CATCHWORDS
CORPORATIONS - cooperation between Australia and foreign courts - assistance from foreign courts having jurisdiction in "external administration matters" under s. 580 of the Corporations Law - letter of request to Supreme Court of Hong Kong to order production and verification of documents - whether request is "a matter relating to winding up" under Chapter 5 - "indirect but relevant connection" a sufficient relationship
WORDS AND PHRASES - definition of "matter" - "subject matter for determination in a legal proceeding, rather than the proceeding itself" - definition of "winding up" - "the process that follows the making of a winding up order" - includes any step taken by a liquidator in getting in assets of corporation - existence of litigation unnecessary
CORPORATIONS - standing to apply to set aside order for request to foreign court - appellant a director of company involved in the subject proceedings - appellant possesses requisite degree of 'closeness' to subject matter of request
MALICIOUS PROCEDURE - abuse of process - letter of request to foreign court to order production and verification of documents - use of power must not be for a purpose foreign to the interests of "the corporation, its contributories or creditors" - request for production of documents a legitimate line of inquiry
Corporations Law s. 580
Hong Kong Bank of Australia Ltd. v Murphy (1992) 28 NSWLR 512 - considered
Tooheys Ltd. v Commission of Stamp Duties (NSW) (1961) 105 CLR 602 - considered
Elna Australia Pty. Ltd. v International Computers (Aust.) Pty. Ltd. (1987) 14 FCR 461 - considered
Gerah Imports Pty. Ltd. v The Duke Group Ltd (in liq.) (1994) 119 ALR 401 - considered
Re Crust 'n' Crumbs Bakers (Wholesale) Pty. Ltd. [1992] 2 Qd R 76 - considered
Re Excel; Worthley v England (1994) 52 FCR 69 - considered
Hamilton v Oades (1989) 166 CLR 486 - considered
Onus v Alcoa of Australia Ltd. (1981) 149 CLR 27 - considered
IAN EDWARD JOYE v BEACH PETROLEUM NL AND ANOR.
No. SG 3046 of 1994
BEAUMONT, SPENDER AND LEHANE JJ
ADELAIDE
14 JUNE 1996
IN THE FEDERAL COURT OF AUSTRALIA )
)
SOUTH AUSTRALIA DISTRICT REGISTRY ) No. SG3046 of 1994
)
GENERAL DIVISION )
APPLICATION FOR LEAVE TO APPEAL FROM THE JUDGMENT
OF A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN: IAN EDWARD JOYE
Applicant
AND: BEACH PETROLEUM NL
First respondent
CORTAUS LIMITED (IN LIQUIDATION)
Second respondent
CORAM: BEAUMONT, SPENDER AND LEHANE JJ.
PLACE: SYDNEY (Heard in Adelaide)
DATE: 14 JUNE 1996
MINUTES OF ORDER
THE COURT ORDERS THAT:
1. Leave to appeal be granted.
2. The appeal be dismissed.
3. The appellant pay seven-eighths of the respondents' costs of the appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
SOUTH AUSTRALIA DISTRICT REGISTRY ) No. SG3046 of 1994
)
GENERAL DIVISION )
APPLICATION FOR LEAVE TO APPEAL FROM THE JUDGMENT
OF A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN: IAN EDWARD JOYE
Applicant
AND: BEACH PETROLEUM NL
First respondent
CORTAUS LIMITED (IN LIQUIDATION)
Second respondent
CORAM: BEAUMONT, SPENDER AND LEHANE JJ.
DATE: 14 JUNE 1996
REASONS FOR JUDGMENT
BEAUMONT AND LEHANE JJ.
INTRODUCTION
This is an application for leave to appeal from an order made by a Judge of the Court (Branson J.) on 19 December 1995 refusing an application by Ian Edward Joye, the present applicant, to set aside an order made by another Judge (O'Loughlin J.) on 1 June 1995 that a letter of request be sent to the Supreme Court of Hong Kong.
The letter of request was sought pursuant to Division 9 of the Corporations Law ("the Law") which deals with cooperation between Australia and foreign courts in "external administration matters". Such matters are defined by s.580 so as to include "a matter relating to" a winding up under Chapter 5 of the Law. Cortaus Limited ("Cortaus") the second respondent, is being so wound up.
The order of O'Loughlin J. was made under s.581(4) of the Law as follows:
"581(4) The [Federal] Court may request a court ... of a country other than Australia, that has jurisdiction in external administration matters to act in aid of, and be auxiliary to, it in an external administration matter."
It is accepted that the Supreme Court of Hong Kong has jurisdiction in "external administration matters".
BACKGROUND TO THE APPLICATION MADE TO BRANSON J.
The background to the application made at first instance is as follows:
(a) The order for the winding up of Cortaus
On 7 June 1994, this Court ordered that Cortaus be wound up under Chapter 5 of the Law and appointed John Sheahan liquidator. (Previously, on 17 June 1993, a Judge of this Court (von Doussa J.) had ordered that Mr. Sheahan be appointed receiver and manager of Cortaus, but that appointment was revoked on 12 September 1994.)
(b) The proceedings brought by Cortaus against Mr. Joye
In 1993, Cortaus, then in receivership, instituted
proceedings in this Court (No. SG 111 of 1993) against several parties, including Mr. Joye. Mr. Joye had been a director of Cortaus. Those proceedings have not yet been heard, but are being pursued by Cortaus through Mr. Sheahan as its liquidator.
After the making of the winding up order, Cortaus's application and its statement of claim in those proceedings were amended. By its amended application, Cortaus sought, inter alia:
(1) Declarations that (a) the payment by Consulmar Stiftung of A$14 million to Larken Limited and/or Mr. Joye and/or entities associated with it and/or him in or about November 1987 was in breach of s.40(1) of the Companies (Acquisition of Shares) Code; (b) Mr. Joye, as a director of Cortaus, acted in contravention of s.44(2) of the Companies (Acquisition of Shares) Code; (c) Mr. Joye, as a director of Cortaus, contravened s.229(1) of the Companies Code; (d) Mr. Joye, as a director of Cortaus, contravened s.229(4) of the Companies Code; and (e) Mr. Joye acted in breach of his fiduciary duties to Cortaus.
(2) A declaration that Mr. Joye (inter alios) is liable to pay to Cortaus, as a debt due, an amount equal to the profit made as a result of the contravention of s.229 of the Companies Code by Mr. Joye pursuant to s.229(7) of
the Companies Code.
(3) An order pursuant to s.229(7) of the Code against (inter alios) Mr. Joye, that he pay to Cortaus, by way of debt, an amount equal to the profit made as a result of the contravention of s.229 of the Code by him.
(4) An order that Mr. Joye account to Cortaus for the profit made as a result of the breach of fiduciary duties owed by him to Cortaus.
The amended statement of claim is a lengthy and complex document and it is not necessary, for present purposes, to attempt to summarise it. Reference should, however, be made to two claims made in it, noting that their context or background was a takeover scheme by which IRL sought to acquire the issued shares of Cortaus.
First, by paras. 31 and 38, reference is made to the payment of A$14 million, already mentioned, as follows:
"31.In or about November 1987, pursuant to the agreement referred to in paragraph 29, Roses Investments and/or Consulmar Stiftung paid to Larken and/or Joye and/or entities associated with it and/or him the sum of A$14 million.
PARTICULARS
31.1On or about 5th November 1987, Roses Investments and/or Consulmar Stiftung paid to Kleinwort Benson Limited, at the direction of Larken and/or Joye and/or its and/or his agents, the sum of A$8 million.
31.2On or about 16th November 1987, Roses Investments and/or Consulmar Stiftung paid to Kleinwort Benson Limited, at the direction of Larken and/or Joye and/or its and/or his agents, the sum of A$6 million."
...
38. The payment of A$14 million by Roses Investments and/or Consulmar Stiftung to Larken and/or Joye and/or entities associated with them was a payment by or on behalf of IRL or a payment by or on behalf of a person associated with IRL which gave to Larken and/or Joye and/or entities associated with it and/or him a benefit not provided for under the Offer and therefore in breach of Section 40 of the CASA.
PARTICULARS
38.1As to the payment being by or on behalf of IRL or a person associated with IRL the applicant repeats paragraphs 12 to 19 inclusive hereof.
38.2As to the provision of a benefit not provided for under the Offer the applicant says that the Offer made no mention of any payment of the sum of A$14 million, or of any sum to Larken and/or Joye and/or entities associated with it and/or him and/or to any other entity."
Secondly, by para.37 of the pleading, it is claimed that, although the events pleaded occurred prior to 31 December 1990 and thus the commencement of the Law, this Court has jurisdiction "with respect to the matters herein" by virtue of s.4(1) of the Jurisdiction of Courts (Cross-vesting) Act.
THE EVIDENCE IN THE APPLICATION TO O'LOUGHLIN J. FOR THE ISSUE OF THE LETTER OF REQUEST
In his affidavit sworn 12 May 1995 in support of the application, Mr. Sheahan gave this evidence:
"17 One issue in the Cortaus v Larken proceedings is the payment of the sum of A$14,000,000 which Cortaus alleges was paid as a benefit outside the takeover scheme of IRL for Cortaus to induce CENZ to accept the offer.
18 Documents discovered by Cortaus in the Cortaus v Larken proceedings suggest that the A$14,000,000 was paid in two tranches:
18.1 $8,000,000 on 5 November 1987;
18.2 $6,000,000 on 16 November 1987.
19 The documents discovered by Cortaus in the Cortaus v Larken proceedings suggest that the two payments referred to in paragraph 18 hereof were paid from a company called Atlantic Capital Corporation to Brooke Blain Russell, solicitors in England, to Kleinwort Benson Ltd of 20 Fenchurch Street, London, England for the account of Kleinwort Benson (Hong Kong) Ltd Account No 275980 AUDCURRI Ref: TH32. Now produced and shown to me and marked with the letters `JS8' is a bundle of documents relating to the payment of the monies to Kleinwort Benson Limited for the account of Kleinwort Benson (Hong Kong) Limited. The documents are:
19.1Fax Kleinwort Benson (Hong Kong) Limited to Carpenter Investments Ltd dated 2 November 1987;
19.2Fax John Austin to Lynne Brooke of Brooke Blain Russell dated 5 November 1987;
19.3Fax Brooke Blain Russell to Lloyds Bank Plc dated 5 November 1987;
19.4Brooke Blain Russell accounts instruction dated 5 November 1987;
19.5Telephone attendance note of Lynne Brooke on Bolton Carpenter on 12 November 1987 - `Told him above [A$6m will be in Brooke Blain Russell account tomorrow so can pay to Hong Kong] he said pay by same route as before';
19.6Brooke Blain Russell accounts instruction dated 16 November 1987;
19.7Atlantic Capital Corporation October balances plus November transactions under cover of fax from Garrison Capital (UK) Limited dated 10 November 1987;
19.8Brooke Blain Russell account ledger undated;
19.9Brooke Blain Russell account ledger dated 9 March 1988;
19.10Draft letter Brooke Blain Russell to Mallesons Stephen Jaques dated 29 July 1988;
19.11Copy extract of the evidence given by Mr Lynne Brooke of Brooke Blain Russell in action No. SG 53 of 1991 in this Honourable Court between Beach Petroleum NL and another and Malcolm Keith Johnson and others;
19.12Fax Brooke Blain Russell to Mallesons Stephen Jaques dated 6 July 1988.
20 If Kleinwort Benson Limited and Kleinwort Benson (Hong Kong) Limited were Australian companies I would wish to obtain information from them regarding the receipt of these monies and any on payment, dispersal or transfer of the moneys. ..."
Mr. Sheahan's evidence went on:
"21 I believe from my perusal of the documents which comprise `JS8', the narrative which is `JS6' hereto and the documents exhibited to the Mills affidavit, that Kleinwort Benson Limited in London and Kleinwort Benson (Hong Kong) Limited in Hong Kong are likely to hold documents relating to the receipt of two payments of A$8,000,000 and A$6,000,000 each as referred to above and the on payment of those funds.
22 As liquidator of Cortaus I believe that the receipt of these documents from Kleinwort Benson Limited and Kleinwort Benson (Hong Kong) Limited is of importance to my administration of Cortaus in winding up for the following reasons:
22.1The documents are relevant to my investigations referred to in paragraphs 5 to 7 hereof; [that is into, inter alia, alleged breaches of duty by officers of Cortaus]
22.2The documents are relevant to the Cortaus v Larken proceedings and will be used for the purposes of those proceedings;
22.3The information contained in the documents will bear upon decisions that must be made by me as liquidator as to the future conduct of the Cortaus v Larken proceedings and how those proceedings are to be conducted;
22.4The documents may contain further information that will lead to other enquiries by me in relation to matters the subject of the Coratus v Larken proceedings or matters relevant to the affairs of Cortaus generally and my investigations;
22.5The documents are relevant to my examination of Joye and will be used in the examination proceedings and may lead me to other avenues of enquiry in relation to those proceedings."
THE LETTER OF REQUEST
The letter of request, dated 6 June 1995, recited, inter alia, the making by this Court of the winding-up order, the investigation by Mr. Sheahan, as liquidator of Cortaus, into its affairs, the pursuit by Cortaus of its action No. SG 111 of 1993, the pursuit by Mr. Sheahan, as liquidator, of proceedings in this Court (No. SG 3137 of 1994) to examine Mr. Joye, and the representation to this Court by Mr. Sheahan that -
"it was necessary and desirable for the purposes of his administration of Cortaus and his conduct of the Cortaus v Larken proceedings [No. SG 111 of 1993] and the examination proceedings to request the assistance of ... [the Supreme] Court [of Hong Kong] to act in aid of and be auxiliary to this Court in these proceedings".
It was further recited that in proceedings No. SG 111 of 1993, it was alleged that the sum of A$14 million was paid in breach of s.40 of the Code, that documents discovered in those proceedings indicated that the $14 million, allegedly paid as a benefit in breach of Mr. Joye's fiduciary duties, was paid in the two amounts of A$8 million and A$6 million, as previously noted, and that Kleinwort Benson (Hong Kong) Limited holds documents in that connection. It was finally recited that it was represented to this Court that the assistance of the Hong Kong Court was necessary to aid this Court "in these proceedings regarding production and verification by Kleinwort ... (Hong Kong) ... of the following documents...". The letter then specifies, in paras. (1), (2) and (3), certain documents in the possession or control of Kleinwort relating to, inter alia, the payment of the above amounts of A$16 million and A$8 million. The letter then requests that the Hong Kong Court order that Kleinwort produce and verify those documents and make other orders to assist Mr. Sheahan in his investigation of the affairs of Cortaus.
PROCEEDINGS IN THE SUPREME COURT OF HONG KONG
The Supreme Court of Hong Kong acceded to this Court's request. By order of Registrar Betts dated 31 July 1995, Kleinwort was ordered to produce, and authenticate, the documents requested. Kleinwort applied to that Court to set
aside the Registrar's order. On 1 December 1985, Woo J. ordered that one paragraph, (3), be struck out and that some parts of paras. (1) and (2) be excised. Otherwise the application was dismissed.
THE APPLICATION MADE TO BRANSON J.
By notice of motion dated 18 December 1995, Mr. Joye moved the Court for (1) an order that pursuant to O.35 r.7(2), the order made by O'Loughlin J. on 1 June 1995 be set aside; (2) a declaration that the letter of request is invalid; and (3) an order restraining Mr. Sheahan, as liquidator of Cortaus, from taking any further steps pursuant to the said letter of request.
In support of the application, Mr. Joye relied on the affidavit of his solicitor, Arturo Luciano Dal Cin, sworn 18 December 1995, which described the history of the matter in the Supreme Court of Hong Kong to that point. For present purposes, it is not necessary to repeat it; it is common ground.
THE REASONS OF BRANSON J.
Her Honour rejected a submission made on behalf of Cortaus that Mr. Joye lacked standing to bring his application.
Branson J. referred to an argument put on behalf of
Mr. Joye that the order made by O'Loughlin J. was beyond power since it was not authorised by s.581(4) because (1) a letter of request issued under that provision could only be ordered "in an external administration matter"; and (2) such a matter (as has been noted) is defined by s.580 as "a matter relating to" the winding up, and the request did not so relate.
Her Honour did not accede to the argument. In her view, "relating to" was "a wide expression" and was applicable here for several reasons, even if it be accepted that a distinction should be drawn between "actions of a liquidator in his or her capacity as such under the ... Law and actions of a liquidator on behalf of the company being things which could have been done by the company even if there were no liquidation".
Branson J. said:
"Mr Sheahan ... swore that the documents sought by the letter of request are important to him in his administration of Cortaus in winding up for a number of reasons. It is true that such reasons relate principally, although not exclusively, to the Cortaus v Larken proceedings [No. SG 111 of 1993]. Such proceedings, I accept, are proceedings which could have been instituted by Cortaus even were it not in liquidation. However, in the events which have happened, the liquidator has caused such proceedings to be commenced in the name of Cortaus as applicant pursuant to his powers under s477(2)(a) of the ... Law. The institution of such proceedings by Mr Sheahan in the name of the company, and his subsequent decisions as to the conduct of such proceedings, are, in my view, matters relating to the winding up of Cortaus under Chapter 5 of the ... Law."
Her Honour went on to say:
"Moreover, Mr Sheahan asserts in his affidavit that the documents sought by the letter of request are relevant to his proposed examination of Mr Joye. It is true that the service of the summons for the examination of Mr Joye is under challenge. Nevertheless, the summons has been issued and I do not understand there to be any challenge to the propriety of the issue of the summons. In my view it is proper for Mr Sheahan to prepare himself for the cross-examination of Mr Joye pursuant to such summons should the validity of its service be upheld or, alternatively, should it subsequently be served in a manner which is uncontentious. In my view the preparation for such examination is a matter relating to the winding up of Cortaus."
SHOULD LEAVE TO APPEAL BE GRANTED?
Although both as a matter of form and of substance, the orders made by O'Loughlin J. and by Branson J. were interlocutory (thus requiring leave to appeal), it appears that the letter of request, at least as modified by the Supreme Court of Hong Kong, will be acted on unless withdrawn by order of this Court. Moreover, it appears that the point considered by Branson J. is a novel one and free from authority. It is also of general application and of at least potential importance. In those circumstances, leave to appeal ought to be granted.
CONCLUSIONS ON THE APPEAL
(a) Mr. Joye's standing
On behalf of the respondents it is submitted that the learned primary Judge should have held that Mr. Joye lacked standing to apply to set aside the order for the request.
In our opinion, it is plain, as her Honour held, that Mr. Joye had a "real interest" in the order. Given the background already mentioned, especially the fact that Mr. Joye's involvement frequently mentioned in Mr. Sheahan's affidavit in support of the application for the sending of the request, and in the letter of request itself, the order has at the very least the potential to affect Mr.Joye in a direct fashion by the production out of the jurisdiction of documents which appears to concern Mr. Joye, the production of which could not be compelled by this Court within the territorial limits of its jurisdiction.
In Onus v Alcoa of Australia Ltd. (1981) 149 CLR 27, Gibbs J. said (at 35-6):
"A plaintiff has no standing to bring an action to prevent the violation of a public right if he has no interest in the subject matter beyond that of any other member of the public; if no private right of his is interfered with he has standing to sue only if he has a special interest in the subject matter of the action... ."
Gibbs J. went on (at 36) to observe that the rule as to standing is "obviously a flexible one since ... the question what is a sufficient interest will vary according to the nature of the subject matter of the litigation".
Stephen J. said (at 42):
"...the distinction between this case and the A.C.F. Case is not to be found in any ready rule of thumb, capable of mechanical application; the criterion of `special interest' supplies no such rule. As the law now stands it seems rather to involve in each case a curial assessment of the importance of the concern which a plaintiff has with particular subject matter and of the closeness of that plaintiff's relationship to that subject matter."
In our view, as a matter of principle, and in practical terms, Mr. Joye has demonstrated the requisite degree of "closeness" to the subject matter of the letter of request to justify his claim to have standing to challenge the order for its issue. To borrow the language of Woolf L.J. (as he then was) in Boeing Co. v PPG Industries Inc. [1988] 3 All ER 839 (at 841), Mr. Joye was "clearly affected" by the order. The objection to standing should be overruled.
(b) Was there power to order this request?
On behalf of Mr. Joye it is submitted that there was no power to make the request since, the argument runs, it is not made "in aid of [this Court] in an external administration matter" within s.581(4), not being, it is said, "a matter relating to ... (a) winding up [of a] company under ... Chapter [5] ... ." It is contended for Mr. Joye that, in this connection, "matter" should be read in a restrictive way, so as to be confined to legal proceedings relating to the winding up of a company, and that the present request should not be so characterised.
As has been noted, the point appears to be free from authority, although on behalf of Mr. Joye reliance was sought to be placed by Mr. Bennett Q.C. upon several decided cases. In our view, these cases are distinguishable for present purposes.
Mr. Bennett referred to Hong Kong Bank of Australia Ltd. v Murphy (1992) 28 NSWLR 512, where it was held that it is not an abuse of process for trustees to apply for examinations under s.597 of the Law for the purpose of obtaining information which might assist them in litigation they have commenced in the interest of investors, even if a forensic advantage might be incidentally gained. But Mr. Bennett relies upon another aspect of that case, namely, the interpretation given by the Court to the phrase "with respect to" in a transitional provision. Section 601 of the Law provides:
"The provisions of this law with respect to winding up do not apply to any body corporate the winding up of which was started before the commencement of this Chapter..." [Emphasis added]
It was held that s.597 is not a provision "with respect to winding up" for the purposes of s.601.
Gleeson C.J. said (at 521):
"Here, however, the object is to determine whether a statutory provision applies to a given body corporate. Either it does or it does not. In such a context, the inquiry must be as to the essential character of the law, rather than as to whether there is a connection between the law and the matter
of winding up.
It is true that the origins of provisions such as s.597 are to be found in insolvency law. It is also true, however, that its immediate precursor, s.541 of the Companies (New South Wales) Code, had been held not to be a law with respect to winding up: Re Hall Autotorium Pty Ltd (in Liq)... .
As appears from its place in the legislative scheme, and from its terms, whilst s.597 has an important role to play in relation to companies that are being wound up, and liquidators or provisional liquidators will be amongst those who most commonly take advantage of its provisions, the operation of the section is by no means confined to liquidators. The statutory context of "external administration", in which s.597 has its place, throws light on the purposes for which the power to order examinations (or to authorise persons to apply for examination orders) is conferred. Those purposes include the protection of shareholders and creditors and of interested members of the public. They are not, however, confined to the need for such protection in the case of winding up. Winding up is only one form of external administration. The scope of s.597 is wider.
I do not consider that s.597 can be characterised as a law with respect to winding up within the meaning of s.601."
But, in our view, the exercise of characterisation to be undertaken in determining whether a law is "with respect to" a specific subject matter is not an appropriate test here, where, as a matter of form and of substance, the language and context are different. The relevant question here, whether the "matter" is one "relating to" a winding up, is concerned with the existence of a relationship. It does not raise a question of characterisation.
Of the phrase "relating to", Taylor J. said, in Tooheys Ltd. v Commissioner of Stamp Duties (NSW) (1961) 105 CLR 602 (at 620):
"... the expression ... is extremely wide but it is also vague and indefinite. Clearly enough it predicates the existence of some kind of relationship but it leaves unspecified the plane upon which the relationship is to be sought and identified. That being so, all that a court can do is to endeavour to seek some precision in the context in which the expression is used".
Taylor J. went on to say (at 620) that "relating to" in the context there considered was not the "equivalent of `referring to;' the `relationship' must be based upon some more substantial ground".
Other decisions of the High Court have acknowledged that, ordinarily, "relates to" is a wide term, and that it will depend upon context whether it is necessary that the relationship be direct or substantial, or whether an indirect or less than substantial connexion will suffice (see Re Dingjan; Ex parte Wagner (1995) 183 CLR 323 at 338 (Brennan J.), 347 (Dawson J.), 354 (Toohey J.) and 370 (McHugh J.); P.M.T. Partners Pty. Ltd. (In Liq.) v Australian National Parks & Wildlife Service (1995) 131 ALR 377 at 385 (Brennan C.J., Gaudron and McHugh JJ.) and 398-9 (Toohey and Gummow JJ.); Re Jarman; Ex parte Cook, High Court, 15 May 1996, unreported, at 5 (Brennan C.J., Gaudron J.) and 12 (Kirby J.). Tooheys' Case has been followed in this Court (see, e.g., Secretary, Department of Foreign Affairs and Trade v Boswell (1992) 36 FCR 367 at 374 (Hill J.) and 383 (Cooper J.)).
In our view, there is nothing in the present context to suggest that the term "relating to", where used in s.580 and when picked up by s.581(4), was not intended to have a wide operation or that an indirect, but relevant, connection would not be a sufficient relationship for present purposes.
It will be necessary, later, to consider whether the requisite relationship, in fact and in law, exists here. It will also be necessary to consider the meaning of "matter" and "winding up" in this connection. Before doing this, we should refer to the other cases relied on for Mr. Joye.
Mr. Bennett referred to Elna Australia Pty. Ltd. v International Computers (Aust.) Pty. Ltd. (1987) 14 FCR 461 where Gummow J. dismissed an application brought under s.7V(1)(c) of the Evidence Act 1905 or, alternatively, in this Court's inherent jurisdiction, for the issue of a letter of request by this Court "to the [English Supreme] Court of Judicature for an order for evidence to be obtained in the United Kingdom by an order for documents [then specified]." By s.7V(1)(c), the Court was empowered to make an order "for the issue of a letter of request to the judicial authorities of a foreign country to take, or to cause to be taken, the evidence of [a] person [outside Australia]." In holding that there was no jurisdiction, Gummow J. said (at 465):
"The production of documents to a court in compliance with a subpoena or an order in the nature of a subpoena is not the taking of evidence or the
causing of the taking of evidence of the person producing the documents... .
The applicant submits that nevertheless, on the true construction of Pt IIIB, the procedure I have described is one for the taking of evidence. He referred to the Attorney-General's second-reading speech; but whilst the Attorney certainly dealt with the obtaining of oral and documentary evidence he did not do so in any way which, in my view, supports the applicant's submission. The applicant further referred to s.7V(9) as throwing light upon s.7V(1)(c). But the reference there to production of documents at an examination is plainly to production at a proceeding for the taking of evidence: see the definition of `examination' in s.7T, and subss (5) and (6) of s.7V."
In our view, the decision and reasoning in Elna have no application in limiting the operation of the general words of s.581(4) of the Law, given especially the absence from that provision of any reference to the taking of evidence as the basis for the issue of the letter of request.
Reference was also made by Mr. Bennett to the distinction made between (1) proceedings brought by a liquidator in that capacity, for instance, in recovery of a preference and (2) proceedings brought by the company being wound up, where the liquidator decides that proceedings will be brought in the company's name. The distinction is well established (see, e.g. Hession v Century 21 South Pacific Ltd. (in liq.) (1992) 28 NSWLR 120). But it does not follow that, for the purposes of the provisions with which this case is concerned, the former category comprises matters relating to the winding up whereas the latter does not. Nor, therefore, does it follow that the letters of request are invalid. Mr. Sheahan has certain functions and responsibilities in his capacity as liquidator of Cortaus: that is, functions of doing, and responsibilities to do, things as liquidator which Cortaus itself could not do. Cortaus itself, on the other hand, could bring and maintain proceedings SG 111 of 1993, liquidation or no liquidation. Their maintenance, however, in the liquidation of Cortaus, in the name of Cortaus, results from a decision of Mr. Sheahan made in exercise of a power he has as liquidator (see Growden v Wiltshire (1935) 52 CLR 286). As a practical matter that was what the situation, viewed in the light of the liquidator's powers and responsibilities, called for.
In Gerah Imports Pty. Ltd. v The Duke Group Ltd. (in liq.) (1994) 119 ALR 401, Dawson J. held that the rights of action of a corporation being wound up, against former accountants, were "examinable affairs" of the corporation within the meaning of s.596B of the Law. Dawson J. said (at 404):
"The section of the Corporations Law which is critical is s.596B. That confers power upon the court to summon a person for examination about a corporation's examinable affairs. When regard is had to the definitions of `examinable affairs', `affairs' and `property' contained in ss.9 and 53, `examinable affairs' include any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and include a thing in action.
Clearly the rights of action, if any, of the corporation against the applicants are examinable affairs within the meaning of the legislation. The
Full Court concluded that an examination of those rights under the relevant provisions was not confined to their existence but extended to their extent and value. Plainly the latter are matters of considerable moment to the liquidator of a corporation in pursuing the assets of the corporation in an economical and efficient manner. And as was pointed out in Hamilton v Oades... a liquidator performs a public function in which one of his duties is to protect the interests of the creditors.
It is not contended before me by the applicants that the examination ordered by the master is oppressive. What is said is that it extends beyond the affairs of the corporation to the affairs of other persons and is merely for the purpose of ascertaining their potential liability and their capacity to satisfy any judgment against them. However, as I have said, these are matters of importance to a liquidator, going in a practical way as they do to the value of the property of the corporation.
The applicants are unable to point to any authority in their favour. The decision of Drummond J. in Re Interchase Corp Ltd (in prov liq)... is indeed against them."
An appeal in Interchase was unsuccessful: see Grosvenor Hill (Qld) Pty. Ltd. v Barber (1994) 48 FCR 301.
That, as has been indicated, leads to a consideration of the meaning of "matter" and "winding up" in the context of the words "matter" "relating to" a "winding up" for the purposes of s.580 and thus of s.581(4).
First, as to "matter", it is well settled that, for the purposes of the exercise of federal judicial power, the word "matter" means the subject matter for determination in a legal proceeding, rather than the proceeding itself (see, e.g. Fencott v Muller (1983) 152 CLR 570; Crouch v Commissioner for Railways Q'ld) (1985) 159 CLR 22 per Mason, Wilson, Brennan, Deane and Dawson JJ. at 37). Although the Law is State legislation, there is no reason to suppose that "matter" was not intended to have its ordinary meaning in the present context.
As to "winding up", in our view, it means the process that follows the making of a winding up order, including collecting and realising assets and distributing the proceeds. In Re Crust `n' Crumbs Bakers (Wholesale) Pty. Ltd. [1992] 2 Qd R 76 at 78, McPherson S.P.J. said (at 78):
"What is meant by `winding up' in this context? In my opinion it does not comprehend steps or proceedings taken for the purpose of obtaining an order that the company be wound up. Winding up is a process that consists of collecting the assets, realising and reducing them to money, dealing with proofs of creditors by admitting or rejecting them, and distributing the net proceeds, after providing for costs and expenses, to the persons entitled. It is a process, comparable to an administration in equity, that begins or `starts' with an order of the Court. However, it is not the court order itself that `winds up' the company; the order does no more than direct that the company be wound up, which is then carried into effect by an officer of court, the liquidator, who does the things I have identified in order to liquidate the company's assets and wind up its affairs. In referring to `winding up' or to the company being `wound up', and to the manner and the incidents of doing so, s.601 therefore speaks not of proceedings aimed at obtaining an order of court to wind up the company but of the process that ensues from and follows such an order. Leaving aside the case of a successful appeal, winding up this `starts' when, and not before, an order to wind up is made appointing a liquidator."
See also Re Scobie; Ex parte Commissioner of Taxation (1995) 59 FCR 177, per Cooper J. at 185.
It follows, in our opinion, that any step taken by a liquidator in getting in the assets of the corporation is a step taken in the winding up; and this is so whether or not the step taken involves litigation aimed at recovery of the assets. If litigation is necessary, the conduct of that litigation is, in our view, a "matter" that "relates to" the "winding up". Moreover, as was held in Duke, the practical prospects of satisfaction of a possible verdict out of insurance cover held by a defendant, is an "affair" of the corporation, and thus a "matter" that "relates to" the winding up. The fact that the step taken by the liquidator in recovering the corporation's asset may be an administrative one, does not mean that the step is not such a "matter". Gummow J. was prepared so to assume, at least, in an application under s.581(4): see Re Dallhold Estates (U.K.) Pty. Ltd. (1992) 10 ACLC 1,374 where (at 1,379) his Honour concluded that it was desirable that the best possible realisation of the assets of Dallhold Estates be achieved for the benefit of all its unsecured creditors by requesting the assistance of the English courts. A similar example, in an analogous bankruptcy context, is Clunies Ross v Totterdell (1988) 20 FCR 358 where a request was made of another court for aid "in [a] matter of bankruptcy" with a view to getting in assets by taking an administrative step.
Mr. Bennett contended, for Mr. Joye, that the relevant "matter" was the claim which Cortaus asserts and which it seeks to enforce in the proceedings; that claim (assuming that it can be made good) was simply an asset which Cortaus had independently of its liquidation; and although it might be said that there was a relationship between the winding up process and the property of a company being wound up, it could not be said conversely, so the argument runs, that any individual item of property of a company being wound up was a matter relating to the company's liquidation. But to say that is sternly - and inappropriately - to exclude the context from consideration. Certainly an item of property of a company in liquidation, including a claim that it has, may not, regarded in the abstract, appropriately be described as a matter relating to the winding up of the company. Here, however, we are not concerned with property, including claims, viewed in the abstract: we are concerned with the pursuit of a claim by a liquidator undertaken by him as an essential part of the winding up of Cortaus: that is, the realisation of its property so that distributions may be made and the company finally wound up. An activity so central to the winding up of a company is inescapably a matter relating to its winding up.
It follows that the challenge on ultra vires grounds should fail.
(c) Discretion - was there an abuse of process?
A letter of request will not issue under s.7V(1) of the Evidence Act 1905 for the impermissible purpose of "merely fishing for witnesses" (see Allstate Life Insurance Co. v Australia & New Zealand Banking Group Ltd. (1995) 133 ALR 667). In Re Excel; Worthley v England (1994) 52 FCR 69, relied on by Mr. Bennett, an abuse of process occurred when an examination order was sought for an improper purpose. Gummow, Hill and Cooper JJ., having previously referred to Murphy's Case, above, and to the frequently cited observations of Street J. (as he then was) in Re Hugh J. Roberts Pty. Ltd. (In liq.) [1970] 2 NSWR 582 (at 585), said (at 91):
"Whether there will be, in a particular case, a use of the process or an abuse of it will depend upon purpose rather than result. The consequence of an examination may well be that the examiner has conducted a `dress rehearsal' of cross-examination which may take place in a subsequent trial. The fact that the trial has commenced, or is contemplated, may throw light upon the purpose. But merely because other proceedings had been commenced or are contemplated would not involve, of itself, an abuse of process. This follows having regard to the nature of the investigative process which could throw light on the question, inter alia, whether there was evidence which would warrant a liquidator, for example, proceeding against an examinee. But it may be quite a different question where proceedings contemplated or instituted are not proceedings to be brought by the company, but proceedings brought by some other party for the advantage of that party rather than the company. For example, it would be an abuse of process for a creditor approved by the Commission for the purposes of s.597(1) to obtain an examination summons to conduct an examination for the purpose of obtaining evidence in proceedings which the creditor proposed to bring against the examinee for defamation. That would be a purpose completely foreign to the power of examination which is ultimately in aid of the company itself and not the personal advantage of the person seeking to
conduct the examination."
In finding an abuse of process, their Honours went on to say (at 93):
"... the use of the power to obtain an examination summons for the principal purpose of furthering the cause of the applicant for the summons or, as in this case, appointor of the applicant in litigation against third parties, not for the benefit of the corporation, its contributories or creditors (other than in the most indirect way) is a use of the power for a purpose foreign to that power and thus an abuse of the power. Such a purpose would provide to the examiner the opportunity for pre-trial depositions which would not be available in the litigation." (Emphasis added)
In our view, no such foreign purpose appears to exist here. On the contrary, it appears to be a legitimate line of inquiry for the liquidator to pursue. The production of the documents sought in Hong Kong could assist in the winding up process by, for instance, enabling the liquidator to be better informed as to the corporation's prospects of success, or otherwise, in proceeding SG 111 of 1993. This may be seen to be analogous to the insurance information gained in Duke and held to have been a matter of legitimate concern for the liquidator. It should be noted for our purposes that the observations of Street J. in Hugh J. Roberts, above, which were cited in Murphy's Case and in Excel and by Mason C.J. in Hamilton v Oades (1989) 166 CLR 486 (at 497) were as follows:
"A liquidator needs information concerning his company just as much in connection with current or contemplated litigation as in connection with other aspects of its affairs. In using the statutory machinery of private examination he will in many
cases be gathering evidence as an ordinary and legitimate use of this procedure ... In my judgment it is immaterial in basic substance whether the private examination is sought to be used by a liquidator to gather information in connection with proceedings he believes he might be able to bring, proceedings he contemplates bringing, proceedings he has decided to bring, and proceedings he has already brought. There is no presently relevant distinction in substance between gathering information referable to commencing proceedings and gathering information referable to continuing proceedings."
(Emphasis added)
The challenge on discretionary grounds also fails.
ORDERS AND COSTS
We would grant leave to appeal, but would dismiss the appeal.
Since the respondents have been substantially successful, they should have most of their costs. To reflect Mr. Joye's success on the issue of standing, we would deduct one-eighth of the respondents' costs, and would order that Mr. Joye pay seven-eighth's of the respondents' costs of the appeal.
I certify that this and the preceding twenty-six (26) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Beaumont.
Associate
Dated: 14 June 1996
IN THE FEDERAL COURT OF AUSTRALIA)
)
SOUTH AUSTRALIA DISTRICT REGISTRY) No. SG 3046 of 1994
)
GENERAL DIVISION )
APPLICATION FOR LEAVE TO APPEAL FROM THE JUDGMENT
OF A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN : IAN EDWARD JOYE
Applicant
AND : BEACH PETROLEUM NL
First respondent
CORTAUS LIMITED (IN
LIQUIDATION)
Second respondent
CORAM: BEAUMONT, SPENDER AND LEHANE JJ
PLACE: SYDNEY (heard in Adelaide)
DATE: 14 JUNE 1996
REASONS FOR JUDGMENT
SPENDER J
I have had the opportunity to read in draft form the reasons for judgment of Beaumont and Lehane JJ in this matter. For the reasons which their Honours give, I agree that leave to appeal should be granted and that the appeal should be dismissed.
The short question on the appeal is whether there was power to make the request to the Supreme Court of Hong Kong. The contention by Mr Joye is that that request is not made in aid of the Federal Court in an "external administration matter" within s 581(4) of the Corporations Law because the proceedings in the Federal Court by the liquidator
in the name of the company against Mr Joye is not "a matter relating to...a winding up [of a company] under Chapter 5...".
"Winding up" comprehends the "process that consists of collecting the assets, realising and reducing them to money, dealing with proofs of creditors by admitting or rejecting them, and distributing the net proceeds, after providing for costs and expenses, to the persons entitled.": Re Crust 'n' Crumb Bakers (Wholesale) Pty Ltd [1992] 2 QdR 76 at 78. In this case the liquidator has pursued proceedings in the name of the company directed to securing the payment by Mr Joye to the company an amount equal to the profit made by him as a result of the claimed contravention of s 229 of The Code by him or, alternatively, that Mr Joye account to the company for the profit made as a result by the breach of fiduciary duties owed by him to the company.
It seems to me plain that the letter of request is a step in aid of the attempts by the liquidator to realise the property of the company so that distributions may be made to persons entitled to them.
Section 581(4) of the Corporations Law relevantly provides:
" The Court may request a court...of a country other than Australia, that has jurisdiction in external administration matters to act in aid of, and auxiliary to, it in an external administra- tion matter. "
Section 580 of the Corporations Law relevantly provides that for the purposes of s 581(4) of the Law:
" ...'external administration matter' means 'a matter relating to:
(a) winding up, under this Chapter, a company...' "
In my opinion, the proceedings in the Federal Court prosecuted by the liquidator in the name of the company seeking to recover what are claimed to be assets of the company for the benefit of the company's creditors is "a matter relating to winding up of the company". Further, the request to the Supreme Court of Hong Kong is a request to that court that it act "in aid of, and be auxiliary to, it [the Federal Court] in an external administration matter" for the purposes of s 581(4) of the Law.
As to costs, it is true that the respondent to the application for leave to appeal sought unsuccessfully to challenge the standing of Mr Joye to apply to set aside the order for the request. This aspect of the matter, however, was a short point which occupied little time on appeal and which would have occupied little time in relation to preparation. The general rule is that a successful party is entitled to its costs. While it is no doubt possible for a court to make a costs order which reflects a particular lack of success in relation to a particular issue in the proceedings, whether at first instance or on appeal, in my view this Court should be reluctant to make costs orders which
are based on success on particular points in a proceeding rather than on the proceedings generally. Any departure from the general rule that costs follow the event requires an assessment that it is both just and practicable to apportion costs depending on the outcome of a particular issue. As Wilcox J observed at first instance in Cummings v Lewis (unreported, 29 May 1993):
" In exercising a discretion as to costs, it may be a mistake to dissect too much."
Consistent with the observations by Toohey J in Hughes v Western Australian Cricket Association (Inc) (1986) ATPR ¶40-748 at 48,136 and by Cooper J in Cummings v Lewis (1993) 41 FCR 559 at 599 and following, Burchett J in Australian Conservation Foundation v Forestry Commission (1988) 81 ALR 166 at 169, and Heerey J in Henderson v Amadio Pty Limited (an unreported judgment of 22 March 1996) at p 491-4, I would not reduce the costs of the successful respondent on account of the unsuccessful attempt to challenge the standing of Mr Joye to seek leave to appeal.
I would order that the appeal be dismissed and that the appellant pay the respondent's costs of the appeal, to be taxed if not agreed.
I certify that this and the preceding three (3) pages are a true copy of the reasons for judgment herein of the Honourable Justice Spender.
Associate
Date: 14 June 1996
Counsel for the applicant : Mr. D M J Bennett QC
and Mr. I.M. Jackman
instructed by : Cowell Clarke
Counsel for the respondent : Mr A J Besanko QC and
Mr G S Davis
instructed by : Piper Alderman
Date of hearing : 10 May 1996
