Candidates cannot ‘fish’ in Babcock & Brown’s pond

On August 18, 2022, Judge Markovic of the Federal Court rejected the request of a financial backer and its director (the Candidates) for access to the confidential supporting statement and transcript of the hearing at which the orders for examination and production were issued. The Court upheld the principles applicable to such applications by concluding that the petitioners had failed to establish an arguable argument, in the absence of the confidential material, that the examination and production orders should be rescinded or rescinded.

Takeaways

The Court will not allow a plaintiff to “fish in” a case by seeking to set aside examination and production orders. An arguable case must first be presented on the basis of currently available evidence (i.e., not relying on confidential documents filed by a liquidator in support of an order for examination), before any consideration is given to the question of whether the confidential documents should be disclosed.

The decision confirms that a party seeking to set aside examination and production orders must establish a case (based on the available evidence) before the Court will consider granting access to confidential documents.

In this case, the Court confirmed that a liquidator is able to question a funder who is funding claims against the liquidator and the insolvent company.

Background

Subpoenas and production orders were issued against the petitioners (the Orders). The liquidator’s affidavit in support of his application is confidential unless the Court orders otherwise and the parties agree that the transcript of the hearing is also confidential (the Confidential material).

The plaintiffs sought to have the orders set aside or rescinded. As part of this request, the requesters also requested access to the confidential material.

The criterion for access is that “plaintiffs must show an arguable case for their release or cancellation and, if they do, that it is in the interests of justice to allow access to the affidavit” .[1]

The jugement

The petitioners raised several grounds on which they argued that the orders should be rescinded or set aside, including the following:

Inconsistency in reading prescriptions

The claimants claimed that there was a technical inconsistency in the defined scope of the examinations and production orders. The Court said that such an inconsistency (even if it existed) could be resolved in the course of the review.

Issuance of exams is an abuse of process

The plaintiffs alleged that the examination and production orders constituted an abuse of process. These sub-reasons fell into three broad categories, namely:

  • The Liquidator and the Claimants are involved in separate legal proceedings involving the liquidation of Babcock & Brown and the interviews may be used as a trial for cross-examination;
  • The liquidator, in the context of these separate proceedings, has other means of obtaining the same information sought through examinations and production orders; and
  • The credibility of the candidates was in question.

The Court said that:

  • Obtaining information that could be useful in this separate procedure between the parties constitutes a legitimate use of the powers conferred on the trustee;
  • The availability of other means of obtaining the information sought does not establish that the route followed by the liquidator (and which is open to him) constitutes an abuse of process; and
  • No evidence was presented to the Court to support the other grievances.

Issuing reviews and production orders goes beyond the company’s “reviewable business”

  • The Court confirmed that the scope of a corporation’s “examining business” is very broad, encompassing any act or thing done by or in connection with the corporation, or its business or assets upon its liquidation, as well as any conduct on the part of society. liquidator and the funder’s director of separate litigation against the liquidator, who may be able to give information on matters relating to such other proceedings, which are things done in connection with the company during its liquidation.

The liquidator waived his right to confidentiality of the affidavit

  • The petitioners alleged that because the purpose of the exams is obvious and the candidates are aware of their purpose, the liquidator implicitly waived any privilege over the confidential documents.
  • The Court found this to be irrelevant.

Ultimately, the Court concluded that, based on the evidence before it, the petitioners had no realistic prospect of success. As such, the Court was not required to consider the next step, namely whether granting access to the Confidential Documents would be in the interests of justice.

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