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[2011] NSWSC 639
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In the matter of Hunter Bulk Materials Pty Ltd (subject to a deed of company arrangement) [2011] NSWSC 639 (24 June 2011)
Last Updated: 27 June 2011
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Case Title:
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In the matter of Hunter Bulk Materials Pty Ltd
(subject to a deed of company arrangement) |
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Medium Neutral Citation:
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Hearing Date(s):
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Decision Date:
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Jurisdiction:
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Equity Division - Corporations
List |
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Before:
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Decision:
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Access granted to transcript/documents for
examination |
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Catchwords:
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CIVIL PROCEDURE - application to set aside or vary
orders made in relation to examinations pursuant to s 597 of the Corporations
Act 2001 (Cth) - CORPORATIONS - application for access to transcript of
examinations and documents the subject of earlier orders restricting
access
thereto - HELD - examinations to be treated as if held in public - access
granted to examination transcript and documents |
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Legislation Cited:
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Cases Cited:
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Texts Cited:
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Austin & Black's Annotations to the Corporations
Act Australian Corporation Law Principles and Practice Ford's Principles
of Corporations Law Keenan, PJ, "Investigations by External Administrators"
(1995) 13 C&SLJ 368 Maiden, S, "Tensions between the Public and Private
Purposes of Examinations under Pt 5.9 of the Corporations Act 2001 (Cth)" (2004)
12 Insolv LJ 28McPherson's Law of Company Liquidation Parker, G,
"Liquidator's Examinations" (1993) ABR 25 |
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Category:
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Procedural and other rulings |
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Parties:
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Wambo Coal Terminal Pty Ltd (Applicant) Adam
Shepard (in his capacity as deed administrator of Hunter Bulk Materials Pty Ltd)
(subject to a deed of company arrangement) (First
Respondent) Laing O'Rourke
(BMC) Pty Ltd (Second Respondent) |
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Representation
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Counsel M Dempsey SC and Ms JA Steele
(Applicant) F P Hicks (Second Respondent) |
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- Solicitors:
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Solicitors Holding Redlich (Applicant) Brown
Wright Stein (First Respondent) Mallesons Stephen Jaques (Second
Respondent) |
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File number(s):
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Publication Restriction:
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Judgment
- HER
HONOUR : On 20 May 2011 I published my reasons in relation to an application
by Laing O'Rourke (BMC) Pty Limited ("BMC") and by two individuals
(Mr Paul Ryan
and Mr Peter Sheedy) who are or were at the relevant time employees of BMC,
seeking to set aside orders obtained by
the deed administrator of Hunter Bulk
Materials Pty Limited for the production of documents and the examination of the
individuals
as part of the deed administrator's investigation into the
examinable affairs of Hunter Bulk pursuant to s 596B of the Corporations Act
2001 (Cth).
- I
refused to set aside the order for production served on BMC (though I made a
direction limiting its scope) and I refused to set
aside the examination
summonses served on the two BMC employees (though I made directions for the
holding of the examinations in
private and as to the manner in which those
examinations were to be transcribed, limiting access to the transcript of the
examinations).
As to the directions I made in relation to the conduct of the
examinations, I made it clear that these were without prejudice to
any
application that might subsequently be made for access to the transcript of the
examinations. Before me now is just such an application.
(In the meantime, I
understand that the examinations of each of Messrs Ryan and Sheedy have taken
place in private in accordance
with the directions I made.)
- Wambo
Coal Terminal Pty Limited, by Further Amended Notice of Motion filed in Court on
20 June 2011, seeks orders enabling it to have
access to copies of the
transcripts of the examinations of, and documents provided to, Mr Ryan and Mr
Sheedy. (The possibility of
such an application was something of which BMC was
no doubt aware at the time of the initial application, since the likely interest
of Wambo in the examinations formed part of the basis on which BMC was resisting
the holding of the examinations in the first place.)
- The
application by Wambo for access to those materials is made on a number of bases:
pursuant to s 596F(l)(e) of the Corporations Act 2001 (Cth) and/or
pursuant to the liberty I had effectively reserved in order 5 of the orders I
made on BMC's initial application. Alternatively,
Wambo seeks an order that
orders 4 and 5 of the orders made on 13 May 2011 be set aside pursuant to Rules
36.16(3), 36.16(1), 13.16(2)(b) and 36.16(3) of the Uniform Civil Procedure
Rules or in the inherent jurisdiction of the Court. Wambo had initially
sought to bring an application in relation to the status of the
examinations in
the morning of 13 May 2011 - my orders not then having formally been entered
(though they had been made in chambers
and their substance had already been
notified to the parties to BMC's application). Once appraised of the terms of
the orders I had
made, Wambo chose simply to file its application in court and
proposed that argument on that application be deferred until after
my reasons
had been published.
Background
- Much
of the background to the present application is set out in my earlier reasons
([2011] NSWSC 467).
- In
summary, Hunter Bulk is a construction company which went into administration in
December 2005 and is now subject to a deed of
company arrangement. BMC and
Hunter Bulk were parties to a sub-contract agreement entered into in March 2005
for earthworks, drainage
and roadwork construction to be carried out by Hunter
Bulk in relation to the construction of the New Rail Spur from Mount Thorley
to
Wambo Coal Terminal. Those works, including earthworks for the construction of
an embankment forming part of the rail spur, formed
part of the works that BMC
was required to perform under a separate contract with Wambo (the head contract)
entered into in December
2004.
- As
between Hunter Bulk and BMC, there was a dispute in 2005 as to the works that
the former was required to carry out under its sub-contract
with BMC and, after
Hunter Bulk was placed into external administration in December 2005, BMC
purported to invoke its rights under
the contract with Hunter Bulk and assumed
the carriage of the then remaining construction works under that contract. As
between Wambo
and BMC, there then arose a dispute as to the performance by BMC
of its obligations under the head contract. That dispute relates
(at least in
part) to whether the earthworks complied with the relevant specifications and is
now the subject of the Wambo proceedings
(51727 of 2011).
- Of
necessity, this outline of the background, and particularly of the nature of the
disputes between the respective parties, is general
in nature and is based on
the respective parties' submissions. (I note this because, insofar as it is
suggested in the submissions
made on the present application by Mr Hicks,
Counsel for BMC, that I have made factual findings as to the works under the
Hunter
Bulk subcontract, I did not intend that to be the case. I am not in a
position to make (nor should I be taken to have done so) factual
findings as to
the underlying disputes between the parties.)
- As
I understand it, the dispute between Hunter Bulk and BMC is as to whether BMC
repudiated the subcontract with Hunter Bulk by assuming
the carriage of the
relevant construction works (a repudiation which Hunter Bulk in turn purported
to accept as bringing to an end
the contract), whereas the dispute between Wambo
and BMC is focussed on whether the work performed under the head contract was
compliant
with specifications.
- It
seems to be accepted by both parties that the matters the subject of the 2011
orders for production and examination obtained by
BMC are of relevance to the
litigation on foot between BMC and Wambo in relation to the Mount Thorley rail
project. BMC made reference
to this in the context of its application to set
aside the production/examination orders (and there has been no submission made
by
BMC to the effect that access to the transcript/documents now sought by Wambo
should not be permitted because they would be irrelevant
to the issues in
dispute between Wambo and BMC).
- I
note that an order for production of documents had earlier been served on Wambo
(since Wambo's application to set aside that order
for production was relied on
by the deed administrator as one of the reasons for the delay in progressing
earlier orders for production/examination
in relation to BMC or its employees).
I do not know whether Wambo ultimately resisted the production of documents
sought by the deed
administrator but the fact that documents were sought from it
highlights the apparent overlap between the respective claims. (The
overlap
between Wambo's dispute with BMC and the latter's dispute with Hunter Bulk is
further illustrated by the fact that the one
category of documents to which the
April 2011 order for production by BMC was limited relates to minutes of project
control group
meetings between Wambo and BMC.)
- It
is submitted by Senior Counsel for Wambo (Mr Dempsey SC) that Wambo has a
legitimate interest in inspecting the transcript and
the documents (relying on
Re Spedley Securities Ltd (1990) 2 ACSR 266, Re Botafago Pty Ltd
(1992) 10 ACSR 31 and Re Southern Equities Corporation Ltd (in liq)
(1998) 28 ACSR 159). That interest is identified by reference to the
position of Wambo as a party to litigation in which there are issues to which
evidence
in the examinations relates or could be relevant. BMC does not dispute
that evidence in the examinations may be relevant to issues
in the Wambo
proceedings. However, it contends that the authorities on which Wambo relies
establish only that it has standing to
make the application and that the fact
that it may have a sufficient or legitimate interest to make the application for
access is
not determinative of the merits of the application.
- As
to the merits of the present application by Wambo, BMC contends that the
relevant test is whether Wambo has a sufficient interest
to warrant a
reconsideration of the finding that there were special circumstances that
made it desirable for the examination to be held in private and for the
transcript to be kept confidential (and maintains that it does not). As to that,
the finding that I made as to the existence of special
circumstances sufficient
to enliven the discretion to direct that the examination be held in private (and
the balancing exercise
carried out in that regard) was one that was made without
the benefit of a focussed debate by a party (such as Wambo) asserting an
interest in the public or other nature of the examination.
- The
deed administrator (and I make no criticism of him in this regard) was
understandably keen to press forward with the examinations
(and his Counsel, Mr
Lo Surdo, informed me that there was no objection on the deed administrator's
part to the examination being
held in private - in effect, to enable any
prejudice of the kind to which BMC had adverted to be addressed). The focus of
the debate
before me was as to whether the deed administrator should be
permitted to do so. There was no identification by BMC of (and certainly
no
debate as to) any specific forensic disadvantage that it would suffer as a
result of the examinations of its employees being held
in public (other than
that Wambo might be able to hear the evidence so given and to obtain a copy of
the transcript of the examinations
on payment of the relevant fee. (Although
there was reference to other prejudice that was likely to be suffered in respect
of the
delay, namely the likely deterioration of the quality of the witnesses'
memory, that is not a matter that relates to the position
as between Wambo and
BMC since Wambo's witnesses would presumably suffer the same prejudice).
- The
application was heard in the short amount of time then available for the hearing
of such an application (before the commencement
of another matter) and with the
examinations fixed to commence the following day. I considered the matter over
the luncheon adjournment
during the course of that other contested matter and my
associate advised the parties after court on that day of the orders that
I
intended to make.
- In
the circumstances, where there was not a considered debate as to the
identification of the particular forensic disadvantage asserted
by BMC (or, as
is now put by Mr Dempsey, as to the corresponding deprivation of a forensic
advantage that a party in the position
of Wambo might otherwise be able to enjoy
in relation to the proposed examinations), it was my concern that any third
party whose
interests might be affected by those orders should be able to make
an application for access to the transcripts. It was this that
prompted the
qualification I made to the confidentiality orders (expressly contemplating that
there might be an application made
for leave by a third party to have access to
the examination transcripts).
- Therefore,
it seems to me that (Wambo not having had an opportunity to contest the making
of the privacy/confidentiality orders before
they were made, as it would have
sought to do had the timing of the application not been as it was), it cannot
now be said that Wambo
should be required to establish some "particular"
circumstance to cause a reconsideration of the conclusion I had reached in its
absence.
- The
relevant question, on the present application, is whether I remain satisfied
that there are special circumstances to restrict
access to the examination
transcripts/documents (or, perhaps more to the point on the alternative way in
which the present application
is put, whether, with the benefit of the
submissions now put by Mr Dempsey, I am of the view that the earlier orders
should not have
been made and should now be set aside or varied).
- In
Parbery Re Trio Capital Ltd [2010] NSWSC 775, Barrett J noted that the
court cannot order that an examination or any part of it be conducted in private
unless it is satisfied
that there are "special circumstances" by reason of which
it is desirable that the examination be held in private and that a positive
case
of the desirability of examination in private must be established by reference
to "special circumstances".
- In
the present case, I reached the conclusion that there were such special
circumstances having balanced the concerns expressed by
BMC against the
recognised public interest in the public nature of examinations under s 596. (I
did note, however, that the case
was not as compelling as that which has in the
past arisen where an examinee is facing the disadvantage of prejudice to his or
her
position in forthcoming criminal proceedings.) In carrying out that
balancing exercise I had regard to the fact that a party asserting
a legitimate
interest in access to the examination transcripts (such as Wambo) would not be
precluded from raising this at a later
time, at which point the question could
be revisited (which gave me some comfort in making the orders that I did in the
limited time
then available to me).
- At
[84], I noted that:
... in other contexts it is also recognised that concerns may arise
not simply because of the existence of proceedings commenced by
the liquidator
against the examinee and that there is an issue as to the appropriateness of the
liquidator conducting an examination
where that may give a forensic advantage to
another party in other litigation. (In McPherson's Law of Company Liquidation
at [15.720] the issue is discussed in the context of when a person who is
likely to be a party to (or a witness at the hearing of)
legal proceedings that
the liquidator or another person is either contemplating or has already
commenced in relation to the affairs of the company in liquidation can be
examined, the authors
noting that "The obvious concern of parties who may be or
are the subject of a liquidator's action is that the liquidator (or, I
might
add, a third party) will be able to gain, through the use of an examination,
significant forensic advantages in the conduct
of contemplated or pending
litigation."
- I
considered that the relevant interests to be balanced in this regard were "on
the one hand, the interests of the public and the
creditors to permit the
collecting of all necessary information relating to the winding up of the
relevant company and, on the other
hand, that the proposed witness is accorded
justice and the right to privacy" (citing, amongst others, Ford's Principles
of Corporations Law at [27.170.1]; Australian Corporation Law Principles
and Practice at [5.7B.0005]-[5.7B.0100]; McPherson's Law of Company
Liquidation at Ch 15; G Parker, " Liquidator's Examinations" (1993)
ABR 25; PJ Keenan, "Investigations by External Administrators" (1995) 13
C&SLJ 368; S Maiden, " Tensions between the Public and Private
Purposes of Examinations under Pt 5.9 of the Corporations Act 2001 (Cth) "
(2004) 12 Insolv LJ 28.)
- Pausing
there, it is perhaps fair to say that in considering the position of the
proposed witnesses, I aligned the position of the
employees with that of their
employer, when considering the forensic disadvantage that BMC might suffer if
its opponent was made
privy to the evidence of its witnesses in advance of the
time at which that would ordinarily occur in the litigious process. There
is no
suggestion that either Mr Ryan or Mr Sheedy is himself a party to the Wambo
proceedings, a distinction that I think needs to
be drawn when considering the
forensic disadvantage of which BMC complains in the litigation to which it is
party. Even apart from
the fact that the Wambo proceedings are not in a criminal
context, there does not seem to be any basis on which to conclude that
the
proposed examinees would personally suffer any prejudice if their evidence in
the examinations were to be made available to Wambo
(and hence available to
Wambo to use in preparation for the hearing of its claim against BMC).
- At
[85] I said:
Here, the argument that there were special circumstances that
should lead to the examination being held in private by reference to
the other
civil proceedings was less compelling than in Parbery . However, on
balance it did not seem to me that the public interest in having examinations of
this kind conducted in public (noting
that the emphasis on the application of
such principles in cases involving the examination of directors of a company
will not necessarily
have the same import where the examinee is an employee,
having a lesser role in the public life of the company) was such as would
necessarily require that a party in the position of BMC should be submitted to
the forensic disadvantage of having its opponent in
other civil proceedings made
privy to the evidence of its witnesses in advance of the time at which that
would ordinarily occur in
that litigation. While in the context of criminal
proceedings, such prejudice would be given considerable weight particularly
having
regard to the right to silence on the part of an accused, I accept that
such considerations will have less weight in the civil context.
Nevertheless, on
balance, I formed the view that there were special circumstances sufficient to
enliven the power to make a direction
that the examinations be held in private.
- Thus,
it was that I considered that the appropriate balance should be struck between
the interest of the creditors in having the deed
administrator complete the
examinations necessary to assess the prospects of a claim to the potential
benefit of the creditors, and
the concerns of BMC not to be placed in a position
of forensic disadvantage (leaving open the ability of a third party such as
Wambo
to make an application for access to the transcript of the examinations).
- Now
that more focus has been placed on the particular nature of the competing
interests, is it the case that the restrictions on access
should be lifted or
varied?
- I
turn first to the question as to the precise nature of the perceived forensic
disadvantage which will be suffered by BMC if access
to the examination
transcripts/documents is granted.
- At
[77] of my earlier reasons I noted the submission that had been made by Mr
Hicks, which was that, in circumstances where (since
the earlier orders, that
were not pursued, were obtained) proceedings had been issued against BMC by
Wambo in relation to matters
the subject of the subcontract between BMC and
Hunter Bulk, BMC would be prejudiced by the ability of Wambo to gain
access to the transcripts of the examination on payment of a fee by reference
to
s 597(14A) of the Corporations Act. The forensic disadvantage was thus
identified by reference to the forensic advantage that Wambo would so obtain
over BMC. I understood
this to be, in effect, a complaint that Wambo would
obtain advance knowledge of the case on which BMC would rely in defending the
claim made by Wambo.
- (As
a practical matter, I noted (at [78]) that in one sense it might be said that
there is no relevant prejudice beyond that which
would have been suffered had
the examinations taken place back in 2006, at a time when I understood there had
been no objection raised
by BMC to the examination of Mr Ryan - on the premise
that had the public examination of one or both of the employees taken place
at
that time then presumably Wambo could have obtained access to the transcript at
that stage. It seems to me that this remains the
case - unless there can be said
to be a prejudice relating to the timing issue of that evidence only now
becoming available and no
such prejudice was suggested.)
- The
fact that such knowledge could confer a forensic advantage on a party to other
civil litigation in which the witness (or, as is
the case here, his or her
employer) is also a party seems to me to be implicitly recognised by the line of
cases that have considered
that the use of an examination as a "dress rehearsal"
of cross-examination in an impending or contemplated trial may be an abuse
of
process. Other examples that have been given of situations where use of an
examination summons may be said to be an attempt to
obtain an impermissible
"forensic advantage" in litigation include "the use of an examination summons to
obtain de facto discovery
where a discovery order had been refused in
proceedings already on foot" (per Street J in Re Hugh J Roberts Pty Ltd (In
liq) [1970] 2 NSWR 582 at [585]). In Re Normans Wines Ltd (Receivers and
Managers appointed) (In Liq); Harvey v Burfield [2004] SASC 171; (2004) 88 SASR 541 at [552]
reference was made, in the context of what might amount to a reason to set aside
an examination summons, to the situation where the
"predominant purpose [is] of
obtaining a forensic advantage not available from ordinary pre-trial
procedures " (my emphasis).
- Therefore,
to the extent that Wambo might gain an advantage by being made privy to evidence
of at least some of BMC's employees in
relation to the issues in dispute between
Wambo and BMC, at a time in advance of the time at which this would ordinarily
occur in
the civil litigation process, it seems to me that there is a reasonable
basis on which to conclude that BMC will face a forensic
(if only temporal)
disadvantage if the transcript of the examination proceedings is available to
the public.
- Wambo
makes a number of submissions in that regard.
- First,
it is said that any prejudice arising from early disclosure of the evidence of
BMC's witnesses would be met by simply deferring
access until the time at which
that might be expected in the ordinary course (either the time of discovery or
the service of evidence).
It is submitted by Mr Dempsey that the relevant orders
go beyond providing protection against early disclosure as they preclude access
"permanently and unconditionally" to Wambo, creditors and any other member of
the public. To the extent that this submission does
not take into account the
carve-out built into the orders, I disagree with the characterisation of the
orders so made. However, I
do accept that, insofar as the forensic disadvantage
is temporal in nature, it could readily be met by a variation of the orders
that
would permit Wambo at some later stage in the proceedings to have access to the
transcript (though this was put very much as
a 'rhetorical' or fall-back
position by Mr Dempsey.)
- Secondly,
it was submitted by Mr Dempsey that, in fact, the orders unintentionally bestow
a forensic advantage upon BMC insofar as they permanently prevent
disclosure of any admission made on oath by an officer or employee of BMC on
matters
relevant to the Wambo proceedings. It was submitted that it would not be
in the interests of justice for the orders to mask (assuming
that were to be the
case) that the evidence of a witness at trial had departed in a material way
from the prior sworn testimony of
that witness given in the examination. (In
other words, it seemed to be suggested that the operation of the orders would
permit any
inconsistency in evidence from coming to light or being tested in the
subsequent litigation.) Again, the orders made would only "permanently"
prevent
such disclosure if no party with an interest in having access to the transcripts
made such an application. More relevantly,
perhaps, it seems to me rather a long
bow to suggest (if this is what in fact was the thrust of the submission) that
there is any
reason to expect that an examinee (aware that an application might
later be brought for access to the transcript or otherwise) might
feel
encouraged or able with impunity to present inconsistent testimony under oath or
affirmation at a later date by reason of the
fact that the initial examination
was held in private and there was a restriction on access to the transcripts.
The cases that have
explored the public policy underlying the public nature of
such examinations have not, as I read them, suggested that it encourages
the
giving of truthful and consistent evidence at the time of examination or later.
That said, I accept that the inability to test
any such inconsistency would be a
forensic disadvantage to Wambo (and a corresponding, and I suspect unintended,
advantage to BMC
and its employees). Again, this disadvantage would be met by
varying the confidentiality orders to give them a temporal operation
only, such
that the transcripts could be made available to Wambo before the hearing of its
proceedings.
- Thirdly,
it was said (by reference to the duty of a litigant under s 56(3) of the
Civil Procedure Act 2005 (NSW) only to put in issue matters which are
genuinely in dispute), and having regard to the processes for discovery and
service of
evidence, that any consequence to Wambo of seeing part of BMC's
evidence early is insignificant and not undesirable. I am told, in
this regard,
that the Wambo proceedings are at a very early stage (the parties at present not
having yet completed the required dispute
resolution procedures under the
contract). In this regard, I asked Mr Hicks whether the dispute resolution
procedures might not be
facilitated by Wambo having access to the examination
transcripts/documents and his response, in effect, was that this would be a
one-way street (as Wambo would have no obligation to make its evidence known on
the relevant matters). Pausing there, it might perhaps
be thought that Wambo
(being, as it clearly is, conscious of the obligations of a litigant under s
56(3)) could be expected to respond favourably to any suggestion that as part of
the dispute resolution process it reciprocate with an outline
of the evidence it
expects to give in relation to matters the subject of the examinations of Messrs
Ryan and Sheedy so that the parties
can consider the resolution of the Wambo
claim with an understanding of the ambit of the real dispute between them on
such issues.
Hence the concern raised by Mr Hicks would, I trust, be unfounded.
- Having
regard to the above, and, in particular to the fact that there has been no
prejudice identified to the position of the individual
examinees and, in any
event, access to the transcript will afford only a temporal advantage (at least
in circumstances where the
employees' evidence would be likely to come to light
in due course in the Wambo proceedings), I consider that the forensic
disadvantage
to which BMC has adverted (and which in principle I accept has been
shown to arise) is one to which less weight should be given than
I had done when
balancing the competing interests at the time I made the order that the
examinations should be held in private.
- Further,
I note that in Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR
512 at [519], in the context of an application to set aside an examination
summons, Gleeson CJ emphasised that the
possibility that a forensic advantage
will be gained does not mean that a making of an order will not advance a
purpose intended
to be secured by the legislation and that, when seeking to set
aside examination summons what is required is that there be an improper
forensic advantage and that the purpose in question must be the predominant
purpose. Here, there is no suggestion that the deed administrator
would have
obtained any forensic advantage (improper or otherwise) by the examinations
being public. Nor can it be said that Wambo
would improperly obtain an
forensic advantage by having access to the examination transcripts/documents.
There is no suggestion that the examinations
have been conducted at Wambo's
behest. The situation simply seems to be that it will obtain an unexpected
benefit from the deed administrators'
decision at this stage to pursue the
examination process.
- Turning
then to the public interest against which the forensic disadvantage to which BMC
points must be tested, Mr Dempsey emphasises
(and I accept) that the weight of
authority is that it will only be in very rare circumstances that examinations
of this kind should
be held in public (and, I would add, those being where
prejudice to the examinee would result therefrom or where there is a sound
reason for an application by the examiner that they be held in private). Mr
Dempsey submits that the circumstances of this case do
not fall within the class
of case in which "special circumstances" have been found to exist (referring to
Parbery and to Kassem ) and a private examination has been
considered appropriate. Thus it is submitted that the order that the examination
be conducted
in private therefore should not have been made in the present case.
In hindsight, I agree.
- Mr
Hicks submits, as a factor to be taken into account in this regard, that the
Wambo proceedings do not relate to the company affairs
of either Hunter Bulk or
BMC but, rather, concern the private rights and obligations of the parties
arising from the head contract.
Therefore, it is said that the general public
interest in the affairs of any company being assessed in public is not of any
real
significance in this case.
- True
it is that I considered, in weighing the public interest in the examinations
being conducted in public, that it was relevant
to note that the examinations
were not of the directors of the company (and hence that the rationale
underlying the "public" nature
of the examinations to which the Court had had
regard in Friedrich was not as readily applicable in the present case).
That said, it does not seem to be now contended that the examinations did not
concern the examinable affairs of Hunter Bulk (having regard to the broad
definition of "examinable affairs" as discussed in Meteyard v Love [2005] NSWCA 444; (2005)
65 NSWLR 36) and the relevant question is whether, in the public interest,
examinations as to those affairs should have been held in public (even
though
the examinees are not persons who have themselves taken on the corporate
director's mantle).
- Mr
Dempsey submits that to entertain a distinction along those lines would be to
open the floodgates to an undesirable plethora of
applications (in which one
would need to assess the scope of the matters the subject of the examinations
and their relevance to the
public perception or role of company directors and
officers). Whether that be a likely result or not, I consider that there is
force
to his submission that a departure from the reasoning underlying
Spedley would have the potential to frustrate the conduct of examinations
and the important policy goals of the examination procedure.
- At
[81] I referred to the discussion in Austin & Black's Annotations to the
Corporations Act as to the legislative recognition that a public examination
is beneficial to the commercial and general community, and that the privilege
of
incorporation is given on terms that the company's affairs can be examined and
any examination will ordinarily be held in public
if the company fails, said to
underlie the statutory presumption that an examination will be held in public.
At [5.597], the authors
went on to say that:
... The court will not order that an examination proceed in private
unless a question and answer or line of questioning would result
in prejudice
which outweighs that presumption: Friedrich v Herald and Weekly Times Ltd
[1990] VicRp 87; [1990] VR 995; (1989) 1 ACSR 277; 8 ACLC 109; Jagelman v Sheahan
(2002) 41 ACSR 487; [2002] NSWSC 419; Re Pan Pharmaceuticals Ltd
(2003) 176 FLR 341; 48 ACSR 452; [2003] NSWSC 1204; Re Euro Star Pty Ltd
(in liq) [2004] NSWSC 462; Re New Tel Ltd (in liq); Evans v Wainter Pty
Ltd (2005) 145 FCR 176; 54 ACSR 284; [2005] FCAFC 114 at [91].
- In
Friedrich v Herald and Weekly Times Ltd [1990] VicRp 87; (1990) VR 995, at p 1003, the
policy underlying the requirement that such examinations be held in public was
considered in the context where serious
criminal proceedings were pending.
There, Kaye, Fullagar and Ormiston JJ said that:
There can be little doubt, therefore, that an examination in
public, in contrast to one in private, is seen as the norm under the
present
legislation. One may venture some opinions as to why this is so. The legislature
must have seen it to be desirable that,
whenever an examination is ordered, it
should be given as much publicity as the matter deserves. Since no dispute is
resolved upon
the hearing of an examination, the benefit must be seen in the
general publication of the proceedings, whether by press, radio, television
or
by word of mouth. Not only might that lead to the possibility of further
information being provided from other sources to the
liquidator or other person
in control of the company, but the risk that improper activities of company
officers might thereby be
spread abroad may have been thought as some form of
deterrence to them: cf McPherson on Company Liquidation, 3rd ed, p 431. One may
doubt that the more thick skinned of the company "sharks" of this world would be
especially conscious of the risk of examination,
but at least the possibility of
public examination may be seen as part of the price paid for the privilege of
incorporation and the
right to transact business as a company, albeit that the
price is usually paid by those who become directors or officers of that
company.
However, it is not for this court to query the policy of the statute, whatever
views one may have as to the need for a public
examination for the purposes of
para (b) of subs(2).
- In
Re Southern Equities Corporation Ltd (in liq) (1998) 28 ACSR 159 (relied
upon by Mr Dempsey for the proposition that a party (other than the liquidator
or other examiner) engaged in other litigation
to which an examination may be
relevant has a legitimate interest in inspecting the transcript of examinations
even where those have
been conducted in private), Debelle J said (at [163])
that:
Examinations under ss 596A and 596B of the Corporations Law are, of
course, unlike the usual form of judicial proceedings. The differences have been
identified on many
occasions. It is sufficient to refer to the observations of
this court in Emanuel v Emanuel Investments Pty Ltd (1996) 21 ACSR 83 and, on
appeal, (1997) 191 LSJS 412. Notwithstanding that an examination is not a
determination of rights and liabilities of adversaries but a function incidental
to
the winding up, the power to conduct examinations is an incident of the
judicial power of winding up and has a judicial character:
Gould v Brown (1998)
72 ALJR 375 per Brennan CJ and Toohey J at 389-90. ...
- His
Honour noted that the examination procedure conferred an advantage on the
liquidator not possessed by other litigants but also
subjected the liquidator to
the disadvantage, in a tactical sense, that if he exercised that power then his
opponent in litigation
would learn the substance of the evidence which a witness
might give concerning matters in dispute (referring to GPI Leisure Corp Ltd
(rec & mgr apptd) v ANI Corp Ltd (1981) 6 ACSR 412 at [414]). His Honour
went on to say (at [164] - [165]) that:
... where the court is satisfied that a party has a legitimate
interest in inspecting the transcript of an examination or a particular
part of
it, that party will be given leave to inspect the transcript: Spedley Securities
Ltd (in liq) v Bond Corp Holdings Ltd (1990) 1 ACSR 726 at 741; Re Spedley
Securities Ltd, supra at 269; GPI Leisure Corp Ltd (rec & mgr apptd) v ANI
Corp Ltd, supra at 414-5. ...
Thus, a person who is a party to litigation with the liquidator or even a
person who is engaged in litigation with a person other
than a liquidator who
can show that the evidence in the examination relates, or could be relevant, to
the issues in the action is,
generally speaking, entitled to inspect the
transcript or the relevant portions of it. An instance where a person engaged in
litigation
with a person other than the liquidator has obtained the transcript
of the examination is GPI Leisure Corp Ltd v ANI Corp Ltd, supra.
In other
words, a person who can satisfy the court that he has a legitimate interest may
obtain the transcript of a public examination.
In addition to the cases already
cited: see also Re BPTC (in liq) (1992) 7 ACSR 539; Re Botafogo Pty Ltd (1992)
10 ACSR 31.
The above principles apply to examinations conducted in public. The fact that
an examination is being conducted in private and is
confidential does not
necessarily mean that a person is disqualified from applying for a copy of the
transcript of the examination
or part of it. As Shepherdson J noted in Re
Country Stores Pty Ltd [1988] 2 Qd R 149 at 155, a liquidation does not remain
static and courts must be flexible enough to meet changes which occur. Thus, an
examination
which has been conducted in private can be converted into a public
examination: Re Country Stores Pty Ltd, supra; Re Lazar International
Pty Ltd
(in liq) [1990] VicRp 70; [1990] VR 799. The fact that the examination was confidential will, of
course, be a factor to be weighed with all other relevant issues. One of
those
issues will be whether the applicant has a legitimate interest in obtaining a
copy of the transcript. But questions as to whether
the applicant should be
permitted to have access to the transcript of a confidential examination are
different from the entitlement
to make the application. In other words, the
question of the entitlement to make the application should not be confused with
the
determination of the merits of the application. The questions whether
confidentiality should be maintained and the persons against
whom it ought to be
maintained are matters to be worked out at a later stage. For example, a person
ordered to attend for examination
who seeks access to the affidavit sworn by the
liquidator in support of the order for examination will be confronted with a
long
line of authority to the effect that the examinee is not entitled to access
the affidavit: see eg, Re Gold Co (1879) 12 Ch D 77; Re Hugh J Roberts Pty Ltd
(in liq) [1970] 2 NSWR 582; Murphy v FAI General Insurance Co Ltd (1997) 24 ACSR
604; cf Re British & Commonwealth Holdings Plc (Nos 1 & 2) [1992] Ch
342; Re Moage Ltd (in liq) (1997) 25 ACSR 53.
- Mr
Hicks, as noted above, submits that this establishes only that a person who has
a legitimate interest has standing to make the
application for access and is a
separate matter from the merits of an application for access. However, the
recognition that there
is a legitimate interest of such a party in making an
application for access is predicated on there being a legitimate interest in
having such access (the only question then being in a particular case as to
whether access should be granted).
- In
Spedley , Needham AJ dealt, inter alia, with an application by a party
engaged in litigation with another party for access to the transcript
of persons
who had been the subject of examination by the liquidator of Spedley, on the
basis that evidence in those examinations
was relevant to the claim for damages
in the proceedings to which it was a party. The liquidator opposed access being
granted. Needham
AJ, noting the different statutory regime in which examinations
then took place from the procedure that had been in place under the
1961
Companies Act, said (at [269]):
It seems to me that the court, in determining whether it should
grant leave to any person to inspect the transcript of examinations
under s 541
of the Code, should satisfy itself that the person making the application has a
legitimate interest in inspecting either
that transcript or a particular part of
that transcript. I have no doubt that, if a party to litigation can show that
evidence given in those examinations relates to or could be relevant
to a claim
made by that party or by the opposing party in legal proceedings, prima facie
that party or those parties should have
leave to inspect that transcript or that
portion of the transcript. (my emphasis)
- In
Re Botafogo Pty Ltd (1992) 10 ACSR 31, Shepherdson J suggested that the
approach by Needham AJ in Re Spedley (of requiring a party seeking access
to transcript of examinations to establish a sufficient legitimate interest in
the proceedings)
might, in view of subsequent cases be seen as rather
restrictive, commending the approach of McLelland J (as his Honour then was)
in
Re BPTC (in liq) (1992) 7 ACSR 539; 10 ACLC 877, that where the
examinations in question are to be held in public there is no reason in
principle why any person with a legitimate
interest should not be able to
obtain, at his own expense, a copy of the transcript of any such public
examination.
- Mr
Hicks refers to In the matter of re: Mypolonga Co-Operative Society ; Re:
River Equity Pty Ltd; Du Bois v Carter [1998] SASC 7199 (25 June 1998) where
Lander J held that there could be any number of commercial or other reasons for
examinations to take place in
private (which reasons may arise from the peculiar
position of the eligible applicant, the company, the proposed examinee or a
third
party) and submits that the only test is whether there are special
circumstances which make a private examination desirable. There,
his Honour said
(at [10] - [11]):
The provisions of s597(4) of the Corporations Law make it clear
that ordinarily an examination of this kind would be held in public.
It is only
if a court considers that there are special circumstances which make it
desirable that the examination be held in private
that the examination is held
other than in public.
An examination usually takes place in public because the power to order a
person to submit to such an examination has been considered
to be for the
benefit of the general public, the benefit of those who invest in public and
private companies and for those who enter
into a commercial arrangement with
public and private companies.
There will be circumstances (if they are special), however, where it will be
appropriate to conduct the examinations in private. Those
circumstances might
attach to the proposed examinee or to the eligible applicant who is conducting
the examination.
I identified the circumstances in which an eligible applicant might seek to
have an examination conducted in private in Re Southern
Equities Corporation
Limited (In Liq); Bond & Anor v England (1997) 25 ACSR 394 at 434. ...
There may be circumstances whereby the conduct of an examination in public
might cause irremedial harm to a proposed examinee. In
those circumstances it
might be appropriate to conduct the examination which otherwise would be
conducted in public, in private.
(my emphasis)
There could be any number of commercial or other reasons for examinations to
take place in private. The reasons might be peculiar
to the eligible applicant,
the company, the proposed examinee or a third party. The only test is whether
there are special circumstances
which make a private examination desirable.
There may be special circumstances whereby an examination will commence in
private but where those special circumstances cease to
exist. If that is so,
then the matter would thereafter proceed in public. It is only whilst the
special circumstances exist that
any examination should take in place in
private. (my emphasis)
- In
that case, his Honour went on to consider (and dismiss) a submission that (the
examination having taken place in private) that
no order could later be made for
access by any party other than the administrator to the transcript (noting that
the appellant claimed
that he had been advised through counsel for the
administrator that the examination was to take place in private and he had acted
on that information to his detriment). No such application could be made in this
case in any event since the orders made clear the
potential for an application
to be made and leave to be granted for access to the transcript of the
examinations. Lander J said (at
[13] - [15]):
The appellant was not, in my opinion, entitled to assume that
simply because his examination was to be held in private no other party
would
ever be entitled to access the transcript of that examination. The best he was
entitled to assume was that, at the time of
his examination, special
circumstances existed for the examination to take place in private. He could not
even assume that the whole
of his examination would take place in private. The
best he could assume was that at the time that the examination commenced special
circumstances existed for the examination to take place in private. If those
special circumstances ceased to exist then he should
have assumed that
thereafter the examination would take place in public. That is what the Act says
and that is the assumption he
should have made.
...
In my opinion, the appellant had no right to assume that this transcript
would only ever become available to the administrator. He
should have assumed
that any number of persons, including the present applicant, might seek to have
access to the transcript.
...
In my opinion there is no doubt that the court does have power to convert
a private examination into a public examination and does
have a power to direct
that evidence adduced and documents produced on that private examination be
treated as though no order that
the examination be held in private has been made
: Re Country Stores Pty Ltd (In Liq) (1988) 6 ACLC 376; Re Lazar
International Pty Ltd [1990] Vic Rp 70; (1990) 8 ACLC 173.
Not only does a court have that power, in my opinion the court is obliged
to exercise that power and require a private examination
to continue in public
if the special circumstances which gave rise to the initial order for the
examination to be held in private
have ceased to operate . (my emphasis)
- In
Re Lazar International Pty Ltd (In Liquidation) [1990] VicRp 70; [1990] VR 799, Beach J
considered an application by the liquidator (who had previously obtained an
order for an examination to be conducted in
private, due to the perceived risk
of collusion between examinees and also to avoid forewarning to the examinees of
facts and matters
of which he was already appraised) for an order that the
evidence adduced and documents produced on various such examinations be
treated
as if there were no order that the examinations be conducted in private and for
an order that any future examinations of
the persons referred to in that earlier
order not be held in private. His Honour said:
An issue not dissimilar to the present issue was considered by
Shepherdson J. in Re Country Stores Pty. Ltd. (1988) 6 ACLC 376. In that case
his Honour was dealing with an appeal against the refusal of a master to vary an
order that an examination be held in
public by converting it to an examination
in private. At p. 381 his Honour said:
A liquidator's duties in a company winding up include requiring him to get in
or protect assets of that company. He may apply, as
was done in these present
cases, for an order under s541. He may do this with a view to discovering and
getting in assets. That order,
if granted, will no doubt be based on the
material before the court at the time the order is made. A liquidator's ongoing
investigations
may bring to light other matters, as has occurred in these
present cases, which cause the liquidator to take the view that the examination
should, at least in respect of one or more of the persons named in an existing
order for a public examination, be held in private.
A liquidator may well
consider that those persons' evidence if held in private and away from the ears
of other persons would assist
the liquidator in future action to recover
property for the benefit of the creditors.
The above are largely hypothetical matters but they illustrate that a
liquidation does not remain static -- the knowledge and information
available to
liquidators may change from day to day and courts, in exercising the powers
given by s541, must in my view be flexible
enough to meet those changes. In my
respectful view, the power given by s541(3) is a power which may be exercised
from time to time
in the one winding up and indeed of the same person or persons
sought to be examined. I can see no warrant for construing s541(3)
and s541(4)
in the restricted way in which Master Weld has construed them. If the
circumstances call for a variation of the original
order by requiring that the
public examination of the persons be converted wholly to a private examination
or party to a private
examination in the sense that one or more of the persons
named in the earlier order are to be examined in private then such a variation
should be made.
- Beach
J agreed with the observations of Stephenson J and held that the court did "have
power to convert a private examination into
a public examination and ... to
direct that evidence adduced and documents produced on an examination conducted
in private be treated
as if there were no order that the examination be
conducted in private".
- I
note that in Re: Eurostar Pty Ltd (In Liquidation) (Receivers and Managers
Appointed) & Ors [2004] NSWSC 462, Campbell J (as his Honour then was)
at [13] said:
Part of the purpose of conducting examinations in public is that
there is a public interest in all aspects of the circumstances which
led to a
corporate collapse being available to all those who might be interested.
Incorporation is a privilege which is made available
because there is seen to be
public benefit in it, but there is a public interest in that privilege not being
abused. The privilege
of incorporation is given on terms that, if the company
collapses, its affairs can be examined, and that examination will ordinarily
be
in public. In at least some instances, publicity of information given in
examinations can cause information which was otherwise
not available to be
brought to the attention of those investigating the circumstances of the
corporate collapse. There needs to be
a good reason before full openness to
public scrutiny of what is said in such examinations should be removed.
- Having
regard to the above (and to the unusual circumstances in which in Parbery
the examinations were to be held in private), I consider that when closer
attention is paid to the forensic disadvantage on which
BMC relies for the
continuation of the orders made on 13 June 2011, that the circumstances do not
warrant orders of the kind that
I then made. In those circumstances, it seems to
me that the appropriate course (having regard to the terms of the orders and the
fact that the examinations in question have now already been held, is to make
orders in effect converting the examinations into public
examinations and
permitting access to the transcripts as if the examinations had been held in
public and the transcript authenticated
in accordance with s 597(13).
- As
to the application for documents, Wambo seek access, as part of the records of
the examination, to the documents shown to witnesses
(relying on Eurostar
(2003) at [23], and New Cap Reinsurance Corporation Holdings Limited
[2001] NSWSC 835 at [33]). Mr Hicks did not direct any particular
submissions to this aspect of the application.
- In
New Cap, Santow J (as his Honour then was) considered the question of
access to documents used in the course of a compulsory examination and
said:
[1] Can and should a creditor (or someone claiming as such) of a
company in liquidation be given access to the documents elicited
from a
liquidator's compulsory examination, when sought by that creditor to assist it
in proceedings against the Company or, as here,
associated defendants? Is there
any difference between documents specifically put to an examinee and marked for
identification and
other documents obtained prior to or in the course of the
examination? The examinees or their companies oppose access and seek return
of
all original documents and destruction of all copies. The liquidator, for his
part, is not opposed to making the documents available,
considering as he does
that their use by the creditor in pursuing the litigation may be in the
interests of the liquidation.
...
[33] Thus a fair way of putting the matter is to conclude that the trend of
expansion of the examination provisions starting in 1991
and expanded in 1993
comports with a legislative scheme that allows creditors access not only to the
transcript but also to the documents
produced pursuant to the examination if
necessary with a Court direction to ensure no abuse. It would be incongruous
that creditors
are permitted to attend such examinations, in public unless
ordered otherwise, able to hear the questions and answers put including
any
reference to documents produced, later be entitled as of right to a copy of the
written record of the examination, yet be denied
copies of the produced
documents after the examination. Such access, if allowed, is not ordinarily
antithetical to the legislative
purpose or thereby an abuse of that process. The
contrary is borne out by the legislative scheme and the prior legislative
history
of expansion of the examination process.
...
[39] It is against that background that I now approach the specific
provisions of the Corporations Law. I am satisfied that there
are a number of
sources of power available to the liquidator to do that which he does not oppose
doing, namely to make available
the documents which were utilised in the
examination either by directly being marked for identification or as otherwise
being produced
for the examination. I see no sensible distinction being drawn
between the two categories of document. The documents not marked for
identification were
still capable of informing the examination and influencing
the questions asked. Indeed the liquidator's submissions appear to favour
that
access. Thus I would include in any access all documents produced, in the
absence of any evidence from those opposing access
that a document was produced
which was entirely extraneous to any possible purpose of the original
examination. (my emphasis)
- It
seems to me that the order for access to transcript should include access or
inspection of the documents provided to each of Messrs
Ryan and Sheedy and
marked for identification in the course of the examinations as sought by BMC.
Orders
- Accordingly,
for the reasons set out above, I propose to make the following orders:
1. Pursuant to s 596F(1)(e) of the Corporations Act 2001
(Cth), I direct that the applicant be provided (on payment of the requisite
fee or otherwise at its cost) with a copy of (or otherwise
be permitted to
inspect and take a copy of):
(a) the transcript taken of the examinations of Mr Ryan and Mr Sheedy on 13
May 2011 and on any later date; and
(b) the documents provided to each of Mr Ryan and Mr Sheedy and marked for
identification in the course of their examinations.
2. I direct that the examinations of Mr Ryan and Mr Sheedy be treated as if
they had been examinations held in public.
3. I vary order 5 of the orders made on 13 June 2011 such that there is no
longer a restriction on access to, or requirement that
it be kept confidential,
the transcript of the examinations of Mr Ryan and Mr Sheedy.
- Before
finalising the above orders, I will give the parties an opportunity to make any
submissions as to the form of those orders
by notifying my Associate by 1 July
2011.
- I
consider that the appropriate order would be for BMC to pay the costs of the
application by Wambo but will hear submissions on this
aspect of the matter if
any party wishes to make such submissions (in which case they should notify my
Associate by 1 July 2011,
failing which I will make the order so foreshadowed).
**********
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