Wadren Pty Ltd v Algeri

A number of insurers intervened in an application for an order requiring production of documents from an external administrator pursuant to s 70-90 Insolvency Practice Schedule. The applicants had applied for a preliminary discovery order in an earlier proceeding. The applicants were said to be precluded from making the application in circumstances where it was so connected with the subject matter of the earlier proceeding that it was unreasonable for the issue not to have been raised in the earlier proceeding, or in the alternative, the application should be stayed as an abuse of process. Justice Brown rejected these arguments. The application was allowed to the extent production of the documents was reasonably necessary for the applicants to make an informed assessment about whether to continue and/or commence litigation against the company under external administration.

Brown J

3 June 2024

Background

The second respondent (herein referred to as the “construction company”) is a member of a large corporate group, over which the first respondents were appointed as external administrators (herein referred to as the “administrators”). [1]. The first applicant had entered into a contract with the construction company for the construction of a shopping centre and the second applicant had acquired a financial interest in the shopping centre (together, the “applicants”). [1]. The applicants notified the construction company of the existence of both structural and non-structural defects with the shopping centre. [2]. Whilst the applicants have commenced proceedings in the Supreme Court of Victoria against the construction company and others alleging liability arising from the structural defects with the shopping centre, they are still considering whether to commence proceedings alleging liability arising from non-structural defects with shopping centre. [2].

The applicants had previously applied for a preliminary discovery order in the Supreme Court of Victoria requiring the construction company and one of its insurers to discover various classes of documents (the “earlier proceeding”). [3]. A preliminary discovery order was made, however, it is currently the subject of an extant appeal. [3]. The applicants requested that the administrators produce documents under s 70-45 Insolvency Practice Schedule. [4]. The administrators refused to comply with this request. [5]. The applicants applied to the Supreme Court of Queensland for an order pursuant to s 70-90 Insolvency Practice Schedule requiring the administrators to produce the documents they had requested. [5]. Neither the administrator, nor the construction company, opposed the application. [5]. However, a number of insurers sought to contradict the application (the “insurers”). [5]. The insurers sought, and were granted, leave to intervene. [5]. The insurers argued:

• that Anshun estoppel precluded the applicants from making the application; or
• in the alternative, the application was an abuse of process; and
• in any event, the application should be dismissed on its merits. [7], [18].

Whether an Anshun estoppel precluded the applicants from making the application

The insurers relied on the doctrine of Anshun estoppel: see Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589. [19]. The insurers argued that the application was so connected with the subject matter of the earlier proceeding that it was unreasonable in the context of that proceeding for the claim not to have been made or the issue not to have been raised. [19]. The applicants argued, inter alia, that this argument must fail. [22]–[23]. A threshold requirement for an Anshun estoppel is that the decision in the earlier proceeding must have finally and conclusively determined the rights of the parties. [22]–[23]. The threshold requirement was said to have been satisfied because an application for preliminary discovery is a stand-alone proceeding. [24]. This was rejected. [28]–[29]. Whilst an application for preliminary discovery is instituted by originating application, its legal effect cannot be characterised as finally and conclusively determining rights. [28].

Whether the application was an abuse of process

The circumstances said to support an inference that the application was an abuse of the court’s processes included, inter alia, that: the application sought many of the same documents by way of preliminary discovery in the earlier proceeding; and the applicants could have made the application pursuant to s 70-90 Insolvency Practice Schedule as an alternative to preliminary discovery in the earlier proceeding. [38]. One of the circumstances which was said to negate this inference included that the administrators had, at least initially, not accepted that the applicants were creditors. [39]. The most efficient course would have been for the application to have been made as an alternative to the preliminary discovery in the earlier proceeding. [40]. However, the issues in the application pursuant to s 70-90 Insolvency Practice Schedule were quite different to those in the earlier proceeding, notwithstanding the fact that the applications have the same purpose. [40].

Justice Brown held that whilst the timing of the application was undesirable, it was not an abuse of process. [43]. Different considerations arise when determining an application for preliminary discovery compared to an application pursuant to s 70-90 Insolvency Practice Schedule. [40]. The parties were also different insofar as the application pursuant to s 70-90 Insolvency Practice Schedule was limited to the administrators. [40]. There was also no risk of inconsistent findings in circumstances where the bases of the applications differed. [40]. The information sought by the applicants, as creditors, was to ascertain the financial worth of the construction company. [41]. The failure to bring the application pursuant to s 70-90 Insolvency Practice Schedule as an alternative to preliminary discovery in the earlier proceeding was satisfactorily explained by the administrators not, at least at that time, accepting that the applicants were creditors. [42].

Whether the application should be dismissed on its merits

When an order is sought under s 70-90 Insolvency Practice Schedule, a court is not confined to determining whether the administrators erroneously refused a request under s 70-45 Insolvency Practice Schedule. [51]– [52]. The deed of company arrangement incorporated as a term, the terms of s 562 Corporations Act 2001 (Cth) and provided that the applicants have a right to be paid insurance moneys received by the administrators in respect of an insured liability incurred by the construction company after the deduction of expenses. [61]. The administrators had told creditors that before a final distribution can be calculated, any outstanding litigation against the construction company and other members of its corporate group concerning insured liabilities must be determined. [61]. For this reason, if the applicants commenced a proceeding against the construction company for what is said to be insured liability for non-structural defects, distributions to creditors will be delayed. [61].

Justice Brown was prepared to make an order of the kind sought by the applicants: see [60]–[70]. It was in the interests of the creditors as a whole that the applicants be provided with sufficient information to enable an informed assessment of the following matters: whether to continue their proceedings in the Supreme Court of Victoria against the construction company and others in relation alleged liability for structural defects with the shopping centre; and/or whether to commence proceedings in relation to alleged liability for non-structural defects with the shopping centre. [65]. There were uncertainties about the extent of insurance coverage which was relevant to these informed assessments. [65]. This could be resolved by requiring the administrators to produce the documents requested. [65]. However, request was impermissibly wide. [67]. Any order must be limited to that which is reasonably necessary for the purpose of making these informed assessments: see [67]–[69].

Disposition

The application was allowed with the parties to be heard on the form of order. [72].

D Kerr