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High Court of New Zealand Decisions |
Last Updated: 26 January 2018
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2011-404-7665 [2012] NZHC 3037
UNDER Sections 284 and 286 of the Companies Act
1993
IN THE MATTER OF EX CED FOODS (FORMERLY CEDENCO FOODS) (IN LIQUIDATION) AND
CEDENCO OHAKUNE (IN LIQUIDATION)
BETWEEN ANZ NATIONAL BANK LTD First Applicant
AND KATE ELIZABETH DEKKER Second Applicant
AND JOHN SHEAHAN AND IAN RUSSELL LOCK
Respondents
CIV 2011-404-6585
AND UNDER Sections 266 and 284 of the Companies Act
1993
IN THE MATTER OF EX CED FOODS (FORMERLY CEDENCO FOODS) (IN LIQUIDATION) AND
CEDENCO OHAKUNE (IN LIQUIDATION)
BETWEEN JOHN SHEAHAN AND IAN RUSSELL LOCK
Applicants
AND ANZ NATIONAL BANK LTD AND KATE ELIZABETH DEKKER
Respondents
ANZ NATIONAL BANK LTD V SHEAHAN AND LOCK HC AK CIV 2011-404-7665 [15 November 2012]
CIV 2011-404-1623
CIV 2011-404-1626
CIV
2011-404-1619
AND UNDER the Insolvency (Cross Border) Act 2006
IN THE MATTER OF THE LIQUIDATIONS OF SS FARMS AUSTRALIA PTY LTD, CEDENCO JV
AUSTRALIA PTY LTD AND SK FOODS AUSTRALIA PTY LTD
BETWEEN JOHN SHEAHAN AND IAN RUSSELL LOCK
Applicants
AND ANZ NATIONAL BANK LTD AND KATE ELIZABETH DEKKER
Respondents
Hearing: 9 and 10 August 2012
Counsel: D Chisholm and K R Phelan for Messrs Sheahan and Lock
M J Tingey and D J Friar for ANZ National Bank Ltd and Ms Dekker
Judgment: 15 November 2012
JUDGMENT OF HEATH J
This judgment was delivered by me on 15 November 2012 at 3.00pm pursuant to
Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
LeeSalmonLong, PO Box 2026, Shortland Street, Auckland
Bell Gully, PO Box 4199, Auckland
Contents
Introduction [1] Background [6] Examination and production of documents
(a) The applications [18]
(b) Ms Dekker’s July 2011 examination [22] (c) Competing submissions [26] (d) Analysis
(i) The scheme [32] (ii) Production of documents – s 266(1) [37] (iii) Examination – s 266(1) [39] (iv) Examination – s 266(2)(a) [43]
Section 261 – remuneration and expenses
(a) The application [69]
(b) The Court’s powers to order remuneration and expenses [75] (c) Is the bank entitled to indemnity costs? [86] (d) Alleged misconduct by New Zealand liquidators [93] The Australian liquidators’ application to examine Ms Dekker [98] Alleged misuse of transcript of Ms Dekker’s first examination
(a) Introductory comments [115]
(b) Jurisdiction [122] (c) Was the transcript misused? [140] (d) Should retrospective approval for the use of the transcript
be given to the Australian liquidators?
[156] Costs
[158] Result
[159]
Introduction
[1] Ex Ced Foods (formerly Cedenco Foods) and Cedenco Ohakune are both
unlimited New Zealand companies, presently in liquidation.
The liquidators are
two Australian insolvency practitioners, Messrs Sheahan and Lock. They are
based in Adelaide. Each company
was put into liquidation by special
resolution of the companies’ shareholders on 6 May 2010. At that time,
both were
in receivership.
[2] Cedenco JV Australia Pty Ltd, SK Foods Australia Pty Ltd and SS Farms Australia Pty Ltd are Australian companies, of which Mr Sheahan and Mr Lock are also liquidators. Those companies were put into liquidation by resolution of creditors who attended a meeting convened on 11 August 2010, under the Australian
voluntary administration legislation.1 At the time of that
meeting, both companies were in receivership.
[3] On 20 May 2011, this Court recognised the three Australian
liquidations as “foreign main proceedings”.2 On 17
June 2011, orders were made by the Federal Court of Australia recognising the
two New Zealand liquidations as “foreign
main proceedings” in
Australia.3 Both applications were made on a without notice
basis.
[4] Unfortunately, the evidence suggests an occasional tendency, on the
part of the liquidators and their advisers, to conflate
their discrete roles as
liquidators of the Australian and New Zealand companies, respectively. As will
become apparent, it is important
to differentiate between the capacities in
which Messrs Lock and Sheahan acted at particular times. To avoid any confusion,
I refer
to them as the New Zealand liquidators and the Australian liquidators,
respectively.
[5] The applications with which I am dealing are brought,
respectively, by Messrs Sheahan and Lock (as liquidators
of the New Zealand and
Australian companies), ANZ National Bank Ltd (ANZ NZ) (the New Zealand
companies’ banker) and
a bank officer employed by ANZ NZ, Ms Dekker. They
are:
(a) An application by the New Zealand liquidators4 to compel ANZ NZ and Ms Dekker to provide specified documents and to attend an examination before them at which all questions relating to the business, accounts or affairs of the New Zealand companies must be answered. In the alternative, orders are sought requiring the scheduled documents5 to be delivered to the New Zealand liquidators and for Ms Dekker to attend before the Court for examination.
Directions are also sought from the Court as to the costs to
which
1 Corporations Act 2000, ss 439C(c) and 446A (Cth). Previously, on 6 May 2012, Messrs
Sheahan and Lock had been appointed as administrators of the three Australian companies.
Model Law on Cross-Border Insolvency. For a discussion of the recognition process generally,
see Williams v Simpson [2010] NZHC 1786; [2011] 2 NZLR 380 (HC) at paras [21]–[34].
4 CIV-2011-404-6585.
5 See para [21] below.
ANZ NZ and Ms Dekker are entitled in complying with obligations imposed under either s 261 or s 266 of the Companies Act 1993 (the
1993 Act).
(b) An application by the Australian liquidators6 for an
order that Ms Dekker be required to attend for examination and produce documents
on matters relating to the Australian companies.
This application is made under
the Insolvency (Cross-border) Act 2006 (the Cross-border Act). They also seek
a declaration as
to their entitlement to use a transcript of an earlier
examination of Ms Dekker that was held before the New Zealand liquidators,
under
s 261(3)(c) of the 1993 Act.
(c) An application by ANZ NZ7 for a declaration that the New Zealand liquidators are prohibited from using any documents or information obtained in the Cedenco NZ liquidations (including the transcript of Ms Dekker’s examination before them) for any purpose foreign to those liquidations.8 It also seeks orders requiring the New Zealand liquidators to pay to ANZ NZ and Ms Dekker reasonable remuneration and expenses (including legal fees, calculated on an indemnity basis) in respect of their compliance with obligations under
s 261 of the 1993
Act.
6 CIV-2011-404-1623.
8 ANZ NZ and Ms Dekker complain that the New Zealand liquidators allowed a transcript of Ms
Dekker’s evidence at an examination held before them, under s 261(3)(c) of the 1993 Act, to be used by them, in their capacity as Australian liquidators, by annexing it as an exhibit to an affidavit sworn by Mr Sheahan on 20 September 2011, in opposition to an application by ANZ Australia, in the Federal Court of Australia, South Australia District Registry (SAD 123 of
2011). By that application, ANZ Australia was seeking “to discharge orders for production”
made on 23 June 2011. The transcript was not signed and verified by Ms Dekker until 4 October
2011: see paras [22] and [25] below.
Background
[6] The Australian and New Zealand companies were part of (what has been called) the Cedenco group of companies.9 Although there are two in liquidation in New Zealand and three in Australia, the parties are agreed that, for the purposes of the present applications, no material difference in treatment arises as between the two New Zealand companies (on the one hand) and the Australian companies (on the other). For that reason, unless the context requires otherwise, I shall refer
generically to the New Zealand companies as Cedenco NZ and to the Australian
entities as Cedenco Australia.
[7] The Cedenco NZ companies are owned by SK Foods International Ltd.
That too is a New Zealand company. There is a dispute
as to ownership of shares
in SK Foods International. The competing claimants are a group of companies in
the United States, beneficially
owned by a Mr Salyer, and the Bank of
Montreal.
[8] Cedenco JV Australia is owned by SK Foods Australia. SK Foods
Australia and SS Farms Australia are owned by entities in
the United States.
There is a dispute about ownership of the shares in those companies. The
competing claimants are SK Foods LP10 and entities associated with Mr
Salyer.
[9] Cedenco NZ and Cedenco Australia carried on business as food processors and distributors. The work was seasonal in nature. The companies produced fruit and vegetable powders, purées, pastes and the like. The nature of the banking facilities extended to each of the companies reflected that. The major sources of finance were ANZ NZ and ANZ Banking Group Ltd (ANZ Australia) respectively. To secure the amounts owing by Cedenco NZ to the banks, ANZ NZ took a debenture over the assets of Cedenco Foods on 24 February 2000 and a general
security agreement over the undertaking of Cedenco Ohakune, on 1
November 2005.
10 A limited partnership in the United States, currently subject to Chapter 11 of the US Bankruptcy
Code.
[10] By 2008, it became clear that the Cedenco NZ companies
were facing financial difficulties. Korda Mentha,
a firm of chartered
accountants in New Zealand, were appointed by Cedenco NZ as investigating
accountants for that company,
at the urgings of ANZ NZ. At this time, the
person with carriage of the ANZ NZ’s relationship with Cedenco NZ was Ms
Dekker.
While she is based in New Zealand, Ms Dekker was also
“relationship manager” for ANZ Australia, in respect of the Cedenco
Australia companies.
[11] During 2009, ANZ NZ required Cedenco NZ to arrange for
Cedenco Australia to cross-guarantee their indebtedness.
It is clear that, if
Cedenco Australia had declined to do so, ANZ NZ would have withdrawn its
financial accommodation to Cedenco
NZ and called up an indisputable debt then
owing. On 31 July 2009, a comprehensive Deed of Cross Guarantee was granted in
favour
of both ANZ NZ and ANZ Australia. Under this deed, the Cedenco NZ and
Cedenco Australia companies jointly and severally guaranteed
each other’s
obligations to the two ANZ entities.
[12] Less than three months later, on 19 October 2009, ANZ NZ gave notice
to Cedenco NZ of an event of default under the loan
and security documents
relating to the Cedenco NZ companies. ANZ NZ alleged that the EBIT11
forecast covenant had been breached. That was not disputed.
[13] Soon afterwards, each of the banks made demands for payment of the full amounts owing by the New Zealand and Australian companies. On 30 October
2009, ANZ NZ’s New Zealand solicitors, Bell Gully, demanded payment of
the
Cedenco NZ’s indebtedness (approximately $48 million), by 2 November
2009. On
4 November 2009, Blake Dawson, solicitors Melbourne, made demand on behalf of for ANZ Australia against Cedenco Australia, for both the Australia debt and that of Cedenco NZ that Cedenco Australia had guaranteed. The amounts claimed were something in the order of $AUD21 million and $NZ21 million, respectively.
Payment was demanded by 5 pm on 4 November
2009.
11 Earnings before interest and tax.
[14] Neither Cedenco NZ nor Cedenco Australia could comply with the
demands. On 9 November 2009, ANZ NZ appointed receivers
over Cedenco
NZ. ANZ Australia did likewise, in respect of Cedenco Australia.
[15] On 23 June 2010, the Australian receivers sold the business and
assets of Cedenco Australia to a Japanese company, Kargomi
Ltd, for
approximately $AUD93 million. Following payment of all its creditors, Cedenco
Australia was left with a significant surplus.
[16] Around the same time, the business and assets of the New Zealand companies were sold by the New Zealand receivers to another Japanese company, Imanaka Ltd, for approximately $NZ29.5 million. It was unclear, at that time, whether that would be sufficient to meet Cedenco NZ’s indebtedness to secured and unsecured creditors. However, the most recent liquidators’ report indicates that, unless any unforeseen creditors emerge, there is a surplus available for distribution to the shareholders of
Cedenco NZ.12
[17] Although ANZ Australia has been repaid in full from the proceeds of
sale of the Australian businesses, the Australian receivers
have declined to
resign and still hold significant funds. In New Zealand, the position is
different. There was a surplus of approximately
$67,000, which the receivers
declined to hold. Instead, they paid that sum into the trust account of the
New Zealand based solicitors
for the New Zealand liquidators, pending resolution
of any disputes between the liquidators and ANZ NZ as to entitlement to it. The
New Zealand receivers have since resigned.
Examination and production of documents
(a) The applications
[18] Ms Dekker was examined by the New Zealand liquidators on 11 July
2011. The New Zealand liquidators contend that she failed
to produce all
documents to
which they were entitled and did not fully answer
questions put to her that fell, they say, within the scope of s 261(3)(c) of the
1993 Act.
[19] As indicated earlier,13 the New Zealand liquidators seek
orders requiring ANZ NZ to deliver documents to them and compelling Ms Dekker to
attend for a second
examination to provide information they say was improperly
withheld. There are cross applications by the New Zealand liquidators
and ANZ
NZ/Ms Dekker in relation to the costs of compliance with demands to deliver
documents and attend examinations that have been
(or will be) incurred by either
of them.14
[20] The New Zealand liquidators seek alternative orders under s 266(1)
and (2). The application states:
(a) Under s 266(1) of the Companies Act 1993 (Act), that:
(i) [ANZ NZ and Ms Dekker] comply with the notices issued under s
261(3) of the on 26 May 2011 by [the New Zealand Liquidators]
by:
The [ANZ NZ] delivering to the Liquidators the documents
set out in the schedule to this application;
[Ms Dekker] attending upon the Liquidators and being
examined on oath and answer questions and providing information about
the
business, accounts, or affairs of the company;
[Ms Dekker] in that examination answering all
enquiries fully where they have been made by the Liquidators acting reasonably
and for the purposes of discharging their duties and for the purposes of
discharging their duties and/or the information
sought is necessary to
give the Liquidators the same knowledge as the directors of the companies at the
date of liquidation;
(b) Alternatively, under s 266(2) of the Act:
(i) That the [ANZ NZ] deliver to the liquidators the documents set
out in the schedule to this application (s 266(2)(b)));
(ii) That [Ms Dekker] attend before the Court and be examined on oath
on any matter relating to the business, accounts, or affairs
of the
companies;
13 See para [5](a) above.
14 The New Zealand liquidators apply for directions under s 284(1) of the 1993 Act, while ANZ NZ
and Ms Dekker seek to invoke the inherent jurisdiction of this Court.
[21] The documents to which the application refers are set out in its
Schedule states:
Documents not already provided and relating to:
(a) [ANZ NZ’s] reasons for promoting and/or requiring the
appointment or removal of directors of the [Ex-Ced Foods
and Cedenco
Ohakune] during 2009 and all related actions contemplated or taken by or on
behalf of [ANZ NZ];
(b) The nature of any defaults or purported or anticipated defaults by
[Ex-Ced Foods and Cedenco Ohakune] under their [ANZ
NZ] facilities in
2009;
(c) In this respect, any relationship between NZ and AU lending and
any cross defaults or purported or anticipated cross defaults;
(d) Full details of all notices or advice of any defaults, purported
or anticipated defaults given to [Ex-Ced Foods and Cedenco
Ohakune] in
2009;
(e) The content and timing of any proposals or discussions
about remedying defaults or purported or anticipated defaults
under the [Ex-Ced
Foods and Cedenco Ohakune] [ANZ NZ] facilities, or to repay, refinance or vary
those facilities in 2009, including
any information as to [ANZ NZ’s]
consideration of the Imanaka proposal in October/November 2009;
(f) Full details of [ANZ NZ’s] consideration of any such matters
and its reasons for rejecting or failing to act on or
respond to any
proposals;
(g) [ANZ NZ’s] decision to appoint receivers to [Ex-Ced Foods
and Cedenco Ohakune] and the reasons for that decision,
including any advice
given or considerations suggested to [ANZ NZ] by the receivers relating to any
of the matters referred to above
whether prior to or after appointment;
(h) The scope, nature, timing and contents of discussions and
correspondence with the directors of [Ex-Ced Foods and Cedenco Ohakune]
(or
their agents or representatives) and the [ANZ NZ] (or its agents or
representatives) in any way relating to the matters in (a)
to (g) above;
and
(i) The scope, nature, timing and contents of discussions and correspondence with the agents or representatives of the owners of [Ex-Ced Foods and Cedenco Ohakune] and the [ANZ NZ] (or its agents or representatives) in any way relating to the matters in (a) to (g) above.
(b) Ms Dekker’s July 2011 examination
[22] Ms Dekker’s examination by the New Zealand liquidators on 11
July 2011 was convened under s 261(3)(c) of the 1993 Act.15
Questions were put to her by a South Australian Silk, instructed by the
New Zealand liquidators, who is admitted to practise in New
Zealand. A
transcript of the examination was made. The transcript was not signed and
verified by Ms Dekker until 4 October 2011.
[23] In attendance at the examination were Mr Sheahan, his Australian
solicitor, Ms Yorston, his New Zealand solicitor, Mr Long,
and Mr Whittington
QC. Mr Tingey and Mr Friar attended as counsel for Ms Dekker.
[24] During the course of the examination, it became clear that, while Ms Dekker would answer questions relating to the businesses of Cedenco NZ, she would not (on legal advice) provide documents or information in relation to the internal workings of the banks; for example, the banks’ reasons for decisions involving the cross- guarantees and enforcement of the security documents.16 Having taken that position, Ms Dekker was not pressed to provide the information. At the conclusion of the examination, counsel for Ms Dekker sought copies of the transcript and the documents produced. Mr Tingey expressly stated that Ms Dekker wanted to provide
a copy of the transcript to her employer, ANZ NZ.
[25] On 30 August 2011, the New Zealand solicitors for the New Zealand liquidators wrote to the solicitors for ANZ NZ stating their view “that Ms Dekker [had] no right to a copy of the transcript” notwithstanding arguments that had been advanced based on the New Zealand Bill of Rights Act 1990 and the principles of natural justice.17 Nevertheless, the solicitors indicated that “a copy of the electronic recording and written transcript, and the bundle of documents, can be provided if Ms Dekker agrees that she will sign and return a copy of the written transcript once
satisfied it is an accurate record”. Following confirmation that
she would do so, the
15 Set out at para [32] below.
documents and the electronic recording were provided to the solicitors for Ms Dekker and ANZ NZ, on 5 September 2011. Ms Dekker perused and corrected the transcript. It was signed and returned to the New Zealand liquidators on 4 October
2011.
(c) Competing submissions
[26] Mr Tingey, for ANZ NZ, submits that the New Zealand liquidators are
acting for an improper purpose in seeking to examine
Ms Dekker for a second
time.18 He contends that the New Zealand liquidators have not laid
a foundation to demonstrate that the proposed examination is a “genuine
investigative step” in the New Zealand liquidations, as opposed to being
“part of an extensive fishing expedition”,19 for the
benefit of Cedenco Australia. Mr Tingey points out that the furthest that Mr
Sheahan goes is to say that the New Zealand
liquidators are investigating
“the circumstances, reasons, and ultimate propriety of [the 2009
cross guarantees] and
... the consequential appointment of receivers in
both” Australia and New Zealand. He also queries whether it is
appropriate
to order an examination in circumstances where it is almost certain
that all creditors of Cedenco NZ will be paid in full from existing
realised
assets.20
[27] Mr Tingey submits that Mr Sheahan’s evidence demonstrates an intention (on the part of the New Zealand liquidators) to use the New Zealand examination process for the purpose of assisting the Australian liquidators to determine whether to issue proceedings in Australia. He submits that, because ANZ NZ was entitled to call up the debt owing by Cedenco NZ on the basis of a default in compliance with the EBIT condition of the existing facility agreement, execution of the 2009 cross
guarantees has no relevance to the liquidation of Cedenco
NZ.
18 Reliance is placed on Re Hartley and Riley Consolidated Gold-Dredging Co Ltd [1931] NZLR
977 (SC) at 983, Re Northrop Instruments and Systems Ltd [1992] 2 NZLR 361 (HC) and
Petterson v Gothard (No 3) [2012] NZHC 666, at para [61].
20 See para [16] above.
[28] Mr Tingey points to the use of the transcript of Ms Dekker’s
first examination in the Australian Court proceedings,
for the purposes
of Cedenco Australia, to underscore his submission that the New Zealand
liquidators are acting for
an improper purpose.21 This, he
submits, is an intended use of information gathered by the New Zealand
liquidators for “purposes collateral to the
[New Zealand]
liquidation”.22
[29] Mr Chisholm, for the New Zealand liquidators, submits that there is no reason why the New Zealand liquidators should not examine, notwithstanding the likely surplus. Further, he contends that the statutory examination process is not limited to obtaining information that merely reconstitutes the knowledge of the company in liquidation. Mr Chisholm submits that the only appellate decision that has purported to confine the examination process to reconstituted knowledge,
Cloverbay Ltd v Bank of Credit and Commerce International SA,23
was subsequently
discredited by the House of Lords24 and, in this country, has been
held to be only part of the range of information that a liquidator may
seek.25
[30] Mr Chisholm acknowledges that the New Zealand
liquidators are investigating whether claims may exist against
parties,
including ANZ NZ. He accepts that may be a factor that is determinative of an
application to examine, in some cases, but
asserts that in the present case, it
is not.
[31] Mr Chisholm disputes the proposition that a solvent company in liquidation ought to be required to undertake litigation in the usual way, without an ability to examine a potential witness or opponent, because, he submits, it is the status of the entity, as a company in liquidation, that gives rise to the power; not its state of
insolvency at any particular
time.
21 See para [5](b) and (c) above and fn 8.
22 Re Barlow Clowes Gilt Managers Ltd [1991] 4 All ER 385 at 391 (ChD) (Millett J).
23 Cloverbay Ltd v Bank of Credit and Commerce International SA [1991] 1 All ER 894 (CA).
24 British and Commonwealth Holdings Plc v Spicer and Oppenheim [1993] AC 426 (HL).
25 Carrow Holdings Ltd (in liq) v Sadiq HC Auckland CIV-2007-404-2855, 5 June 2008.
(d) Analysis
(i) The statutory scheme
[32] Powers to require delivery (or production) of documents and the
attendance of a person for examination are conferred discretely
on liquidators
and the Court. A liquidator’s power to require a person to deliver
documents and to attend for examination
is set out in s 261 of the 1993 Act.
On the other hand, the Court’s powers spring from s 266. Relevantly,
those provisions
state:
261 Power to obtain documents and information
(1) A liquidator may, from time to time, by notice in writing, require
a director or shareholder of the company or any other
person to deliver to
the liquidator such books, records, or documents of the company in that
person's possession or under that person's control as the liquidator
requires.
(2) A liquidator may, from time to time, by notice in writing
require—
...
(e) A receiver, accountant, auditor, bank officer, or other
person having knowledge of the affairs of the company; or
(3) A person referred to in subsection (2) of this section may be
required—
(a) To attend on the liquidator at such reasonable time or times and
at such place as may be specified in the notice:
(b) To provide the liquidator with such information about the
business, accounts, or affairs of the company as the liquidator
requests:
(c) To be examined on oath or affirmation by the liquidator or
by a barrister or solicitor acting on behalf of the liquidator on any matter
relating to the business, accounts, or affairs of the company:
(d) Assist in the liquidation to the best of the person's ability.
...
266 Powers of Court
(1) The Court may, on the application of the liquidator, order a person who has failed to comply with a requirement of the liquidator under section
261 of this Act to comply with that requirement.
(2) The Court may, on the application of the liquidator,
order a person to whom section 261 of this Act applies to—
(a) Attend before the Court and be examined on oath or
affirmation by the Court or the liquidator or a barrister or solicitor acting on
behalf of the liquidator on any matter relating to the business, accounts, or
affairs of the company:
(b) Produce any books, records, or documents relating to the
business, accounts, or affairs of the company in that person's possession
or
under that person's control.
(3) Where a person is examined under subsection (2)(a) of
this section,—
(a) The examination must be recorded in writing; and
(b) The person examined must sign the record.
....
(emphasis added)
[33] The power to require the provision (to use a neutral word) of
documents is expressed differently, depending upon whether
it is exercised by
the liquidator or the Court. A liquidator may only require delivery of
documents “of the company”,26 while the Court may order
production of documents “relating to the business, accounts, or affairs
of the company”.27 This distinction was noted in
Official Assignee v Grant Thornton.28 Associate Judge Abbott
said:
[19] ... If Parliament had intended liquidators to be able to exercise
the same power by notice under s 261(3)(b), the wording
of that subsection could
be expected to mirror that in s 266(2)(b). Further, s 266(2)(b) would then be
unnecessary, as a liquidator
could apply for compliance under s
266(1).
[34] Under s 261, a liquidator may require one or more members of specified classes of persons29 to be examined on oath on any matter relating to the business, accounts, or affairs of the company in liquidation.30 Bank officers are a class of persons who may be summoned for examination.31 The examination process is
commenced by service of a notice in writing on a specified person to
attend on the
26 Ibid, ss 261(1) and (3)(b).
27 Ibid, s 266(2)(b).
28 Official Assignee v Grant Thornton [2012] NZHC 2145 at para [19].
29 Companies Act 1993, s 261(2).
30 Ibid, s 261(3)(c).
31 Ibid, s 261(2)(e).
liquidator, or a barrister or solicitor acting on his or her behalf, to be
examined “on any matter relating to the business,
accounts, or affairs of
the company”.32 Further rules apply to the tendering of
reasonable travelling and other expenses in connection with an examination
and a
proposed examinee’s ability to apply to the Court to receive
reasonable remuneration for his or her attendances.33
[35] Section 266 is the means by which the High Court may order that a qualifying person be examined. Two distinct bases exist to make such an order. First, the Court may order a person who has failed to comply with a requirement of a liquidator under s 261, to comply with it. On that basis, the Court could require Ms
Dekker to be examined further by the liquidators,34 on any
matters on which she
withheld evidence at the first examination, if a relevant default were
proved.35
[36] Alternatively, the Court, without proof of failure to comply with an earlier requirement of a liquidator, may order that a qualifying person attend before the Court, to be examined “on any matter relating to the business, accounts or affairs of the company” and to “produce any books, records, or documents relating to the business, accounts, or affairs of the company in that person’s possession or under that person’s control”.36 While an examination before the Court must be recorded in
writing and signed by the examinee,37 the 1993 Act is silent on
that point when the
examination is before a liquidator.
(ii) Production of documents – s 266(1)
[37] I deal first with the application under s 266(1) for provision of documents requested pursuant to the s 261(1) notice. The documents to which the Schedule to the application refers38 are internal documents of ANZ NZ which, while “relating
to”39 the affairs of Cedenco NZ, are not
documents “of”40 Cedenco NZ. That
being
32 Ibid, s 261(2) and (3)(c).
33 Ibid, s 261(4), (5) and (6). These are discussed at paras [69]–[82] below.
34 Ibid, s 261(3)(c).
35 Ibid, s 266(1).
36 Ibid, s 266(2).
37 Ibid, s 266(3).
38 See para [21] above.
39 Companies Act 1993, s 266(2)(b).
40 Ibid, s 261(1).
so, it was never open to the New Zealand liquidators to compel, by s 261(1)
notice, delivery of such documents to them. No relevant
default has been proved
to trigger the s 266(1) jurisdiction to require documents to be produced to the
New Zealand liquidators.
That being so, the issue must be determined by
reference to the Court’s powers under s
266(2)(b).41
[38] I emphasise that “delivery” of documents “of the company” under s 261(1) is different conceptually from the “production” of documents by a third party, to which s 266(2)(b) refers. Documents42 of a company are delivered to a liquidator because they belong to the company and should be in his or her custody. Documents that are generated by third parties must be produced because a liquidator has no right to retain them. There is no doubt that once such documents are produced to a
liquidator, he or she has the ability to copy them for use in the
administration of the liquidation.
(iii) Examination – s 266(1)
[39] The next question is whether there was any failure, by Ms Dekker, to
provide relevant evidence at the 11 July 2011 examination.
The issue is
whether, by refusing to provide oral evidence about (for example) reasons for
requiring cross-guarantees she failed
to comply with the s 261(3)(c) examination
requirements.
[40] The case for the New Zealand liquidators is that Ms Dekker’s refusal to supply information or documents from ANZ NZ’s internal records that relate to Cedenco NZ is a relevant failure. As indicated previously,43 there is no qualifying failure to comply in respect of the provision of documents, as ANZ NZ’s internal records do not fall either within the scope of s 261(1) or (3)(b). But, Ms Dekker also declined to provide the liquidator with information about the way in which ANZ NZ
made its decisions. The question is whether, by declining to answer
such questions,
41 See para [68] below.
42 The term “document” is defined by s 2(1) of the 1993 Act to mean “a document in any form”;
including: (a) Any writing on any material; and (b) Information recorded or stored by means of a tape-recorder, computer, or other device; and material subsequently derived from information so recorded or stored; and (c) A book, graph, or drawing; and (d) A photograph, film, negative, tape, or other device in which one or more visual images are embodied so as to be capable (with or without the aid of equipment) of being reproduced:
43 See paras [37] and [38] above.
Ms Dekker failed to comply with the liquidator’s requirement
to do so, under
s 261(3)(b).
[41] Section 261(3)(b) places an obligation on an examinee to answer questions “on any matter relating to the business, accounts, or affairs of the company”. The same formulation is found in the Court’s power to order an examination in cases where no prior default can be proved.44 Therefore, if Ms Dekker did not provide evidence falling within the scope of that requirement, the Court would have jurisdiction to order a further examination before the New Zealand liquidators to
compel compliance.
[42] I prefer to assume jurisdiction to make an order for a further
examination under s 266(1) but to deal with the application
on
discretionary grounds, by reference to s 266(2)(a). I do that because, if a
further examination were ordered, problems are
likely to arise about the proper
scope of the liquidators’ inquiries of the witness and whether information
sought from the
examinee falls within s 261(3)(c). In those circumstances, if an
examination order were appropriate, I would make it on terms requiring
it to be
conducted before an Associate Judge who would have the ability to compel answers
to be given to questions falling within
the scope of the order and to direct
that the examinee not answer questions falling outside of it.
(iv) Examination – s 266(2)(a)
[43] The broad powers of examination of third parties in New Zealand have been inherited from English legislation, going back as far as s 115 of the Companies Act
1862 (UK). That provision enabled the Court to summon an officer or other
person supposed to be capable of giving information concerning
a transaction and
trade dealings of a company. It was not until much later that the power to
require a person to be examined on
oath could be exercised administratively by a
liquidator.
[44] Until enactment of the 1993 Act, a distinction was drawn between
private and public examinations.45 Before s 19 of the Companies
Amendments Act 1980 (the
44 Companies Act 1993, s 266(2)(a).
45 For example, Companies Act 1955, ss 262 and 263.
1980 Amendment) came into force, no private examination could be held without a Court order. Even then, the ability to apply was limited to those liquidators who had been appointed by the Court. The 1980 Amendment saw Parliament grant a power to the Official Assignee, when acting as provisional liquidator, liquidator or in his or her supervisory capacity,46 to summon persons to whom the private examination
procedures applied for examination without Court approval.47 A
liquidator from the
private sector did not come within the purview of this new provision. Nor
was any power to examine conferred on a liquidator appointed
in a voluntary
liquidation.
[45] Public examination was reserved for cases in which, for varying
reasons of seriousness, it was desirable to have a person
associated with the
company provide evidence on oath, in public and before the Court.48
The power to examine publicly has since been repealed. The provisions of
the 1993 Act that authorise examinations are more nearly
analogous to the
private examination processes under earlier statutes.
[46] In determining whether it is appropriate for the liquidators to examine Ms Dekker for a second time, under either s 266(1) or (2), it is first necessary to consider whether jurisdiction exists in the circumstances of this case; in particular, where it is almost certain that all creditors of Cedenco NZ will be paid in full from existing realised assets. I begin my analysis by reference to what the 1993 Act calls the
“principal duty of a liquidator”. Section 253
provides:49
253 Principal duty of liquidator
..., the principal duty of a liquidator of a company is—
(a) To take possession of, protect, realise, and distribute the
assets, or the proceeds of the realisation of the assets, of
the company to its
creditors in accordance with this Act; and
46 Ibid, s 232. That section deals with the circumstances in which it was necessary for an Official
Assignee to report to the Court after a winding up order had been made.
of the 1955 Act, discussed further at paras [147]–[150] below
48 Ibid, s 263. There is a useful discussion of the nature and purposes of the public examination procedure in Hamilton v Oades [1989] HCA 21; (1989) 166 CLR 486 (HCA), in the context of s 541(3) of the Companies (New South Wales) Code. The purposes of the public examination procedure was discussed by Mason CJ at 498.
49 Section 253 is subject to s 254, but the latter provision is not relevant in this case.
(b) If there are surplus assets remaining, to distribute them,
or the proceeds of the realisation of the surplus assets,
in accordance with
section 313(4) of this Act—
in a reasonable and efficient manner.
[47] Section 253 differentiates between a liquidator’s duty to
creditors (on the one hand) and shareholders (on the
other). To enable
creditors to be repaid, the liquidator is required to take possession of,
protect, realise, and distribute
the assets or the proceeds of the realisation
of the assets of the company to the creditors, in accordance with the statutory
priorities
set out in Schedule 7 to the 1993 Act.50 In order to
fulfil those functions, a liquidator must determine what assets exist, both
tangible and intangible. To obtain information
from those who are unwilling to
provide it voluntarily, the liquidator may use his or her powers of
examination.
[48] In an insolvent liquidation, the process of realisation will
generally have been completed by the time distribution of surplus
moneys or
assets becomes an issue. The liquidator’s obligation is to distribute any
surplus to shareholders, in accordance
with s 313(4) of the 1993
Act.51
313 Claims of other creditors and distribution of surplus
assets
...
(4) Subject to section 311 of this Act, after paying the claims
referred to in subsection (1) of this section, the liquidator
must distribute
the company's surplus assets—
(a) In accordance with the provisions contained in the
company's constitution; or
(b) If the company's constitution does not contain provisions for the
distribution of surplus assets or, if the company does
not have a constitution,
in accordance with this Act.
[49] In my view, the way in which s 253(a) and (b) is expressed does not necessarily oust the Court’s jurisdiction to order an examination where there is a surplus, as long as the Court is satisfied, as a matter of discretion, that one is justified. There will be cases that might justify exercise of the liquidator’s right to
examine to obtain information, even though the company may be solvent
and any
50 See also Companies Act 1993, s 313.
distributions will be made to shareholders. Examples are cases in which a minority or equal shareholder has taken steps to put a company into liquidation, for example because of oppressive52 conduct against the shareholder53 or an inability for an equal shareholder to operate the business due to deadlock.54 In those circumstances, the rationale for invoking the examination process is the same as that pertaining in an
insolvent liquidation; namely, the need to obtain information about the
company’s affairs that might not be provided voluntarily
by another
shareholder, or a third party. On that analysis, I do not consider that
the likely solvency of Cedenco NZ is
something that removes the
Court’s jurisdiction to order an examination.
[50] That approach is also consistent with the availability of an examination process when a company takes advantage of the voluntary administration regime. A right for an administrator to examine is conferred by s 239AG, by reference to ss 261 and 266 of the Act. That power can be seen in the context of an administrator’s duty
to investigate the company’s affairs and to consider possible courses
of action;55 a
not dissimilar situation to that confronting any liquidator.
[51] In deciding whether, as a matter of discretion, to order an
examination, the nature, scope and purpose of the power are relevant.
The
nature and purpose of the power have been discussed by many eminent company law
Judges over the years. For present purposes,
three examples will
suffice:
(a) In 1879, in Re Gold Co Ltd, Sir George Jessel MR
said:56
. . . the whole object of the section is to assimilate the
practice in winding up to the practice in bankruptcy, which
was established in
order to enable assignees, who are now called trustees, in bankruptcy to find
out facts before they brought an
action, so as to avoid incurring the expense of
some hundreds of pounds in bringing an unsuccessful action, when they might, by
examining
a witness or two, have discovered at a trifling expense that an action
could not succeed.
52 I use the term “oppressive” in a sense that includes all other bases on which liquidation of a
company based on prejudice to shareholders might be brought: see Companies Act 1993, s
174(1).
53 Companies Act 1993, s 174(2).
54 For example, Jenkins v Supscaf Ltd [2006] NZHC 416; [2006] 3 NZLR 264 (HC).
55 Companies Act 1993, s 239AE.
56 In Re Gold Co Ltd (1879) 12 ChD 77 (CA) at 85.
(b) In 1886, in Re Imperial Continental Water
Corporation, Chitty J referred to the examination powers as having been
“conferred upon the Court for the beneficial winding up of the
company,
for sometimes it happens that the liquidator is unable to obtain from
unwilling persons the information which
he
requires”.57
(c) In 1968, Buckley J, in Re Rolls Razor Ltd, said, in relation
to the comparable provision in the Companies Act 1948 (UK):58
The powers conferred by s 268 are powers directed to enabling the court to
help a liquidator to discover the truth of the circumstances
connected with the
affairs of the company, information of trading, dealings, and so forth, in order
that the liquidator may be able,
as effectively as possible and, I think, with
as little expense as possible and with as much expedition as possible, to
complete
his function as liquidator, to put the affairs of the company in order
and to carry out the liquidation in all its various aspects,
including, of
course, the getting in of any assets of the company available in the
liquidation.
It is, therefore, appropriate for the liquidator, when he thinks that he may
be under a duty to try to recover something from some
officer or employee of
a company, or some other person who is, in some way, concerned with the
company's affairs, to be able
to discover, with as little expense as possible
and with as much ease as possible, the facts surrounding any such possible
claim.
. . .
[52] After Rolls Razor, differing approaches to the scope of the power emerged. The first focussed on the need for a balance to be struck between a liquidator’s need to obtain information about a company and the prevention of oppressive conduct against an examinee, or possibly his or her principal. The balancing exercise comes into focus most sharply in cases where a liquidator seeks to examine a potential litigation adversary to obtain admissions under a process that is not available in ordinary civil proceedings. This approach requires consideration of any oppressive
conduct on the part of the liquidator.
57 In Re Imperial Continental Water Corporation (1886) 33 ChD 314 at 316.
[53] A different view was
articulated in 1990, in Cloverbay Ltd v Bank of Credit and Commerce
International SA.59 The principal judgment of the Court of
Appeal in that case was delivered by Sir Nicolas Browne-Wilkinson V-C.
The Vice-
Chancellor, referring to the need for balance, identified the purpose
of the section as enabling a liquidator to reconstitute
the knowledge of
the company, so as to discharge his or her duties to creditors and
(possibly) shareholders.60
[54] In British and Commonwealth Holdings Plc v Spicer and Oppenheim,
the House of Lords disapproved the Cloverbay approach.61
Giving the leading speech, Lord Slynn of Hadley said that, if the
Vice-Chancellor had intended to restrict the purpose of the legislation
to
“reconstituting the company’s knowledge”,62 he was
in error because no such limitation could be ascertained from the general words
of the relevant section.
[55] In any event, the two approaches are not mutually exclusive. They
represent different reasons for allowing a liquidator
to gather documents and
information. I adhere to the view I expressed in Carrow Holdings Ltd v
Sadiq.63 A liquidator will generally be permitted to
examine if the information sought is a genuine investigative step to
enable
the liquidator to reach an informed decision on what to do, whether that
involves reconstitution of knowledge or not.64
[56] In reality, both approaches work together. It is equally important for the liquidator to reconstitute knowledge of directors of the company as it is for him or her to make informed decisions about what steps to take for the benefit of creditors. In that context, it must be remembered that a liquidator usually has limited funds with which to work and it is in the public interest that he or she obtains relevant
information with as little expense as possible and in the most
expeditious manner.
59 Cloverbay Ltd v Bank of Credit and Commerce International SA [1991] Ch 90 (CA).
61 British and Commonwealth Holdings Plc v Spicer and Oppenheim [1992] 4 All ER 876 (HL).
62 Ibid, at 437.
63 Carrow Holdings Ltd (in liq) v Sadiq HC Auckland CIV-2007-404-2855, 5 June 2008 at paras
[27]–[32].
64 Ibid, at para [30].
[57] Evidence in support of the application has been given by one of the
New Zealand liquidators, Mr Sheahan. He does not identify
a specific reason for
the New Zealand liquidators’ belief that it is necessary for them to
examine Ms Dekker for a second time.
The furthest Mr Sheahan goes is in his
affidavit of 18 October 2011, in which he deposes:
Basis for seeking information
20. The circumstances of the receiverships of the [New Zealand]
Companies are highly unusual. The Companies were part
of a number operating in
the Cedenco Foods group. The Companies were profitable, and the Cedenco
companies across Australia and
New Zealand were together highly profitable.
The assets of the Companies were sold at a value that has resulted in a
surplus.
21. There are live questions over issues such as why the Companies
ended up in a position where there was a forced sale of their
assets, and
whether the Companies have any claims against any person in relation to the
events that have led to that forced sale.
I have duties as liquidator of the
Companies to investigate those matters.
[58] The New Zealand liquidators have been able (from the first examination of Ms Dekker and other inquiries) to reconstitute the knowledge of the company at relevant times; in particular, around July 2009 when the cross-guarantees were negotiated and executed. It is most unlikely that the New Zealand liquidators could bring a claim against ANZ NZ in respect of entry into the cross-guarantees because ANZ NZ already held enforceable securities over the assets of the Cedenco NZ
companies.65 No foundation has been laid for a reasonable belief
that such a cause
of action may exist.
[59] Generally speaking, as long as a liquidator is not seeking to bring
pressure to bear on a potential litigation adversary
for some “ulterior
purpose” he or she will be allowed to examine. In such a case, as
McGechan J observed in
Re Northrop Instruments and Systems
Ltd:66
The liquidator’s intentions obviously are intensely unwelcome –
such is usual – but such is not unfairness.
65 See para [11] above.
66 Re Northrop Instruments and Systems Ltd [1992] 2 NZLR 361 (HC) at 365.
[60] Similarly, while acknowledging that there was a public interest
involved in the need to facilitate inquiry into company collapses,
McGechan J
observed that there was “a countervailing concern to restrain liquidators
from excess, however well intentioned”.67 In the particular
case before him, McGechan J took the view that “the public interest
favours early ascertainment of fact, as
opposed to the alternative vexation of
procedure on suspicion”. In the case before him, the Judge concluded that
“no
excess [was] involved”.68
[61] A useful summary of principles applicable when determining
whether a proposed examination is or is not an abuse of
process can be found in
the judgment of the Full Court of the Federal Court of Australia, in Re Excel
Finance Corporation Ltd (Receiver and Manager Appointed); Worthley v
England.69 In summary:
(a) Whether there is an abuse of process will depend on the purpose of
the application and the circumstances of the case.70 Generally, for
an abuse of process to be found, it is necessary that the offensive purpose be,
at least, the predominant purpose.71
(b) If an applicant for an examination order has the purpose of
obtaining a forensic advantage not otherwise available, his
or her conduct is
likely to amount to an abuse of process.72
[62] By way of illustration, the use of the power to obtain an examination summons for the principal purpose of furthering the cause of a liquidator’s appointors in litigation against third parties, for a purpose foreign to that for which it was granted, will amount to an abuse of process.73 That is because it is not being
exercised for the benefit of the corporation, its
contributories74 or creditors. In
Excel,
67 Ibid.
68 Ibid.
69 Re Excel Finance Corporation Ltd (Receiver and Manager Appointed); Worthley v England
[1994] FCA 1251; (1994) 52 FCR 69 (FCA) (Gummow, Hill and Cooper JJ).
70 Ibid, at 89.
71 Ibid.
72 Ibid, at 90–91.
73 Re Excel Finance Corporation Ltd (Receiver and Manager Appointed); Worthley v England
[1994] FCA 1251; (1994) 52 FCR 69 (FCA) at 93.
74 The term “contributories” was widely used in earlier corporate insolvency statutes as a synonym
for shareholders.
the Court took, the view that even if the benefit were indirect, the use of
the examination power might still be for an improper purpose;
for example an
attempt to use the examination process as an “the opportunity for
pre-trial depositions which would not be available”75 in
ordinary civil litigation.
[63] In Evans v Wainter,76 a Full Court of the
Federal Court of Australia considered whether obtaining a significant
litigation advantage could amount
to an abuse of process. Delivering the
principal judgment of the Court, with which Ryan and Crennan JJ agreed, Lander J
remarked
that while the liquidator would obtain a significant advantage in
conducting litigation in respect of foreshadowed
proceedings against
the company’s previous law form for misleading or deceptive conduct in
trade,77 it did not amount to an abuse of process. In that case,
the examinations would benefit the general body of creditors. Two of the
proposed examinees had been directors of the company in liquidation, while the
third was a partner in a firm of solicitors who had
acted for the
company.
[64] Our Court of Appeal considered the point in Re Smith (A Bankrupt).78 In that case, the examination procedure was considered in the context of a summons issued by the Official Assignee to obtain information from a bankrupt’s wife about a transaction that was suspected to fall foul of s 47 of the Matrimonial Property Act
1976; a provision rendering void transactions between husband and wife with
an intent to defeat creditors. The decision is of assistance
because it
considers a case in which no Court order was required to commence the
examination process.79
[65] The wife applied to set aside the summons. Delivering the judgment
of the
Court of Appeal, Holland J said:80
Some care must be taken in considering the English decisions both under the
Companies Act and Bankruptcy Act because those statutes
did not give the
liquidator or official assignee the power to issue a summons. Any summons was
issued by the Court presumably
on the application of the
Official
75 Ibid.
76 Evans v Wainter [2005] FCAFC 114; (2005) 145 FCR 176 (FCA).
77 Ibid, at 218.
78 Re Smith (A Bankrupt) [1992] NZFLR 241 (CA).
80 Re Smith (A Bankrupt) [1992] NZFLR 241 (CA) at 244–245.
Assignee or liquidator. Similarly under the New Zealand Companies Acts prior
to 1980 the summons was issued by the Court. The Act
was amended in 1980 to
enable the Official Assignee when appointed provisional liquidator to
issue a summons.
The control by the Court of the exercise of the powers of the Official Assignee when he has failed to act fairly and without oppression may well be exercised on the same principles as where an application has to be made to the Court to issue the summons except, perhaps, as to the onus of proof. Where the Court is to issue the summons the applicant must satisfy the Court that it is appropriate to do so. Where the Official Assignee has acted within his apparent lawful authority and the application is to set aside the summons the applicant must demonstrate to the Court that the issue of the summons is oppressive and not fair in the circumstances.
...
The conduct of litigation in the last decade or so has changed dramatically from what existed in the 19th and early 20th centuries. The absolute nature of the adversary system in civil litigation has not only been criticised but much modified. Orders for pre-trial disclosure of evidence have become commonplace (see Rule 438 of the High Court Rules). Trial by surprise now has few supporters. It is generally desirable that a litigant or a prospective litigant be as fully informed as possible of all relevant facts at the earliest practical time. In this way costs to litigants and waste of time in Court may be substantially lessened.
Section 68 of the Insolvency Act is for the purpose of enabling the Official
Assignee to obtain information, and, to be as fully informed
as possible
relating to the property and transactions of the bankrupt. It is in part a
recognition that in many cases information
as to the bankrupt’s affairs
and dealings will be incomplete. In so far as prospective litigation is
concerned it will often
be needed to equip him with the same information as
would have been available to the bankrupt prior to the intervention of
bankruptcy,
assuming that proper records had been kept. In cases of dealings
with the bankrupt where the bankrupt is not available, is
suffering
from lack of memory, or is being evasive or unco-operative, it may be
necessary, so as to ensure that the Official Assignee
is able to meet his
opposing litigant on equal terms. In each case the balancing exercise will be
one of degree. ...
(emphasis added)
Since Smith was decided in 1991, the trend against trial by ambush and the need for a litigant to be as fully informed as possible of all relevant facts at the earliest practical time has continued unabated. A good example is the introduction of new discovery rules, implemented from 1 February 2012 by the High Court Amendment
Rules (No. 2) 2011.81
[66] Having balanced relevant
considerations in Smith, the Court of Appeal concluded that the
examination would not give the Official Assignee a forensic advantage over the
wife, as a
litigant. Rather, it was to be held for the purpose of determining
whether or not to continue with an existing proceeding, with
the same knowledge
of the facts that the wife had.82
[67] While I hold that there is jurisdiction to make an order for
examination under s 266(2) (notwithstanding the likely solvency
of Cedenco NZ),
I conclude that the factors weighing against examination far exceed those in
favour. In short:
(a) The New Zealand liquidators have failed to identify any subject on
which Ms Dekker should be examined that would benefit
Cedenco NZ, as opposed to
Cedenco Australia. The Australian liquidators can (and have) sought an
examination of Ms Dekker for the
benefit of Cedenco Australia, under art
21(1)(d) of the First Schedule to the Insolvency (Cross-border) Act 2006. If
Ms Dekker
were to be examined about ANZ NZ’s conduct in relation to
Cedenco Australia, that is the appropriate source of jurisdiction.
(b) It would be oppressive to Ms Dekker (and, inferentially, ANZ NZ) to
require her to attend an examination, when no benefit
could flow to creditors of
Cedenco NZ, who have been paid in full. The New Zealand liquidators’
attempt to examine Ms Dekker
can, in my view, fairly be characterised as being
for an ulterior purpose.
(c) Ordinarily, where creditors have been paid and liquidators’ costs are spiralling upwards, it would be appropriate to terminate the liquidation, with the consequential ability for the company’s board to take action, if they thought fit, to recover any debt or damages they considered were payable. After the liquidation process is terminated
the ability to use the “extraordinary” examination powers is
spent.83
82 Ibid, at 246.
(v) Production of documents – s
266(2)(b)
[68] I am satisfied that there is jurisdiction to make an order under s
266(2)(b) requiring Ms Dekker to produce internal
bank records to the
New Zealand liquidators. However, for the same reasons given in respect of my
refusal to order an examination,
this application should be
dismissed.84
Section 261 – remuneration and expenses
(a) The application
[69] ANZ NZ seeks orders entitling it and Ms Dekker to reasonable
remuneration and expenses (including indemnity costs in
relation to fees
and disbursements charged by their solicitors) for responding to the s 261
notice originally issued by the New
Zealand
liquidators.85
[70] The application is put on two bases:
(a) First, ANZ NZ’s ability to recover remuneration and costs
through the general conditions of its debenture over
Ex-Ced and its
general security agreement over the undertaking of Cedenco Ohakune. In those
security documents, the two companies
each promised ANZ NZ that it would pay
indemnity costs in respect of all enforcement procedures undertaken by ANZ
NZ.
(b) Second, under the discretion reposed in the Court under s 261(5) of
the 1993 Act.86
[71] In its application, ANZ NZ calculates the fees and expenses incurred
by the
New Zealand liquidators, in the period between 6 May 2010 and 19 January
2012 as
84 See para [67] above.
86 Set out at para [79] below.
$2,393,719.29. It asserts that the New Zealand liquidators (personally) have
charged for their services at an hourly rate of $910,
plus GST. To the extent
that the assets of the companies in liquidation might not be sufficient
to meet any costs and/or
expenses claimed or awarded, ANZ NZ seeks an
order that the liquidators be personally responsible for their
payment.
[72] The New Zealand liquidators dispute any obligation to meet ANZ
NZ’s actual costs and expenses through application of
general conditions
in the security documents. They also contend that the costs and expenses
claimed have not been incurred in complying with their requirements under
s 261(3), because ANZ NZ declined to provide all required documents to the New
Zealand liquidators.
[73] The New Zealand liquidators also contend that the
costs claimed ($66,639.89) for providing documents for
the purpose of a single
examination that lasted approximately two hours are not reasonable. Further, Mr
Chisholm submitted that
such costs are not claimable as “expenses”,
under s 261(5).
[74] The New Zealand liquidators also contest the proposition that the
Court can exercise supervisory jurisdiction in relation
to questions of costs,
on the grounds that such jurisdiction extends only to Court appointed
liquidators. I deal with that point
later, in a different context. I hold
against the New Zealand liquidators’ position.87
(b) The Court’s powers to order remuneration and
expenses
[75] I deal with the points taken by Mr Tingey in reverse
order.88
[76] Between 4 March 2011 and 26 May 2011 the New Zealand liquidators issued a series of notices under s 261(3) of the 1993 Act. For present purposes, the notice issued on 26 May 2011 is engaged. Ms Dekker was required to attend before the New Zealand liquidators to “provide them with information and to be examined on oath in relation to business, accounts and affairs of the [Cedenco NZ companies],
and to assist them with the conduct of the liquidation”, to the best of
her abilities.
Those notices led to the first examination of Ms Dekker.
[77] I discussed the scope of the s 261 powers in Petterson v Gothard,89 in the context of attempts by a New Zealand based liquidator to obtain information about the company from Australian based receivers. In the present case, it is necessary to expand on that analysis, to take account of the fact that this case deals with a bank officer summoned for examination to give evidence about her knowledge of ANZ NZ’s interaction with Cedenco NZ, particularly around the time that the cross- guarantees were required and executed, and the bank’s reasons for requiring the
guarantees to be given.90
[78] The final form of the s 261 notice stated:
TAKE NOTICE THAT:
Pursuant to s 261(3) of the Companies Act 1993, the liquidators of Ex-Ced
Foods and Cedenco Ohakune (both in Receivership and Liquidation)
(Companies)
require you to attend on them, provide them with information and be examined on
oath in relation to business, accounts
and affairs of the Companies, and to
assist them with the conduct of the liquidation to the best of your
abilities.
(a) [ANZ NZ’s] reasons for promoting and/or requiring the
appointment or removal of directors of the Companies during
2009 and all related
actions contemplated or taken by or on behalf of [ANZ NZ];
(b) The nature of any defaults or purported or anticipated defaults by
the companies under their [ANZ NZ] facilities in 2009;
(c) In this respect, any relationship between NZ and AU lending and
any cross defaults or purported or anticipated cross defaults;
(d) Full details of all notices or advice of any defaults, purported
or anticipated defaults given to the Companies in 2009;
(e) The content and timing of any proposals or discussions
about remedying defaults or purported or anticipated defaults
under the
Companies’ [ANZ NZ] facilities, or to repay, refinance or vary those
facilities in 2009, including any information
as to [ANZ NZ’s]
consideration of the Imanaka proposal in October/November 2009;
(f) Full details of [ANZ NZ’s] consideration of any such matters and its
reasons for rejecting or failing to act on or respond to any proposals;
(g) [ANZ NZ’s] decision to appoint receivers to the Companies
and the reasons for that decision, including
any advice given or
consideration suggested to [ANZ NZ] by the receivers relating to any of the
matters referred to above whether
prior to or after appointment;
(h) The scope, nature, timing and contents of discussions and
correspondence with the directors of the Companies (or their agents
or
representatives) and the [ANZ NZ] (or its agents or representatives) in any
way relating to the matters in (a) to (g)
above; and
(i) the scope, nature, timing and contents of
discussions and correspondence with the agents or representatives
of the
owners of the Companies and the [ANZ NZ] (or its agents or representatives) in
any way relating to the matters in (a) to (g)
above.
If any information relating to the above issues is contained in documents
then you are required to bring all such documents relating
to the matters above
for the purpose of the examination.
...
Failure to comply with this notice is an offence under s 261(6A) of the
Companies Act 1993.
[79] Section 261(4) and (5) of the Companies Act 1993 relevantly
provide:91
261 Power to obtain documents and information
...
(4) Without limiting subsection (5) of this section, the liquidator
may pay to a person referred to in paragraph (d) or paragraph
(e) or paragraph
(f) of subsection (2) of this section, not being an employee of the company,
reasonable travelling and other expenses
in complying with a requirement of the
liquidator under subsection (3) of this section.
(5) The Court may, on the application of the liquidator or a person
referred to in paragraph (d) or paragraph (e) or paragraph
(f) of subsection (2)
of this section, not being an employee of the company, order that that person is
entitled to receive reasonable
remuneration and travelling and other expenses in
complying with a requirement of the liquidator under subsection (3) of this
section.
....
[80] Section 261(4)–(6) outlines the circumstances in which a person
might be entitled to seek reimbursement of expenses, or
to receive reasonable
remuneration,
when complying with a requirement of the liquidator under s 261(3). Ms Dekker falls within the category of person who may seek reasonable remuneration and expenses. She is a “bank officer”; a person to whom s 261(2)(e) refers. However, ANZ NZ is not an entity that can seek either remuneration or expenses. It is not the proposed examinee. The words used in s 261(4), (5) and (6) all refer to “a” or “the” person who has been required to attend for examination or to provide information to the relevant liquidator. Because only natural persons may be required to do any of
the things to which s 261(3) refers,92 the remuneration and
expenses provisions can
only apply to the human being required to attend for examination or to
provide information.93
[81] A liquidator’s discretion to offer payment of “reasonable travelling and other expenses in complying with a requirement of the liquidator under” s 261(3) does not extend to remuneration.94 Only this Court can determine whether a claim for remuneration should be allowed.95 That authorisation will not usually be given until after the examination has taken place. The 1993 Act explicitly states that a proposed
examinee is not entitled to refuse to comply with any requirement by reason
only that an application to the Court is pending or remuneration
or travelling
and other expenses to which that person is entitled have not been paid in
advance; or, if the liquidator has not paid
for travelling or other
expenses.96
[82] Do the authorities mandate a different approach? Mr Tingey relied
on Re Hartley and Riley Consolidated Gold-dredging Co Ltd97
to support his submission that ANZ NZ should be entitled to solicitor and
client costs out of the assets of the company, in responding
to a
liquidator’s summons to take copies of bank accounts and for a bank
manager to appear for examination. Smith J, without
giving reasons,
said:98
I think that the bank should have its costs of the examination as between
solicitor and client out of the assets in the winding up.
92 Companies Act 1993, s 261(2).
93 Ibid, s 261(3)(b) and (c).
94 Ibid, s 261(4).
95 Ibid, s 261(5).
96 Ibid, s 261(6).
97 Re Hartley and Riley Consolidated Gold-dredging Co Ltd [1931] NZGazLawRp 107; [1931] NZLR 977 (SC).
98 Ibid, at 983.
[83] No analysis was undertaken, in Hartley and Riley, of the
basis on which that should be so. No reference was made to security documents.
Nor was there any provision akin to s 261(5)
of the 1993 Act in the Companies
Act 1908, with which Hartley and Riley was concerned. No other basis was
identified for such an order to be made. I regard Hartley and Riley as
wrongly decided. I decline to follow it.
[84] The Court’s power to order payment of remuneration is new. The comparator provisions of ss 262 and 262A of the Companies Act 1955 (the 1955 Act) referred only to the need to tender a reasonable sum for the proposed examinee to come before the Court (or the Official Assignee) at the appointed time for examination.99
While there is nothing in the Law Commission’s report or Parliamentary
records to
indicate the reason for the change, its likely purpose is to protect a
self-employed person from losing significant earnings while
attending to assist
the liquidator; or, perhaps, to protect from loss someone who had to take leave
from his or her employment because
an employer is not directly or indirectly
involved in the subject matter of the examination and is not prepared to pay
wages for
the examinee’s time involved in assisting the liquidator. I do
not consider that the section was intended to reimburse an
employer for
remuneration paid to an employee when the employee is attending for examination
to assist the liquidator in performing
his or her duties under the 1993 Act.
In this case, the costs incurred by ANZ NZ arose out of the collation of
documents sought
by the New Zealand liquidators and its desire to protect its
and its employee’s interests at the examination.
[85] I accept Mr Chisholm’s submission that the term “travelling or other expenses” do not extend to the legal costs incurred by ANZ NZ in order for an employee to comply with a requirement to assist the liquidators. Different considerations apply where documents have been extracted and produced at an examination in circumstances where a liquidator has no power to compel delivery of the documents or production of them, without a Court order.100 As a result of the solicitors’ involvement in this case, no documents were delivered or produced which fell outside the scope of the New Zealand liquidators’ powers. Nor was oral
evidence given on ANZ NZ’s involvement (or the extent of it) in
the process leading
99 Companies Act 1955, ss 262(4) and 262A(4).
100 Companies Act 1993, s 261(1) and (3)(c).
up to requirement of the cross-guarantees. In other words, the legal
costs and disbursements that ANZ NZ elected to incur were
for its own benefit.
In terms of the statute, ANZ NZ is not entitled to be reimbursed for
them.
(c) Is the bank entitled to indemnity costs?
[86] Mr Tingey submitted that ANZ NZ was entitled to recover all of the
costs and expenses incurred in responding to the
s 261 notices, by
virtue of its security documents. Surprisingly, that submission was made
even though the ANZ NZ has been
repaid its debt in full and the 1993 Act
provides detailed provisions as to the circumstances in which this Court may
exercise a
discretion to award remuneration or expenses to a person required to
comply with a s 261 notice.101
[87] The short answer to this point is that, both in collating documents and in Ms Dekker attending for examination, ANZ NZ was not enforcing its security. Its employee was required to assist the liquidator as a result of the exercise of powers reposed in a liquidator appointed under the 1993 Act. They were not actions (or events of default) of a company on which the security documents could bite. While not completely analogous, the situation may reasonably be compared with what applies when a liquidator obtains payment under a voidable transaction. Because the right to bring an action of that type is conferred on a liquidator, a bank’s security
does not attach to any recoveries.102
[88] The relevant security documents provide for standard indemnities when a lender is seeking to enforce payment of moneys secured. As there is no material difference between the way in which the various security agreements are expressed, I use cl 15.1 of the debenture taken by ANZ NZ over the undertaking of (what was then) Cedenco Foods to explain my reasons for holding against Mr Tingey’s
submission on this point.
101 Ibid, s 261(4) and (5).
102 The liquidators’ powers to recover moneys paid under antecedent transactions are set out in
ss 292–299 of the 1993 Act. As authority for the proposition that recoveries do not fall within relevant security documents, see, for example, Re Yagerphone Ltd [1935] Ch 392 and N A Kratzmann Pty Ltd (in liq) v Tucker (No 2) [1968] HCA 44; (1968) 123 CLR 295 (HCA), in particular at 301 per McTiernan, Taylor and Menzies JJ.
[89] Clause 15.1 provides the general indemnity:
15. INDEMNITIES/NO MARSHALLING
15.1 General Indemnity: The Company indemnifies the Bank and each
receiver on demand to the fullest extent permitted by law, against any cost,
loss, expense
(including all legal expenses on a solicitor and own client
basis), other liability (including loss of profit or of margin) and any
penalty
(including any fine or statutory impost) that the Bank certifies as having been
sustained or incurred as a result of or in
connection with:
(a) the occurrence or continuance of any Event of Default;
(b) anything done or omitted or purported to be done or omitted by the
Bank or a receiver in the exercise or purported exercise
of its rights under
this Debenture or at law (and whether or not arising by reason of mistake,
oversight, negligence or error of
judgment);
(c) a defect of the company’s title to any property that is, or which
appears to be, Secured Property;
(d) any claim, demand, action or legal proceeding made or taken by any
person (including the Company) against the Bank or a
receiver that in any way
relates to the whole or any part of the Secured Property (including, without
limitation, the legal costs
incurred by the Bank or a receiver (on a solicitor
and own client basis) in defending any such claim, demand, action or legal
proceeding);
(e) any amount payable by the Company to the Bank not being paid when
due (whether by acceleration or otherwise) or being received
or recovered by the
Bank other than on its due date:
(f) any failure on the part of the Company to utilise any banking
accommodation (in whole or in part) on the date designated
for utilisation of
the same;
(g) any bill of exchange drawn or accepted for the accommodation of
the Company, to which the Bank is party;
(h) any bond, guarantee, standby letter of credit or analogous
assurance or undertaking issued by the Bank at the request of
the
Company;
(i) the Bank giving credit or performing any other service for the
Company.
...
[90] In order to come within cl 15.1, on the facts of this case, the relevant costs, losses or expenses must have “been sustained or incurred as a result of or in connection with” “the occurrence or continuance of any Event of Default”. None of the “Events of Default” to which cl 9.2 of the Debenture refers would trigger the ability for the liquidators to pay such costs. The contractual provisions provide no
basis for the proposition that ANZ NZ is entitled to require payment of costs
or expenses in circumstances where the receivership
has been completed and
it is responding solely to requirements placed upon it by a liquidator under
relevant statutory provisions;
particularly when those powers are conferred in
the public interest.103
[91] As a matter of policy, it would put an intolerable burden on a
liquidator if a secured creditor were to insist customarily
on payment of
indemnity costs and disbursements to meet fees and expenses incurred by them,
for their own benefit. The liquidators
(on whom the powers are conferred
personally) are not contracting parties. Many liquidations would simply not
have sufficient funds
to enable that to be done and it would simply curtail,
inappropriately, the ability for the liquidator to undertake his or her tasks,
putting at risk the liquidator’s ability to perform his or her statutory
functions. In my view, it would be contrary to public
policy to allow a
contractual term of that nature to override the statutory scheme,
particularly, s 261(5), even if the
documents purported to extend to cover such
expenses.
[92] I rule against ANZ NZ on this point. There is no ability for ANZ NZ
to seek indemnity costs and expenses through application
of its own security
documents, when the costs have been incurred in response to a liquidator’s
requirement under s 261.
(d) Alleged misconduct by New Zealand
liquidators
[93] ANZ NZ contends that the New Zealand liquidators are disentitled from reliance on the indemnity to pay costs and expenses out of the assets of the companies in liquidation because they have engaged in misconduct. Mr Tingey cites
the colourful dictum of Hammond J, in Re Galdonost Dynamics NZ Ltd
(in liq):104
103 See para [51] above.
104 Re Galdonost Dynamics Ltd (in liq) (1994) 7 NZCLC 260,499 (HC) at 260,503.
“Liquidations are not a bottomless well from which insolvency
practitioners may drink”.
The Judge went on to observe that “where there is demonstrated
misconduct or
incompetence on the part of a liquidator, fees may be disallowed in whole or
in part”.
[94] Mr Tingey submits that despite the “routine” nature of
the Cedenco NZ liquidations, for a period of 21 months
from 6 may 2010 to 19
January 2012, the New Zealand liquidators incurred fees and expenses of
$NZ2,393,719.29, plus GST. For more
than half of that time, the receivers
appointed by ANZ NZ were in office, trading and selling the Cedenco NZ business.
Mr Tingey
contends that the hourly rate charged by the New Zealand liquidators
is $NZ1,045 per hour (inclusive of GST), more than $300 per
hour more than what
would be expected of a liquidator based in New Zealand conducting one of the
most complex of liquidations.
[95] Mr Chisholm challenges the underlying premise of Mr Tingey’s
submission, contending that there is no connection between
remuneration charged
by the New Zealand liquidators and the appropriate level of remuneration or
expenses payable to a person summoned
for examination under s 261(3)(c). Mr
Chisholm submits that “it is officious and an abuse of process” for
ANZ NZ to
attempt to put improper pressure on the liquidators by suggesting that
they have overcharged.
[96] The foundation for Mr Chisholm’s submission seems to be that,
to the extent that there is a challenge to a liquidator’s
remuneration, it
can be undertaken by the Court on an application by a qualifying person under s
284(1)(e) of the 1993 Act:
284 Court supervision of liquidation
(1) On the application of the liquidator, a liquidation committee, or,
with the leave of the Court, a creditor, shareholder,
other entitled
person, or director of a company in liquidation, the Court may—
...
(e) In respect of any period, review or fix the remuneration of the
liquidator at a level which is reasonable in the circumstances:
....
[97] Although ANZ NZ comes within none of the qualifying categories, its pre- liquidation debt having been paid in full, I am with Mr Chisholm on this point. In an extreme case, where the rights of creditors would be affected by payment of a significant sum under s 261(5) as a result of misconduct on the part of the liquidator, I consider there would be jurisdiction to exercise a discretion for the remuneration or expenses to be paid personally by a liquidator. However, in the ordinary course there is no reason why liquidators should not have recourse to their indemnity to meet expenses from the assets of the company in liquidation. Such an indemnity is
explicitly provided for by s 278 of the 1993 Act:105
278 Expenses and remuneration payable out of assets of
company
The expenses and remuneration of the liquidator are payable out of the assets
of the company.
The Australian liquidators’ application to examine Ms
Dekker
[98] The Cross-border Act adopted, in New Zealand, the UNCITRAL Model Law on Cross-border Insolvency (the Model Law). The Model Law is directed primarily to commercial debtors (whether corporate or individual) with assets or liabilities in more than one State. Its object is to provide procedural mechanisms to facilitate more efficient disposition of cases in which an insolvent debtor had assets or debts in
more than one State.106
[99] The Australian liquidators apply to examine Ms Dekker. Because, as Australian liquidators, they have no ability to invoke s 266 of the 1993 Act, they have applied under art 21(1)(d) of the First Schedule to the Cross-border Act. The Court has a discretion to order an examination under that provision because the liquidation of each Australian company has been recognised as a foreign main
proceeding in New Zealand.107
107 See para [3] above.
[100] Article 21(1)(d) provides:
21 Relief that may be granted upon recognition of a foreign
proceeding
(1) Upon recognition by the High Court of a foreign
proceeding, whether main or non-main, where necessary to protect the assets
of the debtor or the interests of the creditors, the Court may, at the
request of the foreign representative, grant any appropriate relief,
including:
...
(d) providing for the examination of witnesses, the taking of
evidence, or the delivery of information concerning the debtor's
assets,
affairs, rights, obligations, or liabilities;
....
(emphasis added)
[101] In deciding whether to grant or deny relief sought under either art
19 or art
21, art 22(1) also comes into play:
22 Protection of creditors and other interested persons
(1) In granting or denying relief under article 19 or
article 21, or in modifying or terminating relief under paragraph (3) of
this article, the High Court must be satisfied that the interests of the
creditors and other interested persons, including the debtor, are adequately
protected.
....
(emphasis added)
[102] There are no New Zealand decisions in which an order for examination has been made under art 21(1)(d), after full argument.108 I was referred, however, by Mr Chisholm to a recent decision of the Chancery Division of the High Court, Picard v FIM Advisers LLP.109 That proceeding arose out of an application under the Cross- Border Insolvency Regulations, the instrument by which the Model Law was given
effect in England. In considering the equivalent of art 21(1)(d),
Kitchen J said:110
108 In Re Omegatrend International Pty Ltd (in liq) HC Auckland CIV-2010-404-4098, 5 October
2010, Associate Judge Faire made directions on whether an examination should be held in Court or in chambers, following unchallenged orders for examination made on 5 July 2010 recognising the Australian liquidation as a foreign main proceeding. See also, Williams v Simpson [2011] BPIR 938 (HCNZ) at paras [54] and [56](c) and Williams v Simpson HC Hamilton CIV-2010-
419-1174, 21 September 2010, at para [5].
109 Picard v FIM Advisers LLP [2010] EWHC 1299 (ChD).
110 Ibid, at para 21.
21. Article 21 of schedule 1 to the CBIR reads:
“(1) Upon recognition of a foreign proceeding, whether main or
non-main, where necessary to protect the assets of the debtor
or the interests
of the creditors, the Court may, at the request of the foreign representative,
grant any appropriate relief including-
....
(d) providing for the examination of witnesses, the taking of evidence
or the delivery of information concerning the debtor’s
assets, affairs,
rights, obligations or liabilities.”
22. In addition I must have regard to Article 22 which provides that in
granting or denying relief the court must be
satisfied that the
interests of interested persons are adequately protected. Interested persons
include the person against whom
an order for delivery of information is
sought.
23. It is apparent that Article 21(1)(d) has both a jurisdictional
and a discretionary component. The court must be satisfied that the
information sought concerns the debtor’s assets, affairs, rights,
obligations or liabilities. If it is so satisfied then it
has a discretion to
order the delivery of that information. In exercising that discretion
it must have regard to all
relevant circumstances and ensure that the
interests of the person against whom the order is sought are adequately
protected.
24. Both parties before me were also agreed that it is appropriate for
the court to have regard to the principles upon which
the court will exercise
its powers under section 236 and section 366 of the Insolvency Act 1986. The
relevant principles for present purposes are, I think, these.
25. First, the power is conferred to enable the office holder to
discover the true facts concerning the affairs of the company
so that he may be
able as quickly, effectively and with as little expense as possible to complete
his duties.
26. Second, even an honest person who finds himself to have
been involved in a major fraud which has had a catastrophic
effect for thousands
of investors must be expected to cooperate with the office holder.
27. Third, nevertheless, the court must avoid making any order which is
unnecessary or unreasonable or which is
oppressive to the
respondent.
28. Fourth, one of the factors which weighs against making an order or
limiting its scope in some way is the disruption, stress
and expense likely to
be caused to the respondent.
29. Fifth, in assessing what order to make the court will attach considerable weight to the views of the office holder.
(emphasis added)
[103] The point of difference between this application and that of the New Zealand liquidators’ application is that there may be genuine issues to be explored concerning the cross-guarantees, for the benefit of Cedenco Australia. Mr Tingey acknowledged as much. However, he submitted that this Court ought not to order an examination because the cross-border insolvency legislation is designed to provide assistance to foreign representatives to realise assets of an insolvent debtor for the benefit of its
creditors; as opposed to a foreign representative of a solvent
company.111 Mr Tingey
referred to a decision of the High Court of Australia, in
Hamilton v Oades.112
Mr Tingey also referred to the definition of “foreign proceeding”
in art 2(a) and to its use, in art 21.113 The definition is:
Article 2. Definitions
For the purposes of this Schedule:
(a) foreign proceeding means a collective judicial or administrative
proceeding in a foreign State, including an interim proceeding,
pursuant to a
law relating to insolvency in which proceeding the assets and affairs of the
debtor are subject to control or supervision
by a foreign court, for the purpose
of reorganisation or liquidation;
....
[104] With respect, Mr Tingey’s submission is flawed because, while the administration of the Australian liquidations happens to have produced a surplus, it remains appropriate to characterise the regime as a “collective ... proceeding ... pursuant to a law relating to insolvency”. In Larsen v Navios International Inc,114
Norris J considered an application for additional relief on recognition of a
foreign
proceeding under the (English) Cross-Border Insolvency Regulations.115
The Judge
cited with approval a passage from Professor Ian
Fletcher’s text, The Law of
111 The term “foreign representative” is defined in art 2(d) of the First Schedule to the Insolvency
(Cross-border) Act 2006.
enable the liquidator to gather information to assist in the liquidation, involving protection of the
interests of creditors.
113 See also the opening words of art 21(1), set out at para [100] above.
114 Larsen v Navios International Inc [2012] 1 BCLC 151 (ChD).
115 Cross-Border Insolvency Regulations 2006, Sch 1, art 21.
Insolvency,116 in which the Professor emphasised that the
fundamental principle on which a winding-up is based is its collective nature.
The purpose
is “to ensure that an orderly regime is imposed upon all
interested parties so that none of them individually may enhance his
position by
exploiting some fortuitous circumstance which may yield an unfair advantage
...”117
[105] Although there are no creditors of Cedenco Australia whose interests
require protection, there may be a need to make an order
to protect118
Cedenco Australia’s ability to bring a civil claim against ANZ
Australia, or, much more remotely, ANZ NZ. While a potential
cause of action is
not a perishable asset, relevant limitation periods may constrain the time
available for a liquidator to apprise
himself or herself fully of relevant
considerations, before deciding whether to issue proceedings. In that sense,
it is fair to
characterise a desire to examine as an attempt to
“protect”, or preserve the value of an inchoate asset.
[106] The ability for the Australian liquidators to apply under art
21(1)(d) was triggered by the recognition order made by Courtney
J on 20 May
2011.119 That order remains in force. Although there is
jurisdiction to terminate the order, when circumstances have changed, no
application
has been made by either of the ANZ companies or Ms Dekker to do so.
Articles 17(5) and 22(3) of the First Schedule provide:
Article 17. Decision to recognise a foreign proceeding
...
(5) The provisions of articles 15, 16, 17, and 18 do not
prevent modification or termination of recognition if it
is shown that the
grounds for granting it were fully or partially lacking or have ceased to
exist.
...
Article 22. Protection of creditors and other interested
persons
...
116 Ian F Fletcher The Law of Insolvency (4th ed, Sweet & Maxwell, London, 2009).
117 Larsen v Navios International Inc [2012] 1 BCLC 151 (ChD), at 159–160.
118 See art 21(1) of the Cross-border Act, set out at para [100] above.
119 Re Sheahan and Lock HC Auckland CIV-2011-404-1623, 20 May 2011.
(3) The Court may, at the request of the foreign representative or a
person affected by relief granted under article 19 or
article 21, or at its own
motion, modify or terminate such relief.
...
[107] Although the Model Law has been enacted in some 19 States and territories, to date, no cases have yet come before the Court dealing squarely with this issue.120
In my view, once a foreign proceeding has been recognised as such and the
order remains extant, a foreign representative has standing
to bring an
application under art 21(1)(d). There is jurisdiction to make an order because
the present application is directed to
obtaining information about a potential
asset, in the form of a cause of action.121 Having reached that
point, it is necessary to consider the (non-exhaustive) discretionary
considerations to which Kitchen
J referred in Picard before
determining whether an order should be made.122
[108] The present application falls to be considered in the context of orders that have already been made in Australia. On 23 June 2011 the Federal Court made orders, on a without notice basis, enabling the Australian liquidators to summon two directors of Cedenco Australia to be examined about the affairs of those companies and to produce certain books and records in relation to them. In addition, ANZ Australia and their solicitors, Blake Dawson, were required to produce to the Court certain documentation relating to Cedenco Australia. ANZ Australia and Blake Dawson applied to discharge the orders made against them. The Australian liquidators used the transcript of Ms Dekker’s examination in New Zealand as part
of the evidence on which they relied to oppose that application.123 As a result of a
consent order made on 14 October 2011 the scope of the documents required for
production was narrowed and 34 relevant documents were
produced.
121 See also para [105] above.
122 See para [102] above.
123 See fn 8 above.
[109] The documents that were produced by ANZ Australia and Blake Dawson to
comply with the consent order were those that fell within
two schedules which
defined the documents to be produced by each of those
entities:124
(a) In the case of ANZ Australia they were:
All documents created by Australia and New Zealand Banking Group Ltd (ANZ Australia)) in relation to SK Foods Australia Pty Ltd (ACN 099 245 735) (SKFA), Cedenco JV Australia Pty ltd (ACN 075 836 010) (CVJA) and SS Farms Australia Pty Ltd (ACN
107 746 716) (SSFA) (Collectively the Cedenco Australia
companies, or received by ANZ (Australia) from the Cedenco Australia
companies,
(other than those books or records already produced to the Applicants):
1.1 in the period 1 January 2009 to 30 November 2009
regarding or referring to the proposed or actual granting of the guarantee
dated 31 July 2009 (Guarantee) by the Cedenco Australia Companies in
favour
of ANZ Australia;
1.2 in the period 1 January 2009 to 30 November 2009
regarding or referring to the proposed or actual enforcement
of the Guarantee and any mortgage or other security securing the obligations
under it;
1.3 in the period 1 January 2009 to 30 November 2009
regarding or referring to the proposed or actual appointment
of receivers or other external controller over any of the Cedenco Australia
companies;
1.4 in the period 1 July 2006 to 30 November 2009 regarding or
referring to the transfer or proposed transfer of any shares in the
Cedenco Australia companies;
1.5 in the period 1 July 2006 to 30 November 2009 regarding or
referring to the assignment or posed assignment of any debt owed by SKFA to
SK Foods LP to a third party; and
1.6 in the period 1 January 2009 to 30 November 2009
regarding or referring to the enforcement by ANZ Australia of
any security granted in its favour by any of the Cedenco Australia
companies.
2. All documents created in or referring to communications or conversations between employees of the ANZ Australia or ANZ National Bank (ANZNZ) on the one hand and the directors of Cedenco companies on the other in the period of
1 January 2009 to 30 November 2009 regarding the proposed or actual
enforcement of the Guarantee and any mortgage or other security securing
obligations under it.
124 The term “documents” was defined by reference to s 3 of the Evidence Act 1995 (Cth).
(b) In respect of Blake Dawson, they were:
1. All documents in relation to SK Foods Australia Pty Ltd (ACN 099
245 735) (SKFA), Cedenco JV Australia Pty Ltd (ACN 075
836 010) (CVJA) and SS
Farms Australia Pty Ltd (ACN 107 746 716) (SSFA) (collectively the Cedenco
Australia companies (other than
those books or records already produced to the
Applicants):
1.1 in the period 1 January 2009 to 31 December
2009 regarding or referring to the enforcement by the Australia and New Zealand Banking Group
(ANZ Australia) or any security granted in its favour
by any of the Cedenco Australia companies;
1.2 in the period 1 January 2009 to 31 December
2009 regarding or referring to the proposed or actual appointment of receivers or other external
controller over any of the Cedenco Australia
companies.
[110] Although documents evidencing ANZ Australia’s and ANZ
NZ’s approach to the application for cross-guarantees have
already been
procured by the Australian liquidators, under the consent order made in the
Federal Court,125 they have not had an opportunity to examine Ms
Dekker on those documents, from the Australian side of the transaction. I
remind
myself that Ms Dekker was also the “relationship manager” in
respect of ANZ Australia’s dealings with Cedenco Australia,
as its
customer.126
[111] Although there are genuine issues to be addressed on an examination
of Ms Dekker, I must balance that against the fact that
any examination would
reveal information that might not otherwise be available to Cedenco Australia
were those companies to issue
proceedings against ANZ Australia in that
jurisdiction, or ANZ NZ in New Zealand. I do so in the absence of expert
evidence of relevant
Australian law in relation to the circumstances in which
Australian liquidators of a solvent company might be entitled to examine
Ms
Dekker, under applicable Australian domestic law, if she were within the
Federal Court’s jurisdiction.
[112] The competing considerations are finely balanced. However, I am
concerned about the absence of any evidence of foreign law
to establish whether
an Australian
125 See paras [108] and [109] above.
126 See para [10] above.
Court would authorise an examination by the liquidators of Cedenco Australia,
given its position of solvency. As a matter
of discretion, it would
appear wrong in principle to make an order under the cross-border
legislation, if the Australian
liquidators would not be able to obtain one if
Ms Dekker were resident in Australia. To do so would provide an unnecessary and
undesirable
forensic advantage to the Australian liquidators.
[113] In those circumstances, I propose to adjourn the application
under art
21(1)(d). I have considered the possibility of communicating
directly with Besanko J, the Federal Court Judge in
Australia on whose
docket the Cedenco Australia liquidations appear to be. On reflection, I have
decided not to do so.
[114] As I see it, there are two possibilities. The Australian liquidators may elect to file expert evidence on the point. If that were done, I could act on uncontested evidence or resolve any disputed issues (following affidavits in reply) after a further hearing. Alternatively, if appropriate under applicable Australian law, the Australian liquidators might apply to the Federal Court for directions on whether, if Ms Dekker were within the jurisdiction of that Court, it would order her examination, given the solvent position of Cedenco Australia and any other relevant discretionary
considerations, such as the liquidators’ conduct.127
If the Federal Court were
prepared to rule on that issue in the Australian liquidators’
favour, I would be prepared to make an order that Ms
Dekker be examined in New
Zealand, on terms to be settled later.
Alleged misuse of transcript of Ms Dekker’s first
examination
(a) Introductory comments
[115] Ms Dekker contends that the New Zealand liquidators acted improperly in making available a transcript (unsigned and unverified) of her first examination to themselves, in their capacity as the Australian liquidators. Ms Dekker’s concern is
that the transcript was used by the Australian liquidators in
proceedings they had
127 See paras [156] and [157] below.
brought before the Federal Court for the benefit of the Cedenco Australia
companies, whereas it was evidence obtained for the purpose
of the Cedenco NZ
liquidations.
[116] Mr Sheahan annexed the transcript to an affidavit that he swore in the Federal Court proceeding. Written submissions tendered to the Court for that hearing also referred to and relied on evidence from the transcript. Ironically, on 20 September
2011, before Mr Sheahan’s affidavit was sworn, the solicitors acting
for the New
Zealand liquidators had, in a letter to Ms Dekker’s solicitors
dated 30 August
2011,128 emphasised the private nature of the examination process
in stating (after the examination) that Ms Dekker had no right to receive
a copy
of it.129
[117] Mr Tingey’s contention is that this Court,
exercising a supervisory jurisdiction over liquidators,
is entitled to make
orders to declare any inappropriate use of a transcript as improper, with any
necessary and consequential directions.
In so submitting, Mr Tingey asserts
that a liquidator appointed in a liquidation commenced other than by Court
order is,
nonetheless, an officer of this Court and subject to its supervisory
jurisdiction.130
[118] Mr Tingey contends that the examination conducted by the New Zealand
liquidators under s 261(3)(a) of the 1993 Act is a private
process. While that
view is supported by a long line of authority,131 it requires
reconsideration in light of changes made to the examination provisions after
repeal of the 1955 Act.
[119] Mr Chisholm submits that the New Zealand liquidators were entitled to provide the transcript to the Australian liquidators for their use. He submits that, because the Cedenco NZ liquidations were commenced voluntarily by the shareholders of those companies, the New Zealand liquidators are not officers of this Court and cannot be subject to a sanction that would otherwise be available to a
person holding that status.132 Further, he
submits that, having regard to the changes
128 See para [25] above.
129 Ibid.
130 Generally, see Heath & Whale on Insolvency (LexisNexis looseleaf) at para 22.8(f) and Re
Roslea Path Ltd (in liq) HC Tauranga CIV-2005-470-611, 17 December 2009.
131 For example, see Re Hardy (a bankrupt), ex parte Official Assignee [1922] NZLR 108 (SC) and
Re Baird (a bankrupt) [1994] NZHC 83; [1994] 2 NZLR 463 (HC).
132 See, for example, Re David A Hamilton & Co Ltd (in liq) [1928] NZGazLawRp 44; [1928] NZLR 419 (SC) at 422.
in the liquidation legislation since the 1955 Act, there is now no
prohibition on the use of transcripts, with or without permission
from the
Court.
[120] Strangely, it is the Australian liquidators who apply for an order
approving, retrospectively, their use of the transcript.
Mr Tingey made the
point that it was not for the Australian liquidators to defend their use of the
transcript, but, rather, for
the New Zealand liquidators to assert a lawful
basis on which they provided it. In those circumstances, Mr Tingey submits that
the
application has been made by the wrong liquidators. In his submission, any
application for retrospective approval ought to have
been made in respect
of provision of the transcript, by the New Zealand
liquidators.
[121] Three issues arise:
(a) What jurisdiction does this Court have over liquidators appointed
by shareholders or directors of the company?133
(b) Was the transcript misused?
(c) If so, should retrospective approval for use of the transcript by the
Australian liquidators be given?134
(b) Jurisdiction
[122] Historically, a distinction has been drawn between liquidators appointed by the Court (who have always been regarded as officers of the Court) and those appointed through other means, who have not. However, significant changes were made to the appointment and roles of liquidators when the 1993 Act was passed. In contrast to earlier legislation, Parliament gave to the Court a general power to supervise acts or decisions made by a liquidator appointed by any available means,
including an ability to review or fix his or her remuneration at a level
which was
133 The means by which a liquidator may be appointed voluntarily are set out in s 241(2)(a) and (b)
of the Companies Act 1993.
reasonable in the
circumstances.135 The question whether that change was intended to
characterise all liquidators as officers of the Court is central to
determination
of the jurisdictional question. The point remains
unresolved.
[123] In Re Roslea Path Ltd (in liq),136 a Full Court of
this Court considered, as part of its analysis of the way in which it should
determine applications to fix remuneration
under the 1993 Act, the position
pertaining under the 1955 Act. That part of the Roslea Path judgment
explains the previous liquidation processes in a manner equally applicable to
the point now under consideration.
[124] Based on earlier English models, there were three types of liquidation regime available under the 1955 Act, each being known by the term “winding up”. The three categories were: a members’ voluntary winding up, a creditor’s voluntary winding up and a winding up by the Court.137 In Roslea Path, this Court said:
[22] We take a broad description of each type of winding up regime from
Sutton, Creditors’ Remedies in New Zealand (Butterworths Wellington,
1978) at 7-8, paras 1.51-1.52:
a) A members’ voluntary winding up was initiated by a
resolution of shareholders, coupled with a declaration
by the directors that the
company was solvent. If, at a later stage, it became clear that the company
could not pay all of its debts,
provision was made for it to be administered,
thereafter, as an insolvent company.
b) A creditor’s voluntary winding up was also commenced by a
resolution of shareholders. But, it was not accompanied
by a declaration of
solvency. Because of the assumption of insolvency, a meeting of creditors had
to be called the day after the
company resolved to wind up. A liquidator was
appointed by the creditors. The creditors also had the right to appoint a
Committee
of Inspection, which exercised (some) oversight of the
liquidator’s activities.
c) A creditor could petition the Court for an order that the
company be wound up. The Court would appoint the
Official Assignee as
a “provisional liquidator” who would call meetings of creditors and
contributories. The creditors
would appoint a liquidator, to replace the
provisional appointment, at their meeting.
135 Companies Act 1993, s 284(1).
136 Re Roslea Path Ltd (in liq) HC Tauranga CIV-2005-470-611, 17 December 2009.
137 Ibid, at para [21].
[125] The 1993 Act discarded those three regimes and replaced them with a single liquidation process that could be commenced by resolution of either shareholders or directors, or by Court appointment.138 That change was made in consequence of recommendations made by the Law Commission when it considered company law reform in the late 1980s.139 An illustration of the way in which the assimilation of the prior liquidation regimes works in practice can be found in the provisions of the
1993 Act that permit this Court to fix or to review a liquidator’s
remuneration. In
Roslea Path, Venning J and I said:140
[38] The remuneration provisions of s 276(2) of the 1993 Act differentiate between liquidators appointed by the Court and those appointed by shareholders or directors of the company. They also differentiate between the remuneration payable to the Official Assignee and a private liquidator: s
276(1).
[39] In terms of s 276(1), private liquidators who are appointed by
shareholders or directors of the company are entitled to charge reasonable
remuneration. They do not need Court approval to fix the remuneration, whether
or not the company is insolvent. Nevertheless,
those liquidators are subject to
review of their remuneration on an application under s 284(1)(e) and (f) of the
1993 Act. Unless the Court otherwise orders, an Official Assignee or a
private person appointed as a liquidator by the Court is remunerated
in
accordance with s 276(2).
[40] In practice, that means that creditors of a company put
into liquidation through the appointment of a private
liquidator by either
shareholders or directors must take an active stance in challenging remuneration
charged under s 284(1)(e).
If that were not done, unscrupulous liquidators may
charge as they like.
(emphasis added)
[126] The Commission intended to reduce the role of the Court in liquidations (based on what it termed a “major criticism ... that a liquidator must refer matters to the Court frequently”) and to treat all types of liquidations in the same way.141 While the Commission believed that it had recommended adequate safeguards for a
reduction of the liquidation process to one model, its
recommendations were
138 Ibid, at para [33].
139 Company Law Reform and Restatement (NZLC R 9, 1989).
140 Re Roslea Path Ltd (in liq) HC Tauranga CIV-2005-470-611, 17 December 2009 at paras [38]–
[40].
141 Ibid, at paras 642, 644 and 645.
undermined, at least in one respect, by Parliament’s decision not to
provide explicitly
that a liquidator be an experienced and independent insolvency
practitioner.142
[127] Parliament’s decision, when passing the 1993 Act, not
to discriminate between liquidators appointed by the
Court and otherwise,
coupled with the lack of any provision entitling only experienced practitioners
to act in that capacity, suggests
that it intended to place greater weight
on the Court’s extended powers of supervision over all liquidators,
for
the purpose of safeguarding the interests of parties who might be affected
adversely by the liquidation process.
[128] The wider powers of statutory supervision conferred by s 284(1) of
the 1993
Act are stated to be “in addition to any other powers a Court may
exercise in its jurisdiction relating to liquidators”.143
This Court also has power to require a liquidator to carry out his or her
duties and a concomitant ability to remove a liquidator
from office if he or
she were to fail to comply with any order designed to respond to such an
application.144 Those powers apply to all liquidators, however
appointed.
[129] Section 284(1) also allows applications for directions to be made by liquidators, with respect to matters connected with the exercise of powers or functions of a liquidator.145 Generally, if a liquidator complies with such a direction
he or she is entitled to rely on it in defence to any claim.146
Those powers are
somewhat wider than were available under the 1955 Act. Under s 241(3) of that Act a Court appointed liquidator was entitled to apply for directions “in relation to any particular matter arising under the winding up”. In Re Securitibank Ltd (in liq),147
Barker J held that the Court also had an inherent jurisdiction to give
directions “to its
143 Companies Act 1993, s 284(2).
144 Ibid, s 286(1), (3)(b) and (4)(a).
145 Ibid, s 284(1) and (3)(a).
146 Ibid, s 284(3) and (4).
147 Re Securitibank Ltd (in liq) [1978] 1 NZLR 97 (SC) at 106.
officer, the liquidator”; with that jurisdiction being distinct from
that conferred by
s 241(3).148
[130] The equivalent right of application for a liquidator appointed in a voluntary winding up was confined, by s 298(1), to seeking directions “to determine any question arising in the winding up of a company”. On a voluntary liquidator’s application, the Court could decline to give directions, unless satisfied that “determination of the question or the required exercise of power will be just and
beneficial”.149
[131] Mr Chisholm relied on Re Blue Chip New Zealand Ltd (in
liq)150 in which this Court accepted a submission that reliance
on Re Securitibank Ltd (in liq) was misplaced because it had no ability
to exercise inherent jurisdiction in a liquidation commenced by shareholders or
directors.
In his reasons judgment, Venning J had said:
[9] The high point for the liquidators on this issue is the decision
of Barker J in the Securitibank Ltd case. The directions given by the
Court in Re Securitibank Ltd were extensive and declaratory of
rights under contractual and statutory instruments. Barker J considered
whether the
Court had jurisdiction to make the directions and concluded that he
could deal with the matter and properly give directions, both
under the
Court’s inherent jurisdiction and under s 241(3) of the Companies Act
1955.
[10] In Re Securitibank all counsel agreed Barker J was at
liberty to make orders and give directions under the inherent jurisdiction as
was thought proper.
While jurisdiction cannot be granted by consent, where the
application is opposed, a harder look is required. There are a number
of
differences between the application for directions before Barker J and the
current application.
[11] First, the obvious one that in the present case the companies were
not placed into liquidation by the Court. As the liquidators
have not been
appointed by the Court the basis for the inherent jurisdiction relied on by
Barker J does not exist. If there is
jurisdiction, it must arise from the
statutory wording.
149 Companies Act 1955, 298(2) (as it stood between 1 January 1957 and 30 June 1994).
[132] It is clear, from reading Venning J’s reasons, that he did not have the benefit of full argument on this issue. In addition, the judgment was given some months before the decision of the Full Court (to which both Venning J and I were party) in Roslea Path,151 in which the differences between the various liquidation regimes under the 1955 Act were considered in more detail.152 In those circumstances, and with respect, I do not consider that the view expressed by Venning J in Blue Chip can
be regarded as authoritative on the point in issue.
[133] Another authority to which I was referred by Mr Chisholm was Re
David A Hamilton and Co Ltd (in liq).153 In that case, a
liquidator appointed in a voluntary liquidation applied for directions on
whether he was obliged to refund money to
a shareholder that had been paid as
interest on a call made by the liquidator. One of the issues was whether the
principle that
an officer of the Court should uphold the highest standards of
integrity, notwithstanding legal rights, should be applied in the
context of a
voluntary liquidation.154
[134] Skerrett CJ took the view that the rule in ex parte James did
not apply.155
That “rule” requires the Court’s officer to act with the
utmost integrity and probity and not to take points that
could be seen as
enforcing an unjust claim.156 The Chief Justice
said:157
I am of the opinion that a voluntary liquidator under the provisions of the
New Zealand Companies Act, 1908, is not an officer of
the Court within the line
of cases which commences with Ex parte James. See In re Hills
Waterfall Estate and Gold-mining Co. I cannot satisfy myself that anything
contained in our New Zealand Companies Act, 1908, or in the regulations made
thereunder, has
the effect of creating a liquidator in a voluntary winding-up an
officer of the Court in the same position as a trustee in
bankruptcy.
[135] Re Hill’s Waterfall Estate and Gold Mining Co158
(on which Skerrett CJ
relied) does not stand as authority for the proposition that a
liquidator appointed
151 Re Roslea Path Ltd (in liq) HC Tauranga CIV-2005-470-611, 17 December 2009.
152 See paras [122] and [125] above.
153 Re David A Hamilton and Co Ltd (in liq) [1928] NZGazLawRp 44; [1928] NZLR 419 (SC).
154 Re Condon, ex parte James (1874) LR 9 Ch App 609 (CA).
155 Ibid.
156 See also, Re Byers, ex parte Davies [1965] NZLR 774 (SC) at 780–781.
157 In re David A Hamilton and Co Ltd (in liq) [1928] NZLR at 422 (SC).
158 Re Hill’s Waterfall Estate and Gold Mining Co [1896] 1 Ch 947 (ChD).
other than by the Court can never be an “officer of the Court”. While Hill’s Waterfall Estate was a case involving a voluntary winding up, Stirling J’s decision in that case, that the liquidator was not acting as “an officer of the Court” was one which would have come about even if the liquidation had been commenced by Court order. That is because the question before him turned on the interpretation of a section in the Companies Act 1862 and r 89 of the Companies (Winding-up) Rules 1890. Stirling J
said:159
Rule 89 provides: “The duties imposed on the Court by s 98
of the Companies Act, 1862, with regard to the collection
of the assets of the
company and the application of the assets in discharge of the company’s
liabilities shall be discharged
by the liquidator as an officer of the court
subject to the control of the Court”; and rule 90: “For the purpose
of the
discharge by the liquidator of the duties imposed by s 98 of the
Companies Act, 1862, as varied by s 13 of the Companies (Winding-up)
Act, 1890,
and the last preceding rule, the liquidator shall for the purpose of acquiring
or retaining possession of the property
of the company, be in the same position
as if he were a receiver of the property appointed by the High Court, and the
Court may,
on his application, enforce such acquisition or retention
accordingly”.
Therefore, even if this were a compulsory winding-up the liquidator is
only put in the position of an officer of the Court when he
is discharging the
duties imposed by s 98; and in the present case the liquidator was not acting
under that section but under s 161. ....
(emphasis added)
[136] In my view, none of the authorities dictate a response to the
jurisdictional question that is at odds with the way in which
the obligations
and responsibilities of all liquidators have been recast in the 1993
Act.
[137] I am satisfied that the intention of the New Zealand Parliament, when
the
1993 Act was enacted, was to put all liquidators on an equal footing. That means that the Court’s ability to exercise its inherent jurisdiction to supervise liquidators, previously restricted to those appointed by the Court, now applies to all, however appointed. It does not matter whether Parliament intended to characterise all liquidators as “officers” of the Court. The fundamental point is that Parliament
intended that this Court exercise a general supervisory and, in
appropriate cases
159 Ibid, at 954–955.
involving urgency, summary jurisdiction over them, in a manner akin to the
Court’s supervision of one of its “officers”.
[138] This approach is also consistent with the ability of all liquidators
to exercise the same powers under the 1993 Act. If all
liquidators can exercise
the same powers, it would be strange if Parliament had intended those appointed
other than by the Court
to be subject to less curial supervision than those in
whom the Court, by its own order, has reposed confidence. Liquidators who
are
appointed at the behest of shareholders are more likely (because in many cases
they are seen as the appointor’s protectors)
to require greater
supervision, in the absence of a licensing (or similar) regime.
[139] For those reasons, I hold that the New Zealand liquidators are to be
treated as if they were “officers of the Court”,
for the purpose of
this aspect of ANZ NZ’s application.
(c) Was the transcript misused?
[140] In determining what approach should be taken to this issue, the
judgment of Millett J in Re Barlow Clowes Gilt Managers Ltd is
instructive.160 That case involved a company that had been
wound up by order of the Court. The liquidators had conducted interviews with
various
people who were able to assist in their inquiries, in lieu of the need
to resort to the private examination process. At relevant
times, applicable
English law required a liquidator to apply to the Companies Court for an order
that an examination be held. There
was no ability for the liquidators to
convene an examination administratively.
[141] Millett J described a practice that had grown in England whereby intended examinees would agree to submit to questioning on an informal basis and without a formal order of the Court. In identifying confidentiality as a key factor in this
process, he said:161
160 Re Barlow Clowes Gilt Managers Ltd [1991] 4 All ER 385 (ChD).
Given the
liquidators' powers to obtain information by compulsion, it has become the
widespread practice for responsible persons to
whom requests for information
are addressed by liquidators to co-operate with the liquidators and to
provide them with copy
documents and other information and to submit to being
questioned on an informal basis and without a formal order of the court. This
is
done on the implicit (if not explicit) understanding that the information
supplied will be treated as confidential and will not
be used except for the
purpose of the liquidation. If there comes to be a generally perceived
risk that the records
of such informal interviews may be disclosed to third
parties, there is an obvious danger that professional men will no longer
co-operate
with liquidators on a voluntary basis, but will insist on liquidators
having recourse to the court's compulsory powers so that they
may enjoy the
protection of r 9.
[142] The issue of disclosure, in Barlow Clowes, arose in a different context. The various witnesses had provided voluntary statements to the liquidators in accordance with the practice described by the Judge. During the course of criminal investigations into the activities of the deposit-taking companies following a collapse that left a total liability to investors of over £115 million, those accused of offences requested copies of the transcripts of the interviews to assist preparation for their defence. In the Crown Court, Phillips J indicated that the appropriate course was for the liquidators to apply to the Companies Court for directions before a ruling was given. In the end, based on evidence from a leading English insolvency practitioner, Millett J declined permission, holding that “the proper and efficient functioning of the process of compulsory liquidation would be jeopardised if transcripts of the informal interviews of witnesses carried out by liquidators were to be made
generally available to defendants to criminal proceedings”.162
The Judge considered
that the appropriate course was for the Crown Court to determine whether the
transcripts should be made available after considering
an argument based on
public interest immunity.163
[143] In Barlow Clowes, Millett J said:164
Quite apart from any question of public interest immunity, there
are powerful reasons for not permitting the voluntary
disclosure of the
transcripts by the liquidators. The information was obtained in
circumstances
than the liquidator or the Official Receiver. He added: “Those provisions are a necessary safeguard to ensure that the information obtained by means of this extraordinary process is used only for the purpose of the liquidation” (at 395).
162 Ibid, at 396.
163 Ibid, at 397.
164 Ibid, at 391.
of confidentiality and by assurances, express or implied, that it would be
used only for the purpose of the liquidation. Those assurances
were given by
officers of this court. They were properly given in order to obtain
information necessary to enable this
court to carry out its functions. The
information is now sought to be used for purposes collateral to the
liquidation
and foreign to those for which it was obtained. It ought to be
unthinkable that the court should authorise its own officers to renege
on their
assurances in such circumstances in the absence of some compelling reason to do
so.
[144] Those remarks were based on an earlier decision of the same Judge, in
Re
Esal (Commodities) Ltd (No 2),165 in which His Lordship had
said:
... where leave is sought to make use of material obtained by the use or
under the threat of sec 268 proceedings, then, save in exceptional
circumstances, leave should be granted only if the use proposed to be made is
within the purpose of the statutory procedure, that
is to say, that the use
proposed to be made of the material is to assist the beneficial winding-up of
the company.
[145] Even in England, the protection given to the transcript is not
unqualified. As is clear from Millett J’s view that
the issue of use of
the transcript for the purpose of criminal proceedings might turn on the
applicability (or otherwise) of public
interest privilege, it is necessary in
every case to consider whether there is a countervailing public interest
favouring disclosure.
This approach would also be taken in New Zealand,
primarily by reference to s 69 of the Evidence Act 2006.
[146] Although Barlow Clowes is referable to liquidations ordered by
the Court, in light of my holding that liquidators appointed by
shareholders or
directors are subject to the same supervisory jurisdiction,
there can be no difference in principle on that score. There is, however,
a
separate question. Do changes made to the private examination provisions when
the 1993 Act was passed remove the confidentiality
that otherwise attaches to
what was said at an examination, held under either s 261(3)(c) or following a
Court order under s 266(2)?
[147] Under the 1955 Act, a distinction was drawn between private and public examinations. Section 262 dealt with private examinations and s 263 with those of a
public nature. Following the 1980 Amendment to the 1955 Act, a
provision akin to
165 Re Esal (Commodities) Ltd (No 2) [1990] BCC 708 (ChD) at 723.
s 262 was enacted which enabled the Official Assignee to summon a person for
examination without the need for a Court order.166
[148] The private nature of the examination was emphasised by s 262(8) of
the
1955 Act. It provided:
262 Power to summon persons suspected of having property of
company
...
(8) Save with the consent of the court, on the application
of the provisional liquidator or the liquidator and subject
to such conditions
as the court may prescribe, it shall not be lawful for any person to publish a
report of any examination under
this section, or of any matter arising in the
course of any such examination, and every person who, in breach of this
subsection,
publishes any such report shall be liable to a fine not exceeding
$200.
[149] A similar provision appeared in the Insolvency Act 1967,167 enabling the Official Assignee to examine a bankrupt or other person who might assist in his or her inquiries) and s 262A of the 1955 Act, through incorporation by reference.168
The nature of the prohibition on publishing any report of a private
examination was considered in Re Baird (A bankrupt),169 in
the context of the Official Assignee’s stated intention to annex
transcript of private examinations of third parties to
a statutory report that
he was required to make for the Court. After reference to competing
submissions, Master Kennedy-Grant said:170
I accept [counsel for the Official Assignee’s] submission, for the
following reasons:
(i) The word "publish" imports a far wider degree of dissemination
than occurs in either the incorporation of the transcript
in the Official
Assignee's report in any of the three ways I have described above or use of the
transcript for the purpose of examining
the bankrupt. The Shorter Oxford
English Dictionary (3rd ed, 1973) gives the following definitions of
the word:
"1. trans To make publicly or generally known; . . . to tell or noise abroad;
. . . 4. . . . b. To make generally accessible or available;
to place before or
offer to the public . . .".
166 Companies Act 1955, s 262A. See also paras [44] and [44] above.
167 Insolvency Act 1967, s 68(7).
168 Companies Act 1955, s 262A(5)(c).
169 Re Baird (A bankrupt) [1994] NZHC 83; [1994] 2 NZLR 463 (HC).
170 Ibid, at 468–469.
(ii) The word "report" imports a degree of completeness greater than
that involved in the use of portions of the transcript
of the private
examination for the purpose of the public examination of a bankrupt. The
Shorter Oxford English Dictionary, in
the edition already referred to,
gives the following meaning of the word:
". . . 2. An account brought by one person to another, esp of some matter
specially investigated . . . c. A formal statement of the
results of an
investigation, or of any matter on which definite information is required, made
by some person or body instructed or
required to do so . . . 3. A statement made
by a person; an account, more or less formal, of some person or thing . . . d.
An account,
more or less complete, of the statements made by a speaker or
speakers (as in a debate, lecture, etc), of the proceedings at a meeting,
or of
any occurrence or event, esp with a view to publication in a special form, or in
the newspaper press . . .".
...
(v) A contrary interpretation would have a serious impact on the work
of the Official Assignee and of this Court. It would
mean that whenever an
Official Assignee wished to summarise or quote, or to append the whole of the
transcript of a private examination
under s 68 or documents obtained in the
course of it, in his report to the Court under s 69(3) or s 109(2) or to use an
extract from
such a transcript in the course of his examination of the bankrupt
in a public or private examination or of another person in a
private
examination he would require to obtain the consent of the Court before doing so.
In the case of use of the transcript for
the purpose of the examination of a
bankrupt, the need to apply would present no great problem because it
could be made
in the course of the examination. In the case, however, of
incorporation in his report of information obtained from a private examination
in any of the ways I have described and in the case of use of an extract from
the transcript in the private examination of another
person, there would
be need for an application to the Court before the Official Assignee could
proceed. This could delay the
proceeding and lessen it effectiveness.
(vi) The potential prejudice to persons who have been examined
privately under s 68 is, in my view, slight because:
• In the case of incorporation in the Official Assignee's
report to the Court under s 69(3) or s 109(2), the provisions
of R 66 of the
High Court Rules will apply, with the automatic prohibition of searching until
determination of the examination under
R 66(3) and the power of the Court to
forbid searching after determination without leave of the Court under R
66(7).
• In respect of the use of the transcript in another private examination because of the restrictions on access to that examination and the application of s 68(7) to that other examination.
[150] In the alternative, were he wrong on that point, the Master took the
view that, as a matter of discretion, relevant
factors would justify
Court consent to “publication” of the examination by placing the
documents before the Court
as part of the Official Assignee’s report and
to their use by the Official Assignee in examining (in that case) the bankrupt.
Out of an abundance of caution, the Master elected to deal with the issue by
granting consent, on the basis that the transcript
and exhibits not be provided
to any person other than the bankrupt and should not be available for inspection
or copying by persons
other than the bankrupt or proved
creditors.171
[151] The absence of a provision equivalent to s 262(8) of the 1955 Act
tends to suggest that Parliament intended that, while s
261(3)(c) examinations
were to be conducted by liquidators in such manner as they thought appropriate,
individualised arrangements
ought to be made, before the examination, as to the
use to which the transcript and exhibits produced may later be put.
[152] If, for example, objection were taken by a proposed examinee to a liquidator’s suggestion that the transcript be available for distribution to anyone whom the liquidator might nominate, it would be open to the intended examinee to decline to attend and let the liquidator apply to the Court under s 266(2)(a), so that the use of the transcript could be regulated by the Court. That approach would also encourage conduct of the type to which Millett J referred in Barlow Clowes, whereby responsible persons to whom s 261(2) applies might be prepared to provide documents and information on a more informal basis, subject to agreement as to the
extent of any confidentiality to attach to them.172 Indeed, that
approach provides an
incentive to both liquidator and proposed examinee to take a responsible
approach to the issue because, otherwise, each may be put
to the unnecessary
cost of an application under s 266(2)(a) of the 1993 Act, to resolve the
issues.
[153] In this case, it is clear from the subsequent conduct of the New Zealand liquidators that they believed the examination was being conducted on a private and
confidential basis. That is the reason why, initially, they declined to
make a copy of
171 Ibid, at 470.
172 Re Barlow Clowes Gilt Managers Ltd [1991] 4 All ER 385 (ChD) at 395–396. See also paras
[141], [143] and [145] above.
the transcript of Ms Dekker’s evidence available to her and to ANZ
NZ.173 In those circumstances, the stance taken by the New Zealand
liquidators to provide the transcript to themselves, as Australian liquidators,
amounted to misconduct. Use of the transcript, for a purpose extraneous
to the New Zealand liquidations, that infringed
against the basis on which
the New Zealand liquidators contended that the examination was
conducted.
[154] I am sure the misuse arose out of an unthinking conflation of their
roles as New Zealand liquidators and Australian
liquidators.174
Had the Australian liquidators not been the same persons as the New
Zealand liquidators, it is hard to imagine that the New Zealand
liquidators
would have supplied the examination transcript so readily.
[155] All of that said, the transcript has already been used, by being placed before the Federal Court in Australia. Subject only to a request from this Court to the Federal Court to have the transcript removed from the record, there is nothing more that could be done to protect the content of the examination. Even that may have a degree of futility attached to it, given the need for me to touch on the content of that examination, in the course of this judgment. For those reasons, I conclude that while the New Zealand liquidators have misused the transcript, there is no appropriate sanction that I can impose at this stage. That does not mean that Ms Dekker will be
wrongly disadvantaged; I protect her position in another
way.175
(d) Should retrospective approval for the use of the transcript be given to the
Australian liquidators?
[156] I am not prepared to grant relief to the Australian liquidators on this application for retrospective approval to use the transcript in the manner they did. Because Messrs Sheahan and Lock hold office as both Australian and New Zealand liquidators, they cannot, as Australian liquidators, assert that they did not know what they were doing, as New Zealand liquidators. In effect, they (as Australian
liquidators) were parties to the misconduct of the New Zealand
liquidators. There is
173 See para [25] above.
174 See para [4] above
175 See para [157] below.
the added point that the Australian liquidators are subject to the
supervision of the
Federal Court, not this Court.
[157] In my view, though I cannot compel this course, the Australian
liquidators should disclose what has occurred to the Federal
Court and seek such
orders as they think appropriate with regard to future use of the transcript as
evidence. It is also open to
ANZ NZ or Ms Dekker, in light of what I have said
in this judgment, to apply to the Federal Court for such order as they might
think
appropriate to forbid or limit the ability of any other person to inspect
(or otherwise use) the transcript.
Costs
[158] Both parties have succeeded, to some extent, on the various
applications. In those circumstances, I reserve costs for further
argument.
Result
[159] For the reasons given:
(a) I dismiss the New Zealand liquidators’ application for examination
of
Ms Dekker and production of documents by her.
(b) I dismiss ANZ NZ’s application for remuneration and expenses
to be paid in relation to the July 2011 examination of
Ms Dekker.
(c) The Australian liquidator’s application to examine Ms Dekker, under the Cross-border Act, is adjourned. I will hear from counsel, in Court for chambers, at 9am on the first available date after 18 February
2013, on whether an order should be made at that time. That will enable either expert evidence to be filed or for an application to be
made to the Federal
Court.176
176 See para [114] above.
(d) I make a declaration that the New Zealand liquidators
acted improperly in providing a transcript of Ms Dekker’s
July 2011
examination to the Australian liquidators for use in an Australian
proceeding. They should not have done so without
obtaining the consent of Ms
Dekker or (in the absence of her consent) this Court.
(e) Costs are reserved. If costs cannot be agreed, I invite counsel to
file a joint memorandum indicating appropriate
timetabling orders to
resolve such issues promptly.
[160] I will also hear from counsel, at the next hearing, on whether any
further directions or declarations may be required to give
effect to this
judgment, in light of my reasoning. I have not made orders that respond to
each and every application made as I
consider those that I have made should deal
with all matters in dispute. Nevertheless, if counsel consider that any
further
orders were required, I am prepared to hear them on
that.
[161] I thank counsel for their
assistance.
P R Heath J
Delivered at 3.00pm on 15 November 2012
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