Examination Summonses
45 The applicants do not seek to have the Examination Summonses set aside on the basis that they were issued for an improper purpose. Rather, the applicants cavil with the terms of the schedule to the Examination Summonses by which production of documents is sought from each of the examinees, Messrs Bart and Parker.
46 In the schedule to their written submissions, the applicants set out under the heading "Specific Defect" their objections to categories 1(a) and 1(b) of the Examination Summonses as including documents that do not concern the Company's examinable affairs and including documents which will not be the subject of examination. They also object to category 1(a) on the basis that it is framed in terms "so unclear as to not be permissible". No particularisation is provided. In his oral submissions, Mr Giles, counsel for the applicants, clarified that the applicants' objection to category 1(a) is limited to sub-paragraphs (vii) and (viii). The applicants also complain about the whole of category 1(b) on the basis that it calls for documents which are the subject of a claim for legal professional privilege.
47 The Examination Summonses must be ancillary to the purposes of the examination and comply with the limitations imposed by s 596D(2) of the Act in that they must seek documents that "relate to the corporation or any of its examinable affairs". The obligation on the examinee is to produce "specified books" in that class which are in the examinee's possession: Re Bill Express at [19] to [20].
48 The applicants object to the use of the expression "recording or referring to". They say that the use of those words makes categories 1(a)(vii) and (viii) oppressive and would necessitate the production of documents not related to the examinable affairs of the Company.
49 In Re Bill Express the Court considered an argument that a requirement to produce "all books and records relating to the affairs of Bill Express" in an examination summons issued pursuant to s 596B was oppressive and that use of the term "relating to the affairs" was uncertain and too wide. That argument was rejected at first instance and on appeal by Davies J who found that it was "entirely permissible" for a summons to be expressed in broad terms and to seek production of all books and records relating to the affairs of the relevant company: Re Bill Express at [36].
50 To the extent that s 596D(2) requires the person to produce "specified books", the summons must, as noted by Davies J in Re Bill Express at [33], identify the books and records to be produced with "sufficient clarity" to enable the recipient of the notice to know what documents come within the terms of the summons so that they can "form a reasonable view about what must be produced" in order to comply with it.
51 The definition of examinable affairs is broad. It includes the ascertainment of the financial viability of a prospective defendant and information relating to the insurance position of a prospective defendant. In Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301 (Grosvenor Hill), the Full Court considered the terms of a summons issued to valuers which relevantly sought production of their insurance policies. Those documents were required so that the liquidators could ascertain whether the prospective defendants had the ability to satisfy any judgment. The Full Court made the following comments at 306-307:
The necessity to obtain relevant information in relation to litigation by or against a company being wound up is but one instance of the broad general purpose identified in the decisions cited above and numerous other decisions to like effect. Clearly, one purpose of an examination in relation to pending or contemplated litigation is to determine whether or not there is evidence available to support a claim brought by the company to recover property or damages, or conversely to defend a claim brought against the company, and the strength of that evidence. That such is a purpose falling within the power contained in s 596B of the Law was not challenged by Grosvenor; the whole weight of authority is against such a challenge in any event.
The question is whether the Court is limited by the section to ordering an examination the purpose of which is to go no wider than to determine whether or not there are reasonable grounds, including evidence, to litigate a case to a successful judgment, or whether, the Court has power to order an examination, the purpose of which is to ascertain the likelihood of any judgment being satisfied; that is, whether it is a permitted purpose to inquire as to the worth of a potential defendant so as to be able to make a practical assessment as to the likelihood of a return to the company of the fruits of any favourable judgment and the necessary legal costs expended in obtaining it. Is the Court empowered under the section to order an examination or the production of documents to test the likelihood of the creditors in the winding up receiving a tangible benefit from the satisfaction of any judgment obtained and to enable the liquidator to determine whether it is prudent to commence or maintain litigation with knowledge as to the real likelihood of obtaining any tangible benefit beyond a mere judgment, including a judgment for costs, at the conclusion of the litigation?
In our view, the Court has such a broad power. Additionally, it is a power of long standing.
And at 311:
In our view, the ambit of the power is sufficiently wide to enable information to be sought from a defendant or potential defendant as to the ability of that person to satisfy any reasonable judgment which may be obtained in litigation instituted by the liquidator. In that context it is within power to order production of relevant documents, including insurance policies, to ascertain whether or not the person has an enforceable right to indemnity from an insurer or other person. The obtaining of such information by the liquidator in the course of the winding up is to facilitate the realisation of the chose in action to the best advantage of the company and its creditors.
52 The Full Court's observations in Grosvenor Hill were referred to by Logan J in McEachern, in the matter of Gladstone Civil Pty Limited v Pleash (liquidator) [2014] FCA 1364. His Honour, in considering the terms of a summons issued under s 596B of the Act which sought documents evidencing the examinee's financial position said (at [21]) that the liquidator is entitled under s 596B to engage "in what might be termed a fishing exercise, so long as that exercise can be seen to fall within the terms of s 596B(b) as to the recipient of a summons". Logan J found that the paragraph of the summons in dispute before him was in its terms oppressive but allowed an amendment so that the relevant paragraph would read as follows:
3.3 Books, documents and records as to your financial position for the period 1 January 2012 to the present (the relevant period), as follows:
(a) personal tax returns for the relevant period;
(b) copies of all personal bank statements in respect of the relevant period;
(c) documents evidencing all assets over the value of $10,000, not taking into account moneys owed with respect to the same, during the relevant period;
(d) documents evidencing liabilities over the value of $10,000 and, in particular, copies of any loan agreements, credit card statements and financial facility agreements relating thereto.
53 The amendment made by Logan J allowed production over a period of time relevant to the matter before him. It also allowed the use of the term "documents evidencing".
54 In the case of categories (a)(vii) and (viii), the Liquidator's purpose is to ascertain whether the examinees, directors of the Company, will be able to satisfy a judgment should proceedings be brought. The use of the language complained of does not, in my view, take those categories beyond requiring documents relating to the Company or the examinable affairs of the Company. If some documents of the nature described by Mr Giles are caught - for example a letter from an accountant enclosing a tax return that says no more - I do not think that of itself affects the categories in a way that takes them outside the examinable affairs of the Company. The nature of the documents sought are identified with sufficient clarity and the obligation is for the examinees to produce documents which are in their possession and which fall within the ambit of those categories.
55 The next objection made on behalf of the applicants is that the documents called for by category 1(a)(vii), namely any tax return, accounts or other documents recording a financial position, only relate to the Company's examinable affairs in their most recent or current version. Historical versions of those documents are said to be beyond the "examinable affairs" of the Company. I do not agree. The Examination Summonses seek documents from the period commencing 1 January 2012. Once it is accepted that an inquiry by liquidators as to the financial capacity of a prospective defendant falls within the examinable affairs of a corporation, there is no proper reason why that inquiry should be limited to the current period. The period for which documents are sought is narrower than that in which the transactions identified by the Liquidators appear to have taken place. In the circumstances of this matter, it is a proper and rational time period. Further, in my view, an examination into what has happened over a relevant period leading to the present will assist liquidators in understanding more fully the asset and liability position of a prospective defendant to proceedings and their capacity to meet a judgment should proceedings be pursued.
56 The last matter which arises for consideration in relation to the Examination Summonses is that category 1(b) and category 1(a)(viii) should be set aside because they will, if documents need to be produced, include some documents which will be subject to a claim for legal professional privilege. No evidence was led as to the nature of the documents that are in the possession of Messrs Bart and Parker that fall into those categories and the extent to which those documents would be subject to a claim for legal professional privilege.
57 The applicants relied on the decision in Meteyard v Love to make good that proposition. That matter concerned a number of examination summonses and orders for production of documents which were issued in relation to the affairs of Southland Coal at the request of its receivers and managers. The receivers were seeking to examine individuals and obtain documents relating to the assessment by those parties of an explosion at a coal mine, the majority owner of which was the company in receivership, in order to assess whether to commence proceedings against the insurer. In seeking to set aside the examination summonses and the orders for production, the claimants submitted that they were oppressive. In part they relied upon an argument, in relation to the orders for production, that a significant number of the documents sought were likely to be privileged. The NSW Court of Appeal set aside the orders for production. Its reasons for doing so were summarised by Austin J in Southland Coal at [56]. In particular, in dealing with the issues relating to the argument relying on the suggestion that the documents would be subject to a claim for privilege, Austin J noted the following findings:
…
(f) orders for production made under Pt 36, r 12 of the Supreme Court rules are subject to the client legal privilege provisions of the Evidence Act, by virtue of Pt 36, r 13 which precludes the court from compelling production, even to itself, of a document that is subject to client legal privilege (at [76]-[78], [132] per Basten JA);
(g) the court should not make an order for production that extends to documents that are subject to client legal privilege, and where it may be anticipated that questions of client legal privilege will arise, the court should either not make an ex parte order for production or include in the order an express exception for documents subject to privilege (at [132] per Basten JA);
(h) in the present case, the orders for production should be set aside because it had been established that a significant proportion of the documents identified by the orders were likely to be protected by client legal privilege: at [133] per Basten JA.
58 In Southland Coal, the Court heard the application by the receivers and managers of that company, with all parties present, for the issue of new orders for production arising out of the same event considered in Meteyard v Love. The intended recipients of the orders for production made a submission to the effect that privileged documents are not properly the subject of an order for production because, in terms of s 596B(1)(b)(ii) of the Act, they cannot relate to information about the examinable affairs of the company that any of the examinees "may be able to give". Austin J in considering that submission noted at [80] that the Court of Appeal's reasoning in Meteyard v Love:
… does not mean that in every case, the order for production must contain such an express exclusion [being an order framed to exclude documents that a producing party would be entitled to withhold as privileged]. The Uniform Civil Procedure Rules set out a procedure by which claims for privilege are to be made. As I have explained, the person to whom the order is directed may object to producing the document and once the objection is made, cannot be compelled to do so unless and until the objection is overruled. That is the position as a matter of law. If orders were made expressly excluding documents subject to client legal privilege, there would be a risk that the persons to whom the orders were directed would regard themselves as exonerated from taking any co-operative steps with respect to documents that they regarded as privileged, such [sic] preparing lists or even embarking on any process of review. At least in some cases, it may be preferable simply to add a note to the orders drawing the reader's attention to the relevant rules. But in my view it is unnecessary to take any such step in a fully contested inter partes matter where the parties are legally represented and I do not regard the Court of Appeal as suggesting otherwise. In such a case an acceptable course, in accordance with the rules is to make unqualified orders for production coupled with liberty to apply, which may be exercised for the purpose of giving directions designed to bring forward contested privileged claims for resolution, once specific documents have been identified and particular claims for privilege have been made in respect of those identified documents.
59 In the present case I have been asked to assume that category 1(b) and category 1(a)(viii) include documents which are subject to a claim for legal professional privilege. I am asked to draw that inference based on the terms of the category. There is no evidence before me to make good that proposition. I do not know if the documents that would be subject to such a claim would number in the tens or in the hundreds, would comprise all, most or only some of the documents to be produced. I cannot be satisfied that a "significant proportion" of the documents sought are likely to be protected by a claim for privilege. On this basis alone, in my view, the applicants' submission fails.
60 I accept the submission on behalf of the respondents that a procedure could be designed to resolve contested privilege, to the extent such documents fall within category 1(b) or 1(a)(viii). There are accepted practices for dealing with objections to production on such grounds and I will grant liberty to apply to the parties which may be exercised for the purpose of giving directions designed to deal with and resolve contested privileged claims, once documents have been identified as subject to such a claim.
61 On the basis of the matters set out above, in my view, the Examination Summonses are not oppressive.