FEDERAL COURT OF AUSTRALIA

East Grace Corporation v Xing (No 2) [2005] FCA 1266

PRACTICE AND PROCEDURE – preliminary discovery – debts owed to applicant corporation – debts owed by corporation – director of corporation applying for voluntary deregistration – preliminary discovery sought against former director – whether reasonable cause to believe that there may be a right to claim relief against the former director – applicant’s difficulty in formulating causes of action – speculation and assertion – application dismissed

WA Pines Pty Ltd v Bannerman (1980) 30 ALR 559 cited

Nakkuda Ali v Jayaratne [1951] AC 66 cited

Inland Revenue Commissioners v Rossminster Ltd [1980] AC 952 cited

Hooper v Kirella Pty Ltd (1999) 96 FCR 1 cited

Austrack Operations Pty Ltd (In Liquidation) v State of New South Wales [2003] FCA 1013 cited

Glencore International AG v Selwyn Mines Limited [2005] FCA 801 cited

St George Bank Ltd v Rabo Australia Ltd (2004) 211 ALR 147 cited

EAST GRACE CORPORATION v MIN WEI XING

WAD 266 of 2004

FRENCH J

9 SEPTEMBER 2005

PERTH

THE COURT ORDERS THAT:

1.         The application be dismissed.

2.         The applicant pay the respondent’s costs of the application.

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

REASONS FOR JUDGMENT

Introduction

1                     East Grace Corporation (EGC) is a company incorporated in the Peoples Republic of China.  Min Wei Xing (Mr Min) is a former director of Min’s Australia China Commercial Centre Pty Ltd, (Min’s Australia) a company which was incorporated in Australia. 

2                     On 24 November 2004, EGC filed an application in this Court seeking an order against Mr Xing for preliminary discovery pursuant to O 15A r 6 of the Federal Court Rules.  The documents for which preliminary discovery was sought were by way of financial and business records of Min’s Australia for the period 1996 to 2002. 

3                     Min’s Australia was deregistered in May 2002 on the application of Mr Min made on 26 April 2002.  At the time it was deregistered, and contrary to a declaration contained in the application for voluntary deregistration, apparently made by Mr Min to Australian Securities and Investment Commission (ASIC) on 23 April 2002, it is said that Min’s Australia owed EGC a substantial sum of money.  EGC contends that the money was owed in respect of machinery parts, rubber tracks and pads which it had supplied  The application for deregistration signed by Mr Min contained, declarations that the company’s assets were less than $1,000 and that the company had no outstanding liabilities.

4                     EGC contends that by a Memorandum of Agreement between itself and Min’s Australia made on 25 August 2001:

1.         Min’s Australia, through Mr Min, acknowledged that it owed EGC money and agreed to pay if off by instalments by the end of 2001.

2.         EGC agreed to honour a previous agreement to extend Min’s Australia’s revolving credit of $US300,000.

3.         The parties agreed that Min’s Australia could withhold an amount of $US205,364 pending the investigation of allegations that some of the equipment supplied by EGC to Min’s Australia was defective.

4.         Min’s Australia would pay EGC $US82,844.90 forthwith.

These contentions are set out in an affidavit sworn by EGC’s solicitor, Mr Wyatt.  They were not received as evidence because they are argumentative, however they conveniently encapsulate the contentions made by EGC about the effect of the Memorandum of Agreement.

5                     EGC says that the documents which it seeks are relevant to whether Mr Min has engaged in any of the conduct said to give rise to the various causes of action which it is suggested may lie against him at the suit of EGC.  It is further said that the documents are sought to determine whether assets of Min’s Australia may have been dissipated to defeat creditors such as EGC and whether, given the deregistration of the company in circumstances where EGC’s debt remains unsatisfied, the company may have been trading with EGC when it was insolvent. 

6                     EGC submits that it is at least arguable that from on or after 3 December 1999 or at least 29 December 1999 until June 2002 there was a trading relationship between EGC and Min’s Australia pursuant to which Min’s Australia incurred debts to EGC.  It is further submitted that it is at least arguable that after the incorporation of EGC, Mins Australia became responsible to EGC for debts incurred to corporate predecessors of EGC with whom it had been trading. 

The Documents of which Discovery is Sought

7                     The documents for which pre-action discovery is sought pursuant to O 15A r 6 of the Federal Court Rules are the following documents for the years, 1996-2002, that Min’s Australia was in existence:

1.         Financial statements incorporating the balance sheet, profit and loss statement, cash flow statement and notes to financial statements;

2.         Taxation records and supporting working files, business activity statements, activity instalments, Pay as You Go (‘PAYG’) payment summaries;

3.         General ledger accounting records, asset register, inventory listings, contract register and copies of major contracts;

4.         Management reports and budgets;

5.         Bank statements and monthly bank reconciliations;

6.         Sales register, sales invoice register, sales invoice copies or other similar records of sales;

7.         Payable register, accounts payable listings, cheque butts, invoice payables register, copies of invoices paid or other similar records of payment;

8.         Copies of all insurance documents documents;

10.       Copies of all loan agreements/repayment details;

11.       Copies of all directors meeting minutes, company returns, share register etc;

12.       Copies of contract of employment and employee files.

The Rule Relating to Discovery from a Prospective Respondent

8                     Order 15A r 6 provides:

‘Where –

(a)       there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description has been ascertained;

(b)       after making all reasonable inquiries, the applicant has not sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain that relief; and

(c)        there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had possession of any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist in making the decision –

the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c).’

The Evidence

9                     The evidence adduced on behalf of EGC comprised an affidavit of its solicitor, Mr Wyatt, and two affidavits sworn by Fu Dong Ming (Mr Fu), who describes himself as managing director of EGC. 

10                  EGC was incorporated in December 1999.  Mr Fu said he is presently its managing director and duly authorised to represent it.  He said that in all its dealings and trading EGC used the English name East Grace Corp.  He said that from December 1999 EGC traded in its own capacity with Min’s Australia.  All transactions between Min’s Australia and EGC were conducted in Chinese.

11                  Mr Fu exhibited to his principal affidavit what he described as ‘random’ copies of credit advices from EGC’s bank of payments received from Min’s Australia between December 1999 and June 2001.  Payments received from Min’s Australia were applied to outstanding amounts on a first in first out basis.  Mr Fu also exhibited a statement which he had made to ASIC by way of complaint against Min’s Australia on 15 August 2004.  That statement annexed a document called a ‘Receivables Statement’.  It consisted of a list showing invoice numbers, the nature of the goods supplied in respect of each invoice, the amount of the invoice, the date of each remittance received and the amount received.  The shipping date for the various goods was also set out.  The records of a number of invoices were incomplete in that no remittance amount was shown. 

12                  According to Mr Fu, when making payments, Min’s Australia did not specify the invoice on which it was paying.  EGC therefore used the money paid by Min’s Australia to credit its oldest outstanding invoice.  He contended that the amount owing from Min’s Australia to EGC for the period December 1999 to June 2001 was $US1,397,263.88.  He also said that Mr Min and his new company, Global Track Warehouse Pte Ltd continued to trade with EGC after Min’s Australia ceased to trade.

13                  In his affidavit Mr Fu confirmed the truth of his statement to ASIC. That statement appeared to be by way of complaint about the deregistration of Min’s Australia.  Parts of it were not able to be received in evidence either because they were hearsay or simply argumentative.  It gave the clear impression, however, that one company, EGC, had been dealing with Min’s Australia from 1996 continuously.  In par 2 of the statement Mr Fu said:

‘In or about 1996 onwards, EG Corp and Min’s entered into a series of transactions whereby EG Corp would sell and export to Min’s in Australia, on cif each basis, machinery and parts, rubber tracks and pads and related products (collectively called “the goods”) (the goods were primarily to be used for heavy plant and vehicles such as Caterpillar bull-dozer and the like).’

14                  Mr Fu said that between 1996 and 1998 there were numerous transactions between EGC and Min’s Australia.  Min’s Australia paid for the transactions between 1996 and 1998 save for an amount of $US133,551.93 which remained outstanding at the end of that time.  Min’s Australia alleged there were quality problems with respect to some of the goods but, according to Mr Fu, had never shown or particularised the defects nor returned the goods. 

15                  From 1999 EGC continued to trade with Min’s Australia in good faith and Min’s Australia paid, usually within one to two months after invoice, but never in full.  Over a period of time the unpaid portion accumulated to $US723,649.93. 

16                  A meeting took place in August 2001.  Mr Fu was not present at the meeting so his account of what occurred was not admissible.  However a memorandum which was signed at the meeting between EGC and Min’s Australia was admitted in evidence.  The Memorandum recited that there had been friendly negotiations by the parties.  It had three headings under which agreements were made.  They were as follows:

1.         Outstanding Business-Related T/T Payment

2.         Method of Settlement between the Parties

3.         Payment Outstanding since 1996-1998 total amount being $US133,551.93

The original of the document was in Chinese and it was an English translation made on 8 March 2004 which was attached to the statement sent to ASIC. 

17                  Under the first heading the Memorandum set out a mechanism for resolution of quality problems through negotiations involving the manufacturer of the goods in contention.  It was noted under the first heading, that EGC proposed that the amount owing to it by Min’s Australia would be settled by the end of 2001.  It recited that Min’s Australia found it difficult to repay within such a short period of time the $US300,000 revolving credit facility previously extended by the management of EGC.  The Memorandum expressed the hope of Min’s Australia that it would be allowed a certain grace period.  It was to propose a detailed repayment scheme and implement it upon confirmation by EGC. 

18                  Min’s Australia also proposed, under the first heading, that the outstanding amount of $US588,208.90 due to EGC would be reduced by $US205,364.02 attributable to the alleged quality problems.  It agreed to forthwith remit the difference between the balance of $US382,844.08 and the $US300,000 credit term promised by the previous management of EGC. 

19                  Under the second heading it was agreed that payment methods would change with effect from July 2001. 

20                  Under the third heading, which concerned the outstanding amount of $133,551.93 said to be owing since 1996-1998, EGC recited its belief that this was an issue from the past not caused by it.  It expected Min’s Australia to ‘solve the issue as soon as possible’.  It recited its willingness to make compromises by accepting 60% of the outstanding original amount.

21                  Mr Fu said in his statement that EGC’s potential claim against Min’s Australia was for $US665,438.76.  This represented a total balance of $US723,649.93 less a credit of $US58,211.17 for goods returned by Mr Ming.  The deduction was not disputed by EGC.  The total of outstanding amounts shown in the memorandum was $US721,760.83 comprising the sum of $US588,208.90 and $US133,551.93 owing since 1996-1998.  Mr Fu contended however that the receivables statement was more accurate than the memorandum and on that basis EGC relied on that document. 

22                  According to Mr Fu, EGC wanted to institute legal action against Min’s Australia in 2003.  He then discovered that the company had been deregistered in 2002 and that Mr Min, in applying for deregistration, had declared that there were no debts outstanding.  Because the deregistration had been allowed by ASIC there was no entity against which EGC could pursue its claim. 

23                  In his statement to ASIC Mr Fu requested that ASIC ‘… take a firm view of Min Weixing’s conduct and investigate the matter, or revoke the deregistration of Min’s so that a proper enquiry can be made by judicial process in Australia’.  There was no evidence of ASIC’s response to this complaint.  The company remains deregistered.

24                  Mr Wyatt said in his affidavit that if proceedings were commenced against Mr Min by EGC it would seek repayment from Mr Min of the debt owed by Min’s Australia to EGC.  Mr Wyatt asserted his belief that there was reasonable cause to believe that EGC may have a right of relief against Mr Min but that that decision could not be taken at the present time because of the limited information relating to the activities of Mr Min and his companies. 

25                  Mr Wyatt deposed to inquiries made by Phillips Fox, the solicitors for EGC, in their attempts to obtain sufficient information to determine whether proceedings should be commenced against Mr Min.  The inquiries made were listed as follows:

1.         Searches of ASIC records of materials provided by Mr Min to deregister Min’s Australia.  This yielded the deregistration application document to which reference has already been made.

2.         A search of records of writs or statutory demands that might have been issued against Min’s Australia between 1996 and 2001 yielded no result.  That search was undertaken to determine whether there was a basis for asserting that Mr Min may not have held a reasonable belief that Min’s Australia could pay any part of the debt it was incurring and had incurred with EGC as and when it was incurred.

3.         Historical land title searches were made to determine if any real estate was held by and transferred out of Min’s Australia before its deregistration.  These searches revealed that Min’s Australia did not own any real estate during its existence. 

4.         Searches were undertaken of ASIC records for any annual reports that Min’s Australia may have filed between 1996 and its deregistration.  A bundle of documents held by ASIC under Min’s Australia was exhibited to Mr Wyatt’s affidavit.

26                  The purposes for which these searches were carried out was to determine if:

1.         Min’s Australia incurred debts at a time when there was no basis for a belief that it could pay those debts.

2.         Mr Min stripped assets from the company to prepare it for deregistration.

The documents which the inquiries did yield did not assist EGC in reaching any decision on whether to commence proceedings against Mr Min.  In particular, according to Mr Wyatt, EGC could not, on the basis of currently available information, determine if Mr Min knew or ought to have known that Min’s Australia could not pay the amount that was agreed to be paid on 25 August 2001.  Nor could it decide whether Mr Min stripped the company of its assets after the Settlement Agreement on 25 August 2001 and prior to deregistration.

27                  On 6 September 2004 Phillips Fox wrote to Mr Min seeking copies of documents relevant to its inquiries.  On 17 December 2004 Mr Min’s solicitor, Middletons, wrote to Phillips Fox requesting further information.  Phillips Fox responded  on 22 October 2004.  Middletons wrote back on 29 October 2004 requesting further information and claiming that EGC’s request for pre-action discovery must be narrowed.  Phillips Fox wrote to Middletons with a copy of the requested agreement and putting Mr Min on notice that EGC intended to make an application unless he agreed to provide the requested documents.

28                  A further affidavit of Mr Fu, which had been sworn on 27 May 2005, was also read, albeit much of it could not be received in evidence because it was simply argumentative.  It adds nothing of substance to the evidence already mentioned.

29                  The only evidence adduced by Mr Min was an expert report by Tian Peng, a legal practitioner in the Peoples Republic of China and a partner in a law firm in Shanghai called J & W Law Firm.  The expertise of Mr Peng was not disputed.  He was not called as witness  and was not cross-examined.  His report disclosed that EGC had only come into existence in December 1999 and that it had been preceded by two other companies.  The first of these was Wuxi East Grace (Group) Co Ltd.  It was incorporated under the Company Law of the Peoples’ Republic of China on 21 December 1995 as a limited liability and solely state-owned company.  It still exists.  However it does not carry on business.  A second company called New East Grace International Corporation was incorporated in November 1998.  It is described as a solely state-owned company.  All its shares were held by the State Owned Assets Management Committee of Wuxi when it was incorporated.  In April 2004 that company became a company controlled by natural persons. 

30                  East Grace Co Ltd was incorporated on 3 December 1999.  86.96% of its registered shares are held by Wuxi New East Grace International Corporation.  Another 13.04% is held by the Committee of the Labor Union of Wuxi East Grace (Group) Co Ltd. 

31                  It appears from this uncontested evidence that EGC only came into existence on 3 December 1999.  It is a matter of some concern that the existence of three different corporations over the period, which is the subject of the claims made by EGC, did not emerge from Mr Fu’s affidavit nor from his statement.

The Requirements for Pre-action Discovery

32                  Order 15A r 6 confers a discretion on the Court to order discovery to be given by a prospective respondent to proceedings.  The three paragraphs of r 6 define three necessary conditions each of which must be satisfied before the discretion is enlivened. 

33                  The first condition, which is that set out in par (a) requires an applicant to demonstrate that there is ‘reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description has been ascertained’.  The criterion ‘reasonable cause to believe’ has well-established statutory antecedents and is an objective criterion.  That term and the similar phrase ‘reason to believe’ frequently condition the exercise of statutory powers.  The repository of the power conditioned by such words must have the requisite belief and an objective basis for it. 

34                  By way of example s 155 of the Trade Practices Act 1974 (Cth) conditions the power of the Australian Competition and Consumer Commission to require production of documents, the furnishing of information or the giving of evidence by a person upon the Commission having reason to believe ‘that the person is capable of furnishing information, producing documents or giving evidence relating to a matter that constitutes or may constitute a contravention of [the Trade Practices Act]’.  The condition requires that the Commission hold the requisite belief and that there are reasonable grounds or cause for that belief.  As Lockhart J said of such verbal formulae in WA Pines Pty Ltd v Bannerman (1980) 30 ALR 559 at 571:

‘Words such as these are found frequently in legislation or regulations conferring powers on Ministers of the Crown or public servants.  They must be read as limiting otherwise arbitrary powers.  If they are to be read as empowering a person in whom the power is vested, to determine conclusively whether the limitation has been satisfied, the value of the intended limitation is nugatory.’

35                  In the context of s 155 with which his Honour was concerned in that case, he held it required the Commission to believe that a person was capable of furnishing the relevant information, documents or evidence and ‘there must be reasonable grounds or cause for that belief, before the powers conferred by s 155(1) may be exercised.’  His Honour’s judgment contains a helpful review of authorities including Nakkuda Ali v Jayaratne [1951] AC 66 at 77 (Lord Radcliffe) and Inland Revenue Commissioners v Rossminster Ltd [1980] AC 952 at 1011 (Lord Diplock).

36                  The words of O 15A r 6 condition the exercise of the power which is conferred by that rule upon the Court, upon satisfaction of the criterion that ‘there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court…’.  So framed, the condition does not require that any person hold the requisite belief.  Were it a belief required of the judge hearing the application, the rule might have been framed ‘the Court or a Judge has reasonable cause to believe…’.  In my opinion however, the objective character of the condition requires the Court to be satisfied that a reasonable person could form a belief, on the basis of the material before the Court, that the applicant ‘has or may have the right to obtain relief’.  The word ‘may’ indicates that the content of the putative belief need not incorporate a firm view that there is a right to relief. 

37                  There is no bright line test here.  One way of framing the question is whether a reasonable person, having regard to the material before the Court, could say:

‘I believe that you may have a cause of action against this person but I would need further information before I could believe that you do.’

The difficulty with even that formulation is that it may too readily accommodate speculation or mere suspicion.  The test is confined to some degree by the propositions that while it does not require a prima facie case for relief to be demonstrated, mere assertion of a case  against a prospective respondent is not enough – Hooper v Kirella Pty Ltd (1999) 96 FCR 1 at 11-12. 

38                  Emmett J said in Austrack Operations Pty Ltd (In Liquidation) v State of New South Wales [2003] FCA 1013 at [10]:

‘The words ‘where there is reasonable cause to believe that the applicant has or may have the right to obtain relief’ are not satisfied by mere assertion.  The belief requires more than mere suspicion or conjecture.  On the other hand, it is not necessary for an applicant to establish even a prima facie case.  It is necessary, however, for the applicant to show objectively that there is reasonable cause for the relevant belief. It is not necessary to demonstrate whether or not the applicant has the belief.’

39                  Lindgren J recently put it thus in Glencore International AG v Selwyn Mines Limited [2005] FCA 801 at [16]:

‘… while the notion of ‘reasonable cause to believe that the applicant …. may  have the right to obtain relief ….’ may be seen to set the threshold ‘at quite a low level’ (cf Gulf (sic) Petroleum (WA) Ltd v Tah Land Pty Ltd [2001] FCA 1531 at [59] per Carr J), there must be some tangible support that takes the existence of the alleged right beyond mere ‘belief’ or ‘assertion’ by the applicant (Minister for Health and Aged Care v Harrington Associates Ltd [1999] FCA 549 at [29]; Hooper v Kirella Pty Ltd… at [39]; C7 Pty Ltd v Foxtel Management Pty Ltd [2001] FCA 1864 at [12]).’

40                  In St George Bank Ltd v Rabo Australia Ltd (2004) 211 ALR 147, Hely J conveniently collected the authorities and set out the following propositions emerging from them about the application of O 15A r 6.  Omitting reference to the authorities, they are as follows:

(a)        The rule is to be beneficially construed, given the fullest scope that its language will reasonably allow, with the proper brake on any excesses lying in the discretion of the Court, exercised in the particular circumstances of each case.

(b)        Each of the elements prescribed in sub-pars (a), (b) and (c) of the Rule must be established.  Preliminary discovery cannot itself be used to remedy deficiencies in the satisfaction of the conditions themselves. 

(c)        The test for determining whether the applicant has ‘reasonable cause to believe’ as required by subpar (a), is an objective one.  Further the words ‘or may had’ cannot be ignored.  The applicant does not have to make out a prima facie case.

(d)        Belief requires more than mere assertion and more than suspicion or conjecture.  Belief is an inclination of the mind towards assenting to, rather than rejecting a proposition.  Thus it is not sufficient to point to a mere possibility.  The evidence must incline the mind towards the matter or fact in question.  If there is no reasonable cause to believe that one of the necessary elements of a potential cause of action exists, that would dispose of the application in so far as it is based on that cause of action.

(e)        While uncertainty as to only one element of a cause of action might be compatible with the ‘reasonable cause to believe’ required by subpar (a), uncertainty as to a number of such elements may be sufficient to undermine the reasonableness of the cause to believe.

(f)         The question posed by subpar (b) to the rule is not whether the applicant has sufficient information to decide if a cause of action is available against the prospective respondent.  The question is whether the applicant has sufficient information to make a decision whether to commence proceedings in the Court.  Accordingly, an applicant for preliminary discovery may be entitled to discovery in order to determine what defences are available to the respondent and the possible strength of those defences, or to determine the extent of the respondent’s breach and the likely quantum of any damages award.

(g)        Whether an applicant has ‘sufficient information’ for the purposes of subpar (b) also requires an objective assessment to be made.  The subparagraph contemplates that the applicant is lacking a piece (or pieces) of information reasonably necessary to decide whether to commence proceedings.

(h)        It is no answer to an application under the rule to say that the proceeding is in the nature of a ‘fishing expedition’.  Indeed O 15A r 6 ‘expressly contemplates’ what might once have been castigated as ‘fishing’.

Whether the Conditions for Preliminary Discovery are Satisfied

41                  The evidence in the present case tends to establish that the applicant is a company incorporated in the Peoples Republic of China in December 1999.  This is contrary to the basis upon which the application was brought, namely that the applicant has been in existence and trading with the respondent’s former company, since 1996.  The evidence does not establish that the EGC succeeded to any debts owed to its corporate predecessors by Min’s Australia or otherwise.  There is evidence to support the proposition that the applicant traded with Min’s Australia from 1999 until at least August 2001.  The memorandum of 25 August 2001 names both EGC and New East Grace International Corporation as parties.  That document does evidence an acceptance on the part of Mr Min that his company, Min’s Australia, owed substantial sums of money to EGC which seems, in the memorandum, to have been referred in the alternative as New East Grace International Corporation.

42                  The evidence establishes that the debts were still outstanding as at 23 April 2002 when Mr Min signed the application to the ASIC seeking voluntary deregistration of the company.  In so doing he declared that the company’s assets were worth less than $1,000 and the company had no outstanding liabilities.

43                  In the written submissions filed on behalf of EGC the attempt to identify possible causes of action against Mr Min highlighted the difficulty facing this application.  It was submitted that under s 601AA(2) of the Corporations Act Mr Min, in making his application for voluntary deregistration of his company, was required to sign a declaration of its solvency.  Were that declaration true then Min’s Australia would have assets sufficient to satisfy its creditors.  If it had such assets then those assets, if not dissipated, would have been available to satisfy creditors including EGC.  EGC’s debt remains unsatisfied.  If the assets of Min’s Australia were dissipated with the knowledge of or by Mr Min who was the sole director and secretary of Min’s Australia, without satisfying the EGC debt, a serious question would arise as to whether such conduct was actionable.  Alternatively, it was said that the declaration was false if funds were owing to EGC at the time it was made.  Then it was submitted that in continuing to trade with EGC, Min’s Australia and Mr Min impliedly  indicated that Min’s Australia had the capacity to meet payment of EGC’s invoices.  The absence of payment by Min’s Australia suggested that it lacked that capacity.  In that case, it was submitted, a serious question would arise as to Mr Min’s knowledge of the insolvency of the company and in turn a serious question about EGC’s rights against him.  EGC, it was said, cannot determine the solvency or otherwise of Min’s Australia at the time of its deregistration without access to the materials sought.  It was submitted that there are grounds to believe that a cause of action may exist against Mr Min either for dissipating funds from a solvent company on its deregistration without paying its creditors or for allowing the company to trade while it was insolvent. 

44                  In my opinion, even allowing for the beneficial construction of O 15A r 6 and the fact that such applications will, perforce, be brought in circumstances in which information supporting potential claims for relief  is incomplete or inadequate, the present application does not satisfy the criterion in par (a) of r 6.  The posited rights of relief against the respondent appear to rest more on a foundation of speculation and suspicion than upon any reasonably based hypothesis which can be related to the evidence presently in the possession of EGC.  One range of possible causes of action was foreshadowed in Mr Wyatt’s affidavit, to which reference was made earlier.  A considerably lesser range was set out in the written submissions. 

45                  Quite apart from the non-satisfaction of the condition in par (a) this is a case in which there is a real question whether, even had the conditions been satisfied, the Court should exercise its discretion in favour of EGC.  The core of EGC’s complaint seems to relate to the voluntary deregistration of Min’s Australia which is its alleged primary debtor.  The conduct of the respondent which is complained of is essentially accessorial.  That of itself does not deny the possibility of causes of action against the respondent.  However in the circumstances it may well have been a preferable course for EGC to apply to the Court for reinstatement of the company and then to either institute proceedings against the company or seek its winding up and the appointment of a liquidator who, armed with appropriate investigative powers and some funding support, could require the production of the documents of the kind which are now sought. 

46                  There are, of course, other difficulties with the application not least the existence of three different companies which apparently dealt with Min’s Australia, a fact not disclosed by the applicant or its principal, but only emerging from evidence adduced by the respondent.  In my opinion the application should be dismissed with costs.

Associate:

Dated:              9 September 2005