Ferrinda v Bendigo Bank Ltd - [2002] WASC 169

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: FERRINDA & ANOR -v- BENDIGO BANK LTD [2002] WASC 169

CORAM: MASTER SANDERSON

HEARD: 18 JUNE 2002

DELIVERED : 26 JUNE 2002

FILE NO/S: COR 349 of 2001

MATTER :LINCOLN CONSTRUCTIONS (WA) PTY LTD (IN LIQ) (ACN 054 140 662)

BETWEEN: NINO GIOVANNI FERRINDA
ROBERTO LAPEDOTA
Applicants
AND
BENDIGO BANK LTD (ACN 068 049 178)
Respondent

Catchwords:

Corporations Act - Application to set aside examination summons issued under s 596A of the Act - Turns on own facts

Legislation:

Corporations Act, s 9, s 596A

Result:

Application dismissed

Category: B

Representation:

Counsel:

Applicants: Mr N P Gentilli
Respondent: Mr G I Macnish

Solicitors:

Applicants: Jackson McDonald
Respondent: Cocks Macnish

Case(s) referred to in judgment(s):

Bell Group NV (In Liq) v Aspinall (1998) 19 WAR 561
Hong Kong Bank v Murphy (1992) 10 ACLC 1573
Re Excel Finance Corporation Ltd (Receiver & Manager appointed); Worthley v England (1994) 52 FCR 69
Re Hugh J Roberts Pty Ltd (In Liq) (1970) 2 NSWR 582

Case(s) also cited:

Douglas-Brown (Official liquidator of Woomera Holdings Pty Ltd) v Furzer (1994) 12 ACLC 288
Gerah Imports Pty Ltd v Duke Group Ltd (In Liq) (1993) 61 SASR 557
Re Franks; Ex parte Gittins (1892) 1 QB 646
Re GPI Leisure Corporation Ltd (1994) 12 ACLC 1049
Re Laurie Cottier Productions Pty Ltd (In Liq) (1992) 9 ACSR 513
Re Moage Ltd (In Liq); Sheahan v Pitterno (1997) 15 ACLC 1034
Re Rothwells Ltd (No 2) (1989) 7 ACLC 576
Re Southern Equities Corporation Ltd (In Liq); Bond v England (1997) 15 ACLC 1582
Re Spedley Securities Ltd (In Liq) (1991) 9 ACLC 700
Vagrand Pty Ltd (In Liq) v Permanent Trustee Australia Ltd (1995) 17 ACSR 386
Williams v Spautz (1992) 174 CLR 509

MASTER SANDERSON: This is an application brought by Nino Giovanni Ferrinda ("Ferrinda") and Roberto Lapedota ("Lapedota") to set aside two examination summonses issued under s 596A of the Corporations Act. The applicant for the summonses (and the respondent to this application) was Bendigo Bank Ltd ("Bendigo Bank"). Bendigo Bank is the largest creditor of Lincoln Constructions (WA) Pty Ltd (In Liq) ("Lincoln"). Bendigo Bank is an "eligible applicant" under s 596A(a) of the Act as it has been authorised in writing by the Australian Securities & Investment Commission to make an application and undertake an examination of Ferrinda and Lapedota: see s 9 for the definition of "eligible applicant".
(Ferrinda and Lapedota do not concede that the purported authorisation of Bendigo Bank by the ASIC was proper. They are proceeding under the provisions of the Freedom of Information Act and have foreshadowed a challenge by way of judicial review to ASIC's decision. On that basis they applied to adjourn this application and for an adjournment of the examination summonses. I refused that adjournment. For the purposes of this application, any challenge to the validity of ASIC's authorisation of Bendigo Bank can be put to one side.)
Section 596A is, by its terms, mandatory. If an application is made by an eligible applicant and provided the requirements of subs (b) are satisfied, the Court must make an order. In this case the requirements of subs (b) were satisfied. At all material times Ferrinda and Lapedota were directors of Lincoln. Accordingly, the order was made. Nowhere in s 596A, or indeed, anywhere else in Div 1 of Pt 5.9 of the Corporations Law, is there any provision allowing a Court to set aside an order made under s 596A. However, there would appear to be at least two ways in which it is open to a person to whom an examination summons is directed to seek an order setting aside the summons.
First, as the application for the issue of a summons is made ex parte, it is open to a recipient of a summons to apply to set aside the order for issue of the summons under O 58 r 23. Generally speaking, an order made ex parte will only be set aside if there has been material non‑disclosure on the part of the applicant, or if new facts are put before the Court which would justify the discretion being exercised differently: see Bell Group NV (In Liq) v Aspinall (1998) 19 WAR 561. That was not the approach taken by Ferrinda and Lapedota in this case. There is then, no suggestion, either of material non‑disclosure on the part of Bendigo Bank when they applied for the examination summonses, or that there is new evidence before the Court which would justify the refusal of the order.
The alternative approach, and the one adopted by Ferrinda and Lapedota, is to argue that the examination summonses are an abuse of the court process. There are a number of cases in which this argument has been raised. In this case there was no argument between the parties as to the principles to be adopted. Both counsel were content to rely upon what was said by the Full Court of the Federal Court (Gummow, Hill and Cooper JJ) in Re Excel Finance Corporation Ltd (Receiver & Manager appointed); Worthley v England (1994) 52 FCR 69. For present purposes it is enough if I quote two short passages where the Court deals with the circumstances in which an abuse of process will arise. The Court said (at 89):
"It is apparent that the question whether there is, in a particular case, an abuse of process will be a question which will depend upon the purpose of the applicant seeking the order of the court and the circumstances of the case. For an abuse to be found it will be necessary that the offensive purpose be, at the least, the predominant purpose: see Burns Philp & Co Ltd v Murphy (1993) 29 NSWLR 723 at 732 and Williams v Spautz (1992) 174 CLR 509 at 529."
Their Honours went on to expand upon this broad statement of principle later in the reasons. The Court said (at 91):
"But it may be quite a different question where proceedings contemplated or instituted are not proceedings to be brought by the company, but proceedings brought by some other party for the advantage of that party rather than the company. For example, it would be an abuse of the process for a creditor approved by the Commission for the purposes of s 597(1) to obtain an examination summons to conduct an examination for the purpose of obtaining evidence in proceedings which the creditor proposed to bring against the examinee for defamation. That would be a purpose completely foreign to the power of examination which is ultimately in aid of the company itself and not the personal advantage of the person seeking to conduct the examination."
Counsel for Ferrinda and Lapedota relied upon this latter passage, submitting that this case fell precisely within its terms. Counsel pointed out Bendigo Bank had issued proceedings against Lincoln, Lapedota and the National Australia Bank. The action against Lincoln had not been pursued; as Lincoln was in liquidation, Bendigo Bank needed leave of the Court to proceed with its application and no application for leave had been made. Nor was Bendigo Bank pursuing its action against the National Australia Bank Ltd. That being so, it was submitted, the irresistible inference was that the examination of Ferrinda & Lapedota was being undertaken for the predominant purpose of obtaining information to assist Bendigo Bank in its action against Lapedota. That, it was said, was an abuse of process which would justify both examination summonses being set aside. Counsel for Bendigo Bank rejected any suggestion that the predominant purpose of the examination summonses was to aid his client's case against Lapedota. Rather, he said, it was to examine the former directors to understand the affairs of the company. As a consequence of undertaking the examination for an entirely proper purpose, information might arise which assisted Bendigo Bank in its case against Lapedota. But that was a collateral consequence of the examination; it was not its predominant purpose.
In support of the application, Ferrinda relied upon an affidavit sworn 29 April 2002 and Lapedota relied upon two affidavits, the first sworn 8 April 2002, the second sworn 29 April 2002. On behalf of Bendigo Bank there was an affidavit sworn by Lee Simon Panotidis ("Panotidis") on 7 June 2002. The affidavit of Panotidis was very brief. Essentially all he said was that he had been advised by the liquidator of Lincoln that he (the liquidator) was without funds. That assertion was unchallenged.
Central to determination of the issue in this application is the nature of the claim brought by Bendigo Bank against Lapedota. A copy of the statement of claim appears as annexure "RL3" to the affidavit of Lapedota sworn 8 April 2002. The first four paragraphs of the pleading identify the parties. By par 5 it is pleaded that one Michael Bertolini ("Bertolini") was at all material times the plaintiff's business relationship manager in Western Australia. It is then pleaded that one Lia Nicotina ("Nicotina") was at all material times employed by Bendigo Bank. By par 7 it is pleaded that Lincoln maintained two bank accounts - one with the Bendigo Bank which is described as "the Lincoln Bendigo account" and one with the National Australia Bank, which is described as "the Lincoln NAB account". It is further pleaded that at all material times Lapedota maintained an account with the National Australia Bank in his own name. That account is described in the pleading as "the Lapedota NAB account". By his defence filed 27 May 2002, Lapedota admits all of these facts, save that he says that Bertolini was the "defacto State Manager of the plaintiff".
The statement of claim then refers to four bank accounts maintained with Bendigo Bank. They are defined as the "Cornen account", the "Romano account", the "Riccardi account" and the "Ferrinda account". Collectively these accounts are defined as "the Target accounts". Lapedota's defence contains a bare denial of this plea. There then follows par 10 of the statement of claim which, shorn of its particulars, is in the following terms:
"Between 14 May 1999 and 7 March 2000 Bertolini and Nicotina fraudulently debited or caused to be debited a total of $1,658,900.00 to the Target Accounts and credited or caused to be credited to the Lincoln Bendigo Account sums totalling that amount ('the Transactions')."
The particulars to par 10 set out amounts which were, so it is alleged, fraudulently debited to the Target accounts and credited to the Lincoln Bendigo account. What allegedly followed thereafter can best be shown by quoting par 11 through to par 14 of the statement of claim. Once again I have omitted the particulars.
"11.Each of the Transactions was undertaken by Bertolini and Nicotina at the request and with the connivance of the First Defendant, the Second Defendant and Ferrinda.
12.The entirety of the monies the subject of the Transactions ('the Proceeds') which were credited to the Lincoln Bendigo Account at all times, to the knowledge of the First Defendant, belonged to the Plaintiff and were held upon a constructive trust by the First Defendant as trustee for the Plaintiff.
13.Immediately following each of the Transactions Ferrinda or Ferrinda and the Second Defendant caused the First Defendant, in breach of the trust pleaded in paragraph 12 hereof, to draw cheques upon the Lincoln Bendigo Account for amounts the same as, or nearly the same as, the amounts which had been fraudulently credited to that account as pleaded in paragraph 10 hereof and the Proceeds were then paid into either the Lapedota NAB Account or the Lincoln NAB Account and were thereby fraudulent converted by the First Defendant, alternatively the Second Defendant and/or Ferrinda to the use of the Plaintiff.
14.Part of the Proceeds represented by the cheques drawn upon the Lincoln Bendigo Account pleaded in paragraph 13 hereof was subsequently deposited into the Lincoln NAB Account and the Lapedota NAB Account."
The remainder of the statement of claim alleges that Lapedota took steps to ensure that the money in the National Australia Bank accounts wound up in his hands. It is alleged that he is liable to make repayment to Bendigo Bank. I need not detail this aspect of the pleading with any precision. It is clear from what I have said that the Bendigo Bank alleges against Lapedota the most serious of premeditated frauds.
Lapedota's answers to these charges can best be summarised by quoting par 8 and par 9 of his defence. They are in the following terms:
"8.In or about March 1999 and with the apparent authority of the plaintiff Bertolini granted an overdraft facility ('Facility') in respect of the Lincoln Bendigo Account at Ferrinda's request and thereafter from time to time confirmed the existence of the Facility to Ferrinda, who advised the second defendant accordingly.
9.(a)If the allegations pleaded in paragraph 10 of the statement of claim are true then Bertolini credited funds to the Lincoln Bendigo Account, without informing Ferrinda or the second defendant that those funds came from the accounts of other depositors of the plaintiff, as pleaded in paragraph 10 of the statement of claim;
(b)Admits that he and Ferrinda or Ferrinda caused the first defendant to draw cheques upon the Lincoln Bendigo Account in the amounts particularised but says that those cheques were drawn pursuant to the Facility; and
(c)otherwise denies paragraph 13."
Once the nature of the dispute between the parties is set out in this way it is immediately apparent that Bendigo Bank has an interest in examining directors of Lincoln about the company's affairs. It is pleaded by Lapodeta that Bertolini granted an overdraft facility on the Lincoln Bendigo account. In my view, examination on that issue alone would be sufficient to justify the issue of the examination summonses. But no doubt the examination will cover a far wider range of issues than just the granting of this overdraft facility and such a broad examination would, in my view, be entirely legitimate and permissible. It is not possible, based upon the pleadings as they stand and as supplemented by the limited available evidence, to conclude that the predominant reason for this examination is the action brought by Bendigo Bank against Lapedota. It may be that in the course of any examination information emerges which benefit Bendigo Bank's case. But that is not to the point. The possibility that a forensic advantage might be gained by Bendigo Bank does not automatically make an order for examination an abuse of process: see Re Hugh J Roberts Pty Ltd (In Liq) (1970) 2 NSWR 582 at 584; Hong Kong Bank v Murphy (1992) 10 ACLC 1573 at 1577.
Furthermore, the statement of principle that I quoted from Worthley v England (on page 89) must be treated with some caution. Their Honours say that for an abuse to be found it will be necessary for the offensive purpose to be "at the least" the predominant purpose. This tends to suggest that even if it is found that the offensive purpose is the predominant purpose, that may not be the end of the matter. In this case there is an added dimension. What is alleged by Bendigo Bank is, as I have said, a serious case of fraud. Of course nothing has yet been proved and until trial of the action, the pleaded case put against Lapedota remains a series of allegations - very serious allegations but allegations nonetheless. However, Bendigo Bank sought and obtained an asset preservation order in the proceedings. The fact that such an order was made indicates the Court concluded there was a serious question to be tried. In my view, in circumstances such as this where fraud is alleged, the proper administration of a corporations regime dictates that a party who has been certified by ASIC so as to make it an eligible applicant, ought be permitted to examine directors of the company as to the company's affairs. To do otherwise would run the risk of undermining corporate regulation.
In any event, I am satisfied that based upon the pleadings and the evidence, it cannot be said that this examination is being undertaken for an improper purpose. I would dismiss the applications of Ferrinda and Lapedota. I will hear the parties as to costs.