In the matter of 1st Fleet Pty Ltd (in liquidation), the Commonwealth applied for orders that the liquidators of 10 companies in liquidation provide specific information and/or produce certain documents to the Commonwealth. This request related to the validity of the constitution of and certain steps taken by the Committee of Inspection and the reasonableness of the liquidators’ remuneration. The New South Wales Supreme Court helpfully clarifies the circumstances in which a request for documents or information is “not reasonable” and also whether the liquidators’ electronic time recording records are required to be produced.
Recently, the Commonwealth issued proceedings in the Supreme Court of New South Wales seeking orders that the Liquidators of 10 companies in liquidation (Group Companies), provide specific information and/or produce certain documents to the Commonwealth with respect to 2 aspects of the liquidation, being:
|22 May 2012||The Liquidators were appointed liquidators of the Group Companies.|
|Various||Commonwealth via GEERS and FEG advanced $9,444,014 to employees of the Group Companies.|
|Various dates between
22 May 2012 and 11 August 2017
|The COI approved various amounts of the Liquidators’ remuneration for the period 25 April 2012 to 1 July 2018 in the amount of $4,443,617 (incl. GST) (Remuneration Resolutions).|
|14 June 2017 and 20 April 2018||The Commonwealth made a series of requests for documents/information. Various pieces of information/documents were produced by the Liquidators.|
|24 August 2018||Solicitors for the Commonwealth wrote to the Liquidators expressing concerns as to whether the COI had authority to pass the Remuneration Resolutions and as to whether the quantum of the remuneration claimed was reasonable within the meaning of section 504(2) of the Corporations Act 2001 (Cth) (which was the relevant section for remuneration determinations made before 1 September 2017) and requesting further information (Litigated Request).|
|7 September 2018||The Liquidators’ solicitors wrote to the Commonwealth’s solicitors setting out that the Liquidators “consider that it is not reasonable to comply with the Commonwealth’s request“.|
|28 September 2018||The Commonwealth issued proceedings against the Liquidators seeking orders that the Liquidators provide specified information and produce certain documents to the Commonwealth.|
The Insolvency Practice Schedule (Corporations) (IPSC) (section 70-45) gives individual creditors the right to request certain information from an external administrator and the external administrator must comply with the request unless a specified exception applies, for example, if compliance is “not reasonable“.
What is “not reasonable” includes:
If the external administrator “acting in good faith, is of the opinion that“:
There are further provisions in the IPSC (s. 70-55) giving the Commonwealth a right to request information if either an employee of a company under external administration has made a claim for financial assistance from the Commonwealth regarding unpaid employment entitlements or the Commonwealth considers that such a claim is likely to be made. Again, the external administrator must comply with the request subject to the identified exemptions.
Here, the Commonwealth sought information available to establish certain matters including:
The Court found that the Litigated Request was, with respect to the issue of the validity of the COI, unreasonable for the reasons submitted by the Liquidators, which included that:
The Liquidators’ submitted (amongst other things) that:
In rejecting the Liquidators’ submissions, the Court ordered that the Liquidators’ electronic time recording records, subject to those records being redacted with respect to any entries which are subject to legal professional privilege, were to be produced to the Commonwealth.
 In the matter of 1st Fleet Pty Ltd (in liquidation)  NSWSC 6.
 Justice Black granted leave to the Commonwealth to amend the relevant sub-paragraph of its Originating Process to include a request for documents as well as information.