In the matter of Recycling Holdings Pty Ltd (in liquidation) (deed administrator appointed) ACN 123 236 573

HIS HONOUR: By interlocutory process filed on 4 March 2015 and amended today, the applicant/third defendant Jason Kenneth Ryan seeks orders setting aside paragraphs 10 and 11 of a notice to produce issued by the plaintiffs to him dated 22 December 2014, and also an order setting aside a subpoena issued by the plaintiffs on 10 March 2015 to Dual Australia Pty Limited.

The relevant paragraphs of the notice to produce addressed to Mr Ryan are in the following terms:

As to paragraph 10, I have already held that fee agreements entered into with respect to the conduct of the other proceedings on behalf of the company are relevant, in the liberal sense in which that term is applicable, when it comes to production of documents and subpoenas, because they may inform the issue of the amount that will have to be paid by the funder. The fact that those agreements may be obtained by a subpoena or summons from another source does not mean that, if they are in possession of Mr Ryan, they are not also obtainable from him. It may well be that they are also relevant to the net benefit to creditors to be derived from the deed of company arrangement if the amounts to which they refer are to be deducted from any recovery in those proceedings. While I accept that they are at the remoter, rather than closer, end of the scale of relevance, parties that seek to obtain evidence for use in proceedings should not be unduly constrained in doing so, especially where it is not complained that the obligation cast on the recipient is unduly burdensome and no such complaint is made here. It seems to me that it cannot be said that such fee agreements are, in the relevant sense, of no apparent or potential relevance, and I therefore decline to set aside paragraph 10.

As an issue in the proceedings is the capacity of Front Foot to perform its obligations under the funding agreement, and as it is apparent that Front Foot's capacity to do so is dependent upon the support of Mr Ryan, it seems to me that paragraph 11 must be relevant to that issue. While it is said that there are no documents produced in respect of paragraph 11, it would follow that that paragraph should not be set aside.

So far as the subpoena to Dual Australia is concerned, it is in the following terms:

There is evidence, in the form of a file note of the receiver, that suggests that pursuant to an insurance policy with "Jewel" – presumably a misspelling of Dual – the company made a claim in respect of theft of material, which was settled in December 2013 for $400,000 plus costs of $100,000. An inference may then be available that the company received $500,000 before it went into liquidation in the first half of 2014.

The plaintiffs contend in their points of claim that the resolution to enter into a deed of company arrangement should be set aside or the deed terminated by reason that the s 439A report omitted material matters, including in particular, "adequate detail and information in relation to possible causes of action available to a liquidator in a winding-up, particularly in relation to unfair preferences and insolvent trading." The plaintiffs wish to argue that if the company received $500,000 in December 2013, there was an area calling for investigation, and presumably report, as to how that $500,000 was dealt with. In short, if the company had $500,000 a few months before it went into liquidation; what happened to that fund between then and its going into liquidation? There is some evidence that the administrators have said that they know nothing about the insurance claim.

A first step in advancing that argument would be proving that the moneys were in fact received. The circumstance that an inference to that effect may be available from the file note does not mean that obtaining better and more conclusive evidence of the matter is irrelevant. To the contrary, it seems to me that the plaintiff is entitled to obtain better evidence in an endeavour to establish that the Court must reach that conclusion, rather than that it might draw an inference to that effect from the file note.

Of course, that does not prove the ultimate issue that there was anything omitted from the 439A report, but it is a step on the way to doing so. It is true that to do so, a copy of the policy of insurance and the claim may not be essential; but the policy of insurance and the claim may provide material which assists in characterising the payment received by the company, and casts light on whether the manner in which the proceeds were dealt with was consistent with that. For example, sometimes the proceeds of insurance claims are not paid to the claimant at all, but to a third party who was a claimant on the insured. Conceivably, the terms of the claim in the policy might illustrate that that was not the case, or refute an argument that might otherwise be advanced that it was an alternative hypothesis that could not, on balance, be excluded.

Again, given the liberal concept of the relevance in this context, it cannot be said that the documents sought could not add in some relevant way, directly or indirectly, to the evidentiary material in the case, or could not in some way directly or indirectly advance the case that the plaintiffs wish to make. While these documents too are at the remoter rather than the closer end of the spectrum of relevance, it is in that context significant that no complaint about the burden of the subpoena is made by the recipient Dual.

The Court therefore orders that the amended interlocutory process be dismissed with costs.