FEDERAL COURT OF AUSTRALIA

Pleash, in the matter of Equititrust Limited (In Liquidation) (Receivers and Managers Appointed) (No 2) [2017] FCA 758

ORDERS

THE COURT ORDERS THAT:

1.    Paragraphs 1, 1A, 4, 5 and 6 of the amended interlocutory application filed by David Robert Tucker on 4 July 2017, and further amended on 5 July 2017, are dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

REEVES J:

1    This application relates to an examination of the affairs of Equititrust Limited (in liquidation) (Receivers and Managers Appointed) which is presently being conducted under Part 5.9 of the Corporations Act 2001 (Cth) (the Act). Mr David Tucker, the applicant in this application, was a director of Equititrust for approximately one year (3 September 2010 to 11 October 2011). As well, he acted as Equititrust’s lawyer for a number of years.

2    In this application, Mr Tucker is seeking to set aside the order made under s 596A of the Act for his examination on the ground that it is being conducted for one, or more, of a number of improper purposes and is therefore an abuse of process. It is well-established that an examination order made under Part 5.9 may be set aside on this ground: Palmer v Ayres (2017) 341 ALR 18; [2017] HCA 5 at [35] per Kiefel, Keane, Nettle and Gordon JJ and at [98] per Gageler J.

3    Equititrust was placed in liquidation on 20 April 2012. On that date, Mr Blair Pleash and Mr Richard Albarran, the respondents to this application, were jointly appointed as the Liquidators of the company.

4    On 20 January 2017, on the ex parte application of the Liquidators, Greenwood J made a series of orders under ss 596A and 596B of the Act ([2017] FCA 16). As I have already mentioned above, the particular order affecting Mr Tucker was made under s 596A. That order applied to him and 18 other persons. Because it affects this application, it is appropriate to interpose that the restrictions on inspection imposed by s 596C(2) of the Act applied to the affidavits that were filed by the Liquidators in support of their ex parte application. As well, Greenwood J made orders under s 37AF of the Federal Court of Australia Act 1976 (Cth) that the written outline of submissions used by the Liquidators to obtain the orders were to be treated as confidential.

5    Most of the 19 persons the subject of these orders have since been examined.

6    On 14 June 2017, Deputy Registrar Lynch made orders under s 597(9) of the Act directing Mr Tucker and 11 entities with which he was, and is, associated to produce a number of books at his examination, which was then due to commence at 10.00 am on 11 July 2017.

7    On 15 June 2017, two summonses were issued to Mr Tucker. The first, issued pursuant to the orders of Greenwood J, required him to attend the examination on 11 July 2017. The second, issued pursuant to the orders of Deputy Registrar Lynch, required him to produce the books referred to above at his examination. It subsequently emerged that the former summons contained an error with respect to the period to which it related (“since 1 July 2000”, instead of “since 1 July 2010”). Accordingly, it was replaced by an amended summons that was issued on 30 June 2017.

8    In its original form, this application sought, among other things:

(1)    to discharge the summons issued to Mr Tucker on 15 June 2017 – in context, it is apparent that this referred to the latter summons issued by Deputy Registrar Lynch;

(2)    to either set aside, or postpone compliance with, all of Deputy Registrar Lynch’s orders;

(3)    to require the Liquidators to provide Mr Tucker with copies of various documents that were used to obtain the orders from Deputy Registrar Lynch; and

(4)    to postpone the examination and the operation of Deputy Registrar Lynch’s orders and to delay the hearing of this application until after Mr Tucker had obtained access to the documents in question.

9    Shortly after this application was filed, it was amended. The main effect of the amendment was to add to the documents to which access was sought (see (3) above) certain documents that were used to obtain the orders from Greenwood J. Most, if not all, of those documents were subject to one or other of the restrictions I have already mentioned above (at [4]).

10    At the commencement of the hearing of Mr Tucker’s amended application, it was agreed by both counsel that it was necessary, first, to determine whether Mr Tucker was entitled to obtain access to the documents in question. That was so because, if he were to be afforded that access, that would necessitate an adjournment of the hearing while he had an opportunity to consider those documents.

11    To obtain access to these documents, Mr Tucker needs to show that he has an arguable case that Deputy Registrar Lynch’s orders were obtained for an improper purpose and, as a result, were an abuse of process: Wily re LED (South Coast) Pty Ltd (2009) 76 NSWLR 428; [2009] NSWSC 946 (Wily) at [27], Accord Pacific Holdings Pty Limited v Accord Pacific Land Pty Limited (in liq) [2011] NSWSC 707 at [43]–[47] and Re Southern Equities Corporation Ltd (in liq); Bond v England (1997) 24 ACSR 472 at 487–488.

12    Accordingly, I proceeded to hear submissions on that question. It is worth adding that, if this question were to be determined in Mr Tucker’s favour, that would not suffice to allow him access to the documents in question. He also needs to show that those documents “will be, or at least, ought to be, relevant to that arguable case” so that he can show “that the absence of the material will unfairly prejudice [him] in the consideration and disposal of [his] application”: see Simionato v Macks (1996) 19 ACSR 34 at 63–64 per Lander J. It will be unnecessary to consider this further question because I do not consider Mr Tucker has made out an arguable case on the first question.

13    In the dying stages of the hearing of submissions on the arguable case question, Mr Tucker’s counsel sought to further amend his application to seek an order setting aside so much of the orders of Greenwood J as applied to him. This change in position came about because it emerged from his submissions that Mr Tucker’s fundamental concerns related to the purposes for which the examination was being conducted, rather than the purposes for which the documents were being sought for that examination. In pursuing this amendment, his counsel, Mr Ferrett, said that Mr Tucker wished to rely upon matters that had come to his knowledge since the orders were made by Greenwood J. Since the Liquidators could not point to any prejudice if this amendment were allowed, and since the matter would not be significantly delayed as a result, I granted Mr Tucker leave to make the amendment. In support of this further amended application, Mr Ferrett then sought leave to cross-examine Mr Russell, the lawyer acting for the Liquidators, on a recent affidavit he had filed in opposition to the application. Since that application for leave was not opposed, it was allowed and Mr Ferrett proceeded to cross-examine Mr Russell. I will refer to the pertinent aspects of this cross-examination later in these reasons.

14    The matters upon which Mr Tucker relied to make out an arguable case that his examination is being pursued for an improper purpose, and is therefore an abuse of process, are summarised in two documents: in his written submissions; and in the penultimate paragraph of one of the affidavits he filed in support of his application. First, in his written submissions, he identifies and relies upon a statement contained in a letter Mr Russell sent to him on 28 June 2017, two days before he filed this application. In that letter, Mr Russell described why the Liquidators were seeking to examine him about the affairs of Equititrust, in the following terms:

To put the matter in context, the liquidators are seeking to examine you about your role and that of Mr David Kennedy in gaining what appears to be a very substantial profit, derived from an apparently serious breach of your and his fiduciary and statutory duties. The gross receipts of your scheme are, as you know, at least $17 million. With interest, the claim under investigation exceeds $20 million. The beneficiaries of this claim are the unit holders in the Equititrust Premium Fund.

…

The evidence gathered to date shows that you procured Tuckerloan Pty Ltd to pay one third of the purchase price of $2 million and that Mr Kennedy paid the balance. You and Mr Kennedy set up MS Asia as a nominee Hong Kong company apparently to conceal your and his involvement.

(Emphasis in original)

15    On this matter, Mr Tucker also relies upon statements to similar effect to that emphasised above which the Liquidators have made in various of their Reports to Creditors since January 2017. For example, in the final paragraph of the apposite section of the Report to Creditors dated 3 April 2017, they said:

The Liquidators remain committed to protecting and advancing the interests of all creditors and investors, including (especially in the context of the current examinations) the investors in the [Equititrust Premium Fund]. The sole objective of the current investigation and examinations is to clarify certain transactions which have affected the [Equititrust Premium Fund]. There is no reason to think that doing so could have any detrimental effect on the interests of investors.

(Emphasis added)

16    Secondly, in his written submissions, Mr Tucker points to a submission made by Mr Russell to Deputy Registrar Lynch in support of the application for the orders she made on 14 June 2017. In that submission, Mr Russell stated that the documents that were being sought “either identify or substantially assist in identifying … the ability of Mr Tucker to satisfy a judgment” made against him in the contemplated proceedings.

17    Thirdly, in the penultimate paragraph of his affidavit referred to above, Mr Tucker summarised a number of other concerns he had about the purposes for which the examination was being pursued as follows (at paragraph 108):

I am concerned that:

(a)    Russells are promoting this inquiry, and subsequent litigation, on behalf of the McIvor interests, possibly funded in whole or part by the McIvor interests;

(b)    Mr. Russell and Mr. Tiplady may have an undisclosed economic interest in the outcome of the litigation, via EPF Recoveries Pty Ltd;

(c)    That the liquidators have already determined to issue proceedings against me (given the existence of a draft pleading, the failure to make any sensible enquiries of me and the unnecessarily aggressive nature of their solicitor’s correspondence to me), such that this examination seems to me to just a cross examination dress rehearsal or an attempt to gain an unfair forensic advantage.

18    The transaction to which Mr Russell referred in his letter of 28 June 2017 and the involvement of the individuals mentioned in the penultimate paragraph of Mr Tucker’s affidavit above require some further explanation of the background to this matter. The transaction was connected with a debt Equititrust had incurred with the Bank of Scotland International Limited (BOSI). In his reasons for judgment, Greenwood J briefly described the circumstances in which that debt was incurred, as follows ([2017] FCA 16 at [19]):

[Equititrust] was a money lender operating on the Gold Coast. It was founded by Mr Mark McIvor. It raised funds for that purpose by means of registered managed investment schemes and, relevantly for present purposes, an unregistered trading trust known as the Equititrust Premium Fund (the “EPF”). It has about 50 members including many private superannuation funds. [Equititrust] was indebted to [BOSI] in a certain significant amount. The indebtedness was secured by a number of security interests over the assets of the EPF.

19    Further, in their written submissions in opposition to the present application, the Liquidators described the broad details of the transaction whereby MS Asia (the entity mentioned in Mr Russell’s letter of 28 June 2017 above) acquired the BOSI debt, as follows (at paragraph 2):

In July 2102, MS Asia acquired a debt owed by Equititrust to BOSI. The debt was about $6.5 million; MS Asia paid $2 million. [Mr Tucker’s] company, Tuckerloan contributed one third of the price ($666,667); a co-director, Mr Kennedy, contributed the balance ($1,333,333).

20    The involvement of the various individuals concerned is summarised in Mr Tucker’s written submissions in support of this application by reference to the affidavits he had filed, as follows:

16.    Mr Russell is one of the partners of Russells, the firm acting for the liquidators. That firm has a number of connections with the machinations of Equititrust.

17.    One of the partners at Russells is Ashley Tiplady. Mr Tiplady has acted for Mr McIvor in his personal capacity, and for Equititrust. Mr McIvor and Mr Tucker were substantially at odds in the later part of Mr Tucker’s tenure as a director. Mr McIvor expressed strong criticism of Mr Tucker’s pursuing, with the other members of the board, a strategy of seeking to recover debts owed and litigating against the Company’s defaulting borrowers, particularly against a borrower called Meridien Marinas and associated entities and directors.

18.    Shortly afterwards, in September 2011, Mr Tiplady wrote on behalf of Mr McIvor to Mr Tucker, insisting that Mr Tucker step down as a director. On 12 October 2011, minutes before a board meeting was to commence, Mr Tiplady again wrote on behalf of Mr McIvor to notify Mr Tucker of his dismissal as a director of the Company.

19.    Mr Tiplady moved to Russells and, having done so, continued to act for the McIvor interests, including taking over the Equititrust litigation against Meridien. He also maintained his contact with Mr McIvor. The two met in November 2013, and discussed possible attacks on Mr Kennedy and Mr Tucker. In 2014, Russells also acted for Mr McIvor in substantive litigation against the liquidators of Mr McIvor’s companies, MHSM Family Holdings Pty Ltd and MM Capital Pty Ltd.

20.    Russells’ involvement extends to the further intricacy that Mr Tiplady and Mr Russell have established a company called EPF Recoveries Pty Ltd. The role of that company is not known to the applicants, but the name raises the apprehension that Mr Tiplady and Mr Russell are adding another layer of interests and duties to those already accruing to them .

21.    This web of relationships led to complications inside Russells as to how and when certain information could be used.

21    The following issues therefore fall to be determined in this application:

(a)    Is it an improper purpose to pursue Mr Tucker’s examination to advance the interests of the Equity Premium Fund (EPF) unit holders?

(b)    Is it an improper purpose to pursue Mr Tucker’s examination to identify his ability to satisfy any judgment that may be obtained against him?

(c)    Is it an improper purpose to pursue Mr Tucker’s examination as a dress rehearsal for the contemplated proceedings, or as an attempt to gain an unfair forensic advantage?

(d)    Has Mr Tucker shown an arguable case that Mr Russell and Mr Tiplady are improperly pursuing his examination for the McIvor interests and/or for their own personal interests?

22    For the reasons that follow, I consider that the answers to these questions are:

(a)    “No”;

(b)    “No”;

(c)    “Yes, but neither is a purpose of Mr Tucker’s examination”; and

(d)    “No”.

Is it an improper purpose to pursue Mr Tucker’s examination to advance the interests of the EPF unit holders?

23    As is already recorded above (at [14] and [15]), this issue is raised by the statements in Mr Russell’s letter of 28 June 2017 and the Liquidators’ Reports to Creditors that the beneficiaries of the Liquidators’ contemplated proceedings are the unit holders of the EPF. In his written submissions on this issue, Mr Tucker contended:

30.    The liquidators assert that they are taking the action on behalf of the unitholders in the EPF. The constitution of the EPF provided for the redemption of units upon request by the unitholders (clauses 6.1 and 6.2) and for suspension of the right to withdraw (by clauses 6.7 - 6.9).

31.    Redemptions from the fund were suspended in about 2008-2009. They have no right - present or contingent - to prove in the insolvency of the company. The unitholders are not creditors within the meaning of Chapter 5 of the Corporations Act.

32.    Because the liquidators’ purpose - to pursue a claim for the benefit of the unitholders in the EPF - cannot be characterised as one for the benefit of contributories or creditors, it must be regarded as a purpose foreign to the power to examine. It follows that the examination of Mr Tucker is an abuse of process.

24    In oral submissions, Mr Ferrett submitted that the examinable affairs of a company, as defined in s 9 of the Act, are to be distinguished from the purpose for which an examination is conducted under Part 5.9 of the Act. He submitted that purpose was to aid the Liquidators of a company by providing them with the means to obtain information that may assist them to collect the assets of the company for the benefit of its creditors and contributories. It did not extend, so he submitted, to benefit other parties such as, in this instance, the unit holders of the EPF. He relied upon the judgment of Lander J in Evans v Wainter Pty Ltd (2005) 145 FCR 176; [2005] FCAFC 114 (Evans v Wainter) particularly proposition 3 in the summary of the relevant principles set out at [252]. In response, Mr Cooper, for the Liquidators, submitted that no such limitation existed. He submitted that this was supported by the broad scope of the matters upon which an examinee could be examined, reflected in the definition of the expression “examinable affairs” in s 9 of the Act, as expanded by the provisions of s 53. He submitted this was also supported by the summary of the relevant principles set out in Evans v Wainter at [252].

25    As the reliance on it by both counsel suggests, the answer to the question posed by this issue lies with the Full Court decision in Evans v Wainter. Lander J wrote the leading judgment in that appeal. Except that they did not consider it necessary to reach any conclusions about the difference of views expressed in the Victorian Court of Appeal decision of Flanders v Beatty (1995) 16 ACSR 324 and the South Australian Full Court decision in Sandhurst Trustees Ltd v Harvey (2004) 88 SASR 519 (Ryan J at [2] and Crennan J at [269]), the other members of the Court agreed with Lander J (Ryan J at [1] and Crennan J at [265]). Both counsel have relied upon the summary of the relevant principles contained at [252] of the reasons for Lander J, particularly the legitimate purposes of an examination which his Honour set out in proposition 3 as follows:

The following legitimate purposes emerge:

3.1    First, an examination is designed to serve the purpose of enabling an eligible applicant to gather information to assist the eligible applicant in the administration of the corporation.

3.2    Second, it assists the corporation’s administrators to identify the corporation’s assets, both tangible and intangible. It also allows the corporation’s liabilities to be identified.

3.3    Third, the purpose is to protect the interests of the corporation’s creditors.

3.4    Fourth, it serves the purpose of enabling 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    Fifth, it assists in the regulation of corporations by providing a public forum for the examination of examinable officers of corporations.

26    Importantly, his Honour also added that, to constitute an abuse of process, the purpose for which the examination is conducted must be a predominant purpose (see proposition 7 at [252]).

27    The summary of principles at [252] of Evans v Wainter followed a lengthy and detailed examination by Lander J of the apposite provisions of Part 5.9 of the Act, its legislative predecessors and the authorities relating thereto (at [13]–[244]). Before going to the pertinent parts of that examination, it is worth recording the following aspects of the factual background to the appeal in Evans v Wainter:

(a)    the proceeding in contemplation was connected with statements made to a director of Wainter Pty Ltd, Mr Waller, by two directors of a company called New Tel Ltd (Mr Evans and Mr Malone) and two partners in the law firm Freehills (Mr Evans and Mr Woolfe) in the course of New Tel’s takeover of a company called Cable and Telecom Ltd (CAT) (see Evans v Wainter at [13]–[21]);

(b)    the examination related to what Messrs Malone and Woolfe knew at the time of a particular conversation they had with Mr Waller on 27 November 2001 (see Evans v Wainter at [256]);

(c)    Wainter was not a creditor of CAT because, as a result of the conversation on 27 November 2001, it had assigned its debt to New Tel (see Evans v Wainter at [253]);

(d)    the examination was therefore conducted with the authorisation of the Australian Securities and Investments Commission (ASIC) because Wainter considered it was not an eligible applicant under Part 5.9 of the Act (see Evans v Wainter at [31]);

(e)    the claims Wainter wished to consider pursuing were described as follows:

254    There was no debt owing to the respondent at the time when New Tel went into liquidation. It claims to have a chose in action against New Tel arising out of that conversation which would lead to an award of damages in the order of $60,000,000. The chose in action is said to arise under ss 1041H and 1041I of the Act. The claim against New Tel arises because Mr Malone was at the relevant time a director and Mr Woolfe was acting on behalf of New Tel.

255    The respondent also claims that Mr Woolfe and Freehills (because Mr Woolfe was a partner in Freehills at the relevant time) are liable to it apparently under the Trade Practices Act 1974 (Cth) and Fair Trading Act 1987 (WA).

(f)    the benefit New Tel stood to gain from the contemplated proceedings was described in the following terms:

259    If the respondent were to bring proceedings against Freehills or Messrs Malone and Woolfe and were to recover the amount of the damages suffered by the respondent, then New Tel and its creditors would thereby benefit. New Tel would benefit by being released from any liability it owed to the respondent. The creditors would also benefit.

(g)    Lander J concluded that, while Wainter would stand to benefit from the contemplated proceedings, New Tel would as well (see at [260]–[262]).

28    In his examination of the apposite provisions of Part 5.9 of the Act, Lander J began by reviewing the history surrounding the passage of the Corporations Law in 1989 and the Act in 1992 (see at [44]–[56]). His Honour then noted (at [57]) that Part 5.9 of the Act was first introduced into the Corporations Law in 1989. Thereafter, he set out the meanings of the operative expressions in Part 5.9 as defined in s 53 of the Corporations Law and, subsequently, in ss 9 and 53 of the Act (see at [58]–[77]). Because of ASIC’s involvement in the case, as mentioned above, his Honour also considered the relevant provisions of the Australian Securities and Investments Commission Act 2001 (Cth).

29    At [78], his Honour concluded that s 53 of the Corporations Law was not relevantly different to s 53 of the Act and subparagraphs (a) and (b) of the definition of the expression “examinable affairs” in s 9 of the Act “does not seem to add much to the matters in s 53”. However, his Honour considered that subparagraph (c) of that definition did extend the scope of an examination under Part 5.9 to include “the business affairs of a connected entity insofar as they are or appear to be relevant to the corporation’s examinable affairs” (at [79]). In this respect, his Honour specifically referred to the provisions of ss 53AA and 64B (at [79]). Those provisions describe what matters are included within a body corporate’s “business affairs” and what entities are “connected with a corporation”. On this aspect, it is important, for present purposes, to mention the provisions of ss 53AD and 64A(4). Respectively, those sections describe what matters are included within the business affairs of a trust and when a trust is connected with a body corporate. After noting this extension to the scope of an examination under Part 5.9, his Honour observed that the ambit of an examination under that Part was “extremely wide” (at [80]).

30    Then, after considering the provisions of ss 596A, 596B and 597(9) of the Act (at [83]–[97]), his Honour turned to consider a number of authorities dealing with Part 5.9 of the Act and its legislative predecessors. Since they underpin the pertinent parts of the summary of principles set out at [252], the following observations from that consideration are particularly noteworthy:

(a)    After referring to the judgment in South Cross Petroleum Sales (SA) Pty Ltd (In Liq) v Hirsch (1998) 70 SASR 527 (at [118]), his Honour observed (at [119]) that:

Any purpose that will benefit the company, its creditors, its members or the public generally will be within the contemplation of the section.

(b)    From [120]–[139], his Honour considered the Full Court decision in Re Excel Finance Corp Ltd (rec and mgr apptd); Worthley v England (1994) 52 FCR 69 and concluded (at [140], [143]–[144]) as follows:

140    However, that said, the Court did decide that it would be an abuse of the Court’s processes, by misusing the power to obtain an examination summons, if the summons were obtained not for the benefit of the corporation, its contributories or creditors but only for the benefit of the prescribed person to be used in other litigation.

143    In my opinion, Re Excel stands for the proposition that it is an abuse of process to use the Pt 5.9 procedure if the predominant purpose of the applicant seeking the order is not for the purpose of benefiting the corporation, its contributories or its creditors.

144    If the party seeking the examination summons is doing so for any number of purposes, which do not include the purpose of benefiting the corporation, then that would amount to an abuse. On the other hand, if the party seeking the examination summons has as one purpose the achievement of a benefit to that party but has also a further purpose which is for the benefit of the corporation then the use of the Pt 5.9 procedure will not be an abuse of process.

(c)    Finally, in the paragraphs immediately preceding the summary of principles at [252], his Honour made the following important observations (at [245]–[251]):

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.

246    Those persons who have the responsibility of external administration owe duties to the creditors and the contributories, and to the corporation which they are then managing.

247    In my opinion, they are entitled only to seek an order for an examination summons where the purpose of the examination is, as was stated in Re Excel, for the benefit of the corporation, its creditors or its contributories.

248    So also ASIC is only entitled to authorise a person as an eligible applicant if that person’s purpose in seeking an examination summons is for the benefit of the corporation, its contributories or its creditors.

249    Otherwise, every corporation would be at risk of having its examinable officers or its officers or other witnesses examined to the possible detriment of the corporation. For example, a person claiming damages for a tort against a corporation could be authorised by ASIC as an eligible applicant and apply for an examination summons for the purpose of examining the corporation’s examinable officers under s 596A or its officers under s 596B to provide evidence in support of the action in tort.

250    Whilst I agree that the question of what is a proper purpose must be determined by reference to the legislation itself because it is the legislation which gives the power to issue a summons for an examination and the carrying out of an examination, the power cannot be used for a collateral or ulterior purpose. It must be used for a purpose expressly or implicitly authorised by the legislation itself.

251    The purpose of Pt 5.9 of the Act is not to disadvantage corporations but to make the corporation’s examinable officers and other persons within the contemplation of s 596B accountable to those who are obliged to act in the interests of the corporation.

31    A number of things follow from the parts of Evans v Wainter extracted above that are of importance in determining this issue. First, subparagraph (c) of the definition of “examination affairs” in s 9 of the Act extends the scope of an examination, in the case of a company acting as a trustee, to the “business affairs of the trust” as described in ss 53AD and 64A(4). Secondly, the general ambit of an examination under Part 5.9 is extremely wide. Thirdly, the proper purposes of an examination include any purpose that will benefit the company, its creditors, its members, or the public generally. Fourthly, to constitute an abuse of process, the impugned purpose must be a predominant purpose of the examination. Fifthly and relatedly, it will not be an abuse of process to conduct an examination that will, at the same time, benefit both the company and someone who is not a creditor or contributory of the company.

32    In this matter, Equititrust was the trustee of the unregistered trading trust EPF. The examination being pursued by the Liquidators concerns, in part, the discharge of Equititrust’s role as trustee of that trust. Insofar as Mr Tucker is concerned, the examination is particularly directed to his involvement in the transaction that occurred with respect to the debt owed by Equititrust to BOSI. If it emerges that Mr Tucker’s conduct, or that of any other persons in that transaction, caused Equititrust to breach its duty as trustee, then it is plainly in the interests of Equititrust that Mr Tucker, and/or those other persons, be required to account to Equititrust for their conduct. That being so, the fact that the unit holders in the EPF may coincidentally benefit from any proceeding taken by Equititrust to achieve that accounting does not, in my view, mean that the Liquidators are conducting the examination for an improper purpose.

33    For these reasons, I consider that the answer to the question posed by this issue is “No”. It follows that Mr Tucker has not made out an arguable case that, insofar as the contemplated proceedings to which his examination relates may coincidently advance the interests of the EPF unit holders, it is being pursued for an improper purpose.

Is it an improper purpose to pursue Mr Tucker’s examination to identify his ability to satisfy any judgment that may be obtained against him?

34    This issue is raised by the statement in Mr Russell’s submissions to Deputy Registrar Lynch that a purpose of the examination and a reason for requiring Mr Tucker to produce the documents at the examination is to assist in identifying his ability to satisfy any judgment that may be made against him in the contemplated proceedings (see at [16] above). I infer that a similar submission was put to Greenwood J because his Honour specifically mentioned this issue in his reasons for judgment as follows ([2017] FCA 16 at [20]):

Further, an examination to determine whether any chose in action will be ultimately recoverable from any party (or that party’s insurer) is also within the contemplation of the section: Re New Tel Ltd (in liq); Evans v Wainter Pty Ltd (2005) 221 ALR 331, Lander J at [81] and [82]; Ryan J agreeing at [1] and Crennan J agreeing at [265]; Re HIH Insurance Ltd (In Liquidation) [2004] NSWSC 454; Re Finlen’s Contract Build Pty Ltd; Arnison v Schmierer (2000) 34 ACSR 499.

35    Unsurprisingly, in reaching this conclusion, his Honour relied on the Full Court in Evans v Wainter. As I have already mentioned above, and as his Honour indicated in his citation of that judgment, Lander J wrote the leading judgment of the Court in that matter. The context to the two paragraphs that Greenwood J cited in his judgment has already been set out in some detail above (see at [28]–[29]). From this context, it will be noted that, in the immediately preceding paragraph ([80]), Lander J observed that the ambit of an examination under Part 5.9 of the Act was “extremely wide”. His Honour then proceeded to make the observations upon which Greenwood J relied, as follows:

81    An examination to determine whether the corporation would be likely to succeed in litigation against its officers, auditors or third parties would be within the examinable affairs of a corporation. Such an examination would assist an eligible applicant in identifying a chose in action which is an asset of the corporation: Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301; Re Spedley Securities Ltd (in liq) (1990) 3 ACSR 366 at 376.

82    An examination to determine whether any chose in action will be ultimately recoverable from any party or that party’s insurer is also within the contemplation of the section: Gerah Imports Pty Ltd v Duke Group Ltd (in liq) (1993) 61 SASR 557. Indeed, such an examination may be of a person against whom litigation is contemplated or even pending: Re Hugh J Roberts Pty Ltd (1970) 91 WN (NSW) 537; Hamilton v Oades (1989) 166 CLR 486 at 497; Re Laurie Cottier Productions Pty Ltd (in liq) (1992) 9 ACSR 513.

36    Given the breadth of the general ambit of an examination under Part 5.9, I see no reason why these observations do not apply equally to Mr Tucker’s examination to allow his examination to extend to include the identification of his ability to satisfy any judgment that may be obtained against him. Indeed, in his submissions on this issue, Mr Tucker seemed to accept this was so because he claimed that, in any event, he did not have any financial interest in any of the companies or trusts listed in the orders of Deputy Registrar Lynch. Furthermore, in one of his affidavits filed in support of his application, he stated:

44.    If the liquidators sue me, and I suffer a judgment against me in the sums alleged by the liquidators’ solicitors, or indeed a fraction of those amounts, and it is not covered by insurance, I would not seek to have recourse to the assets of the trusts or superannuation fund described above, but rather I would file for bankruptcy.

45.    Nor could I seek to have recourse to the assets of my superannuation fund as the preservation age is 60, and I am currently aged 49, so I cannot draw funds from it for about 11 years.

37    Whether or not Mr Tucker is correct in these claims and asserted intentions are matters that the Liquidators will undoubtedly investigate during his examination and, depending on the answers he gives, will weigh up in deciding whether to pursue any proceeding against him. However, I do not consider these statements can be used to prevent the Liquidators examining him with respect to his ability to meet a judgment in the contemplated proceeding. To do so would be to accede to the startling proposition that an examinee under Part 5.9 could foreclose on this area of examination under that Part by making claims in an application of this kind that the Liquidators will gain nothing by pursuing that area or, if they do succeed to a judgment, that he or she will take steps to frustrate the collection of any monies under that judgment. If that were the position, the examination power under Part 5.9 would be significantly hindered, if not rendered totally nugatory.

38    For these reasons, I consider the answer to the question posed by this issue is “No”. It follows that Mr Tucker has not made out an arguable case that, insofar as his examination is being pursued to identify his ability to meet any judgment in the contemplated proceedings, it is being pursued for an improper purpose.

Is it an improper purpose to pursue Mr Tucker’s examination as a dress rehearsal for the contemplated proceedings, or as an attempt to gain an unfair forensic advantage?

39    This issue is raised by subparagraph (c) of the final paragraph of Mr Tucker’s affidavit (see at [17] above) where he alleges that:

That the liquidators have already determined to issue proceedings against me (given the existence of a draft pleading, the failure to make any sensible enquiries of me and the unnecessarily aggressive nature of their solicitor’s correspondence to me), such that this examination seems to me to just a cross examination dress rehearsal or an attempt to gain an unfair forensic advantage.

40    Propositions 5 and 6 at [252] of Evans v Wainter are as follows:

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.

These propositions clearly show that, in certain circumstances, it is improper to pursue an examination for the purposes of obtaining a forensic advantage, or conducting a dress rehearsal for the cross-examination of a person in a pending, or subsequent, proceeding. The question, therefore, under this issue is whether Mr Tucker’s examination is being conducted for either of these purposes.

41    On that question, Mr Cooper submitted that the Liquidators had not yet issued any proceeding and that, at this stage, they were still investigating the commercial desirability of pursuing such a proceeding. He referred to Wily at [36]–[45] where Barrett J examined various authorities on this issue. He also referred to the judgment of the Full Court of the South Australian Supreme Court in Gerah Imports Pty Ltd v Duke Group Ltd (in liq) (1993) 61 SASR 557. In that judgment, Olsson J, with whom King CJ and Millhouse J agreed (at 558), said (at 564) that:

The commercial reality of pursuing long and expensive legal proceedings for a very large sum of money against individuals of finite resources is clearly a matter as to which [a liquidator] needs to make a judgment, based upon the likelihood, or otherwise, of potential ultimate recovery from a relevant insurer.

42    In his cross-examination, Mr Russell explained how this process of assessing the commercial realities had proceeded in this matter. He said that some time before his firm, Russells, was retained by the Liquidators he arranged for a draft pleading to be prepared to ascertain whether funding could be obtained from a litigation funder to pursue the examination to investigate whether it was worth pursuing the contemplated proceeding. He said that draft pleading was subsequently put to a number of the litigation funders, along with the written opinions of counsel on the prospects of success in the contemplated proceeding. He said that, at that stage, to facilitate this process of obtaining funding, the designated client in the contemplated proceeding was EPF Recoveries Pty Ltd, however he “was practically sure that if funding was granted [his firm] would be retained by the [Liquidators]” and they would then become the client. He said he had been able to obtain funding for the examination from a litigation funder and his firm had then been retained by the Liquidators. In one of his affidavits, he said that the litigation funding agreement was subsequently approved by Burns J in the Supreme Court of Queensland on 1 December 2016. When asked in cross-examination whether there was any proceeding on foot, he said that “at the moment it’s an investigation stage. There may not be a claim but at the moment there’s no claim”.

43    None of this evidence supports a conclusion that Mr Tucker’s examination is being pursued as a dress rehearsal for cross-examination in any existing proceeding, or even in the contemplated proceeding. No proceeding is currently on foot and I accept Mr Russell’s evidence that the contemplated proceeding remains in the “investigation stage”. There is otherwise no evidence that Mr Tucker’s examination is being conducted to gain an unfair forensic advantage. I do not therefore consider that Mr Tucker has made out an arguable case that his examination is being pursued for either of these improper purposes.

Has Mr Tucker shown an arguable case that Mr Russell and Mr Tiplady are improperly pursuing his examination for the McIvor interests and/or for their own personal interests?

44    This issue is founded on the concerns expressed in subparagraphs (a) and (b) of the penultimate paragraph of Mr Tucker’s affidavit (see at [17] above). If it were shown that Mr Russell and/or Mr Tiplady had persuaded the Liquidators to pursue the examination for the purpose of securing a private benefit or advantage, or for the advantage of an unrelated third party such as the McIvor interests (assuming for present purposes they were such), the principles outlined in Evans v Wainter and the other authorities referred to above clearly show that the pursuit of these purposes would constitute an abuse of process. However, I do not consider that the evidence before me shows that the concerns Mr Tucker has expressed in these subparagraphs of his affidavit are valid. That is so because the affidavits that have been filed by Mr Russell and Mr Tiplady in direct response to Mr Tucker’s statements in those subparagraphs, and Mr Russell’s cross-examination on his affidavit, are sufficient to dispose of them. First, as to the concern expressed in subparagraph (a) of Mr Tucker’s affidavit, Mr Russell said in his affidavit that:

8.    I have interviewed Mr McIvor only once – on 15 June, 2015. My firm has not acted for him or on his behalf in this matter; he did not initiate the matter or the enquiries; I have not reported to him as to progress. He has no role in these enquiries or in the retainer of my firm by the liquidators and the company. I did not seek any funding from him and he has not paid my firm any money whatsoever in relation to this or any other matter. He was and is a potential witness only (along with all other former directors of the company).

9.    The same applies to his former wife, Ms Stacey Turner. She is a former director. She is also a former client of my firm. I did not seek any funding from her and she has not paid my firm any money whatsoever in relation to this matter. She was and is a potential witness only (along with all other former directors of the company).

45    While he was cross-examined about other paragraphs of his affidavit (see below), Mr Russell was not cross-examined about the denials in the two paragraphs above. I therefore accept his evidence that the examination is not being pursued for the benefit or advantage of the McIvor interests.

46    As to the concern expressed in subparagraph (b) of Mr Tucker’s affidavit, Mr Russell explained the role of EPF Recoveries Pty Ltd and his interests in pursuing the examination in the following terms:

3.    My enquiries into the matters before the court began in mid 2014, when I was telephoned by a former director of Equititrust, Mr Paul Vincent, a chartered accountant. He said to me that something was bothering him and asked if I would come to his office to discuss it. Mr Vincent is an old friend. I went to his office.

4.     Mr Vincent described to me his work for clients, Messrs McCart, Roberts and Barrett in their dealings with Mr Tucker and Mr Kennedy, in relation to their guarantee of a debt owed to Equititrust. Mr Vincent said words to the effect that he had learnt of the existence of a Hong Kong company, MS Asia Debt Acquisition Limited, which had acquired securities over the assets held by the Company in a trust known as the Equititrust Premium Fund. He asked me to look into the matter. I agreed.

5.    I later discussed my initial enquiries with Mr Vincent. He told me that he did not wish to incur any substantial cost, but would assist with information and his documents, subject to receiving legal advice from his solicitors, McCullough Robertson. EPF Recoveries Pty Ltd is a company I therefore incorporated simply as a nominee client when I decided to open a file, in September, 2014, to begin recording the enquiries I was making. It has never had any interest in any claim or possible claim against Mr Tucker or others. It has no money, no bank account, no assets and no liabilities. It has no agreement with me, the liquidators or any funder for any interest, financial or otherwise, in any such claim.

6.    My firm’s retainer in this matter by the company and the litigation funding agreement were approved by Justice Burns of the Supreme Court of Queensland, by order made on 1 December, 2016. Mr Stewart QC appeared for the liquidators on that occasion. Now produced and shown to me and marked “SCR-9” is a copy of that order. I have no interest, financial or otherwise, in any proceedings which the company or the liquidators may institute (apart from professional fees under the retainer approved by Justice Burns).

(Emphasis omitted)

47    While Mr Russell was cross-examined about these paragraphs, I do not consider that examination revealed any material which adversely affected the reliability and accuracy of any of the statements in the four paragraphs above. Accordingly, I accept his evidence about those matters, in particular the role of EPF Recoveries Pty Ltd and his disclaimer of any personal interest in pursuing the examination of Mr Tucker.

48    Finally, as to subparagraph (b) of Mr Tucker’s affidavit, in his affidavit, Mr Tiplady said (at paragraph 3):

I have no interest, financial or otherwise, in any proceedings which the company or the liquidators may institute (apart from professional fees under the retainer approved by Justice Burns).

49    No call was made to cross-examine Mr Tiplady on his affidavit. In those circumstances, I accept Mr Tiplady in his disclaimer of any personal interest in pursuing the examination of Mr Tucker.

50    It follows from these reasons that I do not consider Mr Tucker has made out the factual basis for an arguable case that Mr Russell and Mr Tiplady are improperly pursuing his examination for the benefit of McIvor interests and/or for their own personal interests.

Obligation to make disclosure

51    Before concluding these reasons, I should address a separate issue raised by Mr Tucker. He submitted that, when making the application to Deputy Registrar Lynch under s 597(9) of the Act, the Liquidators failed in their obligation to make a full and frank disclosure of all matters which may have impacted on the Deputy Registrar’s decision to issue the summons for the production of documents. In making this submission, he relied upon the observations of the Full Court in Sutherland v Pascoe (2013) 297 ALR 44; [2013] FCAFC 15 at [50]. That judgment clearly establishes that a person applying for an examination summons under Part 5.9 of the Act has an obligation to make such a disclosure.

52    Putting aside his contentions relating to the improper purpose being pursued by the examination which have been disposed of above, and those relating to oppression which remain to be considered at a later stage, Mr Tucker relied upon the following matters in his written submissions to claim that the Liquidators had failed to discharge this obligation:

(c)    it was likely that many of the documents would not serve to assist in proving the identified potential claim, or establish that any of the prospective defendants could meet a judgment;

(d)    the searches that Mr Russell used to identify the targets for the Production Orders were well out of date and unlikely to reflect current circumstances (and not seemingly put into evidence);

(e)    outlines of argument in unrelated litigation were unlikely to assist;

53    In the circumstances of this matter, I do not consider that the Liquidators were obliged to disclose any of these matters. As to the matters in subparagraphs (c) and (e) above, when seeking the issue of a summons under Part 5.9, an applicant does not need to show that the examination, or in this instance, the documents, being sought is, or are, “likely” to assist in proving a claim: see Kimberley Diamonds Ltd v Arnautovic [2017] FCAFC 91 at [99]. There was, therefore, no need for the Liquidators to disclose these matters to Deputy Registrar Lynch.

54    As to the matter in (d) above, while Mr Russell acknowledged in cross-examination that the diagram he provided to Deputy Registrar Lynch in support of the application was inaccurate in certain respects, it was not suggested that he was aware of those inaccuracies at the time of the application. That being so, he could not have failed in his obligation to make disclosure of those inaccuracies. In any event, having received a detailed explanation from Mr Cooper, on behalf of the Liquidators, about the nature and effect of the inaccuracies concerned, I accept his submission that, even taking them into account, there is no real dispute on the critical question that Mr Tucker controls the entities set out in that diagram.

Conclusion

55    For these reasons, I do not consider Mr Tucker has made out an arguable case that either the orders made by Greenwood J, or the orders made by Deputy Registrar Lynch, were obtained for an improper purpose and were therefore an abuse of process. Accordingly, his further amended application must be dismissed.

Associate:    

Dated:    11 July 2017