In the matter of ACN 004 410 833 Limited (formerly Arrium Limited) (subject to deed of company arrangement) & the companies listed in Schedule 1 to the Interlocutory Process [2018] NSWSC 747 (24 May 2018)

Last Updated: 24 May 2018

Supreme Court New South Wales

Case Name:	In the matter of ACN 004 410 833 Limited (formerly Arrium Limited) (subject to deed of company arrangement) & the companies listed in Schedule 1 to the Interlocutory Process
Medium Neutral Citation:	[2018] NSWSC 747
Hearing Date(s):	17 May 2018
Decision Date:	24 May 2018
Before:	Gleeson JA
Decision:	Disclosure of documents permitted, on terms.
Catchwords:	CORPORATIONS – examination of officers and others – where creditors seek access to records of the examination including transcripts – where public examinations conducted by deed administrators – factors relevant to the justification of access – whether Court should allow access to records of the examination – Corporations Act 2001 (Cth), ss 596F, 597.
Legislation Cited:	Corporations Act 2001 (Cth), ss Div 1 of Pt 5.9 , 596F, 597, Div 1 of Pt 5.9
Cases Cited:	New Cap Reinsurance Corporation Holdings Limited [2001] NSWSC 835 Re Eurostar Pty Ltd (in liq) (Receivers and Managers Appointed) [2003] NSWSC 633 Strarch International Ltd [2005] NSWSC 583
Category:	Principal judgment
Parties:	Mark Francis Xavier Mentha, Cassandra Elysium Mathews, Martin Madden and Bryan Webster in their capacities as joint and several deed administrators of ACN 004 410 833 Limited (formerly Arrium Limited) (subject to deed of company arrangement) ACN 004 410 833 and each of the companies listed in Schedule 1 to the Interlocutory Process (Plaintiffs)
Representation:	Counsel: Mr PM Wood / Mr TE O’Brien (Plaintiffs) Solicitors: Arnold Bloch Leibler (Plaintiffs)
File Number(s):	2018/67725

JUDGMENT

1. GLEESON JA: On 17 May 2018 the Court made orders on the application of the plaintiffs, pursuant to s 596F(1)(e) of the Corporations Act 2001 (Cth), to permit nominated creditors of companies formerly known as Arrium Limited and certain of its subsidiaries to access, uplift and copy documents marked for identification in this proceeding and/or produced to an examinee during the course of his or her examination and the transcript of the examination of any examinee in this proceeding conducted by the plaintiffs pursuant to s 597 of the Corporations Act. These are my reasons for making those orders.

Background

2. On 4 November 2016 each of ACN 004 410 833 Limited (formerly known as Arrium Limited) and certain of its subsidiaries entered into deeds of company arrangement. The plaintiffs are the joint and several deed administrators of those companies (the Arrium Group).
3. The deed administrators commenced this proceeding for the purpose of conducting public examinations of certain directors and officers, and also advisers to the Arrium Group, having identified a number of transactions and events which they believe warrant further investigation with a view to identifying potential causes of action against the Arrium directors, officers, auditors and third party advisers. The public examinations commenced on 23 April 2018 and are scheduled to continue until around August 2018.
4. The deed administrators’ solicitors have prepared a paginated bundle of documents for use in the examinations comprising documents sourced from the books and records of the Arrium Group and documents produced by third parties, either pursuant to orders for production or informally by agreement with the deed administrators. Documents the subject of claims for legal professional privilege, have been stamped with a tag identifying the nature of the privilege claimed and the claimant. Where the claim is made exclusively by directors of Arrium, the documents have been redacted.
5. During the course of the examinations access to the paginated bundle has been made available to the instructing solicitors and counsel for each examinee, each examinee and the presiding registrar.
6. Documents within the paginated bundle have been marked for identification as MFI-1 on 23 April 2018 (comprising 19 volumes) and MFI-2 on 14 May 2018 (comprising the first 19 volumes with some additional documents and a further 2 volumes). In each case, the documents marked for identification exclude documents over which legal professional privilege claims have been made. It is not proposed by the deed administrators that access be granted to the nominated creditors in respect of documents over which legal professional privilege is claimed.
7. Various creditors of companies in the Arrium Group have requested the deed administrators to provide access, uplifting and copying of documents marked for identification during the examinations and the transcripts of the examination of any examinee. Those requests relied upon the terms of Corporations Act s 596F(1)(e), which relevantly provides:

596F(1) Subject to s 597, the Court may at any time give one or more of the following:

...
(e) a direction about access to records of the examination.

8. Section 597(4) provides that an examination is to be held in public except to such extent (if any) as the Court considers that, by reason of special circumstances, it is desirable to hold the examination in private. The examinations in this case have been held in public.
9. Section 597 also relevantly provides:

(13) The Court may order the questions put to a person and the answers given by him or her at an examination to be recorded in writing and may require him or her to sign that written record.
(14) Subject to subsection (12A), any written record of an examination so signed by a person, or any transcript of an examination of a person that is authenticated as provided by the rules, may be used in evidence in any legal proceedings against the person.
(14A) A written record made under subsection (13):
(a) is to be open for inspection, without fee, by:
(i) the person who applied for the examination; or
(ii) an officer of the corporation; or
(iii) a creditor of the corporation; and
(b) is to be open for inspection by anyone else on paying the prescribed fee.

Other requests for access

10. The application by the deed administrators by interlocutory process filed in Court on 17 May 2018, followed upon the deed administrators having consented on that day to a similar access application by Anchorage Capital Master Offshore Limited (Anchorage) pursuant to interlocutory process filed on 15 May 2018.
11. Briefly stated, the circumstances of the access application by Anchorage were as follows. Anchorage is a substantial creditor of certain Arrium Group entities; its proof of debt has been admitted in full in the amount of $99,736,092.65. Anchorage has commenced proceedings in the Supreme Court of New South Wales against Ms Delia Sparkes and three other individuals claiming damages for alleged negligence and negligent mis-statement in relation to the signing and issuing of drawdown notices and rollover notices by the defendants in the period of between four and five months prior to Arrium Group entering into voluntary administration on 7 April 2016. Ms Sparkes was the subject of a public examination by the deed administrators on 23 and 24 April 2018. On 7 May 2018, Anchorage obtained authorisation from ASIC as an eligible applicant for the purposes of Div 1 of Pt 5.9 of the Corporations Act to conduct public examinations or participate in the public examinations commenced by the deed administrators of Arrium.
12. The grounds upon which Anchorage sought access to documents relating to the examinations included that it wished to assess whether, and if so to what extent, it will take part pursuant to s 597(5A) of the Corporations Act in the current public examinations conducted by the deed administrators; and that providing such access would facilitate the prosecution of civil proceedings, in particular, the proceedings commenced by Anchorage, where those proceedings bear upon the circumstances that led to, or are associated with, Arrium’s insolvency.
13. The access orders made on 17 May 2018 in relation to Anchorage’s application under s 596F(1)(e) included that until further order of the Court, Anchorage only be permitted to use any documents marked for identification and/or produced to an examinee during the course of his or her examination, being a document produced by any third party under compulsion in the examination proceedings for the purposes of this proceeding, that is, the examination proceeding.

Access requested by lenders

14. By letter dated 16 May 2018, King & Wood Mallesons requested on behalf of certain lenders that the deed administrators permit access to effectively the same documents that were the subject of the access request by Anchorage. Those lenders are: Australia and New Zealand Banking Group Limited; Commonwealth Bank of Australia; Westpac Banking Corporation; National Australia Bank Limited; Banco Bilbao Vizcaya Argentaria, SA; and Deutsche Bank AG (together, the lenders).
15. In support of that request, the lenders’ solicitors stated that the lenders represented approximately 85 percent of the creditors of the Arrium Group by value and the lenders may have claims against Arrium or its current and former directors and officers (including for misleading or deceptive conduct in relation to the continuing drawdown of lender facilities in circumstances where Arrium was unable, or unlikely to be able, to repay those funds in full). The lenders’ solicitors expressed the view that access to the requested materials would assist the lenders’ consideration of whether such claims may be available and, if so pursued.
16. The lenders’ solicitors also drew attention to a number of the lenders being members of the creditors’ committee of Arrium and, pursuant to cl 7.11 of the deed of company arrangement, are required to consult with the deed administrators as to the existence, prospects and value of claims which may only be available to a liquidator of an Arrium company. Access to the written records of the examinations would, according to the lenders’ solicitors, be necessary for the lenders to have those discussions with the deed administrators.
17. Ms Caroline Goulden, the deed administrators’ solicitor, deposed that many of the lenders have potential causes of action arising from the collapse of the Arrium Group which are separate from the claims which may be pursued by the deed administrators on behalf of the companies. She expressed the opinion that pursuit of such claims may result in those creditors recovering amounts in addition to their returns under the deed(s) of company arrangement.

Consideration

18. That the Court is empowered by s 596F(1)(e) to make the orders sought by the deed administrators is well-established by the decisions of Santow J in New Cap Reinsurance Corporation Holdings Limited [2001] NSWSC 835 (New Cap) and Campbell J in Re Eurostar Pty Ltd (in liq) (Receivers and Managers Appointed) [2003] NSWSC 633 (Eurostar).
19. In New Cap Santow J identified two bases or justifications for making the product of the examinations available to third parties claiming a legitimate interest. The first is if such assistance offers sufficient prospect of increasing or protecting the assets available in the winding-up: at [10]. His Honour considered that a reasonable prospect of benefit to creditors, though no certainty, was sufficient: at [24].
20. The second basis for justification for access is that such assistance fulfils a wider statutory purpose of examinations generally: at [13] Santow J remarked at [33] that given creditors are permitted to attend public examinations, and are able to hear the questions and answers, including any reference to documents produced, and are later entitled as of right to a copy of the written record of the examination, it would be incongruous if creditors were denied copies of documents produced (after the examination). His Honour continued at [33] that such access, if allowed, is not ordinarily antithetical to the legislative purpose or thereby an abuse of process. In this regard, Santow J referred at [37] to the remarks of the Court of Appeal in Victoria in Flanders v Beatty [1995] VICSC 73; (1995) 16 ACSR 324 at 335 (Ormiston JA) to the effect that the purposes to be served by examinations ought not be limited by reference to the benefit of the company or its creditors or contributories, but should be discerned only by reference to the statutory provisions which confer those powers.
21. New Cap (at [49]-[43]) and Eurostar (at [23]) recognise that there is a distinction between the “written record” referred to in s 597(14A) and the “records of the examination” referred to in s 596F(1)(e). The “written record” in s 597(14A) can be inspected as of right by any creditor of the corporation. The “records of the examination” referred to in s 596F(1)(e) include but are wider than a “written record made under subsection (13)” referred to in s 597(14A): New Cap at [43] (Santow J). See also Strarch International Ltd [2005] NSWSC 583 at [18] (Barrett J). Such a “written record” contains “the questions put to a person and the answers given by him or her”: s 597(14A)(13). No question arises here as to whether, as Santow J held in New Cap (at [42]), and both parties seemed to accept in Eurostar (as Campbell J noted at [23]), the “written record” includes any documents which were marked for identification and shown to a witness in the course of an examination.
22. Both New Cap and Eurostar establish that s 596F(1)(e) confers on the Court a discretionary power, which enables it to give access to, among other things, documents which were produced under compulsory process for the purpose of the examination, but were not actually used in the course of the examination. As Santow J explained in New Cap at [39]:

... I am satisfied that there are a number of sources of power available to the liquidator to do that which he does not oppose doing, namely to make available the documents which were utilised in the examination either by directly being marked for identification or as otherwise being produced for the examination. I see no sensible distinction being drawn between the two categories of document. The documents not marked for identification were still capable of informing the examination and influencing the questions asked. Indeed the liquidator’s submissions appear to favour that access. Thus I would include in any access all documents produced, in the absence of any evidence from those opposing access that a document was produced which was entirely extraneous to any possible purpose of the original examination.

23. Accepting that the Court’s power in s 596F(1)(e) is expressed to be subject to s 597, Santow J explained the operation of these provisions in New Cap at [43] as follows:

But when one turns to s596F, I consider that there is nothing in s597, to which it is subject, which precludes the court making, in terms of sub-paragraph (e) thereof, “a direction about access to records of the examination”. Such a direction would be one which would permit access to all of the documents produced in aid of the examination, whether marked for identification or not and whether specifically put to the examinee or not. It would be entirely artificial to draw a distinction between documents on the basis of some such criterion as that. I consider that the wider expression “records of the examination” was chosen deliberately to provide a broad discretion in the Court to make a direction permitting access either to be granted or restricted, though so far as restriction is concerned subject to s597 with its mandatory requirement for making “a written record” open for inspection by anyone on paying the prescribed fee. That interpretation gives sensible meaning to the opening words “Subject to section 597” in s596F.

24. The deed administrators take the view that they do not want to allow one creditor access that is not allowed to others. Although considerations of fairness or equality, as between creditors, is understandable, that is not, in my view, a sufficient justification to permit access to the lenders in the present case.
25. Nonetheless, I am satisfied that a direction should be given pursuant to s 596F(1)(e) permitting access to the lenders to the documents sought, subject to the qualification proposed by the deed administrators. First, there is evidence that allowing access to the lenders would facilitate the identification and pursuit of potential causes of action which may be available to those creditors separate from claims available to the deed administrators or a liquidator should one be appointed to any of the companies in the Arrium Group.
26. Second, insofar as some of the lenders are members of the creditors’ committee of Arrium, access to the documents will facilitate their consultation with the deed administrators in relation to potential claims which may only be available to a liquidator of an Arrium company. Further, it is consistent with the beneficial administration of the companies the subject of deed(s) of company arrangement, that the creditors and their representatives through the creditors’ committee be provided with information being the product of the examinations to assist them in making informed decisions about any such recommendations by the deed administrators.
27. Third, given the significant volume of documents already marked for identification and the extended period of time over which the public examinations are anticipated to be conducted, there are good reasons why the lenders should not be limited to exercising their right of inspection of the “written record” under s 597(14A), but should be permitted to obtain a copy of the relevant documents and transcript of the examinee’s examinations.
28. Fourth, there is no suggestion in the present case that permitting the lenders access to the “records of the examination” as referred to in s 596F(1)(e), would involve an abuse of process. That is, there is no suggestion that the documents have been sought by any of the lenders for an improper purpose.
29. The terms of access proposed by the deed administrators mirror the orders made in relation to the application made by Anchorage. Specifically, the access orders include the qualification that the lenders only be permitted to use any documents marked for identification and/or produced to an examinee during the course of his or her examination, which were produced by any third party under compulsion, for the purposes of this proceeding. That qualification is appropriate.
30. The deed administrators did not suggest that the Court’s direction should impose any other safeguards in relation to the access to be permitted to the lenders.

Orders

31. For these reasons, the Court made the following orders on 17 May 2018:
    • (1) Subject to order 2, pursuant to section 596F(1)(e) of the Corporations Act 2001 (Cth), the entities set out in Schedule 2 (Entities) be permitted to access, uplift and make a copy of:
      • (a) the bundles of documents marked “MFI-1” and “MFI-2” in the proceeding;
      • (b) any document or bundle of documents subsequently marked for identification (and not contained in either MFI-1 or MFI-2) in the proceeding and/or produced to an examinee during the course of his or her examination; and
      • (c) the transcript of the examination of any examinee in the proceeding.
    • (2) Until further order of the Court, the Entities only be permitted to use any documents falling within orders 1(a)-(b) above which were produced by any third party under compulsion in this proceeding for the purposes of this proceeding.
    • (3) The interlocutory process filed 17 May 2018 otherwise be stood over to 10.00 am on Monday, 28 May 2018 before Gleeson JA.

Schedule 2

(The Entities)

(4) Australia and New Zealand Banking Group Limited
(5) Commonwealth Bank of Australia
(6) Westpac Banking Corporation
(7) National Australia Bank Limited
(8) Banco Bilbao Vizcaya Argentaria, SA
(9) Deutsche Bank AG

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