Onefone Australia Pty Ltd v One.Tel Ltd

Supreme Court of NSW|2007-10-23|Before: Barrett J

CITATION : Onefone Australia Pty Ltd v One.Tel Ltd [2007] NSWSC 1188

JURISDICTION : Equity Division Corporations List

CATCHWORDS : CORPORATIONS - winding up - special purpose liquidator appointed by court in voluntary winding up - application by special purpose liquidator for order compelling third party to produce documents - whether any such order would be properly regarded as made in proceedings in which liquidator was appointed - or as adjunct to Part 5.9 examinations liquidator has undertaken

Australian Securities and Investments Commission Act 2001 (Cth), s.127(1) LEGISLATION CITED : Civil Procedure Act 2005, s.68 Corporations Act 2001, Part 5.3A, Part 5.9 Supreme Court Rules, Part 36 rule 12

Meteyard v Love (2005) 65 NSWLR 36 Re Allstate Exploration NL; Ryan v QBE Insurance Ltd (2003) 46 ACSR 379 Re BPTC Ltd (No 2) (1992) 8 ACSR 533 CASES CITED : Re BPTC Ltd (No 5) (1993) 10 ACSR 758 Re English Joint Stock Bank (1866) LR 3 Eq 203 Re Leisure Developments (Qld) Pty Ltd; Ell v Palmer (2002) 41 ACSR 276 Re Timberland Ltd; Commissioner for Corporate Affairs v Harvey [1980] VR 669

Onefone Australia Pty Limited - First Plaintiff DCA Resources Australia Pty Limited - Second Plaintiff Pacific Finance Group Pty Limited - Third Plaintiff PARTIES : Talent2 Works Pty Ltd - Fourth Plaintiff One.Tel Limited - First Defendant Steven Sherman - Second Defendant Peter Walker - Third Defendant Paul Gerard Weston - Special Purpose Liquidator

COUNSEL : Mr R.D. Glasson - Applicant - Special Purpose Liquidator Mr D.R. Stack - Respondent - Australian Securities and Investments Commission

SOLICITORS : NOT Lawyers - Special Purpose Liquidator Georgina Hayden - Solicitor for Australian Securities and Investments Commission

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

5291/03 ONEFONE AUSTRALIA PTY LIMITED & 3 ORS v ONE.TEL LIMITED (IN LIQUIDATION) & 2 ORS JUDGMENT 1 Mr Weston is the special purpose liquidator (or "SPL") of One.Tel Limited ("One.Tel"). Mr Sherman and Mr Walker are the liquidators of One.Tel under the form of creditors' voluntary winding up that follows on from Part 5.3A of the Corporations Act 2001 (Cth). Mr Weston, by contrast, was appointed by the court to be an additional liquidator. The jurisdictional basis for the making of such an order in a voluntary winding up is not something that arises at this point. 2 A special and confined function within the winding up was assigned to the SPL by the order appointing him. That function has, in some ways, been extended and modified by subsequent orders of the court. The function involves, broadly speaking, investigation of possible causes of action arising from cancellation of a rights issue of shares by One.Tel in May 2001 and possible proceedings based on any such causes of action. 3 On 18 October 2007, the SPL approached the court seeking an order that Australian Securities and Investments Commission ("ASIC") produce certain documents. The application was made pursuant to s.68 of the Civil Procedure Act 2005. 4 ASIC, it may be noted, initiated proceedings in 2001 in which relief is sought in relation to certain aspects of the affairs of One.Tel. These are the long-running "ASIC v Rich" proceedings in which the hearing has concluded and judgment is reserved. ASIC also performed other functions and exercised other powers in relation to the affairs of One.Tel - particularly, one may infer, the aspects of its affairs which culminated in its insolvency. 5 With one possible exception, the documents sought by the SPL are in the possession of ASIC. The possible exception relates to a document for which ASIC had not had any reasonable opportunity to search when the SPL brought his application before the court. Given the description of the document, it is likely that ASIC holds it or a copy of it. 6 ASIC's position is, in general terms, that it has no desire to hinder the SPL in the performance of his function and will produce whatever it is ultimately required to produce. ASIC is, however, mindful of its statutory duty under s.127(1) of the Australian Securities and Investments Commission Act 2001 (Cth): "(1) ASIC must take all reasonable measures to protect from unauthorised use or disclosure information: (a) given to it in confidence in or in connection with the performance of its functions or the exercise of its powers under the corporations legislation (other than the excluded provisions); or (b) that is protected information." 7 The expression "protected information" (see s.127(1)(b)) is defined, generally speaking, as information disclosed or obtained for the purposes of certain of ASIC's statutory functions which is not lawfully in the public domain. Section 127(1)(a), it may be noted, is concerned with two classes of information, that is, information "given to it in confidence" and information "given to it … in connection with the performance of its functions at the exercise of its powers" under corporations legislation. The command directed to ASIC by s.127(1)(a) operates subject to a number of exceptions and qualifications calculated to allow relevant information to be deployed in the ordinary course of ASIC's ordinary activities and in certain other defined ways. 8 Voluntary communication of information to the SPL, as such, is not within any of the exceptions or qualifications to which s.127(1) is subject. ASIC therefore takes the attitude that, since provision of the requested documents to the SPL would not be within the scope of any of its functions, it must not divulge the information in the documents the SPL seeks unless compelled by an order of the court to do so; also that it is ASIC's responsibility to put the SPL to proof of the matters that would have to be established to obtain such an order. To this there is one possible qualification: where the information concerned is of such a quality that it affects and is relevant to one particular person only, and that person consents to divulgence by ASIC, ASIC may take the attitude that communication of the information is not precluded by the s.127(1) duty. 9 In making the present application, the SPL proceeds on the basis that it is part of his function to seek to obtain the documents in question. Given that the function prescribed by the court includes the seeking out of certain documentary material, so much may be accepted. But the fact that a particular course of action is within the SPL's function as prescribed by the court cannot, without more, justify an order that a person assist or cooperate with the SPL in pursuing that course. The SPL must invoke some recognised jurisdiction of the court. 10 The SPL relies, as I have said, on s.68 of the Civil Procedure Act: "Subject to rules of court, the court may, by subpoena or otherwise, order any person to do either or both of the following: (a) to attend court to be examined as a witness, (b) to produce any document or thing to the court. Note. See also section 77 of the Crimes (Administration of Sentences) Act 1999 and section 42 of the Children (Detention Centres) Act 1987 with respect to the attendance of persons detained in custody." 11 The position taken by the SPL is that s.68 enables the court to make the order for the production of documents by ASIC because the availability of the documents to the SPL will assist the SPL in one of two ways - either, in the performance of the function assigned to the SPL by the order appointing him (as subsequently varied); or in conducting certain examinations undertaken by the SPL under Part 5.9 of the Corporations Act. 12 It can be said at once that the first matter does not form a basis for the making of the order. The winding up of One.Tel is a creditors voluntary winding up. It is not a winding up by the court, even though the court has seen fit to make an order appointing the SPL and assigning to him a particular function in relation to the winding up. The winding up is in no sense an ongoing proceeding in the court. It is clear that s.68 exists to facilitate proceedings in the court. Although s.68 does not, in terms, refer to "proceedings", it is one of ten sections that make up Division 3 of Part 6. That part is headed "Case Management and Interlocutory Matters". Every one of the ten sections in Division 3, except s.68, refers expressly to "proceedings". Section 68 impliedly does so by referring to a "witness". It too is concerned with proceedings in the court. But the proceeding in which the SPL was appointed and his function was prescribed is not an ongoing proceeding. His appointment is complete. His function is defined. He is not, by virtue of his appointment and the definition of his function, a continuing party to proceedings. 13 I might add that, in my opinion, a court ordered winding up stands in the same light and should not be regarded as an ongoing proceeding in the court such as to justify the deployment of s.68 in the aid of fact-finding by a liquidator. It is true that, in such a case, the winding up "is by the court which for the purposes the liquidator is" (Re Timberland Ltd; Commissioner for Corporate Affairs v Harvey [1980] VR 669 at p.696 per Marks J); also that the winding up is set in train by the court's order. But the liquidator, once in office, embarks upon a statutory process of administration. He or she is not, by virtue of the appointment, a party to continuing proceedings able to resort to all the processes made available to parties to litigation. It was held in the early days of the operation of the Companies Act 1862 (Eng) that the means by which a liquidator might properly elicit information from persons judged capable of providing information relevant to the winding up was the examination process made available by that Act, not the court's subpoena power: see Re English Joint Stock Bank (1866) LR 3 Eq 203. 14 The SPL has at his disposal the like examination processes made available by the Corporations Act. He has resorted to those processes. Summonses for examination have been obtained under Part 5.9 and a number of examinations have been conducted or are in the process of being conducted. To be more specific as to the last matter, it was indicated by Mr Glasson of counsel upon the hearing of the present application that adjourned examinations of two persons will be continued in mid-November. 15 The circumstance just mentioned represents the second basis on which the SPL contends that the order for the production of documents by ASIC should be made. Mr Glasson pointed to the recognition in case law of the availability of the s.68 process in aid of an examination under Part 5.9. The most recent treatment of the subject appears in obiter dicta of Basten JA in Meteyard v Love (2005) 65 NSWLR 36 at pp.52, 53: "[56] Questions have arisen in the past, though not addressed in these proceedings, as to whether Pt 36,r 12 may properly be called in aid of an examination under s 597 of the Corporations Act pursuant to a summons issued under s 596A or s 596B. In relation to the Corporations Law , an argument that the provisions now found in Pt 5.9 of the Corporations Act constituted an 'exclusive code' with respect to the production of documents was rejected by McLelland J in Re BPTC Ltd (InLiq) (1992) 29 NSWLR 713 at 718A-719E; applied by Bryson J in Re BPTC Ltd (In Liq) (No 5) (1993) 10 ACSR 756 at 765; 11 ACLC 734 at 742. The primary basis for rejecting that proposition was that the power to issue an examination summons under s 596A and s 596B was in each case restricted to individuals and did not apply to corporations; the power to order the production of documents under s 597(9), during an examination, was, as a consequence, restricted to individuals. Accordingly, unless it were intended that the documents of a company could not be the subject of an order for production, an alternative source of power must be relied upon in relation to such documents.

[57] A similar 'exclusive code' argument was raised with respect to the Corporations Act in Re Chircan Holdings (2002) 21ACLC 29. Barrett J concluded (at 32[14]): '... It is not possible, in my judgment, to argue that the inclusion of s 596D(2) as a adjunct to s 596A and s 596B in the provisions introduced in June 1993 represents some form of displacement of Pt 36, r 12 and its traditional use in this area, at least so far as the several corporations are concerned.' His Honour further concluded in relation to s 597(9) (at 32 [15]): '... But I must say that I cannot glean from s 597(9), or anywhere else for that matter, any indication that it is intended to be the sole source of jurisdiction to compel the production of books relevant to an examination, or indeed that there is any reason of policy why it should be. The provision is facultative. Examinations of this kind are proceedings of the court. The Corporations Act obviously assumes that a whole range of provisions and procedures relevant to proceedings of the court will apply to an examination as to any other proceeding. I see no basis on which the Pt 36, r 12 procedure should be regarded as excluded.'

[58] There are, perhaps, two stages in the analysis supportive of this conclusion. The first is that the amendments introduced in 1993 by the Corporate Law Reform Act 1992 did not exclude the operation of the relevant State rules. The second step in the analysis is to inquire whether, pursuant to s 5E of the Corporations Act , there is direct inconsistency between the Corporations Act and a law of the State: see 5E(4). If there is not, the Corporations Act 'is not intended to exclude or limit the concurrent operation of such a law of the State: s 5E(1). I infer from the analysis undertaken by Barrett J that he would not have identified any such direct inconsistency, so that, at least in relation to a corporation, Pt 36, r 12 could be invoked. No issue being raised in this case as to the operation of Pt 36, r 12, it is not necessary to resolve any further question as to its operation in relation to individual examinees. Such an operation may be assumed." 16 I proceed, therefore, on the basis that s.68 (which has replaced Part 36 rule 12 of the Supreme Court Rules to which Basten JA referred) is available as a means of eliciting from a corporation (which, of its nature, cannot be examined under Part 5.9) documents which, in the case of a natural person, could be obtained under Part 5.9 provisions themselves, or by separate resort to s.68, in the context of a Part 5.9 examination of the natural person. 17 It is, however, important to emphasise that s.68 may be so used only for the purposes of a particular examination. This is made clear in Re BPTC Ltd (No 5) (1993) 10 ACSR 758, a decision of Bryson J cited with approval by Basten JA in Meteyard v Love (above). Bryson J said (at p.762): "There is a well established practice, and explicit judicial approval of requiring production of documents under Pt 36 r 12 by persons not the subject of examination orders. The ancillary power can only be exercised where the production of documents is required for the purpose of exercise of the power to conduct an examination." 18 Then, after noting that the orders relating to the examination of the particular individuals contained a limit on the scope of the examinations (and the reference by McLelland J in Re BPTC Ltd (No 2) (1992) 8 ACSR 533 to the need for a connection between an order for production of documents and a particular examination, so that the order is ancillary to that examination), Bryson J said (at p.763): "An order for production of documents which had the effect of compelling a production of documents which were not required for the examination would in my opinion be oppressive; an order for production which had that purpose would in my opinion be made in excess of the power to make such an order." 19 The same matter was adverted to by Austin J in Re Leisure Developments (Qld) Pty Ltd; Ell v Palmer (2002) 41 ACSR 276, another decision cited with apparent approval by Basten JA in Meteyard v Love. Austin J said at pp.281, 282:

"As to the second ground, the standard of precision to be met by an order for production was considered by Bryson J in Re BPTC Ltd (No 5) (in liq) (1993) 10 ACSR 756 . The practice is to require production of documents, by persons other than those who are the subjects of examination orders, under Pt 36 r 12 of the Supreme Court Rules. That power can only be exercised where the production of documents is required for the purpose of exercising the power to conduct an examination: at 762. While the power to compel production of documents is a wide one, it is ancillary to an examination order, and cannot require the production of documents independently of the examination of particular individuals. An order for production which had the effect of compelling production of documents which were not required for the examination would be oppressive and in excess of the power to make such an order: at 763. Where a call for production goes beyond these limits, it may not be possible to sever the call so far as it covers documents ancillary to the examination order from its coverage of other documents, and in such a case the whole order for production or notice to produce may need to be set aside: at 766." 20 In Re Allstate Exploration NL; Ryan v QBE Insurance Ltd (2003) 46 ACSR 379 at p.383, Austin J described a third party order for production, in the examination context, as "supplementary to the examination process". 21 The problem for the SPL in the present case is that, while there was reference from the bar table to the intention to re-activate two Part 5.9 examinations in November (those of Mr Miller and Mr Green), there was no evidence given about the matter. The court was not told what the re-activated examinations are intended to achieve. It might perhaps be inferred that one of the documents sought bears a relevant relationship to the examination of Mr Miller. The document is described as "a complete copy such [sic] of the imaged data extracted by ASIC, or supplied to ASIC, from the laptop and the Palm Pilot of Darren Howard Miller as in the possession of ASIC" - but even then, the description is not in any way confined to content relevant to the affairs of One.Tel, let alone some aspect of them in relation to which Mr Miller may be further examined. 22 In short, the court is given by the SPL no means of being satisfied that the order he seeks under s.68 of the Civil Procedure Act by reference to the further Part 5.9 examinations of Mr Miller and Mr Green is concerned with documents bearing such a relationship to those examinations (or one or other of them) as to make the power conferred by s.68 exercisable in the way sought. The court has no way of making a connection between the two examinations and the particular documents. It is not enough to say that the examinations, of their nature, concern the "examinable affairs" of One.Tel and the documents also concern the "examinable affairs" of One.Tel. The court must be able to see that the particular examinations will be assisted or facilitated by the production of the particular documents. 23 The SPL initially advanced a third basis for exercise of the court's power under s.68, namely, that the order would be in aid of new and separate proceedings commenced by the SPL in this court by a statement of claim filed in May 2007 but as yet apparently not served. That basis was eventually not pressed and I say no more about it - except that, if third party discovery of documents is sought for the purposes of a particular inter partes proceeding, an application brought with a view to obtaining the documents otherwise than in the normal and regular course of that proceeding might be found to involve an abuse of process. 24 The SPL has not shown that there is a basis upon which the court, acting under s.68 of the Civil Procedure Act, may properly make the order for production by ASIC that the SPL seeks. The interlocutory process filed in court on 18 October 2007 is dismissed. I will hear argument on costs. **********

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