Wainter Pty Ltd, in the matter of New Tel Limited (in liq) ACN 009 068 955 [2005] FCAFC 114
CORPORATIONS LAW – appeals against orders of a Federal Court Judge allowing orders for the issue of summonses for examination – history and purpose of provisions empowering a Court to summon a person for examination about a corporation’s examinable affairs – whether examination sought for an improper purpose – whether purpose of examination was to benefit the corporation, its contributories or creditors.
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Evans v Wainter Pty Ltd [2005] FCAFC 114
Case
[2005] FCAFC 114
Decision Date
CaseChat Overview and Summary
Evans v Wainter Pty Ltd involved a dispute between Evans, the appellant, and Wainter Pty Ltd, the respondent. Evans sought an order to summon a person for examination under the Corporations Act 2001 (Cth) for purposes deemed abusive by Wainter Pty Ltd. The case was heard and determined in the Federal Court of Australia.
The central legal issues the court had to resolve were whether Evans' application for the examination order constituted an abuse of process and if it served any legitimate purpose under the Corporations Act. The court had to determine if Evans' application was made for an offensive purpose, such as gaining a forensic advantage or using the procedure as a rehearsal for cross-examination in pending litigation, rather than for legitimate purposes like gathering information to assist in the administration of the corporation or protecting creditors' interests.
In its decision, the court found that the application for the examination order was indeed an abuse of process. The primary purpose of Evans' application was to obtain a forensic advantage and use the procedure as a rehearsal for cross-examination in the pending litigation, which was unconnected to the legitimate purposes authorised by the Corporations Act. The court emphasised that the procedure could not be used for offensive purposes or as a dress rehearsal for cross-examination in pending or subsequent actions. As a result, the appeal was dismissed, and Evans was ordered to pay the respondent's costs of the appeal.
Orders
Orders of the court
1. The appeal be dismissed.
2. The appellants to pay the respondent’s costs of the appeal.
1. The appeal be dismissed.
2. The appellant to pay the respondent’s costs of the appeal.
Background
Background to the litigation
In my opinion, the following propositions relevant to these appeals emerge from the legislation and the authorities.1.The power given to the Court to summon a person for examination is a coercive power.2. The purpose of the power is to be gleaned from the legislation.3. The following legitimate purposes emerge:3.1First, an examination is designed to serve the purpose of enabling an eligible applicant to gather information to assist the eligible applicant in the administration of the corporation.3.2Secondly, it assists the corporation’s administrators to identify the corporation’s assets, both tangible and intangible. It also allows the corporation’s liabilities to be identified. 3.3Thirdly, the purpose is to protect the interests of the corporation’s creditors. 3.4Fourthly, it serves the purpose of enabling evidence and information to be obtained to support the bringing of proceedings against examinable officers and other persons in connection with the examinable affairs of the corporation. 3.5Fifthly, it assists in the regulation of corporations by providing a public forum for the examination of examinable officers of corporations.4.If an eligible applicant applies for an order for the examination of a person for a purpose unconnected with the purposes authorised by the legislation that will be an abuse of process and the order, if obtained, will be set aside.5.The procedure may not be used to allow a party to obtain a forensic advantage and, if it is, any order obtained will be set aside.6.The procedure may not be used as a dress rehearsal for the cross-examination of a person in a pending or subsequent action. However, it is not improper to seek an order of the Court to summon a person for examination whilst litigation is pending against that person or entities connected with that person.7.The question whether in any particular case the applicant has used the procedure abusively will depend upon the applicant’s purpose in seeking the order and all of the surrounding circumstances. It will not be an abuse unless an offensive purpose is at least the predominant purpose.8.It will be an offensive purpose if the application cannot be characterised as being for the benefit of the corporation, its contributories or creditors.9.A creditor may, if first authorised by ASIC, apply to the Court for an order to summon for examination a person for the purpose of obtaining information in relation to a debt owed to the creditor if such an examination would be in the interests of the corporation or its creditors as a whole.10.A creditor may not use the procedure for the purpose of obtaining a forensic advantage which would not have been available to the creditor if the corporation had not gone into administration.The application of those principles to the facts on these appeals The respondent was a creditor and shareholder in CAT but after the 27 November 2001 conversation assigned that debt to New Tel in consideration of taking shares and options in New Tel.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
RYAN, LANDER AND CRENNAN JJ
Mr Woolfe was not a director of New Tel but was found to be a person who may be able to give information about examinable affairs of the corporation: s 596B(1).Earlier decisions on earlier legislation The current sections were enacted by the 1992 Act and it is necessary to keep in mind that the present sections have evolved since the statutory regime was considered by the High Court in Hamilton v Oades (1989) 166 CLR 486. In that case, the High Court was called upon to consider the predecessor to s 596B, which was then s 541 of the Companies (New South Wales) Code (the NSW Code). That section was in the same form as the Code. The Code did not have an equivalent of s 596A. Section 541 of the NSW Code relevantly provided:‘ (1) In this section, a reference, in relation to a corporation, to a prescribed person, shall be construed as a reference to an official manager, liquidator or provisional liquidator of the corporation or to any other person authorized by the Commission to make applications under this section or to make an application under this section in relation to that corporation.(2) Where it appears to the Commission or to a prescribed person that —(a) a person who has taken part or been concerned in the promotion, formation, management, administration or winding up of, or has otherwise taken part or been concerned in affairs of, a corporation has been, or may have been, guilty of fraud, negligence, default, breach of trust, breach of duty or other misconduct in relation to that corporation; or(b) a person may be capable of giving information in relation to the promotion, formation, management, administration or winding up of, or otherwise in relation to affairs of, a corporation,the Commission or prescribed person may apply to the Court for an order under this section in relation to the person.(3) Where an application is made under sub-section (2) in relation to a person, the Court may, if it thinks fit, order that the person attend before the Court on a day and at a time to be fixed by the Court to be examined on oath or affirmation on any matters relating to the promotion, formation, management, administration or winding up of, or otherwise relating to affairs of, the corporation concerned.’ The Commission was the National Companies and Securities Commission: s 5 of the Code. The Commission was the predecessor of ASIC and charged with similar regulatory duties. There is, in my opinion, no relevant difference between a ‘prescribed person’ and an ‘eligible applicant’. A ‘prescribed person’ included an official manager, liquidator, provisional liquidator of a corporation or a person authorised by the Commission. The inclusion of a provisional liquidator in s 541 but not in ‘eligible applicant’ in the Act is unimportant. The only form of external management apart from liquidation, or possibly receivership, recognised in the Code was official management. Therefore, there was no reference to the two types of administration which were first recognised in the 1992 Act. In both Acts the regulatory authority could authorise a person to be a ‘prescribed person’ in the case of the Code or an ‘eligible applicant’ in the case of the Act.