Federal Court of Australia

David v Livingstone (Liquidator), in the matter of Suria Global (L) Pty Ltd (Receivers and Managers appointed) (in liq) [2023] FCA 1663

ORDERS

THE COURT ORDERS THAT:

1.    The interlocutory application dated 7 September 2023 be dismissed.

2.    The time for the Applicants to produce the documents referred to in category 8 of the Schedule of Books and Records attached to the orders of 27 September 2023 (Orders), as required pursuant to order 5 of the Orders, is extended as follows:

a.    an initial tranche of documents is to be produced by 1 December 2023; and

b.    the Applicants are to produce all documents that respond to category 8 by 20 December 2023.

3.    The Plaintiffs are to file and serve their Cost Summary by 5 December 2023.

4.    The Applicants are to file and serve their Cost Response by 12 December 2023.

5.    The Plaintiffs are to file and serve their submissions on the question of costs by 19 December 2023.

6.    The Applicants are to file and serve their submissions in reply on the question of costs by 30 January 2024.

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

REASONS FOR JUDGMENT

PERRAM J:

1    This case concerns an examination summons and orders for production of documents issued to the First Applicant, Mr David, and his law firm, David Legal, which is the Second Applicant, in relation to the affairs of Suria Global (L) Pty Ltd (Receivers and Managers Appointed) (In Liquidation) (‘Suria’). The summons requires Mr David to attend and be examined about the examinable affairs of Suria. The orders for production require David Legal to produce various categories of documents held by it in relation to work done for Suria.

2    The Applicants now apply to discharge the examination summons and category 8 of the documents sought by the orders for production. They also seek access to the affidavit which the liquidators put before the Registrar in support of their application for the issue of the summons.

3    There are two issues which arise: (a) whether there is any substance to Mr David’s contention that the examination summons involves an abuse of process; and (b) whether category 8 of the documents sought under the orders for production should be set aside. I have concluded that both of these questions should be answered in the negative. I informed the parties on 13 November 2023 that I would dismiss the application and orders to this effect were entered on 1 December 2023.

Abuse of Process

4    The summons was issued pursuant to s 596B of the Corporations Act 2001 (Cth) (‘the Act’). An application for a summons under s 596B must be supported by an affidavit under s 596C. Section 596C(2) provides that ‘The affidavit is not available for inspection except so far as the Court orders.’ Access is normally granted where there is material before the Court from which it appears that ‘the applicant for access has an arguable case’ to which the supporting affidavit relates: Re Excel Finance Corporation Ltd (Receiver and Manager Appointed); Worthley v England (1994) 52 FCR 69 (‘Re Excel’) at 94. What must be arguable is the applicant’s entitlement to set aside the examination summons. In this case, Mr David submits that there is an arguable case that any further proceedings on the examination summons will involve an abuse of process by the liquidators.

5    There are several ways an abuse of process may be established but Mr David advances only two. First, he submits that it is arguable that in procuring the issue of the summons the liquidators were motivated by the illegitimate purpose of seeking to assist the plaintiffs in certain proceedings before the Supreme Court of New South Wales. Secondly, he submits that it is arguable that it is unjustifiably oppressive to him that he should be examined by the liquidators prior to giving evidence in the Supreme Court proceedings. I accept that both of these are known species of abuse of process in the context of examination summonses: Walton v ACN 004 410 833 Limited (formerly Arrium Limited) (in liquidation) [2022] HCA 3; 96 ALJR 166 (‘Arrium’) at [93] per Gageler J. The question is whether there is an arguable case for either.

Illegitimate purpose

6    The abuse of process allegation is based on the existence of proceedings which are pending in the Supreme Court of New South Wales entitled GEMI 169 Pty Ltd v Suria Global (L) Pty Ltd (Proceeding No 2022/181916). In that proceeding GEMI 169 Pty Ltd and GI 214 Pty Ltd (together the ‘GEMI entities’) sue Suria, Mr David, a Mr Violi and various others. The GEMI entities allege that they advanced more than $24 million to Suria which it has not repaid. Because Suria is being wound up the proceeding against it is stayed and it is not an active participant in the litigation.

7    The advances made by the GEMI entities to Suria were apparently secured by a guarantee provided by a Mr Lutui who is Suria’s sole shareholder and director. Mr Lutui was summoned for examination by the liquidators. However, he failed to appear at the examination and fled Australia after a warrant was issued for his arrest: Livingstone (Liquidator) v Lutui, in the matter of Suria Global (L) Pty Ltd (Receivers and Managers appointed) (in liq) [2023] FCA 609.

8    The advances to Suria by the GEMI entities were also secured by a deed of guarantee and indemnity executed by F & L Violi Pty Ltd (‘FLV’). The obligations under that deed were apparently secured by mortgages granted over real property at Strathfield and Griffith in New South Wales. The deed of guarantee and indemnity and the mortgages appear to bear the signature of FLV’s sole director and shareholder, Mr Violi, which appears in each instance to have been witnessed by Mr David.

9    Another interesting document is a deed of joint venture between FLV and Suria which, again, appears to have been executed by Mr Violi whose signature was apparently witnessed by Mr David. The nature of the joint venture is not apparent from the deed.

10    Mr Violi denies any knowledge of the advances by the GEMI entities to Suria or of a joint venture between his company, FLV, and Suria. He says that the signatures which appear on the various documents apparently executed by him were not placed on the documents by him.

11    On the possibility that Mr Violi is right about this, the GEMI entities have also sued Mr David in the alternative for – on this hypothesis – falsely witnessing Mr Violi’s signature on the transaction documents. On the present application, Mr David’s position on the issue of whether he witnessed Mr Violi’s signature was not expressly articulated.

12    The Supreme Court proceedings have reached the stage where the GEMI entities have put on their evidence. The time is approaching when Mr Violi and Mr David will need to show their hand in those proceedings since there are directions in place which will require them to file and serve their evidence in those proceedings in the new year.

13    Mr David submits that it should be inferred that the liquidators have the illegitimate purpose of seeking to assist the GEMI entities in their conduct of the Supreme Court proceedings. Mr David’s case about this has three elements:

(a)    the circumstances of the winding up of Suria;

(b)    the provision by the GEMI entities of funding to the liquidators of Suria; and

(c)    the retention of the same counsel by both the GEMI entities in the Supreme Court proceedings and the liquidators in the examination proceedings before this Court.

(a) The circumstances of the winding up of Suria

14    The GEMI entities are the largest and perhaps only creditors in the winding up of Suria. The liquidators of Suria were initially its administrators having been appointed by the GEMI entities under s 436C of the Act. At the second creditors’ meeting it was resolved that Suria should be wound up and the company’s then administrators became its liquidators.

15    Suria appears to have no assets, no books or records, and no bank accounts. It did not receive the loan funds in question (at least in the sense that the funds were not deposited into a bank account in its name) and does not appear to have conducted any business or, therefore, a joint venture with FLV. As I have noted, Suria’s sole shareholder and director has fled the jurisdiction which is not encouraging.

16    The various allegations made in the Supreme Court proceedings clearly suggest that a very substantial fraud has been perpetrated or, perhaps, is in the course of being perpetrated. The nature of the fraud is no clearer at this stage than the identity of either its authors or its true victims. There may be reason to doubt – one does not know – whether these two classes are entirely distinct.

17    These facts alone demonstrate that there is a significant public interest in ascertaining what occurred in the case of Suria. Why was $24 million advanced to a company which has never conducted business of any kind? Why has its sole director and shareholder fled the jurisdiction when served with an examination summons? Why would Mr Violi’s interests have secured such a loan and, indeed, did they? What was the nature of the joint venture between Suria and Mr Violi’s company, FLV? Why did $2.5 million of the funds advanced by the GEMI entities find their way into a bank account in the name of ‘FP & LW Violi’? Did Mr David actually witness Mr Violi’s signature? If he did, why would Mr Violi now say his signature was forged? If he did not, why would Mr David have done such a thing? These are just the questions which are obvious.

18    In short: little in this case makes any sense and one is left with the distinct sense that something is missing from the picture. The liquidators thought that a good place to start might be to ask some questions of Suria’s sole shareholder and director, Mr Lutui, but he seems disinclined to share with them what he knows about the affairs of Suria and sufficiently enthused to keep this to himself to have left Australia. Mr Violi has also not been persuaded of the merits of telling the liquidators what he knows. Like Mr David, he applied to set aside the examination summons issued to him but that application failed: Violi v Livingstone (Liquidator), in the matter of Suria Global (L) Pty Ltd (Receivers and Managers appointed) (in liq) [2023] FCA 1363. It is unclear whether Mr Violi has yet been examined before the Registrar.

19    In any event, for present purposes it is clear that the liquidators would in the ordinary course wish to examine Mr David about what he knows about the affairs of Suria. Indeed, I would go somewhat further. In my view, the liquidators would be derelict in their duties if they were not vigorously seeking to find out what happened in this case in the manner that they are.

20    I would not therefore infer from the circumstances I have just outlined that the liquidators have been motivated to examine Mr David by the improper purpose of assisting the GEMI entities in the Supreme Court proceedings.

(b) The provision by the GEMI entities of funding to the liquidators of Suria

21    There is no doubt that one of the GEMI entities, GI 214 Pty Ltd, has provided the liquidators with a deed of indemnity and that the GEMI entities have, so far, also provided around $200,000 in funding to the liquidators. It may be inferred that some of these funds have been used for the purposes of the examinations. It is open to infer from this that in providing this funding the GEMI entities are keen to see the liquidators conduct investigations into the affairs of Suria. It is also open to infer that they hope, or at least expect, that these investigations will include a public examination of, amongst others, Mr David. I draw those inferences.

22    The question is whether those matters make open a further inference that because the GEMI entities are motivated by that purpose the liquidators, in seeking to examine Mr David, are motivated by a corresponding purpose of helping the GEMI entities in the Supreme Court proceedings. It is useful to assume that it would be open to infer this from the hope or expectation that I am satisfied the GEMI entities do have in relation to the examination of Mr David. On that assumption, the question becomes whether the inference should in fact be drawn.

23    I am not persuaded that it should be for three reasons. First, it is far from obvious that the interests of the GEMI entities and those of the liquidators are the same or the same on every issue. For example, it may be in the liquidators’ interests to demonstrate that no funds were ever lent to Suria so that it has no primary liability to the GEMI entities at all. Thus, it may become apparent during the examination process that neither Mr Violi nor Mr David have any involvement in the alleged transactions and that both they and Suria are the victims of a fraud.

24    Secondly, the fact that the interests of the liquidators and those of the GEMI entities are different in this way is underscored by the fact that they are represented by separate solicitors.

25    Thirdly, one of the liquidators, Mr Livingstone, gives evidence that his purpose in seeking to examine Mr David is not to advance the interests of the GEMI entities in the Supreme Court proceedings. Assuming I could reject this evidence without Mr Livingstone having been cross-examined about it, I would not do so.

(c) Retention of the same counsel

26    Whilst the liquidators and the GEMI entities are represented by different solicitors, both sets of solicitors have retained the same counsel. Thus, the counsel who will conduct the examinations for the liquidators in this Court are the same counsel who are acting for the GEMI entities in the Supreme Court proceedings. It would not be open to infer from this fact alone that the liquidators are pursuing the examination of Mr David for the improper purpose of seeking to assist the GEMI entities in the Supreme Court proceedings.

27    Even if it were open, I would not draw the inference from this fact alone that the liquidators are pursuing the examination of Mr David for this improper purpose. Mr Livingstone has given evidence that the reason he wishes to examine Mr David is to find out what happened in relation to the affairs of Suria. As I have explained, that this would be Mr Livingstone’s motivation is in my view entirely obvious. Mr Livingstone has also given evidence that the same counsel are being retained to save costs. I accept this evidence. In light of those two matters, even if it were open to infer from the fact that the same counsel were being retained that Mr Livingstone was motivated by the improper purpose now alleged, I would not draw that inference as I am not affirmatively satisfied that Mr Livingstone is in fact motivated by that purpose.

Consideration of these matters together

28    Thus far I have considered whether the three matters put forward by Mr David are each sufficient to warrant drawing an inference that the liquidators are motivated by the improper purpose of assisting the GEMI entities in the Supreme Court proceedings. In each case I am not satisfied either that the inference is open to be drawn or, if it is open, that it should be drawn.

29    It is convenient at this juncture to consider the effect of the three matters together and to treat them, in effect, as a circumstantial case to be considered as whole and not integer by integer. So viewed, I am not persuaded at the civil standard that the circumstantial case is made out. I am not persuaded on this basis that the liquidators have the improper purpose that Mr David seeks to attribute to them.

Unjustifiable oppression

30    If the liquidators were pursuing the proceedings in the Supreme Court against Mr David then there might be much to be said for the view that it would be unjustifiably oppressive to Mr David to permit the liquidators to examine him: Arrium at [109]-[110] per Gageler J; Re Excel at 93. In that situation, the procedures of the examination would resemble discovery against Mr David, including by way of pre-trial deposition.

31    The problem, however, is that the liquidators are not pursuing Mr David in the Supreme Court proceedings. The GEMI entities are not the same as Suria. Suria is taking no part in the Supreme Court proceedings. Mr David’s submission impermissibly conflates Suria with the GEMI entities. If I had accepted Mr David’s first argument that there was a connection between his examination and the pursuit by the GEMI entities of the Supreme Court proceedings then I would accept that this case would be sufficiently close to the facts in Re Excel to draw a conclusion of unjustified oppression.

32    However, that connection is not made out on the facts. Whilst I accept that it is inconvenient to Mr David that he is going to be examined about the affairs of Suria prior to giving evidence about this in the Supreme Court, I do not accept that this is unjustifiably oppressive to him.

Conclusion on abuse of process

33    The submission that the liquidators are involved in an abuse of process by seeking to examine Mr David is without substance. There is no arguable case that there is such an abuse and hence no proper basis for granting Mr David access to the affidavit upon which the examination summons was procured. It follows that there is also no basis upon which to set aside the summons. I refused both of these prayers of the interlocutory application on 13 November 2023 for these reasons.

Category 8

34    The power to summon a person for examination under s 596B also includes a power to require the person to produce books in their possession which relate to the corporation or any of its examinable affairs: s 596D(2). The debate between the parties has narrowed to one category of documents, category 8. It is in these terms:

All other documents held by David Legal on file on behalf of the Company or in relation to matters for which David Legal acted for the Company, including but not limited to:

a. correspondence;

b. file notes;

c. court documents; and

d. contracts and other legal documents.

35    Mr David submits that this category is overly broad. I do not agree. Mr David is plainly one of the persons most likely to be able to give some account of Suria’s role in this episode given that he appears to have acted for it. I reject Mr David’s contention that some of the documents in his possession may be privileged. Any privilege will be that of Suria’s and Mr David cannot assert this without instructions from the liquidators. I am unpersuaded that the course that document production has taken in the Supreme Court helps Mr David. In those proceedings the GEMI entities were successful in obtaining search orders against Mr David on an ex parte basis. A large quantity of documentation was taken from Mr David’s residence and the offices of David Legal. He subsequently filed a notice of motion seeking to set aside the search orders. That motion was resolved consensually. The resolution involved the GEMI entities retaining a team of independent barristers to review the material seized from Mr David. The GEMI entities have recently stopped paying for this and the review process has stalled.

36    That this process in the Supreme Court proceedings has stalled is no doubt regrettable. But I do not see that it provides any reason not to require Mr David to produce the documents sought in this Court.

37    I am likewise unpersuaded by the submission that it may be difficult for the liquidators’ counsel to comply with the implied undertaking in circumstances where they act in both proceedings. It is not uncommon for counsel to act in related proceedings where information obtained in one proceeding may have relevance to another. There is no suggestion here that counsel are not aware of their obligations to the Court. I do not think therefore that as against the liquidators the suggested problem in relation to the implied undertaking has any substance.

38    I see no reason therefore to set aside category 8. If production needs to take place in tranches then this will be suitable.

Disposition

39    For these reasons I dismissed Mr David’s interlocutory application on 13 November 2023. I will hear the parties on costs if they wish but my present inclination is that Mr David should pay the liquidators’ costs of the application.

Associate:

Dated:    22 December 2023