PNP Realty Pty Ltd v Bluechip Development Corporation (Cairns) Pty Ltd [2009] ACTSC 97 (24 August 2009)

Last Updated: 22 September 2009

PNP REALTY PTY LTD (ACN 117 021 566) v BLUECHIP DEVELOPMENT CORPORATION (CAIRNS) PTY LTD (ACN 092 304 633)

[2009] ACTSC 97 (24 August 2009)

PRACTICE AND PROCEDURE – creditor’s application for winding-up – company failing to comply with statutory demand – company seeking leave to establish solvency – whether applicant entitled to production of documents by company

Court Procedures Rules 2006

Bluechip Development Corporation (Cairns) Pty Ltd v PNP Realty Pty Ltd [2009] ACTSC 33

Re West Devon Great Consols Mine (1984) 27 Ch D

Re Bunarba Pastoral Co Pty Ltd (1958) SR(NSW) 23

Re Australian Marinas (A’Asia) Pty Ltd [1975] VR 372

Re A B T Holdings Pty Ltd (1979) 4 ACLR 40

Crown Joinery Pty Ltd v Lyleho Pty Ltd [2007] VSC 214

Assaf, F, Statutory Demands: Law and Practice (LexusNexus Butterworths Australia, 2008)

No. SC 102 of 2009

Judge: Master Harper

Supreme Court of the ACT

Date: 24 August 2009

IN THE SUPREME COURT OF THE )

) No. SC 102 of 2009

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: PNP REALTY PTY LTD (ACN 092 304 633)

Plaintiff

AND: BLUECHIP DEVELOPMENT CORPORATION (CAIRNS) PTY LTD (ACN 117 021 566)

Defendant

ORDER

Judge: Master Harper

Date: 24 August 2009

Place: Canberra

THE COURT ORDERS THAT:

1. The notice to produce filed on behalf of the plaintiff on 24 June 2009 be dismissed

2. The defendant’s costs of the application to dismiss the notice to produce be paid by the plaintiff.

1. This is an interlocutory application in the course of a winding-up application. The principal application is based on failure by the defendant company to comply with a statutory demand. I have previously dismissed applications by the present defendant for orders setting aside the statutory demand and staying the winding-up proceedings on the basis that service of the statutory demand was an abuse of process: Bluechip Development Corporation (Cairns) Pty Ltd v PNP Realty Pty Ltd [2009] ACTSC 33. The defendant seeks leave to adduce evidence to establish that it is solvent, as a defence to the winding-up application. That application has not yet been determined.

2. On 24 June 2009 the plaintiff issued and served a notice to produce requiring production of a large number of documents, including business activity statements, associated working schedules, documents associated with the sale or rental of units in a development at Cairns, the memorandum and articles of association or constitution of the defendant company, and records of any payments made by the defendant to named persons and companies.

3. Whilst a number of affidavits have been filed in the proceedings by directors of the defendant company on which they will no doubt rely on the issue of solvency, the affidavits do not refer in specific terms to any of the documents sought to be produced.

4. The production of documents by one party to another is analogous to discovery. Whilst the Court Procedures Rules 2006 contain provisions about discovery and about notices to produce which empower the Court to order discovery or compliance with such a notice, I have been referred to much authority as to whether a court will do so in the course of a winding-up application. A recent text, Statutory Demands: Law and Practice, Assaf, LexusNexus Butterworths Australia 2008, states at 9.38:

Historically, the general rule was that a petitioner for a winding-up order was not entitled to discovery pending the hearing of a winding-up application save for exceptional circumstances. While the court has an express power to order discovery, the court will generally be reluctant to make orders for discovery in winding-up applications. . . . any power to order discovery in a winding-up application is to be used sparingly and only in exceptional circumstances. . . . notices to produce, subpoena and discovery are not to be used for fishing and will be set aside if the court finds that the use of such process is oppressive.

5. The learned author cites in support of these propositions the following authorities: Re West Devon Great Consols Mine (1884) 27 Ch D 106 at 109 per Cotton LJ; Re Bunarba Pastoral Co Pty Ltd (1958) SR(NSW) 23 at 31-32 per McLelland J; Re Australian Marinas (A’Asia) Pty Ltd [1975] VR 372 at 374-375 per Adam J; and Re A B T Holdings Pty Ltd (1979) 4 ACLR 40 per Cohen M.

6. I was referred in addition during submissions by counsel to Crown Joinery Pty Ltd v Lyleho Pty Ltd [2007] VSC 214 in which Maxwell P upheld the decision of a Master dismissing a notice to produce on the basis that the notice was used for the purpose of fishing, that is seeking to discover whether the plaintiff had a case at all, rather than for bringing before the Court documents which the Court could be satisfied were supportive of the plaintiff’s case.

7. The authorities seem to me to support the general proposition that a court will generally not permit discovery or the enforcement of a subpoena or notice to produce between parties in a winding-up application. The general principle has been stated to be subject to the proviso that discovery may be permitted in exceptional circumstances. The only decisions to which I have been directed where this has been permitted have been in applications by shareholders for winding-up on the ground of oppression: Bunarba Pastoral Co and Australian Marinas, above. I have not been taken to any decided case in which discovery has been permitted in winding-up proceedings brought by a creditor.

8. Whilst it is clear that some of the documents sought in the notice to produce (for example, the memorandum and articles or constitution) must exist, others may or may not. Whilst the position might be different if production were sought of documents which had been summarised or referred to by directors of the defendant company in their affidavits, in the present case I am not persuaded that there is anything exceptional capable of persuading the Court to depart from the general rule.

9. Accordingly the notice to produce will be dismissed and the defendant will not be required to produce any of the listed documents.

10. The plaintiff must pay the defendant’s costs of the application in relation to the notice to produce.

11. The matter is to be listed before me for directions on Friday 4 September 2009, with a view to the determination of the defendant’s application for leave to establish solvency as soon as practicable.

I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Master.

Associate:

Date: 24 August 2009

Counsel for the plaintiff: Mr GJ Blank

Solicitors for the plaintiff: Williams Love & Nicol

Counsel for the defendant: Dr R O’Hair

Solicitors for the defendant: S&T Lawyers

Date of hearing: 24 July 2009

Date of judgment: 24 August 2009