Warner v ANZ Banking Group Ltd [2019] TOSC 42; CV 40 of 2018 (31 July 2019)

IN THE SUPREME COURT OF TONGA
CIVIL JURISDICTION
NUKU’ALOFA REGISTRY

CV 40 of 2018

BETWEEN: DIANNE WARNER

Applicant

AND: ANZ BANKING GROUP LIMITED

Respondent

BEFORE LORD CHIEF JUSTICE PAULSEN

Counsel: Mr. S Fonua for the applicant
Mr. W C Edwards for the respondent

Date of Hearing: 12 July 2019
Date of Ruling: 31 July 2019

RULING

The application

[1] The applicant is the liquidator of Yanjian Group Co Limited (In Liquidation). I shall henceforth refer to the company as “Yanjian Group.”

[2] Yanjian Group is an overseas company that traded in Tonga until around 2012/2013. It was, however, never registered in Tonga. The applicant was appointed liquidator of Yanjian Group on 23 March 2018.

[3] This ruling concerns an application under s. 275 of the Companies Act 1995 (“the application”), for orders for the examination on oath of a bank officer of the respondent (“ANZ”), and for production of documents said to be in the ANZ’s possession or control namely:

(a) Bank statements in respect of account 1826650 for the period 2008 to December 2013 “in the name of” Yanjian Group, “also known as or trading as the Chinese Technical Team”;

(b) Bank statements in respect of account 1613358 for the period 2008 to the present day “in the name of” Yanjian Group, “also known as or trading as the Chinese Technical Team”;

(c) All books, records or documents of Yanjian Group in the possession of ANZ including, but not limited to, bank statements showing certain cash advances said to have been made by Yanjian Group to Yanjian Tonga Limited on 20 August 2013, or thereabouts;

(d) A debenture between Yanjian Group and Yanjian Tonga Limited to secure the said cash advances (mentioned in (c) above); and

(e) Any “other relevant documents” which are in the possession or control of the ANZ.

[4] In his written submissions, Mr. Fonua attached a schedule of documents that the applicant is seeking which goes beyond what is sought in the notice of application. He did not apply to amend the application, refer me directly to the schedule or justify a request for additional documents. I proceed on the basis that all I am concerned with are documents that fairly fall within the categories described in [3] above.

[5] The ANZ opposes the application. It argues that Yanjian Group has never been its customer and that it has no documents or records of Yanjian Group.

The evidence

[6] The evidence was given by affidavit. Before setting out the evidence, I note that on 28 June 2019, the applicant filed what was called a “Submissions Booklet of Counsel for the Applicant” consisting of 192 pages (some of them in Chinese). These had not been put into evidence as exhibits to any affidavit. Mr. Fonua explained this on the basis that in a minute of 16 May 2019, I had directed that any further submissions/documents of the applicant were to be filed by 28 June 2019. I do not accept that explanation, as what was plainly referred to by word “documents” was any further affidavits (along with exhibits). I disregard the bundle.

[7] The evidence in support of the application is sparse. It consists of a brief affidavit of the applicant dated 6 August 2018. The applicant’s affidavit contains the following evidence:

(a) Yanjian Group was not registered in Tonga under the Companies Act 1995 or with the “IRD” and filed no tax returns and “no records exist of its trading results or asset base”;

(b) She has a record (not attached to her affidavit) of a loan advance of $2,278,087 from Yanjian Group to Yanjian Tonga Limited on 20 August 2013;

(c) The documents sought from the ANZ might show the loan advance;

(d) Yanjian Group traded as the Chinese Technical Team;

(e) The Chinese Technical Team owns a bank account, No. 1613358 (one is to infer that the account is with the ANZ);

(f) Yanjian Tonga Limited owns a bank account, No. 1826650 (again the inference being that it is an account with the ANZ).

(g) She wants to “check” these bank accounts “which will show” the transfer of loan funds amounting to TOP$551,958.23 from Yanjian Group to Yanjian Tonga;

(h) She requested the ANZ to provide banks statements for the accounts on 6 June 2018, but the ANZ refused to do so because of confidentiality obligations to its customer;

(i) A notice under s. 270 of the Companies Act was issued to the ANZ on behalf of the liquidator requiring bank statements for certain periods. It was annexed as exhibit A to the affidavit, along with correspondence between the parties’ lawyers; and

(j) It is necessary for her to have the information requested to help her decide whether to proceed further with carrying out her functions/duties.

[8] Mr. Fonua referred me to other proceedings the applicant has commenced against Yanjian Tonga Limited under CV 55 of 2018 (CV55). In that action she relies upon two causes of action. In the first cause of action, she pleads that a loan agreement between Yanjian Group and Yanjian Tonga Limited dated 20 August 2013 was cancelled at undervalue. She seeks recovery of the loan advance in reliance upon s. 306 of the Companies Act. In the second cause of action, she seeks the pooling of the assets of Yanjian Group and Yanjian Tonga Limited and payment of the sum of TOP$3,380,335. In this instance she relies upon s. 280 of the Companies Act.

[9] The sum sought in the applicant’s second cause of action is the amount of a judgment obtained in the Court of Appeal by Lord Luani against Yanjian Group (AC 6/7 of 2017). It appears, Lord Luani is Yanjian Group’s major, if not only, creditor.

[10] In an affidavit filed for the ANZ, one of its officers, Mr. Sulia Toutai, gave evidence:

(a) The ANZ does not have any books, records or documents of Yanjian Group;

(b) The accounts held with the ANZ under the names Yanjian Tonga Limited and the Chinese Technical Team were opened by Yanjian Tonga Limited (There is attached to the affidavit a company search that shows the incorporation date of Yanjian Tonga Limited was 20 June 2012);

(c) Yanjian Group has never opened an account with the ANZ;

(d) There is no evidence provided by the applicant that Yanjian Group and Yanjian Tonga Limited are related companies;

(e) The ANZ does not hold a debenture between Yanjian Group and Yanjian Tonga Limited;

(f) Whilst the ANZ would like to co-operate with the applicant’s enquires, it was required to protect Yanjian Tonga Limited’s right to confidentiality; and

(g) That in correspondence with the applicant’s lawyers, Mr. Fonua had provided a copy of the loan agreement between Yanjian Group and Yanjian Tonga Limited.

[11] In response to a submission of Mr. Edwards, that the ANZ had account application forms for accounts 1826650 and 1613358 and they were in the name of Yanjian Tonga Limited, I asked him to obtain those documents for my inspection. On 23 July 2019, Mr. Edwards filed a memorandum (with documents attached) which confirms that account 1826650 was opened by Yanjian Tonga Limited on 13 December 2013.

[12] However, account 1613358 (a cheque account) together with account 1613369 (a USD currency account), were opened on 11 June 2008 in the name of Chinese Technical Team. The ANZ cannot locate those documents. Accounts 1613358 and 1613369 pre-date the incorporation of Yanjian Tonga Limited and cannot have been opened by it. As significant, Mr. Edwards advises that from 15 June 2015 an amendment to the account authorities was completed. From that date, the holder became “Yanjian Tonga Limited/Chinese Technical Team for Project of Tonga.”

[13] Mr. Edwards also confirmed in his memorandum that the ANZ has statements for accounts 1613358 and 1613369 and is happy to provide those to the Court.

The statutory provisions and the applicant’s argument

[14] The Companies Act relevantly provides in ss. 270 and 275 as follows:

270 Power to obtain documents and information

(1) A liquidator may, from time to time, by notice in writing, require a director or shareholder of the company or any other person to deliver to the liquidator such books, records or documents of the company in that person’s possession or under that person’s control as the liquidator requires.

(2) A liquidator may by notice in writing require —

....

(e) a receiver, accountant, auditor, bank officer or other person having knowledge of the affairs of the company;....

— to do any of the things specified in subsection (3).

275 Powers of Court

(1) The Court may, on the application of the liquidator, order a person who has failed to comply with a requirement of the liquidator under section 270 to comply with that requirement.

(2) The Court may, on the application of the liquidator, order a person to whom section 270 applies to —

(a) attend before the Court and be examined on oath or affirmation by the Court or the liquidator or a law practitioner acting on behalf of the liquidator on any matter relating to the business, accounts or affairs of the company;

(b) produce any books, records or documents relating to the business, accounts or affairs of the company in that person’s possession or under that person’s control.

[15] These provisions are based on ss. 261 and 266 of the Companies Act 1993 (NZ), and decisions of the New Zealand courts are relevant as an aid to their interpretation.

[16] In her notice of application, the applicant is not specific about what statutory provisions she relies upon for each of the orders sought. She states broadly that she relies upon s. 270 and 275. She does not differentiate between the powers conferred by ss. 275(1) and (2). As is clear from the decision in Managh v Currie (2011) 10 NZCLC 264,841, at [12]-[13], the powers conferred under those sections are exercisable in different circumstances. In what follows, I will deal first with s. 275(1) and then s. 275(2).

The application of section 275(1)

[17] Section 275(1) provides the Court with the power to enforce compliance with a notice under s. 270(1). It has been held in Tonga that the powers conferred by s. 270 are designed to assist a liquidator, quickly and effectively as possible, to carry out his/her functions under the Companies Act, favouring a broad, rather than a restrictive, interpretation (Re Friendly Island Fisheries Limited [2003] Tonga LR 327).

[18] In Petterson v Gothard (No. 3)[2012] NZHC 666, Heath J found that receivers fall within the definition of “any other person” and that the purpose of the equivalent to s. 270(1) is:

In general terms, s 261(1) evidences a Parliamentary intention that a liquidator is entitled to obtain delivery of books, records or documents of the company as of right, without the need to expend liquidation funds to pay remuneration or expenses of the person required to comply with the obligation.

[19] I am satisfied that the words “any other person” should be interpreted broadly and consistent with this the ANZ is a person upon whom a notice may be served for the purposes of s. 270(1).

[20] A notice under s. 270(1) must notify the recipient exactly of the documents that the liquidator requires him or her to produce. The notice that was served on the ANZ made only two demands, as follows:

You are required to provide:

1. Bank statements under the account number 1613358 from 2010 to the present day.
2. Bank statements under account number 1826650 from 2012 to 30 April 2016 and from 17 May 2017 to the present day.

[21] In the notice of application, the applicant seeks an order that statements for these two bank accounts be produced but for different periods than were stated in the notice under s. 270(1). In respect of account 1613358, the application requires statements from 2008 to present day (rather than 2010 to the present day). In respect of account 1826650, the application requires statements from 2008 to December 2013 (rather than from 2012 to 30 April 2016 and from 17 May 2017 to the present day). There is no explanation for this inconsistency.

[22] The ANZ’s position is that it holds no books, records or documents of Yanjian Group. Based on the evidence that is before me (along with Mr. Edwards’s memorandum), I do not accept that is the case in respect of account 1613358. The liquidator asserts that Yanjian Group traded as the Chinese Technical Team and that account 1613358 was owned by it. In his affidavit, on behalf of the ANZ, Mr. Toutai denied this on the basis that the account was opened by Yanjian Tonga Limited. That evidence was incorrect, as the memorandum of Mr. Edwards acknowledges. The account was opened in 2008, years before Yanjian Tonga Limited was incorporated, and Yanjian Tonga Limited cannot claim ownership of the account until at least 15 June 2015 when the account authority was amended. It follows that the ANZ should be required to produce the bank statements for that account for the period 2010 (as sought in its notice) up to 15 June 2015 (rather than to “the present day” as sought in the notice). I will order accordingly.

[23] In respect to account 1826650, the position is different. I am satisfied that the account has always belonged to Yanjian Tonga Limited. The applicant admits as much in her affidavit. The account opening form was provided and confirms that the account was opened on 13 December 2013 by Yanjian Tonga Limited. The applicant is not entitled to an order for the production of those statements under s. 275(1).

The application of s. 275(2)

[24] Before s. 275(2) is engaged the applicant must establish that the ANZ is “a person to whom section 270 applies.” The applicant relies upon s. 270(2)(e) which refers to:

a receiver, accountant, auditor, bank officer or other person having knowledge of the affairs of the company.

[25] New Zealand courts have held that the operative requirement of the equivalent of s. 270(2)(e) is “knowledge of the affairs of the company.” Whether a person has the requisite knowledge of the affairs of the company will turn on the particular facts and aspects of the case (Managh v Currie (supra) at [24], Re Communication and Energy Workers Union Inc (1996) 7 NZCLC 261,264 and, Walker v Angus & ors [2018] NZHC 2354 at [37] and [38]).

[26] In Re Communications and Energy Workers Union Inc (supra), the liquidator of a society in liquidation sought orders that bank officers of certain named banks provide, inter alia, bank statements held by them in the name of a company into which sale proceeds of a property, formerly owned by the society, had been paid. Whilst accepting that the liquidator’s wish to make enquires was perfectly proper and consistent with his duties, Greig J refused the orders sought because the society was not the banks’ customer and could not be said to have knowledge of the society’s affairs. He said the section needed to be construed strictly “on the question of the scope of the authority and the entitlement to exercise the powers thereunder” because of the extraordinary powers of an inquisitorial nature that were conferred (relying upon, inter alia, Laing v KPMG Peat Marwick (1989) 3 BCR 336).

[27] The present case is distinguishable because Yanjian Group was (on the evidence before me), at one time, a customer of the ANZ. That said, there is nothing to suggest the ANZ holds any documents for the company (other than statements for account 1613358 and an account opening form that cannot be located) or has, after so many years since the company traded, any knowledge whatsoever of its affairs. Specifically, there is no evidence that the loan advance the applicant wishes to investigate was made from, or into, accounts held with the ANZ. It follows, due to the paucity of the evidence, that s. 275(2) is not engaged.

[28] For completeness, there are other reasons why I would not exercise the Court’s powers under s. 275(2). First, in relation to paragraph (a) of the notice of application, the applicant sought an order:

The respondent appointed [sic] a bank officer to attend the court to be examined and recorded on oath.

[29] The onus rests upon the applicant to identify a person to whom s. 270 applies. The Court may order that person to be examined concerning “any matter relating to the business, accounts or affairs of the company.” It is not for the ANZ to make the assessment of who such a person might be on the applicant’s behalf.

[30] Second, in so far as the application seeks documents “in the name of Yanjian Group Co Limited” or “documents of the Company” (other than statements relating to 1613358) I am satisfied on the evidence that no such documents are in the possession or control of the ANZ except for the loan agreement which was provided to it by the applicant (and possibly an account opening form that cannot presently be found). The ANZ cannot be required to produce documents that are not in its possession or control (see Managh at [84]).

[31] Third, in deciding whether to exercise its powers under s. 275(2), the Court balances the needs of the liquidator to obtain information to investigate the affairs of the company against the effect of an order on the party being compelled to produce documents (Managh at [45]). In this regard, in Managh, at [48] and [51], Mander J said:

[48] There is a public interest for liquidators to obtain information expeditiously and with a little expense as possible. However, requirements for the production of information should not lead to oppressive consequences. The information being sought will need to be referable to a line of inquiry which will benefit the company in liquidation. When assessing the effect on a person required to produce records or documents relating to the business affairs of the company, other considerations are the reasonable expectation of privacy of financial information and the relationship of the person with the company. The more distant the person from the company, the more onerous the obligation will likely be viewed.

...

[51] The power is to be exercised after careful balancing of the relevant factors. The Court is required to take into account the reasonable requirements of the liquidator to carry out his or her task, as well as the need to avoid the making of an order which will result in wholly unreasonable, unnecessary, or oppressive consequences for the person obliged to comply.

[32] In my view, the categories of document sought in the notice of application are too broad. The bank statements sought for account 1826650 relate to a period of 6 years, yet the evidence of the applicant is that she is concerned with the transfer of TOP$551,958 on or around 20 August 2013. In paragraph (v) of the notice of application the applicant seeks “[a]ny other relevant documents” but the ANZ is entitled to ask, relevant to what?

[33] Furthermore, to my mind there is no need for these orders to be made. The applicant has already commenced proceedings against Yanjian Tonga Limited under CV 55 and Yanjian Tonga Limited has engaged in the action. The applicant may obtain any relevant documents of Yanjian Tonga Limited by way of discovery, without compelling disclosure by the ANZ and undermining any confidentiality obligations it may owe its customer.

Result

[34] I make an order under s. 275(1) of the Companies Act that the ANZ shall within 10 days provide to the applicant copies of all statements in its possession or control relating to account 1613358 for the period 1 January 2008 to 15 June 2015.

[35] The application is otherwise dismissed.

[36] The applicant has been successful in small part only. The case was made much more difficult than it should have been by its manner of presentation. It is appropriate that costs shall lie where they fall.

O. G. Paulsen
NUKU’ALOFA: 31 July 2019. LORD CHIEF JUSTICE