In the matter of Idoport Pty Limited (In Liq)

[2011] NSWSC 322

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Idoport Pty Ltd (in liq)(recs apptd) [2011] NSWSC 322
Hearing dates:	9 March 2011
Decision date:	08 April 2011
Jurisdiction:	Equity Division - Corporations List
Before:	Ward J
Decision:	Discharge of examination summonses
Catchwords:	CORPORATIONS - application for access to confidential affidavits filed pursuant to section 596C(1) of the Corporations Act 2001 (Cth) - application for discharge of summonses - HELD - arguable case established for setting aside of summonses and necessary for access so as fairly to dispose of application - access to confidential affidavits granted - summonses seeking to examine about internal information of third parties not examinable affairs of corporation so basis for exercise of power to issue summonses not established - as matter of discretion would have set aside in any event due to fact that non disclosure of import of dispute as to Receivers' title - improper forensic advantage in now relying on summonses - examination summonses discharged
Legislation Cited:	Civil Procedure Act 2005 (NSW) Corporations Act 2001 (Cth) Federal Court of Australia Act 1976 (Cth) Uniform Civil Procedures Rules 2005 (NSW)
Cases Cited:	Commercial Union Insurance Australia v Fercon [1991] 2 NSWLR 389 Commonwealth of Australia v Sheahan, in the matter of Markethaven Pty Ltd (subject to a deed of company arrangement) [2004] FCA 1301 Gerah Imports Pty Ltd v The Duke Group Ltd (in liq) (1993) 61 SASR 557 Gould v Brown (1998) 193 CLR 346 Harris v Caladine (1991) 172 CLR 84 Hugh J Roberts and HongKong Bank v Murphy [1992] 28 NSWLR 512 Idoport v NAB [2005] NSWSC 752 In the matter of Mendarma Pty Ltd (in liq) [2006] NSWSC 1306 Jones v Dunkel Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 Mendarma Meteyard & ors v Love & ors [2005] NSWCA 444 NAB v Market Holdings Pty Ltd (in liq) [2001] NSWSC 253 O'Brien v Wily (2009) 74 ACSR 145 Re Excel; Worthley v England 52 FCR 69 Re Turner Corporation Limited (in liq) (1995) 17 ACSR 761 Tomko v Palasty (No 2) (2007) 71 NSWLR 61 Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955 White Industries (Qld) Pty Limited v Flower & Hart (1998) 156 ALR 169
Texts Cited:	Austin and Black's Annotations to the Corporations Act
Category:	Principal judgment
Parties:	Michaela Jane Healey (First Plaintiff) Brendan Thomas Case (Second Plaintiff) Kevin Francis Courtney (Third Plaintiff) Roland Frank Matrenza (Fourth Plaintiff) Russell Allan McKimm (Fifth Plaintiff) David Milton Krasnostein (Sixth Plaintiff) Garry Francis Nolan (Seventh Plaintiff) John Morrison Stewart (Eighth Plaintiff) Nathan Jaymes Butler (Ninth Plaintiff) Cameron Anthony Clyne (Tenth Plaintiff) David Bannatyne (Eleventh Plaintiff) Geoffrey Donald Bennett (Twelfth Plaintiff) Helen Elizabeth Stogdale (Thirteenth Plaintiff) Janelle Suzanne Hopkins (Fourteenth Plaintiff) Robyn Lesley Weatherley (Fifteenth Plaintiff) John Sheahan (First Defendant) Ian Russell Lock (Second Defendant) Fulham Partners LLC (Third Defendant) Portsmouth Partners LLC (Fourth Defendant) Idoport Pty Ltd (in liq)(recs apptd) (Fifth Defendant)
Representation:	Counsel: J Gleeson SC with JR Williams (Plaintiffs) CR Newlinds SC with D Sulan (First and Second Defendants) T Jucovic QC with Miss T Wong (Third and Fourth Defendants) Solicitors: Freehills (Plaintiffs) Atanaskovic Lawyers (First & Second Defendants) DMAW Lawyers (Third and Fourth Defendants)
File Number(s):	07/254047

Judgment

1. HER HONOUR : Before me for hearing on 9 March 2011 was an application brought by Second Further Amended Interlocutory Process by 15 individuals (all current or former officers, executives or board members of companies in the NAB Group) (the NAB Executives) seeking relief in relation to the issue of examination summonses against each of them Executives (namely an order for access to the confidential affidavits filed pursuant to s 596C(1) of the Corporations Act 2001 (Cth) in support of the application for the issue of examination summonses against each of them and an order for the discharge of the summonses) and declaratory relief as to the invalidity of the appointment of Messrs Sheahan and Lock as the Receivers of the property of Idoport Pty Ltd (in liq) insofar as that property extends to the rights of Idoport under a Consulting Agreement entered into by Idoport with NAB and two other companies (the NAB Parties).

1. Joined as parties to the Second Further Amended Interlocutory Process are the secured creditors of Idoport (Fulham LLC and Portsmouth LLC) who had appointed Messrs Sheahan and Lock as receivers in August 2008 pursuant to the terms of two fixed and floating charges dated 30 March 2005 held by Fulham and Portsmouth respectively.

1. The Secured Creditors were represented on this application by Mr Jucovic SC and Miss Wong of Counsel, in relation to a prospective notice of motion under Part 12 rule 11 of the Uniform Civil Procedures Rules 2005 (NSW) , to argue that the court should decline to exercise its jurisdiction over Fulham and Portsmouth as companies outside the jurisdiction. As it transpired, that motion was not vigorously pressed (and the companies, through their legal representatives, accepted service of the fresh proceedings commenced by the NAB Parties in relation to the appointment of the Receivers (to which the Secured Creditors were clearly appropriate parties). (For the reasons outlined in the NAB Parties' submissions, I am satisfied that it is appropriate for this Court to exercise jurisdiction over the Secured Creditors).

1. In their respective Counsel's submissions (Mr Newlinds SC and Mr Jucovic), served in advance of the present application, both the Receivers and the Secured Creditors maintained that the proceedings then on foot (insofar as they concerned the application for declaratory relief in relation to the appointment of the Receivers) were incompetent, or improperly constituted, as the NAB Parties had not been joined as parties to the Second Further Amended Interlocutory Process and would not be bound by any determination of the court (para [6] of Mr Newlinds' submissions and para [3(b)] of Mr Jucovic's submissions). (Indeed, Mr Newlinds submitted that his clients were bound to succeed on the second part of the interlocutory application relating to the claim for declaratory relief, for want of proper parties.)

1. The complaint as to the absence of the NAB Parties as parties to the present application was put not only on procedural grounds but also on the basis that if the NAB Parties had been joined as parties to the proceedings then the Receivers and the Secured Creditors would have been entitled to invoke the processes of the court (such as for discovery) in advance of a final hearing on the issues raised in relation to the Receivers' appointment.

1. Mr Gleeson SC, appearing for the NAB Executives, responded to this complaint (apart from noting that the NAB Parties were plaintiffs in the originating process for the winding up of Idoport, though he accepted they were not parties to the present application) by seeking to file in court a separate originating process by the NAB Parties as plaintiffs against the Receivers and joining the Secured Creditors thereto (a course of action which had been foreshadowed in his submissions). That originating process seeks the declarations contained in the Second Further Amended Interlocutory Process in relation to the alleged invalidity of the appointment of the Receivers to the rights of Idoport under the Consulting Agreement (and joins the Receivers, the Secured Creditors and Idoport as defendants).

1. When the application was made for the filing in court of the originating process, objection was raised by each of the Receivers and the Secured Creditors. The nub of their objection to the filing in court of the application, as I understood it, went not to the institution of the proceedings as such (they having been adamant that the proceedings for declaratory relief were incompetently constituted in the absence of the NAB Parties) but rather as to any suggestion that the application be heard instanter. (The NAB Parties and Executives, through Mr Gleeson, submitted that the application for declaratory relief could be determined on the present hearing purely on the basis of the material before this hearing, because no discovery or other process would be necessary. Mr Newlinds and Mr Jucovic both took issue with that proposition; Mr Jucovic maintaining that this was tantamount to a summary judgment application without notice).

1. I gave leave for the filing of the originating process on the basis that it did not seem to me consistent with the just, quick and cheap resolution of the real issues in dispute between the respective parties to refuse leave for the originating process to be filed in court (when it could then simply be filed in the Registry, albeit perhaps with some delay) and particularly where it seemed to me that that it raised issues intricately bound up with parts of the interlocutory process then before me. I indicated, however, that I would then address the question of any adjournment necessary to allow the Receivers and the Secured Creditors a proper opportunity to prepare for the application.

1. On that question, I did not accept the NAB Parties' submission that the matter could be dealt with solely on the basis of the material already before the Court.

1. The ability of Idoport to charge its rights under the relevant Consulting Agreement without NAB's consent, and the question whether (if such consent were necessary) it had unreasonably been refused, are matters lying at the heart of the application for declaratory relief in relation to the Receivers' appointment. Mr Gleeson's contention was that, in the absence of a valid consent to assignment of the rights under the consulting agreement, that property is not within the Secured Creditors' charge and the Receivers have not been properly appointed as Receivers of that property.

1. The issue as to the validity of the assignment involves questions not only as to whether there was a constructive refusal on the part of the NAB Parties its part to give consent to a request for the extension of the Secured Creditors' charge to cover those rights but also as to whether there were reasonable grounds for it to refuse consent (and as to the legal effect of a 9 January 2007 notice by the Secured Creditors purporting to extend the charge to those rights, assuming it had in fact been issued, in the absence of an unreasonable withholding of consent by the NAB Parties).

1. I was not satisfied that it would not be open to the Receivers and the Secured Creditors to put in issue (on the hearing of an application as to the validity of the Receivers' appointment) the real reason for the refusal or withholding of consent (as opposed to the matter being determined by reference solely to the reasons that had been proffered by the NAB Parties when refusing consent). In that regard, I was referred to what was said by Young CJ in Eq in Tamsco Ltd v Franklins Ltd (unreported, 14 December 2001) to the effect that the task of the court (where the reasonableness of a withholding of consent is in issue) is to find the real reason for refusal (at [56]). I read this as consistent with the proposition that it is open to the Receivers to seek to go behind the reasons asserted by the NAB Parties for their refusal of consent in order to determine what was the real reason for their refusal and whether that was reasonable or unreasonable.

1. Accordingly, I was of the view that an adjournment of the then new proceedings seeking declaratory relief would be required and I proceeded to hear only the applications in relation to access to the confidential affidavits and the discharge of the examination summonses.

Background

1. Briefly, by way of background, Idoport entered into a Consulting Agreement with the NAB Parties on 13 September 1996. Clause 20 of that agreement in its terms precludes Idoport from assigning or charging any rights under that agreement without the NAB Parties' consent (such consent not to be unreasonably withheld), stating that:

The rights and obligations of each party under this Agreement are personal. They cannot be assigned, encumbered or otherwise dealt with and no party will attempt, or purport, to do so without the prior consent of the other parties (not to be unreasonably withheld).

1. It is common ground that Idoport's only remaining asset is the chose in action comprised by its rights under that agreement, litigation in respect of which was hotly contested between the NAB Parties and Idoport some years ago.

1. In 2001, Young J (as his Honour then was) came to consider issues in relation to the purported appointment of Mr Sheahan as liquidator of an entity associated with Idoport (Market Holdings Pty Limited). In NAB v Market Holdings Pty Ltd (in liq) [2001] NSWSC 253, his Honour did not accept that Mr Sheahan was an appropriate person to act in that capacity, having regard to the inferences his Honour found were open to be drawn as to his partiality to the Idoport interests and bias against the NAB Parties (see paras [241]-[251]). The factual circumstances underpinning those inferences included that Mr Sheahan had had an interest as a 'packager' of the funding arrangements for the litigation in respect of the Consultancy Agreement (and had been entitled, though he was not then pressing, to a success fee in relation to the matter).

1. On 29 January 2002, following the dismissal of the various Idoport proceedings for failure to provide security for costs, orders were made by Einstein J (referred to as the 'barring orders') the effect of which (as confirmed in later proceedings - Idoport v NAB [2005] NSWSC 752 at first instance by Bergin J, as her Honour then was, and then in [2006] NSWCA 206 in the Court of Appeal) was to preclude Idoport (and Market Holdings) from pursuing against the NAB Parties the causes of action in respect of the Consulting Agreement until payment was made of the costs orders in the respective proceedings. What is referred to as the gross sum costs order made in the Idoport proceedings still remains unsatisfied and, taking into account interest thereon, is now in excess of $72m.

1. The circumstances in which the effect of the barring orders came to be considered by Bergin J and then the Court of Appeal were that, in April 2005, with the benefit of litigation funding provided by the Secured Creditors, Idoport paid the (smaller) amount of costs of one of the sets of proceedings (referred to as the MLC Proceedings) and then sought to revive those proceedings. It seems to be accepted by the Receivers that the manner in which the revived MLC claim was pleaded was designed to avoid the operation of the barring orders. (Criticism of that attempt by her Honour and then by the Court of Appeal was relied upon in the present application - it being suggested that what the Receivers are now attempting is yet another means of seeking to avoid the consequence of the existing unsatisfied gross sum costs orders.)

1. The litigation funding arrangements entered into prior to the attempted revival of the claims against the NAB Parties were by way of a loan agreement entered into on 30 March 2005 between Idoport and Fulham and a share subscription agreement entered into on the same day between Idoport and Portsmouth. The facility limit was $10m, subject to further agreement. Fixed and floating equitable charges were granted by Idoport in favour of each of the Secured Creditors on that day and lodged for registration on 7 April 2005.

1. The definition of "Secured Property" in the charges expressly excluded the "Excluded Property" "unless and until the circumstances in clause 3.2 or clause 3.3 occur". Excluded Property was defined as the "rights and obligations of the Chargor [Idoport] under the Consulting Agreement".

1. Clause 3.2 of the respective charges provided that:

If required by the Chargee, the Chargor must seek the written consent of NAB to the granting of a fixed charge in favour of the Chargee over the Excluded Property on the terms and conditions set out in this charge. If NAB consents to the granting of such a charge, then immediately upon the granting of such consent, the Secured Property shall be taken to include the Excluded Property and the Chargor shall be taken to have charged, as beneficial owner, all of its rights, title and interest in the Excluded Property to the Chargee as security for payment of the Secured Money .

1. Clause 3.3 of the respective charges provided that:

Notwithstanding clause 3.2, whether or not NAB consents to the granting of such a charge, the Chargee may at any time by notice to the Chargor declare that the charge in 3.1 will extend to, and operate as a fixed charge over, the Chargor's rights, title and interest in the Excluded Property. Immediately upon the giving of such notice, the Secured Property shall be taken to include the Excluded Property and the Chargor shall be taken to have charged, as beneficial owner, all of its rights, title and interest in the Excluded Property to the Chargee as security for payment of the Secured Money.

1. The Secured Creditors gave notice to Idoport in March 2006 under clause 3.2 to require Idoport to seek consent from the NAB Parties to the extension of the charges to the Excluded Property and on 16 March 2006, Idoport wrote to the NAB (in a letter apparently not received until 30 March 2006) requesting its consent to the grant of a charge over its rights under the Consulting Agreement. NAB responded to that request by letter dated 27 April 2006 requesting further information in order to consider that request. Broadly, the information sought was as to why Idoport had entered into the charges and had bound itself as it had done in clauses 3.2 and 3.2 (ie to bind itself to seek NAB's consent to an extension of the charge and to permit an extension of the charge, irrespective of NAB's position, if notified to that effect by the Secured Creditors); why it was now seeking consent; and the indebtedness secured by the charges.

1. On 22 November 2006, some 7 months later, Idoport responded by providing the NAB Parties with two folders of documents (comprising the loan and security documents). It contended that this material addressed NAB's queries (something disputed by Mr Gleeson).

1. By letter dated 12 December 2006 (received 17 January 2007), a further letter requesting consent was sent by Idoport.

1. Prior to receipt by the NAB parties of the 12 December 2006 letter, a notice was prepared (dated 9 January 2007) by the Secured Creditors giving notice to Idoport under clause 3.3 of the charges to extend the rights under the charges to Idoport's rights under the Consulting Agreement (ie the Excluded Property). There has been a factual dispute raised by the NAB Parties on the present application as to whether that notice was ever sent (on which some issue evidence was later unsuccessfully sought to be tendered at the close of submissions by Mr Jucovic) but in any event there remains a dispute as to the efficacy of any such notice, as against the NAB Parties, in the absence of their consent to the extension of that charge.

1. By letters dated 7 and 12 February 2007, the NAB Parties wrote to Idoport refusing consent to the extension of the charges and stating the reasons for that refusal. Broadly, the letters set out NAB's position in relation to the charges and its position in relation to the request for consent. As to the question of consent, the NAB Parties relied upon the terms of the Consulting Agreement; the fact that the proposed chargees were outside the jurisdiction; the dispute as to the Consulting Agreement; their position as major creditor; and the fact that the amount of funds to be provided would not discharge the likely indebtedness under the gross sum costs order.

1. In essence the NAB Parties' position then and now is that they should not reasonably be expected to give priority to the Secured Creditors where there is no evidence that, if they did, their indebtedness would be met and where they considered that there had been no adequate response to the requests made for information in relation to the request for consent.

1. On 3 September 2008, Idoport was placed in liquidation and, on 25 November 2008, Mr Michael Smith was appointed as the receiver of Idoport by the Secured Creditors. Notification of the appointment of the receiver was lodged with ASIC shortly thereafter.

1. The NAB Parties were notified of the appointment and, though their solicitors, disputed the validity of that appointment by letter dated 19 December 2008.

1. On 9 October 2009 (obviously not having accepted the asserted invalidity of his appointment), Mr Smith placed an advertisement in the Australian Financial Review seeking expressions of interest for the purchase of Idoport's rights under the Consulting Agreement. On 15 October 2009, the NAB Parties through their solicitors, again took issue with the suggestion that the rights under that agreement had been validly charged.

1. On 19 October 2009, Messrs Sheahan and Lock communicated with Mr Smith in response to his call for expressions of interest in relation to the sale of the rights. Pausing there, it is said that what Messrs Sheahan and Lock have done (in taking on the appointment as Receivers and seeking to have examination summonses issued, when they had at an earlier stage expressed an interest in the acquisition of the rights the subject of the Consulting Agreement and/or sought to arrange a syndicate to do so), was akin to what had been criticised in the Market Holdings case as giving rise to an inference of partiality and a conflict of interest. (The evidence before me is that Mr Sheahan did not ultimately pursue a participation in the acquisition of the Consulting Agreement rights and that his sole pecuniary interest is in the fees he will obtain through the receivership. There is no reason not to accept Mr Sheahan's evidence on that issue.)

1. On 16 December 2009 (in a letter received 21 January 2010), Mr Smith sought consent to the extension of the charge. (Mr Gleeson submits that the fundamental flaw in this regard is that Mr Smith was not the appropriate person to make such a request; rather, that request was for the liquidator of Idoport (Mr Sherman) to make because Mr Smith had not been validly appointed as receiver of those rights.) In that letter, Mr Smith acknowledged the barring orders and noted that if an arrangement were to be reached with a third party (for the purchase of the rights) then any assignee would need to meet that gross sum costs order. Mr Smith stated that he was seeking an appropriate means through which Idoport could meet its unsatisfied entitlements under the Consulting Agreement. (In this regard, it is submitted for the Receivers, in effect, that the NAB Parties should now welcome the steps being taken by the Secured Creditors to seek a purchaser for the right to bring proceedings against it - since such an acquisition would be predicated on satisfaction of the $70m costs order.)

1. On 5 February 2010, the NAB Parties, through their solicitors, again refused consent on the grounds previously stated.

1. Having communicated an expression of interest in the acquisition of the rights under the Consulting Agreement (in substance, the chose in action against the NAB Parties that is presently the subject of the barring orders), on 19 May 2010 Messrs Sheahan and Lock requested a copy of the Information Memorandum in relation to the proposed sale from the Receivers (Mr Sheahan in the witness box saying that he had anticipated there would have been one at that stage). On 2 June 2010, a confidentiality deed (on its face pro forma) was provided to Mr Sheahan (recital G of which contained an acknowledgement that the recipient had made a confidential expression of interest in purchasing the benefit of the claim).

1. On 21 June 2010 a copy of the Information Memorandum was provided to Messrs Sheahan and Lock. That memorandum referred to the existing costs orders and the likelihood that they would have to be met before any proceedings could be reviewed. (This is consistent with the examination process now being invoked being limited to questions relating to the Receivers' appointment and not to the substantive dispute with the NAB parties that is presently stayed.)

1. On 23 July 2010, the Secured Creditors (through a Mr Jim Devine representing the American interests) were asked for their view on the "Idoport documents" and it may have been in this context that Mr Sheahan suggested that public examinations be conducted. (Mr Sheahan in the witness box gave evidence that this suggestion had first been made to him in a discussion he had had over a drink with Mr Devine and another insolvency professional, a lawyer, T 89.29.) In an email on 23 July 2010, Mr Sheahan suggested that Senior Counsel's advice be taken as to "whether it would be possible to conduct public examinations and obtain production orders without this being deemed to be the taking of steps in the NAB litigation and accordingly potentially invoking the punitive pre-existing costs orders". (This is consistent with a desire to invoke the coercive powers of the Court only if this could be done without trespassing on the barring orders.)

1. Four days after the suggestion of public examinations was raised with Mr Devine (ie, on 27 July 2010), Mr Sheahan was advised that the Secured Creditors might be 'in the market' for a new receiver for Idoport and asked if he would be interested. On 28 July 2010, Messrs Sheahan and Lock expressed their interest in the role. That interest was qualified by the stated proviso that interests associated with the Secured Creditors were prepared to defend them in the event of a 'related challenge' (the opinion having been expressed that NAB might try to suggest a conflict, vis a vis the position of the director of Idoport, Mr Maconochie, in relation to the appointment of Mr Sheahan). The following day Mr Sheahan sent an email to Mr Devine in which he said that he would instruct his solicitor to "redraft" the affidavit in support of the application for examinations as soon as he was told to proceed.

1. On 30 July 2010, draft appointment documents were forwarded to Messrs Sheahan and Lock by the Secured Creditors' solicitors, referring to the understanding that they "may be willing to step in to replace Idoport's current receiver should the receiver continue to refuse to cooperate with his appointees" - a communication on which some weight was placed by Mr Gleeson but which Mr Sheahan in examination in the witness box attributed to no more than frustration by the Secured Creditors at the length of time the previous receiver was taking to comply with requests (see T 62.4). (I have some difficulty in seeing a complaint as to delay as being a "refusal to co-operate", but I do not draw any adverse inference from Mr Sheahan's protestation that it was. In any event, I note that the observation was not one made by Mr Sheahan but by the Secured Creditors' lawyers and it is not for him to interpret what was there said.) There was also a communication on that date from Mr Devine, which suggested some perceived urgency in the appointment (see Exhibit D, tab 4).

1. On 2 August 2010, Mr Smith resigned as receiver and draft documents were forwarded to Messrs Sheahan and Lock in relation to the proposed application to ASIC in relation to the examination summonses. The following day, Messrs Sheahan and Lock were appointed receivers and on 4 August 2010 they made application to ASIC for authorisation as eligible applicants in relation to the issue of the examination summonses. Mr Sheahan, therefore, would seem to have had at most two days to review the documentation in relation to the application. He said in the witness box that he had been taken through the documentation by the solicitors and he seems to have largely reviewed the material to ensure that the various exhibits said to have been attached to the affidavit were there and correctly described (though he says he read some of them he could not remember which and he did not suggest that he had read them all thoroughly - indeed, he was later taken by Mr Gleeson to an obvious error in his affidavit as to the identity of the judge who had made the adverse findings against him). Mr Sheahan said that he relied on his solicitors' advice in relation to the affidavit material (in the sense that he says he would not have sworn the affidavit had they told him it was incorrect).

1. Two tranches of examination summonses were issued - on 18 November 2010 and 4 February 2011 respectively. Hence there were two letters to ASIC applying for authorisation (23 August and 15 December 2010 respectively) and two confidential affidavits sworn by Mr Sheahan and filed pursuant to s 596C of the Corporations Act (on 10 November 2010 and 18 January 2011 respectively) .

1. With that background in mind, I turn to the two issues that remained before me after the adjournment of the application for declaratory relief.

(i) Access to confidential affidavits

1. The first issue (which logically required determination before the second) was the NAB Executives' application was for access to the two confidential affidavits filed by the Receivers in support of their applications for examination summonses to be issued against the NAB Executives. Each of the s 596C affidavits was sworn by Mr Sheahan. (The first, it was conceded, had initially been prepared on the basis that it would be signed by Mr Smith and then amended to be an affidavit from Mr Sheahan.)

1. An affidavit required, pursuant to s 596C of the Corporations Act, to be filed in support of an application under s 596B is not to be available for inspection unless the court orders. Such an order will not be made unless the court is satisfied that there is an arguable case to set aside the determination and that the court would not be able fairly and properly to determine that case if part of the relevant evidence was not available (see cases cited in Austin and Black, Annotations to the Corporations Act [5.596]).

1. The test as to whether access should be granted to a confidential s 596C affidavit was set out by Barrett J in O'Brien v Wily (2009) 74 ACSR 145, the threshold question being (as noted at [27]) the existence of an arguable case that the issue of the summons exceeded the Court's power:

In a case such as the present, the court considering the application for review may or may not have before it the s 596C(1) affidavit filed in support of the application for the issue of the examination summons. In Meteyard (above) at [140] and [141], Basten JA made it clear that a person seeking to have an examination summons set aside does not, merely by mounting the challenge, place an evidentiary burden on the liquidator to reveal the content of the s 596C(1) affidavit. If the person who has initiated the challenge wishes to the affidavit to be before the court for the purposes of its review, that person must first show that there is an arguable case that the issue of the summons exceeded the court's power under s 596B and that access to the affidavit is likely to assist in determining the correctness of the challenge: see also Ariff (above) at [25] and [26]. In other words, if that person wishes to ensure that the s 596C(1) affidavit is before the court upon the review, the person must independently negotiate the s 596C(2) hurdle. (my emphasis)

1. His Honour noted (at [28]) that it followed that if the challenger could not establish one or both of the things necessary to penetrate the s 596C(2) barrier, the whole of the material upon which the original decision was based would not be before the court when it proceeded to a review of that decision (as had been the case in Meteyard v Love (2005) 65 NSWLR 36).

1. Two separate grounds were raised by Mr Gleeson as the basis on which access was sought, namely that there was an arguable case that:

(i) there was a material non-disclosure (or insufficient disclosure) to the Court in relation to the exercise of its discretion to issue the examination summonses; and

(ii) the application for the examination summonses was for an improper purpose or involved an abuse of process.

1. As to the first, seven areas of alleged non-disclosure or inadequate disclosure were identified by Mr Gleeson, as follows:

(i) the adverse findings made against Mr Sheahan by Young J in the earlier proceedings involving Market Holdings Pty Ltd (which was the second plaintiff in the main Idoport proceedings), and their relationship to the current conduct of the Receivers;

(ii) the dispute as to the Receivers' title in relation to the rights under the Consulting Agreement (ie whether or not Mr Sheahan was a Receiver of the 'excluded property'), a dispute of which Mr Smith had been put on notice well prior to Mr Sheahan's appointment (the submission being that if the material presented to the Court had advised that messages Sheahan and Lock had been appointed as receivers of the property of the company without highlighting the exclusion from their appointment or the specific issue as to whether there was title at all, then there was no disclosure of a fundamental issue);

(iii) a dispute over whether the 9 January 2007 letter had actually been sent to Idoport for the purposes of clause 3.3 of the charge (and whether, as between NAB and the Receivers, it had any effect);

(iv) Mr Sheahan's interest as potential purchaser or packager in the transaction and therefore the potential for conflict of a kind previously raised in the Market Holdings case ;

(v) that Mr Sheahan had formulated the strategy of the examination summonses at a time when he was a potential purchaser of the rights under the Consulting Agreement and not as Receiver (elsewhere this was described as his role as the author of the misused summons strategy);

(vi) that Mr Sheahan had adopted "holus-bolus" the strategy of the former Receiver, Mr Smith, without adequate consideration as to the need for examination of each of the NAB executives; and

(vii) that there had been limited (or, as Mr Gleeson submitted, insufficient) independent or conscientious consideration (due to the short interval of time between Mr Sheahan's appointment as Receiver and the time Mr Sheahan moved, in his capacity as then appointed Receiver of the property of Idoport, to make application for leave to issue the examination summonses) as to the need for the examination of each of the 15 NAB Executives in respect of whom leave was sought for the issue of examination summonses.

1. Those areas of non-disclosure/inadequate disclosure were broadly grouped into two categories by Mr Gleeson - first, those where there was arguably no disclosure at all (because there was no mention of those matters in the letters to ASIC, that being the only material to which the NAB Executives had been able to have access) those including (i), (iv), (v), (vi) and (vii) above, and, secondly, those where there was insufficient disclosure, being (ii) and (iii) (with an additional suggestion that there had been inadequate disclosure of any source of funds which would make the exercise of any assignment useful).

1. Mr Gleeson submitted that I could infer that there was no (or insufficient) disclosure of those matters having regard to the terms of the Receivers' letters to ASIC (of 4 August and 23 August 2010) in support of the application for the examination summonses and by reference to the failure of the Receivers to confirm that those matters had been disclosed to ASIC or to the court when asked to do so. Reference was made to the affidavit sworn 18 February 2011 of Andrew Eastwood (paras [58]-[60]), and the correspondence exhibited to his affidavit, in which Mr Eastwood deposed to requests made of the Receivers' lawyers in February 2011 that they advise whether the affidavits filed by the Receivers disclosed the following matters:

• the history of the dispute and the litigation between Idoport and the NAB Group;
• the dispute over whether the charges granted by Idoport in favour of the Secured Creditors had been validly extended to Idoport's rights under the Consulting Agreement and the dispute over the validity of the appointment of the Receivers as receivers with respect to those rights;
• the fact that in a response to a request for expressions of interest by the prior receiver as to the acquisition of Idoport's rights under the Consulting Agreement, Messrs Sheahan and Lock had apparently expressed an interest in acquiring the rights; and
• that Mr Sheahan had been the subject of adverse findings in the proceedings before Justice Young in relation to this matter.

1. Mr Gleeson pointed to the fact that in the Receivers' letter of 4 August 2010 to ASIC, seeking authorisation as eligible applicants in relation to the issue of what turned out to be the first tranche of examination summonses, Messrs Sheahan and Lock had been described as "Receivers of Idoport", the letter stating that they made the request for authorisation in their "capacity as receivers" and that the matters to be examined upon are of importance to their "role as Receivers of Idoport". It was submitted that the clear impression conveyed by the letter was that the Receivers were validly appointed to the whole of the assets and undertaking of Idoport.

1. The reliance that can be placed on the failure to give such confirmation seems to me to be limited. In In the matter of Mendarma Pty Ltd (in liq) [2006] NSWSC 1306, White J, considering a not dissimilar submission, said:

It was submitted that this could and should be inferred from the fact that Mr McDonald did not respond to the applicants' solicitors' letter of 27 October 2005, and did not swear a further affidavit responding to the matters raised in that letter. I do not agree. In my view, there was no occasion for him to do so. The applicants cannot establish he had an improper purpose merely by making a wide range of allegations which were patently without substance, and then relying on his not responding to those allegations as a basis for inferring that he had an improper purpose.

1. Reference was also made to the Receivers' further letter to ASIC of 23 August 2010, pressing for a decision from ASIC on the basis of the desire "to resolve the issues disputed by the NAB Parties in an expeditious manner" so that the Receivers "can make an informed decision on whether or not to pursue the sale process further and advise the prospective purchasers accordingly". In that letter, the reasons for seeking the examinations were said to be "as outlined in our draft affidavit" in order to "obtain a more comprehensive assessment of, and potentially facilitate a resolution of, the issues disputed by the NAB Parties ... so that we can progress the sale process for the secured assets of Idoport Pty Ltd". It was submitted that the clear impression created by that letter, in conjunction with the earlier letter, was that the Receivers had a valid right to conduct a sale of the whole of Idoport's assets and undertaking.

1. I note that the Receivers' letter to ASIC of 4 August 2010 referred to the appointment of Messrs Sheahan and Lock as receivers on 2 August 2010 (thus it was apparent on the face of the letter that there had been only a short time between their appointment and the application, though this would not of itself indicate the length of time that consideration had been given to the issue of the summonses) and stated that the "background to the matter, matters relied upon in justifying that each of the individuals ... has taken part in the examinable affairs of the company and may be able to give information as to those affairs and the basis upon which we wish to examine the Examinees about the following matters..." (those being, 'certain examinable affairs' of Idoport; why those matters are examinable affairs; and the 'importance of these matters to our role as Receivers of Idoport'). It was contained in the material exhibited to the s 596C affidavit.

1. The 'chase-up' letter of 23 August 2010 letter to ASIC, as noted above, also referred to the existence of a dispute with the NAB Parties (though without articulating the basis of the dispute), intimating that this dispute had some bearing on the progress of the sale process and the Receivers' decision whether or not to pursue that process.

1. Mr Gleeson submits that this is insufficient to disclose the fundamental issue as to title and says that from this letter one can only assume that the Receiver had put its claim for orders under s 596B as being on the basis that the Receivers had full ability to progress the sale process. In that regard, I was prepared to accept that reference to a decision whether or not to pursue a sale process was not one likely to indicate a dispute as to whether there is title in the first place (since if that dispute were determined unfavourably to the Receivers then there would be no asset to be sold and thus no sale process to be pursued), unless one assumes that the decision whether or not to pursue the sale process there contemplated would, if title was not established, be as to whether steps should be taken to rectify that defect and in that fashion to permit the pursuit of the sale process (as in due course that instruction seems to have been.

1. Mr Gleeson submitted that the inference to be drawn from this correspondence was one of non-disclosure of the substance of the dispute as to title (that being that the receivership could not have extended to Idoport's rights under the Consulting Agreement otherwise than with the NAB's consent unless the purported extension of the charge by the Secured Creditors by the 9 January 2007 letter was valid).

1. He submitted that what Mr Sheahan needed to do was to inform the Court that there would be a significant issue as to whether the Secured Creditors had any title at all to the chose in action comprised by the Consulting Agreement and there was an arguable case that he had not done so based on the inference to be drawn from what it was known that he had said.

1. In that regard, Mr Newlinds submitted that it was not possible to infer, from the letters to ASIC, that the affidavits submitted to ASIC and later filed with the court did not disclose the relevant matters to ASIC and to the court, noting that reference was expressly made in those letters to 'issues' disputed by the NAB parties and the indication that these related in some way to the sale process. Mr Newlinds accepted that, insofar as an arguable case was sought to be made on non-disclosure (as opposed to improper purpose), there must always be a difficulty for an applicant seeking access to the relevant confidential affidavit since, by definition, that applicant will not know what is or is not contained in the affidavit; but contended that this is the effect of the legislation and that (as is the fact) it has been recognised by the courts that the applicant in such a case will be in the position that not all the information will necessarily be before the court.

1. In the context of the debate as to what should or should not have been disclosed in relation to the issue of title to the rights, I should note that it was submitted by both Mr Newlinds and Mr Jucovic that whether or not the extension of the charges to the rights under the Consulting Agreement was effective as between Idoport and the NAB Parties, the position as between Idoport and the Secured Creditors was that the appointment of the latter would be effective to permit them to secure any proceeds which are potential future assets of Idoport (referring to the terms of a Settlement Deed in 2007 where that was acknowledged between those parties and to what was said in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 at p108D and Re Turner Corporation Limited (in liq) (1995) 17 ACSR 761 as to the efficacy as between assignor and assignee of an assignment made in breach of a contract with a third party).

1. As to the so-called 'shopping list' of areas identified by Mr Gleeson as ones in which an inference of non (or inadequate) disclosure could be drawn, Mr Newlinds submitted this was pure speculation. Mr Newlinds accepted that the arguable case test was a low threshold to meet but submitted it was not met in the present case. It was said that one could not infer that the adverse findings of Young J in Market Holdings had not been disclosed nor could any such inference be drawn as to the issue now raised as to service of the 9 January 2007 letter. As to the intention to purchase, or the assertion that Mr Sheahan was acting as a promoter or packager, it is said that there is no evidence of such an interest (merely evidence that Mr Sheahan had obtained a copy of the information memorandum and had spoken to a hedge fund operator in New York about the litigation) and no evidence from which it could be inferred that any such interest had not been disclosed. The remaining areas of identified non-disclosure were similarly dismissed by Mr Newlinds as mere speculation or as matters that would not necessarily have had to be disclosed (such as the minutiae of the basis on which the title issue was disputed by reference to the 9 January 2007 letter).

1. In relation to the second basis on which an arguable case was said to have been made out, namely that of improper purpose, Mr Gleeson (recognising that the legitimate purpose of an examination summons is to elicit information for the benefit of the corporation, its contributories and creditors) submitted that here one could infer that the purpose of the examination summonses in this case is improper for four reasons (having regard, among other things, to the history of the dispute and the number of senior NAB executives now sought to be examined):

(i) simple harassment (it being submitted that since there is no evidence that any party has access to funds necessary to revive the full litigation, it can be inferred that the examination summonses are pursued in the expectation of forcing a settlement);

(ii) that they were to further the Receivers' personal interest as potential purchasers of Idoport's rights under the consulting Agreement (a matter outside the examinable affairs of Idoport);

(iii) that the examinations were intended to assess the prospects or likely recovery of a further claim against the NAB Parties (which would, it is said, be an improper purpose in the absence of any evidence of the likelihood of the outstanding costs order being paid and there being funds available to pursue fresh proceedings (including security for costs); and

(iv) that the Receivers were seeking to explore the NAB Parties' refusal to consent to the extension of the charges to Idoport's rights under the Consulting Agreement, which is also said to be outside the scope of Idoport's examinable affairs.

1. As to the contention that there is an arguable case of harassment, Mr Gleeson submitted that the 'scattergun effect' (of issuing the summonses in two tranches) and the breadth and range of the people summonsed indicate harassment. In this regard, Mr Newlinds contended that any 'concern' in this regard (which is not admitted), was addressed by the making of an offer, prior to the commencement of the hearing of this application, to limit the persons to be examined to those identified as having the most direct interest in the matters thereafter stand over the balance. Mr Gleeson pointed out that this offer was coupled with the demand that the Second Further Amended Interlocutory Process be dismissed and, as I apprehend his submission, it was thus not unreasonable for the offer not to be accepted by the NAB Executives.)

1. Insofar as the submission was based on a suggestion that interference with NAB's business and/or potential adverse publicity might force NAB to make a payment, Mr Newlinds submitted that this should be rejected on the basis that, having regard to the numerous hearings over a 10 year period concerning Idoport, it could hardly be suggested that the attendance by executives at examination hearings to be conducted by the Receivers was likely to result in some 'capitulation' by the NAB and that even if the examinations did in some way place pressure on the NAB to consider settlement that, by itself, would not be improper. (There is, of course, authority that the use of court process to secure a collateral advantage by way of a commercial settlement or compromise of a claim before trial, where it can be said that the proceedings are not instituted to vindicate a genuinely asserted right, may be an abuse of process - White Industries (Qld) Pty Limited v Flower & Hart (1998) 156 ALR 169 - but it did not seem to me that it was being put that this was a case falling within that category.) Rather, Mr Gleeson submitted that it could be inferred that the examination summons process had been invoked for the purposes of securing an advantage for the Secured Creditors and the potential purchasers, rather than the company itself; that the exercise is futile since there is no evidence of any source of $70m to meet the barring orders; and that this is a 'dress rehearsal' to obtain a forensic advantage not otherwise available to the Receivers.

1. In Mendarma , White J considered the question of when a 'dress rehearsal' may amount to an improper purpose:

I turn then to the ground that the summonses were issued with an improper purpose. It was submitted for the applicants that the issue of the summonses was sought for the improper purpose of conducting a dress rehearsal of cross-examination of the applicants either in proceedings 5348 of 2005, or in the proceedings which the liquidator has already flagged he is contemplating bringing. Reference was made to the summary of the relevant principles by Lander J in Re New Tel Limited (In Liquidation); Evans v Wainter Pty Ltd (2005) 221 ALR 331; 54 ACSR 284 (at [252]) that:

" [252] In my opinion, the following propositions relevant to these appeals emerge from the legislation and the authorities:

...

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 while 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.

... "

In my view, the evidence does not support the submission that Mr McDonald's purpose, let alone his dominant purpose , was the improper one of conducting a dress rehearsal of cross-examination of the applicants. Such a conclusion would not be drawn merely from the fact that proceedings are pending, let alone from the fact that proceedings are contemplated against the examinees. (my emphasis)

... Lander J went on to say that it does not follow that an order will necessarily be set aside if all material facts are not disclosed in the supporting affidavit. His Honour said (at 424):

"It cannot be said that an order obtained in circumstances where there has been a failure to disclose material facts must necessarily be set aside. Whether or not the order ought to be set aside for failing to disclose material facts will depend upon the facts not disclosed and the circumstances in which the non disclosure came about. An error of judgment in failing to disclose a fact which later becomes material may not necessarily lead to the setting aside of the order previously obtained. So also an innocent non-disclosure may not necessarily require the setting aside of the order for the examination.

On every occasion where there has been a non-disclosure and an order obtained it will be a matter of inquiry as to whether or not that non disclosure should lead to the setting aside of the order.

However, even if the order is set aside that is no bar to an application for a further order. ...".

50 In Hong Kong Bank of Australia Limited v Murphy (1992) 28 NSWLR 512 Gleeson CJ said (at 518-519) that:

" ... the fact that current proceedings are pending makes it necessary for the court to be alert to the possibility that a proposed application might be used for an improper purpose."

1. As to that issue, Mr Newlinds submitted that the examination summonses were in the interests of each of the corporation, its contributories or creditors, since the examinations were sought in order to facilitate a sale of Idoport's rights under the Consulting Agreement and that such a sale would be in its interest (even if it simply resulted in a reduction of the secured debt) and would 'certainly' be in the interests of the NAB as a creditor of Idoport because any enlivening of the Idoport litigation would first have to involve the payment of the NAB costs incurred. Mr Newlinds noted that the Information Memorandum at [2.2.6]-[2.2.7] squarely indicated that the only 'realistic option' was that any assignee would have to satisfy the gross sum costs order in full before the commencement of fresh proceedings, given the breadth of the barring orders and the comments that had been made in the judgments of Bergin J, as her Honour then was, and the Court of Appeal in relation to the earlier attempt at pleading proceedings "in a manner designed to avoid the operation of the Barring Order".

1. Mr Newlinds further submitted that the Receivers' document requests made it clear that the substantive claims (in respect of which the barring orders operated) were not a topic on which examination was sought to be made but in any event that the Receivers were prepared to provide undertakings to that effect.

1. As to the submission that the Receivers might have some personal interest as potential purchasers of Idoport's rights under the Consulting Agreement, this was again said to be pure speculation, based upon nothing more that the fact that the Receivers had asked for an Information Memorandum following the call for expressions of interest by Mr Smith.

1. Mr Newlinds noted that the definition of 'examinable affairs' in s 9 of the Corporations Act 2001 (Cth) is broad, and that in Meteyard at 45, Santow JA had said:

Insofar as the scope of the power depends upon whether the enquiry is directed to the 'examinable affairs' of the corporation, I would emphasise the need for caution in any a prior observations seeking to limit the scope of that very broadly defined expression.

1. Nevertheless, in Meteyard , Basten JA at [42]-[43] made clear his view that "the internal operations or activities of another person or corporation will not fall within the examinable affairs of the corporation simply because they have the potential to affect the value of the assets of the corporation", giving by way of example the internal assessment of information by advisers to a company's insurers even though the result of that assessment may be relevant to the decision taken by the insurer and that decision may affect the value and solvency of the company.

1. Mr Newlinds submitted that it was appropriate for the Receivers to use their coercive powers in order to determine whether certain property was charged or not. Mr Jucovic similarly submitted that where, as against NAB, there had been an effective extension of the charge did not preclude the Receivers proceeding on the examinations summonses because other provisions of the funding documents (clauses 13(b) and (g), noting that Clause 3.1 was an agreement to charge secured property including the present and future rights) permitted them to do so. (In that regard, the definition of secured property expressly excluded the rights under the consulting agreement, hence any future rights relating to that would arguably also be excluded; however, if the effect of the 9 January 2007 notice was to bring the consulting agreement rights into the definition of 'secured property', as between Idoport and the Secured Creditors, then the clauses to which Mr Jucovic referred would confer rights on the Secured Creditors that would seem to support the Receivers' powers as now contended for by them.)

1. Mr Jucovic submitted that the Receivers had an interest in conducting investigations to determine whether they could validly effect the sale of Idoport's rights under the Consulting Agreement either as attorney for Idoport or agent for the Secured Creditors and as to whether they can or should take further steps to seek to perfect the Secured Creditors' security.

1. In reply, Mr Gleeson pointed again to the history of the Idoport litigation and the circumstances of the appointment of the Receivers as permitting the inference that the examination summonses were pursued for an improper purpose. Mr Gleeson emphasised that there was no evidence as to the funding being available to satisfy the costs orders (and hence submitted that the entire purpose of the examinations should be regarded as pointless) and that the Receivers could only establish a legitimate interest in the examinations if properly appointed as receivers of the rights.

1. Mr Gleeson invited me to inspect the affidavits in order to determine the issue as to whether access should be given based upon a review thereof. It was submitted that if the matters raised as being areas of arguable non- or inadequate disclosure were not in fact disclosed then the NAB Parties should be given access to the affidavits. Reference was made to what was said by Emmett J in Commonwealth of Australia v Sheahan, in the matter of Markethaven Pty Ltd (subject to a deed of company arrangement) [2004] FCA 1301 in which his Honour (in considering whether the confidential affidavit was before him in evidence on the hearing of the application to discharge the orders there challenged) said (at [67]):

The affidavits are on the file in which the application for discharge of the Challenged Orders has been brought. I consider that it is open to the Court to have regard to the affidavits in order to determine the extent of the disclosure made by Mr Sheahan to the Court when applying for the Challenged Orders.

and at [71]:

I consider that, to the extent that it is relevant, the Court may have regard to the contents of the affidavits for the purposes of determining the matters that were disclosed to the Registrar. That does not involve treating the affidavits as evidence of the truth or otherwise of the statements made in them.

1. There was a suggestion that the confidential affidavits, being documents that are in the court's control, I could properly review them for the purpose of determining whether an arguable case for access had been made out, and on this question Mr Gleeson put a set of 'descending' submissions: first, that I should review the affidavits, being material in the control of the court and in the interests of justice; secondly, that I should accede to an application made to tender (contents unseen) the confidential affidavits and make orders under s 136 in relation to the use of those affidavits (which was resisted by Mr Newlinds by reference to the approach adopted in the Markethaven decision); thirdly, that I should exercise power over section 596C; and fourthly, that I would be in a position to form the view that sufficient inferences can be drawn to permit the document to be inspected.

1. The course of inspection of the documents prior to a finding that there was an arguable case was opposed by Mr Newlinds, who noted that the passages in his Honour's judgment in Markethaven to which Mr Gleeson had referred followed the finding that there was at least an arguable case that the dominant or principal purpose of Mr Sheahan in obtaining the challenged orders was an improper purpose (which, if sustained, would entitle the applicant to a discharge of the orders).

1. In the event, I was not satisfied that it was appropriate (though it was not suggested that there would not be power to do so) to review the confidential affidavits before determining whether there was an arguable case of non-disclosure or improper purpose, and I did not do so.

Conclusion as to (i)

1. I indicated at the close of the first day's hearing that I would consider the matter overnight and give my ruling as to the application for access to the confidential affidavits when the hearing resumed the following morning. I did so, granting access to the confidential affidavits (though with access limited to the legal advisers). At that time, I briefly indicated the reasons for my decision (in particular, my view that there was an arguable case both as to non-disclosure and improper purpose in relation to the central issue that the examinations were being pursued in effect to justify the standing of the Receivers to conduct such examinations in the first place and thus it was arguable that there was an improper purpose in seeking to obtain a forensic advantage in having that issue explored first in the context of public examinations). As I did not wish to delay the hearing of the second aspect of the matter in the remaining time available, I said that I would provide written reasons as soon as possible thereafter. (In the event, I have incorporated those reasons with my reasons on the discharge application rather than producing two separate sets of reasons.) Also, although I note that it has been said to be preferable to review the affidavits at that stage (in order to determine whether the application to set aside could only fairly be determined by reference thereto), I granted access without having done so on the basis that it seemed to me that where there was an arguable case of non-disclosure that could only fairly be tested by reference to the confidential material; the authorities have indicated that having found an arguable case the usual course would be to grant access; and there was limited time available to determine the application to set aside so that I considered the most expeditious way of facilitating this was for access to be granted without further delay. I therefore granted access, permitted a short adjournment for the NAB Executives' legal representatives to review the affidavits, and then proceeded to hear the application to set aside the summonses.

1. Turning then, in more detail than I gave at the time, as to the reasons on which I concluded that there was an arguable case of non-disclosure, it seemed to me that the issue as to the validity of the Receivers' appointment would have been highly relevant to the exercise of discretion to give leave for the issue of the examination summonses in the first place (just as it was a central issue in relation to the question whether, on a review of the decision to grant such leave, the examination summonses should be set aside). In circumstances where there was no indication in the covering letter that the "dispute" to which reference was there made (the resolution of which might facilitate the resolution of the sale process) was one that related to whether the examination summons should appropriately have been issued at all, and where the letter itself indicated no relevant qualification on the scope of the Receivers' appointment, I considered that an inference could be drawn that the issue had not been sufficiently drawn to the attention of the court.

1. I accept that the letters to ASIC raised obliquely a reference to NAB disputes and that a suggestion could be drawn therefrom that the dispute was something the resolution of which would facilitate the sale process but it was, at least on one view consistent with there being no relevant dispute as to the scope of the Receivers' powers as such.

1. Mr Gleeson submitted that the correspondence in question should be read as a reference to, or an assertion that, the Receivers having rights to deal with the Consulting Agreement rights as part of the secured property and submitted that it did not recognise NAB's dispute that the only person who could properly deal with those rights was the liquidator. I considered that there would be some force in the expectation that an issue so fundamental to the position of the Receivers in seeking leave to issue the examination summonses would have been indicated up front in the letter to ASIC and it was not.

1. I placed less weight on the inference sought to be drawn from the failure of the Receivers to confirm what had been disclosed in the affidavits in question when that issue was raised with them. The history of the disputes between Idoport and the NAB seems likely to have engendered a defensive attitude in that regard (and it might well have been assumed that any response was unlikely to have been accepted at face value in any event).

1. As to the issues raised in (i) and (iii) - (vii) (except insofar as (iii) is linked with (ii)), I did not consider the evidence permitted the inference of non (or inadequate) disclosure and would not have found an arguable case on those matters.

1. As I understood his submissions, I was of the view (seemingly shared by Mr Newlinds) that the real issue on the non-disclosure point was as to whether an inference could be drawn that the dispute as to title (or the 'arguability as to title') had not (and should have been) disclosed. It was submitted that if it be accepted (by reference to the ASIC letter) that the topic or existence of a dispute with the NAB Parties (going in some way to the sale process in respect of the rights) had been disclosed (as it clearly was) then there was no inference that could be drawn as to non-disclosure.

1. What led me to conclude that there was an arguable case of non-disclosure was the absence of a clear statement in the letter to ASIC of a dispute going to the root of the Receivers' ability to deal with the rights under the Consulting Agreement and that it was this very issue about which the Receivers sought to examine the prospective examinees (giving rise to Mr Gleeson's complaint as to the circularity of the Receivers relying on their appointment in order to invoke the coercive powers under the Corporations Act to enquire as to the very issue on which their appointment was disputed).

1. Mr Gleeson submitted that it was for the Receivers to show as a prerequisite to the issue of the examination summons that they had a legitimate interest in pursuing the examination and that they could not justify the examinations on the basis that it is to make good their interest - in other words that the examination power cannot be used simply to gather evidence to justify the standing of the party requesting the examinations. (Insofar as Mr Newlinds put the Receivers' case on improper purpose as being that it was proper for the Receivers to investigate whether the asset could be sold and if so what value might be ascribed to it, that to me highlighted the central nature of the title issue and the need for it to have been adequately disclosed to the Registrar when leave to issue the examination summonses was sought.)

1. It seemed to me that the probability was that had this issue been drawn clearly to the attention of the Registrar, then a different course would have been taken in relation to the application for leave to issue the examination summonses or at least that there was a sufficient likelihood that this would have been the case so as to give rise to the inference that the title issue could not have been disclosed in those terms in the affidavit.

1. As to the other matters identified as areas of non-disclosure I was not satisfied that an arguable case had been shown simply by reference to the absence of those matters from the covering letter to ASIC and I did not consider that there was a similar basis to draw the inference I had drawn in relation to what I might call the 'title' issue, since the other matters did not involve the same circularity as it did.

1. As to the question of improper purpose, again I considered that an inference could be drawn as to the existence of an improper purpose in relation to the application for the issue of the examination summonses by reference to the circularity of the disputed issue as to title. It seemed to me that one could infer that the purpose was to deploy the coercive powers of the court in order to provide a forensic advantage (over the alternative option which was to pursue an application for a declaration as to the issues recognised to be in dispute as to the Receivers' title), in circumstances where the Receivers must have been aware that the very dispute on which they sought to examine was one on which reliance could be placed to deny them an entitlement to examine. I placed less weight on the evidence as to the Receivers having earlier expressed interest in the acquisition of the rights under the Consulting Agreement, although I accept that this could also have given rise to an arguable case that there was an improper purpose in pursuing the examination summons process. (As to the remaining matters, I did not accept that an arguable case of harassment was made out simply by reference to the number or seniority of the persons sought to be examined nor did I think it could be inferred that what was sought was a dress rehearsal for a hearing of the issues in the main proceedings, although that was not something necessarily ruled out by what was said in the ASIC letters.)

1. In the end, however, it seemed to me that there was a proper basis on which to find an arguable case of improper purpose deriving from the circularity of examinations sought to test the title of the examiners (from which any interest in the examinations would logically be derived). Mr Newlinds had submitted (and I accept) that just because there are proceedings on foot this does not mean that the examination process cannot be used - Hugh J Roberts and HongKong Bank v Murphy [1992] 28 NSWLR 512 p 518; that questions which might trespass on the dress rehearsal territory could be dealt with on a question by question basis; and that the case for declaratory relief was not on foot at the time the applications to issue the examination summonses were made.

1. As noted above, the mere fact that proceedings might be contemplated or foot (in this case, say, the main proceedings the subject of the barring orders), would not give rise to an inference that the use of the examination process to obtain information in relation to such a claim was an improper dress rehearsal. Indeed, as Mr Newlinds points out, at that stage there were no proceedings on foot in relation to the declaratory relief sought as to the title issue.

1. However, it seemed to me that the availability of a procedure for determining the title issue without t he use of the examination summons procedure and the forensic advantages that would be gained through the latter - in terms of an opportunity to test the evidence in advance and to compel potential witnesses after having determined what their evidence would be - were such that there was an available inference of improper purpose and hence an arguable case on that point.

1. I was therefore satisfied that there was an arguable case to set aside the examination summonses for either non-disclosure or improper purpose.

1. The second part of the test is then that, in order to have access to the examination summonses, there must be established that the court would not be able fairly and properly to determine the application to set aside the summonses if part of the relevant evidence was unavailable. In Re Excel; Worthley v England 52 FCR 69, it was said that if one cannot fairly deal with an application in the absence of reference to the confidential affidavit then reference can be made to it.

1. Mr Newlinds submitted that access to the affidavits would make no difference to the outcome of the case (on the basis that the case would be won or lost on the title issue, which could be argued without reference to the affidavits) and therefore it was not necessary to grant access to them.

1. It seemed to me that where the application to set aside is based on non-disclosure, the in order to test whether the court will be able fairly and properly to determine the case if part of the relevant evidence is not available, then the question of the individuals position must be carefully considered. If there is material (such as the confidential affidavits) that would be of obvious relevance at least on the disclosure issue, then that test was satisfied.

1. It was submitted by Mr Gleeson that it would be a monstrosity for a person to make no disclosure to the court in the confidential affidavit of relevant matters and then, when inferences were raised as to the efficacy or extent of the disclosure, to say that the court should not be permitted to look at the material in question. Whether that can be said in every case (particularly given that it has been accepted that the judge hearing the application may well be left having to determine it in the absence of all the evidence), nevertheless in this case I formed the view that it would not be possible fairly to decide the application without reference to the confidential affidavits. In so doing, I had regard to the fact that the best evidence as to non-disclosure must be by reference to what was in fact disclosed (and what was not) in the affidavits themselves and to the contentious history of the disputes between the parties that suggested that close attention might need to be paid to the terms and context in which any disclosures were made to ensure that there had been a full and frank disclosure of all relevant matters.

1. Before granting access I raised with Mr Newlinds whether this should be limited in the first instance to the legal representatives, having regard to the fact that one of the policy matters underlying the restriction of access generally to such material is that examinees, faced with an examination summons, should not be put on notice of the intended content of the examination. Although initially Mr Newlinds did not suggest any concern in that regard, ultimately he did seek such a restriction and I made orders for access restricted accordingly.

(ii) Application to discharge summonses

1. I turn then to the application for discharge of the summonses, which was made in the context of access having been by then granted to the confidential affidavits.

• Basis of review

1. At the outset, I note that it was accepted by the NAB Executives and by the Receivers that I should approach this application as a review of the Registrar's decision to issue the summonses and not as a hearing de novo , following the decision of Barrett J in O'Brien v Wily (2009) 74 ASCR 145, although Mr Gleeson SC formally handed up submissions as to why that conclusion was incorrect (in order to preserve the position should this matter be taken on appeal). In O'Brien , his Honour rejected the submission that the court, when hearing an application to set aside examination summons, must embark upon a hearing de novo and that the burden of making out a case for the continuation of the summonses therefore lay on the party who had applied for them; that submission having been put on the basis that the court when hearing such an application is exercising Commonwealth judicial power.

1. In Meteyard , Basten JA (having noted that the Court was exercising federal jurisdiction vested in it pursuant to s 77(iii) of the Constitution in the exercise of the power to issue an examination summons and that the issue of the summonses had occurred by way of an ex parte application on the basis of an affidavit the terms of which had not been disclosed and were not then before the court) observed (at [32]) that "the nature of a proceeding to discharge an ex parte order may be treated as, in substance, a rehearing of the initial application", referring to Gerah Imports Pty Ltd v The Duke Group Ltd (in liq) (1993) 61 SASR 557 at 561.

1. The submissions made on this issue by Mr Gleeson involved the following elements: first that as this Court, in the exercise of the jurisdiction granted by s 1337B of the Corporations Act, is a court within the meaning of s 71 of the Constitution, and is exercising the judicial power of the Commonwealth when issuing an examination summons (referring to Gould v Brown (1998) 193 CLR 346 at [33]); secondly, that the delegation of part of the jurisdiction, powers and functions of this Court as a s 71 court to an officer including a Registrar will be valid only if, inter alia, the exercise of that delegated jurisdiction power or function is subject to review by a judge on questions of both fact and law (referring to Harris v Caladine (1991) 172 CLR 84), and to that end the Federal Court of Australia Act 1976 (Cth) provides (s 35A) that a party may apply to that Court for a review of the exercise of delegated power by a registrar including a decision to issue an examination summons (noting the equivalent delegation to Registrars of this Court in Part 3 of the Delegation to Registrars under s 13 of the Civil Procedure Act 2005 (NSW)), and that a 'review' in federal jurisdiction has a special meaning and is taken to mean a re-examination of the matter afresh (citing Tomko v Palasty (No 2) (2007) 71 NSWLR 61 at [43]), then it is said to follow that a review of a decision by a Registrar of this Court to issue an examination summons must (so as not to offend Ch III of the Constitution) be susceptible of a full review by a judge or judges of this Court considering the matter afresh and that on a rehearing of the matter the applicant must adduce evidence to satisfy the court that the examination summonses should issue.

1. As noted, it was not necessary for me to express an opinion as to this issue as the NAB Executives accepted that on the present application the approach of Barrett J in O'Brien would be followed (and neither Mr Newlinds nor Mr Jucovic suggested otherwise).

• Grounds relied upon for discharge of summonses

1. The application to discharge the summonses was based on the same two broad grounds as the application for access to the confidential affidavits: first, that there had been non-disclosure of material matters and secondly, that there was an improper purpose and thus that the issue of the summonses was an abuse of the court's process. The evidence relied upon was that already then before me, together with the content of the affidavits (to which it was accepted, in light of what was said in Markethaven , I could by this stage have regard without them being formally tendered or read as to the truth of their contents) and the examination of Mr Sheahan who was called to give evidence by Mr Gleeson.

1. As to the alleged non-disclosure, having reviewed the 10 November 2010 affidavit, Mr Gleeson raise the following six areas:

(i) reference to the 9 January 2007 letter

1. In paragraph 53 of his affidavit, Mr Sheahan deposed to the giving of notice on 9 January 2007 by the Secured Creditors to Idoport under clause 3.3 of the respective charges "declaring that the Fulham Charge and the Portsmouth Charge extend to, and operate as a fixed charge over, Idoport's rights, title and interest in the Excluded Property" and a copy of the notice was included in the exhibits to his affidavit.

1. Mr Gleeson submitted that this was misleading in failing to reveal the existence of a dispute as to whether the notice had in fact been given. That dispute, it was said, was apparent from the document appearing at p 644 of the exhibits to Mr Sheahan's 10 November 2010 affidavit (a letter dated 19 October 2009 from the liquidator, Mr Sherman, to Mr Smith then the receiver, advising that Mr Sherman had been unable to find evidence in the books and records of the company of the notice of 9 January 2007 to which reference was made in his Deed of Appointment; that it had not been served on him and that the director of the company, Mr Maconochie, had advised that he was not aware of such notice being issued). In that letter, the liquidator expressed the view that in the event that such notice had not been given then the property was not under Mr Smith's control and he was not in a position to be calling for expressions of interest. Mr Gleeson accepted that this was an innocent non-disclosure but submitted that if the notice had not been served (or was not valid) then the rights under the Consulting Agreement would still remain with the company in liquidation and could only become the secured property if a declaratory order were to be made in favour of the Secured Creditors.

1. As to the requirements of the section, the issue was raised as to whether what was sought to be examined upon was in fact within the section (ie within the examinable affairs of Idoport. Reliance was placed by Mr Gleeson on what was said by Basten JA in paragraphs [39] to [43] of Meteyard :

A consideration of the terms of s 596B(1)(b)(ii) suggests that the scope of the power is delimited by four considerations, namely that:

(a) the proposed examinee may have "information" to give;

(b) the information must be relevant in the sense that it is about "examinable affairs of the corporation";

(c) because the purpose of the section is to allow the receivers and managers to be informed of facts about the affairs of the company, the information should be information not within their knowledge, although the extent of knowledge will not be precisely definable, and (2005) 65 NSWLR 36 at 47

(d) there must be a factual basis for the Court to form a reasonable state of satisfaction that a proposed examinee may have relevant information.

The results of an investigation into an incident could affect the payment made to the company, or the decision to refuse a payment. A refusal may, and has in the case of the joint venture partner, Theiss Coal, led to litigation between the insured and the insurer. One possible outcome of such litigation is an order of a court that the insurer make a payment to the company. However, if that flowed from a judgment of the court, it could not properly be said that the consideration by the court of the circumstances of the claim fell within the examinable affairs of the company. That is because the court is exercising its own powers independently of the company, albeit the result may have important consequences for the balance sheet of the company, and even its solvency.

That consideration may be extended: there are a large range of actions by strangers to the company which may affect its affairs, including the value of its assets. The imposition of more stringent statutory regulation of mining operations in the interest of safety, and the decisions of a local government

authority in relation to the zoning of the land to be used for mining, are but two examples. Even if the company had an entitlement to be heard in relation to a rezoning proposal, the consideration of the proposal by the local government authority would not constitute part of the affairs of the company which would be examinable under s 596B. Of course, the corporation's reaction to such external events would be capable of constituting part of its own affairs.

This distinction, as the claimants noted, derives support from the paragraph in the definition of "examinable affairs" in s 9 of the Corporations Act relating to the affairs of a connected entity of the corporation. Whilst, as noted above, there is considerable overlap between par (a) and par (b) of that definition, par (c) identifies a separate class of factors. The definition of "connected entity" in s 9 picks up the concept of a related body corporate as defined in s 50 and a connected entity as defined in s 64B. One aspect of the definition of a connected entity is a body corporate over which the corporation can exercise control or material influence: another is a body corporate which is indebted to the corporation: s 64B(1)(a) and s 64B(1)(f). In relation to such bodies, the business affairs of the body can be examined if they are or appear to be "relevant to" the corporation or the corporation's examinable affairs. This provision confirms the conclusion that the internal operations or activities of another person or corporation will not fall within the examinable affairs of the corporation simply because they have the potential to affect the value of the assets of the corporation. In other words, although the "property" of the corporation may constitute part of its examinable affairs, the phrase "information about" such property should not be read so broadly as to include "any information which may affect the value of the property".

Application of these principles would suggest that, at least where a decision has been made and communicated, the internal assessment of information by advisers to the insurer fall outside the category of "examinable affairs" of Southland Coal, even though the result of that assessment may be relevant to the decision taken by the insurer and hence to the value and even the solvency of Southland Coal. Such an assessment may need to be distinguished from the insurer's decision with respect to the claim and its grounds for refusal, if it is (2005) 65 NSWLR 36 at 48declined. And an assessment should be distinguished from the information being assessed and, arguably, the fact that the insurer had, or did not have knowledge of particular information.

1. It was submitted by Mr Gleeson that the decision by the NAB parties to refuse consent to the extension of the charge (though it may affect the value of Idoport and may affect the affairs of the company) does not fall within the examinable affairs of Idoport. Insofar as the examinations seek to focus on the internal decision making process of the NAB Parties, through the NAB Executives, I agree.

1. In considering whether there was there proposed to be an enquiry into examinable affairs , in Meteyard , Basten JA said (at [47]):

Returning to the scope of the power conferred by s 596B, the aspect of the examinable affairs of the company of primary relevance in the present circumstances is sufficiently encapsulated in the concepts of management and administration identified in par (a) of the definition of "examinable affairs". Part of the management and administration of Southland Coal will be deciding whether to institute proceedings against QBE in relation to a denial of liability under the insurance policy. Information relevant to that decision forms part of the examinable affairs of Southland Coal. Such information will, consistently with the authorities, include:

(a) information necessary to assess the justification or otherwise of the denial, and

(b) in an appropriate case (of which this is not one) information as to the worth of the potential defendant in such proceedings.

Such material falls within the proper field of examinable affairs described by Street J in Re Hugh J Roberts Pty Ltd (In Liq) and the Companies Act (at 540; 584), quoted with approval by the Full Court of the Federal Court in Grosvenor Hill (Qld) Pty Ltd v Barber (1994) 48 FCR 301 at 309:

"The liquidator is given by the statute this special authority to proceed by way of private examination to obtain information which he needs for the due winding up of the company, the affairs of which he has the responsibility of administrating."

1. Here, what is sought to be examined upon are the internal workings of the NAB Parties or their corporate minds. I do not accept that these fall within the examinable affairs of Idoport for the purpose of the section.

1. As to the question of purpose, in Meteyard at [44], Basten JA said:

There is, in addition, an established line of authority to the effect that an eligible applicant under s 596B may examine a potential defendant, or an existing defendant, in relation to proposed or actual litigation, in order to determine whether the defendant has sufficient assets to meet an adverse judgment, if unsuccessful in the litigation. On the other hand, the authorities draw a line between those possible topics of inquiry and use of the examination process to determine the strength or weakness of the corporation's case, or its opponent's case, in relation to the dispute. In the recent decision of the Full Court of the Supreme Court of South Australia, Re Normans Wines Ltd (Receivers and Managers appointed) (In Liq); Harvey v Burfield (2004) 88 SASR 541 at 552 [41], Mullighan J quoted without criticism, the following statement of the trial judge:

" '[41] The authorities establish that an improper purpose includes a purpose of using the examination as a dress rehearsal for cross-examination, or for the purpose of destroying the credibility of the examinees or witnesses who might be called for the examinee in substantive proceedings, or for the predominant purpose of obtaining a forensic advantage not available from ordinary pre-trial procedures, or simply to cause undue inconvenience or embarrassment to the examinee or to inflict costs'."

1. It was submitted that in circumstances where there has been a dispute since at least late 2008 when Mr Smith was appointed, as to the title issue, the appropriate means of determining that dispute is not by invoking the examination process but by a declaratory suit of the kind that could have been brought by the Receivers under s 418A of the Corporations Act and that has now been brought by in the proceedings commenced by leave at the outset of this application.

1. This raises the question as to the predominant purpose of the applications and whether that was impermissibly to obtain a forensic advantage.

1. In Excel at (90-91):

The Australian jurisprudence eschews the English distinction in favour of the more useful test of whether the person seeking the examination order has the purpose of obtaining a forensic advantage not otherwise available: see per Gleeson CJ in HongkongBank of Australia Ltd v Murphy (1992) 28 NSWLR 512 at 519. However, as Gleeson CJ also points out:

... the possibility that a forensic advantage will be gained does not mean that a making of an order will not advance a purpose intended to be secured by the legislation . (my emphasis)

1. As to the subjective purpose of the examinations, Mr Sheahan gave evidence, in effect, that his firm adopts the examination procedure as a more expeditious and efficient procedure as a matter of course. (That would be of some concern if, by this, it was suggested that there had not been careful consideration as to the need to invoke the procedure in relation to each proposed examinee, but I understood Mr Sheahan there to be speaking of a general philosophy as to how best to determine issues arising in the context of a receivership where information as to the examinable affairs of the corporation was sought.)

1. As to the objective purpose, Mr Newlinds submits that it has to be the predominant purpose and that the mere fact that there may be a collateral advantage or by-product from the course sought to be adopted that works in the Receivers' favour is not sufficient. It was submitted that there cannot be found a common purpose to obtain an unfair advantage through this process and that what is sought is a perfectly proper (and common) course of ascertaining whether the Receivers have something of value to sell. Mr Newlinds emphasised that what is required is that there be an improper forensic advantage and he submitted that here there was not such an advantage.

1. In Re Excel at p 89, the Court emphasized that the purpose in question must be the predominant purpose:

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 (supra) at 732 and Williams v Spautz (supra) at 529.

1. As to the circularity issue, insofar as Mr Newlinds submitted that the NAB Parties' position was premised on an assumption (that he and Mr Jucovic maintain is incorrect) that there was no title absent consent by the NAB Parties, in contrast it seemed to me that the Receivers' position was premised on there being an assumption that there was a question as to title that the Receivers were entitled to resolve by invoking a procedure in their capacity as receivers of at least some of the assets of the company (even though there may be a dispute as to the precise assets the subject of the proposed examinations). Mr Newlinds submitted that the comments made in para [43] of O'Brien v Wily were equally applicable in the present case.

1. In that regard, it seems to me that there is a distinction between invoking the examination summons process in order to determine the prospects of success of litigation on foot (or contemplated) and invoking the process in order (from a practical point of view) to determine the very issue in question - namely, whether there is title to the asset so as to give the Receivers and interest in the subject matter of the proposed examinations.

1. Finally, as to discretion, Mr Gleeson raised the following matters: first, that the asserted purpose is to assist the Secured Creditors to recover funds invested by them in the earlier proceedings that were themselves an abuse of process; secondly, that the intent of the barring order is to prevent the NAB Parties being vexed with Idoport claims until the gross sum costs order is paid (and that even if what is sought by the examination summons process is the right side of the barring orders, in the absence of evidence that anyone is willing and able to meet those costs orders, the coercive powers of the Court should not be made available to the Secured Creditors); thirdly that the scale of the summonses is oppressive and the reasons for pressing the summonses against the 15 NAB Executives cannot be tested as they depend in part on material over which privilege is claimed and not put before the court; and finally, that Mr Sheahan has not demonstrated himself to be an impartial person to be entrusted with such powers.

1. In relation to the last submission, apart from the criticism made as to the care (or, more precisely, the lack thereof) in relation to the preparation of his affidavit evidence, Mr Gleeson pointed to two matters arising from Mr Sheahan's evidence in the witness box: first, his statement that he was not interested in the position of unsecured creditors (though he immediately qualified that by reference to the acknowledgement that, as receiver, he should not do anything detrimental to the interests of the company) (T 79) ( by which I had understood Mr Sheahan to be seeking to emphasise that his principal duty was to the Secured Creditors pursuant to his appointment and on that basis I draw no adverse inference from this evidence); and, secondly, the evidence (on which I gave Mr Gleeson leave pursuant to s 38A(1) of the Uniform Evidence Act to cross-examine) that Mr Gleeson correctly characterised as a slur on the integrity of the liquidator.

1. At T 99.20, Mr Sheahan (in what was later described by his Counsel as a brain explosion) when asked in cross-examination by Mr Newlinds what his view was as to whether there was any prospect that the liquidator might try to sell the rights under the consultancy agreement (Mr Newlinds having earlier taken him to, and tendered, a copy of minutes of a meeting of creditors of Idoport of 8 March 2010 in which the chairman, Mr Sherman was recorded as having advised that he was considering options in relation to a possible acceleration of the finalisation of the liquidation) said:

My view your Honour is that it is the most commercial, it's almost commercial suicide for certain accounting and legal practices to act against the interests of certain banks and other financiers and that if they act generally, generally act otherwise than in accordance than in that particular Bank's interest they will be summarily dismissed from the Bank's panel of professional advisors. I am not trying to be specific or personal but -

1. That evidence, particularly in light of the fact that Mr Sheahan had had no communications directly with Mr Sherman since his appointment and had not asked him what his intentions or capability would be in terms of realising the asset) was said by Mr Gleeson to reflect the same partiality or bias as was the subject of the adverse findings made by Young J in Market Holdings .

1. True it is that Mr Sheahan also said (on further examination by Mr Newlinds) that there had been no contact by Mr Sherman suggesting that the latter would rather bring the case (T 102.13). However, it seemed to me that by his earlier answers (even though Mr Sheahan denied that he had intended to refer to Mr Sherman as within that group of 'suicide candidates' - "Not Mr Sherman specifically , no" - T 101.3 and denied that he had intended to convey that the liquidator of Idoport was a person within that group of non-independent people - " Not specifically , your Honour" - T 101.34), in the context of the question that had been put to Mr Sheahan, his response could only fairly be seen as implying that Mr Sherman might have a commercial reason not to seek to sell the rights under the Consulting Agreement or to bring the case against the NAB Parties. Mr Newlinds quite properly did not attempt to suggest otherwise. I must admit that the response had the flavour of someone inclined to take an adverse view of the position of parties in the position of the NAB Parties and perhaps to indicate some degree of personal emotion or ill feeling in relation to this case (which may not be surprising given that Mr Sheahan has personally been the focus of judicial criticism as to his conduct in the proceedings). His reference to 'punitive' costs orders in correspondence with the Secured Creditors' representatives is also reflective of this. I think this evidence is capable of giving rise to an inference of partiality.

1. While I do not ignore the fact that this seems to be a case in which there have been heated emotions on the part of the party seeking to invoke the coercive powers of the Court against senior executives of an organisation amongst those apparently accused of being prone to exert commercial pressure on liquidators, and that this evidence is indicative of partiality on Mr Sheahan's part, ultimately it is not necessary to make any finding on this issue as I am able to decide this application on other grounds.

Conclusion as to (ii)

1. As to non-disclosure, the test is not (as made clear in Mendarma) , whether the information would have made a difference to the decision; the test is whether the information not disclosed was material in the sense of relevant to the consideration of the issue in question.

1. Of the areas of identified non-disclosure, that with which I had the most concern was as to the import of the dispute as to the validity of the extension of the charge to the excluded property. Other matters, such as the criticism earlier made of the conduct of Mr Sheahan in another context (albeit in relation to the same underlying litigious dispute) would only be material to the exercise of discretion if it could be said that the fact that Mr Sheahan had previously acted in such a fashion was likely to mean that he was in this instance also acting improperly. Similarly, the technicalities of the basis on which the validity of the Receivers' appointment were challenged are not necessarily material to the decision whether to allow the examination summonses to be issued (the real issue being as to the import of the dispute as to title not how it arose).

1. I accept that there was no disclosure on the face of the affidavits of the matters identified in (i) and (ii) and that there was seemingly incomplete disclosure of the matters identified in (v) - (vi) (in relation to the last, there being an unwillingness of Mr Sheahan to disclose all the sources of information on which the decision to examine each of the NAB Executives was based). I also consider there to have been insufficient disclosure of the matter identified in (iii) (a clear example of matters appearing in the annexures or exhibits but not being drawn to the attention of the Court), though I am by no means convinced that this was a material matter to disclose.

1. I consider that the affidavit did fairly draw to the court's attention the ongoing dispute as to the validity of the Receivers' appointment to the rights under the Consulting Agreement (and thus as to the chose in action that the Receivers were seeking to sell) and that this was a matter that affected their ability to sell the rights. What was not articulated in the affidavit (and thus not expressly drawn to the attention of the registrar) was that the import of this dispute was that there was a question as to whether the issue of examination summonses in order to explore the internal reasoning of the NAB Parties when withholding consent to the extension of the charges was a proper exercise of the coercive power of the court when (on one view at least) if that issue was ultimately determined contrary to the Receivers' position, the Consulting Agreement rights were assets of the company in which the Receivers had no interest (and it was a matter for the liquidator to pursue).

1. I understand that the position contended for by Mr Newlinds and Mr Jucovic is that it does not matter whether the Receivers' charges extended to the excluded property as they were in a position to exercise their powers in any event (and they had an interest in ascertaining what future property might become the subject of their security). However, the material information that I consider ought to have been put squarely before the registrar was that there was an issue in that regard.

1. Is that a reason to set aside the orders for the examination summonses, particularly in circumstances where it does not seem to be the case that this argument was expressly articulated in the correspondence and it may well be the case that the Receivers had not turned their minds to that issue? On balance, I am not persuaded that there was a material non-disclosure at the time of the applications, even though the consequence which the NAB Parties contend followed from the dispute as to title was not expressly drawn to the Registrar's attention. I accept that there is a heavy onus on a party seeking orders on an ex parte basis and that there is a need to alert the Court to the possible arguments or facts that will be relied on by the defence. (I do not accept that there is a lesser onus where the application if of the present kind as opposed, for example, to an application for injunctive relief.) However, it is one thing to draw to the attention of the Court arguments it is actually anticipated that the other side may put; it is another thing where the argument was not expressly articulated and where it may not have been appreciated at the time.

1. As to the matters relied upon as going to establish an improper purpose, I do not accept that those were made out. I was concerned as to the issue of improper purpose in seeking to obtain a forensic advantage but I am not satisfied that this has been shown to be the predominant purpose of the applications, though as it transpires I consider this would be the effect of permitting the examination summonses to stand.

1. However, as Nr Newlinds' conceded, on a review of the decision I must consider whether the orders should now be set aside. I am of the view that, whether or not there was adequate disclosure based on the Receivers' then knowledge at the time and notwithstanding that the predominant purpose of seeking public examinations in lieu of commencing declaratory proceedings has not been shown to have been improper, as a matter of discretion the examination summonses should now be discharged. There are on foot now proceedings in which the fundamental title issue will be able to be resolved with the procedure being balanced in terms of fairness as between all the parties. Relevantly, I also consider, as I have noted above, that the internal decision making processes of the NAB Parties or their executives are not part of the examinable affairs of Idoport and hence the basis on which such applications could properly have been made has not been established. That of itself warrants the discharge of the summonses.

1. I did consider whether to permit the examination summonses to stand solely in relation to the request for production of documents but it seems to me that this will be dealt with more appropriately by way of discovery in the declaratory relief proceedings. I also considered whether simply to stay the examination summonses until after the determination of the declaratory relief proceedings (by which time the question of title would be determined). However, by that stage there would be no utility in the examinations.

1. Accordingly, I will order that the examination summonses issued to each of the NAB executives be discharged. I will hear any submissions as to costs at a convenient time. I will also hear submissions as to whether there should be any restriction on publication of these reasons in light of the confidential nature of the affidavit material (though in light of the conclusion I have reached as to the fate of the examination summonses it seems to me unlikely that any legitimate purpose would be served thereby.) Finally, I will make directions as to the further conduct of the declaratory proceedings (since the directions made on the last occasion took the matter only to the stage of the filing of the Statement of Claim as it was the position of the Receivers that no directions beyond that should be made until a determination as to the application to set aside the examination summonses (Mr Newlinds wishing, had the NAB Executives' application been wholly or partly unsuccessful, to have the examination summonses dealt with and the examinations conducted before the Receiver made a decision as to whether to proceed to defend the declaratory proceedings).

1. I will defer the making of any orders other than the discharge of the examination summonses until I have heard submissions in relation to the above matters.

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Decision last updated: 19 April 2011