The scope of the Court's power under s 70-90
24 The insurers submitted that the Court's function on an application under s 70-90 is limited to deciding whether the administrator formed the opinion in good faith; if there is a reasonable basis for the opinion formed, it will be shown to have been an opinion formed in good faith.
25 The insurers submitted that:
The administrators had formed the opinion, in good faith, that complying with the request would found an action for breach of confidence.
The holding of that opinion is a prescribed category where it is not reasonable to comply with the request under s 70-45 of the IPS: r 70-15(2)(c) of the IPR.
The administrators' opinion has a reasonable basis. The insurance policies are confidential, and the insurers would therefore have an action against at least DASS were the policies to be disclosed.
The applicant has identified no grounds to impugn the bona fides of that opinion. It follows that the request is "not reasonable" and is exempt from production.
26 According to the insurers, it was not the Court's function to determine whether the opinion of the external administrators was in fact correct, less still whether it was the preferable decision.
27 There is some support for the construction contended for by the insurers. In Re Pacific Biotechnologies Ltd [2020] VSC 636, Pacreef had requested documents which the administrator had refused to provide. One of the documents was a file note. The administrator had refused to provide the file note on the basis of the view, held in good faith, that the documents were privileged from production in legal proceedings on the ground of legal professional privilege - see: r 70-15(2)(c) of the IPR. Robson J said at [33] (footnotes omitted):
I accept that the administrator must establish that he or she was acting in good faith in holding one or other of the prescribed opinions. I do not accept, as was submitted by Pacreef, that it is the court's function in applying r 70-15(2)(b) to determine whether there is in fact privilege, and if so whether it has been waived.
28 His Honour stated at [35] and [36]:
In my opinion, for an administrator to discharge the onus placed on the administrator by r 70-15 to establish that he or she has acted in good faith, the administrator should establish that his or her opinion was based upon a reasonable basis.
In sum, in considering a request for document production under the Insolvency Practice Schedule, the administrators must establish that it is 'not reasonable' to comply with the request. In order to do so, the administrators must establish that they, acting in good faith, held any of the opinions in r 70-15(2) of the Insolvency Practice Rules.
29 Robson J concluded that it was not reasonable for the administrator to comply with the request for production of a file note, because the administrator, acting in good faith, had formed the view that it would be privileged from production in legal proceedings - see: [45], [49], [50].
30 There is nothing in the terms of s 70-90(3) which expressly provides for the Court's task to be limited in the way suggested by the insurers. Nothing in the language of s 70-90 expressly confines the Court to an inquiry into whether the administrators' decision was reasonable or was held in good faith.
31 In my view, the power under s 70-90 is not so constrained. If, for example, an administrator had refused to produce a document pursuant to a s 70-45 request for information because, acting in good faith, the administrator was of the opinion that the document was subject to legal professional privilege, it would be open to a Court to make an order pursuant to s 70-90(3)(a) for the external administrator to give the person who made the request all or part of the document, if the Court concluded that the document was not privileged, on the basis of its inspection of the document or otherwise. If a statutory power were needed for the Court to inspect the document, it is supplied by s 70-90(3)(b).
32 Section 70-90(3) is expressed in broad terms. It is unlikely that it was intended that a Court on an application under s 70-90(3) could not order production of documents in circumstances where a Court was satisfied that an external administrator had, in good faith, formed an erroneous opinion that a document was legally privileged.
33 The obverse situation has been considered, namely whether relief could be refused by the Court in circumstances where it was reasonable for an administrator to comply with a request. A broad view has been adopted.
34 Section 70-90(3)(a) of the IPS provides that, on application, the Court "may" order the external administrator to provide the relevant material all or part of that material. In 1st Fleet at [26]-[27], Black J stated:
[26] There was reference, in submissions, to whether the word "may" in s 70-90(3) of the IPSC confers a discretion on the Court whether to make an order for production. Mr Kerr did not submit that the word "may" in s 70-90(3) meant "must" but submitted that the discretion conferred by that term was confined, and possibly limited to the type of orders that the Court might make to facilitate or require the production of documents, and was not a discretion at large to refuse to require a liquidator to comply with mandatory obligations imposed elsewhere in the IPSC (T10-11). Mr Ng submitted that, although s 70-55 of the IPSC does not authorise an external administrator to refuse compliance with a request by the Commonwealth on the basis that such compliance is not reasonable, s 70-90(3) nonetheless confers a discretion upon the Court in deciding whether to order the production of the relevant material, where the external administrator does not comply with a request under s 70-55. Mr Ng submitted that questions of reasonableness and whether a request is vexatious are relevant to the exercise of that discretion.
[27] It seems to me that, although the use of the word "may" does not necessarily require that such a discretion exist, it is consistent with such a discretion. There is also good reason for the Court to have such a discretion, to deal at least with the possibility that documents have been produced by a liquidator, between the time of the original request and the time the matter is determined by the Court, so that there is no utility in an order for production being made by the Court. The Court plainly also has, on the express terms of s 70-90 of the IPSC, a discretion as to the extent to which information or documents should be produced. Such a discretion should, however, be exercised having regard to the purpose of the relevant provisions, namely to require the production of documents or information to creditors where an appropriate request is made, and it is not established that the request is unreasonable for the purposes of s 70-45 of the IPSC or r 70-15 of the Insolvency Practice Rules (Corporations), or where the requirement to produce such documents or information was mandatory under s 70-55 of the IPSC. It seems to me unlikely that the legislature would have intended that the Court had a further discretion, at large, under s 70-90(3) of the IPSC to withhold an order for the provision of information or documents, where s 70-45 or s 70-55 of the IPSC required that such information or documents be provided. The existence of a wider discretion of that character would undermine the predictability of the relevant provisions, increase the likelihood that there would be disputes as to their application, and undermine the purpose of the provisions recognised in the Explanatory Memorandum to the Insolvency Law Reform Bill, to which I have referred above.
35 I reject the insurers' submissions concerning the scope of the power in s 70-90. The provision operates according to its terms. The external administrator of a company must refuse a relevant request before s 70-90 can apply: s 70-65(1). It follows that there must have been a request made under a relevant provision. The relevant provision here was s 70-45. Assuming a request has been made and refused, then the person "who made the request for the relevant material may apply to the Court for an order that the external administrator give the person or persons all or part of the relevant material": s 70-90(1). If such an application is made, s 70-90(3) provides that the Court "may": (a) order the external administrator to give the person some or all of the material; and (b) make such other orders, including orders as to costs, as it thinks fit. The word "may" plainly furnishes a discretion: s 33(2A) of the Acts Interpretation Act 1901 (Cth). The discretion in s 70-90(3) is confined only by the statutory purposes for which the power is conferred.