FEDERAL COURT OF AUSTRALIA

Henke v Carter [2002] FCA 252

CORPORATIONS – winding up – examination of directors – nature of Court’s power – review of exercise by registrar of power to order examination

Corporations Act 2001 (Cth) ss 9, 286, 475(1), 596A, 596B, 596D, 596F, 597

Federal Court of Australia Act 1976 (Cth) s 35A(1)(h)

Income Tax Assessment Act 1936 (Cth)

Income Tax Assessment Act 1997 (Cth)

Federal Court (Corporations) Rules r 11.3, 11.5, 16.1

Federal Court Rules O 20 r 2

Harris v Caladine (1991) 172 CLR 84 considered

Allesch v Maunz [2000] HCA 40 (2000) 203 CLR 172 considered

Re Southern Equities Corporations Ltd (In Liq); Bond v England (1997) 24 ACSR 472 considered

IAN SIDNEY HENKE, LANCE STEWART MILLER, ROBYN DIANE CONINGHAM AND FRANCIS JOHN CONINGHAM v BRUCE JAMES CARTER AND FINLAYSONS (A FIRM)

V 1166 of 2001

GRAY J

14 MARCH 2002

MELBOURNE

THE COURT ORDERS THAT:

1.         The District Registrar of the South Australia District Registry issue a summons,
pursuant to s 596A of the Corporations Act 2001 (Cth), calling upon each of Ian Sidney Henke of 48 Lyall Street, Hastings in the State of Victoria, Lance Stewart Miller of Unit 117 Mactaggarts Place, 53 Vernon Terrace, Tenneriffe Wharves in the State of Queensland, Robyn Diane Coningham of 28 Eugenia Street, Rivett in the Australian Capital Territory and Francis John Coningham of 28 Eugenia Street, Rivett in the Australian Capital Territory to attend before the Federal Court of Australia to be examined in respect of the examinable affairs of Institute of Taxation Research Pty Ltd ACN 086 352 329 (In Liquidation) on 9 April 2002 at 10.00 am.

2.         Each summons require the person to whom it is addressed, pursuant to s 596D
of the Corporations Act 2001 (Cth), to produce to the Court all books and records in his or her possession concerning Institute of Taxation Research Pty Ltd (In Liquidation) and its examinable affairs, including but not limited to:

All documents including but not limited to correspondence, diary notes, facsimiles, telephone messages, e-mails, file notes, memoranda, timesheets, agreements, accounts and any other documents (whether such documents are drafts or final versions of the same, or are in hard copy or electronic format), bearing a date or brought into existence since 18 February 1999 until 19 March 2001, or relating to that period which concern or relate to the examinable affairs (as that term is defined in s 9 of the Corporations Act 2001 (Cth)) of Institute of Taxation Research Pty Ltd (In Liquidation) (‘the company’).  Such documents include, but are not limited to, each of the following:

            Client Agreements and Records

1.         Records of any agreement between the company and any person (‘a
            client’) in the nature of a consultancy and research agreement or any
            other form of agreement with a client together with all
            communications, correspondence and records of payments to or from
            the company and a client;

            Communications with Third Parties

2.         All communications, correspondence to or from the company, relating
            to, or concerning a client, with any third party, including any court,
            tribunal, the Australian Taxation Office, the Commissioner of
            Taxation, the Deputy Commissioner of Taxation, the Australian
            Government Solicitor, any solicitor or barrister or other adviser
            acting in relation to or for such a client, or the company, or any other
            person;

3.         Records of any payments made by or on behalf of the company, and
            without limitation to you, or on your behalf;

            Records Concerning the Examinee

4.         Records of the terms of your engagement as an officer or employee or
            agent or contractor of the company together with details of all
            payments made by the company, or from the company’s assets to you
            in either of those capacities and records of the receipt by you, or on
            your behalf of any payments made by or on behalf of the company on
            any account whatever;

            Company Financial Records

5.         All financial records including signed copies of annual accounts with
            directors’ statement, chairman of directors’s report, secretary’s
            declaration and auditors’ report, general ledger posted and
            balanced to date of liquidation, reconciled cash book, Australian
            Securities and Investments Commission documents and company
            income taxation returns which correctly record and explain the
            transactions and financial position and performance of the company
            within the meaning of s 286 of the Corporations Act 2001 (Cth);

            Promotional Material

6.         Any literature, including any brochure, pamphlet, circular,
            advertisement, newsletter or any other document distributed by the
            company concerning the liability of any person to pay taxation within
            or to or on behalf of the Commonwealth of Australia;

            Court Documents

7.         Any documents, including without limitation documents filed in any
            court or tribunal including but not limited to the Administration
            Appeals Tribunal relating to the affairs of a client, or the company;

            Company Meeting Records

8.         Any minutes or memoranda, recording any meeting of any of the
            directors of the company, together with all board papers or other
            material distributed for the purpose of such meetings, or otherwise
            tabled during the course of such meetings;

            Financial Agreements / Bank Records

9.         Any contract or other form of agreement between the company and
            any third person including any bank, finance company or other
            financial institution pursuant to which the company was provided with
            any form of financial accommodation or advance, including any
            documentation such as bank statements, cheque books, deposit books,
            and all other records relating to any bank account operated by the
            company in any capacity whether as trustee or otherwise;

            Intellectual Property

10.       Any agreement, or document which otherwise records the terms,
            pursuant to which the company was able to use any form of
            intellectual property associated with its views concerning the liability
            of persons to pay taxation within the Commonwealth of Australia;

            Employment Documentation

11.       All documentation relating to wages paid to employees including wage
            books and employee records, including used or unused group
            certificates;

            Taxation Records

12.       All documentation relating to Group Tax, Payroll Tax and / or Sales
Tax, Workcover or the like registration certificates with copies of returns           made;

            Sales Information

13.       Any additional sales documentation including but not limited to
            general journals with explicit narrations to all entries, purchases
            journals, sales journals, debtors ledger balanced and reconciled,
            creditors ledger balanced and reconciled;

            Company Contracts

14.       Copies of any contracts entered into including hire purchase and
            leasing agreements;

            Miscellaneous Documents

15.       Plant and asset registers, including any depreciation schedules.

16.       Titles to any land owned.

17.       Certificates for any shares or other securities owned.

18.       Motor vehicle registration certificates.

3.         The registrar conducting each examination exercise all or any of the powers referred
to in s 596F of the Corporations Act 2001 (Cth) in relation to each such examination, from time to time, as the exercise of any such power appears to the registrar to be appropriate.

4.         Questions put to Ian Sidney Henke, Lance Stewart Miller, Robyn Diane Coningham
and Francis John Coningham and answers given by each of them shall be recorded in writing.

5.         The liquidator’s costs of and incidental to the preparation and service of each such
summons, and of each such examination be paid out of the assets of Institute of Taxation Research Pty Ltd (In Liquidation).

6.         There be no order as to the costs of the proceeding in which these orders have been
made.

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

REASONS FOR JUDGMENT

1                     The controversy dealt with in these reasons for judgment results from the making of orders of a kind routine in the liquidation of a corporation.  Although routine, those orders have been challenged by the persons to whom they relate by a procedure that is not available, and on a number of grounds, some of which appear to be based on misconceptions about the nature, form and purpose of the orders.  Nonetheless, the question whether all of the orders should be made is before the Court and must be dealt with.

2                     On 18 February 1999, a corporation called Institute of Taxation Research Pty Ltd (“ITR”) was registered in Victoria as a proprietary company limited by shares.  On 19 March 2001, the Supreme Court of South Australia ordered that ITR be wound up.  Bruce James Carter (“the liquidator”) was appointed liquidator.  An appeal against the winding up order was subsequently dismissed.  At the date of the winding up, the directors of the company were Lance Stewart Miller, Ian Sidney Henke and Robyn Diane Coningham.  Francis John Coningham had been a director of ITR until 31 August 1999.

3                     On 3 October 2001, Finlaysons, a firm of solicitors acting on behalf of the liquidator (“the liquidator’s solicitors”), filed in the South Australia District Registry of the Court four applications.  Three were headed “Interlocutory Process” and the fourth was headed “Originating Process”, but nothing appears to turn on this distinction.  Rule 11.3(1) of the Federal Court (Corporations) Rules (“the Corporations Rules”) permits an application for the issue of an examination summons to be made by filing an interlocutory process or an originating process, as the case requires.  In other respects, save for the name of the person in respect of whom the orders were sought, the applications were the same.  It is sufficient to quote the body of one application:

“A.      DETAILS OF APPLICATION

This application seeks the issuance of a summons for examination under section 596A of the Corporations Act 2001, orders for the production of books and records under section 596D of the Corporations Act 2001 and other orders under section 596F of the Corporations Act 2001.

On the facts stated in the supporting affidavit the applicant seeks the following orders:

1.         That this Honourable Court issue a Summons in the form annexed
            hereto to Ian Sidney Henke of 48 Lyall Street, Hastings, Victoria, 3915
            requiring him to:

            1.1       Produce all books and records in his possession concerning
                        Institute of Taxation Research Pty Ltd (In Liquidation) and its
                        examinable affairs, including but not limited to those books
                        and records specified in the Schedule to the Summons annexed
                        hereto; and

            1.2       Appear before the Court for examination about the examinable
                        affairs of Institute of Taxation Research Pty Ltd (In
                        Liquidation).

2.         That the examination referred to in paragraph 1 above (‘the
            examination’) be conducted in private and no other person other than
            the applicant and anyone authorised by the applicant be allowed
            access to attend at them.

3.         That no person other than the applicant and anyone authorised by the
            applicant be able to access the records of, and any document produced
            to the Court in, the examination (including the transcript of the
            examination) save and except an examinee may access their own
            transcript of examination and the documents they produce to the
            Court.

4.         That no person other than the applicant and anyone authorised by the
            applicant shall communicate any of the following to a person to whom       a summons for examination is or has been directed in relation to
            Institute of Taxation Research Pty Limited (In Liquidation) (‘the
            examinees’), or any partner, employee, related entity, adviser or agent
            of the examinees:

            4.1       information about the content of any of the examinations;

            4.2       information about the evidence given at any of the
                        examinations and any exhibits therein tendered or otherwise;

            4.3       the existence of any of the examinations; and

            4.4       the making of any order in respect of or concerning any of the
                        examinations.

5.         That further consideration of this process be adjourned to the time of
            the examination.

6.         That any person interested be at liberty to apply prior to the time of
            the examination to vary or discharge this Order.

7.         That the costs of and incidental to this Order and the examination be
            paid out of the assets of the company.

8.         Such further or other orders as this Honourable Court deems fit.”

4                     Rule 16.1 of the Corporations Rules provides as follows:

“(1)     For the purposes of paragraph 35A(1)(h) of the Federal Court of
            Australia Act 1976, if the Court or a Judge so directs, a Registrar may
            exercise a power of the Court:

            (a)        under a provision of the Law mentioned in column 2, or a
                        provision of these Rules mentioned in column 3, of an item in
                        Part 1 of Schedule 2; or

            (b)        under a provision of the ASIC Law mentioned in column 2, or a
                        provision of these Rules mentioned in column 3, of an item in
                        Part 2 of Schedule 2.

(2)       A decision, direction or act of a Registrar made, given or done under
            these Rules, may be reviewed by the Court or a Judge.

(3)       An application for the review of a decision, direction or act of a
            Registrar made, given or done under these Rules, must be made
            within:

            (a)        21 days after the decision, direction or act complained of; or

            (b)        any further time allowed by the Court.”

5                     Section 35A(1)(h) of the Federal Court of Australia Act 1976 (Cth) provides that a power of the Court prescribed by rules of court may, if the Court or a judge so directs, be exercised by a registrar.  Rule 16.1 of the Corporations Rules is such a prescription.  Schedule 2 to the Corporations Rules, in item 96, lists ss 596A, 596B and 596F of the Corporations Act 2001 (Cth) (“the Corporations Act”) as powers that may be exercised by a registrar. 

6                     Section 596A of the Corporations Act provides as follows:

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

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

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

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

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

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

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

7                     Section 9 contains a definition of “eligible applicant” in relation to a corporation, which includes a liquidator of the corporation.  Section 9 also contains a definition of the phrase “examinable officer” in relation to a corporation, which includes a director of the corporation.  Section 596A is expressed in mandatory terms.  If an eligible applicant applies and the Court is satisfied that the person is an examinable officer, or was during the two years ending when the winding up began, the section provides that the Court “is to summon” the person for examination about the corporation’s examinable affairs.  The section is not to be confused with s 596B, which provides as follows:

“(1)     The Court may summon a person for examination about a
            corporation’s examinable affairs if:

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

            (b)        the Court is satisfied that the person:

                        (i)         has taken part or been concerned in examinable affairs
                                    of the corporation and has been, or may have been,
                                    guilty of misconduct in relation to the corporation; or

                        (ii)        may be able to give information about examinable
                                    affairs of the corporation.

(2)       This section has effect subject to section 596A.”

8                     The use of the word “may” in s 596B makes it clear that the power given by that section is a discretionary one.  See s 33(2A) of the Acts Interpretation Act 1901 (Cth).  By contrast, if the application is made pursuant to s 596A, the Court “is to” make the order, if the conditions for its making are satisfied.

9                     Section 596D of the Corporations Act provides as follows:

“(1)     A summons to a person under section 596A or 596B is to require
            the person to attend before the Court:

            (a)        at a specified place and at a specified time on a specified day,
                        being a place, time and day that are reasonable in the
                        circumstances; and

            (b)        to be examined on oath about the corporation’s examinable
                        affairs.

(2)       A summons to a person under section 596A or 596B may require the
            person to produce at the examination specified books that:

            (a)        are in the person’s possession; and

            (b)        relate to the corporation or to any of its examinable affairs.

(3)       A summons under section 596A is to require under subsection (2) of
            this section the production of such of the books requested in the
            application for the summons as the summons may so require.”

10                  Section 596F of the Corporations Act provides as follows:

“(1)     Subject to section 597, the Court may at any time give one or more of
            the following:

            (a)        a direction about the matters to be inquired into at an
                        examination;

            (b)        a direction about the procedure to be followed at an
                        examination;

            (c)        a direction about who may be present at an examination while
                        it is being held in private;

            (d)        a direction that a person be excluded from an examination,
                        even while it is being held in public;

            (e)        a direction about access to records of the examination;

            (f)        a direction prohibiting publication or communication of
                        information about the examination (including questions asked,
                        and answers given, at the examination);

            (g)        a direction that a document that relates to the examination and
                        was created at the examination be destroyed.

(2)       The Court may give a direction under paragraph (1)(e), (f) or (g) in
            relation to all or part of an examination even if the examination, or
            that part, was held in public.

(3)       A person must not contravene a direction under subsection (1).”

11                  The applications were accompanied by an affidavit of the liquidator.  In accordance with r 11.3(4) of the Corporations Rules, the documents were filed in a sealed envelope.  By r 11.3(7), unless the Court otherwise orders, an affidavit in support of an application for an examination summons is not available for inspection by any person.  No application was made at any time to the Court to order that the affidavit be made available for inspection by any person. 

12                  In accordance with r 16.1(1) of the Corporations Rules, the then District Registrar of the South Australia District Registry of the Court (“the registrar”) dealt with the applications.  On 18 October 2001, the registrar made four orders.  Apart from the identity of the person concerned, the orders were in identical terms.  It is sufficient to set out one of them:

“1.       IAN SIDNEY HENKE of 48 Lyall Street, Hastings in the State of
            Victoria be summoned pursuant to section 596A of the Corporations
            Act 2001 to attend before this Honourable Court to be examined in
            respect of the examinable affairs of Institute of Taxation Research Pty
            Limited ACN 086 352 329 (In Liquidation) on 9 November 2001 at
            10:00 a.m. by summons in terms of Annexure A hereto.

2.         IAN SIDNEY HENKE pursuant to section 596D of the Corporations
            Act 2001 produce to the Court all books and records in his possession
            concerning Institute of Taxation Research Pty Ltd (In Liquidation) and
            its examinable affairs, including but not limited to those books and
            records specified in the schedule to the summons referred to in
            paragraph 1 above.

3.         Each affidavit filed in support of this Order and exhibits thereto be
            placed in a sealed envelope and not disclosed to any person other than
            the applicant and this Honourable Court.  Such documents to be held
            by the Registrar and not opened except on an order of a Judge or
            Registrar of this Court.

4.         The examination referred to in paragraph 1 above (‘the examination’)
            be conducted in private and no other examinee shall be allowed access
            to attend at them without leave of the Court.  For the purposes of these
            orders the examinees are Ian Sidney Henke, Lance Stewart Miller,
            Robyn Diane Coningham, Wolter Joosse, Francis John Coningham,
            Leanne Kluyt, Marleen Elva Broadley, Zolton Varszeghy, Noel Stewart
            Waters, or their agents or advisers.

5.         No examinee or agent or adviser of that examinee be able to access the
            records of, and any document produced to the Court in the
            examination (including the transcript of the examination) save and
            except an examinee or their agent or adviser may access their own
            transcript of examination and the documents they produce to the
            Court.

6.         No examinee shall directly or indirectly communicate any of the
            following to any other examinee:

            6.1.      information about the content or the evidence given at any of
                        the examinations;

            6.2.      information about exhibits tendered or otherwise at any of the
                        examinations.

7.         Questions put to Ian Sidney Henke and answers given by him shall be
            recorded in writing.

8.         Further consideration of this process be adjourned to the time of the
            said examination.

9.         The person to whom this Order is directed has liberty to apply to set
            aside this Order by filing, within three days of service of this Order
            upon him or her, a notice of motion in these proceedings seeking to
            vary or discharge this Order together with an affidavit setting out the
            material facts and matters on which he or she relies.

10.       The costs of and incidental to this Order and the examination be paid
            out of the assets of the company.”

13                  The orders were entered on 25 October 2001.  Each was accompanied by a summons for examination, in accordance with r 11.3(8) of the Corporations Rules and form 17 in Sch 1 to the Corporations Rules.  Each summons informed the person to whom it was addressed as follows:

“You are summoned under sections 596A and 596D of the Corporations Act to:

(a)       attend at The Federal Court of Australia, Grenfell Centre, 25 Grenfell
            Street, Adelaide, South Australia 5000 at 10:00 am on 9 November
            2001 and from day to day until excused by the Court, to be examined
            on oath or affirmation about the examinable affairs of Institute of
            Taxation Research Pty Ltd (In Liquidation) ACN 086 352 329; and

(b)       to produce at the examination all books in your possession, custody or
            under your control in relation to the above company and those
            documents specified in the Schedule attached hereto.”

14                  The summons contained a notice to the person to whom it was addressed in the following terms:

“B.      NOTICE TO PERSON TO BE EXAMINED

The Court may order that the questions put to you and the answers given by you at the examination are to be recorded in writing and signed by you.

If you do not attend the examination in accordance with this summons, without reasonable cause, you may be arrested and imprisoned without further notice.

This summons is issued at the request of The Applicant Bruce James Carter whose address for service is C/- Finlaysons (ref: MB:184866/111) 81 Flinders Street, Adelaide SA 5000.”

15                  The schedule to each summons described the documents to be produced in the following terms:

“All documents including but not limited to correspondence, diary notes, facsimiles, telephone messages, e-mails, file notes, memoranda, timesheets, agreements, accounts and any other documents (whether such documents are drafts or final versions of the same, or are in hard copy or electronic format), bearing a date or brought into existence since 18 February 1999 until 19 March 2001, or relating to that period which concern or relate to the examinable affairs (as that term is defined in section 9 of the Corporations Act 2001) of Institute of Taxation Research Pty Ltd (In Liquidation) (‘the company’).  Such documents include, but are not limited to, each of the following:

            Client Agreements and Records

1.         Records of any agreement between the company and any person (‘a
            client’) in the nature of a consultancy and research agreement or any
            other form of agreement with a client together with all
            communications, correspondence and records of payments to or from
            the company and a client;

            Communications with Third Parties

2.         All communications, correspondence to or from the company, relating
            to, or concerning a client, with any third party, including any Court,
            Tribunal, the Australian Taxation Office, the Commissioner of
            Taxation, the Deputy Commissioner of Taxation, the Australian
            Government Solicitor, any solicitor or barrister or other adviser
            acting in relation to or for such a client, or the company, or any other
            person;

3.         Records of any payments made by or on behalf of the company, and
            without limitation to you, or on your behalf;

            Records Concerning the Examinee

4.         Records of the terms of your engagement as an officer or employee or
            agent or contractor of the company together with details of all
            payments made by the company, or from the company’s assets to you
            in either of those capacities and records of the receipt by you, or on
            your behalf of any payments made by or on behalf of the company on
            any account whatever;

            Company Financial Records

5.         All financial records including signed copies of Annual Accounts with
            Directors’ Statement, Chairman of Directors’ Report, Secretary’s
            Declaration and Auditors’ Report, General Ledger posted and
            balanced to date of liquidation, Reconciled Cash book, Australian
            Securities and Investments Commission documents and company
            income taxation returns which correctly record and explain the
            transactions and financial position and performance of the company
            within the meaning of s 286 of the Corporations Act 2001;

            Promotional Material

6.         Any literature, including any brochure, pamphlet, circular,
            advertisement, newsletter or any other document distributed by the
            company concerning the liability of any person to pay taxation within
            or to or on behalf of the Commonwealth of Australia;

            Court Documents

7.         Any documents, including without limitation documents filed in any
            Court or Tribunal including but not limited to the Administration
            Appeals Tribunal relating to the affairs of a client, or the company;

            Company Meeting Records

8.         Any minutes or memoranda, recording any meeting of any of the
            directors of the company, together with all board papers or other
            material distributed for the purpose of such meetings, or otherwise
            tabled during the course of such meetings;

            Financial Agreements / Bank Records

9.         Any contract or other form of agreement between the company and
            any third person including any bank, finance company or other
            financial institution pursuant to which the company was provided with
            any form of financial accommodation or advance, including any
            documentation such as bank statements, cheque books, deposit books,
            and all other records relating to any bank account operated by the
            company in any capacity whether as trustee or otherwise;

            Intellectual Property

10.       Any agreement, or document which otherwise records the terms,
            pursuant to which the company was able to use any form of
            intellectual property associated with its views concerning the liability
            of persons to pay taxation within the Commonwealth of Australia;

            Employment Documentation

11.       All documentation relating to wages paid to employees including wage
            books and employee records, including used or used group
            certificates;

            Taxation Records

12.       All documentation relating to Group Tax, Payroll Tax and / or Sales
            Tax, Workcover etc. Registration certificates with copies of returns
            made;

            Sales Information

13.       Any additional sales documentation including but not limited to
            General Journals with explicit narrations to all entries, Purchases
            Journals, Sales Journals, Debtors Ledger balanced and reconciled,
            Creditors Ledger balanced and reconciled;

            Company Contracts

14.       Copies of any contracts entered into including Hire Purchase and
            Leasing Agreements;

            Miscellaneous Documents

15.       Plant and Asset registers, including any depreciation schedules.

16.       Titles to any land owned.

17.       Certificates for any shares or other securities owned.

18.       Motor Vehicle Registration Certificates.”

16                  Paragraph 9 of each order informed the person in respect of whom the order was made that he or she had liberty to apply to set aside the order by filing, within three days of service of the order, a notice of motion seeking to vary or discharge the order and an affidavit setting out the material facts and matters on which he or she relied.  This paragraph reflected the provisions of r 11.5 of the Corporations Rules.  None of the persons to whom the summonses were directed exercised this liberty.  Instead, all four, through a solicitor, filed in the Victoria District Registry of the Court on 9 November 2001 what purported to be a notice of appeal from the orders made by the registrar.  The purported notice of appeal named the liquidator and the liquidator’s solicitors.

17                  The purported notice of appeal came before me on 17 December 2001 for directions.  There was discussion as to whether there was any right of appeal from orders made by a registrar of the Court pursuant to the statutory provisions referred to above.  No-one was able to point to any express right of appeal in the Corporations Act, the Corporations Rules, the Federal Court of Australia Act 1976 (Cth) or the Federal Court Rules.  On 14 December 2001, the respondents named in the notice of appeal had attempted to file a notice of motion, seeking to have the appeal dismissed or permanently stayed pursuant to O 20 r 2 of the Federal Court Rules, or to have it dismissed as incompetent.  At the directions hearing on 17 December, I suggested to the solicitor then appearing for the liquidator and the liquidator’s solicitors that such a notice of motion was unnecessary.  The separate hearing of such a motion had the potential to increase costs if it should fail.  As the hearing of the purported appeal appeared likely to be short in any event, it would have been more appropriate to deal with any issues as to the prospects of success of the appeal or of its competence on that hearing.  Nonetheless, the liquidator and the liquidator’s solicitors insisted on proceeding with their motion.  A significant amount of material was filed on their behalf in support of the motion. 

18                  The matter came before me again on 4 February 2002.  Again, no-one was able to refer me to any provision under which there was a right of appeal from the orders of the registrar.  I am unaware of any such provision.  There is, however, in r 16.1(2) of the Corporations Rules a provision that a decision, direction or act of a registrar made, given or done under the Corporations Rules may be reviewed by the Court or a judge.  Such a provision is required for constitutional reasons if a person other than a judge is to be authorised to exercise the jurisdiction of the Court.  See Harris v Caladine (1991) 172 CLR 84 especially at 95 per Mason CJ and Deane J.  By implication from the reasoning of the High Court, it appears that the review for which r 16.1(2) provides is intended to be by way of a rehearing de novo.  For the purposes of such a rehearing, the exercise of the power by the registrar must be ignored and the Court or judge must exercise it afresh on the evidence and submissions available at the time of the fresh exercise.  See also Allesch v Maunz [2000] HCA 40 (2000) 203 CLR 172 at [23] per Gaudron, McHugh, Gummow and Hayne JJ.  On 4 February 2002, the parties agreed that I should treat the purported notice of appeal as an application for review of the decisions or acts of the registrar, pursuant to r 16.1(2).  The purported notice of appeal was filed within the twenty-one day time limit specified in r 16.1(3)(a).  Dealing with the matter in this way made it unnecessary to consider much of the material that had been filed by the liquidator and the liquidator’s solicitors. 

19                  Ordinarily, it is a simple task to deal with an application of the kind made by the liquidator for orders for the examination of directors of a liquidated company, and those who have been its directors within the preceding period of two years.  It is only necessary to look to see whether the applicant is an eligible applicant and whether the person whose examination is sought is an examinable officer or was so during the period of two years specified in s 596A(b) of the Corporations Act.  In the present case, both elements are satisfied.  The liquidator is an eligible applicant and a director is an examinable officer.  Mr Henke, Mr Miller and Ms Coningham are current directors.  Mr Coningham was a director within two years ending when the winding up began.  In its terms, s 596A mandates the making of the order.  Unlike s 596B, the section does not provide for the exercise of a discretion.

20                  Counsel who appeared for Mr Henke, Mr Miller, Ms Coningham and Mr Coningham argued that an ulterior purpose on the part of the liquidator in seeking the order would provide a ground for the refusal to make it.  Counsel for the liquidator and the liquidator’s solicitors conceded this to be so.  I do not need to consider whether the concession was a proper one.  It is enough to consider whether the material placed before me suggests an ulterior motive on the part of the liquidator.

21                  Taken at its broadest, the material placed before the Court by Mr Henke, Mr Miller, Ms Coningham and Mr Coningham includes the grounds specified in the purported notice of appeal and three affidavits of Mr Henke, sworn respectively on 8 November 2001, 1 February 2002 and 4 February 2002.  A reading of the material is apt to produce considerable confusion in the mind of the reader about the precise point sought to be made.  This confusion was not unravelled significantly by counsel who appeared for Mr Henke, Mr Miller, Ms Coningham and Mr Coningham on 4 February 2002.

22                  Ignoring those parts of the material that are argumentative as to the law, the material seems to be an attempt to allege impropriety on the part of the liquidator, and perhaps the liquidator’s solicitors, in various respects.  The purported notice of appeal and one of the affidavits suggest that paragraph 10 of each order of the registrar, whereby the costs of and incidental to the order and the examination are directed to be paid out of the assets of ITR, was demonstrably false.  Reference was made to a report by the liquidator to the Australian Securities and Investments Commission dated 19 September 2001.  The claim was that this report showed that ITR had no assets.  In fact, the report was a progress report.  The relevant entries refer to a statement of the position in the winding up.  The form requires, with respect to assets, an estimate of the realisable value in the report as to affairs, a statement of the actual amounts realised to the date of the report and a statement of the estimated realisable value of the balance.  The fact that the word “nil” is entered against each category of assets in each column cannot be taken as a final statement that ITR has no assets.  Even if it could, it is difficult to understand how an order for the payment of costs out of the assets of a company in liquidation, being a routine order in proceedings related to the winding up, could be an indication of an ulterior purpose on the part of the liquidator in seeking orders for examination. 

23                  The purported notice of appeal also suggested that other false information may have been placed before the registrar.  This was mere speculation about the contents of the affidavit required to be kept secret.  I have examined that affidavit and can detect no falsity in it. 

24                  In the material are various references to proceedings in the High Court of Australia.  The material seems to suggest an ulterior purpose on the part of the liquidator in seeking examinations for the purpose of obtaining information for use in those proceedings, or of ascertaining the case to be made by parties to those proceedings, or of outflanking legal professional privilege that would otherwise be applicable in relation to those proceedings.  Whilst there are references in the secret affidavit to those proceedings, they do not indicate that the liquidator’s purpose in seeking examination is in any way improper.  It has been recognised in relation to the discretionary power in s 596B of the Corporations Act that the existence of parallel legal proceedings, and the desire of a liquidator to obtain information in relation to them, is not indicative of an ulterior purpose.  In Re Southern Equities Corporation Ltd (In Liq); Bond v England (1997) 24 ACSR 472 at 486, Debelle J said:

“Not infrequently, applications by liquidators for an order for examination are made in circumstances where litigation is intended or pending.  It is well-settled that the fact that the liquidator seeks to use the examination to gather information in relation to proceedings which he intends to institute or which he has already instituted does not, standing alone, constitute an abuse of process.”

The same must be applicable to a proceeding in which the liquidator is not the initiating party.

25                  Mr Henke, Mr Miller, Ms Coningham and Mr Coningham seem to be concerned that the requirement to produce documents will be a requirement that overrides any privilege attaching to those documents or any secrecy provisions to be found in the Income Tax Assessment Act 1936 (Cth) or the Income Tax Assessment Act 1997 (Cth).  The simple answer is that such a fear cannot prevent the making of a proper order for examination, or for the production of documents.  If the examinees are entitled to refuse to produce specific documents, because of the existence of any privilege, they or other persons entitled to the privilege may claim it at the appropriate time.  The possible existence of any such privilege is not a ground for refusing to make an order.  Nor is the seeking of the order in circumstances where there may be privileged documents evidence of an ulterior purpose on the part of the liquidator.

26                  There is a suggestion in the material that the liquidator had a purpose wider than the examination of the affairs of ITR, extending to the pursuit of claims of interest to third parties.  The liquidator is obliged, of course, to act in the interests of creditors of ITR.  To that extent, at least, the liquidator would not be acting with an ulterior purpose. 

27                  The material contains allegations that the liquidator’s solicitors authorised an unlawful search of some premises and unlawful seizure of documents.  I am not in a position to make any findings about these allegations, which are not expressed with clarity.  In any event, if the liquidator has, or his solicitors have, acted improperly in some other respect, it cannot be concluded that the liquidator has an ulterior purpose in seeking examinations as to the affairs of ITR.

28                  None of the material suggests an ulterior purpose on the part of the liquidator.  I am satisfied from the liquidator’s affidavit that he seeks an order for the examination of Mr Henke, Mr Miller, Ms Coningham and Mr Coningham for a proper purpose.  To the extent to which ITR is a party to extant legal proceedings, the liquidator requires information about those proceedings, so as to be in a position to make a decision whether to adopt them or relinquish them.  To the extent to which the directors have not made their reports as to the affairs of ITR pursuant to s 475(1) of the Corporations Act, the liquidator is entitled to seek the information that would have been provided.  He is also entitled to investigate whether ITR has any claims that might be pursued against any other party, including its directors and former directors, or any other assets.  I shall therefore make orders that a summons be issued requiring each of Mr Henke, Mr Miller, Ms Coningham and Mr Coningham to attend for examination.

29                  The question also arises whether I should make orders pursuant to s 596F(1) that the examination of each of the persons be conducted in private and that specified persons be excluded from it.  On reviewing the material in the liquidator’s affidavit, I am not satisfied that the examination should be conducted in private.  I start with the proposition that it is undesirable to conduct such examinations in private unless there is good reason.  The mere possibility of examinees tailoring their answers so that they conform with answers given by other examinees does not seem to me to be a sufficient reason for departing from the normal rule.  It should not be presumed that people will act dishonestly.  If the examinees do intend to act dishonestly, it is difficult to make orders that will prevent them from colluding as to the answers to be given, in any event.  If it appears to the registrar in the course of conducting the examinations that there are orders that should be made, s 596F(1) gives the registrar ample power to make them at that time.  I propose to confirm the direction that whichever registrar of the Court conducts the examination, he or she exercise the powers contained in s 596F of the Corporations Act as and when their exercise is appropriate.  I am not satisfied that there is public benefit in the privacy of the examinations on the basis that publicity as to the activities of ITR will ensue.  If such publicity did occur, it is unlikely to be favourable.  For these reasons, I would not make orders of the kinds referred to in paragraph 4, 5 and 6 of the orders made by the registrar.

30                  With respect to s 596D, subs (3) mandates that the summons issued as a result of an order under s 596A require the production of such of the books requested in the application for the summons as the summons may so require.  The documents referred to in the schedule to each summons already issued are properly required.  I shall therefore order that each summons require the person to whom it is directed to produce those documents.

31                  I shall therefore make orders in a form similar to paragraphs 1, 2 and 7 of the orders made by the registrar, with the substitution of an appropriate date for the examination and with appropriate renumbering.  The orders will direct the registrar to issue to each of Mr Henke, Mr Miller, Ms Coningham and Mr Coningham a summons in the form already issued (with minor amendments, including amendments designed to identify clearly the legislation to which reference is made), with the substitution of the appropriate date for the examination.  With respect to the costs of and incidental to the preparation and service of each summons, and of the examinations, the liquidator is entitled to the usual order for the payment of those costs out of the assets of ITR.

32                  The remaining question that arises relates to the costs of this review.  Mr Henke, Mr Miller, Ms Coningham and Mr Coningham have succeeded in part, because I have resolved not to make orders at this stage that the examinations be conducted in private and consequential orders restricting communication about them between those persons.  They have failed to the extent that orders for the examination and the production of documents to the extent already required will be made.  They have brought the purported appeal against the liquidator’s solicitors with no justification whatever, in circumstances in which they should have known that there was no case for proceeding against the liquidator’s solicitors.  On the other hand, the persistence of the liquidator and the liquidator’s solicitors with the notice of motion seeking dismissal of the purported appeal, and the unnecessary material filed in relation to that, have increased the costs considerably.  In all the circumstances, it seems to me that the most appropriate result is to make no order as to the costs of the proceeding.  Those costs should lie where they fall.

Associate:

Dated:              14 March 2002