Caboche v England

[1999] HCATrans 249

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide  No A60 of 1997

B e t w e e n -

DELORES JEAN CABOCHE

Applicant

and

RICHARD ANTHONY FOUNTAYNE ENGLAND (as liquidator of SOUTHERN EQUITIES CORPORATION LIMITED (in liquidation))

Respondent

Application for special leave to appeal

GLEESON CJ
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT ADELAIDE ON THURSDAY, 12 AUGUST 1999, AT 3.40 PM

Copyright in the High Court of Australia

MR R.A. CONTI, QC:  Your Honours, I appear with MR A.R. HARRIS, for the applicant.  (instructed by Cosoff Cudmore and Partners)

MR T.A. GRAY, QC:  I appear with MR M.C.J. HOFFMAN, for the respondent, if the Court pleases.  (instructed by Fisher Jeffries)

GLEESON CJ:   Yes, Mr Conti.

MR CONTI:   Your Honours, there are two relevantly short points arising.  One is a construction point of importance in the field of insolvency administration, construction, a statute; and the second matter is the requisite judicial test in the application of whatever be the correct statutory construction, in any event. 

Your Honours, as to the construction point:  in 1993, there was introduced some new legislation into the Corporations Law which, of course, has effect throughout Australia.  Do you have a separate bundle of our statutes and authorities?

GLEESON CJ:   Applicant special leave materials?  Yes.

MR CONTI:    Thank you.  Well, in tab 1.1, which is the first tab, you will see that there are three sections, 596A, 596B and 596C.  Section 596A addresses the circumstances, not here relevant, of mandatory examination.  In other words, an officer of the company at a material point in time being required to attend without any affidavit having been presented to the court as to reasons why he should be required to attend.  It is mandatory.  Sections 596B and 596C are here applicable and those provisions deal with the discretionary requirement for an attendance of a person for examination.

This dichotomy of mandatory and discretionary has not appeared in any analogous statutes to our understanding prior to its introduction here.  The impetus for these amendments came about by virtue of the Law Reform Commission’s Report which appears at our tab 3.1.  In paragraph 592 on that single page at tab 3.1, there is reference to Justice Lockhart expressing a juridical principle about what he describes as this “inquisitorial power” and the requirement for the exercise of considerable care for the powers invoked.  The Commission’s recorded agreement with that dictum and the proposal that the law be amended to render “the filing of affidavit or other documentary material in justification of an order for examination”, mandatory.

So, back to 596C which is within the area which we are addressing, that is, discretionary examination, it is mandatory, in our respectful submission, as a matter of construction, that a person who is proposed to be examined being a person of the description in 596B, as was Ms Caboche, it is mandatory that there be filed an affidavit in support of the application.  That particular mandatory requirement is to be seen in the context that the affidavit is not available for inspection unless the court orders.

So that, the legislation envisages that an examinee may well not have the opportunity ever to test whether there has been an affidavit in justification of the order which is made, which makes it all the more imperative that the requirements of 596C, in respect of affidavits, be complied with.  Your Honours, in the present case, the Full Court below did, in fact, hold that compliance was mandatory.  That is at application book 157 and, at line 45, a statement to that effect appears.  It is the last paragraph on page 157, Justice Lander said, “In my opinion s 596C makes it mandatory”.

However, his Honour then proceeded to reject, at line 32, the liquidator’s argument against that which was being propounded by my client that there was no necessity to commit certain material matters to affidavit.  So, a finding as to mandatory and a necessity consistent with that finding to commit matters to affidavit.  But then, at 159, line 19, Justice Lander, with whom the other members of the court agreed, went on to say this:

It is s 596B which invokes the jurisdiction to make an order for an examination summons.  True it is that s 596C makes it mandatory upon an applicant to file an affidavit in support of that application.  However in my opinion the failure to comply with s 596C does not mean necessarily that there is no jurisdiction to make an order under s 596B.

And there is the point of departure.  We say that there is no jurisdiction if there is a failure to comply with the mandatory requirements found by their Honours and their Honours are against us on the jurisdiction point.  So, the judgment concludes on that page on this point between lines 25 and 30, “In my opinion” - it is the final sentence:

compliance with s 596C is not a pre-condition to the making of an order under s 596B.

Your Honours, all that is known about the content of the affidavit in this case ‑ ‑ ‑

GUMMOW J:   I do not understand this argument about 596C.  The court’s power under 596B(1) is conditioned by the matters there set out, are they not, and they did not include 596C?  The court may summon if certain things are there.

MR CONTI:    Yes, but it would render the operation of 596C somewhat nugatory if it did not impact upon 596B such as to require that the court’s satisfaction in 596B was not predicated upon an affidavit which complied with what was, as it were, necessary to attract the operation of the jurisdiction and it is whatever is necessary to attract the operation of the jurisdiction, is mandatory, in our respectful submission, whether one was seeking to rely upon the first limb of paragraph (b) of 596B(1) or the second limb.  Whichever one it was seeking to rely upon, it is mandatory that there be sufficient evidence to make out that particular requirement.

Now, your Honours, the finding of Justice Lander below was that there was a degree of insufficiency in the affidavit.  He was not prepared to find that despite the mandatory requirements that all things, as it were, were required to be stated.  He said that jurisdiction was still there because the court was told about, verbally, what was, as it were, missing.  What was missing was the circumstance as found by the court below, but when the affidavit in this particular matter was sworn in late 1995, which caused the first application to issue and which formed the basis for subsequent applications, it was not disclosed in that affidavit the intention that the liquidator was going to sue Ms Caboche in any event.

So that, if I could paraphrase the situation:  the liquidator’s state of mind as found by the court, as a matter of inference, at the time the application was made, was Ms Caboche was going to be sued as a party for misconduct – that is the statutory expression which covers tortious breach of duty and breach of fiduciary duty – irrespective of the outcome of her examination.  Now, in those circumstances, your Honours, we would respectfully submit that an important albeit it brief principle of construction arises and that is as to the administration in insolvency of the statutory provisions as to bringing before the court persons with whom it is within the court’s discretion as to whether they should be brought before the court.

Given that the requirement is mandatory – forgive my continual repetition of the expression – by virtue of the word “must”, given that there was, as found by the court below, a failure to put entirely within the affidavit the material factors, then it must follow, in our respectful submission, as a matter of construction on this important area, that there was a failure to comply on the liquidator’s part, with the consequence, as we would seek, that the liquidator cannot make use of the transcript of Ms Caboche’s evidence.

GLEESON CJ:   Does that mean that there is an absence of jurisdiction even if there was an accidental omission?

MR CONTI:    Yes.  Your Honour, why it ‑ ‑ ‑

GLEESON CJ:   The reasoning of the court below, as I understand it on the point, is to say the fact of an omission does not deny jurisdiction but it may found a discretionary application to set aside an order.

MR CONTI:    Yes.  We put it higher than that.  We say that mandatory, as it were, means mandatory without any implicit excuse.

GLEESON CJ:   When you bear in mind the variety of circumstances in which an omission might come about, that sounds a fairly reasonable approach, does it not?  In other words, it is not a sudden death operation.

MR CONTI:    One is tempted to say it would depend on the omission but as we would see it, your Honour, there is really no alternative in this area of the law but to imply the inflexible rule.  So, the examinee here, does not know the basis upon which he is brought to the court – never sees the affidavit and, therefore, he must get the benefit of the doubt to the extent that anything material that is omitted – it must be material – whether accidentally or otherwise, is sufficient to ensure that the liquidator does not get the benefit of that particular material.

Your Honours, all the more important is that so, because when a lot of the previous law was laid down there was not this division within the statute in terms of examinees and the area of discretionary examination is obviously one which is being called for in terms of jurisdiction within the principle that Justice Lockhart enunciated and which was accepted by the Law Reform Commission.

GUMMOW J:   Mr Conti, in your draft notice of appeal at page 236 various grounds are set out.  You have been addressing us, I think, on grounds 2 and3, would that be right, on page 236, but not, I think, on grounds 4 and 5?

MR CONTI:    Yes, your Honour, that is so.  Your Honours, just before I leave this point, can I just emphasise that Justice Lander drew an analogy between the obligation to disclose on affidavit in this kind of circumstance, with the obtaining of ex parte injunctions.  His Honour used the expression “one must disclose to the court”, that is to say the liquidator must disclose to the court, “things that are favourable and unfavourable”, and unless the obligation is not conditioned in any way, even as to accidental matters, then the potential of difficulty to the examinee, the person whose rights, as it were, his normal rights are being invaded because of this special statutory recognition of the circumstances of liquidators.            I mean, rights, of course, in the ordinary litigious sense are being invaded.  Then, where is the logical stopping place for the protection that he must have?  If it is a case, “Well, there was an accidental failure to disclose the material matter”, we say, well, that must be too bad because where is the line going to be drawn, where is the logical stopping place? 

Your Honours, the other matters which we raise go to the question of purpose.  In the context, not of 596A or 596B, but in the context of the earlier law, there was an enunciation of principle in many of the cases as to the appropriate test in terms of purpose.  Your Honour Justice Gummow was party to one of those enunciations in the Broken Hill Case, which is cited here.  Your Honour Justice Gleeson was party to an observational test in Hong Kong Bank v Murphy.  But, your Honours, here we have, since the bringing into being of this partition of examinees, two examinations of the test, and I will close here, your Honours, both of which seem to move away from looking at the purpose of the liquidator, testing the purpose of the liquidator by reference to the events at the time of the grant of the examination and moving the focus to what appears during the course of the examination.

We would respectfully submit that if it is a matter of looking as to what occurs during the course of the examination, that is one thing, but the old law as to purpose must still be there.  Your Honours, the two cases which we say have, as it were, with respect, complicated the situation in circumstances which require elucidation by a clear restatement of the purpose in the light of, as it were, the new legislation:  one of them is Douglas-Brown v Furzer which is referred to in 2.9 - that is the Full Court of Western Australia - of the special leave materials, and the particular passage is on page 408 in the penultimate paragraph.  It is summarised on page 256 of the appeal book where it has been extracted in full but the passage in the judgment of the Full Court, as I say, in the penultimate paragraph on the fourth line is:

Taking all the provisions together, the intention of the legislation appears to be that such examination should now be carried out in such a way which will facilitate not only investigations but also the prosecution of civil or criminal proceedings ‑ ‑ ‑

et cetera, and this is the critical passage, the next sentence:

The intention is that the persons who are eligible applicants and any other relevant persons are given a forensic advantage which the court

can prevent being abused by its control over the conduct of the examination.

That is, of course, different from purpose, and the same has been said below in the judgment of Justice Landers, the same theme looking at conduct rather than original purpose.  Thank you, your Honours.

GLEESON CJ:   Mr Gray, we do not need your assistance on the first point made by Mr Conti, but what do you say about that last point that he has made concerning purpose?

MR GRAY:    If the Court pleases, the points we make are quite short.  If I could start this way:  the examinations of Ms Caboche are completed - they have occurred, and there has been no such issue of any abuse, any evidence of any abuse or even a hint of abuse, through examinations with Ms Caboche being represented by counsel throughout and that ‑ ‑ ‑

GUMMOW J:   Do you say this is not a convenient vehicle to test what is said to be a point about purpose?

MR GRAY:    We say it is not a convenient vehicle, if the Court pleases, because, in that sense, the point is academic to the case, it is moot to the case.  Secondly, if the Court pleases, as far as purpose is concerned, there are two express findings about purpose that, in fact, go a little against my learned friend’s outline of argument and submission to the Court that are contained, first, in the judgment of Justice Debelle at page 75 when there was a disclosure by Mr Hoffmann of the proceedings and then, more particularly, in the Full Court judgment at page 118 and 119 when Justice Lander, speaking for the Full Court, deals in detail with the liquidator’s reasons, these being summarised by the Master.  The Master had the confidential information, but it summarised the purpose and, in particular, the effect of the affidavit in the top paragraph on page 119:

The affidavit, in effect, explains that the various applications contained within the one application are a package designed to, if possible, locate or, alternatively trace, as far as possible, substantial assets of the company –

so, the first purpose is location and tracing.  The second purpose identified was at point 5 on the page:

the liquidator asserted his belief that SECL may be entitled to institute proceedings to recover any loss occasioned by the dealings in the paintings and that he seeks his examination to assess the prospects of success.

They were the liquidator’s purposes.  What has happened is that Justice Lander, when expressing his reasons, has gone a little further and said, “Moreover, quite above from gathering information in that sense, it would be appropriate to gather evidence”.  So that, on the facts of this case, the purposes were information about location of assets, information about prospects of success, but it was not a case for the liquidator who says, “I am about obtaining evidence”, and what the court has said was, as Justice Lander put it, “Moreover, in addition to that”, in Justice Lander’s view, “a liquidator can gather evidence”.

Now, with respect, that is not an unacceptable proposition in the courts of this State because that was the expression that Chief Justice Mason used in Hamilton v Oades, in that oft-cited passage when his Honour said, “the examination is desired to elicit, among other things, evidence”, that is the top of 497.  If the Court pleases.

GLEESON CJ:   Yes, thank you, Mr Gray.  Mr Conti, do you want to say anything in reply?

MR CONTI:    Yes, your Honour.  The matter is not academic, your Honours, because if the requisite purpose is as we have propounded the same in our submissions, and that requisite purpose was not addressed, then there is a very real consequence follows, and that is that no use can be made of the information obtained by the liquidator.  That is, of course, information which was obtained in the context of the fact that a summons was issued without disclosure to examinee - that was on 2 January 1996 - and the summons, in an amended form, was not served on the examinee until some 15 months later during 1997.

So, in that particular context, we would respectfully submit that there would follow a very important sanction which would underline the need to demonstrate the requisite purpose.  The passage which I was looking for in Justice Lander’s judgment in terms of purpose which, as it were, we are saying confuses the established tests, as does the Western Australian test, is what appears at page 165, lines 20 to 25, the last sentence.  That is pitching the purpose test in a similar way to the Western Australian Supreme Court, Full Court, as we outlined to you, and both of which have moved away from looking at the purpose of the examination as it must appear in the affidavit – or should appear in the affidavit – at the time of the order being issued against the examinee.

GLEESON CJ:   In this matter, the application for special leave to appeal seeks, in substance, to raise two issues on an appeal.  The first concerns a question of jurisdiction and involves the relationship between sections 596B and 596C of the relevant legislation.  In relation to that issue, the Court is of the view that there are insufficient prospects of success of an appeal to warrant a grant of special leave. 

The other issue sought to be raised by the applicant concerns the question of purpose.  In relation to that matter, the Court considers that the present case is not a suitable vehicle to test the proposition which the applicant seeks to argue.  The application for special leave is dismissed. 

Can you resist an order for costs, Mr Conti?  The applicant must pay the respondent’s costs of the application.

AT 4.08 PM THE MATTER WAS CONCLUDED