Boys v Quigley
[2002] WASCA 99
•30 APRIL 2002
BOYS & ORS -v- PETER RAYMOND QUIGLEY (AS RECEIVER AND MANAGER OF GENEVA FINANCE LTD) [2002] WASCA 99
| (2002) 26 WAR 454 | |||
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2002] WASCA 99 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:175/2001 | 8 APRIL 2002 | |
| Coram: | WALLWORK J MURRAY J ANDERSON J | 30/04/02 | |
| 18 | Judgment Part: | 1 of 1 | |
| Result: | Appeal and cross-appeal allowed in part | ||
| A | |||
| PDF Version |
| Parties: | ALAN HAROLD BOYS RONALD GEORGE HOWARD DESMOND FRANK CRAWLEY ANTHONY HAYES DOUGLAS-BROWN ANTHONY HOWARD LEIBOWITZ KEVIN ERNEST JUDGE PETER RAYMOND QUIGLEY (AS RECEIVER AND MANAGER OF GENEVA FINANCE LTD) |
Catchwords: | Corporations Examinations Order for examination of former auditors Made on application of receiver and manager Purpose to assess whether to proceed with claim for damages against auditors Whether abuse of process Whether scope of examination order oppressive Whether examination should be public |
Legislation: | Corporate Law Reform Act 1992 (Cth) Corporations Act 2001 (Cth), s 9, s 53, s 596A, s 596B, s 596C, s 596F, s 597A, s 597B, s 1337T(1) |
Case References: | Flanders v Beatty (1995) 16 ACSR 324 Gerah Imports Pty Ltd v Duke Group Ltd (In Liq) (1994) 12 ACLC 220 Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301 Hamilton v Oades (1989) 166 CLR 486 Hongkong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512 In re Spiraflite Ltd (1979) 1 WLR 1096 New Zealand Steel (Aust) Pty Ltd v Burton (1994) 13 ACSR 610 New Zealand Steel (Australia) Pty Ltd v Burton (1994) 13 ACSR 610 Re BPFC Ltd (In Liq) (1994) 14 ACSR 460 Re Dominion Trust Co (Critchley's Case) (1916) 27 DLR 580 Re Excel; Wortheley v England (1994) 52 FCR 69 Re Hugh J Roberts Pty Ltd (In Liq) (1970) 91 WN (NSW) 537 Re Interchase Corporation Ltd (In Liq) (1996) 20 ACSR 600 Re John Arnold's Surf Shop Pty Ltd (In Liq) (1979) 4 ACLR 663 Re Just Juice Corp Ltd; James v Commonwealth Bank of Australia (1992) 8 ACSR 444 Re Network Welding Pty Ltd (In Liq)(No 2) [2001] NSWSC 809; [2001] ACL Rep 120 NSW 117 Emanuel Investments Pty Ltd (In Liq); Saint v Macks [1999] SASC 264 Expo International Pty Ltd v Chant [1979] 2 NSWLR 820 Gray v Bridgestone Australia Ltd; Ewing v Fiandri Pty Ltd (1986) 4 ACLC 330 Newhart Developments Ltd v Co-operative Commercial Bank Ltd [1978] QB 814 Re Equitcorp Finance Ltd; ex parte Brock (1992) 6 ACSR 725 Re Ezishop.net Ltd (In Liq); Sims v Stone (2001) 38 ACSR 349 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : BOYS & ORS -v- PETER RAYMOND QUIGLEY (AS RECEIVER AND MANAGER OF GENEVA FINANCE LTD) [2002] WASCA 99 CORAM : WALLWORK J
- MURRAY J
ANDERSON J
- RONALD GEORGE HOWARD
DESMOND FRANK CRAWLEY
ANTHONY HAYES DOUGLAS-BROWN
ANTHONY HOWARD LEIBOWITZ
KEVIN ERNEST JUDGE
Appellants
AND
PETER RAYMOND QUIGLEY (AS RECEIVER AND MANAGER OF GENEVA FINANCE LTD)
Respondent
Catchwords:
Corporations - Examinations - Order for examination of former auditors - Made on application of receiver and manager - Purpose to assess whether to proceed with claim for damages against auditors - Whether abuse of process - Whether scope of examination order oppressive - Whether examination should be public
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Legislation:
Corporate Law Reform Act 1992 (Cth)
Corporations Act 2001 (Cth), s 9, s 53, s 596A, s 596B, s 596C, s 596F, s 597A, s 597B, s 1337T(1)
Result:
Appeal and cross-appeal allowed in part
Category: A
Representation:
Counsel:
Appellants : Mr M J Buss QC & Mr J Garas
Respondent : Mr C L Zelestis QC & Mr K L Christensen
Solicitors:
Appellants : Mallesons Stephen Jaques
Respondent : Tottle Christensen
Case(s) referred to in judgment(s):
Flanders v Beatty (1995) 16 ACSR 324
Gerah Imports Pty Ltd v Duke Group Ltd (In Liq) (1994) 12 ACLC 220
Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301
Hamilton v Oades (1989) 166 CLR 486
Hongkong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512
In re Spiraflite Ltd (1979) 1 WLR 1096
New Zealand Steel (Australia) Pty Ltd v Burton (1994) 13 ACSR 610
Re BPFC Ltd (In Liq) (1994) 14 ACSR 460
Re Dominion Trust Co (Critchley's Case) (1916) 27 DLR 580
Re Excel; Wortheley v England (1994) 52 FCR 69
Re Hugh J Roberts Pty Ltd (In Liq) (1970) 91 WN (NSW) 537
Re Interchase Corporation Ltd (In Liq) (1996) 20 ACSR 600
Re John Arnold's Surf Shop Pty Ltd (In Liq) (1979) 4 ACLR 663
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Re Just Juice Corp Ltd; James v Commonwealth Bank of Australia (1992) 8 ACSR 444
Re Network Welding Pty Ltd (In Liq)(No 2) [2001] NSWSC 809; [2001] ACL Rep 120 NSW 117
Case(s) also cited:
Emanuel Investments Pty Ltd (In Liq); Saint v Macks [1999] SASC 264
Expo International Pty Ltd v Chant [1979] 2 NSWLR 820
Gray v Bridgestone Australia Ltd; Ewing v Fiandri Pty Ltd (1986) 4 ACLC 330
Newhart Developments Ltd v Co-operative Commercial Bank Ltd [1978] QB 814
Re Equitcorp Finance Ltd; ex parte Brock (1992) 6 ACSR 725
Re Ezishop.net Ltd (In Liq); Sims v Stone (2001) 38 ACSR 349
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1 WALLWORK J: I agree with the reasons and conclusions of Anderson J.
2 This is nothing I could usefully add.
3 MURRAY J: I have been greatly assisted in this case by having read in draft the judgment to be published by Anderson J. It provides completely for me the reasons for which I too would dismiss the appeal insofar as it seeks to set aside the decision of Master Sanderson declining to discharge the summonses for examination issued against the appellants. I agree that the essential question for the Master in the decision of that application was whether, the proposed examinees and the applicant for the summonses being both before the court and able to go into evidence, the issue of the summonses in the form in which they were issued could be seen to involve anything which might properly be described as an abuse of the process of the court. The applications to discharge the examination summonses were in no sense a review of the original ex parte decision to issue the summonses.
4 It is, of course, the case that the decision of the application to discharge such a summons will involve consideration, on the basis of the information put before the Master at that time, of the power to issue an examination summons under s 596A or s 596B of the Corporations Act 2001. A court dealing with such an application might, in my respectful opinion, be usefully guided as to the test of an abuse of process by the observations of Hayne J of the Supreme Court of Victoria, as his Honour then was, in New Zealand Steel (Australia) Pty Ltd v Burton (1994) 13 ACSR 610 at 616 – 7:
"There would be an abuse of process if the coercive powers of s 596B were to be invoked for a purpose foreign to the purposes for which those powers are conferred. As was pointed out in State of Victoria v Day Neilson Jenkins & John [1993] 2 VR 545, the conclusion that there has been an abuse of process does not depend upon the application of what was there described as 'some vague notion of "fairness" in civil litigation ([1993] 2 VR 545-59). Thus it is not to the point to determine whether the creditor that has applied for an order for examination may (in its capacity as plaintiff in the pending action) obtain some advantage in the prosecution of its action which is an advantage not otherwise obtainable from the interlocutory processes available to it in the action. Nor am I called on to say whether obtaining any such advantage is "fair" or "unfair". Such an
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- approach would obscure the fundamental question which is whether the power is being used for a purpose foreign to the purpose for which it was given. If it is, then there is an abuse for that reason. If it is not, then no question of fairness arises; the legislature has permitted the step to be taken in such a case.
Nor do I consider the fact that by means of an order for examination and production of documents, the creditors may obtain discovery of the defendant's documents when the defendant has been excused from making discovery in the action is of itself reason to conclude that it is an abuse of process to make an order under s 596B requiring the production of documents."
5 As to those aspects of the appeal and cross-appeal which are concerned with the ambit of the examination summonses, I am content with the conclusion that to the extent mentioned by Anderson J, both appeal and cross-appeal should be allowed. If necessary, I would hear counsel further on the manner in which the description of documents in pars 2.3 to 2.9 might be confined and given greater particularity. They are, I agree, undoubtedly too generally expressed at present.
6 I am, with respect, attracted to the description of the documents which might appropriately be required to be produced which Anderson J has suggested. For myself, at the moment, I can see no need for the "refinement and embellishment" which his Honour supposes might be required. I would join in the order proposed by Anderson J, to be made under the Act, s 597(4), that the examinations be in private having regard to the circumstances of this case and the express purpose of the examinations.
7 Finally, I appreciate that to confine the requirement for the production of documents in the way proposed leaves unaffected the breadth of the general requirement contained in par 1 of the summonses, to be examined "about the examinable affairs of Geneva Finance Ltd (receiver and manager appointed)", but, in my view, to confine the documents to be produced in the way proposed will have an effect upon the breadth of the summonses generally by providing guidance to the Registrar as to the appropriateness of questions about the examinable affairs of the corporation under the Act, s 597(5B). That would seem to me to be the most convenient way of dealing with that aspect of the examinations.
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8 ANDERSON J: This is an appeal by leave from a decision in Master's Chambers delivered on 12 November 2001, refusing to discharge six summonses, issued pursuant to s 596B of the Corporations Act 2001, for the attendance of the appellants to be examined on oath or affirmation about the examinable affairs of Geneva Finance Ltd (Receiver and Manager Appointed). The appellants are former partners in the firm of Howarth & Howarth who were the auditors of Geneva. The company has instituted proceedings against the appellants claiming damages for negligence in the discharge of their auditors' duties. It is large and complex litigation in the long causes list.
9 The application for the issue of the examination summonses was made by the respondent in this appeal, Mr Quigley, who is the receiver and manager of Geneva appointed by the trustee of a debenture deed pursuant to which Geneva had issued some $30,000,000 worth of debenture stock. The application was supported by the respondent's affidavit with respect to which an order for inspection was made pursuant to s 596C(2) and in which he deposed that, in his capacity as receiver and manager having the conduct of Geneva's claim for damages against the appellants, he had become concerned about the appellants' insurance arrangements and financial capacity. He deposed that he had information which suggested that the appellants' insurers were "involved" with the HIH group of insurance companies, notorious for its spectacular collapse not long ago. The respondent's concern is that the appellants may no longer have any worthwhile insurance cover and their own financial resources may be inadequate, raising the question whether it is worthwhile proceeding with the damages claim. In his affidavit, the respondent said:
"9. I now wish to examine the said [appellants] for the purposes of ascertaining their financial resources for meeting judgments which may be obtained by Geneva and also to gather information regarding their professional indemnity insurance at relevant times."
10 The application was made ex parte to Master Bredmeyer and the terms of the order were simply that "summonses pursuant to section 596B of the Corporations Law [sic] be issued, in the form annexed hereto, against [the appellants]".
11 The summonses that were issued are in identical terms and informed each appellant that he was required to "attend before the Registrar in chambers at the Supreme Court of Western Australia, Perth at 10.30 am on Tuesday, the 18th day of September 2001, and from day-to-day until
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- excused by the court, to be examined on oath or affirmation about the examinable affairs of Geneva Ltd (Receiver and Manager Appointed)", and ordered each appellant to produce at the examination the following:
"2.1 all professional indemnity insurance policies, and any endorsement to those policies, current at the time that you notified any insurer or broker of a claim, arising in respect of a claim in the Supreme Court of Western Australia in action number CIV 1765 of 1993 ('the Action');
2.2 all correspondence between you and your professional insurer or broker, since 26 July 1990, in any way relating to the Action;
2.3 all documents relating to each and every asset including land, house, contents, motor vehicles, shares or other property in your possession custody or power, or which you own or owned or have or have had an interest since 26 July 1990 ('the Assets');
2.4 valuations or appraisals, and correspondence or notes of communications with valuers, appraisers, art or antique dealers, since 26 July 1990, in any way relating to the Assets;
2.5 any agreements, correspondence and/or notes of any communication to any bank, financier or other lender since 26 July 1990, evidencing any pledging, charging, granting of any form of security over any of the Assets or evidence of the terms upon which you have granted any personal guarantee or indemnity to any third person or entity;
2.6 each and every income tax return prepared and/or lodged by you or on your behalf since 26 July 1990;
2.7 each and every statement of financial position prepared by you or on your behalf since 26 July 1990,
2.8 each and every document evidencing the nature and extent of the legal or beneficial interest held by you in each and every company or trust which you have or have had any legal or beneficial interest since 26 July 1990;
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- 2.9 each and every bank statement recording the balance of any account maintained by you and/or any company or trust as referred to in paragraph 2.8 since 26 July 1990."
12 The significance of the date 26 July 1990 is that it is the date of Mr Quigley's appointment.
13 By summonses of 10 August 2001, each appellant applied in Master's Chambers for an order discharging the examination summonses. These applications came before Master Sanderson, who refused to discharge the summonses, but modified them by reducing the range of documents required to be produced. It is the Master's refusal to discharge the examination summonses which is the subject of this appeal. The appellants also complain in the alternative that the scope of the examination remains too wide. The respondent has cross-appealed, contending that the order made by Master Sanderson reducing the range of documents went too far.
14 The two sections of the Corporations Act mostly under consideration in these proceedings are in the following terms:
"596A Mandatory examination
The court is to 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 is an examinable officer of the corporation or was such an officer during or after the years ending … "
596B Discretionary examination
(1) [Grounds for discretionary examination] 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
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- misconduct in relation to the corporation; or
- (ii) may be able to give information about examinable affairs of the corporation.
- (2) …"
15 Auditors of a corporation are not within the definition of "examinable officer" in s 596A, the consequence being that the application for their examination is brought under s 596B and the significance of this is that there is a discretion to refuse to make the order, notwithstanding that the court is satisfied of the jurisdictional facts set out in subss (a) and (b) of s 596B(1).
16 It should be noted for completeness that Mr Quigley was authorised in writing by the Australian Securities and Investments Commission (ASIC) to make the application. Being so authorised, he is within the definition of "eligible applicant" in s 9 of the Corporations Act and, hence, an eligible applicant for the purposes of s 596B(1)(a).
17 There is no provision in the Corporations Act to set aside an examination summons which has been issued pursuant to an order made under either s 596A or s 596B. However, the Judges of the Supreme Court are authorised by s 1337T(1) of the Corporations Act to make rules of court with respect to proceedings and the practice and procedure of the court under the corporations legislation. This Court has made such rules, including O 81G r 69 which provides:
"69. 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 … "
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- the definition of "examinable affairs" in ss 9 and 53 of the Corporations Act, the detailed provisions of which need not be examined in this judgment.
19 Master Sanderson was satisfied as to the existence of the jurisdictional facts referred to in s596B, namely, that the respondent was an eligible applicant and that the appellants were persons who may be able to give information about examinable affairs of the corporation, and he was not persuaded that there was any discretionary ground on which to set aside the summonses. As has already been noted, he did, however, modify the summonses by cutting down the range of documents to be produced.
20 It is of benefit to the receiver and manager in the discharge of his duties to know what amount is likely to be recovered in actions by the company against persons who are considered liable to compensate the company for losses sustained by reason of their breach of duty. It is within the purposes of s 596B to conduct an examination for the purpose of obtaining that kind of information. There are now many cases holding this to be so. See, for example, Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301, especially at 306 - 307. That case and the cases cited by Beaumont, Spender and Cooper JJ in the course of their joint judgment provide ample authority for the proposition that the Court has power to order an examination for the purpose of ascertaining the worth of a person against whom the corporation claims to have a cause of action. See also Flanders v Beatty (1995) 16 ACSR 324 per Ormiston J at 340 and Gerah Imports Pty Ltd v Duke Group Ltd (In Liq) (1994) 12 ACLC 220.
21 As I understood his argument, senior counsel for the appellants, Mr Buss QC, did not seek to put a contrary proposition as to the proper construction of s 596B, and the ambit of the Court's power under that section, but contended that because the respondent is not a liquidator, but a privately appointed receiver and manager acting in the interests of a particular group, that is, secured creditors of the corporation, the public interest considerations which may compel the exercise of a discretion in favour of a liquidator are not as pressing in the case of receivers and managers. Mr Buss submitted that the "radical" differences between the functions and duties of a liquidator and those of a privately appointed receiver and manager bear heavily on the Court's discretion in examination cases. He submitted that, whilst in the case of liquidators, there is a definite public interest in the orderly winding-up of insolvent companies, and, thus, in obtaining the necessary information to enable liquidators properly and effectively to carry out their duties, the functions
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- and duties of a receiver and manager are essentially private, being to realise the assets of the corporation for the benefit of the mortgagees and only to the extent necessary to pay them out, so that the public interest in the discharge of his functions is very much reduced, if it exists at all.
22 I am not persuaded that, in exercising a discretion under s 596B, the Court should take a different approach according to whether the application is made by a liquidator on the one hand or a privately appointed receiver and manager on the other, except perhaps to the limited extent that, where the eligible applicant is a receiver and manager and therefore not completely independent (which liquidators are generally considered to be), the Court may be more concerned to look out for the possibility of abuse in the sense of the possibility that the examination is being sought for purposes foreign to those for which the power to examine is conferred: Re Network Welding Pty Ltd (In Liq)(No 2) [2001] NSWSC 809; [2001] ACL Rep 120 NSW 117 per Young CJ in Equity at par 15. Save to that extent, the distinction contended for by Mr Buss depends on too narrow a view of the purposes for which s596A to 597B were enacted. There are, of course, many decided cases in which the statements of principle do, in their terms, refer to the public interest in enabling liquidators to carry out their functions and duties. For example, in Hamilton v Oades (1989) 166 CLR 486, Mason CJ said, at 496:
"There are two important public purposes that the examination is designed to serve. One is to enable the liquidator to gather information which will assist him in the winding up; that involves protecting the interests of the creditors. The other is to enable evidence and information to be obtained to support the bringing of criminal charges in connection with the company's affairs: Mortimer v Brown (1970) 122 CLR 493 at 496, 499."
- See also In re Spiraflite Ltd (1979) 1 WLR 1096 at 1100; Re John Arnold's Surf Shop Pty Ltd (In Liq) (1979) 4 ACLR 663 at 666; Re Interchase Corporation Ltd (In Liq) (1996) 20 ACSR 600. However, these are cases which concerned liquidators; and many were decided under statutory provisions different from the expanded statutory regime in ss 596A to 596F and 597A and 597B of the Corporations Act. The new regime introduced by the Corporate Law Reform Act 1992 (Cth) extends the range of possible applicants for examination summonses and has altered the scope of and procedure relating to examinations. See the discussion of this in Flanders v Beatty (supra) per Ormiston J at 332.
23 It is true that the fundamental obligation of the court appointed liquidator is to conduct the winding-up in strict accordance with the
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- Corporations Act by having the assets of the company collected and realised, its debts and liabilities discharged and any remaining balance distributed among its members, and that this is in the nature of a public function which only a liquidator can perform: Keay, "McPherson, The Law of Company Liquidation", Law Book Co 4th ed (1999) at 331; Re Dominion Trust Co (Critchley's Case) (1916) 27 DLR 580; and it is true that the duties of a receiver and manager appointed out of court under a debenture are different, they being to realise or profitably manage the assets of the debtor company for the benefit of the debenture holders to liquidate the secured debt: Re Just Juice Corp Ltd; James v Commonwealth Bank of Australia (1992) 8 ACSR 444 at 452. However, except to the extent already mentioned, this does not mean that the Court should approach the exercise of its discretion under s 596B differently, depending on whether the applicant for examination summonses is a liquidator, a privately appointed receiver and manager, or some other eligible applicant. There is, or may be, just as weighty a public interest consideration in the efficient and effective enforcement of securities issued by corporations as in the winding-up of insolvent corporations. In any given case, debenture holders may greatly exceed unsecured creditors, both in number and value, and there is nothing to say that debenture holders will ordinarily be better able to withstand a loss than the unsecured creditors of the same corporation. On another level, there is a public interest in facilitating commerce and therefore in protecting the interests of creditors who provide finance to corporations. Anyway, I would venture to say that it is in the interests of the company, its contributories and unsecured creditors that the receiver and manager effectively pursue the corporation's choses in action, even although he may be doing so primarily for the benefit of only one group of creditors.
24 This is a case in which the company has, by its receiver and manager, started major litigation against its former auditors for breach of their duty. The debenture holders naturally wish to know whether it is worthwhile proceeding with the action, having regard for the appellants' present insurance arrangements and general financial resources. The respondent became an eligible applicant in his capacity as the receiver and manager of Geneva. That is, he was authorised by ASIC to apply for examination summonses under s 596B because he was appointed the receiver and manager of Geneva. The Court must therefore approach the exercise of its discretion on the basis that the powers of examination sought to be exercised by the respondent in this case will "advance a purpose intended to be secured by the legislation": Hongkong Bank of Australia Ltd v Murphy (1992) 28 NSWLR 512 per Gleeson CJ at 519.
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25 Of course, if the Court saw that the process of the examination was being used vexatiously, or oppressively, or for some private purpose entirely outside the scope of the section, it might either decline to make the order in the first place, or discharge the summonses as abuses of the process of the court: Flanders v Beatty (supra), especially per Ormiston J at 335; Re Hugh J Roberts Pty Ltd (In Liq) (1970) 91 WN (NSW) 537 per Street J at 539; New Zealand Steel (Australia) Pty Ltd v Burton (1994) 13 ACSR 610 per Hayne J at 613 - 614. For example, an exercise of the examination power in order to assist a third party to bring defamation proceedings may well be an abuse of process: Re Excel; Wortheley v England (1994) 52 FCR 69 at 91. However, once it is accepted that seeking information to enable a receiver and manager to decide whether to continue to attempt to realise an asset of the company in the form of a chose in action is a legitimate purpose of the power conferred by s 596B, it seems impossible to say that an exercise of the power by a receiver and manager is an abuse of process. The manner of its exercise - the breadth of the examination summons - must still be scrutinised to see whether the demands made on the proposed examinees for the purposes of the examination "go beyond the legitimate requirements of the occasion", to use the words of McLelland CJ in Re BPFC Ltd (In Liq) (1994) 14 ACSR 460 at 463, but if they do not, I can see no remaining discretionary ground for disallowing an examination. It can hardly be vexatious or oppressive to require a proposed examinee to submit to an examination which is within the purpose of s 596B and is within proper limits. As Hayne J said in the New Zealand Steel case at 616:
"Thus it is not to the point to determine whether the creditor that has applied for an order for examination may (in its capacity as plaintiff in the pending action) obtain some advantage in the prosecution of its action which is an advantage not otherwise obtainable from the interlocutory processes available to it in the action. Nor am I called on to say whether obtaining any such advantage is 'fair' or 'unfair'. Such an approach would obscure the fundamental question which is whether the power is being used for a purpose foreign to the purpose for which it was given. If it is, then there is an abuse for that reason. If it is not, then no question of fairness arises; the legislature has permitted the step to be taken in such a case."
26 Insofar as the appeal challenges the decision of Master Sanderson not to discharge the summonses, it must be dismissed.
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27 This leaves the question whether the summonses go too far in respect to the demands made on the appellants. Master Sanderson thought that they did and, in respect to the production of documents, as has been observed, he modified them in that respect. What he did was to strike from the summonses pars 2.3 to 2.9, thus confining the duces tecum part of the summonses to the insurance documents set forth in 2.1 and 2.2. He further confined this part of the summonses by ordering that the date in 2.2, ie, 26 July 1990, should be amended to 1 January 2001. The effect of this was to discharge the summonses insofar as they required the appellants to produce documents relating to their personal financial capacity, and to limit the production of insurance correspondence by reference to a commencing date of 1 January 2001.
28 On behalf of the appellants, Mr Buss contended that, although the appellants were no longer required to produce the wide range of documents enumerated in pars 2.3 to 2.9, the order still allows the respondent to question the appellants on their financial affairs and the existence and contents of documents concerning their financial affairs. Although they do not have to bring the documents with them, there is no limit placed by the order on the questions that may be asked of the appellants with respect to their financial affairs. In my opinion, this is not a reason to discharge the summonses. The personal financial condition of the appellants is a legitimate field of inquiry, having regard for the purpose that is intended to be served by the examination. The examination will be under the control of the Registrar who may disallow questions that are not "appropriate": s 597(5B).
29 On behalf of the respondent, Mr Zelestis QC contended that modifications ordered to be made to the summonses by Master Sanderson have unduly circumscribed the scope of the examination, having regard for its legitimate purpose, both with respect to the production of insurance correspondence and with respect to the production of documents revealing the appellants' personal financial worth. The respondent has cross-appealed seeking orders which will, in effect, reinstate the summonses, with some modification to their terms.
30 Concerning par 2.2 of the summonses in their original form, I think that a requirement to produce all correspondence between the particular appellant and his professional indemnity insurer or broker since 26 July 1990 "in any way relating to the litigation" goes beyond the legitimate requirements of the respondent. It is too wide, not so much because of the period of time which it covers, which was the learned Master's concern, but because the description of documents would include documents
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- having no connection with the enforceability of any claim by Geneva against the appellant. Mr Buss submitted, in effect, that the class of documents in par 2.2 should at least be restricted to written communications (if any) from an insurer or insurance broker to the appellant, (a) stating the limit of cover of any policy referred to in par 2.1, (b) stating the conditions of any such policy, (c) denying liability under any such policy either generally or in relation to any of the claims made in the proceedings referred to in par 2.1, and (d) stating the grounds of any such denial of liability. That classification is taken from the judgment of McLelland CJ in Re BPFC Ltd (In Liq) (supra) at 463. If the class of documents was to be limited in that way, I do not think a requirement to produce them would be oppressive, even if the requirement was with reference to a time period commencing on 26 July 1990.
31 Whilst I would uphold the Master's decision to narrow par 2.2, I would accede in part to the submissions of both Mr Buss and Mr Zelestis as to the order that should be made to effect an appropriate narrowing. I would reinstate the commencing date of 26 July 1990, but limit the class of correspondence that must be produced in the manner set out immediately above. To this extent, I would allow both the appeal and the cross-appeal.
32 Concerning the requirement to produce documents relating to the appellants' personal financial capacity to meet any judgment against them, Master Sanderson seems to have been of the opinion (which I gather from par 18 of his judgment) that information of this kind was not reasonably required by the respondent in order to make a decision as to whether or not to continue with the action. This conclusion seems to have been reached in part in light of the fact that, in his affidavit in support of the order for the examinations, the respondent made it clear that it was the collapse of the HIH group of insurance companies which had precipitated his application.
33 In my opinion, it is not oppressive or inappropriate to seek to obtain information about the personal financial capacity of the appellants which would enable the respondent to assess the appellants' capacity to satisfy a judgment in the action. However, I think that in this case the width and generality of the description of documents in pars 2.3 onwards really makes the requirement to produce them oppressive as a whole and I would uphold the learned Master's decision to discharge the summonses to the extent that they contained pars 2.3 to 2.9 on that ground.
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34 Mr Zelestis QC or those instructing him have prepared an amended form of order which is more limited as to the documents sought to be produced and which is intended to be more narrowly expressed, but, in my opinion, the amended form of order remains oppressive on its face. It is in the following terms:
"2.3 all documents
2.4 valuations or appraisals, and correspondence or notes of communications with valuers, appraisers, are to antique dealers, since 26 July 1990, in any way relating to the Assets;
2.52.4 any agreements, and/or correspondence and/or notes of any communication relating to any Assets with any bank, financier or other lender since 26 July 1990 and 1 January 2002, evidencing any pledging, charging, granting of any form of security over any of the Assets or evidence of the terms upon which you have granted any personal guarantee or indemnity to any third person or entity as at 26 July 1990 and 1 January 2002;
2.62.5 each and every income tax return prepared and/or lodged by you or on your behalf since 26 July 1990;
2.72.6 each and every statement of financial position prepared by your or on your behalf since 26 July 1990;
28.2.7 each and every document evidencing the nature and extent of theany legal or beneficial interest held by you in each and every company or trust which you have or have had any legal or beneficial interest or any expectation to have vested or distributed to you any
(Page 17)
- capital or income from any trust
35 With due respect, these categories are described in terms which are of uncertain meaning in some respects. For example, one may ask, what is (in par 2.3) a "document … showing … an expectation to have vested any capital, from any discretionary trusts, as at 26 July 1990 …"? Another problem is relevance. How can documents of that type which are of that age assist the respondent to assess the particular appellant's present or future capacity to satisfy a judgment? With reference to par 2.5, the relevance of the appellants' 1991 income tax returns to the present worth of the company's chose in action is not, to my mind, self-evident. At the very least, it would seem to be so peripheral as to be outweighed by considerations of privacy and confidentiality. I do not understand the second part of par 2.7 at all, I must confess.
36 I would dismiss the cross-appeal insofar as it relates to these paragraphs of the summonses, but I think the respondent should have liberty to make submissions to the Court as to whether there may be some way to settle a form of orders which enables the respondent to fairly examine the appellants as to their relevant personal means. Perhaps a form of orders can be settled in Master's Chambers in the light of the judgments of the members of this Court. Counsel should be heard further on this aspect. In case it may be of assistance, I would not regard as oppressive a requirement to produce documents described as:
"Every document in the possession or control of the examinee evidencing or referring to any ownership interest, legal or equitable, in any real or personal property including money and choses in action; and every document in the examinee's possession or control evidencing or referring to any trust arrangement pursuant to which the examinee may exercise any power of disposition or distribution; and every document in the examinee's possession or control evidencing or referring to any trust arrangement pursuant to which the examinee or any member of his family will or may obtain a benefit; and every document in the examinee's possession or control evidencing or referring to any disposition of property by the examinee since 26 July 1990 otherwise than in the ordinary course of business
(Page 18)
- or in the ordinary course of management of the examinee's family or domestic affairs."
37 Obviously, there is room for refinement and embellishment.
38 Finally, having regard for the purpose of these examinations and for the private nature of the information that is sought, I see no reason why the examinations should be in public and I would, in any event, make an order under s 597(4) that they be in private. I think the respondent should also be called on to give appropriate undertakings to safeguard the confidentiality of any documents that may be produced at the examination.
42
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