This week's TGIF considers In the matter of Arrium Limited  NSWSC 747 in which the Court granted creditors access to documents produced in public examinations.
On 4 November 2016, Arrium Limited and several of its subsidiaries entered into deeds of company arrangement (Arrium). On 23 April 2018, the joint and several deed administrators (Deed Administrators) of Arrium commenced public examinations of certain directors, officers, auditors and third party advisors.
As part of those examinations, the Deed Administrators prepared bundles of documents, either sourced from Arrium's books or produced by third parties, to be referred to and put to the examinees (Examination Documents).
On 16 May 2018, a group of lenders, comprising roughly 85% of Arrium's creditors by value, requested access to:
- the Examination Documents; and
- the transcripts of the examinations.
The request was made pursuant to s 596F(1)(e) of the Corporations Act 2001 (Cth) (Corporations Act) which provides a discretion to the Court to make a direction about access to "records of the examination".
THE DIFFERENCE BETWEEN "WRITTEN RECORD" AND THE "RECORDS OF THE EXAMINATION"
Under s 597(14A) of the Corporations Act, a creditor has access, as a matter of right, to the "written record" of a public examination. The "written record" includes the questions put to an examinee and the answers given by him or her.
In contrast, s 596F(1)(e) provides the Court with the discretion to grant access to the "records of the examination". While the "records of the examination" include the "written record", they also extend to documents shown to a witness in the course of an examination.
The Court noted that earlier cases identified two bases for making the product of examinations available to third parties, being:
- if doing so had sufficient prospects of increasing or protecting the assets available in a winding up; and
- if doing so fulfilled the broader purpose of examinations and the rights provided to creditors more generally.
Further, it was observed that the discretion conferred on the Court enabled it to extend access beyond documents comprising the Examination Documents to all material produced under compulsory process (whether or not used in the examination).
The Court permitted access to the documents sought and, in making the orders, identified the following factors weighing in the creditors' favour:
- first, allowing access to the documents would facilitate the identification and pursuit of potential causes of action not available to the Deed Administrators or a liquidator (if one were appointed);
- insofar as some of the lenders were members of the creditors' committee of Arrium, access would assist their consultation with the Deed Administrators regarding potential claims available to a liquidator of Arrium;
- the significant volume of the Examination Documents and the lengthy anticipated period of the examinations; and
- finally, there was no indication that the lenders sought access to the documents for an improper purpose.
With respect to this last point, the access granted was qualified to ensure that, until further order of the Court, the creditors could only use the documents so obtained for the purposes of "this proceeding" being the examinations in the Supreme Court.
Such a qualification was consistent with that made in respect of a similar request for access by a separate creditor who sought documents in order to assess whether to take part in the current examinations as an 'eligible applicant' and to pursue separate civil proceedings against an examinee.
Insolvency practitioners should be mindful that creditors, in addition to their statutory right to obtain examination transcripts, may also request access to all documents produced in aid of an examination (irrespective of whether the document was specifically put to the examinee).
On consideration of a request for access, the Court will consider whether there is a reasonable benefit to creditors in allowing such access and if such access is consistent with the wider statutory purpose of examinations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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