Re Calder Park Promotions (In Liquidation) [2015] VSC 285 (19 June 2015)

1 The second plaintiffs (the liquidators) are the liquidators of Calder Park Promotions Pty Ltd (In Liquidation) ('the Company'). By an originating process filed 17 April 2014 the liquidators made application that summonses be issued for the examination of certain persons in relation to the examinable affairs of the company pursuant to sections 596A and section 596B of the Corporations Act 2001 (Cth) ('the Act').

2 On 23 April 2014, orders were made that a summons ('the summons') be issued to Robert Frederick Jane ('Mr Jane') pursuant to s 596A of the Act. The summons was issued by the Court on 24 April 2014. As well as requiring Mr Jane to attend to be examined in respect of the examinable affairs of the Company, it required Mr Jane to produce the documents listed in the schedule to the summons. It was an extensive list. No application was made on behalf of Mr Jane that such documents did not relate to the examinable affairs of the company, that compliance with the summons was oppressive or that the summons was too wide in its scope.

3 The summons was initially returnable on 7 May 2014 when production of the documents listed in the schedule was required. The examination of Mr Jane proceeded on 4 June, 5 June, 31 July and 1 October 2014. The liquidators now seek an order that Mr Jane pay their costs wasted by reason of his failure to produce the documents specified in the schedule to the summons of 24 April 2014 and the orders made by this Court pursuant to s 597(9) of the Act in the course of the examination on 26 June 2014 and 19 August 2014. They also seek the costs of this application.

4 The application is made pursuant to s 24(1) of the Supreme Court Act 1986 (Vic) ('Supreme Court Act') and Rules 11.10(1)(a)(v) and (2) of the Supreme Court (Corporations) Rules 2013 (Vic) ('Corporations Rules'). The liquidators also seek an order pursuant to r 63.07(2)(c) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) ('Rules') that those costs be fixed in the amount of $68,500.00 rather than be taxed.

5 The liquidators rely on an affidavit of Bridget Ellen Slocum sworn 4 December 2014. Mr Jane relies on an affidavit of his solicitor, Gary David Goldsmith sworn 9 February 2015. In compliance with directions made by the Court on 5 December 2014, the parties have filed written submissions.

6 The essence of the liquidators' application is, that by reason of Mr Jane not complying with his obligations to produce the documents identified in the summons, costs have been needlessly wasted by reason that it has been necessary to pursue Mr Jane to compel such compliance over a long period of time. This has required expenditure of time and resources by the liquidators' solicitors and counsel in and out of court. It is said this has caused the liquidators to incur costs that they would not otherwise have spent in this proceeding. It is submitted by the liquidators that there has been serial non-compliance by Mr Jane with the summons and the orders of this Court, such that he should pay the costs which have been incurred in that regard.

7 In a detailed written submission prepared by Mr Mereine, counsel for the liquidators, he chronicles what is submitted to be that serial non-compliance. That chronicle is essentially uncontroversial and has not been contradicted. It is set out in Ms Slocum's affidavit and supported by reference to the transcript of the examination of Mr Jane in Mr Mereine's written submissions.

8 On the first return date for the summons, 7 May 2014, Mr Jane himself did not attend Court and appeared through his counsel Mr McCormick. It was indicated to the Court by Mr McCormick that he had been unable to obtain instructions but indicated that the documents required to be produced may have been left at Calder Park Raceway.

9 On 15 May 2014 Mr McCormick attended Court again on behalf of Mr Jane. A single document, an Australian New Zealand Banking Group Ltd ('ANZ Bank') bank statement, was produced in response to the summons. Mr McCormick indicated that no other documents of the Company could be produced as they were at Calder Park Raceway and were not able to be accessed by Mr Jane as he did not control that premises.[1] The examination was adjourned to 4 June 2014.

10 At the hearing on 4 June 2014, the first day on which there was actual oral examination, Mr Jane maintained the position that he had no other documents which responded to the summons because all the documents were either at Calder Park Raceway or had already been given to the liquidators. When pressed about this by Mr Mereine, Mr Jane firmly stated that he had no other documents that answered the summons. During the examination conducted that day however, Mr Jane did concede that he had not approached ANZ Bank in relation to the account maintained by it on behalf of the company's affiliate Bob Jane Global Tyre Corporation (Hong Kong) Ltd ('Bob Jane Hong Kong') and he made reference in his testimony to documents which had not but should have been produced in response to the summons.

11 The examination proceeded on 5 June 2014. In the course of the examination that day, Mr Jane referred in his testimony to documents which had not been produced in response to the summons, such as invoices said to have been rendered by an affiliate of the company, Vendetta Wheels Pty Ltd. When questioned about this Mr Jane indicated that he would conduct a search for those documents in his office.

12 During the course of the examination on 4 and 5 June 2014, Mr Jane agreed that if directed by the Court, he would produce specific documents to which he had referred to in his testimony. The liquidators' solicitors prepared a draft order in that regard, listing such documents but its terms were not agreed to by Mr Jane and his legal representatives. The liquidators' solicitors listed the matter for mention on 26 June 2014, as it had been indicated on behalf of Mr Jane that counsel wished to be heard on the terms of the order proposed by the liquidators' solicitors.

13 On 26 June 2014, submissions were made in regard to the terms of the liquidators' proposed order. After hearing argument, I ordered that Mr Jane produce documents in two tranches, on 7 and 14 July 2014. The documents described in paragraphs 1(a) to 1(kk) of the order, which included documents held by third parties such as RACV, ANZ Bank, National Australia Bank, King & Whittle Pty Ltd, Travel Scene, Victoria Police, Carew Counsel Solicitors, Hall & Wilcox Lawyers ('Hall & Wilcox'), Raj Lawyers and Balmain Mortgage Managers were required to be produced. Mr Jane was required to produce his personal diaries redacted insofar as they did not relate to the examinable affairs of the Company together with all documents stored on his laptop computer and touchscreen computer. The order made on 26 June 2014 was substantially in the form of the order proposed by the liquidators' solicitors.

14 Mr Jane did not comply with the order of 26 June 2014 by the dates stipulated and on 9 July 2014, the solicitors for the liquidators again requested that the proceeding be listed for mention. On the afternoon of 9 July 2014, the day that the liquidators' solicitors made the request for further listing, Mr Jane's lawyers, Goldsmiths Lawyers, indicated to the liquidators' solicitors that documents had been produced to the Court on 8 July 2014 and 9 July 2014 but they refused to consent to an order for the uplift of those documents to enable inspection by the liquidators' solicitors. After receiving an indication of the order that the Court proposed to make in the circumstances in response to a circularised email to my associate, Goldsmiths Lawyers consented to such uplift and the order was made.

15 On 11 July 2014, the liquidators' solicitors complained to Mr Jane's solicitors that Mr Jane had still not complied with the 26 June 2014 order for production of documents. The matter was listed before the Court again on 14 July 2014.

16 On that day, counsel for the liquidators submitted that Mr Jane should explain his non-compliance by way of an affidavit. This course was opposed by Mr Jane's counsel, Mr McCormick, by reason that such an affidavit would not be protected by the statutory privilege of s 597(12) and further that Mr Jane should not have to incur the cost of preparing such an affidavit. Instead it was suggested that Mr Jane would attend Court and explain paragraph by paragraph why he had not produced the documents and then be cross-examined. In the course of the hearing on 14 July 2014, the Court and the liquidators were informed for the first time that 24,000 pages of documentation had been located on Mr Jane's computer, which was contrary to his evidence given at the examination on 4 June 2014 that his computer had been searched and all of the documents given to the liquidators. The examination was adjourned to 31 July 2014.

17 During the course of the examination on 31 July 2014, Mr Jane produced an incomplete set of the ANZ bank statements for Bob Jane Hong Kong which he stated had been found at his Diggers Rest office. This was again contrary to his evidence of 4 June 2014. At the hearing on 31 July 2014, Mr Jane could not say when enquiries with the ANZ Bank were first made in regards to the Hong Kong bank statements or when ANZ Bank would provide the bank statements. Mr Jane was unable to say when enquiries had been made of his accountants, King & Whittle, what had happened in relation to those enquiries or why the financial documents for a substantial related party creditor, Bob Jane Global Tyre Corporation (Australia) Pty Ltd ('Webtyre'), had not been produced. The examination was adjourned to 19 August 2014. Mr Jane was ordered to give written answers to questions to be served by the liquidators and appear for further examination on that date. This was decided upon as an appropriate mechanism to expeditiously deal with the issue.

18 On 6 August 2014, the liquidators served on Mr Jane questions in relation to the production of documents in response to the summons and the order of 26 June 2014. On 14 August 2014, Mr Jane served his answers to the questions on the liquidators.

19 On 19 August 2014, Mr Jane did not attend the Court for examination. The Court was informed by his solicitors that Mr Jane was unwell and unable to attend. Mr McCormick attended Court on behalf of Mr Jane and further submissions were made in relation to documents which had not been produced by Mr Jane. The Court adjourned the examination until 1 October 2014 and ordered Mr Jane to produce further documents including documents held by third parties together with all emails and documents which had passed between him and a Mr Hyams in relation to a transaction whereby Bob Jane Hong Kong received $400,000.00 from the Company on 18 September 2012. He was ordered to produce such documents on or before 3pm on 26 August 2014.

20 Mr Jane did not comply with the 19 August 2014 order.

21 On 5 September 2014, Mills Oakley Lawyers ('Mills Oakley') sent a letter to Goldsmiths Lawyers relating to the failure to comply with the 19 August 2014 order. There was then an exchange of correspondence with Mr Goldsmith. On 9 September 2014, Mills Oakley requested the proceeding be listed for hearing given Mr Jane's failure to comply with the 19 August 2014 order. On 11 September 2014 the liquidators' solicitors sent a letter to Goldsmiths Lawyers requesting an update on the progress of compliance with the order but the request in that regard was refused by Goldsmiths Lawyers on 12 September 2014.

22 On 16 September 2014 the proceeding came before the Court in respect of the non-compliance by Mr Jane of the 26 June 2014 order and the 19 August 2014 order. As it appeared that the nature of the application by the liquidators was one for contempt, I indicated that the matter should be referred to a Judge of the Court. Ultimately however, the application for contempt was not pressed and orders were sought which required Mr Jane to file and serve a supplementary response to the questions served on Mr Jane on 6 August 2014. The Court ordered that Mr Jane file a supplementary statement and produce the documents concerned by 17 September 2014.

23 On 16 September 2014 the liquidators' solicitors, Mills Oakley wrote to Mr Jane's former solicitors, Hall & Wilcox, Arrow Law and his accountants, King & Whittle seeking information so as to avoid the need to serve subpoenas, a course which had been suggested by Mr McCormick. In response to an approach to Hall & Wilcox, Hall & Wilcox indicated that Mr Jane had been sent an email on 20 August 2014 attaching a significant number of the documents which had been requested by Mr Jane. The following day Mr Jane served his supplementary response to the questions and the liquidators received responses from Arrow Law and King & Whittle.

24 On 18 September 2014, on the application of the liquidators' solicitors, a subpoena was issued to the ANZ Bank to obtain the documents in relation to the Company's affiliates Bob Jane Hong Kong and Webtyre.

25 On 22 September 2014, Mr Jane was ordered to produce further documents to the Court at 4pm on 24 September 2014. He was also required to file an affidavit and submission in support of his contention that legal professional privilege existed in respect of various invoices which had been paid by the Company for work in relation to his personal legal matters.[2]

26 On 1 October 2014, the examination of Mr Jane continued. At the commencement of the examination Mr Jane said that the response and supplementary response to the questions served by the liquidators were both prepared on his instructions and that their contents were true and correct. He then adopted both documents by signing them.

27 In the course of the examination on 1 October 2014, Mr Jane said that he had read the 26 June 2014 order and understood that it required him to obtain documents from third parties and knew that it required him to produce them by 7 July 2014. He indicated however that he had only requested the documents from ANZ Bank, Hall & Wilcox, Raj Lawyers and King & Whittle on 7 July 2014, the very day that he was required to comply with the order of 26 June 2014. No explanation was given by him for his failure to seek the documents before that day. He agreed that McClusky's Lawyers had given him the documents in relation to the sale of Webtyre's domain name on 8 July 2014 but denied that he had deliberately disregarded the 26 June 2014 order. He could not explain why those documents had not been produced before his examination recommenced on 31 July 2014. He stated in his evidence that he had difficulty getting third parties to respond in a timely fashion to his various requests for documents that the Court had ordered production of.

28 Mr Mereine of counsel for the liquidators submits that that evidence should be rejected by reason of the prompt and substantial response from those to whom those enquiries were directed including Hall & Wilcox, Arrow Law and King & Whittle. In this regard, Mr Jane was not able to explain why the Hall & Wilcox invoices were not produced after Hall & Wilcox provided them to him on 20 August 2014. Mr Jane conceded that his evidence on 4 June 2014 that the emails on his computer did not answer the summons was untrue. He stated that notwithstanding the orders of 26 June 2014 and 19 August 2014, as at 1 October 2014 he had still not contacted Mr Hyams to obtain documents relating to Bob Jane Hong Kong. He stated he had no excuse for failing to do so.

29 As I have said, this very unsatisfactory chronicle is essentially uncontroversial. Mr Jane has not sworn an affidavit in opposition to the application. In his affidavit, Mr Goldsmith, the solicitor for Mr Jane, makes various assertions and submissions which are for the main part inadmissible. He asserts that the liquidators are claiming costs which would have been incurred regardless of the delay in lodging the documents. He says that on many occasions the late or non-provision of requested material was not the fault of Mr Jane as documents were held by a third party and had been requested but not provided in a timely fashion. I do not accept that contention and refer to the submissions made by Mr Meriene in that regard to which reference is made in paragraph 28 above. Mr Goldsmith stated that it is uncommon for a non-party to be awarded to pay costs of a party to the proceeding and that the volume of documents required to be produced was substantial, particularly given that Mr Jane was suffering from ill health and was 85 years of age during the period of the summons and the examination. The affidavit culminated in a submission that if costs are to be awarded against Mr Jane, the most appropriate form to determine the quantum is the taxation of costs with such costs to be in accordance with the scale on the standard basis.

30 Mr Goldsmith states that he was informed and believes that employees of Goldsmiths Lawyers spent a total of 30 hours searching for, printing, scanning and producing to the Court over 24,000 pages of documents sought by the liquidators that were loaded on a touchscreen computer of the examinee. This involved a slow and detailed examination of computer records and then printing the documents for the record. He states that a number of folders containing the documents amounted to over 25 large ring binders which required Mr Jane to inspect the folders to determine which documents were relevant to the orders obtained by the liquidators. He states that Mr Jane spent over 180 hours searching for and reviewing documents and providing answers to the questions posed for him by the liquidators on 6 August 2014. Of course, it was Mr Jane's obligation to do so. He was the 'controlling mind' of the company and the case law indicates that as an 'insider' he is probably not entitled to any compensation for his time and associated expenses for doing so.[3]

31 I note at this juncture that at no point during the conduct of the examination did Mr Jane or his counsel indicate to the Court that time was required to produce the documents because of their volume. Rather the position was put that Mr Jane was not able to produce the documents because they were located at Calder Park Raceway and he did not have access to them. It was only after the pressing by the liquidators' lawyers for the production of the documents by the obtaining of the various orders that the documents were obtained. If Mr Jane had made application for further time for the production of such documents because of the difficulties he confronted and the time needed to sought through the documents on his personal computer, I consider that the Court would likely have dealt with such applications sympathetically but such an application was never made. It was not suggested that Mr Jane was impaired by reason of his physical health from complying with the summons or the orders. Instead what ensued was an extraordinarily drawn out process with serial resistance to the production of the documents and the proffering of various excuses as to why the production of the documents could not take place. In my view those excuses had no substance.

Section 24(1) of the Supreme Court Act provides that:

Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.

32 In UTSA Pty Ltd (in liquidation) v Ultratune Australia Pty Ltd,[4] Chernov J held that s 1335(2) of the Act does not limit the power of the Court to award costs against a non-party to the proceeding under s 24(1) of the Supreme Court Act. Mr Jane's counsel, Mr McCormick accepts that to be the position. 'The Rules' is a reference to the Supreme Court Rules,[5] more particularly in the present context rules 11.10(1)(a)(v) and (2) of the Corporations Rules which provide that the Court may make any orders that it 'thinks just or necessary 'if the person summoned to attend for examination, 'without reasonable excuse refuses or fails to produce books that the summons requires the person to produce.'

33 In my view there is power in the Court to make an order for costs against Mr Jane of the type proposed by the liquidators. In Burness v Latimer; Re Charles Henry Pty Ltd (in Liquidation)[6] Ryan J , relying on r 11.10(2)(b) of the Federal Court (Corporations Rules) 2000 (Cth), ordered an examinee to pay the liquidator's costs thrown away by reason of the examinee's failure to attend an examination, including the costs of the application. In Hughes, Re; Firepower Operations Pty Ltd (In Liquidation) (No 3),[7] an examinee did not appear to answer the examination summons with which he had been served. The liquidator applied for a warrant for his arrest under r 11.10 of the Federal Court (Corporations Rules) 2000 (Cth). Siopis J held that r 11.10 (which is the same rule as r 11.10 of the Supreme Court (Corporations) Rules 2013 (Vic)):

...provides a sufficient basis upon which the Court may order that [the examinee] pay the liquidator's wasted costs of his failure to attend the Court ... in answer to the examination summons; and also the liquidator's costs in respect of the notice of motion which the liquidator was required to file in order to compel [the examinee's] attendance at the examination summons.[8]

34 In my view, the principle of those cases is apposite for application here. Here, rather than non-attendance, there was serial non-compliance with the requirement under the summons to produce the documents identified in the schedule until numerous Court orders and appearances compelled it. Despite ample opportunity to do so, there has been no evidence put before the Court directed to establishing the existence of any reasonable cause available to Mr Jane for not complying with the summons and the subsequent court orders. The time spent by the liquidators' lawyers pursuing such compliance in and out of court should not have been necessary. Unless an order is made requiring Mr Jane to meet the costs wasted by reason of such non-compliance, those costs will be borne by the creditors of the company or, more particularly, those creditors who are meeting the liquidators' legal costs of the examination. I consider that it is just and necessary to make an order against Mr Jane that he pay the costs which have been wasted.

35 In this regard, I agree with Mr Mereine's submission that if Mr Jane had produced the documents required to be produced pursuant to the summons when he was obliged to, there would have been no requirement for the subsequent orders made by the Court, the disputes about those orders and the time wasted in and out of court would have been avoided. By way of example, on a review of the transcript of the first day of examination, 4 June 2014, most of the day was occupied examining Mr Jane as to matters associated with his failure to produce the documents which should have been produced in compliance with the summons. Mr Mereine submits and I agree, that half the day was wasted in that exercise. There then ensued the pursuit by the liquidators of the documents which should have been produced by the orders made by the Court on 26 June 2014 which required the hearing on 31 July 2014 and the subsequent hearings relating to Mr Jane's non-compliance. It is obvious that there was also significant time spent out of court pursuing such compliance. As an example, Mr Jane should have obtained production himself of the documents which were instead obtained by the liquidators' solicitors from Mr Jane's several firms of solicitors and by subpoena from the ANZ Bank.

36 The plaintiffs have requested that I fix the costs pursuant to r 63.07(2)(c) of the Rules rather than refer the matter to the Costs Court for taxation. I am not minded to take that course. The Costs Court routinely deals with such questions and is better equipped to do justice between the parties having regard to such experience. Ms Slocum's affidavit of 4 December 2014 breaks up the costs which have been incurred into four periods and exhibits documentation which details the items for costs incurred as a result of Mr Jane's non-compliance. That material forms a good basis for my reference to the Costs Court. The plaintiffs in arguing for an order for fixed costs contended that in arriving at the amount at which costs should be fixed the amount has been discounted generously and that the costs claimed were only sought on an ordinary basis. Because I have declined to fix the costs as the plaintiffs' propose, I will allow short submissions to be made by the parties if the plaintiffs wish to press for an order that Mr Jane pay the plaintiffs costs on an indemnity basis.

37 I will order that Robert Frederick Jane be ordered to pay the costs of the second plaintiffs wasted by reason of the non-compliance with his obligations to produce documents in answer to the summons issued to him on 24 April 2014 and in compliance with the orders of 26 June 2014 and 19 August 2014. Mr Jane shall also pay the second plaintiffs' costs of this application for costs.

[1] Transcript of Proceedings, 16 May 2014.

[2] Transcript of proceeding, 22 September 2014.

[3] Medici Institute Pty Ltd; McVeigh v Brumley and anor [2009] VSC 668.

[5] See definition of 'Rules' in s 3 of the Supreme Court Act 1986 (Vic).

[6] [2005] FCA 343.

[7] [2010] FCA 141.