Highstoke Pty Ltd v Hayes Knight GTO Pty Ltd [2007] FCA 13 (16 January 2007)

Last Updated: 17 January 2007

FEDERAL COURT OF AUSTRALIA

Highstoke Pty Ltd v Hayes Knight GTO Pty Ltd [2007] FCA 13

CORPORATIONS – compulsory examination – power to issue summons for examination – no application to examinable affairs of corporation not under external administration – no power in ASIC to authorise application for such a summons – if purported power so extends unconstitutional conferral of administrative function on Court

CONSTITUTIONAL LAW – judicial power – administrative function – not able to be characterised as judicial not incidental to the exercise of any judicial power – power to issue summons for examination with respect to examinable affairs of corporation – corporation not under external administration – not subject to any other relevant judicial process under Ch 5 of Corporations Act – purported conferral of power invalid



Corporations Act 2001 (Cth) s 596A, s 596B, s 9, s 53, s 283AC(2), s 283AE(2)
Australian Securities and Investments Commission Act 2001 (Cth) s 11
Administrative Decisions (Judicial Review) Act 1977 (Cth) s 13
Judiciary Act 1903 (Cth) s 78B

Hayes Knight GTO Pty Ltd v Australian Securities & Investments Commission [2005] FCA 1509 cited
Gould v Brown [1998] HCA 6; (1998) 193 CLR 346 cited
Re Greys Brewery Company (1883) 2 Ch D 400 cited
Re Gold Company (1879) 12 Ch D 77 cited
Re Csidei; Ex parte Andrew (1979) 39 FLR 387 cited
Ex parte Barnes (1896) AC 146 cited
Re Rolls Razor Ltd [1968] 3 All ER 698 cited
Hamilton v Oades [1989] HCA 21; (1989) 166 CLR 486 cited
Re Hugh J Roberts Pty Ltd (1970) 91 WN (NSW) 537 cited
Rothwells Ltd (No 2) (1989) 7 ACLC 576 cited
New South Wales v Commonwealth [1990] HCA 2; (1990) 169 CLR 482 cited
Re Compass Airlines Pty Ltd (1992) 35 FCR 446 cited
HongKong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512 cited
New Zealand Steel (Australia) Pty Ltd v Burton (1994) 13 ACSR 610 cited
Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301 cited
Re Wakim; Ex parte McNally [1999] HCA 27; (1999) 198 CLR 511 cited
Evans v Wainter Pty Ltd [2005] FCAFC 114; (2005) 145 FCR 176 cited
Flanders v Beatty (1995) 16 ACSR 324 cited
Sandhurst Trustees Ltd v Harvey (2004) 88 SASR 519 cited
HongKong Bank of Australia Ltd v Australian Securities Commission (1992) 40 FCR 402 cited
Mercantile Mutual Life Insurance Co Ltd v Australian Securities Commission (1993) 40 FCR 409 cited
Re Excel; Worthley v England (1994) 52 FCR 69 cited
Burns Philp & Co Ltd v Murphy (1993) 29 NSWLR 7232 cited
Huddart Parker & Co Pty Ltd v Moorehead [1909] HCA 36; (1909) 8 CLR 330 cited
R v Kirby; Ex parte Boilermakers’ Society of Australia [1956] HCA 10; (1956) 94 CLR 254 cited
Re Tracey; Ex parte Ryan [1989] HCA 12; (1989) 166 CLR 518 cited
Pioneer Concrete (Vic) Pty Ltd v Trade Practices Commission [1982] HCA 65; (1982) 152 CLR 460 cited
Re Monadelphous Engineering Associates (NZ) Ltd (in liq); ex parte McDonald and Watson (1989) 7 ACLC 220 cited
Friedrich v Herald & Weekly Times Ltd [1990] VR 995 cited
Spratt v Hermes [1965] HCA 66; (1965) 114 CLR 226 cited
Capital TV and Appliances Pty Ltd v Falconer [1971] HCA 10; (1971) 125 CLR 591 cited
Spinks v Prentice (1998) 87 FCR 89 cited
Re Governor, Goulburn Correctional Centre; Ex parte Eastman [1999] HCA 44; (1999) 165 ALR 171 cited
North Australian Aboriginal Legal Aid Service Inc v Bradley [2002] FCAFC 297; (2002) 122 FCR 204 cited
Federal Commissioner of Taxation v Munro [1926] HCA 58; (1926) 38 CLR 153 cited
Cominos v Cominos [1972] HCA 54; (1972) 127 CLR 588 cited
R v Quinn; Ex parte Consolidated Foods Corporation [1977] HCA 62; (1977) 138 CLR 1 cited
Dalton v New South Wales Crime Commission [2006] HCA 17; (2006) 226 ALR 570 cited


McPherson’s Law of Company Liquidation (5^th Edition, Thomson)
Gower, Principles of Modern Company Law (6^th Edition, Sweet & Maxwell, 1997)
Ford’s Principles of Corporations Law (12t^h Edition, Butterworths, 2005)
Ford HAJ, Principles of Company Law (Butterworths, 1974)
Keay AR, "Gone Fishing" Is it Legitimate in an Examination Under Section 597 of the Corporations Law? (1991) 9 C & SLJ 70
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Harrison Moore W, The Constitution of the Commonwealth of Australia (2^nd (1910) Edition, Legal Books, 1997 Reprint)
Kluver and Woellner, Powers of Investigation in Revenue, Companies and Trade Practices Law (Butterworths, 1983)



HIGHSTOKE PTY LTD (ACN 109 142 225) AS TRUSTEE FOR HOLDERS OF DEBENTURE STOCK ISSUED BY PERFORMANCE FINANCE LIMITED (IN RECEIVERSHIP) v HAYES KNIGHT GTO PTY LTD ACN 009 101 286 AND JOHN MICHAEL O'BRIEN
WAD 198 OF 2005
HAYES KNIGHT GTO PTY LTD (ACN 009 101 286) and JOHN MICHAEL O’BRIEN v AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, ROBERT GEORGES BERNARD RASSOOL delegate of the Australian Securities and Investments Commission and HIGHSTOKE PTY LTD (ACN 109 142 225)
WAD 281 OF 2005

FRENCH J
16 JANUARY 2007
PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 198 OF 2005

IN THE MATTER OF HAYES KNIGHT GTO PTY LTD ACN 009 101 286

BETWEEN: AND:

HIGHSTOKE PTY LTD (ACN 109 142 225) AS TRUSTEE FOR HOLDERS OF DEBENTURE STOCK ISSUED BY PERFORMANCE FINANCE LIMITED (IN RECEIVERSHIP) Applicant HAYES KNIGHT GTO PTY LTD ACN 009 101 286 First Respondent JOHN MICHAEL O'BRIEN Second Respondent

JUDGE:	FRENCH J
DATE OF ORDER:	16 JANUARY 2007
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1. The summons issued by Lee J on 2 September 2005 be discharged.
2. The costs are reserved for submissions on Friday 19 January 2007 at 9.30am.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 281 OF 2005

IN THE MATTER OF HAYES KNIGHT GTO PTY LTD ACN 009 101 286

BETWEEN: AND:	HAYES KNIGHT GTO PTY LTD ACN 009 101 286 First Applicant JOHN MICHAEL O’BRIEN Second Applicant AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION First Respondent ROBERT GEORGES BERNARD RASSOOL 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
JUDGE:	FRENCH J
DATE OF ORDER:	16 JANUARY 2007
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1. The second respondent’s decision made on 3 August 2005 to authorise the third respondent to apply to the Court for the issue of a summons in relation to the first applicant be quashed.
2. The first and third respondents pay the applicants’ costs of the application.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 198 OF 2005

IN THE MATTER OF HAYES KNIGHT GTO PTY LTD ACN 009 101 286

BETWEEN:	HIGHSTOKE PTY LTD (ACN 109 142 225) AS TRUSTEE FOR HOLDERS OF DEBENTURE STOCK ISSUED BY PERFORMANCE FINANCE LIMITED (IN RECEIVERSHIP) Applicant
AND:	HAYES KNIGHT GTO PTY LTD ACN 009 101 286 First Respondent JOHN MICHAEL O'BRIEN Second Respondent

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 281 OF 2005

IN THE MATTER OF HAYES KNIGHT GTO PTY LTD ACN 009 101 286

BETWEEN: AND:

HAYES KNIGHT GTO PTY LTD ACN 009 101 286 First Applicant JOHN MICHAEL O’BRIEN Second Applicant AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION First Respondent ROBERT GEORGES BERNARD RASSOOL 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

JUDGE:	FRENCH J
DATE:	16 JANUARY 2007
PLACE:	PERTH

REASONS FOR JUDGMENT

Introduction

1 From 1993 Hayes Knight GTO Pty Ltd (Hayes Knight) was trustee for the debenture holders of Performance Finance Ltd (Performance Finance) which raised money from private investors in connection with the production of feature films. In 2003 Hayes Knight, concerned about the operations of Performance Finance, appointed a receiver and manager to that company under the terms of the debenture trust deed. In 2004 Hayes Knight was removed as trustee by the Court on the application of certain debenture holders. Highstoke Pty Ltd (Highstoke) was appointed in its place. Highstoke, on behalf of the debenture holders, commenced proceedings against Hayes Knight and against the former auditors of Performance Finance. In the proceedings it claims damages against Hayes Knight for breach of its duties as trustee. The action is supported by a litigation funding agreement with a commercial litigation fund, IMF (Australia) Ltd (IMF). It has not yet come to trial. In the meantime, Highstoke sought from the Australian Securities and Investments Commission (ASIC) authority to make an application to the Court for the issue of a summons for the examination of a director of Hayes Knight in respect of its professional indemnity insurance cover to determine whether any judgment on the damages claim was likely to be satisfied. ASIC gave the authorisation. Highstoke applied for the issue of a summons and a summons was issued by a Judge of the Court to John Michael O’Brien, a director of Hayes Knight.

2 Hayes Knight and Mr O’Brien have challenged the issue of the summons on the basis that the power to issue summonses is to be exercised only in relation to the examinable affairs of a corporation in some form of external administration, such as winding up or receivership or a deed of arrangement. Hayes Knight is not under any form of external administration. It says that the summons should be discharged and that the ASIC decision authorising the application to the Court should be set aside.

3 Hayes Knight also contends that if the power conferred on the Court by s 596A of the Corporations Act 2001 (Cth) to issue summonses for examination extends to corporations which are not under any form of external administration, then it is invalid. It does so on the basis that the section as applied in this case purports to confer administrative, rather than judicial, power on the Court in circumstances in which the administrative power so conferred is not incidental to any judicial process. On that basis, it is said, that the section of the Corporations Act under which the summons was issued, if applicable to the examinable affairs of corporations generally, offends against the principle of separation of powers and to the extent that it so applies is invalid.

4 For the reasons that follow, I accept the submissions by Hayes Knight that on its proper construction s 596A of the Corporations Act under which the summons was issued does not apply to the examinable affairs of a corporation not in external administration or otherwise subject to any of the processes for which Ch 5 of the Corporations Act provides. It follows that it should be discharged. It follows also, that the stated purpose for which Highstoke sought ASIC’s authority to apply to the Court for such a summons was beyond the proper purposes for which the issue of a summons could be made. The decision of ASIC authorising the application by Highstoke will be set aside.
Factual and procedural history

5 Hayes Knight was incorporated on 29 June 1984 under the name Gillard and Turner Pty Ltd. The company changed its name to Hayes Knight on 30 January 2001. Mr O’Brien has been one of its directors since 4 June 1987. The other directors are Paolo Fazzari and Alan Thomas. Hayes Knight conducts an accountancy practice and has done so during the whole of the time that Mr O’Brien has been a director. The company is not under any form of external administration.

6 On 10 June 1993 Hayes Knight, under its former name Gillard, Turner and O’Brien Pty Ltd, entered into a debenture trust deed with Performance Finance, then known as Golden Dolphin Ltd. Under the deed Hayes Knight agreed to act as trustee for the holders of debenture stock issued by Performance Finance pursuant to the trust deed. Funds raised by Performance Finance under the debentures which it issued were apparently lent to a related company, California (Gold) Pty Ltd which in turn made loans to individuals, companies and trusts to fund their investments pursuant to prospectuses issued by Kamishi Corporation Ltd in certain feature films.

7 On 14 June 2003 the former Australian Securities Commission gave approval to Hayes Knight acting as trustee under the deed. The approval was given under s 1052 of the former Corporations Law. It was expressed to be subject to certain terms and conditions including a condition that:

‘The Trustee must maintain Professional Indemnity insurance satisfactory to the Commission in all respects, including that the sum insured for any one claim is not less than the value (including any interest payable) of the Debentures on issue from time to time.’

8 The debenture trust deed constituted a floating charge, by Performance Finance in favour of Hayes Knight, of all of the undertakings of Performance Finance and all its real and personal property and assets. The charge secured the payment of the principal and interest moneys from time to time payable in respect of issued stock under the deed and all other moneys owing on the security of the deed (cl 14.1). The deed provided for a number of default events upon which the security would, at the option of Hayes Knight, become enforceable and the secured moneys become immediately payable (cl 27). It made provision for a notice of default and for the enforcement of the security upon default (cl 28 and cl 29). The trustee was empowered to appoint a receiver or receiver and manager to the secured property at any time after the security became enforceable (cl 32).

9 On 23 September 2003 Hayes Knight, acting under the debenture trust deed, appointed Jennifer Low of Sheridans Chartered Accountants, as receiver and manager of the assets and undertakings of Performance Finance charged under the deed. This was achieved, pursuant to the terms of the debenture trust deed, by Hayes Knight as trustee certifying that in its opinion "the continued carrying on of the business of PFL will by reason of trading losses by PFL endanger the security of the stockholders of the Debenture Trust Deed."

10 On 4 March 2004 Patrick James O’Keeffe and Patricia O’Keeffe, who are debenture holders under the deed, applied to the Federal Court in action WAD48 of 2004 to have Hayes Knight removed as trustee. The application followed correspondence to Hayes Knight from Williams & Hughes, solicitors for a number of the debenture holders, alleging that the company had breached its duties to them, that it was therefore in a position of conflict and that it could not continue to act as trustee. Reliance was placed upon s 283AC(2) of the Corporations Act. Hayes Knight refused to resign.

11 Despite its refusal to resign in response to the demand made on behalf of the debenture holders, Hayes Knight conceded the application at the hearing on 13 September 2004. On that date Nicholson J made orders, including the following:

‘2. The appointment of Hayes Knight GTO Pty Ltd as Trustee of the debenture stock issued by Performance Finance Limited be terminated.

3. Highstoke Pty Ltd (the New Trustee) is appointed as the Trustee of the Trust Deed (dated 10 June 1993 made between Golden Dolphin Limited and Gillard Turner & O’Brien Pty Ltd and each several stock holder) and the subsequent amendments thereto ("the Trust").

4. All the property of the Trust shall vest in the New Trustee immediately.’

Hayes Knight was ordered to deliver up the property of the trust and books relating to the trust to Highstoke, a company related to the accounting practice known as KordaMentha. It was also required to deliver up documentation and accounts relating to the subsidiaries and ultimate subsidiaries of Performance Group Holdings, the appointment of Ms Low as receiver to Performance Finance and to California Film Finance (Gold) Pty Ltd and the conduct of those receiverships. In addition, all correspondence and records of communications between directors, officers and/or employees of Hayes Knight and any other party in relation to the affairs of Performance Finance and the Performance Finance Group were required to be delivered up. Hayes Knight was directed, within 21 days, to furnish to Highstoke a detailed account of all of its dealings with the property of the trust.

12 As appears from affidavits of 14 November 2005 and 22 May 2006 sworn by Brian McMaster, a director of Highstoke, there are approximately 120 persons or entities who are the holders of debentures issued by Performance Finance. The majority of these are retirees or superannuation funds of retirees. According to Mr McMaster’s affidavit of 14 November 2005 the indebtedness of Performance Finance under the debentures was $9,475,000 inclusive of interest as at 30 September 2005.

13 The maximum professional insurance indemnity cover held by Hayes Knight for the period 31 December 2002 to 19 June 2003 was $5 million. This was increased to $15 million with effect from 19 June 2003. The maximum cover available for claims prior to 19 June 2003 was therefore $5 million. This appears from certificates of currency provided to Highstoke’s solicitors, Williams & Hughes, by Hayes Knight in November 2003 and a letter to Williams & Hughes dated 21 December 2004 from Allens Arthur Robinson, solicitors for the insurers.

14 The debenture holders resolved at a meeting held on 22 December 2004, to direct Highstoke as trustee to commence proceedings against Hayes Knight and against the former auditors of Performance Finance. They also directed Highstoke to enter into a litigation funding agreement with IMF to fund such action. IMF carries on the business of funding litigation. On 23 December 2004 Highstoke, in its capacity as trustee to the debenture holders, commenced proceedings in the Federal Court in action WAD 295 of 2004, claiming damages and other relief based upon alleged breaches of duty by Hayes Knight as trustee under the trust deed. The action is funded by IMF under an undated agreement with Highstoke.

15 On 20 May 2005 Allens Arthur Robinson wrote to the solicitors for Highstoke advising that the insurer had "denied indemnity" to Hayes Knight in respect of the damages claim. Hayes Knight had informed them that it would shortly be appointing its own solicitors.

16 On 1 July 2005 Williams & Hughes wrote to ASIC on behalf of Highstoke requesting that their client "be accorded eligible applicant status to make application to the Court pursuant to s 596B of the Corporations Act to examine persons in relation to the examinable affairs of Performance Finance Ltd (Receiver Appointed)". The solicitors set out, by way of background, a history of the operations of Performance Finance, the appointment of Hayes Knight as trustee, the collapse of the investment scheme operated by Performance Finance, the removal of Hayes Knight as trustee and its replacement by Highstoke. They also referred to the proceedings commenced by Performance Finance debenture holders against Hayes Knight. The stated purpose of the application to be accorded "eligible applicant status", according to the letter of 1 July 2005, was to enable Highstoke to examine the auditors of Performance Finance in relation to its examinable affairs.

17 On 26 July 2005 Williams & Hughes again wrote to ASIC on behalf of Highstoke this time applying for "eligible applicant status in order to make an application or applications under the Corporations Act Division 1 Part 5.9 in relation to Hayes Knight". Explaining the further application the solicitors referred to the denial of indemnity by Hayes Knight’s insurer and said:

‘The economics of the action brought by Highstoke against Hayes Knight depends entirely on the asset and insurance position of Hayes Knight. In that regard, if indemnity under the insurance policy has been properly denied, and Hayes Knight has no other assets from which recovery can be made, the cause of action which Highstoke holds on behalf of the debenture holders against Hayes Knight would not be worth pursuing.’

They went on:

‘In order for Highstoke to determine whether it is appropriate to continue to pursue the litigation against Hayes Knight, Highstoke needs to obtain information in relation to:

1. the terms of Hayes Knight’s insurance policy and the basis upon which Hayes Knight’s insurer denied liability in relation to the claim so it can make an assessment as to whether that decision is correct or can be challenged.

2. the other assets of Hayes Knight which may be available to a judgment creditor.

These issues in our view clearly fall within the examinable affairs of Hayes Knight. Accordingly, Highstoke hereby applies for eligible applicant status in order to make an application or applications under the Corporations Act Division 1 Part 5.9 in relation to Hayes Knight.’

18 On 3 August 2005 Robert Rassool, a senior lawyer employed by ASIC, authorised Highstoke, under Pt 5.9 of the Corporations Act and s 11 of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), to make an application or applications under Pt 5.9 of the Corporations Act in relation to Hayes Knight. Highstoke thereby became "an eligible applicant" under the Corporations Act in relation to the examinable affairs of Hayes Knight. On 8 August 2005 Highstoke applied to the Court for the issue of an examination summons to John Michael O’Brien, a director of Hayes Knight. The application was made under s 596A of the Corporations Act. The proceedings initiated by that application are numbered WAD 198 of 2005 (the Examination Proceedings).

19 On 2 September 2005, on the ex parte application of Highstoke, Lee J made an order that a summons issue returnable on a date and time to be fixed by the District Registry for the public examination of Mr O’Brien. The summons issued on 7 September 2005 and required Mr O’Brien to attend before Registrar Stanley for examination under s 596A. The subject matter of the examination was stated in the summons to be "the examinable affairs of Hayes Knight GTO Pty Ltd ...". Mr O’Brien was also required to produce at the examination books specified in the schedule to the summons as follows:

‘1.1 Hayes Knight’s professional indemnity policies for the period 1 July 1998 to present;

1.2 Any certificates of currency in relation to Hayes Knight’s professional indemnity insurance policies for the period 1 July 1998 to present;

1.3 Any correspondence or other documentation received from Hayes Knight’s insurers touching or concerning the insurer’s denial of indemnity to Hayes Knight in relation to Federal Court Action WAD 295 of 2004;

1.4 Any documents passing between Hayes Knight and its insurers relating to the level of professional indemnity insurance being restricted to $5,000,000.00 from 31 December 2002 to 18 June 2003 and to $15,000,000.00 from 19 June 2003 with a retrospective date of 19 June 2003 as per the certificate of currency attached and marked "A".

1.5 The balance sheets of Hayes Knight as at 30 June 2003, 30 June 2004 and 30 June 2005;

1.6 Any other documents evidencing the asset position of Hayes Knight since 30 June 2003;

1.7 Any documents showing or relating to the ownership or interest of Hayes Knight in the accountancy practice owned and operated by it until 30 June 2005;

1.8 Documentation showing the nature of the corporate restructure of Hayes Knight occurring on or about 30 June 2005 culminating in a share buy back by Hayes Knight of 150,000 shares.’

On 16 September 2005 Hayes Knight brought an interlocutory application in the Examination Proceedings seeking an order, inter alia, that the examination summons be set aside.

20 On 19 September 2005 Hayes Knight made a request to ASIC, pursuant to s 13 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act), to provide reasons for its decision of 3 August 2005 authorising Highstoke as an eligible applicant. On 20 September 2005 ASIC refused to provide reasons. It said its decision was not a decision to which s 13 of the ADJR Act applied. This was on the basis that the decision fell within that class described in par (f) of Schedule 2 of the ADJR Act, which covers:

‘(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;’

Hayes Knight and Mr O’Brien were joined as respondents to the Examination Proceedings by order of Siopis J made on 22 September 2005.

21 On 30 September 2005 Hayes Knight and Mr O’Brien commenced the proceedings, WAD 281 of 2005, against ASIC, its delegate and Highstoke for an order of review of the ASIC decision of 3 August 2005 (the Judicial Review Proceedings). The examination summons had been stayed pending the determination of Hayes Knight’s application in the Examination Proceedings and of its application in the Judicial Review Proceedings.

22 On 26 October 2005 Siopis J dismissed Hayes Knight’s interlocutory application in the Judicial Review Proceedings seeking the provision by ASIC of reasons for its decisions of 3 August 2005. His Honour did, however, make an order that ASIC give discovery of documents relating to its decision: Hayes Knight GTO Pty Ltd v Australian Securities & Investments Commission [2005] FCA 1509.

23 The applications by Hayes Knight in the Examination Proceedings and the Judicial Review Proceedings came on for hearing on 18 November 2005. In opening, counsel for Hayes Knight, Mr Donaldson SC, drew the Court’s attention to a passage from the judgment of Gaudron J in Gould v Brown [1998] HCA 6; (1998) 193 CLR 346 at 405 in which her Honour said:

‘... to the extent that the power conferred by Ch 5, Pt 5.9 is not confined to examination by a court which has exercised or is exercising jurisdiction to make an order for the winding up of the corporation, it is not properly characterised as judicial power.’

Counsel submitted that there was a question whether Pt 5.9 went beyond the judicial power of the Commonwealth to the extent that it authorised examination unrelated to a matter, such as the winding up of a corporation. Discussion ensued about the possibility of transferring the matter to the Supreme Court of Western Australia but, as was pointed out by counsel for Hayes Knight, that did not cure the difficulty as the Supreme Court would still be asked to exercise federal jurisdiction and so confined by the constraints of Ch III of the Constitution. In the event, the hearings were adjourned to enable the parties to consider their positions. Ultimately Notices of a Constitutional Matter were given under s 78B of the Judiciary Act 1903 (Cth) to the Attorneys-General of the Commonwealth and the States.

24 On 8 February 2006 ASIC filed a notice of intervention in the Examination Proceedings in relation to the Hayes Knight application to discharge the examination summons. Both applications were subsequently relisted for hearing on 24 and 25 May 2006.
The applications

25 In the Examination Proceedings a "Minute of Proposed Amended Interlocutory Process" was filed on 3 November 2005. On 7 November 2005 Siopis J directed that it stand as the amended interlocutory processes of Hayes Knight and Mr O’Brien. That is the document that can be regarded as the initiating document in the discharge application brought by Hayes Knight and Mr O’Brien.

26 The relevant initiating document in the Judicial Review Proceedings is the "Further Re-Amended Application for Order of Review" which was filed in Court at the hearing on 24 May 2006.
Principal findings of fact

27 The preceding factual and procedural history is based upon affidavit evidence which exhibited the documents referred to in the history and which was not in dispute. Of importance to the present proceedings are the following facts which emerge from that history:
1. Hayes Knight is not a company under any form of external administration.

2. The application by Highstoke to ASIC on 26 July 2005 for eligible applicant status was made for the disclosed purpose of making an application to the Court under s 596A to summon persons for examination about the examinable affairs of Hayes Knight in order to determine whether it was economically worthwhile for Highstoke, on behalf of the debenture holders, to pursue a damages claim against it.
3. I infer that ASIC authorised Highstoke to make an application under s 596A in relation to Hayes Knight for the purpose stated in its letter of 26 July 2005.

Principal contentions

28 Hayes Knight makes the following contentions in the Examination Proceedings in support of its application to discharge the examination summons or to stay the proceedings:

1. The powers conferred on the Court by Pt 5.9 to summon persons for examination about a corporation’s examinable affairs are limited in their application to the examinable affairs of corporations under external administration.
2. Hayes Knight is not under external administration and therefore the Court had no power under Pt 5.9 to issue the summons for the examination of Mr O’Brien in relation to its examinable affairs.
3. If, contrary to its primary submission, Pt 5.9, properly construed, authorises the Court to issue a summons for the examination of persons in relation to the examinable affairs of corporations not under any form of external administration, then it exceeds the legislative competence of the Commonwealth Parliament. The examination of a person in relation to the examinable affairs of a corporation not under external administration is not an exercise of judicial power nor incidental to the exercise of judicial power.

29 In the Judicial Review Proceedings Hayes Knight challenges the decision of ASIC’s delegate made on 3 August 2005 on the grounds that it was an improper exercise of power (s 5(1)(e) ADJR Act) and that it involved an error of law (s 5(1)(f) ADJR Act).

30 Under the heading "Improper Exercise of Power" Hayes Knight alleges:

(a) Failure by ASIC’s delegate to take relevant considerations into account in exercising the power namely:

(i) Hayes Knight was not under any form of external administration of the kind referred to in Chapter 5 of the Act or otherwise amenable to the provisions of Chapter 5;

(ii) Highstoke’s purpose in proposing to examine in respect of the examinable affairs of Hayes Knight was not for the benefit of Hayes Knight, its contributors or its creditors.

(b) ASIC’s delegate exercised the power for a purpose other than a purpose for which the power is conferred in that:

(i) the purpose of the power conferred on ASIC is to authorise persons to apply under Division 1 Part 5.9 of the Act to examine in respect of the examinable affairs of corporations in external administration (or otherwise amenable to the provisions of Chapter 5) and Hayes Knight was not in any form of external administration;

(ii) further, or in the alternative, the purpose of the power conferred on ASIC is to authorise persons to apply under Division 1 Part 5.9 of the Act to examine in respect of the examinable affairs of the corporation where the purpose of the person to be authorised is to benefit a corporation and here ASIC granted the Authorisation where Highstoke’s purpose was to benefit Highstoke and/or the Stockholders not Hayes Knight and where the examination cannot benefit Hayes Knight.

31 Under the heading "Error of Law" it is said that the decision by ASIC’s delegate involved an error of law in that the delegate construed the power in such a way as to authorise Highstoke in respect of the examinable affairs of Hayes Knight:

‘(a) where Hayes Knight was not under any form of external administration where an examination summons can only issue in respect of the examinable affairs of a corporations (sic) in external administration (or otherwise amenable to the provisions of Chapter 5); and

(b) further, or in the alternative, where Highstoke’s purpose was to benefit Highstoke and/or the Stockholders, not Hayes Knight and where the examination cannot benefit Hayes Knight.

32 As appears from the above the legal questions to be determined in this case are:

1. Is the power conferred on the Court by s 596A to summon a person for examination about a corporation’s examinable affairs limited to cases in which the relevant corporation is under external administration?
2. If the power conferred on the Court by s 596A is not so limited, is the section beyond the constitutional competence of the Commonwealth Parliament?
3. What are the consequences of the answers to the above questions to the power of ASIC to authorise a person to make an application under Pt 5.9 and the power of the Court to issue a summons and conduct an examination under s 596A or s 596B?
4. Whether an examination in relation to the examinable affairs of a corporation which is not for the benefit of the corporation, its creditors or contributories is lawful? The question does not need to be answered if the power to issue the challenged summons did not exist either as a matter of construction or as a matter of constitutional limitation.

Statutory framework – Corporations Act 2001 (Cth)

33 The substantive provisions of the Corporations Act relevant to the issue of a summons for examination are to be found in Chapter 5 entitled "External Administration". The Chapter is divided into a number of Parts thus:
Part 5.1 Arrangements and Reconstructions
Part 5.2 Receivers, and Other Controllers, of Property of Corporations

Part 5.3A Administration of a Company’s Affairs with a View to Executing a Deed of Company Arrangement

Part 5.4 Winding up in Insolvency
Part 5.4A Winding up by the Court on other Grounds
Part 5.4B Winding up in Insolvency or by the Court
Part 5.5 Voluntary Winding Up
Part 5.6 Winding Up Generally
Part 5.7 Winding up Bodies other than Companies

Part 5.7B Recovering Property or Compensation for the Benefit of Creditors of Insolvent Company
Part 5.8 Offences
Part 5.8A Employee Entitlements
Part 5.9 Miscellaneous

34 Part 5.9 headed "Miscellaneous" comprises:
Division 1 – Examining a person about a corporation (ss 596A to 597B)
Division 2 – Orders against a person in relation to a corporation (s 598)
Division 3 – Provisions applying to various kinds of external administration (ss 600A to 600F).

35 Section 596A entitled "Mandatory Examination" provides:

‘The Court is to summon a person for examination about a corporation’s examinable affairs if:

(a) an eligible applicant applies for the summons; and

(b) the Court is satisfied that the person is an officer or provisional liquidator of the corporation or was such an officer or provisional liquidator during or after the 2 years ending:

(i) if the corporation is under administration – on the section 513C day in relation to the administration; or

(ii) if the corporation has executed a deed of company arrangement that has not yet terminated – on the section 513C day in relation to the administration that ended when the deed was executed; or

(iii) if the corporation is being, or has been, wound up – when the winding up began; or

(iv) otherwise – when the application is made.’

36 The terms "eligible applicant" and "examinable affairs" are defined in s 9 of the Act thus:

‘eligible applicant, in relation to a corporation, means:

(a) ASIC; or

(b) a liquidator or provisional liquidator of the corporation; or

(c) an administrator of the corporation; or

(d) an administrator of a deed of company arrangement executed by the corporation; or

(e) a person authorised in writing by ASIC to make:

(i) applications under the Division of Part 5.9 in which the expression occurs; or

(ii) such an application in relation to the corporation.’

‘examinable affairs in relation to a corporation means:

(a) the promotion, formation, management, administration or winding up of the corporation; or

(b) any other affairs of the corporation (including anything that is included in the corporation’s affairs because of section 53); or

(c) the business affairs of a connected entity of the corporation, in so far as they are, or appear to be, relevant to the corporation or to anything that is included in the corporation’s examinable affairs because of paragraph (a) or (b).’

37 Paragraph (b) of the definition of "examinable affairs" imports by reference those things included in a corporation’s affairs because of s 53. Section 53, in pars (a) to (k) sets out a non-exhaustive list of things included in the term "affairs" of a body corporate. Relevantly, they include:

‘(b) in the case of a body corporate (not being an authorised trustee corporation) that is a trustee ... matters concerned with the ascertainment of the identity of the persons who are beneficiaries under the trust, their rights under the trust and any payments that they have received, or are entitled to receive, under the terms of the trust;’

Paragraphs (e) to (k) inclusive concern the ownership of shares, debentures and interests in managed investment schemes made available by the relevant body corporate and other matters relating to such schemes.

38 The term "administration" in relation to a company is said, by s 9, to have the meaning given by (a) s 435C; and (b) s 1381. Section 435C defines the administration of a company as commencing when an administrator is appointed under s 436A, 436B or 436C. An appointment under s 436A is done by resolution of a company board. An appointment under s 436B is done by a liquidator or provisional liquidator of a company. An appointment under s 436C can be done by a person entitled to enforce a charge on the whole or substantially the whole of the company’s property if the charge has become and is enforceable. Section 1381 appears to have no relevance to the definition.

39 The term "connected entity", used in the definition of "examinable affairs" at par (c), is defined in s 9 in relation to a corporation as:

‘(a) a body corporate that is, or has been, related to the corporation; or

(b) an entity that is, or has been, connected (as defined by section 64B with the corporation.’

A "related body corporate" is defined in s 9 by reference to s 50 which in turn refers to corporations which are holding or subsidiary corporations of each other or are subsidiaries of a common holding company. There is a definition of "related entity" but that term is not used in the definition of "connected entity" and so is not imported into it.

40 The second limb of the definition of a "connected entity" picks up the terms of s 64B. By virtue of s 64B(4) read with s 64A(b), a trustee is connected with a corporation if the corporation is a creditor of the trustee (s 64B(4)(f)). These definitions are of some significance as the business affairs of Hayes Knight are included in the scope of the examinable affairs of Performance Finance. In the present case however this aspect of the definition does not assist Highstoke as its authority from ASIC as an eligible applicant and the summons which issued on its application relate to the examinable affairs of Hayes Knight and not those of Performance Finance.

41 Section 596B provides for discretionary examination. By that section the Court is empowered but not required to summon a person for examination about a corporation’s examinable affairs if an eligible applicant applies and the Court is satisfied that the person has taken part or been concerned in the examinable affairs of the corporation and has been or may have been guilty of misconduct in relation to the corporation or may be able to give information about its examinable affairs.

42 Section 596C provides for affidavits in support of applications under s 596B. Section 596D deals with the content of a summons issued under ss 596A or 596B. Section 596E concerns notice of the examination and s 596F confers powers on the Court to give directions. Section 597 makes provision for the way in which examinations are to be conducted and the obligations of persons summoned. Examinations are to be held in public except to the extent that the Court considers that, by reason of special circumstances, it is desirable to hold an examination in private (s 597(4)). ASIC and any other eligible applicant may take part in the examination and may be represented by a lawyer or authorised agent (s 597(5A)). The Court may put or allow to be put to a person being examined "such questions about the corporation or any of its examinable affairs as the Court thinks appropriate" (s 597(5B)). Section 597A sets out the conditions under which the Court is to require a person to file an affidavit about a corporation’s examinable affairs.

43 The term "External Administration" used in the title to Ch 5 is not defined in the Act. However the term "externally-administered body corporate" is defined in s 9. It means a body corporate:

‘(a) that is being wound up; or

(b) in respect of property of which a receiver, or a receiver and manager, has been appointed (whether or not by a court) and is acting; or

(c) that is under administration; or

(ca) that has executed a deed of company arrangement that has not yet terminated; or

(d) that has entered into a compromise or arrangement with another person the administration of which has not been concluded.’

The term is used on nine occasions in the entire Corporations Act and only once in Ch 5. A body corporate applying for registration as a company must provide evidence that it is not "an externally-administered body corporate" (s 601BC(7)(a)).

44 Reference should also be made to Ch 2L – Debentures. Section 283AA(1) requires a body making an offer of debentures under certain conditions to enter into a trust deed that complies with s 283AB and appoint a trustee that complies with s 283AC. Section 283AC is entitled "Who can be trustee". Section 283AC(2) provides:

‘A person may only be appointed or act as trustee (except to the extent provided for by section 283AD) if the appointment or acting will not result in a conflict of interest or duty. This subsection is not intended to affect any rule of law or equity.’

Section 283AE(2) provides:

‘The Court may:

(a) appoint a person who may be a trustee under section 283AC as trustee on the application of the borrower, a debenture holder or ASIC if:

(i) a trustee has not been validly appointed; or

(ii) the trustee has ceased to exist; or

(b) terminate the existing trustee’s appointment and appoint a person who may be a trustee under section 283AC as trustee in the existing trustee’s place on the application of the borrower, the existing trustee, a debenture holder or ASIC if:

(i) the existing trustee cannot be trustee under section 283AC; or

(ii) the existing trustee fails, or refuses, to act.’

Statutory framework –Australian Securities and Investments Commission Act 2001 (Cth)

45 The Judicial Review Proceedings are concerned with the decision of ASIC to authorise Highstoke to apply for an examination summons. The power of ASIC to do so is not expressed. It must be located either in the definition of "eligible applicant" or in the general conferral of powers and functions on ASIC by s 11 of the ASIC Act or in some combined reading of the two provisions. Section 11 provides, in the relevant parts:

‘(1) ASIC has such functions and powers as are conferred on it by or under the corporations legislation (other than the excluded provisions).

...

(4) ASIC has power to do whatever is necessary for or in connection with, or reasonably incidental to, the performance of its functions.’

Section 11(4) is replicated by s 12A(6), s 12A being concerned with "other functions and powers" conferred on ASIC.
Legislative ancestry of the examination power and relevant judicial exegesis

46 Statutory powers of examination of persons in connection with the affairs of bankrupts predated the creation of such powers with respect to the affairs of companies. What has been called the first bankruptcy statute in England, the 1842 Act, 34 and 35 Hen VIII c 4, provided for the examination of third persons about a debtor’s estate. The earliest such provision in the companies laws of the United Kingdom was s 15 of the Joint Stock Companies Winding Up Act 1844 (UK) (7 and 8 Vict 111). Of that provision it is said in the 5^th Edition of McPherson’s Law of Company Liquidation (Thomson, at 15.500):

‘It empowered the court to summon and examine persons who were thought to be capable of giving information about the property and past transactions of the company. But the primary purpose of examinations of this kind was to assist the liquidator in locating the assets.’

Like powers were conferred by s 115 of the Companies Act 1862 (UK) (25 and 26 Vict c 89). By that section the court was given power to summon before it any person whom it might deem capable of giving information concerning the trade dealings, estate, or effects of the company. The examination was in private. It was referred to by Chitty J as the "Star Chamber" clause: Re Greys Brewery Company (1883) 25 Ch D 400 at 408. It was analogous to s 120 of the Bankruptcy Law Consolidation Act 1849 (UK) (12 & 13 Vict 106) which was in force when the 1862 Act was passed. Sir George Jessell MR in Re Gold Company (1879) 12 Ch D 77 at 85 said:

‘In fact the whole object of the section is to assimilate the practice in winding-up to the practice in bankruptcy, which was established in order to enable assignees, who are now called trustees, in bankruptcy to find out facts before they brought an action, so as to avoid incurring the expense of some hundreds of pounds in bringing an unsuccessful action, when they might, by examining a witness or two, have discovered at a trifling expense that an action could not succeed.’

47 The connection between examination under bankruptcy and winding up laws has been recognised over more than 125 years that have passed since Jessell MR made his comments. The position historically is no different in Australia. As Lockhart J said in Re Csidei; Ex parte Andrew (1979) 39 FLR 387 at 390:

‘... the process of examining persons in the winding up of companies has been borrowed from the law of bankruptcy and the purpose of the inquisitorial powers conferred by bankruptcy and company legislation is much the same.’

48 Section 8 of the Companies (Winding Up) Act 1890 (UK) provided for the examination by the court of promoters, officers and other persons who had past connections with the company following upon a report to the court by the official receiver. Unlike s 115 of the 1862 Act, which remained in force, s 8 provided for public examinations: See Ex parte Barnes (1896) AC 146. Its introduction in England in 1890 is described in McPherson as "... part of the general policy in England at the time assimilating liquidations with bankruptcy" (at 15-500). The Australian colonies prior to federation enacted companies statutes based on the Companies Act 1862 (UK).

49 In the first half of the twentieth century the laws of the United Kingdom relating to companies were reviewed at 20 year intervals by a Departmental Committee appointed by the Board of Trade. This resulted in consolidations of the Companies Act in 1908, 1929 and 1948: Gower Principles of Modern Company Law (6^th edition, Sweet & Maxwell, 1997) at 48-49. Although the Companies Acts of the Australian States were based on the UK models differences developed over time between them. The inconveniences caused by these differences led to the development, by agreement between the States and the Commonwealth, of a Uniform Companies Bill based on the Companies Act 1958 (Vic). In 1961 and 1962 the States each passed a Companies Act based on the Bill. The Commonwealth made Companies Ordinances in like terms for the Australian Capital Territory, the Northern Territory and what was the then Territory of Papua New Guinea: Fords Principles of Corporations Law (12^th Edition, Butterworths, 2005) at [2-170], see also Ford HAJ, Principles of Company Law (Butterworths, 1974) at [111].

50 The powers of examination of persons in connection with the court ordered winding up of companies were found in ss 249 and 250 of the Companies Act 1961. The two sections were located in Div 2 of Pt 10 entitled "Winding up by the Court". They were based on ss 268 and 270 of the Companies Act 1948 (UK). Section 249 conferred power on the court to "summon before it any officer of the company or person known or suspected to have in his possession any property of the company or supposed to be indebted to the company, or any person whom the court deems capable of giving information concerning the promotion, formation, trade dealings, affairs or property of the company" (s 249(1)). Such an examination could be held, if the court so directed, before a magistrate (s 249(4)). The section was silent on whether such examinations were to be held in public. Section 250 conferred power on the court to order a public examination of persons or officers of the company where the liquidator had made a report to the court alleging the commission of a fraud or the concealment of any material fact by a promoter or officer of the company.

51 The purpose of s 268 of the Companies Act 1948 (UK) on which s 249 was based was described by Buckley J in Re Rolls Razor Ltd [1968] 3 All ER 698 thus (at 700):

‘The powers conferred by s 268 are powers directed to enabling the court to help a liquidator to discover the truth of the circumstances connected with the affairs of the company, information of trading, dealings and so forth, in order that the liquidator may be able, as effectively as possible and I think, with as little expense as possible and with as much expedition as possible, to complete his function as liquidator, to put the affairs of the company in order and to carry out the liquidation in all its various aspects, including of course the getting in of any assets of the company available in the liquidation.’

52 There has been debate in Australian and English authorities about whether the examination power permits "fishing" questions: See: Keay AR, "Gone Fishing!" Is it Legitimate in an Examination Under Section 597 of the Corporations Law? 1991, 9 C & SLJ 70. The authorities and the issues discussed in that article revolved around the difficulties facing liquidators trying to obtain information about the affairs of a company in often chaotic circumstances following its winding up.

53 A broader power of examination was introduced into the Companies Act 1961 by the Companies Act Amendment Act 1969 (WA) which enacted s 367A. That section provided, in subs (1):

‘Where it appears to the Attorney General that any officer or former officer of a company to which this section applies has conducted himself in such a way that the officer or former officer has rendered himself liable to action by the company in relation to the performance of his duties as an officer of the company, the Attorney General, or any person who is authorised in that behalf by the Attorney General, may apply ex parte to the Court for an order that the officer or former officer shall attend before the Court on a day to be appointed by the Court to be examined as to his conduct and dealings as an officer of the company.’(emphasis added)

Section 367A(2) provided that any examination under that section should not be held in open court unless the court otherwise ordered. The range of companies encompassed by the term "a company to which this section applies" in s 367A was limited by s 367C(1) to companies which were in the course of being wound up or were under official management, companies in respect of which an inspector had been appointed and companies in respect of which a receiver and manager had been appointed either by the court or under an instrument. It also extended to any company which had ceased to carry on business or was unable to pay its debts.

54 The Uniform Companies Scheme was replaced in 1981 by a Cooperative Scheme based upon the Companies Act 1981 (ACT), enacted by the Parliament of the Commonwealth for the Australian Capital Territory in reliance upon s 122 of the Constitution. Each State passed a Companies Code reflecting the provisions of the Commonwealth Act. The Scheme was overseen by a Ministerial Council for Companies and Securities and a National Regulator called "The National Companies and Securities Commission (NCSC)" which worked in conjunction with State regulatory authorities.

55 A power of examination was conferred on the Court by s 541 of the Companies Act 1981 and of the Companies Codes of the various States. Section 541 provided, in the relevant parts:

‘(1) In this section, a reference, in relation to a corporation, to a prescribed person, shall be construed as a reference to an official manager, liquidator or provisional liquidator of the corporation or to any other person authorised by the Commission to make applications under this section or to make an application under this section in relation to that corporation.

(2) Where it appears to the Commission or to a prescribed person that:

(a) a person who has taken part or being concerned in the promotion, formation, management, administration or winding up of, or has otherwise taken part or been concerned in affairs of, a corporation has been, or may have been, guilty of fraud, negligence, default, breach of trust, breach of duty or other misconduct in relation to that corporation; or

(b) a person may be capable of giving information in relation to the promotion, formation, management, administration or winding up of, or otherwise in relation to affairs of, a corporation;

the Commission or prescribed person may apply to the Court for an order under this section in relation to the person.

(3) Where an application is made under subsection (2) in relation to a person, the Court may, if it thinks fit, order that the person attend before the Court at a date and at a time to be fixed by the Court to be examined on oath or affirmation on any matters relating to the promotion, formation, management, administration or winding up of, or otherwise relating to the affairs of, the corporation concerned.

(4) An examination under this section shall be held in public except to such extent (if any) as the Court considers that, by reason of special circumstances, it is desirable to hold the examination in private.’

56 The section was located in Pt XIV of the Companies Act 1981 under the heading "Miscellaneous" in Div 1 entitled "General". The Companies Bill Explanatory Memorandum 1981, at par 1174, stated that the section was based on the provisions of ss 249, 250 and 367A of the Uniform Companies Acts subject to modifications. The power of the Court to summon persons of its own initiative was removed. The class of persons who could seek such an order was extended to official managers. The Court was given additional procedural powers for conduct of the examination including a power to order that the examination be held in private and to make any special orders as to costs.

57 The operation of s 541 was discussed by the High Court in Hamilton v Oades [1989] HCA 21; (1989) 166 CLR 486 in the context of its effect upon the privilege of self incrimination. Mason CJ, in the leading majority judgment, described the section as creating "a system of discovery". It gave to the liquidator rights not possessed by an ordinary litigant. The Chief Justice quoted with approval from the judgment of Street J in Re Hugh J Roberts Pty Ltd (1970) 91 WN (NSW) 537 at 541 when he said that it must be accepted that the section applies equally to proceedings which a liquidator:

‘.. might be able to bring, proceedings he contemplates bringing, proceedings he has decided to bring, and proceedings he has already brought."

See also: Rothwells Ltd (No 2) (1989) 7 ACLC 576 at 588 (Nicholson J) in which authorities relevant to the scope of the inquiry which may be undertaken under compulsory examination were collected. In that judgment Nicholson J acknowledged a difference of approach between Australian and English authorities the latter holding, as a general rule, that a liquidator could not undertake such an examination when a firm decision had been taken to commence proceedings to which the proposed examination was relevant. The Australian approach to that point merely required the court to treat the liquidator’s application with greater caution (588).

58 In 1989 the Commonwealth, in reliance upon the Corporations power in s 51(xx) of the Commonwealth Constitution, passed the Corporations Act 1989 (Cth) imposing a national scheme of corporate regulation. It also established the Australian Securities Commission. However in New South Wales v Commonwealth [1990] HCA 2; (1990) 169 CLR 482 the High Court held that the Commonwealth did not have power to make laws about the incorporation of companies. This led to the introduction of the 1991 Cooperative Scheme. The Commonwealth Parliament enacted the Corporations Act 1989 as a law of the Government of the Australian Capital Territory pursuant to s 122 of the Constitution. Each of the States then passed its own Corporations Act applying the Corporations Law set out in the Corporations Act 1989 and the Australian Securities Commission Act 1989 as laws of the State. Each State conferred jurisdiction on the Federal Court "with respect to civil matters arising under the Corporations Law of [the State]". Like jurisdiction was conferred by each State Act on the Supreme Court of the State and the Supreme Court of the Australian Capital Territory. The scheme reflected the more general provisions of the reciprocal Federal and State cross vesting legislation which had been introduced in 1987. It provided a special purpose cross vesting arrangement. It operated from 1 January 1991.

59 Section 597 of the Corporations Act 1989 and the Corporations Law of each State reflected s 541 of the former Companies Codes. As the Explanatory Memorandum for the Corporations Bill 1988 succinctly stated:

‘This provision is based on CA s 541.’

The examination power conferred by s 597 was subsequently described as:

‘In many respects a conflation of the powers of examination in ss 249, 250 and 367A of the Uniform Companies Act 1961."

AR Keay, op cit at 70.

Conflation as confusion was the view of the new provisions advanced by Parker G in Liquidator’s Examinations (1993) 10 Aust Bar Rev 25. He found it hard to escape the conclusion that most of the changes made in 1981 were accidental (at 29):

‘The Explanatory Memoranda betrayed no awareness of the separate origins and purposes of the examination provisions which were being fused together. Not all the changes made to the previous law were identified. No reasons were given for those that were identified.’

60 The legislative antecedents of s 597 were discussed by Lockhart J (Beaumont and Gummow JJ concurring) in Re Compass Airlines Pty Ltd (1992) 35 FCR 446 at 452-453. His Honour referred to the "long history" of the section in companies legislation and noted that neither s 597 nor its predecessor, s 541 of the Companies Code, had been confined to companies in the course of being wound up. He referred also to the "close correspondence" between the "inquisitorial provisions" under the companies legislation and the equivalent provisions with respect to individuals under bankruptcy legislation. He said (at 453):

‘Like its predecessors, s 597 plays an important role in the administration of companies in liquidation, other administrations in insolvency and "external administrations" generally:...’

He contrasted such provisions with those which relate to the investigation of the affairs of companies (whether or not in the course of being wound up) by government regulatory authorities and the making of reports by those authorities. The Compass case was concerned with the effect of s 597 upon legal professional privilege.

61 The extension of the examination power to companies under external administration, not limited to winding up, was noted by Gleeson CJ (Mahoney and Priestley JJA agreeing) in HongKong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512 at 521. His Honour said:

‘The statutory context of "external administration", in which s 597 has its place, throws light on the purposes for which the power to order examinations (or to authorise persons to apply for examination orders) is conferred. Those purposes include the protection of shareholders and creditors and of interested members of the public. They are not however confined to the need for such protection in the case of winding up. Winding up is only one form of external administration. The scope of s 597 is wider.’

The company whose officers were the subject of examination in that case was the former trustee of unit trusts known as the Estate Mortgage Trust. The trustee itself was in liquidation. The question whether s 597 was limited to companies in liquidation was relevant because s 601 of the Corporations Law stated that its provisions with respect to winding up did not apply to any body corporate, the winding up of which was started before the commencement of the chapter. The section was held not to apply to s 597 because that section was not a law with respect to winding up.

62 The Corporations Law was amended by the Corporate Law Reform Act 1992 (Cth) which introduced a new Div 1 in Pt 5.9. That Division was entitled "Examining a person about a corporation". It comprised ss 596A to 596F inclusive. Section 597 was reduced to its present form as a provision about the way in which examinations authorised under ss 596A and 596B are to be conducted.

63 The 1992 amendments implemented the Report of the Australian Law Reform Commission in its General Insolvency Inquiry Report No 45 (The Harmer Report). In par 584 of that Report the chief purposes of inquisitorial examinations in bankruptcy and company insolvency law were described thus:

‘... to facilitate the recovery of property, to discover whether conduct of the insolvent led to the insolvency and to investigate possible causes of action against third parties.’

The Commission recommended that company law be brought into closer alignment with bankruptcy law by allowing examination without court order of any person who had been a relevant company officer within two years before winding up commenced (par 586). It also recommended the retention of the requirement for a court order for examination of persons other than officers of the company who might nevertheless be able to provide information relating to the company’s affairs. The Commission recommended as wide a definition of "examinable affairs" as applied to bankrupts under recent amendments. It agreed with the observation by Lockhart J in re Csidei that "the very nature and breadth of the inquisitorial power ... requires the exercise by the Court or Registrar of considerable care before it is invoked". On that basis it recommended that applications to the Court for examination orders be supported by affidavit.

64 The Explanatory Memorandum for the Corporate Law Reform Bill 1992 contained a section specifically dealing with Pt 4 of the Bill entitled "External Administration of Companies and Part 5.7 Bodies". Part 4 covered, inter alia, the new examination sections 596A and 596B, their associated definitions and ancillary provisions. The Explanatory Memorandum began by stating (at 311):

‘Part 4 contains the amendments to be made to the Corporations Law in implementing the Harmer Report.’

65 In par 344 the Explanatory Memorandum referred to the proposed definition of "eligible applicant" and stated:

‘The list of persons is similar to the list in existing subsection 597(1), except that an administrator of a corporation and an administrator of a deed of company arrangement, who may be appointed under the new administration procedure proposed by Part 5.3A, have been added. In the light of the proposed repeal of the official management procedure currently provided by Part 5.3, official managers have been omitted from the list of eligible applicants.’

The proposed definition of "examinable affairs" was based upon the definition of that term in the Bankruptcy Act and defined the questions that could be put to an examinee under proposed subs 597B (par 347).

66 The Explanatory Memorandum discussed the operation of the proposed s 596A. After summarising, at par 1154, the content of s 596A it went on (at 1155):

‘The intention is that the Court will issue the summons where it is satisfied that the person’s connection with the company is such that the person is an examinable officer, without the need to inquire further into such matters as whether that person has taken part or been concerned in the examinable affairs of the corporation, been guilty of misconduct in relation to the corporation or is able to give information about examinable affairs of the corporation. It is envisaged that the issue of a summons in such circumstances will be a formality, and that the respective Court rules may provide for execution of the function by a Registrar or equivalent official, where appropriate.’

67 The new subs 597(5B) set out the matters in relation to which a person might be examined. The Explanatory Memorandum observed that the subsection would provide that the questions that might be put to an examinee are those that relate to the corporation or any of its "examinable affairs", a term that is to be defined widely in line with the definition of "examinable affairs" of a bankrupt under subs 5(1) of the Bankruptcy Act. It was proposed to omit the existing subs 597(3) which described the issues on which a person might be examined as follows:

‘... any matters relating to the promotion, formation, management, administration or winding up, or otherwise relating to affairs of, the corporation concerned.’

The Explanatory Memorandum went on (at par 1173):

‘The aim of the proposal to omit this existing requirement and replace it with proposed subsection 597(5B) is to cast a very broad net in defining the matters on which a person may be examined under section 597, in order to allow eligible applicants to ascertain, inter alia, not only whether any monies or property are missing from the assets of the company being administered or wound up in insolvency, but also where those monies or property have gone to.’

It is clear from this passage that the Explanatory Memorandum proceeded on the assumption that the examination power was to be applied in relation to companies under some form of external administration.

68 In New Zealand Steel (Australia) Pty Ltd v Burton (1994) 13 ACSR 610 Hayne J, in the Supreme Court of Victoria, quoted and evidently adopted for the purposes of s 596B of the Corporations Law, what Gleeson CJ had said in HongKong Bank v Murphy. His Honour did so in aid of the proposition that (at 616):

‘... no longer are the examination provisions of the companies legislation to be regarded as restricted to cases in which the company has been wound up and it therefore follows that the provisions are not to be limited to cases in which the examination will be for the purpose of a winding up and the benefit of those interested in that winding up.’

In New Zealand Steel the company whose examinable affairs were in issue had a receiver and manager appointed. The question before the court was whether the examination proposed was an abuse of process because it was directed to obtaining a private forensic advantage in pending litigation.

69 A broad view of "examinable affairs" was adopted by the Full Federal Court in Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301. In that case the challenged orders had been made under s 596B and had required a valuer employed by Grosvenor Hill to be examined to determine whether the liquidators of a second company, Interchase Corporation Ltd (In Liq), had a good cause of action for damages against Grosvenor Hill in respect of valuation advice which the individuals had provided. In holding that the inquiry was within the examinable affairs of Interchase, their Honours said (at 305 - 306):

‘In accordance with the settled course of authority ... information with respect to the probability or otherwise of success in litigation contemplated by the corporation would be information with respect to the "examinable affairs" of the corporation in question. This information would be "relevant", that is to say, it would bear upon or be connected with, the question whether the corporation possessed a cause of action, that is, a chose in action, as its property. It is not, and could not be, seriously disputed that an inquiry as to the existence, and value, of any property that the corporation may possess would be a "relevant" inquiry for the purposes of s 597(9).’

The "examinable affairs" in that case were those of the company which was the subject of a winding up order albeit it was an officer of another company that was to be examined about them. The Court also referred to the special position of the liquidator as an officer of the Court under a duty and responsibility to get in and maximise the assets of the company for distribution for the benefit of the creditors. The limited knowledge of the company’s assets and business affairs possessed by a liquidator had been recognised by the legislature in the enactment of the examination provisions of the Corporations Law and its predecessors.

70 The Full Court said that the language of s 597B, having regard to the definition of "examinable affairs" in s 9, had a broader operation than its statutory ancestor, s 115 of the Companies Act 1862 (UK) (at 308 - 309):

‘The fact that the examination of a person under s 596B of the Law is not a proceeding inter partes is a circumstance in favour of a broad and generous construction of the section having regard to its statutory purpose, subject to the power of the Court not to allow the provision to be used oppressively to the private interests of the examinee.’

The Court also held that the power could be used to order the production of relevant documents including insurance policies to ascertain whether or not the person against whom action might be taken by the liquidator had an enforceable right to indemnity from an insurer or other person (at 311):

‘Realisation of the chose in action is an "examinable affair" within the meaning of ss 596B(1)(6)(ii) and 9 of the Law. Any policy of professional indemnity insurance containing the terms of the indemnity, including any exclusions and excesses and the amount of cover is, we think, a document "relevant to matters to which the examination relates or will relate" (s 597(9) of the Law)."

71 The cross vesting arrangements under the Corporations Law were challenged in Gould v Brown as an element of a challenge to the exercise of the examinations power under ss 596A and 596B by the Federal Court. The High Court divided evenly on the challenge to the cross vesting scheme which was therefore upheld as it had been in the Full Federal Court below. It was, however, only a matter of time before the validity of the cross vesting arrangements would come up again for consideration by the High Court. They did so and were held by a majority in Re Wakim; Ex parte McNally [1999] HCA 27; (1999) 198 CLR 511 to be invalid to the extent that the State Corporations Laws purported to confer jurisdiction on the Federal Court.

72 The difficulties flowing from the invalidation of the cross vesting provisions applicable to the Federal Court were ultimately overcome by a referral of power from the States to the Commonwealth to enable the Commonwealth Parliament to enact the Corporations Act and the ASIC Act. Both laws were made under the referred matters power in s 51(xxxvii) of the Constitution and so had the character of federal laws. They were therefore able to provide for the conferring of the relevant federal jurisdiction on both the Federal Court and the Courts of the States and Territories. The examination powers in Pt 5.9 of the Corporations Act and the relevant definitions were as in the previous Corporations Laws.

73 The operation of the examination powers was given comprehensive consideration by Lander J who wrote the principal judgment in the Full Court of the Federal Court in Evans v Wainter Pty Ltd [2005] FCAFC 114; (2005) 145 FCR 176. The case involved the issue of summonses under ss 596A and 596B for the examination of persons in relation to the examinable affairs of New Tel Ltd (in liq). An interlocutory application to discharge the summonses was refused and an appeal by leave taken to the Full Court, which appeal was ultimately dismissed. The appellants contended that the sole purpose of the examinations was to elicit evidence in relation to causes of action said to have arisen out of representations made by them to the company Wainter Pty Ltd in relation to New Tel. The Full Court held that New Tel stood to benefit from any action brought by Wainter against the appellants as recovery by Wainter against the appellants would reduce its claim against New Tel.

74 Lander J reviewed the history and authorities relevant to the examination powers and identified their legislative purposes in terms which may be paraphrased as follows (at [252]):

3.1 To enable an eligible applicant to gather information to assist the eligible applicant in the administration of the corporation.
3.2 To assist the corporation’s administrators to identify the corporation’s assets, both tangible and intangible, and to allow its liabilities to be identified.
3.3 To protect the interests of the corporation’s creditors.
3.4 To enable evidence and information to be obtained to support the bringing of proceedings against examinable officers and other persons in connection with the examinable affairs of the corporation.
3.5 To assist in the regulation of corporations by providing a public forum for the examination of examinable officers of corporations.

With respect, the last mentioned purpose must be regarded with some reserve in terms of its compatibility with the exercise of judicial power. This is, however, subsumed in the discussion that follows about the characterisation of the examination power, for purposes of assessing constitutional validity, as judicial or administrative.

75 His Honour also advanced the following propositions about the exercise of the examinations power which he said emerged from the legislation and the authorities (at [252]):

‘4. If an eligible applicant applies for an order for examination of a person for a purpose unconnected with the purposes authorised by the legislation that will be an abuse of process and the order, if obtained, will be set aside.

5. The procedure may not be used to allow a party to obtain a forensic advantage and, if it is, any order obtained will be set aside.

6. The procedure may not be used as a dress rehearsal for the cross- examination of a person in a pending or subsequent action. However, it is not improper to seek an order of the Court to summon a person for examination whilst litigation is pending against that person or entities connected with that person.

7. The question whether in any particular case the applicant has used the procedure abusively will depend upon the applicant’s purpose in seeking the order and all of the surrounding circumstances. It will not be an abuse unless an offensive purpose is at least the predominant purpose.

8. It will be an offensive purpose if the application cannot be characterised as being for the benefit of the corporation, its contributories or creditors.

9. A creditor may, if first authorised by ASIC, apply to the Court for an order to summon for examination a person for the purpose of obtaining information in relation to a debt owed to the creditor if such an examination would be in the interests of the corporation or its creditors as a whole.

10. A creditor may not use the procedure for the purpose of obtaining a forensic advantage which would not have been available to the creditor if the corporation had not gone into administration.’

76 Ryan and Crennan JJ generally agreed with Lander J subject to certain expressed qualifications. Lander J did not accept the correctness of the opinions of the Full Court of the Supreme Court of Victoria in Flanders v Beatty (1995) 16 ACSR 324 and the Full Court of the Supreme Court of South Australia in Sandhurst Trustees Ltd v Harvey (2004) 88 SASR 519, that the scope of the examination process had been greatly expanded by the 1992 amendments ([187] and [206]). Ryan and Crennan JJ both held it unnecessary to reflect upon those views for the purpose of dealing with the appeal before them.

77 Lander J made some observations relevant to the question now before the Court on whether Pt 5.9 is limited in its application to the examinable affairs of corporations under external administration. At one point he said of s 596A (at [84]):

‘The corporation may be in administration, subject to a deed of company arrangement, or being wound up. However, that is not essential. ASIC, or a person authorised by ASIC, could apply to summon an examinable officer about the corporation’s examinable affairs even where the company is solvent and still trading provided that the person is an examinable officer at the time of the application: s 596A(b)(iv).’

That observation was, with respect, obiter as the case before the Court concerned the examinable affairs of a company in liquidation. And later in the reasons for judgment his Honour agreed with the observations of Hayne J in New Zealand Steel, and said (at [245]):

‘In my opinion, the procedure in Pt 5.9 of the Law and the Act is to aid persons who have the responsibility of the external administration of the company in carrying out their duties.’

78 In Meteyard v Love [2005] NSWCA 444; (2005) 224 ALR 588 summonses for examination had issued to the insurer of a company in receivership on the application of its creditors. Basten JA, who wrote the principal judgment, dealt with questions of oppression, abuse of process and the effect of the examination power on legal professional privilege. Santow JA, who agreed with Basten JA, noted that the particular purpose of the examinations in that case was not to expose misconduct but to provide information that would advance the external administration of the company under receivership. His Honour considered that the limitations upon the examination power, in that context, were as articulated by Lander J in Wainter in [245] – [251] (at [7]). There is nothing in that judgment supportive of the application of the power in respect of examinable affairs of companies not under external administration.
The construction of the authorisation and examination powers

79 This case concerns in part the scope of the following statutory powers and obligations:
(i) The power of ASIC to authorise a person to make an application under Pt 5.9.

(ii) The obligation and associated power of the Court, under s 596A, to summon a person for examination about a corporation’s examinable affairs and the power under s 597 to examine a person so summoned.

80 The Corporations Act makes no express provision for ASIC to authorise a person to make an application under Pt 5.9. Its function in that respect is identified in the definition of "eligible applicant". The function so identified is picked up by the general provisions of s 11(1) of the ASIC Act. The power to do whatever is necessary for the performance of its functions is conferred upon ASIC by s 11(4). Section 11(4) is therefore the source of ASIC’s power to authorise a person as an "eligible applicant". That has been so held in respect of analogous provisions of the Corporations Law in three decisions of the Full Court: HongKong Bank of Australia Ltd v Australian Securities Commission (1992) 40 FCR 402; Mercantile Mutual Life Insurance Co Ltd v Australian Securities Commission (1993) 40 FCR 409 and Re Excel; Worthley v England (1994) 52 FCR 69. The Court of Appeal of New South Wales in Burns Philp & Co Ltd v Murphy (1993) 29 NSWLR 723 held that the power was located in the definitional provision of s 597(1) of the Corporations Law, reflected in the definition of "eligible applicant" in s 9 of the Corporations Act. I will, with respect, follow and apply the analysis and conclusions of the Full Court of the Federal Court in the three decisions mentioned. They are helpfully discussed in Zumbo F, Liquidator’s Power of Examination under the Corporations Law: The State of Play (1994) 12 C & SLJ 504. The precise location of the statutory power to authorise a person to make application for an examination summons was relevant, in those cases, to the availability of administrative review by the Administrative Appeals Tribunal. The decisions of the Full Court of the Federal Court had the consequence that such review was not available. No such limitation applies in respect of judicial review of the ASIC decision whether under the ADJR Act or the provisions of s 39B(1A) of the Judiciary Act 1903 (Cth).

81 The principal question in this case in respect of both the authorisation of eligible applicants by ASIC and the issues of summonses and subsequent examination under Pt 5.9 is whether the application of the empowering provisions is limited to the examinable affairs of corporations under external administration. The term "external administration", as earlier noted, is not defined in the Corporations Act although there is a definition of an "externally- administered body corporate" which is not of any particular assistance. The principal question may be reduced to the more precise inquiries whether the corporations whose examinable affairs are referred to in ss 596A and 596B are corporations subject to one of the forms of external administration or other processes for which Ch 5 provides.

82 In construing any statute the first resort must be to its ordinary words having regard to their context and their purpose. Section 596A refers to examination of "a corporation’s examinable affairs". It does not, by that language, limit the class of corporations to which it applies to those under some form of external administration. The class of persons who may be subject to a mandatory summons are set out in s 596A(b). Subparagraphs (i), (ii) and (iii) define them by reference to corporations under specific forms of external administration, namely administration (as defined in s 435C), deeds of company arrangement and winding up. Subparagraph (iv) covers residual circumstances by use of the word "otherwise".

83 If "otherwise" in subpar 596A(b)(iv) refers to other forms of administration then the section is properly construed as limited to corporations under one of the three specified forms of external administration and any other forms for which Ch 5 provides. If "otherwise" refers to any other circumstance at all, then the section allows a summons to issue for examination of persons in respect of any corporation’s examinable affairs whether it is in external administration or not.

84 There are forms of external administration not covered by s 596A(b)(i), (ii) and (iii). A person may be appointed to administer a compromise or arrangement approved under Pt 5.1 of the Act. Certain categories of persons cannot be so appointed without the leave of the Court (s 411(7)). Part 5.2 covers the qualifications, appointment, powers and duties of receivers and controllers of the property of corporations. The Court is given functions in respect of such persons including determining the validity of appointments and of the entry by controllers into possession of company property (s 418A). The Court may authorise the controller of property of a corporation to dispose of it despite a prior charge (s 420B) and otherwise to supervise the performance of the duties of such persons (s 423). Parts 5.1 and 5.2 appear to cover forms of external administration not included in those specifically enumerated in s 596A. There is therefore work for s 596A(b)(iv) to do by reference to those other forms of external administration.

85 Section 596B does not contain any terms which expressly limit its application to corporations under external administration. Nevertheless, like s 596A, it must be read in the context in which it appears.

86 The ordinary meaning of the words of both ss 596A and 596B would permit their application to the examinable affairs of any corporation whatever its status. But they are found in a chapter dealing with arrangements and reconstructions, receiverships, administration with a view to execution of a deed of company arrangement and winding up in insolvency and otherwise. Not all of these parts of Ch 5 seem to fall readily within the term "external administration". This is particularly so of arrangements and reconstructions. Nevertheless they are processes subject to court approval and supervision. "External administration" is not a term of particular statutory significance here beyond its use as the title to Ch 5. What is of significance is the context provided by Ch 5, however it is described.

87 The context in which Pt 5.9 of the Act appears, as a set of miscellaneous provisions in Ch 5, strongly suggests that the examination power is intended to be ancillary to the functions of the Court and/or the functions of external receivers, controllers or liquidators of corporations for which Ch 5 makes provision. In so far as Ch 5 validly confers judicial functions on the Court, the power to issue summonses for examination may be seen as incidental to such functions. There is, of course, a separate question in the present case about the validity of the examination power if it purports to extend to cases of corporations not subject to any form of administration or judicial function to which it would be incidental. That question is discrete and its consideration does not resolve the validity of all possible applications of the power to corporations subject to processes for which Ch 5 provides. In particular, it does not answer the question whether the examination power in aid of non-judicial processes of external administration would be a valid exercise of the judicial power.

88 In my opinion the context in which Pt 5.9 operates is inconsistent with the propounded construction of ss 596A and 596B as conferring a general power on the Court to issue summonses for the examination of persons about the examinable affairs of any corporation whether or not affected by other processes for which Ch 5 provides. It is inconsistent also with the history of the legislation. That history indicates, it is true, a widening of the power of examination beyond the examinable affairs of corporations subject to winding up orders. But the historical roots of the power lie deep in corporate insolvency law nourished by the development of the examination powers in respect of bankrupt individuals. The proposition that s 541 of the Companies Codes introduced, by a sidewind, unrecognised in the Explanatory Memorandum, a general power in the courts to examine persons about the affairs of corporations is, with respect, improbable. It is remarkable that the Harmer Report would have failed to recognise the statutory divergence from that closer alignment with bankruptcy law which it proposed. The Explanatory Memorandum for the 1992 amendments which introduced ss 596A and 596B into the Corporations Law was focussed on insolvency and forms of external administration. Moreover if a general power of judicial examination of persons about the affairs of corporations were intended, the question arises whether there was any point in retaining specific references to the various categories of external administration mentioned in s 596A.

89 In my respectful opinion, the weight of authority, to the extent that it has considered the matter tends to support the proposition that ss 596A and 596B and their predecessors have been seen as provisions applicable to companies in one or other form of administration and not as applicable to companies at large. So much appears from the judgment of the Full Court in Re Compass Airlines and the Court of Appeal of New South Wales in HongKong Bank. New Zealand Steel also appears to be consistent with the views expressed by Gleeson J that the statutory context of s 597 was that of "external administration". It follows, that I would not, with respect, agree with the obiter observations at [84] of the Wainter judgment which would see the application of ss 596A and 596B extended to solvent corporations not under any form of external administration.

90 It is not necessary for present purposes to extract from Ch 5 all of the conceivable classes of corporate circumstances covered by that Chapter to which s 596A or s 596B may be incidental and, as a matter of construction, applicable. It is sufficient to say that they do not extend to the examinable affairs of a corporation which is not under any form of external administration nor subject to any other judicial or administrative process for which Ch 5 provides.

91 There is no suggestion in this case that Hayes Knight itself was under any form of Ch 5 administration or process. It had been removed by the Court as a trustee for the Performance Finance debenture holders under Ch 2L of the Act. That removal process however was at an end. In the light of what I think is the correct construction of s 596A there was no basis upon which a summons could issue under that section for the examination of any officers of Hayes Knight in respect of its examinable affairs. That would not, of course, have prevented the issue of a summons for the examination of officers of Hayes Knight in respect of the examinable affairs of Performance Finance. The summons issued was therefore, in my opinion, beyond the power of the Court to issue and should be discharged.

92 In case I am in error on the construction of s 596A and it does extend as far as Highstoke contends, I will consider the constitutional question raised by Hayes Knight. The answer to that question, if favourable to Hayes Knight, may also have an impact on the construction of s 596A by virtue of the reading down operation of s 15A of the Acts Interpretation Act 1901 (Cth).

93 The constitutional question requires a consideration of whether the power conferred on the Court by s 596A is judicial power when applied to a corporation which is not under any form of external administration or judicial process under Ch 5.
Compulsory examination – the nature of the task

94 The limits of the judicial power of the Commonwealth are not easily defined. At its heart is "the power which any sovereign authority must of necessity have to decide controversies between its subjects, or between itself and its subjects, whether the rights relate to life, liberty or property": Huddart Parker & Co Pty Ltd v Moorehead [1909] HCA 36; (1909) 8 CLR 330 at 357 (Griffith CJ). But as was pointed out in R v Davison [1954] HCA 46; (1954) 90 CLR 353, the elements of controversy between subjects and the determination of existing rights and liabilities were "entirely lacking from many proceedings falling within the jurisdiction of various courts of justice in English law" (per Dixon CJ and McTiernan J at 368). Examples given included directions as to the administration of trusts, orders relating to the maintenance and guardianship of infants and declarations of legitimacy. Their Honours also referred to incidental administrative functions such as the issue of warrants of execution and said (at 368):

‘But to say that a thing may be done in the course of the exercise of judicial power is not to say that it may be done without the exercise of judicial power.’

Their Honours recognised that some functions are treated as judicial because they have long been so treated (at 369):

‘The truth is that the ascertainment of existing rights by the judicial determination of issues of fact or law falls exclusively within judicial power so that the Parliament cannot confide the function to any person or body but a court constituted under ss 71 and 72 of the Constitution and this may be true also of some duties or powers hitherto invariably discharged by courts under our system of jurisprudence but not exactly of the foregoing description.’

95 Non-judicial functions may be conferred as an incident of judicial power. As was said in R v Kirby; Ex parte Boilermakers’ Society of Australia [1956] HCA 10; (1956) 94 CLR 254 at 278:

‘... it must not be forgotten that s 51(xxxix) expressly empowers the Parliament to make laws with respect to matters incidental to the execution of any power vested by the Constitution in the federal judicature. What belongs to the judicial power or is incidental or ancillary to it cannot be determined except by ascertaining if it has a sufficient relation to the principal or judicial function or purpose to which it may be thought to be accessory.’

More recently in Re Tracey; Ex parte Ryan [1989] HCA 12; (1989) 166 CLR 518 Deane J observed (at 580):

‘The Executive Government cannot absorb or be amalgamated with the judicature by the conferral of non-ancillary executive functions upon the courts.’

96 Taken alone, a power to require a person to answer questions or produce documents in aid of an investigation is administrative in character. Taken alone, it neither leads to, nor is incidental to, a binding determination of rights or liabilities. As Professor W Harrison Moore wrote in the 2nd (1910) Edition of The Constitution of the Commonwealth of Australia (Legal Books, 1997 Reprint) (at 308-309):

‘The mere power to inquire, and to require testimony upon an inquiry, is not judicial power. Inquiry is incidental to judicial power, but it is equally incidental to other powers of government. The Executive and the Legislature alike are entitled to seek information to guide them in the exercise of their powers; and that which is non-judicial when exercised without coercive power does not change its nature when information can be required.’

97 When a regulatory body or authority such as ASIC or the Australian Competition and Consumer Commission or the Commissioner of Taxation is given such a power it is a power to investigate not to decide in the sense that a court decides when it gives judgment upon a matter before it: Huddart Parker & Co Pty Ltd v Moorehead at 358 (Griffiths CJ), 380 (O’Connor J), 384 (Isaacs J), 418 (Higgins J); Pioneer Concrete (Vic) Pty Ltd v Trade Practices Commission [1982] HCA 65; (1982) 152 CLR 460. The latter case concerned s 155 of the Trade Practices Act conferring power on the Chairman of the Trade Practices Commission to orally examine persons or require production of documents relevant to possible contraventions of the Act. The Court held that s 155 did not purport to confer judicial power on the Commission. Mason J made some observations relevant to the distinction between the exercise of an investigative power which may lead to subsequent judicial proceedings but nevertheless remains administrative and the exercise of an administrative power as an incident of judicial power. He said (at 471 - 472):

‘The absence in s 155 of any power to decide or determine a dispute between parties – the central element in the exercise of judicial power – might be thought to be an overwhelming answer to the argument that there is an attempt to confer judicial power on the Commission.

However, it is suggested that if the Commission requires information to be given for the purpose of obtaining evidence in a matter before the Court then it is exercising judicial power. According to Holmes J in Prentis v Atlantic Coastline [(1908) 211 US 210 at p 227], "The nature of the final act determines the nature of the previous inquiry". But this does not mean that because the determination ultimately made by the Federal Court in proceedings in respect of a contravention of the Act is an exercise of judicial power the issue and service of the notices is itself such an exercise. Holmes J was merely saying that the character of the order or final decision made by a tribunal will determine the character of the inquiry which precedes its decision, so that if its determination is a judicial order then its inquiry will constitute an exercise of judicial power. R v Davison [(1954) [1954] HCA 46; 90 CLR 353] was just such a case. This is not to say that it is legitimate to characterize the nature of the power exercised by the Commission under s 155 by reference to the judicial power which the Court exercises when it hears proceedings for a penalty under the Act. What the Commission does will produce information which may be presented in evidence by a party in proceedings in respect of a contravention under the Act, but this is no basis for saying that there is an exercise of judicial power on the part of the Commission. The exercise of a power to compel the provision of information is not inherently such an exercise. It may constitute an element in the exercise of judicial power when the power is part of the proceedings of the court, its object being to aid the court or the parties to obtain and present evidence in those proceedings. Then the exercise of the power by the court or the parties in proceedings in the court is for the purpose of enabling the court to hear and determine the lis and is, accordingly, incidental to, if not an element in, the exercise of judicial power.’

See also Kluver and Woellner, Powers of Investigation in Revenue, Companies and Trade Practices Law (Butterworths, 1983, [102] - [103])

98 In Re Monadelphous Engineering Associates (NZ) Ltd (in liq); ex parte McDonald and Watson (1989) 7 ACLC 220 Northrop J referred to the investigative character of the examination procedure under s 541 of the Companies (Victoria) Code and said it was "inappropriate" for a judge of the Federal Court to conduct such a process (at 225-226):

‘... examination is not a court hearing in the true sense. It is not the exercise of judicial power. It is part of an investigative procedure ... In my opinion it would not be appropriate for a Judge of the Federal Court to conduct examinations of an investigatory nature, and not truly judicial.’

He transferred the matter, which was an application by a liquidator, to the Supreme Court of Victoria. The same characterisation of the examination process was made by the Full Court of the Supreme Court of Victoria in Friedrich v Herald & Weekly Times Ltd [1990] VR 995 at 1003:

‘... essentially this procedure is administrative and does not result in judicial decisions as to any parties’ rights, except decisions as to the manner in which the examination itself should be conducted.’

99 In Gould v Brown summonses for examination issued by the Federal Court under ss 596A and 596B of the Corporations Law were challenged on the basis that the Court had no jurisdiction to issue them or conduct examinations. The first basis of the challenge, which failed, on the evenly divided vote of the Court, was that the State Parliaments had no power to invest in the Federal Court jurisdiction in matters arising under the Corporations Laws of the States. The second basis, relevant here, was that the examination function conferred on the Federal Court by the State laws did not involve the exercise of judicial power.

100 Brennan, Toohey and Kirby JJ who supported the validity of the cross vesting provisions considered the second question. They held that the challenged examinations were incidental to the Court-ordered winding up of the company and on that basis had judicial character. In their joint judgment, at 387, Brennan CJ and Toohey J said that the power to order the examination of witnesses in the cause and for the purposes of a winding up and to conduct and hear such an examination had long been conferred on and exercised by courts exercising jurisdiction in the winding up of corporations. They accepted the description given by Lockhart J in the Full Court:

‘The examination orders, summonses and proposed examination which are the subject of this challenge are in truth but part of the processes that follow from the making of the winding-up order, and which ultimately protect and adjust the rights of companies, their creditors and in some cases contributories. The Court’s supervisory role in the course of a winding-up is to ensure that the winding-up laws are properly interpreted and applied to correct mistakes, and to supervise the exercise of compulsory processes in relation to the examination of persons and the obtaining of documents for the purposes of the conduct of those examinations.’

BP Australia Ltd v Amann Aviation Pty Ltd (1996) 62 FCR 451 at 475.

Their Honours observed that although the function of the Court in conducting an examination is not the determination of the rights and liabilities of adversaries it is incidental to the winding up (at 388):

‘The incidental character of the function and the traditional supervision exercised by the court in performing it are sufficient to stamp it with a judicial character.’

and cited R v Davison at 367-368. Their characterisation of the power to order examinations as judicial was dependent upon its connection with the administration of the winding up of a company pursuant to an order made by the Court. They said (at 389):

‘To the extent that the power to order and conduct examinations is available for exercise in the course and for the purposes of a winding up, it is an incident of the judicial power of winding up and has a judicial character.’ (emphasis added)

101 It was clear that, as a consequence of the categories of persons in the definition of "eligible applicant" and the categories of matters in the definition of "examinable affairs", the powers available under ss 596A and 596B might be exercised to order and conduct examinations otherwise than in the course and for the purposes of a winding up. As to that their Honours said (at 390):

‘For example, if the Australian Securities Commission ... were to apply for a summons for the examination of a chief executive officer ... of a corporation about a takeover being made by the corporation ... the issuing of the summons to the Chief Executive Officer and the conduct of his or her examination about the takeover offer would not be an exercise of judicial power.’

They reasoned however that, by virtue of s 31 of the Interpretation Act 1987 (NSW), the New South Wales equivalent of s 15A of the Acts Interpretation Act 1901 (Cth), only those parts of the Corporations Law of the Commonwealth which could validly be picked up were picked up by s 7 of the New South Wales Act (at 392):

‘The provisions which can be upheld in this way include those on which the examination orders are based. Paragraph (b) of the definition of "eligible applicant" in s 9 – "a liquidator or provisional liquidator of the corporation" – can be combined with par (a) of the definition of "examinable affairs" in s 9 – "the promotion, formation, management, administration or winding up of the corporation" – so as to ensure that the powers conferred by ss 596A and 596B are exercised in the course of and for the purpose of a winding up."

It is not necessary for present purposes to consider the relationship of those observations to the nature of the law being "picked up" by the New South Wales Act, that law being a Commonwealth law passed in the exercise of the Territories’ power and therefore not subject to all the constraints imposed by Ch III of the Constitution in respect of laws conferring federal jurisdiction.

102 Gaudron J held that Ch III would preclude conferral on the Federal Court of a non-judicial examinations power "not confined to examination by a court which has exercised or is exercising jurisdiction to make an order for the winding up of corporations" (405). However there was nothing to prevent the Commonwealth from conferring power of that kind on the Supreme Court of the Australian Capital Territory (405). Reference should be made in that regard to the developing jurisprudence about the interaction of Ch III and the Territories’ power in Spratt v Hermes [1965] HCA 66; (1965) 114 CLR 226; Capital TV and Appliances Pty Ltd v Falconer [1971] HCA 10; (1971) 125 CLR 591; Re Governor, Goulburn Correctional Centre; Ex parte Eastman [1999] HCA 44; (1999) 165 ALR 171 and in the joint judgment of Black CJ and Hely J in North Australian Aboriginal Legal Aid Service Inc v Bradley [2002] FCAFC 297; (2002) 122 FCR 204 at [106] – [133].

103 Neither McHugh J nor Gummow J who held the cross vesting of jurisdiction to be invalid made any comment on the characterisation of the examination process. Kirby J who held the cross vesting provisions to be valid, said that the examination function was "... a necessary and usual step in the process of the judicial winding up of a company". He acknowledged that it was a more difficult question whether the extension of the power to other "eligible applicants" such as the Australian Securities Commission and the inclusion of other inquisitorial powers contaminated the legislative provisions in such a way that they could not be severed to uphold permissible provisions and exercise the impermissible. As to that he agreed with the reasons of Brennan CJ and Toohey J (500).

104 Spinks v Prentice (1998) 87 FCR 89 was one of a group of appeals decided in conjunction with Re Wakim. It was an appeal from the Full Court of the Federal Court with respect to an order for examination of former officers of a company in liquidation. The company was taken to be incorporated in the Australian Capital Territory. The Full Court held that the Corporations Act 1989 (Cth), which applied the Corporations Law to the ACT, validly conferred jurisdiction on the Federal Court to entertain the application for an examination summons. The examination orders were also challenged before the Full Court on the basis that they did not involve an exercise of judicial power. As to that the Court said (at 96):

‘It is true that, although there is no challenge to the winding up order made here, s 596A would permit an examination where there has been no winding up. But given the long history of courts exercising such powers, we can see nothing foreign to the exercise of judicial power in this aspect of s 596A.’

They referred to the Compass Airlines and Grosvenor Hall cases. It is not clear, given the absence of any long history of judicial examination of corporations at large unrelated to winding up or other judicial procedures, whether their Honours were saying that applications under s 596A when there was no winding up order or pending court proceedings were an exercise of judicial power. To the extent that they were so saying, their observations were dicta.

105 In the High Court, on appeal from the Full Federal Court in Spinks v Prentice, Gummow and Hayne JJ noted that it had not been contended that the power to order the examination of witnesses and the production of documents for the purposes of a winding up and to supervise the conduct of the examination was otherwise than in the exercise of a function incidental to the exercise of judicial power. Their Honours did not think it appropriate to express any view on the validity of provisions conferring jurisdiction on the Federal Court to make orders under Pt 5.9 save for those immediately in question. On that point Kirby J agreed with them (619).

106 Divorced from association with a judicial proceeding nothing about the examination power under the Corporations Act marks it as judicial in character. It lacks the core elements of the judicial process such as the finding of facts, the making of value judgments and binding determinations as to legal rights and obligations. There are of course, functions, which can be viewed as administrative or judicial depending upon the body that discharges them: Federal Commissioner of Taxation v Munro [1926] HCA 58; (1926) 38 CLR 153 at 175-179; Cominos v Cominos [1972] HCA 54; (1972) 127 CLR 588 at 599, 605 and 606; R v Quinn; Ex parte Consolidated Foods Corporation [1977] HCA 62; (1977) 138 CLR 1 at 6. It is nevertheless a necessary condition of the attribution of this "chameleon" status to a particular function that it be capable of constituting an exercise of judicial power.

107 The examination power taken alone, in the sense used above, is not an exercise of judicial power nor, taken alone, is it judicial when exercised by a court. It can only be accommodated within the exercise of judicial power if incidental to it or justified by historical usage. An examination ordered in aid of the implementation of a winding up order made by a court can be seen as incidental to the exercise of judicial power and has long been accepted as such, at least implicitly if not explicitly, on that basis. On the other hand an examination which is "free standing" in the sense that it is exercised without reference to any pending proceeding does not fall within the scope of the judicial power unless it can be characterised as judicial on the basis that it is a function which courts have long carried out. The historical incidence of investigative functions exercised by courts was referred to in Dalton v New South Wales Crime Commission [2006] HCA 17; (2006) 226 ALR 570. That case concerned the validity of s 76 of the Service and Execution of Process Act 1992 (Cth). The section empowers the Supreme Court of a State, in which a subpoena is issued by a tribunal for a person to give evidence before the tribunal, to give leave to serve the subpoena out of the State. It was submitted in the High Court that the exercise by the Courts of investigative functions did not occasion or support the issue and service of process under s 51(xxiv) of the Constitution. There was therefore said to be no foundation for an analogical extension in respect of the investigative functions of tribunals. To the extent that this argument involved a denial of the investigative function of courts it was rejected in the joint judgment of Gleeson CJ, Gummow, Hayne, Callinan, Heydon and Crennan JJ. Their Honours said (at [45]):

‘From a time well before federation, the courts of the Australian colonies, like those in England and elsewhere in the Empire, exercised a range of administrative and investigative functions. Provisions for the examination of judgment debtors, bankrupts, and officers of failed corporations are in point. In Cheney v Spooner [(1929) [1929] HCA 12; 41 CLR 532] this court upheld the application of the 1901 Act to an order by the Supreme Court of New South Wales under ss 123 and 124 of the Companies Act 1899 (NSW) which gave leave to the liquidator of a company in voluntary liquidation to summons a number of persons to attend for examination by the Master in Equity. The equity jurisdiction of the Supreme Courts with respect to bills of discovery (or preliminary discovery in more recent parlance) provides another instance of an investigative procedure. So also the courts of marine inquiry established in the Australian colonies. Likewise the next of kin inquiry in an administration suit, conducted in New South Wales by the master in equity. Further, the 1901 Act, as King CJ pointed out in [Alliance Petroleum Australia NL v Australian Gaslight Co (1983) 34 SASR 215 at 236], applied to subpoenas and summonses issued by coroners.’

108 The above passage states no new principle and indeed refers generally in a footnote to the discussion by Dixon CJ and McTiernan J in R v Davison. But to say that the courts have historically exercised investigative functions does not mean that all investigative functions conferred on a court, absent relevant historical antecedents or analogues, are to be regarded as judicial if not otherwise incidental to the exercise of judicial power. Without some limitation of that kind investigative obligations may be imposed by statute upon courts exercising federal jurisdiction on any subject within the legislative competence of the Commonwealth Parliament.

109 The question in this case is where there is any historical basis for characterising the examination power as now propounded as judicial in character. Its purported extension to corporations which are not being wound up or otherwise subject to judicial processes is an event of recent and certainly post-federation history. Nor can its characterisation as judicial be treated as analogous to such processes as preliminary discovery or bills of discovery in equity which have, in any event, a narrower field of operation than that which is proposed for s 596A. In so saying it is necessary to bear in mind that the validity of s 596A in its general application to solvent corporations not under any form of administration or judicial process is not to be judged by reference to this particular application in respect of such a corporation. The examination power cannot be justified on the basis that there is a damages claim pending against the company being examined. The construction of s 596A relied upon and necessary to support the issue of the examination summons in this case does not depend upon the existence of the damages claim but upon the status of Hayes Knight as a corporation.

110 In my opinion if the construction of s 596A for which Highstoke contends is the correct construction, then s 596A purports to confer on the Court a power which is not capable of characterisation as judicial and which, in its present application, is not incidental to the exercise of judicial power. To that extent, s 596A would exceed the legislative power of the Commonwealth. It may be that, by virtue of s 15A of the Acts Interpretation Act s 596A can be read down to yield the construction which, in my opinion, is in any event the correct one. The outcome is the same. The summons must be discharged.
The Judicial Review Proceedings

111 The disposition of the Judicial Review Proceedings is effectively governed by the conclusions in respect of the Examination Proceedings. It was at the very least a mandatory relevant consideration to be taken into account by the ASIC delegate, if not a factor defining the limits of the delegate’s power that Hayes Knight was not under any form of external administration of the kind referred to in Ch 5 of the Act or otherwise amenable to the provisions of the Act. The stated purpose for which authorisation was sought was for an application which, on the proper construction of the relevant provisions, would be beyond the power of the Court. The authorisation decision should be quashed. There is no point in remitting the matter for reconsideration by ASIC as the quashing of the authorisation decision depends upon the proposition that, having regard to the purpose for which the application for authorisation was made, authorisation could not properly have been granted.

112 The question whether the issue of the summons was for an improper purpose because it was related to an examination not for the benefit of Hayes Knight falls away.
Conclusion

113 For the preceding reasons the summons will be discharged and the authorisation decision set aside.

I certify that the preceding one hundred and thirteen (113) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.

Associate:
Dated: 16 January 2007

Counsel for the Applicants in WAD281 of 2005 and for the First and Second Respondents in WAD198 of 2005:	Mr G Donaldson SC and M r J Garas
Solicitor for the Applicants in WAD281 of 2005 and for the First and Second Respondents in WAD198 of 2005:	Allens Arthur Robinson
Counsel for the Applicant in WAD198 and for the Third Respondent in WAD281 of 2005: Solicitor for the Applicant in WAD198 and for the Third Respondent in WAD281 of 2005:	Mr D Stone Williams & Hughes
Counsel for the First and Second Respondents in WAD281 of 2005 and for the Intervenor in WAD198 of 2005:	Mr D Bennett QC and Mr S Lloyd and Ms K Vernon
Solicitor for the First and Second Respondents in WAD281 of 2005 and for the Intervenor in WAD198 of 2005:	Australian Government Solicitor
Date of Hearing:	24 and 25 May 2006
Date of Judgment:	16 January 2007