FEDERAL COURT OF AUSTRALIA

Kirk, in the matter of Westlink Pty Ltd (Receivers Appointed) [2023] FCA 893

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to r 1.39 of the Federal Court Rules 2011 (Cth), the time for the bringing of the applicants’ interlocutory application filed 14 March 2023 be extended to that date.

2.    The interlocutory application filed on 14 March 2023 be dismissed.

3.    The applicants pay the respondent’s costs to be assessed, if not agreed.

4.    Within 14 days of these orders, the parties seek to agree a confidentiality regime with respect to the documents produced by the applicants in response to the Summonses issued to them on 1 February 2023, failing which the parties are to notify the Associate to Justice Sarah C Derrington that a date for hearing is required.

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

REASONS FOR JUDGMENT

SARAH C DERRINGTON J:

Introduction

1    On 30 January 2023, a Registrar of this Court made orders, inter alia, pursuant to s 596B of the Corporations Act 2001 (Cth) issuing summonses in respect of the receivership of Westlink Pty Ltd (receivers appointed). On 7 February 2023, summonses for examination were served on Mr David Scaysbrook and Mr Brian Restall, and on Quinbrook Asset Management Pty Ltd (applicants) to produce books and records pursuant to s 597(9) of the Corporations Act (Summonses).

2    Mr Scaysbrook is, and was at all material times, a director of Quinbrook. Mr Restall is a senior director of Quinbrook Infrastructure Partners Pty Ltd, a related entity of Quinbrook.

3    By an interlocutory application filed on 14 March 2023, the applicants sought orders:

(1)    pursuant to r 1.39 of the Federal Court Rules 2011 (Cth), extending the time for the bringing of the application to 14 March 2023;

(2)    pursuant to r 11.5 of the Federal Court (Corporations) Rules 2000 (Cth), that the Examination Summonses issued to Messrs Scaysbrook and Restall be discharged;

(3)    further or alternatively to paragraph 2, a review under r 3.11 of the Rules of the exercise of the power of this Court by the Registrar on 30 January 2023 in:

(a)    ordering the issue of the Summonses; and

(b)    directing Quinbrook to produce books and records;

(4)    pursuant to s 596C of the Corporations Act and r 11.3(7) of the Corporations Rules, granting the applicants leave to inspect the affidavits of Darryl Edward Kirk filed in this proceeding by the respondent (Receivers) in support of their application for the issue of the Summonses; and

(5)    further or in the alternative, protecting the confidentiality of any documents produced by the applicants pursuant to the Summons or the direction to produce.

4    The applicants did not press order 4.

5    The gravamen of the applicants’ complaint is that the Receivers are unable to satisfy the Court of the existence of a reasonable hypothesis or scenario established by some fact or facts, which raises the likelihood, or possibility, that the potential examinees have information concerning the examinable affairs of Westlink.

6    For the reasons that follow, the application must be dismissed.

Factual background

7    Westlink was incorporated on 2 September 2008. Mr Craig Doyle has been its sole director since incorporation. Westlink acquired a parcel of land in Adare, Queensland (Land), on or about 5 January 2009, and obtained a development approval for the purpose of constructing an open-cycle gas turbine power station.

8    In March 2017, Westlink contracted with Capital Partners Australia Pty Ltd as trustee for the Australian Clean Power Trust to sell the land to the Trust (Contract). Capital Partners, as trustee, became the registered owner of the Land on 18 April 2017.

9    On completion, Capital Partners gave Westlink a mortgage of the Land, under special condition 13.1(a) of the Contract, to secure performance of Capital Partners’ post-completion obligations (Mortgage). Westlink and Capital Partners subsequently entered into a Tripartite Deed with Solstice Development Services (SDS) Pty Ltd, concerning the development of the project.

10    By the terms of the Contract, Capital Partners was obligated to make payments to Westlink upon attaining certain milestones in respect of the Project which was defined in special condition 1 as “the development and construction of a gas fired power station on the Land in stages after obtaining all Approvals (including the Development Approval) and Project Agreements”.

11    Special condition 14.1 of the Contract provides for five tranches of payments by Capital Partners to Westlink:

(a)     $2.5 million when [Capital Partners] enters into a Tolling Agreement;

(b)     $3.1 million on achievement of Stage 1 FID [financial investment decision as defined];

(c)     $70,000.00 per megawatt for any electricity generation capacity exceeding 100 megawatts in Stage 1 (if applicable) on achievement of Stage 1 FID;

(d)     $70,000.00 per megawatt for any electricity generation capacity exceeding the megawatt capacity of Stage 1 but capped at 200 megawatts on achievement of Stage 2 FID; and

(e)     an annual amount for every Financial Year based on [Capital Partners’] Final Accounts equal to 10% of cash returns earned by [Capital Partners] or a successor in title on an ongoing basis over and above a 12% unlevered post tax internal rate of return hurdle for electricity generation capacity exceeding 200 megawatts.

12    It is apparent that pursuit of the Project was necessary for Westlink to have the opportunity to obtain the benefit of special condition 14.1. The first step was to make a “Tolling Agreement” as defined in special condition 1.

13    It is also relevant that the payment liabilities of Capital Partners under special condition 14.1 of the Contract are prospective or contingent. Those prospective or contingent liabilities are defined as “Secured Moneys” under the Mortgage, which by clause 6 required Capital Partners to “ensure that the Secured Moneys are paid … as required by the Transaction Document [which was defined to mean, inter alia, the Contract]”. Accordingly, Westlink contends that Capital Partners was required to do all things necessary to enable Westlink to have the benefit of special condition 14.1, which included pursuit of the Project. If the Project was not pursued, the obligation to pay Westlink under special condition 14.1 would not mature into a present monetary obligation.

14    On 19 December 2017, Westlink (by Mr Doyle) and Capital Partners agreed to vary the payments required of Capital Partners under special condition 14.1 of the Contract (the First Variation). The First Variation provided for:

(a)    an immediate payment of $250,000 by Capital Partners to Westlink; and

(b)    a reduction in the amount payable under special condition 14.1(a) from $2.5 million to $2.1 million.

15    In November 2018, Quinbrook became the new trustee of the Trust. Simultaneously, the Land was transferred, subject to the Mortgage, to Perpetual Corporate Trust Ltd as a custodian trustee. By s 63(1) of the Land Title Act 1994 (Qld), Perpetual became liable to comply with the terms of the Mortgage, including by performance of clause 6 of the Mortgage.

16    Westlink contends that if clause 6 of the Mortgage was breached by Quinbrook and Perpetual, Westlink would suffer loss, because Westlink would not receive the benefit of special clause 14.1 coming to pass. This would amount to “Loss”, meaning “loss, damage, cost, expense or liability” as defined in clause 1.1 of the Mortgage. Clause 21.1 of the Mortgage requires Perpetual to indemnify Westlink for any “Loss” incurred “as a direct or indirect result… of any act or omission of [Perpetual]”. “Event of Default” is defined under the Mortgage as a failure to pay or repay any amount due under, inter alia, the Contract, including a failure by Perpetual to indemnify Westlink under clause 21.1. Clause 14.1 of the Mortgage provides that it becomes enforceable on the occurrence of an “Event of Default”.

17    On 2 November 2018, Westlink, Quinbrook, SDS and Perpetual also entered into a “Deed of Transfer of Tripartite Deed”, by which Perpetual assumed Capital Partners’ obligations under the Mortgage and the Tripartite Deed.

18    In or about November 2018, the Federal Government announced a new scheme known as the Underwriting New Generation Investments Program (UNGI). The relevance of UNGI to the Project was not in evidence. It is nevertheless apparent from a letter dated 13 June 2023 from the solicitors for the applicants to the solicitors for the Receivers (13 June Letter) that Quinbrook and Mr Doyle communicated about UNGI on several occasions during November 2018. In early 2019, Quinbrook corresponded with Mr Doyle to provide updates on the Project which included Quinbrook’s expression of interest in UNGI. Further correspondence was exchanged between Quinbrook and the Federal Government regarding UNGI in April and May of 2019. There appears to have been broader correspondence between Quinbrook, Mr Doyle, “and others” concerning negotiations and discussions with the Federal and State Governments and the Queensland Opposition throughout June to December 2019, and then between Quinbrook, the Federal Government, CS Energy and Mr Doyle regarding draft term sheets for the Project’s participation in UNGI throughout the months of January to September 2020.

19    It appears that initial agreement between Quinbrook and the Federal Government regarding the Project’s participation in UNGI was reached on 13 November 2013, and negotiations continued until May 2021. It appears an impasse was arrived at in the latter half of 2021.

20    A Second Variation of special condition 14.1 of the Contract was agreed between Quinbrook (by Mr Scaysbrook) and Westlink (by Mr Doyle), on or about 8 April 2020. The Second Variation provided:

(a)    for payment of $400,000 by Quinbrook to Westlink in instalments of:

(i)    $100,000 payable within 24 hours of countersigning the letter;

(ii)    $100,000 payable within 72 hours of receiving a countersigned term sheet from the Federal Government; and

(iii)    $200,000 payable within 72 hours of receiving a binding agreement with the Federal Government; and

(b)    for a reduction in the amount payable under special condition 14.1(a):

(i)    from $2.1 million to $1.88 million, upon payment of the first $100,000 instalment;

(ii)    from $1.88 million to $1.66 million, upon payment of the second $100,000 instalment; and

(iii)    from $1.66 million to $1.34 million, upon payment of the $200,000 instalment.

21    A Third Variation to special condition 14.1 of the Contract was agreed between Quinbrook (by Mr Scaysbrook) and Westlink (by Mr Doyle), on or about 11 February 2021. The Third Variation provided for a payment to Westlink of $200,000 in return for:

(a)    a reduction in the amount payable under special condition 14.1(a) from $1.88 million to $1.44 million;

(b)    the deletion of special condition 14.1(e); and

(c)    the second $100,000 instalment and the $200,000 instalment under the Second Variation being rendered null and void.

22    On 25 May 2022, Starkorp Pty Ltd, a secured creditor of Westlink, exercised its rights under a general security deed and appointed the Receivers as receivers of all of the property of Westlink. By letter dated 8 July 2022, the Receivers requested that Quinbrook provide copies of quarterly updates of the Project between 16 March 2017 and 30 June 2022, and marketing information for the Project. Mr Restall refused to provide the requested information.

23    On 22 August 2022, the Receivers sent a draft statement of claim to the applicants’ solicitors. The draft claim sought declarations that: Perpetual failed to comply with clause 6 of the Mortgage; Westlink suffered “Loss” as a result; Perpetual is required to, but has not, indemnified Westlink pursuant to clause 21.1 of the Mortgage; and that an “Event of Default” occurred. In alleging that Perpetual did not comply with clause 6 of the Mortgage, the claim alleges that the Project has not been pursued. The Receivers sought to investigate, by examination, whether such allegation could be proven.

24    Accordingly, by an originating process lodged on 9 December 2022, the Receivers applied for:

25    On 30 January 2023, a Registrar of this Court made orders granting the Receivers’ application and the Summonses were issued on 1 February 2023. The Receivers served the Summonses on 7 February 2023.

26    On 17 February 2023, the applicants’ solicitors sent two letters to the Receivers’ solicitors. The first letter contended there was no basis, of which they were aware, for any claim against Quinbrook to support orders for public examination or the production of documents and noted their concern regarding the proper basis for the issue of the Summonses. The second letter contended that the scope of the Summonses was oppressive.

27    The applicants’ solicitors sent the Receivers’ solicitors the 13 June Letter, which recorded their concern that Westlink had no cause of action against Quinbrook and invited the Receivers to discontinue the proposed examination process. The letter outlined that Quinbrook had taken steps and expended amounts in progressing the Project.

28    The Receivers objected to paragraphs 4 and 5 of the Affidavit of Brian Graham Restall filed 10 July 2023, to which this letter was annexed, to the extent that those paragraphs sought to establish the truth of the matters in the letter to contend that Perpetual and Quinbrook have been taking reasonable steps since November 2018 to progress the Project. No objection was taken to the Affidavit of Christopher John Connor filed on 6 July 2023 to which the same letter was annexed. The objection to those paragraphs was rightly taken, the content being irrelevant to the question to be decided by an application to set aside summonses for examination: s 56(2) of the Evidence Act 1995 (Cth).

29    The applicants now bring this interlocutory application to set aside or review the issuing of the Summonses.

Statutory Framework

Issuing a summons

30    Section 596B of the Corporations Act provides the circumstances in which the Court may summon a person (other than a person summonsed under s 596A) for examination about a corporation’s examinable affairs:

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.

31    Section 596D of the Corporations Act concerns the content of the summons, including the ability of the Court to require a person so summonsed to produce documents:

Content of summons

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

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

Setting aside a summons

32    Rule 11.5 of the Corporations Rules makes provision for the discharging of an examination summons issued under s 596B of the Corporations Act:

Discharge of examination summons

(1)     This rule applies if a person is served with an examination summons.

(2)     Within 3 days after the person is served with the examination summons, the person may apply to the Court for an order discharging the summons by filing:

(a)     an interlocutory process seeking an order discharging the summons; and

(b)     an affidavit stating the facts in support of the interlocutory process.

(3)     As soon as practicable after filing the interlocutory process seeking the order and the supporting affidavit, the person must serve a copy of the interlocutory process and the supporting affidavit on:

(a)     the person who applied for the examination; and

(b)    unless that person is ASIC or a person authorised by ASIC—ASIC.

33    Rule 3.11 of the Rules together with s 35A of the Federal Court of Australia Act 1976 (Cth) (FCA Act) also provides an avenue for the review of the exercise of power of a Registrar of the Court:

Application for review of a Registrar’s exercise of power

(1)     A party may apply to the Court under section 35A(5) of the Act for review of the exercise of a power of the Court by a Registrar.

(2)     The application must be made within 21 days after the day on which the power was exercised.

34    Section 35A(5) and (6) of the FCA Act provide:

Power of Registrars

(5)     A party to proceedings in which a Registrar has exercised any of the powers of the Court under subsection (1) may, within the time prescribed by the Rules of Court, or within any further time allowed in accordance with the Rules of Court, apply to the Court to review that exercise of power.

(6)     The Court may, on application under subsection (5) or of its own motion, review an exercise of power by a Registrar pursuant to this section and may make such order or orders as it thinks fit with respect to the matter with respect to which the power was exercised.

Role of the Court on an application under s 35A of the Corporations Act

35    The parties were agreed that the nature of a review hearing of a Registrar’s decision under s 35A(6) of the FCA Act is by way of a hearing de novo: Pearce, in the matter of Bandiera Holdings Pty Ltd (receivers appointed) v Bandiera Holdings [2022] FCA 876 at [29]; Pitman v Park (liquidator); Re BAM Recycling Pty Ltd (in liq) [2020] FCA 887 at [28]-[32]. It follows that it is necessary for the Court to ascertain on the material before it whether it should make an order for the issuing of a summons and, if so, on what terms.

Whether the Summonses were issued for a proper purpose

36    The applicants contend the Summonses were not issued for a proper purpose and that the Receivers are engaged in a “fishing exercise”. The applicants contend the claim as a whole is doomed to fail, is speculative, far-fetched or misconceived and cannot possibly support the Summonses. The applicants characterised it as “the possibility of a possible claim” and therefore one step removed from what the Receivers are required to establish to ground a proper basis for the Summonses.

37    In support of that allegation, the applicants rely on the 13 June Letter in which the solicitors for the applicants informed the Receivers that:

Westlink cannot have any valid basis for the claims made in the Draft [statement of claim]. Further, Quinbrook is not aware of any other valid basis for any further or different claims which Westlink could possibly make against it.

38    That conclusion was said to flow from Quinbrook’s contention “that any such claims against it are hopeless and bound to fail” for the following reasons:

    Quinbrook cannot be in breach of the Land Sale Contract because there is no express provision in the Contract providing for any particular timetable in respect of the development of the Project or the for the timing of post completion payments to be made to Westlink;

    The claims in the draft statement of claim are based on two false assertions, namely that the Project has not been pursued, and that Mr Scaysbrook had made certain statements to the effect that Quinbrook would not be developing the Land into a power station and intended to cause the Land to be sold;

    No counterfactual has been pleaded which is a necessary element of any allegation of breach and so the draft statement of claim is liable to be struck out;

    There has been no “Loss” under the Mortgage and so the declaration sought that Quinbrook has failed to comply with clause 6 of the Mortgage is ill-conceived.

39    The applicants also contend the Summonses should be set aside because they are being used for the improper purpose of applying pressure with a view to settling the potential claim the subject of the examination.

40    For the reasons that are discussed below, whether or not these claims are hopeless, they are within the scope of the examinable affairs of Westlink. These claims underpin a reasonable hypothesis that, on a proper construction of the Contract and the Mortgage, and in light of the “dealings” between various persons and entities as detailed in the 13 June Letter, there may have been a breach of special condition 14.1 of the Contract and subsequent Loss to Westlink under the Mortgage.

41    As Kiefel CJ and Keane J explained in Walton v ACN 004 410 833 Ltd (formerly Arrium Ltd) (in liq) [2022] HCA 3; 399 ALR 1 at [19]:

There can be no doubt that if the predominant purpose of the examination for which an application is made under s 596A, or s 596B, is collateral or foreign to the statutory purpose of such an examination, the application will amount to an abuse of process… Two purposes must therefore be considered: first, the statutory purpose, and then the applicant’s purpose in light of the statute’s purpose.

42    It is unnecessary to recount Kiefel CJ and Keane J’s exposition of the historical context and purpose of the provisions that are now enacted as s 596A and 596B: Walton at [34]-[86]. That exposition is, however, critical to understanding the statutory purpose of the public examination and whether that purpose places limits upon when a summons may properly issue, given, as their Honours observed, “The text of s 596A does not provide much assistance in determining the statutory purpose …”: Walton at [26].

43    In identifying the extraordinary nature of the powers of examination, as they were described by Chitty J in Re Imperial Continental Water Corporation (1886) 33 Ch D 314, their Honours observed that “the general powers have always been framed largely by reference to [the] administration and never by reference to litigation by individuals for their benefit”: Walton at [77]. Their Honours continued at [83]-[84]:

So far as concerns the conduct of the examination, Pt 5.9 provides that its subject is the “examinable affairs” of the company, as defined. Both the Harmer Report and the Explanatory Memorandum explain that it was considered desirable to adopt the wider definition of “examinable affairs” in s 5(1) of the Bankruptcy Act 1966 (Cth). No wider purpose…can be discerned by that adoption.

The decided cases have consistently identified the purposes of the examination power. In no way do they depart from those identified In re Imperial Continental Water Corporation. The decision in [Hong Kong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512] confirms that decision’s currency in recent time. Whilst the Harmer Report acknowledged that they may include the investigation of possible causes of action, this was as part of the general recovery of property, which, in the context of insolvency, is for the benefit of the company’s creditors or contributories. The decided cases referred to above, and in particular Hong Kong Bank and [Re Excel Finance Corporation Ltd (rec and mgr apptd); Worthley v England (1994) 52 FCR 69], have consistently held an order for an examination summons for some other, foreign purpose to be an abuse of the power and process of the court. The decision In re Imperial Continental Water Corporation has never been doubted, consistently with an acceptance that the law on this subject has been settled.

(Emphasis added.)

44    Contrary to the applicants’ submissions, it is not for this Court to assess whether there is viable claim under the Contract or the Mortgage, or whether the assertions made in the draft statement claim are based on false premises. In Kimberley Diamonds Ltd v Arnautovic [2017] FCAFC 91; 252 FCR 244, the Full Court made that proposition pellucid at [102]-[103]:

The fact that an examination can be stayed as an abuse of process if it is found that the eligible applicant had a private purpose in conducting the examination does not mean that a summons can be stayed as an abuse simply because the Court is not satisfied, on the evidence available at that stage, that there are reasonable prospects that the examination will reveal wrongdoing on the part of the examinee, or will otherwise disclose a viable cause of action which may benefit the company. That would ignore the fact that an examination summons under s 596A is essentially an information gathering process.

It would be entirely proper for an eligible applicant to apply for and obtain an examination summons under s 596A for the purpose of obtaining information concerning legitimate issues, or to obtain answers to legitimate questions, which relate to the management of the company, including while it is in the process of being wound up. That would be the case even if, at that stage, the information that was available to the eligible applicant was not such that it could be said that the applicant had an arguable case, or that the examination was likely to reveal conduct capable of supporting a claim. The obtaining of answers to otherwise unanswered questions, or the quelling of a perceived controversy concerning the management of the company can, in a broad sense, be regarded as amounting to a benefit to the company, its creditors or contributories, and as therefore fulfilling a purpose of s 596A. An examination that achieves nothing more than that may still be reasonably regarded as having some practical utility. It would not necessarily be an abuse of process.

(Emphasis added.)

45    To the extent that the applicants contend that the Summonses should be set aside because they are being used for the improper purpose of applying pressure with a view to settling the potential claim the subject of the examination, I reject that contention. As was made clear in Walton, at [75], all that is required to resist a contention that an examination summons is an abuse of process is to show that one of the purposes for which it was issued was legitimate. In any event, in circumstances where there is a genuinely asserted right about matters on which they are entitled to examine, it cannot be an abuse of process to issue summonses whilst simultaneously pursuing settlement negotiations to the extent that they may be in the best interests of creditors: Re Newheadspace Pty Ltd (in liq) [2020] NSWSC 173; 144 ACSR 224 at [117].

46    Further, it is not the role of the Court on an application such as this to accept or reject the bare assertions of the applicants about the factual issues and their merits. Provided the matters about which the Receivers propose to inquire are relevant to the examinable affairs of Westlink and support a reasonable hypothesis that the applicants may be able to give information about them, the Receivers are properly entitled to test those matters using the examination process. That is a proper purpose of the examination procedure as it may reveal whether a claim is available to the benefit of Westlink and its creditors. As explained by Williams J in In the matter of Jewel of India Holdings Pty Ltd [2022] NSWSC 356 at [142], “[i]t is not open to the Applicants to attempt to pre-empt public examinations … by adducing evidence that they contend covers the field and demonstrates there is nothing more to examine”.

47    I am satisfied there was no abuse of process.

Whether the power to issue a summons was enlivened

48    I am satisfied on the material before the Court that the jurisdictional facts in s 596B(1)(a) and s 596B(1)(b) of the Corporations Act have been established.

49    There was no dispute that the Receivers were “eligible” applicants within the meaning of s 9, as required by s 596B(1)(a). In relation to the requirements of s 596B(1)(b)(ii), the Receivers must objectively satisfy the Court that the person whom they wish to summon may be able to give information about the examinable affairs of the company: Re Australasian Liquid Storage Pty Ltd (in liq) [2017] FCA 559; 121 ACSR 119 at [17]-[19].

50    It is uncontroversial that the concept of the “examinable affairs” of a company is broad and encompasses the transactions and dealings of the company as well as its property. The latter includes the existence and value of any causes of action which the company might have against third parties: Bandiera Holdings at [35]. It is also uncontroversial that there is a relatively low bar to be overcome for the purposes of s 596B in order to satisfy the Court that the party seeking the summons has presented sufficient facts to demonstrate that a proposed examinee is likely to be able to give information warranting the Court to call upon that person to be examined or to produce documents: Ex parte Merrett (1997) 25 ACSR 146 at 150.

51    In Kimberley Diamonds, albeit in the context of s 596A but in terms that are equally applicable to 596B, the Full Court drew attention to the position that the primary purpose of public examinations is to gather information and that there is no requirement that the information intended to be gathered is directed to legal proceedings. Nevertheless, the Court accepted that the power is not open-ended and it must be directed to the ascertainment of a company’s examinable affairs. The Court said at [104]:

The position may be different if the examinee is able to demonstrate that the controversy, or the perceived controversy, or the unanswered questions, do not genuinely relate to or arise from the examinable affairs of the company, or are otherwise speculative, far-fetched or misconceived. In such circumstances, it could well be concluded that the examination was an abuse of process. The use of the examination process for such a purpose could rightly be found to be vexatious or oppressive and to bring the administration of justice into disrepute. The “heavy” onus of demonstrating this rests on the party seeking to stay the summons. …

(Emphasis added.)

52    The Receivers submit that the applicants may have information about the examinable affairs of Westlink, primarily because Quinbrook (of which Mr Scaysbrook is and was at all material times a director), is the trustee of the Trust, the previous trustee of which entered into the Contract with Westlink which is in material respects executory. On the applicants’ evidence, Quinbrook, through Messrs Restall and Scaysbrook, had dealings with Westlink in respect of the Contract. Those dealings have included agreeing to vary the Contract. The Receivers contend that such dealings may give rise to claims by Westlink against its director, Mr Doyle, for breach of his duties.

53    It is apparent from evidence of the commercial relationship between Quinbrook, Perpetual, and Westlink that Quinbrook and its officers may have information relevant to the examinable affairs of Westlink. The facts which support this hypothesis, and raise the likelihood or possibility that the applicants have information, include:

(1)    The correspondence between Quinbrook and Mr Doyle as described in the table commencing on page 7 of the 13 June Letter;

(2)    The negotiations with Mr Doyle by Messrs Scaysbrook and Restall to enter into the Second and Third Variations.

54    As the Receivers submitted, the interests of Westlink created by the Contract and the Mortgage are a significant asset of Westlink. That asset depends for its value on the actions of Quinbrook (and Perpetual) and the steps which Quinbrook alleges it has taken and is taking to progress the Project. This necessarily renders Quinbrook, and its officers, persons who may be able to provide information about the examinable affairs of Westlink.

55    Further, as the Receivers submit, they are entitled to inquire into matters relevant to the examinable affairs for the purposes of benefitting creditors. Creditors may be benefitted not only by claims which Westlink may have against Quinbrook or Perpetual, but also by claims which Westlink may have against Mr Doyle. The applicants’ affidavit material itself shows that Quinbrook (through Messrs Restall and Scaysbrook) was directly involved in dealing with Mr Doyle, on behalf of Westlink, about the Project, the Contract and the Mortgage. In particular, that evidence extends to indicating that Messrs Restall and Scaysbrook were directly involved in the Second and Third Variations. By those Second and Third Variations, Westlink’s rights under the Contract were varied. The Receivers say the Second and Third Variations were possibly to the detriment of Westlink. There is a reasonable hypothesis that the applicants may be able to give information about these dealings. That is something about which the Receivers are entitled to inquire.

56    I accept the Receivers’ submission that it cannot be said that the claim is so speculative, far-fetched, or misconceived as to not warrant further investigation. Almost 5 years has elapsed since November 2018 and still no Tolling Agreement has been made. There is a reasonable hypothesis that the applicants may be able to give information about the circumstances surrounding the apparent delay, including as to what other opportunities Quinbrook may have been pursuing throughout that period. As the Receivers rightly point out, the applicants may be able to demonstrate that Quinbrook has been progressing the Project, including by seeking to negotiate tolling agreements. If that is so, Westlink might not have a claim. The Receivers are nevertheless entitled to test those assertions.

57    The correct approach to the exercise of the judicial discretion to issue an examination summons can be found in the observations of Lander J in Southern Cross Petroleum Sales (SA) Pty Ltd (in liq) v Hirsch (1998) 70 SASR 527 where his Honour said at 536-537:

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.

58    The applicants have not discharged the onus of demonstrating that the matters into which the Receivers wish to inquire do not genuinely relate to or arise out of the examinable affairs of Westlink. I am therefore satisfied that the maintenance of the Summonses is an appropriate exercise of the judicial discretion.

The breadth of the Summonses

59    The applicants contend the Summonses should be set aside because they are broad and oppressive. It is submitted that the categories of documents sought go beyond the “examinable affairs” of Westlink and are therefore oppressive to Messrs Restall and Scaysbrook and to Quinbrook.

60    Eight categories of document were identified.

61    Categories 1 and 2 seek “[a]ny Documents…which record...communication between Quinbrook and either Westlink or Doyle regarding, under, or in relation to the Contract” and “regarding the status or development of the Project”. The objection is to the 5-year period captured by the request, and the fact that the request is not limited, for example, to reports under special condition 15.2(c), nor communication relevant to a payment milestone under special condition 14.1. It would also, impermissibly it is said, capture any dealings between Quinbrook and Mr Doyle in his capacity as a consultant to Quinbrook, rather than merely as a director.

62    In support of these categories, the Receivers point to the possible claims Westlink may have against Mr Doyle (including in respect of the Second and Third Variations but also for possible breach of director’s duties) and to assessing the merits of the possible claim Westlink may have against Perpetual. The 13 June Letter itself supports the time period over which the Summonses are directed. I am satisfied that Categories 1 and 2 are appropriately directed to the examinable affairs of Westlink.

63    Category 3 seeks “[a]ny Documents…which record or evidence payments made by Quinbrook to either Westlink, Doyle or any other person or entity regarding, under or in relation to the Contract or the Project”. The applicants submit that the category is unduly broad and oppressive in circumstances where Quinbrook has expended over $4.3 million on the Project in the last 12 months alone and $7 million since 1 January 2018. The applicants contend Westlink has no contractual entitlement to receive details of payments made by Quinbrook and so they are not within the examinable affairs of Westlink.

64    The Receivers are concerned by this Category to inquire into whether Mr Doyle may have received any payments personally, in conflict with his duty as a director of Quinbrook, and to inquire into what other payments Quinbrook was making to third parties in pursuit, or otherwise, of the Project. Whether or not Westlink has any contractual entitlement to receive details of payments made by Quinbrook, the relevance of any payments to the progress, or otherwise, of the Project are clearly within the examinable affairs of Westlink.

65    Category 4 seeks “[a]ny Documents…which record dealings between Quinbrook and any Federal, State or local government bodies regarding the variation of the Development Approval and the development of the Project.” The applicants make the same objection as for Category 3 and asserts that the production of documents recording dealings between Quinbrook and third parties are not within the “examinable affairs” of Westlink.

66    Category 5 seeks “[a]ny Documents…which record dealings between Quinbrook and any valuer or sales agent with respect to the sale, or potential sale, of the Project or any part of the Project”. The applicants make the same objection as for Category 4 but, in addition, complain that such documents cannot establish the value of any asset of Quinbrook. The same objection is made in respect of Categories 6 to 8.

67    Category 6 seeks “[a]ny Documents…which were located in any data room (or like database) established by Quinbrook for the purposes of the sale or proposed sale of the Project or any part of the Project”.

68    Category 7 seeks “[a]ny Documents…which record or evidence offers received by Quinbrook from parties expressing an interest in purchasing the Project or any part of the Project”.

69    As to Categories 4 to 7, the Receivers point to their wish to inquire into what was going on to progress the Project, including whether changes in Government policy may have made a difference to the manner in which the Project was being pursued, and whether the focus of Quinbrook was on selling at particular times, rather than achieving the milestones. I am satisfied that Categories 4 to 7 are appropriately directed to the examinable affairs of Westlink.

70    Category 8 seeks “[a]ny Documents…which record or evidence negotiations or agreements between Quinbrook (or any related or associated entity) and any other entity regarding the entry into a tolling agreement for the Project [sic]”. The applicants concede that such documents would need to be produced if I found that the Receivers are entitled to investigate the existence or otherwise of claim against Perpetual for breach of clause 6 of the Mortgage. That concession was rightly made and, as I have found above, that investigation is within the examinable affairs of Westlink.

Confidentiality regime

71    The applicants seek a confidentiality regime in relation to the documents they are required to produce. The detail of any such regime was debated by counsel but, ultimately, it seemed that the most appropriate way forward was to invite the parties to agree a regime once I had ruled on the scope of the examinable affairs.

72    The Receivers indicated nevertheless that they considered themselves bound by the implied undertaking in accordance with the decision of Branson J in Carter v Gartner [2003] FCA 653; 130 FCR 99 at [60].

Disposition

73    For the reasons given, the application is dismissed with costs. The parties are invited to attempt to agree an appropriate confidentiality regime within 14 days of the date of this judgment, failing which the matter will be re-listed to determine that issue.

Associate:

Dated:    10 August 2023