Onefone Australia Pty Ltd v One.Tel Ltd

Supreme Court of NSW|2009-08-25|Before: Barrett J

CITATION : Onefone Australia Pty Ltd v One.Tel Ltd [2009] NSWSC 865 This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S) : 19/08/09, 24/08/09, 25/08/09

JURISDICTION : Equity Division Corporations List

CATCHWORDS : PROCEDURE - confidentiality order previously made by consent - one party seeks discharge of order - compromise that order to be discharged as to certain items only - certain other items remain in dispute - assessment by court of need for continued confidentiality of those items - CORPORATIONS - creditors' voluntary winding up - roles of special purpose liquidator and committee of inspection - source of confidentiality constraints upon them - confidentiality a product of duties of each to use information for proper purposes and in interests of general body of creditors - need for forthcoming meeting of creditors to consider mistrust and friction existing between special purpose liquidator and committee of inspection

CASES CITED : Onefone Australia Pty Ltd v One.Tel Ltd [2008] NSWSC 1335; (2008) 69 ACSR 290

Onefone Australia Pty Limited - First Plaintiff DCA Resources Australia Pty Limited - Second Plaintiff Pacific Finance Group Pty Limited - Third Plaintiff Concept Systems (Australia) Pty Limited - Fourth Plaintiff PARTIES : One.Tel Limited (in liquidation) - First Defendant Steven Sherman - Second Defendant Peter Walker - Third Defendant John Deloughery, Barbara Galloon, Gary Phillips, Alex Roth - Applicants Paul Gerard Weston - First Respondent Optus Mobile Pty Limited - Second Respondent

COUNSEL : Mr C R C Newlinds SC/Mr D T Kell - Applicants Mr N A Cotman SC/Mr R D Glasson - First Respondent

SOLICITORS : Baker & McKenzie - Applicants NOT Lawyers - First Respondent

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

5291/03 ONEFONE AUSTRALIA PTY LIMITED & 3 ORS v ONE.TEL LIMITED & 2 ORS

1 In proceedings determined in November 2008, certain orders were made by consent. The parties to those proceedings were Mr Weston, the special purpose liquidator of One.Tel Limited, and the members of the committee of inspection in the creditors' voluntary winding up of One.Tel.

2 The November 2008 proceedings had at their centre matters of dispute concerning the activities of the special purpose liquidator and certain actions of members of the committee of inspection related to the litigation at the suit of One.Tel that represents the sole function of the special purpose liquidator. 3 Among the consent orders of 10 November 2008 was order 5, which was an order that certain affidavits and exhibits to them be kept confidential. This was one of several orders that both sides asked the court to make when they reached a consensual resolution of their immediate dispute. The court did not make any assessment of matters of confidentiality reflected in order 5. The parties made that assessment and simply invited the court to make an order that both of them agreed to be appropriate. 4 The committee of inspection has now made application for discharge of order 5 in its entirety, but indicated this morning, by way of compromise, that it will accept a position where certain defined items remain subject to the order. In other words, the committee's application for discharge of order 5 is now pressed as to part of the subject matter of order 5, but not the whole of it.

5 The special purpose liquidator's position is that order 5 should remain in force to an extent greater than that which the committee finds acceptable. In issue, therefore, is a middle ground and the question whether the order should continue as to a small number of particular documents. 6 The particular context should be noted. The material in question was relied on in the November 2008 proceedings. Apart from part of the cross-examination of the special purpose liquidator on that occasion and an earlier application by him that the whole of the proceedings be conducted in closed court, the whole of the proceedings of November 2008 occurred in open court. The material would thus in the ordinary course of events have been, as it were, public property. The parties themselves brought about a different result by joining in an application that the court make a confidentiality order. 7 The important point, in my view, is that the present application should be approached on the footing that the confidentiality order will be discharged as to a particular disputed item unless a positive case is made for its continuance in relation to that item. 8 Another contextual matter is important. It concerns the parties' relationship. The special purpose liquidator has defined functions in the winding up of One.Tel. They are defined by orders of the court. So too does the committee of inspection. Its functions are largely statutory functions, although there is an additional dimension briefly discussed in a judgment of 12 December 2008 (Onefone Australia Pty Ltd v One.Tel Ltd [2008] NSWSC 1335; (2008) 69 ACSR 290). Each - that is, the special purpose liquidator and the committee of inspection - is obviously bound to pay attention to and promote the interests of the creditors of One.Tel, with the special purpose liquidator's obligations necessarily confined to his designated function. 9 There is no basis whatsoever for suggesting that all communications between the committee and the special purpose liquidator are confidential; nor is there any basis for suggesting that everything occurring within a meeting of the committee of inspection is confidential, any more than it can be said that everything that happens within a board of directors is confidential. 10 The true principle is that persons who, as liquidators or as members of a committee of this kind, obtain information, are duty bound to use and treat that information in a way that promotes or, at least, does not harm the interests of the general body of creditors. The constraint is one of proper use and proper application which may in certain circumstances and as to certain matters mean that confidentiality must be observed. The guiding factor is the interests of the body of creditors. 11 I turn to a third contextual matter. A meeting of One.Tel's creditors is to be held tomorrow. The special purpose liquidator has circulated a report in which he makes criticisms of the committee of inspection. The special purpose liquidator has also seen fit to issue a press release. He says that the committee of inspection has attempted to derail his efforts as special purpose liquidator resulting in substantial costs to creditors. He quantifies these at $1.5 million. He says that confidential information given to the committee of inspection has been "leaked" and the committee has had "covert meetings with representatives of the defendants to my proceedings"; also, that the committee has "on numerous occasions tried to interfere with my work", which leads him to question the committee's motives. 12 With these statements having been made by the special purpose liquidator, the committee of inspection wishes to be free from any unnecessary constraint that might preclude it from dealing with the liquidator's criticisms at the meeting. The special purpose liquidator, having seen fit to put in issue before the meeting various aspects of the conduct of the committee, must be taken to have waived any confidentiality belonging to him, as liquidator, that subsists in material directly relevant to those matters of criticism. 13 That raises, of course, the question whether any confidentiality is properly regarded as belonging to the special purpose liquidator. In the particular context, I do not accept that any unilateral right to confidentiality subsists in the special purpose liquidator in respect of matters he has discussed with the committee of inspection or that have been the subject of correspondence between them. In saying this, I leave to one side such express promises of a contractual kind to maintain confidentiality as may have been given. 14 In relation to the material now in question, the special purpose liquidator on the one hand and the committee of inspection on the other are alike subject to the proper purpose requirement and to any obligation of confidentiality that flows from it.

15 Against this general background, I turn to the particular documents still in dispute. I shall deal with them according to the tab numbers in the bundle handed up in court this morning. 16 The first item, at Tab 1, is a passage in an affidavit of a committee member, Ms Galloon, about an offer of settlement made by an officer of one of the defendants in the special purpose liquidator's litigation. I am satisfied that disclosure of that information could prejudice the special purpose liquidator's tasks to the detriment of the general body of creditors. It will remain confidential. 17 The second item (Tab 2) is part of a letter of 7 March 2008 from the special purpose liquidator to the committee. It concerns discussions between the committee and the special purpose liquidator regarding a possible basis for the committee members being remunerated. There is nothing intrinsically secret about that and no reason to think that disclosure will be inimical to the interests of creditors. The order will not be continued in relation to that document. 18 The third document, the document at Tab 3, is an email from the committee of inspection members to the special purpose liquidator. It conveys a request to have certain matters on the agenda of a committee meeting. The first five paragraphs ask that particular items of subject matter not of themselves of a confidential nature or of a sensitive kind be listed. The sixth paragraph makes a request as to the way in which the special purpose liquidator presents his expenses to the committee. In essence, greater particularity of expenses is sought. Given the function that the committee was performing, and known to be performing, in relation to expenses, the making and terms of the request cannot conceivably be a matter the disclosure of which will or may prejudice the interests of creditors. 19 The sixth and eighth items - I pass over the intervening items for the moment - those at Tabs 6 and 8, are one and the same document, being the so-called "high level review" commissioned by the committee of inspection and conducted by Mr Hambrett of Baker & McKenzie in relation to the special purpose liquidator's expenses for March and April 2008. That document was referred to and actually quoted by the special purpose liquidator's counsel in open court on 7 November 2008 on what had by then become the special purpose liquidator's ex parte application to the court with respect to expenses. 20 It is inconsistent with that having been done for the special purpose liquidator now to maintain that the document should remain unavailable. Added to that, there is nothing intrinsically secret about criticisms made by a creditors committee of the conduct of a liquidator. Also, there is nothing to suggest that disclosure would prejudice the interests of creditors. 21 I go back to the fourth document, the document at Tab 4, which is a letter from the special purpose liquidator to the committee, again about the level of expenses incurred by the special purpose liquidator. There is reference in it to the committee's proposal to commission what became Mr Hambrett's high level review. The assessment in relation to the documents at Tabs 6 and 8 again applies. 22 The document at Tab 5 is a letter from the committee to the special purpose liquidator conveying suggestions and recommendations as to the way in which the special purpose liquidator should approach and perform his tasks. The same assessment applies. 23 Tab 7 concerns one paragraph of an affidavit of Mr Deloughery, a member of the committee of inspection. The paragraph does no more than record the deponent's views about certain matters concerning litigation that is at the centre of the special purpose liquidator's function. There is no basis on which it can be said that the interests of creditors will be prejudiced by disclosure of the unilaterally held views of Mr Deloughery. 24 That brings me finally to Tab 9, which is the whole of an exhibit to an affidavit of Ms O'Brien of Baker & McKenzie (the committee of inspection's solicitors) consisting of correspondence between the special purpose liquidator's solicitors and the committee's solicitors. It traverses a number of subjects, most of which have already been mentioned, including the high level review and the general matter of the special purpose liquidator's expenses. None of this needs to be kept from disclosure. 25 Also, however, there are some aspects of Ms O'Brien's exhibit that go to approaches to and prospects of success in the litigation to which the special purpose liquidator's functions relate. Disclosure of these could be inimical to the interests of creditors. They should remain unavailable. I refer specifically to paragraphs (a), (b) and (c) starting at the bottom of page 4 of the letter of 8 August 2008 from Baker & McKenzie to NOT Lawyers. Otherwise, disclosure of Ms O'Brien's exhibit does not appear to me to entail prejudice to the interests of creditors. 26 I would make a particular comment in conclusion. The fact that the special purpose liquidator and the committee of inspection are at loggerheads and have been for a long time is notorious. It is highly desirable that the general body of creditors have as much information as is practicable in relation to the differences existing between the special purpose liquidator and the committee. An expression of opinion by the creditors must carry significant weight with both parties. A meeting of creditors, not necessarily tomorrow's meeting, might also see fit to exercise certain formal powers. 27 The court encourages the body of creditors to absorb the information creditors have already been given and will be given for the purposes of the forthcoming meeting and to give serious thought to how their own interests may best be promoted and protected in the circumstances of mistrust and friction now existing. 28 The result of the committee's application is that there will be an order that order 5 of 10 November 2008 be varied so that only the Tab 1 material and the specified parts of the Tab 9 material remain subject to embargo, in addition to the parts which the parties have agreed are to remain confidential.

29 I will ask that a form of order giving effect to this decision be agreed by the parties and brought to court shortly before 4 o'clock. **********

27/08/2009 - Error in appearances - Paragraph(s) Front sheet

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