Jirsch Sutherland partner Andrew Spring copped a judicial warning and took advice about self-incrimination during the hearing last month of an application to terminate a deed of company arrangement (DoCA).
On June 12 and 13 Spring was cross-examined by counsel for the applicant, an Owners Corporation which had seen its claim for more than $7 million in respect of alleged defects in a residential development in Botany reduced through the DoCA to $200,000.
“The Administrators contend that Mr Spring exercised his casting vote appropriately and conscientiously by reference to several matters, including that the Owners Corporation’s claim was disputed; that creditors stood to receive a greater and more timely return under the DOCA as compared to the likely return to creditors in the event that ACD was to be wound up; that the proposed DOCA was consistent with the objects of s 435A of the Act; and that Mr Spring had reference to the interests of creditors as a whole and the ARITA Code of Professional Practice in exercising his casting vote.” Justice Ashley Black.
At one point the judge interrupted questioning by barrister for the applicant Geoff Macdonald to advise Spring that he was entitled to object to a question if he thought it might incriminate him or expose him to a penalty.
Macdonald had asked Spring if he had disclosed to creditors of Academy Construction & Development Pty Ltd (ACD) that he’d been providing advice to the director and former director prior to his appointment as administrator of ACD, along with colleague Peter Moore on October 6, 2023.
But as Spring’s counsel Daniel Krochmalik pointed out, non-disclosure wasn’t part of the Owner’s Corporation’s pleaded case so the judge canned the line of questioning.
At the time Spring and Moore were appointed on August 31, 2023, defects proceedings brought by the Owners Corporation against the company had been underway in the Supreme Court’s Technology and Construction List for almost two and half year.
The resolution to enter into the deed was passed at the second meeting of ACD creditors on October 6, 2023.
As meeting chairman Spring used his casting vote in favour of the resolution to break a deadlock between the majority in number in support and the Owners Corporation, which had the majority in value and was implacably opposed.
In the matter of Academy Construction & Development Pty Ltd (subject to Deed of Company Arrangement) [2024] NSWSC 808 the judge said: “The Administrators contend that Mr Spring exercised his casting vote appropriately and conscientiously by reference to several matters, including that the Owners Corporation’s claim was disputed; that creditors stood to receive a greater and more timely return under the DOCA as compared to the likely return to creditors in the event that ACD was to be wound up; that the proposed DOCA was consistent with the objects of s 435A of the Act; and that Mr Spring had reference to the interests of creditors as a whole and the ARITA Code of Professional Practice in exercising his casting vote.”
But back to the hearing.
After Krochmalik’s objection Macdonald moved onto other pre-appointment communications, including email correspondence between Spring and Piper Alderman partner Tim Coleman for ACD, in which they discussed the provision of third party releases of liability via the DoCA.
As Spring was pressed on his use of the term “need for a DoCA” Krochmalik objected and NSW Supreme Court judge Ashley Black asked Spring to step outside the court room before reminding Krochmalik that the correspondence had been put in issue by his own client and Macdonald was entitled to grill Spring about it.
Justice Black then told the court that in determining the question of whether the proposed third party releases were compliant with the Act or otherwise, it might potentially be found that Spring was not at that time acting independently and the DoCA was in effect an alternative to settling the defects litigation.
While his musings were hypothetical, the judge said he could potentially be required to refer Spring to ASIC or ARITA for what he described as “regulatory action”.
After some further debate about the question and whether its pursuit was appropriate in the context of the Owners Corporation’s case the judge said it was possible the correspondence could reveal either a lack of independence or improper use of the voluntary administration and DoCA provisions of the Act in a way that could potentially have consequences for Spring, and that he should therefore issue a formal warning under Section 132 of the Evidence Act.
After instructing that Spring be returned to the witness box Krochmalik leapt up to advise that Spring’s solicitor first wanted to remind her client that he can claim privilege against self-incrimination.
After a short adjournment Spring returned to the witness box. The questions about third parties and releases continued and it wasn’t long before Spring sought the relevant protections, asking the judge if he was entitled to object to the questions Macdonald was pursuing.
The judge then explained to Spring that if he was worried about providing an answer that could potentially invite a penalty or might tend to show that he’d committed an offence he should indicate his concern.
This the judge said was because whilst he was not expressing any final view, he believed that the communications in issue could suggest that Spring’s role could be viewed as one of advisor to the deed proponent rather than as an independent voluntary administrator and that Spring had reasonable grounds for objecting, given that the question could provoke professional disciplinary proceedings depending on his answers.
Fortunately for Spring the judge offered him the protection of an immunity certificate provided for under S 128 of the Evidence Act, which meant that if he agreed to willingly answer the question being put then his answer or anything obtained from his answer couldn’t be used in a proceeding in an Australian Court, unless it was a criminal proceeding brought on the basis of him having provided false evidence.
Spring agreed and then told Macdonald he wasn’t supportive of releases being included in the DoCA because he didn’t believe they would have any force if the Owners Corporation, as turned out at the second meeting, voted against the deed terms.
On Monday the judge delivered his reasons, ordering that the DoCA be terminated and that Anthony Elkerton and Paul Weston be appointed liquidators of ACD.
His honour also expressed the preliminary view that no orders as to costs should made either in favour of or against the Spring and Moore, the latter of which took no part in the hearing.
We asked Spring if he would invoking his lien in respect of remuneration and he told iNO that there was “nothing in his Honours reasons which would suggest the Administrators’ indemnity is in any way prejudiced”.
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