Actwane Pty Limited (In Liquidation) (Receiver & Manager Appointed)
[2002] NSWSC 512
•15 March 2002
CITATION: Actwane Pty Limited (In Liquidation) (Receiver & Manager Appointed) [2002] NSWSC 512 CURRENT JURISDICTION: Equity FILE NUMBER(S): SC 5990/01 HEARING DATE(S): 15 March 2002 JUDGMENT DATE: 15 March 2002 PARTIES :
Actwane Pty Limited (In Liquidation) (Receiver & Manager Appointed) - Anthony Milton Sims (Plaintiff)JUDGMENT OF: Campbell J
COUNSEL : P Braham (Plaintiff)
N Kidd (for Dr Larkin)SOLICITORS: Walker Insolvency Lawyers (Plaintiff)
Selby Kent Levitt (for Dr Larkin)CATCHWORDS: CORPORATIONS - receivers managers and controllers - examination summons to director - what is "reasonable cause" not to comply - Corporations Law Rules, Rule 11.5 - issue of warrant for arrest of director - factors relevant to discretion LEGISLATION CITED: Corporations Law DECISION: Evidence intended to show that director has a reasonable argument that issue of the examination summons was an abuse of process rejected. Adjournment to file further evidence refused. Warrant for arrest issued.
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST
CAMPBELL J
FRIDAY 15 MARCH 2002
5990/01 ACTWANE PTY LIMITED (IN LIQUIDATION) (RECEIVER & MANAGER APPOINTED)
JUDGMENT - (On admissibility of paragraphs 7 and 12 of affidavit of Stephen Michael Larkin)
1 HIS HONOUR: I have heard argument about the admissibility of paragraph 7 and paragraph 12 of the affidavit of Stephen Michael Larkin. I reject those paragraphs. The basis for that rejection is that I am told by counsel that they provide a basis for submitting that Dr Larkin had a reasonable argument that the issue of the examination summons was an abuse of process.
2 In my view, that is an irrelevant matter for the question now before me. The question now before me is whether Dr Larkin should have an adjournment of an interlocutory process which seeks his arrest. The occasion for issue of that interlocutory process is that Dr Larkin failed yesterday to obey an examination summons. He had, at the time, an application on foot for the setting aside of that examination summons. His application to set aside the examination summons was filed late, and well outside the three day period provided by Rule 11.5(2) of the Corporations Law Rules (that being three days after the service with the examination summons).
3 It is the effect of Rule 11.10 of the Corporations Law Rules that, for so long as there is an extant examination summons, that is, one which has not been set aside or stayed, any person on whom it has been served, and whom it orders to attend at court, is obliged to comply with it, unless he has reasonable cause not to comply. It is irrelevant to any question of reasonable cause for non-compliance that Dr Larkin had, at one stage, or might even now have, grounds for setting aside the examination summons, if the summons had not actually been set aside or stayed at the time when it required him to attend court. “Reasonable cause” in Rule 11.10 includes matters like serious illness. However, it does not include the recipient’s own opinion of whether he has grounds to set the summons aside, when those grounds have not been put before the court in the manner, and within the time, that the CorporationsLaw Rules lay down. Were it otherwise, a recipient of an examination summons could readily evade it. The Rules are not to be construed in a way which makes them easily evaded.
4 Hence, I reject paragraphs 7 and 12 of the affidavit of Dr Larkin.
5 Counsel for Dr Larkin also tenders various documents which are exhibits to the affidavit of Dr Larkin, identified as exhibits SML1 through to SML22. Counsel informs me that the relevance of those exhibits is the same as the relevance of paragraphs 7 and 12. In those circumstances I also reject the tender of exhibits SML1 through to SML22.
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST
CAMPBELL J
FRIDAY 15 MARCH 2002
5990/01 ACTWANE PTY LIMITED (IN LIQUIDATION) RECEIVER & MANAGER APPOINTED)
JUDGMENT – (On application for adjournment)
1 HIS HONOUR: On 20 December 2001 Dr. Stephen Michael Larkin was served with a summons for examination requiring him to attend the court yesterday at 10.00 am, and from day to day until excused by the court to be examined on oath or affirmation about the examinable affairs of Actwane Pty Limited (In liquidation) (Receiver and Manager appointed).
2 Dr. Larkin did not appear at court yesterday. Yesterday an application was made, instead, by counsel briefed by Dr. Larkin to Young CJ in Eq. That application sought a stay of the examination summons. Young CJ in Eq refused that application.
3 Yesterday, a second application was made in the course of the afternoon to Young CJ in Eq for leave to serve with short notice an interlocutory application. That interlocutory application seeks, so far as is presently relevant, an order that a warrant be issued for the arrest of Stephen Michael Larkin of 1165 Bells Line of Road, Kurrajong Heights, and various orders for costs. I am told from the bar table, without any dissent from counsel for Dr. Larkin, that, yesterday, Young CJ in Eq did not deal with the application immediately because at that time counsel for Dr. Larkin expressed a desire to put on some evidence.
4 The interlocutory process came before me in the Duty Judge list this morning. When that happened, counsel for Dr. Larkin made an application to adjourn the hearing of that interlocutory process. It is with that application for adjournment which I now deal.
5 The application for the arrest of Dr. Larkin is made in a statutory context where cl 11.10 of the Corporations Law rules empowers the court to issue a warrant for the arrest of a person summoned or ordered to attend for examination. That rule sets out the conditions in which such an order may be made. One of the circumstances is if, without reasonable cause, the person fails to attend at the time and place appointed.
6 For the purpose of the adjournment application before me there is no dispute that Dr. Larkin has failed to attend at the time and place appointed. There is, however, dispute about whether his attendance was without reasonable cause. The adjournment is sought on the basis that the adjournment will enable Dr. Larkin to prepare evidence which will go to the question of whether he had reasonable cause for non-attendance, and also evidence which goes to discretionary matters.
7 On this application, an affidavit of Dr. Larkin's solicitor, Mr. Levitt, was read. That affidavit discloses that Dr. Larkin was formerly involved in a joint venture company with Bill Moss, that those shareholders have fallen out, and that Bill Moss has acquired a fixed and floating charge over the assets of the joint venture vehicle, Actwane Pty Limited. The examination summons is one which is brought by the receiver of that company.
8 On 13 March 2002 Mr. Levitt caused to be filed an interlocutory process and supporting affidavit of Dr. Larkin, which sought a stay of the examination summons. It is that application which was before Young CJ in Eq yesterday, and was refused. Mr. Levitt deposed to having instructions to file a summons for leave to appeal against the decision of Young CJ in Eq yesterday. I am told from the bar table that an application will also be made to the Court of Appeal seeking an order, nunc pro tunc setting aside the examination summons. In support of a submission that there was substance in a claim to set aside the examination summons, extensive evidence was tendered before me today. I have rejected that evidence. I will not repeat here the reasons I then gave for rejecting it.
9 The affidavit of Mr. Levitt deposes to being informed, on information and belief, that when Dr. Larkin was served with the examination summons he not really provided with any conduct money, notwithstanding what the process server who served the examination summons had sworn to. Before me, however, counsel for Dr. Larkin accepted that there was no entitlement in Dr. Larkin to receive conduct money before obeying an examination summons.
10 Thus, any application based on the absence of conduct money must fail.
11 Another basis deposed to in Mr. Levitt's affidavit is that he is informed by Dr. Larkin that Dr. Larkin had difficulty in getting an appointment with a solicitor to take action in relation to the summons prior to Christmas and that he attempted to make an appointment with Mr. Levitt (who has acted for Dr. Larkin for a long time) but was unable to do so before 4 February 2002, the day when Mr. Levitt returned to his office after a prolonged absence in South Africa from 13 January 2002.
12 Mr. Levitt also says:
- "It was not until late February that Dr. Larkin was able to gain an appointment to see me for the first time about this matter as my erstwhile firm of LMG, solicitors and attorneys, merged with and relocated to the offices of Selby Anderson Attorneys and Consultants to form Selby Kent Levitt Attorneys and Consultants, at the beginning of 2002, which merger involving approximately 50 personnel, proved to be disruptive and interfered with work flow and my availability, throughout February 2002."
13 The Corporations Law rules in rule 11.5 say:
- “(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 [certain specified documents].
- (3) As soon as practicable after filing the [certain specified documents] the person must serve a copy of the [certain specified documents] on:
- (a) the person who applied for the examination, and
- (b) unless that person is the Commission or a person authorised by the Commission - the Commission.”
14 Dr. Larkin is well out of time in making the application which he makes.
15 I do not regard the difficulties which he has had in seeing Mr. Levitt as providing, even arguably, a reasonable cause for his failure to obey the court order. When that is so, his being able to say with greater elaborateness how those difficulties arose will not assist in the resolution of the matter and I would not be prepared to grant an adjournment to allow evidence of that type to be put on.
16 It was also submitted that Dr. Larkin would wish to put on evidence going to the Court's discretion about whether an order for arrest should be made. The items of evidence which it was submitted ought be before the Court were:
· full details of the application before Young CJ in Eq;
· the transcript of the hearing before Young CJ in Eq;
· evidence of the appeal which has been lodged to the Court of Appeal from the decision of his Honour.
· material to show that the summons to set aside the examination summons has reasonable prospects of success, "in a form more readily understood” than the evidence which I have already rejected.
17 In my view, evidence about the detail of the procedure before Young CJ in Eq yesterday morning and afternoon will not assist in deciding whether, at an earlier time yesterday morning, Dr. Larkin had reasonable cause to fail to attend. Nor will it provide a basis for a discretionary decision about whether he should not now be required to carry out the order of the Court which he has known about since 20 December last.
18 I reject the submission that the Court in deciding whether to issue an arrest warrant ought have that material before it.
19 Likewise, I reject the submission that the court ought to have before it material to show that the summons to set aside has reasonable prospects of success. For the reasons which I gave in rejecting that evidence in the present application, it will likewise not be of assistance in determining the question of whether an arrest warrant should be issued.
20 Reliance is also placed on matters concerning prejudice. It is submitted for Dr. Larkin that the prejudice of not granting an adjournment outweighs the prejudice of allowing an adjournment. I do not accept that this is so. This is a case where the Court has already ordered that an examination should take place, and the avenue the Rules allow to challenge that decision was not availed of. It would take considerable matter indeed to show that there is a reason why this order ought not be able to stand.
21 No particular type of prejudice was suggested to me in submission, and accordingly I am not persuaded that any adjournment to allow evidence of prejudice to be put on would be necessary to enable justice to be done in the instant case.
22 For these reasons I reject the adjournment application.
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST
CAMPBELL J
FRIDAY 15 MARCH 2002
5990/01 ACTWANE PTY LIMITED (IN LIQUIDATION) RECEIVER & MANAGER APPOINTED)
JUDGMENT – (On issue of warrant for arrest of Dr Stephen Michael Larkin)
1 HIS HONOUR: This is an application for the issue of a warrant for the arrest of Stephen Michael Larkin. The circumstances in which it comes to be brought have been outlined in the judgment which I gave on an application for adjournment earlier today.
2 I am satisfied that an examination summons was served on Dr. Larkin on 20 December 2001. I am also satisfied that he failed, yesterday, to attend before the Registrar for that examination to take place.
3 This leaves a question of whether his failure to attend was without reasonable cause.
4 An affidavit of Ms. Fiona Touhill, a solicitor employed by the solicitors for the receiver and manager of Actwane Pty Limited (In liquidation) deposes to the conversation which occurred before the Registrar yesterday. Mr. Kidd of counsel, who appeared for Dr. Larkin on that occasion and also today, said to the Registrar:
- "Dr. Larkin is not here. We want to stay the examination summons and in the meantime lodge an appeal and a stay to the Court of Appeal. I appreciate that may mean that you are bound to issue a certificate. I am instructed that my client believes the examination summons is an abuse of process and exercises his rights and will seek a stay".
5 It appears that no reason was put before the Registrar on that occasion for Dr. Larkin's non-attendance beyond his belief that the examination summons was an abuse of process. For reasons I have already given, that is not a valid reason for his failure to obey an extant court order.
6 The affidavit of Mr. Levitt deposes to some difficulties that Dr. Larkin says he had in being able to obtain legal advice. Those difficulties are that he had difficulty in getting an appointment with a solicitor to take action in relation to the summons prior to Christmas, and that his attempts to obtain an appointment with Mr. Levitt were unsuccessful until late February, partly because of Mr. Levitt being out of the country from 13 January 2002 until 4 February 2002, and partly because Mr. Levitt was moving his practice from one office to another.
7 The affidavit says nothing about any difficulties in obtaining advice from any solicitor after Christmas, nor about difficulties in obtaining advice from Mr. Levitt in the period prior to 13 January 2002. I do not regard those difficulties he has deposed to as providing a reasonable cause for his non-attendance.
8 It is now well over two months since the summons was served.
9 There is evidence that Dr. Larkin was in the CBD area of Sydney today, talking to Mr. Levitt. From that I can infer he is alive, well, and in practical terms, available to give evidence. Furthermore, he has had an opportunity to put on evidence and has not taken it, beyond having Mr. Levitt swear the affidavit to which I have already referred. That failure to put on evidence is, in my view, material from which I can more strongly draw the conclusion that he did not have any reasonable cause.
10 What I have said so far establishes that the preconditions for making an order have been met. There is still, however, a question of discretion about whether I should actually make the order.
11 Mr. Kidd, for Dr. Larkin, submits that an examination summons is an unusual order of the court, made without one of the relevant parties having any right to be heard. That is perfectly true. However, Dr. Larkin has had ample time since the summons was served on him in which to invoke an order of the court to set aside the examination summons. Mr. Kidd submits that since the examination summons was served on him, Dr. Larkin has tried to exercise his rights to question the propriety of the order. He has now filed a process seeking to have that order set aside, which is returnable on 14 April 2002. It appears as though he did not think that the matter was of sufficient urgency to warrant an application for short service, or for any early hearing date.
12 Mr. Kidd also pressed in aid that an application was made for a stay of the examination summons. This is the application which Young CJ in Eq heard yesterday. It is asserted that that hearing before his Honour was not a full hearing on the merits. That is, in my view, an irrelevant consideration, or at the very least a consideration which does not weigh particularly heavily on my mind.
13 It is also alleged that there is an appeal on foot to the Court of Appeal, and a notice of motion in the Court of Appeal proceedings seeking a stay of the examination summons nunc pro tunc which is returnable this coming Monday. It is suggested that, if I were minded to make an order, I could perhaps order that a warrant be issued but that it lie in the registry until Monday. Mr. Kidd submits that unless I take a course of this kind, Dr. Larkin will not be heard at all about the propriety of the examination summons which is issued against him. If that is so, I am not persuaded that it provides a reason why, in my discretion, the warrant for arrest should not issue. In the circumstances which I have outlined, I regard it as a completely self-imposed wound.
14 On the other hand, the failure to attend is a serious and deliberate disregard of a court order. It is a disregard of an order which is of considerable public importance. The provisions of the Corporations Law which provide for examination of officers of corporations are a very important aid to the open and honest conduct of the affairs of corporations, and it is of considerable importance that they be obeyed.
15 In all the circumstances, I see no reason in my discretion why I ought refuse to make the order sought. I accordingly will do so. I make the order for issue of a warrant for the arrest of Stephen Michael Larkin.
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST
CAMPBELL J
FRIDAY 15 MARCH 2002
5990/01 ACTWANE PTY LIMITED (IN LIQUIDATION) RECEIVER & MANAGER APPOINTED)
JUDGMENT
1 HIS HONOUR: I made an order earlier today for the issue of a bench warrant for the arrest of Dr Stephen Michael Larkin. Dr Larkin is presently before the Court in custody of the sheriff’s officer.
2 I am informed that the manner in which he came here was that he heard of the making of the order and voluntarily came to Court, and it was only once he was at Court that he was arrested by the sheriff’s officer. That arrest occurred while Dr Larkin was in the Registrar’s Court awaiting the start of the examination.
3 Mr Braham, for the examiner, makes application that Dr Larkin be put on remand in custody, as that is the only way of ensuring that he will continue to attend the Court at the resumed hearing.
4 It is presently 5 to 4 in the afternoon, so there will be little time for examination to continue this afternoon, though there will be some. I gather that the examination would be able to continue next Tuesday.
5 I have given consideration to Mr Braham’s application. I accept the submission which Mr Kidd put to me that for someone to be retained in custody it is a particularly serious matter; indeed, he put that it was an extreme matter. Likewise, though, the failure to obey a Court order which has not been set aside is a particularly serious matter.
6 There are powers of the Court under the laws of contempt to punish those who do not obey Court’s orders and it is very important that any order of a superior Court should be obeyed unless and until such time as it is set aside.
7 In the circumstances of the present case, however, and in particular bearing in mind that Dr Larkin voluntarily came to Court on hearing of the making of the order, I would not exercise any power to require him to be kept in custody.
8 In making this decision I have assumed, without deciding, that such power exists. In the circumstances, I discharge the bench warrant.
9 The basis on which I do so is that I am informed that Dr Larkin is prepared to proffer to the Court an undertaking to attend the examination this afternoon and whenever the examination is adjourned to from time to time unless and until he is released from this undertaking.
10 Do you give that undertaking to the Court on behalf of Dr Larkin, Mr Kidd?
KIDD: I do, your Honour.
11 That undertaking to the Court is given by Mr Kidd on behalf of Dr Larkin. The bench warrant having been discharged, Dr Larkin is now free from custody.
12 The Court will now adjourn so that the examination proceedings can continue.
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