FEDERAL COURT OF AUSTRALIA

Cunningham, in the matter of Australasian Liquid Storage Pty Ltd (in liq) [2017] FCA 559

ORDERS

THE COURT ORDERS THAT:

1.    The applicants have leave to amend the Originating Application to elide from paragraph 2(c) the words, “The State of Queensland by the Honourable Grace Grace, Minister for Employment and Industrial Relations for the State of Queensland” and to insert the words, “The Regulator under the Work Health and Safety Act 2011 as that office is described by Part 8 Division 1 of the Work Health and Safety Act 2011”.

2.    The application for an order that a summons be issued under s 596B of the Corporations Act to “The Regulator under the Work Health and Safety Act 2011 as that office is described by Part 8 Division 1 of the Work Health and Safety Act 2011”, is dismissed.

3.    Pursuant to s 597(9) of the Corporations Act 2001 (Cth), The Regulator under the Work Health and Safety Act 2011 as that office is described by Part 8 Division 1 of the Work Health and Safety Act 2011 (the Regulator) is directed to produce at the examinations in this Court of Alan Walker, Samuel Jason Lindsay, the proper officer of Lindsay Consulting Pty Ltd and or the proper officer of Lend Lease Corporation Ltd at 9:30am on 18 July 2017 the following documents:

(a)    any books (as that word is defined by s 9 of the Corporations Act) in the possession of the Regulator which are relevant to the collapse of a water tank on 16 October 2015 at the Sunshine Coast University Hospital;

(b)    any books (as that word is defined by s 9 of the Corporations Act) in the possession of the Regulator which are relevant to the cause of the collapsing of a water tank on 16 October 2015 at the Sunshine Coast University Hospital; and or

(c)    any books (as that word is defined by s 9 of the Corporations Act) in the possession of the Regulator which are relevant to the consequences of the collapsing of a water tank on 16 October 2015 at the Sunshine Coast University Hospital;

4.    The Regulator may apply to this Court on two days’ notice in writing to set aside, vary or alter the terms of order 3 hereof.

5.    The applicants’ costs of this application be their costs in the winding up.

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

REASONS FOR JUDGMENT

DERRINGTON J:

1    On 23 March 2017 the applicants, Mr John William Cunningham and Mr Paul Eric Nogueira, being the liquidators of Australasian Liquid Storage Pty Ltd (in liq), filed an application seeking the issuing of summonses pursuant to s 596A and s 596B of the Corporations Act 2001 (Cth) (the Act). The application was returnable before a Registrar and it was substantially dealt with on 19 April 2017, when the Acting District Registrar made orders issuing summonses to various persons requiring them to attend for examination about the affairs of the company.

2    By paragraph 2(c) of the relief claimed in the Application, the liquidators sought an order that a summons be issued pursuant to s 596B of the Act to “the State of Queensland by The Honourable Grace Grace, Minister for Employment and Industrial Relations for the State of Queensland”. The Registrar, quite properly, was reluctant to issue a summons directed to a Minister of the Crown in the right of a State in the circumstances evidenced before him and he referred it to the Court for determination.

3    On 4 May 2017 the applicants sent submissions to the Court in support of the Application. At paragraph 4 of those submissions they indicated that they would seek to amend the Application by eliding paragraph 2(c) as it stood and substituting for it an order for the issuing of a summons to “The Regulator under the Work Health and Safety Act 2011 as that office is described by Part 8 Division 1 of the Work Health and Safety Act 2011”.

4    It is appropriate to grant the applicants the leave they seek to amend the Application.

The facts

5    The facts as they relate to the issues before the Court are contained in an affidavit of Mr Cunningham filed on 23 March 2017 and they are usefully summarised in the submissions.

6    Australasian Liquid Storage Pty Ltd (in liq) (“the Company”), was registered in Queensland on 23 September 2004. It had operated a business from the Sunshine Coast, Queensland, which involved the specialist manufacture and installation of large water tanks for commercial and industrial use. Such tanks are, apparently, manufactured and installed across Australia. At all relevant times, the company has had a sole director, secretary and shareholder in the form of Mr Alan Walker (Mr Walker).

7    On 31 March 2016, Mr Walker, constituting the totality of the members of the Company, passed a special resolution pursuant to s 249B and s 490 of the Act that the Company be wound up. It was also resolved to appoint Mr Cunningham and Mr Nogueira of Worrells Solvency and Forensic Accountants as the joint and several liquidators of the company. The circumstances leading up to the members’ voluntary winding up originated from an incident which occurred in October 2015 at the Sunshine Coast University Hospital where the Company had been engaged in the installation of a number of large water tanks. It seems that one such water tank, which had a capacity of 2.5 million litres, collapsed in the process of it being filled. There was a rapid escape of a large volume of water onto the surrounding construction site and onto a nearby road. The escaping water had the consequence that a number of third parties suffered injuries. Mr Cunningham asserts, on information and belief, that this incident was well publicised with the result being that the Company suffered significant and irreparable damage to its reputation. A consequence was that it was unable to obtain any new work and, it is said, that ultimately led to its insolvency.

8    The remaining matters surrounding the occurrence of the incident and the connection to the persons against whom the summonses have been sought are set out in detail in the affidavit of the Mr Cunningham. Given that it is unusual for any party to have access to the contents of affidavit in support of an application for the issuing of summonses, it is not appropriate to say anything further about those matters in these reasons.

The legislative provision

9    To the extent to which the application has not yet been determined, only s 596B of the Act is relevant. That section provides:

596B Discretionary examination

(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.

10    The section has a number of constituent elements to it. They are:

(a)    an “eligible applicant” makes an application for the summons (596B(1)(a));

(b)    the court is satisfied that the person to whom the summons is sought to be directed meets either the criteria in subparagraphs s 596B(1)(a)(i) or (ii). (In this case it is only subparagraph (ii) which is relevant); and

(c)    the discretion of the court (which is found in the chapeaux of the section) is then enlivened such that the court may summon a person for examination about the corporation’s examinable affairs.

11    The expression “examinable affairs” is defined in s 9 of the Act as:

Examinable affairs, in relation to a corporation means:

(a)    the promotion, formation, management, administration or winding up of the corporation; or

(b)    any other affairs of the corporation (including anything that is included in the corporation’s affairs because of s 53);

(c)    or the business affairs of a connected entity of the corporation, insofar as they are, or appear to be relevant to the corporation or to anything that is included in the corporation’s examinable affairs because of subparagraph (a) or (b).

12    The reference in the definition to s 53 of the Act has the effect of widening the scope of matters which are “the examinable affairs” of the company. For present purposes it is only necessary to consider s 53(a) which provides that the affairs of a body corporate include:

(a)    the promotion, formation, membership, control, business, trading, transactions and dealings (whether alone or jointly with any other person or persons and including transactions and dealings as agent, bailee or trustee), property (whether held alone or jointly with any other person or persons and including property held as agent, bailee or trustee), liabilities (including liabilities owed jointly with any other person or persons and liabilities as trustee), profits and other income, receipts, losses, outgoings and expenditure of the body.

13    In determining any application for the issuing of a summons under s 596B it must be kept steadily in mind that the satisfaction of the matters in subparagraphs 596B(1)(a) and (b) are statutory preconditions to the exercise of the discretion. That is so, even though there will necessarily be an overlap of the evidence relevant to the satisfaction of subparagraph (b) and the exercise of the discretion. In Re Bill Express Ltd (in liq) (2010) 238 FLR 329, Davies J aptly described the operation of the section (putting aside the operation of subparagraph (a)) in the following terms:

[12]     The provision:

(a)     makes it a condition of the court’s exercise of power that the court be satisfied about either of the matters contained in s 596B(1)(b); and

(b)     makes an order for examination at the discretion of the court.

Eligible applicant

14    The liquidators in this case are within the scope of the meaning of “eligible applicant” for the purposes of s 596B(1)(a) (See s 9 of the Act). That is so regardless of the fact that they were appointed in a voluntary winding up process. In Ex parte Merrett (1997) 40 FLR 412 at 414, Young J queried whether or not a voluntary liquidator was a “liquidator” within the meaning of the definition of “eligible person”, however, any such doubts have been dispelled by the assumptions underpinning the decision of the High Court in Palmer v Ayres (in their capacities as liquidators of Queensland Nickel Pty Ltd (In liq) (2017) 341 ALR 18 at 22 [11] – [12].

15    It follows that the two essential issues in this case are whether the proposed examinee is a person who “maybe able to give information about examinable affairs of the corporation” and whether the Court ought to exercise its discretion to summons the proposed examinee.

Is the information about “examinable affairs”?

16    The material contained in the affidavit filed in support of the application discloses that the incident which occurred on 25 October 2015 (“the Incident”), was an event which now forms part of the “examinable affairs” of the company. The collapse of the tank was an event occurring in the “business, trading, transactions and dealings” of the body corporate and it also gave rise to the liabilities or potential liabilities of the body corporate. It follows that information “about” the Incident will be information about the “examinable affairs of the corporation”.

Whether the examinee may be able to give information about the examinable affairs?

17    The next question is whether or not the Court can be satisfied that the proposed examinee is a person who “may” be able to give information about that incident.

18    Although that requirement in s 596B(1)(ii) sets a relatively low bar for an applicant to satisfy, its satisfaction becomes more problematic the more removed the proposed examinee was from the operation of the relevant company. An employee (who is not an “officer” for the purposes of s 596A) is very likely to be a person who may be able to give information about the examinable affairs of the employer company for the purposes of s 596B, as is the company’s accountant. Similarly, it is likely that persons who have transacted business with the company may be able to give information about the examinable affairs to the extent to which they relate to the particular transaction. However, the further removed from the operation of the company a person has been, the less likely it is that they might be able to provide information about the examinable affairs. Where, as in this case, the proposed examinee had no direct contact or dealings with the company, the scope of the requirement that the proposed examinee “may” be able to give information requires careful consideration.

19    In Ex parte Merrett (1997) 140 FLR 412, Young J considered the requirements of the obligation of an applicant for a summons to show that the proposed examinee “may be able to give information” about the examinable affairs. After considering the history of the section his Honour observed (at 416):

Accordingly, I believe that the words ‘may be able to give information’ connote the court being satisfied that objectively there are facts before it which show that it is so likely that the proposed examinee can give information that it warrants the court in calling upon the person named to give the liquidator the information he may well have.

20    In reaching that conclusion his Honour observed that, whilst the public examination process was important to the liquidators in administering the company in the public interest, the compliance with the summons by the examinee often involved onerous burdens. This, his Honour held, necessitated the court engaging in a balancing process when determining whether the requirements of the section had been met. He said (at 416):

When there is such a burden put on the examinee, the court must be careful to consider the rights of both parties. It must be careful not to fetter a liquidator who is seeking to administer an insolvent company in the public interest on the one hand and, on the other hand, must be careful to see that persons to whom summonses are directed are not oppressed by the procedure.

21    In other words, his Honour considered that the level of satisfaction required to establish that the proposed examinee “may” have the relevant information fluctuated, depending upon the circumstances of the case and, in particular, the expected impact of issuing the summons. He also identified that the level of satisfaction that had to be shown was described as being “likely”. According to the Oxford English Dictionary, that expression generally connotes “probable” or having “a high degree of probability”, whereas the expression “may” carries with it a lower degree of certainty.

22    A different construction was adopted in the subsequent decision of Meteyard v Love (2005) 65 NSWLR 36 at 46 – 47, [39]. There, Baston JA (with whom Beazley and Santow JJA agreed) identified that the application of s 596B(1)(ii) involved a number of considerations:

[39]     A consideration of the terms of s 596B(1)(b)(ii) suggests that the scope of the power is delimited by four considerations, namely that:

(a)     the proposed examinee may have “information” to give;

(b)     the information must be relevant in the sense that it is about “examinable affairs of the corporation”;

(c)     because the purpose of the section is to allow the receivers and managers to be informed of facts about the affairs of the company, the information should be information not within their knowledge, although the extent of knowledge will not be precisely definable, and

(d)     there must be a factual basis for the Court to form a reasonable state of satisfaction that a proposed examinee may have relevant information.

23    One difference between the approach of Young J in Ex parte Merrett and that of Baston JA in Meteyard v Love concerned whether a court, when determining whether it is satisfied of the matters in s 596B(1)(b)(ii), ought to take into account the potential burdens on the proposed examinee of the making of the order. That is, whether the satisfaction of s 596B(1)(b)(ii) requires any qualitative balancing exercise to be undertaken. Whilst that was a consideration relevant to Young J, it did not feature in the analysis of Baston JA.

24    It is difficult to identify in the words of s 596B(1)(b) the existence of any requirement for a court to take into account any impact on the proposed examinee of the making of an order. On the natural meaning of the words used, all that the court needs to do is to objectively satisfy itself that the proposed examinee “may be able to give information about the examinable affairs”. That is a deductive process rather than a qualitative assessment, the latter of which requires a weighing of competing interests. This appears to have been the approach favoured by Davies J in Re Bill Express Ltd (in liq) (2010) 238 FLR 329 at 336 [13] – [14] where his Honour said:

[13] To enliven the court’s exercise of power under s 596B, the eligible applicant must put before the court sufficient facts which enable the court to be “satisfied” of either of the criteria for examination. The provision does not require a high threshold. It is sufficient that the eligible applicant can show that the person to be summonsed “may be able” to give information about the corporation or its examinable affairs. In some circumstances it may be enough to show that a person had some involvement in the management or administration of the company. In other circumstances, the connection may require greater explanation. But, relevantly, an eligible applicant does not need to show that the proposed examinee will be able to provide such information.

[14] In Evans v Weinter Pty Ltd Lander J (with whom Ryan and Crennan JJ agreed) observed that because the court is given a discretion under s 596B, the court needs to be aware of the purpose and subject matter of the examination

In that way, the court can ensure that only those persons who qualify under s 596B(b) are summoned for examination.

Analytically, that is the view that the court must reach in order to issue a summons under s 596B since the court must be “satisfied” of either of the conditions in s 596B(1)(b) for the exercise of power. The discretion itself is facultative, if the court’s power has been enlivened. …”

25    These observations of Davies J are persuasive and, whilst it is likely that the nature and the extent of the burden on the proposed examinee of complying with any summons would be relevant to the exercise of the discretion, there is no warrant for any such consideration in the determination of whether the requirements of s 586B(1)(b)(ii) have been met. Additionally, his Honour’s reasons correctly indicate that there is no requirement to demonstrate that it is “likely” that the proposed examinee would be able to give information about the examinable affairs of the company in the sense of it being ‘probable” that they could give such information.

26    The steps which ought be considered in relation to the exercise of the power to summons a person under s 586B(1)(b)(ii) were compendiously identified by Besanko J in S & V Nominees Pty Ltd (in liq) v Rabobank Australia Ltd (2010) 78 ACSR 85 at 94 [35] where his Honour said:

[35] In relation to the examinee’s first argument, a number of points about s 596B(1)(b)(ii) should be noted. First, the paragraph only requires the court to be satisfied that the person may be able to give information. It is not necessary for the court to be satisfied that the person is able to give information. Second, the court must be satisfied that the person may be able to give information about examinable affairs. Information is broader than direct evidence. As I understand it, the person to be summonsed need not have direct knowledge of the examinable affairs of the corporation. In Meteyard v Love (in their capacity as recs and mgrs of Southland Coal Pty Ltd (in liq)) (2005) 65 NSWLR 36 ; 224 ALR 588 ; 56 ACSR 487 ; [2005] NSWCA 444 (Meteyard), Basten JA (with whom Beazley JA agreed) said (at [38]):

[38] The concept of “information” may also need to be considered in context but appears not to have been the subject of detailed consideration in relation to this provision of the Act. The primary meaning given in The Australian Concise Oxford Dictionary is “something told; knowledge” and “items of knowledge; news”. No doubt information can include matters of fact, belief and opinion; nevertheless, there will be a point at which opinions are better described as speculation rather than information.

Third, the court must be satisfied that the person may be able to give information about examinable affairs of the corporation. As can be seen from s 53, there is a broad definition of examinable affairs. A person who is able to say that a company had a document which recorded a transaction between that company and the corporation referred to in s 596B is a person who may be able to give information about examinable affairs of the corporation.

27    As mentioned, the legislature has set a relatively low threshold by the requirements of s 596B(1)(b)(ii). It only has to be shown that the prospective examinee “may” be able to give the relevant information. However, it is difficult to construe the reference to “may” as meaning “any possibility” no matter how remote. In one sense it could be said that a person “may” be able to provide information simply because it is not known that they do not possess it, but it is not likely that the legislature conditioned the exercise of the discretion upon the existence of a mere theoretical possibility. On the other hand, it does not seem probable that the legislature intended that an applicant for a summons was required to show that it was more likely than not that the proposed examinee would be able to provide the relevant information, even if there was residual doubt. In a curial context that would be the same as establishing that the person “is” able to provide the information.

28    In order to satisfy a Court that the proposed examinee “may” have the relevant information, two essential elements must exist. First, the Court must be satisfied of the existence of a reasonable hypothesis or scenario which raises the likelihood or possibility that the examinee has the information. That is not the same as establishing that the examinee “has” the information, however, without there being some postulated scenario where there is a possibility or likelihood of that, it is difficult to assert that the person “may” have the information, other than in the most general of senses. Second, there must be some facts or circumstances before the Court which supports the reasonable hypothesis or postulated scenario. Without the need for the proving of such facts or circumstances, the section would be satisfied by mere uninformed speculation.

29    In the context of s 596B(1)(b)(ii), a person “may” be able to provide the relevant information if it is established that there exists a reasonable degree of likelihood that the proposed examinee is able to provide it. That can be achieved by establishing the foundational facts which support a reasonable hypothesis or postulated scenario to that effect.

Do the circumstances satisfy the requirement of s 596B(1)(b)(ii)?

30    The scenario or hypothesis on which the applicants rely to assert that the Regulator “may” have the relevant information is apparently founded, to some extent, on the statutory regime in which the Regulator operates. It seems that the Court is asked to draw inferences from the statutory regime which, when combined with some established facts, will establish the necessary nexus between the Regulator and the information about the examinable affairs.

31    In its amended form, paragraph 2(c) of the Application seeks an order for the issuing of a summons to the office holder known as “The Regulator under the Workplace Health and Safety Act 2011” (WHSA). Under Part 1 of Schedule 2 of that Act such a person is appointed to the office by the Governor in Council. That office is an independent one and its holder has various statutory obligations to fulfil. The Regulator’s functions and powers are set out in s 152 of the WHSA and include the power to “conduct and defend proceedings under this Act before a court or tribunal” (See s 152(1)(h)). This subsection was initially relied upon by the applicants, although it does not appear to have a great deal of relevance to the issues as they emerged at the hearing.

32    Similarly, the applicants relied upon s 154 of the WHSA, which provides that the Regulator may delegate to an Inspector, or other appropriately qualified public service employee, a function or power under the Act. There is no evidence as to what functions or powers have been delegated which might be relevant in the present case. That said, it may be the case that all powers and functions concerning the inspection of workplace accidents have been delegated to some other person. The difficulty is that the present administrative arrangements in the office of the Regulator are unknown.

33    Under Part 9 Division 1 of the WHSA, the Regulator has the power to appoint Inspectors whose duties include, inter alia, the function to investigate contraventions of the Act and to assist in the prosecution of offences. The power to appoint Inspectors is an inherent part of securing compliance with the requirements of the Act which is a function of the Regulator (see s 152(1)(b)). In the carrying out of their functions to secure compliance with the requirements of the WHSA, Inspectors are subject to the direction of the Regulator (See s 162 of the WHSA). There is, however, no material before the Court as to the extent to which the Regulator has sought to provide directions to the Inspectors, if at all.

34    The factual matters supporting the application are set out in the affidavits of Mr Cunningham and Mr Kimball. Although the contents of those affidavits remain generally confidential, at the hearing of this matter it was conceded by Counsel for the applicants that the fact of the occurrence of the Incident and the subsequent inspection by Inspectors under the WHSA were well known matters and there was no need to be sensitive of any confidentiality in that respect. The affidavit material supported this contention.

35    It was submitted by the applicants that the facts, when taken together with the requirements of the statutory scheme of the WHSA, are sufficient to satisfy the Court that the Regulator is a person who may have information about the Company’s examinable affairs. Although the hypothesis or scenario on which they rely is not entirely clear, the argument appears to be that, by reason of the senior position of the Regulator and his control over the Inspector who undertook the inspection of the Incident, he is a person who may know about the Incident and, more particularly, its cause. The rationale seems to be that, by reason of the statutory position of the Regulator, there is a likelihood that he would be aware of the content of any documents or report produced by the Inspector, if any. Alternatively, the argument may be that the Regulator would be aware of the existence of documents which consider or discuss the circumstances of the Incident.

36    An important part of the hypothesis relied upon by the applicants was the closeness of the connection between the Regulator and the inspection on the basis, so it was submitted, that the inspection was carried out under the authority or delegation of the Regulator. However, that reliance was misconceived as s 160(e) of the WHSA directly grants investigative powers to inspectors in relation to potential contraventions of the Act. It is not a power vested in the Regulator which is then delegated to Inspectors as the applicants suggest. Reliance on that matter does not assist the applicants.

37    There is no doubt that there exists a legal nexus between the Regulator and the Inspectors under the WHSA in that the Regulator appoints the Inspectors and the Inspectors may undertake work which relates to the responsibilities of the Regulator. The Regulator also has the power to provide directions to the Inspectors, either generally or specifically. However, even if one relied upon a presumption that everything which was required to be done under the WHSA was done regularly, it is still difficult to detect any factual basis for being satisfied that the Regulator may be able to give information about the examinable affairs of the Company and, in particular, in relation to the Incident. The mere fact that the Regulator appoints the Inspector, or is able to give directions, does not give rise to a reasonable hypothesis that the Regulator may be able to give information about the Incident.

38    For there to be a reasonable hypothesis to the effect that the Regulator may have information about the Incident, there would need to be some evidence concerning the propensity of the Regulator to know of information produced by Inspectors as a result of their inspections. It would not have to be shown that the Regulator did receive inspection reports generally or the report in question, however, material does have to exist to demonstrate some degree of likelihood that the information produced by an Inspector would come to be known by the Regulator. In this matter there is a complete absence of any material which indicates that a Regulator might become aware of information which Inspectors acquire or produce as a result of their Inspections. It may be that the Regulator has the authority to access the information in the documents were he so minded to consider them, however, there is nothing to suggest that he does so regularly or at all. Moreover, no relationship between the Regulator and the Inspector is identified from which a reasonable inference might be drawn that the Regulator regularly considered the work of the Inspectors such as might exist between a partner of a law firm and an employed solicitor.

39    The material before the Court does, perhaps, support a hypothesis that the Regulator has the authority to produce any documents which were created as a result of the inspection such as notes and any report. The senior position of the Regulator would suggest that such would be the case. However, having the ability, if necessary, to ascertain the existence of documents and produce them for the purposes of a subpoena or the like does not give rise to any inference that the Regulator would be aware of their contents.

40    It follows that the applicants have failed to satisfy the court that the Regulator “may be able to give the information about the examinable affairs” of the company. Whilst that conclusion can stand on its own, it is also the result arrived at by identifying that the applicants have failed to establish facts which support a reasonable hypothesis or postulated scenario connecting the Regulator with the information.

41    This result is not surprising given that, at the time the affidavit of Mr Cunningham was sworn, there was no intention to summons the Regulator. Moreover, no further affidavit material has been filed which seeks to connect the Regulator to any knowledge arising from an investigation undertaken by an Inspector. Were there to be additional evidence of the role of the Regulator relating to his consideration of information obtained in the course of an inspection, the situation might be different although that is not relevant for present purposes.

The discretion and its exercise

42    If it were the case that the evidence in relation to the Regulator was sufficient to satisfy the test in s 596B(1)(b)(ii), the next question to arise is whether the discretion in the chapeau of the section ought to be exercised in the applicants’ favour?

43    There is surprisingly little authority concerning the manner of the exercise of the discretion in s 596B(1). Whilst it is expressed in the usual untrammelled terms, it necessarily must be exercised in a principled manner which is informed by the nature and the scope of the power. In this respect, the observations of Digby J in Re Carpenter International Pty Ltd (in liq) (No 2) [2015] VSC 681 are helpful. There, his Honour was dealing with an application to discharge summonses which had been issued. In the course of his careful consideration, his Honour made the following useful observation as to the types of matters which might be considered in the exercise of the discretion in s 596B. He said (at [39]):

In my view the discretion to issue the Examination Summonses, and to maintain them, is unimpinged by the Albrechts’ arguments, having regard to the purpose of the intended examinations, the importance of the information sought by the Liquidators, the seriousness of the subject of the summonses, and the utility of the sort of information sought, the lack of cooperation from the examinees and the great difficulty to date obtaining the information sought by the Liquidators from other sources.

44    The qualitative assessments which, in his Honour’s view, might be considered in exercising the discretion reflect the consideration of such matters as referred to by Young J in Ex parte Merrett (1997) 140 FLR 412, 416, albeit that his Honour was considering them at an earlier stage in the decision making process. His Honour appears to adopt the proposition that the court might justifiably take into account and balance the likely strength of the evidence which the proposed examinee might give on the one hand, and on the other, the burden which might be imposed upon the proposed examinee. In that consideration, the ease at which the information might be otherwise obtained, including from an alternative source, would be relevant. In such an evaluative process, the more likely it is that the proposed examinee may have the relevant information, the easier it will be for the discretion to be exercised in favour of issuing the summons.

45    A not dissimilar approach to that identified in Re Carpenter International Pty Ltd (in liq) (No 2) [2015] VSC 681 was followed by the Full Court of the Federal Court in Re New Tel (2005) 145 FCR 176, which adopted the observations of Lander J in Southern Cross Petroleum Sales (SA) Pty Ltd (in liq) v Hirsch (1998) 70 SASR 527 at 536 – 537 where he said:

The discretion is unfettered but must be exercised judicially. In exercising that discretion the court might have regard to the expressed purpose of the examination; the importance of the information to the eligible applicant; the seriousness of the matters to be inquired into; the use to which the information obtained on the examination might be put; the possibility of an advantage to the eligible applicant which he or she would not otherwise enjoy and the concomitant disadvantage to the prospective examinee; the availability of the information from other sources; the cost to the prospective examinee in attending for examination; whether the information sought is so peripheral to make the attendance of the prospective examinees oppressive; and the wider public interest in investigating the affairs of the corporation.

46    That passage has been cited with approval by Davies J in Re Bill Express Ltd (in liq) (2010) 238 FLR 329 and, in addition, his Honour observed that the “evident purpose for the discretion is to safeguard against abuse of the examination process”. See also Accord Pacific Holdings Pty Ltd v Accord Pacific Land Pty Ltd (in liq) [2011] NSWSC 707 [136] per Ward J.

47    Necessarily, the matters which a Court will take into account on any application will vary with the circumstances of the case and, in particular, the stage reached in the administration of the winding up. Where a liquidator seeks to summon persons for the purpose of obtaining information concerning existing or proposed litigation, additional considerations arise (see the observations of Mansfield J in In the matter of Moage Pty Ltd (in liq); Sheahan v Pitterino (1997) 77 FCR 81). However, in all cases it is necessary for the Court to keep in mind that the liquidators are nearly always personally unaware of the transactions engaged in by the company prior to the liquidation and that the inquisitorial procedure prescribed under Part 5.9 Division 1 permits the conducting of public examinations in which questions of a “fishing” nature are expected.

48    In the matter before the Court, even if it were assumed that the Regulator was able to give some evidence about the investigation carried out by the Investigator, it would necessarily be of a limited nature. There is no suggestion that the Regulator had any direct connection with the Company or the Incident. If the Investigator had prepared a report and if the Regulator had read it, the Regulator might be able to give some evidence as to whether any WHSA requirements were breached by reason of the failure of the water tank. Conceivably that may include a consideration of the causes of the Incident. However, it is fairly clear that the predominant interest of the liquidators is in the documents which were produced by the Inspector in the course of his investigation. There does not appear to be any further information which the Regulator might possibly give and that is a significant factor in the exercise of the discretion to issue a summons to require the Regulator to attend for the ostensible purpose of giving evidence.

49    In relation to the exercise of the discretion, the matters referred to in Southern Cross Petroleum Sales above ought to be considered. Unfortunately there was not a substantial amount of material in the affidavits in support of the Application which sought to advance those matters to any great extent. Nevertheless, it is appropriate to consider them to the extent to which they are relevant to the present matter.

50    It can be said that the purpose of the intended examination is to obtain information about how the Incident occurred and what caused it, however, those are not matters of which it is suggested that the Regulator has direct knowledge. Indeed, there is only speculation that he has indirect knowledge. If he did have some relevant information, it could only mirror that contained in the documents produced as a result of the inspection. Whilst it cannot be doubted that information as to the cause of the Incident is relevant to the liquidators’ considerations, it is far from clear that any conclusions have been reached by the Inspector who conducted the investigation. It can be accepted, however, that information of that type could be useful for the liquidators to advance claims or consider advancing claims against third parties. On the material before the Court, there is nothing to suggest that the Regulator would suffer any detriment if the summons were issued, although the Regulator has not yet been afforded the opportunity to advance any contentions at this stage.

51    One consideration which attracts substantial weight is whether the information is available to the liquidators through other means. That is particularly relevant in this case where it was conceded that the liquidators’ primary concern was to obtain the documents in the power or control of the Regulator, rather than examine him as to what he has learned from reading them. Here it is more than likely that there will be a number of other persons who will be examined about the cause of the failure of the water tank. Those persons are likely to have been directly involved in the construction of the tank or any alterations done to it and would be knowledgeable about the circumstances of its failure. Given that such persons will be examined as to the cause of the failure, the liquidators prima facie are entitled to apply to the Court for an order under s 597(9) of the Act directing the Regulator to produce at the examination of those persons, “books” which are in the possession of the Regulator and which will arise in the examination. Importantly, the word “book” as used in s 597(9) is defined widely in s 9 to include “document”. Although the entitlement to an order for the production of such books is discretionary, there appears to be good grounds for the making of such an order in the present case. Indeed, in the circumstances where the Regulator is in no position to give any substantial information about the matter other than that which might appear in reports or documents produced by the Inspector, it is probably preferable that the order for production be made rather than a summons be issued requiring the Regulator to give evidence at a public examination.

52    In the exercise of the discretion under s 596B(1) it is appropriate to consider the significance of the information sought by the liquidators from the proposed examinee. In this matter the information concerns the cause of the Incident or, at least, a WHSA Inspector’s view as to the cause of the Incident and any information which that person gathered in reaching any conclusion. However, it is not likely that the documents in the possession or power of the Regulator are the only documents which might reveal any such considerations. In the ordinary course of an engineering failure of this description and magnitude, there is likely to have been a number of investigations by a number of interested parties all concerning the reasons for the mishap. Indeed, it would be most unlikely were the Company itself not have undertaken a complete and thorough investigation of the Incident and its causes such that the Company’s own documents would give some indication of the reasons for the collapse of the tank. That is not to say that the conclusions of the Inspectors would be less relevant, but it keeps their relative importance in perspective.

53    It is also pertinent to consider the position of the Regulator and the appropriateness of requiring him to attend to give evidence as well as produce documents. It is apparent from the scheme of the WHSA that the Regulator occupies a senior position and it is not likely that he and his responsibilities might be easily replaced for the time required for the examination to be conducted. In this respect, Counsel for the applicants submitted that if a summons was issued, the usual course would be for discussions to occur between the lawyers for the parties such that an informal inspection of documents might take place and the need for examination of the Regulator would be reconsidered. It was suggested that such a course was likely to occur in this matter. This was submitted in the context of Counsel acknowledging that the interest of the liquidators was focused on the documents produced by the Inspectors rather than the knowledge of the Regulator. Whilst the course proposed by Counsel for the liquidators may be a practice which occurs in the conduct of examinations, it is not something which can carry much weight on an application such as the present where the application is for a summons for examination. However, it is relevant that an order under s 597(9) would permit the Regulator, by his agent, to cause documents to be delivered to the court for the purposes of the public examination when it first occurs such that the liquidators can then inspect them. If necessary the examination can be adjourned to another day whilst further consideration of the documents is undertaken. That is the manner in which such documents would usually be made available to the liquidators so as to allow them to utilise the documents in the most productive manner in the public examinations (see Sheahan (as joint and several liquidators of Blue Ridge WA Pty Ltd) (in liq) [2015] FCA 567; [19]).

54    Although there is always a public interest to be served in identifying the causes of the failure of companies and the existence of any causes of action which might be available to meet the claims of creditors, that is not a significant consideration in the present matter where the creditors appear to be limited and, on the information available on this application, the Company’s insolvency did not arise from the defalcations of its officers.

55    It follows that, even if the applicants had been able to identify some information which the Regulator may have been able to provide, it would have been of minimal utility. That being the case, the above considerations do not support the exercise of the discretion in their favour for the issuing of the summons and the relief sought in paragraph 2(c) of the Originating Application should be refused.

Use of the 596B process for the sole purpose of obtaining documents

56    As indicated above in these reasons, the applicants seek to use the process to obtain information by way of the production of documents to which the Regulator has access or over which he has the power to produce. It might be fairly assumed that the senior position of the Regulator within the statutory regime would afford him access to and authority over all of the books and records held there. It may also be assumed that the Inspector who undertook the inspection would not necessarily have access to such documents or, if he did, would not have the authority to produce them to a Court. This might be the reason why the applicants have sought the issuing of the summons to the Regulator rather than to the Inspector who carried out the investigation.

57    During the course of the hearing Counsel for the liquidator, Mr Coulson, very properly acknowledged that the primary interest of the applicants was to gain access to the documents which are presumed to be the records of investigations and deliberations of the Investigator. The position was that the liquidators were not specifically interested in examining any person who actually inspected the site after the occurrence of the Incident. In S & V Nominees Pty Ltd (in liq) v Rabobank Australia Ltd (2010) 78 ACSR 85, 95 [39], Besanko J was prepared to accept for the purposes of that matter, that if the sole purpose of the application for a summons was to obtain documents the application would be for an ulterior purpose. The purpose of issuing a summons under s 596B is the examination of persons who may have information about the examinable affairs of the company. It is not to be used as a de facto discovery tool. The remarks of Besanko J were supported by the observations of Mulligan J in Gerah Imports Pty Ltd v Duke Group Ltd (in liq) (No.2) (1993) 62 SASR 158 to the same effect.

58    In order to overcome the above authorities, Counsel for the liquidators submitted that the Regulator may be able to give evidence about the identity of those who conducted the investigation and of any documents created in the course of the investigation which existed in his office. Such evidence has a very tenuous link to the “examinable affairs” of the Company. Rather it concerns the workings of the Regulator’s office to the extent to which they relate to the affairs of the Company. To describe such information as being about the examinable affairs of the Company would be to stretch that description beyond its hitherto accepted boundaries. It might also be noted that the identity of the Inspector who undertook the investigation is something which would be well known to many people including the director of the Company whom, it might be assumed, would have been interviewed by him. It should be added that, even if such information could be described as being “about examinable affairs”, the issuing of a summons under s 596B should be refused on the discretionary grounds. In addition to the matters referred to above, the relative inconsequential nature of the information sought would not justify summonsing the Regulator to give evidence about it.

Direction under s 597(9)

59    Given the above discussion it is apparent that the liquidators are able to obtain all that they need from any relevant documents which are in the possession or control of the Regulator. Any other information not found in those documents which might be given by the Regulator must be considered to be peripheral. It follows that, if the liquidators so desired, it would be more appropriate to make an order under s 597(9) of the Act which only requires the production of documents rather than the attendance of the Regulator at Court for the purposes of giving evidence. The production of such documents can be undertaken by the Regulator’s agent (See s 597A).

60    A requirement for the making of an order under s 597(9) is that the documents are to be used for the purposes of an examination of some person (Re South Pacific Energy Trading Pty Liq (in liq) (1996) 21 ACSR 435). In this case, the Acting District Registrar has made orders that various summons issue to a number of persons whom, it is apparent on the material, will be examined about the cause and consequences of the Incident. Those summonses are made returnable at 9:30am on 18 July 2017. The documents in the possession or power of the Regulator and which are of interest to the applicants are relevant to those examinations. They are, therefore, capable of being made the subject of an order for production under s 597(9).

61    It is apparent from the terms of the orders of the Acting District Registrar that the return of the summons on 18 July 2017 is for the initial purpose of the production of documents only although, technically, the summons does require attendance for examination. Whilst that may be so, it is appropriate that any orders made under s 597(9) be returnable on the same day such that all documents might be produced for the purposes of the public examinations at the same time.

62    In the result, if the liquidators so desire it, an order will be made under s 597(9) directing the Regulator to produce to the Court the documents in his possession which relate to Incident.

63    The orders made on this application under s 597(9) are made ex parte and, as such, are made without prejudice to the entitlement of the Regulator to apply to the Court to set them aside, to vary or to alter them.

Associate:

Dated:    22 May 2017