FEDERAL COURT OF AUSTRALIA

Ann Street Mezzanine Pty Ltd v Beck [2011] FCA 1047

THE COURT ORDERS THAT:

1.    On or before 13 September 2011, the second cross-respondent provide written answers to the interrogatories set out in paragraph [21] of the reasons for judgment delivered today.

2.    Submissions, if any, as to the costs of the cross-claimants’ application for the second cross-respondent to provide written answers to interrogatories be filed on or before 15 September 2011.

Note:    Entry of orders is dealt with in Rule 39.3 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    The cross-claimants seek leave to interrogate the second cross-respondent (‘ASIC’) “in relation to the identity of the senior officers who decided to file winding up applications against York Street Mezzanine Pty Ltd and Ann Street Mezzanine Pty Ltd referred to in the email from the solicitors for the second cross-respondent to the Court dated 12 July 2010”. This leave was sought by a notice of motion filed on 25 July 2011. The winding-up decisions were apparently made on 22 November 2005 and 6 December 2005. I refer to York Street Mezzanine Pty Ltd and Ann Street Mezzanine Pty Ltd hereafter as ‘the companies’.

2    This is not the first time that the cross-claimants have attempted to ascertain the identity of the officers who, on behalf of ASIC, decided that ASIC should apply to wind up the companies. The history of these attempts is as follows:

    On 30 March 2010 the cross-claimants filed a request for further and better particulars (dated 23 March 2010), in which they asked for the “the usual particulars of the person or persons within ASIC who considered the matters in connection with the said applications”.

    ASIC’s response dated 21 June 2010 stated that “the person who considered the matters in connection with the said applications made on 22 November 2005 and 6 December 2005 was ASIC, and not any one individual”.

    Thereafter, on 26 June 2010, the cross-claimants filed a notice of motion which, amongst other things, sought an order that ASIC provide further and better particulars of its defence to cross-claim, including full particulars of “the names of each of the second cross-respondent’s staff and members who were involved in the decision to cause the filing of the applications”.

    The motion was heard on 7 July 2011. The transcript of that hearing shows (at pp 17-19, 27-30) that the Court, then constituted by Finkelstein J, was initially under the impression that ASIC’s response to the cross-claimants indicated that the decisions were taken at a meeting of ASIC’s commissioners. Senior counsel for ASIC was, however, unable to state whether this was so. At the conclusion of the hearing, his Honour indicated (at p 65) that he would reserve his decision and also asked that ASIC consider the question, “who was the decision maker at ASIC or agent of ASIC, and what effect that might have on the description of the information upon which reliance was placed” and to prepare a note in answer.

    On 12 July 2010, ASIC’s solicitor sent an email to Finkelstein J’s chambers (and copied to the solicitors for the cross-claimants), stating, amongst other things, that:

ASIC confirms that it is not its position that the decisions to file winding-up applications against York Street Mezzanine and Ann Street Mezzanine were decisions which were the subject of a formal resolution moved and approved by members of the Commission.

Instead, ASIC’s position (without prejudice to its position that its pleading of good faith in its defence neither amounts to the pleading of a state of mind nor a waiver of legal professional privilege) is that the decisions were made by a number of senior officers of ASIC acting under formal delegations made to them under the ASIC Act. The decisions were based on the information that was available to them at the time that the decisions were made and information that became available between then and the dates of the making of the winding-up applications. (Emphasis original)

    On 13 July 2010, the proceeding came on for hearing again.

    On 20 July 2010, the Court made lengthy orders, none of which dealt with the question with which this interlocutory application is presently concerned.

    On 25 August 2010, the solicitors for the cross-claimant sent an email to Finkelstein J’s chambers, with the orders that they proposed “in relation to the notices of motion dated 19 May 2010, 10 June 2010 and 25 June 2010”. The minute of the proposed orders contemplated that ASIC be directed to “identify the names of the senior officers of ASIC who made the decision to bring the applications as referred to in the email from ASIC to the Court dated 12 July 2010”. By way of explanation, the cross-claimants’ solicitors referred, amongst other things, to ASIC’s email of 12 July 2010, and affirmed that ASIC’s explanation was inadequate and that “a more fulsome explanation ought to be provided”.

    On the same date, 25 August 2010, ASIC also submitted a minute of proposed orders, together with submissions. In these submissions, ASIC contended that there was no basis for the additional particulars sought by the cross-claimants.

    On 25 August 2010, Finkelstein J made orders in the proceeding. These orders did not direct that ASIC identify the officers of ASIC who made the relevant decisions on behalf of ASIC. His Honour did not deliver any reasons.

3    Having regard to this history, the cross-claimants argued the issue as to delivery of particulars of the identity of the persons who made the relevant decisions on behalf of ASIC had not been closed and that they “should not have to guess about the identity of the ASIC officers involved”. Further, the cross-claimants affirmed that “no satisfactory reason was given why ASIC should not be required to disclose the identity of the delegates. The decision almost went by default.” The cross-claimants argued that this information was particularly relevant to their claim for misfeasance in public office.

4    ASIC contended that the cross-claimants’ application for leave to interrogate should not be granted, first, because it was not in compliance with Rule 21.01 of the Federal Court Rules. This objection can readily be put to one side. Whilst there was non-compliance with Rule 21.01, there was no relevant prejudice since the cross-claimants had informed ASIC well before the hearing what in substance they sought and provided copies of the interrogatories that they sought to administer shortly prior to the hearing. These interrogatories were very short.

5    Second, ASIC argued that the current application was an abuse of process because the same issue had already been brought before Finkelstein J and refused. This objection also fails, for the reasons now stated.

6    First, Finkelstein J was never concerned with an application for leave to interrogate. Second, whilst his Honour did not in fact make the order for further and better particulars, as sought by the cross-claimants in July and August 2010, the circumstances disclosed at paragraph [2] above leave open the possibility that Finkelstein J overlooked this issue, or even had it in mind to return to it at a later date. In any event, his Honour made no express ruling on the topic. He delivered no reasons stating if or why he refused the cross-claimants’ further and better particulars application. Even if his Honour’s orders of 20 July and 25 August 2010 could be regarded as, in effect, rulings against the cross-claimants on the particulars point, the rulings were interlocutory in character and constituted no necessary bar to a renewed application: see, for example, Windsor v Sydney Medical Service Co-operative Ltd (No 2) [2009] FCA 704 at [25]. A fortiori, they were no bar to this application for leave to administer interrogatories.

7    Of course, as Edmonds J said in Windsor at [26], the power to stay or dismiss a proceeding for an abuse of process is not limited to those proceedings in which res judicata or issue estoppel arises in respect of them. As his Honour explained at [29]:

An example of an abuse of process is where interlocutory orders, though not truly able to found an issue estoppel, may be capable of finally determining an issue of fact or law if ‘it is reasonable to regard the earlier decision as a final determination of the issue’ (Re Martin & Anor; Ex parte Amtron Australia Pty Limited (1996) 62 FCR 438 per Cooper J at 443) or the parties have conducted the litigation ‘upon the footing that this part of the proceedings is to be then determined, to that extent, finally’ (Leppington Pastoral Co Pty Limited v Commonwealth of Australia (1997) 76 FCR 318 per Beaumont J (with whom Jenkinson and Lehane JJ agreed)) or ‘a reasonable construction of the interlocutory judgment shows that a point has been the subject of a final determination’ (Northern Star Agriculture Pty Ltd v Morgan and Banks Developments Pty Ltd [2007] NSWSC 98 per Young CJ in Eq at [42]).

The circumstances disclosed in this case do not, however, fall within any of the categories of case to which his Honour referred. Nor can it be said that the current interlocutory application is unjustifiably vexatious and oppressive in the sense referred to in Walton v Gardiner (1993) 177 CLR 378 at 393 (Mason CJ, Deane and Dawson JJ).

8    Accordingly, I would reject ASIC’s submission that the cross-claimants’ current application was an abuse of process and should be refused on this ground.

9    Third, ASIC argued that: (1) the grant of leave would serve no legitimate forensic purpose in the circumstances where ASIC has admitted that it held public office and it made the decision to file the winding up applications; (2) the application amounts to a ‘fishing’ exercise on the part of the cross-claimants; and (3) there is no good reason justifying a grant of leave to interrogate.

10    These submissions raise the critical issues for the determination of this application. I discuss them further below, but, before doing so, it is convenient to refer to recent statements of the principles concerning leave to deliver interrogatories in this Court. These principles are a guide as to whether the Court would order that a party provide written answers to interrogatories under Rule 21.01 of the Federal Court Rules 2011, there being no material difference in this respect between Rule 21.01 and O 16 r 1 of the former Rules, with which the authorities mentioned below were concerned.

11    One can usefully begin with McKerracher J’s statement in Austal Ships Pty Ltd v Incan Australia (No 3) (2010) 272 ALR 177 (‘Austal’) at 181 [7] that:

The administering and answering of interrogatories is a form of discovery. Just as this Court has now substantially limited the scope for wide ranging discovery, the circumstances on which leave to administer interrogatories will be granted is increasingly rare. That is not to say that interrogatories and discovery of documents are mutually exclusive. It is clear that they may overlap on occasions. In this Court it will be unlikely that interrogatories will be permitted as a substitute for discovery of documents.

12    As McKerracher J said in the more recent case of Lynx Engineering Consultants Pty Ltd v The ANI Corporation Limited trading as ANI Bradken Rail Transportation Group (No 5) [2011] FCA 216 (‘Lynx’) at [12] “interrogatories may be sought as to matters which enable a party to maintain that party’s case or destroy the case of the adversary”. More particularly, as Lockhart J said in WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175 (‘WA Pines’) at 190-191) (footnotes omitted):

There are four objects of interrogatories: 1. To obtain admissions as to facts which will support the case of the interrogating party. 2. To obtain admissions which will destroy or damage the case of the party interrogated. 3. Interrogatories which are in the nature of a request for further and better particulars. 4. Interrogatories which seek to obtain accounts from a party occupying a fiduciary position.

13    Of course, an interrogatory may be the subject of valid objection on various grounds, including that it is fishing: see, for example, Aspar Autobarn Co-operative Society v Dovala Pty Ltd (1987) 16 FCR 284 at 287. In WA Pines at 190-191, Lockhart J explained the law with regard to fishing as follows:

In Hennessy v. Wright (No. 2) [(1888) 24 Q.B.D. 445] (reported as a note to Parnell v. Walter [(1890) 24 Q.B.D. 441)] Lord Esher M.R. said: “In other words, the plaintiff wishes to maintain his questions, and to insist upon answers to them, in order that he may find out something of which he knows nothing now, which might enable him to make a case of which he has no knowledge at present. If that is the effect of the interrogatories, it seems to me that they come within the description of ‘fishing’ interrogatories, and on that ground cannot be allowed.

The moment it appears that questions are asked and answers insisted upon in order to enable the party to see if he can find a case, either of complaint or defence, of which at present he knows nothing, and which will be a different case from that which he now makes, the rule against ‘fishing’ interrogatories applies”. [(1888) 24 QBD, at p.448]

In Lane v. Gray [(1873) L.R. 16 Eq. Cas. 552] Sir Richard Malins V.C. held that the court's power to make an order for discovery was a discretionary power to order production when it shall appear to the court to be right to do so. His Lordship refused the application until the case had proceeded further and the plaintiff made out a prima facie case in support of her claim. The plaintiff had brought a suit claiming to be entitled to a share in the estate of an intestate as an alleged next of kin. It appears that discovery was refused because all that the plaintiff had done at that stage of the case was to allege that she was next of kin of the intestate and there was no evidence to support her assertion. The estate of intestates were frequently claimed by persons of whom many had no foundation for their claims; but by obtaining on discovery production of documents belonging to the intestate they obtained information by means of which fresh fictitious cases were in many instances manufactured.

In Associated Dominions Assurance Society Pty. Ltd. v. John Fairfax & Sons Pty. Ltd. [(1952) 72 W.N. (N.S.W.) 2], Owen J. said: “A ‘fishing expedition’, in the sense in which the phrase has been used in the law, means, as I understand it, that a person who has no evidence that fish of a particular kind are in a pool desires to be at liberty to drag it for the purpose of finding out whether there are any there or not”. See also Bray on Discovery (1885), pp. 13, 16, 98 and 461.

In the present case the appellant seeks discovery and leave to interrogate before there is any evidence that the respondent did not have the belief required by [the relevant statutory provision]. There are the barest allegations in par. 5 and 6 of the statement of claim. They are denied by the respondent … Together with the form of the notice under the section that is all the material on which this Court is asked to act and to permit discovery and administration of interrogatories.

“This is not merely clutching at a non-existent straw, but expecting to be carried by it”: per Menzies J in Mulley v Manifold [(1959) 103 CLR 341 at 345].

Unsurprisingly, in view of this state of affairs, leave to interrogate was not granted.

14    McKerracher J in Austal followed this well-accepted analysis when he said (at 182 [10]):

In circumstances where a party makes allegations in a pleading based on suspicion, it is not entitled to interrogate on those suspicions, for to do so is the clearest example of fishing by making a case where none exists: WA Pines Pty Ltd v Bannerman (1980) 41 FLR 169 at 173-174 per Toohey J; WA Pines 41 FLR 175 at 181-182 per Brennan J; and 190-191 per Lockhart. More recently see Minister for Immigration & Multicultural & Indigenous Affairs v Wong [2002] FCAFC 327 at [28]-[36]).

15    For the reasons set out below, I am satisfied that the cross-claimants’ request is not a mere fishing exercise and that there is a legitimate forensic purpose in discovering the identity of the officers who made the decision. This forensic purpose depends on the fact that, in their amended cross-claim, the cross-claimants have pleaded misfeasance in public office against ASIC as the public office holder.

16    In order to appreciate the forensic purpose of the interrogatories that the cross-claimants wish to deliver, it is necessary to bear in mind the elements of the tort that they have pleaded. In Government Law and Policy – Commercial Aspects (B Horrigan (ed), The Federation Press, 1998) Tina Cockburn described the nature of the tort (in chapter 9, “Personal Liability of Government Officers in Tort ad Equity”, p 342) in the following way:

In order for the “illegal” activity of public officers to be actionable the plaintiff must establish either intention or negligence on the part of the defendant. A court will not impose liability for a mere “error of judgment” by a public officer. The tort of misfeasance in public office will only be relevant where intention can be proved, as “it is a deliberate tort”. Therefore there will be no liability in misfeasance where an officer has acted in good faith and without knowledge as to the invalidity. (Footnotes omitted.)

17    More particularly, in Northern Territory v Mengel (1995) 185 CLR 307 (‘Mengel’) at 370, Deane J set out the five elements of the tort of misfeasance in public office, namely: (1) an invalid or unauthorised act; (2) done maliciously; (3) by a public officer; (4) in the purported discharge of his or her public duties; (5) which causes loss to the parties. Also in Mengel at 357, Brennan J outlined elements of a claim of misfeasance, stating:

Misfeasance in public office consists of a purported exercise of some power or authority by a public officer otherwise that in an honest attempt to perform the functions of his or her office whereby loss is caused to a plaintiff. Malice, knowledge and reckless indifference are states of mind that stamp on a purported but invalid exercise of power the character of abuse of or misfeasance in public office. If the impugned conduct then causes injury, then the cause of action is complete.

18    The amended cross-claim clearly has regard to the elements of the tort, as stated in Mengel. In oral submissions senior counsel for the cross-claimants described paragraph 29C of the amended cross-claim as being the “real engine” of the misfeasance claim. This paragraph reads as follows:

From at least in or about May 2005, ASIC acted for an improper purpose, namely to “shut down the Westpoint Group” regardless of whether such conduct was necessary or appropriate and in the knowledge that it was likely to cause harm to the cross-claimants or recklessly indifferent to such harm.

19    The considerations that were said to support an inference of improper purpose are the subject of an extensive and detailed pleading in paragraph 29D. Senior counsel for the cross-claimants further explained at the hearing (Transcript at pp. 32-33) that:

… making good the details of the improper purpose will involve two phases. There’s the phase which involves formulating and carrying out – carrying into effect the strategic plan, as we refer to it, and then there are the specific exercises of power … and they are primarily the two end decisions to commence the winding up application, first of all of the grounds of insolvency when Deloitte had advised, as set out in [paragraph 29F] that in Deloitte’s expert opinion each individual entity and the group was solvent and would continue to be solvent for the next six months, as long as it could continue with its fundraising and so on.

So somebody had to respond to that by deciding, well, we will do something about that, and then somebody, name unknown, made a decision as a delegate to seek the winding up of these companies on insolvency in this very uncertain environment as to whether they were insolvent or solvent and would continue to be solvent within the next six months, which all depended on their ability to roll over promissory notes or raise money through the income fund.

20    At the hearing of the interlocutory application, senior counsel for ASIC expressed doubt about the forensic purpose of identifying the individual delegates, because the pleading is drawn solely against ASIC and not against any individual officers. Presumably, the cross-claimants will need to establish (if they can) that any “malice, knowledge [or] reckless indifference” on the part of the officer or officers, who, on behalf of ASIC, made the winding up decisions is attributable to ASIC. It is probable that this requirement will raise its own peculiar considerations: compare Three Rivers District Council and others v Bank of England (No 3) [2000] 3 All ER 1 at 8. This is a matter for another day.

21    In these circumstances, however, as a practical matter, the identity of the ASIC officer or officers who, on behalf of ASIC, decided that ASIC should apply to wind up the companies, would appear to be forensically important for the cross-claimants’ case. Although ASIC stated in written submissions that, “[t]o the extent that the matters the subject of the interrogatories are necessary to the cross-claimants’ preparation of their case, the relevant conduct of ASIC will be the subject of ASIC’s lay evidence when it is filed”, its senior counsel declined to state at the hearing that this lay evidence would disclose the names of the officers who, on behalf of ASIC, made the relevant decisions – notwithstanding senior counsel was specifically asked whether it would. It is no answer to say, as ASIC did, that the actual identity of the relevant officer is irrelevant because ASIC has admitted that it was ASIC that made the decisions. Further, as senior counsel for the cross-claimants pointed out, it is also no answer to say, as senior counsel for ASIC did, that the cross-claimants might discover the identity of the relevant officer or officers at the time of cross-examining the relevant witnesses. This is, plainly enough, too late in the proceeding for the cross-claimants and, since it would be known in the usual course only after the cross-claimants had closed their case, its late disclosure would operate unfairly against them.

Conclusion

22    For the reasons stated, I am satisfied that an order should be made that ASIC provide answers to the interrogatories that the cross-claimants apply to administer. These interrogatories are brief and consist of the following two questions:

1.    What is the name of each natural person who on behalf of ASIC decided that ASIC should on 22 November 2005 apply to wind up York Street Mezzanine Pty Ltd?

2.    What is the name of each natural person who on behalf of ASIC decided that ASIC should on 6 December 2005 apply to wind up Ann Street Mezzanine Pty Ltd?

23    Provisionally at least, I would be inclined to order that ASIC pay the cross-claimants’ costs of the cross-claimants’ application for answers to these interrogatories. I would not, however, make such an order until the parties have had an opportunity to make submissions to the contrary, if they be so advised. Accordingly, I would also order that, if the parties wish, on or before 15 September 2011, they may make short submissions as to costs. In the event that no submissions are received within this time, I would order that ASIC pay the cross-claimants’ costs of and incidental to the cross-claimants’ application for an order that ASIC provide answers to interrogatories.

Associate:

Dated:    8 September 2011

SCHEDULE OF PARTIES