), on the one hand, and the Company, Holdings, Nominees and/or Jarrad Holdings, on the other hand;
including, for the avoidance of doubt, any emails or other communications with:
1.7. any director or employee of the Company, Holdings, Nominees and/or Jarrad Holdings;
1.8. the Australian Taxation Office concerning the business or affairs of the Company and/or Holdings, including any communications for or on behalf of the Company and/or Holdings concerning payments and/or payment plans of the Company and/or Holdings;
1.9. Bank SA and/or the Westpac Banking Corporation relating to the business or affairs of Company and/or Holdings;
1.10. SA Water (SA 0382838A) ("SA Water") relating to the business or affairs of Company and/or Holdings, including in respect of the SA Water Bank Guarantee issued to SA Water by Contura and/or CFC Group following the execution of the DOCA for the Company DOCA on 11 November 2011.
2. Email communications (including attachments) sent or received by or copied to:
2.1. Christopher Mallios;
2.2. Richard King;
2.3. Filippo Cardaci; and/or
2.4. Brett Cornelius;
from 1 February 2014 to 31 July 2014 relating to payments between C.F.C. Holdings Pty Ltd (ACN 008 777 348) ("CFC Holdings"), on the one hand, and the Company, Holdings, Nominees and/or Jarrad Holdings, on the other hand, including, for the avoidance of doubt, any emails or other communications with any director or employee of the Company, Holdings, Nominees and/or Jarrad Holdings.
3. Annual, any quarterly and six-monthly financial statements for Contura and Construction Equipment during the Relevant Period.
4. Documents evidencing or recording any offers made by one or more of Contura, Construction Equipment, CFC Holdings or the CFC Trust for any of the shares or assets of the Company, Holdings, Nominees and/or Jarrad Holdings during the Relevant Period.
5. Copies of any policies of any professional indemnity insurance held during the Relevant Period by:
5.1. Contura, Construction Equipment, CFC Holdings or the CFC Trust; and/or
5.2. the directors, senior management and/or head office staff of Contura, Construction Equipment, CFC Holdings or the CFC Trust.
6. Any corporate structure chart or similar diagrams evidencing within the Relevant Period the corporate structure of the group to which Contura, Construction Equipment, CFC Holdings, the CFC Trust and their associated companies and trusts belong.
7. Any personnel chart or similar diagram evidencing within the Relevant Period the key personnel and lines of authority within Contura, Construction Equipment, CFC Holdings, the CFC Trust and their associated companies and trusts.
8. Minutes of board meetings recording or evidencing any discussions within Contura, Construction Equipment, CFC Holdings and/or the CFC Trust of the business or affairs of the Company and/or Holdings during the Relevant Period.
10 These are my reasons for making those orders.
11 First, I think paragraph 2 in the orders is an appropriate limitation and overcomes the objection based on the scope of the order encompassing a range of documents relating to the ordinary business dealings between CFC Holdings and the company. Secondly, having regard to the liquidator's affidavit sworn on 15 October 2015, paragraphs 3, 4, 5, 6, 7 and 8 are relevant and appropriately confined. That leaves for consideration the annual, any quarterly and six-monthly financial statements for the period from 11 November 2011 to 31 July 2014. The potential claims against the CFC Group are preference claims and a claim against directors for insolvent trading. Contura had an investment in the company and Holdings, and that investment and how it is dealt with is, one may assume, recorded in its financial statements. It had a loan account with the company and again, one may assume, that and how it is dealt with is recorded in its financial statements. Construction Equipment is an entity which, according to Mr Whelan, "assists with the financial transactions in the Contura and CFC Holdings". The insolvent directors trading claim potentially goes back to 11 November 2011 when the Deed of Company Arrangement was executed. The documents are not being sought by a commercial competitor and there is no reason to think that they would fall into the hands of such a competitor. Within the confines of the order I have made, and recognising the effect of the order, there is no reason to think that the Court to which the documents are produced could not add a further layer to the confidentiality of the documents if that was considered appropriate. Finally, without seeing the documents and understanding them, I was not at all confident that I could make a more confined order appropriate to the circumstances of this case.
I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.