Documents relating to interests in trusts
85 The second ground advanced was that Mr Pitman should not be obliged to disclose documents which evidenced his financial interests in trusts on the basis that as any such interests would not be available to meet any judgment which the liquidator might secure. On that basis it was said that the documents identified in paragraphs 22, 23, 26, 29 and 31 of the amended form of summons did not relate to an examinable affair of the company; namely the prospect of recovery in respect of a company's chose in action. In advancing this submission, Mr Coulson relied upon the statements in Pleash v Tucker at 385-386 [52]-[53] and [55]:
[52] … However, the exercise of assessing the ability of a prospective defendant to meet a judgment debt necessarily requires a consideration of property that can be attached or recovered in some manner and applied against the debt.
[53] The ability of a prospective defendant to satisfy a judgment debt in the event that litigation is pursued by a liquidator is within the scope of such examinable affairs but we do not consider there is a proper basis to extend the scope of "examinable affairs" to a consideration of what assets outside of those that comprise a prospective defendant's property might voluntarily be directed to payment of such debt.
…
[55] One would not expect a liquidator to recommend to creditors that litigation be pursued against a party based only on speculation and the hope that a favourable judgment would be met by voluntary payments from the assets of a friendly third party, or by a trustee who is able legitimately to control or direct funds to other beneficiaries or, for example, from monies that the judgment debtor may choose to borrow for that purpose in the future. Absent some form of binding agreement, commitment or obligation by a trustee or other third party to make funds available, it is difficult to imagine how documents that evidence assets not owned by the defendant could properly assist the liquidator in assessing the ability of the prospective defendant to satisfy a judgment or assist in advising creditors.
86 That case concerned the question of the scope of documents which might be ordered to be produced under s 597(9) of the Act although the parties seemed to accept that similar principles apply in relation to s 596D(2). However, there the documents which the liquidator sought related to discretionary trusts of which the target defendant was one of the beneficiaries and a director of the corporate trustees. The difficulty in seeking such documents is that they did not relate to the property of the prospective defendant in that he had no proprietary interest in the trust assets and, particularly as a beneficiary of a discretionary trust, he had no right to enforce any distribution to him. The Full Court also found that a person's power of appointment was not property in respect of which judgment might be recovered. At 384 [46] it was said:
The primary judge in these proceedings properly followed and applied Swishette. Both Fordyce v Ryan and Swishette address whether a beneficiary's control over a trustee operates so that the income and capital of a discretionary trust may be treated as if it were property of the beneficiary. The proposition is rejected in both and we consider the decisions to be correct and applicable in the circumstances of this case. Despite Swishette addressing a different statutory provision, the Court in both Swishette and these proceedings is concerned with the potential application of trust income and capital to meet a judgment debt.
87 It followed that the proposed examinee's interests in the discretionary trusts or the powers of appointment with respect to them, were not property against which the liquidator might enforce any judgment obtained. That being so, documents concerning those interests did not relate to an examinable affair of the company.
88 It is difficult to ascertain how the decision in Pleash v Tucker relates to the documents in paragraphs 22, 23, 26, 29 and 31. The paragraphs, in their amended form, are generally concerned with the assets of trusts of which Mr Pitman is a trustee, whereas Pleash v Tucker was generally concerned with the rights of persons as beneficiaries of trusts or with powers of appointment with respect to trusts. Although, as trustee, Mr Pitman would not have any beneficial interest in the trust assets, he may have interests in the assets which are held pursuant to the terms of the trust. As trustee he may have a right of exoneration in respect of expenses which he has incurred in that capacity and which he has discharged. In those circumstances he would have a right to be exonerated out of the assets held on the trust and in priority to the beneficiaries' claims. He would also have an equitable lien over those assets to the extent of the right of indemnity. The right of exoneration and the associated lien would be property available to meet the liquidator's claims: Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth (2019) 93 ALJR 807; and, to that extent, documents relating to that right would be within the scope of s 596D(2). Mr Coulson did not appear to cavil with these propositions.
89 The description of the documents in paragraphs 22, 23, 26, 29 and 31 do not indicate whether the trusts in question were discretionary trusts or otherwise and there was scant evidence as to the nature of the trusts in question. That, however, is irrelevant as the documents being sought relate to Mr Pitman's right as trustee of any trust to exoneration and not to any right as a beneficiary of the trust, be it a discretionary trust or otherwise.
90 In the application of the above principles the following can be observed as to the disputed paragraphs of the schedule to the summons as they are now advanced by the liquidator:
91 Paragraph 22 of the schedule to the summons described the following category of documents:
22. all documents which record, evidence or concern any trust of which you or the Company are or were:
c. a trustee of a trust
92 Given what is said above as to the nature of the trustee's right of exoneration, the category of documents is directed to identifying assets from which Mr Pitman might satisfy any judgment against him. The decision in Pleash v Tucker, insofar as it relates to the interests of beneficiaries of discretionary trusts, has nothing to say about the interests of a trustee and their right of exoneration. This category of documents relates to an examinable affair of the Company.
93 In its amened form paragraph 23 of the schedule of the summons provides:
23. all documents which record or evidence any interest in any real property which any trustee of a trust has, or had, where you are or were:
c. a trustee of such trust;
94 The comments made in relation to paragraph 22 also apply in relation to this paragraph. The documents sought relate to an examinable affair of the Company, being Mr Pitman's interest in any right of exoneration.
95 Paragraph 26 of the schedule to the summons in its amended form describes the following documents:
26. all documents which record or evidence any interest in any personal property or other asset not being real property which cost, or if not purchased, has a value of, $10,000 or more, which any trustee of a trust has, or has had, where you are or were:
c. a trustee of such trust;
96 This category is also unaffected by the decision in Pleash v Tucker, in the sense that its concern is with the trustee's right of exoneration from the trust assets and not any right as a beneficiary of a discretionary trust.
97 Paragraph 29 of the schedule of the summons now provides:
29. a current bank account statement for any bank account in which any trustee, has or had, where you are or were:
c. a trustee of such trust;
98 For the reasons referred to above in relation to paragraph 26, the scope of paragraph 29 does not extend beyond the scope of documents which relate to the examinable affairs of the Company.
99 The alleged invalidity of the scope of paragraph 31 was founded upon the alleged invalidity of paragraphs 22, 23, 26 and 29 in that the description of the documents sought was in the following terms:
31. the financial reports, half yearly financial reports, balance sheets, profit and loss accounts, and tax returns of any trust encompassed within 22(c), 23(c), 26(c) and 29(c) above; and
100 The documents identified in this paragraph may demonstrate the value of any right of exoneration of the trustee and, therefore, the scope of the documents described in paragraph 31 does not extend beyond those relating to the examinable affairs of the Company.