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Duke Group Ltd v Duke Group Ltd [1994] HCA 3; (1994) 119 ALR 401; (1994) 12 ACSR 600; (1994) 12 ACLC 220; (1994) 68 ALJR 196 (18 February 1994)

CATCHWORDS

HEARING

ORDER

DECISION

2. The respondent corporation is The Duke Group Limited. It is being wound up pursuant to an order of the Supreme Court of South Australia.
The liquidator has commenced proceedings against the West Australian
partners of an accounting firm, Nelson Wheeler. He alleges that the
West Australian partners were negligent in preparing a report supplied
to the corporation.

3. The liquidator has also issued proceedings against a number of defendants who are alleged to be the partners in a national
partnership of Nelson Wheeler. Whether the West Australian partners
were members of a national partnership remains a live issue in the
litigation. It is alleged that there is a national partnership, and
that the national partners are liable for the negligence of the West
Australian partners.

4. The applicants in the current application before me are, or have been, involved in the West Australian partnership or the national
partnership of Nelson Wheeler. The liquidator sought to have the
Court examine them pursuant to the provisions of the Corporations Law.
He sought information and documents about whether the West Australian
partners were part of the national partnership. He also sought
information about the level of insurance covering the West Australian
and national partners which might be available to satisfy any judgment
obtained by him in the negligence proceedings.

5. The Master of the Supreme Court made orders on 22 September 1993, varied on 1 November 1993, that the applicants attend an examination
for these purposes. The applicants appealed to the Full Court of the
Supreme Court of South Australia, alleging that the purpose of the
examination was beyond power, and in particular, that the nature of
the national partnership and the extent of the partners' insurance
cover were not part of the "examinable affairs" of the corporation.
The Full Court dismissed their appeal on 23 December 1993 ((1) Gerah
Imports Pty. Ltd. v. The Duke Group Ltd. (in liq.) [1993] SASC 4359; (1994) 12 ACLC 116.).
On 24 December 1993 the Master again varied his orders and set down
the examination for 21 February 1994.

6. The applicants then applied to Debelle J for a stay of the Master's orders pending an application for special leave to appeal
against the judgment of the Full Court. On 14 January 1994 he granted
a stay. The liquidator then appealed to the Full Court. Millhouse
and Olsson JJ, King CJ dissenting, allowed the appeal on
17 February 1994 and removed the stay.

7. In the meantime an application for special leave to appeal to this Court had been lodged on 14 January 1994. As that application
was one day out of time, the applicants also filed an application for
enlargement of time. By a summons issued yesterday, 17 February 1994,
the applicants seek a stay of the order of the Master pending the
hearing of their application for special leave to appeal. If I do not
grant the stay, the applicants will be required to attend an
examination on 21 February 1994; if I do grant the stay, it is likely
that the application for special leave will be heard in the week
beginning 21 March 1994.

8. The inherent jurisdiction of this Court to order a stay of proceedings pending the determination of an application for special
leave is well established ((2) See Re Federated Ironworkers'
Association; Ex parte Australian Building Construction Employees' and
Builders Labourers' Federation (1981) 55 ALJR 395 at 396; 34 ALR 208 at
211; Jennings Construction Ltd. v. Burgundy Royale Investments Pty.
Ltd. (No.1) [1986] HCA 84; (1986) 161 CLR 681 at 683.). It is an extraordinary
jurisdiction which will only be exercised in exceptional
circumstances.

9. Exceptional circumstances may arise where the subject-matter of the proposed appeal will be lost without a stay, with the result that
the application for special leave and any subsequent appeal will be
nugatory ((3) Rahme v. Commonwealth Bank [1993] HCA 62; (1993) 68 ALJR 53 at 54-55;
[1993] HCA 62; 117 ALR 618 at 620-621.). Clearly, in the present case, the
subject-matter of the litigation - the immunity of the applicants from
examination and from the production of documents concerning the matters
in contention - will have disappeared before the application for
special leave is heard if the application for a stay is refused.
Having regard to the date of the proposed examinations, in the absence
of a stay the questions will have been asked and answered and the
documents produced before the application for special leave is heard.

10. Notwithstanding this circumstance, the jurisdiction to grant a stay is discretionary and other matters are relevant to the exercise
of the discretion.

11. Importantly, the applicant must establish a substantial prospect that special leave to appeal will be granted ((4) Jennings
Construction Ltd. v. Burgundy Royale Investments Pty. Ltd. (No.1)
[1986] HCA 84; (1986) 161 CLR 681; Elspan International v. Aerospatiale (1992) 67 ALJR
177 at 178.). It is, I think, the prospect of success in that
application which is significant, although, of course, the prospect of
ultimate success in any appeal (if leave is granted) is an important
element to be taken into account by the Court in deciding whether or
not to grant special leave ((5) See Rahme v. Commonwealth Bank
(1993) 68 ALJR at 54; 117 ALR at 620.).

12. In addition, there are other matters to be taken into consideration in the exercise of the discretion to grant a stay. The
failure, if any, of the applicants to pursue such avenues as are
available in the court below for obtaining a stay is of significance.
Any loss which may be caused to interested parties by the granting of
a stay must be taken into account. And the balance of convenience is
always something to be considered ((6) Jennings Construction Ltd. v.
Burgundy Royale Investments Pty. Ltd. (No.1) (1986) 161 CLR at 685.).

13. In the present case, the application for special leave has been instituted by the applicants and is likely to be heard and determined
within five weeks. Clearly, when one balances that relatively short
delay against the loss of immunity which the applicants seek to
avoid by an appeal, the balance of convenience lies in granting the
application. No financial loss during that time to the respondent
or any other interested party, if a stay is granted, has been
demonstrated. The applicants have fully pursued their opportunity to
obtain a stay in the court below, having been granted a stay at first
instance, which they lost, by a majority, on appeal to the Full Court.

14. That leaves the question of the applicants' prospect of success in their application for special leave to appeal.

15. The section of the Corporations Law which is critical is s.596B. That confers power upon the Court to summon a person for examination
about a corporation's examinable affairs. When regard is had to the
definitions of "examinable affairs", "affairs" and "property"
contained in ss.9 and 53, "examinable affairs" include any legal or
equitable estate or interest (whether present or future and whether
vested or contingent) in real or personal property of any description
and include a thing in action.

16. Clearly the rights of action, if any, of the corporation against the applicants are examinable affairs within the meaning of the
legislation. The Full Court concluded that an examination of those
rights under the relevant provisions was not confined to their
existence but extended to their extent and value. Plainly the latter
are matters of considerable moment to the liquidator of a corporation
in pursuing the assets of the corporation in an economical and
efficient manner. And as was pointed out in Hamilton v. Oades ((7)
[1989] HCA 21; (1989) 166 CLR 486 at 496.), a liquidator performs a public function
in which one of his duties is to protect the interests of the
creditors.

17. It is not contended before me by the applicants that the examination ordered by the Master is oppressive. What is said is that
it extends beyond the affairs of the corporation to the affairs of
other persons and is merely for the purpose of ascertaining their
potential liability and their capacity to satisfy any judgment against
them. However, as I have said, these are matters of importance to a
liquidator, going in a practical way as they do to the value of the
property of the corporation.

18. The applicants are unable to point to any authority in their favour. The decision of Drummond J in Re Interchase Corporation
Ltd. ((8) (1993) 12 ACLC 97.) is indeed against them. The
decision of the Court of Appeal of New South Wales in Kelly v. Murphy
((9) (1993) 11 ACLC 1230.) is to be explained upon the basis that
the trustees only sought information for a limited purpose, which did
not extend to discovering the capacity of the partners of the firm of
solicitors in question to satisfy any judgment. In any event, the
question of oppression was raised in relation to the extended
examination eventually sought in that case, a question which is not now
raised in these proceedings.

19. In the end, I am not satisfied that the applicants have discharged the onus upon them of demonstrating that the application for special
leave enjoys a substantial prospect of success. The power conferred
by s.596B is wide and I am not persuaded that the conclusion reached
by the Full Court involves any error either in construction of the
provision or otherwise.

20. The application is accordingly refused.