FEDERAL COURT OF AUSTRALIA

Oswal, in the matter of Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) v Carson, McEvoy and Theobald (Receivers and Managers) (No 2) [2012] FCA 794

IN THE MATTER OF BURRUP FERTILISERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ACN 095 441 151)

THE COURT ORDERS THAT:

1.    The plaintiff is granted leave to re-amend the amended originating process, dated 11 November 2011 in accordance with the terms of the minute of the draft re-amended originating process, attached to the plaintiff’s interlocutory application dated 21 March 2012, subject to:

(a)    the deletion of proposed ground (a);

(b)    the insertion of the word “proposed” between the words “their” and “resignation” in the proposed ground (h); and

(c)    the re-numbering and amendment of the minute to accommodate the matters referred to in (a) and (b) above,

2.    The directions hearing is adjourned to 11.30 am on 26 April 2012.

3.    The matter is to be listed for hearing for 2 days, commencing at 10.15 am on 31 July 2012.

4.    The parties have liberty to apply on 48 hours notice.

5.     Costs in the interlocutory hearing of 4 April 2012 are reserved.

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

REASONS FOR JUDGMENT

1    This is an application by the plaintiff to amend his originating application for an order for an inquiry into the conduct of the defendants as receivers and managers of a company, Burrup Fertilisers Pty Ltd, pursuant to s 423 of the Corporations Act 2001 (Cth).

2    In his originating application, the plaintiff identified a number of complaints relating to the conduct of the defendants. Among those complaints, were complaints arising from the fact that the defendants had, at the same time, also been appointed as receivers and managers to take possession of the shares which the plaintiff held in Burrup Holdings Limited, the holding company of Burrup Fertilisers. The plaintiff has also made other complaints in his originating application. Those complaints are identified and referred to in a previous decision which I have given in this matter (Oswal, in the matter of Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) v Carson, McEvoy and Theobald (Receivers and Managers) [2012] FCA 341).

3    By this interlocutory application, the plaintiff seeks to amend the originating application by including the following three further complaints:

(a)    conducting the receivership, not for the purpose of enforcing the security in the instrument under which they were appointed, but for the purpose of assisting the receivers and managers of the shares which the plaintiff held in Burrup Holdings Limited and facilitating the sale of such shares.

(b)    causing Burrup Fertilisers Pty Ltd (receivers and managers appointed) ACN: 095 441 151 to enter into a new gas supply agreement with Apache Northwest Pty Ltd on substantially less favorable terms than the gas supply agreement with the Harriet Gas Sellers, dated 17 December 2001.

…

(h)    despite their resignation as receivers and managers of Burrup Fertilisers Pty Ltd ACN: 095 441 151, retaining rights to continue or commence proceedings in the name of Burrup Fertilisers Pty Ltd ACN: 095 441 151, not for the purpose of enforcing the security in the instrument under which they were appointed, but for the purpose of facilitating the sale of the shares which the plaintiff held in Burrup Holdings Limited ACN: 097 138 353.

4    The amendment of the originating application to include the complaint in subpara (b) is not the subject of dispute between the parties. The defendants accept that the amendment can be made.

5    However, there is dispute between the parties in respect of the inclusion in the originating application of the proposed complaints in subpara (a) and subpara (h).

6    The defendants oppose the amendment to include the proposed complaint in subpara (a), on the grounds that the scope of the language of the proposed amendment is too general, and that, if an order for an inquiry was made in those terms, it would mean that each of the acts in which the defendants engaged during their administration, could be the subject of scrutiny on the basis that it was potentially relevant to an assessment of the purpose for which that act was conducted. The consequence of making an inquiry order in those wide terms, said the defendants, would be to cause the inquiry to range over the whole of the 13 month administration of the defendants.

7    Each of the parties has referred me to the case of Leslie, in the matter of the Aboriginal Councils and Associations Act 1976 v Hennessy [2001] FCA 371 at [8], as to the Court’s approach to determining the scope of any inquiry ordered under s 423 of the Corporations Act. The defendants referred me to a number of other cases to the effect that where the Court orders such an inquiry, the Court is concerned to ensure that the scope of the inquiry is confined to specific conduct and, except in very exceptional circumstances, is not expressed as a general inquiry.

8    Counsel for the plaintiff argued that the Court should simply allow the amendment today, and the merits of whether to make an order for an inquiry into the complaint described in subpara (a), could be argued at the final hearing of the originating application.

9    The defendants, however, argued that there was no realistic prospect of the Court, at the final hearing, ordering an inquiry in such wide terms because of the many avenues of inquiry it would open, the impossibility of answering the complaint and the existence of authorities which require specificity. Therefore, said the defendants, the plaintiff’s application for amendment should be refused.

10    In my view, there is substance in the defendants’ contention. The test which should be applied is whether there is any reasonable prospect of the Court making an order for an inquiry into the complaint described in subpara (a) of the proposed amendment, at the final hearing. This is the same test as would be applied as to whether a pleading should be struck out on the grounds of the absence of reasonable prospect of success.

11    In my view, because an inquiry into the complaint described in subpara (a) would open up an inquiry over such a wide range of issues on the basis of their potential relevance to an assessment of the purpose for which the defendants acted, it is highly unlikely the Court would order an inquiry into that complaint. Accordingly, the proposed amendment would not enjoy a sufficient prospect of success to permit the pleading to be amended to include that complaint.

12    In those circumstances, I do not permit the originating application to be amended to bring in the complaint in subpara (a).

13    As mentioned, the amendment to include subpara (b) has been agreed.

14    As to the proposed amendment to include subpara (h), the defendants contended that that complaint sought to inquire into the conduct of the defendants after their resignation as receivers and managers, and it was beyond the power of the Court to order such an inquiry.

15    The plaintiff said that he would amend the proposed subpara (h) by the insertion of the word “proposed” before the word “resignation” in the first line.

16    In my view, the addition of the word “proposed”, meets the defendants’ objection. It also raises a complaint of sufficient specificity for the amended pleading to be permitted to go to trial.

17    In those circumstances, I am prepared to allow the amendment by the inclusion of subpara (h) as amended by the addition of the word “proposed” as mentioned.

18    I will list the matter for directions at 11.30 am on 26 April 2012.

Associate:

Dated:    30 July 2012