Federal Court of Australia

Ghedia (liquidator), in the matter of SK Homes Aus Pty Ltd (in liq) [2024] FCA 859

ORDERS

THE COURT ORDERS THAT:

The application brought by the SAAR parties

1.    Pursuant to r 1.39 of the Federal Court Rules 2011 (Cth), the time for the making of an application under r 3.11 of the Rules for a review of the orders made by Senior National Judicial Registrar Farrell on 7 May 2024 (7 May 2024 orders) be extended to 27 June 2024.

2.    Order 2(g), (h) and (j) of the 7 May 2024 orders be set aside to the extent that it authorises the issue of an order for production to any of the SAAR parties (as defined) for the production of invoices rendered by Joseph Trimarchi & Associates to any of the SAAR parties other than in respect of the Property (as defined).

3.    The interlocutory application otherwise be dismissed.

4.    Any party seeking an order as to costs is to notify the Associate to Goodman J by 4:00pm on 16 August 2024.

The application brought by Mr Agrawal

5.    The interlocutory application filed on 19 July 2024 be dismissed.

6.    Subject to order 7, Mr Agrawal pay the plaintiffs’ costs of that application as agreed or taxed.

7.    Any party seeking to vary order 6 is to notify the Associate to Goodman J by 4:00pm on 16 August 2024.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011

REASONS FOR JUDGMENT

GOODMAN J

A.    Introduction

1    The plaintiffs, Mr Ghedia and Mr Banerjee, bring this proceeding in their capacity as the liquidators of SK Homes Aus Pty Ltd, Pramukham Enterprise Pty Ltd and SK Capital Pty Ltd (Companies).

2    The proceeding was commenced in a context in which – based upon his investigations into the affairs of the Companies, and as set out in statutory reports that he has made to creditors in respect of each of the Companies – Mr Ghedia believes that a series of matters warrant further investigation for the purpose of determining whether the Companies are able to recover monies including:

(1)    various potential actions against Mr Krishnakumar Agrawal, who was at all material times a director of the Companies including for breaches of his duties as a director of the Companies; and

(2)    potential actions against Mr Rajeev Narula and Mrs Sonia Narula and a company of which they are the only directors and shareholders, namely SAAR Super Pty Ltd (collectively, the SAAR parties) in respect of the transfer by SK Homes of a property located at Box Hill in New South Wales (Box Hill property) to SAAR, which transfer Mr Ghedia believes may be a voidable transaction by dint of ss 588FDB and 588FE of the Corporations Act 2001 (Cth) and in respect of which Mr Ghedia believes Mr and Mrs Narula may have liability by reason of “knowing assistance and for receipt of the Box Hill property”.

3    On 7 May 2024, Senior National Judicial Registrar Farrell made orders in this proceeding pursuant to which he granted leave to the plaintiffs to file and serve:

(1)    summonses for examination under s 596A and 596B of the Corporations Act to various persons, including Mr and Mrs Narula and Mr Agrawal. The summonses which have been issued pursuant to those orders require those named therein to attend the Court on 13 August 2024 to be examined about the affairs of the Companies; and

(2)    orders for production to various natural and corporate persons, including each of the SAAR parties, Mr Agrawal, and Mr Aydin Acar trading as AI Legal. Summonses for production have subsequently been issued.

4    The SAAR parties have filed an interlocutory application concerning the orders for production addressed to them. Mr Agrawal has filed an interlocutory application concerning the order for production addressed to him and the order for production addressed to Mr Acar.

B.    The SAAR parties’ APPLICATION

B.1    Overview and legal framework

5    The 7 May 2024 orders were made by way of an exercise of power by a Registrar in accordance with s 35A(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act).

6    The SAAR parties seek an order pursuant to s 35A(5) of the FCA Act setting aside the second of the 7 May 2024 orders, to the extent that it requires them to produce: (1) any documents relating to the personal financial affairs or property interests of Mr and Mrs Narula; or (2) any invoices rendered by Joseph Trimarchi & Associates, solicitors, to any of the SAAR parties other than invoices for work relating to the contract for sale and purchase of the Box Hill property.

7    The application is brought out of time. The plaintiffs do not oppose the making of an order extending time and I will make such an order.

8    An application for review under s 35A(5) of the FCA Act proceeds as a rehearing de novo: see, e.g., Trevor, in the matter of Bell Group NV (in liq) (No 2) [2017] FCA 927; (2017) 122 ACSR 418 at 423 [20] (Jagot J). Section 35A(6) of the FCA Act provides that the Court may, on an application under s 35A(5), review an exercise of power by a Registrar pursuant to s 35A and may make such order or orders as it thinks fit with respect to the matter with respect to which the power was exercised.

9    Section 597(9) of the Corporations Act provides that:

The Court may direct a person to produce, at an examination of that or any other person, books that are in the first-mentioned person’s possession and are relevant to matters to which the examination relates or will relate.

(emphasis added)

10    It is common ground that the central question for determination on this application is whether the documents sought by the liquidators are, in the terms of s 597(9), “relevant to matters to which the examination relates or will relate”.

11    A determination as to whether the books sought are relevant to matters to which the examination will or may relate arises in a context in the present case in which:

(1)    s 596B of the Corporations Act provides in so far as is presently relevant that:

(1)     The Court may summon a person for examination about a corporation’s examinable affairs ... ;

(2)    “examinable affairs” are defined in s 9 of the Corporations Act as meaning, in relation to a corporation:

(a)     the promotion, formation, management, administration, restructuring or winding up of the corporation; or

(b)     any other affairs of the corporation (including anything that is included in the corporation’s affairs because of section 53); or

(c)     the business affairs of any of the following, in so far as those business affairs are, or appear to be, relevant to the corporation or to anything that is included in the corporation’s examinable affairs because of paragraph (a) or (b):

(i)     a body corporate that is, or has been, related to the corporation;

(ii)     an entity that is, or has been, connected with the corporation.; and

(3)    s 53 of the Corporations Act relevantly provides that for the purposes of the definition of “examinable affairs” in s 9, the affairs of a body corporate includes a very broad range of matters, including its property and liabilities and “property” is defined in s 9 as meaning relevantly for present purposes:

any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action ...

12    In Evans v Wainter Pty Ltd [2005] FCAFC 114; (2005) 145 FCR 176 at 191 ([81] to [82]) Lander J (Ryan and Crennan JJ agreeing) explained:

81    An examination to determine whether the corporation would be likely to succeed in litigation against its officers, auditors or third parties would be within the examinable affairs of a corporation. Such an examination would assist an eligible applicant in identifying a chose in action which is an asset of the corporation: Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301; Re Spedley Securities Ltd (in liq) (1990) 3 ACSR 366 at 376.

82    An examination to determine whether any chose in action will be ultimately recoverable from any party or that party’s insurer is also within the contemplation of the section: Gerah Imports Pty Ltd v Duke Group Ltd (in liq) (1993) 61 SASR 557. Indeed, such an examination may be of a person against whom litigation is contemplated or even pending: Re Hugh J Roberts Pty Ltd (1970) 91 WN (NSW) 537; Hamilton v Oades (1989) 166 CLR 486 at 497; Re Laurie Cottier Productions Pty Ltd (in liq) (1992) 9 ACSR 513.

13    The production of documents may require the disclosure of private financial information of the recipient of the order for production or of an examinee. However, there is a clear legislative intent that there be power to provide access to such information to external managers of companies and effect should be given to that intent: see HP Mercantile Pty Limited v Crouch; in the matter of Tumut River Orchard Management Limited (in liq) [2009] FCA 1492 at [16] to [17] (Graham J).

14    Nevertheless, the decision to make an order requiring the production of documents involves the exercise of a discretion; and there is a difference between the power to require production of documents and the discretion in exercising that power. In Grosvenor Hill (Queensland) Pty Ltd v Barber [1994] FCA 59; (1994) 48 FCR 301, Beaumont, Spender and Cooper JJ explained at 311 to 312:

We stress that it is important to bear clearly in mind the difference between the ambit of the power and the circumstances in which the power will be exercised. The court retains a discretion in appropriate cases to refuse to exercise the power or to make its exercise subject to stringent conditions. It is impossible in advance to lay down all of the relevant circumstances which will affect the exercise of a discretion to exercise the power or to subject it to limitations or conditions. Some of the relevant circumstances are set forth in the judgment of Nicholson Jin Re Rothwells Ltd (No 2) (1989) 7 ACLC 576 at 587-9. However, in the final analysis, it must be left to the court in any particular instance, guided by the evident statutory purpose of the section, to determine whether or not the information is relevant to the liquidator for the purpose of performing his statutory duty and whether and in what manner any proposed examinee needs to be safeguarded beyond the ordinary safeguards of court control of the examination process from any oppressive exercise of the power.

B.2    Documents relating to the financial affairs and property interests of Mr and Mrs Narula

15    I turn now to consider the first aspect of the application, namely, documents relating to the financial affairs and property interests of Mr and Mrs Narula. The paragraphs in issue are:

(1)    for the order for production issued to SAAR:

Financial Documents

9.    Any and all bank statements for all mortgages from 1 January 2023 to date held solely or jointly in the name(s) of any one or more of the SAAR Parties and/or the SAAR Super Fund.

10.    A list of any and all real property interests held solely or jointly in the name(s) of, or beneficially owned on behalf of any one or more of the SAAR Parties and/or the SAAR Super Fund.

11.    Bank statements for any and all bank accounts held solely or jointly by any one or more of the SAAR Parties and/or SAAR Super Fund from 1 January 2023 to date.

12.    Statements for any and all credit cards and loan accounts held solely or jointly by any one or more of the SAAR Parties and/or the SAAR Super Fund from 1 January 2023 to date. ;

(2)    for the orders for production issued to Mr and Mrs Narula:

Financial Documents

10.    Any and all bank statements for all mortgages from 1 January 2023 to date held solely or jointly in the name(s) of you, and any of the SAAR Parties.

11.    A list of any and all real property interests held solely or jointly in the name(s) of, or beneficially owned on behalf of any one or more of the SAAR Parties.

12.    Bank statements for any and all bank accounts held solely or jointly by any one or more of the SAAR Parties from 1 January 2023 to date.

13.    Statements for any and all credit cards and loan accounts held solely or jointly you from 1 January 2023 to date.

14.    Copies of individual tax returns for you for financial years ending 30 June 2020, 30 June 2021, 30 June 2022 and 30 June 2023.

15.    Documents recording or evidencing any and all assets owned by you, whether solely or jointly, with a value in excess of $10,000.

16    As noted above, Mr Ghedia deposed that he is investigating potential actions against the SAAR parties (and Mr Agrawal) in respect of the transfer by SK Homes of the Box Hill property to SAAR, which Mr Ghedia believes may be a voidable transaction under ss 588FDB and 588FE of the Corporations Act; and in respect of which Mr Ghedia believes Mr and Mrs Narula may be liable.

17    Mr Ghedia also deposed that the documents in the orders for production directed to the SAAR parties concerning Mr and Mrs Narula’s property and financial interests are relevant to the prospects of any potential recoveries against Mr and Mrs Narula arising from those matters.

18    The SAAR parties accept that documents relating to the personal financial affairs and property interests of Mr and Mrs Narula are relevant to matters to which the examinations relate or may relate. However they submit, drawing upon the observations of the Full Court of this Court in Grosvenor Hill set out above, that the proper exercise of the discretion would be to not require production of such documents because to do so would be oppressive in circumstances where:

(1)    any potential action against Mr Narula and Mrs Narula is (they submit) described in such vague and general terms as to suggest that an examination of their personal financial affairs and property interests cannot be for a proper purpose; and

(2)    a title search records no encumbrances on that property other than a caveat lodged by the plaintiffs, such that if the transfer of the Box Hill property from SK Homes to SAAR were to be found to be a voidable transaction, then relief in the form of an order pursuant to s 588FF(1)(b) of the Corporations Act directing SAAR to transfer the Box Hill property to SK Homes would be sufficient, and there would be no need for any action against Mr and Mrs Narula or to seek relief against their assets.

19    I do not accept this submission for the following reasons.

20    First, the plaintiffs are not required to advance a precisely formulated cause of action. Indeed, the purposes of the examinations may include investigating the viability of various causes of action with a view to the formulation of one or more precise causes of action. The evidence of Mr Ghedia is sufficient to establish the relevance of the documents sought. Thus, no improper purpose is established.

21    Secondly, the potential availability of forms of relief other than by judgment against Mr and Mrs Narula does not render the orders for production oppressive to the extent that those orders seek financial documents of Mr and Mrs Narula. A liquidator is entitled to investigate various forms of potential relief – including relevantly to the present case the viability and recoverability of a claim for compensation against Mr and Mrs Narula – in assessing whether to bring a claim on behalf of a company in liquidation, particularly when the suitability of particular forms of relief available may depend upon various factors. The form of relief, if any, to be granted is ultimately at the discretion of the Court and it is inapt to proceed at this stage on the basis that a particular form of relief is the only, or the most appropriate, form of relief. I also accept the submission made on behalf of the plaintiffs that it cannot be assumed that the re-transfer of the Box Hill property would necessarily provide adequate compensation to the Companies for losses suffered by reason of the original transfer of that property.

B.3    Invoices from Joseph Trimarchi and Associates

22    The second aspect of the application brought by the SAAR parties concerns those parts of the orders for production which call for the production of invoices rendered by Joseph Trimarchi & Associates. The paragraphs in issue are each in the following form:

Any and all invoices rendered by Joseph Trimarchi & Associates to any one or more of the SAAR Parties from 1 January 2023 to date.

23    The SAAR parties submit that in circumstances where the liquidators have indicated that they are investigating potential recoveries based upon the transfer of the Box Hill property, there cannot be any proper basis for requiring the production of all invoices issued by Joseph Trimarchi & Associates to the SAAR parties without any limitation on the legal services to which the invoices relate.

24    Mr Ghedia’s evidence is that he expects that the invoices sought will shed light on the scope of Mr Trimarchi’s engagement by the SAAR parties in acting on their behalf in respect of the affairs of the Companies, including the potentially voidable transaction involving the Box Hill property.

25    There is nothing in the evidence to suggest that the SAAR parties may have had dealings with the Companies (or that Trimarchi & Associates acted for them) other than in respect of the Box Hill property. Thus, the paragraphs calling for the invoices appear to travel beyond a call for documents relating to the “examinable affairs” of the Companies.

26    It follows that order 2 of the 7 May 2024 orders should be set aside to the extent that it authorises the issue of an order for production to any of the SAAR parties for the production of invoices rendered by Trimarchi & Associates to any of the SAAR parties other than in respect of the Box Hill property.

C.    Mr Agrawal’s application

27    I turn now to consider Mr Agrawal’s application. That application also has two parts.

C.1    The order for production addressed to Mr Agrawal

28    Mr Agrawal seeks first to set aside the following paragraphs of the order for production addressed to him:

Superannuation

29.    A list of any and all superannuation funds of which you are a beneficiary.

30.    Statements for any and all superannuation funds of which you are a beneficiary for the period 7 May 2020 to date.

31.    Financial statements for any and all superannuation funds of which you are a beneficiary for the financial years ending 30 June 2021, 30 June 2022, 30 June 2023 and to date.

29    He seeks to do so on the basis that such documents cannot be relevant to the “examinable affairs” of Mr Agrawal (or anyone else) because (he submits) recovery is not available against moneys held in superannuation funds. I do not accept this submission when, as counsel for the plaintiffs indicated, the fact of transfers of money into such superannuation funds may be evidence relevant to the establishment of claims available to the Companies. In other words, the documents sought may be relevant to elements of potential claims, rather than the ability of Mr Agrawal to satisfy such claims.

C.2    The order for production addressed to Mr Acar

30    The second part of Mr Agrawal’s application involves a claim for legal professional privilege over documents produced by Mr Acar and contained in a packet marked “S5”.

31    There was initially an issue raised by the plaintiffs as to the adequacy of the evidence concerning Mr Agrawal’s claims of legal professional privilege and in particular whether he had adduced evidence of the kind required to establish such a claim: see, e.g., Singtel Optus Pty Ltd v Robertson [2024] FCAFC 58 at [24] to [32] (Murphy, Anderson and Neskovcin JJ) and the authorities there cited. Had that issue been pressed, then I would not have been satisfied that Mr Agrawal had established that he had a claim of legal professional privilege, given the scant and conclusionary nature of the evidence adduced on his behalf.

32    However, during the hearing counsel for the plaintiffs indicated that the plaintiffs were prepared to accept – consistent with conclusionary assertions made by Mr Agrawal in his affidavit evidence and in the submissions filed on his behalf – that Mr Acar had been engaged to provide legal services jointly to both Mr Agrawal and to the entities in respect of which he was a director (including the Companies) and that the documents in packet S5 were the subject of a joint legal professional privilege. On the basis of that premise, counsel for the plaintiffs submitted that Mr Agrawal was unable to maintain a claim for privilege as against the plaintiffs as liquidators of the Companies.

33    The solicitor for Mr Agrawal submitted that Mr Agrawal was able to maintain his claim for privilege in the face of the order for production and that the joint privilege could not be waived without the consent of each joint holder of the privilege.

34    It is well-established the holders of a joint privilege are entitled to maintain that privilege as against outsiders, but they are not entitled to maintain that privilege against each other. In Farrow Mortgage Services Pty Ltd (In Liq) v Webb (1996) 39 NSWLR 601 Sheller JA (with whom Waddell AJA agreed) explained at 608:

Two or more persons may join in communicating with a legal adviser for the purpose of retaining his or her services or obtaining his or her advice. The privilege which protects these communications from disclosure belongs to all the persons who joined in seeking the service or obtaining the advice. The privilege is a joint privilege. So is it also if one of a group of persons in a formal legal relationship communicates with a legal adviser about a matter in which the members of the group share an interest. Communications by one partner about the affairs of the partnership or a trustee about the affairs of the trust are examples. Implicit in the relationship is the duty or obligation to disclose to other parties thereto the content of the communication. Accordingly no privilege attaches to such communications as against others who, with the client, share an interest in the subject matter of communication. But the parties together are entitled to maintain the privilege “against the rest of the world”: Phipson, par 20-28 and par 20-29. Logically the joint nature of the privilege means that all to whom it belongs must concur in waiving it. Theirs is one inseverable right. ...

(emphasis added)

35    See also Re Doran Constructions Pty Ltd (in liq) [2002] NSWSC 215; (2002) 194 ALR 101 at 104 [7] (Campbell J); Mercantile Mutual Insurance (NSW Workers Compensation) Ltd v Murray [2004] NSWSC 151; (2004) 13 ANZ Ins Cas 61-612 at 77,418 [41] (Mason P; Handley JA and Brownie AJA agreeing); Schreuder v Murray (No 2) [2009] WASCA 145; (2009) 260 ALR 139 at 142 [10] (Pullin JA) and 153 [65] (Buss JA; McLure JA agreeing); Equititrust Ltd (in liq) v Equititrust Ltd (in liq) (No 3) [2016] FCA 738; (2016) 341 ALR 301 at 305 ([12] and [13]) (Markovic J). In Hancock v Rinehart (Freehills subpoena) [2017] NSWSC 530, Brereton J explained at [38], citing inter alia Farrow:

Where solicitors act for multiple parties jointly, there is a waiver of privilege as between those parties by reason of the joint retainer. The holders of a joint privilege have no confidence against each other: if they fall out and sue each other, they cannot claim privilege against each other in respect of communications made during the subsistence of the joint retainer before an actual conflict emerged, although they can maintain privilege against the rest of the world.

36    It follows that Mr Agrawal is unable to maintain his claim for legal professional privilege as against the other joint privilege holders including the Companies, and thus cannot maintain it against the plaintiffs qua liquidators of the Companies.

37    Contrary to the submissions made on behalf of Mr Agrawal, the production of the documents in answer to an order for production issued at the request of the plaintiffs would not amount to a waiver of privilege by Mr Agrawal as the information would not be provided to persons outside of the group of holders of the joint privilege.

38    I note for completeness that counsel for the plaintiffs fairly recognised the possibility that there may be documents which are the subject of a claim for legal professional privilege which arises in circumstances where Mr Agrawal is the only person entitled to make a claim of privilege (i.e., whether there is a separate retainer). Counsel indicated that should Mr Agrawal’s solicitor be in a position to identify any such documents then the plaintiffs would be prepared to accommodate such a claim. I invited the representatives of the parties to confer in this regard and to notify my Associate of any agreed position. No agreement was reached. The evidence before the Court does not allow a conclusion to be drawn that there are any such documents.

39    Thus, Mr Agrawal’s application should be dismissed.

D.    Conclusion

40    The SAAR parties’ application should be dismissed in so far as it relates to the objection concerning the production of documents relating to the financial affairs and property interests of Mr and Mrs Narula, but upheld in so far as it relates to the objection concerning invoices from Joseph Trimarchi and Associates. The parties have had mixed success on this application and I am presently minded not to make a costs order, such that each side bears its own costs. I will however give any party who wishes to be heard on costs the opportunity to do so.

41    Mr Agrawal’s application should be dismissed. There is no apparent reason why costs should not follow the event. I will order that Mr Agrawal pay the plaintiffs’ costs, but allow an opportunity for any party seeking a different costs order to do so if they wish.

42    I will make orders accordingly.

Associate:    

Dated:    2 August 2024