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Federal Court of Australia |
Last Updated: 27 October 2005
FEDERAL COURT OF AUSTRALIA
Hayes Knight GTO Pty Ltd ACN 009 101 286 v Australian Securities and Investments Commission [2005] FCA 1509
ADMINISTRATIVE LAW – decision to authorise an
‘eligible applicant’ to make an application for the issue of
examination summons –
whether ASIC required to give reasons for decision
– whether ASIC required to provide discovery
WORDS AND
PHRASES - ‘proceedings in a civil
court’
Corporations Act 2001 (Cth) Div 1 Pt 5.9, ss 9,
596A, 596B
Administrative Decisions (Judicial Review) Act 1977 (Cth)
ss 5(e), 5(f), 13, 15, 16, Sch 2 par (f)
Judiciary Act
1903 (Cth) s 39B
In re Appleton, French &
Scrafton, Ltd [1905] 1 Ch 749 applied
Cheney v Spooner [1929] HCA 12; (1929) 41
CLR 532 applied
Re John Sanderson & Co (NSW) Pty Ltd (in liq) (No
2) [1976] VR 225 cited
Carmody v MacKellar (1996) 68 FCR 265
approved
Re New Tel Ltd (in liq) (ACN 099 068 955); Evans & Anor v
Wainter Pty Ltd (ACN 008 725 586) [2005] FCAFC 114; (2005) 54 ACSR 284
cited
Australian Securities Commission & Ors v Somerville (1994)
51 FCR 38 applied
HAYES KNIGHT GTO PTY LTD ACN 009 101 286 and
JOHN MICHAEL O’BRIEN v AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
and ROBERT GEORGES
BERNARD RASSOOL as delegate of the Australian Securities
and Investments Commission and HIGHSTOKE PTY LTD ACN 109 142 225 as trustee
for
holders of debenture stock issued by Performance Finance Limited (receiver and
manager appointed)
WAD 281 OF 2005
SIOPIS
J
26 OCTOBER 2005
PERTH
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HAYES KNIGHT GTO PTY LTD ACN 009 101 286
FIRST APPLICANT JOHN MICHAEL O’BRIEN SECOND APPLICANT |
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AND:
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AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
FIRST RESPONDENT ROBERT GEORGES BERNARD RASSOOL as delegate of the Australian Securities and Investments Commission SECOND RESPONDENT HIGHSTOKE PTY LTD ACN 109 142 225 as trustee for holders of debenture stock issued by Performance Finance Limited (receiver and manager appointed) THIRD RESPONDENT |
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DATE OF ORDER:
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WHERE MADE:
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THE COURT ORDERS THAT:
1 By 4.00 pm on 2 November 2005, the first respondent give discovery under O 15 r 2 of the Federal Court Rules by serving upon the applicants a list which enumerates and describes all documents which are or have been in its possession, custody or power relating to the decision made on 3 August 2005 to authorise the third respondent to make an application or applications under Div 1 Pt 5.9 of the Corporations Act 2001 (Cth) in relation to the first applicant.
2 The application otherwise be dismissed.
Note: Settlement and entry of orders
is dealt with in Order 36 of the Federal Court Rules.
REASONS FOR JUDGMENT
1 The applicants have brought an application for judicial review of a decision made by the first respondent (‘ASIC’) by its delegate, the second respondent, to authorise the third respondent (‘Highstoke’) to make an application or applications to a court under Div 1 Pt 5.9 of the Corporations Act 2001 (Cth) (‘the Act’) for the issue of one or more examination summonses in respect of the first applicant (‘Hayes Knight’) – a corporation which is not in external administration. The application for judicial review is brought under ss 5(e), 5(f), 15 and 16 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (‘ADJR Act’) and s 39B of the Judiciary Act 1903 (Cth).
2 In this application, the applicants seek a declaration that they are entitled to reasons from the first respondent (‘ASIC’) for the impugned decision within the terms of s 13 of the ADJR Act. They also seek orders that:
‘(a) within 2 days of the date of this order, the ASIC and [the second respondent] produce, during normal business hours upon the request of the applicants, at the ASIC’s offices at 66 St George’s Terrace, Perth:
(i) all of their internal correspondence, file notes, memoranda and emails relating to the application by Highstoke to be authorised by ASIC to make an application or applications under Division 1 Part 5.9 of the Act in relation to Hayes Knight; and
(ii) all draft and final reasons for decisions to authorise Highstoke to make an application or applications under Division 1 Part 5.9 of the Act in relation to Hayes Knight; and
(b) the applicants, their solicitors and counsel briefed by their solicitors are at liberty to inspect the documents so produced upon request to make notes of their contents and be supplied with copies of all documents which they request.’
The factual background
3 Hayes Knight was, until 13 September 2004, the trustee for the holders of debenture stock (‘the stockholders’) issued by Performance Finance Limited (Receiver and Manager Appointed) under a Debenture Trust Deed (‘the Trust Deed’). The second applicant (‘Mr O’Brien’) is a director of Hayes Knight.
4 On 13 September 2004, Highstoke replaced Hayes Knight as the trustee for the stockholders under the Trust Deed.
5 On 23 December 2004, Highstoke as trustee for the stockholders commenced proceedings in this Court against Hayes Knight seeking damages for losses allegedly suffered by the stockholders as a result of alleged breach of duty by Hayes Knight as trustee under the Trust Deed.
6 On 3 August 2005, ASIC made the impugned decision to authorise Highstoke to make an application or applications under Div 1 Pt 5.9 of the Act in relation to Hayes Knight.
7 On 8 August 2005 Highstoke applied to this Court by way of a notice of motion as an ‘eligible applicant’ within the meaning of s 9 of the Act, for the issue of an examination summons to Mr O’Brien under s 596A of the Act.
8 On 2 September 2005 Lee J granted the relief sought by Highstoke and an examination summons was issued to Mr O’Brien returnable on 28 September 2005. The examination summons requires Mr O’Brien’s attendance to be examined in relation to the examinable affairs of Hayes Knight and to produce books at the examination, including books relating to Hayes Knight’s professional indemnity insurance and asset position.
9 On 16 September 2005 the applicants commenced proceedings in this Court to set aside the examination summons to Mr O’Brien. The examination summons to Mr O’Brien has been stayed pending the final determination of those proceedings as well as these review proceedings. Both sets of proceedings are listed to be heard on 18 November 2005.
10 By a letter dated 19 September 2005, the applicants requested ASIC to provide reasons for its decision pursuant to s 13 of the ADJR Act. By a letter dated 20 September 2005, ASIC refused to give the applicants reasons for its decision. ASIC said that the impugned decision was not a decision to which s 13 of the ADJR Act applies, because it fell within the ambit of the class of decisions described in par (f) of Schedule 2 of the ADJR Act (‘Sch 2’).
11 Schedule 2 refers to those classes of decisions to which s 13 of the ADJR Act does not apply. Paragraph (f) of Sch 2 refers to the following class of decisions:
‘(f) decisions in connection with the institution or conduct of proceedings in a civil court, including decisions that relate to, or may result in, the bringing of such proceedings for the recovery of pecuniary penalties arising from contraventions of enactments, and, in particular:
...
(iv) decisions under enactments requiring the production of documents, the giving of information or the summoning of persons as witnesses.’
Is ASIC obliged to give reasons for its decision under s 13 of the ADJR Act?
12 ASIC argued that the impugned decision could be characterised either as a decision made in connection with the conduct of the existing compensation proceedings for breach of duty brought by Highstoke against Hayes Knight and currently pending in this Court; or as a decision in connection with the institution of proceedings for the issue of the examination summons under s 596A or s 596B of the Act. In either case, ASIC argued that the decision fell within the ambit of par (f) of Sch 2 and there was no obligation to give reasons.
13 Much of the argument at the hearing was addressed to the question as to whether the impugned decision was sufficiently proximate to the conduct of the compensation proceedings as to satisfy the requirement under par (f) of Sch 2 that the impugned decision be made ‘in connection with’ the conduct of those proceedings. However, because of the view to which I have come, it has proved unnecessary to decide that issue.
14 The alternative argument relied upon by ASIC is that the impugned decision was made in connection with the institution of proceedings for the issue of the examination summons under s 596A or s 596B of the Act.
15 The issue raised by this argument is whether the application to a court for the issue of an examination summons under s 596A or s 596B of the Act can be regarded as a proceeding or proceedings in a civil court within the meaning of par (f) of Sch 2. There is no suggestion that the impugned decision was not sufficiently proximate to such proceedings if such an application is properly to be characterised as a proceeding or proceedings in a civil court.
16 This question of the proper characterisation of an application for an examination summons has been the subject of consideration in several cases.
17 In the case of In re Appleton, French & Scrafton, Ltd [1905] 1 Ch 749 (‘Appleton’) Warrington J held that an application made by a creditor and some contributories for the issue of an examination summons under the Companies (Winding Up) Act 1890 (UK) was properly to be regarded as a ‘proceeding in the Supreme Court’ within the meaning of s 5 of the Judicature Act 1890 (UK). Section 5 of the Judicature Act provided that:
‘...the costs of and incidental to all proceedings in the Supreme Court...shall be in the discretion of the Court or the judge...’
18 In that case, by a summons dated 7 August 1899 the applicants applied for relief which included orders that they might be at liberty ‘to issue against the directors a summons under s 10 of the Companies (Winding Up) Act, 1890; and for leave to examine such persons as they might be advised under s 115 of the Companies Act, 1862’. The relief claimed under the summons was granted and examination summonses were issued requiring Mr Watson and Mr Appleton to attend for examination. The examination subsequently occurred over a three day period. Subsequent to the examinations a misfeasance summons was issued against the witnesses but was not proceeded with. The witnesses then sought their costs in respect of their legal fees incurred in attending the examination hearings.
19 In order to determine whether the court had power to make costs orders, the court had to determine whether the examinations could properly be regarded as proceedings in the Supreme Court. At 754 Warrington J said:
‘Now as regards the jurisdiction to order the costs to be paid, in my judgment the summons of August, 1899, the order for examination made under it, the summons issued in pursuance of that order, and the examination which took place are all "proceedings in the Supreme Court". If they are not, I do not know what they are.’
20 The observations of Warrington J in the Appleton case were approved by the High Court of Australia in the case of Cheney v Spooner [1929] HCA 12; (1929) 41 CLR 532 (‘Cheney’). In that case, the High Court held that an examination summons issued by a liquidator under s 123 of the Companies Act 1899 (NSW) pursuant to an order from the New South Wales Supreme Court, requiring attendance at an examination, was a summons to give evidence in a ‘civil proceeding’ within the meaning of s 16 of the Service and Execution of Process Act 1901-1924 (Cth).
21 At 536 Isaacs and Gavan Duffy JJ said:
‘A "proceeding", used broadly as it is used in sec. 16 of the Federal Service and Execution of Process Act, is merely some method permitted by law for moving a Court or judicial officer to some authorized act, or some act of the Court or judicial officer.’
22 At 538 Starke J said:
‘A civil proceeding, I apprehend, includes any application by a suitor to a Court in its civil jurisdiction for its intervention or action. The application for the issue of a summons in this case was such a proceeding: the cases of In re Beall and In re Appleton, French & Scrafton, Ltd are decisive in favour of this view.’
23 These observations of Isaacs and Gavan Duffy JJ and of Starke J in Cheney were quoted with approval by Kaye J in the case of Re John Sanderson & Co (NSW) Pty Ltd (in liq) (No 2) [1976] VR 225.
24 In my view, the observations made in the cases referred to above are determinative of whether an application by an ‘eligible applicant’ to a court for orders under s 596A or 596B of the Act is to be regarded as a proceeding or proceedings in a civil court for the purposes of par (f) of Sch 2. Although the observations in those cases were made by reference to provisions in statutes other than the ADJR Act, the observations are capable of more general application and should be applied in construing par (f) of Sch 2. I, accordingly, find that an application for the issue of an examination summons under s 596A or s 596B of the Act is properly to be regarded as falling within the ambit of ‘proceedings in a civil court’ within the meaning of par (f) of Sch 2. Accordingly, I find that the impugned decision is a decision in connection with the institution of proceedings in a civil court under par (f) of Sch 2. It follows that ASIC is not required under s 13 of the ADJR Act to furnish reasons for its decision made on 3 August 2005.
Is ASIC required to produce the documents relating to the decision to the applicants?
25 The applicants rely upon the following observations by Merkel J in Carmody v MacKellar (1996) 68 FCR 265 as setting out the applicable principles to determine whether discovery should be ordered in an application for judicial review. At 280 Merkel J said:
‘ The following principles may now be taken to be well established by the decisions of the Court in Melbourne Home of Ford v Trade Practices Commission (1979) 36 FLR 450, WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175 and Australian Securities Commission v Somerville (1994) 51 FCR 38.
• the Court has a discretionary power to order discovery in proceedings for the review of an administrative decision;
• the proper exercise of the power depends upon the nature of the case and the stage of the proceedings at which discovery is sought;
• if a proceeding or claims in it are essentially speculative in nature the Court will not order discovery in order to assist the applicant in a fishing exercise;
• the evidence or material which will be required to establish that the proceeding or particular claims in it are not essentially speculative will vary with the nature and circumstances of the particular case;
• if there is not the slightest evidence or there is no other material to support the bare allegations made in the proceeding, then as a general rule, an order for discovery ought not to be made.’
26 A central ground of the applicants’ case in the proceedings for judicial review of the decision is that ASIC could not, in the proper exercise of its power, authorise Highstoke as an ‘eligible applicant’ in relation to Hayes Knight, because Hayes Knight was not a corporation in external administration.
27 The respondents argued that the review application is speculative. In support of their argument, the respondents pointed to observations made by Lander J in the Full Court decision Re New Tel Ltd (in liq) (ACN 099 068 955); Evans & Anor v Wainter Pty Ltd (ACN 008 725 586) [2005] FCAFC 114; (2005) 54 ACSR 284 at 298, at [84] to the effect that the examination provisions of the Act are not restricted to cases where the corporation is in external administration. However, in that case the examination summons issued was in respect of the examinable affairs of a corporation which was in liquidation. In my view, the question of whether ASIC can exercise its powers to grant ‘eligible applicant’ status for the purposes of making an application to issue an examination summons in respect of the examinable affairs of a corporation that is not in external administration has not yet been authoritatively determined. I find that the applicants’ review proceedings are not speculative.
28 ASIC also argued that if the Court was to find that ASIC was not obliged to give reasons, no order for production of documents identified in the application should be made, nor should any order for discovery be made. ASIC argued that an order for production or discovery in those circumstances would undermine the statutory exemption from the provision of reasons.
29 The Full Court in Australian Securities Commission & Ors v Somerville (1994) 51 FCR 38 at 43 observed that it did not logically follow that because a decision-maker has a right to decline to give reasons for a decision that the Court’s powers to order discovery in an application to review that decision are affected. These observations are applicable to this case.
30 As I have concluded that ASIC does not have to provide reasons under s 13 of the ADJR Act, it would not be appropriate to make an order for production of documents in the terms sought by the applicants. However, I am of the view that ASIC is obliged to give discovery of the documents relevant to the review proceedings. No doubt, if there is a document already in existence containing ASIC’s reasons, ASIC will, in giving discovery, claim an exemption from production in respect of that document.
31 Accordingly, I will order that ASIC provide discovery within seven days of all documents relevant to the impugned decision.
32 I will hear the parties on costs.
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I certify that the preceding thirty-two (32) numbered paragraphs are a
true copy of the Reasons for Judgment herein of the Honourable
Justice
Siopis.
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Associate:
Dated: 26 October 2005
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Counsel for the First and Second Applicants:
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Mr G R Donaldson SC and Mr J Garas
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Solicitor for the First and Second Applicants:
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Allens Arthur Robinson
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Counsel for the First and Second Respondents:
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Ms K A Vernon
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Solicitor for the First and Second Respondents:
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Mr D Jackson
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Counsel for the Third Respondent:
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Mr D Kilpatrick
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Solicitor for the Third Respondent:
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Williams & Hughes
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Date of Hearing:
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14 October 2005
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Date of Judgment:
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26 October 2005
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