In the NSW Supreme Court this week iNO heard tell of a liquidator who on being presented with two options, chose a third which doesn’t exist. It hasn’t turned out well, though as is chronicled below, worse was averted.
The practitioner in question is Balance Insolvency’s Tim Cook, and it would be remiss of us to not also mention Mills Oakley special counsel David Armstrong, who as Cook’s legal advisor had the unpalatable job of fronting the court of Corporations Judge Ashley Black on Monday to apologise on his client’s behalf.
The apology was a necessary step in Cook avoiding an inquiry into his conduct as liquidator of Bailey Roberts Group, a possibility flagged by Justice Black before Easter when a creditor of the company seeking material came to court complaining that Cook was refusing to comply with a subpoena.
As iNO reported late last month, the subpoena had been issued in November 2023 but Cook had baulked, arguing that the scope was too broad for a liquidator without funds.
On Monday however it emerged that Cook had indicated to the creditor that he might be able to comply if the creditor chipped in no less than $50,000 to cover the cost of identifying the relevant hard copy documents and assessing whether or not they’d be subject to legal professional privilege.
It further emerged that if the creditor was content with a digital disgorgement then Cook could get by with $25,000.
Armstrong told the judge that he thought his client and the creditor had arrived at an agreement to narrow the subpoena’s scope earlier this month, which might have explained why there had been non-appearance on two occasions, for which Armstrong also apologised.
The contrition seemed to assuage Justice Black, who had earlier taken some time to clarify that a subpoena is a “compulsive order” and not an invitation, a clarification he expressed in a noticeably firm tone of voice, his complexion acquiring an uncharacteristically choleric hue as the extent of his dissatisfaction was made manifest.
Terms like “repentance”, “non-compliance”, “inconvenience” and “apologies” featured as the judge unleashed his spleen.
A liquidator presented with a subpoena had two options the judge said. He or she could comply with it, or apply to have it set aside. There was no third option, irrespective of whether the liquidator was in funds or otherwise.
The judge was also moved to question the condition Cook sought to impose requiring that the applicant’s legal advisors not be allowed to examine the relevant documents unsupervised, “presumably because the plaintiff’s solicitors can’t be trusted”, the judge opined.
Justice Black said all that was required was for the liquidator to put the material in a box and reserve his rights as to privilege “as many liquidators have done in the past”.
In the end though his honour seemed much placated by Armstrong’s chastened demeanour, with the judge complimenting “the constructive way that the liquidator and his advisors have approached the hearing today.”
iNO asked Cook if his approach had been guided by legal advice. By way of reply Cook would say only that the subpoena was broad and included potentially confidential personal and financial details, and his advice was that these were potential issues.
“As I was unfunded, we were working with HWL Ebsworth on a regime to fund a review and compliance,” Cook said.
“Despite agreeing to a regime, instead of agreeing to pay the estimated compliance costs, they chose to decline the agreement.
“The court ordered I comply and deliver up the records regardless of content.”
The response indicates that Cook maintains the view that he had a third option which he was forced to abandon by order of the court.
Further reading:
It is not uncommon for external administrators or people in a like position to fail to produce unless their costs of compliance are paid or Subpoena limited. As said by Balck J there are in fact 2 courses of action as it is a court order. The Subpoena itself makes provision for recovery of compliance costs either by agreement (desirable) or application to the Court. Usually, the costs of compliance are flagged as to time and costs at time of or just before compliance. The practice of delaying compliance has become a practice over last few years and is clearly contrary to the overriding principle in relation to conduct of court proceedings or for that matter compliance.